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HomeMy WebLinkAboutContract 45214 (2)Ir PAZ ENERGY LLC, Plaintiff, VS. CAUSE NO. 153-237052-09 DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD, CITY OF FORT WORTH, CITY OF DALLAS, CHESAPEAKE EXPLORATION, L.L.C., LADA INVESTMENTS, LLC, CALLEJO ENERGY L.L.C, FIRST PRESTON INVESTMENTS, L.L.C., FORTY-FOUR ENERGY, LP, ICC ENERGY CORPORATION, MARGOLF, INC., SLNJG INVESTMENTS, LLC, S.B.DIKE, LTD., Defendants. DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD, CITY OF FORT WORTH, and CITY OF DALLAS, Realigned Plaintiffs, VS. CHESAPEAKE EXPLORATION, LLC Realigned Defendant. 4 4 4 3 CI /7 17-0 IN THE DISTRICT COURT 153 "" JUDICIAL DISTRICT TARRANT COUNTY, TEXAS FINAL SETTLEMENT AGREEMENT This Final Settlement Agreement (the "Agreement") is executed on the one hand by Dallas/Fort Worth International Airport Board, City of Fort Worth and City of Dallas (collectively "DFW"), and on the other hand by Chesapeake Exploration, L L.C. 932780 12-26-12 P1 ("Chesapeake"). Additionally, Chesapeake is seeking the consent and agreement of SP DFW, LLC (as successor -in -interest to Paz Energy, LLC), LADA Investments, LLC, Callejo Energy L.L.C., First Preston Investments, L.L.C., Forty -Four Energy, LP, ICC Energy Group, LLC (as successor -in -interest to ICC Energy Corporation), Margolf, Inc., SLN.JG Investments, LLC, Catalina C. Productions, Inc. S.B. Dike, Ltd., CL PAZ, LP, and Petro Capital IX, LP (collectively "M/WBE Working Interest Owners"), and Total E&P USA, Inc. ("Total"; collectively, Total and the M/WBE Working Interest Owners will be referred to as the "Working Interest Owners"). DFW, Chesapeake, and any Working Interest Owners who execute both this Agreement and the Lease Amendment (as defined below) (collectively, the "Consenting Working Interest Owners") are sometimes referred to herein collectively as the "Parties" and individually as a "Party." This Agreement is effective as of the date stated below. I. Recitals. A. DFW and Chesapeake entered into the Oil and Gas Lease effective October 5, 2006 (the "Lease"). B. DFW and Chesapeake disagreed as to whether Chesapeake was properly paying royalties to DFW under the Lease (the "Royalty Claims"). B. As a result of these and other disputes, DFW filed claims against Chesapeake in Cause No. 153-237052-09; Dallas/Fort Worth Intl Airport Board, et al. v. Chesapeake Exploration, LLC; in the 153`d District Court, Tarrant County, Texas (the "Lawsuit"). C. The Parties previously resolved their disputes related to the so-called Retained Tract Claims asserted by DFW in the Lawsuit as evidenced by their Partial Settlement and Release Agreement dated April 16, 2012, and the related Ratification, Amendment and Revivor of Paid -Up Oil and Gas Lease. 2 932780 D. As a result of thorough discussions and negotiations, DFW, Chesapeake, and any Consenting Working Interest Owners have determined that it is in their best interests to resolve the remaining disputes between them on the terms and conditions set forth in this Agreement. II. Settlement Provisions. NOW, THEREFORE, for the consideration stated in this Agreement, the receipt and sufficiency of which is hereby acknowledged by each of the Parties, it is agreed as follows: A. Consideration. 1. In consideration of this Agreement, the Parties will execute the Second Ratification, Amendment and Revivor of Paid -Up Oil and Gas Lease attached hereto as Exhibit A (the "Lease Amendment") contemporaneously with the execution of this Agreement. 2. In further consideration of this Agreement, Chesapeake, as operator of the Lease and on behalf of itself and the Working Interest Owners will pay, or cause to be paid, to DFW five million and 00/100 dollars ($5,000,000.00) (the "Payment"). The first one-half of the Payment shall be due five (5) days after the Closing, which shall mean the date DFW obtains the last necessary signatures on the Lease Amendment (as defined below) and Chesapeake has received those signatures. The second one-half of the Payment shall be due forty-five (45) days after the Closing. 3. In further consideration of this Agreement, at Closing, DFW will consent in writing to Chesapeake's partial leasehold assignment to Total E&P USA, Inc. ("Total") of the Lease as amended, restated and revived if Total ratifies this Agreement with respect to its undivided working interest in the Lease The required form of DFW consent is attached hereto as Exhibit B. 3 932780 4. In further consideration of this Agreement, and notwithstanding any prior assumptions of joint and several liability under the Lease, each M/WBE Working Interest Owner who executes or ratifies the Agreement and agrees to reimburse Chesapeake within thirty (30) days after Closing for such M/WBE Working Interest Owner's proportionate share (based upon such M/WBE's fractional working interest ownership in the Lease) of the Payment shall not be jointly and severally liable to DFW for past or future obligations under the Lease and instead shall only be liable to DFW for obligations under the Lease in proportion to its leasehold working interest ownership in the Lease, retroactive to the effective date of such Consenting Working Interest Owner's acquisition of a leasehold working interest in the Lease In furtherance of this agreement, the Parties agree to execute (and Chesapeake shall record) an instrument in the form attached hereto as Exhibit C as to each M/WBE Working Interest Owner who executes this Agreement and agrees to reimburse Chesapeake for its proportionate share of the Payment. Chesapeake shall remain jointly and severally liable for all obligations arising under the Lease, including the payment of royalties. However, if there are Working Interest Owners that do not consent to this Agreement and the Lease Amendment, DFW covenants and agrees not to sue Chesapeake for any alleged non-compliance by the non -consenting Working Interest Owner(s) with respect to the royalty valuation obligations under the Lease, as originally drafted (to the extent such obligations differ from or are in addition to the obligations under the Lease, as amended), such that Chesapeake's joint and several royalty obligation shall be limited to that which is required by this Agreement and the Lease, as amended by the Lease Amendment. 5. In further consideration of Chesapeake's promises and covenants stated herein, DFW jointly, severally and completely RELEASES and forever discharges each and all 4 932780 of the Chesapeake Releasees, as defined below, from any and all past or present claims, rights, damages, costs, benefits, expenses and compensation of any nature whatsoever, whether based upon tort, contract, statute, common law or any other theory or basis of' recovery, and whether for compensatory, statutory or exemplary damages or for equitable relief, which DFW holds, in any way related to the Royalty Claims or the payment of royalties generally, whether known or unknown, asserted or unasserted, up to and including payments due in connection with production from the Lease through June 2012. This release shall include any and all of DFW's claims for monetary damages or otherwise arising out of royalties relating to production occurring during or before June 2012. This is intended to be a general release providing the Chesapeake Releasees the greatest protection allowable under the law as to the Royalty Claims or the payment of royalties generally. Notwithstanding anything to the contrary in this Agreement, this Release shall in no way affect any of Chesapeake's rights or defenses as to any royalty dispute related to production occurring on the Lease after June 2012. 6. In further consideration of DFW's promises and covenants stated herein, Chesapeake and the Consenting Working Interest Owners jointly, severally and completely RELEASE and forever discharge each and all of the DFW Releasees, as defined below, from any and all past or present claims, rights, damages, costs, benefits, expenses and compensation of any nature whatsoever, whether based upon tort, contract, statute, common law or any other theory or basis of recovery, and whether for compensatory, statutory or exemplary damages or for equitable relief, which Chesapeake and/or the Consenting Working Interest Owners hold, in any way related to the Royalty Claims or the payment of royalties generally, whether known or unknown, asserted or unasserted, up to and including payments due in connection with production from the Lease through June 2012. This release shall include any and all of 5 932780 Chesapeake's and the Consenting Working Interest Owners' claims for monetary damages or otherwise arising out of royalties relating to production occurring during or before June 2012. This is intended to be a general release providing the DFW Releasees the greatest protection allowable under the law as to the Royalty Claims or the payment of royalties generally. Notwithstanding anything to the contrary in this Agreement, this Release shall in no way affect any of DFW's rights or claims as to any royalty dispute related to production occurring on the Lease after June 2012. 7. As used in this Agreement, the Chesapeake Releasees are defined as follows: A. Chesapeake; B. All agents, employees, shareholders, directors, officers, fiduciaries, attorneys or other representatives of Chesapeake; and C. All subsidiaries, parent corporations, affiliated entities or sister corporations of Chesapeake or any of their successors or assigns that have in any way conducted any activity or that have been requested to have had any activity associated with the Lease, that serves as the basis of the above -referenced the Lawsuit; and D. All Working Interest Owners, or their predecessors and successors in interest and all agents, employees, shareholders, directors, officers, fiduciaries, attorneys or other representatives of the Working Interest Owners and their predecessors and successors in interest. The term "Chesapeake Releasees" shall be construed as broadly as possible to include all of the foregoing named or described persons or entities, 8. As used in this Agreement, the DFW Releasees are defined as follows: A. DFW; and All agents, employees, officers, fiduciaries, attorneys, board members, council members or other representatives of DFW. 6 932780 The term "DFW Releasees" shall be construed as broadly as possible to include all of the foregoing named or described persons or entities. 9. As additional consideration for this Agreement, DFW shall ensure that the Lawsuit is dismissed with prejudice, whether by request or voluntary nonsuit with prejudice, which shall be filed within five (5) business days of the date Chesapeake pays DFW the full Settlement Payment contemplated by Paragraph IV.A.2 above. 10. Other than as modified herein or by the Lease Amendment, the terms of the Lease as previously ratified, amended, and revived remain in effect. B. Warranty of Canacity to Execute Agreement and Release. Each Party represents and warrants that it has the full legal right, capacity and authority to sign this Agreement and to make the promises, representations and warranties contained herein. Each Party further represents that it has not sold, assigned, transferred, conveyed or otherwise disposed of any of the rights, claims, demands, obligations or causes of action referred to in this Agreement and/or the attached Lease Amendment. C. Binding Effect. This Agreement shall be binding upon execution by Chesapeake and DFW. The Agreement shall further bind any Consenting Working Interest owner who executes the Agreement at Closing or within five (5) days after Closing. The failure of any Working Interest Owner to execute this Agreement and the Lease Amendment shall not render this Agreement ineffective as to DFW, Chesapeake, and any Consenting Working Interest Owner(s). D. Successors and Assigns Bound. This Agreement shall bind and benefit each Party's heirs, successors, predecessors, agents, employees, representatives, counsel, owners, directors, partners, shareholders, insurers, assigns, subsidiaries, board members, council 7 932780 members, parent corporations, affiliated entities or sister corporations, as the case may be, and all others claiming an interest in the Lease, or the lands covered by the Lease by, through or under such Party E. Severability. Should any of the provisions herein be determined to be invalid by a court of competent jurisdiction, it is agreed that this shall not affect the enforceability of any other provision herein and that the Parties shall renegotiate in good faith that provision so determined to be invalid to effectuate the purpose of and to conform to the law regarding such provision. In the event the Parties are unable to renegotiate the provision, they hereby waive a jury such that the issue shall be resolved, if at all, by a court in Tarrant County, Texas. F. Controlling Law. This Agreement is entered into in Texas and shall be construed, interpreted and enforced in accordance with Texas law without reference to choice -of - law rules. This Agreement is performable in whole or in part in Tarrant County, Texas. The parties waive their right to a jury trial concerning this Agreement. Thus, all disputes concerning this Agreement shall be tried to the court G. Integration. Each Party expressly acknowledges and agrees that this Agreement is fully integrated, it represents the entire understanding of the Parties with respect to the subject matter hereof, there are no other agreements, representations, promises or negotiations that have not been expressly embodied herein and this Agreement supersedes any and all prior agreements with respect to the subject matter hereof. H. Modification in Writing. The Parties agree that this Agreement may be amended or modified only by a writing executed by the Party to be charged with the modification. 8 932780 I. Independent Leeal Advice. Each Party acknowledges and represents that it has received independent Iegal advice and has not relied upon any representations of any other Party or its agents, employees, representatives or counsel on any subject contained in this Agreement or otherwise, other than as expressly set forth in this Agreement. J. No Admissions. This Agreement is entered into for the purpose of buying peace and settling doubtful and disputed claims. By entering into this Agreement, no Party acknowledges, but instead denies liability. K. Captions. The paragraph titles appearing in this Agreement are for convenience only and shall not by themselves determine the construction of this Agreement. L. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of' which shall constitute one and the same instrument. M. Terms to be Read in Context. Singular and plural terms, as well as terms stated in the masculine, feminine or neuter gender, shall be read to include the other(s) as the context requires to effectuate the full purposes of this Agreement. EACH PARTY FURTHER STATES THAT IT HAS CAREFULLY READ THIS AGREEMENT; THAT THIS AGREEMENT HAS BEEN FULLY EXPLAINED TO IT BY COUNSEL OF ITS CHOICE; THAT IT FULLY UNDERSTANDS THE FINAL AND BINDING EFFECT OF THIS AGREEMENT; THAT THE ONLY PROMISES MADE TO IT TO SIGN THIS AGREEMENT ARE THOSE STATED ABOVE; AND THAT IT IS SIGNING THIS AGREEMENT VOLUNTARILY. 9 932780 EXECUTED to be effective as of this • day of io L C P , 2012, which date is the date upon which the last of the DFW entities and Chesapeake execute this Agreement. SIGNATURE PAGES FOLLOW 10 932780 DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD By: Name. effrey P. Fegan Its: Chief Executive Officer CITY OF FORT WORTH BY: 43/487400a00014 COL Name: 'Fe'ltin,kQu DO 0.06% Its: SS -CA)\rr �U MS\-)\i C91C6t LEGAL .I UNSEL, DFW AIR Attested by; CITY OF DAL By: Name: 46�# fr/LALW Its: 1 CHESAPEAKE EXPLORATIQ, L.L.C. By: eter Its: Senior Vice President — Land and Legal 932780 /"14- Assistant City Attorney Approved Thornas By egality; `I A C Mont* Name: Henry J. HooLY Working Interest Owners (anv of whom have so executed being a Consenting Working Interest Owner): SP DFW, LLC By: Name: David F. Steinmetz Its: Authorized Signatory LADA INVESTMENTS, LLC By: Name: Guillermo Perales Its: CEO/Manager CALLEJO ENERGY LLC By: Name: William Callejo Its: President FIRST PRESTON INVESTMENTS, LLC By: Name: Nancy Tartaglino Richards Its: Manager 12 932780 FORTY-FOUR ENERGY, LP By: FORTY FOUR MANAGEMENT L.L.C., Its General Partner By: Name: Orlando Salazar Its: Manager ICC ENERGY CORPORATION By: Name: Karl Butler Its: President MARGOLF, INC. By: Name: Martha V Leonard Its: President SLNJG INVESTMENTS, LLC By: Name: Shirlee J. Gandy Its: President CATALINA C. PRODUCTIONS, INC. By: Name: Catherine L. Brittingham Its: President 13 932780 S.B. DIKE, LTD. By: Name: Sara Dike Its: President CL PAZ, LP By: Crestline Management, LP Its Investment Manager By: Name: Caroline Cooley Title: Vice President of Crestline Management, LP Its General Partner PETRO CAPITAL IX, LP By: Petro Capital Management, IX, LLC, Its General Partner By: Name: Rosser Newton Its: Managing Member TOTAL E&P USA, INC. By: Name: Its: 14 932780 NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER SECOND RATIFICATION. AMENDMENT AND REVIVOR OF PAID -UP OIL AND GAS LEASE STATE OF TEXAS § COUNTY OF TARRANT § COUNTY OF DALLAS § KNOW ALL MEN BY THESE PRESENTS: This Second Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease ('Amendment") is executed by the Dallas/Fort Worth International Airport Board ("the Board"), the City of Dallas and the City of Fort Worth (hereafter collectively called "Lessor"), Chesapeake Exploration, L.L.C., the address of which is P. O. Box 18496, Oklahoma City, Oklahoma 73154-0496 ("Lessee"), and the working interest assignees whose names and addresses are listed herein and whose signatures appear below for the purposes and considerations hereinafter expressed. WHEREAS, Lessee is the current owner of an undivided interest in and under that certain oil and gas lease (the "Lease") dated October 5, 2006, from Lessor, a Memorandum of which is recorded as document number D206319462, D.R.T C. and as document number 200600378053 of the D.R.D C. covering the following property to wit: All of the lands described in Exhibit A to this Amendment (the "Land") WHEREAS, the following parties have been conveyed and presently own the respective undivided working/leasehold interests in the aforementioned Lease (together with Lessee, these leasehold working interest assignees shall be collectively referred to herein as the 'Leasehold Working Interest Owners"): Assianees: Working Interest: LADA Investments, LLC 7750 N. MacArthur Blvd# 120-211 Irving Texas 75063 SP DFW, LLC (as successor -in -interest to Paz Energy, LLC) c/o Silver Point Finance LLC Two Greenwich Plaza, 1st Floor Greenwich Connecticut 06860 ATTN. Hares Sheikh 1.00% 9.92255242% • • Exhibit A • CL PAZ, L.P. (as successor -in -interest to Paz Energy, LLC) c/o Crestline Investors, Inc. 201 Main Street, Suite 1900 Fort Worth, Texas 76102 ATTN: Curti. Futch Petro Capital IX, LP (as successor -in -interest to Paz Energy, LLC) 3838 Oak Lawn Avenue, Suite 1775 Dallas, Texas 75219 ATTN: Ali Mirza Callejo Energy, LLC 4314 N. Central Expressway Dallas, Texas 75206 First Preston Investments, LLC 5040 Addison Circle, Suite 400 Addison, Texas 75001 Forty -Four Energy, LP 1401 McKinney #2222 Houston, Texas 77010 ICC ENERGY GROUP, LLC (as successor -in -interest to ICC Energy Corporation) 208 N N. Market Suite 300 Dallas, Texas 75202 Margolf, Inc. 2120 Ridgmar Blvd., Suite 14 Fort Worth, Texas 76116 SLNJG Investments, LLC 1401 Jones Street #205 Fort Worth, Texas 76102 S.B Dike, Ltd. 3200 West 4th Street Fort Worth, Texas 76107 930355 0.77654758% 0.3309% 0.52% 3.00% 1.01% 1.01% 0.35% 1.00% 1.00% Page 2 of 10 Catalina C. Productions, Inc. 6729 Lakewood Blvd. Dallas, Texas 75241 Total E&P USA, Inc. 1201 Louisiana, Suite 1800 Houston, Texas 77002 0.25% 19.3325% WHEREAS, the Lease has been previously amended by Lessor and the Leasehold Working Interest Owners, by that certain Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease, Memorandum of which is recorded as document number D212122508 D.R.T.C. and as document number 201200147391 of the D.R D.0 WHEREAS, Lessor and the Leasehold Working Interest Owners now desire to amend the Lease as hereinafter set forth. 1. Paragraph 4 of the Lease is hereby replaced with the following: 4. Royalty. (a) Lessor has directed Lessee to make specified deliveries and payments to the Board and has authorized the Board to make certain elections. Accordingly, as royalties Lessee agrees: (1) To deliver free of cost to the Board, at the well(s) or to the credit of the Board, at the pipeline to which the well(s) may be connected twenty-five percent (25%) (the "Royalty Fraction") of all oil and other liquid hydrocarbons produced and saved from the Land. At the Board's option, which may be exercised from time to time Lessee shall pay to the Board the Royalty Fraction of the market value at the well of oil and other liquid hydrocarbons of like grade and gravity prevailing on the day the oil and other hydrocarbons are run from the lease in the general area in which the Land is located. (2) To deliver free of cost to the Board, at the well(s) or to the credit of the Board, at the pipeline to which the well(s) may be connected, the Royalty Fraction in kind of gas produced and saved from the Land or, at the Board's option, which may be exercised from time to time, Lessee shall pay to the Board: (i) On gas produced from the Land and sold by Lessee or used on or off the Land and to which the following subparagraphs (ii) and (iii) do not apply, the Royalty Fraction of the market value of the gas at the point of sale, use, or other disposition. (ii) On gas produced from the Land that is processed in a processing plant In which Lessee or an affiliate of Lessee has a direct or indirect interest, the higher of the Royalty Fraction of the market value of the gas at the inlet to the processing plant, or the Royalty Fraction of the market value of all processed liquids saved from the gas at the plant plus the Royalty Fraction of the market value of all residue gas at the point of sale, use, or other disposition. (iii) On gas produced from the Land that is processed in facilities other than a processing plant in which Lessee or an affiliate of Lessee has a direct or indirect interest, the Royalty Fraction of the market value at the inlet to the processing plant of all Page 3 of 10 930355 processed liquids credited to the account of Lessee and attributable to the gas plus the Royalty Fraction of the market value of all residue gas at the point of sale, use, or other disposition (iv) In order to verify royalty is being paid on the correct volumes, the volume of gas produced from the Land shall be measured using a meter meeting or exceeding the standards established by the American Gas Association report 3. All gas produced from the Land shall be measured before it is commingled with gas attributable to acreage other than the Land, except as it relates to gas produced from a pooled unit in accordance with the provisions of paragraph 8 (3) In the event the Board elects to take its Royalty Fraction in kind, the parties shall enter into a mutually acceptable balancing agreement providing for the nght of an underproduced party to make up an imbalance by taking up to one hundred fifty percent (150%) of its share of production in any month other than November, December, January or February and shall settle any imbalance remaining after depletion in cash, based on the greater of the proceeds received by the overproduced party when the imbalance was created and the market value of the gas when the imbalance was created. If the overproduced party s gas was used but not sold, then the cash settlement shall be based on the market value of the gas when the imbalance was created (b) The market value of oil shall be determined in accordance with the terms of the original Lease pnor to amendment. The market value of gas shall be determined by reference to the gross heating value (measured in British thermal units) of the gas. No matter which subparagraph of this paragraph 4 is used to calculate royalty, the market value used in the calculation of gas royalty (the "Market Value Price") shall be the higher of (a) the first of the month Index Price for Natural Gas Pipeline Co. of America — Texok Zone as published in Platt's Inside FERC's Gas Market Report (the "Index Price") minus $0,35/MMBtu (referred to as the "Adjusted Index Price") or (b) Lessee's Net Proceeds, defined below in Paragraph 4(c) In the event that the Index Pnce is $5.00 per MMBtu or more (the "Price Hurdle") for three consecutive months, the Adjusted Index Price shall become the Index Price minus $0.225/MMBtu for gas produced and sold in the immediately following month and in each month thereafter until the Price Hurdle is not reached for three consecutive months (the end of the third consecutive month in which the Price Hurdle is not met being referred to as the °Price Hurdle Termination"). For example, if the first of the month Index Price for March 2013, Apnl 2013, and May 2013 is $5.00/MMBtu in each month then beginning with June 2013 production, the Adjusted Index Price will be the June 2013 Index less $0 225/MMBtu. If Price Hurdle Termination occurs the Adjusted Index Price shall thereafter be the Index Price minus $0.35/MMBtu until the Price Hurdle is again attained, subject to future Price Hurdle Termination. Royalty shall be payable on gas produced from the Land and consumed by Lessee on the Land for compression, dehydration, fuel, or other use. (c) "Net Proceeds" shall mean the actual proceeds received by Lessee for the sale of Lessor's gas less only actual third -party, non-affiliated transportation costs incurred by Lessee to move gas produced from the Land from the boundary of the Land to a downstream point of sale, whether (a) such costs are paid directly by Lessee, or by an affiliate of Lessee, to an unaffiliated third party or (b) such costs are netted out of the price paid to Lessee for gas produced from the Land. Net Proceeds shall never include a deduction for any costs incurred on the Land or related to Lessee's or its affiliate s firm transportation commitments not actually being used to transport gas produced from the Land. The foregoing language shall not be deemed surplusage under Heritage Resources, Inc. v. NationsBank, 939 S W.2d 118 (Tex. 1996). (d) The Board shall be paid the Royalty Fraction of all payments and other benefits made under any oil or gas sales contract or other arrangement, including take -or -pay payments and payments received in settlement of disputes; provided that if the Board receives a take -or - pay payment or similar payment for gas that has not been produced, and if the gas is subsequently produced, the Board will only receive its Royalty Fraction of any payments made for make-up gas taken pursuant to the take -or -pay provision or similar provision. Page 4 of 10 930355 (e) In the event the Index Price ceases to be published, it shall be replaced by using the average price of the two published first of the month indices that were, on average, closest in price to the Index Price over the last six months that the Index Price was published from the following list: Platt's Gas Daily (I) El Paso, Permian (ii.) Waha, (iii.) Transwestern, Permian, (iv.) Carthage Hub, (v.) Tx. Eastern, ETX, (vie) Tx. Gas zone 1, (vii.) Houston Ship Channel, (viii.) Katy, (ix.) ANR, La. and (x.) Henry Hub. In the event a replacement index ceases publication the preceding process shall be used to select an additional replacement price. (f) As used in this section "affiliate" means (i) a corporation joint venture partnership or other entity that owns more than ten percent (10%) of the outstanding voting interest of Lessee or in which Lessee owns more than ten percent (10%) of the outstanding voting interest; or (ii) a corporation, joint venture, partnership, or other entity in which, together with Lessee, more than ten percent (10%) of the outstanding voting interests of both Lessee and the other corporation, joint venture, partnership, or other entity is owned or controlled by the same persons or group of persons. (g) In the event the Board does not elect to take its Royalty Fraction in kind, Lessee must disburse or cause to be disbursed to the Board its royalty on production from a particular well not later than ninety (90) days after completion of the well in the case of an oil well, or after the pipeline connection in the case of a gas well. Thereafter Lessee must disburse or cause to be disbursed to the Board Its royalty on production by the last day of the second month after the month of production If not paid when due, Lessor's royalty shall bear interest at the maximum lawful rate from the due date until paid to the Board, which amount Lessee agrees to pay. Acceptance by the Board of royalties that are past due shall not act as a waiver or estoppel of the right to receive interest due thereon unless the Board expressly so provides in writing signed by the Board The royalty payment obligations under this Lease shall not be affected by any division order or the provisions of Section 91.402 of the Texas Natural Resources Code or any similar statute. (h) The receipt by Lessee from a purchaser or a pipeline company of proceeds of production for distribution to the Board will not result in Lessee acquiring legal or equitable title to those proceeds, but Lessee shall at all times hold the proceeds in trust for the benefit of Lessor, to be paid to the Board. Notwithstanding the insolvency, bankruptcy, or other business failure of a purchaser of production from the Land or a pipeline company transporting production from the Land, Lessee shall remain liable for payment to the Board as directed by Lessor for and agrees to pay to the Board, all royalties due the Board as directed by Lessor together with interest if not timely paid. (i) For production occurring in the months of July 2012 through December 2012, Lessor shall receive $60,000.00 in additional royalty per month (the "Pace Guarantee") as compared to what Lessor would have received had royalties been calculated and paid based upon the proceeds received from Louis Dreyfus Energy Services, LP ("Dreyfus") for sales at Atmos Line W (the "Dreyfus Proceeds"). In the event gas produced from the Land ceases to be sold to Dreyfus in this manner, then paragraph 4(i)(2) shall apply. (1) To determine whether the Price Guarantee is satisfied in a particular month, Lessee shall compare the calculated royalty amount based upon the Market Value Price (the "Market Value Royalty Amount) to the calculated amount of royalty that would have been owed had royalties been calculated based upon Dreyfus Proceeds (the "Baseline Royalty Amount"). If in any month the Market Value Royalty Amount does not exceed the Baseline Royalty Amount by $60,000, Lessee shall make an additional compensatory royalty payment to make up the difference between (a) $60,000 and (b) the amount by which the Market Value Royalty Amount exceeds the Baseline Royalty Amount if any. For example, if the Market Value Royalty Amount for a particular month is $40,000.00 more than the Baseline Royalty Amount, then Lessee shall make an additional payment of $20,000.00 to Lessor for that month. Additionally, if in any month Page 5ofl0 930355 Lessee is selling gas produced from the Lease to Dreyfus at Atmos Line W and the Baseline Royalty Amount calculated based upon the Dreyfus Proceeds exceeds the Market Value Royalty Amount, then Lessee shall make an additional payment to Lessor of $60,000.00 for that month. In no event however, shall Lessee ever owe Lessor a payment under this subparagraph 40) in excess of $60,000 for any single month, it being specifically recognized, however, that any monthly payment under this subparagraph 4(1) (and the $60,000 limitation on such payment) shall be in addition to, and not a limitation on the monthly royalty payments owed under other provisions of this paragraph 4, as amended. (2) In the event that Lessee ceases selling gas to Dreyfus at Atmos Line W, the published Carthage daily midpoint price less $0.65 per MMBtu on a weighted average basis for all gas sold in the month shall be used in lieu of the Dreyfus Proceeds to determine whether the Price Guarantee is satisfied for the months contemplated by this paragraph 40). 2. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective heirs, successors and assigns, and may be executed in any n umber of multiple counterparts, each of which shall have the same force and effect as an o riginal instrument executed by all of the undersigned parties, regardless of whether such counterpart is executed prior to or subsequent to the date hereof or the filing of record of a counterpart hereof. The failure of any Leasehold Working Interest Owner to execute a counterpart shall not render this Amendment ineffective as to (a) those Leasehold Working Interest Owners executing this Amendment, or (b) Lessor. 3. The Lessor hereby grants and leases the Land to the Lessee on the terms and conditions set forth in the Lease, as amended hereby, and the Lessor hereby (to the extent n ecessary) revives, adopts, ratifies and confirms the Lease as amended hereby (and as amended previously), and agrees that the Lease, as amended hereby (and as amended previously) is a valid and subsisting lease in full force and effect in accordance with its terms and provisions, as amended. 4. It is further understood and agreed by all parties hereto that the provisions contained herein shall supersede any provision to the contrary in said Lease described herein, however in all other respects, said Lease, as previously amended, and the prior provisions thereto, shall remain in full force and effect. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lessor does hereby revive, adopt, ratify, and confirm said Lease (as amended), and grant, demise and let the Land unto the Leasehold Working Interest Owners, subject to and in accordance with all of the terms and provisions of said Lease as amended herein (and as previously amended). Page 6 of 10 930355 EXECUTED on the date(s) indicated below, but effective as of the 1st day of July, 2012. LESSOR: DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD By: Jeffrey P. Fegan, Chief Executive Officer Date: CITY OF DALLAS By: , City Manager Date: CITY OF FORT WORTH By: Date: 930355 , City Manager Page 7 of 10 LESSEE: • CHESAPEAKE EXPLORATION L.L.C., an Oklahoma limited liability company By: Henry J. Hood, Senior Vice President — Land and Legal LESSEE/WORKING INTEREST ASSIGNEES: SP DFW, LLC LADA INVESTMENTS, LLC By: By Name. David F. Steinmetz Name: Guillermo Perales Its: Authorized Signatory Its: CEO/Manager CALLEJO ENERGY LLC FIRST PRESTON INVESTMENTS, LLC By; By Name: William Callejo Name: Nancy Tartaglino Richards Its: Manager/Member Its: Manager FORTY-FOUR ENERGY LP ICC ENERGY GROUP, LLC By: Forty Four Management, L.L.C., Its: General Partner By: Name, Orlando Salazar Its: Manager By Name. Karl Butler Its: Manager MARGOLF, INC. SLNJG INVESTMENTS, LLC By By Name. Martha V. Leonard Name: Shirlee J. Gandy Its: President Its: President Page 8 of 10 930355 S.B. DIKE, LTD. CATALINA C PRODUCTIONS, INC. By: By Name: Sara Dike Name. Catherine L. Brittingham Its: President, Dike Management, LLC, Its: President General Partner CL PAZ, LP. By: Crestline Management, LP Its: Investment Manager PETRO CAPITAL IX, LP By: Petro Capital Management, IX, LLC, Its: General Partner By By Name. Caroline Cooley, Vice President, Name. Rosser Newton Crestline Investors Inc., Its: Managing Member Its: General Partner TOTAL E&P USA, INC., a Delaware corporation By. Name: Its: Page 9 of 10 930355 EXHIBIT "A" to Ratification. Revivor. and Amendment of Paid Up Oil and Gas Lease 18,460.67 acres, more or Tess as described in that certain Memorandum of Lease dated October 5, 2006 by and between Dallas/Fort Worth International Airport Board et al as Lessor and Chesapeake Exploration Limited Partnership as Lessee filed as Document No. D206319462 in the Deed Records of Tarrant County, Texas and as Document No. 200600378053 in the Deed Records of Dallas County. Page 10 of 10 930355 LESSOR'S CONSENT TO ASSIGNMENT OF LEASE WHEREAS, the City of Dallas, the City of Fort Worth, and the Dallas/Fort Worth International Airport Board (collectively 'Lessor') granted a Paid up Oil and Gas lease to Chesapeake Exploration, L. P. covering the Dallas/Fort International Airport dated October 5 2006 ("the Lease"); and WHEREAS, Chesapeake Exploration, LLC (successor -in -interest to Chesapeake Exploration, L. P) (' Lessee") has assigned an undivided 19.3325% fractional leasehold working interest in the Lease to Total E & P USA, Inc. ("Assignee") in that certain Assignment, Bill of Sale and Conveyance, dated September 13 2010 but effective October 1, 2009 and recorded in Dallas County as entry number 201100051383 and in Tarrant County as entry number D211047364 (the "Assignment") and the Airport Board has the authority on behalf of Lessor to consent to said Assignment: NOW THEREFORE, in consideration of the mutual covenants set forth herein, Lessor hereby consents to Lessee's assignment to Assignee of a portion of Lessee's undivided leasehold working interest in the Lease, notwithstanding any prohibitions against such assignments contained in the Lease, subject to the following conditions; 93278I 1. Assignee hereby assumes the duty to perform all of Lessee's obligations pursuant to the lease both monetary and non -monetary, and assumes its proportional legal liability for failure to perform any such obligation. Assignee shall not be jointly and severally liable to Lessor for past or future obligations under the lease and instead shall only be liable to Lessor for obligations under the lease in proportion to Assignee's leasehold working interest ownership in the lease, beginning on the effective date of Assignee's acquisition of an interest in the Lease. This consent does not constitute a release of Lessee s obligations and liability thereunder, and does not constitute a release of the obligations and liability of any guarantors. 2. Assignee acknowledges that it has received and read all documents constituting or concerning the Lease, that it is fully aware of all rights and obligations being assumed herein, and that it has not received and is not relying upon any representations, verbal or otherwise which contradict or supplement the written terms of the Lease. 3. Lessee and Assignee acknowledge and represent that they are not owned or controlled by the same real -parties -in -interest. However, Lessor may rely on Exhibit B • the actions, directives, and representations of Lessee as being authorized by Assignee. 4. The parties hereto acknowledge that all terms of the Lease, as amended by that certain Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease and by that certain Second Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease, remain in effect, including without limitation the prohibition against assignments or subleases thereof (except as to the specific assignment referenced herein) All terms of the Lease are incorporated herein by reference. This consent is effective as of October 1, 2009. DALLAS/FORT WORTH INTERNATIONAL APPROVED AS TO FORM: AIRPORT BOARD By: Jeffrey P. Fegan, Chief Executive Officer Board ACKNOWLEDGMENTS STATE OF TEXAS COUNTY OF DALLAS By: Legal Counsel, DFW Airport This instrument was acknowledged before me on this day of , 2012, by Jeffrey P. Fegan, Chief Executive Officer of the Dallas/Fort Worth Intemational Airport Board, to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such board, for the uses and purposes therein set forth, on behalf of said board. Notary Public in and for the State of Texas 2 932781 CHESAPEAKE EXPLORATION, L.L.C. An Oklahoma Limited Liability Company By: Chesapeake Operating, Inc., General Partner By: Henry J. Hood, Sr. Vice President —Land & Legal STATE OF OKLAHOMA § COUNTY OF OKLAHOMA § This instrument was acknowledged before me on this day of , 2012, by Henry J. Hood, Senior Vice President - Land and Legal of Chesapeake Exploration, L LC , to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such Iim'ted liability company, for the uses and purposes therein set forth, on behalf of said limited liability company. Notary Public in and for the State of Oklahoma 3 932781 TOTAL E&P USA, Inc. By: Name: Title: Date: STATE OF COUNTY OF This instrument was acknowledged before me on this day of , 2012, by , ,, of Total E&P USA, Inc , to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such corporation, for the uses and purposes therein set forth, on behalf of said corporation. Notary Public in and for the State of 4 932781 EXHIBIT C Form of Amended Consent, MWBE Working Interest Owners LESSOR'S AMENDED CONSENT TO ASSIGNMENT OF LEASE WHEREAS, the City of Dallas, the City of Fort Worth, and the Dallas/Fort Worth International Airport Board (collectively 'Lessor') granted a Paid up Oil and Gas lease to Chesapeake Exploration, L. P. ("Lessee") covering the Dallas/Fort International Airport dated October 5, 2006, a Memorandum of which is recorded as document number D206319462, D.R.T.C. and as document number 200600378053 of the D.R.D.C. ('the Lease"); WHEREAS, Lessee or a successor -in -interest to Lessee with respect to some or all of the leasehold working interest in the Lease has assigned to [INSERT M/WBE WORKING INTEREST OWNER NAME HERE] ("Assignee") an undivided fractional leasehold working interest in the Lease (the "Assignment"); WHEREAS, the Airport Board has the authority on behalf of Lessor to consent to assignments of the Lease; WHEREAS, this Amended Consent to Assignment of Lease ("the Amended Consent") is intended to confirm Lessor's consent to the Assignment and to supersede and replace any consent to the Assignment which may have been previously executed by the Airport Board: NOW THEREFORE, in consideration of the mutual covenants set forth herein, Lessor hereby consents to Lessee's assignment to Assignee of a portion of Lessee's undivided leasehold working interest in the Lease, notwithstanding any prohibitions against such assignments contained in the Lease, subject to the following conditions; 932523 1. Assignee hereby assumes the duty to perform all of Lessee's obligations pursuant to the lease, both monetary and non -monetary, and assumes its proportional legal liability for failure to perform any such obligation. Assignee shall not be jointly and severally liable to Lessor for past or future obligations under the lease and instead shall only be liable to Lessor for obligations under the lease in proportion to Assignee's leasehold working interest ownership in the lease, beginning on the effective date of Assignee's acquisition of an interest in the Lease. This consent does not constitute a release of Lessee s obligations and liability thereunder, and does not constitute a release of the obligations and liability of any guarantors. 2. Assignee acknowledges that it has received and read all documents constituting or concerning the Lease, that it is fully aware of all rights and obligations being assumed herein, and that it has not received and is not relying upon any representations, verbal or otherwise, which contradict or supplement the written terms of the Lease. 3. Assignee and Chesapeake Exploration, LLC ("Chesapeake"), the owner of a majority of the undivided leasehold working interest in and operator of the Lease, both acknowledge and represent that they are not owned or controlled by the same real -parties -in -interest. However, Lessor may rely on the actions, directives, and representations of Lessee as being authorized by Assignee. 4. The parties hereto acknowledge that all terms of the Lease, as amended by that certain Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease and by that certain Second Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease, remain in effect, including without limitation the prohibition against assignments or subleases thereof (except 2 932523 as to the specific assignment referenced herein). All terms of the Lease are incorporated herein by reference. 5. This Amended Consent shall supersede and replace any consent to the Assignment previously executed by the Airport Board. This Amended Consent may be executed in any number of multiple counterparts, each of which shall have the same force and effect as an original instrument executed by all of the undersigned parties, regardless of whether such counterpart is executed prior to or subsequent to the date hereof and is effective as of the date Assignee first acquired its leasehold working interest ownership in the Lease. 3 932523 DALLAS/FORT WORTH INTERNATIONAL APPROVED AS TO FORM: AIRPORT BOARD By: By: Legal Counsel, DFW Airport Board Jeffrey P. Fegan, Chief Executive Officer STATE OF TEXAS § § COUNTY OF DALLAS § This instrument was acknowledged before me on this day of , 2012, by Jeffrey P. Fegan, Chief Executive Officer of the Dallas/Fort Worth International Airport Board, to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such board, for the uses and purposes therein set forth, on behalf of said board. Notary Public in and for the State of Texas 4 932523 CHESAPEAKE EXPLORATION, L.L.C. An Oklahoma Limited Liability Company By: Chesapeake Operating, Inc., General Partner By: Henry J. Hood, Sr. Senior Vice President Land & Legal STATE OF OKLAHOMA § § COUNTY OF OKLAHOMA § This instrument was acknowledged before me on this day of , 2012, by Henry J. Hood, Senior Vice President — Land and Legal of Chesapeake Exploration, L.L.C., to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such limited liability company, for the uses and purposes therein set forth, on behalf of said limited liability company. Notary Public in and for the State of Oklahoma 5 932523 [INSERT CONSENTING M/WBE WORKING INTEREST OWNER NAME HERE] By: Name: Title: Date: STATE OF § § COUNTY OF § by This instrument was acknowledged before me on this day of , 2012, , of , to me known to be the identical person who subscribed the name of the maker thereof to the foregoing instrument and acknowledged to me that he executed the same as his free and voluntary act and deed and as the free and voluntary act and deed of such entity, for the uses and purposes therein set forth, on behalf of said entity. Notary Public in and for the State of 6 932523 G NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER. SECOND RATIFICATION, AMENDMENT AND REVIVOR OF STATE OF TEXAS § COUNTY OF TARRANT § COUNTY OF DALLAS § PA[DSPUP OIL AND GAS LEASE KNOW ALL MEN BY THESE PRESENTS: This Second Ratification, Amendment and Revivor of Paid Up Oil and Gas Lease ("Amendment") is executed by the Dallas/Fort Worth International Airport Board ("the Board"), the City of Dallas and the City of Fort Worth (hereafter collectively called "Lessor"), Chesapeake Exploration, L.L.C., the address of which is P. O. Box 18496, Oklahoma City, Oklahoma 73154-0496 ("Lessee"), and the working interest assignees whose names and addresses are listed herein and whose signatures appear below for the purposes and considerations hereinafter expressed. WHEREAS, Lessee is the current owner of an undivided interest in and under that certain oil and gas lease (the "Lease") dated October 5, 2006, from Lessor, a Memorandum of which is recorded as document number D206319462, D.R.T.C. and as document number 200600378053 of the D.R.D.C. covering the following property to wit: All of the lands described in Exhibit A to this Amendment (the "Land") WHEREAS, the following parties have been conveyed and presently own the respective undivided working/leasehold interests in the aforementioned Lease (together with Lessee, these leasehold working interest assignees shall be collectively referred to herein as the "Leasehold Working interest Owners"): Assignees: Working Interest: LADA Investments, LLC 7750 N. MacArthur Blvd# 120-211 Irving, Texas 75063 SP DFW, LLC (as successor -in -interest to Paz Energy, LLC) c/o Silver Point Finance, LLC Two Greenwich Plaza, 1st Floor Greenwich, Connecticut 06860 ATTN: Harris Sheikh 1.00% 9, 92255242% 1 2-25-1 2 P 1 2 :5) IN CL PAZ, L.P. (as successor -in -interest to Paz Energy, LLC) c/o Crestline Investors, Inc. 201 Main Street, Suite 1900 Fort Worth, Texas 76102 ATTN: Curt I. Futch Petro Capital IX, LP (as successor -in -interest to Paz Energy, LLC) 3838 Oak Lawn Avenue, Suite 1775 Dallas, Texas 75219 ATTN: Ali Mirza Callejo Energy, LLC 4314 N. Central Expressway Dallas, Texas 75206 First Preston Investments, LLC 5040 Addison Circle Suite 400 Addison, Texas 75001 Forty -Four Energy, LP 1401 McKinney #2222 Houston, Texas 77010 ICC ENERGY GROUP, LLC (as successor -in -interest to ICC Energy Corporation) 208 N. N. Market Suite 300 Dallas, Texas 75202 Margolf, Inc. 2120 Ridgmar Blvd., Suite 14 Fort Worth, Texas 76116 SLNJG Investments, LLC 1401 Jones Street #205 Fort Worth, Texas 76102 S.B Dike, Ltd. 3200 West 4th Street Fort Worth, Texas 76107 930355 0.77654758% 0.3309% 0.52% 3.00% 1.01 % 1.01% 0.35% 1.00% 1.00% Page 2 of 10 Catalina C. Productions, Inc. 6729 Lakewood Blvd. Dallas, Texas 75241 Total E&P USA, Inc. 1201 Louisiana, Suite 1800 Houston, Texas 77002 0.25% 19.3325% WHEREAS, the Lease has been previously amended by Lessor and the Leasehold Working Interest Owners, by that certain Ratification Amendment and Revivor of Paid Up Oil and Gas Lease, Memorandum of which is recorded as document number D212122508 D.R.T.C. and as document number 201200147391 of the D.R.D.0 WHEREAS, Lessor and the Leasehold Working Interest Owners now desire to amend the Lease as hereinafter set forth 1. Paragraph 4 of the Lease is hereby replaced with the following: 4. Royalty. (a) Lessor has directed Lessee to make specified deliveries and payments to the Board and has authorized the Board to make certain elections. Accordingly, as royalties Lessee agrees: (1) To deliver free of cost to the Board, at the well(s) or to the credit of the Board, at the pipeline to which the well(s) may be connected twenty-five percent (25%) (the Royalty Fraction") of all oil and other liquid hydrocarbons produced and saved from the Land. At the Board's option which may be exercised from time to time Lessee shall pay to the Board the Royalty Fraction of the market value at the well of oil and other liquid hydrocarbons of like grade and gravity prevailing on the day the oil and other hydrocarbons are run from the lease in the general area in which the Land is located. (2) To deliver free of cost to the Board, at the well(s) or to the credit of the Board, at the pipeline to which the well(s) may be connected, the Royalty Fraction in kind of gas produced and saved from the Land or, at the Board's option, which may be exercised from time to time, Lessee shall pay to the Board: (i) On gas produced from the Land and sold by Lessee or used on or off the Land and to which the following subparagraphs (ii) and (iii) do not apply, the Royalty Fraction of the market value of the gas at the point of sale, use, or other disposition (ii) On gas produced from the Land that is processed in a processing plant in which Lessee or an affiliate of Lessee has a direct or indirect interest, the higher of the Royalty Fraction of the market value of the gas at the inlet to the processing plant or the Royalty Fraction of the market value of all processed liquids saved from the gas at the plant plus the Royalty Fraction of the market value of all residue gas at the point of sale, use, or other disposition. (iii) On gas produced from the Land that is processed In facilities other than a processing plant in which Lessee or an affiliate of Lessee has a direct or indirect interest, the Royalty Fraction of the market value at the inlet to the processing plant of all Page 3 of 10 930355 processed liquids credited to the account of Lessee and attributable to the gas plus the Royalty Fraction of the market value of all residue gas at the point of sale, use, or other disposition (iv) In order to verify royalty is being paid on the correct volumes, the volume of gas produced from the Land shall be measured using a meter meeting or exceeding the standards established by the American Gas Association report 3. All gas produced from the Land shall be measured before it is commingled with gas attributable to acreage other than the Land, except as it relates to gas produced from a pooled unit in accordance with the provisions of paragraph 8 (3) In the event the Board elects to take its Royalty Fraction in kind, the parties shall enter into a mutually acceptable balancing agreement providing for the right of an underproduced party to make up an imbalance by taking up to one hundred fifty percent (150%) of Its share of production in any month other than November, December, January or February and shall settle any imbalance remaining after depletion in cash, based on the greater of the proceeds received by the overproduced party when the imbalance was created and the market value of the gas when the imbalance was created. If the overproduced parry's gas was used but not sold, then the cash settlement shall be based on the market value of the gas when the imbalance was created (b) The market value of oil shall be determined in accordance with the terms of the original Lease prior to amendment. The market value of gas shall be determined by reference to the gross heating value (measured in British thermal units) of the gas. No matter which subparagraph of this paragraph 4 is used to calculate royalty, the market value used in the calculation of gas royalty (the "Market Value Price") shall be the higher of (a) the first of the month Index Price for Natural Gas Pipeline Co. of America — Texok Zone as published in Platt's Inside FERC's Gas Market Report (the "Index Price") minus $0.35/MMBtu (referred to as the 'Adjusted Index Price") or (b) Lessee's Net Proceeds, defined below in Paragraph 4(c) In the event that the Index Pnce is $5 00 per MMBtu or more (the "Price Hurdle") for three consecutive months, the Adjusted Index Price shall become the Index Price minus $0.225/MMBtu for gas produced and sold in the immediately following month and in each month thereafter until the Price Hurdle is not reached for three consecutive months (the end of the third consecutive month in which the Price Hurdle is not met being referred to as the "Price Hurdle Termination"). For example, if the first of the month Index Price for March 2013, April 2013, and May 2013 is $5.00/MMBtu in each month then beginning with June 2013 production, the Adjusted Index Price will be the June 2013 Index less $0 225/MMBtu. If Price Hurdle Termination occurs the Adjusted Index Price shall thereafter be the Index Price minus $0.35/MMBtu until the Price Hurdle is again attained, subject to future Price Hurdle Termination. Royalty shall be payable on gas produced from the Land and consumed by Lessee on the Land for compression, dehydration, fuel, or other use. (c) "Net Proceeds" shall mean the actual proceeds received by Lessee for the sale of Lessor's gas less only actual third -party, non-affiliated transportation costs incurred by Lessee to move gas produced from the Land from the boundary of the Land to a downstream point of sale, whether (a) such costs are paid directly by Lessee, or by an affiliate of Lessee, to an unaffiliated third party, or (b) such costs are netted out of the price paid to Lessee for gas produced from the Land. Net Proceeds shall never include a deduction for any costs incurred on the Land or related to Lessee's or its affiliate's firm transportation commitments not actually being used to transport gas produced from the Land. The foregoing language shall riot be deemed surplusage under Heritage Resources, Inc. v. NationsBank, 939 S W.2d 118 (Tex. 1996). (d) The Board shall be paid the Royalty Fraction of all payments and other benefits made under any oil or gas sales contract or other arrangement, including take -or -pay payments and payments received in settlement of disputes; provided that if the Board receives a take -or - pay payment or similar payment for gas that has not been produced, and if the gas is subsequently produced, the Board will only receive its Royalty Fraction of any payments made for make-up gas taken pursuant to the take -or -pay provision or similar provision. Page 4 of 10 930355 (e) In the event the Index Price ceases to be published, it shall be replaced by using the average price of the two published first of the month indices that were, on average, closest in price to the Index Price over the last six months that the Index Price was published from the following list: Platt's Gas Daily (i.) El Paso, Permian, (ii.) Waha (iii.) Transwestern, Permian, (iv.) Carthage Hub, (v.) Tx. Eastern, ETX (vi,) Tx. Gas, zone 1, (vii.) Houston Ship Channel, (vol.) Katy, (ix.) ANR, La. and (x.) Henry Hub. In the event a replacement index ceases publication the preceding process shall be used to select an additional replacement price. (f) As used in this section "affiliate" means (i) a corporation, joint venture, partnership or other entity that owns more than ten percent (10%) of the outstanding voting interest of Lessee or in which Lessee owns more than ten percent (10%) of the outstanding voting interest; or (ii) a corporation, joint venture, partnership, or other entity in which, together with Lessee, more than ten percent (10%) of the outstanding voting interests of both Lessee and the other corporation, joint venture, partnership, or other entity is owned or controlled by the same persons or group of persons. (9) In the event the Board does not elect to take its Royalty Fraction in kind, Lessee must disburse or cause to be disbursed to the Board its royalty on production from a particular well not later than ninety (90) days after completion of the well in the case of an oil well, or after the pipeline connection, in the case of a gas well. Thereafter Lessee must disburse or cause to be disbursed to the Board its royalty on production by the last day of the second month after the month of production. If not paid when due, Lessor's royalty shall bear interest at the maximum lawful rate from the due date until paid to the Board, which amount Lessee agrees to pay. Acceptance by the Board of royalties that are past due shall not act as a waiver or estoppel of the right to receive interest due thereon unless the Board expressly so provides in writing signed by the Board The royalty payment obligations under this Lease shall not be affected by any division order or the provisions of Section 91.402 of the Texas Natural Resources Code or any similar statute. (h) The receipt by Lessee from a purchaser or a pipeline company of proceeds of production for distribution to the Board will not result in Lessee acquiring legal or equitable title to those proceeds, but Lessee shall at all times hold the proceeds in trust for the benefit of Lessor, to be paid to the Board. Notwithstanding the insolvency, bankruptcy, or other business failure of a purchaser of production from the Land or a pipeline company transporting production from the Land, Lessee shall remain liable for payment to the Board as directed by Lessor for and agrees to pay to the Board, all royalties due the Board as directed by Lessor together with interest if not timely paid. (i) For production occurring in the months of July 2012 through December 2012, Lessor shall receive $60,000.00 in additional royalty per month (the "Price Guarantee") as compared to what Lessor would have received had royalties been calculated and paid based upon the proceeds received from Louis Dreyfus Energy Services, L.P ("Dreyfus') for sales at Atmos Line W (the "Dreyfus Proceeds"). In the event gas produced from the Land ceases to be sold to Dreyfus in this manner, then paragraph 4(i)(2) shall apply. (1) To determine whether the Price Guarantee is satisfied in a particular month, Lessee shall compare the calculated royalty amount based upon the Market Value Price (the ' Market Value Royalty Amount") to the calculated amount of royalty that would have been owed had royalties been calculated based upon Dreyfus Proceeds (the "Baseline Royalty Amount"). If in any month the Market Value Royalty Amount does not exceed the Baseline Royalty Amount by $60,000, Lessee shall make an additional compensatory royalty payment to make up the difference between (a) $60,000 and (b) the amount by which the Market Value Royalty Amount exceeds the Baseline Royalty Amount, if any For example, if the Market Value Royalty Amount for a particular month is $40,000.00 more than the Baseline Royalty Amount, then Lessee shall make an additional payment of $20,000.00 to Lessor for that month. Page 5 of 10 930355 Additionally, if in any month Lessee is selling gas produced from the Lease to Dreyfus at Atmos Line W and the Baseline Royalty Amount calculated based upon the Dreyfus Proceeds exceeds the Market Value Royalty Amount, then Lessee shall make an additional payment to Lessor of $60,000.00 for that month. In no event however, shall Lessee ever owe Lessor a payment under this subparagraph 4(i) in excess of $60,000 for any single month, it being specifically recognized, however, that any monthly payment under this subparagraph 4(i) (and the $60,000 limitation on such payment) shall be in addition to, and not a limitation on, the monthly royalty payments owed under other provisions of this paragraph 4, as amended. (2) In the event that Lessee ceases selling gas to Dreyfus at Atmos Line W, the published Carthage daily midpoint price less $0.65 per MMBtu on a weighted average basis for all gas sold in the month shall be used in lieu of the Dreyfus Proceeds to determine whether the Price Guarantee is satisfied for the months contemplated by this paragraph 4(i). 2 This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective heirs, successors and assigns, and may be executed in any n umber of multiple counterparts, each of which shall have the same force and effect as an o riginal instrument executed by all of the undersigned parties, regardless of whether such counterpart is executed prior to or subsequent to the date hereof or the filing of record of a counterpart hereof. The failure of any Leasehold Working Interest Owner to execute a counterpart shall not render this Amendment ineffective as to (a) those Leasehold Working Interest Owners executing this Amendment, or (b) Lessor. 3, The Lessor hereby grants and leases the Land to the Lessee on the terms and conditions set forth in the Lease, as amended hereby, and the Lessor hereby (to the extent n ecessary) revives, adopts, ratifies and confirms the Lease as amended hereby (and as amended previously), and agrees that the Lease, as amended hereby (and as amended previously) is a valid and subsisting lease in full force and effect in accordance with its terms and provisions, as amended. 4. It is further understood and agreed by all parties hereto that the provisions contained herein shall supersede any provision to the contrary in said Lease described herein, however in all other respects, said Lease, as previously amended, and the prior provisions thereto, shall remain in full force and effect. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lessor does hereby revive, adopt, ratify, and confirm said Lease (as amended), and grant, demise and let the Land unto the Leasehold Working Interest Owners, subject to and in accordance with all of the terms and provisions of said Lease as amended herein (and as previously amended). Page 6 of 10 930355 EXECUTED on the date(s) indicated below, but effective as of the 1st day of July, 2012, LESSOR: APPPO LEGAL C©NSEL, DFW AIRPORT Approved _comas By .SSi stant torn t Approved as a 'f Assistant City Attorney Attorn o form_and leplit 930355 Y: 1 DALLAS/FORT WORTH INTERNATIONAL AIRPORT By: Date: , /0 CITY OF DALLAS By: Date: ae5 /o - OARD egan, Chief Executive Officer CITY OF FORT WORTH ia,stiess••••4 B}l: l21 s S E S TArNC Date: /gAi /Z, Moe° 7-ac.#'rtpity Manager City Manager Page 7 of 10 LESSEE: CHESAPEAKE EXPLOIlrt'ION, L.L.C., an Oklahoma limited li By: Henry J. H6od, Se Land and Legal LESSEENVORKING INTEREST ASSIGNEES: SP DFW, LLC LADA INVESTMENTS, LLC By By Name: David F. Steinmetz Name. Guillermo Perales Its: Authorized Signatory Its: CEO/Manager CALLEJO ENERGY LLC FIRST PRESTON INVESTMENTS, LLC By By Name. William Callejo Name. Nancy Tartaglino Richards Its: Manager/Member Its: Manager FORTY-FOUR ENERGY LP ICC ENERGY GROUP, LLC By: Forty Four Management, L.L.C., Its: General Partner By Name. Orlando Salazar Its: Manager By Name. Karl Butler Its: Manager MARGOLF, INC. SLNJG INVESTMENTS, LLC By• By: Name. Martha V. Leonard Name: Shirlee J. Gandy Its: President Its: President Page 8 of 10 930355 S.B. DIKE, LTD. CATALINA C PRODUCTIONS, INC. By By Name. Sara Dike Name: Catherine L. Brittingham Its: President, Dike Management, LLC, Its: President General Partner CL PAZ, LP. By Crestline Management, LP Its: Investment Manager PETRO CAPITAL IX, LP By: Petro Capital Management, IX, LLC, Its: General Partner By By Name. Caroline Cooley, Vice President, Name: Rosser Newton Crestline Investors, Inc., Its: Managing Member Its: General Partner TOTAL E&P USA, INC., a Delaware corporation By Name. Its: Page 9 of 10 930355 EXHIBIT "A" to Ratification. Revivor. and Amendment of Paid Up Oil and Gas Lease 18,460.67 acres, more or Tess as described in that certain Memorandum of Lease dated October 5 2006 by and between Dallas/Fort Worth International Airport Board et al as Lessor and Chesapeake Exploration Limited Partnership as Lessee filed as Document No. D206319462 in the Deed Records of Tarrant County, Texas and as Document No. 200600378053 in the Deed Records of Dallas County. 930355 Page 10 of 10 M&C Review CIYY COUNCIL AGENDA DATE: CODE: SUBJECT: Page 1 of 2 Official site of the City of Fort Worth, Texas FORTW'ORTII nj-4 COUNCIL ACTION: Approved on 9/25/2012 i= Resolution No. 4135-09-2012 9/25/2012 REFERENCE NO.:G-17690 G TYPE: NON - CONSENT LOG NAME: PUBLIC HEARING: 12DFW CHESAPEAKE SETTLE NO Authorize Execution of a Full and Final Settlement Agreement in Cause No. 153-237052- 09, Dallas/Fort Worth International Airport Board, et al. v. Chesapeake Exploration, L.L.C. and Adopt a Resolution Authorizing an Amendment to the Mineral Lease Between Dallas/Fort Worth International Airport Board, City of Fort Worth, City of Dallas and Chesapeake Exploration, L.L.C. (ALL COUNCIL DISTRICTS) RECOMMENDATION: It is recommended that the City Council: 1. Authorize execution of a full and final Settlement Agreement in Cause No. 153-237052-09, Dallas/Fort Worth International Airport Board, et al. v. Chesapeake Exploration, L.L.C.; and 2. Adopt a Resolution Authorizing an Amendment to the Mineral Lease between Dallas/Fort Worth International Airport Board, City of Fort Worth, City of Dallas and Chesapeake Exploration, L L C. DISCUSSION: The City of Fort Worth, the City of Dallas and the Dallas/Fort Worth International Airport Board (Board) are in litigation with Chesapeake Exploration, L.L.C. The original claims were based on the measure of royalties and the measure of retained tracts. On April 16, 2012, the parties entered into a partial settlement Agreement, covering the measure of retained tracts. The proposed settlement Agreement will settle the measure of royalties dispute, which is the only remaining claim, on the following terms: Back Royalties. Chesapeake will pay the Board $5,000,000.00 for production from the first date of production through June 2012 and be released from all royalty liability for that period. Future Index. Beginning with July 2012 production, royalties will be based on the higher of (a) proceeds actually received by Chesapeake or (b) the index price for Natural Gas Pipeline Company of America-Texok Zone, as published in Platt's Insider FERC's Natural Gas Report (the Index) less $0.35 (the Adjusted Index). 2012 (July -December) Price Guarantee. From July 2012 to December 2012, Chesapeake guarantees that royalties payable to the Board will be at least $60,000.00 per month higher than they would have been if based on proceeds received from Chesapeake's current marketer, Louis Dreyfus. In the event Chesapeake ceases to sell to Louis Dreyfus, then the royalties paid to the Board will be at least $60,000.00 per month higher than it would have been if based on the published Carthage daily midpoint price less $0.65 on a weighted average basis for all natural gas sold during the month. Limited Liability of Working Partners. All working interest partners, including the remaining M/WBEs, will no longer have joint and several liability for the entire lease. The liability of the working interest partners will be limited to their proportion of ownership. Chesapeake will continue to have joint and several liability for all lease obligations. An Amendment to the Mineral Lease is necessary to change the manner of calculating royalties and to limit the liability of the working partners. On September 6, 2012, the Board approved the proposed settlement and amendment to the Mineral http://apps.cfwnet.org/council packet/mc_review.asp?ID=17470&councildate=9/25/2012 12/19/2013 M&C Review Page 2 of 2 Lease. The City of Dallas has not yet scheduled a vote on this item. FISCAL INFORMATION/CERTIFICATION: The Financial Management Services Director certifies that this action will have no material effect on City funds. TO Fund/Account/Centers FROM Fund/Account/Centers Submitted for Citv Manager's Office bv: Originating Department Head: Additional Information Contact: Fernando Costa (6122) Sarah Fullenwider (8006) Charlene Sanders (7611) ATTACHMENTS O&G Final Settlement OBA.odf Resolution authorizing amendment to Mineral Lease final.doc http://apps.cfwnet.org/council packet/mc_review.asp?ID=17470&councildate=9/25/2012 12/19/2013