Exhibit
99.2
SAN JUAN BASIN
AMENDED AND RESTATED ROYALTY TRUST INDENTURE
This Amended and Restated Royalty Trust Indenture shall be effective as of December 12, 2007
(the Indenture), the original Royalty Trust Indenture having been entered into as of November 1,
1980 (the Original Indenture), between Southland Royalty Company, a Delaware corporation with its
principal office in Fort Worth, Texas (now known as Burlington Resources Oil & Gas Company LP) (the
Company), as Trustor, and The Fort Worth National Bank, a banking association organized under the
laws of the United States with its principal place of business in Fort Worth, Texas (as succeeded
by Compass Bank) (FWNB or, including any successor trustee, the Bank), as Trustee. The
Original Indenture was amended and restated effective September 30, 2002. The Original Indenture
evidenced that the Company had for many years been engaged in the business of exploring for,
producing and marketing oil and gas, and owned oil and gas leasehold interests, fee mineral
interests, royalty and overriding royalty interests in lands located in the San Juan Basin in New
Mexico which contained proven reserves and were producing oil and gas; that the Company determined
that it would be in the best interest of its shareholders to carve out and distribute to such
shareholders certain net overriding royalties in such leasehold, mineral and royalty interests (the
Royalties) by means of the conveyance attached hereto as Exhibit 1 to this Indenture (the
Conveyance); that since it was impractical to distribute legal title to undivided interests in
the Royalties to each shareholder, and the shareholders had approved the transfer by the Company by
means of the Conveyance of the Royalties to FWNB, to be held in trust for the benefit of the
shareholders on the date of execution of the Original Indenture, and their respective heirs,
personal representatives, successors and assigns, as more particularly provided therein and herein,
and FWNB agreed to accept the Conveyance on such terms; that the Company executed the Conveyance to
FWNB; and that accordingly, the Company, by delivering the Conveyance, granted, bargained, assigned
and delivered the Royalties to FWNB, as trustee in trust and FWNB accepted the Conveyance and the
Royalties and the Company and FWNB agreed that such assets and all other assets received by FWNB
pursuant to this Indenture in trust were to be held, administered, paid and delivered for the
purposes and subject to the terms and conditions hereafter provided, as such may be amended from
time to time
ARTICLE I
DEFINITIONS
As used herein, the following terms are used with the meanings indicated:
Business Day means any day which is not a Saturday, Sunday or other day on which
national banking institutions in the City of Fort Worth, Texas, are closed as authorized or
required by law.
Beneficial Interest means the equitable interest of the Unit Holders in the Trust
Estate as expressly set out in this Indenture and all other rights of beneficiaries of
express trusts created under the Texas Trust Code, subject to the limitations set forth in
this Indenture.
Certificate means a certificate issued by the Trustee pursuant to Article IV
evidencing the ownership of the one or more Units.
Code means the Internal Revenue Code of 1986, as amended.
Distribution Date means the date of any distribution, which shall be on or before ten
(10) Business Days after a Monthly Record Date.
Environmental Laws means all applicable, federal, state and local laws, regulations,
ordinances, rules, orders, permits and governmental restrictions relating to the
environment, the effect of the environment on human health or safety, pollutants,
contaminates, hazardous substances, or hazardous waste, any effect on the date of this
indenture and all binding judicial and administrative interpretations thereof.
Indenture means this instrument, as originally executed, or, if amended or
supplemented, as so amended or supplemented.
Monthly Distribution Amount for any Monthly Period means the sum of (a) the cash
received by the Trustee during the Monthly Period attributable to the Royalties, (b) any
cash available for distribution as a result of the reduction or elimination during the
Monthly Period of any existing cash reserve created pursuant to Section 3.08 hereof to
provide for the payment of liabilities of the Trust, and (c) any other cash receipts of the
Trust during the Monthly Period, including without limitation any cash received from
interest earned pursuant to Section 3.04 reduced by the sum of (d) the liabilities of the
Trust paid during the Monthly Period and (e) the amount of any cash used pursuant to Section
3.08 hereof in the Monthly Period to establish or increase a cash reserve for the payment of
any accrued, future or contingent liabilities of the Trust. If the Monthly Distribution
Amount determined in accordance with the preceding sentence shall for any Monthly Period be
a negative amount, then the Monthly Distribution Amount shall be zero, and such negative
amount shall reduce the next Monthly Distribution Amount.
Notwithstanding the foregoing, the Monthly Distribution Amount for any Monthly Period
shall not include any amount which would have been required to be reported to any stock
exchange on which the Units are listed in connection with the establishment of an ex date
in order to be distributed to Unit Holders who were such on the Monthly Record Date for such
Monthly Period but was not so reported unless the stock exchange agrees to such amount being
a part of that Monthly Periods Monthly Distribution Amount or the Trustee receives an
opinion of counsel stating that none of the Trust, the Trustee or any owner of Units will be
adversely affected by such inclusion. An amount which pursuant to the preceding sentence is
not included in the Monthly Distribution Amount for that Monthly Period shall be included in
the Monthly Distribution Amount for the next Monthly Period (unless it is reserved pursuant
to Section 3.08 hereof).
Monthly Period means the period which commences on the day after the date of creation
of the Trust or a Monthly Record Date and continues through and includes the
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next succeeding Monthly Record Date, which shall be the Monthly Record Date for such
Monthly Period.
Monthly Record Date for each month means the close of business on the last Business
Day of such month unless the Trustee determines that a later date is required to comply with
applicable law or the rules of any exchange on which the Units may be listed, in which event
it means such later date.
Person means an individual, a corporation, partnership, trust, estate or other
organization.
Royalties means the net overriding royalty interests conveyed to the Trustee pursuant
to the Conveyance.
Transferee, as to any Unit Holder or former Unit Holder, means any Person succeeding
to the interest of such Unit Holder or former Unit Holder in one or more Units of the Trust,
whether as purchaser, donee, legatee or otherwise.
Trust means the express trust created hereby which shall be held and administered as
provided herein and in accordance with the terms and provisions (not inconsistent with any
terms and provisions hereof) of the Texas Trust Code.
Trust Estate means the assets held by the Trustee under this Indenture, and shall
include both income and principal if separate accounts or records are kept therefor.
Trustee means the initial Trustee under this instrument, or any successor, during the
period it is so serving in such capacity.
Unit means an undivided fractional interest in the Beneficial Interest, determined as
hereinafter provided. A Unit may be evidenced by a Certificate or a book-entry position
entered in compliance with the procedures the Trustee establishes for uncertificated Units
pursuant to Section 4.01 hereof.
Unit Holder means the owner of one or more Units as reflected on the books of the
Trustee pursuant to Article IV.
ARTICLE II
NAME AND PURPOSE OF THE TRUST
2.01.
Name
. The Trust shall be known as the San Juan Basin Royalty Trust, and the
Trustee may transact the affairs of the Trust in that name.
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2.02.
Purposes
. The purposes of the Trust are:
(a) to convert the Royalties to cash either (1) by retaining them and collecting the proceeds
from production until production has ceased or the Royalties have otherwise terminated or (2) by
selling or otherwise disposing of the Royalties (within the limits stated herein); and
(b) to distribute such cash, net of amounts for payment of liabilities of the Trust, to the
Unit Holders pro rata.
It is the intention and agreement of the Company and the Trustee to create an express trust
within the meaning of Section 111.004(4) of the Texas Trust Code, for the benefit of the owners of
Units, and a grantor trust for federal income tax purposes of which the owners of Units are the
grantors. As set forth above and amplified herein, the Trust is intended to be limited to the
receipt of revenues attributable to the Royalties and the distribution of such revenues, after
payment of or provision for Trust expenses and liabilities, to the Unit Holders. It is neither the
purpose nor the intention of the parties hereto to create, and nothing in this Trust Indenture
shall be construed as creating, a partnership, joint venture, joint stock company or business
association between or among Unit Holders, present or future, or among or between Unit Holders, or
any of them, and the Trustee or the Company.
ARTICLE III
ADMINISTRATION OF THE TRUST
3.01.
General
. Subject to the limitations set forth in this Indenture, the Trustee is
authorized to take such action as in its judgment is necessary or advisable best to achieve the
purposes of the Trust, including the authority to agree to modifications or settlements of the
terms of the Conveyance or to settle disputes with respect thereto, so long as such modifications
or settlements do not alter the nature of the Royalties as rights to receive a share of the
proceeds of oil and gas produced from the properties presently burdened by such Royalties which are
free of any obligation for operating expenses and as rights which do not possess any operating
rights or obligations. The Trustee may not dispose of all or any portion of the Royalties except as
provided in Sections 3.02, 3.09 and 9.03.
The Trustee will cause the Trust to file any registration statement, report or other materials
required by law (including the Securities Exchange Act of 1934 and the rules thereunder) or by any
securities exchange on which the Units are at any time registered.
3.02.
Limited Power to Dispose of Royalties
.
(a) In the event the Trustee determines it to be in the best interest of the Unit Holders the
Trustee may sell at any time and from time to time all or any part of any of the Royalties for cash
in such a manner as it deems in the best interest of the Unit Holders if approved by the Unit
Holders present or represented at a meeting held in accordance with the requirements of Article
VIII but without such approval it may not sell or otherwise dispose of all or any part of the
Royalties. This Section 3.02(a) shall not be construed to require approval of the Unit Holders for
any sale or other disposition of all or any part of the Royalties pursuant to
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Sections 3.02(b), 3.09 or 9.03. The Trustee is authorized to retain any of the Royalties in
the form in which such property was transferred to the Trustee, without regard to any requirement
to diversify investments or other requirements.
(b) Notwithstanding anything to the contrary contained in this Indenture, during any
twelve-month period the Trustee may sell, assign, transfer and convey up to one percent (1%) of the
value of the Royalty in any one or more transactions that the Trustee determines to be in the best
interest of the Unit Holders. For purposes of this Section 3.02(b), the value of the Royalties to
be sold and of all the Royalties shall be the discounted present value of the future net revenue
attributable to the proved reserves attributable to such Royalties, as set forth in a reserve
report as of December 31 of the year preceding the date of the definitive sale agreement for any
sale (such report to be prepared by independent petroleum engineers selected by the Trustee). The
use of such values is solely for the purpose of determining compliance with this Section 3.02(b),
and it is recognized that the proceeds of the sale may be greater or lesser than the value so
determined.
3.03.
No Power to Engage in Business or Make Investments
. The Trustee shall not, in
its capacity as Trustee under the Trust, engage in any business or commercial activity of any kind
whatsoever and shall not, under any circumstances, use any portion of the Trust Estate to acquire
any oil and gas lease, royalty or other mineral interest other than the Royalties, or, except as
permitted in Sections 3.04 and 3.15, acquire any other asset. The Trustee shall not accept
contributions to the Trust other than the Royalties.
3.04.
Interest on Cash on Hand
. Cash being held by the Trustee as a reserve for
liabilities or for distribution at the next Distribution Date shall be placed (in the Trustees
discretion) in:
(a) obligations issued by (or unconditionally guaranteed by) the United States or any agency
or instrumentality thereof (provided such agencys or instrumentalitys such obligations are
secured by the full faith and credit of the United States); or
(b) repurchase agreements secured by obligations qualifying under subparagraph (a) above; or
(c) certificates of deposit of any bank having a capital, surplus and undivided profits in
excess of $50,000,000; or
(d) money market mutual funds registered under the Investment Company Act of 1940, as amended,
that have been rated at least AAm by Standard & Poors and at least Aa by Moodys, provided that
the portfolio of such money market mutual funds is limited to obligations described in subparagraph
(a) above and to agreements to repurchase such obligations;
provided such repurchase agreements or certificates shall bear interest at a rate which is
the greater of (i) the interest rate which the Bank or its successor pays in the normal
course of business on amounts placed with it, taking into account the amounts involved,
the period held and other relevant factors, or (ii) the rate of interest paid on
obligations qualifying under subparagraph (a) above. Any such obligations, repurchase
agreements or
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certificates must mature on or before the next succeeding Distribution Date and must be held
to maturity. To the extent not prohibited by Section 113.057 of the Texas Trust Code any
such cash may be placed with Bank or any successor bank serving as Trustee.
3.05.
Power to Settle Claims
. The Trustee is authorized to prosecute or defend, or to
settle by arbitration or otherwise, any claim of or against the Trustee, the Trust or the Trust
Estate, to waive or release rights of any kind and to pay or satisfy any debt, tax or claim upon
any evidence by it deemed sufficient.
3.06.
Power to Contract for Services
. In the administration of the Trust, the Trustee
is empowered to employ oil and gas consultants, accountants, attorneys, transfer agents, investment
advisors and other professional and expert persons and to employ or contract for clerical and other
administrative assistance and to make payments of all fees for services or expenses in any manner
thus incurred out of the Trust Estate.
3.07.
Payment of Liabilities of Trust
. The Trustee shall, to the extent that funds of
the Trust are available therefor, make payment of all liabilities of the Trust, including, but
without limiting the generality of the foregoing, all expenses, taxes, liabilities incurred of all
kinds, compensation to it for its services hereunder, and compensation to such parties as may be
consulted as provided for in Section 3.06 hereof.
3.08.
Establishment of Reserves
. With respect to any liability which is contingent or
uncertain in amount or which otherwise is not currently due and payable, the Trustee in its sole
discretion may, but is not obligated to, establish a cash reserve for the payment of such
liability.
3.09.
Limited Power to Borrow
. If at any time the cash on hand and to be received by
the Trustee is not, or will not, in the judgment of the Trustee, be sufficient to pay liabilities
of the Trust as they become due, the Trustee is authorized to borrow the funds required to pay such
liabilities. In such event, no further distributions will be made to Unit Holders until the
indebtedness created by such borrowing has been paid in full. Such funds may be borrowed from any
Person, including, without limitation, the Bank or any other fiduciary hereunder. To secure payment
of such indebtedness, the Trustee is authorized to mortgage, pledge, grant security interests in or
otherwise encumber (and to include as a part thereof any and all terms, powers, remedies, covenants
and provisions deemed necessary or advisable in the Trustees discretion, including, without
limitation, the power of sale with or without judicial proceedings) the Trust Estate, or any
portion thereof, including the Royalties, and to carve out and convey production payments.
3.10.
Income and Principal
. The Trustee shall not be required to keep separate
accounts or records for income and principal or maintain any reserves for depletion of the
Royalties. However, if the Trustee does keep such separate accounts or records, then the Trustee is
authorized to treat all or any part of the yield from the Royalties as income or principal, and in
general to determine all questions as between income and principal and to credit or charge to
income or principal or to apportion between them any receipt or gain and any charge, disbursement
or loss as is deemed advisable under the circumstances of each case.
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3.11.
Term of Contracts
. In exercising the rights and powers granted hereunder, the
Trustee is authorized to make the term of any transaction or contract or other instrument extend
beyond the term of the Trust.
3.12.
Transactions between Related Parties
. The Trustee shall not be prohibited in any
way in exercising its powers from making contracts or having dealings with itself in any other
capacity (fiduciary or otherwise) or with the Company.
3.13.
No Bond Required
. The Trustee shall not be required to furnish any bond or
security of any kind.
3.14.
Timing of Trust Income and Expenses
. The Trustee will use all reasonable efforts
to cause the Trust and the Unit Holders to recognize income (including any income from interest
earned on reserves established pursuant to Section 3.08 hereof) and expenses on Monthly Record
Dates. The Trustee will invoice the Trust for services rendered by the Trustee only on a Monthly
Record Date and shall cause the Trust to pay any such invoices only on the Monthly Record Date on
which an invoice is rendered and will use all reasonable efforts to cause all persons to whom the
Trust becomes liable to invoice the Trust for such liability on a Monthly Record Date and to cause
the Trust to pay any such liabilities on the Monthly Record Date on which such liability is
invoiced. In connection with the requirements of any stock exchange on which the Units are listed,
the Trustee will, if required by such stock exchange, use all reasonable efforts to determine the
Monthly Distribution Amount and report such amount to the exchange at such time as may be required
by such stock exchange. Nothing in this Section shall be construed as requiring the Trustee to
cause payment to be made for Trust liabilities on any date other than on such date as in its sole
discretion it shall deem to be in the best interest of the Unit Holders.
3.15.
Divestiture of Units
. If at any time the Trust or the Trustee is named a party
in any judicial or administrative proceeding which seeks the cancellation or forfeiture of any
property in which the Trust has an interest because of the nationality, or any other status, of any
one or more Unit Holders, the following procedures will be applicable:
(a) The Trustee will promptly give written notice (Notice) to each holder (Ineligible
Holder) whose nationality or other status is an issue in the proceeding as to the existence of
such controversy. The Notice will contain a reasonable summary of such controversy and will
constitute a demand to each Ineligible Holder that he dispose of his Units, to a party which would
not be an Ineligible Holder, within 30 days after the date of the Notice.
(b) If any Ineligible Holder fails to dispose of his Units as required by the Notice, the
Trustee will have the preemptive right to purchase, and will purchase, any such Units at any time
during the 90 days after the expiration of the 30-day period specified in the Notice. The purchase
price on a per Unit basis will be determined as of the last business day (determination day)
preceding the end of the 30-day period specified in the Notice and will equal the following per
Unit amount: (i) if the Units are then listed on a stock exchange, the price will equal the
closing price of the Units on such exchange (or, if the Units are then listed on more than one
exchange, on the largest such exchange in terms of the volume of Units traded thereon during the
preceding twelve months) on the determination day if any Units were sold on such exchange on such
day or, if not, on the last preceding day on which any Units were sold on
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such exchange, or (ii) if the Units are not then listed on any stock exchange, the price will
equal the mean between the closing bid and asked prices for the Units in the over-the-counter
market on the determination day if quotations for such prices on such day are available or, if not,
on the last preceding day for which such quotations are available. Such purchase will be
accomplished by tender of the above cash price to the Ineligible Holder at his address as shown on
the records of the Trustee, either in person or by mail as provided in Section 11.06, accompanied
by notice of cancellation. Concurrently with such tender the Trustee shall cancel or cause to be
cancelled all Units (including any Certificates representing certificated Units) then owned by such
Ineligible Holder and for which tender has been made, and the Trustee shall issue or cause to be
issued to itself a Unit or Units representing the same number of Units as were so cancelled. In the
event the tender is refused by the Ineligible Holder or if he cannot be located after reasonable
efforts to do so, the tendered sum shall be held by the Trustee in an interest bearing account for
the benefit of such Ineligible Holder, until proper claim for same (together with interest accrued
thereon) has been made by such Holder, but subject to applicable laws concerning unclaimed
property.
(c) The Trustee may, in its sole discretion, cancel any Units acquired in accordance with the
foregoing procedures or may sell such Units, either publicly or privately, in accordance with all
applicable laws. The proceeds of any such sale of Units, less the expenses of such sale, will
constitute revenues of the Trust.
(d) The Trustee may, in its sole discretion, borrow any amounts required to purchase Units in
accordance with the procedures described above.
3.16.
Miscellaneous
. Except as otherwise provided in this Indenture, this Indenture
and the Trust shall be governed, construed, administered and controlled by and under the laws of
the State of Texas, and the rights, powers, duties and liabilities of the Trustee shall be in
accordance with and governed by the terms and provisions of the Texas Trust Code and other
applicable laws of the State of Texas in effect at any applicable time.
ARTICLE IV
BENEFICIAL SHARES AND CERTIFICATES
4.01.
Creation and Distribution
. The entire Beneficial Interest shall be divided into
that number of Units which is equal to the number of whole shares of common stock of the Company
issued and outstanding on the record date for determination of stockholders of the Company entitled
to receive Units. The ownership of the Units shall be evidenced by (i) Certificates in
substantially the form set forth on Schedule 1 hereto, containing such changes or alterations of
form, but not substance, as the Trustee shall from time to time, in its discretion, deem necessary
or desirable, (ii) a book-entry position in Units maintained as part of a direct registration
system, or (iii) in any other manner required or permitted by United States securities laws or
regulations promulgated by the Securities and Exchange Commission thereunder or the regulations of
any stock exchange on which the Units are listed. Initially, the Company shall own all of the
Units. However, the Company intends to distribute to each of its stockholders of record as of the
close of business on the date fixed for determining stockholders of the Company entitled to receive
Units one Unit for each share of the common stock of the Company so owned of record by such
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stockholder. The Trustee shall forthwith issue Certificates to such person evidencing the
number of Units distributed to such person. Thereafter, Units shall be represented by Certificates
or shall be uncertificated as provided in this Section 4.01.
4.02.
Rights of Unit Holders
. The Unit Holders shall own pro rata the Beneficial
Interest and shall be entitled to participate pro rata in the rights and benefits of the Unit
Holders under this Indenture. A Unit Holder by assignment or otherwise takes and holds the same
subject to all the terms and provisions of this Indenture and the Conveyance, which shall be
binding upon and inure to the benefit of the heirs, personal representatives, successors and
assigns of the Unit Holder. By an assignment or transfer of one or more Units, the assignor thereby
shall, effective as of the close of business on the date of transfer and with respect to such
assigned or transferred Unit or Units, part with, except as provided in Section 4.04 in the case of
a transfer after a Monthly Record Date and prior to the corresponding payment date, (i) all his
Beneficial Interest attributable thereto; (ii) all his rights in, to and under the Certificate (if
such Units are certificated); and (iii) all interests, rights and benefits under this Trust of a
Unit Holder which are attributable to such Unit or Units as against all other Unit Holders and the
Trustee. The Certificates, the Units and the rights, benefits and interests evidenced by either or
both (including, without limiting the foregoing, the entire Beneficial Interest) are and shall be
held and construed to be in all respects intangible personal property, and the Units and the
Certificates evidencing such Units (if such Units are certificated) shall be bequeathed, assigned,
disposed of and distributed as intangible personal property. No Unit Holder as such shall have any
legal title in or to any real property interest which is a part of the Trust Estate, including,
without limiting the foregoing, the Royalties or any part thereof, but the sole interest of each
Unit Holder shall be such Unit Holders Beneficial Interest and the obligation of the Trustee to
hold, manage and dispose of the Trust Estate and to account for the same as in this Indenture
provided. No Unit Holder shall have the right to call for or demand or secure any partition or
distribution of the Royalties during the continuance of the Trust or during the period of
liquidation and winding up under Section 9.03.
4.03.
Execution of Certificates
. All Certificates shall be signed by a duly authorized
officer of the Trustee. Certificates may be signed and sealed on behalf of the Trustee by such
persons as at the actual date of the signing and sealing of such Certificates shall be the proper
officers of the Trustee, although at the nominal date of such Certificates any such person shall
not have been such officer of the Trustee. Any such signature may be the manual or facsimile
signature of such officers and may be affixed, imprinted or otherwise reproduced on the
Certificate.
4.04.
Registration and Transfer of Units
. The Units shall be transferable as against
the Trustee only on the records of the Trustee upon the surrender of Certificates or in compliance
with the Trustees procedures for uncertificated Units and, in either case, compliance with such
reasonable regulations as the Trustee may prescribe. No service charge shall be made to Unit
Holders or Transferee for any transfer of a Unit, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.
Until any such transfer, the Trustee may treat the owner of any Certificate as shown by its
records, or the Unit Holder of record in accordance with the Trustees procedures for
uncertificated Units, as the owner of the Units evidenced thereby and shall not be charged with
notice by any other party of any claim or demand respecting such Unit or the interest represented
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thereby. A transfer of a Unit after any Monthly Record Date shall not transfer to the
Transferee the right of the transferor to any sum payable to such transferor as the Unit Holder of
record on said day. As to matters affecting the title, ownership, warranty or transfer of Units,
Article 8 of the Uniform Commercial Code and other statutes and rules with respect to the transfer
of securities, each as adopted and then in force in the State of Texas, shall govern and apply. The
death of any Unit Holder shall not entitle the Transferee to an account or valuation for any
purpose, but such Transferee shall succeed to all rights of the deceased Unit Holder under this
Indenture upon proper proof of title satisfactory to the Trustee.
4.05.
Mutilated, Lost, Stolen and Destroyed Certificates
. If any Certificate is lost,
stolen, destroyed or mutilated, the Trustee, in its discretion and upon proof satisfactory to the
Trustee, together with a surety bond sufficient in the opinion of the Trustee to indemnify the
Trustee against all loss or expenses in the premises (if deemed advisable by the Trustee), and
surrender of the mutilated Certificate, will issue, at the discretion of the holder of such lost,
stolen, destroyed or mutilated Certificate as shown by the records of the Trustee and upon payment
of a reasonable charge of the Trustee and any reasonable expenses incurred by it in connection
therewith, either a new Certificate or evidence of Unit ownership compliant with the Trustees
procedures for uncertificated Units.
4.06.
Protection of Trustee
. The Trustee shall be protected in acting upon any notice,
credential, certificate, assignment or other document or instrument believed by the Trustee to be
genuine and to be signed by the proper party or parties. The Trustee is specifically authorized to
rely upon the application of Article 8 of the Uniform Commercial Code and the application of other
statutes and rules with respect to the transfer of securities, each as adopted and then in force in
the State of Texas, as to all matters affecting title, ownership, warranty or transfer of either
the Certificates and the Units represented thereby or of uncertificated Units, without any personal
liability for such reliance, and the indemnity granted under Section 6.02 shall specifically extend
to any matters arising as a result thereof.
4.07.
Determination of Ownership of Unit
. In the event of any disagreement between
persons claiming to be Transferees of any Unit Holder, the Trustee shall be entitled at its option
to refuse to recognize any such claims so long as such disagreement shall continue. In so refusing,
the Trustee may elect to make no delivery or other disposition of the interest represented by the
Unit involved, or any part thereof, or of any sum or sums of money, accrued or accruing thereunder,
and, in so doing, the Trustee shall not be or become liable to any Person for the failure or
refusal of the Trustee to comply with such conflicting claims, and the Trustee shall be entitled to
continue so to refrain and refuse so to act, until
(a) the rights of the adverse claimants have been adjudicated by a final judgment of a court
assuming and having jurisdiction of the parties and the interest and money involved, or
(b) all differences have been adjusted by valid agreement between said parties and the Trustee
shall have been notified thereof in writing signed by all of the interested parties.
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ARTICLE V
ACCOUNTING AND DISTRIBUTIONS
5.01.
Fiscal Year and Accounting Method
. The fiscal year of the Trust shall be the
calendar year. The Trustee shall maintain its books in accordance with generally accepted
accounting principles or such other method as will provide appropriate financial data responsive to
the needs of the Unit Holders.
5.02.
Distributions
. On the Distribution Date of each month, the Trustee will
distribute pro rata to Unit Holders of record on the Monthly Record Date for such month the Monthly
Distribution Amount for that month.
5.03.
Federal Income Tax Reporting
. For federal income tax purposes, the Trustee shall
file such returns and statements as in its judgment are required to comply with applicable
provisions of the Code and regulations and to permit each Unit Holder correctly to report such Unit
Holders share of the income and deductions of the Trust. The Trustee will treat all income and
deductions of the Trust for each month as having been realized on the Monthly Record Date for such
month unless otherwise advised by its counsel or the Internal Revenue Service. The Trustee will
report as a grantor trust until and unless it receives an opinion of tax counsel that such
reporting is no longer proper.
5.04.
Reports to Unit Holders
. As promptly as practicable following the end of each
calendar quarter, the Trustee shall mail to each Person who was a Unit Holder of record on a
Monthly Record Date during such quarter a report which shall show in reasonable detail such
information as is necessary to permit holders of units to make all calculations necessary for tax
purposes including depletion, and which shall show the assets and liabilities and receipts and
disbursements of the Trust for such quarter and for each month in such quarter. Within 90 days
following the end of each fiscal year, the Trustee shall mail, to each Person of record on a date
to be selected by the Trustee, an annual report containing financial statements audited by a
nationally recognized firm of independent public accountants selected by the Trustee.
Notwithstanding the foregoing, the Trustee will furnish to the Unit Holders such reports, in such
manner, as are at any time required by law or by regulations of any stock exchange on which the
Units are listed.
ARTICLE VI
LIABILITY OF TRUSTEE AND METHOD OF SUCCESSION
6.01.
Liability of Trustee
.
(a) Except as otherwise provided herein and specifically except as provided in paragraph (b)
below, the Trustee, in carrying out its powers and performing its duties, may act in its discretion
and shall be personally or individually liable only for fraud or for acts or omissions in bad faith
and shall not individually or personally be liable for any act or omission of any agent or employee
of the Trustee unless the Trustee has acted in bad faith in the selection and retention of such
agent or employee.
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(b) If the Trustee enters into a contract on behalf of the Trust Estate without ensuring that
any liability arising out of such contract shall be satisfiable only out of the Trust Estate and
shall not in any event, including the exhaustion of the Trust Estate, be satisfiable out of amounts
at any time distributed to any Unit Holder or out of any other assets owned by any Unit Holder,
then Trustee, vis-a-vis the Unit Holders, shall be fully and exclusively liable for such liability,
but shall have the right to be indemnified and reimbursed from the Trust Estate to the extent
provided in Section 6.02.
6.02.
Indemnification of Trustee
. The Trustee, its officers, agents and employees
shall be indemnified by, and receive reimbursement from, the Trust Estate against and from any and
all liability, expense, claims, damages or loss incurred by it individually or as Trustee in
administration of the Trust and the Trust Estate or any part or parts thereof, including, without
limitation, any liability, expense, claims, damages or loss arising out of or in connection with
any liability under Environmental Laws, or the doing of any act done or performed or omission
occurring on account of its being Trustee, except such liability, expense, claims, damages or loss
as to which it is liable under Section 6.01(a). Trustee shall have a lien upon the Trust Estate to
secure it for such indemnification and reimbursement and for compensation to be paid to the
Trustee. Except as provided in Section 4.05, neither the Trustee, nor any officer, agent or
employee of the Trustee shall be entitled to any reimbursement or indemnification from any Unit
Holder for any liability, expense, claims, damages or loss incurred by the Trustee or any such
officer, agent or employee, their right of reimbursement and indemnification, if any, being limited
solely to the Trust Estate, whether or not the Trust Estate is exhausted without full reimbursement
or indemnification of the Trustee or any such officer, agent or employee.
6.03.
Resignation of Trustee
. The Trustee may resign, with or without cause, at any
time by written notice to each of the then Unit Holders, given by first-class United States mail,
postage prepaid, addressed to each such holder at such holders last known address as shown by the
records of the Trustee at the time such notice is given. Such notice shall specify a date when such
resignation shall take effect, which shall be a Business Day not less than ninety (90) days after
the date such notice is mailed. In case of such resignation, the Trustee will use its best efforts
to nominate a successor, to call a meeting of Unit Holders for the purpose of appointing a
successor, and to solicit proxies for such meeting.
6.04.
Removal of Trustee
. The Trustee may be removed, with or without cause, at a
meeting held in accordance with the requirements of Article VIII by the affirmative vote of the
holders of a majority of all the Units then outstanding.
6.05.
Appointment of Successor Trustee
. In the event of a vacancy in the position of
Trustee or if a Trustee has given notice of its intention to resign, the Unit Holders present or
represented at a meeting held in accordance with the requirements of Article VIII may appoint a
successor Trustee. Nominees for appointment may be made by (i) the resigned or removed Trustee and
(ii) any Unit Holder or Unit Holders owning at least 15% of the Units. Any such successor Trustee
shall be a bank or trust company having a capital, surplus and undivided profits (as of the end of
its last fiscal year prior to its appointment) of at least $50,000,000. In the event that a vacancy
in the position of Trustee continues for sixty (60) days, a successor Trustee may be appointed by
any State or Federal District Court holding terms in Tarrant County, Texas, upon the application of
any Unit Holder, and in the event any such application is filed, such court
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may appoint a temporary Trustee at any time after such application is filed with it which
shall, pending the final appointment of a Trustee, have such powers and duties as the court
appointing such temporary Trustee shall provide in its order of appointment, consistent with the
provisions of this Indenture.
Immediately upon the appointment of any successor Trustee, all rights, titles, duties, powers
and authority of the succeeded Trustee hereunder shall be vested in and undertaken by the successor
Trustee which shall be entitled to receive from the Trustee which it succeeds all of the Trust
Estate held by it hereunder and all records and files in connection therewith. No successor Trustee
shall be obligated to examine or seek alteration of any account of any preceding Trustee, nor shall
any successor Trustee be liable personally for failing to do so or for any act or omission of any
preceding Trustee. The preceding sentence shall not prevent any successor Trustee or anyone else
from taking any action otherwise permissible in connection with any such account.
ARTICLE VII
COMPENSATION OF THE TRUSTEE
7.01.
Compensation of Trustee
. The Trustee shall receive compensation for its services
as Trustee hereunder and as transfer agent as set forth in Schedule 2 attached hereto.
7.02.
Expenses
. The out-of-pocket costs incurred by the Trustee for long distance
telephone calls, overtime necessitated by rush orders, travel, legal services, stationery, binders,
envelopes, ledger sheets, transfer sheets, checks, Unit Holder list sheets, postage and insurance
will be reimbursed to the Trustee at actual cost.
7.03.
Other Services
. The Trustee shall be reimbursed for actual expenditures made on
account of any unusual duties in connection with matters pertaining to the Trust. In the event of
litigation involving the Trust, audits or inspection of the records of the Trust pertaining to the
transactions affecting the Trust or any other unusual or extraordinary services rendered in
connection with the administration of the Trust, Trustee shall be entitled to receive reasonable
compensation for the services rendered.
7.04.
Source of Funds
. All compensation, reimbursements and other charges owing to the
Trustee will be payable by the Trust out of the Trust Estate.
ARTICLE VIII
MEETINGS OF UNIT HOLDERS
8.01.
Purpose of Meetings
. A meeting of the Unit Holders may be called at any time and
from time to time pursuant to the provisions of this Article to transact any matter that the Unit
Holders may be authorized to transact.
8.02.
Call and Notice of Meetings
. Any such meeting of the Unit Holders may be called
by the Trustee in its discretion and will be called by the Trustee at the written request of Unit
Holders owning not less than 15% of the then outstanding Units. All such meetings shall be held
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at such time and place as is designated in the notice of meeting, provided, however, that all
such meetings must be held in (i) Fort Worth, Texas, (ii) New York, New York, (iii) the city in
which the principal United States office of the Trustee is located, or (iv) any United States city
where the Trustee maintains an office. Written notice of every meeting of the Unit Holders signed
by the Trustee setting forth the time and place of the meeting and in general terms the matters
proposed to be acted upon at such meeting shall be given in person or by mail not more than 60 nor
less than 20 days before such meeting is to be held to all of the Unit Holders of record not more
than 60 days before the date of such mailing. No matter other than that stated in the notice shall
be acted upon at any meeting.
8.03.
Voting
. Each Unit Holder shall be entitled to one vote for each Unit owned by
such Unit Holder, and any Unit Holder may vote in person or by written proxy. (A telegram, telex,
cablegram, or other form of electronic transmission, including telephone transmission, by the Unit
Holder or a photographic, photostatic, facsimile or similar reproduction of a writing executed by
the Unit Holder shall be treated as an execution in writing for purposes of this Section 8.03.
Any electronic transmission must contain or be accompanied by information from which it can be
determined that the transmission was authorized by the Unit Holder.) At any such meeting the
presence in person or by proxy of Unit Holders holding a majority of the Units at the time
outstanding shall constitute a quorum, and, except as otherwise specifically provided herein, any
matter shall be deemed to have been approved by the Unit Holders if it is approved by the vote of a
majority in interest of such Unit Holders constituting a quorum, although less than a majority of
all of the Units at the time outstanding, except that the affirmative vote by the Unit Holders of
at least 75% of all the Units then outstanding shall be required to:
(a) approve or authorize any sale of all or any part of the assets of the
Trust; or
(b) terminate the Trust pursuant to Section 9.02(b); or
(c) approve any amendment to or affecting this Section 8.03;
provided, however, that nothing contained in this Section 8.03 shall be deemed to require Unit
Holder approval of any sale pursuant to Section 3.02(b).
8.04.
Conduct of Meetings
. The Trustee may make such reasonable regulations consistent
with the provisions hereof as it may deem advisable for any meeting of the Unit Holders, including
regulations covering the closing of the transfer books of the Trustee for purposes of determining
Unit Holders entitled to notice of or to vote at any meeting, the appointment of proxies, the
appointment and duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, the preparation and use at the meeting of a
list authenticated by or on behalf of the Trustee of the Unit Holders entitled to vote at the
meeting and such other matters concerning the calling and conduct of the meeting as it shall deem
advisable.
ARTICLE IX
DURATION, REVOCATION AND TERMINATION OF TRUST
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9.01.
Revocation
. The Trust is and shall be irrevocable and Company retains no power
to alter, amend or terminate the Trust. The Trust shall be terminable only as provided in Section
9.02, and shall continue until so terminated.
9.02.
Termination
. The Trust shall terminate upon the first to occur of the following
events:
(a) at such time as its gross revenue for each of two successive years is less than $1,000,000
per year,
(b) a vote in favor of termination by the Unit Holders present or represented at a meeting
held in accordance with the requirements of Article VIII, or
(c) the expiration of twenty-one years after the death of the last survivor of the lawful
descendants of any degree of the signers of the Declaration of Independence in being on the date of
execution hereof.
9.03.
Disposition and Distribution of Properties
. For the purpose of liquidating and
winding up the affairs of the Trust at its termination, the Trustee shall continue to act as such
and exercise each power until its duties have been fully performed and the Trust Estate finally
distributed. Upon the termination of the Trust, the Trustee shall sell for cash in one or more
sales all the properties other than cash then constituting the Trust Estate. The Trustee shall as
promptly as possible distribute the proceeds of any such sales and any other cash in the Trust
Estate according to the respective interests and rights of the Unit Holders, after paying,
satisfying and discharging all of the liabilities of the Trust, or, when necessary, setting up
reserves in such amounts as Trustee in its discretion deems appropriate for contingent liabilities.
In the event that any property which the Trustee is required to sell is not sold by the Trustee
within three years after the termination of the Trust, the Trustee shall cause such property to be
sold at public auction to the highest cash bidder. Notice of such sale by auction shall be mailed
at least thirty days prior to such sale to each Unit Holder at such Unit Holders address as it
appears upon the books of the Trustee. The Trustee shall not be required to obtain approval of the
Unit Holders prior to selling property pursuant to this Section. The Trustee may engage the
services of one or more investment advisors or other parties deemed by the Trustee to be qualified
as experts on such matters to assist with such sales and shall be entitled to rely on the advice of
such persons as contemplated by Section 11.02. Upon making final distribution to the Unit Holders,
the Trustee shall be under no further liability except as provided in 6.01(b).
ARTICLE X
AMENDMENTS
10.01.
Prohibited
. No amendment may be made to any provision of the Indenture which
would
(a) alter the purposes of the Trust or permit the Trustee to engage in any business or
investment activities substantially different from those specified herein;
(b) alter the rights of the Unit Holders vis-a-vis each other; or
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(c) permit the Trustee to distribute the Royalties in kind either during the continuation of
the Trust or during the period of liquidation or winding up under 9.03.
10.02.
Permitted
. All other amendments to the provisions of the Indenture may be made
by a vote of the Unit Holders present or represented at a meeting held in accordance with the
requirements of Article VIII; provided that no amendment shall be effective without the express
written approval of the Trustee.
ARTICLE XI
MISCELLANEOUS
11.01.
Inspection of Trustees Books
. Each Unit Holder and such Unit Holders duly
authorized agents, attorneys and auditors shall have the right during reasonable business hours to
examine, inspect and make audits of the Trust and records of the Trustee, including lists of Unit
Holders for any proper purpose in reference thereto.
11.02.
Trustees Employment of Experts
. The Trustee may, but shall not be required to,
consult with counsel, who may be its own counsel, accountants, geologists, engineers and other
parties deemed by the Trustee to be qualified as experts on the matters submitted to them, and the
opinion of any such parties on any matter submitted to them by the Trustee shall be full and
complete authorization and protection in respect of any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of any such party.
11.03.
Merger or Consolidation of Trustee
. Neither a change of name of the Trustee nor
any merger or consolidation of its corporate powers with another bank or with a trust company shall
affect its right or capacity to act hereunder.
11.04.
Filing of this Indenture
. Neither this Indenture nor any executed copy hereof
need be filed in any county in which any of the Trust Estate is located, but the same may be filed
for record in any county by the Trustee. In order to avoid the necessity of filing this Indenture
for record, the Trustee agrees that for the purpose of vesting the record title to the Royalties in
any successor to the Trustee, the retiring Trustee will, upon appointment of any successor Trustee,
execute and deliver to such successor Trustee appropriate assignments or conveyances.
11.05.
Severability
. If any provision of this Indenture or the application thereof to
any Person or circumstances shall be finally determined by a court of proper jurisdiction to be
illegal, invalid or unenforceable to any extent, the remainder of this Indenture or the application
of such provision to Persons or circumstances, other than those as to which it is held illegal,
invalid or unenforceable, shall not be affected thereby, and every provision of this Indenture
shall be valid and enforced to the fullest extent permitted by law.
11.06.
Notices
. Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served upon the Trustee by any Unit Holder may be given or
served by being deposited, postage prepaid and by registered or certified mail, in a post office or
letter box addressed (until another address is designated by notice to the Unit Holders) to the
Trustee at 2525 Ridgmar Boulevard, Fort Worth, Texas 76116. Any notice or other communication by
the Trustee to any Unit Holder shall be deemed to have been sufficiently
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given, for all purposes, when deposited, postage prepaid, in a post office or letter box
addressed to said Unit Holder at his address as shown on the records of the Trustee.
11.07.
Counterparts
. This Indenture may be executed in a number of counterparts, each
of which shall constitute an original, but such counterparts shall together constitute but one and
the same instrument.
11.08.
Force Majeure
. No party to this Indenture (or its affiliates) shall incur any
liability to any other party to this Indenture or to any Unit Holder, if, by reason of any current
or future law or regulation thereunder of the federal government or any other governmental
authority, or by reason of any act of God, war or other circumstance beyond its control, such party
is prevented or forbidden from doing or performing any act or thing required by the terms hereof to
be done or performed; nor shall any party to this Indenture incur any liability to any other party
to this Indenture or any Unit Holder by reason of any non-performance or delay caused as aforesaid
in the performance of any act or thing required by the terms hereof to be done or performed.
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SCHEDULE 1
FORM OF CERTIFICATES
stock certificate CUSIP 798241 10 5
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SAN JUAN BASIN ROYALTY TRUST Pursuant to Section 3.15 of the Royalty Trust Indenture, the Trustee
may require mandatory divestiture of a Unit holders Units in the Trust in the event that the Trust
or the Trustee is named in certain proceedings which seek the cancellation or forfeiture of any
property of the Trust due to the nationality or other status of such Unit holder. See Section 3.15
of the Royalty Trust Indenture for complete details. The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations: TEN COM as tenants in common UNIF GIFT MIN ACT-
Custodian . (Cust) (Minor) TEN ENT as tenants by the entireties under Uniform Gift to Minors Act
(State) JT TEN as joint tenants with right of survivorship and not as tenants in common
Additional abbreviations may also be used though not in the above list. For Value Received, hereby
sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE___(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) ___
Units of Beneficial Interest represented by the within Certificate, and do hereby constitute and
appoint irrevocably ___Attorney to transfer the said Units on the books of the within named
Trustee, with full power of substitution in the premises. Dated: 20 Signature: ___Signature: ___
Notice: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER. Signature Guaranteed By: Signatures must be guaranteed by an eligible guarantor
institution meeting the requirements of the Trustee or the Paying Agent, which requirements on and
after October 26, 1992 will include membership or participation in STAMP or such other signature
guarantee program as may be determined by the Trustee or the Transfer Agent and Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
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SCHEDULE 2
TRUSTEE COMPENSATION
A. Administrative Fee.
For all administrative services, preparation of quarterly and annual statements with attention
to tax and legal matters:
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1.
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1/20 of 1% of the first $100 million of the annual gross revenue of the Trust,
and 1/30 of 1% of the annual gross revenue of the Trust in excess of $100 million.
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2.
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Trustees standard hourly rates for time in excess of 300 hours annually.
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Notwithstanding the foregoing, effective January 1, 2003, the fee earned by the Trustee pursuant to
(1) and (2) above shall in no event be less than $36,000 per annum, adjusted annually to reflect
increases in the Producers Price Index as published by the United States Department of Labor,
Bureau of Labor Statistics or such equivalent index as may be published from time to time. The
annual adjustments shall reflect the percentage rise in this index on a December-to-December basis
beginning December 31, 2003.
B. Transfer Agency Fee.
1. $4.92 annually per Unit Holder account for maintaining computer records of each Unit
Holder, name and address of record, tax identification number, outstanding Unit balances,
alternative payee, various coded fields of pertinent information; for processing change of address
and tax identification numbers; posting each Certificate cancelled or issued; issuance of 10,000
Certificates; processing request and documentation required for replacement of lost or destroyed
Certificates; for placing and/or removing stop transfer orders; registering Certificates;
disbursing the Monthly Distribution Amounts; preparing and mailing required Internal Revenue
Service forms; mailing of proxies and other related material; tabulation of proxies; and
maintenance and printing of Unit Holder list.
2. For Certificates issued, registered and posted in excess of 10,000 annually, $1.00 for each
Certificate.
3. The transfer agency fees stated above will be subject to escalation based upon the general
rise in prices in the economy. The index used will be the Producers Price Index as published by the
United States Department of Labor, Bureau of Labor Statistics or such equivalent index as may be
published from time to time. All transfer agency fees will be adjusted annually by the percentage
rise in this index on a December-to-December basis beginning December 31, 1981.
C. Termination Fee.
A fee will be charged upon termination of the Trust commensurate with the amount of work and
responsibility involved which shall not exceed 10% of the proceeds received and distributed in
connection with the termination liquidation; provided that termination is
accomplished under Article 9.02(a) of the Trust Indenture. Under any other method of
termination, fees will be charged on an hourly basis only.
D. Invested Funds.
To the extent consistent with the Trust Indenture and applicable statutes and regulations,
funds held by the Trustee will be invested after receipt thereof until the next succeeding
Distribution Date in such investments as are permitted by the Trust Indenture and the income so
earned will be disbursed to the Unit Holders in accordance with the provisions of the Trust
Indenture.
After funds are disbursed on the Distribution Date, an analysis will be made by the Trustee of
the disbursement account or accounts and a credit for funds as calculated under the practice as it
exists in the Trustee bank at the time and, from time to time, will be applied to reduce the
administrative fee described in paragraph A above charged by the Trustee at the next administrative
fee payment date. In no event shall the credit exceed the administrative fee.
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EXHIBIT 1
NET OVERRIDING ROYALTY CONVEYANCE
(San Juan Basin Royalty Trust)
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THE STATE OF NEW MEXICO
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§
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§
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KNOW ALL MEN BY THESE PRESENTS:
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COUNTIES OF SAN JUAN,
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§
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RIO ARRIBA AND SANDOVAL
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§
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THAT, SOUTHLAND ROYALTY COMPANY, a Delaware corporation (Assignor), for and in consideration
of the sum of Ten Dollars ($10.00) and other good and valuable consideration to it paid by The Fort
Worth National Bank, a bank organized under the laws of the United States, acting not in its
individual corporate capacity but solely as trustee under that certain San Juan Basin Royalty Trust
Indenture dated as of November 1, 1980 (Assignee), the receipt and sufficiency of which are
hereby acknowledged, has bargained, sold, granted, conveyed, transferred, assigned, set over and
delivered, and by these presents does hereby bargain, sell, grant, convey, transfer, assign, set
over and deliver unto Assignee a net overriding royalty interest (the Royalty Interest) in and to
the Minerals in and under, and if, as and when produced, saved and sold from, the Subject Lands
during the term of the Subject Interests equal to Seventy-Five percent (75%) of the Net Proceeds
attributable to the Subject Interests, as each of the above capitalized words are defined in
Article I and all as more fully provided herein.
TO HAVE AND TO HOLD the Royalty Interest, together with all and singular the rights and
appurtenances thereto in anywise belonging, unto Assignee, its successors and assigns, subject,
however, to the terms and provisions of this Conveyance; and Assignor does by these presents bind
and obligate itself, its successors and assigns, to WARRANT and FOREVER defend all and singular the
Royalty Interest unto the said Assignee, its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part thereof by, through or under
Assignor, but not otherwise.
ARTICLE I
DEFINITIONS
As herein used the following words, terms or phrases have the following meanings:
SECTION 1.01. Affiliate means, as to the party specified, any Person controlling, controlled
by or under common control with such party, with the concept of control in such context meaning the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of another, whether through the ownership of voting securities, by contract or
otherwise.
SECTION 1.02. Assignor means the Assignor named herein while it owns all or any part of or
interest in the Subject Interests and any other Person or Persons who acquire all or any part of or
interest in the Subject Interests.
EXHIBIT
1
SECTION 1.03. Assignee means the Assignee named herein while it owns all or any part of or
interest in the Royalty Interest and any other Person or Persons who acquire legal title to all or
any part of or interest in the Royalty Interest.
SECTION 1.04. Conveyance means this Net Overriding Royalty Conveyance.
SECTION 1.05. Effective Date means 7:00 oclock A.M., local time in effect at the location
of each Subject Interest, on November 1, 1980.
SECTION 1.06. Excess Production Costs at any point in time means an amount equal to the
excess of Production Costs over Gross Proceeds for the period ending with such point and beginning
with the end of the most recent month in which there were Net Proceeds.
SECTION 1.07. Gross Proceeds means the amounts received from and after the Effective Date by
Assignor from the Sale of Subject Minerals sold after the Effective date, in the aggregate, subject
to the following:
(a) There shall be excluded from Gross Proceeds all general property (ad valorem),
production, severance, sales, gathering and windfall profits taxes and other taxes (whether
state, federal or otherwise) assessed or levied on or in connection with the Subject
Interests, the Royalty Interest or the production therefrom, or against Assignor as owner of
the Subject Interests or Assignee as owner of the Subject Interests or Assignee as owner of
the Royalty Interest, and which taxes are deducted or excluded from proceeds of Sale
received by Assignor.
(b) There shall be excluded any amount for Subject Minerals attributable to nonconsent
operations conducted with respect to the Subject Interests (or any portion thereof) as to
which Assignor shall be a nonconsenting party and which is dedicated to the recoupment or
reimbursement of costs and expenses of the consenting party or parties by the terms of the
relevant operating agreement, unit agreement, contract for development or other instrument
providing for such nonconsent operations, provided Assignors election not to participate in
such operations is made in conformity with the provisions of Section 6.01 of this
Conveyance.
(c) There shall be excluded any amount which Assignor shall receive as any of the
following: consideration for transfer or sale of any of the Subject Interests (subject to
the Royalty Interest) or equipment or other personal property or fixtures on the Subject
Lands; delay rental; shut-in gas well royalty or payment; minimum royalty (to the extent not
attributable to actual production of the Subject Minerals); payments for gas not taken, when
such payments are made (but to the extent such payments are allocated to gas taken in the
future such payments shall be included without interest in Gross Proceeds when such gas is
taken); damages arising from any cause other than drainage or reservoir injury; rental for
reservoir use; payments made to Assignor in connection with the drilling of any well on any
of the Subject Lands or lands in the vicinity (such exclusion including dry and bottom hole
payments, provided that if such well is drilled on the Subject Lands and Assignor incurs
Production Costs in connection therewith such payments shall reduce Production Costs) or in
connection with any adjustment of any
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well and leasehold equipment upon unitization of any of the Subject Interests; provided
there shall be included in Gross Proceeds advance or prepaid payments for future production
received by Assignor to the extent not subject to repayment in the event of insufficient
subsequent production (and to the extent so subject to repayment shall be included without
interest in Gross Proceeds when the Minerals on which such payment was so advanced or
prepaid are actually produced) and payments made to Assignor in connection with the
deferring of drilling of any well on any of the Subject Lands (including payments from an
operator in the vicinity for refraining from drilling an offset well).
(d) There shall be excluded any amount for Subject Minerals lost in the production or
marketing thereof or used by Assignor in conformity with ordinary or prudent practices for
drilling, production and plant operations (including gas injection, secondary recovery,
pressure maintenance, repressuring, cycling operations, plant fuel or shrinkage) conducted
for the purpose of drilling for, producing or processing Subject Minerals or for operations
on any unit or plant to which the Subject Interests are committed, but only so long as such
Subject Minerals are so used.
(e) Amounts received as a loan by Assignor from a purchaser of Subject Minerals,
whether with or without interest, shall not be considered to be derived from the sale of
Subject Minerals, provided that the related Sales Contract meets the requirements of Section
4.01 hereof.
(f) So long as and to the extent that the same may be required by applicable laws and
regulations, in the case of any Subject Interest derived under a lease from the United
States of America from which the average production of oil per well per day averaged on the
monthly basis is 15 barrels or less, the obligation to pay and the right of Assignee to
receive the proceeds of oil produced from such lease shall be suspended until said average
production of oil per well per day exceeds said minimum amount, and such suspension shall
apply separately to any zone or portion of such lease segregated for computing government
royalties.
(g) If a controversy or possible controversy exists (whether by reason of any statute,
order, decree, rule, regulation, contract or otherwise) between Assignor and any purchaser
as to the correct sales price of any Subject Mineral or, for any other reason, as to
Assignors right to receive or collect the proceeds of sale of any Subject Minerals, then
(i) amounts withheld by the purchaser or deposited by it with an escrow agent
shall not be considered to be received by Assignor until actually collected by
Assignor, but the amounts received by Assignor shall include any interest, penalty
or other amount paid to Assignor in respect thereof;
(ii) amounts received by Assignor and promptly deposited by it with an escrow
agent shall not be considered to have been received by Assignor, but all amounts
thereafter paid to Assignor by such escrow agent shall be considered to be amounts
received from the sale of Subject Minerals; and
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(iii) amounts received by Assignor and not deposited with an escrow agent shall
be considered to be received for purposes of this Section 1.07.
(h) Assignor shall have the right to contest the amount of the windfall profits tax
alleged to be due on proceeds included in Gross Proceeds and to seek refunds thereof. In
the event any amounts are required to be paid because of any deficiency in prior payment of
windfall profits tax for periods after the Effective Date, the amounts so paid shall be
included in Production Costs as paid.
SECTION 1.08. Minerals means oil, gas and all other minerals produced in association with
oil or gas, but excluding all other minerals, whether similar or dissimilar.
SECTION 1.09. Monthly Record Date for each month means the close of business on the last day
of such month which is not a Saturday, Sunday or other day on which national banking institutions
in the City of Fort Worth, Texas, are closed as authorized or required by law, unless Assignee
determines that a later date is required to comply with applicable law or the rules of an exchange
pursuant to the terms of the San Juan Basin Royalty Trust Indenture referred to above.
SECTION 1.10. Net Proceeds for any period means the excess of Gross Proceeds realized during
such period over the sum of (a) Production Costs incurred during such period and (b) Excess
Production Costs as of the end of the immediately preceding period.
SECTION 1.11. Non-Affiliate means, as to the party specified, any Person who is not an
Affiliate of such party.
SECTION 1.12. Person means any individual, corporation, partnership, trust, estate or other
entity, organization or association.
SECTION 1.13. Prime Interest Rate means the interest rate per annum charged by Morgan
Guaranty Bank of New York on ninety day loans to its most substantial and responsible commercial
borrowers.
SECTION 1.14. Processing Costs means the costs to Assignor of manufacturing, refining or
processing (all herein referred to as processing) gas and casinghead gas included in the Subject
Minerals before the Sale thereof, which costs for purposes hereof shall consist of
(a) the sum of (i) any such processing charges paid to Non-Affiliates and (ii) the
expenses (including depreciation but otherwise not including capital costs) incurred by
Assignor or its Affiliate in processing such Subject Minerals plus an amount equal to a
return of 15% on the depreciated book value of the fixed assets used in such processing (for
which purpose of computing depreciation and the return on depreciated book value the value
of fixed assets owned by Assignor will be their book value as of the date first used in
processing Subject Minerals), or
(b) if greater, the amount allowed as processing charges by any Federal or State agency
having jurisdiction over the sale of such Subject Minerals.
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If Assignor or an Affiliate receives a share of the production of others or of plant products
therefrom (or proceeds of sale thereof) for processing such production of others, such share shall
not be included in Subject Minerals (or Gross Proceeds). If Assignor or an Affiliate does not bear
any processing costs but the owners or operators of a plant receive a share of the Subject Minerals
(or proceeds of sale thereof) for processing them, such share (or proceeds) shall be excluded from
the Subject Minerals (and Gross Proceeds).
SECTION 1.15. Production Costs means, on an accrual accounting method and accruing with
respect to the following from and after the Effective Date, and whether capital or non-capital in
nature,
(a) the sum of
(i) all amounts borne by Assignor as any of the following: royalty; overriding
royalty or other presently existing burden against production or the proceeds of
sale of production attributable to the Subject Interests; delay rental; shut-in gas
well royalty or payment; minimum royalty; payments to lessors or others in the area
in connection with the drilling or deferring of drilling of any well on any of the
Subject Lands or lands in the vicinity (including dry and bottom hole payments and
payments made to others for refraining from drilling an offset well) or in
connection with any adjustment of any well and leasehold equipment upon unitization
of any of the Subject Interests; and rent and other consideration paid for use of or
damage to the surface;
(ii) all general property (ad valorem), production, severance, sales, gathering
and windfall profits taxes and other taxes (whether state, federal or otherwise),
except income taxes, assessed or levied on or in connection with the Subject
Interests, the Royalty Interest or the production therefrom or equipment on the
Subject Lands, or against Assignor as owner of the Subject Interests or Assignee as
owner of the Royalty Interest, and which taxes are paid by Assignor, and any income
tax on the Royalty Interest paid by Assignor;
(iii) the aggregate costs incurred by Assignor under any joint operating
agreement applicable to the Subject Interests to which Assignor and one or more
Non-Affiliates are parties;
(iv) The aggregate costs incurred by Assignor under Schedule B attached hereto
with respect to any Subject Interest not subject to a joint operating agreement
between Assignor and a Non-Affiliate.
(v) all other costs, expenses and liabilities of investigating, exploring,
prospecting, drilling and mining for, operating and producing Subject Minerals and
sale and marketing thereof, including without implied limitation: costs of
equipping, plugging back, reworking, completing, recompleting and plugging and
abandoning of any well on the Subject Lands and of making the Subject Minerals ready
or available for market; the cost of construction of gathering lines, tanks,
transmission lines, meters and other production and delivery facilities and of
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transporting, compressing, dehydrating, separating, treating, storing and
marketing the Subject Minerals; the cost of secondary recovery, pressure
maintenance, repressuring, cycling and other operations conducted for the purpose of
enhancing production; and the cost of litigation concerning title to or operation of
the Subject Interests and any other acts or omissions of Assignor consistent
herewith or brought by Assignor to protect the Subject Interests;
(vi) Processing Costs;
(vii) interest accrued during any month in which there were Excess Production
Costs computed at the Prime Interest Rate in effect at the end of such period on the
amount of Excess Production costs at the end of such period;
(viii) the costs of the audits furnished pursuant to Section 2.06 hereof;
(ix) any amounts paid by Assignor, whether as refund, interest or penalty, to a
purchaser because the amount initially received by Assignor as sales price was more
or allegedly more than permitted by the terms of any applicable contract, statute,
regulation, order, decree or other obligation;
(x) any other amounts paid by Assignor with respect to the Subject Interests or
operation thereof or sale of production therefrom, whether as refund, fine, interest
or penalty, pursuant to litigation or settlement of threatened litigation or order
of governmental agency, provided that Assignor has not breached Section 6.01 hereof;
and
(xi) all consideration hereafter paid and costs and expenses hereafter incurred
by Assignor for any renewals or extensions of leases or other rights hereafter
acquired which are included in the definition herein of Subject Interests;
(b) but excluding
(i) costs which would otherwise be treated as Production Costs but which shall
not be so treated for purposes hereof (until the following amounts have been fully
credited against such costs) equal to amounts reimbursed or credited to Assignor by
insurance from damage to property, by sales of property or transfers of property off
the leases included in the Subject Interests or by proceeds from unitization or
other disposition of property;
(ii) the costs incurred in drilling a well to a lower depth than that to which
the Subject Interests are by the definition below limited unless the well is
ultimately completed as a producer within the depths included in the Subject
Interests and is not completed as a producer below such depths and, even in such
event, the cost of drilling below such depths (as allocated by Assignor) shall be
excluded; and
(iii) any amounts which would otherwise be Production Costs but which are
attributable to periods before the Effective Date.
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SECTION 1.16. Sale includes exchanges and other dispositions for value.
SECTION 1.17. Sales Contracts means all contracts and agreements for the offer or sale of,
or commitment to offer or sell, or right of first refusal to purchase, Subject Minerals.
SECTION 1.18. Subject Interests means each kind and character of right, title, claim or
interest which Assignor has on the Effective Date in the oil, gas or mineral leases, mineral
interests, royalty interests and overriding royalty interests and the unitization and pooling
agreements and the units created thereby which are described in Schedule A, and all the right,
title, claim or interest which Assignor has on the Effective Date in and to the Subject Lands,
whether such right, title, claim or interest be under and by virtue of a lease, a mineral deed or
reservation, a royalty deed or reservation, an overriding royalty assignment or reservation, a
unitization or pooling agreement, a unitization or pooling order, an operating agreement, a
division order, a transfer order or any other type of contract, conveyance or instrument or under
any other type of claim or title, legal or equitable, recorded or unrecorded, even though
Assignors interests be incorrectly or incompletely described in, or a description thereof be
omitted from, Schedule A, all as the same shall be enlarged by the discharge of any payments out of
production or by the removal of any charges or encumbrances to which any of the same are subject
and any and all renewals and extensions of any of the same, but subject to all burdens to which
Assignors such right, title, claim or interest is subject (while same remains so subject),
limited, however, as follows: (i) limited to the depths to which the definition below of Subject
Lands is limited, (ii) limited, as to duration, with respect to each Subject Interest which is a
mineral interest subject on the Effective Date to an oil and gas lease (or oil, gas and mineral
lease), whether or not owned in whole or in part by Assignor, or which is a royalty interest as to
which the underlying mineral estate is subject to such a lease, to the life of that lease or any
renewal or extension thereof (so that if a lease in force on the Effective Date should terminate in
whole or in part for any reason and not be renewed or extended then such Subject Interest, to the
extent same, or the underlying mineral estate in same, is no longer subject to such lease, shall no
longer be subject to this Conveyance and the rights, titles and interests therein hereby conveyed
shall revert to Assignor without necessity of written proof so evidencing) and (iii) limited, if
Assignors interest in any Subject Interest should terminate sooner than the reversion provided in
the foregoing (ii), to the period to which Assignors interest in such Subject Interest is limited.
There shall be excluded from the term Subject Interests any interest hereafter acquired by
Assignor in and to any of the Subject Lands, except any interest acquired pursuant to existing
agreements for no new consideration and renewals or extensions of leases. For purposes of this
Conveyance renewals or extensions of any lease shall be limited to renewals or extensions of an
existing lease obtained by the present owner thereof (or such owners successors in interest) while
such lease is in force or within six months after such lease terminates. Assignor shall be under
no duty to seek renewals or extensions of any lease.
SECTION 1.19. Subject Lands means the lands which are described in or which are subject to
the oil, gas and mineral leases, mineral deeds, royalty deeds, assignments and other instruments
described in Schedule A attached hereto from the surface of such lands to the base of the
Basin-Dakota Gas Pool as defined in Rule 25 of Order No. R-1670-C (as amended to the date hereof)
issued by the New Mexico Oil Conservation Commission, provided that if Assignors ownership rights
in any such lands are presently limited to depths shallower than such depth the Subject Lands
shall likewise be subject to such limitation and provided further that
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where the description in Schedule A excepts land or refers to an instrument insofar only as it
covers certain land, no interest in such excepted land or in land other that to which such
reference is limited shall be included in the terms Subject Lands or Subject Interests.
SECTION 1.20. Subject Minerals means all Minerals in and under, and which may be produced,
saved and sold from, and which shall accrue and be attributable to, the Subject Interests,
including plant products attributable thereto from processing gas or casinghead gas included in the
Subject Minerals before sale thereof (but not including products derived from processing oil).
ARTICLE II
RECORDS AND REPORTS
SECTION 2.01.
Books and Records
. Assignor shall at all times maintain true and
correct books and records sufficient to determine the amounts payable to Assignee hereunder,
including, but not limited to, a Net Proceeds account to which Gross Proceeds and Production Costs
are credited and charged.
SECTION 2.02.
Inspections
. The books and records referred to in Section 2.01 shall be
open for inspection at the office of Assignor during normal business hours.
SECTION 2.03.
Quarterly Statements
. Within thirty (30) days next following the close
of each calendar quarter, Assignor shall deliver to Assignee a statement showing the computation of
Net Proceeds attributable to such quarter.
SECTION 2.04.
Assignees Exceptions to Quarterly Statements
. If Assignee shall take
exception to any item or items included in the quarterly statements rendered by Assignor, Assignee
shall notify Assignor in writing within 180 days after the receipt of the report and annual audit
furnished pursuant to Section 2.06 hereof, setting forth in such notice the specific charges
complained of and to which exception is taken or the specific credits which should have been made
and allowed; and, with respect to such complaints and exceptions as are justified, adjustment shall
be made. If Assignee shall fail to give Assignor notice of such complaints and exceptions prior to
the expiration of such 180 days period, then the statements for such calendar year as originally
rendered by Assignor shall be deemed to be correct as rendered.
SECTION 2.05.
Geological Data
. Upon request Assignor shall, subject to the
limitations of confidentiality undertakings with co-owners or other third parties, furnish to
Assignee access to all geological, well and production data which Assignor has on hand relating to
operations on the Subject Interests. Assignor shall also furnish to Assignee quarterly reports
showing the status of development, producing and other operations conducted by Assignor on the
Subject Interests. All information furnished to Assignee pursuant to this section is confidential
and for the sole benefit of Assignee and shall not be shown by Assignee to any other Person.
SECTION 2.06.
Annual Audits and Reports
. Within 90 days after the end of the calendar
year, Assignor shall deliver to Assignee a statement which has been audited by a
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nationally recognized firm of independent public accountants selected by Assignor, which shall
show the information provided for in Section 2.03 on an annual basis.
ARTICLE III
PAYMENT
SECTION 3.01.
Payment
. On or before the Monthly Record Date, Assignor shall pay to
Assignee as a royalty and overriding royalty hereunder an amount equal to Seventy-Five percent
(75%) of the Net Proceeds for the preceding month. On December 31, 1980, Assignor shall pay to
Assignee as an advance royalty the sum of $1,000,000. Such amount shall be subtracted from the
amounts otherwise payable under this Section with respect to future periods.
SECTION 3.02.
Interest on Past Due Payments
. Any amount not paid by Assignor to
Assignee when due shall bear, and Assignor will pay, interest at the rate of four percentage points
over the Prime Interest Rate, determined at the end of each month, from such due date until such
amount is paid, but not in excess of the maximum amount allowed by law.
SECTION 3.03.
Overpayment
. If at any time Assignor inadvertently pays Assignee more
than the amount due, Assignee shall not be obligated to return any such overpayment, but the amount
or amounts otherwise payable to Assignee for any subsequent period or periods shall be reduced by
such overpayment, plus an amount equal to interest computed at 120% of the weighted average Prime
Interest Rate in effect during the period of such overpayment.
ARTICLE IV
MARKETING OF SUBJECT MINERALS
SECTION 4.01.
Sales Contracts
. Assignor, to the extent it has the right to do so,
shall market or cause to be marketed the Subject Minerals. For such purpose, sales of Subject
Minerals may continue to be made pursuant to existing Sales Contracts. Assignor may amend such
existing Sales Contracts and may enter into one or more Sales Contracts in the future at the best
prices and on the best terms Assignor shall deem reasonably obtainable in the circumstances. Gross
Proceeds of Subject Minerals subject to Sales Contracts shall be determined on the basis of amounts
actually received by Assignor from sales under the Sales Contracts regardless of whether at the
time of production or sale market value should be different from proceeds of sale.
SECTION 4.02.
Performance of Sales Contracts
. Assignor will duly perform all
obligations binding on it under all Sales Contracts in accordance with the terms thereof and will
take all appropriate and reasonable measures to enforce the performance under each of the Sales
Contracts of the obligations of the purchaser thereunder. All Subject Minerals sold by Assignor,
whether pursuant to Sales Contracts or otherwise, shall be delivered by Assignor to the purchasers
thereof, into the pipelines to which the wells producing such Subject Minerals may be connected or
to such other point of purchase as is reasonably required in the marketing of such Subject
Minerals.
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SECTION 4.03.
Reliance by Third Party
. As to any party, the acts of Assignor shall be
binding on Assignee. It shall not be necessary for Assignee to join with Assignor in any division
or transfer order or any Sales Contract, and proceeds of sale of the Subject Minerals shall be paid
by the purchaser thereof (or others disbursing proceeds) directly to Assignor without necessity of
joinder by or consent of Assignee.
ARTICLE V
NON-LIABILITY OF ASSIGNEE
In no event shall Assignee be liable or responsible in any way for any Production Costs or
other costs or liabilities incurred by Assignor or others attributable to the Subject Interests or
to the Minerals produced therefrom.
ARTICLE VI
OPERATION OF SUBJECT INTERESTS
SECTION 6.01.
Prudent Operator Standard
. Assignor agrees, to the extent it has the
legal right to do so under the terms of any lease, operating agreement, unit operating agreement,
contract for development or similar instrument affecting or pertaining to the Subject Interests (or
any portion thereof), that it will conduct and carry on the maintenance and operation of the
Subject Interests with reasonable and prudent business judgment and in accordance with good oil an
gas field practices, and that it will drill such wells as a reasonably prudent operator would drill
from time to time in order to protect them from drainage. However, nothing contained in this
Section 6.01 shall be deemed to prevent or restrict Assignor from electing not to participate in
any operation which is to be conducted under the terms of any operating agreement, unit operating
agreement, contract for development or similar instrument affecting or pertaining to the Subject
Interests (or any portion thereof) and allowing consenting parties to conduct nonconsent operations
thereon, if such election is made by Assignor in good faith. Notwithstanding anything elsewhere
herein to the contrary, Assignor shall never be liable to Assignee for the manner in which Assignor
performs its duties hereunder as long as Assignor has acted in good faith.
SECTION 6.02.
Abandonment of Properties
. Nothing herein contained shall obligate
Assignor to continue to operate any well or to operate or maintain in force or attempt to maintain
in force any of the Subject Interests when, in Assignors opinion, such well or Subject Interest
ceases to produce or is not capable of producing oil or gas in paying quantities. The expiration
of a Subject Interest in accordance with the terms and conditions applicable thereto shall not be
considered to be a voluntary surrender or abandonment thereof.
SECTION 6.03.
Insurance
. Although Assignor is permitted to carry policies of
insurance covering the property upon the Subject Interests and risks incident to the operation
thereof and to charge premiums therefore to the Net Proceeds account, Assignor shall not be
required to carry insurance on such property or covering any of such risks unless it elects so to
do. In no event shall Assignor be liable to Assignee on account of any losses sustained which are
not covered by insurance.
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ARTICLE VII
UNITIZATION
SECTION 7.01.
Pooled
Subject Interests. Certain of the Subject Interests may have
been heretofore pooled and unitized for the production of Minerals. Such Subject Interests are and
shall be subject to the terms and provisions of such pooling and unitization agreements, and the
Royalty Interest in each such Subject Interest shall apply to and affect only the production from
such units which accrues to such Subject Interest under and by virtue of the applicable pooling and
unitization agreements.
SECTION 7.02.
Right to Pool and Process
. Assignor shall have the right and power,
exercisable only during the period provided in Section 7.03 hereof, (a) to pool and unitize any of
the Subject Interests and to alter, change or amend or terminate any pooling or unitization
agreements heretofore or hereafter entered into, as to all or any part of the land covered hereby,
as to any one or more of the formations or horizons hereunder, and as to any one or more Minerals,
upon such terms and provisions as Assignor shall in its sole discretion determine, and (b) to
commit any of the Subject Interests (including the Royalty Interest attributable thereto) to an
agreement for processing same (pursuant to which, by way of example and not by way of limitation,
the plant owner or operator receives a portion of the Subject Minerals or plant products therefrom
or proceeds of the sale thereof as a fee for processing). If and whenever through the exercise of
such right and power, or pursuant to any law hereafter enacted or any rule, regulation or order of
any governmental body or official hereafter promulgated, any of the Subject Interests are pooled or
unitized in any manner, the Royalty Interest insofar as it affects such Subject Interest shall also
be pooled and unitized, and in any such event such Royalty Interest in such Subject Interest shall
apply to and affect only the production which accrues to such Subject Interest under and by virtue
of the pooling and unitization.
SECTION 7.03.
Applicable Period
. Assignors power and rights in Section 7.02 shall be
exercisable only during the period of the life of the last survivor of the descendants of the
signers of the Declaration of Independence living on the date of execution hereof, plus twenty-one
(21) years after the death of such last survivor, or the term of this Conveyance, whichever period
shall first expire.
ARTICLE VIII
GOVERNMENT REGULATION
All obligations of Assignor hereunder shall be subject to all applicable provisions of the
Emergency Petroleum Allocation Act of 1973, the Department of Energy Organization Act, the Natural
Gas Act, the Natural Gas Policy Act of 1978 and each other statute purporting to provide regulation
of the sale of Minerals or establishing maximum prices at which the same may be sold and all
applicable laws, orders, rules and regulations thereunder of the Federal Energy Regulatory
Commission, the Department of Energy and each other legislative or governmental body, agency, board
or commission having jurisdiction. Rates permitted under the Natural Gas Act, the Natural Gas
Policy Act of 1978, the Emergency Petroleum Allocation Act of 1973 and each such other statue and
the rules and regulations thereunder to be paid for the Subject
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Minerals shall be controlling if lower than prices established in Sales Contracts. Assignor
shall be entitled to use its reasonable discretion in making filings, for itself and on behalf of
Assignee, with the Federal Energy Regulatory Commission, the Department of Energy or any other
governmental body, agency, board or commission having jurisdiction, affecting the price or prices
at which Subject Minerals may be sold, and with purchasers of production, operators or others with
respect to the windfall profits tax.
ARTICLE IX
ASSIGNMENTS
SECTION 9.01.
Assignment by Assignor
. Assignor shall have the right to assign, sell,
transfer, convey, mortgage or pledge the Subject Interests, or any part thereof, subject to the
Royalty Interest and the terms and provisions of this Conveyance. From and after the effective
date of any such assignment, sale, transfer or conveyance by Assignor, the assignee thereunder
shall succeed to all the requirements upon and responsibilities of Assignor hereunder, as to the
interests so acquired by such assignee, and, from and after the said effective date, Assignor shall
be relieved of such requirements and responsibilities, excepting only those accrued or due for
performance prior to such effective date.
SECTION 9.02.
Partial Assignment
. If Assignor assigns its interest under the Subject
Interests as to some of such Subject Interests or as to some part thereof, then, effective as of
the date of such assignment, in determining the Royalty Interest payable with respect to production
from such assigned Subject Interests or parts thereof, the Gross Proceeds, Production Costs and Net
Proceeds attributable to such assigned interests will be computed and determined by the assignee of
such assigned interests in the aggregate as to the assigned interests owned by such assignee, but
separate from and not aggregated with the computation and determination made by Assignor as to
unassigned interests.
SECTION 9.03.
Assignment by Assignee
. Assignee has the right to assign the Royalty
Interest in whole or in part, but (with respect to the assignee named herein) only as authorized by
the San Juan Basin Royalty Trust Indenture referred to above. However, no such assignment will
affect the method of computing Net Proceeds, and if more than one Person becomes entitled to
participate in the Royalty Interest, Assignor may withhold from such other Person payments to which
such Person would otherwise be entitled hereunder and the furnishing of any data or information
which Assignor is required by the terms hereof to furnish Assignee until Assignor is furnished a
recordable instrument executed by or binding upon all Persons interested in the Royalty Interest
designating one Person who is to receive such payments, data and information. In making
conveyances or assignments of any of the Subject Interests (to the extent permitted hereunder),
Assignee need not vest in its grantee or assignee all of the rights of Assignee hereunder with
respect to the interest in the Subject Interests so conveyed or assigned.
SECTION 9.04.
Change in Ownership
. No change of ownership or right to receive payment
of the Royalty Interest, or of any part thereof, however accomplished, shall be binding upon
Assignor until notice thereof shall have been furnished by the Person claiming the benefit thereof,
and then only with respect to payments thereafter made. Notice of Sale or assignment shall consist
of a certified copy of the recorded instrument accomplishing the same; notice of
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change of ownership or right to receive payment accomplished in any other manner (for example
by reason of incapacity, death or dissolution) shall consist of certified copies of recorded
documents and complete proceedings legally binding and conclusive of the rights of all parties.
Until such notice shall have been furnished Assignor as above provided, the payment or tender of
all sums payable on the Royalty Interest may be made in the manner provided herein precisely as if
no such change in interest or ownership or right to receive payment had occurred. The kind of
notice herein provided shall be exclusive, and no other kind, whether actual or constructive, shall
be binding on Assignor.
SECTION 9.05.
Rights of Mortgagee or Trustee
. If Assignee shall at any time execute a
mortgage or deed of trust covering all or part of the Royalty Interest, the mortgagee(s) or
trustee(s) therein named or the holder of any obligation secured thereby shall be entitled, to the
extend such mortgage or deed of trust so provides, to exercise all the rights, remedies, powers and
privileges conferred upon Assignee by the terms of this Conveyance and to give or withhold all
consents required to be obtained hereunder by Assignee, but the provisions of this Section 9.05
shall in no way be deemed or construed to impose upon Assignor any obligation or liability
undertaken by Assignee under such mortgage or deed of trust or under the obligation secured
thereby.
ARTICLE X
MISCELLANEOUS
SECTION 10.01.
Proportionate Reduction
. In the event of failure or deficiency in
title to any of the Subject Interests, the portion of the production from such Subject Interest out
of which the Royalty Interest attributable to such Subject Interest shall be payable shall be
reduced in the same proportion that such Subject Interest is reduced.
SECTION 10.02.
Term
. Subject to the limitations stated in Section 1.18 hereof, this
Conveyance shall remain in force so long as any of the Subject Interests are in effect.
SECTION 10.03.
Further Assurances
. Should any additional instruments of assignment
and conveyance be required to describe more specifically any interests subject hereto, Assignor
agrees to execute and deliver the same. Also, if any other or additional instruments are required
in connection with the transfer of State, Federal or Indian lease interests in order to comply with
applicable laws, regulations or agreements, Assignor will execute and deliver the same.
SECTION 10.04.
Notices
. All notices, statements, payments and communications between
the parties hereto shall be deemed to have been sufficiently given and delivered if enclosed in a
post paid wrapper and deposited in the United States Mails directed, or if personally delivered, to
the party to whom the same is directed or to be furnished or made at the respective addresses, as
follows:
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Southland Royalty Company
1000 Fort Worth Club Tower
Fort Worth, Texas 76102
Attention: Treasurer
The Fort Worth National Bank
Post Office Box 2050
Fort Worth, Texas 76101
Attention: Trust Department
Either party or the successors or assignees of the interest or rights or obligations of either
party hereunder may change its address or designate a new or different address or addresses for the
purposes hereof by a similar notice given or directed to all parties interested hereunder at the
time.
SECTION 10.05.
Binding Effect
. This Conveyance shall bind and inure to the benefit of
the successors and assigns of Assignor and Assignee.
SECTION 10.06.
Governing Law
. The validity, effect and construction of this
Conveyance shall be governed by the laws of the State of New Mexico.
SECTION 10.07.
Headings
. Article and Section headings used in this Conveyance are for
convenience only and shall not affect the construction of this Conveyance.
SECTION 10.08.
Substitution of Warranty
. This instrument is made with full
substitution and subrogation of Assignee in and to all covenants of warranty by others heretofore
given or made with respect to the Subject Interests or any part hereof or interest therein.
SECTION 10.09.
Counterpart Execution
. This Conveyance may be executed in multiple
counterparts, each of which shall be an original. Certain counterparts may have descriptions
relating to different recording jurisdictions omitted from Schedule A. A counterpart with all such
descriptions is being filed for record in San Juan County, New Mexico.
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IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to be executed in its
name and behalf and its corporate seal to be affixed hereto and attested by its proper signatory
officers thereunto duly authorized, as of November 1, 1980.
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ATTEST:
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SOUTHLAND ROYALTY COMPANY
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/s/ Lucy H. Lowry
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By:
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/s/ Alton C. Goodrich
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Lucy H. Lowry, Secretary
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Alton C. Goodrich
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Executive Vice President
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ATTEST:
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The Fort Worth National Bank
acting not in its individual capacity
but solely as the Trustee of the
San Juan Basin Royalty Trust
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/s/ Palmer S. Haffner, Jr.
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By:
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/s/ Bruce Petty
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Palmer S. Haffner, Jr.
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Bruce Petty
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Trust Officer
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Executive Vice President and
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Trust Officer
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THE STATE OF TEXAS
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§
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COUNTY OF TARRANT
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§
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The foregoing instrument was acknowledged before me this third day of November, 1980 by ALTON
C. GOODRICH, Executive Vice President of Southland Royalty Company, a corporation, on behalf of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the third day of November, 1980.
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/s/ Diana Marsh
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Notary Public in and for Tarrant
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County, Texas
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My Commission Expires:
December 31, 1980
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THE STATE OF TEXAS
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§
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COUNTY OF TARRANT
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§
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The foregoing instrument was acknowledged before me this third day of November, 1980 by BRUCE
PETTY, Executive Vice President and Trust Officer of The Forth Worth National Bank, a banking
association organized under the laws of the United States, on behalf of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the third day of November, 1980.
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/s/ Diana Marsh
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Notary Public in and for Tarrant
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County, Texas
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My Commission Expires:
December 31, 1980
16
CERTIFICATE
The undersigned does hereby certify on behalf of Compass Bank, the Trustee of the San Juan
Basin Royalty Trust (the Trust) that:
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1.
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The original Royalty Trust Indenture of the Trust was entered into on November
1, 1980 (the Original Indenture), between Southland Royalty Company, a Delaware
corporation with its principal office in Fort Worth, Texas (now known as Burlington
Resources Oil & Gas Company LP) (the Company), as Trustor, and The Fort Worth
National Bank, a banking association organized under the laws of the United States with
its principal place of business in Fort Worth, Texas (now known as Bank One, N.A.), as
Trustee.
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2.
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On September 30, 2002, Bank One, N.A. held a special meeting of Unit Holders,
at which the Unit Holders appointed TexasBank (now known as Compass Bank) as the new
Trustee of the Trust and voted to amend certain provisions of the Original Indenture
(as amended, the Amended Indenture).
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3.
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On December 12, 2007, Compass Bank held a special meeting of Unit Holders, at
which the Unit Holders voted to amend certain provisions of the Amended Indenture.
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4.
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Attached is a true and correct copy of the Amended and Restated Royalty Trust
Indenture as amended by the vote of the Unit Holders on December 12, 2007.
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5.
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The execution of this Certificate shall serve as the Trustees express written
approval of the amendments to the Amended and Restated Royalty Trust Indenture.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the date written
below.
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Compass Bank,
Trustee of the San Juan Basin Royalty Trust
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/s/ Lee Ann Anderson
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Lee Ann Anderson
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Vice President and Senior Trust Officer
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Date: December 12, 2007