CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND REPLACED WITH “[***]”. SUCH IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE OF INFORMATION THAT THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL.

Exhibit 10.9

Execution Version

WATER FACILITY AND ACCESS AGREEMENT

NORTH RANCH

This WATER FACILITY AND ACCESS AGREEMENT (this “Agreement”) is made and entered into as of October 15, 2021 (the “Effective Date”) by and between DBR Land LLC, a Delaware limited liability company (the “Company”), as lessee of certain lands owned by Delaware Basin Ranches Inc., a Texas corporation (“Landowner”), under the Master Lease (as defined herein), and WaterBridge Stateline LLC, a Delaware limited liability company (“Operator”). The Company and Operator are sometimes referred to herein each individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein that are not defined in the other provisions of this Agreement have the respective meanings set forth in Article I.

RECITALS:

WHEREAS, the Company and/or its applicable subsidiary owns or controls certain fee surface interests and related real property rights in Reeves and Loving Counties, Texas, as further described on Exhibit A hereto (collectively, the “North Ranch”);

WHEREAS, Operator desires to develop, own and operate facilities and equipment used in the gathering, transportation, storage, treatment, blending, processing, recycling, evaporation, distribution, sale and/or disposal of Produced Water (defined herein) and Recycled Water (defined herein), distribution and sale of Fresh Water (defined herein), treatment, separation, recovery and/or recycling of BS&W (defined herein) and such other activities as are mutually agreed to by the Parties, including Disposal Facilities (defined herein), Recycling Facilities (defined herein), Reclamation Facilities (defined herein), and associated layflat lines, pipelines, ponds, pumps, risers, access roads, electrical facilities and other related infrastructure (together, the “Facilities”), in each case to be located on the North Ranch; and

WHEREAS, the Company desires for Operator to develop, own and operate the Initial Facilities (defined herein) and other Facilities on the North Ranch, subject to the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

1.1 Definitions. When used in this Agreement, the following capitalized terms have the following respective meanings:

“Additional Facility” has the meaning set forth in Section 2.2(b).

“Affiliate”, unless otherwise provided herein, means (a) with respect to the Company, only the Company and its direct and indirect subsidiaries; and (b) with respect to Operator, only WaterBridge NDB LLC and its subsidiaries (excluding the Company and its direct and indirect subsidiaries); and the term “Affiliated” shall have a correlative meaning.

“Agreement” has the meaning set forth in the preamble.

“BS&W” means tank bottoms, drilling muds and similar substances.

 

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“Company” has the meaning set forth in the preamble.

“Company Default” has the meaning set forth in Section 5.1.

“Confidential Information” means: (a) all information, materials and data provided by one Party or any of its Affiliates (the “Disclosing Party”) to another Party or any of its Affiliates (the “Receiving Party”) under this Agreement or in connection with the performance hereof and (b) the terms of this Agreement or any other Transaction Document. Confidential Information does not include (i) information that was in the lawful possession of the Receiving Party without confidentiality restrictions prior to this Agreement; (ii) information that is or becomes public knowledge without the fault of the Receiving Party; (iii) information that is or becomes available to the Receiving Party on an unrestricted basis from a source having a right to make such disclosure; or (iv) information that is developed by the Receiving Party independent of Confidential Information received hereunder.

“Disclosure Recipients” means, with respect to any Party, such Party’s Affiliates, directors, officers, employees, representatives, agents, investors, attorneys or other financial or professional advisors, in each case that receive Confidential Information of the other Party hereto.

“Disposal Facilities” means any facilities and equipment intended to process, evaporate and/or dispose of Produced Water, including Disposal Wells, evaporation facilities, ponds, pipelines and related infrastructure, as applicable.

“Disposal Well” means a Produced Water injection well and its related facilities operated by Operator.

“Due Date” has the meaning set forth in Section 2.3(f).

“Easement” has the meaning set forth in Section 2.3(a).

“Environmental Laws” means any applicable Law that pertains to (a) pollution or pollution control, (b) the protection of the environment (including natural resources and threatened or endangered species) or relating to public or worker health or safety or (c) the management, transportation, or disposal of Hazardous Materials and the remediation of contamination in connection with the operations under any Lease or Easement, including the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C. §§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq., the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act, 16 U.S.C. § 1531 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., Clean Water Act, 33 U.S.C. §§ 1251 et seq., Rivers and Harbors Act, 33 U.S.C. §§ 401 and 40, National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq., Fish & Wildlife Coordination Act, 16 U.S.C. §§ 661 et seq., Resource Conservation & Recovery Act, 42 U.S.C. §§ 6901 et seq., each as amended, and the regulations and orders promulgated by a Governmental Authority thereunder.

“Event of Bankruptcy” means, with respect to any Party, any of the following: (a) making a general assignment for the benefit of creditors; (b) filing a voluntary petition in bankruptcy; (c) filing a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law; (d) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets under any bankruptcy, insolvency or other similar law; or

 

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(e) the passage of one hundred twenty (120) days after the commencement of any involuntary proceeding against such Party, seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law, if the proceeding has not been dismissed, or the passage of ninety (90) days after the appointment without its consent or acquiescence of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets, if the appointment is not vacated or stayed, or the passage of ninety (90) days after the expiration of any such stay, if the appointment is not vacated.

“Facilities” has the meaning set forth in the Recitals.

“Fee” means, collectively, the Produced Water Fee, the Fresh Water Fee and the Skim Oil Fee.

“Fresh Water” means groundwater that may be produced from any subsurface water-bearing formation or aquifer that may be used in oil and gas operations or for some other beneficial purpose, but excluding Produced Water and Recycled Water.

“Fresh Water Fee” has the meaning set forth in Section 2.3(b)(ii).

“Fresh Water Meters” has the meaning set forth in Section 2.3(e).

“Governmental Authority “ means (a) any federal, state, local, municipal, tribal or other government, (b) any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or other taxing power, and (c) any court or governmental tribunal.

“Hazardous Material” means any substance regulated or that may form the basis of liability under any Environmental Law, including any substance regulated as “hazardous,” “toxic,” a “pollutant,” a “contaminant,” a “waste,” or words of similar meaning and regulatory effect.

“HHR Operating” means HHR Operating, LLC, a Texas limited liability company and indirect wholly-owned subsidiary of the Company.

“HHR Permits” means those certain Permits and pending applications for Permits set forth on Exhibit D hereto.

“Initial Facilities” means the Disposal Facilities and/or Recycling Facilities described on Exhibit B hereto.

“Initial Term” has the meaning set forth in Section 4.1.

“Landowner” has the meaning set forth in the preamble.

“Law” means any applicable statute, law (including common law), rule, regulation, requirement, ordinance, order, code, ruling, writ, injunction, decree, or other official act of or by any Governmental Authority.

“Lease” has the meaning set forth in Section 2.3(a).

“Legacy Agreements” has the meaning set forth in Section 2.4.

“Master Lease” has the meaning set forth in Section 8.17.

 

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“Memorandum” has the meaning set forth in Section 8.16.

“Meters” has the meaning set forth in Section 2.3(e).

“North Ranch” has the meaning set forth in the Recitals.

“Operator” has the meaning set forth in the preamble.

“Operator Default” has the meaning set forth in Section 5.3.

“Overdue Rate” means the rate per month equal to the lesser of (i) 1.5% plus the prime rate specified under the caption “Money Rates” in the Wall Street Journal (New York edition) on the date that the applicable payment was required to have been made and (ii) the maximum rate permitted by Applicable Laws.

“Party” and “Parties” have the meanings set forth in the preamble.

“Person” means an individual, a partnership (general, limited or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or any other entity or organization or a Governmental Authority.

“Permit” means a permit to construct and operate a Disposal Facility (including a Disposal Well), Recycling Facility, Reclamation Facility or other pond that is validly issued and approved by the Railroad Commission of Texas or its successor Governmental Authority.

“Produced Water” means any produced water, flowback water, brine water, saltwater, associated incidental hydrocarbons, trace amounts of oil industry chemicals or various trace solids, and any other water borne liquid substances generated as waste in connection with drilling for and producing hydrocarbons, but excluding Fresh Water and Recycled Water.

“Produced Water Fee” has the meaning set forth in Section 2.3(b)(i).

“Project Limitation” has the meaning set forth in Section 2.2(c).

“Project Proposal” has the meaning set forth in Section 2.2(b).

“Qualifying Opportunity” has the meaning set forth in Section 2.2(d).

“Reclamation Facility” means any reclamation and/or stationary transfer facilities and equipment intended to treat, separate, recover and/or recycle BS&W and related infrastructure.

“Recycled Water” means Produced Water that is treated or blended using Recycling Facilities and sold and provided to customers for use or reuse.

“Recycling Facilities” means any facilities and equipment intended to store and/or treat Produced Water (and/or blend Produced Water with Fresh Water) for the purpose of making such Produced Water or blended water available to customers for use or reuse, including ponds, pipelines, aeration and/or chemical treating facilities and related infrastructure, as applicable.

“Renewal Term” has the meaning set forth in Section 4.1.

“Representing Party” has the meaning set forth in Section 3.1.

 

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“Skim Oil” means oil, condensate and other liquid hydrocarbons recovered from Produced Water.

“Skim Oil Fee” has the meaning set forth in Section 2.3(b)(iii).

“Surface Damages” means amounts charged for surface damages, caliche and other real property related charges for the applicable Facilities, including such amounts as set forth on Schedule 2.3.

“Term” has the meaning set forth in Section 4.1.

“Transaction Documents” means this Agreement, together with any Lease and any Easement, in each case that is executed and delivered by the Parties.

1.2 Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) “or” is not exclusive; (c) words in the singular include the plural, and words in the plural include the singular; (d) provisions apply to successive events and transactions; (e) the words “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; (f) all references herein to Articles, Sections, paragraphs, subparagraphs and clauses shall be deemed to be references to Articles, Sections, paragraphs, subparagraphs and clauses of this Agreement unless the context shall otherwise require; (g) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (h) the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”; (i) references to “$” or “dollars” shall mean United States dollars; (j) unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement, instrument or statute that is referred to herein means such agreement, instrument or statute as from time to time amended, restated, waived or otherwise modified or supplemented, including (i) in the case of agreements or instruments, by waiver or consent, and (ii) in the case of statutes, by succession of comparable successor statutes, and references to all attachments thereto and instruments incorporated therein.

ARTICLE II

OPPORTUNITIES; LEASES AND EASEMENTS

Section 2.1 Grant of Rights.

a. Non-Exclusive Right to Develop Facilities. Subject to the terms and conditions set forth in this Agreement and the Transaction Documents, the Company hereby grants to Operator the non-exclusive right during the Term to (i) construct, develop, own, operate and maintain on the North Ranch (A) the Initial Facilities and any other Facilities necessary or convenient in connection with the Initial Facilities and (B) other Produced Water, Fresh Water and Recycled Water pipelines and related gathering and transportation facilities, and (ii) market and utilize such Facilities to (I) gather, transport, treat, process, blend, store, recycle, distribute, sell and/or dispose of Produced Water and Recycled Water, (II) distribute and sell Fresh Water, (III) treat, separate, recover and/or recycle BS&W and (IV) conduct such other activities as are mutually agreed to by the Parties, as applicable, in each case pursuant to such Leases and Easements as are mutually agreed to by the Parties in accordance with Section 2.3.

b. Non-Exclusive Access Right. Subject to the terms and conditions set forth in this Agreement, the Company hereby grants to Operator the non-exclusive right during the Term to use the existing lease roads located on the North Ranch in connection with the construction, development, operation and/or maintenance of the Facilities. Operator shall (i) comply with any reasonable rules and regulations of the Company provided in writing to Operator connection with the exercise of such access rights and (ii) maintain all lease roads utilized by Operator in good repair; provided that to the extent maintenance of a

 

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lease road is required and responsibility for damages cannot be definitively determined, responsibility for such maintenance shall be apportioned appropriately between Operator and such other operators or persons that utilize such lease road, based upon their proportionate use of such road as determined by the Company in its reasonable discretion. To the extent Operator desires to construct additional lease roads to access the Facilities following the Effective Date, Operator shall submit a Project Proposal for such new road in accordance with the terms and conditions of Section 2.2.

c. [***]

d. Reservations. Notwithstanding anything herein to the contrary, (i) the rights granted by this Section 2.1 shall not require the Company to violate any terms of any existing agreement, in each case, unless the relevant third party agrees otherwise in writing, and (ii) the Company may amend existing agreements, and enter into agreements with and grant rights to any other parties without Operator’s prior written consent, except in the case of this clause (ii) to the extent the same are in contravention of Operator’s consent right under Section 2.1(c) or interfere with the Initial Facilities or any other right set forth in this Agreement.

e. Fresh Water. Operator shall have the right, but not the obligation, to purchase Fresh Water from the Company for the price set forth herein, at the times, in the volumes, and at the locations mutually agreed by the Parties. Operator shall not be restricted in its use, transport, transfer or resale of such Fresh Water. The Company shall make Fresh Water available to Operator on an as-is where-is basis; provided that the Company shall have no obligation to supply Operator with any amount of Fresh Water pursuant to this Agreement or any liability for failure to do so. Operator shall submit a Project Proposal for each distribution and sale of Fresh Water pursuant to this Section 2.1(e).

Section 2.2 Operator Facilities and Project Proposals.

a. Initial Facilities. As of the Effective Date, the Company hereby accepts and consents to each of the Initial Facilities identified as accepted on Exhibit B, including the location and composition thereof. Operator may construct each Initial Facility during the Initial Term, in all cases subject to the Operator’s compliance with this Agreement.

b. Additional Facilities. From time to time during the Term, Operator may propose that additional Facilities be constructed, owned and operated by Operator on the North Ranch, including (i) additional layflat lines, pipelines, access roads, electrical facilities and other infrastructure necessary or convenient in connection with the operation of the Initial Facilities and (ii) other Produced Water, Fresh Water and Recycled Water pipelines and related gathering and transportation facilities (each, an “Additional Facility” and each such proposal, a “Project Proposal”). Each Project Proposal shall be submitted to the Company in writing and include (x) a reasonably detailed description of the proposed Additional Facilities, (y) the portions of the North Ranch on which the Additional Facilities are proposed to be located, including a survey of such lands prepared by Operator and (z) such other information related to such Additional Facilities that is reasonably requested by the Company. Subject to Section 2.2(c), the Company shall accept and consent to each Project Proposal for an Additional Facility described in clause (i) or (ii) above. Operator shall promptly notify the Company in writing (email being sufficient) of any expected material changes, alterations or amendments to the applicable Additional Facilities throughout the course of the development of such Additional Facilities; provided that, for the avoidance of doubt, any material change to the location, scope or purpose of an Additional Facility shall require the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.

 

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c. Project Limitations. If the Company determines in good faith that a Project Proposal conflicts with any then-existing use or business operations conducted by the Company or third parties on the North Ranch, including then-existing oil and gas operations, Produced Water, Recycled Water and/or Fresh Water operations (each a “Project Limitation”), the Company shall notify Operator in writing of such determination and the basis therefor within fifteen (15) days from the date of receipt of the Project Proposal, and the Parties shall negotiate in good faith for not less than thirty (30) days to amend the Project Proposal. If the Parties are unable to mutually agree on a revised Project Proposal within such thirty (30) day period, then Operator shall not pursue such Additional Facility. For the avoidance of doubt, if the Company does not provide written notice of any objection to a Project Proposal that is subject to a Project Limitation within fifteen (15) days from the date of receipt of the Project Proposal, the Company shall be deemed to have accepted and consented to the Project Proposal for all purposes to the extent that the Company is not expressly prohibited from doing so by a valid existing instrument to which the Company is a party.

d. Qualifying Opportunity. Upon the Company’s acceptance and consent to, or deemed consent to, a Project Proposal in accordance with Section 2.2(c), the applicable Additional Facility shall be deemed a “Qualifying Opportunity.”

e. Cooperation. During the Term, the Company shall cooperate as reasonably requested by Operator to identify mutually acceptable locations on the North Ranch for Facilities and associated infrastructure that would not be subject to a Project Limitation, including allowing Operator to permit and stake potential Disposal Facility, Recycling Facility and/or Reclamation Facility locations on the North Ranch.

f. Transfer of Permits Following Initial Term. If Operator does not construct all of the Initial Facilities within the Initial Term, then promptly after the expiration of the Initial Term, Operator will assign all remaining unused Permits to the Company or its designated Affiliate. The rights set forth in the immediately preceding sentence will be the Company’s sole and exclusive remedy for Operator’s failure to construct the Initial Facilities within the Initial Term.

Section 2.3 Leases and Easements.

a. Execution of Leases and Easements. For each Qualifying Opportunity, the Company and Operator or their applicable Affiliates shall, within fifteen (15) days of the Company’s acceptance (or deemed acceptance) of any Qualifying Opportunity, execute and deliver, as applicable, such (i) surface use agreements substantially in the form of Schedule I hereto (each, a “Lease”) and/or (ii) easements substantially in the form of Schedule II hereto (each, an “Easement”) covering the applicable portion(s) of the North Ranch, in each case as are necessary or convenient in connection with such Qualifying Opportunity, with such modifications to the Lease and/or Easement forms as may be necessary to incorporate the specific terms of the applicable Qualifying Opportunity.

b. Fees. Operator shall pay to the Company (without duplication):

(i) [***] for each Barrel of Produced Water that is either gathered or transported by Operator onto the North Ranch or initially received by WaterBridge into its Disposal Facilities or Recycling Facilities on the North Ranch (“Produced Water Fee”), without duplication of any volumes;

(ii) Not less than [***] for each Barrel of Fresh Water that Operator purchases from the Company that is produced from a well located on the North Ranch (“Fresh Water Fee”), without duplication of any volumes, it being agreed that the Company shall determine, in its reasonable discretion, the applicable Fresh Water Fee for a Project Proposal within 15 days following delivery by Operator of such Project Proposal;

 

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(iii) [***] of the proceeds received by Operator from the sale of Skim Oil recovered from Operator’s Disposal Facilities on the North Ranch, net of royalty or other payments owed to Third Parties with respect to the sale of such Skim Oil (“Skim Oil Fee”); and

(iv) without duplication of any other fee owed to the Company, such Surface Damages due and payable hereunder or pursuant to an applicable Lease or Easement and, with respect to Reclamation Facilities, such additional royalties and fees applicable to such Facility, which shall in all cases be on arm’s length, market terms as determined by the Company for the year in which such Lease or Easement is executed.

c. Annual Determination of Fees. The Surface Damages in effect for the period beginning on the Effective Date and ending on December 31, 2022 are set forth on Schedule 2.3. Not later than December 31 of each year, the Company shall determine, in its reasonable discretion and with reference to market-based surface damages in the immediate vicinity of the North Ranch, the applicable Surface Damages for all Leases and Easements that are executed in the immediately succeeding calendar year and shall provide notice to Operator thereof. If the Company does not make this determination and provide notice to Operator thereof in accordance with this section, the then-current Surface Damages shall continue in effect.

d. Escalation. Beginning on [***], and annually on January 1 of each subsequent calendar year, the Produced Water Fee and Fresh Water Fee shall automatically increase by the lesser of (i) [***] and (ii) the amount of any upward percentage change between January 1 and December 31 of the year immediately preceding the Adjustment Date, in the Consumer Price Index for All Urban Consumers, or its most comparable successor, as published by the Department of Labor, or its most comparable successor.

e. Metering. Operator shall provide, operate and maintain properly calibrated flow meters (the “Meters”) at each (i) Disposal Facility owned by Operator on the North Ranch, (ii) point at which one of Operator’s Produced Water pipelines brings Produced Water onto the North Ranch, (iii) receipt point on the North Ranch at which Produced Water originally produced on the North Ranch enters Operator’s Disposal Facilities, and (iv) any other necessary locations on the Facilities, all to the extent necessary to calculate the amounts owed by Operator pursuant to this Section 2.3 and in compliance with all applicable laws, rules and regulations; provided that so long as the volumes flowing through any point described in clauses (ii) or (iii) flow exclusively to and through another point at which a Meter is located, Operator will not be required to set a Meter at the applicable point described in clause (ii) or (iii). The Company will provide, operate and maintain properly calibrated flow meters at each Fresh Water production well (“Fresh Water Meters”) and will provide Operator access to the Fresh Water Meters to allow Operator to perform under this Agreement.

f. Statements and Payments. No later than the sixtieth (60th) day following the end of each month during the Term (the “Due Date”):

(i) Operator shall deliver to the Company a statement setting forth (a) the Produced Water volumes, Fresh Water volumes and Skim Oil sales for which the Operator owes a payment to the Company pursuant to Section 2.3(b) for such subject month, expressed in Barrels and multiplied by the applicable Fee, and (b) payments for Surface Damages (to the extent not previously paid) and any other fees and expenses due pursuant to Section 2.3(b)(iv), in each case as set forth in the applicable Lease or Easement for the subject month; and

 

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(ii) Operator shall pay in full any amounts due as reflected on the applicable statement by check or ACH transfer to the Company’s designated bank account. If Operator fails to pay the undisputed amount of any statement within sixty (60) days after the Due Date for such statement, interest on such amounts will accrue from the Due Date through and including the date such Party actually makes payment, at the Overdue Rate.

In the event the Company disputes in good faith all or any portion of a statement, then the undisputed portion, if any, shall be due and payable in accordance with Section 2.3(e)(ii). In the event that the dispute is resolved in favor of the Company, then Operator shall promptly pay the disputed amount plus interest at the Overdue Rate from the date the disputed payment was originally due pursuant to Section 2.3(e)(ii) through, and including, the date paid.

g. Audit. The Leases and Easements will provide that, at any time on no less than thirty (30) days’ notice (but no more frequently than twice in any 12-month period), the Company may, at the sole cost and expense of the Company, conduct an audit of Operator’s accounts, invoices and other documents related to the North Ranch and operations pursuant to this Agreement, including records of Produced Water and Fresh Water volumes sourced, disposed of, transported or recycled on the North Ranch. Such examination shall use electronic records or, solely to the extent original documents are required, take place in the office location where such books and records are kept in the normal course of business; provided, however, that no examination may unreasonably interfere in the ongoing job responsibilities of the personnel of any Party. In the event the Parties mutually determine there was a Operator overpayment, Operator shall be due credit by the Company for the amount of such overpayment on the next succeeding statement following such determination.

Section 2.4 Legacy Agreements. The Company (or its applicable subsidiary) and Operator are parties to certain existing easements, leases and other agreements as of the Effective Date, and Operator may in the future acquire from a third party easements, leases or other agreements between the Company (or its applicable subsidiary) and such third party following the Effective Date (all such agreements, collectively, the “Legacy Agreements”). The Parties agree (i) that the Legacy Agreements as of the Effective Date are as set forth on Exhibit E hereto and (ii) that either Party may update Exhibit E from time-to-time without the requirement of a formal amendment pursuant to Section 8.3 in order to reflect any additional Legacy Agreements acquired by Operator following the Effective Date. Notwithstanding anything to the contrary set forth in Section 2.3(b), in no event shall Operator be required to pay a Fee or any other fee under this Agreement for any Barrel of Produced Water that is transported by Operator onto or off of the North Ranch pursuant to a Legacy Agreement, except to the extent that any such Produced Water is received by Operator into any of its Facilities on the North Ranch that were constructed under this Agreement pursuant to a Lease.

Section 2.5 Waiver of Rights. Notwithstanding anything herein to the contrary and subject to the opportunity to cure provided herein, Operator shall not have any rights under this Article II with respect to a particular Qualifying Opportunity if, at the time of execution of a Lease or Easement for such Qualifying Opportunity, as applicable, (i) the applicable representations and warranties of Operator in Article III are not true and correct in all material respects or (ii) if there exists an uncured Operator Default.

Section 2.6 Taxes. During the Term of this Agreement, the Company shall be responsible for paying all ad valorem taxes assessed on the North Ranch. Operator shall pay any personal property taxes assessed specifically against the Facilities during the Term.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS

Section 3.1 Reciprocal Representations and Warranties. Each Party (such Party, the “Representing Party”) represents and warrants to the other Party that, as of the Effective Date and as of the execution of each Lease and Easement:

a. Organization. The Representing Party is duly organized, validly existing and in good standing under the Laws of the State of its formation, and is qualified to do business and is in good standing in the State of Texas.

b. Authority; Binding Effect. The Representing Party has all requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to carry out the transactions contemplated hereby and thereby. The Representing Party has taken (or caused to be taken) all acts required to be taken by it to authorize the execution, delivery and performance by the Representing Party of this Agreement and the other Transaction Documents. This Agreement has been duly executed and delivered by the Representing Party and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar Laws affecting the rights of creditors generally and by principles of equity, whether considered in a proceeding at Law or in equity.

c. Non-Contravention. The execution, delivery and performance of this Agreement by the Representing Party does not and will not (i) conflict with, or result in, any violation of or constitute a breach or default (with notice or lapse of time, or both) under (A) any provision of its organizational documents, or (B) any applicable statute, Law, rule, regulation, court order, agreement, instrument or license applicable to the Representing Party, or (ii) require the submission of any notice, report, consent or other filing with or from any Governmental Authority or other Person, other than such consents that are customarily obtained after the transfer of instruments similar to the Lease or Easement, as applicable.

d. Bankruptcy; Solvency. There are no bankruptcy, reorganization or receivership proceedings pending, or, to the Representing Party’s actual knowledge, threatened against the Representing Party or an Affiliate of the Representing Party. The Representing Party is not now insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement.

Section 3.2 Company Representations and Warranties Regarding Ownership of the North Ranch. Except as set forth in any disclosure schedule delivered to Operator by the Company prior to or in connection with the execution and delivery of this Agreement, the Company represents and warrants to Operator that the Company has good and defensible title to the North and there are no parties other than the Company and its grazing lessees in possession of that portion of the North Ranch on which the Initial Facilities are to be located.

Section 3.3 Reporting Requirements. With respect to all (i) Facilities and (ii) Qualifying Opportunities, Operator shall furnish the Company with reasonable access to the following data and reports within the applicable time frames set forth below, to the extent related to the applicable Facilities located on the North Ranch and owned or operated by Operator:

a. Reasonably promptly following receipt thereof, copies of all material correspondence received by Operator from any governmental authority, along with any material correspondence (including any reports) sent by Operator to any governmental authority;

b. Reasonably promptly following receipt thereof, copies of all written notices regarding material violations or potential material violations of laws, including Environmental Laws;

 

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c. Reasonably promptly following the receipt thereof, copies of all claims, demands, or actions or threatened claims, demands or actions, in each case, which are of a material nature;

d. Reasonably promptly following receipt or preparation by Operator, copies of all surveys, including in a digitally recorded format if such exists; and

f. Daily drilling reports, in Excel format if available, which shall be provided within 30 days after the end of each calendar month.

Section 3.4 Assignment of Permits. On the Effective Date, the Company shall cause HHR Operating to assign all HHR Permits to Operator, and Operator shall be responsible for all costs and expenses associated with the HHR Permits following such assignment. The Parties agree that the assignment of such HHR Permits is a material inducement to the Parties’ entry into this Agreement and the grant of the rights and obligations set forth herein, without which the Parties would not have entered into this Agreement.

ARTICLE IV

TERM AND TERMINATION

Section 4.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until December 31, 2026 (the “Initial Term”). Following the Initial Term, this Agreement shall automatically renew for successive one-year terms (each, a “Renewal Term” and collectively with the Initial Term, the “Term”) and until the Agreement is terminated by either Party by providing at least one hundred and eighty (180) days’ written notice prior to the expiration of the Initial Term or any Renewal Term, as applicable. The Parties may mutually agree to terminate this Agreement at any time with respect to all or any portion of the Subject Lands. No Party may terminate this Agreement except as provided in this Article IV and Article V.

Section 4.2 Effect of Termination. In the event this Agreement is terminated in accordance with Section 4.1, the Parties shall have no further rights or obligations hereunder; provided that (a) no such termination shall relieve any Party of any liabilities or obligations that accrued prior to the date of such termination, (b) the termination of this Agreement shall not affect any Lease or Easement executed and delivered prior to the date of such termination, and (c) the provisions of this Section 4.2, Section 1.2, Section 2.1(b), Sections 2.3(b)-(g), Section 3.3, Section 6.1, Article V, Article VI, Article VII, and Article VIII, together with the definitions in Section 1.1 used in such Sections and Articles shall survive the termination of this Agreement.

ARTICLE V

EVENTS OF DEFAULT

Section 5.1 Company Default. The Company shall be in default of this Agreement (a “Company Default”) (a) upon an Event of Bankruptcy with respect to the Company; or (b) if the Company is in material breach of any of its obligations under this Agreement, and the Company fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any sums of money owed) following delivery to the Company of a notice from Operator stating with reasonable particularity the nature and extent of such Company Default or if a remedy cannot be effected within such initial 30-day period, an additional reasonable period no longer than ninety (90) days, provided that the Company has commenced pursuit of a remedy within the initial thirty (30) day period and diligently pursues such remedy to completion.

 

11

Section 5.2 Operator Remedies Against Company Default. If a Company Default occurs and is uncured and continuing after the cure periods set forth in Section 5.1(b), and without prejudice to any of Operator’s other rights under this Agreement or any other Transaction Document, then during the period in which the Company Default is continuing, Operator shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement, (b) pursue specific performance of this Agreement, and/or (c) file suit to recover its actual damages, if any.

Section 5.3 Operator Default. Operator shall be in default of this Agreement (an “Operator Default”) (a) upon an Event of Bankruptcy with respect to Operator; or (b) if Operator is in material breach of any of its obligations under this Agreement, and Operator fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any sums of money owed) following delivery to Operator of a written notice from the Company stating with reasonable particularity the nature and extent of such Operator Default, or if a remedy cannot be effected within such initial thirty (30) day period, an additional reasonable period no longer than ninety (90) days, provided that Operator has commenced remedy within the initial thirty (30) day period and diligently pursues such remedy to completion.

Section 5.4 Company Remedies Against Operator Default. If an Operator Default occurs and is uncured and continuing after the cure periods provided in Section 5.3(b), and without prejudice to any of the Company’s other rights under this Agreement or any other Transaction Document, then during the period in which the Operator Default is continuing, the Company shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement, (b) pursue specific performance, and/or (c) file suit to recover its actual damages, if any.

ARTICLE VI

NOTICES

Section 6.1 Notices. All notices and communications required or permitted under this Agreement shall be in writing and addressed as indicated below, and any communication or delivery hereunder shall be deemed to have been duly delivered upon the earliest of: (a) actual receipt by the Party to be notified; (b) three (3) business days after deposit with the U.S. Postal Service, certified mail, postage prepaid, return receipt requested; (c) if by e-mail transmission, upon read receipt confirmation by the recipient (with the receiving Party being obligated to respond affirmatively to any read receipt requests delivered by the other Party); or (d) by Federal Express overnight delivery (or other reputable overnight delivery service), two (2) days after deposited with such service. Addresses for all such notices and communication shall be as follows:

 

To Operator:		WaterBridge Stateline LLC
		840 Gessner Road, Suite 100
		Houston, Texas 77024
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]
To the Company:		DBR Land LLC
		840 Gessner Road, Suite 100
		Houston, Texas 77024
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]

Any Party may, upon written notice to the other Party, change the address and Person to whom such communications are to be directed.

 

12

Section 6.2 Reporting. With respect to any notices, communications and information required to be delivered pursuant to Section 3.3, such notices, communications and information shall be sufficient in all respects if given in accordance with Section 6.1 or if such notice is delivered by email to the address specified for a Person in Section 6.1.

ARTICLE VII

CONFIDENTIALITY

Section 7.1 Non-Disclosure. Each Receiving Party shall keep confidential and shall not disclose, or permit any of its Disclosure Recipients to disclose, any Confidential Information of the Disclosing Party except as required or reasonably necessary (a) to enforce this Agreement, (b) by Law, (c) to its accountants, auditors, advisors, and/or attorneys that are subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information, or (d) in connection with any potential or actual sale of any of such Party’s assets subject to this Agreement, provided that any such recipient is subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information.

Section 7.2 Required Disclosures. In the event that any Receiving Party or any of its Disclosure Recipients is required by any applicable Law to disclose Confidential Information to any Governmental Authority, unless otherwise agreed to by the Disclosing Party, prior to such disclosure, such Receiving Party (or its Disclosure Recipients) shall promptly notify the Disclosing Party (to the extent not prohibited by applicable Law from giving notice) in writing of such anticipated disclosure, which notification shall include the nature of the legal requirement and the extent of the required disclosure and such Receiving Party (or its Disclosure Recipients) shall reasonably cooperate with the Disclosing Party to preserve the confidentiality of such information consistent with applicable Law (including reasonably withholding disclosure of such Confidential Information until such time as it has been finally determined that such disclosure is required under applicable Law). Each Receiving Party shall cause any of its Disclosure Recipients to which it discloses any Confidential Information to hold such information confidential to the same extent as would be required if such Disclosure Recipients were a Party, and no Receiving Party or Disclosure Recipient may use any Confidential Information it receives for any purpose not contemplated by this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Applicable Law; Venue. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT THE APPROPRIATE, EXCLUSIVE AND CONVENIENT FORUM FOR ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE RELATIONSHIP OF THE PARTIES HEREUNDER SHALL BE IN ANY STATE OR FEDERAL COURT IN MIDLAND COUNTY, TEXAS, AND EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES HEREUNDER. THE PARTIES FURTHER AGREE THAT THE PARTIES SHALL NOT BRING SUIT WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES HEREUNDER IN ANY COURT OR JURISDICTION OTHER THAN THE ABOVE SPECIFIED COURTS.

 

13

Section 8.2 Jury Waiver. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY ASSOCIATED AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF AND THE RELATIONSHIP OF THE PARTIES HEREUNDER. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS SECTION 8.2 MAY BE FILED AS A WRITTEN CONSENT TO A BENCH TRIAL.

Section 8.3 Amendments. Except as otherwise provided herein, no supplement, amendment, alteration, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Parties.

Section 8.4 Assignment. Neither Party may assign any of its rights or obligations under this Agreement or any portion thereof without the prior written consent of the other Party, which consent may be withheld in the non-assigning Party’s sole discretion; provided that such restriction shall not apply to assignments to Affiliates so long as such assignment to an Affiliate includes the assignment of all of the assigning Party’s rights and obligations under this Agreement; provided further that in the case of the Company, (a) the Company shall assign its obligations and its rights hereunder to any purchaser or assignee of any portion of the North Ranch solely to the extent relating to the purchased or assigned portion of the North Ranch and (b) the Company may assign all or any portion of its rights to payment hereunder without consent of the Operator.

Section 8.5 Waiver. Except as otherwise provided for in this Agreement, a waiver of any of the provisions of this Agreement shall not be deemed or shall not constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver, unless otherwise expressly provided.

Section 8.6 Relationship of the Parties. This Agreement is not intended to create, and shall not be construed to create, an association for profit, a trust, a joint venture, a mining partnership or other relationship of partnership, or entity of any kind between the Parties.

Section 8.7 Severability. If any provisions of this Agreement, in whole or in part, are held invalid as a matter of Law, it is the Parties’ intent that such holding not affect the other portions of this Agreement, and that such portions that are not invalid be given effect without the invalid portion.

Section 8.8 Counterpart Execution. This Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which taken together shall constitute one agreement. Delivery of an executed counterpart signature page by facsimile or PDF is as effective as executing and delivering this Agreement in the presence of the other Party to this Agreement.

Section 8.9 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon anyone, other than the Parties and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement or to constitute any Person a third party beneficiary of this Agreement.

Section 8.10 Time of Essence. Time is of the essence with respect to the performance by each Party of its obligations under this Agreement.

 

14

Section 8.11 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Parties and their respective successors and permitted assigns.

Section 8.12 Attorney’s Fees. SHOULD EITHER PARTY BE REQUIRED TO RESORT TO EMPLOYMENT OF ATTORNEYS TO ENFORCE THIS AGREEMENT, OR ANY OF ITS RIGHTS UNDER THIS AGREEMENT, THE SUBSTANTIALLY PREVAILING PARTY SHALL BE ENTITLED TO REIMBURSEMENT FROM THE OTHER PARTY FOR THE SUBSTANTIALLY PREVAILING PARTY’S ATTORNEYS’ FEES.

Section 8.13 Limitation on Damages. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES OR DAMAGES FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY, ON BEHALF OF ITSELF AND ITS AFFILIATES, DOES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES OR DAMAGES FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 8.14 Entire Agreement. This Agreement, the other Transaction Documents and the exhibits and schedules attached hereto and thereto constitute the entire agreement between the Parties with respect to the transactions contemplated hereunder, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.

Section 8.15 Covenants Run with the Lands. This Agreement, and the rights granted hereunder and obligations contained herein, shall be covenants running with the North Ranch lands and shall be binding upon and inure to the benefit of each of the Parties and their respective successors and permitted assigns. Any sale, conveyance, grant, transfer, assignment or other disposition of all or any portion of the North Ranch shall be made expressly subject to this Agreement, and this Agreement or the applicable portion hereof shall be assumed by the purchaser or assignee, and both this Agreement and the North Ranch shall otherwise be sold or assigned in accordance with Section 8.4.

Section 8.16 Recording Memorandum. Contemporaneously with their execution and delivery of this Agreement, the Parties shall execute a recording memorandum that is substantially identical in form and substance to that attached hereto as Exhibit C (the “Memorandum”) for purposes of conferring constructive public notice of the existence of this Agreement. Except as may be required by applicable law or as mutually agreed in writing by the Parties, neither Party shall file of record in any county or other public records this Agreement, a copy thereof or any portion thereof (other than the Memorandum).

 

15

Section 8.17 Acknowledgement and Ratification. As necessary to ensure that this Agreement survives termination or expiration of the Master Lease, dated effective October 15, 2021, between the Company and Landowner (the “Master Lease”) during the Term, Landowner hereby (a) grants an interest in the North Ranch sufficient to provide Operator with the rights granted hereunder to the North Ranch for the Term of this Agreement, subject to the terms and conditions of this Agreement, and (b) acknowledges and ratifies the terms and conditions of this Agreement. Upon termination or expiration of the Master Lease, all of the Company’s rights and obligations under this Agreement shall automatically, ipso facto revert to Landowner, as successor in interest to the Company, and Landowner shall provide written notice to Operator of such reversion.

[Remainder of page intentionally left blank; signature page follows.]

 

16

This Agreement has been executed and delivered by the Parties effective as of the Effective Date.

 

 

Signature Page – Water Facility and Access Agreement (North Ranch)

Schedule 2.3

SUA/Damages

[Omitted]

Exhibit A

North Ranch

[Omitted]

Exhibit B

Initial Facilities

[Omitted]

Exhibit C

Recording Memorandum

[Omitted]

Exhibit D

HHR Permits

[Omitted]

Exhibit E

Legacy Agreements

[Omitted]

Schedule I

Form of Lease

[Omitted]

Schedule II

Form of Easement

[Omitted]

Exhibit 10.10

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND REPLACED WITH “[***]”. SUCH IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE OF INFORMATION THAT THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL.

 

PRODUCED WATER FACILITIES AND ACCESS AGREEMENT

among

TEXAS PACIFIC RESOURCES LLC,

DBR LAND LLC,

DELAWARE BASIN RANCHES INC.

and

WATERBRIDGE STATELINE LLC

Dated March 8, 2022

Table of Contents

 

				Page
1.		Definitions and Interpretation			1
2.		Produced Water Rights and Operations			5
3.		Memorandum			6
4.		Royalties and Payment			7
5.		Third Party Water Midstream Development on AMI Lands			9
6.		Produced Water Opportunities Within the AMI Lands; TPR Purchase of Produced Water in New Mexico; Produced Water Opportunities Outside the AMI Lands.			9
7.		Withdrawal of Protests			11
8.		Assignment			12
9.		Reciprocity			13
10.		Insurance			14
11.		State and Federal Laws, Rules and Regulations			14
12.		Force Majeure			14
13.		Term and Termination			15
14.		Defaults and Remedies			16
15.		Payment of Taxes			16
16.		Costs and Expenses			16
17.		Confidentiality			16
18.		Relationship of the Parties			17
19.		Covenants Binding			17
20.		Further Assurances			17
21.		Severability			17
22.		Governing Law; Dispute Resolution; Waiver of Jury Trial			17
23.		Entire Agreement; Headings; Precedence			18
24.		Limitation of Grant			18
25.		Independent Counsel			18
26.		Multiple Counterparts			18
27.		No Third Party Beneficiaries			18
28.		Acknowledgement and Ratification			18
29.		Certain Representations and Covenants			19
30.		Specific Performance			19

 

Exhibits:
Exhibit A		Addresses for Notice
Exhibit B		Form of Memorandum of Agreement
Schedules:
Schedule 1		DBR Lands; TPR Lands; AMI Lands
Schedule 2		Insurance

 

i

PRODUCED WATER FACILITIES AND ACCESS AGREEMENT

This Produced Water Facilities and Access Agreement (this “Agreement”) is entered into as of March 8, 2022 (the “Effective Date”), by and among Texas Pacific Resources LLC, a Delaware limited liability company (“TPR”), DBR Land LLC, a Delaware limited liability company (“DBR”), WaterBridge Stateline LLC, a Delaware limited liability company (“WBSL”) and, Delaware Basin Ranches Inc., a Texas corporation (“Landowner”). TPR, DBR, WBSL and Landowner may be referred to collectively as the “Parties” and individually as a “Party”.

RECITALS

WHEREAS, Landowner is the owner of and DBR, pursuant to the Master Lease (defined herein), leases the lands in Reeves County and Loving County, Texas described on Schedule 1 attached hereto as DBR Checkerboard Lands and Contiguous DBR Lands (the “DBR Lands”), and TPR owns the lands in Reeves County and Loving County, Texas described on Schedule 1 attached hereto as TPR Lands (the “TPR Lands”);

WHEREAS, TPR, Landowner and DBR desire to designate the TPR Lands and the DBR Lands as the “AMI Lands,” and TPR further desires to grant WBSL certain rights to develop, construct and operate Produced Water Facilities on the TPR Lands, each in accordance with the terms and conditions of this Agreement and the Transaction Documents; and

WHEREAS, TPR, Landowner, DBR and WBSL further desire, as between the Parties, to grant WBSL the exclusive rights to market and sell Produced Water within the AMI Lands, and WBSL desires to grant TPR certain rights to purchase Produced Water from WBSL outside of the AMI Lands, each in accordance with the terms and conditions of this Agreement and the Transaction Documents.

AGREEMENT

NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, the Parties agree as follows:

1. Definitions and Interpretation.

(a) Unless otherwise required by the context in which any defined term appears, the following terms shall have the meanings specified in this Section 1(a).

[***]

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, (i) controls or owns the first Person, (ii) is controlled and owned by the first Person or (iii) is under common control or ownership with the first Person, where “own” (including the terms “owned by” and “under common ownership with”) means ownership of 50% or more of the equity interest(s) of the Person, and “control” (including the terms “controlled by” and “under common control with”) means the power to direct

 

1

or cause the direction of the management or policies of the Person through direct or indirect ownership of more than 50% of the voting securities or interest. Notwithstanding the foregoing, each Party acknowledges that Five Point Energy LLC and its affiliates manage a variety of private investment funds (the “FPE Funds”) and that the FPE Funds currently own, and may in the future acquire, interests in energy and/or Produced Water-related companies (the “FPE Portfolio Companies”), including WBSL, and each Party agrees that none of the terms of this Agreement other than Section 17 shall apply to any FPE Fund or to any of the FPE Portfolio Companies (other than (a) WaterBridge NDB LLC and its subsidiaries, and (b) if DBR and/or Landowner are not controlled by WaterBridge NDB LLC and are controlled by one or more FPE Funds, then the FPE Portfolio Company or FPE Portfolio Companies that control DBR, Landowner, or both and their subsidiaries), and that none of the FPE Funds or the FPE Portfolio Companies or any of their affiliates (other than (a) WaterBridge NDB LLC and its subsidiaries, and (b)if DBR and/or Landowner are not controlled by WaterBridge NDB LLC and are controlled by one or more FPE Funds, then the FPE Portfolio Company that controls DBR and Landowner or either of them and their subsidiaries) shall be “Affiliates” of the WBSL Parties for the purposes of this Agreement other than for purposes of Section 17.

“Agreement” has the meaning set forth in the Preamble.

“Alternate Royalty” has the meaning set forth in Section 4(b).

“Alternate Royalty Year” has the meaning given in the definition of “Annual Volume”.

“AMI Lands” has the meaning set forth in the Recitals.

“Annual Volume” for each 12 month period described in this definition (each such 12 month period an “Alternate Royalty Year”) means:

 

•

[***] Barrels (corresponding to [***] in Alternate Royalty payments) during the 12 month period beginning on the Royalty Date;

 

•

[***] Barrels (corresponding to [***] in Alternate Royalty payments) during the 12 month period beginning on first anniversary of the Royalty Date;

 

•

[***] Barrels (corresponding to [***] in Alternate Royalty payments) during the 12 month period beginning on the second anniversary of the Royalty Date;

 

•

[***] Barrels (corresponding to [***] in Alternate Royalty payments) during the period beginning on the third anniversary of the Royalty Date; and

 

•

[***] Barrels (corresponding to [***] in Alternate Royalty payments) during the period beginning on the fourth anniversary of the Royalty Date.

“Applicable CDBRL Barrel” has the meaning set forth in Section 4(a).

“Applicable Laws” means all applicable laws, treaties, regulations, standards, decrees, rules, decisions, judgments, orders, injunctions, interpretations, authorizations, directives, or other requirements of any Governmental Authority, including any Governmental Approval.

“Barrel” means 42 U.S. gallons.

“Capacity Achievement Date” has the meaning set forth in Section 4(b).

“Capacity Threshold” means the lesser of (i) the actual Applicable CDBRL Barrels per day of disposal volumes reached by WBSL as of the Capacity Achievement Date or (ii) [***].

 

2

“Checkerboard Lands” means the DBR Checkerboard Lands and TPR Lands identified on Schedule 1.

“Confidential Information” has the meaning set forth in Section 17.

“Contiguous DBR Lands” means the Contiguous DBR Lands identified on Schedule 1.

“DBR” has the meaning set forth in the Preamble.

“DBR Lands” has the meaning set forth in the Recitals.

“Default” has the meaning set forth in Section 14(a).

“Due Date” has the meaning set forth in Section 4(g).

“Effective Date” has the meaning set forth in the Preamble.

“Election Date” has the meaning set forth in Section 9.

“Force Majeure” has the meaning set forth in Section 12.

“Governmental Approval” means any permit, license, permission, grant or other similar authorization issued by, or required to be issued by, any Governmental Authority, and necessary for a Party to perform its obligations under this Agreement.

“Governmental Authority” means any federal, tribal, state or local governmental entity, or any of the several states or subdivisions thereof, and any of their respective, agencies, branches, courts, tribunals, commissions, institutions, military forces or other bodies or authorities, whether legislative, judicial, executive, or arbitral, having jurisdiction or authority, actual or apparent, over the Parties or subject matter in question.

“Hydrocarbons” means any mixture of gaseous or liquid hydrocarbons, or of hydrocarbons and other gases, whether in a gaseous state, or consisting primarily of methane, oil, condensate, natural gasoline, and all liquid hydrocarbons, or any blend of such.

“Initial Term” has the meaning set forth in Section 13(a).

“Landowner” has the meaning set forth in the preamble.

“Master Lease” means that certain Master Lease dated effective October 15, 2021 between Landowner, as landlord, and DBR, as tenant, as the same may be amended from time to time.

“New Infrastructure” means any Produced Water Facilities developed by WBSL within the AMI Lands from and after the date of acquisition of the DBR Lands by Landowner, but does not include infrastructure acquired by WBSL from a non-affiliate.

“Notice of Default” has the meaning set forth in Section 14(a).

“Overdue Rate” means the rate per annum equal to the lesser of (i) 6% plus the prime rate specified under the caption “Money Rates” in the Wall Street Journal (New York edition) on the date that the applicable payment was required to have been made and (ii) the maximum rate permitted by Applicable Laws.

“Parties” or “Party” have the meanings set forth in the Preamble.

 

3

“Person” means any individual, corporation, voluntary association, partnership, limited partnership, limited liability company, association, trust, incorporated organization, unincorporated organization, or any other entity or organization, or Governmental Authority.

“Planned Facility” has the meaning set forth in Section 2(b).

“Produced Water” means any produced water, flowback water, brine water, saltwater, associated incidental Hydrocarbons, trace amounts of oil industry chemicals or various trace solids, and any other water borne liquid substances each generated in connection with drilling for and producing Hydrocarbons. For the avoidance of doubt, Produced Water does not include Produced Water blended with fresh or brackish water.

“Produced Water Facilities” means facilities, infrastructure and equipment used for storage, transportation, recycling, treating, reuse, sale, and/or disposal (including by injection, evaporation or treatment) of Produced Water, including pipelines, commercial SWD Wells and related infrastructure.

“Reciprocal Rights” has the meaning set forth in Section 8(b).

“Renewal Term” has the meaning set forth in Section 13(a).

“Royalty” and “Royalties” have the meanings set forth in Section 4(a).

“Royalty Date” means the first day of the [***] after the Effective Date.

“Skim Oil” means all oil, condensate and other Hydrocarbons which are recovered from Produced Water using Produced Water Facilities.

“SWD Well” means a disposal well on the AMI Lands used for the purpose of injecting Produced Water into the ground.

“Term” means the Initial Term and each Renewal Term, cumulatively.

“Third Party” means any Person other than a TPR Party or a WBSL Party.

“TPR” has the meaning set forth in the Preamble.

“TPR Lands” has the meaning set forth in the Recitals.

“TPR Parties” means TPR and its Affiliates.

“Transaction Documents” means the agreements, instruments, certificates and other documents executed and delivered by any Party to another Party pursuant to this Agreement.

“Transfer” means to sell, assign, convey, lease or otherwise transfer the interest of a Party in and to this Agreement and/or all or any portion of the AMI Lands.

“WBSL” has the meaning set forth in the Preamble.

“WBSL Development Plan” has the meaning set forth in Section 2(c).

“WBSL Parties” means WBSL, DBR, Landowner and their respective Affiliates.

[***]

 

4

(b) All references to any agreement or document shall be construed as of the particular time that such agreement or document may then have been executed, amended, varied, supplemented or modified. Capitalized terms shall have the meanings set forth in Section 1(a) unless the context otherwise requires. References in the singular shall include the plural. References to a particular article, section, subsection, paragraph, subparagraph, schedule, exhibit or appendix, if any, shall be a reference to such article, section, subsection, paragraph, subparagraph, schedule, exhibit or appendix in and to this Agreement. The words “include” and “including” shall include the phrase “without limitation.” Any reference to a Person shall include that Person’s permitted successors and assigns or any Person succeeding to that Person’s functions. Headings are for convenience of reference only and shall not affect the interpretation or construction of this Agreement. Any schedules or exhibits are fully incorporated and made part of this Agreement. The words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular Section or Article in which such words appear unless otherwise indicated. Any schedules or exhibits shall be read in conjunction with the provisions of the body of this Agreement, and such schedules or exhibits and the body of this Agreement shall be interpreted to give effect to the intent of the Parties as evidenced by their terms when taken as a whole, provided that in the event of an irreconcilable conflict between the terms of a schedule or exhibit and the provisions of the body of this Agreement, the provisions of the body of this Agreement shall control.

2. Produced Water Rights and Operations.

(a) Subject to the terms and conditions set forth herein, TPR hereby grants WBSL the non-exclusive right to develop, construct, and operate Produced Water Facilities (excluding evaporation facilities) on the TPR Lands for handling of Produced Water and the non-exclusive right of ingress and egress within the TPR Lands for the purposes of performing and exercising its rights under this Agreement. The Parties hereby agree that all Produced Water Facilities developed and constructed by WBSL on the TPR Lands pursuant to this Agreement and owned and/or operated by WBSL hereunder shall be subject to this Agreement, and all royalty payments and fees related to such Produced Water Facilities shall be paid in accordance with this Agreement and the applicable Transaction Document.

(b) If, from time to time during the Term, WBSL desires to develop Produced Water Facilities (excluding evaporation facilities) on the TPR Lands (each, a “Planned Facility”), then WBSL shall provide a written notice to TPR which notice shall describe the Planned Facility and provide information regarding the proposed route and/or location of the Planned Facility (including reasonably detailed preliminary plans and specifications for the Planned Facility, to the extent feasible without a survey or plat) and vertical depths of any SWD Well. [***]

 

(i)

TPR will either approve or deny in writing the Planned Facility for survey within ten business days of receipt of WBSL’s notice of a Planned Facility in compliance with Section 2(b)(v). If TPR does not deny the Planned Facility in writing within ten business days, TPR will be deemed to have approved the Planned Facility for survey.

 

(ii)

If TPR denies the Planned Facility for survey, then TPR will provide in the written notice of such denial (A) specific reasons supporting such denial in compliance with Section 2(b)(v), (B) a reasonable alternative route and/or location for the Proposed Facilities within the AMI Lands. TPR and WBSL will further reasonably cooperate with each other in good faith to identify a route/location that is reasonably acceptable to both Parties.

 

5

(iii)

WBSL shall provide TPR with a surveyed plat accurately describing the approved proposed route and/or location of the Planned Facility, as well as corresponding share files (and/or other forms of spatial data that TPR and WBSL are then currently using in their geographical information systems), for TPR’s review and written approval prior to beginning any necessary activities related to the construction thereof.

 

(iv)

TPR will either finally approve or deny the Planned Facility in compliance with Section 2(b)(v) within ten business days of receipt of reasonably complete information provided by WBSL under Section 2(b)(iii). If TPR does not deny the Planned Facility in writing within ten business days after receipt of such information, TPR will be deemed to have approved the Planned Facility. TPR shall promptly evidence its approval (including deemed approval) by providing WBSL with an executed surface lease or easement agreement needed to grant WBSL the rights to develop, construct and operate the Planned Facility (conditioned on receiving from WBSL the applicable fees in accordance with Section 2(c)), utilizing an agreement in substantially the same form as TPR’s applicable form lease or easement, revised as necessary to (A) reflect the applicable economic terms of this Agreement and ensure no duplication of Royalty payments, (B) provide the term for the SWD Well lease will run so long as the SWD Well is used continuously with no lapse of 180 consecutive days or more unless earlier terminated as provided therein, (C) otherwise be consistent with the terms of this Agreement and (D) such other changes as TPR and WBSL may agree.

 

(v)

Notwithstanding anything to the contrary herein, TPR must act in good faith in determining whether to approve or deny or refuse to approve WBSL’s Planned Facility or the associated route or location.

(c) WBSL shall be solely responsible for the costs and expenses of developing, owning and operating its Produced Water Facilities on the TPR Lands, but shall have no obligation to construct any Produced Water Facilities. Each quarter, WBSL will provide TPR a map of existing WBSL facilities within the AMI Lands and projected development within the AMI Lands over the next 12 months (each, a “WBSL Development Plan”). Prior to any construction thereof, WBSL shall pay fees for pipeline right of way, surface damages and any other surface use related fees for Produced Water Facilities located on TPR Lands at the prevailing market rates.

(d) [***].

(e) In the event WBSL constructs any Produced Water Facilities on the TPR Lands in violation of the terms and conditions hereof, TPR shall be entitled to (a) seek immediate injunctive relief in addition to, and not in lieu of, any other rights or remedies TPR may have under this Agreement or otherwise, at law or in equity; (b) in its sole discretion, either require WBSL to remove or relocate the Produced Water Facilities and restore all areas of the land disturbed as a result thereof to TPR’s reasonable satisfaction; or (c) following thirty (30) days’ advanced notice, remove such Produced Water Facilities and restore all areas of the land disturbed as a result thereof and all reasonable costs incurred or suffered by TPR in connection with the performance of any such action shall be payable to TPR by WBSL upon demand.

3. Memorandum. Contemporaneously with the execution of this Agreement, the Parties shall execute a short form memorandum of agreement substantially in the form of Exhibit E. At any time after the Royalty Date, WBSL may file such memorandum in the real property records of Loving County to provide notice of the AMI Lands and the rights granted herein. If any AMI Lands are added to or permanently released from the terms of this Agreement, the Parties agree to amend the memorandum or file a release, as applicable, in the real property records reflecting the addition or release.

 

6

4. Royalties and Payment.

(a) Subject to the further provisions regarding royalties and payments below, WBSL will pay the following royalties to TPR, without duplication (each a “Royalty” and together the “Royalties”):

 

(i)

[***] per Barrel of Produced Water disposed of or transported, in either case, utilizing New Infrastructure on or within the Contiguous DBR Lands, and not ever crossing any part of the Checkerboard Lands (each such applicable Barrel of Produced Water, an “Applicable CDBRL Barrel”);

 

(ii)

[***] per Barrel of Produced Water disposed of or transported, in either case, utilizing New Infrastructure on or within the Checkerboard Lands; and

 

(iii)

[***] of gross proceeds received by WBSL from Skim Oil recovered by WBSL utilizing New Infrastructure within the AMI Lands.

(b) The obligation of WBSL to pay (x) the Royalties set forth in Section 4(a)(iii) with respect to Skim Oil attributable to the Applicable CDBRL Barrels and (y) the Royalties set forth in Section 4(a)(i) shall be suspended as of the Effective Date and shall remain suspended until the [***] anniversary of the Royalty Date, or until the date that WBSL has reached [***], whichever occurs first (such earlier date, the “Capacity Achievement Date”).

 

(i)

Until the Capacity Achievement Date, in lieu of the suspended Royalties described in the introductory paragraph of this Section 4(b), WBSL shall pay to TPR [***] (the “Alternate Royalty”).

 

(ii)

[***].

 

(iii)

The Annual Volume will be prorated as applicable for the Alternate Royalty Year in which the Capacity Achievement Date occurs and, promptly following the Capacity Achievement Date, WBSL will pay the Alternate Royalty on any remaining deficiency for the Annual Volume for any prior Alternate Royalty Year and any deficiency in the prorated Annual Volume for the current Alternate Royalty Year, if applicable.

 

(iv)

For the avoidance of doubt, the Alternate Royalty shall not apply to any Barrels of Produced Water disposed of or transported, in either case, utilizing New Infrastructure on or within the Checkerboard Lands, and WBSL shall be obligated to pay the Royalties set forth in Section 4(a)(ii) and Section 4(a)(iii) above for such Barrels.

 

7

(c) Notwithstanding anything herein to the contrary, on and after the Capacity Achievement Date WBSL shall pay:

 

(i)

the Royalty set forth in Section 4(a)(i) in respect of [***] of the Applicable CDBRL Barrels up to the Capacity Threshold [***];

 

(ii)

the Royalty set forth in Section 4(a)(i) on all Applicable CDBRL Barrels in excess of the Capacity Threshold; and

 

(iii)

the Royalty set forth in Section 4(a)(iii) on Skim Oil attributable to all Applicable CDBRL Barrels in excess of the Capacity Threshold [***].

(d) Every [***] anniversary of January 1, 2022, the Royalties [***] shall automatically be adjusted by the percentage increase in in the Consumer Price Index, as published by the Bureau of Labor Statistics of the United States Department of Labor for All Urban Consumers, specifically, the “All Items” Unadjusted Expenditure Category, for December 31, 2021 and for December 31 of the year immediately preceding the applicable increase, but in no event shall the percentage increase be less than [***] of the Royalties amounts from the previous five year term, or more than [***] of the Royalties amounts from the previous [***] year term.

(e) No later than the 25th day of each month WBSL shall deliver to TPR a statement setting forth, for the preceding month, the Produced Water volumes and Skim Oil sales for which WBSL owes a payment pursuant to Sections 4(a)-(c), together with a calculation of the respective amounts owed.

(f) No later than the 25th day of each month, each of DBR and TPR shall deliver to the other Party a statement setting forth, for the preceding month, any payments owed by such delivering Party pursuant to Section 5(b).

(g) Payment in full of any amounts due from any Party as reflected on the applicable statement shall be made by wire transfer on or before the last business day of the subsequent month (the “Due Date”). If a Party fails to pay the amount of any statement within 60 days after the date of such statement, interest on such amounts will accrue from the Due Date through and including the date such Party actually makes payment, at the Overdue Rate.

(h) At any time on no less than 30 days’ notice (but no more frequently than twice in any 12-month period so long as a Default by the other Party is not occurring), any Party may, at the sole cost and expense of such Party, conduct an audit of any other Party’s records, including the examination of accounts, invoices and other documents related to the AMI Lands and/or operations pursuant to this Agreement, and including records of Produced Water disposed of, and/or transported, as the case may be. Such examination shall use electronic records or, solely to the extent original documents are required, take place in the office location where such books and records are kept in the normal course of business; provided that no examination may unreasonably interfere in the ongoing job responsibilities of the personnel of any Party.

(i) WBSL shall provide, operate and maintain properly calibrated flow meters at each (i) SWD Well owned or operated by WBSL on the AMI Lands, (ii) point at which one of WBSL’s Produced Water pipelines brings Produced Water onto the AMI Lands, (iii) point at which one of WBSL’s Produced Water pipelines brings Produced Water onto the Checkerboard Lands from the Contiguous DBR Lands, (iv) receipt point on the AMI Lands at which Produced Water originally produced on the AMI Lands enters WBSL’s Produced Water Facilities, and (v) any other necessary locations on the Produced Water Facilities, all to the extent necessary to calculate the amounts owed by any WBSL Party pursuant to Section 4 and in compliance with all Applicable Laws, rules and regulations.

 

8

(j) [***]

5. Third Party Water Midstream Development on AMI Lands.

(a) [***]

(b) Each of DBR and TPR shall promptly inform the other Party of any agreements in respect of 3P Royalties, and DBR shall pay to TPR, and TPR shall pay to DBR, on a monthly basis and within 30 days of receipt, an amount equal to [***] of all 3P Royalties received by such Party. If a joint agreement is entered into by DBR, TPR and the applicable Third Party, the agreement will direct the payments to be made in accordance with this paragraph.

(c) In no event shall Section 5(a) (i) prevent or restrict Third Parties from utilizing land rights acquired prior to the Effective Date or constructing facilities utilizing such land rights acquired prior to the Effective Date, in both cases solely to the extent permitted in agreements existing on the Effective Date (as such agreements existed on the Effective Date) or (ii) require any Party’s consent under Section 5(a) for the matters described in Section 5(c)(i)).

6. Produced Water Opportunities Within the AMI Lands; TPR Purchase of Produced Water in New Mexico; Produced Water Opportunities Outside the AMI Lands.

(a) [***] WBSL will use commercially reasonable efforts to market, sell and redeliver Produced Water for use in oil and gas drilling and completion operations within the AMI Lands. If a TPR Party becomes aware of such an opportunity, TPR will promptly inform WBSL and WBSL will have the right to pursue the opportunity. WBSL shall pay TPR for all Produced Water (including recycled, treated, and raw Produced Water) sold, treated or redelivered by WBSL under this Section 6(a) as follows (the “Fees”):

 

9

i. [***] of the gross proceeds WBSL receives for such sale, treatment, or redelivery, net of WBSL’s actual and documented direct out of pocket operating expenses directly incurred in delivering such volumes of Produced Water from WBSL’s pipeline risers or skim oil recovery facilities to customer take points, plus the operating expenses for redelivery, recycling and treatment set forth in the table below. [***].

 

Service		Operating Expense
Redelivery of Raw Water		[***]
Light Oxidation Treatment to meet following spec:   •  ORP > 150 •  PH 6-8 •  Iron < 15 •  Turbidity < 300 •  H2S < 1		[***]
Full Oxidation Treatment to meet following spec:   •  ORP > 400 •  PH 6-7.5 •  Iron < 5 •  Turbidity < 100 •  H2S Non-Detect		[***]
Other recycling/treatment and/or water quality specs not listed above		[***]

ii. If WBSL sells Produced Water to an affiliated party or uses Produced Water in its own operations, the gross proceeds used to determine the Fees for such Produced Water pursuant to Section 6(a)(i) will be the average Produced Water sale price WBSL received from unaffiliated third parties for sales of Produced Water under this Section 6(a) within the preceding six full months; provided that if any such affiliated party resells such Produced Water (without blending or otherwise changing the character of such Produced Water), directly or indirectly, to an unaffiliated third party under this Section 6(a), WBSL shall provide TPR with all relevant information regarding such sale, and TPR shall have the option to have the Fees determined in accordance with Section 6(a)(i), using such third party price as the “gross proceeds”.

iii. If WBSL markets, sells or redelivers Produced Water (including recycled, treated and raw Produced Water) for use in oil and gas drilling and completion operations outside the AMI Lands, or provides the treatment and delivery services required in connection therewith, and (A) such Produced Water utilizes any New Infrastructure on TPR Lands (including pipelines used to transfer

 

10

Produced Water) or (B) such Produced Water is otherwise transported from the Contiguous DBR Lands for use in oil and gas drilling and completion operations in Texas, including by utilizing WBSL’s Produced Water infrastructure located in New Mexico, then WBSL shall pay TPR for such volumes of Produced Water in accordance with this Section 6(a); except that the reference in Section 6(a)(i) to [***] shall instead be [***] with respect to all such Produced Water volumes.

(b) [***]

(c) To the extent WBSL or its Affiliates owns or controls Produced Water in New Mexico, TPR or its designated Affiliate may purchase such Produced Water from WBSL’s facilities in New Mexico on a non-exclusive, interruptible basis to the extent reasonably requested by TPR or its designated Affiliate and delivered to TPR or its designated Affiliate at the existing pipeline operating pressure (i.e. no boost pumps required). TPR or its designated Affiliate will pay WBSL [***] for all volumes taken pursuant to this Section 6(c) and shall have possession and control of, and be responsible for all liabilities associated with, any such Produced Water once such Produced Water leaves WBSL’s facility. TPR and WBSL representatives will discuss such opportunities in their discussions addressing other matters under this Agreement.

(d) [***]

7. Withdrawal of Protests.

 

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

 

11

[***]

[***]

[***]

[***]

8. Assignment.

(a) WBSL may not Transfer its interest in this Agreement, in whole or in part, without the express prior written consent of TPR, which may be withheld by TPR at its sole discretion for any reason or no reason. Notwithstanding the foregoing, WBSL may assign all, but not less than all, of its interest in this Agreement without TPR’s consent to an Affiliate of WBSL, provided that WBSL gives prior written notice to TPR. In the event of a permitted Transfer hereunder, such party shall agree in writing to be bound by the terms of this Agreement and WBSL shall furnish to TPR a copy of such agreement within thirty (30) days of such assignment. For the avoidance of doubt, no assignment by WBSL of this Agreement or any rights hereunder shall relieve WBSL of any subsequent liability and WBSL shall remain primarily liable for any and all obligations under this Agreement unless the express written release of such liability shall be obtained from TPR. WBSL may not engage in a series of transactions that both (i) result in this Agreement or an interest herein being owned by a non-Affiliate and (ii) are designed to avoid the consent requirements set forth in this Section 8(a).

(b) TPR may not Transfer its rights under Section 9 (including its rights to make the election under Section 9 and the rights it obtains or would obtain under this Agreement as a result of making such election) (collectively, the “Reciprocal Rights”), in whole or in part, without the express prior written consent of DBR, which may be withheld by DBR at its sole discretion for any reason or no reason. Notwithstanding the foregoing, TPR may assign all, but not less than all, of the Reciprocal Rights without DBR’s consent to an Affiliate of TPR, provided that TPR gives prior written notice to DBR. In the event of a permitted Transfer hereunder, such party shall agree in writing to be bound by the terms of this

 

12

Agreement and TPR shall furnish to DBR a copy of such agreement within thirty (30) days of such assignment For the avoidance of doubt, no assignment by TPR of this Agreement or any rights hereunder shall relieve TPR of any subsequent liability and TPR shall remain primarily liable for any and all obligations under this Agreement unless the express written release of such liability shall be obtained from DBR. TPR may not engage in a series of transactions that both (i) result in the Reciprocal Rights or an interest therein being owned by a non-Affiliate and (ii) are designed to avoid the consent requirements set forth in this Section 8(b).

(c) Any Transfer of all or any portion of the AMI Lands by a Party shall be made expressly subject to this Agreement. In the event that TPR Transfers less than all of the TPR Lands to any Third Party, such Third Party shall not have any rights to receive any amounts payable to TPR pursuant to Section 4 unless specifically assigned to such Third Party.

(d) Any Transfer in violation of this Section 8 shall be void ab initio. The Parties shall cause any Person obtaining an ownership interest in AMI Lands to join this Agreement. No Transfer by one Party shall be binding upon any other Party until the transferring Party has furnished each other Party with a copy of the instrument evidencing the Transfer.

(e) For the avoidance of doubt, none of the following shall be restricted by this Section 8 (and no consent shall be required for), (i) a change of control of, or sale, assignment or other transfer of equity of, any Party or any of its Affiliates (except to the extent in conflict with the last sentence of Section 8(a) or the last sentence of Section 8(b)), or (ii) a sale, assignment or transfer by DBR, Landowner or TPR of any or all of the AMI Lands or rights thereto (subject to compliance with Sections 8(c) and 8(d)).

9. Reciprocity. The Parties acknowledge and agree that TPR, at any time during the Term of this Agreement after the [***] shall have the option to exercise the same rights and enjoy the same benefits with respect to the DBR Lands as have been granted and otherwise made available to WBSL hereunder, financial and otherwise, with respect to the TPR Lands upon not less than thirty (30) days’ prior written notice to WBSL, DBR, and Landowner (the date on which such election becomes effective, the “Election Date”); [***] Each reference to “TPR” in this Section 9 will be read as “TPR or its designated Affiliate.” If TPR properly exercises such option, the following will apply:

(a) From and after the Election Date, subject to Sections 9(b) and 9(e), as between TPR, Landowner and DBR, (i) TPR shall have the same rights and obligations under this Agreement with respect to the DBR Lands as WBSL has under this Agreement vis a vis TPR with respect to the TPR Lands; [***].

(b) Notwithstanding anything to the contrary in this Agreement, the rights and obligations of TPR and DBR under Section 9(a) shall be subject to the following:

 

(i)

[***]

 

13

(ii)

TPR facilities on DBR Lands may not unreasonably interfere with any then existing WBSL facilities or any facilities set forth in the most recent WBSL Development Plan.

 

(iii)

The Royalties payable by TPR shall be those set forth in Sections 4(a)(ii) and 4(a)(iii), as the same may be adjusted from time to time pursuant to Section 4(d), and such Royalties shall be owed with respect to all volumes of Produced Water that enter or are transported through TPR’s Produced Water Facilities. For the avoidance of doubt, neither Section 4(b) nor Section 4(c) shall apply to TPR’s obligations to pay Royalties.

(c) Subject to Section 9(b) and 9(e), the rights and obligations set forth in Section 9(a) shall be upon the same terms and conditions as otherwise provided in this Agreement, without any requirement to amend this Agreement or execute any additional documentation, provided that the Parties hereto shall execute such commercially reasonable documentation in confirmation of the foregoing as either TPR or its Affiliates or DBR or Landowner may reasonably request. Such reciprocal rights and benefits shall be applicable to the DBR Lands to the same extent as the rights and benefits of WBSL to the TPR Lands. For the avoidance of doubt, nothing in this Section 9 or the implementation thereof shall in any manner diminish or otherwise adversely affect any of WBSL’s rights or obligations under this Agreement.

(d) [***]

(e) [***]

10. Insurance. Each Party shall carry insurance with responsible carriers as set forth on Schedule 2. Each WBSL Party required to carry insurance pursuant to this Agreement shall name TPR as an additional insured, and each TPR Party required to carry insurance pursuant to this Agreement shall name DBR, Landowner and WBSL as additional insureds. Each Party will provide copies of such insurance policies (and certificates of insurance) to any other Party within ten days of such other Party’s request for same. Each Party agrees that its obligation to carry and maintain insurance pursuant to this Section 10 shall be independent of its indemnity obligations herein. All insurance policies required pursuant to this Section 10 shall provide for waivers of subrogation among the Parties. Industry standard blanket endorsements may be utilized to satisfy the additional insured and waiver of subrogation requirements. Upon request, a Party will promptly provide the other Parties with a copy of all reports made by its insurers or to others of accidents or occurrences occurring on the AMI Lands.

11. State and Federal Laws, Rules and Regulations. All of the terms and provisions of this Agreement are hereby expressly made subject to Applicable Laws. Each Party shall prepare and file all such applications, notices, reports and other information concerning its operations to the extent required by Applicable Law. Each Party shall bear its own expenses incurred in participating in any hearings or proceedings.

12. Force Majeure. If any Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than the obligation to make money payments, that Party shall give to all other Parties prompt written notice of the Force Majeure with reasonably full

 

14

particulars concerning it; thereupon, the obligations of the Party giving the notice, other than the obligation to make money payments, so far as they are affected by the Force Majeure, shall be suspended during, but no longer than, the continuance of the Force Majeure. The affected Party shall use commercially reasonable efforts to remedy the Force Majeure as quickly as possible. The requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts, or other labor difficulty by the Party involved, contrary to its wishes; how all such difficulties shall be handled shall be entirely within the discretion of the Party concerned. The term “Force Majeure” as used in this Agreement means an act of God, strike, lockout, or other industrial disturbance, act of public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, epidemic, pandemic, governmental restraint, any action or inaction by any Governmental Authority, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, that is not reasonably within the control of the Party claiming suspension.

13. Term and Termination.

(a) The term of this Agreement shall commence on the Effective Date and shall continue until the fifteenth anniversary of the Effective Date (the “Initial Term”) and shall continue thereafter for successive one year terms (each, a “Renewal Term”) until any Party gives the other Parties written notice at least 180 days prior to the end of the Initial Term or any Renewal Term of its intent to terminate this Agreement, following which this Agreement will terminate at the end of the then-current Initial Term or Renewal Term. No Party may terminate this Agreement except as provided in this Section 13(a) or Section 14.

(b) The termination of this Agreement shall not relieve any Party hereto from any payment, liability or other obligation or any remedy therefor which has accrued or attached prior to the date of such termination. Upon termination of this Agreement and the satisfaction of all obligations hereunder, in the event a memorandum of this Agreement has been filed of record, each Party is authorized to file of record in all necessary recording offices a notice of termination, and each Party hereto agrees to execute such notice of termination as to each other Party’s interest, upon request of any Party, if such requesting Party has satisfied its financial obligations.

(c) Notwithstanding anything in this Agreement to the contrary, upon termination of this Agreement, (i) WBSL shall retain ownership of its Produced Water Facilities on the AMI Lands and the rights to operate such Produced Water Facilities in accordance with any Transaction Documents, (ii) TPR shall continue to receive (x) payments as set forth in Section 4 with respect to the New Infrastructure that is located on the AMI Lands and exists as of the date of the termination and (y) payments as set forth in Section 6(a) with respect to Produced Water (including recycled, treated and raw Produced Water) marketing, sales and redelivery, and treatment and delivery services required in connection therewith, for use in oil and gas drilling and completion operations within or outside the AMI Lands, and (iii) all other agreements entered into by WBSL and TPR with respect to the TPR Lands will continue in full force and effect. For the avoidance of doubt, WBSL shall not be permitted under this Agreement to construct Produced Water Facilities on the TPR Lands following termination of this Agreement. Further, upon termination of this Agreement, the provisions of this Agreement which are intended to extend beyond its termination, including the liability, warranty, and confidentiality provisions, and the provisions applicable to the enforcement of those provisions and/or the enforcement of rights and obligations incurred hereunder that are not fully discharged prior to the termination of this Agreement, shall survive termination to the extent necessary to effect the intent of the Parties and/or enforce such rights and obligations. For the avoidance of doubt, in addition to and not in limitation of the rights otherwise described in this Section 13(c), the following Sections of this Agreement shall survive the termination of this Agreement: Sections 4, 11, 13, 15, 17, 18, 21, 22, 23 and 29.

 

15

14. Defaults and Remedies. If any Party fails to pay any amount owed, or fulfill any other financial obligation under this Agreement within the time period required for such payment hereunder, or fails to perform any of its material obligations pursuant to this Agreement (any such event, a “Default”) then in addition to any other remedies provided for in this Agreement, the remedies set forth below shall apply. Any Default by WBSL shall be a Default solely by WBSL and not any of DBR or Landowner, unless DBR and/or Landowner is independently in Default, and vice versa. Election of any one or more of the following remedies shall not preclude the subsequent use of any other remedy specified below or any other remedy available by Applicable Law to a non-defaulting Party.

(a) Any Party may deliver to the Party in default a notice of Default (“Notice of Default”), which specifies the Default, specifies the action to be taken to cure such Default, and specifies that failure to take such action will result in the exercise of one or more of the remedies provided in this Section. If the Default is not cured within 30 days following the delivery of such Notice of Default (which 30 day period will be extended for so long as the Party in Default has commenced attempting to cure within the initial 30 day period and continues to diligently pursue a cure, up to a maximum of 90 additional days), all of the rights of the defaulting Party granted by this Agreement may, upon notice, be suspended until the Default is cured, without prejudice to the right of the non-defaulting Party or Parties to continue to enforce the obligations of the defaulting Party previously accrued or thereafter accruing under this Agreement. The rights of a defaulting Party that may be suspended hereunder at the election of the non-defaulting Parties shall include the right to receive information related to the AMI Lands or the operations thereon conducted during the period of such Default and the right to receive payment pursuant to Section 4. Further, without prejudice to the other rights and remedies of the non-defaulting Party or Parties, each non-defaulting Party shall be entitled to offset any amounts owing from the defaulting Party pursuant to this Agreement against any amounts owed to such non-defaulting Party.

(b) In the event any Party shall be required to bring legal proceedings to enforce this Agreement, then the prevailing Party shall also be entitled to recover all court costs, costs of collection, and reasonable attorney’s fees.

15. Payment of Taxes. Each Party shall report its own income and expenses on its respective individual or consolidated tax returns, and shall be responsible for its own taxes resulting therefrom (whether local, state, or federal). For the avoidance of doubt: (i) the applicable WBSL Parties will pay all taxes levied on Produced Water or attributable to their Produced Water Facilities, the Produced Water operations, and the DBR Lands, together with any corporate income taxes, ad valorem, and property or similar taxes of the WBSL Parties; (ii) the applicable TPR Parties will pay all taxes levied on their operations, and the TPR Lands, together with any corporate income taxes, ad valorem, and property or similar taxes of the TPR Parties, and (iii) no Party shall deduct amounts for taxes from the payments made pursuant to Section 4. In the event of any conflict between this Section 15 and the taxes provision of any Transaction Document, the obligations of such Transaction Document shall control.

16. Costs and Expenses. All costs and expenses incurred in connection with this Agreement and each Transaction Document and the transactions contemplated hereby and thereby shall be paid by the Party incurring such costs and expenses.

17. Confidentiality. At all times during the term of this Agreement the Parties shall have access at all reasonable times to the books and records of the other Parties to the extent related to this Agreement or operations on the AMI Lands (subject to Section 4(h)); provided that each Party shall hold in confidence, and shall require its Affiliates, and its and their respective principals, officers, employees, representatives and agents to hold in confidence the terms of this Agreement and all of the following information belonging to any other Party: (i) any accountings, (ii) all information pertaining to revenues and expenses, (iii) any records or other financial information provided by or on behalf of a Party related to the New Infrastructure on the AMI Lands, (iv) any books, records, computer printouts, designs or information regarding Produced

 

16

Water Facilities, and (v) any other proprietary information regarding Produced Water Facilities on the AMI Lands (collectively, “Confidential Information”). No Party may disclose such Confidential Information to others or permit the use of such Confidential Information by others for their benefit or to the detriment of any other Party hereto; provided that each Party may disclose Confidential Information (i) to any other Party or its or their Affiliates and their respective principals, officers, employees, representatives, agents, working interest owners, investors, potential investors, lenders, potential financing sources and bona fide prospective acquirors and (ii) as required by Applicable Law, including complying with any applicable disclosure obligations in connection with any securities offering or periodic or current reporting requirement, or any rule or requirement of any national securities exchange, or as required or requested pursuant to legal, administrative or judicial process, including an audit or examination by a regulator or self-regulatory organization (including by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process); provided that, in the case of disclosure under this clause (ii), the disclosing Party shall use commercially reasonable efforts to minimize the disclosure of Confidential Information, including if applicable by requesting confidential treatment in respect of such Confidential Information. Notwithstanding anything herein to the contrary, the following information shall not constitute “Confidential Information”: (x) information which was known to the receiving Party on a non-confidential basis prior to being furnished to the receiving Party by the disclosing Party; (y) information disclosed to the receiving Party by third parties that, to the knowledge of the receiving Party, are not bound by restrictions on disclosure with the disclosing Party with respect to such information; or (z) information that is or hereafter becomes generally available to the public other than through a breach of this Agreement by the receiving Party or its Affiliates, or any of its or their respective principals, officers, employees, representatives and agents.

18. Relationship of the Parties. This Agreement shall not be construed as creating a partnership or joint venture of any kind among the Parties. The rights of the Parties shall be individual and not joint or collective. NOTWITHSTANDING ANY DUTY (INCLUDING ANY FIDUCIARY DUTY) THAT MAY OTHERWISE EXIST AT LAW OR IN EQUITY, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) NO PARTY SHALL HAVE A FIDUCIARY DUTY TO ANY PERSON BOUND BY THIS AGREEMENT, AND (II) THE SOLE DUTIES, IF ANY, OF EACH PARTY TO THIS AGREEMENT AND ITS RESPECTIVE AFFILIATES TO ANY PERSON BOUND BY THIS AGREEMENT SHALL BE LIMITED TO THE CONTRACTUAL DUTIES IMPOSED BY THIS AGREEMENT.

19. Covenants Binding. All of the terms and provisions of this Agreement shall extend to, and be binding upon, the Parties, their respective heirs, representatives, successors and assigns, and shall constitute covenants running with the land with respect to the AMI Lands.

20. Further Assurances. The Parties agree to take such further actions, including the execution and delivery of any documents, as may be required, necessary, or desirable for the performance of this Agreement and the Transaction Documents.

21. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under the present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of the Agreement, and the remaining provisions of this Agreement shall remain in full force and effect.

22. Governing Law; Dispute Resolution; Waiver of Jury Trial.

(a) This Agreement, and all claims or causes of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the laws of the State of Texas without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of laws of another jurisdiction.

 

17

(b) Each Party agrees to attempt in good faith to resolve disputes prior to filing suit. Within five days following delivery of written notice by one Party to another of a perceived breach or other dispute, a senior executive of each Party will meet together in person (or if agreed by both parties, via telephone) to discuss ways to correct the dispute prior to taking further action.

(c) EACH PARTY SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES HEREUNDER EXCLUSIVELY IN ANY FEDERAL OR STATE COURT LOCATED IN MIDLAND COUNTY, TEXAS, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND HEREBY SUBMITS TO THE JURISDICTION OF, AND WAIVES ANY OBJECTION OF INCONVENIENT FORUM WITH RESPECT TO, SUCH COURTS. EACH OF THE PARTIES HEREBY KNOWINGLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY OF ANY AND ALL CLAIMS AND CAUSES OF ACTION ARISING FROM, IN CONNECTION WITH, OR IN ANY WAY RELATING TO THE NEGOTIATION, FORMATION, CONSTRUCTION, INTERPRETATION, PERFORMANCE, NON-PERFORMANCE, AND/OR BREACH OF THIS AGREEMENT.

(d) NOTWITHSTANDING ANY CONTRARY IN THIS AGREEMENT, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY PUNITIVE, CONSEQUENTIAL (EXCEPT TO THE EXTENT CONSTITUTING DIRECT DAMAGES), INCIDENTAL OR INDIRECT DAMAGES, OF ANY TYPE OR CHARACTER, INCLUDING LOSS OF PROFIT, LOSS OF PRODUCTION, REVENUE OR ANTICIPATED BUSINESS ARISING FROM OR RELATED IN ANY WAY TO THIS AGREEMENT, WITHOUT REGARD TO THE CAUSE(S) THEREOF, EXCEPT TO THE EXTENT A PARTY IS LIABLE TO AN UNRELATED THIRD PARTY FOR THE SAME.

23. Entire Agreement; Headings; Precedence. This Agreement, together with the Transaction Documents, constitutes the entire agreement of the Parties relating to the subject matter hereof, and supersedes all previous agreements, written or oral. Except as provided otherwise in this Agreement, this Agreement may not be amended or modified except by an instrument in writing signed by all Parties. In the event of an irreconcilable conflict between the terms of any Transaction Document and the provisions of this Agreement, the provisions of this Agreement shall control.

24. Limitation of Grant. Any and all uses of the AMI Lands other than those expressly granted by this Agreement to any Party are deemed to be reserved by the owner of such property and are not intended to be granted, and are not granted, to any Party by this Agreement. Any use beyond the scope of rights expressly granted to the Parties, respectively, by the terms herein must be expressly agreed upon in writing by the Parties, with valid consideration agreed upon and tendered to owner of the affected portion of the AMI Lands before such additional rights to use of the AMI Lands described herein commence.

25. Independent Counsel. Each Party acknowledges that it has had sufficient opportunity to, and has, consulted with its attorneys.

26. Multiple Counterparts. This Agreement may be executed in one document signed by all Parties, or in separate documents, which shall be counterparts hereof, or may be joined in, confirmed and ratified by any and all necessary parties by a separate document specifically referring this Agreement.

27. No Third Party Beneficiaries. This Agreement does not create any rights, claims or benefits inuring to any person that is not a Party hereto nor create or establish any third party beneficiary hereto.

28. Acknowledgement and Ratification. As necessary to ensure that this Agreement survives termination or expiration of the Master Lease, during the Term, by executing this Agreement, Landowner hereby acknowledges and ratifies the terms and conditions of this Agreement. Upon termination or expiration of the Master Lease, all of DBR’s rights and obligations under this Agreement shall automatically, ipso facto revert to Landowner, as successor in interest to DBR, and Landowner shall provide written notice to the other Parties of such reversion.

 

18

29. Certain Representations and Covenants. Each Party represents and warrants to the other Party, as of the Effective Date, that (a) it is duly formed and existing and in good standing under its jurisdiction of formation (and is in good standing with all regulatory agencies having jurisdiction over it), and is duly qualified to do business under the laws of such jurisdiction and each other jurisdiction in which such qualification is required to perform its obligations under this Agreement, (b) it has the limited liability company or corporate power and authority to execute and deliver this Agreement, perform its obligations under this Agreement, cause this Agreement to burden the DBR Lands (with respect to DBR and Landowner) and the TPR Lands (with respect to TPR), and to grant the rights granted to other Parties by this Agreement and (c) this Agreement has been duly executed and delivered by it and is legally binding upon it (assuming that the other Party has duly executed and delivered this Agreement), enforceable in accordance with its terms. Each Party covenants to take all actions necessary to maintain its good standing with regulatory agencies having jurisdiction over it (except where a failure to do so would not materially and adversely affect the ability of such Party to comply with this Agreement).

30. Specific Performance. Notwithstanding anything to the contrary in this Agreement, each Party recognizes and acknowledges that a breach by it of any applicable covenants, agreements or obligations contained in this Agreement shall cause the other Party to sustain irreparable harm for which they would not have an adequate remedy at law, and therefore in the event of any such breach the aggrieved Party shall, without the posting of bond or other security (any requirement for which each Party hereby waives), be entitled to the remedy of specific performance of such covenants, agreements and obligations, including injunctive and other equitable relief, in addition to any other remedy to which it might be entitled, (a) a Party shall be entitled to an injunction or injunctions to prevent breaches of any covenants, agreements or obligations contained in this Agreement and (b) in the event that any action or suit is brought in equity to enforce such covenants or agreements, neither Party shall allege, and each Party hereby waives the defense or counterclaim, that there is an adequate remedy at law.

[Signature Page Follows]

 

19

EXHIBIT A

ADDRESSES FOR NOTICE

If to TPR:

Texas Pacific Resources LLC

1700 Pacific Avenue, Suite 2900

Dallas, Texas 75201

Attention: Kevin Pierce, Director of Land

Email: [***]

With a copy to:

1700 Pacific Avenue, Suite 2900

Dallas, Texas 75201

Attention: Katie Keenan, Legal Department

Email: [***]

If to WBSL, DBR or Landowner:

DBR Land LLC

Delaware Basin Ranches Inc.

WaterBridge Stateline LLC

306 W. Wall Street, Suite 500

Midland, TX 79701

Attention: CEO; General Counsel

Email: [***]

EXHIBIT B

FORM OF MEMORANDUM OF AGREEMENT

(See attached)

EXHIBIT B

MEMORANDUM OF PRODUCED WATER FACILITIES AND ACCESS AGREEMENT

THIS MEMORANDUM OF PRODUCED WATER FACILITIES AND ACCESS AGREEMENT (this “Memorandum”) is entered into effective as of March 8, 2022 (the “Effective Date”), by and among Texas Pacific Resources LLC, a Texas limited liability company with an address of 1700 Pacific Avenue, Suite 2900, Dallas, Texas 75201 (“TPR”), DBR Land LLC, a Delaware limited liability company with an address of 840 Gessner Road, Suite 100, Houston, Texas 77024 (“DBR”), Delaware Basin Ranches Inc., a Texas corporation with an address of 840 Gessner Road, Suite 100, Houston, Texas 77024 (“DB Ranches”), and WaterBridge Stateline LLC, a Delaware limited liability company with an address of 840 Gessner Road, Suite 100, Houston, Texas 77024 (“WBSL”). TPR, DBR, DB Ranches and WBSL are hereinafter sometimes referred to singularly as a “Party” and collectively as the “Parties.” Capitalized terms used in this Memorandum but not defined herein have the meaning ascribed to such terms in the Agreement (as defined below).

RECITALS

WHEREAS, the Parties entered into that certain Produced Water Facilities and Access Agreement, dated as of the Effective Date (as such agreement may be modified or amended and restated from time to time, the “Agreement”), that provides, among other things, the terms and conditions related to the development, construction and operation of Produced Water Facilities, and the marketing, sale and redelivery of Produced Water, in each case on the properties owned by TPR in Reeves and Loving Counties, Texas, that are described as “TPR Lands” on Exhibit A hereto (the “TPR Lands”) and the properties owned or leased by DBR and DB Ranches in Reeves and Loving Counties, Texas, that are described as “DBR Lands” on Exhibit B hereto (the “DBR Lands”); and

WHEREAS, the Parties desire to file this Memorandum of record in the real property records of Reeves and Loving Counties, Texas, to give notice of the existence of the Agreement and certain provisions contained therein.

AGREEMENT

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. Notice. Notice is hereby given of the existence of the Agreement and all of its terms, covenants and conditions to the same extent as if the Agreement was fully set forth herein. Certain provisions of the Agreement are summarized in Sections 2 through 4 below.

2. Grant of Rights.

a. Right to Develop Facilities. Subject to the terms and conditions of the Agreement, TPR granted to WBSL the non-exclusive right to develop, construct, and operate Produced Water Facilities (excluding evaporation facilities) on the TPR Lands for handling Produced Water and the non-exclusive right of ingress and egress within the TPR Lands for the purposes of performing and exercising its rights under the Agreement, in each case pursuant to such leases and easements as are mutually agreed to by TPR and WBSL.

b. Produced Water Sales. Subject to the terms and conditions of the Agreement, TPR granted WBSL the right to market, sell and redeliver Produced Water (including recycled, treated, and raw Produced Water), and to provide the treatment and delivery services required in connection therewith, for use in oil and gas drilling and completion operations within the TPR Lands.

c. Reciprocity. Subject to the terms and conditions of the Agreement, DBR and DB Ranches granted unto TPR the option to exercise the same rights and enjoy the same benefits with respect to the DBR Lands as have been granted and otherwise made available to WBSL, financial and otherwise, with respect to the TPR Lands.

3. Covenant Running with the Land. The Parties agree that the Agreement, and the rights granted thereunder and obligations contained therein (including payment obligations), shall be covenants running with the TPR Lands and DBR Lands and shall be binding upon and inure to the benefit of each of the Parties and their respective successors and permitted assigns. Any sale, conveyance, grant, transfer, assignment or other disposition of all or any portion of the TPR Lands and the DBR Lands shall be made expressly subject to the Agreement, and the Agreement or the applicable portion hereof shall be assumed by the purchaser or assignee.

4. Certain Definitions.

“Produced Water” means any produced water, flowback water, brine water, saltwater, associated incidental hydrocarbons, trace amounts of oil industry chemicals or various trace solids, and any other water borne liquid substances each generated in connection with drilling for and producing hydrocarbons. Produced Water does not include Produced Water blended with fresh or brackish water.

“Produced Water Facilities” means facilities, infrastructure and equipment used for storage, transportation, recycling, treating, reuse, sale, and/or disposal (including by injection, evaporation or treatment) of Produced Water, including pipelines, commercial SWD Wells and related infrastructure.

5. No Amendment to Agreement. This Memorandum is executed and recorded solely for the purpose of giving notice and shall not amend nor modify the Agreement or any other agreement entered into by the Parties in connection with the Agreement in any way. Notwithstanding anything herein to the contrary, in the event of a conflict between the provisions of the Agreement and this Memorandum, the provisions of the Agreement shall control in all respects.

6. Execution in Counterparts; Amendment. This Memorandum may be executed in counterparts, including by electronic transmission, each of which so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. The terms of this Memorandum may only be modified or amended by an instrument in writing, fully executed by the Parties.

[Signature Page Follows]

 

2

IN WITNESS WHEREOF, intending to be legally bound, the Parties have executed this Memorandum as of the date first written above.

WaterBridge Stateline LLC,

a Delaware limited liability company

 

By:
Name: Harrison Bolling
Title: SVP and General Counsel

 

STATE OF TEXAS		§
		§
COUNTY OF HARRIS		§

This document was acknowledged before me on _________________________, 2022, by Harrison Bolling, SVP and General Counsel of WaterBridge Stateline LLC, a Delaware limited liability company, on behalf of said company.

 

				Notary Public
My commission expires:
				Notary’s Printed Name

[Signature Page to Memorandum of Produced Water Facilities and Access Agreement]

Texas Pacific Resources LLC,

a Texas limited liability company

 

By:

Name:

Title:

 

STATE OF TEXAS		§
		§
COUNTY OF		§

This document was acknowledged before me on [____], 2022, by [________], [________] of Texas Pacific Resources LLC, a Texas limited liability company, on behalf of said company.

 

				Notary Public
My commission expires:
				Notary’s Printed Name

[Signature Page to Memorandum of Produced Water Facilities and Access Agreement]

DBR LAND LLC,

a Delaware limited liability company

 

By:
Name: Harrison Bolling
Title: SVP and General Counsel

 

STATE OF TEXAS		§
		§
COUNTY OF HARRIS		§

This document was acknowledged before me on _________________________, 2022, by Harrison Bolling, SVP and General Counsel of DBR Land LLC, a Delaware limited liability company, on behalf of said company.

 

				Notary Public
My commission expires:
				Notary’s Printed Name

[Signature Page to Memorandum of Produced Water Facilities and Access Agreement]

DELAWARE BASIN RANCHES INC.,

a Texas corporation

 

By:
Name: Harrison Bolling
Title: SVP and General Counsel

 

STATE OF TEXAS		§
		§
COUNTY OF HARRIS		§

This document was acknowledged before me on _________________________, 2022, by Harrison Bolling, SVP and General Counsel of Delaware Basin Ranches Inc., a Texas corporation, on behalf of said corporation.

 

				Notary Public
My commission expires:
				Notary’s Printed Name

[Signature Page to Memorandum of Produced Water Facilities and Access Agreement]

SCHEDULE 1

DBR LANDS; TPR LANDS¹

 

 

1

Only the TPR Lands within the AMI Lands are considered “TPR Lands” for purposes of this Agreement. All TPR Lands within the AMI Lands are Checkerboard Lands. All of the “DBR Lands” within the AMI Lands (and only the DBR Lands within the AMI Lands) other than the Contiguous DBR Lands are considered “DBR Checkerboard Lands” for purposes of this Agreement.

SCHEDULE 2

INSURANCE

 

I.	Commercial General Liability Insurance. Occurrence form with minimum limits of liability for bodily injury, death, and property damage of $1,000,000 combined single limit per occurrence, and an aggregate annual minimum limit of $2,000,000. Coverage shall include:

 

a.

Pollution Liability, including cleanup costs;

 

b.

Broad Form Blanket Contractual Liability;

 

c.

Independent Contractors Coverage for work let or sublet, with no exclusions, restrictions or limitations;

 

d.

Premises/Operations;

 

e.

“Action Over/Indemnity Buyback” and deletion of any provisions that limit or exclude coverage of claims made by the insured Party’s employees against the other Party on the basis of their employment relationship; and

 

f.

Products/Completed Operations.

 

II.	Commercial Automobile Liability Insurance. Minimum limits of liability for injury, death or property damage of $1,000,000 combined single limit per occurrence. Coverage shall include:

 

a.

Owned, hired and non-owned vehicles; and

 

b.

The insured Party’s employees as Insureds.

 

III.

Workers’ Compensation and Employer’s Liability Insurance. In accordance with statutory requirements of Texas and complying with federal laws and requirements, with minimum Employer’s Liability limits of $1,000,000 per accident. No substitute policies shall be permitted. At minimum, coverage shall include:

 

a.

Occupational Disease;

 

b.

Voluntary Compensation; and

 

c.

Alternate Employer and Borrowed Servant Endorsements;

 

IV.	Umbrella / Excess Liability Insurance. Umbrella/Excess Liability Insurance with minimum combined single limits of $10,000,000.00. Coverage shall include:

 

a.

Coverage at least as broad and on a following form basis in excess of the underlying minimum coverages required in Sections I-III of this Schedule 2; and

 

b.

Aggregate limits, if any, shall apply separately to each annual policy period.

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND REPLACED WITH “[***]”. SUCH IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE OF INFORMATION THAT THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL.

Exhibit 10.11

PRODUCED WATER FACILITIES AND ACCESS AGREEMENT

EAST RANCHES

This PRODUCED WATER FACILITIES AND ACCESS AGREEMENT (this “Agreement”) is made and entered into as of May 10, 2024 (the “Effective Date”) by and between DBR Land LLC, a Delaware limited liability company (“Company”), and WaterBridge Stateline LLC, a Delaware limited liability company (“Operator”). Company and Operator are sometimes referred to herein each individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein that are not defined in the other provisions of this Agreement have the respective meanings set forth in Article I.

RECITALS:

WHEREAS, Company owns or controls the Lands, and Operator owns and operates the Initial Facilities (as defined herein) on the Lands used in the gathering, transportation, storage, treatment, blending, processing, recycling, evaporation, distribution, and/or disposal of Produced Water (defined herein) and Recycled Water (defined herein); and

WHEREAS, Operator desires to develop, construct, own, and operate Disposal Wells (defined herein) at New Disposal Well Locations (defined herein) and Additional Facilities (defined herein) on the Lands pursuant to this Agreement, including Disposal Facilities (defined herein), Recycling Facilities (defined herein), and associated layflat lines, pipelines, ponds, pumps, risers, roads, electrical facilities, and other related infrastructure and equipment, in each case located or to be located on the Lands (collectively, the “Facilities”).

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

1.1 Definitions. The following capitalized terms have the following respective meanings:

“Additional Facility” has the meaning set forth in Section 2.2(b).

“Affiliate” unless otherwise provided herein, means (a) with respect to Company, only Company and its direct and indirect subsidiaries; and (b) with respect to Operator, only NDB Midstream LLC and its direct and indirect subsidiaries (excluding Company and its direct and indirect subsidiaries); and the term “Affiliated” shall have a correlative meaning.

“Agreement” has the meaning set forth in the preamble.

“Available Capacity” has the meaning set forth in Section 2.1(d).

“Barrel” means forty-two (42) U.S. gallons.

“Commercially Reasonable Terms” has the meaning set forth in Section 2.1(d).

“Company” has the meaning set forth in the preamble.

“Company Default” has the meaning set forth in Section 5.1.

 

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“Confidential Information” means: (a) all information, materials and data provided by one Party or any of its Affiliates (the “Disclosing Party”) to the other Party or any of its Affiliates (the “Receiving Party”) under this Agreement or in connection with performance under this Agreement; and (b) the terms of this Agreement or any other Transaction Document. Confidential Information does not include (i) information that was in or comes into the lawful possession of the Receiving Party without confidentiality restrictions at the time of acquiring such information; (ii) information that is or becomes public knowledge without the fault of the Receiving Party; (iii) information that is or becomes available to the Receiving Party on an unrestricted basis from a source having a right to make such disclosure; or (iv) information that is developed by the Receiving Party independent of Confidential Information received hereunder.

“Dagger Draw Ranch” means the fee and leasehold surface interests and related real property rights in Eddy County, New Mexico as further described on Exhibit A-3 attached hereto.

“Disclosure Recipients” means, with respect to any Receiving Party, such Party’s Affiliates, directors, officers, employees, representatives, agents, investors, lenders, accountants, attorneys or other financial or professional advisors, in each case that receive Confidential Information of the Disclosing Party.

“Disposal Facilities” means any facilities and equipment intended to transport, store, process, treat, separate, evaporate and/or dispose of Produced Water, in each case, for the ultimate disposal thereof, including those certain Disposal Wells that are included in the Initial Facilities and other subsequent Disposal Wells, as well as all evaporation facilities, ponds, pipelines and related infrastructure, as applicable.

“Disposal Well” means a Produced Water injection well and its related facilities and equipment operated by Operator or its Affiliates (or its or their respective successors and permitted assigns) that is permitted by the Railroad Commission of Texas, the New Mexico Oil & Gas Conservation Division, or other applicable Governmental Authority and used to inject Produced Water only into and stored in non-commercial hydrocarbon productive zones or intervals underlying the Lands, but only to the extent that such well has a surface location within the Lands. For the avoidance of doubt, Disposal Wells shall not be used to, and shall not include any wells or related facilities and equipment used to, inject and/or store any non-hydrocarbon gases (including carbon dioxide) or non-oilfield liquid wastes into or beneath the Lands.

“Due Date” has the meaning set forth in Section 2.7(b).

“Easement” has the meaning set forth in Section 2.3(a).

“East Stateline Ranch” means the fee surface interests and related real property rights in Loving and Winkler County, Texas and Lea County, New Mexico, as further described on Exhibit A-1 attached hereto.

“Environmental Laws” means any applicable Law that pertains to (a) pollution or pollution control, (b) the protection of the environment (including natural resources and threatened or endangered species) or relating to public or worker health or safety, or (c) the management, transportation, or disposal of Hazardous Materials and the remediation of contamination in connection with the operations under any Lease or Easement, including the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C. §§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq., the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act, 16 U.S.C. §

 

2

1531 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., Clean Water Act, 33 U.S.C. §§ 1251 et seq., Rivers and Harbors Act, 33 U.S.C. §§ 401 and 40, National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq., Fish & Wildlife Coordination Act, 16 U.S.C. §§ 661 et seq., Resource Conservation & Recovery Act, 42 U.S.C. §§ 6901 et seq., each as amended, and the regulations and orders promulgated by a Governmental Authority thereunder.

“Event of Bankruptcy” means, with respect to any Party, any of the following: (a) making a general assignment for the benefit of creditors; (b) filing a voluntary petition in bankruptcy; (c) filing a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law; (d) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets under any bankruptcy, insolvency or other similar law; or (e) (i) the passage of one hundred twenty (120) days after the commencement of any involuntary proceeding against such Party, seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law, if the proceeding has not been dismissed, (ii) the passage of ninety (90) days after the appointment without its consent or acquiescence of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets, if the appointment is not vacated or stayed, or (iii) the passage of ninety (90) days after the expiration of any such stay, if the appointment is not vacated.

“Existing Commitment” has the meaning set forth in Section 8.15(b).

“Facilities” has the meaning set forth in the Recitals. For the avoidance of doubt, “Facilities” includes the Facilities existing as of the Effective Date and any other Facilities constructed or acquired by Operator after the Effective Date, in each case that are directly or indirectly owned and/or operated by Operator or its Affiliates (or its or their respective successors or permitted assigns).

“Fee” means, collectively, the Produced Water Fee, the Recycled Water Fee, and the Skim Oil Fee.

“Fresh Water” means groundwater that may be produced from any subsurface water-bearing formation or aquifer that may be used in oil and gas operations or for some other beneficial purpose, but excluding Produced Water and Recycled Water.

“Governmental Authority” means (a) any federal, state, local, municipal, tribal or other government, (b) any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or other taxing power, and (c) any court or governmental tribunal.

“Hazardous Material” means any substance regulated or that may form the basis of liability under any Environmental Law, including any substance regulated as “hazardous,” “toxic,” a “pollutant,” a “contaminant,” a “waste,” or words of similar meaning and regulatory effect.

“Initial Facilities” means the Disposal Facilities and Recycling Facilities existing on the Lands as of the Effective Date and described on Exhibit B-1 hereto.

“Initial Term” has the meaning set forth in Section 4.1.

“Invoice” has the meaning set forth in Section 2.7(a).

“Lands” means, collectively, East Stateline Ranch, Northeast Ranch, Dagger Draw Ranch and any other fee or leasehold surface interests acquired by Company or its Affiliates following the Effective Date and added to this Agreement pursuant to Section 2.1(f).

 

3

“Law” means any applicable statute, law (including common law and Environmental Laws), rule, regulation, requirement, ordinance, order, code, ruling, writ, injunction, decree, or other official act of or by any Governmental Authority.

“Lease” has the meaning set forth in Section 2.3(a).

“Legacy Agreements” has the meaning set forth in Section 2.8.

“Memorandum” has the meaning set forth in Section 8.16.

“Meters” has the meaning set forth in Section 2.6(a).

“Minimum Off Ranch Recycled Water Fee” has the meaning set forth in Section 2.4(b)(iii).

“New Disposal Well Location” means each of the locations set forth on Exhibit B-2, as may be adjusted in accordance with Section 2.11; provided that after the [***] anniversary of the Effective Date, no location shall be deemed to be a New Disposal Well Location for purposes of this Agreement.

“Northeast Ranch” means the fee and leasehold surface interests and related real property rights in Andrews County, Texas and Lea County, New Mexico as further described on Exhibit A-2 attached hereto.

“Off Ranch Recycled Water Fee” has the meaning set forth in Section 2.4(b)(iii).

“On-Ranch Water” means Produced Water produced from a surface hole located on East Stateline Ranch.

“Operator” has the meaning set forth in the preamble.

“Operator Default” has the meaning set forth in Section 5.3.

“Opex Credit” has the meaning set forth in Section 2.4(b)(iii).

“Other Lands” means other lands owned or leased by Company or its applicable Affiliate during the Term for which Operator or its applicable Affiliate has the right to transport and/or dispose of Produced Water or transport Recycled Water and for which Company or its applicable Affiliate receives a fee, including pursuant to that certain Water Facility and Access Agreement North Ranch dated October 15, 2021 among Operator, Company and Delaware Basin Ranches Inc., and excluding, for the avoidance of doubt, the Lands.

“Overdue Rate” means the lesser of 1% per month and the maximum rate permitted by Law.

“Party” and “Parties” have the meanings set forth in the preamble.

“Permit” means a permit to construct and operate a Disposal Facility (including a Disposal Well), Recycling Facility, or other pond that is validly issued and approved by the Railroad Commission of Texas, the Oil Conservation Division of the New Mexico State Land Office, or other Governmental Authority having jurisdiction.

“Person” means an individual, a partnership (general, limited or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other entity or organization, or a Governmental Authority.

 

4

“Produced Water” means any produced water, flowback water, brine water, saltwater, associated incidental hydrocarbons, trace amounts of oil industry chemicals or various trace solids, and any other water borne liquid substances generated as waste in connection with drilling for and producing hydrocarbons, but excluding Fresh Water and Recycled Water.

“Produced Water AOI” means East Stateline Ranch and the other surface lands located within the area of interest designated on Exhibit D attached hereto, in each case as further described on such Exhibit D.

“Produced Water Credit” has the meaning set forth in Section 2.12(c).

“Produced Water Fee” has the meaning set forth in Section 2.4(b)(i).

“Project Limitation” has the meaning set forth in Section 2.2(c).

“Project Proposal” has the meaning set forth in Section 2.2(b).

“Qualified Midstream Operator” means, with respect to any Person, that such Person, together with its Affiliates, has the requisite experience and capabilities to manage and operate the acquired assets and business of Operator as reasonably determined by Company; provided that a Person will be deemed to be a Qualified Midstream Operator if (a) a majority of the individual members of the executive management team (including Senior Vice Presidents and above) operating the business of Operator as of immediately prior to the consummation of the applicable transaction (including pursuant to any services or similar agreement) will continue to operate the assets acquired from Operator immediately following the consummation of the applicable transaction (including pursuant to any services or similar agreement) or (b) such Person (1) is a midstream water services provider and a material part of such Person’s current operations involve operating assets that are similar to those of Operator, (2) has never filed a voluntary bankruptcy proceeding or been declared bankrupt involuntarily, and (3) has not been denied or prohibited by any Governmental Authority from holding any material permits, licenses or approvals necessary to operate such Person’s midstream water assets, in each case, as a result of the quality of such Person’s past operations or such Person’s prior failures to materially comply with material permits, licenses or approvals, or otherwise had any such material permits, licenses or approvals rescinded or revoked by any Governmental Authority due to a material violation thereof.

“Qualifying Opportunity” has the meaning set forth in Section 2.2(d).

“Recycled Water” means Produced Water that is treated or blended using Recycling Facilities and sold and provided to customers for use or reuse in oil and gas drilling, exploration, and completion operations, it being agreed that Recycled Water that is used in drilling or completions operations for oil and gas wells shall cease to be Recycled Water hereunder and shall be deemed to be Produced Water if and when subsequently produced from such wells. For the avoidance of doubt, Recycled Water does not include untreated Produced Water that is delivered to or redelivered from a Disposal Facility.

“Recycled Water Fee” has the meaning set forth in Section 2.4(b)(ii).

“Recycling Facilities” means any facilities and equipment intended to transport, store and/or treat Produced Water (and/or blend Produced Water with Fresh Water) for the purpose of making such Produced Water or blended water available to customers for use or reuse in oil and gas drilling, exploration, and completion operations, including ponds, pipelines, aeration and/or chemical treating facilities and related infrastructure, as applicable, but excluding Disposal Facilities.

“Renewal Term” has the meaning set forth in Section 4.1.

 

5

“Representing Party” has the meaning set forth in Section 3.1.

“Skim Oil” means oil, condensate and other liquid hydrocarbons recovered from Produced Water.

“Skim Oil Fee” has the meaning set forth in Section 2.4(b)(iv).

“Surface Damages” means the surface damages and corresponding rates described on Schedule 2.4; provided that such rates may be escalated in accordance with Section 2.4.

“Term” has the meaning set forth in Section 4.1.

“Third Party” means any Person that is not a Party or an Affiliate of a Party to this Agreement.

“Transaction Documents” means this Agreement, together with any Lease and any Easement delivered pursuant to this Agreement, in each case that is executed and delivered by the Parties in accordance with this Agreement.

1.2 Construction. Unless the context otherwise requires: a term has the meaning assigned to it; “or” is not exclusive; words in the singular include the plural, and words in the plural include the singular; provisions apply to successive events and transactions; the words “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; all references herein to Articles, Sections, paragraphs, subparagraphs and clauses shall be deemed to be references to Articles, Sections, paragraphs, subparagraphs and clauses of this Agreement unless the context shall otherwise require; the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”; references to “$” or “dollars” shall mean United States dollars; unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement, instrument or statute that is referred to herein means such agreement, instrument or statute as from time to time amended, restated, waived or otherwise modified or supplemented, including (i) in the case of agreements or instruments and references to all attachments thereto and instruments incorporated therein, by waiver or consent, and (ii) in the case of statutes, by succession of comparable successor statutes.

ARTICLE II

FACILITIES; LEASES AND EASEMENTS

Section 2.1 Grant of Rights.

a. Exclusive Rights on East Stateline Ranch. Subject to the terms and conditions set forth in this Agreement (including Section 2.1(d)) and the Transaction Documents, Company hereby grants to Operator the exclusive right to (i) own, operate, and maintain the Initial Facilities and (ii) gather, transport, dispose of or recycle On-Ranch Water (to the extent that any such gathering, transportation, disposal or recycling of On-Ranch Water requires additional rights granted by Company or its applicable Affiliate).

b. Non-Exclusive Right to Develop Facilities on the Lands. Subject to the terms and conditions set forth in this Agreement and the Transaction Documents, and in addition to and without limiting the exclusive rights set forth in Section 2.1(a), Company hereby grants to Operator the non-exclusive right to: (i) acquire, construct, develop, install, integrate, own, operate, upgrade, and maintain Disposal Facilities, Recycling Facilities, or other Facilities developed by Operator on the Lands (including at any New Disposal Well Locations), and (ii) market and utilize all such Facilities to gather, transport, treat, process, blend, store, recycle, distribute, exchange, transfer, sell, and/or dispose of Produced Water

 

6

and Recycled Water (including the delivery or redelivery of untreated Produced Water to any Person), and conduct such other activities as are mutually agreed to by the Parties, as applicable, in each case pursuant to this Agreement and such Leases and Easements as are mutually agreed to by the Parties in accordance with Section 2.3. Notwithstanding the foregoing or anything to the contrary herein, as between Company and Operator, Operator shall have the exclusive use of all Facilities constructed, developed, owned, operated and maintained in accordance with the terms and conditions of the applicable Lease or Easement.

c. Non-Exclusive Access Right. Subject to the terms and conditions set forth in this Agreement and payment of the applicable Surface Damages, Company hereby grants to Operator the non-exclusive right to use the existing roads located on the Lands, at no additional cost except for the obligation to maintain pursuant to the next succeeding sentence, in connection with the construction, development, operation, maintenance, relocation, and/or removal of the Facilities. Operator shall (i) comply with any reasonable rules and regulations of Company provided in writing to Operator in connection with the exercise of such access rights and (ii) maintain all existing roads utilized by Operator in reasonably good repair; provided that to the extent maintenance of such existing road is required and responsibility for damages cannot be definitively determined, responsibility for such maintenance shall be apportioned appropriately between Operator and such other operators or persons that utilize such road, based upon their proportionate use of such road as determined by Company in its reasonable discretion. To the extent Operator desires to construct new roads to access the Facilities following the Effective Date, Operator shall submit a Project Proposal for such new road in accordance with the terms and conditions of Section 2.2, and if such new road is approved and constructed, such new road(s) shall be subject to the above requirements.

d. Release from Exclusivity; Credit. Operator’s rights set forth in Section 2.1(a) with respect to the transportation and disposal of On-Ranch Water shall not apply to the transportation or disposal of any volume of On-Ranch Water that Operator cannot, or elects not to, transport and/or dispose of on Commercially Reasonable Terms or for which Operator does not have Available Capacity. With respect to any such volume of On Ranch Water released from exclusivity pursuant to the prior sentence, Company may permit or consent to (in each case, including the granting of reasonable associated incremental surface rights) the affected volumes of On-Ranch Water being transported off of East Stateline Ranch for disposal by a Third Party; provided that in no event shall Company permit any Third Party to transport such On-Ranch Water for a royalty, throughput or usage fee and surface damages that are less than the Produced Water Fee and Surface Damages fees in effect at such time with respect to Operator; provided further that, with respect to On-Ranch Volumes released from exclusivity hereunder by Operator due to a lack of Available Capacity, Operator shall be entitled to receive a credit against any other amounts owed by Operator to Company under this Agreement equal to [***] for each Barrel of such On-Ranch Water taken or received by such Third Party (the “Produced Water Credit”). For the avoidance of doubt, and notwithstanding the foregoing or anything to the contrary herein, Operator shall not be entitled to receive the Produced Water Credit to the extent Operator has or can obtain Available Capacity and nonetheless fails or declines to accept such On-Ranch Water volumes. For the further avoidance of doubt, the rejection by a Third Party of an offer by Operator to provide transportation and/or disposal services hereunder with respect to any volume of On-Ranch Water on Commercially Reasonable Terms shall not release such volume from Operator’s rights in Section 2.1(a). Except with respect to On-Ranch Water volumes released pursuant to this Section 2.1(d), neither Company nor any of its Affiliates shall grant any rights to any Third Party, or otherwise take any action to permit any Third Party, to transport or dispose of any On-Ranch Water volumes, including by waiver or consent under or amendment of any agreement. Company shall: (i) promptly notify Operator in writing of any such agreements with Third Parties; (ii) require such Third Party to accurately meter such On-Ranch Water volumes; and (iii) notify Operator in writing of any Produced Water Credits that have accrued as of the end of any given month within five (5) business days of the end of such month. Notwithstanding anything to the contrary herein, the Produced Water Credit shall not apply in respect of the exercise of any rights (and the transportation of corresponding volumes of Produced Water) by any Third Party to the extent such rights exist as of the Effective Date.

 

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Terms offered or proposed by Operator shall be deemed to be “Commercially Reasonable Terms” if they are commercially reasonable rates and terms at the time (taking into account then-prevailing market rates and terms for the transportation and disposal of Produced Water on East Stateline Ranch, available supply of, and demand for, disposal capacity in the relevant area, and all other relevant factors, including operating expenses, construction expenses for additional Facilities and drilling and completion expenses for additional Disposal Wells, royalties, throughput fees and surface damages payable to Company or its Affiliates and Third Parties, if any). Operator shall be deemed to have “Available Capacity” with respect to any On-Ranch Water volumes if Operator has, or could obtain on a commercially reasonable basis (taking into account then-prevailing market rates for transportation and disposal services and the capital expenses required to accommodate such Produced Water volumes, including drilling and completion expenses for additional Disposal Wells on the Lands to the extent Operator or its applicable Affiliate holds a valid Permit for such Disposal Wells), sufficient transportation and/or disposal capacity on East Stateline Ranch or other lands owned or leased by Company or its Affiliates to service such On-Ranch Water volumes.

e. Third Party Operations. During the Term, other than as expressly permitted by Section 2.1(d), Company shall: (i) not amend any existing agreement, enter into any new agreement, grant any right, or otherwise permit any Person (other than Operator) to develop, construct and/or operate disposal wells and/or Recycling Facilities on the Lands, except to the extent (A) any such disposal well is located at least one (1) mile from any then-existing Disposal Well, any New Disposal Well Location, the location of a Disposal Well that is otherwise permitted by Operator, and/or any Third Party disposal well and (B) any such disposal well is utilized solely for the disposal of Produced Water that is not On-Ranch Water; (ii) to the extent any agreement exists as of the Effective Date that either grants a Third Party the right to gather, transport, dispose of or recycle On-Ranch Water or prevents the delivery of On-Ranch Water to Operator, give timely notice to terminate any such agreement prior to the commencement of any “evergreen” or “renewal” term; and (iii) to the extent any agreement exists as of the Effective Date that either grants a Third Party the right to gather, transport, dispose of or recycle On-Ranch Water or prevents the delivery of On-Ranch Water to Operator, exercise any option or right it has under such agreement to terminate the same without additional cost to Company (other than any cost for which Operator agrees to reimburse Company), it being understood that Company shall exercise any such option or right at the earliest possible time. For the avoidance of doubt, nothing in this Agreement shall prevent Company from granting any other Person the right to permit, drill, and operate disposal wells or Produced Water pipelines on the Lands other than East Stateline Ranch except as expressly set forth in this Section 2.1(d). The Parties agree that the covenant and agreement in this Section 2.1(d): (1) is a covenant attached to, concerning, and running with the Lands and binding on the Parties’ successors and permitted assigns; (2) benefits, burdens and otherwise affects the Lands in place, even as the same remain undisturbed; and (3) are being made contemporaneously with the grant of property rights from Company to Operator pursuant to this Agreement, with the grant, delivery, and performance of such property rights being a material inducement to the Parties’ entry into this Agreement, without which the Parties would not have entered into this Agreement.

f. Additional Lands. Company and Operator agree that all fee or leasehold surface interests located in the area of mutual interest described on Exhibit C that are acquired by Company or any of its Affiliates after the Effective Date shall automatically become part of and subject to the terms and conditions of this Agreement and be included as part of the Lands hereunder. Company shall promptly notify Operator of such acquisition and deliver to Operator a map and legal description of the acquired interests. The Parties shall execute and file a Memorandum or amendment thereto pursuant to Section 8.16 with respect to such newly acquired interests.

g. Reservations. Notwithstanding anything herein to the contrary, (i) the rights granted to Operator under this Agreement are subject to the terms of all existing oil, gas and mineral leases and all existing easements, rights-of-way, surface use agreements and other agreements or interests covering or affecting the Lands, in each case, that are filed of public record or disclosed to Operator in writing as of the Effective Date, and (ii) Company may amend such existing agreements and enter into agreements with and grant rights to any other Persons without Operator’s prior written consent, except to the extent the same are in contravention of Operator’s rights under Section 2.1(a), (b), (c), (d) or (e) or Section 2.11 or unreasonably interfere, as reasonably determined by Operator, with then-existing Facilities, any New Disposal Well Locations, or any other rights set forth in this Agreement.

 

8

Section 2.2 Operator Facilities and Project Proposals.

a. Initial Facilities. As of the Effective Date, Company hereby acknowledges, accepts and consents to each of the Initial Facilities identified on Exhibit B-1. The Parties hereby agree to promptly enter into Leases and Easements with respect to each of the Initial Facilities.

b. Additional Facilities. From time to time during the Term, Operator may propose that additional Facilities be constructed, owned, and operated by Operator on the Lands, including (i) additional layflat lines, pipelines, roads, electrical facilities, and other related infrastructure and equipment reasonably necessary or convenient in connection with the operation of the Initial Facilities and (ii) other Disposal Facilities, Recycling Facilities, Produced Water and Recycled Water pipelines and other Facilities (each, an “Additional Facility” and each such proposal, a “Project Proposal”). Each Project Proposal shall be submitted to Company in writing and include (x) a reasonably detailed description of the proposed Additional Facilities, (y) the portions of the Lands on which the Additional Facilities are proposed to be located, including a survey of such lands prepared by Operator and (z) such other information related to such Additional Facilities that is reasonably requested by Company. Subject to Section 2.2(c), Company shall accept and consent in writing (email being sufficient) to each Project Proposal for an Additional Facility described in clause (i) or (ii) above within fifteen (15) days from the date of receipt of the Project Proposal. Subject to Section 2.2(c), if Company does not timely accept and consent to a Project Proposal, Company shall be deemed to have accepted and consented to such Project Proposal. Operator shall promptly notify Company in writing (email being sufficient) of any expected material changes, alterations or amendments to the applicable Additional Facilities throughout the course of the development of such Additional Facilities; provided that, for the avoidance of doubt, any material change to the location, scope or purpose of an Additional Facility shall require the prior written consent of Company, which consent shall not be unreasonably withheld, conditioned or delayed.

c. Project Limitations. If Company determines in good faith that a Project Proposal conflicts with any then-existing use or business operations conducted by Company or Third Parties on the Lands, including then-existing oil and gas operations, Produced Water and/or Recycled Water operations (each, a “Project Limitation”), Company shall notify Operator in writing of such determination and the basis therefor within fifteen (15) days from the date of receipt of the Project Proposal, and the Parties shall negotiate in good faith for not less than thirty (30) days to amend the Project Proposal; provided that any Project Proposal to locate a Disposal Well within one (1) mile of any other existing Disposal Well, existing Third Party disposal well, or Permit operated or held by Operator or any other Person shall in each case be deemed to conflict with then-existing Produced Water operations and, following Company’s notice to Operator of the Project Limitation, Company shall have no further obligations to consider or negotiate such Project Proposal with Operator. If the Parties are unable to mutually agree on a revised Project Proposal within such thirty (30)-day period, then Operator shall not pursue such Additional Facility. For the avoidance of doubt, if Company does not provide written notice of any objection to a Project Proposal that is subject to a Project Limitation within fifteen (15) days from the date of receipt of the Project Proposal, Company shall be deemed to have accepted and consented to such Project Proposal for all purposes to the extent that Company is not expressly prohibited from doing so by a valid existing instrument to which Company is a party.

d. Qualifying Opportunity. Upon Company’s acceptance and consent to, or deemed consent to, a Project Proposal in accordance with this Section 2.2, the applicable Additional Facility shall be deemed a “Qualifying Opportunity.”

 

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e. Cooperation. During the Term, Company shall cooperate as reasonably requested by Operator to identify mutually acceptable locations on the Lands for Additional Facilities and associated infrastructure that would not be subject to a Project Limitation, including allowing Operator to permit and stake potential Additional Facility locations on the Lands.

Section 2.3 Leases and Easements.

a. For each of the Initial Facilities, Company and Operator shall use commercially reasonable efforts to promptly execute and deliver, as applicable, such (i) surface use agreements substantially in the form of Schedule I hereto (each, a “Lease”) and/or (ii) easements substantially in the form of Schedule II hereto (each, an “Easement”), which shall cover the applicable portion(s) of the Lands, in each case, as are necessary or convenient in connection with such Initial Facilities, with such modifications to each such Lease and/or Easement forms as may be necessary to incorporate the specific terms of the applicable Initial Facility.

b. For each Qualifying Opportunity, Company and Operator or their applicable Affiliates shall, within thirty (30) days of Company’s acceptance (or deemed acceptance) of any Qualifying Opportunity, execute and deliver, as applicable, such Leases and/or Easements covering the applicable portion(s) of the Lands, in each case, as are necessary or convenient in connection with such Qualifying Opportunity, with such modifications to each such Lease and/or Easement forms as may be necessary to incorporate the specific terms of the applicable Qualifying Opportunity.

Section 2.4 Surface Damages; Fees.

a. Operator shall pay to Company the applicable Surface Damages for the applicable Facilities constructed and/or utilized by Operator pursuant to this Agreement. For the avoidance of doubt, Operator shall not owe any Surface Damages with respect to the Initial Facilities as the same exist on the Effective Date, but shall owe any applicable Surface Damages with respect to the Initial Facilities to the extent the same arise after the Effective Date. Not later than December 31 of each year, Company shall determine, in its reasonable discretion and with reference to market-based surface damages in the approximate vicinity of the applicable Facilities, the applicable Surface Damages for all Leases and Easements that are executed in the immediately succeeding calendar year, and shall provide not to Operator thereof along with reasonable supporting documentation; provided that if Company or its applicable Affiliate has received surface damages from one or more Third Parties in the approximate vicinity of the applicable Facilities within the prior twelve (12) months, the adjusted Surface Damages shall not exceed the highest surface damages paid to Company or its applicable Affiliate by a Third Party in the approximate vicinity of the applicable Facilities within the prior twelve (12) months. If Company does not make this determination and provide notice and the required documentation to Operator thereof in accordance with this Section 2.4(a), the then-current Surface Damages shall continue in effect. Other than any Surface Damages as determined in accordance with this Section 2.4(a) and the fees set forth in Section 2.4(b), Operator will not be obligated to pay any royalties, throughputs, or other fees with respect to Operator’s use of or access to the Lands in accordance with this Agreement.

b. Operator shall pay to Company (without duplication) the following fees:

 

i.

[***] for each Barrel of Produced Water that is either gathered or transported by Operator onto the Lands or initially received by Operator into its Disposal Facilities or Recycling Facilities on the Lands (“Produced Water Fee”), without duplication of any volumes;

 

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ii.

[***] for each Barrel of Recycled Water that Operator sells from a Recycling Facility for use on the Lands (“Recycled Water Fee”);

 

iii.

[***] of the gross proceeds Operator receives for each Barrel of Recycled Water that Operator sells from a Recycling Facility for use off of the Lands (“Off Ranch Recycled Water Fee”), net of [***] per Barrel for Operator’s operating expenses for redelivery, recycling and treatment of such Recycled Water (“Opex Credit”); provided that in no event shall the Off Ranch Recycled Water Fee be less than [***] per Barrel of Recycled Water (“Minimum Off Ranch Recycled Water Fee”); and

 

iv.

[***] of the proceeds received by Operator from the sale of Skim Oil recovered from Operator’s Facilities on the Lands, net of royalty or other payments owed to Third Parties with respect to the sale of such Skim Oil (“Skim Oil Fee”).

c. Notwithstanding anything to the contrary herein, with respect to any Produced Water volumes or Recycled Water volumes that are transported across or enter the Lands more than once, Operator shall incur the applicable Fee set forth in Section 2.4(b) with respect to the first instance that such volumes enter the Lands, and shall not incur an additional Fee with respect to subsequent crossings for such volumes.

d. Notwithstanding anything to the contrary herein, with respect to any Produced Water volumes or Recycled Water volumes that are transported across or enter the Lands and subsequently enter or cross Other Lands, Operator shall incur the applicable fee with respect to the first instance that such volumes enter the Lands or Other Lands, as applicable, and shall not incur an additional fee with respect to subsequent crossings of the Lands or Other Lands, as applicable, for such volumes.

e. To the extent that Operator is required to pay a fee or royalty to a Third Party with respect to Disposal Wells or Recycling Facilities located on Lands leased from such Third Party by Company, the applicable Fee payable to Company with respect to any such Produced Water or Recycled Water volumes shall be reduced, on a dollar for dollar basis, by the amount of such Third Party fees or royalties.

Section 2.5 Escalation. Beginning on [***], and annually on January 1 of each subsequent calendar year, the Produced Water Fee, Recycled Water Fee, Minimum Off Ranch Recycled Water Fee, Opex Credit, and Produced Water Credit shall automatically increase by the lesser of (i) [***] and (ii) the amount of any upward percentage change between January 1 and December 31 of the immediately preceding year, in the Consumer Price Index for All Urban Consumers or its most comparable successor, as published by the Department of Labor or its most comparable successor.

Section 2.6 Meters. Operator, at its sole cost, risk, and expense, shall provide, operate and maintain properly calibrated flow meters (the “Meters”) at each (i) Disposal Facility owned by Operator on the Lands, (ii) receipt point at which one of Operator’s Produced Water pipelines brings Produced Water onto the Lands, (iii) receipt point on the Lands at which Produced Water originally produced on the Lands enters Operator’s Disposal Facilities, (iv) receipt point on Operator’s Recycling Facilities at which Produced Water is treated and becomes Recycled Water, and (v) any other necessary locations on the Facilities, all to the extent necessary to calculate the amounts owed by Operator pursuant to Section 2.4 and in compliance with all Laws; provided that so long as the volumes flowing through any point described in clauses (ii) or (iii) of this Section 2.6(a) flow exclusively to and through another point at which a Meter is located, Operator will not be required to set a Meter at the applicable point described in clause (ii) or (iii) of this Section 2.6(a).

 

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Section 2.7 Payment.

a. No later than the thirtieth (30th) day following the end of each month during the Term: Operator shall deliver to Company an invoice (“Invoice”) setting forth (a) the Produced Water volumes, Recycled Water volumes and Skim Oil sales for which the Operator owes a payment to Company pursuant to Section 2.4(b) for such subject month, expressed in Barrels and calculated as provided for in Section 2.4(b)(i)-(iv), as applicable, (b) payments owed by Operator for any Surface Damages (to the extent not previously paid), in each case, as set forth in the applicable Lease or Easement for the subject month, and

(c) all Produced Water Credits applied for the subject month, if applicable. b. Operator shall pay in full any undisputed amounts due as reflected on the applicable Invoice by check or ACH transfer to Company’s designated bank account on or prior to the date that is sixty (60) days following the end of the month with respect to which such amounts are owed (the “Due Date”). If any undisputed amount due hereunder remains unpaid for sixty (60) days after the Due Date for such statement, interest on such amounts will accrue at the Overdue Rate from the Due Date through and including the date the owing Party actually makes payment.

d. In the event Company disputes in good faith all or any portion of an Invoice, then the undisputed portion, if any, shall be due and payable in accordance with Section 2.7(b). In the event that the dispute is resolved in favor of Company, then Operator shall promptly pay the disputed amount plus interest at the Overdue Rate from the date the disputed payment was originally due pursuant to Section 2.7(b) through, and including, the date paid.

e. Audit. At any time on no less than thirty (30) days’ notice (but no more frequently than once in any twelve (12)-month period), either Party may, at the sole cost and expense of the requesting Party, conduct an audit of the other Party’s accounts, invoices and other documents related to the Lands and operations pursuant to this Agreement, including records of Produced Water and Recycled Water volumes sourced, disposed of, transported or recycled on the Lands. Such examination shall use electronic records or, solely to the extent original documents are required, take place in the office location where such books and records are kept in the normal course of business; provided that no examination may unreasonably interfere in the ongoing job responsibilities of the personnel of any Party. In the event the Parties mutually determine there was an Operator overpayment, Operator shall be due credit by Company for the amount of such overpayment on the next succeeding statement following such determination. In the event the Parties mutually determine there was an Operator underpayment, such amount shall be immediately due and payable, and Operator shall pay Company within thirty (30) days of such determination.

Section 2.8 Legacy Agreements. Company (or its applicable predecessor) and Operator are parties to certain existing easements, leases and other agreements burdening and/or covering the Lands as of the Effective Date, and, following the Effective Date, Operator may in the future acquire from a Third Party additional easements, leases or other agreements burdening and/or covering the Lands between Company (or its applicable Affiliate) and such Third Party, subject in each case to Sections 2.1(d) and 2.1(f) (all such agreements, collectively, the “Legacy Agreements”). The Parties agree (a) that the Legacy Agreements as of the Effective Date are as set forth on Exhibit E hereto and (b) that either Party may update Exhibit E from time-to-time without the requirement of a formal amendment pursuant to Section 8.3 in order to reflect any additional Legacy Agreements acquired by Operator following the Effective Date. Notwithstanding anything to the contrary set forth in this Agreement, no provision of this Agreement shall be construed so as to negate, modify or affect in any way the provisions of the Legacy Agreements. In the event of any inconsistency between this Agreement and any Legacy Agreement, or with respect to any matter that is addressed in this Agreement and any Legacy Agreement, the terms, provisions and intent of the applicable Legacy Agreement shall govern and control. Notwithstanding anything to the contrary set forth in Section 2.4(b), in no event shall Operator be required to pay a Fee or any other fee under this Agreement for any Barrel of Produced Water that is transported by Operator onto or off of the Lands pursuant to a Legacy Agreement, except to the extent that any such Produced Water is received by Operator into the Initial Facilities or any other Facilities on the Lands that were constructed under this Agreement pursuant to an Easement or Lease.

 

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Section 2.9 Waiver of Rights. Notwithstanding anything herein to the contrary and subject to the opportunity to cure provided herein, Operator shall not have any rights under this Article II with respect to a particular Qualifying Opportunity if, at the time of execution of a Lease or Easement for such Qualifying Opportunity, as applicable, (i) the applicable representations and warranties of Operator in Article III are not true and correct in all material respects or (ii) if there exists an uncured Operator Default.

Section 2.10 Taxes. During the Term of this Agreement, Company shall be responsible for paying all ad valorem taxes assessed on the Lands. Operator shall pay any personal property taxes assessed specifically against the Facilities during the Term.

Section 2.11 Exclusive Right to Develop Certain Disposal Wells.

a. Subject to the terms and conditions set forth in this Agreement and the Transaction Documents, Company hereby grants to Operator the exclusive right to construct, develop, own, operate and maintain on the Lands at least thirty (30) Disposal Wells, each at a New Disposal Well Location, it being mutually acknowledged and agreed that the Parties may mutually agree in writing to additional Disposal Wells beyond those thirty (30) initial Disposal Wells. The Parties hereby agree to enter into a Lease with respect to each such Disposal Well for each New Disposal Well Location. To the extent that either Party desires to move a New Disposal Well Location for which Operator has not yet commenced constructing Facilities and/or has not received a Permit from the applicable Governmental Authority, then upon written notice from such requesting Party to the other Party, the Parties shall cooperate in good faith to designate a suitable alternative location for such New Disposal Well Location (which alternative location, if requested by Company, shall not impose any additional out-of-pocket costs or expenses on Operator, other than de minimis costs and expenses), and Company shall, if necessary, reasonably cooperate with Operator in amending or obtaining any Permit required by the applicable Governmental Authority for such New Disposal Well Location.

b. To the extent (i) the Parties have entered into or Company is obligated to deliver a Lease in accordance with Section 2.11 with respect to any Disposal Well to be located at a New Disposal Well Location, (ii) Operator or its applicable Affiliate has obtained the necessary Permits for such Disposal Well and (iii) such Disposal Well has yet to be drilled and completed, in each case as of the time immediately prior to the [***], the Parties’ obligation to enter into a Lease for each such Disposal Well shall remain in effect until the expiration of the Permit for each such Disposal Well.

Section 2.12 Produced Water AOI. Operator agrees that all Produced Water received by Operator or any of its Affiliates from a surface hole location within the Produced Water AOI for the provision of disposal services shall either (i) be transported by Operator or its applicable Affiliate to the Lands or to Other Lands for such services, or (ii) incur the Produced Water Fee. Notwithstanding the foregoing:

a. if Operator or its applicable Affiliate does not have sufficient existing disposal capacity on the Lands or Other Lands (which as used in this Section 2.12 shall only mean those Other Lands located solely within the area of mutual interest described on Exhibit C attached hereto) to comply with its obligations under this Section 2.12 and is unable to obtain additional disposal capacity on the Lands or Other Lands on a commercially reasonable basis (taking into account then-prevailing market rates for transportation and disposal services and the capital expenses required to accommodate such Produced Water volumes, including new Facilities, and drilling and completion expenses for additional Disposal Wells on the Lands to the extent Operator or its applicable Affiliate holds a valid Permit for such Disposal

 

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Wells), Operator shall be released from its obligations set forth in this Section 2.12 solely to the extent of the affected volumes within the Produced Water AOI and only for so long as Operator lacks sufficient Facilities in the Produced Water AOI and disposal capacity on the Lands or Other Lands to comply with its obligations under this Section 2.12; provided that, for the avoidance of doubt, Operator’s obligations under this Section 2.12 shall resume on the first day of the month that is at least [***] after the date Operator notifies Company in writing that Operator or its Affiliates has sufficient Facilities in the Produced Water AOI and additional disposal capacity on the Lands to comply with its obligations under this Section 2.11(b) with respect to any such affected volumes; and

b. in the event that Operator or its applicable Affiliate acquires additional Produced Water disposal and/or transportation assets within the Produced Water AOI following the Effective Date that are not located on the Lands or Other Lands, this Section 2.12 shall only apply with respect to Produced Water in excess of the then-operating disposal capacity of such acquired Produced Water assets and/or any disposal commitments or dedications associated with such acquired Produced Water assets.

ARTICLE III

REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS

Section 3.1 Reciprocal Representations and Warranties. Each Party (such Party, the “Representing Party”) represents and warrants to the other Party that, as of the Effective Date and as of the execution of each Lease and Easement:

a. Organization. The Representing Party is duly organized, validly existing and in good standing under the Laws of the State of its formation and is qualified to do business and is in good standing in the State of Texas and State of New Mexico.

b. Authority; Binding Effect. The Representing Party has all requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to carry out the transactions contemplated hereby and thereby. The Representing Party has taken (or caused to be taken) all acts required to be taken by it to authorize the execution, delivery and performance by the Representing Party of this Agreement and the other Transaction Documents. This Agreement has been duly executed and delivered by the Representing Party and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar Laws affecting the rights of creditors generally and by principles of equity, whether considered in a proceeding at Law or in equity.

c. Non-Contravention. The execution, delivery and performance of this Agreement by the Representing Party does not and will not (i) conflict with, or result in, any violation of or constitute a breach or default (with notice or lapse of time, or both) under (A) any provision of its organizational documents, or (B) any Law, court order, agreement, instrument or license applicable to the Representing Party, or (ii) require the submission of any notice, report, consent or other filing with or from any Governmental Authority or other Person, other than such consents that are customarily obtained after the transfer of instruments similar to the Lease or Easement, as applicable.

d. Bankruptcy; Solvency. There are no bankruptcy, reorganization or receivership proceedings pending, or, to the Representing Party’s actual knowledge, threatened against the Representing Party or an Affiliate of the Representing Party. The Representing Party is not insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement.

Section 3.2 Company Representations and Warranties Regarding Ownership of the Lands. Except as set forth in any disclosure schedule delivered to Operator by Company prior to or in connection with the execution and delivery of this Agreement, Company represents and warrants to Operator that Company has good and defensible title to the Lands and there are no Persons other than Company and its grazing lessees in possession of that portion of the Lands on which the Initial Facilities are to be located.

 

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Section 3.3 Reporting Requirements. With respect to all (i) Facilities and (ii) Qualifying Opportunities, Operator shall furnish Company upon Company’s request with reasonable access to the following data and reports within the applicable time frames set forth below, to the extent related to the applicable Facilities located on the Lands and owned or operated by Operator:

a. Reasonably promptly following receipt thereof, copies of all material correspondence received by Operator from any Governmental Authority, along with any material correspondence (including any reports) sent by Operator to any Governmental Authority;

b. Reasonably promptly following receipt thereof, copies of all written notices regarding material violations or potential material violations of Laws;

c. Reasonably promptly following the receipt thereof, copies of all claims, demands, or actions or threatened claims, demands or actions, in each case, which are of a material nature;

d. Reasonably promptly following receipt or preparation by Operator, copies of all surveys, including in a digitally recorded format if such exists; and

e. Daily drilling reports, in Excel format if available, which shall be provided within thirty (30) days after the end of each calendar month.

ARTICLE IV

TERM AND TERMINATION

Section 4.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until December 31, 2034 (the “Initial Term”), except as otherwise provided in this Section 4.1. Following the Initial Term, this Agreement shall automatically renew for successive one-year terms (each, a “Renewal Term” and collectively with the Initial Term, the “Term”) until the Agreement is terminated by either Party by providing at least one hundred and eighty (180) days’ written notice prior to the expiration of the Initial Term or any Renewal Term, as applicable. The Parties may mutually agree in writing to terminate this Agreement at any time with respect to all or any portion of the Lands, in which case, Section 4.2 below shall apply only to such terminated Lands. No Party may terminate this Agreement except as provided in this Article IV and Article V. Notwithstanding anything to the contrary herein, (a) the rights and obligations set forth in Section 2.11(a) shall automatically terminate on the [***] anniversary of the Effective Date, (b) the rights and obligations set forth in Section 2.12 shall automatically terminate on the [***] anniversary of the Effective Date and (c) with respect to East Stateline Ranch (but excluding the rights and obligations set forth in Section 2.12), the Term shall commence on the Effective Date and shall continue for so long as Operator (or its successors or permitted assigns) operates Facilities on East Stateline Ranch in accordance with the terms and conditions of the applicable Leases and Easements.

Section 4.2 Effect of Termination. In the event this Agreement is terminated in accordance with Section 4.1, the Parties shall have no further rights or obligations hereunder; provided that (a) no such termination shall relieve any Party of any liabilities or obligations that accrued prior to the date of such termination, (b) the termination of this Agreement shall not affect any Legacy Agreement or any Lease or Easement executed and delivered prior to the date of such termination, and (c) the provisions of this Section 4.2, Section 1.2, Section 2.3(d), Section 2.4, Section 2.5, Section 2.7, Section 3.3, Article V, Article VI, Article VII, and Article VIII, together with the definitions in Section 1.1 used in such Sections and Articles shall survive the termination of this Agreement.

 

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ARTICLE V

EVENTS OF DEFAULT

Section 5.1 Company Default. Company shall be in default of this Agreement (each, a “Company Default”): (a) upon an Event of Bankruptcy with respect to Company or (b) if Company is in material breach of any of its obligations under this Agreement, and Company fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any undisputed sums of money owed) following delivery to Company of a notice from Operator stating with reasonable particularity the nature and extent of such material breach or if a remedy cannot be effected within such initial thirty (30)-day period, an additional reasonable period no longer than ninety (90) days, provided that Company has commenced pursuit of a remedy within the initial thirty (30)-day period and diligently pursues such remedy to completion.

Section 5.2 Operator Remedies Against Company Default. If a Company Default occurs and is uncured and continuing after the cure periods set forth in Section 5.1(b), and without prejudice to any of Operator’s other rights under this Agreement or any other Transaction Document, then during the period in which Company Default is continuing, Operator shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement and/or the other applicable Transaction Document, provided that this shall not affect any rights or obligations under any Legacy Agreement, or any Lease or Easement executed and delivered prior to the date of such suspension; (b) pursue specific performance of this Agreement and/or the other applicable Transaction Documents; or (c) pursue any and all other rights and remedies available at law or in equity subject however to the limitations in this Agreement.

Section 5.3 Operator Default. Operator shall be in default of this Agreement (each, an “Operator Default”): (a) upon an Event of Bankruptcy with respect to Operator or (b) if Operator is in material breach of any of its obligations under this Agreement, and Operator fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any undisputed sums of money owed) following delivery to Operator of a written notice from Company stating with reasonable particularity the nature and extent of such material breach, or if a remedy cannot be effected within such initial thirty (30)-day period, an additional reasonable period no longer than ninety (90) days, provided that Operator has commenced remedy within the initial thirty (30)-day period and diligently pursues such remedy to completion.

Section 5.4 Company Remedies Against Operator Default. If an Operator Default occurs and is uncured and continuing after the cure periods provided in Section 5.3(b), and without prejudice to any of Company’s other rights under this Agreement or any other Transaction Document, then during the period in which the Operator Default is continuing, Company shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement and/or the other applicable Transaction Document, provided that this shall not affect any rights or obligations under any Legacy Agreement, or any Lease or Easement executed and delivered prior to the date of such suspension; (b) pursue specific performance of this Agreement and/or the other applicable Transaction Documents; or (c) pursue any and all other rights and remedies available at law or in equity subject however to the limitations in this Agreement.

 

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ARTICLE VI

NOTICES

Section 6.1 Notices. All notices and communications required or permitted under this Agreement shall be in writing and addressed as indicated below, and any communication or delivery hereunder shall be deemed to have been duly delivered upon the earliest of: (a) actual receipt by the Party to be notified; (b) three (3) business days after deposit with the U.S. Postal Service, certified mail, postage prepaid, return receipt requested; (c) if by email transmission, upon read receipt confirmation by the recipient (with the receiving Party being obligated to respond affirmatively to any read receipt requests delivered by the other Party); or (d) by Federal Express overnight delivery (or other reputable overnight delivery service), two (2) days after deposited with such service. Addresses for all such notices and communication shall be as follows:

 

To Operator:		WaterBridge Stateline LLC
		5555 San Felipe, Suite 1200
		Houston, Texas 77056
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]
To Company:		DBR Land LLC
		5555 San Felipe, Suite 1200
		Houston, Texas 77056
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]

Any Party may, upon written notice to the other Party, change the address and Person to whom such communications are to be directed.

Section 6.2 Reporting. With respect to any notices, communications and information required to be delivered pursuant to Section 3.3, such notices, communications and information shall be sufficient in all respects if given in accordance with Section 6.1 or if such notice is delivered by email to the address specified for a Person in Section 6.1.

ARTICLE VII

CONFIDENTIALITY

Section 7.1 Non-Disclosure. Each Receiving Party shall keep confidential and shall not disclose, or permit any of its Disclosure Recipients to disclose, any Confidential Information of the Disclosing Party except as required or reasonably necessary (a) to enforce this Agreement or any other Transaction Document, (b) by Law, (c) to its accountants, auditors, advisors, and/or attorneys that are subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information, or (d) to a potential purchaser or financing source in connection with any potential or actual sale of a Party or its applicable Affiliate (or an interest therein), any potential or actual sale or lease of any of such Party’s assets subject to this Agreement or any other Transaction Document or any bona fide equity or debt financing transaction, provided that any such recipient is subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information.

Section 7.2 Required Disclosures. In the event that any Receiving Party or any of its Disclosure Recipients is required by any Law to disclose Confidential Information to any Governmental Authority, unless otherwise agreed to by the Disclosing Party, prior to such disclosure, such Receiving Party (or its Disclosure Recipients) shall promptly notify the Disclosing Party (to the extent not prohibited by Law from giving notice) in writing of such anticipated disclosure, which notification shall include the nature of the requirement of Law and the extent of the required disclosure and such Receiving Party (or its Disclosure Recipients) shall reasonably cooperate with the Disclosing Party to preserve the confidentiality of such information consistent with Law (including reasonably withholding disclosure of such Confidential

 

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Information until such time as it has been finally determined that such disclosure is required under Law). Each Receiving Party shall cause any of its Disclosure Recipients to which it discloses any Confidential Information to hold such information confidential to the same extent as would be required if such Disclosure Recipients were a Party, and no Receiving Party or Disclosure Recipient may use any Confidential Information it receives for any purpose not contemplated by this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Applicable Law; Venue. THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT THE APPROPRIATE, EXCLUSIVE AND CONVENIENT FORUM FOR ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND THE RELATIONSHIP OF THE PARTIES HEREUNDER SHALL BE IN ANY STATE OR FEDERAL COURT IN MIDLAND COUNTY, TEXAS, AND EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, OR THE RELATIONSHIP OF THE PARTIES HEREUNDER. THE PARTIES FURTHER AGREE THAT THE PARTIES SHALL NOT BRING SUIT WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, OR THE RELATIONSHIP OF THE PARTIES HEREUNDER IN ANY COURT OR JURISDICTION OTHER THAN THE ABOVE SPECIFIED COURTS.

Section 8.2 Jury Waiver. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND/OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF AND THE RELATIONSHIP OF THE PARTIES HEREUNDER. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND ALL OTHER TRANSACTION DOCUMENTS. IN THE EVENT OF LITIGATION, THIS SECTION 8.2 MAY BE FILED AS A WRITTEN CONSENT TO A BENCH TRIAL.

Section 8.3 Amendments. Except as otherwise provided herein, no supplement, amendment, alteration, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Parties.

Section 8.4 Assignment. Neither Party may assign any of its rights or obligations under this Agreement or any portion thereof without the prior written consent of the other Party, which consent may be withheld in the non-assigning Party’s sole discretion; provided that such restriction shall not apply to assignments to Affiliates so long as such assignment to an Affiliate includes the assignment of all of the assigning Party’s rights and obligations under this Agreement; provided further that in the case of Company, (a) Company may assign its obligations and its rights hereunder to any purchaser or assignee of any portion of the Lands solely to the extent relating to the purchased or assigned portion of the Lands, (b) Company may assign all or any portion of its rights to payment hereunder without consent of the Operator

 

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and (c) Operator may assign its obligations and its rights hereunder to any purchaser or assignee of all or substantially all of its assets subject to this Agreement so long as Operator demonstrates that such purchaser or assignee is a Qualified Midstream Operator. Notwithstanding anything to the contrary herein, (x) Operator may assign its right to install, operate and maintain temporary surface pipelines to transport Recycled Water on the Lands to its customers or contractors for Recycled Water, but no such assignment shall relieve Operator of its obligations under this Agreement or any associated Lease or Easement and (y) Operator may assign Leases for Disposal Wells, subject to the terms and conditions of the applicable Lease and the payment obligations set forth in this Agreement. Notwithstanding the foregoing or anything to the contrary herein, any assignment not made in accordance with the provisions of this Section 8.4 shall be null and void ab initio.

Section 8.5 Waiver. Except as otherwise provided for in this Agreement, a waiver of any of the provisions of this Agreement shall not be deemed or shall not constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver, unless otherwise expressly provided.

Section 8.6 Relationship of the Parties. This Agreement is not intended to create, and shall not be construed to create, an association for profit, a trust, a joint venture, a mining partnership or other relationship of partnership, or entity of any kind between the Parties.

Section 8.7 Severability. If any provisions of this Agreement, in whole or in part, are held invalid as a matter of Law, it is the Parties’ intent that such holding not affect the other portions of this Agreement, and that such portions that are not invalid be given effect without the invalid portion.

Section 8.8 Counterpart Execution. This Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which taken together shall constitute one agreement. Delivery of an executed counterpart signature page by PDF is as effective as executing and delivering this Agreement in the presence of the other Party to this Agreement.

Section 8.9 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon anyone, other than the Parties and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement or to constitute any Person as a third party beneficiary of this Agreement.

Section 8.10 Time of Essence. Time is of the essence with respect to the performance by each Party of its obligations under this Agreement.

Section 8.11 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Parties and their respective Affiliates and each of their respective successors and permitted assigns.

Section 8.12 Attorney’s Fees. SHOULD EITHER PARTY BE REQUIRED TO RESORT TO EMPLOYMENT OF ATTORNEYS TO ENFORCE THIS AGREEMENT, OR ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS, THE SUBSTANTIALLY PREVAILING PARTY SHALL BE ENTITLED TO REIMBURSEMENT FROM THE OTHER PARTY FOR THE SUBSTANTIALLY PREVAILING PARTY’S ATTORNEYS’ FEES.

Section 8.13 Limitation on Damages. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES, OR INDIRECT DAMAGES FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT

 

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TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY, ON BEHALF OF ITSELF AND ITS AFFILIATES, DOES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES, OR INDIRECT DAMAGES FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 8.14 Entire Agreement. This Agreement, the other Transaction Documents, and the exhibits and schedules attached hereto and thereto constitute the entire agreement between the Parties with respect to the transactions contemplated hereunder, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties with respect to the transactions contemplated hereunder. Notwithstanding anything herein to the contrary, nothing herein shall be deemed to amend or supersede that certain Water Facility and Access Agreement North Ranch dated October 15, 2021 among Operator, Company and Delaware Basin Ranches Inc. or that certain Fresh Water Facilities and Access Agreement North Ranch dated as of the Effective Date between Operator and Company.

Section 8.15 Covenant Running with the Lands. This Agreement, and the rights granted hereunder and obligations contained herein, shall be covenants running with the Lands and shall be binding upon and inure to the benefit of each of the Parties and their respective successors and permitted assigns. Any sale, conveyance, grant, transfer, assignment or other disposition of all or any portion of the Lands or the Facilities, as applicable, shall be made expressly subject to this Agreement, and this Agreement or the applicable portion hereof shall be assumed by the purchaser or assignee, and both this Agreement and the Lands or the Facilities, as applicable, shall otherwise be sold or assigned in accordance with Section 8.2.

Section 8.16 Recording Memorandum. Contemporaneously with their execution and delivery of this Agreement, the Parties shall execute a recording memorandum that is substantially identical in form and substance to that attached hereto as Exhibit F (the “Memorandum”). Operator may file such Memorandum in the real property records of, as applicable, Andrews, Loving, and Winkler Counties, Texas, and Eddy and Lea Counties, New Mexico, in each applicable case for purposes of conferring constructive public notice of this Agreement. Notwithstanding the foregoing, except as may be required by applicable Law or as mutually agreed in writing by the Parties, neither Party shall file of record in any county or other public records this Agreement, a copy thereof, or any portion thereof (other than the Memorandum). In the event of any conflict between recitations contained in the Memorandum and the provisions contained in this Agreement, the provisions of this Agreement shall control. The execution and recording of the Memorandum shall not limit, increase, or in any manner affect any of the terms of this Agreement, or any rights, interests, or obligations of the Parties.

Section 8.17 Conspicuousness. THE PARTIES AGREE THAT ANY PROVISION OF THIS AGREEMENT THAT IS SET FORTH IN THE STYLE OF THIS SECTION 8.17 IS CONSPICUOUS.

[Remainder of page intentionally left blank; signature page follows.]

 

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This Agreement has been executed and delivered by the Parties effective as of the Effective Date.

 

Signature Page – Produced Water Facilities and Access Agreement (East Ranches)

Schedule 2.4

Surface Damages

[Omitted]

Exhibit A-1

East Stateline Ranch

[Omitted]

Exhibit A-2

Northeast Ranch

[Omitted]

Exhibit A-3

Dagger Draw Ranch

[Omitted]

Exhibit B-1

Initial Facilities

[Omitted]

Exhibit B-2

New Disposal Well Locations

[Omitted]

Exhibit C

Additional Lands Area of Mutual Interest

[Omitted]

Exhibit D

Produced Water AOI

[Omitted]

Exhibit E

Legacy Agreements

[Omitted]

Exhibit F

Recording Memorandum

[Omitted]

Schedule I

Form of Lease

[Omitted]

Schedule II

Form of Easement

[Omitted]

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND REPLACED WITH “[***]”. SUCH IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) THE TYPE OF INFORMATION THAT THE COMPANY TREATS AS PRIVATE OR CONFIDENTIAL.

Exhibit 10.12

FRESH WATER FACILITIES AND ACCESS AGREEMENT

EAST RANCHES

This FRESH WATER FACILITIES AND ACCESS AGREEMENT (this “Agreement”) is made and entered into as of May 10, 2024 (the “Effective Date”) by and between DBR Land LLC, a Delaware limited liability company (“Company”), and WaterBridge Stateline LLC, a Delaware limited liability company (“Operator”). Company and Operator are sometimes referred to herein each individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein that are not defined in the other provisions of this Agreement have the respective meanings set forth in Article I.

RECITALS:

WHEREAS, Company owns or controls the Lands, and Operator owns and operates the Initial Facilities (as defined herein) on East Stateline Ranch used in the production, gathering, transportation, storage, distribution, and/or sale of Fresh Water (defined herein); and

WHEREAS, Operator desires to develop, construct, own, and operate Additional Facilities (defined herein) on the Lands pursuant to this Agreement, including Fresh Water Wells (defined herein), Fresh Water Facilities (defined herein), and associated layflat lines, pipelines, ponds, pumps, risers, roads, electrical facilities, and other related infrastructure and equipment, in each case located or to be located on the Lands (collectively, the “Facilities”).

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

1.1 Definitions. The following capitalized terms have the following respective meanings:

“Additional Facility” has the meaning set forth in Section 2.2(b).

“Affiliate” unless otherwise provided herein, means (a) with respect to Company, only Company and its direct and indirect subsidiaries; and (b) with respect to Operator, only NDB Midstream LLC and its direct and indirect subsidiaries (excluding Company and its direct and indirect subsidiaries); and the term “Affiliated” shall have a correlative meaning.

“Agreement” has the meaning set forth in the preamble.

“Barrel” means forty-two (42) U.S. gallons.

“Commercially Reasonable Terms” has the meaning set forth in Section 2.1(d).

“Company” has the meaning set forth in the preamble.

“Company Default” has the meaning set forth in Section 5.1.

 

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“Confidential Information” means: (a) all information, materials and data provided by one Party or any of its Affiliates (the “Disclosing Party”) to the other Party or any of its Affiliates (the “Receiving Party”) under this Agreement or in connection with performance under this Agreement; and (b) the terms of this Agreement or any other Transaction Document. Confidential Information does not include (i) information that was in or comes into the lawful possession of the Receiving Party without confidentiality restrictions at the time of acquiring such information; (ii) information that is or becomes public knowledge without the fault of the Receiving Party; (iii) information that is or becomes available to the Receiving Party on an unrestricted basis from a source having a right to make such disclosure; or (iv) information that is developed by the Receiving Party independent of Confidential Information received hereunder.

“Dagger Draw Ranch” means the fee and leasehold surface interests and related real property rights in Eddy County, New Mexico as further described on Exhibit A-3 attached hereto.

“Disclosure Recipients” means, with respect to any Receiving Party, such Party’s Affiliates, directors, officers, employees, representatives, agents, investors, lenders, accountants, attorneys or other financial or professional advisors, in each case that receive Confidential Information of the Disclosing Party.

“Due Date” has the meaning set forth in Section 2.7(b).

“Easement” has the meaning set forth in Section 2.3(a).

“East Stateline Ranch” means the fee surface interests and related real property rights in Loving and Winkler County, Texas and Lea County, New Mexico, as further described on Exhibit A-1 attached hereto.

“Environmental Laws” means any applicable Law that pertains to (a) pollution or pollution control, (b) the protection of the environment (including natural resources and threatened or endangered species) or relating to public or worker health or safety, or (c) the management, transportation, or disposal of Hazardous Materials and the remediation of contamination in connection with the operations under any Lease or Easement, including the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C. §§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq., the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act, 16 U.S.C. § 1531 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., Clean Water Act, 33 U.S.C. §§ 1251 et seq., Rivers and Harbors Act, 33 U.S.C. §§ 401 and 40, National Environmental Policy Act, 42 U.S.C. §§ 4321 et seq., Fish & Wildlife Coordination Act, 16 U.S.C. §§ 661 et seq., Resource Conservation & Recovery Act, 42 U.S.C. §§ 6901 et seq., each as amended, and the regulations and orders promulgated by a Governmental Authority thereunder.

“Event of Bankruptcy” means, with respect to any Party, any of the following: (a) making a general assignment for the benefit of creditors; (b) filing a voluntary petition in bankruptcy; (c) filing a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law; (d) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets under any bankruptcy, insolvency or other similar law; or (e) (i) the passage of one hundred twenty (120) days after the commencement of any involuntary proceeding against such Party, seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy, insolvency or other similar law, if the proceeding has not been dismissed, (ii) the passage of ninety (90) days after the appointment without its consent or acquiescence of a trustee, receiver or liquidator of such Party, or of all or any substantial part of its properties or assets, if the appointment is not vacated or stayed, or (iii) the passage of ninety (90) days after the expiration of any such stay, if the appointment is not vacated.

 

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“Facilities” has the meaning set forth in the Recitals. For the avoidance of doubt, “Facilities” includes the Facilities existing as of the Effective Date and any other Facilities constructed or acquired by Operator after the Effective Date, in each case that are directly or indirectly owned and/or operated by Operator or its Affiliates (or its or their respective successors or permitted assigns).

“Fee” means, collectively, the Fresh Water Fee and the Fresh Water Royalty.

“Fresh Water” means groundwater that may be produced from any subsurface water-bearing formation or aquifer that may be used in oil and gas operations or for some other beneficial purpose, but excluding Produced Water and Recycled Water.

“Fresh Water Facilities” means any facilities and equipment intended to produce, store, and/or transport Fresh Water, in each case for the purpose of making such Fresh Water available to customers for use or reuse in oil and gas drilling, exploration, and completion activities, including those certain Fresh Water Wells that are included in the Initial Facilities and other subsequent Fresh Water Wells, as well as all ponds, tanks, pipelines, and related infrastructure, as applicable.

“Fresh Water Fee” has the meaning set forth in Section 2.4(b)(i).

“Fresh Water Royalty” has the meaning set forth in Section 2.4(b)(ii).

“Fresh Water Well” means any well drilled and completed for the production of Fresh Water with a surface hole location within the Lands.

“Governmental Authority” means (a) any federal, state, local, municipal, tribal or other government, (b) any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or taxing authority or other taxing power, and (c) any court or governmental tribunal.

“Hazardous Material” means any substance regulated or that may form the basis of liability under any Environmental Law, including any substance regulated as “hazardous,” “toxic,” a “pollutant,” a “contaminant,” a “waste,” or words of similar meaning and regulatory effect.

“Initial Facilities” means the Fresh Water Facilities existing on the Lands as of the Effective Date and described on Exhibit B hereto.

“Initial Term” has the meaning set forth in Section 4.1.

“Invoice” has the meaning set forth in Section 2.7(a).

“Lands” means, collectively, East Stateline Ranch, Northeast Ranch, Dagger Draw Ranch and any other fee or leasehold surface interests acquired by Company or its Affiliates following the Effective Date and added to this Agreement pursuant to Section 2.1(f).

“Law” means any applicable statute, law (including common law and Environmental Laws), rule, regulation, requirement, ordinance, order, code, ruling, writ, injunction, decree, or other official act of or by any Governmental Authority.

“Lease” has the meaning set forth in Section 2.3(a).

 

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“Legacy Agreements” has the meaning set forth in Section 2.8.

“Memorandum” has the meaning set forth in Section 8.16.

“Meters” has the meaning set forth in Section 2.6.

“Minimum Fresh Water Royalty” has the meaning set forth in Section 2.4(b)(ii).

“Northeast Ranch” means the fee and leasehold surface interests and related real property rights in Andrews County, Texas and Lea County, New Mexico as further described on Exhibit A-2 attached hereto.

“On-Ranch Water” means Fresh Water for use in oil and gas drilling, exploration, and completion activities on East Stateline Ranch, whether such Fresh Water is produced on or off of East Stateline Ranch.

“Operator” has the meaning set forth in the preamble.

“Operator Default” has the meaning set forth in Section 5.3.

“Opex Credit” has the meaning set forth in Section 2.4(b)(ii).

“Other Lands” means other lands owned or leased by Company or its applicable Affiliate during the Term for which Operator or its applicable Affiliate has the right to transport Fresh Water and for which Company or its applicable Affiliate receives a fee, including pursuant to that certain Water Facility and Access Agreement North Ranch dated October 15, 2021 among Operator, Company and Delaware Basin Ranches Inc. and excluding, for the avoidance of doubt, the Lands.

“Overdue Rate” means the lesser of 1% per month and the maximum rate permitted by Law.

“Party” and “Parties” have the meanings set forth in the preamble.

“Person” means an individual, a partnership (general, limited or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other entity or organization, or a Governmental Authority.

“Produced Water” means any produced water, flowback water, brine water, saltwater, associated incidental hydrocarbons, trace amounts of oil industry chemicals or various trace solids, and any other water borne liquid substances generated as waste in connection with drilling for and producing hydrocarbons, but excluding Fresh Water and Recycled Water.

“Project Limitation” has the meaning set forth in Section 2.2(c).

“Project Proposal” has the meaning set forth in Section 2.2(b).

“Qualified Operator” means, with respect to any Person, that such Person, together with its Affiliates, has the requisite experience and capabilities to manage and operate the acquired assets and business of Operator as reasonably determined by Company; provided that a Person will be deemed to be a Qualified Midstream Operator if (a) a majority of the individual members of the executive management team (including Senior Vice Presidents and above) operating the business of Operator as of immediately prior to the consummation of the applicable transaction (including pursuant to any services or similar agreement) will continue to operate the assets acquired from Operator immediately following the

 

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consummation of the applicable transaction (including pursuant to any services or similar agreement) or (b) such Person (1) is a water services provider and a material part of such Person’s current operations involve operating assets that are similar to those of Operator, (2) has never filed a voluntary bankruptcy proceeding or been declared bankrupt involuntarily, and (3) has not been denied or prohibited by any Governmental Authority from holding any material permits, licenses or approvals necessary to operate such Person’s water assets, in each case, as a result of the quality of such Person’s past operations or such Person’s prior failures to materially comply with material permits, licenses or approvals, or otherwise had any such material permits, licenses or approvals rescinded or revoked by any Governmental Authority due to a material violation thereof.

“Qualifying Opportunity” has the meaning set forth in Section 2.2(d).

“Recycled Water” means Produced Water that is treated or blended using Recycling Facilities and sold and provided to customers for use or reuse in oil and gas drilling, exploration, and completion operations, it being agreed that Recycled Water that is used in drilling or completions operations for oil and gas wells shall cease to be Recycled Water hereunder and shall be deemed to be Produced Water if and when subsequently produced from such wells. For the avoidance of doubt, Recycled Water does not include untreated Produced Water that is delivered to or redelivered from a disposal facility.

“Recycling Facilities” means any facilities and equipment intended to transport, store and/or treat Produced Water (and/or blend Produced Water with Fresh Water) for the purpose of making such Produced Water or blended water available to customers for use or reuse in oil and gas drilling, exploration, and completion operations, including ponds, pipelines, aeration and/or chemical treating facilities and related infrastructure, as applicable, but excluding any facilities and equipment intended to transport, store, process, treat, separate, evaporate and/or dispose of Produced Water, in each case, for the ultimate disposal thereof, including all disposal wells, evaporation facilities, ponds, pipelines and related infrastructure, as applicable.

“Renewal Term” has the meaning set forth in Section 4.1.

“Representing Party” has the meaning set forth in Section 3.1.

“Surface Damages” means the surface damages and corresponding rates described on Schedule 2.4; provided that such rates may be escalated in accordance with Section 2.4.

“Term” has the meaning set forth in Section 4.1.

“Third Party” means any Person that is not a Party or an Affiliate of a Party to this Agreement.

“Transaction Documents” means this Agreement, together with any Lease and any Easement delivered pursuant to this Agreement, in each case that is executed and delivered by the Parties in accordance with this Agreement.

1.2 Construction. Unless the context otherwise requires: a term has the meaning assigned to it; “or” is not exclusive; words in the singular include the plural, and words in the plural include the singular; provisions apply to successive events and transactions; the words “herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; all references herein to Articles, Sections, paragraphs, subparagraphs and clauses shall be deemed to be references to Articles, Sections, paragraphs, subparagraphs and clauses of this Agreement unless the context shall otherwise require; the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”; references to “$” or “dollars” shall mean United States dollars; unless otherwise expressly provided herein, any

 

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agreement, instrument or statute defined or referred to herein or in any agreement, instrument or statute that is referred to herein means such agreement, instrument or statute as from time to time amended, restated, waived or otherwise modified or supplemented, including (i) in the case of agreements or instruments and references to all attachments thereto and instruments incorporated therein, by waiver or consent, and (ii) in the case of statutes, by succession of comparable successor statutes.

ARTICLE II

FACILITIES; LEASES AND EASEMENTS

Section 2.1 Grant of Rights.

a. Exclusive Rights on East Stateline Ranch. Subject to the terms and conditions set forth in this Agreement (including Section 2.1(d)) and the Transaction Documents, Company hereby grants to Operator the exclusive right to: (i) own, operate, and maintain the Initial Facilities on East Stateline Ranch; (ii) construct, develop, own, operate and maintain Fresh Water Wells and other Facilities on East Stateline Ranch; (iii) market and sell Fresh Water produced from East Stateline Ranch to Third Parties for use in oil and gas drilling, exploration, and completion activities on or off East Stateline Ranch; and (iv) transport, market and sell Fresh Water for use in oil and gas drilling, exploration, and completion activities on East Stateline Ranch.

b. Non-Exclusive Right to Develop Facilities on the Lands. Subject to the terms and conditions set forth in this Agreement and the Transaction Documents, and in addition to and without limiting the exclusive rights set forth in Section 2.1(a), Company hereby grants to Operator the non-exclusive right to: (i) acquire, construct, develop, install, integrate, own, operate, upgrade, and maintain Facilities developed by Operator on the Lands and (ii) market and utilize all such Facilities to produce, gather, transport, store, distribute, and/or sell Fresh Water, and conduct such other activities as are mutually agreed to by the Parties, as applicable, in each case pursuant to such Leases and Easements as are mutually agreed to by the Parties in accordance with Section 2.3. Notwithstanding the foregoing or anything to the contrary herein, as between Company and Operator, Operator shall have the exclusive use of all Facilities constructed, developed, owned, operated and maintained in accordance with the terms and conditions of the applicable Lease or Easement.

c. Non-Exclusive Access Right. Subject to the terms and conditions set forth in this Agreement and payment of the applicable Surface Damages, Company hereby grants to Operator the non-exclusive right to use the existing roads located on the Lands, at no additional cost except for the obligation to maintain pursuant to the next succeeding sentence, in connection with the construction, development, operation, maintenance, relocation, and/or removal of the Facilities. Operator shall (i) comply with any reasonable rules and regulations of Company provided in writing to Operator in connection with the exercise of such access rights and (ii) maintain all existing roads utilized by Operator in reasonably good repair; provided that to the extent maintenance of such existing road is required and responsibility for damages cannot be definitively determined, responsibility for such maintenance shall be apportioned appropriately between Operator and such other operators or persons that utilize such road, based upon their proportionate use of such road as determined by Company in its reasonable discretion. To the extent Operator desires to construct new roads to access the Facilities following the Effective Date, Operator shall submit a Project Proposal for such new road in accordance with the terms and conditions of Section 2.2, and if such new road is approved and constructed, such new road(s) shall be subject to the above requirements.

d. Release from Exclusivity. Operator’s exclusive rights set forth in Section 2.1(a) with respect to the production, sale and transportation of On-Ranch Water shall not apply to the production, sale and transportation of any volume of On-Ranch Water that Operator cannot, or elects not to, supply on Commercially Reasonable Terms, and any such volume of On-Ranch Water shall automatically be released

 

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from such exclusivity in any such event. With respect to any such volume of On-Ranch Water released from exclusivity pursuant to the prior sentence, Company or its Affiliates may permit or consent to (in each case, including the granting of reasonable associated incremental surface rights) the affected volumes of On-Ranch Water being produced from and/or transported across East Stateline Ranch for use by any Third Party in oil and gas drilling, exploration, and completion activities on East Stateline Ranch; [***]. For the avoidance of doubt, the rejection by a Third Party of an offer by Operator to supply any volume of On-Ranch Water on Commercially Reasonable Terms shall not release such volume from Operator’s exclusive rights in Section 2.1(a). [***]. Company shall (i) promptly notify Operator in writing of any such agreements with Third Parties and (ii) require such Third Party to accurately meter such On-Ranch Water volumes. For the further avoidance of doubt, no release of Operator’s exclusivity rights with respect to the production, sale and transportation of On-Ranch Water shall affect Operator’s exclusive right to produce Fresh Water on East Stateline Ranch for use in oil and gas drilling, exploration, and completion activities that are located off of East Stateline Ranch. Terms offered or proposed by Operator shall be deemed to be “Commercially Reasonable Terms” if they are commercially reasonable rates and terms at the time (taking into account then-prevailing market rates and terms for the production, sale, and transportation of Fresh Water on East Stateline Ranch, available supply of, and demand for, Fresh Water in the relevant area, and all other relevant factors, including transportation expenses, construction expenses for additional Facilities and drilling and completion expenses for additional Fresh Water Wells, royalties, throughput fees and surface damages payable to Company or its Affiliates and Third Parties, if any).

e. Third Party Operations. During the Term, other than as expressly permitted by Section 2.1(d), Company shall: (i) not amend any existing agreement, enter into any new agreement, grant any right, or otherwise permit any Person (other than Operator) to develop, construct and/or operate Fresh Water Wells or other Facilities on East Stateline Ranch; (ii) to the extent any agreement exists as of the Effective Date that either grants a Third Party the right to produce, gather, transport, store, distribute, and/or sell On-Ranch Water or prevents the production, transportation and/or sale of On-Ranch Water by Operator, give timely notice to terminate any such agreement prior to commencement of any “evergreen” or “renewal” term; and (iii) to the extent any agreement exists as of the Effective Date that either grants a Third Party the right to produce, gather, transport, store, distribute, and/or sell On-Ranch Water or prevents the production, transportation and/or sale of On-Ranch Water by Operator, exercise any option or right it has under such agreement to terminate the same without additional cost to Company (other than any cost for which Operator agrees to reimburse Company), it being understood that Company shall exercise any such option or right at the earliest possible time. For the avoidance of doubt, nothing in this Agreement shall prevent Company from granting any other Person the right to permit, drill, and operate Fresh Water Wells or other Fresh Water facilities on the Lands other than East Stateline Ranch. The Parties agree that the covenant and agreement in this Section 2.1(e): (1) is a covenant attached to, concerning, and running with the Lands and binding on the Parties’ successors and permitted assigns; (2) benefits, burdens and otherwise affects the Lands in place, even as the same remain undisturbed; and (3) are being made contemporaneously with the grant of property rights from Company to Operator pursuant to this Agreement, with the grant, delivery, and performance of such property rights being a material inducement to the Parties’ entry into this Agreement, without which the Parties would not have entered into this Agreement.

 

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f. Additional Lands. Company and Operator agree that all fee or leasehold surface interests located in the area of mutual interest described on Exhibit C that are acquired by Company or any of its Affiliates after the Effective Date shall automatically become part of and subject to the terms and conditions of this Agreement and be included as part of the Lands hereunder. Company shall promptly notify Operator of such acquisition and deliver to Operator a map and legal description of the acquired interests. The Parties shall execute and file a Memorandum or amendment thereto pursuant to Section 8.16 with respect to such newly acquired interests.

g. Reservations. Notwithstanding anything herein to the contrary, (i) the rights granted to Operator under this Agreement are subject to the terms of all existing oil, gas and mineral leases and all existing easements, rights-of-way, surface use agreements and other agreements or interests covering or affecting the Lands, in each case, that are filed of public record or disclosed to Operator in writing as of the Effective Date, and (ii) Company may amend such existing agreements, and enter into agreements with and grant rights to any other Persons without Operator’s prior written consent, except to the extent the same are in contravention of Operator’s rights under Section 2.1(a), (b), (c), (d) or (e) or unreasonably interfere, as reasonably determined by Operator, with then-existing Facilities or any other rights set forth in this Agreement.

Section 2.2 Operator Facilities and Project Proposals.

a. Initial Facilities. As of the Effective Date, Company hereby acknowledges, accepts and consents to each of the Initial Facilities identified on Exhibit B. The Parties hereby agree to promptly enter into Leases and Easements with respect to each of the Initial Facilities.

b. Additional Facilities. From time to time during the Term, Operator may propose that additional Facilities be constructed, owned, and operated by Operator on the Lands, including (i) additional layflat lines, pipelines, ponds, tanks, roads, electrical facilities, and other related infrastructure and equipment reasonably necessary or convenient in connection with the operation of the Initial Facilities and (ii) Fresh Water Wells and other Facilities (each, an “Additional Facility” and each such proposal, a “Project Proposal”). Each Project Proposal shall be submitted to Company in writing and include (x) a reasonably detailed description of the proposed Additional Facilities, (y) the portions of the Lands on which the Additional Facilities are proposed to be located, including a survey of such lands prepared by Operator and (z) such other information related to such Additional Facilities that is reasonably requested by Company. Subject to Section 2.2(c), Company shall accept and consent in writing (email being sufficient) to each Project Proposal for an Additional Facility described in clause (i) or (ii) above within fifteen (15) days from the date of receipt of the Project Proposal. Subject to Section 2.2(c), if Company does not timely accept and consent to a Project Proposal, Company shall be deemed to have accepted and consented to such Project Proposal. Operator shall promptly notify Company in writing (email being sufficient) of any expected material changes, alterations or amendments to the applicable Additional Facilities throughout the course of the development of such Additional Facilities; provided that, for the avoidance of doubt, any material change to the location, scope or purpose of an Additional Facility shall require the prior written consent of Company, which consent shall not be unreasonably withheld, conditioned or delayed.

c. Project Limitations. If Company determines in good faith that a Project Proposal conflicts with any then-existing use or business operations conducted by Company or Third Parties on the Lands, including then-existing oil and gas operations, Produced Water and/or Recycled Water operations (each, a “Project Limitation”), Company shall notify Operator in writing of such determination and the basis therefor within fifteen (15) days from the date of receipt of the Project Proposal, and the Parties shall negotiate in good faith for not less than thirty (30) days to amend the Project Proposal. If the Parties are unable to mutually agree on a revised Project Proposal within such thirty (30)-day period, then Operator shall not pursue such Additional Facility. For the avoidance of doubt, if Company does not provide written notice of any objection to a Project Proposal that is subject to a Project Limitation within fifteen (15) days from the date of receipt of the Project Proposal, Company shall be deemed to have accepted and consented to such Project Proposal for all purposes to the extent that Company is not expressly prohibited from doing so by a valid existing instrument to which Company is a party.

 

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d. Qualifying Opportunity. Upon Company’s acceptance and consent to, or deemed consent to, a Project Proposal in accordance with this Section 2.2, the applicable Additional Facility shall be deemed a “Qualifying Opportunity.”

e. Cooperation. During the Term, Company shall cooperate as reasonably requested by Operator to identify mutually acceptable locations on the Lands for Additional Facilities and associated infrastructure that would not be subject to a Project Limitation, including allowing Operator to permit and stake potential Additional Facility locations on the Lands.

Section 2.3 Leases and Easements.

a. For each of the Initial Facilities, Company and Operator shall use commercially reasonable efforts to promptly execute and deliver, as applicable, such (i) surface use agreements substantially in the form of Schedule I hereto (each, a “Lease”) and/or (ii) easements substantially in the form of Schedule II hereto (each, an “Easement”), which shall cover the applicable portion(s) of the Lands, in each case, as are necessary or convenient in connection with such Initial Facilities, with such modifications to each such Lease and/or Easement forms as may be necessary to incorporate the specific terms of the applicable Initial Facility.

b. For each Qualifying Opportunity, Company and Operator or their applicable Affiliates shall, within thirty (30) days of Company’s acceptance (or deemed acceptance) of any Qualifying Opportunity, execute and deliver, as applicable, such Leases and/or Easements covering the applicable portion(s) of the Lands, in each case, as are necessary or convenient in connection with such Qualifying Opportunity, with such modifications to each such Lease and/or Easement forms as may be necessary to incorporate the specific terms of the applicable Qualifying Opportunity.

Section 2.4 Surface Damages; Fees.

a. Operator shall pay to Company the applicable Surface Damages for the applicable Facilities constructed and/or utilized by Operator pursuant to this Agreement. For the avoidance of doubt, Operator shall not owe any Surface Damages with respect to the Initial Facilities as the same exist on the Effective Date, but shall owe any applicable Surface Damages with respect to the Initial Facilities to the extent the same arise after the Effective Date. Not later than December 31 of each year, Company shall determine, in its reasonable discretion and with reference to market-based surface damages in the approximate vicinity of the applicable Facilities, the applicable Surface Damages for all Leases and Easements that are executed in the immediately succeeding calendar year, and shall provide not to Operator thereof along with reasonable supporting documentation; provided that if Company or its applicable Affiliate has received surface damages from one or more Third Parties in the approximate vicinity of the applicable Facilities within the prior twelve (12) months, the adjusted Surface Damages shall not exceed the highest surface damages paid to Company or its applicable Affiliate by a Third Party in the approximate vicinity of the applicable Facilities within the prior twelve (12) months. If Company does not make this determination and provide notice and the required documentation to Operator thereof in accordance with this Section 2.4(a), the then-current Surface Damages shall continue in effect. Other than any Surface Damages as determined in accordance with this Section 2.4(a) and the fees set forth in Section 2.4(b), Operator will not be obligated to pay any royalties, throughputs, or other fees with respect to Operator’s use of or access to the Lands in accordance with this Agreement.

b. Fees. Operator shall pay to Company (without duplication) the following fees:

i. [***] for each Barrel of Fresh Water that is either (A) produced from a Fresh Water Well and sold by Operator or (B) transported across the Lands by Operator, or its designee, using any Facilities located on the Lands, in either case, for use in oil and gas operations on the Lands (“Fresh Water Fee”); and

 

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ii. [***] of the gross proceeds Operator receives for each Barrel of Fresh Water that Operator produces from a Fresh Water Well and sells to Third Parties for use in oil and gas operations located off of the Lands (“Fresh Water Royalty”), net of [***] per Barrel for Operator’s operating expenses for the production, lifting, and storage of Fresh Water (“Opex Credit”), plus any additional transportation costs actually incurred by Operator to transport such Fresh Water to such Third Party’s location (if applicable); provided that in no event shall the Fresh Water Royalty be less than [***] per Barrel of Fresh Water (“Minimum Fresh Water Royalty”).

c. Notwithstanding anything to the contrary herein, with respect to any Fresh Water volumes that are transported across or enter the Lands more than once, Operator shall incur the applicable Fee set forth in Section 2.4(b) with respect to the first instance that such volumes enter the Lands, and shall not incur an additional Fee with respect to subsequent crossings for such volumes.

d. Notwithstanding anything to the contrary herein, with respect to any Fresh Water volumes that are transported across or enter the Lands and subsequently enter or cross Other Lands, Operator shall incur the applicable fee with respect to the first instance that such volumes enter the Lands or Other Lands, as applicable, and shall not incur an additional fee with respect to subsequent crossings of the Lands or Other Lands, as applicable, for such volumes.

Section 2.5 Escalation. Beginning on [***], and annually on January 1 of each subsequent calendar year, the Fresh Water Fee, Minimum Fresh Water Royalty, and Opex Credit shall automatically increase by the lesser of (i) [***] and (ii) the amount of any upward percentage change between January 1 and December 31 of the immediately preceding year, in the Consumer Price Index for All Urban Consumers or its most comparable successor, as published by the Department of Labor or its most comparable successor.

Section 2.6 Meters. Operator, at its sole cost, risk, and expense, shall provide, operate and maintain properly calibrated flow meters (the “Meters”) at each (i) Fresh Water Well owned by Operator on the Lands, and (ii) any other necessary locations on the Facilities, all to the extent necessary to calculate the amounts owed by Operator pursuant to Section 2.4 and in compliance with all Laws.

Section 2.7 Payment.

a. No later than the thirtieth (30th) day following the end of each month during the Term: Operator shall deliver to Company an invoice (“Invoice”) setting forth (a) the Fresh Water volumes for which the Operator owes a payment to Company pursuant to Section 2.4(b) for such subject month, expressed in Barrels and calculated as provided for in Section 2.4(b)(i)-(ii), as applicable, and (b) payments owed by Operator for any Surface Damages (to the extent not previously paid), in each case, as set forth in the applicable Lease or Easement for the subject month.

b. Operator shall pay in full any undisputed amounts due as reflected on the applicable Invoice by check or ACH transfer to Company’s designated bank account on or prior to the date that is sixty (60) days following the end of the month with respect to which such amounts are owed (the “Due Date”). If any undisputed amount due hereunder remains unpaid for sixty (60) days after the Due Date for such statement, interest on such amounts will accrue at the Overdue Rate from the Due Date through and including the date the owing Party actually makes payment.

 

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c. In the event Company disputes in good faith all or any portion of an Invoice, then the undisputed portion, if any, shall be due and payable in accordance with Section 2.7(b). In the event that the dispute is resolved in favor of Company, then Operator shall promptly pay the disputed amount plus interest at the Overdue Rate from the date the disputed payment was originally due pursuant to Section 2.7(b) through, and including, the date paid.

d. Audit. At any time on no less than thirty (30) days’ notice (but no more frequently than once in any twelve (12)-month period), either Party may, at the sole cost and expense of the requesting Party, conduct an audit of the other Party’s accounts, invoices and other documents related to the Lands and operations pursuant to this Agreement, including records of Fresh Water volumes produced, stored, or transported on the Lands. Such examination shall use electronic records or, solely to the extent original documents are required, take place in the office location where such books and records are kept in the normal course of business; provided that no examination may unreasonably interfere in the ongoing job responsibilities of the personnel of any Party. In the event the Parties mutually determine there was an Operator overpayment, Operator shall be due credit by Company for the amount of such overpayment on the next succeeding statement following such determination. In the event the Parties mutually determine there was an Operator underpayment, such amount shall be immediately due and payable, and Operator shall pay Company within thirty (30) days of such determination.

Section 2.8 Legacy Agreements. Operator may in the future acquire from a Third Party additional easements, leases or other agreements burdening and/or covering the Lands between Company (or its applicable Affiliate) and such Third Party, subject in each case to Section 2.1(c) and 2.1(e) (all such agreements, collectively, the “Legacy Agreements”). The Parties agree (a) that the Legacy Agreements as of the Effective Date are as set forth on Exhibit D hereto and (b) that either Party may update Exhibit D from time-to-time without the requirement of a formal amendment pursuant to Section 8.3 in order to reflect any additional Legacy Agreements acquired by Operator following the Effective Date. Notwithstanding anything to the contrary in this Agreement, no provision of this Agreement shall be construed so as to negate, modify or affect in any way the provisions of the Legacy Agreements. In the event of any inconsistency between this Agreement and any Legacy Agreement, or with respect to any matter that is addressed in this Agreement and any Legacy Agreement, the terms, provisions and intent of the applicable Legacy Agreement shall govern and control. Notwithstanding anything to the contrary set forth in Section 2.4(b), in no event shall Operator be required to pay a Fee or any other fee under this Agreement for any Barrel of Fresh Water that is transported by Operator onto or off of the Lands pursuant to a Legacy Agreement acquired by Operator from a Third Party except for the fee(s) provided by such Legacy Agreement.

Section 2.9 Waiver of Rights. Notwithstanding anything herein to the contrary and subject to the opportunity to cure provided herein, Operator shall not have any rights under this Article II with respect to a particular Qualifying Opportunity if, at the time of execution of a Lease or Easement for such Qualifying Opportunity, as applicable, (i) the applicable representations and warranties of Operator in Article III are not true and correct in all material respects or (ii) if there exists an uncured Operator Default.

Section 2.10 Taxes. During the Term of this Agreement, Company shall be responsible for paying all ad valorem taxes assessed on the Lands. Operator shall pay any personal property taxes assessed specifically against the Facilities during the Term.

Section 2.11. Water Purchases from Operator.

a. Upon request by Company, from time to time during the Term, Company may, but shall have no obligation to, purchase from Operator Fresh Water in such volumes and at such locations as designated by Operator. Operator shall have no obligation to supply any such Fresh Water volumes, and if and to the extent that Operator agrees to supply any such Fresh Water Volumes, all such Fresh Water volume shall be supplied by Operator on a fully interruptible basis from Operator’s then-existing Facilities and without warranty of any kind. Operator shall have no obligation to incur any out-of-pocket costs or

 

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expenses (other than lifting costs and associated operating expenses) with respect to any Fresh Water volumes supplied by Operator under this Section 2.11(a), except for such expenses as are reimbursed by Company. If requested by Operator, Company shall execute and deliver Operator’s then-current form of Fresh Water purchase agreement with respect to any Fresh Water volumes supplied by Operator under this Section 2.11(a). Any Fresh Water volumes purchased by Company under this Section 2.11(a) shall be used solely for uses other than in connection with oil and gas drilling, exploration and completion operations.

b. Company shall pay to Operator an amount equal to [***] for each Barrel of Fresh Water supplied by Operator pursuant to Section 2.11(a). The payment terms set forth in any applicable Fresh Water purchase agreement with respect to such Fresh Water volumes shall apply or, if no such agreement is executed, the payment terms set forth in Section 2.7 shall apply with respect to such amounts, mutatis mutandis. For the avoidance of doubt, Operator shall not owe any Fee or other payment to Company with respect to any Fresh Water supplied by Operator pursuant to Section 2.11(a).

ARTICLE III

REPRESENTATIONS AND WARRANTIES; CERTAIN COVENANTS

Section 3.1 Reciprocal Representations and Warranties. Each Party (such Party, the “Representing Party”) represents and warrants to the other Party that, as of the Effective Date and as of the execution of each Lease and Easement:

a. Organization. The Representing Party is duly organized, validly existing and in good standing under the Laws of the State of its formation and is qualified to do business and is in good standing in the State of Texas and State of New Mexico.

b. Authority; Binding Effect. The Representing Party has all requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to carry out the transactions contemplated hereby and thereby. The Representing Party has taken (or caused to be taken) all acts required to be taken by it to authorize the execution, delivery and performance by the Representing Party of this Agreement and the other Transaction Documents. This Agreement has been duly executed and delivered by the Representing Party and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, moratorium, reorganization or similar Laws affecting the rights of creditors generally and by principles of equity, whether considered in a proceeding at Law or in equity.

c. Non-Contravention. The execution, delivery and performance of this Agreement by the Representing Party does not and will not (i) conflict with, or result in, any violation of or constitute a breach or default (with notice or lapse of time, or both) under (A) any provision of its organizational documents, or (B) any Law, court order, agreement, instrument or license applicable to the Representing Party, or (ii) require the submission of any notice, report, consent or other filing with or from any Governmental Authority or other Person, other than such consents that are customarily obtained after the transfer of instruments similar to the Lease or Easement, as applicable.

d. Bankruptcy; Solvency. There are no bankruptcy, reorganization or receivership proceedings pending, or, to the Representing Party’s actual knowledge, threatened against the Representing Party or an Affiliate of the Representing Party. The Representing Party is not insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement.

Section 3.2 Company Representations and Warranties Regarding Ownership of the Lands and Fresh Water. Except as set forth in any disclosure schedule delivered to Operator by Company prior to or in connection with the execution and delivery of this Agreement, Company represents and warrants to Operator that Company has good and defensible title to the Lands and the Fresh Water produced

 

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hereunder, and there are no Persons other than Company and its grazing lessees in possession of that portion of the Lands on which the Initial Facilities are located. The quality of any Fresh Water produced hereunder shall be “as is” upon withdrawal from the applicable Fresh Water Well. Company does not make any representation or warranty regarding the quality of the Fresh Water, including whether the Fresh Water is fit for any particular purpose. EXCEPT AS MAY BE EXPRESSLY PROVIDED IN THIS AGREEMENT, COMPANY MAKES NO WARRANTIES OF ANY TYPE, EXPRESS OR IMPLIED, REGARDING THE FRESH WATER AND DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PURPOSE.

Section 3.3 Reporting Requirements. With respect to all (i) Facilities and (ii) Qualifying Opportunities, Operator shall furnish Company upon Company’s request with reasonable access to the following data and reports within the applicable time frames set forth below, to the extent related to the applicable Facilities located on the Lands and owned or operated by Operator:

a. Reasonably promptly following receipt thereof, copies of all material correspondence received by Operator from any Governmental Authority, along with any material correspondence (including any reports) sent by Operator to any Governmental Authority;

b. Reasonably promptly following receipt thereof, copies of all written notices regarding material violations or potential material violations of Laws;

c. Reasonably promptly following the receipt thereof, copies of all claims, demands, or actions or threatened claims, demands or actions, in each case, which are of a material nature;

d. Reasonably promptly following receipt or preparation by Operator, copies of all surveys, including in a digitally recorded format if such exists; and e. Daily drilling reports, in Excel format if available, which shall be provided within thirty (30) days after the end of each calendar month.

ARTICLE IV

TERM AND TERMINATION

Section 4.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until December 31, 2034 (the “Initial Term”), except as otherwise provided in this Section 4.1. Following the Initial Term, this Agreement shall automatically renew for successive one-year terms (each, a “Renewal Term” and collectively with the Initial Term, the “Term”) until the Agreement is terminated by either Party by providing at least one hundred and eighty (180) days’ written notice prior to the expiration of the Initial Term or any Renewal Term, as applicable. The Parties may mutually agree in writing to terminate this Agreement at any time with respect to all or any portion of the Lands, in which case, Section 4.2 below shall apply only to such terminated Lands. No Party may terminate this Agreement except as provided in this Article IV and Article V. Notwithstanding anything to the contrary herein, with respect to the East Stateline Ranch, the Term shall commence on the Effective Date and shall continue for so long as Operator (or its successors or permitted assigns) operates Facilities on East Stateline Ranch in accordance with the terms and conditions of the applicable Leases and Easements.

Section 4.2 Effect of Termination. In the event this Agreement is terminated in accordance with Section 4.1, the Parties shall have no further rights or obligations hereunder; provided that (a) no such termination shall relieve any Party of any liabilities or obligations that accrued prior to the date of such termination, (b) the termination of this Agreement shall not affect any Legacy Agreement or any Lease or Easement executed and delivered prior to the date of such termination, and (c) the provisions of this Section 4.2, Section 1.2, Section 2.4, Section 2.5, Section 2.6, Section 2.7, Section 3.3, Article V, Article VI, Article VII, and Article VIII, together with the definitions in Section 1.1 used in such Sections and Articles shall survive the termination of this Agreement.

 

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ARTICLE V

EVENTS OF DEFAULT

Section 5.1 Company Default. Company shall be in default of this Agreement (each, a “Company Default”): (a) upon an Event of Bankruptcy with respect to Company or (b) if Company is in material breach of any of its obligations under this Agreement, and Company fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any undisputed sums of money owed) following delivery to Company of a notice from Operator stating with reasonable particularity the nature and extent of such material breach or if a remedy cannot be effected within such initial thirty (30)-day period, an additional reasonable period no longer than ninety (90) days, provided that Company has commenced pursuit of a remedy within the initial thirty (30)-day period and diligently pursues such remedy to completion.

Section 5.2 Operator Remedies Against Company Default. If a Company Default occurs and is uncured and continuing after the cure periods set forth in Section 5.1(b), and without prejudice to any of Operator’s other rights under this Agreement or any other Transaction Document, then during the period in which Company Default is continuing, Operator shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement and/or the other applicable Transaction Document, provided that this shall not affect any rights or obligations under any Legacy Agreement, or any Lease or Easement executed and delivered prior to the date of such suspension; (b) pursue specific performance of this Agreement and/or the other applicable Transaction Documents; or (c) pursue any and all other rights and remedies available at law or in equity subject however to the limitations in this Agreement.

Section 5.3 Operator Default. Operator shall be in default of this Agreement (each, an “Operator Default”): (a) upon an Event of Bankruptcy with respect to Operator or (b) if Operator is in material breach of any of its obligations under this Agreement, and Operator fails to cure such breach within thirty (30) days (or ten (10) days for an obligation to pay any undisputed sums of money owed) following delivery to Operator of a written notice from Company stating with reasonable particularity the nature and extent of such material breach, or if a remedy cannot be effected within such initial thirty (30) day period, an additional reasonable period no longer than ninety (90) days, provided that Operator has commenced remedy within the initial thirty (30)-day period and diligently pursues such remedy to completion.

Section 5.4 Company Remedies Against Operator Default. If an Operator Default occurs and is uncured and continuing after the cure periods provided in Section 5.3(b), and without prejudice to any of Company’s other rights under this Agreement or any other Transaction Document, then during the period in which the Operator Default is continuing, Company shall have the right to take one or more of the following actions: (a) suspend performance under this Agreement and/or the other applicable Transaction Document, provided that this shall not affect any rights or obligations under any Legacy Agreement, or any Lease or Easement executed and delivered prior to the date of such suspension; (b) pursue specific performance of this Agreement and/or the other applicable Transaction Documents; or (c) pursue any and all other rights and remedies available at law or in equity subject however to the limitations in this Agreement.

 

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ARTICLE VI

NOTICES

Section 6.1 Notices. All notices and communications required or permitted under this Agreement shall be in writing and addressed as indicated below, and any communication or delivery hereunder shall be deemed to have been duly delivered upon the earliest of: (a) actual receipt by the Party to be notified; (b) three (3) business days after deposit with the U.S. Postal Service, certified mail, postage prepaid, return receipt requested; (c) if by email transmission, upon read receipt confirmation by the recipient (with the receiving Party being obligated to respond affirmatively to any read receipt requests delivered by the other Party); or (d) by Federal Express overnight delivery (or other reputable overnight delivery service), two (2) days after deposited with such service. Addresses for all such notices and communication shall be as follows:

 

To Operator:		WaterBridge Stateline LLC
		5555 San Felipe, Suite 1200
		Houston, Texas 77056
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]
To Company:		DBR Land LLC
		5555 San Felipe, Suite 1200
		Houston, Texas 77056
		Attn: General Counsel
		Telephone: [***]
		E-mail: [***]

Any Party may, upon written notice to the other Party, change the address and Person to whom such communications are to be directed.

Section 6.2 Reporting. With respect to any notices, communications and information required to be delivered pursuant to Section 3.3, such notices, communications and information shall be sufficient in all respects if given in accordance with Section 6.1 or if such notice is delivered by email to the address specified for a Person in Section 6.1.

ARTICLE VII

CONFIDENTIALITY

Section 7.1 Non-Disclosure. Each Receiving Party shall keep confidential and shall not disclose, or permit any of its Disclosure Recipients to disclose, any Confidential Information of the Disclosing Party except as required or reasonably necessary (a) to enforce this Agreement or any other Transaction Document, (b) by Law, (c) to its accountants, auditors, advisors, and/or attorneys that are subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information, or (d) to a potential purchaser or financing source in connection with any potential or actual sale of a Party or its applicable Affiliate (or an interest therein), any potential or actual sale or lease of any of such Party’s assets subject to this Agreement or any other Transaction Document or any bona fide equity or debt financing transaction, provided that any such recipient is subject to a professional or other obligation of confidentiality with respect to any such disclosed Confidential Information.

Section 7.2 Required Disclosures. In the event that any Receiving Party or any of its Disclosure Recipients is required by any Law to disclose Confidential Information to any Governmental Authority, unless otherwise agreed to by the Disclosing Party, prior to such disclosure, such Receiving Party (or its Disclosure Recipients) shall promptly notify the Disclosing Party (to the extent not prohibited by Law from giving notice) in writing of such anticipated disclosure, which notification shall include the nature of the requirement of Law and the extent of the required disclosure and such Receiving Party (or its Disclosure Recipients) shall reasonably cooperate with the Disclosing Party to preserve the confidentiality

 

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of such information consistent with Law (including reasonably withholding disclosure of such Confidential Information until such time as it has been finally determined that such disclosure is required under Law). Each Receiving Party shall cause any of its Disclosure Recipients to which it discloses any Confidential Information to hold such information confidential to the same extent as would be required if such Disclosure Recipients were a Party, and no Receiving Party or Disclosure Recipient may use any Confidential Information it receives for any purpose not contemplated by this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 Applicable Law; Venue. THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE PARTIES AGREE THAT THE APPROPRIATE, EXCLUSIVE AND CONVENIENT FORUM FOR ANY DISPUTES BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND THE RELATIONSHIP OF THE PARTIES HEREUNDER SHALL BE IN ANY STATE OR FEDERAL COURT IN MIDLAND COUNTY, TEXAS, AND EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, OR THE RELATIONSHIP OF THE PARTIES HEREUNDER. THE PARTIES FURTHER AGREE THAT THE PARTIES SHALL NOT BRING SUIT WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATED TO THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, OR THE RELATIONSHIP OF THE PARTIES HEREUNDER IN ANY COURT OR JURISDICTION OTHER THAN THE ABOVE SPECIFIED COURTS.

Section 8.2 Jury Waiver. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ALL OTHER TRANSACTION DOCUMENTS, AND/OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF AND THE RELATIONSHIP OF THE PARTIES HEREUNDER. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND ALL OTHER TRANSACTION DOCUMENTS. IN THE EVENT OF LITIGATION, THIS SECTION 8.2 MAY BE FILED AS A WRITTEN CONSENT TO A BENCH TRIAL.

Section 8.3 Amendments. Except as otherwise provided herein, no supplement, amendment, alteration, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Parties.

Section 8.4 Assignment. Neither Party may assign any of its rights or obligations under this Agreement or any portion thereof without the prior written consent of the other Party, which consent may be withheld in the non-assigning Party’s sole discretion; provided that such restriction shall not apply to assignments to Affiliates so long as such assignment to an Affiliate includes the assignment of all of the assigning Party’s rights and obligations under this Agreement; provided further that in the case of Company, (a) Company may assign its obligations and its rights hereunder to any purchaser or assignee of any portion of the Lands solely to the extent relating to the purchased or assigned portion of the Lands, (b)

 

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Company may assign all or any portion of its rights to payment hereunder without consent of the Operator and (c) Operator may assign its obligations and its rights hereunder to any purchaser or assignee of all or substantially all of its assets subject to this Agreement so long as Operator demonstrates that such purchaser or assignee is a Qualified Operator. Notwithstanding anything to the contrary herein, (x) Operator may assign its right to install, operate and maintain temporary surface pipelines to transport Fresh Water on the Lands to its customers or contractors for Fresh Water, but no such assignment shall relieve Operator of its obligations under this Agreement or any associated Lease or Easement and (y) Operator may assign Leases for Fresh Water Wells, subject to the terms and conditions of the applicable Lease and the payment obligations set forth in this Agreement. Notwithstanding the foregoing or anything to the contrary herein, any assignment not made in accordance with the provisions of this Section 8.4 shall be null and void ab initio.

Section 8.5 Waiver. Except as otherwise provided for in this Agreement, a waiver of any of the provisions of this Agreement shall not be deemed or shall not constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver, unless otherwise expressly provided.

Section 8.6 Relationship of the Parties. This Agreement is not intended to create, and shall not be construed to create, an association for profit, a trust, a joint venture, a mining partnership or other relationship of partnership, or entity of any kind between the Parties.

Section 8.7 Severability. If any provisions of this Agreement, in whole or in part, are held invalid as a matter of Law, it is the Parties’ intent that such holding not affect the other portions of this Agreement, and that such portions that are not invalid be given effect without the invalid portion.

Section 8.8 Counterpart Execution. This Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which taken together shall constitute one agreement. Delivery of an executed counterpart signature page by PDF is as effective as executing and delivering this Agreement in the presence of the other Party to this Agreement.

Section 8.9 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon anyone, other than the Parties and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement or to constitute any Person as a third party beneficiary of this Agreement.

Section 8.10 Time of Essence. Time is of the essence with respect to the performance by each Party of its obligations under this Agreement.

Section 8.11 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the Parties and their respective Affiliates and each of their respective successors and permitted assigns.

Section 8.12 Attorney’s Fees. SHOULD EITHER PARTY BE REQUIRED TO RESORT TO EMPLOYMENT OF ATTORNEYS TO ENFORCE THIS AGREEMENT, OR ANY OF ITS RIGHTS UNDER THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS, THE SUBSTANTIALLY PREVAILING PARTY SHALL BE ENTITLED TO REIMBURSEMENT FROM THE OTHER PARTY FOR THE SUBSTANTIALLY PREVAILING PARTY’S ATTORNEYS’ FEES.

Section 8.13 Limitation on Damages. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES, OR INDIRECT DAMAGES

 

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FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY, ON BEHALF OF ITSELF AND ITS AFFILIATES, DOES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES, OR INDIRECT DAMAGES FOR LOST PROFITS OR LOSS OF USE OR BUSINESS OPPORTUNITY (IN ALL CASES EXCEPT TO THE EXTENT CONSTITUTING DAMAGES PAID OR PAYABLE TO AN UNAFFILIATED THIRD PARTY), ARISING UNDER, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. 

Section 8.14 Entire Agreement. This Agreement, the other Transaction Documents, and the exhibits and schedules attached hereto and thereto constitute the entire agreement between the Parties with respect to the transactions contemplated hereunder, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties with respect to the transactions contemplated hereunder. Notwithstanding anything herein to the contrary, nothing herein shall be deemed to amend or supersede that certain Water Facility and Access Agreement North Ranch dated October 15, 2021 among Operator, Company and Delaware Basin Ranches Inc. or that certain Produced Water Facilities and Access Agreement North Ranch dated as of the Effective Date between Operator and Company.

Section 8.15 Covenant Running with the Lands. This Agreement, and the rights granted hereunder and obligations contained herein, shall be covenants running with the Lands and shall be binding upon and inure to the benefit of each of the Parties and their respective successors and permitted assigns. Any sale, conveyance, grant, transfer, assignment or other disposition of all or any portion of the Lands or the Facilities, as applicable, shall be made expressly subject to this Agreement, and this Agreement or the applicable portion hereof shall be assumed by the purchaser or assignee, and both this Agreement and the Lands, or the Facilities, as applicable, shall otherwise be sold or assigned in accordance with Section 8.4.

Section 8.16 Recording Memorandum. Contemporaneously with their execution and delivery of this Agreement, the Parties shall execute a recording memorandum that is substantially identical in form and substance to that attached hereto as Exhibit E (the “Memorandum”). Operator may file such Memorandum in the real property records of, as applicable, Andrews, Loving, and Winkler Counties, Texas, and Eddy and Lea Counties, New Mexico, in each applicable case for purposes of conferring constructive public notice of this Agreement. Notwithstanding the foregoing, except as may be required by applicable Law or as mutually agreed in writing by the Parties, neither Party shall file of record in any county or other public records this Agreement, a copy thereof, or any portion thereof (other than the Memorandum). In the event of any conflict between recitations contained in the Memorandum and the provisions contained in this Agreement, the provisions of this Agreement shall control. The execution and recording of the Memorandum shall not limit, increase, or in any manner affect any of the terms of this Agreement, or any rights, interests, or obligations of the Parties.

Section 8.17 Conspicuousness. THE PARTIES AGREE THAT ANY PROVISION OF THIS AGREEMENT THAT IS SET FORTH IN THE STYLE OF THIS SECTION 8.17 IS CONSPICUOUS.

[Remainder of page intentionally left blank; signature page follows.]

 

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This Agreement has been executed and delivered by the Parties effective as of the Effective Date.

 

 

 

Signature Page – Fresh Water Facilities and Access Agreement (East Ranches)

Schedule 2.4

Surface Damages

[Omitted]

Exhibit A-1

East Stateline Ranch

[Omitted]

Exhibit A-2

Northeast Ranch

[Omitted]

Exhibit A-3

Dagger Draw Ranch

[Omitted]

Exhibit B

Initial Facilities

[Omitted]

Exhibit C

Additional Lands Area of Mutual Interest

[Omitted]

Exhibit D

Legacy Agreements

[Omitted]

Exhibit E

Recording Memorandum

[Omitted]

Schedule I

Form of Lease

[Omitted]

Schedule II

Form of Easement

[Omitted]