EXHIBIT 10.2

Prepared by and when recorded, please return to:

Porter & Hedges, LLP
1000 Main, 36th Floor
Houston, Texas 77002
Attention: Ephraim del Pozo

 
 
CONVEYANCE OF OVERRIDING ROYALTY INTEREST

THIS CONVEYANCE OF OVERRIDING ROYALTY INTEREST (“Conveyance”) dated as of
October 22, 2008, to be effective as of the Effective Time, is made by RANCHER
ENERGY CORP., a Nevada corporation doing business in the State of Wyoming as
RANCHER ENERGY OIL & GAS CORP. (the “Grantor”), to and in favor of GASROCK
CAPITAL LLC, a Delaware limited liability company (the “Grantee”).

ARTICLE I
 
Defined Terms
 
Section 1.1. Defined Terms. When used in this Conveyance or in any exhibit or
schedule hereto (unless otherwise defined in any such exhibit or schedule), the
following terms have the respective meanings assigned to them in this section or
in the sections, subsections, exhibits and schedules referred to below:
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
 
“Control,” for purposes of further defining “Affiliate,” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise. For the purposes of this definition, and
without limiting the generality of the foregoing, any Person that owns directly
or indirectly 10% or more of the equity interests having ordinary voting power
for the election of the directors or other governing body of a Person will be
deemed to “control” such other Person. “Controlling” and “Controlled” have
meanings correlative thereto.
 
“Credit Agreement” means that certain Term Credit Agreement dated October 16,
2007 between Grantor, as borrower, and Grantee, as lender, as amended by the
First Amendment thereto dated October 22, 2008 and as the same may be further
amended, restated or supplemented from time to time.
 
“Effective Time” means 7:00 a.m. M.S.T. on October 1, 2008.
 
 
 

--------------------------------------------------------------------------------

 
“Fixed Rate” means, for any day, the rate that is the lesser of (a) twelve
percent (12%) per annum, based on actual days elapsed and a year of 360 days or
(b) the maximum of interest allowed by applicable Law.
 
“Hydrocarbons” means oil, gas, drip gasoline, natural gasoline, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
or separated therefrom
 
“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment,
order, decree, permit, concession, franchise, license, agreement or other
governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof. Any reference to a Law includes any
amendment or modification to such Law, and all regulations, rulings, and other
Laws promulgated under such Law.
 
“Leasehold Interest” means an interest in Hydrocarbons arising from ownership
relating to an oil, gas and/or mineral lease.
 
“Option to Repurchase” means Grantor’s option to repurchase one-third of the
aggregate combined overriding royalty interest consisting of the Overriding
Royalty Interest granted hereunder and the Original Overriding Royalty Interest
granted under the Original Conveyance of Overriding Royalty Interest, pursuant
to the Credit Agreement. Grantor’s option must be exercised, if at all, no later
than April 30, 2009 or such earlier date as may be provided in the Credit
Agreement.
 
“Original Conveyance of Overriding Royalty Interest” means that certain
Conveyance of Overriding Royalty dated October 16, 2007 made by Grantor to and
in favor of Grantee which was duly recorded at #941798, Book 1321, Page 792 of
the official public records of Converse County, Wyoming and at #831005 of the
official public records of Natrona County, Wyoming.
 
“Original Overriding Royalty Interest” means the two percent (2.0%) of 8/8ths
overriding royalty interest (proportionately reduced to Grantor’s Working
Interest), granted by Grantor to and in favor of Grantee pursuant to the
Original Conveyance of Overriding Royalty Interest, in and to all Hydrocarbons
produced and saved from the Subject Interests described on Exhibit A attached
thereto.
 
“Overriding Royalty Interest” has the meaning assigned to such term in Section
2.1.
 
“Overriding Royalty Interest Hydrocarbons” means the Hydrocarbons attributable
to the Overriding Royalty Interest.
 
“Permitted Encumbrances” means:
 
(a) the contracts, agreements, burdens, encumbrances and other matters set forth
as being applicable to certain of the Subject Interests in the descriptions of
such Subject Interests on Exhibit A hereto;
 
(b) liens for taxes, assessments or other governmental charges or levies which
are not due or which are being contested in good faith by appropriate action
promptly initiated and diligently conducted and for the payment of which Grantor
has reserved adequate funds;
 
(c) liens of vendors, contractors, subcontractors, carriers, warehousemen,
mechanics, laborers or materialman or other like liens arising by law or
contract in the ordinary course of business for sums which are not due or which
are being contested in good faith by appropriate action promptly initiated and
diligently conducted and for the payment of which Grantor has reserved adequate
funds;
 
 
 

--------------------------------------------------------------------------------

 
(d) covenants, restrictions, easements, servitudes, permits, conditions,
exceptions, reservations, minor rights, minor encumbrances, minor irregularities
in title or conventional rights of reassignment prior to abandonment which do
not materially interfere with the occupation, use and enjoyment by Grantor or
Grantee of their respective interests in the Subject Interests in the normal
course of business as presently conducted or to be conducted, materially impair
the value thereof for the purpose of such business, or impair the value of the
Overriding Royalty Interests;
 
(e) liens and security interests in favor of Grantee or its Affiliates; and
 
(f) liens of operators under joint operating agreements or similar contractual
arrangements with respect to Grantor’s proportionate share of the expense of
exploration, development and operation of Hydrocarbon leasehold or fee interests
owned jointly with others, to the extent that such liens secure sums which are
not due or which are being contested in good faith by appropriate action
promptly initiated and diligently conducted and for the payment of which Grantor
has reserved adequate funds.
 
“Person” means an individual, corporation, general partnership, limited
partnership, limited liability company, association, joint stock company, trust
or trustee thereof, estate or executor thereof, court or governmental unit or
any agency or authority thereof, or any other legally recognizable entity.
 
“Specified Costs” means Specified Taxes, Specified Marketing Costs, and
Specified Transportation Costs.
 
“Specified Marketing Costs” means a charge for marketing the Overriding Royalty
Interest Hydrocarbons that is equal to the fair and reasonable costs which would
have been charged at the time, and in the same geographical area, in
arm’s-length dealings with parties other than Affiliates of Grantor.
 
“Specified Taxes” means all ad valorem or property taxes assessed against the
Overriding Royalty Interests and all conservation taxes, severance taxes or
similar taxes assessed against or measured by production and severance of
Overriding Royalty Interest Hydrocarbons or the value thereof. To the extent
that any jurisdiction in which the Subject Lands are located also requires
Grantor to withhold income taxes or similar taxes payable by Grantee, the taxes
so withheld shall also be “Specified Taxes.”
 
“Specified Transportation Costs” means all costs paid by Grantor (or any other
operator of Subject Interests on behalf of Grantor) to gatherers, processors or
transporters for transporting Overriding Royalty Interest Hydrocarbons from the
applicable lease to the point of sale or for processing Overriding Royalty
Interest Hydrocarbons off of the Subject Lands to meet pipeline or transporter
specifications and qualifications, provided however, that no such costs shall
exceed fair and reasonable costs for the area which would have been charged at
the time in arm’s-length dealings with parties other than Affiliates of Grantor.
 
“Subject Hydrocarbons” means that portion of the Hydrocarbons in and under and
that may be produced from (or to the extent pooled or unitized, allocated to)
the Subject Interests.
 
“Subject Interests” means:
 
(a) All right, title and interest of Grantor in the leases described in Exhibit
A; and
 
 
 

--------------------------------------------------------------------------------

 
(b) All right, title and interest of Grantor in and to, or otherwise derived
from, all presently existing and valid Hydrocarbon unitization, pooling, or
communitization agreements, declarations or orders and in and to the properties
covered and the units created thereby (including all units formed under orders,
rules, regulations, or other official acts of any federal, state, or other
authority having jurisdiction, voluntary unitization agreements, designations or
declarations, and so-called “working interest units” created under operating
agreements or otherwise) relating to the properties described in subsection (a)
above in this definition.
 
“Subject Interests” does not include any overriding royalty interest, royalty
interest, and/or mineral interest currently owned by Grantor in the leases
described on Exhibit A.
 
“Subject Lands” means the lands described or referred to in Exhibit A or in the
leases described in Exhibit A.
 
“Subject Wells” means all wells now or hereafter located or pooled or unitized
with the Subject Lands.
 
“Unit” means, in respect of each Subject Well or group of related Subject Wells,
Grantor’s interest in Leasehold Interests covering the lands attributed to each
such respective Subject Well or group of related Subject Wells for pooling,
unitization and/or proration purposes, from time to time, whether so attributed
to such Subject Well or group of related Subject Wells in order to comply with
the terms of the applicable deed, oil and gas leases, pooling or unitization
agreements, unit operating agreements or the like or in order to comply with the
applicable rules and regulations of applicable governmental authorities related
to pooling, unitization, well spacing or the like and, including without
limitation any pooled (compulsory or voluntary) unit, production unit,
regulatory unit, field-wide unit, or other similar designation or allocation of
lands to such Subject Well or group of related Subject Wells.
 
“Working Interest” and “WI” means Grantor’s share of the costs of operations
conducted thereon (less applicable carried interests and non-consent working
interests).
 
Section 1.2. Rules of Construction. All references in this Conveyance to
articles, sections, subsections and other subdivisions refer to corresponding
articles, sections, subsections and other subdivisions of this Conveyance unless
expressly provided otherwise. Titles appearing at the beginning of any of such
subdivisions are for convenience only and shall not constitute part of such
subdivisions and shall be disregarded in construing the language contained in
such subdivisions. The words “this Conveyance”, “this instrument”, “herein”,
“hereof”, “hereunder” and words of similar import refer to this Conveyance as a
whole and not to any particular subdivision unless expressly so limited. Unless
the context otherwise requires: “including” and its grammatical variations mean
“including without limitation”; “or” is not exclusive; words in the singular
form shall be construed to include the plural and vice versa; words in any
gender include all other genders; references herein to any instrument or
agreement refer to such instrument or agreement as it may be from time to time
amended or supplemented; and references herein to any Person include such
Person’s successors and assigns. All references in this Conveyance to exhibits
and schedules refer to exhibits and schedules to this Conveyance unless
expressly provided otherwise, and all such exhibits and schedules are hereby
incorporated herein by reference and made a part hereof for all purposes.
 
 
 

--------------------------------------------------------------------------------

 
 
ARTICLE II
 
Granting Provisions
 
Section 2.1. Granting Clause. For a good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Grantor does hereby GRANT,
BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, WARRANT and DELIVER to Grantee a one
percent (1.0%) of 8/8ths overriding royalty interest (proportionately reduced to
Grantor’s Working Interest) in and to all Hydrocarbons produced and saved from
the Subject Interests described on Exhibit A (the “Overriding Royalty
Interests”). In the event any Lease covers less than the full oil and gas estate
in the Lands covered by the Lease, the Overriding Royalty Interests shall be
reduced in the proportion that the oil and gas estate covered by the applicable
Lease bears to the full and undivided oil and gas estate in the Lands.
 
TO HAVE AND TO HOLD the Overriding Royalty Interests unto Grantee, its
successors and assigns, forever. This Conveyance is made with full substitution
and subrogation of Grantee in and to all covenants and warranties by others
heretofore given or made.
 
Section 2.2. Non-Cost-Bearing Interest. Except for Specified Costs and except as
otherwise specifically provided herein, the Overriding Royalty Interests shall
be free and clear of, and shall bear no burden or part of, all “costs of
production” as defined in the Wyoming Royalty Payment Act, W.S. § 30-5-301
through 305.
 
Section 2.3. Measurement: Hydrocarbons Lost or Used. The Overriding Royalty
Interests shall not apply to any Hydrocarbons that are unavoidably lost in the
production thereof or in the compression, processing or transportation of
Subject Hydrocarbons prior to the applicable point of sale or which are used by
Grantor or the operator of any Subject Well for the production of Subject
Hydrocarbons or for the compression or transportation thereof prior to the
applicable point of sale, in each case only to the extent the same are lost or
used in the course of operations which are being conducted prudently and in a
good and workmanlike manner.
 
Section 2.4 Renewals and Extensions. This Conveyance and any overriding royalty
interest granted hereunder shall apply to Grantor’s and any Affiliate’s,
successor’s, assign’s, agent’s or representative’s of Grantor interests in all
renewals and extensions, whether such renewals and extensions have heretofore
been obtained or are hereafter obtained and whether or not the same are
described in Exhibit A.
 
For the purposes of the preceding paragraph, a new Hydrocarbon lease (as used in
this paragraph, “lease”) that covers the same interest (or any part thereof)
covered by a prior lease, and which is acquired within one year after the
expiration, termination, or release of such prior lease, shall be treated as a
renewal or extension of such prior lease. If a court of competent jurisdiction
determines that, due to the acquisition or ownership by Grantor or any of its
Affiliates, successors, assigns, agents or representatives of the Grantor, all
or a portion of the fee interest associated with any of the leases (the “Grantor
Fee”), the Overriding Royalty Interest associated with such lease has
terminated, then Grantor or any of its Affiliates, successors, assigns, agents
or representatives, as the case may be, shall immediately convey to Grantee a
non-participating royalty interest in the Grantor Fee equal to the overriding
royalty interests set forth in Section 2.1 with respect to the Grantor Fee. Such
overriding royalty interest shall be reduced on a property-by-property basis in
the proportion which the percentage of the oil and gas estate covered by the
Grantor Fee in that property bears to one hundred percent (100%) of the oil and
gas estate in that property. To the fullest extent allowed by applicable law,
the royalty interest shall be conveyed by Grantor to Grantee with the same
provisions, representations, warranties and covenants that are in this
Conveyance.
 
 
 

--------------------------------------------------------------------------------

 
 
ARTICLE III
 
Marketing of Overriding Royalty Interest Hydrocarbons and Distribution of
Proceeds
 
Section 3.1 Nature of Marketing Arrangements. Grantor shall have the obligation
to prudently market, or cause to be prudently marketed, the Overriding Royalty
Interest Hydrocarbons on behalf of and for the account of Grantee in
transactions with reputable purchasers, with each such marketing arrangement,
including those arrangements relating to sales, treating, transportation,
compression and processing, to be made upon terms and conditions (the “Marketing
Terms and Conditions”) that, in the case of an arms-length sale to a third
party, are the same terms and conditions under which Grantor sells its share of
produced Hydrocarbons (with Grantee receiving the same consideration as Grantor
and Grantor’s Affiliates receive), or in the case of any other sale (a) are the
best reasonably obtainable in the general field or area, (b) are at least as
favorable as Grantor or any Affiliate of Grantor obtains for Grantor’s share of
the Hydrocarbons attributable to the Subject Interests or attributable to any
other properties in the same field or general area, and (c) take into account
and give due regard to the best interests of Grantee. No Overriding Royalty
Interest Hydrocarbons are or will become subject to any sales arrangement
whereby (i) payment for Overriding Royalty Interest Hydrocarbons is or can be
deferred for a substantial period after the Month in which the Overriding
Royalty Interest Hydrocarbons are delivered (i.e., in excess of 60 days), or
(ii) payments may be made other than by checks, drafts, wire transfer or similar
communications for the immediate payment of money. Grantor shall duly and
prudently perform all obligations performable by it under any arrangements by
which Overriding Royalty Interest Hydrocarbons are sold or otherwise marketed,
and shall take all appropriate measures to enforce the performance under each
such arrangement of the obligations of the other parties thereto. As to any
third parties, all acts of Grantor in marketing the Overriding Royalty Interest
Hydrocarbons and all sales or other marketing agreements executed by Grantor in
accordance herewith shall be binding on Grantee and the Overriding Royalty
Interests; it being understood that the right and obligation to market the
Overriding Royalty Interest Hydrocarbons is at all times vested in Grantor, and
Grantee does not have any such right or obligation. Accordingly, it shall not be
necessary for Grantee to join in any production sales or marketing agreements or
any amendments to existing production sales or marketing agreements.
 
Section 3.2 Distribution of Funds. Grantee shall receive all payments for (or on
account of) Overriding Royalty Interest Hydrocarbons on or before noon on the
last business day of each month in which proceeds from sale are received by
Grantor, net of Specified Costs. All payments shall be sent to Grantee by the
purchaser of the Hydrocarbons from the Subject Interests by wire transfer or
check to such account or location as Grantee may direct from time to time in
writing. If any proceeds are received by Grantor for or on account of Overriding
Royalty Interest Hydrocarbons, such proceeds shall immediately be paid to
Grantee. Grantor shall cause to be prepared and executed such division orders,
transfer orders, or instructions in lieu thereof, as may be necessary to cause
payments to be made directly to Grantee by the purchaser of the Hydrocarbons
from the Subject Interests.
 
Section 3.3 Production Records, Statements and Payments. Grantor shall keep
full, true, and correct records of: (a) the Hydrocarbons produced from or
attributable to the Subject Interests, and the portion attributable to the
Overriding Royalty Interests, (b) all costs of production as defined in W.S.
§ 30-5-304, and all costs of marketing the Hydrocarbons produced from or
attributable to the Subject Interests, and (c) any other records necessary to
keep proper accounts in accordance with the provisions of this Conveyance. Such
records may be inspected by Grantee or its authorized representatives and copies
made thereof at all reasonable times. On or before noon on the last business day
of each month in which proceeds from sale are received by Grantor, Grantor or
Grantor’s oil and gas purchaser shall send to Grantee a statement setting forth:
(i) the production from the Subject Interests for the applicable month, (ii) the
portion of such production attributable to the Overriding Royalty Interests,
(iii) to the extent Grantee does not receive direct payment of proceeds from
sale of Overriding Royalty Interest Hydrocarbons pursuant to Section 3.2 above,
the gross proceeds attributable to the sale of Overriding Royalty Interest
Hydrocarbons and the Specified Costs allocable thereto, and (iv) such other data
as Grantee may reasonably request in writing.
 
 
 

--------------------------------------------------------------------------------

 
 
ARTICLE IV
 
Representations, Warranties and Covenants
 
Grantor hereby represents, warrants and covenants for the benefit of Grantee as
follows:
 
Section 4.1 Operations. The Subject Interests and properties unitized therewith
are being (and, to the extent the same could adversely affect the ownership or
operation of the Subject Interests after the date hereof, have during Grantor’s
tenure of ownership been) maintained, operated and developed in a good and
workmanlike manner, in accordance with prudent industry standards and in
conformity with all applicable laws, rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with all
Hydrocarbon leases, deeds and other contracts and agreements forming a part of
or pertaining to the Subject Interests. Grantor, directly or through appropriate
agreements with the operator of the Subject Interests, has all governmental
licenses and permits necessary or appropriate to own and operate the Subject
Interests, and Grantor has not received any notices of any material violations
in respect of any such licenses or permits. Grantor shall develop, operate and
maintain the Subject Interests as would a prudent operator. Decisions with
regard to the conduct of operations will be made by Grantor without considering
the effect of the Overriding Royalty Interests as burdens on the Subject
Interests. As to any portions of the Subject Interests as to which Grantor is
not the operator, Grantor shall take all actions and exercise all legal rights
and remedies as are available to it to cause the operator to so develop,
maintain and operate such portions of the Subject Interests in accordance with
this Section 4.1.
 
Section 4.2. Title; Permitted Encumbrances. Grantor has good and defensible
title to the Subject Interests, free and clear of all liens, security interests,
and encumbrances except for Permitted Encumbrances. Such qualification as to
Permitted Encumbrances is made for the sole purpose of limiting the
representations and warranties of Grantor made herein, and is not intended to
restrict the description of the Subject Interests, nor is it intended that
reference herein to any Permitted Encumbrance shall subordinate the Overriding
Royalty Interests to such Permitted Encumbrance or otherwise cause this
Conveyance or any rights of Grantee hereunder to be made subject to, or reduced
or encumbered by, such Permitted Encumbrance. Grantor hereby binds itself to
WARRANT and FOREVER DEFEND all and singular title to the Overriding Royalty
Interests unto Grantee, its successors and assigns, against every Person
lawfully claiming or to claim the same or any part thereof. This Conveyance is
made with full substitution and subrogation of Grantee in and to all covenants,
representations and warranties by others heretofore given or made with respect
to the Subject Interests.
 
Section 4.3. Leases, Deeds and Contracts; Performance of Obligations. The
Hydrocarbon leases, contracts, servitudes, fees, deeds, and other agreements
forming a part of the Subject Interests, to the extent the same cover or
otherwise relate to the Subject Interests, are in full force and effect, and
Grantor agrees to so maintain them, or to cause them to be so maintained, in
full force and effect to the extent a prudent operator, without giving effect to
the Overriding Royalty Interests or this Conveyance, would do so.
 
 
 

--------------------------------------------------------------------------------

 
Section 4.4 Ad Valorem and Severance Taxes. Grantor shall timely pay and
discharge (or cause to be paid and discharged) (a) all ad valorem taxes assessed
against or with respect to the Subject Interests or any part thereof, and (b)
all production, severance, excise and other taxes assessed against, or measured
by, the Overriding Royalty Interest Hydrocarbons or the value, or proceeds, of
the Overriding Royalty Interest Hydrocarbons.
 
Section 4.5. Imbalances.
 
(a) Definitions. As used herein, “undertake” means that an owner of production
from a Subject Well takes a lesser share of Hydrocarbons produced from such
Subject Well than the share which such owner is entitled to take by virtue of
its ownership interest, determined without regard to any rights under any
production balancing agreement or similar arrangement or any rights under common
law with respect to production balancing, and “overtake” means that an owner of
production from a Subject Well takes a greater share of Hydrocarbons produced
from such Subject Well than the share which such owner is entitled to take by
virtue of its ownership interest, again determined without regard to any rights
under any production balancing agreement or similar arrangement or any rights
under common law with respect to production balancing. If an owner undertakes,
the amount of production not taken is “underproduction” and if an owner
overtakes, the extra share of production taken is “overproduction”.
 
(b) No Undertakes Without Consent. Grantor will not undertake or overtake from a
Subject Well (either for itself or on behalf of Grantee) if an Affiliate of
Grantor is the party that would thereby be the party which overtakes or
undertakes. Grantor may otherwise elect to undertake or overtake in its
reasonable business judgment exercised for the benefit of itself and Grantee. If
any undertake by Grantor occurs in violation of this subsection (b), the
quantity of Overriding Royalty Interest Hydrocarbons for which Grantor must
account to Grantee hereunder shall be determined (to the maximum extent allowed
under applicable law) without regard thereto.
 
(c) No Balancing From Other Properties. Grantor will not allow any Subject
Interest to be subject to any production balancing arrangement under which one
or more third Persons may overtake a portion of the production attributable to
such Subject Interest as a result of undertakes or overtakes (or other actions
or inactions) with respect to properties other than such Subject Interest. If,
however, any overtake by any such third Person occurs in violation of this
subsection (c), the quantity of Overriding Royalty Interest Hydrocarbons for
which Grantor must account to Grantee hereunder shall be determined (to the
maximum extent allowed under applicable law) without regard thereto. For the
purposes of this subsection (c), a production unit in which all parties have
uniform interests shall be considered to be a single Subject Interest.
 

ARTICLE V
 
Assignments and Transfers
 
Section 5.1. Assignment and Transfer by Grantee. Subject to Grantor’s Option to
Repurchase, Grantee may sell, convey, assign, mortgage or otherwise dispose of
any Overriding Royalty Interest (including its rights, titles, interests,
estates, remedies, powers and privileges appurtenant or incident to such
Overriding Royalty Interest under this Conveyance), in whole or in part. No
change of ownership of any Overriding Royalty Interest shall be binding upon
Grantor, however, until Grantor is furnished with copies of the original
documents evidencing such change.
 
 
 

--------------------------------------------------------------------------------

 
Section 5.2. Assignment and Transfer by Grantor. The Conveyance shall inure to
the benefit of and be binding to the parties and their respective heirs, legal
representatives, successors and assigns.
 
Section 5.3. Covenants Running With the Subject Interests. All covenants and
agreements of Grantor herein contained shall be deemed to be covenants running
with the Subject Interests. All of the provisions hereof shall inure to the
benefit of Grantee and its Affiliates, heirs, legal representatives, successors
and assigns.
 
ARTICLE VI
 
Miscellaneous Provisions
 
Section 6.1. Further Assurances. Grantor agrees to execute and deliver to
Grantee, and, to the extent it is within Grantor’s power to do so, to cause any
third parties to execute and deliver to Grantee, all such other and additional
instruments and to do all such further acts and things as may be necessary or
appropriate to more fully vest in and assure to Grantee, from time to time, all
of the rights, titles, interests, remedies, powers and privileges herein granted
or intended so to be.
 
Section 6.2. No Waiver. The failure of Grantee to insist upon strict performance
of a covenant hereunder or of any obligation hereunder, irrespective of the
length of time for which such failure continues, shall not be a waiver of
Grantee’s right to demand strict compliance in the future. No consent or waiver,
express or implied, to or of any breach or default in the performance of any
obligation hereunder shall constitute a consent or waiver to or of any other
breach or default in the performance of the same or any other obligation
hereunder. No provision of this Conveyance shall be deemed a waiver by Grantee
of any rights granted to Grantee under applicable Law governing overriding
royalty interests and the rights and privileges of the owners thereof.
 
Section 6.3. Applicable Law. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW,
THIS CONVEYANCE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF WYOMING.
 
Section 6.4. Severability. Every provision in this Conveyance is intended to be
severable. If any term or provision hereof is determined to be invalid, illegal
or unenforceable for any reason whatsoever, such invalidity, illegality or
unenforceability shall not affect the validity, legality and enforceability of
the remainder of this Conveyance.
 
Section 6.5. Notices. Unless otherwise stated herein, all notices authorized or
required by the terms of this Conveyance shall be in writing and shall be
delivered by United States Postal Service, courier or facsimile to the party to
be notified, or by delivering such notice in person to such party. Notice shall
be deemed effective only upon receipt by the party to whom such notice is
directed. Any party may change its address for notice at any time by giving
written notice of the new address to the other party in the manner set forth
herein. For purposes of notice, the addresses of Grantor and Grantee shall be as
follows:
 
GRANTOR
GRANTEE
Rancher Energy Corp.
GasRock Capital LLC
999 18th Street, Suite 3400
1301 McKinney Street, Suite 2800
Denver, Colorado 80202
Houston, Texas 77010-2026
Attention: John Works
Attention: Marshall Lynn Bass
Facsimile: (702) 904-5698
Facsimile: (713) 300-1401
   

 
 
 

--------------------------------------------------------------------------------

 
 
Section 6.6. NO LIABILITY OF GRANTEE; INDEMNITY. EXCEPT AS EXPRESSLY PROVIDED
HEREIN WITH RESPECT TO DEDUCTION OR REIMBURSEMENTS OF SPECIFIED COSTS, NO
GRANTEE INDEMNITEE SHALL EVER BE RESPONSIBLE FOR ANY PART OF THE COSTS, EXPENSES
OR LIABILITIES INCURRED IN CONNECTION WITH:
 
(A) THE EXPLORING, DEVELOPING, OPERATING, OWNING, MAINTAINING, REWORKING OR
RECOMPLETING OF THE SUBJECT INTERESTS OR SUBJECT LANDS, ANY OBLIGATIONS OF
GRANTOR WITH RESPECT TO ANY TAX PARTNERSHIPS BURDENING THE SUBJECT INTERESTS,
THE PHYSICAL CONDITION OF THE SUBJECT INTERESTS OR THE SUBJECT LANDS, OR THE
HANDLING, TREATING OR TRANSPORTING OF HYDROCARBONS PRODUCED FROM THE SUBJECT
INTERESTS (INCLUDING ANY COSTS, EXPENSES, LOSSES OR LIABILITIES RELATED TO
COMPLIANCE WITH OR VIOLATION OF AN ENVIRONMENTAL LAW OR OTHERWISE RELATED TO
DAMAGE TO OR REMEDIATION OF THE ENVIRONMENT, WHETHER THE SAME ARISE OUT OF
GRANTEE’S OWNERSHIP OF AN INTEREST IN PROPERTY OR OUT OF THE ACTIONS OF GRANTOR
OR GRANTEE OR OF THIRD PARTIES OR ARISE OTHERWISE), OR
 
(B) THE FAILURE BY GRANTOR TO HAVE GOOD AND DEFENSIBLE TITLE TO THE SUBJECT
INTERESTS FREE AND CLEAR OF ALL BURDENS, ENCUMBRANCES, LIENS AND TITLE DEFECTS
(INCLUDING ANY COSTS, EXPENSES, LOSSES OR LIABILITIES SUFFERED BY ANY GRANTEE
INDEMNITEE AS A RESULT OF ANY CLAIM THAT SUCH GRANTEE INDEMNITEE MUST DELIVER OR
PAY OVER TO ANY PERSON ANY PART OF THE OVERRIDING ROYALTY INTEREST HYDROCARBONS
OR ANY PROCEEDS THEREOF AT ANY TIME PREVIOUSLY RECEIVED OR THEREAFTER TO BE
RECEIVED BY SUCH GRANTEE INDEMNITEE),
 
AND GRANTOR AGREES TO INDEMNIFY, DEFEND AND HOLD EACH GRANTEE INDEMNITEE
HARMLESS FROM AND AGAINST ALL COSTS, EXPENSES, LOSSES AND LIABILITIES INCURRED
BY ANY GRANTEE INDEMNITEE (I) IN CONNECTION WITH ANY OF THE FOREGOING OR (II) IN
CONNECTION WITH THIS CONVEYANCE, OR THE TRANSACTIONS, ACTIVITIES AND EVENTS
(INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF OR HEREOF) AT ANY TIME ASSOCIATED
WITH OR CONTEMPLATED IN ANY OF THE FOREGOING OR (III) IN CONNECTION WITH ANY TAX
PARTNERSHIP BURDENING ANY OF THE SUBJECT INTERESTS. SUCH INDEMNITY SHALL ALSO
COVER ALL REASONABLE COSTS AND EXPENSES OF ANY GRANTEE INDEMNITEE, INCLUDING
REASONABLE LEGAL FEES AND EXPENSES, WHICH ARE INCURRED INCIDENT TO THE MATTERS
INDEMNIFIED AGAINST. AS USED IN THIS ARTICLE VI, “GRANTEE INDEMNITEES” MEANS
GRANTEE AND GRANTEE’S SUCCESSORS AND ASSIGNS AND PURCHASERS (INCLUDING ANY
PERSON WHO AT ANY TIME PURCHASES OVERRIDING ROYALTY INTEREST HYDROCARBONS), ALL
OF THEIR RESPECTIVE AFFILIATES, AND ALL OF THE OFFICERS, DIRECTORS, AGENTS,
BENEFICIARIES, TRUSTEES, ATTORNEYS AND EMPLOYEES OF THEMSELVES AND THEIR
AFFILIATES.
 
THE FOREGOING INDEMNITY SHALL SURVIVE ANY TERMINATION OF THIS CONVEYANCE.
 
(Signatures and acknowledgments are on the following pages)
 
 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Conveyance is executed as of the acknowledgement date
of each of the parties hereto, but shall be effective as of the Effective Time.

GRANTOR:

RANCHER ENERGY CORP.,
a Nevada corporation d/b/a
RANCHER ENERGY OIL & GAS CORP.

By:    /s/ John Works                                             
John Works
President and Chief Executive Officer

 
 
 
 

 
 
Signature Page to Conveyance of Overriding Royalty Interest

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Conveyance is executed as of the acknowledgement date
of each of the parties hereto, but shall be effective as of the Effective Time.

GRANTEE:

GASROCK CAPITAL LLC,
a Delaware limited liability company

By:        /s/ Marshall Lynn Bass                           
Marshall Lynn Bass
Principal
 
 
 
 
Signature Page to Conveyance of Overriding Royalty Interest

--------------------------------------------------------------------------------

 
 
 

STATE OF COLORADO §   § COUNTY OF DENVER § 

 
The foregoing instrument was acknowledged before me this 22nd day of October
2008, by John Works, the President and Chief Executive Officer of Rancher Energy
Corp., a Nevada corporation doing business in the State of Wyoming as Rancher
Energy Oil & Gas Corp., on behalf of said corporation.
 

 
/s/Alyssa Bodden                                   
 
Notary Public
     
My Commission Expires: 11/10/2008

 
(SEAL)

 

 
Acknowledgement Page to Conveyance of Overriding Royalty Interest

--------------------------------------------------------------------------------

 

 
 
STATE OF TEXAS
§   §
COUNTY OF HARRIS
§ 

 
This instrument was acknowledged before me on October 22, 2008 by Marshall Lynn
Bass, Principal of GasRock Capital LLC, a Delaware limited liability company on
behalf of said limited liability company.

 

 
 /s/ Linda J. Rose                                              
 
Notary Public, State of Texas
      My Commission Expires: October 21, 2011

 
(SEAL)
 
 

 
Acknowledgement Page to Conveyance of Overriding Royalty Interest

--------------------------------------------------------------------------------