EX-10.17






GUARANTY AGREEMENT




This Guaranty Agreement is made as of September 1, 2009, by ESCONDE ENERGY LLC, a Texas
limited liability company (the “Guarantor”), in favor of AMERICAN STATE BANK, a Texas banking
association (the “Bank”).



NOTICE IS TAKEN OF THE FOLLOWING:




	A.	 	Of even date herewith, ESCONDE RESOURCES LP, a Texas limited partnership, as Borrower (the
“Borrower”); the Guarantor, as Guarantor; and the Bank, as the Lender entered into that
certain Loan Agreement of even date herewith, (such loan agreement, as the same may be
amended, restated, modified, or supplemented from time to time, being hereinafter called the
“Loan Agreement”). Pursuant to the Loan Agreement, the Bank has agreed to renew and extend
existing loans to the Borrower on the terms and conditions set forth in the Loan Agreement.






	B.	 	One of the terms and conditions stated in the Loan Agreement for the making of the loans as
provided therein is the execution and delivery to the Bank of this Guaranty Agreement;





NOW, THEREFORE, (i) in order to comply with the terms and conditions of the Loan Agreement,
(ii) to induce the Bank, at any time and from time to time, to loan monies with or without security
to or for the account of the Borrower in accordance with the terms of the Loan Agreement, (iii) at
the special insistence and request of the Bank, and (iv) for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby agrees as
follows:



ARTICLE 1




General Terms




Section 1.01 Terms Defined Above. As used herein, the terms “Bank,” “Borrower,”
“Guarantor” and “Loan Agreement” shall have the meanings indicated above.



Section 1.02 Certain Definitions. As used herein, the following terms shall have the
following meanings, unless the context otherwise requires:



“Financial Statement” shall have the meaning indicated in Subsection 3.01(e)
hereof.



“Guaranty Agreement” shall mean this Guaranty Agreement, as the same may be
amended, restated, modified or supplemented from time to time.



“Indebtedness” shall have the meaning indicated in Section 2.01 hereof.



“Lien” shall mean any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and including, without limitation, the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term “Lien” shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For purposes of
this Guaranty Agreement, the Guarantor shall be deemed to be the owner of any
Property which he has acquired or holds subject to a conditional sale agreement,
financing lease or other arrangement pursuant to which title to the Property has
been retained by or vested in some other Person for security purposes.



“Note” shall mean the promissory note described in Subsection 2.01(a) hereof.



“Person” shall mean any individual, corporation, partnership, limited
partnership, joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or any
other form of entity.



“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.



ARTICLE 2




The Guaranty




Section 2.01 Indebtedness Guaranteed. The Guarantor hereby irrevocably and
unconditionally guarantees the prompt payment when due, whether at maturity or otherwise of the
following (hereinafter collectively called the “Indebtedness”):



All indebtedness, obligations and liabilities of the Borrower to the Bank (and
also to others to the extent of participations granted them by the Bank) arising out
of and pursuant to the Loan Agreement, now outstanding or owing or which may be
existing or incurred, directly between the Borrower and the Bank, absolute or
contingent, jointly and/or severally, secured or unsecured, arising by operation of
law or otherwise, or direct or indirect, including, without limitation, the
following:




	 	a.	 	That certain Term Note, of even date herewith, in the
original principal amount of $309,681.87, executed by the Borrower and
payable to the order of the Bank, together with any and all renewals,
extensions for any period, increases and rearrangements thereof;	 






	 	b.	 	All liabilities of Borrower for future advances,
extensions of credit, or other value at any time advanced, given, or
made by the Bank to Borrower; and	 






	 	c.	 	The indebtedness, covenants and obligations of the
Borrower contained or referred to in the Loan Agreement, including,
without limitation, the reimbursement of reasonable expenses, all
reasonable attorneys’ fees, commitment fees, and other liabilities,
obligations, and indebtedness of the Borrower to the Bank arising
pursuant to the provisions of the Loan Agreement, or any other
instrument executed in connection with or as security for the Note.	 





Section 2.02 Nature of Guaranty. This Guaranty Agreement is an absolute,
irrevocable, complete and continuing guaranty of payment and not a guaranty of collection, and no
notice of the Indebtedness need be given to the Guarantor. This Guaranty Agreement may not be
revoked by the Guarantor and shall continue to be effective with respect to debt under the
Indebtedness arising or created after any attempted revocation by the Guarantor and after the
Guarantor’s dissolution. The Bank and the Borrower may modify, alter, rearrange, extend for any
period and/or renew from time to time, the Indebtedness and the Bank may waive any Event of Default
(as defined in the Loan Agreement) without notice to the Guarantor and in such event the Guarantor
will remain fully bound hereunder on the Indebtedness. This Guaranty Agreement shall continue to
be effective or be reinstated, as the case may be, if at any time any payment of the Indebtedness
is rescinded or must otherwise be returned by the Bank upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not been made. This
Guaranty Agreement may be enforced by the Bank and any subsequent holder of the Indebtedness and
shall not be discharged by the assignment or negotiation of all or part of the Indebtedness. The
Guarantor hereby expressly waives presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of intent to accelerate maturity, notice of acceleration of
maturity and any other notice in connection with the Indebtedness, and also notice of acceptance of
this Guaranty Agreement, acceptance on the part of the Bank being conclusively presumed by its
request for this Guaranty Agreement and delivery of the same to it. This Guaranty Agreement may
require the Guarantor to make multiple payments to the Bank with respect to the Indebtedness.



Section 2.03 Bank’s Rights. The Guarantor authorizes the Bank, without notice or
demand and without affecting the Guarantor’s liability hereunder, to take and hold security for the
payment of this Guaranty Agreement and/or the Indebtedness, and exchange, enforce, waive and
release any such security; and to apply such security and direct the order or manner of sale
thereof as the Bank in its discretion may determine; and to obtain a guaranty of the Indebtedness
from any one or more Persons and at any time or times to enforce, waive, rearrange, modify, limit
or release any of such other Persons from their obligations under such guaranties.



Section 2.04 Guarantor’s Waivers. The Guarantor waives any right to require the Bank
to (a) proceed against the Borrower or any other Person liable on the Indebtedness, (b) enforce its
rights against any other guarantor of any portion of the Indebtedness, (c) proceed or enforce its
rights against or exhaust any security given to secure any portion of the Indebtedness, (d) have
the Borrower joined with the Guarantor in any suit arising out of this Guaranty Agreement and/or
the Indebtedness, or (e) pursue any other remedy in the Bank’s power whatsoever. The Bank shall
not be required to mitigate damages or take any action to reduce, collect or enforce the
Indebtedness. The Guarantor waives any defense arising by reason of any disability, lack of
corporate authority or power, or other defense of the Borrower or any other guarantor of any
portion of the Indebtedness, and shall remain liable hereon regardless of whether the Borrower or
any other guarantor be found not liable thereon for any reason. Until the Indebtedness shall have
been paid in full, the Guarantor shall not have any right of subrogation. Until the Indebtedness
shall have been paid in full, the Guarantor waives any right to enforce any remedy which the Bank
now has or may hereafter have against the Borrower, and waives any benefit of any right to
participate in any security now or hereafter held by the Bank.



Section 2.05 Maturity of Indebtedness and Payment. The Guarantor agrees that if the
maturity of any portion of the Indebtedness is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand
or notice to the Guarantor. The Guarantor will, forthwith upon notice from the Bank of the
Borrower’s failure to pay any of the Indebtedness at maturity, pay to the Bank at its banking
headquarters, the amount due and unpaid by the Borrower and guaranteed hereby. The failure of the
Bank to give this notice shall not in any way release the Guarantor hereunder.



Section 2.06 Bank’s Expenses. If the Guarantor fails to pay any of the Indebtedness
after notice from the Bank of the Borrower’s failure to pay such Indebtedness, and if the Bank
obtains the services of an attorney for collection of amounts owing by the Guarantor hereunder, or
if suit is filed to enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy,
probate, receivership or other judicial proceedings for the establishment or collection of any
amount owing by the Guarantor hereunder, or if any amount owing by the Guarantor hereunder is
collected through such proceedings, the Guarantor agrees to pay to the Bank its reasonable
attorneys’ fees.



Section 2.07 Liability. It is expressly agreed that the liability of the Guarantor
for the payment of the Indebtedness guaranteed hereby shall be primary not secondary.



Section 2.08 Events and Circumstances Not Reducing or Discharging Guarantor’s
Obligations. The Guarantor hereby consents and agrees to each of the following to the fullest
extent permitted by law, and agrees that its obligations under this Guaranty Agreement shall not be
released, diminished, impaired, reduced or adversely affected by any of the following, and waives
any rights (including without limitation rights to notice) which he might otherwise have as a
result of or in connection with any of the following:




	 	a.	 	Modifications, Etc. Any renewal, extension, modification, increase,
decrease, alteration or re-arrangement of all or any part of the Indebtedness, or of
the Note, or the Loan Agreement or any instrument executed in connection therewith, or
any contract or other agreement between the Borrower and the Bank, or any other
Person, pertaining to any portion of the Indebtedness;






	 	b.	 	Adjustment, Etc. Any adjustment, indulgence,
forbearance or compromise that might be granted or given by the Bank to the
Borrower or the Guarantor or any Person liable on any portion of the
Indebtedness;






	 	c.	 	Condition of Borrower or Guarantor. The insolvency,
bankruptcy, arrangement, adjustment, composition, liquidation, disability,
dissolution, death or lack of power of the Borrower or of the Guarantor or of
any other Person at any time liable for the payment of all or any part of the
Indebtedness; or any dissolution of the Borrower, or any sale, lease or
transfer of any or all of the assets of the Borrower or of the Guarantor, or
any changes in the owners, partners, shareholders or equity holders of the
Borrower or any reorganization of the Borrower;






	 	d.	 	Invalidity of Indebtedness. The invalidity,
illegality or unenforceability of all or any part of the Indebtedness, or any
document or agreement executed in connection with any portion of the
Indebtedness, for any reason whatsoever, including, without limitation, the
fact that the Indebtedness, or any part thereof, exceeds the amount permitted
by law, the act of creating the Indebtedness or any part thereof is
ultra vires, the individuals, officers or representatives
executing the documents or otherwise creating the Indebtedness acted in excess
of their authority, the Indebtedness violates applicable usury laws, the
Borrower has valid defenses, claims or offsets (whether at law, in equity or
by agreement) which render the Indebtedness wholly or partially uncollectible,
the creation, performance or repayment of all or any portion of the
Indebtedness (or the execution, delivery and performance of any document or
instrument representing part of the Indebtedness or executed in connection
with the Indebtedness, or given to secure the repayment of any portion of the
Indebtedness) is illegal, uncollectible, legally impossible or unenforceable,
or the Loan Agreement or other documents or instruments pertaining to any
portion of the Indebtedness have been forged or otherwise are irregular or not
genuine or authentic;






	 	e.	 	Release of Obligors. Any full or partial release of
the liability of the Borrower on the Indebtedness or any part thereof, of any
co-guarantors, or any other Person now or hereafter liable, whether directly
or indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Indebtedness or any part thereof, it
being recognized, acknowledged and agreed by the Guarantor that he may be
required to pay the Indebtedness without assistance or support of any other
Person, and the Guarantor has not been induced to enter into this Guaranty
Agreement on the basis of a contemplation, belief, understanding or agreement
that any Person other than the Borrower will be liable to perform any portion
of the Indebtedness, or the Bank will look to any other Person to perform any
portion of the Indebtedness. Notwithstanding the foregoing, the Guarantor
does not hereby waive or release (expressly or impliedly) any rights of
subrogation, reimbursement or contribution which he may have, after payment in
full of the Indebtedness, against others liable on the Indebtedness. The
Guarantor’s rights of subrogation and reimbursement are, however, subordinate
to the rights and claims of the Bank;






	 	f.	 	Other Security. The taking or accepting of any other
security, collateral or guaranty, or other assurance of payment, for all or
any part of the Indebtedness;






	 	g.	 	Release of Collateral, Etc. Any release, surrender,
exchange, subordination, deterioration, waste, loss or impairment (including
without limitation negligent, willful, unreasonable or unjustifiable
impairment) of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of the
Indebtedness;






	 	h.	 	Care and Diligence. The failure of the Bank or any
other Person to exercise diligence or reasonable care in the preservation,
protection, enforcement, sale or other handling or treatment of all or any
part of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of the
Indebtedness;






	 	i.	 	Status of Liens. The fact that any collateral,
security, security interest or Lien contemplated or intended to be given,
created or granted as security for the repayment of any portion of the
Indebtedness shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or Lien, it being
recognized and agreed by the Guarantor that he is not entering into this
Guaranty Agreement in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the collateral for
any portion of the Indebtedness. Notwithstanding the foregoing, the Guarantor
does not hereby waive or release (expressly or impliedly) any right to be
subrogated to the rights of the Bank in any collateral or security for any
portion of the Indebtedness, after payment in full of the Indebtedness. The
Guarantor’s rights of subrogation are, however, subordinate to the rights,
claims, Liens and security interests of the Bank;






	 	j.	 	Payments Rescinded. Any payment by the Borrower to
the Bank is held to constitute a preference under the bankruptcy laws, or for
any reason the Bank is required to refund such payment or pay such amount to
the Borrower or someone else; or






	 	k.	 	Other Actions Taken or Omitted. Any other action
taken or omitted to be taken with respect to the Loan Agreement, the
Indebtedness or any part thereof, or the security and collateral therefor,
whether or not such action or omission prejudices the Guarantor or increases
the likelihood that he will be required to pay the Indebtedness pursuant to
the terms hereof; it being the unambiguous and unequivocal intention of the
Guarantor that he shall be obligated to pay the Indebtedness guaranteed hereby
when due, notwithstanding any occurrence, circumstance, event, action, or
omission whatsoever, whether contemplated or uncontemplated, and whether or
not otherwise or particularly described herein, except for the full and final
payment and satisfaction of the Indebtedness.





ARTICLE 3




Representations and Warranties




Section 3.01 By Guarantor. In order to induce the Bank to accept this Guaranty
Agreement, the Guarantor represents and warrants to the Bank (which representations and warranties
will survive the creation of the Indebtedness and any extension of credit thereunder) that:




	 	a.	 	Benefit. The Guarantor’s guaranty pursuant to this
Guaranty Agreement reasonably may be expected to benefit, directly or
indirectly, the Guarantor.






	 	b.	 	Binding Obligations. This Guaranty Agreement
constitutes the valid and binding obligation of the Guarantor, enforceable in
accordance with its terms (except that enforcement may be subject to any
applicable bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditor’s rights).






	 	c.	 	No Legal Bar or Resultant Lien. This Guaranty
Agreement will not violate any provisions of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which the Guarantor
is subject, or result in the creation or imposition of any Lien upon any
Property of the Guarantor.






	 	d.	 	No Consent. The Guarantor’s execution, delivery and
performance of this Guaranty Agreement does not require the consent or approval
of any other Person, including without limitation any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.






	 	e.	 	Financial Statement. The financial statement (the
“Financial Statement”) most recently submitted to the Bank by the Guarantor is
true and correct and presents fairly the financial condition of the Guarantor
at such date.






	 	f.	 	No Litigation. As of the date hereof, there is no
litigation, legal, administrative or arbitral proceeding, investigation or
other action of any nature pending, or, to the knowledge of the Guarantor,
threatened against or affecting the Guarantor or any of its Property.





Section 3.02 No Representations by Bank. Neither the Bank nor any other Person has
made any representation, warranty or statement to the Guarantor in order to induce him to execute
this Guaranty Agreement.



Section 3.03 Solvency. As of the date hereof, and after giving effect to this
Guaranty Agreement and the contingent obligation evidenced hereby, the Guarantor will be solvent.



ARTICLE 4




Miscellaneous




Section 4.01 Successors and Assigns. This Guaranty Agreement is and shall be in
every particular available to the successors and assigns of the Bank and is and shall always be
fully binding upon the heirs, personal representatives, successors and assigns of the Guarantor,
notwithstanding that some or all of the monies, the repayment of which this Guaranty Agreement
applies, may be actually advanced after any bankruptcy, receivership, reorganization or other event
affecting the Guarantor.



Section 4.02 Notices. Any notice or demand to the Guarantor under or in connection
with this Guaranty Agreement may be given and shall conclusively be deemed and considered to have
been given and received upon the deposit thereof, in writing, duly stamped and addressed to the
Guarantor at the address appearing on the last page of this Guaranty Agreement or at such other
address of which the Guarantor shall have notified the Bank in writing, in the United States mail,
but actual notice, however given or received, shall always be effective.



Section 4.03 Construction. THIS GUARANTY AGREEMENT IS A CONTRACT MADE UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.



Section 4.04 Entire Agreement. THIS GUARANTY AGREEMENT REPRESENTS THE FINAL AGREEMENT
OF THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS OF THE PARTIES.



{The remainder of this page is intentionally blank; signature page follows.}




EXECUTED this 1st day of September 2009.



Address:




	3327	 	West Wadley Avenue, ESCONDE ENERGY LLC, a Texas





	 	 	 	 	 
	Suite 3-267	 	Limited Liability Company
	Midland, Texas 79701
	 	

By:
	 	

Pierce-Hamilton Energy Partners LP, its

managing member








	 	 	 	By:
Muscoda Hill Energy LLC, its
general partner






By:      /s/ Lisa P. Hamilton—

Lisa P. Hamilton, President




By:      /s/ Paul W. Heard—




	 	 	Paul W. Heard






Managing Member




By:      /s/ Ronnie L. Steinocher—
Ronnie L. Steinocher



	 	 	 	 	 
	 	 	 	 	Managing Member MAKER
	By its signature, Bank acknowledges the truth of the notice hereinabove.
	 	 	AMERICAN STATE BANK
	 	 	By:       /s/ Mike Marshall—
	 
	 	 	 	 	Mike Marshall








	 	 	President





BANK