Exhibit
10.1


 


DEMAND PROMISSORY NOTE


 


	
  $3,000,000

  	
   

  	
  As of September 28, 2007

  



 


FOR VALUE RECEIVED, JPMORGAN CHASE BANK, N.A., solely in its capacity
as trustee for MESA OFFSHORE TRUST, a trust formed under the laws of the State
of Texas, having an address at 919 Congress Avenue, Austin, Texas 78701 (“Borrower”),
promises to pay ON DEMAND to the order of  JPMORGAN CHASE BANK, N.A.  (“Lender”), whose address is
1111 Polaris Parkway, Columbus, Ohio 43240, at said address or such other
address as may be designated in writing by the holder hereof from time to time,
the principal sum of  THREE MILLION AND
No/100 Dollars ($3,000,000.00), or, if less, the aggregate unpaid principal
amount of all loans (collectively, the “Demand Loans”, and each a “Demand
Loan”) made by the Lender to the Borrower, together with interest on said
principal, at a rate equal to prime rate plus TWO percent (2%); provided, however, that in no event shall such rate exceed
the maximum legal rate of interest permitted by applicable law.


This Demand Note evidences an extension of credit for borrowed money
authorized under Section 3.07 of the Royalty Trust Indenture, dated as of
December 1, 1982, by and between Mesa Petroleum Co., as Trustor, and Texas
Commerce Bank National Association, as Trustee (the “Trust Indenture”).  This Demand Note shall have the priority with
regard to payments set forth in Section 3.07 of the Trust Indenture, and the
Borrower agrees to comply with Section 3.07 of the Trust Indenture with regards
to distributions to its unitholders.


Prior to any demand for the repayment hereof, Borrower promises to pay
interest on the unpaid principal amount of each Demand Loan from the date of
such Demand Loan until such principal amount is paid in full, annually, in
arrears, at such interest rates as are specified herein.  The date, amount, and payment(s) (if any) of
principal, the Demand Loan(s) to which such payment(s) will be applied (which
shall be at the discretion of the Lender) and the outstanding principal balance
of Demand Loans shall be recorded by the Lender on its books and records (which
may be electronic in nature) and at any time and from time to time may be, and
shall be prior to any transfer and delivery of this Note, entered by the Lender
on the schedule attached or any continuation of the schedule attached hereto by
the Lender (at the discretion of the Lender, any such entries may aggregate
Demand Loans (and payments thereon) with the same interest rate and tenor and,
if made on a given date, may show only the Demand Loans outstanding on such
date).


Borrower may prepay any outstanding principal and accrued and unpaid
interest under this Demand Note, in whole or in part, at any time without
penalty.


The Lender has approved an
uncommitted line of credit to the Borrower in a principal amount not to exceed
the face amount of this Note.  The execution and delivery of this Note and the acceptance by the Lender of this Note shall not be deemed or construed to create any contractual
commitment to lend by the Lender to the Borrower. The line of credit is in the form of
advances made from time to time by the Lender in its sole and absolute
discretion to the Borrower. Borrower may borrow sums under this Note, up to the
principal amount of this Note, until such time as Lender makes demand for
payment in full 


 


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of this Note or until December 31, 2008, whichever is earlier, and may
repay those sums at any time, at its option; provided,
however, that if any sums are so repaid they may not later be
reborrowed.


The Lender may decline to fund any request by Borrower for borrowings
under this Demand Note at any time in its sole discretion, for any reason
whatsoever, including without limitation in the event that Lender has reason to
believe that Borrower will not be able to satisfy its obligations to repay
Demand Loans under this Demand Note as required under the terms of this Demand
Note.  Lender further reserves the right
at any time to demand a mortgage, pledge, grant of security interests in or other
encumbrance on assets of Borrower prior to making any additional Demand Loans
under this Demand Note to the extent permitted under Section 3.07 of the Trust
Indenture.  The failure of Lender to make
Demand Loans hereunder for any reason whatsoever shall not constitute a breach
of this Demand Note.


In the event of default in the payment of any installment of principal
or interest when due hereunder, or upon failure in performance of any covenant,
agreement, or obligation to be performed under any documents executed in
connection with this Demand Note, Lender may declare the entirety of this
Demand Note, principal and interest, immediately due and payable without
further notice, but failure to exercise said option shall not constitute a
waiver on the part of Lender of the right to exercise the same at any other
time.


In the event default is made in the payment of this Demand Note in
whatever manner its maturity may be brought about, and it is placed in the
hands of an attorney for collection, or is collected through probate,
bankruptcy or other proceedings, Borrower promises to pay all reasonable
amounts actually incurred by Lender for court costs and attorneys’ fees in
connection therewith.


Borrower waives grace, notice, demand, presentment for payment, notice
of non-payment, protest, notice of protest, notice of intention to accelerate,
notice of acceleration of the indebtedness due hereunder and all other notice,
filing of suit and diligence in collecting this Demand Note, and the enforcing
of any of the security rights of Lender, and consent and agree that the time of
payment hereof may be extended without notice at any time and from time to
time, and for periods of time, whether or not for a term or terms in excess of
the original term hereof, without notice or consideration to, or consent from,
any of them.  Time is of the essence
hereof.


This note is secured by a pledge of the Trust Estate, as that term is
defined in the Trust Indenture, including without limitation the 99.99% general
partnership interest in the Mesa Offshore Royalty Partnership owned by the Mesa
Offshore Trust, pursuant to that one certain pledge agreement of even date
herewith executed by Borrower for the benefit of Lender .


THIS DEMAND
NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF TEXAS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.


 


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EXECUTED to be effective the day and year first written above.


	
   

  	
  MESA OFFSHORE TRUST,

  
	
   

  	
  a
  Texas trust

  
	
   

  	
   

  
	
   

  	
  By:
  The Bank of New York Trust Company, N. A. as attorney-in-fact for JPMORGAN
  CHASE BANK, N.A. Trustee

  
	
   

  
	
   

  	
  By:

  	
  /s/
  Mike Ulrich

  
	
   

  	
  Name:

  	
  Mike
  Ulrich

  
	
   

  	
  Title:

  	
  Vice
  President

  



 


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DEMAND
LOANS AND PAYMENTS OF PRINCIPAL


	
  Date

  	
   

  	
  Amount of Demand Loan

  	
   

  	
  Amount of Principal Paid or
  Prepaid

  	
   

  	
  Unpaid Principal Balance

  	
   

  	
  Notation Made By

  
	
   

  	
   

  	
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