Document:

exv10w15

Exhibit 10.15

EXPLORATION AND DEVELOPMENT AGREEMENT

HACKBERRY CREEK PROJECT AREA

HESS CORPORATION

AND

ZAZA ENERGY, LLC

March 26,
2010

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	I. Recitals
	 	 	2	 
	II. Definitions
	 	 	2	 
	III. Operations and Costs
	 	 	5	 
	IV. Collaboration in the Hackberry Creek Project Area
	 	 	7	 
	V. Area of Mutual Interest
	 	 	9	 
	VI. Wells
	 	 	10	 
	VII. Operating Agreement
	 	 	10	 
	VIII. Exploration and Development Tax Rider
	 	 	10	 
	IX. Miscellaneous
	 	 	11	 
	X. REPRESENTATION, WARRANTIES AND COVENANTS OF HESS
	 	 	13	 
	XI.
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF ZAZA
	 	 	13	 

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EXPLORATION AND DEVELOPMENT AGREEMENT

          This Exploration and Development Agreement is entered into this 26th day of
March, 2010 (the “Effective Date”) between HESS Corporation, a Delaware corporation “HESS”, with
offices at One Allen Center, 500 Dallas Street, Houston, TX 77002 and ZaZa Energy, LLC, a Texas
limited liability company, hereinafter “ZAZA”, with offices at 600 Leopard Street, Suite 2100,
Corpus Christi, TX 78401. HESS and ZAZA will sometimes hereinafter be referred to individually as
a “Party” and collectively as the “Parties”.

I. Recitals

          1.1. The Parties have identified certain geographic areas located in Lavaca and Colorado
Counties for conducting exploration and production operations thereon, hereinafter the “Hackberry
Creek Project Area”.

          1.2. The Parties have agreed upon the relative contributions, responsibilities, rights and
duties in connection with the Hackberry Creek Project, all in accordance with the terms and
conditions hereinafter contained.

          NOW, THEREFORE, in consideration of the mutual covenants set forth below and other good and
valuable consideration, the Parties agree as follows:

II. Definitions

          The following terms when used in this Agreement will have the following meanings:

          2.1.
“Acquisition Costs” means, for costs incurred in the acquisition of leases over and above
the Hackberry Creek Leases, one hundred percent (100%) of the cost of (i) one thousand five hundred
dollars ($1500) per net mineral acre; or (ii) if the sum of the actual lease bonus cost plus third
party brokerage is greater than one thousand five hundred dollars ($1500) per net mineral acre then
the cost to Hess shall be the sum of the actual lease bonus and brokerage costs plus two hundred
dollars ($200) per net mineral acre.

          2.2. “Agreement” means this agreement and all exhibits attached hereto.

          2.3. “Carry Free of Costs” means a Working Interest ownership that is free and clear of
Exploration and Development Costs up to the Well Cap.

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          2.4. “Exploration and Development Costs” of the Wells means all actual third party direct
costs and expenses incurred or paid with respect to the Wells, including but not limited to (a)
location costs, costs of drilling, re-entering (excluding any Wells that have been previously
produced under this Agreement), logging, testing, completing, fracing and equipping such Well(s)
for production including flow-lines, tanks, flow meters and other equipment located on the drilling
unit, (b) that portion of drilling rate overhead charges allocated to such Well(s) under the
applicable JOA, and (c) costs of plugging and abandoning and surface restoration for any such well
completed as a dryhole, explicitly excluding Operating Costs

          2.5. “Hackberry Creek Leases” mean leases totaling 13,500 Net Mineral Acres on the Hackberry
Creek Project Area delivered by ZAZA to HESS pursuant to the terms of the PSA.

          2.6. “Hackberry Creek Project Area” means the area outline in bold on Exhibit “A” and part of
the Hackberry Creek Purchase and Sales Agreement, attached thereto as Exhibit “A”.

          2.7. “Hackberry Creek Purchase and Sale Agreement” or “PSA” means that certain agreement
between HESS and ZAZA dated March 26, 2010.

          2.8. “Existing Burdens” means (i) any royalty, overriding royalty, production payment, and
other similar burdens on production which burden the Subject Leases at the time of acquisition by
either Party, and (ii) the Reserved Interest.

          2.9. “Exploration Program” means the operations to be conducted by the Parties in the area
using 2-D, and or 3-D seismic, and other exploration technologies to explore for subsurface
geological formations and anomalies indicative of the existence of oil, gas and other hydrocarbons,
along with all necessary processing, review and analysis of such data, including without limitation
acquisition of new geophysical data or the reprocessing of existing available geophysical data
covering some or all of the Hackberry Creek Project Area or across other areas if the data will
contribute to the evaluation of the trend and the subsequent leasing of prospective areas.

          2.10. “HESS Corporation” or “HESS” has the meaning ascribed in the preamble to this Agreement,
with a mailing address of 500 Dallas, Houston, Texas 77002.

          2.11. “JOA” or “Operating Agreement” means the operating agreement referred to in Article VII
herein.

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          2.12 “Net Mineral Acres” means shall be computed separately for each Lease and shall mean, for
each such Lease, the product of the number of gross acres in the lands covered by such Lease,
multiplied by (a) the undivided interest in the oil and gas or other mineral interest covered by
such Lease in such lands, multiplied by (b) the undivided working interest (expressed as a decimal)
in such Lease acquired by or for the benefit of the Parties insofar as it covers such lands
(provided that if items (a) and/or (b) vary as to different areas covered by the Lease, a separate
calculation shall be done for each such area).

          2.13 “Operating Costs” of a Well means all costs incurred in producing such Well and disposing
of such production including, but not limited to:

          (i) labor and other services necessary for the maintenance and operation of
such Well;

          (ii) materials, equipment, supplies, transportation, repairs, and replacements
used in the maintenance and operation of such Well, including replacements for all
parts of machinery, equipment, tanks, or other equipment to replace and/or repair
original Well and/or lease equipment;

          (iii) reworking or re-equipping such Well;

          (iv) gathering, treating, processing, transporting, and marketing of production
from such Well, explicitly including all gathering lines and pipelines (explicitly
excluding flow-lines); and ad valorem, severance, gathering, windfall profits, or
other applicable taxes; and

          (v) that portion of cost and expenses allocated to such Well in accordance
with the usual and customary accounting practices and a COPAS Accounting Procedure
(including, but not limited to, overhead costs of the operator as set out in the
JOA) which, pursuant to such accounting practices, are determined to be Operating
Costs.

          2.15 “Reserved Interest” means on Leases included in Exhibit A(i) of the PSA, an overriding
royalty interest in and to each Lease reserved by ZAZA’s predecessor in interest pursuant to the
Purchase and Sale Agreement by and between Blackstone Oil & Gas, LLC, et al. as Sellers and ZAZA as
Buyer, being an overriding royalty interest equal to the positive difference between (a) 25% of
8/8* and (b) the lessor’s royalty burden; and as to any Additional Interest acquired by either
Party pursuant to Article IV, an overriding royalty interest equal to the positive difference
between (a) twenty-five percent (25%) of 8/8ths and (b) the lessor’s royalty burden, determined on
a lease by lease basis; in no event, however, to ever be less than three percent (3%) of 8/8ths
such that the Parties will acquire a maximum of seventy-five percent (75%) net revenue interest,
but no less than a seventy-two percent (72%) net revenue interest in the additional Leases acquired
in accordance with Section 3.2.

          2.16 “Seismic Data” means, with respect to each separate and distinct seismic operation on the
Hackberry Creek Project Area, the final gained and ungained migrated three

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dimensional survey (or two dimensional) stack data obtained in connection with the
Exploration Program.

     2.17 “Subject Leases” means the Oil, Gas and Mineral Leases, or individually “Lease”,
covering portions of the Hackberry Creek Project Area acquired or to be acquired in connection with
exploration efforts to be conducted pursuant to this Agreement.

     2.18 “Well” means any well or wells drilled on the Subject Leases, or lands pooled therewith
and completed either as a producer or plugged and abandoned as a dry hole.

     2.19 “Well Cap” means the number of wells HESS is obligated to carry ZAZA in the Hackberry
Creek Project Area and shall be the number of wells derived by dividing the Net Mineral Acres
retained in the Hackberry Creek Project Area (explicitly excluding any acreage that expires) by 640
gross mineral acres by way of example: if the Hackberry Creek Project
Area acreage totals 19, 200
Net Mineral Acres and is divided by 640 acres, then the Well Cap would be 30 carried wells in the
Hackberry Creek Project Area. The Well Cap shall be reduced in proportion to acreage expiring
during the AMI Term (as that term is defined herein below). During development of the Hackberry
Creek Project Area, if a portion of the net acreage is condemned and deemed non-productive by HESS
the Well Cap shall be proportionately adjusted downward to reflect the condemned net acreage. HESS
shall then, upon the written request of ZAZA, re-assign or otherwise convey its Working Interest in
such condemned acreage to ZAZA. Notwithstanding the foregoing, prior to making a written request
for such condemned acreage, ZAZA shall not be obligated to accept the condemned acreage.

     2.20 “Working Interest” means the cost-bearing leasehold estate and working interest in and to
the Subject Leases held by the Parties, subject to applicable participation elections.

     2.21 “ZaZa Energy, LLC (“ZAZA”)” has the meaning ascribed in the preamble to this Agreement,
with a mailing address of 600 Leopard St., Suite 2100, Corpus Christi, Texas 78401.

III. Operations and Costs

          3.1. Program Operator. ZAZA, as Operator, will conduct the Exploration and Development
Program across the Hackberry Creek Project Area. ZAZA and HESS acknowledge that HESS, at its sole
discretion, shall have the right to take over all operations including, but not limited to, all
drilling and production operations, at any time on or after two years from the spud date of the
first well drilled on the Hackberry Creek Project Area upon not less than thirty (30) days prior
written notice to ZAZA. ZAZA and HESS acknowledge that ZAZA, at its sole discretion, shall have the
right to turn over all operations including, but not limited to, all drilling and production
operations, at any time on or after two years from the spud date of the first well drilled on the
Hackberry Creek Project Area upon not less than thirty (30) days prior written notice to HESS.

          3.2. Leasing. ZAZA shall, in good faith, use its best efforts to (a) obtain oil and gas

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leases within the Hackberry Creek Project Areas identified and mutually approved by the
Parties on leasing terms acceptable to HESS and substantially comparable to the current competitor
leasing terms found in the Hackberry Creek Project Area. HESS shall advise ZAZA of maximum
approved royalty and bonus terms in excess of such competitor leasing terms that it is willing to
offer for leases in the Hackberry Creek Project Area and ZAZA shall not offer in excess of such
maximum approved royalty and bonus. HESS and ZAZA shall periodically meet (at least once every
month) to review leasing efforts and to discuss, identify and solicit approval for the joint
acquisition in the Hackberry Creek Project Area and to discuss other matters pertinent to lease
acquisition. If HESS and ZAZA agree in writing on the acquisition of certain Leases (to be
identified by either land descriptions, a plat with an area outlined, or by landowner), then such
Leases shall be jointly acquired by ZAZA on behalf of the Parties. HESS is under no obligation to
accept any oil and gas lease acquired by ZAZA which does not conform to the above procedures.
Subject to the foregoing provisions of this Section 3.2, in the event the Parties cannot agree on
the joint acquisition of certain additional leases, or if either HESS or ZAZA separately acquire
additional leases within the Hackberry Creek Project Area without such periodic meeting and
subsequent agreement, then such leases shall be subject to the provisions of Section 5.1.

          ZAZA shall retain consultants and brokers, both full time and part time, reasonably necessary
to assist ZAZA and HESS in the ongoing operations and development of the Hackberry Creek Project
Area. HESS shall have the right to approve any multi-year consulting terms. The associated fees
and expenses of all consultants and brokers related to the ongoing operations of the Exploration
and Development Program will be billed to HESS at cost (with supporting documentation) and HESS
shall reimburse ZAZA within thirty (30) days of HESS’ receipt of an invoice for such charges from
ZAZA. All such consultants and brokers shall be the contractors of ZAZA unless otherwise agreed to
in writing by HESS and the consultants and brokers in accordance with the provisions of this
Section 3.2. ZAZA shall assign to HESS, on a lease by lease basis, an undivided 90% of the working
interest acquired in each Lease and a proportionate share of the net revenue interest, reduced by a
proportionate 90% share, if applicable, of the Reserved Interest. The Reserved Interest is to be
reserved in favor of ZAZA and/or their assigns in all leasehold acquired pursuant to this
Agreement.

          3.3. Leasing Costs. HESS shall provide ZAZA a lease fund, in accordance with this Agreement
and a mutually agreed upon funding agreement, reasonably necessary to facilitate Lease purchases
within the Hackberry Creek Project Area in accordance with Section 3.2. HESS shall deposit into
the lease fund only those amounts necessary for the acquisition of oil and gas leases that HESS
has previously agreed in writing to acquire. ZAZA shall use its reasonable efforts to acquire oil
and gas leases within the Hackberry Creek Project Area in accordance with the provisions of
Section 3.2. Of those oil and gas leases acquired pursuant to Section 3.2, HESS shall acquire
ninety percent (90%) working interest in the Subject Leases and shall pay one hundred percent
(100%) cost share of all Acquisition Costs. ZAZA shall retain an undivided ten percent (10%)
working interest in each Lease for its own account (proportionately reduced). ZAZA shall identify
areas available for lease within the Hackberry Creek Project Area and if for any reason ZAZA
offers to HESS and HESS declines to participate, ZAZA shall be free to pursue said
acreage for its own account outside of this Agreement for terms identical to or less favorable
than those presented to HESS. HESS shall

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have ten (10) business days to approve or decline an area for lease, unless otherwise agreed to
by the Parties where time is determined, in the reasonable opinion of the Parties, to be of the
essence.

          3.4. Proportionate Reduction. To the extent that a Lease subject to this Agreement covers
less than the full interest in oil, gas and other minerals in the lands purported to be covered
under such Lease or if ZAZA’s interest in such Lease is less than the full leasehold interest,
then the Working Interest conveyed therein to HESS and the Reserved Interest shall be reduced in
proportion to the interest actually covered by such Lease.

IV. Collaboration in the Hackberry Creek Project Area

          4.1 Operating Teams. It is the intention of the Parties to collaborate in the
exploration and development of the Hackberry Creek Project Area through joint teams comprised of
employees, consultants or representatives of each Party. In this regard, the Parties shall form the
working groups described below (collectively the Operating Teams) to provide overall supervision,
direction and coordination of the lease acquisition, exploration, drilling, development and
production operations under this Agreement. The Operating Teams shall be composed of a minimum of
five (5) separate joint teams: (i) the Exploration Team, (ii) Engineering Team, (iii) the Land
Team, (iv) the Commercial Team and (v) the Management Team. Each of the team may subdivide into
separate sub-teams as the individual teams deem appropriate. Unless otherwise provided, each Team
shall consist of at least one (1) and no more than five (5) representatives from each Party. The
head of each team (“Team Lead”) shall initially be a ZAZA employee except for the Commercial Team
and the Management Team which HESS shall chair. HESS shall, however, have the option after the
initial well on the Hackberry Creek Project Area is drilled to total depth to place a HESS employee
as the Team Lead on any of the Operating Teams. The work of each Party’s team members shall be
performed independently at office locations provided by the Party designating such members.
However, from time to time either Party’s team members may be seconded at the other Party’s offices
in order to maximize team efficiencies. The Operating Teams are teams specific to this Agreement
and shall be independent from any study team (in connection with the undertaking of a feasibility
study) and/or any project team that may be established pursuant to the terms of the Operating
Agreement.

          4.2 Exploration Team. The Exploration Team will be responsible for conducting the Exploration
Program for the evaluation of the Hackberry Creek Project Area to identify the most desirable
drillable areas and to identify areas in the Hackberry Creek Project Area for future lease
acquisitions and exploration by the Parties. The Parties agree to disclose to each other their
technical data and interpretations of the Participation Area (unless such data and interpretation
are subject to third party confidential data restrictions). In any event, all such data or
interpretations disclosed shall be subject to the confidentiality provisions of the Operating
Agreement. The Exploration Team shall provide recommendations for the placement of drilling units
and the location of wells on any such drilling units and well evaluation procedures.

          4.3 Engineering Team. The Engineering Team shall include at least one (1) member from HESS’
Environmental, Health and Safety unit and shall be responsible for well design, completion and
fracturing and stimulation procedures, scheduling of drilling operations,

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compliance with federal, state and local environmental, safety and operational regulations, and
the production of hydrocarbon resources throughout the term of this Agreement. The Engineering
Team and the Exploration Team shall work together to efficiently accomplish the responsibilities
of each Team.

          4.4 Land Team. The Land Team shall include one (1) member from HESS’ Legal Department and
shall be responsible for construction and implementation of all contracts and other instruments
necessary for the conduct of business under this Agreement. The Team shall also coordinate the
approval of leases, lease negotiations and acquisitions, facilitate funding for lease acquisitions
and payment of acquisition costs. The Team shall conduct joint venture negotiations with third
parties, procurement of drillsite title opinions and preparation of unit declarations and other
matters relating to overall supervision of business matters, other than commercial, in the
Hackberry Creek Project Area.

          4.5 Commercial Team. The Commercial Team shall consist of at least one (1) but not more than
three (3) representatives from each Party and will be responsible for the planning and
implementation of transportation and marketing strategies for field production. The Commercial Team
shall identify, evaluate and attempt to agree upon the most commercially advantageous form of field
gathering system, and the assessment of any third party gathering proposals (including the review
of pertinent contracts in connection with any such proposals). The Commercial Team is expected to
develop effective and cost-efficient strategies and plans for the construction and/or installation
of production facilities intended to service numerous wells across the Hackberry Creek Project
Area.

          4.6 Management Team. The Management Committee will be composed of a Vice President level
manager from HESS and a Managing Partner from ZAZA. The Management Team shall have the
responsibility for ensuring that (a) the Teams are properly formed, maintained and functioning in a
manner consistent with this Agreement; (b) effective coordination and cooperation of efforts exists
within the Operating Teams and the management of each of the Parties; and (c) that a forum exists
for prompt reconciliation of competing alternative views of a Party’s members of the respective
Teams. In particular, the Management Team shall (1) review, assess and approve reports and
recommendations from the respective Teams; (2) attempt to reconcile the views and proposals
supported by one Party’s Team members with the other Party’s members where practicable.
Additionally, the Management Team shall serve as a forum to resolve differences of opinion among
Team members as to matters such as appropriate AFE costs, geophysical data acquisition and
reprocessing, well locations, drilling schedules, completion procedures or health, safety and
environmental matters. The Management Team shall perform its purpose in good faith and use its
reasonable best efforts to arrive at unanimous solutions as expeditiously as possible. Failing to
reach a consensus view, the decision of HESS shall prevail.

          On a regularly scheduled basis, but no less than once a month, the respective Teams will
prepare a report to the Management Team of its recommendations on: (1) The approval of any
potential lease acquisitions and funding; (2) a subsurface review updated to reflect new well
results in the area; and (3) a tentative drilling schedule of wells for the coming six (6) months.

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V. Area of Mutual Interest

          5.1 AMI Procedures. The Parties established an Area of Mutual Interest pursuant to the PSA
(“AMI”). The AMI shall remain in effect until all Leases in the AMI terminate or April 1, 2020,
whichever is first to occur (“AMI Term”). During the AMI Term, if any Party hereto (the “Acquiring
Party”) acquires any oil and gas leasehold interest, unleased mineral interest, or the right to
earn any such interest, directly or indirectly (whether through joiner in a joint operating
agreement, participation agreement or otherwise) (through any individual or entity associated or
affiliated with such Party) (through any individual or entity associated or affiliated with such
Party), the Acquiring Party shall, within fifteen (15) business days following such acquisition,
notify the other Party to this AMI provision, or a counterpart thereof (the “Offeree”) of such
acquisition. To the extent a lease covers acreage inside and outside the AMI, the portion situated
outside the AMI shall also be offered to the Acquiring Party. If the Offeree elects to purchase
its proportionate share of the lease, the AMI shall be amended to include the acreage outside the
AMI. The notice from the Acquiring Party to the Offeree shall include a copy of all instruments of
acquisition and any other pertinent available data, and an itemized statement of the actual costs
and expenses incurred by the Acquiring Party in acquiring such interest, excluding, however, costs
and expenses of its own personnel. The Offeree shall have ten (10) business days after the receipt
of such notice within which to notify the Acquiring Party of its election to acquire its
proportionate interest in the interest acquired by the Acquiring Party. The proportionate
interests will be based upon the Party’s respective Working Interests, the Reserved Interest and
the Carried Free of Costs rights of ZAZA. If the Acquiring Party has not received actual notice of
the election of an Offeree to acquire its proportionate interest within the ten (10) business day
period, it shall be conclusively presumed that the Offeree has rejected the offer. If the Offeree
notifies the Acquiring Party within the aforesaid time period of its election to acquire its
proportionate interest in the interest acquired, the Acquiring Party shall promptly invoice the
Offeree for its proportionate part of the actual third party costs incurred in the acquisition,
along with a written agreement whereby the Offeree assumes its proportionate share of all terms,
conditions, provisions, obligations and liabilities assumed by the Acquiring Party in connection
with such acquisition.

     Notwithstanding any of the foregoing, however, if a well is being drilled within the AMI at
the time of acquisition, the result of which, is reasonably expected to impact the value of the
interest so acquired, the Acquiring Party shall so advise the Offeree, and the election to acquire
a proportionate interest in the acquired interest must be made within forty-eight (48) hours after
receipt of such notice. Failure of the Offeree to timely respond in either case to the Acquiring
Party shall be conclusively deemed an election by such Party not to acquire its proportionate
interest in the acquired interest. In the event that a Party to this AMI provision, or a
counterpart thereof, should elect not to acquire its proportionate interest in such acquisition,
or should fail to timely exercise its option, then such Offeree will be deemed to have forfeited
all rights to acquire any right, title and interest in and to
acquired interest.

          If the Offeree elects to acquire its proportionate interest and assumes its obligations, as
hereinabove set forth, the Acquiring Party shall, after such Offeree has paid the invoice amount
and executed and delivered the written agreement provided for above, execute and deliver a written
assignment in recordable form covering the Offeree’s proportionate share in the acquired interest,
and an attributable net working interest (net of the ZAZA Reserved Interest in each

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Lease) which assignment shall be made without any warranty of title, express or implied, except to
claims of all persons claiming or to claim the same or any part thereof by, through or under the
Acquiring Party, but not otherwise. Such assignment shall also be made subject to the terms of
this Agreement.

          5.2 Existing AMI Areas. The Parties acknowledge that they may have existing areas of mutual
interest within the Hackberry Creek Project Area with third parties. The Parties agree these areas
are exempt from this Agreement. A list of such areas is attached hereto as Exhibit “C”.

          5.3 Excluded from the Hackberry Creek Project Area. Share acquisitions and mergers by
either Party are explicitly excluded from this Agreement.

VI. Wells

          6.1 Wells. Drilling, completion, reworking and production operations on all wells drilled on
the Hackberry Creek Project Area will be conducted in accordance with the JOA. As to each well
drilled up to the Well Cap, ZAZA will retain a 10% carried Working Interest on a Carry Free of
Costs basis proportionately reduced to HESS’ Working Interest in any such well(s). Once the Well
Cap is reached, ZAZA shall have the right to participate for a cost bearing 10% Working Interest
on subsequent Wells within the Hackberry Creek Project Area pursuant to the terms of the
applicable JOA.

VII. Operating Agreement

          7.1 Concurrent with the execution of this Agreement, the Parties agree to be bound by the
terms of a JOA substantially in the form of the JOA attached as “Exhibit B”, with appropriate
revisions for the date of the agreement, the description of the Leases covered, and the interest
of the Parties naming ZAZA as “Operator”, covering operations conducted with respect to the
Hackberry Creek Project Area and jointly owned Leases acquired pursuant to the PSA and this
Agreement. In the event of a conflict between the terms and provisions of this Agreement and the
JOA, the terms of this Agreement shall control.

VIII. Exploration and Development Agreement Tax Rider

          8.1 Tax Partnership. The Parties intend and expect that the transactions contemplated by this
Agreement and the PSA will be treated, for purposes of federal income taxation and for purposes of
certain state income tax laws that incorporate or follow federal income tax principles, as
resulting in (a) the creation of a partnership (the “Tax Partnership”) in which HESS and ZaZa are
treated as partners, with the Tax Partnership being treated for Tax purposes as holding the Subject
Leases and engaging in all activities of the Parties with respect to the Subject Leases and any
other assets that may subsequently be acquired by the Parties jointly pursuant to this Agreement;
and (b) the realization by the Tax Partnership of all items of income or gain and the incurrence by
the Tax Partnership, of all items of costs or expenses attributable to the ownership, operation or
disposition of such assets and other assets that may subsequently be acquired by the Parties
jointly, notwithstanding that such items are realized, paid or incurred by the Parties
individually, all as set forth in the Tax Partnership Agreement

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attached as Exhibit “D” .

          With respect to any of the Subject Leases purchased by HESS pursuant to this Agreement (but
not those purchased pursuant to the PSA)as to which HESS will be considered to own a ninety percent
(90%) working interest (and regardless of how title is taken), the Parties specifically intend that
(a) HESS shall be treated as having purchased such leases or other property for the Tax Partnership
for an amount equal to all costs paid by HESS with respect to such property (including, but not
limited to, Acquisition Costs as defined in this Agreement); (b) the Tax Partnership will be
considered to have paid any amounts payable to ZaZa pursuant to Sec. 3.2 of this Agreement as
amounts described in Sec. 707(a) of the Internal Revenue Code of 1986, (“Code”) for services
rendered; and (c) the Reserved Interest shall also be considered amounts payable to ZaZa by the Tax
Partnership as amounts described in Sec. 707(a) of the Code for services rendered.

IX. Miscellaneous

          9.1 Relationship of the Parties. It is not the purpose nor intention of this Agreement to
create, and this Agreement shall never be construed as creating, a joint venture, mining
partnership, or other relationship by and between the Parties whereby any Party shall be held
liable for the acts, either of omission or commission, of any other Party hereto. The rights and
liabilities of the Parties hereunder shall be several and not joint or collective.

          9.2 Confidentiality. The Parties shall keep this transaction and the information obtained from
the Exploration Program strictly confidential and agree that no Party shall disclose in whole or in
part, any such information to any third party without the other Party’s prior written consent. It
is agreed that the Parties may disclose the information to the following persons only to the extent
necessary to evaluate the participation in acquiring leases and drilling a well or wells thereon:
(a) the Parties’ (and their affiliates’ and nominees’) employees, officers and directors who need
to examine the information for purposes of evaluation; (b) any professional consultant retained for
the purpose of evaluating the information; (c) their respective working interest owners or
potential participants in the Hackberry Creek Project Area or non-consent acreage; or (d) any
lender financing the Parties’ participation in the potential acquisition or drilling, including any
professional consultant retained by the lender for purposes of evaluating the information. In any
event, the disclosing Party shall be responsible for ensuring that any party to whom the
information is disclosed shall keep the information confidential in accordance with this provision.

          9.3 Exhibits. The exhibits attached hereto are hereby incorporated herein and made a part
hereof for all purposes.

          9.4 Binding Effect. This Agreement will be binding upon the Parties hereto, their successors
and assigns. The AMI provision hereof constitutes a covenant running with the land.

          9.5 Complete Agreement. Excluding the PSA, this Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect to the

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subject matter hereof and contains all of the covenants and agreements between the parties with
respect to said matter. Time is of the essence in this Agreement.

          9.6 Amendment. No change, modification, or alteration of this Agreement shall be binding upon
any Party unless made in writing and executed by all Parties.

          9.7 Construction. This Agreement shall be construed in accordance with and governed in all
respects by the laws of the State of Texas. This Agreement shall be deemed to have been executed in
Houston, Texas, and all payments hereunder shall be deemed payable in Harris County, Texas.

          9.8 Notices. Any and all notices, requests, consents, responses to notices, or other
communications permitted or required to be given under the terms of this Agreement shall be in
writing, properly addressed to the other Party as shown below, and delivered by mail (postage
paid), by hand delivery or by facsimile transmission. Notices sent by email are ineffective.
Notices or responses are effective when received by the receiving Party during that Party’s regular
business hours. Notices and responses shall be deemed received (a) if given by facsimile
transmission, when transmitted if transmitted on a business day and during normal business hours of
the recipient, and otherwise on the next business day following transmission, (b) if given by
certified mail, return receipt requested, postage prepaid, three (3) business days after being
deposited in the United States mails and (c) if given by Federal Express service or other means,
when received or personally delivered. All communications shall be sent to the respective Party at
the address set forth below or at such other address as such Party may designate by ten (10) days
advance written notice to the other Party hereto:

	 	 	 	 	 

	 

	 	Addresses for Notices:	 	 
	 

	 	If to HESS:
	 	Hess Corporation
	 

	 	 	 	One Allen Center
	 

	 	 	 	500 Dallas St.
	 

	 	 	 	Houston, TX 77002
	 

	 	 	 	Attention: J.Y. Christopher
	 

	 	 	 	Facsimile: (713) 609-4041
	 
	 	 	 	 
	 

	 	If to ZAZA:
	 	ZAZA ENERGY, LLC
	 

	 	 	 	Attn: Todd Brooks
	 

	 	 	 	1301 McKinney St., Ste. 2850
	 

	 	 	 	Houston, TX 77010
	 

	 	 	 	Fax: (713) 595-1919

          9.9 Arbitration. All disputes, controversies, or claims that may arise among the
parties relating to this Agreement will be submitted to, and determined by, binding arbitration.
The arbitration will be conducted before a single arbitrator pursuant to the Commercial Arbitration
Rules then in effect of the American Arbitration Association but without using the offices or
auspices of the AAA. Exclusive venue for the arbitration will be in Harris County, Texas. The
arbitrator will apply the laws of the State of Texas (without regard to conflict of

12

 

law rules) to the dispute, controversy, or claim. Evidentiary questions will be governed by the
Texas Rules of Evidence. The arbitrator’s award will be in writing and shall set forth findings
and conclusions upon which the arbitrator based the award. The prevailing Party in the arbitration
will be entitled to recover its reasonable attorneys’ fees, costs, and expenses incurred in
connection with the arbitration, as determined by the arbitrator. Any award pursuant to the
arbitration will be final and binding upon the Parties and judgment on the award may be entered in
any federal or state court sitting or located in Harris County, Texas, or in any other court
having jurisdiction. The provisions of this Section will survive the termination of this
Agreement. Notwithstanding the foregoing, this Section will not prevent any Party from seeking
injunctive relief from a court of competent jurisdiction under appropriate circumstances,
provided, however, such action will not constitute a waiver of the provisions of this Section.

          9.10
Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.

          9.11 Public Announcements. The Parties agree to consult with each other prior to issuing any
press release or making any public statement with respect to this Agreement and, except for any
press release or public announcements, the making of which are required by law or any listing
agreement with any notional securities exchange, shall not issue any such press release or make any
such public statement prior to such consultation and the consent of the other Party.

X. REPRESENTATION, WARRANTIES AND COVENANTS OF HESS

          HESS hereby represents, warrants, and covenants to ZAZA as follows:

          10.1 Organization, Good Standing and Qualification. HESS is duly organized, validly existing
and in good standing under the laws of the State of Delaware and is qualified to do business and in
good standing in the State of Texas. HESS has all requisite corporate power and authority to
execute and deliver this Agreement, and to carry out the provisions
of this Agreement.

          10.2 Requisite Power and Authority. HESS has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and to carry out its provisions.
All action on HESS’ part required for the lawful execution and delivery of this Agreement has been
or will be taken prior to the closing. Upon its execution and delivery, this Agreement will be a
valid and binding obligation of HESS enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights and (b) general principles of equity that
restrict the availability of equitable remedies.

XI.
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF ZAZA

          ZAZA hereby represents, warrants, and covenants to HESS as follows:

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          11.1 Organization, Good Standing and Qualification. ZAZA is duly organized, validly existing
and in good standing under the laws of the State of Texas and is qualified to do business and in
good standing in the State of Texas. ZAZA has all requisite company power and authority to
execute and deliver this Agreement, and to carry out the provisions of this
Agreement.

          11.2 Requisite Power and Authority. ZAZA has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and to carry out its
provisions. All action on ZAZA’s part required for the lawful execution and delivery of this
Agreement has been or will be taken prior to the closing. Upon its execution and delivery, this
Agreement will be a valid and binding obligation of ZAZA, enforceable in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights and (b) general
principles of equity that restrict the availability of equitable remedies. ZAZA represents that
it has obtained all necessary consents and/or approvals of all of its partners to enter into this
Agreement and to perform its obligations set forth hereunder.

          11.3 No Conflict. The execution, delivery and performance by ZAZA of this Agreement and the
consummation of the transactions contemplated hereby do not and will not: (i) violate or conflict
with any provision of the charter documents or bylaws of ZAZA; (ii) violate any provision or
requirement of any domestic or foreign, national, state, or local law, statute, judgment, order,
writ, injunction, decree, award, rule, or regulation of any governmental entity applicable to
ZAZA; (iii) violate, result in a breach of, constitute (with due notice or lapse of time or both)
a default or cause any obligation, penalty, premium or right of termination to arise or accrue
under any contract; (iv) result in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever upon any of the properties or assets of
ZAZA; and (v) result in the cancellation, modification, revocation or suspension of any
license, permit, certificate, franchise, authorization or approval issued or granted by any
governmental entity.

          11.4 Consents. No consents or notices are required to be obtained or given by or on behalf
of ZAZA before consummation of the transactions contemplated by this Agreement in compliance with
all applicable laws, rules, regulations, orders or governmental or other agency directives, or
the provisions of any document binding upon ZAZA.

          11.5 Books and Records. ZAZA has maintained its books, records and files accurately and in
accordance with generally accepted industry standards and all books, records and files are in
ZAZA’s possession and the accounting records have been maintained in accordance with generally
accepted accounting principles consistently applied.

          11.6 Legal Proceedings. There is no suit, action, claim, investigation by any person or
entity or by any administrative agency or governmental body, and no legal administrative or
arbitration proceeding pending or, to ZAZA’s best knowledge, threatened against ZAZA which has
materially adversely affected or may so affect the performance of ZAZA.

14

 

          11.7 No Third Party Beneficiaries. No third party has any rights under this Agreement or may
enforce any provision in this Agreement.

          11.8 Conflicts of Interest. Except as otherwise expressly provided in this Agreement, no
director, employee, or agent of any Party shall give to or receive from any director, employee or
agent of any other Party, or any affiliate of any other Party, any commission, fee, rebate, gift,
or entertainment of significant cost or value in connection with this Agreement. In addition, no
director, employee, or agent of any Party shall enter into any business arrangement with any
director, employee, or agent of any other Party, or any affiliate of any other Party, who is not
acting as a representative of such other Party or its affiliate, without prior written notification
thereof to the other Party.

          11.9 Assignment of This Agreement. Neither Party may assign or transfer in whole or part its
rights and obligations under this Agreement without the prior written consent of the other Party,
which consent shall not be unreasonably withheld, conditioned or delayed. Any purported assignment
or transfer in breach of this obligation is void as between HESS and ZAZA. However, either Party
may assign any of its rights and obligations under this Agreement to an Affiliate or subsidiary
without the consent of the other Party.

          11.10 Limitation of Liability and No Responsibility for Extraordinary Damages. The
Parties acknowledge their sole obligation and liability to each other in connection with the
subject matter hereof shall be governed by the terms of this Agreement and the Operating Agreement.
Each Party mutually waives and releases to the fullest extent permitted by applicable law, all
claims for Consequential Loss, punitive or exemplary damages arising out of this Agreement, whether
such claims are made in connection with an indemnity, a breach of any obligation under this
Agreement, or otherwise. For the purposes of this Agreement, the phrase “Consequential
Loss” shall mean any of the following regardless of cause, whether arising under common law,
equity or contract, by virtue of any fiduciary duty, in tort or delict (including negligence) as a
consequence of breach of any duty (statutory or otherwise) or under any other legal doctrine or
principle whatsoever, irrespective of whether recoverable in law or equity.

(A) Loss of production, failure or inability to produce, process, take delivery of,
transport or deliver or delay in producing, processing, taking delivery of,
transporting or delivering hydrocarbons.

(B) Any failure, loss or damage or expense directly or indirectly consequent upon
any of the foregoing, including any loss or damage incurred or liquidated or
pre-estimated damages or penalties of any kind whatsoever borne or payable, under
any contract [for the sale, exchange, transportation, processing, storage or other
disposal of hydrocarbons].

(C) Any loss associated with business interruption including the cost of overheads
incurred during business interruption or deferment of revenue or income, loss of or
failure to obtain any contract or other business opportunity or loss of profit.

(D) Any loss, damage, cost and expense arising out of any action, claim,

15

 

suit, demand or judgment resulting from or arising out of any of the
foregoing.

(E) Loss of bargain, contract, expectation or opportunity in each case whether
direct or indirect.

(F) Any indirect or consequential loss under applicable law whether or not
foreseeable at the date of execution of this Agreement.

          IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate counterpart
originals to be effective as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 

	HESS CORPORATION	 	 	 	ZAZA ENERGY L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ William T. Drennen III
 

	 	 
	 	By:
	 	/s/ Todd A. Brooks 

	 	 
	Name: William T. Drennen III	 	 	 	Name: Todd A. Brooks	 	 
	Title: Sr. VP Global
Expl.	 	 	 	Title: Managing Partner	 	 
	Date: July 27, 2010	 	 	 	Date: 7/27/2010	 	 

16

 

Exhibit “A”

Plat of Hackberry Creek Project Area

17

 

Exhibit “D”

ATTACHED TO AND MADE A PART OF THAT CERTAIN

EXPLORATION AND DEVELOPMENT AGREEMENT ENTERED

INTO MARCH 26,2010 BETWEEN HESS CORPORATION AND

ZAZA ENERGY, LLC.

HESS & ZAZA

HACKBERRY CREEK PROJECT AREA

TAX PARTNERSHIP PROVISIONS

1. General Provisions

1.1 Designation of Documents.

This exhibit is referred to in, and is part of, that Agreement identified above and, if so
provided, a part of any agreement to which the Agreement is an exhibit. Such agreement(s)
(including all exhibits thereto, other than this exhibit) shall be hereinafter referred to as the
“Agreement;” and this exhibit is hereinafter referred to as the “Exhibit” or the “Tax Partnership
Provisions.” Except as may be otherwise provided in this Exhibit, terms defined and used in the
Agreement shall have the same meaning when used herein.

1.2 Relationship of the Parties.

The parties to the Agreement shall be hereinafter referred to as “Party” or “Parties.” The Parties
understand and agree that the arrangement and undertakings evidenced by the Agreement result in a
partnership for purposes of Federal income taxation and certain State income tax laws which
incorporate or follow Federal income tax principles as to tax partnerships. Such partnership for
tax purposes is hereinafter referred to as the “Partnership.” For every other purpose of the
Agreement the Parties understand and agree that their legal relationship to each other under
applicable State law with respect to all property subject to the Agreement is one of tenants in
common, or undivided interest owners, or lessee(s)-sublessee(s) and not a partnership; that the
liabilities of the Parties shall be several and not joint or collective; and that each Party shall
be responsible solely for its obligations.

1.3 Priority of Provisions of this Exhibit.

If there is a conflict or inconsistency, whether direct or indirect, actual or apparent, between
the terms and conditions of this Exhibit and the terms and conditions of the Agreement, or any
other exhibit or any part thereof, the terms and conditions of this Exhibit shall govern and
control.

1.4 Survivorship.

1.4.1 Any termination of the Agreement shall not affect the continuing application of the

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Tax Partnership Provisions for the termination and liquidation.

1.4.2 Any termination of the Agreement shall not affect the continuing application of the Tax
Partnership Provisions for the resolution of all matters regarding Federal and State income
reporting.

1.4.3 These Tax Partnership Provisions shall inure to the benefit of, and be binding upon, the
Parties hereto and their successors and assigns.

1.4.4 Term. The effective date of the Agreement shall be the effective date of these Tax
Partnership Provisions. The Partnership shall continue in full force and effect from, and after
such date, until termination and liquidation.

2. Tax Reporting Partner and Tax Matters Partner

2.1 Tax Reporting Partner.

The Operator (or the Party listed in Sec. 9.1) as the Tax Reporting Partner (“TRP”) is responsible
for compliance with all tax reporting obligations of the Partnership, see Sec. 3.1, below. In the
event of any change in the TRP, the Party serving as TRP at the beginning of a given taxable year
shall continue as TRP with respect to all matters concerning such year.

2.2 If Small Partnership Exception Not Applicable.

If the Partnership does not qualify for the “small partnership exception” from, or if the
Partnership elects (see infra Elections at Secs. 4.1 and 9.2) to be
subject to, §§6221 et seq.,
Subchapter C of Chapter 53 of Subtitle A (the “TEFRA rules”) of the Internal Revenue Code (the
“Code”) the TRP shall also be the Tax Matters Partner as defined in Code §6231(a) (the “TMP”) and
references to the TRP shall then include references to the TMP and vice versa.

2.2.1 Expenses. The TMP shall not be required to incur any expenses for the preparation for, or
pursuance of, administrative or judicial proceedings, unless the Parties agree on a method for
sharing such expenses.

2.2.2 Information Request by the TMP. The Parties shall furnish the TMP, within two weeks from the
receipt of the request, the information the TMP may reasonably request to comply with the
requirements on furnishing information to the Internal Revenue Service.

2.2.3 The TMP shall not agree to any extension of the statute of limitations for making assessments
on behalf of the Partnership without first obtaining the written consent of all Parties. The TMP
shall not bind any other Party to a settlement agreement in tax audits without obtaining the
written concurrence of any such Party.

2.2.4 Any other Party who enters in a settlement agreement with the Secretary of the

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Treasury with respect to any partnership items, as defined in Code §6231(a)(3), shall
notify the other Parties of the terms within ninety (90) days from the date of such settlement.

2.2.5 Inconsistent Treatment of Partnership Items. If any Party intends to file a notice of
inconsistent treatment under Code §6222(b), such Party shall, prior to the filing of such notice,
notify the TMP of the (actual or potential) inconsistency of the Party’s intended treatment of a
partnership item with the treatment of that item by the Partnership. Within one week of receipt the
TMP shall remit copies of such notification to the other Parties. If an inconsistency notice is
filed solely because a Party has not received a Schedule K-1 in time for filing of its income tax
return, the TMP need not be notified.

2.2.6
Request for Administrative Adjustment. No Party shall file pursuant to Code §6227 a request
for an administrative adjustment of partnership items without first notifying all other Parties.
If all other Parties agree with the requested adjustment, the TMP shall file the request on behalf
of the Partnership. If unanimous consent is not obtained within thirty (30) days from such
notice, or within the period required to timely file the request, if shorter, any Party, including
the TMP, may file a request for administrative adjustment on its own behalf.

2.2.7 Judicial Proceedings. Any Party intending to file with respect to any partnership item, or
any other tax matter involving the Partnership, a petition under Code §§6226, 6228, or any other
provision, shall notify the other Parties prior to such filing of the nature of the contemplated
proceeding. In the case where the TMP is the Party intending to file such petition, such notice
shall be given within a reasonable time to allow the other Parties to participate in the choice of
the forum for such petition. If the Parties do not agree on the appropriate forum, then the forum
shall be chosen by majority vote. Each Party shall have a vote in accordance with its percentage
interest in the Partnership for the year under audit. If a majority cannot agree, the TMP shall
choose the forum. If a Party intends to seek review of any court decision rendered as a result of
such proceeding, the Party shall notify the other Parties prior to seeking such review.

3. Income Tax Compliance and Capital Accounts

3.1 Tax Returns.

The TRP shall prepare and file all required Federal and State partnership income tax returns. Not
less than thirty (30) days prior to the return due date (including extensions), the TRP shall
submit to each Party for review a copy of the return as proposed.

3.2 Fair Market Value Capital Accounts.

The TRP shall establish and maintain for each Party fair market value (“FMV”) capital accounts and
tax basis capital accounts. Upon request, the TRP shall submit to each Party along with a copy of
any proposed partnership income tax return an accounting of such Party’s FMV capital accounts as of
the end of the return period.

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3.3 Information Requests.

Each Party agrees to furnish to the TRP not later than sixty (60) days before the return due date
(including extensions) such information relating to the operations conducted under the Agreement
as may be required for the proper preparation of such returns. Similarly, each Party agrees to
furnish to the TRP, as requested and timely, any the information and data necessary for the
preparation and/or filing of other required reports and notifications, and for the computation of
the capital accounts. As provided in Code §6050K(c), a Party transferring its interest must notify
the TRP to allow compliance with Code §6050K(a) (see also Sec. 8.1).

3.4 Best Efforts.

The TRP and the other Party(ies) shall use its/their best efforts to comply with responsibilities
outlined in this Section, and with respect to the service as TMP as outlined Sec. 2.2, and in
doing so shall incur no liability to any other Party.

4. Tax and FMV Capital Account Elections

4.1 General Elections.

For both income tax return and capital account purposes, the Partnership shall elect:

a) to deduct when incurred intangible drilling and development costs (“IDC”);

b) to use the maximum allowable accelerated tax method and the shortest permissible tax life for
depreciation;

c) the accrual method of accounting;

d) to
report income on a calendar year basis;

and the Partnership shall also make any elections as specially noted in Sec. 9.2, below.

4.2 Depletion.

Solely for FMV capital account purposes, depletion shall be calculated by using simulated cost
depletion within the meaning of Treas. Reg.§1.704-1(b)(2)(iv)(k)(2), unless the use of simulated
percentage depletion is elected in Sec. 9.2, below. The simulated cost depletion allowance shall
be determined under the principles of Code §612 and be based on the FMV capital account basis of
each Lease. Solely for purposes of this calculation, remaining reserves shall be determined
consistently by the TRP.

4.3 Election Out Under Code §761(a).

4.3.1 The TRP shall notify all Parties of an intended election to be excluded from the application
of Subchapter K of Chapter 1 of the Code not later than sixty (60) days prior to the filing date or
the due date (including extensions) for the Federal partnership income tax return, whichever comes
earlier. Any Party that does not consent must provide the TRP with written objection within thirty
(30) days of such notice.

4.3.2 After an election-out, to avoid an unintended impairment of the election-out: The Parties
will avoid, without prior coordination, any operational changes which would terminate the
qualification for the election-out status; all Parties will monitor the

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continuing qualification of the Partnership for the election-out status and will notify the
other Parties if, in their opinion, a change in operations will jeopardize the election-out; and,
all Parties will use, unless agreed to by them otherwise, the cumulative gas balancing method as
described in Treas. Reg.§1.761-2(d)(2).

4.4 Consent Requirements for Other Tax or FMV Capital Account Elections.

Unless stipulated differently in Sec. 9.3, any election, other than those referenced above, must
be approved by the affirmative vote of two (2) or more Parties owning a majority of the working
interest based upon post-Payout ownership.

5. Capital Contributions and FMV Capital Accounts

The provisions of this Sec. 5 and any other provisions of the Tax Partnership Provisions relating
to the maintenance of the capital accounts are intended to comply
with Treas. Reg. §1.704-1(b) and
shall be interpreted and applied in a manner consistent with such regulations.

5.1 Capital Contributions.

The respective capital contributions of each Party to the Partnership shall be (a) each Party’s
interest in the oil and gas lease(s), including all associated lease and well equipment, committed
to the Partnership, and (b) all amounts of money paid by each Party in connection with the
acquisition, exploration, development, and operation of the lease(s), and all other costs
characterized as contributions or expenses borne by such Party under the Agreement. The
contribution of the leases and any other properties committed to the Partnership shall be made by
each Party’s agreement to hold legal title to its interest in such leases or other property as
nominee of the Partnership.

5.2 FMV Capital Accounts.

The FMV capital accounts shall be increased and decreased as follows:

5.2.1 The FMV capital account of a Party shall be increased by:

(i) the amount of money and the FMV (as of the date of contribution) of any property
contributed by such Party to the Partnership (net of liabilities assumed by the Partnership
or to which the contributed property is subject);

(ii) that Party’s share of Partnership items of income or gain, allocated in accordance with
Sec. 6.0; and

(iii) that
Party’s share of any Code §705(a)(1)(B)item.

5.2.2 The FMV capital account of a Party shall be decreased by:

(i) the amount of money and the FMV of property distributed to a Party (net of liabilities
assumed by such Party or to which the property is subject);

(ii) that Party’s Sec. 6.1 allocated share of Partnership loss and deductions, or items
thereof; and,

(iii) that Party’s share of any Code §705(a)(2)(B) item.

5.2.3 “FMV” when it applies to property contributed by a Party to the Partnership shall

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be assumed to equal the adjusted tax basis, as defined in Code §1011, of that property
unless the Parties agree otherwise as indicated in Sec. 9.2.

5.2.4 FMV Capital Account Revaluation.

As
provided in Treas, Reg. §1.704-1(b)(iv)(e), the capital accounts will be adjusted to reflect
the manner in which the unrealized income, gain, loss and deduction inherent in distributed
property (not previously reflected in the capital accounts) would be allocated among the Parties
if there were a taxable disposition of such property at its FMV as of the time of distribution.
Furthermore, if so agreed to in Sec. 9.2, under the rules of Treas.
Reg. § 1.704-1(b)(iv)(f), the
FMV capital accounts shall be revalued to reflect value changes of the Partnership property.

6. Partnership Allocations

6.1 FMV Capital Account Allocations.

Each item of income, gain, loss, or deduction shall be allocated to each Party as follows:

6.1.1 Actual or deemed income from the sale, exchange, distribution or other disposition of
production shall be allocated to the Party entitled to such production or the proceeds from the
sale of such production. The amount received from me sale of production and the amount of the FMV
of production taken in kind by the Parties are deemed to be identical; accordingly, such items may
be omitted from the adjustments made to the Parties’ FMV capital accounts.

6.1.2 Exploration cost, IDC, operating and maintenance cost shall be allocated to each Party in
accordance with its respective contribution, or obligation to contribute, to such cost.

6.1.3 Depreciation shall be allocated to each Party in accordance with its contribution, or
obligation to contribute, to the cost of the underlying asset.

6.1.4 Simulated depletion shall be allocated to each Party in accordance with its FMV capital
account adjusted basis in each oil and gas property of the Partnership.

6.1.5 Loss (or simulated loss) upon the sale, exchange, distribution, abandonment or other
disposition of depreciable or depletable property shall be allocated to the Parties in the ratio of
their respective FMV capital account adjusted bases in the depreciable or depletable property.

6.1.6 Gain (or simulated gain) upon the sale, exchange, distribution, or other disposition of
depreciable or depletable property shall be allocated to the Parties so that the FMV capital
account balances of the Parties will most closely reflect their respective percentage or fractional
interests under the Agreement.

6.1.7 Costs or expenses of any other kind shall be allocated to each Party in accordance

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with its respective contribution, or obligation to contribute, to such costs or expense.

6.1.8 Any other income item shall be allocated to the Parties in accordance with the manner in
which such income is realized by each Party.

6.2 Tax Return and Tax Basis Capital Account Allocations.

6.2.1 Unless otherwise expressly provided in this Sec. 6.2, the allocations of the Partnership’s
items of income, gain, loss, or deduction for tax return and tax basis capital account purposes
shall follow the principles of the allocations under Sec. 6.1. However, the Partnership’s gain or
loss on the taxable disposition of a Partnership properly in excess of the gain or loss under Sec.
6.1, if any, is allocated to the contributing Party to the extent of such Party’s pre-contribution
gain or loss.

6.2.2 The Parties recognize that under Code §613A(c)(7)(D) the depletion allowance is to be
computed separately by each Party. For this purpose, each Party’s share of the adjusted tax basis
in each oil and gas property shall be equal to its contribution to the adjusted tax basis of such
property.

6.2.3 Under Code §613A(c)(7)(D) gain or loss on the disposition of an oil and gas property is to be
computed separately by each Party. According to Treas. Reg.
§1.704-1(b)(4)(v), the amount realized
is allocated as follows: (i) An amount that represents recovery of adjusted simulated depletion
basis is allocated (without being credited to the capital accounts) to the Parties in the same
proportion as the aggregate simulated depletion basis was allocated to such Parties under Sec. 5.2;
and (ii) any remaining realization is allocated in accordance with Sec. 6.1.6.

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6.2.4 Depreciation shall be allocated to each Party in accordance with its contribution to
the adjusted tax basis of the depreciable asset.

6.2.5 In accordance with Treas. Reg. §1.1245-l(e), depreciation recapture shall be allocated, to
the extent possible, among the Parties to reflect their prior sharing of the depreciation.

6.2.6 In accordance with the principles of Treas. Reg. §1.1254-5, any recapture of IDC is
determined and reported by each Party separately. Similarly any recapture of depletion shall be
computed separately by each Party, in accordance with its depletion allowance computed pursuant to
Sec. 6.2.2.

6.2.7 For Partnership properties with FMV capital account values different from their adjusted tax
bases the Parties intend that the allocations described in this Section 6.2 constitute a
“reasonable method” of allocating gain or loss under Treas.
Reg. §1.704-3(a)(1).

6.2.8 Take-in-kind.

If checked “Yes” in Sec. 9.2, below, each Party has the right to determine the market for its
proportionate share of production. All items of income, deductions, and credits arising from such
marketing of production shall be recognized by the Partnership and shall be allocated to the Party
whose production is so marketed.

7. Termination and Liquidating Distribution

7.1 Termination of the Partnership.

7.1.1 Upon termination, as provided in Code §708(b)(l)(A), the business shall be wound-up and
concluded, and the assets shall be distributed to the Parties as described below by the end of such
calendar year (or, if later, within ninety (90) days after the date of such termination). The
assets shall be valued and distributed to the Parties in the order provided in Secs. 7.1.2, 7.5,
and 7.7

7.1.2 Reversion. First, all cash representing unexpended contributions by any Party and any
property in which no interest has been earned by any other Party under the Agreement shall be
returned to the contributor.

7.2 Balancing of FMV Capital Accounts.

Second, the FMV capital accounts of the Parties shall be determined as described hereafter. The TRP
shall take the actions specified under this Sec. 7.2 in order to cause the ratios of the Parties’
FMV capital accounts to reflect, as closely as possible, their interests under the Agreement. The
ratio of a Party’s FMV capital account is represented by a fraction, the numerator of which is the
Parry’s FMV capital account balance and the denominator of which is the sum of all Parties’ FMV
capital account balances. This is hereafter referred to as the “balancing of the FMV capital
accounts” and, when

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completed, the FMV capital accounts of the Parties shall be referred to as “balanced.”

7.3 Deemed Sale Gain/Loss Charge Back.

The FMV of all Partnership properties shall be determined and the gain or loss for each property,
which would have resulted if sold at such FMV, shall be allocated in accordance with Secs. 6.1.5
and 6.1.6.

7.4 Deficit Make-Up Obligation.

If hereafter a Party has a negative FMV capital account balance, that is a balance of less than
zero, in accordance with of Treas. Reg.
§1.704-1(b)(2)(ii)(b)(3) such Party is obligated to
contribute an amount of money to the Partnership sufficient to achieve a zero balance FMV capital
account (the “Deficit Make-Up Obligation”). Moreover, any Party may contribute an amount of cash
to the Partnership to facilitate the balancing of the FMV capital accounts. If after these
adjustments the FMV capital accounts are not balanced, Secs. 7.5 shall apply.

7.5 Distribution to balance capital accounts.

7.5.1 If all Parties agree, any cash or an undivided interest in certain selected properties shall
be distributed to one or more Parties as necessary for the purpose of balancing the FMV capital
accounts.

7.5.2 Distribution of undivided interests.

Unless Sec.7.5.1 applies, an undivided interest in each and every property shall be distributed to
one or more Parties in accordance with the ratios of their FMV capital accounts.

7.6 FMV determination.

If a property is to be valued for purposes of balancing the capital accounts and making a
distribution under this Sec. 7, the Parties must first attempt to agree on the FMV of the
property; failing such an agreement, the TRP shall cause a nationally recognized independent
engineering firm to prepare an appraisal of the FMV of such property.

7.7 Final Distribution.

After the FMV capital accounts of the Parties have been adjusted pursuant to Secs.7.2 to 7.5, all
remaining property and interests then held by the Partnership shall be distributed to the Parties
in accordance with their positive FMV capital account balances.

8. Transfers, Indemnification, and Correspondence

8.1 Transfer of Partnership Interests.

Transfers of Partnership interests shall be governed by the Agreement. A Party transferring its
interest, or any part thereof, shall notify the TRP in writing within two weeks after such
transfer.

Page D9 of D11

Hess ZaZa Hackberry Creek TPP

 

 

8.2 Correspondence.

All correspondence relating to the preparation and filing of the Partnership’s income tax returns
and capital accounts shall be sent to:

	 	 	 	 	 	 

	 	TRP

	 	 	“Att to:” reference	 
	 	Hess Corporation

	 	 	Att: Milton Mosk

500 Dallas St.

Box 2040

Houston, Texas 77252-2040	 
	 

Other Parties:

	 	 	 	 	 	 

	 	ZaZa Energy, LLC

	 	 	Attn: Todd Brooks

1301 McKinney St., Ste. 2850

Houston, TX 77010	 
	 

9. Elections and Changes to above Provisions

9.1 Operator not the TRP.

With respect to Sec. 2.1, (insert name of Party to be TRP instead of Operator, or indicate “N/A”)
Hess Corporation is designated as TRP.

9.2 Special Tax Elections

With respect to Sec. 4.1, the Parties agree (if not applicable insert “N/A” or strike):

	 	 	 	 	 	 

	 	 

	 	 	Yes	 
	 	e) that the Partnership shall elect to account for dispositions of depreciable
assets under the general asset method to the extent permitted by Code §168(i)(4);

	 	 	Yes	 
	 	f) that the Partnership shall elect under Code §754 to adjust the basis of
Partnership property, with the adjustments provided in Code §734 for a distribution
of property and in Code §743 for a transfer of a partnership interest. In case of
distribution of property the TRP shall adjust all tax basis capital accounts. In the
case of a transfer of a partnership interest the acquiring party(ies) shall establish
and maintain its (their) tax basis capital account(s);

	 	 	Yes	 
	 	g) that the Partnership shall elect under Code §6231 to be subject to the TEFRA rules.

	 	 	N/A	 
	 

	 	 	 	 	 	 

	 	With
respect to Sec. 4.2, Depletion, the Parties agree that the Partnership shall use
simulated percentage depletion instead of simulated cost depletion.

	 	 	N/A	 
	 	With
respect to Sec. 5.2.4, under the rules of Treas. Reg. §
1.704-1(b)(iv)(f), the
Parties agree that the FMV capital accounts shall be revalued to reflect value
changes of the Partnership property upon the occurrence of the events specified in
(5)(i) through (iii) of said regulations.

	 	 	N/A	 
	 

Page D10 of D11

Hess ZaZa Hackberry Creek TPP

 

 

	 	 	 	 	 	 

	 	With respect to Sec. 6.2.8, the income attributable to
take-in-kind production will be reflected on the tax return.

	 	 	N/A	 
	 

     With respect to Sec. 5.2.3 the FMV for the listed properties are determined as follows (mark as
“N/A” if not applicable)

	 	 	 	 	 	 

	 	Property Description

	 	 	FMV	 
	 	 

	 	 	N/A	 
	 

9.3 Change of Majority for Other Tax Elections

Instead of the Sec. 4.4 majority for other tax elections, a majority shall be considered if
consisting of (specify or line out blanks) N/A

—END OF EXHIBIT “D”—

Page D11 of D11

Hess ZaZa Hackberry Creek TPPexv10w16

Exhibit 10.16

REVOLVING CREDIT AGREEMENT

	 	 	 
	LENDER:

	 	TEXAS CHAMPION BANK
	 
	 	 
	LENDER’S ADDRESS:

	 	P. O. Box 270550
	 

	 	Corpus Christi, Texas 78427
	 
	 	 
	BORROWER:

	 	ZAZA ENERGY, LLC
	 
	 	 
	BORROWER’S ADDRESS:

	 	1301 McKinney, Suite 2850
	 

	 	Houston, Texas 77010

     1. Line of Credit. Lender hereby establishes a revolving line of credit in favor of
Borrower in the amount of $5,000,000.00, subject to all legal requirements. The line of credit is to bear
interest and be repayable in
accordance with a note of even date herewith executed by Borrower payable to the order of
Lender. The line of credit
shall terminate on September 25, 2012.

     2. Collateral: Expenses. The line of credit shall be secured by a first lien on the
Borrower’s interest in
the oil and gas properties listed on Exhibit “A”. Borrower warrants that its interests are as
set forth on Exhibit “B”.
Borrower agrees to pay or reimburse Lender for the legal fees and other out-of-pocket expenses
incurred by Lender in
connection with the line of credit, including but not limited to costs for credit reports,
appraisals, surveys,
environmental studies and reports, lien and title searches, recording fees and preparation of
loan documents.

     3. Conditions. Notwithstanding anything herein to the contrary, the performance of
each covenant to
be performed by Borrower hereunder and under the note and mortgage instrument, and the truth
of every representation
made by Borrower, shall be a condition precedent to each and every advance to be made to
Borrower, or to any other
obligation of the Lender hereunder; and the Lender shall not be required to make any advance
when Borrower is in
default on any obligation to Lender.

     4. No Fee. There will not be a loan fee.

     5. Financial Reports. If requested by Lender, Borrower will from time to time
provide Lender with
Borrower’s financial statements, including a current balance sheet, current income statement
and current statement of
sources and uses of cash. Each financial statement shall be in a form acceptable to Lender.

     6. Production Reports. Borrower shall furnish to Lender a monthly report showing the
production
from oil and gas properties mortgaged to Lender, including copies of checks for proceeds of
production.

     7. Benefit. The provisions hereof shall inure to the benefit of Lender, its successors
and assigns, and to
Borrower. Borrower’s rights hereunder are personal to Borrower and may not be assigned or
transferred to or assumed
by any other party.

     8. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

 

     Dated the            day of September, 2011.

	 	 	 	 	 	 	 	 	 	 	 	 	 

	BORROWER:	 	 	 	LENDER:	 	 
	ZAZA ENERGY, LLC	 	 	 	TEXAS CHAMPION BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gaston L. Kearby
	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Gaston L. Kearby
	 	 	 	 	 	Name:	 	 	 	 
	 

	 	A Manager
	 	 	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 

	 	 
	By:

	 	/s/ John E. Hearn, Jr.	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	John E. Hearn, Jr.	 	 	 	 	 	 	 	 	 	 
	 

	 	A Manager	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Todd A. Brooks	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Todd A. Brooks	 	 	 	 	 	 	 	 	 	 
	 

	 	A Manager	 	 	 	 	 	 	 	 	 	 

- 2 -

 

REVOLVING CREDIT PROMISSORY NOTE

			
	$5,000,000.00
	 	September 23, 2011

     For value received ZAZA ENERGY, LLC, a Texas limited liability company, (hereinafter called
“Maker” whether one or more) promises to pay to the order of TEXAS CHAMPION BANK, (“Payee”) at its
office in Corpus Christi, Nueces County, Texas, in lawful money of the United States the sum of
FIVE MILLION DOLLARS, or so much thereof as may be advanced and unpaid hereon from time to time,
together with interest on the unpaid principal balance hereon outstanding from time to time prior
to maturity at a rate of five and one-half percent (5.5%) per annum.

     Said rate prior to maturity shall be computed on a per annum basis of a year of 360 days and
for the actual number of days elapsed. The maximum legal rate and all other rates hereunder shall
be computed on a full calendar year (365/366 days) basis. Chapter 346 of the Texas Finance Code
shall not in any event apply to the loan evidenced hereby. After maturity hereof, unpaid principal
and accrued interest shall bear interest from maturity until paid at the rate of 17.5% per annum,
calculated on a full calendar year basis.

     Principal shall be due and payable on or before September 25, 2012 (the “maturity date”), and
in accordance with a Revolving Credit Agreement of even date herewith. Accrued interest shall be
due and payable on a monthly basis commencing October 25, 2011, and on the same day of each
succeeding month thereafter, and at maturity.

     Late Payment Charge. If the holder of this Note has not received the full amount of
any regularly scheduled installment payment prior to maturity by the end of ten (10) calendar days
after it is due, Maker agrees to pay a reasonable late charge to the note holder. The amount of
the late charge will be five percent (5%) of the amount of the overdue installment payment, which
amount is stipulated by Maker to be reasonable in order to compensate the note holder for its
additional costs incurred as a result of having to attend to such delinquency. Maker agrees to pay
the late charge promptly. The late charge will be charged only one time with respect to any late
installment payment, and shall not apply to any payment due at maturity of this note. It is
further agreed that the imposition of any such late payment charge shall in no way prejudice or
limit the note holder’s rights or remedies against the Maker under this Note or under any
documents securing payment hereof or under any other documents.

     Each payment will be first applied to reduce the amount owed for charges which are neither
interest nor principal, including any late charges and costs to be reimbursed Payee under any
agreement or document relating to or securing this Note. The remainder, if any, of each payment
will then be applied first to reduce accrued and unpaid interest, and then any remaining amount
applied to unpaid principal.

     Principal and accrued interest may be prepaid in whole or in part from time to time without
penalty or premium.

     This note evidences funds to be advanced to Maker pursuant to a Revolving Credit Agreement of
even date. Payment hereof is secured by as set forth in such Revolving Credit Agreement.

     This note shall evidence the Maker’s, endorsers’, sureties’ and guarantors’ joint and several
obligation to pay all advances, together with interest thereon, made by Payee to Maker or for
Maker’s account. Interest shall accrue on principal only from the date advanced until paid.

     The Maker and all endorsers, guarantors and sureties hereof authorize Payee from time to time
to make advances to the Maker hereof without any requirement that Payee notify them or any of them
of such advances, provided the total principal owing hereunder shall not exceed at any one time
the face amount of this note. The amount owing hereunder at any given time shall be determined by
the total of all advances made less any principal payments made plus the unpaid accrued interest
thereon as determined by the provisions hereof.

     At the option of the holder hereof, the maturity of this note may be accelerated and all
unpaid amounts of principal and accrued interest shall become immediately due and payable, without
presentment or demand or notice to

 

 

Page 2

$5,000,000.00 Revolving Credit Promissory Note

Maker: ZAZA ENERGY, LLC

Payee: TEXAS CHAMPION BANK

any person obligated as Maker or any other person obligated hereon, upon the occurrence of any of
the following events: default in the payment of any indebtedness or any part thereof owing to
holder by any person obligated as Maker or any other person obligated hereon, whether evidenced by
this note or otherwise; or failure to perform or keep any of the conditions and covenants contained
in any document given to secure indebtedness owing to holder by any person obligated as Maker or
any other person obligated hereon or any document evidencing loan agreements made in connection
herewith; or death of any person obligated as Maker or of any other person obligated hereon; or, if
Maker is an entity, failure of Maker to maintain its status in good standing as an entity qualified
to do business in the State of Texas, or any dissolution, merger or consolidation of Maker; or
insolvency or making of any general assignment for the benefit of creditors by any person obligated
as Maker or any other person obligated hereon; or the filing of any petition or commencement of any
proceeding by or against any person obligated as Maker or any other person obligated hereon for any
relief, discharge, rearrangement, reorganization or otherwise under any bankruptcy or insolvency
laws; or the levying on, seizure or freezing of any account of any person obligated as Maker or any
other person obligated hereon by any agency or instrumentality of the State or Federal government;
or the issuance of any writ of attachment or garnishment relating to or affecting any of the
property or assets of any person obligated as Maker or any other person obligated hereon; or if the
holder hereof in good faith deems itself insecure.

     The holder hereof shall be entitled, as further security for the payment of this note, to a
security interest in all property pledged as collateral and any money found on deposit with the
holder to the credit of the Maker, and may retain and apply said money, securities or proceeds of
such collections to the payment of this note and indebtedness. The holder’s right to set-off
applies without prior notice by holder to Maker. Holder will not be liable for wrongful dishonor
of a check where such dishonor occurs because of holder’s set-off of this debt against Maker’s
accounts.

     Maker and all sureties, endorsers and guarantors of this note hereby severally waive demand,
presentment for payment, notice of non-payment, protest, notice of protest, notice of intention to
accelerate maturity, notice of acceleration of maturity, and all other notice, and diligence in
collecting this note or filing suit thereon or enforcing any security given therefor, and agree to
any substitution, exchange or release of any security now or hereafter given for this note or the
release of any party primarily or secondarily liable hereon. Maker and all sureties, endorsers and
guarantors of this note further severally agree that it will not be necessary for the payee or any
holder hereof, in order to enforce payment of this note, to first institute or exhaust its
remedies against any person obligated as Maker or other party liable therefor or to enforce its
rights against any security for this note and hereby consent to the renewal and extension or
modification from time to time of this note (regardless of the number or length of time of the
renewals, extensions or modifications), and to any other indulgence with respect hereto, without
notice of any such renewal, extension, modification or indulgence. All persons obligated hereon,
whether as a maker, endorser, surety, guarantor or otherwise, shall be jointly and severally
liable for repayment of the indebtedness evidenced by or arising under this note.

     In the event that this note is placed into the hands of an attorney for collection, or if
collected through probate, bankruptcy or other judicial proceedings, then there shall be
additionally owing hereon all expenses and costs of collection, including reasonable attorney’s
fees.

     It is expressly provided and stipulated that, notwithstanding any provision of this Note or
any loan agreement or in any deed of trust, assignment, security agreement or other agreement
securing payment of this note, in no event shall the aggregate of all interest paid by the Maker
to the holder hereof or contracted for, chargeable or receivable hereunder ever exceed the maximum
legal rate of interest which may lawfully be charged Maker under the laws of the State of Texas or
the United States (whichever may permit the higher rate) on the principal balance of this note
from time to time advanced and remaining unpaid. In this connection, it is expressly stipulated
and agreed that it is the intent of the payee and the Maker in the execution and delivery of this
note to contract in strict compliance with usury laws of the State of Texas or the United States
(whichever may permit the higher rate). In the event said maximum legal rate is calculated under
Texas statutes, the applicable rate ceiling (maximum rate) shall be the indicated (weekly) rate
ceiling

 

 

Page 3

$5,000,000.00 Revolving Credit Promissory Note

Maker: ZAZA ENERGY, LLC

Payee: TEXAS CHAMPION BANK

from time to time in effect, as provided in Chapter 303 of the Texas Finance Code, as amended. In
furtherance thereof, none of the terms of this note or any loan agreement or in any deed of trust,
assignment, security agreement or other agreement securing payment of this note, shall ever be
construed to create a contract to pay for the use, forbearance or detention of money, interest at a
rate in excess of the maximum legal interest rate permitted to be charged to the Maker under such
laws. The Maker or any guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this note shall never be liable for interest in excess of the maximum interest that may
lawfully be charged under such laws, and the provisions of this paragraph shall govern over all
other provisions of this note or any loan agreement or any deed of trust, assignment, security
agreement or other agreement securing payment of this note, should such provisions be in apparent
conflict herewith. All sums paid or agreed to be paid to payee or the holder of this note for the
use, forbearance or detention of the indebtedness of Maker under the terms of this note or
otherwise shall be amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the actual rate of interest with respect to such
indebtedness is uniform throughout the term hereof, and, in conjunction therewith, if the loan
evidenced by this note should ever be deemed to consist of two or more loans, then any sum paid or
agreed to be paid to the holder hereof for the use, forbearance or detention of the indebtedness of
Maker to payee under the terms of this note which is deemed to be excessive interest with respect
to one or more of such loans shall be allocated to the loans for which a maximum lawful rate of
interest has not been contracted for, charged or received or for which no maximum rate of interest
exists.

NOTICE TO CONSUMER: UNDER TEXAS LAW, IF YOU CONSENT TO THIS AGREEMENT, YOU MAY BE SUBJECT TO A
FUTURE RATE AS HIGH AS 17.5 PERCENT PER YEAR.

	 	 	 	 	 	 	 

	 	 	ZAZA ENERGY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gaston L. Kearby
 

Gaston L. Kearby
	 	 
	 

	 	 	 	A Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Hearn, Jr.
 

John E. Hearn, Jr.
	 	 
	 

	 	 	 	A Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Todd A. Brooks
 

Todd A. Brooks
	 	 
	 

	 	 	 	A Manager	 	 

 

 

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR
ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY
BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S
LICENSE NUMBER.

DEED OF TRUST, SECURITY AGREEMENT,

ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT

(Oil & Gas)

DATE: September 23, 2011

			
	MORTGAGOR’S NAME & ADDRESS:	 	ZAZA ENERGY, LLC 
1301 McKinney, Suite 2850, Houston, Texas 77010

			
	BENEFICIARY’S NAME & ADDRESS:	 	TEXAS CHAMPION BANK 
P. O. Box 270550, Corpus Christi, Texas 78427

SECTION I. DEFINITIONS.

1:1 “Obligations” mean:

(a) Revolving Credit Promissory Note of even date in the principal sum of $5,000,000.00 executed by
Mortgagor payable to the order of Beneficiary.

(b) Any sums which may hereafter be advanced by Beneficiary under the terms hereof together with
interest thereon and attorney’s fees as hereinafter provided;

(c) Any additional loans made by Beneficiary to Mortgagor, however evidenced; and in this
connection it is contemplated that Beneficiary may lend additional sums to Mortgagor from time to
time, but shall not be obligated to do so, and Mortgagor agrees that if Mortgagor should become
indebted to Beneficiary in any such additional sum or sums the same shall be secured by this
instrument as well as any other security which Beneficiary may now or hereafter hold for the
payment thereof; and,

(d) Any and all other indebtedness, obligations or other liabilities of Mortgagor to Beneficiary
now or hereafter owing, whether direct or indirect, primary or secondary, fixed or contingent,
matured or unmatured, joint or several, regardless of how evidenced or arising.

(e) Any and all renewals and extensions of the foregoing, regardless of the number of or length of
time of such renewals and extensions, and regardless of whether or not Mortgagor joins in or
executes any agreement relating to such renewals and extensions.

Provided, notwithstanding the foregoing subparagraphs (c) and (d), the liens and security
interests herein provided shall not secure any indebtedness arising under or by reason of loans
pursuant to Chapters 342 through 347, of the Texas Finance Code.

1:2 “Oil and Gas Property or Properties” mean: the oil and/or gas mineral leases, subleases,
farm-outs, royalties, overriding royalties, net profits interest, production payments and similar
mineral interests described in Exhibit A attached hereto and made a part hereof or covering or
relating to land described in Exhibit A hereto; and any renewals and extensions of any of such
leases and the like; and any leases and interests therein which may hereafter be entered into
relating to the realty, or any portion thereof, covered by any of such leases, etc., or lands,
described in Exhibit A.

 

 

1:3 “Hydrocarbons” mean oil, gas and other liquid or gaseous hydrocarbons.

1:4 “Operating Equipment” means all surface or subsurface machinery, equipment, facilities,
supplies or other property of whatsoever kind or nature (excluding drilling rigs, trucks,
automotive equipment or other property taken to the premises to drill a well or for other similar
temporary uses) now or hereafter located on or used in connection with any of the Oil and Gas
Properties which are useful for the production, treatment, storage or transportation of
Hydrocarbons, including, but not limited to, all oil wells, gas wells, water wells, injection
wells, casing, tubing, rods, pumping units and engines, Christmas trees, derricks, separators, gun
barrels, flow lines, tanks, gas systems (for gathering, treating and compression), water systems
(for treating, disposal and injection), power plants, poles, lines, transformers, starters and
controllers, machine shops, tools, storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading racks and shipping facilities.
The term does not include any items incorporated into realty or structures or improvements located
therein or thereon in such a manner that they no longer remain personalty under applicable state
law. “Fixture Operating Equipment” means any of the above described items which, as a result of
being affixed to realty or structures or improvements located therein or thereon with the intent
that they remain there permanently, constitute fixtures under applicable state law.

SECTION II. CREATION OF SECURITY AND DESIGNATION OF TRUSTEE.

2:1 Conveyance and Grant. In consideration of and to induce Beneficiary’s advancing or extending
the funds or credit constituting the Obligations and in further consideration of the mutual
covenants herein contained, Mortgagor by this agreement:

	 	A.	 	(Realty Collateral). Grants, bargains, sells and conveys unto Trustee for the
benefit of Beneficiary all of Mortgagor’s right, title and interest now or hereafter
acquired in and to the Oil and Gas Properties, all unsevered and unextracted
Hydrocarbons in and under or attributable to said Oil and Gas Properties, and all items
now or hereafter incorporated into Oil and Gas Property realty or structures or
improvements located therein or thereon in such a manner that said items no longer
remain personalty under applicable state law together with all pipelines,
rights-of-way, surface or ground leases, easements, servitudes and franchises located
on or granting rights to all or any part of the Oil and Gas Properties; all of which
will be hereafter collectively referred to as “Realty Collateral.”
	 
	 	B.	 	(Personalty Collateral). Grants to Beneficiary a security interest in all of
Mortgagor’s right, title and interest now or hereafter acquired in and to all
non-Fixture Operating Equipment, all Hydrocarbons now or hereafter severed and
extracted from or attributable to the Oil and Gas Properties, and all present and
future contracts, permits and licenses relating to the said Oil and Gas Properties,
including, but not limited to, farm-outs, options, operating agreements and Production
Sale Contracts; all of which will be hereafter collectively referred to as “Personalty
Collateral.” Proceeds of the Personalty Collateral are also covered but this should not
be construed to mean that Beneficiary consents to Mortgagor’s sale of any of the
Personalty Collateral other than the Hydrocarbons severed and extracted from or
attributable to the Oil and Gas Properties. If requested by Beneficiary, Mortgagor
agrees to deliver the Production Sales Contracts to Beneficiary.
	 
	 	C.	 	(Fixture Collateral.) Grants to Beneficiary a security interest in all of
Mortgagor’s right, title and interest now or hereafter acquired in and to all Fixture
Operating Equipment. Proceeds therefrom are also covered, but this should not be
construed to mean that Beneficiary consents to Mortgagor’s sale of any of such
equipment. Mortgagor also grants, bargains, sells and conveys unto Trustee for the
benefit of Beneficiary all of Mortgagor’s right, title and interest now or hereafter
acquired in and to the Fixture Operating Equipment. The property covered by this
Paragraph “C” will be hereafter referred to as “Fixture Collateral.” Collateral is or
includes fixtures. The record owner of the real estate is Mortgagor.

2:2 Definition of Collateral. The Realty Collateral, Personalty Collateral and Fixture Collateral
will be hereafter collectively referred to as the “Collateral.”

- 2 -

 

2:3 Designation of Trustee. Ed A. Lopez whose address is P. O. Box 270550, Corpus Christi, Texas
78427 is hereby designated as Trustee hereunder.

TO HAVE AND TO HOLD the Realty and Fixture Collateral unto the Trustee in Trust to secure the
performance of the covenants of Mortgagor contained in this instrument. If Mortgagor performs all
the covenants attributable to the Obligations and pays same in full, this Deed of Trust shall have
no further effect and Beneficiary shall release it at Mortgagor’s expense.

SECTION III. COLLECTION OF PROCEEDS FROM PRODUCTION.

3:1 Beneficiary’s Receipt of Production Proceeds. As a consequence of Hydrocarbons severed and
extracted from or attributable to the Oil and Gas Properties and proceeds therefrom, Mortgagor
agrees that Beneficiary will be entitled to receive such Hydrocarbons (and the proceeds therefrom)
which are produced from and which accrue to the Oil and Gas Properties beginning at 12:01 a.m. on
the first day of the first calendar month following the date of execution of this instrument. All
parties producing, purchasing or receiving any such Hydrocarbons or the proceeds therefrom are
authorized and directed to treat Beneficiary as the person entitled in Mortgagor’s place and stead
to receive such Hydrocarbons and the proceeds therefrom; and further, said parties will be fully
protected in so treating Beneficiary and will be under no obligation to see the application by
Beneficiary of any of such proceeds received by it.

3:2 Application of Proceeds. All payments received by Beneficiary pursuant to subsection 3:1 above
shall be placed in a collateral collection account at Beneficiary and on the first day of each
month applied as follows: (a) First, toward satisfaction of all costs and expenses incurred in
connection with the collection of such proceeds and the payment of any part of the Obligations not
represented by a written instrument; (b) Second, to the payment of all accrued interest on the
Obligations; (c) Third, to the payment of any then due and owing principal constituting part of
the Obligations; (d) The balance, if any, may either be applied against any unmatured principal
constituting part of the Obligations (the method of application being wholly in Beneficiary’s
discretion) or, at Beneficiary’s option, may be released to Mortgagor.

3:3 Mortgagor’s Payment Duties. Nothing contained herein will limit Mortgagor’s absolute duty to
make payment on the Obligations when the proceeds received by Beneficiary pursuant to this Section
are insufficient to pay the interest and principal then owing, and the receipt of proceeds under
this Section will be in addition to all other security now or hereafter existing to secure payment
of the Obligations.

3:4 Liability of Beneficiary. Beneficiary is hereby absolved from all liability for failure to
enforce collection of any of such proceeds and from all other responsibility in connection
therewith except the responsibility to account to Mortgagor for proceeds actually received.

3:5 Indemnification. Mortgagor agrees to indemnify the Trustee and the Beneficiary against all
claims, actions, liabilities, judgment, costs, attorneys’ fees or other charges of whatsoever kind
or nature (hereafter referred to in this subsection as “Claims”) made against or incurred by the
Trustee or the Beneficiary as a consequence of the assertion, either before or after the payment
in full of the Obligations, that the Trustee or the Beneficiary received Hydrocarbons or proceeds
pursuant to this Section which were claimed by third persons. Beneficiary and the Trustee will
have the right to employ attorneys and to defend against any such Claims, and unless furnished
with reasonable indemnity, Beneficiary and the Trustee will have the right to pay or compromise
and adjust all such Claims. Mortgagor will indemnify and pay to Beneficiary and the Trustee all
such accounts as may be paid in respect thereof or as may be successfully adjudged against them.
The liabilities of Mortgagor as set forth in this subsection will survive the termination of this
instrument.

SECTION IV. MORTGAGOR’S WARRANTIES AND COVENANTS.

4:1 Payment of Obligations. Mortgagor covenants that he shall pay when due all interest and
principal comprising the Obligations secured by this instrument.

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4:2 Mortgagor warrants that:

	 	A.	 	The Oil and Gas Properties described in Exhibit A are valid and subsisting and
are paramount to all claims by others except as stated; and
	 
	 	B.	 	Mortgagor to the extent of the interest specified in Exhibit A, has valid and
indefeasible title to each property right or interest constituting the Collateral and
has a good and legal right to grant and convey same to the Trustee and Beneficiary; and
	 
	 	C.	 	No approval or consent of any regulatory or administrative commission or
authority or of any other governmental body is necessary to authorize the execution and
delivery of this instrument or of any written instruments constituting part or all of
the Obligations, or to authorize the observance or performance by Mortgagor of the
covenants contained in this instrument or in said written instruments; and
	 
	 	D.	 	All information contained in statements furnished or to be furnished by
Beneficiary by or on behalf of Mortgagor in connection with the Obligations secured by
this instrument is or will be complete and accurate; and
	 
	 	E.	 	The Collateral is free from all liens, security interest or encumbrances except
as permitted by the provisions of subsection 4:5E; and
	 
	 	F.	 	Mortgagor is not obligated, by virtue of a prepayment arrangement under any
contact providing for the sale by Mortgagor of Hydrocarbons and containing a “take or
pay” clause or similar arrangement, to deliver Hydrocarbons at some future time without
then or thereafter receiving full payment therefor.

4:3 Mortgagor covenants that Mortgagor shall warrant and forever defend the Collateral against
every person whomsoever lawfully claiming the same or any part thereof and that Mortgagor shall
maintain and preserve the lien and security interest herein created as long as any of the
Obligations remains unpaid.

4:4 Further Assurances. Mortgagor covenants that Mortgagor shall execute and deliver such other
and further instruments and shall do such other and further acts as in the opinion of the Trustee
may be necessary or desirable to carry out more effectively the purposes of this instrument,
including, without limiting the generality of the foregoing:

	 	A.	 	Prompt correction of any defect which may hereafter be discovered in the title
to the Collateral, or in the execution and acknowledgment of this instrument, any
written instrument comprising part or all of the Obligations or any other document used
in connection herewith; and
	 
	 	B.	 	Prompt execution and delivery of all division or transfer orders which in
Beneficiary’s opinion are required to transfer to Beneficiary the proceeds from the
sale of all Hydrocarbons severed and extracted from or attributable to the Oil and Gas
Properties.

4:5 Operation of Mortgaged Property. As long as any of the Obligations remain unpaid, and whether
or not Mortgagor is the operator of the Oil and Gas Properties, Mortgagor shall (at Mortgagor’s
own expense):

	 	A.	 	Do all things necessary to keep unimpaired Mortgagor’s rights in the Collateral
and not abandon any well or forfeit, surrender or release any oil and gas lease,
sub-lease or farm-out or any rights in the Collateral or enter into any operating
agreement without the Beneficiary’s prior written consent; and
	 
	 	B.	 	Cause the Collateral to be maintained, developed and protected against drainage
and continuously operated for the production of Hydrocarbons in a good and workmanlike
manner as a prudent operator would in accordance with generally accepted practices,
applicable operating agreements, and all applicable federal, state and local laws,
rules and regulations, excepting those being contested in good faith; and

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	 	C.	 	Promptly pay or cause to be paid when due and owing: (1) all rentals and
royalties payable in respect of the Collateral; (2) all expenses incurred in or
arising from the operation or development of the Collateral; and (3) all taxes,
assessments and government charges legally imposed upon this instrument, upon the
Collateral, upon the interest of Beneficiary or the Trustee, or upon the income and
profits from any of the above; and
	 
	 	D.	 	Cause the Operating Equipment to be kept in good and effective operating
condition and cause to be made all repairs, renewals, replacements, additions and
improvements thereof or thereto needful to the production of Hydrocarbons from the Oil
and Gas Properties; and permit the Trustee and Beneficiary (through its agents and
employees) to enter upon the Oil and Gas Properties for the purpose of investigating
and inspecting the conditions and operations of the Collateral; and
	 
	 	E.	 	Cause the Collateral to be kept free and clear of liens, charges, security
interests, and encumbrances of every character other than: (1) the lien and security
interest created by this instrument; (2) taxes constituting a lien but not due and
payable; (3) defects or irregularities in title, and liens, security interests,
charges or encumbrances which are not such as to interfere materially with the
development, operation or value of the Collateral and not such as to affect materially
title thereto; (4) those being contested in good faith by Mortgagor in such manner as
not to jeopardize the Trustee’s consented to in writing by the Beneficiary; and
	 
	 	F.	 	Carry with standard insurance companies and in amounts satisfactory to the
Beneficiary the following insurance: (1) workmen’s compensation insurance and public
liability and property damage insurance in respect of all activities in which the
Mortgagor might incur personal liability for the death or injury of an employee or
third person, or damage to or destruction of another’s property; and (2) to the extent
such insurance is carried by other engaged in similar undertakings in the same general
area in which the Collateral is located, insurance in respect of the Operating
Equipment against loss or damage by fire, lightening, hail, tornado, explosion and
other similar risks. All policies of insurance will provide the maximum prior written
notice to Beneficiary of cancellation which the insurance company will provide.
Beneficiary may apply any proceeds of such insurance which it may receive toward part
or full satisfaction of any or all of the Obligations secured hereby whether or not
they are then due and owing.

4:6 Recording, Etc, Beneficiary shall promptly (at Mortgagor’s expense) record, register, deposit
and file this and every other instrument in addition or supplement thereto including applicable
financing statements in such offices and places and at such times and as often as may be necessary
to preserve, protect and renew and the lien and security interest herein created as a first lien
or prior security interest on real or personal property as the case may be, and otherwise shall do
and perform all matters or things necessary or expedient to be done or observed by reason of any
law or regulation of any state or of the United States or of any other competent authority for the
purpose of effectively creating, maintaining and preserving the lien and security interest created
herein the Collateral.

4:7 Sale of or Encumbrances on Collateral. In the event Mortgagor shall sell, convey, contract to
convey, mortgage or grant security interests in or otherwise dispose of or encumber any of the
Collateral or any of Mortgagor’s right, title or interest therein (excluding sales of severed
Hydrocarbons in the ordinary course of Mortgagor’s business) without first securing the
Beneficiary’s written consent, then Beneficiary, at its election and without notice to Mortgagor,
may declare the entire indebtedness secured hereby at once due and payable.

4:8 Records, Statements and Reports. Mortgagor shall keep proper books of record and account in
which complete and correct entries shall be made of Mortgagor’s transactions in accordance with
generally accepted accounting principles and shall furnish or cause to be furnished to
Beneficiary:

	 	A.	 	Upon request of Beneficiary, but not more than once a year, reports prepared by an
independent person or firm acceptable to Beneficiary concerning: (1) the quantity of
Hydrocarbons recoverable from the Oil and Gas Properties; (2) the projected income
and expense attributable to the Collateral; and (3) the expediency of any change in
methods of treatment or operation of all or any wells productive of Hydrocarbons,
and new drilling or development, any method of secondary recovery by repressuring
or otherwise, or any other action with respect to the Collateral, the decision as
to which

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	 	 	 	may increase or reduce the quantity of Hydrocarbons ultimately recoverable, or the
rate of production thereof; and
	 
	 	B.	 	Monthly a report showing the gross proceeds from the sale of Hydrocarbons
produced from the Oil and Gas Properties described in Exhibit A (including any thereof
taken by Mortgagor for Mortgagor’s own use); the quantity of such Hydrocarbons sold;
the severance, gross production, occupation, or gathering taxes deducted from or paid
out of such proceeds; the number of wells operated, drilled or abandoned; and such
other information as Beneficiary may reasonably request (upon request of Beneficiary,
the reports referred to in Subdivision A above and this Subdivision B shall set forth
the information required on a lease or unit bases); and
	 
	 	C.	 	Such other information concerning the business and affairs and financial
condition of Mortgagor as Beneficiary may from time to time reasonably request.

4:9 Provisions Applicable to Corporate Mortgagor. If Mortgagor is a corporation, it is and will
continue to be, (a) duly organized and existing under the laws of the State in which it is
incorporated, and (b) duly qualified to transact business in each State where the conduct of its
business requires it to be qualified, and (c) duly authorized to execute and deliver the written
instruments comprising the Obligations and this instrument and to observe and perform its duties
thereunder and hereunder, and (d) will not, without the prior written consent of the Trustee,
consolidate or merge with any other corporation, or reorganize.

SECTION V. EVENTS OF DEFAULT.

5:1 Acts Constituting Default. Mortgagor will be in default under this instrument upon the
happening of any of the following events or conditions (hereafter called an “Event of Default”);

	 	A.	 	Mortgagor fails to pay when due any principal or interest owing under any of
the written instruments comprising part or all the Obligations or otherwise breaches
any of the provisions contained in said written instruments or contained in loan
agreements made in connection therewith; or
	 
	 	B.	 	Any warranty or representation made in this instrument by Mortgagor is
determined by Beneficiary to be untrue in any material respect; or
	 
	 	C.	 	Within 30 days after notice thereof from Beneficiary, Mortgagor fails to cure a
default in the due performance or observance of any covenant, undertaking or agreement
contained in this instrument; or
	 
	 	D.	 	Mortgagor’s title to the Collateral or any substantial part thereof becomes the
subject matter of litigation which would or might, in the Beneficiary’s opinion, upon
final determination result in substantial impairment or loss of the security provided
by this instrument.

5:2 Acceleration upon Default. Upon the occurrence of any such Event of Default, or at any time
thereafter, Beneficiary may, at is option, declare the entire unpaid principal of and the interest
accrued on the Obligations to be forthwith due and payable, without any notice, presentment or
demand of any kind, both of which are hereby expressly waived.

SECTION VI. BENEFICIARY’S RIGHTS UPON DEFAULT.

6:1 Operation of Realty Collateral by the Trustee or the Beneficiary. Upon the occurrence of an
Event of Default, or at any time thereafter, and in addition to all other rights herein conferred
on the Trustee or the Beneficiary, the Trustee or the Beneficiary (or any person, firm or
corporation designated by the Beneficiary) will have the right and power, but will not be
obligated, to enter upon and take possession of any of the Realty Collateral, to exclude Mortgagor
therefrom, and to hold, use, administer, manage and operate the same to the extent that Mortgagor
could do so. The Trustee or the Beneficiary, or any person, firm or corporation designated by the
Trustee or the Beneficiary, may operate the property without any liability to Mortgagor in
connection with such operations except for failure to use ordinary care in the operation of said
property; and the Trustee or the Beneficiary or any person, firm or corporation

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designated by the Trustee or the Beneficiary, will have the right to collect, receive and receipt
for all Hydrocarbons produced and sold from the properties, to make drill additional wells, and to
exercise every power, right and privilege of Mortgagor with respect to the Realty Collateral. When
and if the expenses of such operation and development (including costs of unsuccessful workover
operations or additional wells) have been paid and the Obligations paid, said properties shall be
returned to the Mortgagor (providing there has been no foreclosure sale).

6:2 Judicial Proceedings: Upon the occurrence of an Event of Default, or at any time thereafter,
the Trustee or the Beneficiary, in lieu of or in addition to exercising the power of sale hereafter
given, may proceed by a suit or suits in equity or at law for the special performance of any
covenant or agreement herein contained or in aid of the execution of any power herein granted, for
the appointment of a receiver pending any foreclosure hereunder or the sale of the Realty
Collateral, or for the enforcement of any other appropriate legal or equitable remedy; and further,
in lieu of the non-judicial power of sale hereafter given, the Trustee or the Beneficiary may
proceed by suit for a sale of the Realty Collateral. Appraisement of the Realty Collateral located
in the State of Oklahoma may be waived at the option of the Trustee, such option to be exercised
prior to or at the time the judgment is rendered in any foreclosure proceeding. Pursuant to Section
24-2-19, New Mexico Statutes, Annotated, 1953 Comp., Mortgagor agrees that as to the Realty
Collateral situated in the State of New Mexico, the redemption period will be shortened to three
months.

6:3 Foreclosure by Sale.

	 	A.	 	Mechanics of Sale.

(1) Realty Collateral Located in Texas. Upon the occurrence of any Event of Default,
or at any time thereafter, the Trustee shall, in response to Beneficiary’s request
(which Mortgagor agrees will be presumed to have been given), enforce this trust by
selling the Realty Collateral in its entirety or in parcels, as the Trustee may
elect, to the highest bidder for cash at public auction in the following manner:
Written or printed notice containing the time, place and terms of sale shall be
posted at the courthouse door of the county or counties where the Realty Collateral,
or portion or portions thereof to be sold, is located at least twenty-one (21) days
preceding the date of the sale; and, in addition, such other and further notices as
may be required under applicable law shall also be given. Thereafter, the sale shall
take place at the courthouse door of the county where the Realty Collateral, or
portion or portions thereof to be sold, is located on the first Tuesday in any month
between the hours of 10:00 a.m. and 4:00 p.m., provided however, if the Realty
Collateral to be sold is located in more than one county, such sale may take place
at the courthouse door of any of the counties wherein a portion of the Realty
Collateral to be sold is located, and the aforesaid notices shall specify the county
of sale. Any purchaser or purchasers will be provided with a general conveyance
binding Mortgagor. Sale of a part of the Realty Collateral will not exhaust the
power of sale, and sales may be made from time to time until all the property is
sold or the Obligations are paid in full. The Trustee will have the authority to
appoint an attorney-in-fact to act as trustee in conducting the foreclosure sale and
executing a deed to the purchasers.

(2) Realty Collateral Located in Other States. Upon the occurrence of any Event of
Default, or at any time thereafter, the Trustee shall, in response to Beneficiary’s
request (which Mortgagor agrees will be presumed to have been given), enforce this
trust by selling, to the extent permitted by law, at one or more sales, as an
entirety or in parcels, as the Trustee may elect, the Realty Collateral, at such
place or places and otherwise in such manner and upon such notice as may be required
by law, or, in the absence of any such requirement, as the Trustee may deem
appropriate, and to make conveyance to the purchaser or purchasers; the Mortgagor
shall warrant title to the Realty Collateral to such purchaser or purchasers. The
Trustee may postpone the sale of all or any portion of the Realty Collateral by
public announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made at time of
sale fixed by the preceding postponement. Sale of a part of the Realty Collateral
will not exhaust the power of sale, and sales may be made from time to time until
all the property is sold or the Obligations are paid in full.

	 	B.	 	Certain Aspects of Sale. Beneficiary will have the right to become the
purchaser at any sale held by the Trustee, and Beneficiary will have the right to
credit upon the amount of the bid made therefor

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	 	 	 	the amount payable out of the net proceeds of such sale to it. Recitals contained in any
conveyance to any purchaser at any sale made hereunder will conclusively establish the
truth and accuracy of the matters therein stated, including, without limiting the
generality of the foregoing, nonpayment of the unpaid principal sum of, and the interest
accrued on, the written instruments constituting part or all of the Obligations after the
same have become due and payable, advertising and conduct of such sale in the manner
provided herein, and appointment of any successor Trustee hereunder. Mortgagor does hereby
ratify and confirm all legal acts the Trustee may do in carrying out the Trustee’s duties
and obligations under this instrument.
	 
	 	C.	 	Receipt to Purchaser. Upon any sale made under the power of sale herein granted and
conferred, the receipt of the Trustee will be sufficient discharge to the purchaser or
purchasers at any sale for his, its or their purchase money, and such purchaser or purchasers,
his, its or their assigns or personal representatives, will not, after paying such purchase
money and receiving such receipt of the Trustee be obliged to see to the application of such
purchase money or be in anywise answerable for any loss, misapplication or non-application
thereof.
	 
	 	D.	 	Effect of Sale. Any sale or sales of the Realty Collateral will operate to divest all right,
title, interest, claim and demand whatsoever either at law or in equity, of Mortgagor in and
to the premises and the property sold, and will be a perpetual bar, both at law and in equity,
against Mortgagor, Mortgagor’s successors or assigns, and against any and all persons claiming
or who shall thereafter claim all or any of the property sold from, through or under
Mortgagor, or Mortgagor’s successors or assigns. Nevertheless, if requested by the Trustee so
to do, Mortgagor shall join in the execution and delivery of all proper conveyances,
assignments and transfers of the properties so sold. The purchaser or purchasers at the
foreclosure sale will receive, as incident to his, its or their ownership, immediate
possession of the property purchased, and Mortgagor agrees that if Mortgagor retains
possession of the Realty Collateral, or any part thereof, subsequent to such sale, Mortgagor
will be considered a tenant at sufferance of the purchaser or purchasers and will, if
Mortgagor remains in possession after demand to remove, be guilty of forcible detainer and
will be subject to eviction and removal, forcible or otherwise, with or without process of
law; and all damages by reason thereof are hereby expressly waived.
	 
	 	E.	 	Application of Proceeds. The proceeds of any sale of Realty Collateral or any part thereof,
whether under the power of sale herein granted and conferred or by virtue of judicial
proceedings, will be applied as follows:

     FIRST: To the payment of all expenses incurred by the Trustee in the performance of
his duties including, without limiting the generality of the foregoing, court costs,
compensation of agents and employees, legal fees, and a commission of five percent (5%) to
the Trustee plus expenses of any entry or taking of possession, sale, advertising or
conveyance thereof.

     SECOND: To the payment of the Obligations; and

     THIRD: Any surplus thereafter remaining will be paid to Mortgagor or Mortgagor’s
successors or assigns, as their interests may appear. Mortgagor will remain liable for any
deficiency remaining after a sale or other disposition hereunder. Mortgagor waives all
rights, remedies, claims and defenses based upon or related to Sections 51.003, 51.004 and
51.005 of the Texas Property Code.

	 	F.	 	Mortgagor’s Waiver of Appraisement, Marshalling, Etc. Mortgagor agrees that Mortgagor will
not at any time insist upon or plead or in any manner whatever claim the benefit of any
appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order
to prevent or hinder the enforcement of foreclosure of this instrument, the absolute sale of
the Realty Collateral, or the possession thereof by any purchaser at any sale made pursuant to
this instrument or pursuant to the decree of any court of competent jurisdiction; and
Mortgagor, for Mortgagor and all who may claim through or under Mortgagor, hereby waives the
benefit of all such laws, mortgagor, for Mortgagor and all who may claim through or under
Mortgagor, waives, to the extent that Mortgagor may

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	 	 	 	lawfully do so under applicable state law, any and all right to have the Realty
Collateral marshalled upon any foreclosure of the lien hereof or sold in inverse
order of alienation, and Mortgagor agrees that the Trustee may sell the Realty
Collateral as an entirety.
	 
	 	G.	 	Waiver of Deficiency Statute, (a) In the event an interest in any of the
property is foreclosed upon
pursuant to a judicial or nonjudicial foreclosure sale, Mortgagor agrees as
follows. Notwithstanding the provisions of Section 51.003, 51.004 and 51.005 of the
Texas Property Code (as the same may be amended from time to time), and except to
the extent limited by law or limited by any written agreement executed by
Beneficiary to the contrary, Mortgagor agrees that Beneficiary shall be entitled to
seek a deficiency judgment from Mortgagor and any other party obligated on the
indebtedness secured hereby equal to the difference between the amount owing on the
indebtedness and the amount for which the property was sold pursuant to judicial or
nonjudicial foreclosure sale. Mortgagor expressly recognizes that this section
constitutes a waiver of the above-cited provisions of the Texas Property Code which
would otherwise permit Mortgagor and other persons against whom recovery of
deficiencies is sought or any guarantor independently (even absent the initiation of
deficiency proceedings against them) to present competent evidence of the fair
market value of the property as of the date of the foreclosure sale and offset
against any deficiency the amount by which the foreclosure sale price is determined
to be less than such fair market value. Mortgagor further recognizes and agrees that
this waiver creates an irrebuttable presumption that the foreclosure sale price is
equal to the fair market value of the property for purposes of calculating
deficiencies owed by Mortgagor, any guarantor, and others against whom recovery of a
deficiency is sought.

(b) Alternatively, in the event the waiver provided for in subsection (a) above is
determined by a court of competent jurisdiction to be unenforceable, the following
shall be the basis for the finder of fact’s determination of the fair market value
of the property as of the date of the foreclosure sale in proceedings governed by
Sections 51.003, 51.004 and 51.005 of the Texas Property Code (as amended from time
to time): (i) the property shall be valued in an “as is” condition as of the date
of the foreclosure sale, without any assumption or expectation that the property
will be repaired or improved in any manner before a resale of the property after
foreclosure; (ii) the valuation shall be based upon an assumption that the
foreclosure purchaser desires a resale of the property for cash promptly (but no
later than twelve (12) months) following the foreclosure sale; (iii) all reasonable
closing costs customarily borne by the seller in commercial real estate
transactions should be deducted from the gross fair market value of the property,
including, without limitation, brokerage commissions, title insurance, a survey of
the property, tax prorations, attorneys’ fees, and marketing costs; (iv) the gross
fair market value of the property shall be further discounted to account for any
estimated holding costs associated with maintaining the property pending sale,
including, without limitation, utilities expenses, property management fees, taxes
and assessments (to the extent not accounted for in (iii) above), and other
maintenance, operational and ownership expenses; and (v) any expert opinion
testimony given or considered in connection with a determination of the fair market
value of the property must be given by persons having at least five (5) years
experience in appraising property similar to the property and who have conducted
and prepared a complete written appraisal of the property taking into consideration
the factors set forth above.

     Mortgagor agrees that in the event a foreclosure hereunder should be commenced by the
Trustee, or his substitute or successor, Beneficiary may at any time before the sale of said
property direct the said Trustee to abandon the sale, and may then institute suit for the
collection of the Obligations, and for the foreclosure of the lien hereunder; it is further agreed
that if Beneficiary should institute a suit for the collection thereof, and for a foreclosure of
the lien hereunder, that he may at any time before the entry of a final judgment in said suit
dismiss the same, and require the Trustee, his substitute or successor to sell the property in
accordance with the provisions hereof.

6:4 Personalty Collateral. Upon the occurrence of any Event of Default, or at any time thereafter,
Beneficiary may, without notice to Mortgagor, exercise its right to declare all Obligations
secured by the security interest created herein to be immediately due and payable in which case
Beneficiary will have all rights and remedies granted by law and particularly by the Uniform
Commercial Code, including but not limited to, the right to take possession of the Personalty
Collateral, and for this purpose Beneficiary may enter upon any premises on which any or all of
the personalty is situated and take possession of and operate said Collateral or remove it
therefrom. Beneficiary may

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require Mortgagor to assemble the Personalty Collateral and make it available to Beneficiary at a
place to be designated by Beneficiary which is reasonably convenient to both parties. Unless the
Personalty Collateral is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Beneficiary will send Mortgagor reasonable notice of the
time and place of any public sale or of the time after which any private sale or other disposition
of the Personalty collateral is to be made. This requirement of sending reasonable notice will be
met if such notice is mailed, postage prepaid, to mortgagor at the address designated at the end
of this agreement at least five days before the time of the sale or disposition. In addition to
the expenses of retaking, holding, preparing for sale, selling and the like, Beneficiary will be
entitled to recover reasonable attorneys’ fees and legal expenses as provided for in this
instrument and in the writings evidencing said Obligations before applying the balance of the
proceeds from the sale or other disposition toward satisfaction of the Obligations themselves.
Mortgagor will remain liable for any deficiency remaining after the sale or other disposition.

6:5 Fixture Collateral. Upon the occurrence of any Event of Default, or at any time thereafter,
Beneficiary may elect to treat the Fixture Collateral as either Realty Collateral or as Personalty
Collateral (but not both) and proceeds to exercise such rights as apply to the type of Collateral
selected.

6:6 Proceeding As to Both Realty and Personalty. Without limiting anything in the foregoing to the
contrary, Beneficiary or Trustee may proceed to foreclose as to personal property (and fixtures)
in accordance with the rights and remedies herein provided as to real property pursuant to Section
9.604 of the Texas Uniform Commercial Code.

6:7 Mineral Leasing Act. Notwithstanding any other provisions hereof, any oil and gas leases
covered by this Mortgage which are subject to the Mineral Leasing Act of 1920 as amended, and the
regulations promulgated thereunder, shall not be sold or otherwise disposed of to any party other
than citizens of the United States, or to associations of such citizens or to any corporation
organized under the laws of the United States, or any state or territory thereof that are
qualified to own or control interests in such Oil and Gas Leases under the provisions of such Act
and regulations, or to persons who may acquire ownership or interest in such Oil and Gas Leases
under the provisions of 30 U.S.C. § 184(g) if applicable, as such Act or regulation are now or may
be from time to time in effect.

SECTION VII. MISCELLANEOUS.

7:1 Pooling and Unitization. Mortgagor will have the right and is hereby authorized to pool or
unitize all or any part of any Oil and Gas Properties with adjacent lands, leaseholds and other
interests when in the reasonable judgment of Mortgagor, it is necessary or advisable to do so in
order to form a drilling unit to facilitate the orderly development of that part of the Oil and Gas
Properties affected thereby, or to comply with the requirements of any law or governmental order or
regulation relating to the spacing of wells or proration of the production therefrom; provided,
however, that any unit so formed for the production of oil will not substantially exceed 160 acres,
and any unit so formed for the production of gas will not substantially exceed 640 acres, unless a
larger area is required to conform to an applicable law or governmental order or regulation
relating to the spacing of wells or to obtain the maximum allowable production under any applicable
law or governmental order or regulation relating to the proration of production therefrom; and
further provided that the Hydrocarbons produced from any unit so formed will be allocated among the
separately owned tracts or interests comprising the unit in proportion to the respective surface
areas thereof. Any unit so formed may relate to one or more zones or horizons, and a unit formed
for a particular production of oil need not conform in area with any unit formed for the production
of gas. Immediately after the formation of any such unit, Mortgagor shall furnish to the Trustee a
true copy of the pooling agreement, declaration of pooling or other instrument creating such unit,
in such number of counterparts as the Trustee may reasonably request. The interest in any such unit
attributable to the Oil and Gas Properties (or any part thereof) included therein will become a
part of the Realty Collateral and will be subject to the lien hereof in the same manner and with
the same effect as though such unit and the interest of Mortgagor therein were specifically
described in Exhibit A. Mortgagor may enter into pooling or unitization agreements not hereinabove
authorized only with the prior written consent of the Beneficiary.

7:2 Compliance with Hazardous Materials Laws. With respect to any substances defined as or
included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials” or
“toxic substances” under any applicable federal, state or local laws, ordinances or regulations
(including, without limitation, friable asbestos and asbestos deemed hazardous by federal or state
regulations) (such substances collectively referred to hereinafter as “Hazardous Materials” and
such laws, ordinances and regulations together with all rules, orders and permits pursuant thereto
collectively referred to hereinafter as “Hazardous Materials Laws”), Mortgagor:

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	 	(a)	 	represents that (except as to Hazardous Materials violations that have been
remedied as required by governmental authorities having jurisdiction of the matter)
neither Mortgagor nor any affiliate, employee, or agent of Mortgagor nor, to the
best of Mortgagor’s knowledge, any of Mortgagor’s predecessors in title (i) has ever
stored, buried, installed, transported, treated or disposed of any Hazardous
Materials at, to or from the property in violation of any applicable Hazardous
Materials Laws, (ii) has ever caused or was legally responsible for the release,
discharge, emission, leak, spill or dumping of any Hazardous Materials at or from
the property except for those releases allowed under applicable Hazardous Materials
Laws, or (iii) has ever received notification from any federal, state or other
governmental authority of the presence or potential or actual release of any
Hazardous Materials at or from the property;
	 
	 	(b)	 	covenants to (i) comply with all applicable Hazardous Materials Laws with
respect to the manufacture, storage, transmission, presence, discharge and removal of
Hazardous Materials at or from the property, (ii) pay promptly when due the costs of
any required removal of any Hazardous Materials from the property and to keep the
property free of any lien imposed pursuant to any Hazardous Materials Laws, and (iii)
notify Beneficiary promptly in writing of the commencement of any legal or regulatory
proceedings relating to Hazardous Materials affecting the property; and
	 
	 	(c)	 	agrees to indemnify and to hold harmless Beneficiary, its officers, employees,
agents, successors and assigns (the “Indemnitees”) from and against, and to reimburse
the Indemnitees with respect to, any and all claims, demands, causes of action, loss,
damage, liabilities, costs, and expenses (including attorneys’ fees and court costs) of
any and every kind or character, known or unknown, fixed or contingent, asserted
against or incurred by the Indemnitees at any time or from time to time, whether as
beneficiary under the Deed of Trust, as mortgagee in possession, or as
successor-in-interest to Mortgagor by foreclosure deed or deed in lieu of foreclosure,
by reason of or arising out of any violation of any Hazardous Materials Laws
(including, without limitation, all claims, demands, loss, damage, liabilities, costs
and expenses in connection with the presence on the property or release from or to the
property of Hazardous Materials disposed of or otherwise released), regardless of
whether the act, omission, event, or circumstance constituted a violation of applicable
law at the time of existence or occurrence. Mortgagor’s obligations hereunder shall
arise upon the discovery of the presence of any Hazardous Materials, whether or not any
federal agency or any state or local environmental agency has taken or threatened any
action in connection with the presence of any Hazardous Materials. The foregoing
indemnity shall survive the repayment of the indebtedness secured hereby and the
release of the lien of the Deed of Trust and shall survive the transfer of any or all
right, title and interest in and to the property by Mortgagor to any other party.

In the event Mortgagor fails, after reasonable notice, to pay any amounts described in clause
(b)(ii) immediately above, Beneficiary may, but shall not be obligated to, cause the Hazardous
Materials to be removed from the property and the cost of such removal shall be added to the
indebtedness secured hereby (regardless of whether such addition increases the outstanding balance
of the indebtedness secured hereby to an amount in excess of the face amount of any notes
described herein). Beneficiary shall have the right at reasonable times and reasonable intervals,
following reasonable advance notice to Mortgagor, to conduct an environmental audit of the
property and Mortgagor shall cooperate in the conduct of such environmental audit, Mortgagor shall
pay the cost of environmental audits of the property conducted for the benefit or at the request
of Beneficiary.

7:3 Successor Trustees. The Trustee may resign in writing addressed to Beneficiary or be removed
at any time with or without cause by an instrument in writing duly executed by Beneficiary. In
case of the death, resignation or removal of the Trustee, a successor Trustee may be appointed by
Beneficiary by instrument of substitution complying with any applicable requirements of law, and
in the absence of any such requirement, without other formality than an appointment and
designation in writing. Such appointment and designation will be full evidence of the right and
authority to make the same and of all facts therein recited, and upon the making of any such
appointment and designation, this conveyance will vest in the named successor Trustee all the
estate and title of the Trustee in all of the Realty Collateral, and said successor will thereupon
succeed to all the rights, powers, privileges, immunities and duties hereby conferred upon the
Trustee. All references herein to the Trustee will be deemed to refer to the Trustee from time to
time acting hereunder.

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7:4 Advances by Beneficiary or the Trustee. Each and every covenant herein contained shall be
performed and kept by Mortgagor solely at mortgagor’s expense. If Mortgagor fails to perform or
keep any of the covenants of whatsoever kind or nature contained in this instrument, Beneficiary,
or the Trustee or any receiver appointed hereunder, may, but will not be obligated to, make
advances to perform the same in the Mortgagor’s behalf, and Mortgagor hereby agrees to repay such
sums and any attorneys’ fees incurred in connection therewith upon demand plus interest at the rate
of interest borne by the Obligation. This amount will be in addition to any sum of money which may,
pursuant to the terms and conditions of any written instruments comprising part of all of the
Obligation, be due and owing apart from the principal and interest thereon. No such advance will be
deemed to relieve Mortgagor from any default hereunder.

7:5 Defense of Claims. Mortgagor shall promptly notify the Beneficiary in writing of the
commencement of any legal proceedings affecting Beneficiary’s interest in the Collateral, or any
part thereof, and shall take such action, employing attorneys agreeable to the Trustee, as may be
necessary to preserve Mortgagor’s, The Trustee’s and Beneficiary’s rights affected thereby; and
should Mortgagor fail or refuse to take any such action, the Trustee or Beneficiary may take such
action in behalf of and in the name of Mortgagor and at Mortgagor’s expense. Moreover, Beneficiary
or the Trustee on behalf of Beneficiary, may take such independent action in connection therewith
a they may in their discretion deem proper; and Mortgagor hereby agrees to make reimbursement for
all sums advanced and all expenses incurred in such actions plus interest at the rate of ten
percent (10%) per annum.

7:6 Termination. If all the Obligations are paid in full and the covenants herein contained are
well and truly performed, then all of the Collateral will revert to Mortgagor and the entire
estate, right, title and interest of the Trustee and Beneficiary will thereupon cease; and the
Trustee in such case shall, upon the request of Mortgagor and at Mortgagor’s cost and expense,
deliver to Mortgagor proper instruments acknowledging satisfaction of this instrument.

7:7 Renewals, Amendments and Other Security. Renewals and extensions of the written instruments
constituting part or all of the Obligations may be given at any time, amendments may be made to
agreements relating to any part of such written instruments or the Collateral, and Beneficiary may
take or hold other security for the Obligations without notice to or consent of Mortgagor. The
Trustee or Beneficiary may resort first to such other security or any part thereof, or first to
the security herein given or any part thereof, or from time to time to either or both, even to the
partial or complete abandonment of either security, and such action will not be a waiver of any
rights conferred by this instrument.

7:8 Instrument an Assignment, Etc. This instrument will be deemed to be and may be enforced from
time to time as an assignment, chattel mortgage, contract, deed of trust, financing statement,
real estate mortgage, or security agreement, and from time to time as any one or more thereof if
appropriate under applicable State law.

7:9 Limitation on Interest Rate. Notwithstanding anything herein or in any notes, contracts,
agreements or other instruments to the contrary, no party is obligated to and shall never be
required to pay interest on amounts owing by such party to Beneficiary in excess of the maximum
permissible to be paid by such party under applicable law; and if payment by any such party of the
Obligations shall involve transcending the limit of validity prescribed by law or for such party,
then, ipso facto, the obligation to be fulfilled shall be reduced as to such party to the limit of
such validity.

7:10 Unenforceable or Inapplicable Provisions. If any provision hereof or of any of the written
instruments constituting part or all of the Obligations is invalid or unenforceable in any
jurisdiction, the other provisions hereof or of said written instruments will remain in full force
and effect in such jurisdiction, and the remaining provisions hereof will be liberally construed
in favor of the Trustee and Beneficiary in order to carry out the provisions hereof. The
invalidity of any provision of this instrument in any jurisdiction will not affect the validity or
enforceability of any such provision in any other jurisdiction. Any reference herein contained to
a statute or law of a state in which no part of the Collateral is situated will be deemed
inapplicable to, and not used in, the interpretation hereof.

7:11 Rights Cumulative. Each and every right, power and remedy herein given to the Trustee or
Beneficiary will be cumulative and not exclusive; and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Trustee, or Beneficiary, as the case may
be, and the exercise, or the beginning of the exercise, of any such right, power or remedy will
not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right,

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power or remedy. No delay or omission by the Trustee or by Beneficiary in the exercise of any
right, power or remedy will impair any such right, power or remedy or operate as a waiver thereof
or of any other right, power or remedy then or thereafter existing.

7:12 Waiver by Beneficiary. Any and all covenants in this instrument may from time to time by
instrument in writing signed by the Beneficiary be waived to such extent and in such manner as the
Beneficiary may desire, but not such waiver will ever affect or impair either the Trustee’s or
Beneficiary’s rights hereunder, except to the extent specifically stated in such written
instrument. All changes to and modifications of this instrument must be in writing signed by
Beneficiary.

7:13 Joint and Several Liability. The term “Mortgagor” as used in this instrument will be construed
as singular or plural to correspond with the number of persons executing this instrument as
mortgagor. If more than one person executes this instrument as Mortgagor, his, her, their, or its
duties and liabilities under this instrument will be joint and several, and the grants of liens and
security interests herein made shall cover each such person’s joint interest as well as his several
interest in the property mortgaged hereunder. The terms “Beneficiary” and “Mortgagor” as used in
this instrument include the heirs, executors or administrators, successors, representatives,
receivers, trustees, and assigns of those parties. This instrument is binding upon the Mortgagor,
the Mortgagor’s successors and assigns, and will inure to the benefit of the Trustee and the
Trustee’s successors and Beneficiary and its successors and assigns.

7:14 Counterparts. This instrument may be executed in any number of counterparts, each of which
will for all purposes be deemed to be an original, and all of which are identical except that, to
facilitate recordation, in any particular counterpart portions of Exhibit A hereto which describe
properties situated in Counties other than the County in which such counterpart is to be recorded
may have been omitted.

7:15 THIS INSTRUMENT IS INTENDED AS A FINANCING STATEMENT as that term is used in the Texas
Uniform Commercial Code covering the properties hereinabove described to the full extent same may
be subject to the Texas Uniform Commercial Code. THIS INSTRUMENT (STATEMENT) IS TO BE FILED IN THE
REAL ESTATE RECORDS AND COVERS FIXTURES. An originally signed copy of this instrument, or a
photographic or other reproduction of an originally signed copy of this instrument, may be filed
as a financing statement under the Uniform Commercial Code in Texas and other jurisdictions which
permit such.

7:16 Additions to Mortgaged Property. It is understood and agreed that the Mortgagor may
periodically subject additional properties to the lien and security interest hereof. In the event
that additional properties are to be subjected to the lien and security interest hereof, the
parties hereto agree to execute a supplemental mortgage, satisfactory in form and substance to the
Beneficiary, together with any security agreement, financing statement or other security
instrument required by the Beneficiary, all in form and substance satisfactory to the Beneficiary
and in a sufficient number of executed (and, where necessary or appropriate, acknowledged)
counterparts for recording purposes. Upon execution of such supplemental mortgage, all additional
properties thereby subjected to the lien and security interest hereof shall become part of the
Collateral for all purposes.

7:17 Recordings. The recordings of the leases referred to in Exhibit A are incorporated herein by
reference for all purposes including a description of the real estate covered thereby.

7:18 All Interest Mortgaged. All of Mortgagor’s interest now owned or hereafter acquired in the
leases described in Exhibit A are being mortgaged hereunder. Without limiting the preceding
sentence, if there are any ownership interests set forth in Exhibit “A”, then Mortgagor warrants
and represents that Mortgagor presently owns at least such interests.

- 13 -

 

	 	 	 	 	 	 	 

	 	 	ZAZA ENERGY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gaston L. Kearby
 

Gaston L. Kearby 

A Manager
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John E. Hearn, Jr.
 

John E. Hearn, Jr. 

A Manager
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Todd A. Brooks
 

Todd A. Brooks
	 	 
	 

	 	 	 	A Manager	 	 

	 	 	 	 	 

	STATE OF TEXAS

	 	§
	 	 
	 

	 	§
	 	 
	COUNTY OF NUECES

	 	§
	 	 

     This instrument was acknowledged before me on the 23rd day of
September, 2011, by GASTON L. KEARBY, as a Manager of ZAZA ENERGY, LLC, a Texas limited liability
company, on behalf of said company.

	 	 	 	 	 
	 	 	 
	 	                                                      /s/ KANDICE SHEEHAN-FERGUS
 	 
	 	Notary Public, State of Texas 	 
	 	 	 
	 

	 	 	 	 	 

	STATE OF TEXAS

	 	§
	 	 
	 

	 	§
	 	 
	COUNTY OF NUECES

	 	§
	 	 

     This instrument was acknowledged before me on the 23rd day of
September, 2011, by JOHN E. HEARN, JR., as a Manager of ZAZA ENERGY, LLC, a Texas limited liability
company, on behalf of said company.

	 	 	 	 	 
	 	 	 
	 	                                                      /s/ KANDICE SHEEHAN-FERGUS
 	 
	 	Notary Public, State of Texas 	 
	 	 	 
	 

	 	 	 	 	 

- 14 -

 

	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

	 	 	 	 	 

	STATE OF TEXAS

	 	§
	 	 
	 

	 	§
	 	 
	COUNTY OF NUECES

	 	§
	 	 

     This instrument was acknowledged before me on the            day of September, 2011, by TODD A.
BROOKS, as a Manager of ZAZA ENERGY, LLC, a Texas limited liability company, on behalf of said
company.

	 	 	 	 	 
	 	 	 
	 	                                                      /s/ KANDICE SHEEHAN-FERGUS
 	 
	 	Notary Public, State of Texas 	 
	 	 	 
	 

- 15 -

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