WHEN RECORDED AND/OR
FILED RETURN TO:
Xxxxxx X. Xxxxx, Esq.
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION AND PROCEEDS,
FINANCING STATEMENT AND FIXTURE FILING
from
FORELAND CORPORATION (Taxpayer I.D. No. 00-0000000) and
EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY
(Taxpayer I.D. No. 00-0000000), AS DEBTORS
to
FIRST AMERICAN TITLE COMPANY OF NEVADA, AS TRUSTEE
and to and for the benefit of
ENERGY INCOME FUND, L.P., AS SECURED PARTY
(Taxpayer I.D. No. 00-0000000)
Dated as of January 6, 1998
THIS INSTRUMENT SHALL BE GOVERNED BY THE PROVISIONS OF SECTIONS 106.300 THROUGH
106.400 OF THE NEVADA REVISED STATUTES.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
EXHIBIT "A" CONTAINS A LEGAL DESCRIPTION OF THE REAL ESTATE CONCERNED. DEBTORS
HAVE AN INTEREST OF RECORD IN THE REAL ESTATE. SOME OF THE PERSONAL PROPERTY
CONSTITUTING A PORTION OF THE COLLATERAL IS OR IS TO BECOME FIXTURES RELATED TO
THE REAL ESTATE.
THIS INSTRUMENT COVERS FIXTURES AND MINERALS OR THE LIKE OR OTHER SUBSTANCES OF
VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING OIL AND GAS) AND THE
ACCOUNTS RELATING THERETO, INCLUDING ACCOUNTS RESULTING FROM THE SALE THEREOF AT
THE WELLHEAD.
THIS INSTRUMENT IS TO BE RECORDED IN THE REAL ESTATE RECORDS OF THE COUNTY
RECORDER IN EACH COUNTY WHERE THE REAL ESTATE IS LOCATED.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY ALLOW
SECURED PARTY OR THE TRUSTEE TO TAKE THE COLLATERAL AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION.
DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION AND PROCEEDS,
FINANCING STATEMENT
AND FIXTURE FILING
This Deed of Trust, Security Agreement, Assignment of Production and
Proceeds, Financing Statement and Fixture Filing (this "Instrument"), dated as
of January 6, 1998, is from FORELAND CORPORATION, a Nevada corporation and
EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY (also known as Eagle Springs
Production Limited Liability Company), a Nevada limited liability company
(collectively "Debtors"), both with an address of 00000 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxxx 00000, to FIRST AMERICAN TRUST COMPANY OF NEVADA, a Nevada
corporation ("Trustee"), and to and for the benefit of ENERGY INCOME FUND, L.P.,
a Delaware limited partnership ("Secured Party"), with an address of 000 Xxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000.
COLLATERAL
All of the property described in paragraphs 1 through 10 below is
herein collectively called the "Collateral":
1. The entire estates or the undivided interests therein as described
in Exhibit "A" in and to all of the mineral estates, surface estates,
leasehold estates and other estates described in Exhibit "A" and in and to
the mineral interests, royalty interests, working interests, operating
rights interest, record title interests, overriding royalty interests,
production payment interests, net profit interests and other interests
described in Exhibit "A" and in and to the leases, licenses, subleases,
sublicenses, easements, rights-of-way, farmouts, farmins, minerals
agreements, unit agreements, cooperative development agreements,
communitization agreements, unit operating agreements, pooling agreements,
joint operating agreements and other documents and instruments described in
Exhibit "A" and any other estates, property interests and rights covering or
relating to all or any part of the land described either in Exhibit "A" or
in the leases, licenses, subleases, sublicenses, easements, rights-of-way,
agreements and other documents and instruments described in Exhibit "A"
(collectively, the "Land"; the term "Land" as used herein includes, without
limitation, the land specifically described in Exhibit "A" and all land
described in or covered by the leases, licenses, subleases, sublicenses,
easements, rights-of-way, agreements and other documents and instruments
described in Exhibit "A" whether or not such land is specifically described
in Exhibit "A"), together with any and all other right, title and interest
of Debtors of whatever kind or character (whether now owned or hereafter
acquired by operation of law or otherwise) (which right, title and interest
of Debtors shall, for all purposes of this Instrument, be deemed to include,
without limitation, any and all right, title and interest now owned or
hereafter acquired by Debtors in any amendment, modification, supplement,
restatement, extension, renewal or replacement of any of the leases,
licenses, subleases, sublicenses, easements, rights-of-way, agreements and
other documents and instruments described in Exhibit "A") in, to and under
or that covers, affects or otherwise relates to the Land or the leases,
licenses, subleases, sublicenses, easements, rights-of-way, agreements and
other documents and instruments described in Exhibit "A" or to any of the
estates, property, interests or rights described or referred to above or
herein; including, without limitation, the following:
(a) All of Debtors' right, title and interest of whatever kind or
character (whether now owned or hereafter acquired by operation of law
or otherwise) in, to and under or that covers, affects or otherwise
relates to the Land or the leases, licenses, subleases, sublicenses,
easements, rights-of-way, agreements and other documents and
instruments described in Exhibit "A" or to any of the estates,
property, interests or rights described or referred to above or herein,
even though Debtors' interest therein may be incorrectly described in,
omitted from or not described in Exhibit "A";
(b) All of Debtors' right, title and interest (whether now owned
or hereafter acquired by operation of law or otherwise) in, to and
under all presently existing and hereafter created oil, gas or mineral
unitization, cooperative development, pooling, spacing or
communitization agreements, declarations or orders, and in and to the
lands and properties covered and the units created thereby (including,
without limitation, units formed under orders, rules, regulations or
other official acts of any federal, state, tribal, local or other
authority having jurisdiction and so called "working interest units"
created under operating and similar agreements or otherwise), that
cover, affect or otherwise relate to the Land or the leases, licenses,
subleases, sublicenses, easements, rights-of-way, agreements and other
documents and instruments described in Exhibit "A" or to any of the
estates, property, interests or rights described or referred to above
or herein;
(c) All of Debtors' right, title and interest (whether now owned
or hereafter acquired by operation of law or otherwise) in, to and
under all presently existing and hereafter created operating
agreements, equipment leases, production sales, purchase, exchange or
processing agreements, transportation or gathering agreements, farmout
or farmin agreements, disposal agreements, area of mutual interest
agreements and other contracts or agreements that cover, affect or
otherwise relate to the Land or the leases, licenses, subleases,
sublicenses, easements, rights-of-way, agreements and other documents
and instruments described in Exhibit "A" or to any of the estates,
property, interests or rights described or referred to above or herein
or the operations thereon, or the production, treatment, storage,
gathering, transportation, handling, processing, manufacturing, sale or
marketing of Hydrocarbons (as hereinafter defined) produced therefrom
or allocated or attributed thereto, including, without limitation,
those contracts and agreements listed in Exhibit "A" as the same may be
amended or supplemented from time to time; and
(d) All of Debtors' right, title and interest of whatever kind or
character (whether now owned or hereafter acquired by operation of law
or otherwise) in, to and under all presently existing or hereafter
created easements, servitudes, rights-of-way, surface leases, licenses,
permits and other surface rights used, or held for use, in connection
with the Land or any of the estates, property, interests or rights
described or referred to above or herein, or the operations thereon, or
the production, treatment, storage, gathering, transportation,
handling, processing, manufacturing, sale or marketing of Hydrocarbons
produced therefrom or allocated or attributed thereto, including,
without limitation, the easements and rights-of-way described in
Exhibit "A" as same may be amended or supplemented from time to time;
2. All of the oil, gas, drip gasoline, natural gasoline, natural gas
liquids, condensate, distillate, casinghead gas and other solid, liquid or
gaseous hydrocarbons and other associated or related substances of whatever
kind or character and in whatever form or phase (including without
limitation, gases produced from coal-bearing formations and strata such as
so-called "coal-bed gas" and "coal-bed methane"), and all products,
by-products and all other substances derived therefrom or the processing
thereof (collectively, "Hydrocarbons") in, on, under or allocated or
attributed to any of the estates, property, interests or rights described or
referred to above or herein or any other interest of Debtors (whether now
owned or hereafter acquired by operation of law or otherwise) in, to and
under or that covers, affects or otherwise relates to the Land or to any of
the estates, property, interests or rights described or referred to above or
herein;
3. All xxxxx (including, without limitation, the xxxxx described in
Exhibit "A"), platforms, derricks, casing, tubing, tanks, tank batteries,
compressors, condensers, treaters, separators, rods, pumps, pumping units,
flow lines, water lines, transportation lines, gathering lines, gas lines,
machinery, pipelines, power lines and other goods and equipment, and all of
the personal property and fixtures, as defined under applicable state law,
now or hereafter located in, on, under, affixed, allocated or attributed to
or obtained or used in connection with any of the estates, property,
interests or rights described or referred to above or herein or any other
interest of Debtors (whether now owned or hereafter acquired by operation of
law or otherwise) in, to and under or that covers, affects or otherwise
relates to the Land or to any of the estates, property, interests or rights
described or referred to above or herein, or that are used, acquired,
purchased or otherwise held for the production, treatment, storage,
gathering, transportation, handling, processing, manufacturing, sale or
marketing of Hydrocarbons, whether located on the Land or other lands;
4. All of the accounts, contract rights and general intangibles now
or hereafter arising in connection with the production, treatment, storage,
gathering, transportation, handling, processing, manufacturing, sale or
marketing of Hydrocarbons produced from or allocated or attributed to any of
the estates, property, interests or rights described or referred to above or
herein or any other interest of Debtors (whether now owned or hereafter
acquired by operation of law or otherwise) in, to or under or that covers,
affects or otherwise relates to the Land or to any of the estates, property,
interests or rights described or referred to above or herein and all other
accounts, contract rights and general intangibles now or hereafter arising
in connection with the estates, property, interests or rights described or
referred to above or herein;
5. All of the severed and extracted Hydrocarbons produced from or
allocated or attributed to any of the estates, property, interests or rights
described or referred to above or herein or any other interest of Debtors
(whether now owned or hereafter acquired by operation of law or otherwise)
in, to and under or that covers, affects or otherwise relates to the Land or
to any of the estates, property, interests or rights described or referred
to above or herein;
6. All geological, geophysical, engineering, accounting, legal and
other information and all rights therein and thereto in the possession of
Debtors or to which Debtors have access or has any rights therein concerning
the estates, property, interests or rights described or referred to above or
herein, including, without limitation, lease files, abstracts of title,
title opinions, geological and geophysical information (unless such
geological or geophysical information is restricted as to transfer or use by
an existing license or agreement concerning proprietary rights identified in
Exhibit "A"), reserve or reservoir studies and well logs, engineering data
and reports, production records and all magnetic media and computer data
relating to the estates, property, interests or rights described or referred
to above or herein;
7. All rights of Debtors to liens and security interests securing
payment of proceeds from the sale of production from the estates, property,
interests or rights described or referred to above or herein; together with
Debtors' interest in any and all renewals and extensions of any of the
estates, property, interests or rights described or referred to above or
herein, Debtors' interest in all contracts and agreements supplemental to or
amendatory of or in substitution for the contracts and agreements described
or referred to herein, and any and all additional interests of any kind
hereafter acquired by Debtors in and to the estates, property, interests or
rights described or referred to above or herein;
8. All of Debtors' right, title and interest, whether now owned or
hereafter acquired, in and to (a) that certain Escrow Agreement, among
Debtors, as Borrower, Secured Party, as Lender, and Peoples Bank, Holyoke,
Massachusetts, as Escrow Agent, (b) all funds deposited and held by the
Escrow Agent in the escrow account established pursuant to such Escrow
Agreement, and (c) all distributions and proceeds therefrom and thereof;
9. All renewals, extensions and restatements of, modifications,
changes, amendments and supplements to, and substitutions for the estates,
property, interests and rights described or referred to in paragraphs 1
through 8 above, and all additions and accessions thereto;
10. All of the rights, privileges, benefits, hereditaments and
appurtenances in any way belonging, incidental or appertaining to the
estates, property, interests and rights described or referred to in
paragraphs 1 through 9 above; and
11. All of the proceeds and products of the estates, property,
interests and rights described or referred to in paragraphs 1 through 10
above, including without limitation, condemnation awards and the proceeds of
any and all insurance policies (including title insurance policies as well
as other types of insurance policies) covering all or any part of said
estates, property, interests or rights and, to the extent they may
constitute proceeds, instruments, accounts, securities, general intangibles,
contract rights and inventory.
GRANTING CLAUSES
In consideration of ten dollars and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Debtors, and the matters hereinafter set forth, Debtors hereby irrevocably:
A. Real Property. Grant, bargain, sell, mortgage, assign, transfer
and convey to Trustee, with POWER OF SALE, for the benefit of Secured Party,
that part of the Collateral that is real property (including any fixtures
that are real property under applicable state law), subject to the
assignment of severed and extracted Hydrocarbons and the proceeds thereof
made under paragraph C below; TO HAVE AND TO HOLD all of the Collateral that
is real property (including any fixtures that are real property under
applicable state law), together with all of the rights, privileges,
benefits, hereditaments and appurtenances in any way belonging, incidental
or pertaining thereto, to Trustee and its successors and assigns, forever,
IN TRUST, NEVERTHELESS, for the security and benefit of Secured Party and
its successors and assigns, subject to all of the terms, conditions,
covenants, agreements and trusts herein set forth;
B. Personal Property. Grant to Secured Party a security interest in
that part of the Collateral that is personal property (including any
fixtures that are personal property under applicable state law); and
C. Assignment of Production. Absolutely assign, grant and transfer
to Secured Party all of the severed and extracted Hydrocarbons produced from
or allocated or attributed to any of the Collateral or any other interest of
Debtors (whether now owned or hereafter acquired by operation of law or
otherwise) in, to and under or that covers, affects or otherwise relates to
the Land or to any of the estates, property rights or other
interestsdescribed or referred to above or herein, together with all of the
proceeds, rents, income, issues and profits thereof and therefrom and
payments in lieu thereof.
ARTICLE I
Obligations
Section 1.1 Obligations Secured. This Instrument is executed,
acknowledged and delivered by Debtors to secure and enforce the following
indebtedness, liabilities and obligations (the "Obligations"):
A. Notes. All indebtedness (including principal, interest, fees
and penalties), liabilities and obligations under or pursuant to the
following described notes, and any renewals, extensions or restatements
thereof, modifications, changes, amendments or supplements thereto and
substitutions therefor (collectively, the "Notes"):
1. Refinancing Note, dated as of January 6, 1998, in the
maximum principal amount of $680,000 made by Debtors and payable to the
order of Secured Party on or before January 1, 2002, together with
interest until maturity or default at the rate of 12% per annum (the
"Standard Interest Rate"), and after maturity or default at the rate of
15% per annum (the "Default Rate");
2. Acquisition Note, dated as of January 6, 1998, in the
maximum principal amount of $2,327,000 made by Debtors and payable to
the order of Secured Party on or before January 1, 2002, together with
interest until maturity at the Standard Interest Rate, and after
maturity or default at the Default Rate; and
3. Development Note, dated as of January 6, 1998, in the
maximum principal amount of $13,893,000 made by Debtors and payable to
the order of Secured Party on or before January 1, 2002, together with
interest until maturity or default at the Standard Interest Rate, and
after maturity or default at the Default Rate;
B. Loan Agreement. All indebtedness, liabilities and
obligations of whatever kind or character, now existing or hereafter created
or arising under or pursuant to that certain Financing Agreement (the "Loan
Agreement"), dated as of January 6, 1998, as amended and as may be amended
from time to time, among Debtors and Secured Party;
Section 1.2 Maximum Indebtedness Secured. This Instrument shall be
governed by the provisions of Sections 106.300 through 106.400 of the Nevada
Revised Statutes, as may be amended from time to time. Debtors, Secured Party
and Trustee agree and acknowledge that Secured Party may elect to make
additional advances under the terms of the Notes, the Loan Agreement or
otherwise, and that any such future advances shall be subject to, and secured
by, this Instrument. Should the Obligations decrease or increase pursuant to
the terms of the Notes, the Loan Agreement or otherwise, at any time or from
time to time, this Instrument shall retain its priority position of record until
the termination of the Loan Agreement and until full, final and complete payment
of all the Obligations. The aggregate unpaid principal amount of the
Obligations outstanding at any particular time (after having given effect to all
advances and all repayments made prior to such time) which is secured by the
Collateral shall not aggregate in excess of One-Hundred Million Dollars
($100,000,000). Such amount does not in any way imply that Secured Party is
obligated to make any future advances to Debtors at any time unless specifically
so provided in the Loan Agreement or any other loan document.
Section 1.3 Recourse. Except as otherwise provided herein, in no
event shall Debtors have any personal liability for payment of principal and
interest on the Notes. Secured Party shall look solely to the Collateral for
the payment of such principal and interest and shall not seek a deficiency or
other personal judgment against Debtors for such principal and interest in the
event that any sale of the Collateral shall be insufficient to satisfy the
Notes. Nothing herein contained shall, however, impair any right, remedy or
security of Secured Party with respect to the Collateral under this Instrument,
the Notes, the Loan Agreement or any other documents or instruments evidencing,
securing or relating to the Obligations, nor limit Debtors' obligations to
perform any of Debtors' other obligations under this Instrument, the Notes, the
Loan Agreement or any other documents or instruments evidencing, securing or
relating to the Obligations, including without limitation, Debtors' obligation
to indemnify Secured Party as set forth herein and in the Loan Agreement.
Notwithstanding the foregoing limitation of recourse, Debtors will remain fully
liable for:
A. Fraud, breach of trust, or any material misrepresentation by
Debtors in this Instrument, the Notes, the Loan Agreement or any other
documents or instruments evidencing, securing or relating to the
Obligations;
B. Waste of a material nature to any part of the Collateral caused
by Debtors' gross negligence or willful and wanton neglect or abuse of the
Collateral or failure to exert reasonable control appropriate for an owner
that is not also the operator;
C. Failure to pay taxes, insurance, assessments, charges for labor
or materials, or other charges, fees or assessments that can create or
result in liens on any portion of the Collateral;
D. Any breaches of warranty or defects of title to the Collateral;
E. Any breach of a warranty or representation contained in this
Instrument or any other instrument securing the Obligations, failure to
perform any covenant or other agreement contained in this Instrument or any
other instrument securing the Obligations, or any indemnity contained in
this Instrument or any other instrument evidencing, securing or otherwise
relating to the Obligations;
F. Any attempt to communicate in any manner with the purchasers of
production from the Collateral after the delivery to such purchasers of a
Transfer Order (as defined in Section 3.1) in an attempt to hinder or
interfere with the rights of Secured Party;
G. The return of, or reimbursement for, all monies received by
Debtors from the purchasers of production for monies attributable to
production after receipt by any such purchaser of a Transfer Order;
H. Any attempt to hinder or interfere with the foreclosure of or
other realization on, the Collateral (whether by judicial action, power of
sale, trustee's sale or otherwise), including without limitation the filing
of a lis pendens, the initiation of any lawsuit or the requesting of
injunctive relief from any court or tribunal, having the effect of hindering
or delaying the exercise by Secured Party or Trustee of any right or remedy
under this Instrument or any other instrument evidencing, securing or
otherwise relating to the Obligations; and
I. After an Event of Default (as hereinafter defined), Debtors
shall fail or refuse to execute and deliver to Secured Party any instrument
reasonably requested by Secured Party and prepared at its expense, which is
necessary to fully vest title to the Collateral in Secured Party or the
purchaser(s) of all or part of the Collateral pursuant to any sale as
provided for in this Instrument or any other instrument securing the
Obligations.
Debtors shall be fully and personally liable for all attorneys' fees and
costs and expenses incurred by Secured Party arising out of any of the
foregoing paragraphs A through I.
ARTICLE II
Warranties, Representations, Covenants
and Indemnities
Section 2.1 Representations and Warranties. Debtors warrant and
represent as follows:
A. Power and Authority. Debtors have the full power and authority
to grant, bargain, sell, mortgage, assign and convey the Collateral as
provided herein.
B. Title. Unless otherwise indicated in Exhibit "A", the oil and
gas leases and licenses described in Exhibit "A" cover all of the oil, gas
and other Hydrocarbons in and under the Land. Debtors are the lawful owners
of good and marketable title to the Collateral; and Debtors have good and
marketable title to the undivided interests in the leases, licenses,
subleases, sublicenses, easements, rights-of-way, agreements and other
documents and instruments as described in Exhibit "A" free and clear of all
royalties and other burdens, charges, liens, security interests,
encumbrances, agreements, contracts, assignments and other matters, except
landowner's royalties and the overriding royalties and the agreements and
contracts specifically described in Exhibit "A". The leases, licenses,
subleases, sublicenses, easements, rights-of-way, agreements and other
documents and instruments described in Exhibit "A" hereto are valid and
subsisting and are in full force and effect. All rents and royalties due
and payable under the leases, licenses, subleases, sublicenses, easements,
rights-of-way, agreements and other documents and instruments described in
Exhibit "A" hereto have been paid. All xxxxx located on the Land have been
drilled, operated and produced in conformity with all applicable laws,
rules, regulations and orders of all regulatory authorities having
jurisdiction, and are subject to no penalties on account of past production.
None of such xxxxx are deviated from the vertical more than the maximum
permitted by applicable laws, rules, regulations and orders. Such xxxxx are
in fact bottomed under and are producing from, and the well bores are wholly
within, the lands described in Exhibit "A". Debtors warrant and will
forever defend the title to the Collateral against the claims of all persons
claiming or to claim the same or any part thereof.
C. Working and Net Revenue Interests. (1) With respect to each
of the oil and gas leases and licenses described in Exhibit "A", Debtors'
share of development and operating costs with respect to the portion of the
Land covered thereby as described in Exhibit "A", without regard to pooling
and unitization, is not greater than the "Working Interest" or "Operating
Rights Interest" specified in Exhibit "A"; and, without giving effect to the
Override Assignments (as defined in Section 7.12 below), Debtors' share of
the gross production of Hydrocarbons produced, saved and marketed from said
Land, without regard to pooling and unitization, is no less than the "Net
Revenue Interest" specified in Exhibit "A".
(2) With respect to each of the xxxxx described in
Exhibit "A", Debtors' share of development and operating costs with respect
thereto and the portion of the Land attributed thereto, is not greater than
the "Working Interest" or "Operating Rights Interest" specified in
Exhibit "A"; and, without giving effect to the Override Assignments,
Debtors' share of the gross production of Hydrocarbons produced, saved and
marketed from said xxxxx and said Land is no less than the "Net Revenue
Interest" specified in Exhibit "A".
(3) With respect to each of the overriding royalty interests
described in Exhibit "A", without giving effect to the Override Assignments,
Debtors' share of the gross production of Hydrocarbons produced, saved and
marketed from the portion of the Land subject thereto as described in
Exhibit "A", is no less than the "Net Revenue Interest" specified in
Exhibit "A".
(4) With respect to each of the mineral interests described
in Exhibit "A", without giving effect to the Override Assignments, Debtors'
share of the gross production of Hydrocarbons in and under and that may be
produced, saved and marketed from the portion of the Land subject thereto as
described in Exhibit "A" is no less than the stated percentage specified in
Exhibit "A".
(5) With respect to each of the royalty interests described
in Exhibit "A", without giving effect to the Override Assignments, Debtors'
share of the gross production of Hydrocarbons produced, saved and marketed
from the portion of the Land subject thereto as described in Exhibit "A" is
no less than the percentage specified in Exhibit "A".
(6) With respect to each of the units and pools described in
Exhibit "A", Debtors' share of development and operating costs with respect
to the portion of the Land covered thereby as described in Exhibit "A" or in
the agreements creating such units and pools recorded as described in
Exhibit "A" and the xxxxx on said Land, is no greater than the "Unit Working
Interest" specified in Exhibit "A"; and, without giving effect to the
Override Assignments, Debtors' share of the gross production of oil, gas and
other Hydrocarbons produced, saved and marketed from said Land and said
xxxxx is no less than the "Unit Net Revenue Interest" specified in
Exhibit "A".
All such shares of development and operating costs and of gross
production are not and will not be subject to change (other than changes
that arise pursuant to nonconsent provisions of operating agreements
described in Exhibit "A" hereto in connection with operations hereafter
proposed and consented to by Secured Party) except, and only to the extent
that, such changes are reflected in Exhibit "A".
D. Operations of Oil and Gas Properties. The Collateral (and
all properties spaced, communitized, unitized or otherwise aggregated
therewith) has been maintained, operated and developed in a good and
workmanlike manner and in conformity in all material respects with all
applicable laws, rules, regulations and orders of all federal, state, tribal
and local governmental bodies, authorities and agencies and in conformity in
all material respects with the provisions of all leases, subleases or other
contracts and agreements comprising a part of the Collateral. None of the
Collateral is subject to having allowable production reduced below the full
and regular allowable (including the maximum permissible tolerance) because
of an overproduction (whether or not the same was permissible at the time)
prior to the date hereof. None of the Collateral is subject to having
production reduced below the full amount producible therefrom as result or
consequence of applicable laws, rules, regulations and orders or otherwise.
E. Sale of Production. (1) All proceeds from the sale of
Debtors' interests in Hydrocarbons from the Collateral are currently being
paid in full to Debtors by the purchaser or remitter thereof on a timely
basis and at prices and terms comparable to market prices in terms
generally available at the time such prices and terms were negotiated for
oil and gas production from producing areas situated near the Collateral,
and none of such proceeds are currently being held in suspense by such
purchaser or any other party.
(2) Neither Debtors, nor their predecessors in title, have
entered into or are subject to any agreement or arrangement (including
without limitation, "take or pay" or similar arrangements), nor is the
Collateral subject to any such agreement or arrangement, to deliver
Hydrocarbons produced or to be produced from the Collateral at some future
time without then or thereafter receiving full payment therefor.
(3) Except as previously disclosed to Secured Party in
writing, none of the Collateral is or, without the prior written consent of
Secured Party, will become subject to any contractual or other arrangement
whereby payment for production from such Collateral is to be deferred for a
substantial period after the month in which such production is delivered
(that is, in the case of oil, not in excess of 60 days, and in the case of
gas, not in excess of 90 days).
(4) None of the Collateral is or will become subject to any
contractual or other arrangement for the sale of crude oil that cannot be
canceled on 180 days' or less notice; and none of the Collateral is or will
become subject to a gas sales contract that contains terms that are not
customary in the industry.
(5) None of the Collateral is subject at the present time to
any regulatory refund obligation and, to the best of Debtors' knowledge, no
facts exist that might cause the same to be imposed.
(6) None of the Collateral is subject to a gas balancing
arrangement under which an imbalance exists with respect to which imbalance
Debtors or the Collateral is in an overproduced status and is required to
(a) permit one or more third parties to take a portion of the production
attributable to such Collateral without payment (or without full payment)
therefor, or (b) make payment in cash, in order to correct such imbalance.
F. Condition of Personal Property. The inventory, equipment,
fixtures and other tangible personal property and fixtures forming a part of
the Collateral are in good repair and condition and are adequate for the
normal operation of the Collateral in accordance with prudent industry
standards, and the Collateral includes all equipment necessary or advisable
for the proper and efficient operation of the xxxxx and leases, licenses,
subleases, sublicenses and rights-of-way included in the Collateral. All of
such Collateral is located on the Land.
G. Consents and Preferential Rights to Purchase. There are no
preferential rights to purchase all or any portion of the Collateral, and
there are no rights of third parties to consent to the transfer of all or
any portion of the Collateral.
H. Contracts and Agreements. Exhibit "A" sets forth all
operating agreements, unit agreements, equipment leases, production sales,
purchase, exchange or processing agreements, transportation or gathering
agreements, farmout or farmin agreements, disposal agreements, area of
mutual interest agreements and other contracts and agreements that cover,
affect or otherwise relate to the Land or the leases, licenses, subleases,
sublicenses, easements, rights-of-way, agreements and other documents and
instruments described in Exhibit "A" that relate to operations thereon, or
the production, treatment, storage, gathering, transportation, handling,
processing, manufacturing, sale or marketing of Hydrocarbons produced
therefrom or allocated or attributed thereto.
I. Taxes. All ad valorem, property, production, severance,
excise and similar taxes and assessments based on or measured by the
ownership of property or the production of Hydrocarbons or the receipt of
proceeds therefrom relating to the Collateral that have become due and
payable have been properly and timely paid.
J. Duly Qualified. Debtors are duly qualified to own, hold and
operate all of the leases, easements, rights-of-way, mineral agreements and
other agreements included within the Collateral, and to conduct their
business as contemplated.
K. Environmental. (1) The Collateral is, and, except as
previously disclosed to Secured Party in writing, to the best of Debtors'
knowledge, at all times has been, operated in compliance with all applicable
Environmental Laws (as hereinafter defined); and to the best of Debtors'
knowledge, no condition exists with respect to the Collateral or other
property owned or operated by Debtors or any affiliate of or party related
to Debtors that would or could reasonably be expected to subject Debtors,
any affiliate of or party related to Debtors, or Secured Party to any
damages (including without limitation, actual, consequential, exemplary and
punitive damages), material liability (absolute or contingent, determined or
determinable), penalties, injunctive relief or cleanup costs under any
applicable Environmental Laws, or that require or could reasonably be
expected to require cleanup, removal, remedial action or other response by
Debtors, any affiliate of or party related to Debtors, or Secured Party
pursuant to any applicable Environmental Laws.
(2) Debtors have not received and, to the best of Debtors'
knowledge, none of their affiliates have received, and none of Debtors' or
their affiliates' or related parties' predecessors in title to the
Collateral have received, any notice from a governmental agency asserting or
alleging a violation of any Environmental Laws as they relate to the
Collateral.
(3) There are no pending or threatened suits, actions,
claims or proceedings against Debtors or its affiliates or related parties
or, to the best of Debtors' knowledge, Debtors' or their affiliates'
predecessors in title, arising from or related to, directly or indirectly,
any Environmental Laws as they relate to the Collateral.
(4) Neither Debtors, any affiliate of or party related to
Debtors, any part of the Collateral, nor, to the best of Debtors' knowledge,
Debtors' or any affiliate's or related parties' predecessors are subject to
any judgment, decree, order or citation related to or arising out of any
Environmental Laws, and neither Debtors nor any affiliate or party related
to Debtors have been named or listed as a potentially responsible party by
any governmental or other entity in a matter arising under or relating,
directly or indirectly, to any Environmental Laws.
(5) Debtors have obtained or caused to be obtained all
permits, licenses, and approvals required under all Environmental Laws to
operate the Collateral.
(6) There are not now, nor to the best of Debtors' knowledge
have there ever been, Hazardous Materials (as hereinafter defined)
discharged, leaked, spilled or released in, on, to, from or at the
Collateral or other properties owned or operated by Debtors or any of their
affiliates or stored, treated, or recycled at or in tanks or other
facilities thereon or related thereto which give rise or could reasonably be
expected to give rise to material liability under any Environmental Laws.
(7) The use which Debtors make and intend to make of the
Collateral will not result in: (a) the use or storage of any Hazardous
Materials on, in or in connection with the Collateral, or disposal of any
Hazardous Materials from the Collateral except in compliance with all
applicable Environmental Laws, or (b) the treatment, processing, discharge
or release of any Hazardous Materials on, in, to or from the Collateral
except in compliance with all applicable Environmental Laws.
(8) There are no underground storage tanks, surface
impoundments, or wastewater injection xxxxx located on or in the Collateral.
As used herein, the term "Environmental Laws" shall mean any one
or more of the following: (i) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq.
("CERCLA"); (ii) the Resource Conservation and Recovery Act, as amended by
the Hazardous and Solid Waste Amendment of 1984, 42 U.S.C. Section 6901
et seq. ("RCRA"); (iii) the Clean Air Act, 42 U.S.C. Section 7401 et seq.;
(iv) the Federal Water Pollution Control Act, 33 U.S.C. Section 1251
et seq.; (v) the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.; (vi) the Federal Safe Drinking Water Act, 42 U.S.C.
Sections 300f to 300j-11; (vii) the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section 1101 et seq.; (viii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; and
(ix) all other foreign, federal, state, tribal and local laws (whether
common or statutory), rules, regulations, consent agreements, compliance
schedules, and orders directly and/or indirectly relating to public health
and safety, air pollution, water pollution, noise control, wetlands, oceans,
waterways, and/or the presence, use, generation, manufacture,
transportation, processing, treatment, handling, discharge, release,
disposal, or recovery of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or materials and/or underground storage tanks,
including, without limitation, all rules, regulations and orders of all
state and local governmental bodies, authorities and agencies pertaining or
relating to the exploration, development, regulation and conservation of oil
and gas resources, as each of the foregoing laws, rules, regulations,
consent agreements, compliance schedules and orders may be enacted, amended,
supplemented, or reauthorized from time to time.
As used herein, the term "Hazardous Materials" shall mean any one
or more of the following substances, wastes and materials: (i) any
substance, waste or material defined as a "hazardous substance," "hazardous
material," "hazardous waste," "pollutant," "contaminant," "toxic material,"
or "toxic substance," in any of the applicable Environmental Laws, or in the
standards, criteria, rules and/or regulations promulgated pursuant to any of
said Environmental Laws (including without limitation Hydrocarbons); and
(ii) any substance, waste or material, the presence of which requires
investigation or remediation under any Environmental Laws.
L. Non-Foreign Person Status. Debtors are not "foreign persons"
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), Sections 1445 and 7701; that is, Debtors are not nonresident
aliens, foreign corporations, foreign partnerships, foreign trusts or
foreign estates as those terms are defined in the Code and any regulations
promulgated thereunder.
Section 2.2 Covenants. Debtors covenant and agree as follows:
A. Obligations. Debtors shall pay when due and perform the
Obligations in accordance with the terms thereof and hereof.
B. Recording and Filing. Debtors shall (1) promptly and at
Debtors' own expense, file or cause to be filed in such offices, at such
times and as often as may be necessary, this Instrument and every other
instrument in addition or supplemental hereto, including applicable
financing statements, as may be necessary to create, perfect, maintain and
preserve the first priority of the liens and security interests intended to
be created hereby and the rights and remedies of Secured Party and Trustee
hereunder; (2) promptly furnish to Secured Party evidence satisfactory to
Secured Party of all such filings; and (3) otherwise do all things necessary
or expedient to be done effectively to create, perfect, maintain and
preserve the priority of the liens and security interests intended to be
created hereby as a first lien on real property and fixtures and a first
priority security interest in personal property and fixtures.
C. Modifications and Dispositions. Without the prior written
consent of Secured Party, Debtors shall not (1) amend, modify or otherwise
revise any lease, license or other agreement described in Exhibit "A";
(2) release, surrender, abandon or forfeit the Collateral or any part
thereof; (3) sell, convey, assign, lease, sublease, alienate, mortgage or
grant security interests in or otherwise dispose of or encumber the
Collateral or any part thereof, except to the extent explicitly permitted by
the Loan Agreement and except sales of severed Hydrocarbons in the ordinary
course of Debtors' business and for fair consideration, and except for the
liens and security interests created by this Instrument and liens for taxes,
assessments and governmental charges not delinquent; or (4) consent to,
permit or authorize any such act by another party with respect to the Land,
the Collateral or any part thereof.
D. Maintenance of Collateral. Debtors shall, at Debtors' own
expense, (1) keep in full force and effect all of the leases, licenses and
other agreements described in Exhibit "A" and all rights-of-way, easements
and privileges necessary or appropriate for the proper operation of such
leases, licenses and agreements, by the proper payment of all rentals,
royalties and other sums due thereunder and the proper performance of all
obligations and other acts required thereunder; (2) cause the Collateral to
be properly maintained, developed and continuously operated for the
production of Hydrocarbons and protected against drainage and damage in a
good and workmanlike manner as a prudent operator would in accordance with
good oil field practice and all applicable federal, state, tribal and local
laws, rules, regulations and orders; (3) pay or cause to be paid when due
all expenses incurred in connection with such maintenance, development,
operation and protection of the Collateral; (4) keep all goods, including
equipment, inventory and fixtures included in the Collateral in good and
effective repair, working order and operating condition and make all
repairs, renewals, replacements, substitutions, additions and improvements
thereto and thereof as are necessary and proper; (5) comply with all
applicable laws, rules, regulations and orders of all federal, state, tribal
and local governmental bodies, authorities and agencies in all material
respects; (6) permit Secured Party, and its respective agents, employees,
contractors, designees and consultants, at reasonable times and upon prior
notice to enter upon the Collateral for the purpose of investigating and
inspecting the condition and operation of the Collateral, and do all things
necessary or proper to enable Secured Party to exercise this right whenever
Secured Party so desires; and (7) do all other things necessary to keep
unimpaired Secured Party's and Trustee's interests in the Collateral.
E. Notification of Breach. Debtors shall promptly notify
Secured Party (1) if any representation or warranty of Debtors contained in
this Agreement is discovered to be or becomes untrue, or (2) if Debtors fail
to perform or comply with any covenant or agreement contained in this
Agreement or it is reasonably anticipated that Debtors will be unable to
perform or comply with any covenant or agreement contained in this
Agreement. Debtors shall cause all the representations and warranties of
Debtors contained in this Agreement to be true and correct in all material
respects from time to time and all times.
F. Defense of Title. If the title or interest of Debtors,
Trustee or Secured Party to the Collateral or any part thereof, or the lien
or encumbrance created by this Instrument, or the rights or powers of
Secured Party or Trustee hereunder, shall be attacked, either directly or
indirectly, or if any legal proceedings are commenced against Debtors,
Secured Party or Trustee of the Collateral, Debtors shall promptly give
written notice thereof to Secured Party and at Debtors' own expense shall
take all reasonable steps diligently to defend against any such attack or
proceedings, employing attorneys reasonably acceptable to Secured Party.
Secured Party and Trustee may take such independent action in connection
therewith as they may in their reasonable discretion deem advisable, and all
costs and expenses, including without limitation, attorneys' fees and legal
expenses, incurred by or on behalf of Secured Party and by Trustee in
connection therewith shall be a demand obligation owing by Debtors to
Secured Party and shall bear interest at the Default Rate until paid, and
shall constitute a part of the Obligations and be indebtedness secured and
evidenced by this Instrument.
G. Environmental. (1) Debtors shall comply with all applicable
Environmental Laws as they relate to the Collateral and shall maintain and
obtain, or cause to be maintained and obtained, all permits, licenses, and
approvals now or hereafter required under all applicable Environmental Laws
as they relate to the Collateral.
(2) Debtors shall not do or permit anything to be done that
will subject the Collateral, Debtors or Secured Party to any material
liability under any applicable Environmental Laws as they relate to the
Collateral, assuming disclosure to governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Collateral.
(3) Debtors shall promptly notify Secured Party in writing
of any citation, complaint, demand, order or notice relating to the
Collateral which is known to Debtors, or any other existing, pending or
threatened investigation or inquiry by any governmental authority relating
to the Collateral known to Debtors and in connection with any applicable
Environmental Laws.
(4) Debtors shall take, or cause to be taken, all steps
necessary to determine that no Hazardous Materials have been: (a) used or
stored on, in or in connection with any Collateral that Debtors acquire with
funds that Debtors receive from Secured Party in accordance with the Loan
Agreement, or disposed from such Collateral, or (b) treated, processed,
discharged or released on, to, in or from such Collateral, except, in each
case, in full compliance with all applicable Environmental Laws.
(5) Debtors shall not cause or permit: (a) the use or
storage of Hazardous Materials on, in or in any manner in connection with
the Collateral, or (b) the treatment, processing, discharge or release of
any Hazardous Materials on, to, in or from the Collateral, except in each
case, in full compliance with all Environmental Laws.
(6) Except in full compliance with all applicable
Environmental Laws, Debtors shall not keep, or cause or allow to be kept,
Hazardous Materials in, on or under the Collateral, and shall remove the
same (or if removal is prohibited by applicable law, shall take whatever
action is required by applicable law) promptly upon discovery of such
Hazardous Materials, all at Debtors' sole cost and expense.
(7) Debtors shall provide, upon Secured Party's reasonable
request, at any time, and from time to time (but not more often than once a
year), inspections, tests and audits of the Collateral from an engineering
or consulting firm approved by Secured Party indicating the presence or
absence of Hazardous Materials on the Collateral and compliance with all
applicable Environmental Laws. The cost of all inspections, tests and
audits of the Collateral performed pursuant to this Section shall be shared
equally by Debtors and Secured Party. Nothing contained herein shall
relieve Debtors from conducting its own inspections, tests and audits or
taking any other steps necessary to comply with all Environmental Laws, nor
shall anything contained herein be construed to imply or impose any duty on
Secured Party concerning Debtors' compliance or noncompliance therewith.
H. Further Assurances. Debtors shall execute, acknowledge and
deliver, or cause to be executed, acknowledged or delivered, to Secured
Party such other and further instruments and do such other acts as in the
reasonable opinion of Secured Party may be necessary or desirable to effect
the intent of this Instrument, promptly upon request of Secured Party and at
Debtors' expense.
Section 2.3 Costs, Expenses and Indemnities. Debtors agree to
reimburse, pay, indemnify, defend and hold harmless Secured Party and Trustee as
follows:
A. Costs and Expenses. Debtors shall reimburse and pay Secured
Party for all fees, costs and expenses (including without limitation,
reasonable attorneys' fees, court costs and legal expenses and consultant's
and expert's fees and expenses), incurred or expended by Secured Party or
Trustee in connection with (1) the breach by Debtors of any representation
or warranty contained in this Instrument, the Loan Agreement, the Notes or
any other documents and instruments evidencing, securing or otherwise
relating to the Obligations, (2) the failure by Debtors to perform any
agreement, covenant, condition, indemnity or obligation contained in this
Instrument, the Loan Agreement, the Notes or any other documents and
instruments evidencing, securing or otherwise relating to the Obligations,
(3) Secured Party's or Trustee's exercise of any of its rights and remedies
under this Instrument, the Loan Agreement, the Notes and the other documents
and instruments evidencing, securing or otherwise relating to the
Obligations, or (4) the protection of the Collateral and the liens thereon
and security interests therein. All such fees, costs and expenses shall be
a demand obligation owing by Debtors to Secured Party and shall bear
interest at the Default Rate until paid, and shall constitute a part of the
Obligations and be indebtedness secured and evidenced by this Instrument.
The foregoing agreements shall be perpetual and shall survive the payment or
satisfaction of the Obligations and the release, reconveyance, foreclosure
or other termination of this Instrument.
B. Environmental Indemnity. Debtors agree to indemnify, defend,
and hold harmless Secured Party, its affiliates and related parties, and
their respective directors, officers, shareholders, partners, members,
employees, consultants and agents (individually, an "Indemnified Party," and
collectively, "Indemnified Parties") from and against, and shall reimburse
and pay Indemnified Parties with respect to, any and all claims, demands,
liabilities, losses, damages (including without limitation actual,
consequential, exemplary and punitive damages), causes of action, judgments,
penalties, fees, costs and expenses (including without limitation attorneys'
fees, court costs and legal expenses and consultant's and expert's fees and
expenses) of any and every kind or character, known or unknown, fixed or
contingent, that may be imposed upon, asserted against, or incurred or paid
by or on behalf of any Indemnified Party on account of, in connection with,
or arising out of (1) the breach of any representation or warranty of
Debtors relating to Environmental Laws or Hazardous Materials, or (2) the
failure of Debtors to perform any agreement, covenant or obligation required
to be performed by Debtors relating to Environmental Laws or Hazardous
Materials, (3) any violation of or failure to comply with any Environmental
Law now existing or hereafter occurring, (4) the removal of Hazardous
Materials from the Collateral (or if removal is prohibited by law, the
taking of whatever action is required by law), (5) any act, omission, event
or circumstance existing or occurring or resulting from or in connection
with the ownership, construction, occupancy, operation, use or maintenance
of the Collateral, regardless of whether the act, omission, event or
circumstance constituted a violation of or failure to comply with any
Environmental Law at the time of its existence or occurrence, and (6) any
and all claims or proceedings (whether brought by private party or
governmental agency) for bodily injury, property damage, abatement or
remediation, environmental damage, or impairment or any other injury or
damage resulting from or relating to any Hazardous Material located upon or
migrating into, on, from or through the Collateral (whether or not any or
all of the foregoing was caused by Debtors, a prior owner of the Collateral,
an operator or prior operator of the Collateral, their respective tenants or
subtenants, or any third party and whether or not the alleged liability is
attributable to the handling, storage, use, treatment, processing,
distribution, manufacture, generation, discharge, transportation or disposal
of such Hazardous Material or the mere presence of such Hazardous Material
on the Collateral). Without limiting the generality of the foregoing, it is
the intention of Debtors and Debtors agree that the foregoing indemnities
shall apply to each Indemnified Party with respect to claims, demands,
liabilities, losses, damages (including without limitation actual,
consequential, exemplary and punitive damages), causes of action, judgments,
penalties, fees, costs, court costs and legal expenses and consultant's and
expert's fees and expenses, of any kind or character, known or unknown,
fixed or contingent, that in whole or in part are caused by or arise out of
the negligence of such Indemnified Party; however, such indemnities shall
not apply to any Indemnified Party to the extent the subject of the
indemnification is caused by or arises out of the gross negligence or
willful misconduct of such Indemnified Party. Any amount to be paid
hereunder by Debtors to Secured Party or for which Debtors have indemnified
an Indemnified Party shall be a demand obligation owing by Debtors to
Secured Party and shall bear interest at the Default Rate until paid, and
shall constitute a part of the Obligations and shall be indebtedness secured
and evidenced by this Instrument. The foregoing agreements shall be
perpetual and shall survive the payment or satisfaction of the Obligations
and the release, reconveyance, foreclosure or other termination of this
Instrument.
C. General Indemnity. Debtors agree to indemnify, defend and
hold harmless Secured Party upon demand, from and against any and all
liabilities, obligations, penalties, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
Subsection, collectively called "liabilities and costs") which to any extent
(in whole or in part) may be imposed on, incurred by, or asserted against
Secured Party growing out of, resulting from or in any other way associated
with any of the Collateral, this Instrument, the Notes, the Loan Agreement
or any other documents or instruments evidencing, securing or relating to
the Obligations, or the transactions and events (including the enforcement
or defense thereof) at any time associated therewith or provided for
therein. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY SECURED PARTY,
provided only the Secured Party shall not be entitled under this Subsection
to receive indemnification for that portion, if any, of any liabilities and
costs which is proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment. If any person or
entity (including Debtors or any of their affiliates or related parties)
ever alleges such gross negligence or willful misconduct by Secured Party,
the indemnification provided for in this Subsection shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to the
extent and effect of the alleged gross negligence or willful misconduct.
Any amount to be paid hereunder by Debtors to Secured Party or for which
Debtors have indemnified any person or entity hereunder shall be a demand
obligation owing by Debtors to Security Party and shall bear interest at the
Default Rate until paid, and shall constitute a part of the Obligations and
the indebtedness secured and evidenced by this Instrument. As used in this
Subsection the term "Secured Party" shall refer not only to the entity
defined as such in the Preamble to this Instrument but also to each
director, officer, partner, member, agent, attorney, employee,
representative and affiliate of, and person or entity related to, such
entity. The foregoing agreements shall be perpetual and shall survive the
payment or satisfaction of the Obligations and the release, reconveyance,
foreclosure or other termination of this Instrument.
Section 2.4 Performance by Secured Party. Debtors agree that, if
Debtors fail to perform any act which Debtors are required to perform hereunder,
Secured Party and Trustee may, but shall not be obligated to, perform or cause
to be performed such act, and any expense so incurred by Secured Party or by
Trustee in connection therewith shall be a demand obligation owing by Debtors to
Secured Party and shall bear interest at the Default Rate until paid, and shall
constitute a part of the Obligations and be indebtedness secured and evidenced
by this Instrument, and Secured Party shall be subrogated to all of the rights
of the party receiving such payment. Debtors hereby irrevocably appoint Secured
Party as Debtors' attorney-in-fact and proxy, with full authority in the place
and stead of Debtors and in the name of Debtors or otherwise, from time to time
to take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the foregoing and the other purposes of
this Instrument. Such appointment is coupled with an interest and shall be
irrevocable from the date hereof and so long as any part of the Obligations is
outstanding.
ARTICLE III
Collection of Proceeds of Production
Section 3.1 Assignment of Proceeds. Pursuant to Paragraph C of the
Granting Clauses of this Instrument, Secured Party is absolutely assigned,
granted and transferred and entitled to receive all of the severed and extracted
Hydrocarbons produced from or allocated or attributed to all of the Collateral,
together with all of the proceeds, rents, income, issues and profits thereof and
therefrom and payments in lieu thereof, such as "take or pay" or similar
payments. Debtors acknowledge and agree that said assignment is intended to be
an absolute and unconditional assignment and not merely a pledge of or creation
of a security interest in said Hydrocarbons and proceeds or an assignment as
additional security. Debtors shall execute, acknowledge and deliver or cause to
be executed, acknowledged and delivered, transfer orders or letters-in-lieu
thereof ("Transfer Orders") directing all pipeline companies or other purchasers
of Hydrocarbons to make payments directly to Secured Party. All parties
producing, purchasing, receiving or having in their possession any such
Hydrocarbons or proceeds are hereby authorized and directed by Debtors to treat
and regard Secured Party as the party entitled in Debtors' place and stead to
receive such Hydrocarbons and proceeds; and said parties shall be fully
protected in so treating and regarding Secured Party and shall be under no
obligation to see to the application by Secured Party of any such proceeds
received by it. For its convenience, Secured Party may, with respect to any or
all such Hydrocarbons or proceeds, permit Debtors to receive such Hydrocarbons
or proceeds until such time as Secured Party shall have made written demand
therefor. Such election by Secured Party shall not in any way waive the right
of Secured Party to demand and receive such Hydrocarbons and proceeds thereafter
allocated or attributed to the Collateral and shall not in any way diminish the
absolute and unconditional right of Secured Party to receive all of such
Hydrocarbons and proceeds and cash proceeds not theretofore expended or
distributed by Debtors. Any such Hydrocarbons or proceeds received by Debtors
shall, when received, constitute trust funds in Debtors' hands and shall be held
by Debtors upon an express trust for the benefit of Secured Party. Debtors
hereby agrees that upon the first to occur of either (i) written demand of
Secured Party, or (ii) the occurrence of any event which constitutes an Event of
Default (as hereinafter defined) or which upon the giving (or receiving) of
notice or lapse of time, or both, would constitute such an Event of Default, all
cash, proceeds, instruments and other property, of whatever kind or character,
received by Debtors on account of the Collateral, whether received by Debtors in
the exercise of its collection rights hereunder or otherwise, shall, in
accordance with instructions then given by Secured Party, be remitted to Secured
Party or deposited to an account designated by Secured Party, in the form
received (properly assigned or endorsed to the order of Secured Party or for
collection and in accordance with Secured Party's instructions) not later than
the first banking business day following the day of receipt, to be applied as
provided in Section 3.2 hereof and, until so applied, may be held by Secured
Party in a separate account on which Debtors may not draw. Debtors agree not to
commingle any such property with any of its other funds or property and agrees
to hold the same upon an express trust for Secured Party until remitted to
Secured Party.
Section 3.2 Application of Proceeds. Secured Party shall apply all of
the proceeds received pursuant to Section 3.1 hereof in satisfaction of the
Obligations as provided below, unless otherwise agreed to by Secured Party and
Debtors. All such proceeds received and to be applied by Secured Party up to
the close of business on the last day of each calendar month shall be applied by
Secured Party on or before the fifth business day of the next succeeding
calendar month as follows (with any balance remaining after such application to
be paid to Debtors):
A. First, to the payment to Secured Party and Trustee of all
outstanding or unreimbursed fees, costs and expenses incurred by Secured
Party or Trustee pursuant hereto, and any part of the Obligations not
evidenced by written instrument, including without limitation, all charges
and penalties, including interest thereon, due Secured Party;
B. Second, to the payment or prepayment of all interest accrued
on the Obligations; and
C. Third, to the payment or prepayment of the principal of the
Obligations in any order the Secured Party may elect from time to time.
If any date of application specified above shall be a Saturday, Sunday or legal
holiday, the proceeds to be applied by Secured Party pursuant to this Section
3.2 shall be applied on the business day next succeeding such date which is not
a Saturday, Sunday or legal holiday, and the amount to be applied as described
above shall be the amount accrued up to such date. If the proceeds received by
Secured Party pursuant to Section 3.1 during any month are not sufficient to
make the minimum payments of principal of and interest on the Obligations
required by the terms of the Loan Agreement or the Notes, then Debtors on or
before the due date shall make payment to Secured Party of an amount sufficient
when added to such proceeds received to make the minimum required payments of
principal and interest of the Obligations.
Section 3.3 Inclusion in Sale. Upon any sale of any of the Collateral
pursuant to Article V hereof and expiration of any mandatory redemption periods,
the Hydrocarbons thereafter produced from or attributed to the part of the
Collateral so sold, and the proceeds thereof, shall be included in such sale and
shall pass to the purchaser free and clear of the provisions of this Article
III.
Section 3.4 No Liability in Secured Party. Secured Party is hereby
absolved from all liability for failure to enforce collection of any such
proceeds and from all other responsibility in connection therewith, except the
responsibility to account to Debtors for proceeds actually received.
Section 3.5 Indemnity. Debtors shall indemnify Secured Party against
all claims, actions, liabilities, judgments, costs, reasonable attorneys' fees
or other charges of every kind or nature (herein called "Claims") made against
or incurred by Secured Party as a consequence of the assertion, either before or
after the payment in full of the Obligations, that Secured Party received
Hydrocarbons or proceeds pursuant to this Article III which were claimed by
third persons. Secured Party shall have the right to employ attorneys and to
defend against any Claims, and unless furnished with reasonable indemnity,
Secured Party shall have the right to pay or compromise and adjust all Claims.
Debtors shall indemnify and pay to Secured Party all such amounts as may be paid
with respect thereto or as may be successfully adjudicated against Secured
Party, and such amounts shall be a demand obligation owing by Debtors to Secured
Party and shall bear interest at the Default Rate until paid, and shall
constitute a part of the Obligations and be indebtedness secured and evidenced
by this Instrument. The foregoing shall survive the payment or satisfaction of
the Obligations and the release, reconveyance, foreclosure or other termination
of this Instrument.
Section 3.6 Rights of Secured Party. Secured Party shall have the
immediate and continuing right to demand, collect, receive and receipt for all
production, proceeds and payments assigned hereunder, and Secured Party is
hereby appointed agent and attorney-in-fact of Debtors (which appointment is
coupled with an interest and is irrevocable) for the purpose of executing any
release, receipt, division order, transfer order, relinquishment or other
instrument that Secured Party deems necessary in order for Secured Party to
collect and receive such production, proceeds and payments. In addition,
Debtors agree that, upon the request of Secured Party, they will promptly
execute and deliver to Secured Party such transfer orders, payment orders,
division orders and other instruments as Secured Party may deem necessary,
convenient or appropriate in connection with the payment and delivery directly
to Secured Party of all proceeds, production, and payments assigned hereunder.
Debtors hereby authorize and direct that, upon the request of Secured Party, all
pipeline companies, purchasers, transporters and other parties now or hereafter
purchasing Hydrocarbons produced from or allocated or attributed to the
Collateral or any other interest of Debtors (whether now owned or hereafter
acquired by operation of law or otherwise), in, to or relating to the Land or to
any of the estates, property, rights or other interests included in the
Collateral, or any part thereof, or now or hereafter having in their possession
or control any production from or allocated to the Collateral or any other
interest of Debtors (whether now owned or hereafter acquired by operation of law
or otherwise), in, to or relating to the Land or to any of the estates,
property, rights or other interests included in the Collateral, or any part
thereof, or the proceeds therefrom, or now or hereafter otherwise owing monies
to Debtors under contracts and agreements herein assigned, shall, until Secured
Party directs otherwise, pay and deliver such proceeds, production or amounts
directly to Secured Party at Secured Party's address set forth in the
introduction to this Instrument, or in such other manner as Secured Party may
direct such parties in writing, and this authorization shall continue until the
assignment of production and proceeds contained herein is released and
reassigned. Debtors agree that all division orders, transfer orders, receipts
and other instruments that Secured Party may from time to time execute and
deliver for the purpose of collecting and receipting for such proceeds,
production or payments may be relied upon in all respects, and that the same
shall be binding upon Debtors and their successors and assigns. No payor making
payments to Secured Party at its request under the assignment of production and
proceeds contained herein shall have any responsibility to see to the
application of any of such funds, and any party paying or delivering proceeds,
production or amounts to Secured Party under such assignments shall be released
thereby from any and all liability to Debtors to the full extent and amount of
all payments, production or proceeds so delivered. Debtors agrees to indemnify
and hold harmless any and all parties making payments to Secured Party, at the
request of the Secured Party under the assignment of production and proceeds
contained herein, against any and all liabilities, actions, claims, judgments,
costs, charges and attorneys' fees and legal expenses resulting from the
delivery of such payments to Secured Party. The indemnity agreement contained
in the previous sentence is made for the direct benefit of and shall be
enforceable by all such persons and shall survive the termination of this
Instrument. Should Secured Party bring suit against any third party for
collection of any amounts or sums included within the assignment of production
and proceeds contained herein (and Secured Party shall have the right to bring
any such suit), it may xxx either in its own name or in the name of Debtors, or
both.
Section 3.7 Change of Connection. Should any purchaser taking the
production from the Collateral or any other interest of Debtors (whether now
owned or hereafter acquired by operation of law or otherwise), in, to or
relating to the Land or to any of the estates, property, rights or other
interests included in the Collateral, or any part thereof, fail to make any
payment promptly to Secured Party, in accordance with the assignment of
production and proceeds herein made, then Secured Party, to the fullest extent
permissible under applicable law, shall have the right to demand a change of
connection and to designate another purchaser with whom a new connection may be
made, without any liability on the part of Secured Party in making such
selection; and failure of Debtors to consent to and promptly effect such change
of connection shall constitute an Event of Default under Article V below.
Section 3.8 No Delegation or Assumption. Nothing in this Instrument
shall be deemed or construed to create a delegation to or assumption by Secured
Party, of the duties and obligations of Debtors under any agreement or contract
relating to the Collateral or any portion thereof, and all of the parties to any
such contract shall continue to look to Debtors for performance of all covenants
and other obligations and the satisfaction of all representations, warranties,
covenants, indemnities and other agreements of Debtors thereunder,
notwithstanding the assignment of production and proceeds contained herein or
the exercise by Secured Party, prior to foreclosure, of any of its rights
hereunder or under applicable law.
Section 3.9 Cumulative. The assignment of production and proceeds
contained herein shall not be construed to limit in any way the other rights and
remedies of Secured Party hereunder, including without limitation, its right to
accelerate the indebtedness evidenced by the Obligations upon an Event of
Default and the other rights and remedies herein conferred, conferred in the
other documents and instruments evidencing, securing or relating to the
Obligations, or conferred by operation of law. Monies received under the
assignment of production and proceeds contained herein shall not be deemed to
have been applied in payment of the Obligations unless and until such monies
actually are applied thereto by Secured Party.
ARTICLE IV
Termination and Release
Section 4.1 Release Upon Termination. If all of the Obligations shall
be paid in full and otherwise satisfied pursuant to the terms and conditions of
this Instrument and the other documents and instruments evidencing, securing or
relating to the Obligations, and if Debtors shall have well and truly performed
all of the covenants and agreements herein contained, and if Secured Party has
no further obligation to advance any amounts to Debtors, then all of the
Collateral shall revert to Debtors, the liens and security interests created by
this Instrument shall terminate and Secured Party or Trustee, or both, as
required by applicable law, shall, promptly after the request of Debtors or as
otherwise required by applicable law, execute, acknowledge and deliver to
Debtors a release or reconveyance of this Instrument and such other instruments
as may be necessary to evidence the termination of the liens and security
interests created by this Instrument.
Section 4.2 Partial Release. No partial release or reconveyance from
the liens and security interests created by this Instrument of any part of the
Collateral by Trustee or Secured Party shall in any way alter, vary or diminish
the force or effect of this Instrument or impair, release or subordinate the
liens and security interests created by this Instrument on the remainder of the
Collateral. Except as specifically provided in any such partial release or
reconveyance (i) this Instrument and liens and security interests created hereby
shall remain in full force and effect, (ii) such partial release or reconveyance
will not modify or affect the terms, conditions or provisions of this
Instrument, and (iii) nothing contained in any such partial release or
reconveyance shall be deemed to be, or construed as, a waiver of any such terms,
conditions or provisions or as a waiver of any other term, condition or
provision.
Section 4.3 Execution. Except as may be required by applicable law,
Secured Party shall have full power and authority to execute, acknowledge and
deliver any release or reconveyance of this Instrument without the joinder
therein or execution thereof by Trustee, and any such release or reconveyance
shall be binding upon Secured Party and Trustee. All releases and reconveyances
executed in connection with this Instrument shall be without warranty of any
kind, express, implied or statutory.
Section 4.4 Costs, Expenses and Effect. Debtors shall pay all legal
fees and other fees, costs and expenses incurred by Secured Party and Trustee
for preparing and reviewing instruments of termination and release or
reconveyance and the execution and delivery thereof and Secured Party may
require payment of the same prior to delivery of such instruments. The release
and reconveyance of this Instrument and the termination of the liens and
security interests created by this Instrument, in whole or in part, shall not
terminate or otherwise affect Secured Party's right or ability to exercise any
right, power or remedy relating to any claim for breach of warranty or
representation, for failure to perform any covenant or other agreement, under
any indemnity or for fraud, deceit or other misrepresentation or omission.
ARTICLE V
Default
Section 5.1 Events of Default. The occurrence of any of the following
events shall constitute an event of default ("Event of Default") and upon the
occurrence thereof the liens and security interests created hereby shall be
subject to foreclosure in any manner provided for herein or provided for by
applicable law:
A. Failure of Debtors to pay any fee or other amount due Secured
Party or Trustee under this Instrument within 10 days after the date that
any such payment is due;
B. Failure of Debtors to perform or observe any covenant,
agreement, indemnity, condition or provision in this Instrument and such
failure shall continue for 30 days after written notice of such failure has
been given to Debtor;
C. Any of Debtors' representations or warranties made in this
Instrument or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in
any material respect as of the date made or deemed made; or
D. An "Event of Default" as defined in the Loan Agreement shall
occur.
Section 5.2 Treatment of Fixtures. Upon the occurrence of any Event
of Default, or at any time thereafter, if deemed appropriate by Secured Party or
if required by applicable law, Secured Party may elect to treat the fixtures
included in the Collateral either as real property or as personal property, or
both, and proceed to exercise such rights as apply to the type of property
selected.
Section 5.3 Foreclosure. Upon the occurrence of any Event of Default,
or at any time thereafter, in addition to any other rights, powers and remedies
herein conferred or conferred by operation of law, Secured Party and Trustee
shall have all of the rights, powers and remedies of a secured party, a
beneficiary under a deed of trust, and a trustee under a deed of trust granted
under applicable law. Secured Party may, without notice, demand or declaration
of default, which are hereby waived by Debtors to the extent such waiver is not
prohibited by applicable law, declare all indebtedness secured hereby due and
payable, and whether or not Secured Party exercises such option, it may, at its
option and in its sole discretion, without any prior notice to or demand upon
Debtors, proceed by one or more actions in equity or at law for the seizure and
sale of the Collateral or any portion thereof, for the foreclosure or sale of
the Collateral or any portion thereof by judicial foreclosure by appropriate
proceedings in any court of competent jurisdiction, by the power of sale granted
herein, by a trustee's sale, or in any other manner then permitted by law, for
the specific performance of any covenant or agreement of Debtors herein
contained or in aid of the execution of any right, power or remedy herein
granted, or for the enforcement of any other appropriate equitable or legal
remedy and to recover judgment against Debtors. In furtherance, and not in
limitation, thereof:
A. Deed of Trust. This Instrument shall constitute a trust deed
under applicable law, as amended and as may be amended from time to time, or
any future law containing provisions under which the sale of property
securing debts is authorized or permitted; and upon an Event of Default, or
any time thereafter, Trustee shall, whenever requested by Secured Party,
cause the Collateral to be sold in accordance with the provisions thereof
and hereof. In addition, upon the occurrence of an Event of Default, or at
any time thereafter, this Instrument may be foreclosed as to any of the
Collateral by judicial action or in any manner then permitted by applicable
law.
B. Election. In the event a sale of the Collateral under the
power of sale shall be commenced by Trustee, Secured Party may at any time
before the sale of the Collateral, elect to abandon the sale, and Secured
Party may then institute a suit for the collection of the Obligations and
for the foreclosure of this Instrument by judicial action. It is agreed
that if Secured Party should institute a suit for the foreclosure of this
Instrument by judicial action, Secured Party may at any time before the
entry of a final judgment, dismiss such suit, and then sell, cause to be
sold or direct Trustee to sell, the Collateral under the power of sale
herein granted in accordance with the provisions of this Instrument.
C. Additional Actions. This Instrument shall also constitute
and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement and security agreement, and
from time to time as any one or more thereof as appropriate under applicable
law. Secured Party shall be entitled to all of the rights, remedies and
benefits of a secured party and a beneficiary granted under applicable law;
and, to the fullest extent of such law, shall be entitled to enforce such
rights, remedies and benefits. Debtors intend and hereby grant to Secured
Party all rights, powers and remedies accorded a secured party and a
beneficiary under applicable law whether or not such rights, powers and
remedies are expressly granted or reserved herein.
D. Notice, Place and Manner of Sale. Any sale of the Collateral
under this Article V shall take place 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 Secured Party may deem appropriate.
Debtors expressly agree that, except as may be required by applicable law,
Secured Party or Trustee may offer the Collateral as a whole or in such
parcels or lots as Secured Party or Trustee elects, regardless of the manner
in which the Collateral may be described.
E. Postponement of Sale. Any sale of the Collateral conducted
under this Article V may be postponed from time to time as provided by
applicable law; or, in the absence of any such provisions, Secured Party may
postpone the sale of the Collateral or any part thereof 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 the
time of sale fixed by the preceding postponement. Sale of a part of the
Collateral will not exhaust the power of sale, and sales may be made from
time to time until all Collateral is sold or the Obligations are paid in
full.
F. Secured Party's Right to Purchase. Secured Party shall have
the right to bid or to become the purchaser at any sale made pursuant to the
provisions of this Article V, and shall have the right to credit upon the
amount of the bid made therefor the amount payable to it out of the net
proceeds of such sale.
G. Conveyance to Purchaser. Any deed, xxxx of sale or other
conveyance executed by or on behalf of Trustee, Secured Party, the sheriff
or other official or party responsible for conducting the sale shall be
prima facie evidence of the compliance with all statutory requirements for
the sale and execution of such deed, xxxx of sale or other conveyance and
will conclusively establish the truth and accuracy of the recitals and other
matters stated therein, including, without limitation, nonpayment or
nonperformance of the Obligations, violation of the terms and covenants
contained herein, and the advertisement and conduct of such sale in the
manner provided herein or as provided by applicable law. Debtors do hereby
ratify and confirm all legal acts that Trustee and Secured Party may do in
carrying out the provisions of this Instrument. Any sale of the Collateral
or any portion thereof pursuant to the provisions of this Article V will
operate to divest all right, title, interest, claim and demand of Debtors in
and to the property sold and will be a perpetual bar against Debtors and
shall, subject to applicable law, vest title in the purchaser free and clear
of all liens, security interests and encumbrances, including without
limitation, liens, security interests and encumbrances junior or subordinate
to the liens, security interests and encumbrances created by this
Instrument. Upon any sale of the Collateral or any portion thereof pursuant
to the provisions of this Article V, the receipt by Secured Party, Trustee,
the sheriff or other official or party responsible for conducting the sale,
shall be sufficient discharge to the purchaser or purchasers at any sale for
the purchase money, and such purchaser or purchasers and the heirs,
devisees, personal representatives, successors and assigns thereof shall
not, after paying such purchase money and receiving such receipt of Secured
Party, Trustee, the sheriff or such other official or party, be obliged to
see to the application thereof or be in anywise answerable for any loss,
misapplication or nonapplication thereof. Any purchaser at a sale will,
subject to mandatory redemption periods, if any, receive immediate
possession of the Collateral purchased, and Debtors agree that if Debtors
retain possession of the Collateral or any part thereof subsequent to such
sale, Debtors will be considered a tenant at sufferance of the purchaser,
and will, if Debtors 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 to Debtors by
reason thereof are hereby expressly waived by Debtors.
H. Federal Transfers. Upon a sale conducted pursuant to this
Article V of all or any portion of the Collateral consisting of interests
(the "Federal Interests") in leases, easements, rights-of-way, agreements or
other documents and instruments covering, affecting or otherwise relating to
federal lands (including, without limitation, leases, easements and rights-
of-way issued by the Bureau of Land Management); Debtors agree to take all
action and execute all instruments necessary or advisable to transfer the
Federal Interests to the purchaser at such sale, including without
limitation, to execute, acknowledge and deliver assignments of the Federal
Interests on officially approved forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements, to seek and request
approval thereof and to take all other action necessary or advisable in
connection therewith. Debtors hereby irrevocably appoint Secured Party as
Debtors' attorney-in-fact and proxy, with full power and authority in the
place and xxxxx of Debtors, in the name of Debtors or otherwise, to take any
such action and to execute any such instruments on behalf of Debtors that
Secured Party may deem necessary or advisable to so transfer the Federal
Interests, including without limitation, the power and authority to execute,
acknowledge and deliver such assignments, to seek and request approval
thereof and to take all other action deemed necessary or advisable by
Secured Party in connection therewith; and Debtors hereby adopt, ratify and
confirm all such actions and instruments. By separate instruments Debtor
has also irrevocably appointed Secured Party as Debtor's attorney-in-fact
and proxy, with full power and authority in the place and xxxxx of Debtor,
in the name of Debtor or otherwise, to take any such action and to execute
any such instruments on behalf of Debtor that Secured Party may deem
necessary or advisable to so transfer the Federal Interests, including
without limitation, the power and authority to execute, acknowledge and
deliver such assignments, to seek and request approval thereof and to take
all other action deemed necessary to advisable by Secured Party in
connection therewith; and by such separate instruments Debtor has adopted,
ratified and confirmed all such actions and instruments. Such powers of
attorney and proxies are coupled with an interest, shall survive the
dissolution, termination, reorganization or other incapacity of Debtors and
shall be irrevocable. No action taken by Secured Party shall constitute
acknowledgment of, or assumption of liabilities relating to, the Federal
Interests, and neither Debtors nor any other party may claim that Secured
Party is bound, directly or indirectly, by any such action.
Section 5.4 Personal Property. Upon the occurrence of any Event of
Default, or at any time thereafter, in addition to all other rights, powers and
remedies herein conferred or conferred by operation of law, Secured Party shall
have all of the rights and remedies of an assignee and secured party granted by
applicable law, including without limitation, the applicable Uniform Commercial
Code as then in effect, and shall, to the extent permitted by applicable law,
have the right and power, but not the obligation, to take possession of the
personal property included in the Collateral and any proceeds thereof wherever
located, and for that purpose Secured Party may enter upon any premises on which
any or all of such personal property is located and take possession of and
operate such personal property or remove the same therefrom. Secured Party may
require Debtors to assemble such personal property and make it available to
Secured Party at a place to be designated by Secured Party that is reasonably
convenient to both parties. The following presumptions shall exist and shall be
deemed conclusive with regard to the exercise by Secured Party of any of its
remedies with respect to personal property:
A. If notice is required by applicable law, Debtors agree that
five days' prior written notice of the time and place of any public sale or
of the time after which any private sale or any other intended disposition
thereof is to be made shall be deemed reasonable notice to Debtors. No such
notice is necessary if such property is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market.
B. If Secured Party in good faith believes that the Securities
Act of 1933 or any other state or federal law prohibits or restricts the
customary manner of sale or distribution of any of such property, Secured
Party may sell such property privately or in any other manner deemed
advisable by Secured Party at such price or prices as Secured Party
determines in its sole discretion. Debtors recognize that such prohibition
or restriction may cause such property to have less value than it otherwise
would have and that, consequently, such sale or disposition by Secured Party
may result in a lower sales price than if the sale were otherwise held.
Section 5.5 Possession. Upon the occurrence of any Event of Default,
or at any time thereafter, in addition to all other rights, powers and remedies
herein conferred or conferred by operation of law, Secured Party shall, to the
extent not prohibited by applicable law, have the right and power, but not the
obligation, to enter upon and take immediate possession of the Collateral or any
portion thereof, to exclude Debtors therefrom, to hold, use, operate, manage,
enjoy and control such Collateral, to make all such repairs, replacements,
alterations, additions and improvements to the same as Secured Party may deem
proper or expedient, to sell all of the severed and extracted Hydrocarbons
included in the same subject to the provisions of Article III hereof, to demand,
collect and retain all other earnings, rents, issues, profits, proceeds and
other sums due or to become due with respect to such Collateral accounting for
and applying to the payment of the Obligations only the net earnings arising
therefrom after charging against the receipts therefrom all fees, costs,
expenses, charges, damages and losses incurred by reason thereof plus interest
thereon at the Default Rate without any liability to Debtors in connection
therewith. Such possession shall at once be delivered to Secured Party upon
request, and on refusal or failure to so deliver possession, the delivery of
such possession may be enforced by Secured Party by any appropriate civil suit,
proceeding or other action.
Section 5.6 Appointment of Receiver. Upon the occurrence of any Event
of Default, or at any time thereafter, in addition to all other rights, powers
and remedies herein conferred or conferred by operation of law, Secured Party
shall be entitled to the appointment of a receiver of the Collateral without the
necessity of the posting of a bond or notice; and shall, to the extent not
prohibited by applicable law, be entitled to such receiver as a matter of right,
without regard to the solvency or insolvency of Debtors, the value or adequacy
of the Collateral or the Collateral being in danger of being materially injured
or reduced in value as security by removal, destruction, deterioration,
accumulation of prior liens or otherwise; and such receiver may be appointed by
any court of competent jurisdiction upon ex parte application, and without
notice, notice being expressly waived by Debtors to the extent such waiver is
not prohibited by applicable law. Debtors do hereby consent to the appointment
of such receiver or receivers, waive any and all defenses to such appointment,
and agree not to oppose any application therefor by Secured Party, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Secured Party under this Article V. Nothing herein is to be
construed to deprive Secured Party of any other right, remedy or privilege it
may now or hereafter have under law to have a receiver appointed. Any money
advanced by Secured Party in connection with any such receivership shall be a
demand obligation owing by Debtors to Secured Party and shall bear interest,
from the date of making such advancement until paid, at the Default Rate. Any
such receiver shall have all powers conferred by the court appointing such
receiver, which powers shall, to the extent not prohibited by applicable law
include, without limitation, the right to enter upon and take immediate
possession of the Collateral or any part thereof, to exclude Debtors therefrom,
to hold, use, operate, manage and control such Collateral, to make all such
repairs, replacements, alterations, additions and improvements to the same as
such receiver or Secured Party may deem proper or expedient, to sell all of the
severed and extracted Hydrocarbons included in the same subject to the
provisions of Article III hereof, to demand and collect all of the other
earnings, rents, issues, profits, proceeds and other sums due or to become due
with respect to such Collateral, accounting for only the net earnings arising
therefrom after charging against the receipts therefrom all fees, costs,
expenses, charges, damages and losses incurred by reason thereof plus interest
thereon at the Default Rate without any liability to Debtors in connection
therewith which net earnings shall be turned over by such receiver to Secured
Party to be applied by Secured Party to the payment of the Obligations in the
order set forth in Section 5.10.
Section 5.7 Waiver by Debtors. To the extent not prohibited by
applicable law, Debtors agree that Debtors shall not at any time have, invoke,
utilize or assert any right under any laws pertaining to the marshaling of
assets or liens, the sale of property in the inverse order of alienation, the
exemption of homesteads, the administration of estates of decedents,
appraisement, moratorium, valuation, stay, extension or redemption now or
hereafter in force, and Debtors hereby waives the benefit of all such laws to
the fullest extent not prohibited by applicable law.
Section 5.8 Remedies Cumulative. All rights, powers and remedies
herein conferred are cumulative, and not exclusive, of (a) any and all other
rights and remedies herein conferred, (b) any and all rights, powers and
remedies existing at law or in equity, and (c) any and all other rights, powers
and remedies provided for in any other documents or instruments evidencing,
securing or relating to the Obligations, and Secured Party shall, in addition to
the rights, powers and remedies herein conferred, be entitled to avail itself of
all such other rights, powers and remedies as may now or hereafter exist at law
or in equity for the collection of and enforcement of the Obligations and the
enforcement of the warranties, representations, covenants, indemnities and other
agreements contained in this Instrument and the other documents and instruments
evidencing, securing or relating to the Obligations and the foreclosure of the
liens and security interests created by this Instrument. Each and every such
right, power and remedy may be exercised from time to time and as often and in
such order as may be deemed expedient by Secured Party and the exercise of any
such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter, any other right, power or remedy. No
delay or omission by Secured Party or by Trustee, the sheriff or other official
or person 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.
Section 5.9 Costs and Expenses. All fees, costs and expenses
(including, without limitation, reasonable attorneys' fees and legal expenses,
court costs, filing fees, and mortgage, transfer, stamp and other excise taxes,
inspection fees, appraisers' fees, outlays for documentary and expert evidence,
stenographers' charges, publication, notice and advertising costs, postage,
photocopies, telephone charges and costs of procuring all abstracts of title,
title searches and examinations, title opinions, title insurance policies and
similar title data and assurances as Secured Party or Trustee may deem
appropriate either to prosecute such suit or to evidence to bidders at the sales
that may be had pursuant to such proceeding the condition of the title to or the
value of the Collateral, trustee's fees and expenses, sheriff's fees and
expenses, receiver's fees and expenses, and fees and expenses of agents of
Secured Party and Trustee, costs and expenses of defending, protecting and
maintaining the Collateral and Secured Party's and Trustee's interest therein
including repair and maintenance costs and expenses and costs and expenses of
protecting and securing the Collateral including insurance costs and all other
fees, costs and expenses provided for or authorized by applicable law), incurred
by or on behalf of Secured Party or Trustee in protecting and enforcing their
rights hereunder or incident to the enforcement of this Instrument and the liens
and security interests created hereby, shall be a demand obligation owing by
Debtors to Secured Party and shall bear interest at the Default Rate until paid,
and shall constitute a part of the Obligations and be indebtedness secured and
evidenced by this Instrument.
Section 5.10 Application of Proceeds. The proceeds of any sale of the
Collateral or any part thereof made pursuant to this Article V shall be applied
as may be required by applicable law, or, in the absence of any such
requirements, as follows:
A. First, to the payment of all fees, costs and expenses
incident to the enforcement of this Instrument and the liens and security
interests created hereby, including without limitation, the fees, costs and
expenses described in Section 5.9 hereof;
B. Second, to the payment or prepayment of accrued interest
remaining unpaid on the Notes;
C. Third, to the payment or prepayment of principal remaining
unpaid on the Notes in such order as Secured Party may elect;
D. Fourth, to the payment or prepayment of the Obligations other
than the Obligations evidenced by the Notes in such order as Secured Party
may elect; and
E. Fifth, the remainder, if any, shall be paid to Debtors or
such other person or persons as may be legally entitled thereto.
Section 5.11 Waiver of Statute of Limitations. Debtors hereby waive
the right to assert any statute of limitations as a defense to the Obligations
(including, without limitation, the indebtedness, liabilities and obligations
under and pursuant to this Instrument, the Notes, the Loan Agreement and any
other instrument evidencing, securing or otherwise relating to the Obligations),
to the fullest extent permitted by applicable law.
Section 5.12 Limitation on Rights and Waivers. All rights, powers and
remedies herein conferred shall be exercisable by Trustee and Secured Party only
to the extent not prohibited by applicable law; and all waivers and
relinquishments of rights and similar matters shall only be effective to the
extent such waivers or relinquishments are not prohibited by applicable law.
ARTICLE VI
Trustee
Section 6.1 Resignation and Removal of Trustee. Trustee may resign in
writing addressed to Secured Party, or be removed at any time with or without
cause by an instrument in writing duly executed by Secured Party, and such
resignation or removal shall be effective upon the appointment of a successor
Trustee. In case of the death, resignation or removal of Trustee, a successor
Trustee may be appointed by Secured Party as may be required by applicable law
or, in the absence of any such requirement, by Secured Party without formality
other 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 Instrument will vest in the named successor trustee all
the right, title and interest of Trustee in and to all of the Collateral, and
said successor will thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon Trustee. All references herein to
Trustee shall be deemed to refer to the Trustee from time to time acting
hereunder.
Section 6.2 Substitute Trustees and Agents. To the extent not
prohibited by applicable law, Trustee may appoint or delegate any one or more
persons as agents to perform any act or acts of Trustee under this Instrument in
the name and on behalf of Trustee, including any act or acts necessary or
incident to any sale conducted by Trustee. If Trustee shall have given notice
of sale hereunder, any successor trustee may complete the sale and the
conveyance of the Collateral pursuant thereto as if such notice had been given
by the successor trustee conducting the sale. To facilitate the administration
of the Trustees' duties under this Instrument, Secured Party may appoint
multiple trustees to serve in such capacity or in such jurisdictions as Secured
Party may designate.
Section 6.3 Liability of Trustee. Trustee shall not be liable for any
error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Trustee's gross negligence, willful misconduct or bad faith. Trustee shall have
the right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by Trustee hereunder,
believed by Trustee in good faith to be genuine. All monies received by Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received but need not be segregated in any manner
from any other monies except to the extent required by law, and Trustee shall be
under no liability for interest on any monies received by Trustee hereunder
except as may be provided by applicable law. Debtors hereby ratify and confirm
any and all acts Trustee shall do lawfully by virtue hereof.
Section 6.4 Indemnification of Trustee. Debtors shall reimburse
Trustee for, and save Trustee harmless against, any and all liability and
expenses which may be incurred by Trustee in the performance of Trustee's
duties, except to the extent attributable to Trustee's gross negligence, willful
misconduct or bad faith. In addition, Debtors shall indemnify Trustee against
any and all claims, actions, liabilities, judgments, costs, expenses, attorneys'
fees or other charges of whatsoever kind or nature made against or incurred by
Trustee, and arising out of, or in any way relating to, Trustee performing the
duties of Trustee hereunder, except to the extent attributable to Trustee's
gross negligence, willful misconduct or bad faith.
ARTICLE VII
Miscellaneous Provisions
Section 7.1 Waiver. Any and all covenants of Debtors in this
Instrument may from time to time, be waived by Secured Party by an instrument in
writing signed by Secured Party to such extent and in such manner as Secured
Party may desire, but no such waiver will ever affect or impair Secured Party's
rights hereunder, except to the extent specifically stated in such written
instrument. All changes to, amendments and modifications of this Instrument
must be in writing and signed by Secured Party.
Section 7.2 Severability. If any provision of this Instrument or of
any of the instruments and documents evidencing, securing or relating to the
Obligations is invalid or unenforceable in any jurisdiction, such provision
shall be fully severable from this Instrument and the other provisions hereof
and of said instruments and documents shall remain in full force and effect in
such jurisdiction and the remaining provisions hereof shall be liberally
construed in favor of Secured Party and Trustee in order to carry out the
provisions and intent hereof. The invalidity of any provision of this
Instrument in any jurisdiction shall not affect the validity or enforceability
of any such provision in any other jurisdiction.
Section 7.3 Subrogation. This Instrument is made with full
substitution and subrogation of Secured Party and Trustee in and to all
covenants and warranties by others heretofore given or made with respect to the
Collateral or any part thereof.
Section 7.4 Financing Statement. This Instrument shall be deemed to
be and may be enforced from time to time as an assignment, contract, deed of
trust, financing statement or security agreement, and from time to time as any
one or more thereof is appropriate under applicable state law. A carbon,
photographic or other reproduction of this Instrument or of any financing
statement in connection herewith shall be sufficient as a financing statement
for any and all purposes.
Section 7.5 Rate of Interest. All interest required hereunder and
under the Obligations shall be calculated on the basis of a year of 360 days.
Section 7.6 Recording. All recording references in Exhibit "A" are to
the official real property records of the county in which the affected Land is
located and in which records such documents are or in the past have been
customarily recorded, whether real estate records, deed records, oil and gas
records, oil and gas lease records or other records. The references in this
Instrument and in Exhibit "A" to liens, encumbrances and other burdens are for
the purposes of defining the nature and extent of Debtors' warranties and shall
not be deemed to ratify, recognize or create any rights in third parties.
Section 7.7 Execution in Counterparts. This Instrument may be
executed in one or more original counterparts. To facilitate filing and
recording, there may be omitted from any counterpart the parts of Exhibit "A"
containing specific descriptions of the Collateral that relate to land located
in counties other than the county in which the particular counterpart is to be
filed or recorded. Each counterpart shall be deemed to be an original for all
purposes, and all counterparts shall together constitute but one and the same
instrument.
Section 7.8 Notices. All notices and other communications made or
required to be given pursuant to this Instrument shall be in writing and shall
be deemed given if delivered personally or by facsimile transmission (if receipt
is confirmed by the facsimile operator of the recipient), or delivered by
overnight courier service or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice;
provided that notices of a change of address shall be effective only upon
receipt thereof):
To Debtors:
Foreland Corporation
Eagle Springs Production Limited Liability Corporation
00000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: N. Xxxxxx Xxxxxx
Facsimile No. (000) 000-0000
To Secured Party:
Energy Income Fund, L.P.
000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
Any notice hereunder delivered in person or by facsimile (if receipt is
confirmed by the facsimile operator of the recipient) shall be deemed given on
the date thereof, any notice by registered or certified mail shall be deemed
given three days after the date of mailing; and any notice by overnight courier
shall be deemed given two days after shipment or the date of receipt, whichever
is earlier.
Section 7.9 Binding Effect. This Instrument shall bind and inure to
the benefit of the respective successors and assigns of Debtors, Secured Party
and Trustee. Notwithstanding any other provision of this Instrument, if any
right, interest or estate in property granted by this Instrument or pursuant
hereto does not vest upon the date hereof, such right, interest or estate shall
vest, if at all, within 21 years less 1 day after the death of the last
surviving descendant of Xxxxxx X. Xxxxxxx, father of Xxxx X. Xxxxxxx, former
President of the United States of America, who is living on the date of the
execution of this Instrument by Debtors or the effective date hereof, whichever
is earlier.
Section 7.10 References. All references in this Instrument to
Exhibits, Articles, Sections, Subsections, paragraphs, subparagraphs and other
subdivisions refer to the Exhibits, Articles, Sections, Subsections, paragraphs,
subparagraphs and other subdivisions of this Instrument unless expressly
provided otherwise. Titles and headings appearing at the beginning of any
subdivision are for convenience only and do not constitute any part of any such
subdivision and shall be disregarded in construing the language contained in
this Instrument. The words "this Instrument," "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Instrument as a whole and
not to any particular subdivision unless expressly so limited. The phrases
"this Section," "this Subsection" "this paragraph," "this subparagraph" and
similar phrases refer only to the Sections, Subsections, paragraphs or
subparagraphs hereof in which the phrase occurs. Capitalized terms used herein
without definition shall have the meanings ascribed thereto in the Loan
Agreement. The word "or" is not exclusive. All references to days are to
calendar days unless otherwise specifically stated. Pronouns in masculine,
feminine and neuter gender shall be construed to include any other gender.
Words in the singular form shall be construed to include the plural and words in
the plural form shall be construed to include the singular, unless the context
otherwise requires.
Section 7.11 Filing. Some of the above described goods are or are to
become fixtures on the Land described in Exhibit "A". This Instrument is to be
filed for record in, among other places, the real estate records of each county
identified in Exhibit "A". This Instrument covers fixtures and minerals or the
like or other substances of value which may be extricated from the earth
(including oil and gas) and the accounts relating thereto, including accounts
resulting from the sale thereof at the wellhead. Debtors are the owner of an
interest of record in the real estate concerned.
Section 7.12 Override Assignments. By instruments entitled Assignment
of Overriding Royalty Interests (the "Override Assignments"), dated effective as
of January 1, 1998, at 7:00 A.M. local time and executed as of the date of this
Instrument, Debtors assigned to Secured Party certain overriding royalty
interests covering and related to the Land as more specifically described
therein. The Override Assignments were executed and delivered immediately prior
to the execution and delivery of this Instrument, and are intended to be and
shall be an absolute, unconditional, indefeasible and perpetual assignments and
transfers from Debtors to Secured Party.
Section 7.13 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. DEBTORS
HEREBY: (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT
ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INSTRUMENT, THE NOTES,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING, SECURING
OR RELATING TO THE OBLIGATIONS OR ANY TRANSACTION PROVIDED FOR THEREIN OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) IRREVOCABLY WAIVE, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THEY MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(D) ACKNOWLEDGES THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS INSTRUMENT, THE
NOTES, THE LOAN AGREEMENT AND ANY OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING,
SECURING OR RELATING TO THE OBLIGATIONS AND THE TRANSACTIONS PROVIDED FOR HEREIN
AND THEREIN, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.
Section 7.14 USURY SAVINGS. IT IS THE INTENTION OF THE PARTIES HERETO
TO COMPLY WITH ALL APPLICABLE USURY LAWS; ACCORDINGLY, IT IS AGREED THAT
NOTWITHSTANDING ANY PROVISIONS TO THE CONTRARY IN THIS INSTRUMENT, THE NOTES,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR
OTHERWISE RELATING TO THE OBLIGATIONS, IN NO EVENT SHALL SUCH DOCUMENTS OR
INSTRUMENTS REQUIRE THE PAYMENT OR PERMIT THE COLLECTION OF INTEREST (WHICH
TERM, FOR PURPOSES HEREOF, SHALL INCLUDE ANY AMOUNT WHICH, UNDER APPLICABLE LAW,
IS DEEMED TO BE INTEREST, WHETHER OR NOT SUCH AMOUNT IS CHARACTERIZED BY THE
PARTIES AS INTEREST) IN EXCESS OF THE MAXIMUM AMOUNT PERMITTED BY SUCH LAWS. IF
ANY EXCESS INTEREST IS UNINTENTIONALLY CONTRACTED FOR, CHARGED OR RECEIVED UNDER
THE NOTES OR UNDER THE TERMS OF THIS INSTRUMENT, THE LOAN AGREEMENT OR ANY OTHER
DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR RELATING TO THE OBLIGATIONS, OR
IN THE EVENT THE MATURITY OF THE INDEBTEDNESS EVIDENCED BY THE NOTES IS
ACCELERATED IN WHOLE OR IN PART, OR IN THE EVENT THAT ALL OR PART OF THE
PRINCIPAL OR INTEREST OF THE NOTES SHALL BE PREPAID, SO THAT THE AMOUNT OF
INTEREST CONTRACTED FOR, CHARGED OR RECEIVED UNDER THE AMOUNT OF INTEREST
CONTRACTED FOR, CHARGED OR RECEIVED UNDER THE NOTES OR UNDER THIS INSTRUMENT,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR
RELATING TO THE OBLIGATIONS, ON THE AMOUNT OF PRINCIPAL ACTUALLY OUTSTANDING
FROM TIME TO TIME UNDER THE NOTES SHALL EXCEED THE MAXIMUM AMOUNT OF INTEREST
PERMITTED BY THE APPLICABLE USURY LAWS, THEN IN ANY SUCH EVENT (A) THE
PROVISIONS OF THIS SECTION SHALL GOVERN AND CONTROL, (B) NEITHER DEBTORS NOR ANY
OTHER PERSON OR ENTITY NOW OR HEREAFTER LIABLE FOR THE PAYMENT THEREOF, SHALL BE
OBLIGATED TO PAY THE AMOUNT OF SUCH INTEREST TO THE EXTENT THAT IT IS IN EXCESS
OF THE MAXIMUM AMOUNT OF INTEREST PERMITTED BY SUCH APPLICABLE USURY LAWS,
(C) ANY SUCH EXCESS WHICH MAY HAVE BEEN COLLECTED SHALL BE EITHER APPLIED AS A
CREDIT AGAINST THE THEN UNPAID PRINCIPAL AMOUNT THEREOF OR REFUNDED TO DEBTORS
AT SECURED PARTY'S OPTION, AND (D) THE EFFECTIVE RATE OF INTEREST SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM LAWFUL RATE OF INTEREST ALLOWED UNDER THE
APPLICABLE USURY LAWS AS NOW OR HEREAFTER CONSTRUED BY THE COURTS HAVING
JURISDICTION THEREOF. IT IS FURTHER AGREED THAT WITHOUT LIMITATION OF THE
FOREGOING, ALL CALCULATIONS OF THE RATE OF INTEREST CONTRACTED FOR, CHARGED OR
RECEIVED UNDER THE NOTES OR UNDER THIS INSTRUMENT, THE LOAN AGREEMENT OR ANY
OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS WHICH ARE MADE FOR THE PURPOSE OF DETERMINING WHETHER SUCH RATE
EXCEEDS THE MAXIMUM LAWFUL RATE OF INTEREST, SHALL BE MADE, TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAWS, BY AMORTIZING, PRORATING, ALLOCATING AND
SPREADING IN EQUAL PARTS DURING THE PERIOD OF THE FULL STATED TERM OF THE
OBLIGATIONS EVIDENCED THEREBY, ALL INTEREST AT ANY TIME CONTRACTED FOR, CHARGED
OR RECEIVED FROM DEBTORS OR OTHERWISE BY SECURED PARTY IN CONNECTION WITH THE
OBLIGATIONS.
Section 7.15 GOVERNING LAW. THIS INSTRUMENT AND ALL MATTERS ARISING
UNDER OR GROWING OUT HEREOF SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
ITS PRINCIPLES OF CONFLICTS OF LAWS, AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT THAT THE LAW OF THE STATE OF NEVADA SHALL GOVERN WITH RESPECT TO
PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE VALIDITY, CREATION,
PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS AND
REMEDIES OF THIS INSTRUMENT GRANTED HEREIN AS TO THAT PORTION OF THE COLLATERAL
LOCATED IN THE STATE OF NEVADA. EXCEPT AS TO THE VALIDITY, CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED HEREBY, DEBTORS AND
SECURED PARTY AGREE THAT THE TRANSACTIONS PROVIDED FOR HEREIN BEAR A REASONABLE
RELATIONSHIP TO THE COMMONWEALTH OF MASSACHUSETTS AND THAT THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS GOVERNS (A) ISSUES RELATING TO THE TRANSACTIONS
PROVIDED FOR HEREIN, INCLUDING THE VALIDITY AND ENFORCEABILITY OF AN AGREEMENT
RELATING TO SUCH TRANSACTIONS OR A PROVISION OF AN AGREEMENT, AND (B) THE
INTERPRETATION OR CONSTRUCTION OF AN AGREEMENT RELATING TO SUCH TRANSACTIONS OR
A PROVISION OF AN AGREEMENT.
Executed as of the date first above written.
DEBTORS:
FORELAND CORPORATION,
a Nevada corporation
By /s/ N. Xxxxxx Xxxxxx
N. Xxxxxx Xxxxxx, President
Tax I.D. No. 00-0000000
EAGLE SPRINGS PRODUCTION
LIMITED-LIABILITY COMPANY (also
known as Eagle Springs Production Limited
Liability Company), a Nevada limited liability
company
By /s/ N. Xxxxxx Xxxxxx
N. Xxxxxx Xxxxxx, Manager
Tax I.D. No. 00-0000000
ACKNOWLEDGMENT CERTIFICATES
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This instrument was acknowledged before me on January 8, 1998, by N.
XXXXXX XXXXXX, Manager of EAGLE SPRINGS PRODUCTION LIMITED-LIABILITY COMPANY
(also known as Eagle Springs Production Limited Liability Company), a Nevada
limited liability company.
/s/ Xxxxxx X. Xxxxxxxxxx
Notary Public
My commission expires: 10/14/2001
(NOTARIAL SEAL)
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This instrument was acknowledged before me on January 8, 1998, by N.
XXXXXX XXXXXX, as President of FORELAND CORPORATION, a Nevada corporation.
/s/ Xxxxxx X. Xxxxxxxxxx
Notary Public
My commission expires: 10/14/2001
(NOTARIAL SEAL)
