ENVIRONMENTAL INDEMNITY AGREEMENT
This Environmental Indemnity Agreement (this "Agreement"), dated as of
August 11, 1998, is among PETRO SOURCE CORPORATION, a Utah corporation ("Petro
Source Corp."), and Petro Source Investments, Inc., a Delaware corporation
("Petro Source Parent") (Petro Source Corp. and Petro Source Parent shall be
referred to collectively as the "Petro Source Group"), and FORELAND CORPORATION,
a Nevada corporation ("Foreland Corp."), FORELAND REFINING CORPORATION, a Texas
corporation ("Foreland Refining"), FORELAND Asset Corporation, a Nevada
corporation ("Foreland Asset"), and PETROSOURCE TRANSPORTATION, a Utah
corporation ("Transportation") (Foreland Corp., Foreland Refining, Foreland
Asset and Transportation shall be referred to collectively as, the "Foreland
Group").
RECITALS
A. By Option and Purchase Agreement, dated effective as of December 31,
1997, among Foreland Corp., Petro Source Corp., Petro Source Refining
Corporation ("Petro Source Refining"), and Transportation, as amended by
Amendment to Option and Purchase Agreement, dated as of , 1998, by
and between Foreland Corp., Foreland Refining (as successor in interest to Petro
Source Refining), Petro Source Corp. and Transportation (as amended, the
Purchase Agreement"), Foreland Corp. agreed to acquire, directly or indirectly,
certain properties, interests and rights generally described as: (i) all of the
issued and outstanding stock of Transportation, which owns various rolling stock
and other properties, (ii) the properties owned by Foreland Refining, including,
without limitation, two refineries known as the Tonopah Refinery and the Eagle
Springs Refinery and related properties, and (iii) all of the issued and
outstanding stock of Foreland Refining, all as more particularly described in
the Purchase Agreement. Such properties, including, without limitation, the
Tonopah Refinery and the Eagle Springs Refinery and related properties, and the
properties owned by Transportation shall be referred to collectively as the
"Acquired Properties." All other properties at any time owned by any member of
the Petro Source Group, Petro Source Refining, Foreland Refining, Transportation
or any predecessor in interest to the Acquired Properties shall be referred to
collectively as the "Other Properties." The Acquired Properties and the Other
Properties shall be referred to collectively as the "Properties."
X. Xxxxx Source Corp. is the wholly owned subsidiary of Petro Source
Parent.
C. It is a condition precedent to Foreland Corp. proceeding with the
closing of the transactions provided for by the Purchase Agreement, that the
Petro Source Group execute and agree as provided herein.
AGREEMENT
In consideration of Foreland Corp. proceeding with the closing under the
Purchase Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Petro Source Group and the
Foreland Group agree as follows:
1. Definitions. As used herein, the following items shall have the
following meanings:
Hazardous Materials. The term "Hazardous Materials" shall mean
(i) any oil, flammable substances, explosives, radioactive materials, hazardous
wastes or substances, toxic wastes, wastes or substances or any other materials
or pollutants which (A) pose a hazard to the Properties or to persons on or
about the Properties, or (B) cause the Properties to be in violation of any
federal, state, tribal or local laws, rules, ordinances, regulations, orders or
policies relating to the environment, health and safety, or to industrial
hygiene or the environmental conditions on, under or about the Premises,
including, without limitation, soil and groundwater conditions; (ii) asbestos in
any form which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls in excess of fifty (50) parts per million; and
(iii) any chemical, material or substance defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," or "toxic
substances" or words of similar import under any applicable local, state or
federal laws or the regulations adopted or publications promulgated pursuant
thereto.
Hazardous Materials Claims. The term "Hazardous Materials Claims"
shall mean any and all enforcement, clean-up, removal, remedial or other
governmental or regulatory actions or orders threatened, instituted or completed
pursuant to any Hazardous Materials Laws, together with any and all claims made
or threatened by any third party against the Foreland Group or the Properties
relating to damage, contribution, cost recovery compensation, loss or injury
resulting, from any Hazardous Materials.
Hazardous Materials Laws. The term "Hazardous Materials Laws" shall
mean any federal, state, tribal or local laws, rules, ordinances, regulations,
orders or policies relating to the environment, health and safety, any Hazardous
Materials (including, without limitation, the use, handling, transportation,
production, disposal, discharge, storage, clean-up or remedy of contamination
thereof) or to industrial hygiene or the environmental conditions in, on, under,
about or otherwise relating to the Properties, including, without limitation,
soil, groundwater and indoor and ambient air conditions.
2. Indemnity. The Petro Source Group shall protect, indemnify, defend
and hold harmless each of the Foreland Group and its lenders and its and their
directors, officers, members, employees, agents and shareholders from and
against any and all actual or potential claims, liabilities, damages, losses,
fines, penalties, judgments, awards, costs and expenses (including without
limitation, attorneys' fees and costs and expenses of investigation)
(collectively, the "Claims and Expenses") which are reasonably incurred and
arise out of or relate in any way to any use, handling, production,
transportation, disposal, transportation or storage of any Hazardous Materials
in, on, under or through or migrating into, on, from or through the Acquired
Properties on or prior to the date the closing occurs under the Purchase
Agreement (the "Closing Date") and the Other Properties on, prior to or after
the Closing Date, including, without limitation: (i) all foreseeable and all
unforeseeable damages (specifically including, but not limited to, consequential
damages) directly or indirectly arising out of (A) the use, generation, storage,
discharge or disposal of Hazardous Materials by any person or entity, or (B) any
residual contamination affecting any natural resource or the environment; and
(ii) the reasonably incurred costs of any required or necessary repair, cleanup,
or detoxification of the Properties and the preparation of any closure or other
required plans; provided, however, that the Petro Source Group agrees that in
the event any Hazardous Material is caused to be removed from the Properties by
any member of the Petro Source Group, the Foreland Group or any other person,
the number assigned by the Environmental Protection Agency or any other agency
to such Hazardous Material shall, to the extent such matter is within the Petro
Source Group's control, be solely in the name of a member of Petro Source Group
and the Petro Source Group understands and agrees that its liability to the
aforementioned indemnified parties shall arise from the earlier to occur of
(a) discovery of any Hazardous Materials in, on, under or about the Properties,
or (b) the institution of any Hazardous Material Claim, and not upon the
realization of loss or damage; and the Petro Source Group agrees to pay to the
Foreland Group from time to time, immediately upon request, an amount equal to
such Claims or Expenses, as reasonably determined by the Foreland Group.
3. Survivability. The obligation of the Petro Source Group shall survive
any transfer of title to the Properties by the Foreland Group through a
foreclosure, deed in lieu of foreclosure or otherwise as part of a remedy
exercised by an entity providing the Foreland Group with financing, but not
otherwise, and shall inure to the benefit of any transferee of the Acquired
Properties as well as the Foreland Group after any such transfer. Such
obligation shall not be affected by any investigation by or on behalf of or by
any information which the Foreland Group may have obtained with respect to the
matters indemnified against by the Petro Source Group hereunder; provided that
the Foreland Group, upon written request from the Petro Source Group, will
provide the Petro Source Group with copies of any such written materials or
information. The Petro Source Group hereby waives the right to assert any
statute of limitations as a defense to the obligations under this Agreement to
the fullest extent permitted by applicable law. The obligations of the Petro
Source Group under this Agreement shall be joint and severable.
4. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be valid and enforceable to the
fullest extent permitted by applicable law. If any provision of this Agreement,
or the application of any such provision to any person or circumstance, shall,
to any extent, be held to be invalid, illegal or unenforceable under applicable
law, the remainder of this Agreement, or the application of such provision to
persons or circumstances other than those as to which it is invalid, illegal or
unenforceable, shall not be affected thereby.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Nevada.
6. Section Titles. The section titles contained in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of any provision of this Agreement.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
8. Amendments and Waivers. No provision of this Agreement may be amended
or terminated except by an instrument in writing setting forth the terms of such
amendment or termination and signed by the party against whom enforcement is
sought. No waiver of any provision of this Agreement nor consent to any
departure by either party therefrom shall in any event be effective unless the
same shall be in writing and signed by the other party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on either party shall in any
case entitle it to any other or further notice or demand in similar or other
circumstances. No failure on the part of either party to exercise and no delay
in exercising any right or remedy hereunder, at law or in equity, shall operate
as a waiver thereof; nor shall either party be estopped to exercise any such
right or remedy at any future time because of any such failure to delay; nor
shall any single or partial exercise of any such right or remedy preclude any
other or further exercise thereof or the exercise of any other right or remedy.
9. Attorneys' Fees. In the event of any litigation between the parties
hereto to enforce any of the provisions of this Agreement or any right of either
party hereto, the unsuccessful party to such litigation hereby agrees to pay any
and all costs and expenses (including, without limitation, reasonable attorneys'
fees) incurred by the successful party in enforcing any rights or remedies under
this Agreement.
10. Notice. Any notice, demand, request, consent, approval, or
communication that any party desires, or is required, to give to any other party
or any other personal shall be in writing and either served personally or sent
by prepaid, first-class mail to the other party at the following address:
To Petro Source Group: Petro Source Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: A. Xxxxxx XxXxxxxx, President
With copies to: Petro Source Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx III, General Counsel
To Foreland Group: Foreland Corporation
00000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: N. Xxxxxx Xxxxxx, President
With copies to: Xxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx, L.L.C.
Xxxxxx Xxxxx, Xxxx Xxx Xxxxx
00 Xxxx Xxxxxxxx (300 South)
Xxxx Xxxx Xxxx, Xxxx 00000
Any party may change its address by so notifying the other party of
the change of address.
11. Successors. This Agreement shall be binding on, and inure to the
benefit of, the parties hereto and, to the extent specified in Section 3 hereof,
their respective successors and assigns, including, without limitation, the
successors to the Foreland Group.
12. Construction. Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular and the singular the
plural. The word "or" is not exclusive. The words "hereof," "herein,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. In the event of a
conflict between the Purchase Agreement and this Agreement, this Agreement shall
control.
The parties hereto have executed and delivered this Agreement as of the
date first written above.
PETROSOURCE GROUP:
Petro Source Corporation, a
Utah corporation
By /s/ Xxxxxx XxXxxxxx
President
Petro Source Investments, Inc., a
Delaware corporation
By /s/ Xxxxxx XxXxxxxx
President
FORELAND GROUP:
Foreland Corporation, a
Nevada corporation
By /s/ N. Xxxxxx Xxxxxx
President
Foreland Refining Corporation, a
Texas corporation
By /s/ N. Xxxxxx Xxxxxx
President
Foreland Asset Corporation, a
Nevada corporation
By /s/ N. Xxxxxx Xxxxxx
President
Petrosource Transportation, a
Utah corporation
By /s/ N. Xxxxxx Xxxxxx
President
