__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - December 30, 1993
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
New York 0-4597 25-0484900
(State or other juris- (Commission (IRS Employer
diction of incorporation) file number) Identification No.)
1500 Colorado National Building, 950 - 17th Street, Denver, CO 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814)368-7171
__________________________________________________________________________
Item 2. Acquisition or Disposition of Assets
On December 30, 1993, Forest Oil Corporation (Forest)
completed the purchase of a 35.65% working interest in the Loma
Vieja/Martinez Field located in Zapata and Jim Hogg Counties,
Texas, from Wagner & Brown, Ltd. for a total consideration of $60
million. The property had gross daily production of approximately
61 million cubic feet of natural gas from 11 wells.
Forest completed the purchase on December 10, 1993 of the
interest of Atlantic Richfield Company (ARCO) in Chandeleur Sound
32 offshore in the Gulf of Mexico and two onshore fields, Barbers
Hill Field and the Katy Field in the Gulf Coast area for $26.5
million. These properties have daily net production of
approximately 6.5 million cubic feet of natural gas and 600
barrels of oil.
On December 14, 1993, Forest also purchased interests in
five offshore fields in the Gulf Coast area from Sandefer
Offshore Company (Sandefer) for $24.7 million. The estimated
recoverable reserves from these properties are approximately 19.3
billion cubic feet of natural gas and 1.5 million barrels of oil
and condensate.
Forest acquired additional working interests in two of the
properties it acquired in late 1993 from ARCO. The interests
acquired were the remaining 30% working interest (and operatorship)
in Chandeleur Sound 32 from Davis Petroleum Corp. for $3.5 million
on December 28, 1993 and an additional 1% working interest in the
Katy Field in Texas from Eland for $860,000 on January 6, 1994.
On December 30, 1993, Forest closed a non-recourse loan
agreement arranged by Enron Finance Corp., an affiliate of Enron
Gas Services, that provides for borrowings of up to $70 million.
Approximately $51.6 million was advanced to Forest in 1993 to
provide financing for a portion of the offshore Louisiana and
South Texas properties acquired from Wagner & Brown, Ltd. and
Sandefer, as described above.
Another $5.8 million of the loan proceeds were advanced in
1993 for development work. Under the terms of the loan agreement,
additional funds may be advanced to fund a portion of the development
projects which will be undertaken by Forest on the properties pledged
as security for the loan.
Forest entered into a $50,000,000 secured master credit
facility with The Chase Manhattan Bank, N.A. as agent on December
1, 1993. Under the credit facility, Forest may initially borrow
up to $25,000,000 for the acquisition or development of proved
oil and gas reserves, which amount is subject to semi-annual
redetermination, and up to $10,000,000 for working capital and
general corporate purposes. The credit facility is secured by a
mortgage on substantially all of Forest's existing proved oil and
gas properties and related assets, subject to existing liens of
volumetric production payment agreements. The maturity date of
loans under the facility is December 31, 1996.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
It is impractical to file the financial statements
and pro forma financial information currently.
They will be filed no later than 60 days after
this Form 8-K must be filed.
(b) Pro Forma Financial Information
It is impractical to file the financial statements
and pro forma financial information currently.
They will be filed no later than 60 days after
this Form 8-K must be filed.
(c) Exhibits
4.1 Loan Agreement between Forest Oil Corporation and CE
Joint Energy Development Investments Limited
Partnership dated as of December 28, 1993.
4.2 Deed of Trust, Assignment of Production, Security CE
Agreement and Financing Statement dated as of
December 28, 1993 by and between Forest Oil Corporation
and Joint Energy Development Investments Limited
Partnership.
4.3 Act of Mortgage, Assignment of Production, Security CE
Agreement and Financing Statement dated as of
December 28, 1993 between Forest Oil Corporation and
Joint Energy Development Investments Limited
Partnership.
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Dated: January 14, 1994 By /s/ Daniel L. McNamara
__________________________
Daniel L. McNamara
Secretary
LOAN AGREEMENT
between
FOREST OIL CORPORATION
and
JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP
________________________________________________________________
TABLE OF CONTENTS
ARTICLE 1.
__________
GENERAL TERMS
_______________
Section 1.01 Certain Definitions. 1
Section 1.02 Accounting Principles 15
ARTICLE 2.
__________
AMOUNT AND TERMS OF LOAN
____________________________
Section 2.01 The Loan and Commitment 15
Section 2.02 Use of Proceeds. 15
Section 2.03 Nonscheduled Capital Operations. 16
Section 2.04 Interest and Additions to Principal 17
Section 2.05 Notice and Manner of Borrowing 17
Section 2.06 Note 17
Section 2.07 Voluntary Prepayments 18
Section 2.08 Mandatory Prepayments 18
Section 2.09 Payment Procedure 19
Section 2.10 Business Days 19
Section 2.11 Collateral 19
Section 2.12 Setoff 19
Section 2.13 Production Proceeds 20
ARTICLE 3
__________
REPRESENTATIONS AND WARRANTIES
___________________________________
Section 3.01 Corporate Existence 22
Section 3.02 Corporate Power and Authorization 22
Section 3.03 Binding Obligations 22
Section 3.04 No Legal Bar or Resultant Lien 22
Section 3.05 No Consent 22
Section 3.06 Financial Condition 22
Section 3.07 Liabilities; Litigation 23
Section 3.08 Taxes; Governmental Charges 23
Section 3.09 Title, etc. 23
Section 3.10 Defaults 23
Section 3.11 Casualties; Taking of Properties 24
Section 3.12 Margin Stock 24
Section 3.13 Compliance with the Law 24
Section 3.14 ERISA 24
Section 3.15 Investment Company Act 25
Section 3.16 Public Utility Holding Company Act 25
Section 3.17 Subsidiaries 26
Section 3.18 Designated Contracts 26
Section 3.19 Location of Business and Offices 26
Section 3.20 Gas Imbalances 26
Section 3.21 Rate Filings 27
Section 3.22 Environmental Matters 27
Section 3.23 Qualification to Hold Federal Oil and
Gas Leases 28
Section 3.24 Operations of Oil and Gas Properties 28
Section 3.25 Insurance 28
Section 3.26 Payments by Purchasers of Production 28
Section 3.27 South Africa 29
Section 3.28 Disclosure 29
Section 3.29 Purchase Agreements 29
ARTICLE 4.
__________
AFFIRMATIVE COVENANTS
_________________________
Section 4.01 Financial Statements and Reports 29
Section 4.02 Annual Certificates of Compliance 32
Section 4.03 Quarterly Certificates of Compliance 32
Section 4.04 Taxes and Other Liens 32
Section 4.05 Maintenance 32
Section 4.06 Further Assurances 33
Section 4.07 Performance of Obligations 33
Section 4.08 Reimbursement of Expenses 33
Section 4.09 Insurance 34
Section 4.10 Accounts and Records 35
Section 4.11 Right of Inspection and Audit 35
Section 4.12 Notice of Certain Events 35
Section 4.13 Performance of Designated Contracts 35
Section 4.14 Title Information 36
Section 4.15 Environmental Procedures 36
Section 4.16 Collateral 36
Section 4.17 Capital Expenditures 36
Section 4.18 Eugene Island Block 325 Platform 37
Section 5.01 Liens 37
Section 5.02 Nature of Business 37
Section 5.03 Mergers, Etc. 37
Section 5.04 Proceeds of Note 37
Section 5.05 Preservation of Designated Contracts 38
Section 5.06 Sale of Properties 38
Section 5.07 Environmental Matters 38
Section 5.10 Change in Location 38
Section 5.11 Change in Operatorship 38
ARTICLE 6.
__________
EVENTS OF DEFAULT
___________________
Section 6.01 Events 38
Section 6.02 Remedies 40
Section 6.03 Limited Recourse 41
Section 6.04 Suspension of Capital Expense
Deductions. 41
ARTICLE 7.
__________
CONDITIONS OF LENDING
_______________________
Section 7.01 Conditions to Loan 42
Section 7.02 Guerra Tract and U Sand Prospect
Deferred Funding Provisions 45
ARTICLE 8.
__________
MISCELLANEOUS
_____________
Section 8.01 Notices 47
Section 8.02 Amendments and Waivers 48
Section 8.03 Capital Adequacy 48
Section 8.04 Payment of Expenses, Indemnities, etc 48
Section 8.05 Invalidity 50
Section 8.06 Survival of Agreements 51
Section 8.07 Successors and Assigns 51
Section 8.08 Renewal, Extension or Rearrangement 51
Section 8.09 Waivers 51
Section 8.10 Cumulative Rights 51
Section 8.11 Singular and Plural 52
Section 8.12 Construction 52
Section 8.13 Interest 52
Section 8.14 References 53
Section 8.15 Taxes, etc. 53
Section 8.16 Governmental Regulation 53
Section 8.17 Entire Agreement 53
Section 8.18 Exhibits 53
Section 8.19 Titles of Articles, Sections
and Subsections 53
Section 8.20 Satisfaction Requirement 54
Section 8.21 Counterparts 54
Exhibits:
A - Note
B - Borrowing Request
C - Compliance Certificate
D - Disclosure Statement
E1 - Conveyance Overriding Royalty Interest (EI Block 326)
E2 - Conveyance Overriding Royalty Interest (Wagner & Brown)
F - Subordination Agreement
G - Insurance
H - Description of Development Properties and Sandefer Property
I - Scheduled Capital Operations and Prior Capital Operations
J - Scheduled Principal Amounts & Projected Twelve Month Cash Flow
K - Secondary Scheduled Capital Costs Ceiling
L - Monthly Payment Amount
M - Legal Opinions
M1 - Corporate and Texas Counsel Opinion
M2 - Colorado Counsel Opinion
M3 - Louisiana Counsel Opinion
N1 - Production Agreement (EI Block 326)
N2 - Production Agreement (Wagner & Brown)
O - Accounting Procedure
P - Form of AFE
Q - Wagner & Brown Prospects, Release Prices
LOAN AGREEMENT
_________________
THIS LOAN AGREEMENT is made and entered into as of this 28th day of
December, 1993, between FOREST OIL CORPORATION, a New York corporation with
principal offices at 950 17th Street, Colorado National Building, Denver,
Colorado 80202 (the "Borrower"), and JOINT ENERGY DEVELOPMENT INVESTMENTS
LIMITED PARTNERSHIP, a Delaware limited partnership, with offices at 1400
Smith Street, Houston, Texas 77002 (the "Lender").
In consideration of the mutual covenants and agreements herein
contained and of the loans and commitment hereinafter referred to, the
Borrower and the Lender agree as follows:
ARTICLE 1.
__________
GENERAL TERMS
________________
Section 1.01 Certain Definitions. As used in this Agreement,
the following terms shall have the following meanings:
"Accounting Procedure" shall mean as to each Mortgaged Property the
COPAS accounting procedure attached to and made a part of the operating
agreement applicable to such Mortgaged Property provided that such operating
agreement is between Borrower and one or more parties which are not Affiliates
of Borrower, or in the event there is no such operating agreement, the
accounting procedure attached hereto as Exhibit O.
"AFE" shall mean an authority for expenditure of the type customarily
used in the oil and gas industry substantially in the form of Exhibit P and
otherwise in form and substance reasonably satisfactory to the Lender.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person and (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above. For the purposes of this definition
"control" of any Person means ownership, directly or indirectly, of 50% or
more of the voting stock of such Person, if a corporation, and ownership of
50% or more of the equity or beneficial interest in any other Person. The
general partner of any Person which is a limited partnership will be deemed
to control such Person.
"Agreement" shall mean this Loan Agreement, as the same may from
time to time be amended or supplemented.
"Applicable Interest Rate" means 12.5% per annum.
"Approved AFE" means an AFE for an Approved Nonscheduled Capital
Operation which has been approved by Lender pursuant to Section 2.03.
"Approved Nonscheduled Capital Operation" means any Nonscheduled
Capital Operation which has been approved by Lender pursuant to Section 2.03.
"Banks" shall mean the banks or other lenders which are parties to,
or entitled to the benefits of, the Chase Loan Documents, their successors
and assigns.
"Basic Data" shall mean the written information, reports and other
data furnished to Lender by Borrower relating to the Borrower and its
Properties or in connection with the transactions contemplated in this
Agreement, except interpretations, opinions, evaluations, and reserve and
cash flow reports and summaries thereof.
"Borrower" shall mean Forest Oil Corporation, a New York corporation,
its successors and permitted assigns.
"Borrower's Account" shall mean the account of the Borrower at The
Chase Manhattan Bank, New York, New York, ABA No. 021000021; Account No.
910-1-014703.
"Borrowing Request" shall mean a request for a loan pursuant to
Section to be substantially in the form attached as Exhibit B.
"Business Day" shall mean a day other than a Saturday, Sunday or
legal holiday for commercial banks under the laws of the States of Colorado
or Texas.
"Capital Expenses" means (i) with respect to any Scheduled Capital
Operation, 80% of the costs actually incurred by Borrower to conduct such
operation, not to exceed (a) during the period from January 1, 1994 through
December 31, 1995 the Initial Scheduled Capital Costs Ceiling and (b) in any
calendar year thereafter the Secondary Scheduled Capital Costs Ceiling, and
(ii) with respect to any Approved Nonscheduled Capital Operation, 80% of the
costs actually incurred by Borrower pursuant to the Approved AFE for such
Approved Nonscheduled Capital Operation, not to exceed 80% of 110% of
Borrower's share of the amount of the Approved AFE. Notwithstanding anything
to the contrary set forth herein, the following shall apply in determining
Capital Expenses:
(a) Capital Expenses shall not include any cost in excess of $500,000
incurred by Borrower for any Capital Operation unless prior to the Payment
Date on which such Capital Expense would be deducted in computing the Monthly
Payment Amount due on such Payment Date Borrower has actually paid such
Capital Expense;
(b) Capital Expenses shall be determined in accordance the applicable
Accounting Procedure, and shall not include any general, administrative or
office charges or overhead, except as permitted by the applicable Accounting
Procedure;
(c) If Borrower exercises its rights under Section 2.15(a) with
respect to any Wagner & Brown Prospect, Capital Expenses shall not include
any costs incurred to develop such Wagner & Brown Prospect; however if Lender
elects under Section 2.15(a) to return the Release Price to Borrower and
Borrower has theretofore incurred any costs to develop such Prospect which
were not paid or financed by any third party, such costs shall be considered
as Capital Expenses; and
(d) If Lender exercises its rights under Section 6.04 to suspend the
deduction of Capital Expenses, none of the costs thereafter incurred by
Borrower to conduct Capital Operations shall be considered as Capital
Expenses, except for such costs as are approved in writing by Lender.
"Capital Operation" shall mean any Scheduled Capital Operation, any
Nonscheduled Capital Operation and any Prior Capital Operation.
"Chase" shall mean The Chase Manhattan Bank (National Association)
for itself and as agent for the Banks.
"Chase Loan Documents" shall mean that certain Credit Agreement dated
December 1, 1993 by and among the Borrower, the Banks and Chase, as the same
may be modified, amended or supplemented from time to time, and all mortgages,
security agreements and other instruments executed pursuant thereto or in
connection therewith.
"Chase Group" shall mean The Chase Manhattan Bank (National
Association) and the Banks.
"Chase Lien" shall mean any Lien created or arising pursuant to any
of the Chase Loan Documents or otherwise securing the indebtedness owed to
the Chase Group pursuant to the Chase Loan Documents.
"Code" shall mean the Internal Revenue Code of 1986, as amended and
any successor statute.
"Collateral" shall mean all of the following:
(a) all Mortgaged Properties;
(b) all accounts, accounts receivable, equipment,
machinery, fixtures, inventory, chattel paper, documents,
instruments, and general intangibles, and proceeds thereof
attributable to the Mortgaged Properties;
(c) the Price Protection Agreements; and
(d) any other Property which may now or hereafter be
subject to a Lien in favor of the Lender as security for the
Indebtedness.
"Commitment" shall mean the obligation of the Lender to make the Loan
to the Borrower under Section up to the Maximum Commitment.
"Conveyance of Overriding Royalty (EI Block 326)" shall mean the
Conveyance of Overriding Royalty Interest in the form of Exhibit E1 hereto
from Borrower to Lender covering the Eugene Island Block 326 Property.
"Conveyance of Overriding Royalty (Wagner & Brown)" shall mean the
Conveyance of Overriding Royalty Interest in the form of Exhibit E2 hereto
from Borrower to Lender covering the Wagner & Brown Properties.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money as
evidenced by bonds, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
bankers' acceptances, surety or other bonds and similar instruments; (c) all
obligations of such Person to pay the deferred purchase price of Property or
services, (other than for borrowed money) arising in the ordinary course of
business of such Person; (d) all obligations under leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital
leases in respect of which such Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or in respect of which obligations such
Person otherwise assures a creditor against loss; (e) all Debt and other
obligations of others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person; (f) all Debt and other obligations
of others guaranteed by such Person; (g) all obligations or undertakings of
such Person to maintain or cause to be maintained the financial position or
covenants of other Persons; (h) all obligations with respect to payments
received in consideration of oil, gas, or other minerals yet to be acquired
or produced at the time of payment (including without limitation obligations
under "take-or-pay" contracts to deliver gas in return for payments already
received and the undischarged balance of any production payment created by
such Person or for the creation of which such Person directly or indirectly
received payment) or with respect to other obligations to deliver goods or
services in consideration of advance payments therefor; (i) obligations
arising under futures contracts, swap contracts, or similar speculative
agreements; and (j) obligations arising with respect to letters of credit
or applications or reimbursement agreements therefor.
"Default" shall mean an Event of Default or an event which with
notice or lapse of time or both would become an Event of Default.
"Designated Contract" shall mean each Production Marketing Agreement
and each Price Protection Agreement.
"Development Properties" means the Eugene Island Block 320 Property,
the Eugene Island Block 326 Property, the Vermilion Block 255 Property, the
Vermilion Block 101 Property and the Vermilion Block 102 Property.
"Drawdown Termination Date" shall mean the earlier of June 30, 1994
or the date when all amounts available to Borrower under Section have been
borrowed.
"EGM" means Enron Gas Marketing, Inc., a Delaware Corporation.
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any Governmental
Authority pertaining to health or the environment in effect in any and all
jurisdictions in which Borrower is conducting or at any time has conducted
business, or where any of its Property is located, including without
limitation, the Oil Pollution Act of 1990 ("OPA"), as amended, the Clean Air
Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil"
shall have the meaning specified in the OPA, the terms "hazardous substance"
and "release" (or "threatened release") have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have
the meanings specified in RCRA; provided, however, that (i) in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment, (ii) to the extent the laws of the state in which
any Property of Borrower is located establish a meaning for "hazardous
substance," "release," "solid waste" or "disposal" which is broader than
that specified in either CERCLA or RCRA, such broader meaning shall apply,
and (iii) the terms "hazardous substance" and "solid waste" shall include
all oil and gas exploration and production wastes that may present an
endangerment to public health or welfare or the environment, even if such
wastes are specifically exempt from classification as hazardous substances
or solid wastes pursuant to CERCLA or RCRA or the state analogues to those
statutes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower would be deemed to be a
"single employer" within the meaning of Section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of Section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event for which the 30-day notice requirement is waiver pursuant
to such regulations), (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a
notice of intent to terminate a Plan under Section 4041(c) of ERISA or the
treatment of a Plan amendment as a termination under Section 4041(c) of
ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC
or (v) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.
"ERMS" shall mean Enron Risk Management Services Corp., a Delaware
corporation.
"Eugene Island Block 320 Property" means the Oil and Gas Property
described in Part 1 of Exhibit H.
"Eugene Island Block 326 Property" means the Oil and Gas Property
described in Part 2 of Exhibit H.
"Eugene Island Block 326 Overriding Royalty" means the overriding
royalty interest created by the Conveyance of Overriding Royalty (EI Block
326).
"Event of Default" shall have the meaning specified in Section .
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or
other governmental charges or levies not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted by the Borrower
and for which adequate reserves have been made pursuant to GAAP; (ii) Liens
in connection with workmen's compensation, unemployment insurance or other
social security, old age pension or public liability obligations; (iii)
operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
workmen's, materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Mortgaged Properties
and statutory landlord's liens in respect of obligations which are not yet
due and payable or which are being contested in good faith by appropriate
proceedings diligently conducted by the Borrower and for which adequate
reserves have been made pursuant to GAAP; provided that any such Lien shall
not extend to or cover any Property of the Borrower other than the Property
with respect to which the work or services giving rise to such Lien was done
or furnished and either (A) shall not have existed for more than 60 days or
(B) the aggregate amount secured by all such Liens on the Mortgaged Properties
with respect to amounts not yet due and payable shall not exceed $100,000
and the aggregate amount secured by all such Liens on the Mortgaged Properties
with respect to amounts being contested in good faith shall not exceed
$1,000,000; (iv) any Liens reserved in leases for rent and for compliance
with the terms of the leases in the case of leasehold estates, to the extent
that any such Lien referred to in this clause does not materially impair the
use of the Property covered by such Lien for the purposes for which such
Property is held by the Borrower or materially impair the value of such
Property subject thereto; (v) encumbrances (other than to secure the payment
of borrowed money or the deferred purchase price of Property or services),
easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any rights of way or other Property of the
Borrower for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and defects,
irregularities and deficiencies in title of any rights of way or other
Property which in the aggregate do not materially impair the use of such
rights of way or other Property for the purposes of which such rights of
way and other Property are held by the Borrower or materially impair the
value of such Property subject thereto; (vi) any Liens permitted by the
terms of the Security Instruments or otherwise permitted in writing by the
Lender; (vii) any Liens contained in transportation, production handling
and other similar agreements necessary or desirable in the operation and
production of Hydrocarbons from the Properties hereafter entered into by
Borrower in the ordinary course of business securing amounts (other than
for borrowed money) not yet due and payable or which are being contested
in good faith by appropriate proceedings diligently conducted by the Borrower
and for which adequate reserves have been made pursuant to GAAP; (viii) rights
reserved to or vested in any municipality or governmental authority to control
or regulate any of the Mortgaged Properties; (ix) rights of reassignment upon
surrender or expiration of any oil and gas lease;and (x) all of the agreements,
instruments, contracts and other documents listed in the description of the
Mortgaged Properties.
"Fee Letter" shall mean that certain fee letter of even date herewith
between Borrower and Enron Finance Corp.
"Final Maturity Date" shall mean December 31, 2000.
"Financial Statements" shall mean the consolidated financial statement
or statements of the Borrower described or referred to in Section .
"GAAP" shall mean generally accepted accounting principles, applied
on a consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
Statements of the Financial Accounting Standards Board and/or their respective
successors and which are applicable in the circumstances as of the date in
question. Accounting principles are applied on a "consistent basis" when
the accounting principles observed in a current period are comparable in all
material respects to those accounting principles applied in a preceding
period.
"Governmental Authority" shall include the United States, the state,
county, city and political subdivisions in which any Property of the Borrower
is located or which exercises valid jurisdiction over any such Property, and
any agency, department, commission, board, bureau or instrumentality of any
of them which exercises valid jurisdiction over any such Property.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational,
safety and health standards or controls) of any (domestic or foreign) federal,
state, county, municipal or other government, department, commission, board,
court, agency or any other instrumentality of any of them.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates in and to oil and gas leases, oil, gas and mineral leases, or other
liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interest and production payment
interests, including any reserved or residual interest of whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined therefrom and all other minerals.
"Indebtedness" shall mean any and all obligations, indebtedness, and
liabilities of the Borrower to the Lender, now existing or hereafter arising,
under or in connection with this Agreement, the Note or the other Loan
Documents, including without limitation, the Swap Agreement.
"Indemnity Matters" shall have the meaning specified in Section.
"Initial Reserve Reports" shall mean the reserve reports dated
December 16, 1993 prepared by Borrower as of January 1, 1994 with respect to
the Eugene Island Block 320 Property, the Eugene Island Block 326 Property,
the Vermilion Block 255 Property, the Sandefer Properties, the Wagner & Brown
Properties, the Vermilion Block 101 Property and the Vermilion Block 102
Property, each of which has been delivered to the Lender.
"Initial Scheduled Capital Costs Ceiling" means $40,000,000, as the
same may be reduced pursuant to the provisions of Sections 2.15(c) or 4.17.
"Lender" shall mean Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, its successors and assigns.
"Lender's Account" the account of the Lender at Norwest Bank Denver,
Denver, Colorado, ABA No. 102000076, Account No. 101-8026791, or to such
other account in the State of Colorado as Lender may from time to time
designate by notice in writing to Borrower.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
security interest, pledge, charge (including, without limitation, production
payments and the like payable out of the Oil and Gas Properties), or
encumbrance of any kind with respect to such Property. The term "Lien"
shall include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property. For the purposes of this Agreement,
the Borrower or any Subsidiary, as applicable, shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, financing lease or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person for
security purposes.
"Loan" shall mean the loan made pursuant to Section , including any
additions to the principal thereof pursuant to Section 2.04.
"Loan Documents" shall mean the this Agreement, the Note, the Security
Instruments, the Subordination Agreement and all other documents, certificates,
instruments and agreements executed and delivered pursuant to this Agreement
or in connection herewith, as the same may be amended, supplemented, modified,
renewed, or extended from time to time.
"Material Adverse Effect" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations,
affairs or circumstances of the Borrower individually or of the Borrower and
its Subsidiaries on a consolidated basis from those reflected in the Financial
Statements or from the facts represented or warranted in this Agreement or
any other Security Instrument, (ii) the ability of the Borrower individually
or the Borrower and its Subsidiaries on a consolidated basis to carry out its
business as at the date of this Agreement or as proposed at the date of this
Agreement to be conducted or meet its obligations under the Note, this
Agreement or the other Security Instruments on a timely basis, or (iii) the
Lender's interest in the Collateral or the Lender's ability to enforce its
rights and remedies under this Agreement and the other Loan Documents.
"Maximum Commitment" shall mean $58,800,000.
"Maximum Principal Amount" means $70,000,000.
"Monthly Payment Amount" as of the end of any month means the amount,
if any, by which (i) 90% of Net Operating Cash Flow through the end of such
month, less (ii) cumulative Capital Expenses through the end of such month,
exceeds (iii) the sum of all Monthly Payment Amounts calculated hereunder for
all prior months.
"Mortgaged Properties" means (i) all Oil and Gas Properties subject
to Liens in favor of the Lender under the Security Instruments, including,
but not limited to, the Development Properties, the Sandefer Properties, the
Wagner & Brown Properties, and all Hydrocarbon production therefrom, and (ii)
any other Oil and Gas Property and the Hydrocarbon production therefrom that
is hereafter subjected to Liens in favor of the Lender under the Security
Instruments, less and except (iii) any portion of said Oil and Gas Properties
which have been released by Lender from such Liens pursuant to any of the
provisions hereof and (iv) any portion of the Oil and Gas Properties subject
to a subordination in favor of a third party pursuant to Section 2.15.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 3(37) or 4001 (a)(3) of ERISA.
"Net Operating Cash Flow" as of the end of any month means the amount
by which cumulative Net Production Revenues from January 1, 1994 through the
end of such month exceeds the cumulative Operating Costs from January 1, 1994
through the end of such month.
"Net Production Revenues" means the amount determined in accordance
with GAAP equal to the sum, without duplication, of the following: (i) all
revenue and other direct or indirect consideration from the sale or other
disposition of Hydrocarbons produced from the Mortgaged Properties, including,
without limitation, advance payments, payments under take or pay or similar
provisions of production sales agreements and payments for natural gas
liquids which may be extracted from any gas, less (ii) existing royalties,
overriding royalties, net profits interests and other burdens set forth in
the applicable Security Instruments payable by Borrower on production from
the Mortgaged Properties, plus (iii) any net amount payable to Borrower under
the Price Protection Agreements, less (iv) any net amount payable by Borrower
under the Price Protection Agreements, and plus (v) any other net revenues
payable to Borrower with respect to the Mortgaged Properties.
"Nonscheduled Capital Operation" means any drilling, sidetracking,
deepening, completing, recompleting, plugging back or other similar operation
on or in any oil and/or gas well, setting any platform, acquisition of
production facilities, or any other operation requiring a single expenditure
in excess of $100,000.00, other than a Scheduled Capital Operation or Prior
Capital Operation.
"Note" shall mean the promissory note of the Borrower described in
Section and being in the form of note attached as Exhibit A, together with
any and all renewals, extensions for any period, increases or rearrangements
thereof.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
governmental body or agency having jurisdiction) which may affect all or any
portion of the Hydrocarbon Interests; all operating agreements, contracts and
other agreements which relate to any of the Hydrocarbon Interests or the
production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, the lands covered thereby and all oil in tanks and all accounts,
rents, issues, profits, proceeds, products, revenues and other incomes from
or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in anywise appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, Properties, rights, titles, interests
and estates described or referred to above, including any and all Property,
real or personal, now owned or hereinafter acquired and situated upon, used,
held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding
drilling rigs, automotive equipment or other personal property which may be
on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells, injection
wells or other wells, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of
the foregoing.
"Operating Costs" means all of the following costs, without
duplication, incurred by Borrower determined in accordance with GAAP:
(i) all direct costs of operating, producing, and
maintaining the Mortgaged Properties determined in
accordance with the applicable Accounting Procedure;
(ii) all direct costs of gathering, transporting and
marketing production from the Mortgaged Properties determined
in accordance with the applicable Accounting Procedure;
(iii) all Taxes incurred by Borrower with respect to the
ownership of the Mortgaged Properties;
(iv) all insurance premiums paid by Borrower for insurance
actually carried with respect to the Mortgaged Properties, or
incident to the operation or maintenance of the Mortgaged
Properties; and
(v) amounts attributable to the Mortgaged Properties and
chargeable as overhead charges under the applicable Accounting
Procedure;
Notwithstanding anything to the contrary set forth herein, Operating Costs
shall not include any of the following:
(a) any cost incurred in conducting any Capital Operation;
(b) any profit or rate of return on investment, any
interest, premiums, fees or similar charges arising out of
borrowings or purchases on credit, depreciation, depletion
or amortization of costs;
(c) any general, administrative or office charges or
overhead, except as permitted under clause (v) of the
definition of Operating Costs;
(d) any expenses, penalties, interest (in excess of the
Prime Rate) or other charges which result from the failure of
Borrower to properly discharge all costs and expenses
(including Taxes) of developing, operating and maintaining
the Mortgaged Properties;
(e) any damages, penalties, interest or other charges
paid by Borrower to any third party or governmental agency,
commission or similar body arising from any conduct or
omission by Borrower in its capacity as operator of any the
Mortgaged Properties and any costs and expenses (including
attorneys' fees) incurred in defending any such action;
(f) all costs, expenses and damages incurred by Borrower
as the result of the failure of Borrower to obtain or carry,
or cause any applicable parties to obtain or carry, the types
or amounts of insurance coverage required hereunder, but all
costs, expenses and damages which are subject to deductible
amounts under any such insurance coverage shall be included
in Operating Costs to the extent such deductible amounts are
provided for herein.
"Option Agreement" means the Option Agreement of even date herewith
between Borrower and ERMS, as the same may be modified, amended or restated
from time to time.
"Past Due Rate" shall mean 15% per annum.
"Payment Date" shall mean March 15, 1994 and each 15th day of each
month thereafter continuing through and including the Final Maturity Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form
of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (a) is currently or hereafter sponsored,
maintained or contributed to by the Borrower or an ERISA Affiliate, or (b)
was at any time during the six calendar years preceding the date of this
Agreement, sponsored, maintained or contributed to, by the Borrower or an
ERISA Affiliate.
"Price Protection Agreements" means the Swap Agreement, Option
Agreement, and each other swap agreement, option agreement or other agreement,
including confirmations thereunder, which Borrower with the written approval
of Lender enters into to hedge the price of Hydrocarbons produced from the
Mortgaged Properties and which Borrower has pledged to Lender in accordance
with the terms hereof.
"Prior Capital Operations" means the operations described in
Exhibit I.
"Prime Rate" shall mean the annual rate of interest publicly announced
from time to time by Chase as its prime or base rate, calculated on the basis
of a 365 day year, but not to exceed the maximum nonusurious rate permitted
by applicable law.
"Production Agreement (EI Block 326)" shall mean the Production
Agreement in the form of Exhibit N1 hereto from Borrower to Lender covering
the Eugene Island Block 326 Property.
"Production Agreement (Wagner & Brown)" shall mean the Production
Agreement in the form of Exhibit N2 hereto from Borrower to Lender covering
the Wagner & Brown Properties.
"Production Marketing Agreement" means each agreement described in
Section (a) and each other gas purchase agreement, crude oil purchase
agreement and other agreement entered into pursuant to Section pursuant to
which Hydrocarbons produced from the Mortgaged Properties are sold by
Borrower.
"Projected Twelve Month Cash Flow" means as of the end of any month
set forth on Exhibit J the amount set forth for such month on such Exhibit.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Release Price" means with respect to each Wagner & Brown Prospect
the amount set forth in Exhibit Q.
"Requirements of Law" shall mean as to any Person, the certificate
of incorporation and bylaws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
"Reserve Report" shall mean the reports provided to the Lender
pursuant to Section hereof and the Initial Reserve Reports.
"Sandefer Properties" means the Oil and Gas Properties described in
Part 6 of Exhibit H.
"Scheduled Capital Operation" means (i) any operation described in
Exhibit I hereto and (ii) any other drilling, sidetracking, deepening,
completing, recompleting, plugging back or other similar operation on or in
and oil and/or gas well, setting any platform, acquisition of production
facilities, or any other operation requiring a single expenditure in excess
of $100,000.00 hereafter conducted to develop or produce oil and/or gas
reserves classified as proved, probable or possible in the Initial Reserve
Reports, other than a Prior Capital Operation.
"Scheduled Principal Amount" means as of any Semiannual Payment Date
after December 31, 1995 the applicable amount set forth in Exhibit J, as the
same may be adjusted pursuant to Section 2.03(a).
"Secondary Scheduled Capital Costs Ceiling" means the amount shown
on Exhibit K for each calendar year after December 31, 1995, as the same may
be reduced pursuant to the provisions of Section 2.15(c) or 4.17.
"Security Instruments" shall mean this Agreement, the Subordination
Agreement, the agreements or instruments described and referred to in
Sections 4.16 and 7.01(g) and any and all other agreements or instruments
now or hereafter executed and delivered by the Borrower, or any other Person
(other than participation or similar agreements between the Lender and any
other bank or creditor with respect to any Indebtedness) as security for the
payment or performance of, the Indebtedness, as such agreements may be
amended or supplemented from time to time.
"Semiannual Payment Date" shall mean the Payment Dates in February
and August of each calendar year commencing with 1996.
"Subordinated Liens" shall mean any Chase Liens which have been
subordinated to the Liens securing the Indebtedness in accordance with the
terms of the Subordination Agreement.
"Subordination Agreement" shall mean a Subordination Agreement
between the Lender and The Chase Manhattan Bank (National Association) in
the form of Exhibit F, as the same may be amended from time to time.
"Subsidiary" shall mean any corporation of which more than 50% of
the issued and outstanding securities having ordinary voting power for the
election of directors is owned or controlled, directly or indirectly, by the
Borrower and/or one or more of its subsidiaries.
"Suspension Event" means any Default or any event which could
reasonably be expected to result in a Default regardless of whether the
Borrower expects to be able to avoid the occurrence of the Default.
"Swap Agreement" shall mean that certain Swap Agreement (Basic Swap)
between Borrower and Lender of even date herewith, as the same may be
modified, amended or restated from time to time.
"Trailing Twelve Month Cash Flow" as of the end of any month shall
mean for the twelve month period ending as of such date the Net Production
Revenues for such period less the Operating Costs for such period less the
Capital Expenses for such period.
"Transactions" shall mean the transactions provided for in and
contemplated by this Agreement, the other Security Instruments and the Note.
"Transfer Orders" shall mean written directions addressed to
purchasers of Hydrocarbons from the Mortgaged Properties executed by the
Borrower placing such purchasers on notice of the Security Instruments and
directing such purchasers to make settlement of such Hydrocarbons to Lender
for the account of Borrower.
"Trustee" shall mean any Person serving as a trustee under any
Security Instrument, including any successor trustee.
"Vermilion Block 101 Property" means the Oil and Gas Property
described in Part 4 of Exhibit H.
"Vermilion Block 102 Property" means the Oil and Gas Property
described in Part 5 of Exhibit H.
"Vermilion Block 255 Property" means the Oil and Gas Property
described in Part 3 of Exhibit H.
"Wagner & Brown Overriding Royalty" shall mean the overriding
royalty interest created by the Conveyance of Overriding Royalty (Wagner
& Brown).
"Wagner & Brown Properties" means the Oil and Gas Properties
described in that certain Purchase and Sale Agreement dated as of December 9,
1993 between Borrower and Wagner & Brown, Ltd.
"Wagner & Brown Prospect" means each of the prospect areas described
in Exhibit Q covering portions of the Wagner & Brown Properties.
Section 1.02 Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, this shall be done in
accordance with GAAP, except where such principles are inconsistent with the
requirements of this Agreement.
ARTICLE 2.
__________
AMOUNT AND TERMS OF LOAN
________________________
Section 2.01 The Loan and Commitment. Subject to the terms and
conditions and relying on the representations and warranties contained in
this Agreement, the Lender agrees to make a Loan to the Borrower on any
Business Day, during the period from the date hereof until the Drawdown
Termination Date, in each case, in such amount as the Borrower may request
pursuant to a Borrowing Request not to exceed the Maximum Commitment. The
Borrower may make prepayments as permitted or required in Sections 2.07 and
2.08 but not reborrowings in respect thereof. The Loan made by the Lender
to the Borrower pursuant to this Agreement shall be evidenced by the Note.
Section 2.02 Use of Proceeds. The Lender shall be required to
make the Loan to be used only for the following purposes, and Borrower agrees
to use the proceeds of the Loan made hereunder only for the following purposes:
(a) Up to $5,800,000 to be used to reimburse Borrower for 80% of
the costs of the Prior Capital Operations.
(b) Up to $15,000,000 to be used to fund a portion of the purchase
price of the Sandefer Properties.
(c) Up to $38,000,000 to be used to fund a portion of the purchase
price of the Wagner & Brown Properties.
Section 2.03 Nonscheduled Capital Operations. (a) Prior to
conducting any Nonscheduled Capital Operation on the Mortgaged Properties
Borrower shall submit to Lender an AFE setting forth among other things the
estimated commencement date, the proposed depth, the objective zone or zones
to be tested, the surface and bottom hole locations, applicable details
regarding directional drilling, the equipment to be used and the estimated
costs of the operation, and such other information as Lender reasonably may
request. Lender shall have ten (10) Business Days (one (1) Business Day if
the rig is on location and Borrower notifies Lender of such circumstance at
the time the AFE is submitted for approval, or sixty (60) Business Days if
the AFE involves the construction of a platform and/or facilities either as
a part of the well proposal or as a separate proposal) after receipt of such
AFE within which to approve the proposed Nonscheduled Capital Operation and
AFE. Failure of Lender to notify Borrower in writing within such period of
time of such approval shall be deemed disapproval of the proposed operation
and AFE. None of the costs of conducting a Nonscheduled Capital Operation
shall be included in computing any Monthly Payment Amount unless such
Nonscheduled Capital Operation shall have been approved by Lender pursuant
to this Section 2.03(a). In the event any Nonscheduled Capital Operation is
submitted to Lender pursuant to this Section 2.03(a) and Lender does not
approve such Nonscheduled Capital Operation in accordance with the provisions
of this Section 2.03(a), then subject to the provisions of Section 2.03(b),
Lender will release the Liens held by Lender securing the Indebtedness
insofar and only insofar as such Liens cover the portion of the Collateral
to be developed by such Nonscheduled Capital Operation, but shall retain
from such release any portion of the Collateral which in Lender's opinion
was evaluated as proved, probable or possible in the Initial Reserve Reports.
In the event the costs of any Approved Nonscheduled Capital Operation exceed
110% of the Approved AFE for such Approved Nonscheduled Capital Operation,
such excess costs shall not be included in computing any Monthly Payment
Amount unless Lender approves a supplemental AFE for such increased costs.
In connection with any Nonscheduled Capital Operation which Lender desires
to approve pursuant to this Section 2.03(a), Borrower and Lender shall
attempt to mutually agree on any appropriate adjustment to the Scheduled
Principal Amounts relating to such Nonscheduled Capital Operation. In the
event that Borrower and Lender do not agree on an adjustment to be made to
the Scheduled Principal Amounts within the period for Lender to approve such
Nonscheduled Capital Operation, then Lender shall be deemed not to have
approved such Nonscheduled Capital Operation. If Borrower and Lender agree
upon a adjustment to the Scheduled Principal Amounts, the parties will
execute an appropriate amendment to this Agreement to reflect such adjustment.
(b) Lender's obligation to execute any release pursuant to Section
2.03(a) in connection with any Nonscheduled Capital Operation shall
be subject to satisfaction of the following conditions:
(i) Lender shall have received a written request from Borrower
containing a written description of the portion of the Collateral
to be released in form and substance satisfactory to Lender;
(ii) Lender in its discretion shall have determined that none of the
Collateral to be released includes proved, probable or possible oil
and gas reserves evaluated in the Initial Reserve Reports and none of
the Collateral to be retained by Lender will be adversely affected
(through drainage or otherwise) by the proposed Nonscheduled Capital
Operation;
(iii) No Default shall exist hereunder; and
(iv) Borrower shall have commenced such Nonscheduled Capital
Operation within ninety (90) days following the date Lender disapproved or
was deemed to disapprove such Nonscheduled Capital Operation. If such
Nonscheduled Capital Operation is not commenced within such time period,
the effect shall be as if the proposal had not been made and such operation
shall again be subject to the provisions of Section 2.03(a). A Nonscheduled
Capital Operation shall be deemed to have commenced (A) on the date the
contract for a new platform, production facility or other similar item is let,
if the notice indicated the need for such property, or (B) on the date the
rig charges begin accruing according to the terms of the applicable drilling
contract.
Section 2.04 Interest and Additions to Principal. The aggregate
outstanding principal amount of the Loan shall bear interest from the date
made until due at the Applicable Interest Rate. Past due interest, principal
and other amounts hereunder shall bear interest at the Past Due Rate from the
date due until paid. All payments of interest shall be computed on the per
annum basis of a year of 365 or 366 days, as the case may be, and for the
actual number of days (including the first day but excluding the last day)
elapsed. Accrued interest shall be paid monthly on each Payment Date in an
amount equal to the lesser of (i) the accrued and unpaid interest to such
Payment Date or (ii) the Monthly Payment Amount computed as of the end of
the second month preceding the month in which such Payment Date falls. For
example, with respect to the Payment Date occurring on March 15, 1994,
accrued interest shall be paid to the extent of the Monthly Payment Amount
computed as of the end of the month of January 1994. Any interest that has
accrued as of any Payment Date in excess of the Monthly Payment Amount for
such Payment Date shall not be considered past due at such time, but shall be
added to the principal amount of the outstanding Loan on such Payment Date.
Section 2.05 Notice and Manner of Borrowing. The amount and date
of the Loan shall be designated by the Borrower's execution of a Borrowing
Request to be received by the Lender at least one Business Day prior to the
date of the Loan, which date shall be a Business Day. Disbursement of the
Loan proceeds shall be made from the Lender's Account to the Borrower's
Account , and shall be funded prior to 1:00 p.m., Mountain Time on the day
so requested in immediately available funds in the amount so requested.
Section 2.06 Note. To evidence the Loan made by the Lender
pursuant to this Agreement, the Borrower will issue, execute and deliver the
Note in the principal amount of $100,000,000 dated as of the date of this
Agreement. At the time the Loan is made hereunder or payment (including,
without limitation, prepayments) is made on the Note, Lender is hereby
irrevocably authorized by the Borrower to make an appropriate notation on
a ledger forming a part of the Note reflecting the amount loaned or paid and
the date thereof; provided however, the failure of the Lender to do so shall
not relieve the Borrower or any other liable party of its liability hereunder
or under the Note or subject the Borrower or any other liable party to
additional liability under the Note. Furthermore, the Lender is hereby
irrevocably authorized by the Borrower to attach to and to make a part of the
Note a continuation of any such schedule of payments, as and when required,
reflecting the amount paid and the date of such payment. The aggregate
unpaid amount of the Loan reflected by the notations by the Lender on its
records or a ledger sheet or sheets affixed to the Note shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note.
Interest provided for in this Agreement and in the Note shall be calculated
on the unpaid sums actually loaned and outstanding pursuant to the terms of
this Agreement (including accrued and unpaid interest added to principal in
accordance with the terms hereof) and interest shall accrue only for the
period from the date or dates advanced (or, in the case of accrued and
unpaid interest added to principal in accordance with the terms hereof,
from the date such interest was added to principal) until repaid. The
liability for payment of principal evidenced by the Note shall be limited
to the principal amounts actually loaned and outstanding or added to
principal pursuant to this Agreement. All outstanding principal, including
any amounts which have been added to principal, and accrued interest on the
Loan shall be due and payable on the Final Maturity Date.
Section 2.07 Voluntary Prepayments. The Borrower may at its
option prepay the principal amount of the Note outstanding hereunder at any
time, but only on any Payment Date, in whole or from time to time in part
(but no partial prepayment shall be less than $1,000,000), without premium
or penalty, upon giving the Lender at least five Business Days' prior notice
of the aggregate principal amount to be prepaid, and in the event of any such
notice being given, the amount so notified shall be due and payable on the
day so notified, together with accrued interest on the outstanding principal
amount of the Note to the date of prepayment. Voluntary prepayments of
principal will be applied to installments of principal due hereunder in the
inverse order of maturity.
Section 2.08 Mandatory Prepayments. The principal balance of the
Loan made hereunder shall be payable in monthly installments on each Payment
Date. On each Payment Date Borrower shall prepay the principal amount of the
Loan outstanding hereunder in an amount equal to the amount by which the
Monthly Payment Amount computed as of the end of the second month preceding
the month in which such Payment Date falls exceeds the interest due on the
Loan on such Payment Date. In addition, on any Payment Date on which the
outstanding principal amount exceeds, or would pursuant to any of the
provisions hereof exceed, the Maximum Principal Amount Borrower will prepay
the outstanding principal amount of the Loan by an amount sufficient to
reduce the outstanding principal amount on such Payment Date to the Maximum
Principal Amount. Furthermore, if on any Semiannual Payment Date the
aggregate outstanding principal amount of the Loan exceeds, or would
pursuant to any of the provisions hereof exceed, the Scheduled Principal
Amount for such date and the Trailing Twelve Month Cash Flow as of the end
of the second preceding month is less than the Projected Twelve Month Cash
Flow for the twelve month period ending at the end of such second preceding
month, the Borrower on such Payment Date shall prepay the principal amount
of the Loan outstanding hereunder in the amount necessary to reduce the
outstanding principal balance to the Scheduled Principal Amount for such
Semiannual Payment Date. Borrower will give Lender at least five Business
Days prior notice of the aggregate principal amount to be prepaid on each
Payment Date pursuant to this Section 2.08. Prepayments of principal under
this Section 2.08 shall be without premium or penalty, and shall be made
together with the payment of accrued interest on the outstanding principal
amount of the Note.
Section 2.09 Payment Procedure. All payments and prepayments
made by the Borrower under the Note or this Agreement shall be made by wire
transfer in immediately available funds before 1:00 p.m. Mountain Time on
the date such payment is required to be made to the Lender's Account . Any
payment received and accepted by the Lender after such time shall be
considered for all purposes (including the calculation of interest, to the
extent permitted by law) as having been made on the Lender's next following
Business Day. All payments and prepayments received shall be applied first
to accrued interest and then to the reduction of principal.
Section 2.10 Business Days. If the date for any loan payment or
prepayment falls on a day which is not a Business Day, then for all purposes
of the Note and this Agreement the same shall be deemed to have fallen on the
next following Business Day, and such extension of time shall in such case
be included in the computation of payments of interest.
Section 2.11 Collateral. To secure full and complete payment and
performance of the Indebtedness, the Borrower, as applicable, shall execute
and deliver or cause to be executed and delivered the Security Instruments
creating first and prior liens and security interests in the Collateral.
Borrower, as applicable, shall execute and deliver or cause to be executed
and delivered such further documents and instruments, including, without
limitation, Uniform Commercial Code financing statements, as Lender, in its
sole discretion, deems necessary or desirable to evidence and perfect its
Liens in the Collateral.
Section 2.12 Setoff. Lender shall have the right to set off and
apply against the Indebtedness in such manner as Lender may determine at any
time and without notice to Borrower, the Borrower's interest in any and all
amounts at any time owing from Lender (or any Affiliate of Lender), to
Borrower in connection with the Mortgaged Properties, including without
limitation, any production proceeds payable by any Affiliate of Lender to
Borrower from any Mortgaged Property, upon the occurrence and continuance
of an Event of Default, whether or not the Indebtedness is then due. In
addition to Lender's right of setoff and as further security for the
Indebtedness, Borrower hereby grants to Lender a security interest in all
amounts at any time credited by or owing from Lender (or any Affiliate of
Lender) to Borrower in connection with the Mortgaged Properties. The rights
and remedies of Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which Lender may have.
Section 2.13 Production Proceeds. From and after the occurrence
of a Suspension Event, Borrower at the request of Lender shall direct and
cause all purchasers of Hydrocarbons produced from the Mortgaged Properties
to deposit all payments of any nature whatsoever due and owing by such
Persons to Borrower directly into the Lender's Account. In this connection
the Lender shall be authorized upon the occurrence of a Suspension Event to
complete and deliver to such purchasers the Transfer Orders. Funds deposited
in the Lender's Account in accordance with the terms hereof shall be credited
when collected to the payment of the Indebtedness in accordance with the
other provisions of this Agreement.
Section 2.14 Overriding Royalty Instruments; Production Agreements.
Prior to making the Loan Borrower will execute, acknowledge and deliver to
Lender the Conveyance of Overriding Royalty (EI Block 326), the Production
Agreement (EI Block 326), the Conveyance of Overriding Royalty (Wagner &
Brown) and the Production Agreement (Wagner & Brown). Borrower and Lender
acknowledge that if Borrower makes any voluntary prepayments on the Loan
pursuant to Section 2.07 and the Loan is repaid in full earlier than if the
Loan had only been paid out of the application of the Monthly Payment Amounts
accordance with Sections 2.04 and 2.08 that the effect would be to increase
the value of the Eugene Island Block 326 Overriding Royalty since overriding
royalty payments to Lender thereunder will commence at an earlier date.
Accordingly, if any such prepayments are made and the Loan is repaid in full
earlier than if the Loan had only been paid out of the application of Monthly
Payment Amounts in accordance with Sections 2.04 and 2.08, Borrower and
Lender will mutually agree upon what the value of the Eugene Island Block 326
Overriding Royalty would have been if such prepayment had not occurred and
any increased value of the Eugene Island Block 326 Overriding Royalty
resulting from such prepayment and amend the Conveyance of Overriding Royalty
(EI Block 326) to reduce the Overriding Royalty Percentage (as defined
therein) so that the value of the Eugene Island Block 326 Overriding Royalty,
as amended, equals the value that the Eugene Island Block 326 Overriding
Royalty would have had if the prepayments had not been made. In the event
the Loan is repaid in full on or before December 31, 1995, Borrower shall
have the right to repurchase the Wagner & Brown Overriding Royalty for a
purchase price to be mutually agreed upon between Borrower and Lender which
when paid to Lender will result in an internal rate of return to Lender of
1.271% per month. Such internal rate of return shall be calculated as
specified in the definition of Termination Time in the Conveyance of
Overriding Royalty (Wagner & Brown), but changing the rate 1.5% specified
therein to 1.271%. In order to exercise this right, Borrower shall notify
Lender of its election to repurchase on or before the time the Loan is
finally paid.
Section 2.15 Wagner & Brown Prospects. (a) Subject to the
provisions of Section 2.15(b), Lender, at the request of Borrower, agrees
upon commencement by Borrower of Scheduled Capital Operations on any Wagner
& Brown Prospect to subordinate the Liens held by Lender securing payment of
the Indebtedness, insofar as such Liens cover such Wagner & Brown Prospect,
to the terms of any agreement entered into by Borrower with any third party
or parties not Affiliated with Borrower providing financing to Borrower for
such Scheduled Capital Operation or to which Borrower has farmed out an
interest in (or made other similar arrangements, whether for cash, property
or services, whereby such non- Affiliated third party pays for and receives
a portion of) such Wagner & Brown Prospect. Prior to obtaining any
subordination pursuant to this Section 2.15(a) Borrower shall pay the
Release Price to Lender. Lender shall hold such funds as cash Collateral in
accordance with the terms of this Section 2.15(a). No interest shall accrue
on such cash Collateral, but as long as such cash Collateral is held by Lender
and not applied on the Loans in accordance with the terms of this Section 2.15
(a), interest shall not accrue on a portion of the outstanding principal
amount of the Loans equal to the amount so held by Lender. When the
development of such Wagner & Brown Prospect has been completed, Borrower shall
furnish Lender all information requested by Lender which is available to
Borrower concerning such Prospect and Lender shall have 30 days after receipt
of such information within which to notify Borrower whether Lender elects (i)
to apply said Release Price to the payment of the Indebtedness in such order
as Lender may direct and release the Liens held by Lender covering such Wagner
& Brown Prospect, or (ii) return said Release Price to Borrower and retain
the Liens held by Lender on Borrower's interest in such Wagner & Brown
Prospect, subject to the subordination previously granted. Any releases or
subordinations pursuant to this Section 2.15(a) shall be in form and
substance satisfactory to Lender and shall be prepared at the expense of
Borrower.
(b) Lender's obligation to execute any subordination or release
pursuant to Section 2.15(a) in connection with any Wagner & Brown Prospect
shall be subject to satisfaction of the following conditions:
(i) Lender shall have received a written request from Borrower for
the subordination or release;
(ii) No Default shall exist hereunder;
(iii) Borrower shall have paid to Lender the Release Price; and
(iv) Borrower shall have commenced such Scheduled Capital Operation
within ninety (90) days following the date Borrower paid such Release Price.
If such Scheduled Capital Operation is not commenced within such time period,
Lender may return to Borrower such Release Price and the effect shall be as
if Borrower had not exercised its rights under Section 2.15(a). Such
Scheduled Capital Operation shall again be subject to the provisions of
Section 2.15(a) in the event Borrower subsequently elects to proceed under
such Section. Such Scheduled Capital Operation shall be deemed to have
commenced on the date the rig charges begin accruing according to the terms
of the applicable drilling contract.
(c) In the event Lender elects to develop any Wagner & Brown
Prospect pursuant to the provisions of this Section 2.15(a), the Initial
Scheduled Capital Costs Ceiling and Secondary Scheduled Capital Costs Ceiling
shall be reduced by 110% of the applicable amounts set forth in Exhibit I
with respect to such Prospect.
ARTICLE 3.
__________
REPRESENTATIONS AND WARRANTIES
______________________________
In order to induce the Lender to enter into this Agreement and to
make the Loan hereunder, the Borrower represents and warrants to the Lender
on the date hereof and as of the date of the Loan hereunder (which
representations and warranties will survive the delivery of the Note and the
making of the Loan thereunder) that:
Section 3.01 Corporate Existence. The Borrower is a corporation
duly organized, legally existing and in good standing under the laws of the
State of New York and is duly qualified to do business in Texas and Louisiana
and in all other jurisdictions in which the nature of the business conducted
by it makes such qualification necessary except where the failure to so
qualify would not have a Material Adverse Effect.
Section 3.02 Corporate Power and Authorization. The Borrower has
all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry
on its business as now being conducted or as proposed to be conducted. The
Borrower has all necessary corporate power and authority to execute, deliver
and perform its obligations under this Agreement and the other Loan Documents
to which it is a party; and the execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents to which it is a party
have been duly authorized by all necessary corporate action.
Section 3.03 Binding Obligations. This Agreement and the other
Loan Documents constitute valid and binding obligations of Borrower enforceable
in accordance with their terms (except that enforcement may be subject to any
applicable bankruptcy, insolvency or similar laws generally affecting the
enforcement of creditors' rights).
Section 3.04 No Legal Bar or Resultant Lien. The execution,
delivery and performance by Borrower of this Agreement and the other Loan
Documents do not and will not violate any provisions of the certificate of
incorporation or bylaws of the Borrower or any contract, agreement, instrument
or Governmental Requirement to which the Borrower is a party or is subject or
result in the creation or imposition of any Lien upon any Properties of the
Borrower other than those provided for in this Agreement.
Section 3.05 No Consent. The execution, delivery and performance
by the Borrower of this Agreement and the other Loan Documents to which it is
a party do not require the consent or approval of any other Person which has
not been obtained, including without limitation any Governmental Authority.
Section 3.06 Financial Condition. The audited consolidated
balance sheet of the Borrower as at December 31, 1992 and the related
consolidated statement of income, changes in shareholder's equity and cash
flow of the Borrower for the period ended as of said date heretofore furnished
to Lender and the unaudited consolidated interim financial statements of the
Borrower dated as of September 30, 1993 heretofore furnished to Lender have
been prepared in accordance with GAAP and present fairly the financial
condition and changes in financial position of the Borrower as at the date
or dates and for the period or periods stated. Since September 30, 1993 no
change, either in any case or in the aggregate, has since occurred in the
condition, financial or otherwise, of the Borrower which would have a Material
Adverse Effect.
Section 3.07 Liabilities; Litigation. Except for liabilities
incurred in the normal course of business which do not have a Material Adverse
Effect, neither the Borrower nor any Subsidiary has any material (individually
or in the aggregate) liabilities, direct or contingent, except as disclosed
or referred to in the Financial Statements or as disclosed to the Lender in
Exhibit D. Except as disclosed to the Lender in Exhibit D, at the date of
this Agreement there is no litigation, legal, administrative or arbitral
proceeding, investigation or other action of any nature pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary which involves the possibility of any judgment or liability
not fully covered by insurance, and which would have a Material Adverse
Effect. No burdensome restriction, restraint, or hazard not customary in the
oil and gas industry exists by contract, law or governmental regulation or
otherwise that affects the Mortgaged Properties, except as disclosed to the
Lender in Exhibit D.
Section 3.08 Taxes; Governmental Charges. The Borrower has filed
all tax returns and reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon it or upon any
of its Properties or income which are due and payable, including interest and
penalties, or have provided adequate reserves for the payment thereof and in
each case, if not filed or paid, could result in a Lien on any of the
Mortgaged Properties.
Section 3.09 Title, etc. The Borrower has good and marketable
title to the Mortgaged Properties, free and clear of all Liens except Liens
allowed by Section . After giving full effect to the Excepted Liens, the
Borrower owns the net interests in production of Hydrocarbons from the
Mortgaged Properties set forth in the Security Instruments and the ownership
of such Properties does not obligate Borrower to bear costs and expenses
relating to the maintenance, development and operations of each such Property
in an amount in excess of the working interest of each such Property set
forth in the Security Instruments. Except as set forth on Exhibit D, all
rentals and royalties due and payable in accordance with the terms of the
leases and subleases comprising part of the Mortgaged Properties have been
duly paid and such leases and subleases are in full force and effect.
Section 3.10 Defaults. Neither the Borrower nor any Subsidiary
is in default nor has any event or circumstance occurred which, but for the
passage of time or the giving of notice, or both, would constitute a default
under any loan or credit agreement, indenture, mortgage, deed of trust,
security agreement, conveyance or production payment, production and delivery
agreement or other agreement or instrument evidencing or pertaining to any
Debt of the Borrower or any Subsidiary, or under any material agreement or
other instrument to which the Borrower or any Subsidiary is a party or by
which the Borrower or any Subsidiary is bound, except as disclosed to the
Lender in Exhibit D. No Default hereunder has occurred and is continuing.
Section 3.11 Casualties; Taking of Properties. Since the date of
the Financial Statements, no fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition
or taking of Property or cancellation of contracts, permits or concessions by
any domestic or foreign government or any agency thereof, riot, activities of
armed forces or acts of God or of any public enemy adversely affecting the
Mortgaged Property or the operation thereof or that would adversely affect
Borrower's ability to perform its obligations under this Agreement or the
other Loan Documents has occurred.
Section 3.12 Margin Stock. None of the Loan proceeds will be
used for the purpose of purchasing or carrying any "margin stock" as defined
in Regulation G of the Board of Governors of the Federal Reserve System
(12 C.F.R. Part 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation G. The Borrower
is not engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying
margin stocks. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause the Note or any
of the Security Instruments, including this Agreement, to violate Regulation
G or any other regulation of the Board of Governors of the Federal Reserve
System or to violate Section 7 of the Securities Exchange Act of 1934 or
any rule or regulation thereunder, in each case as now in effect or as the
same may hereinafter be in effect.
Section 3.13 Compliance with the Law. The Borrower and each
Subsidiary is not in violation of any Governmental Requirement, which violation
or failure would have (in the event such violation or failure were asserted by
any Person through appropriate action) a Material Adverse Effect.
Section 3.14 ERISA.
(a) The Borrower and each ERISA Affiliate have complied
in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which
could result in imposition on the Borrower or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to Section 502(c) or (i) of ERISA or a tax imposed
by Section 4975 of the Code or (ii) breach of fiduciary duty liability
damages under Section 409 of ERISA.
(d) No Plan (other than a defined contribution Plan) or
any trust created under any such Plan has been terminated since
September 2, 1974 under circumstances in which the Borrower or any
ERISA Affiliate has any current liability with respect to such Plan
or trust. No liability to the PBGC (other than for the payment of
current premiums which are not past due) by the Borrower or any ERISA
Affiliate has been or is expected by the Borrower or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event
with respect to any Plan has occurred.
(e) Full payment has been made of all amounts which the
Borrower or any ERISA Affiliate is required under the terms of each
Plan or applicable law to have paid as contributions to such Plan as
of the date hereof, and no accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the Code) whether or not
waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Title IV of ERISA does not, as of
the end of the Borrower's most recently ended fiscal year, exceed the
current value of the assets (computed on a Plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in Section 4041 of ERISA.
(g) Neither the Borrower nor any ERISA Affiliate sponsors,
maintains or contributes to, or has at any time in the six-year period
preceding the date of this Agreement sponsored, maintained or
contributed to, any Multiemployer Plan.
(h) Neither the Borrower nor any ERISA Affiliate is required
to provide security under Section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the
Plan.
The Borrower and each ERISA Affiliate shall be deemed to be in
compliance with the representations and warranties set forth in
paragraphs (a), (b), (c), (d), (e) and (f) above except where
noncompliance (individually or in the aggregate) would have a Material
Adverse Effect.
Section 3.15 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
Section 3.16 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 3.17 Subsidiaries. The Borrower has no Subsidiaries,
except for those listed on Exhibit D, each of which are owned by the Borrower
in the percentages set forth therein.
Section 3.18 Designated Contracts. (a) The Borrower has entered
into that certain gas purchase and sale agreement with EGM dated of even date
herewith pursuant to which gas produced from certain Mortgaged Properties will
be sold to EGM for the term of such contract. Borrower acknowledges that the
prices payable under such agreement represent the fair market value of the
natural gas covered thereby, that the other terms thereof are fair and
reasonable, that the agreement was the result of arms length negotiations
between the parties thereto, and except for the natural gas covered by such
agreement, Borrower is not obligated to sell oil or gas produced from the
Mortgaged Properties to Lender or any of its Affiliates.
(b) The Borrower has entered into the Swap Agreement pursuant to
which Borrower and Lender have agreed to a price swap on natural gas prices
covering the notional quantities of natural gas described therein at the
prices described therein. The fixed prices in the Swap Agreement represent
the fair market value of the Swap Agreement at the time it was entered into,
and the terms thereof are fair and reasonable and are the result of arms
length negotiations between the parties thereto. The Borrower has entered
into the Option Agreement with ERMS pursuant to which Borrower has purchased
from ERMS a put or an option to purchase a put on natural gas prices covering
certain notional quantities of natural gas described therein at the strike
prices described therein. The premiums, strike prices and other terms of the
Option Agreement represent the fair market value of price hedges thereunder
at the time the Option Agreement were entered into and are the result of arms
length negotiations between the parties thereto. Although Lender has required
price protection of the type provided by the Swap Agreement and Option
Agreement, as a condition to making the Loan hereunder, Borrower acknowledges
that Lender has not required that such price protection be purchased from
Lender or its Affiliates, and that Lender would have accepted comparable
price protection purchased from another creditworthy party. The Swap
Agreement and Option Agreement provide Borrower a significant benefit in
reducing the risks of its business. The requirement that Borrower obtain
price protection with the Loan is customary and reasonable for Loans of the
type Lender has agreed to make hereunder.
(c) The agreements described in Sections (a) and (b) have not
been modified, terminated, assigned or pledged by Borrower, are in full force
and effect and no party is in default in the performance of its obligations
thereunder.
Section 3.19 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated in the opening recital of this Agreement.
Section 3.20 Gas Imbalances. Except as set forth on Exhibit D,
none of the Mortgaged Properties is subject to any "take or pay", gas
balancing or similar provisions in accordance with which Hydrocarbons have
been or may be produced and delivered without Borrower then or thereafter
receiving full payment therefor and no gas imbalances presently exist.
Except as set forth in Exhibit D, none of the Mortgaged Properties is subject
to any contractual or other arrangement whereby payment for production
therefrom is to be deferred for a substantial period of time after the month
in which such production is delivered (i.e., in the case of oil, not in excess
of 60 days, and in the case of gas, not in excess of 90 days). Except as set
forth on Exhibit D, none of the Mortgaged Properties is subject to a
contractual or other arrangement for the sale of oil or gas production for a
fixed price which cannot be cancelled on 90 days (or less) notice or which
contains terms which are not customary in the industry. None of the Mortgaged
Properties are subject at present to any regulatory refund obligation and no
facts exist which might cause the same to be imposed.
Section 3.21 Rate Filings. The Borrower has not violated any
provisions of The Natural Gas Act or any other Federal or State law or any of
the regulations thereunder (including those of the respective conservation
Commissions and Land Offices of the various jurisdictions having authority
over Mortgaged Properties) with respect to any Mortgaged Property which would
have a Material Adverse Effect, and Borrower has made all necessary rate
filings, certificate applications, well category filings, interim collection
filings and notices, and any other filings or certifications, and has received
all necessary regulatory authorizations (including without limitation necessary
authorizations, if any, with respect to any processing arrangements conducted
by it or others respecting the Mortgaged Properties or production therefrom)
required under said laws and regulations with respect to the Mortgaged
Properties and the production therefrom so as not to have a Material Adverse
Effect. Said material rate filings, certificate applications, well category
filings, interim collection filings and notices, and other filings and
certifications contain no untrue statements of material facts nor do they
omit any statements of material facts necessary in said filings.
Section 3.22 Environmental Matters. Except for matters that would
not have a Material Adverse Affect:
(a) Neither the Mortgaged Property nor the operations conducted
thereon violate any order or requirement of any court or Governmental
Authority with respect to human health or environmental quality or any
Environmental Laws, nor are there any conditions existing on any such
Property or resulting from operations conducted thereon that may give rise
to any on-site or off-site remedial obligations under any Environmental Laws.
(b) Neither the Mortgaged Property nor the operations currently
conducted thereon or by any prior owner or operator of such Mortgaged
Property or operation, are subject to any existing, pending or, to the best
of Borrower's knowledge, threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority.
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or use
of any and all of the Mortgaged Property including without limitation past or
present treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed, and
Borrower is in compliance with the terms and conditions of all such notices,
permits, licenses and similar authorizations.
(d) Since the inception of RCRA or any other Environmental Laws
having similar requirements, all hazardous substances or solid waste generated
at any and all of the Mortgaged Property have been transported only by carriers
maintaining valid permits under RCRA and any other Environmental Law and
treated and disposed of only at treatment, storage and disposal facilities
maintaining valid permits under RCRA and any other Environmental Law, which
carriers and facilities have been and are operating in compliance with such
permits and are not the subject of any existing, pending or, to the best of
Borrower's knowledge, threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws.
(e) Borrower has taken all steps necessary to determine and have
determined that no hazardous substances or solid waste have been disposed of
or otherwise released and there has been no threatened release of any hazardous
substances on or to any of the Mortgaged Property except in compliance with
Environmental Laws.
(f) The Borrower does not have any contingent liability in
connection with any release or threatened release of any hazardous substance
or solid waste on or from the Mortgaged Property.
Section 3.23 Qualification to Hold Federal Oil and Gas Leases The
Borrower is duly qualified to own, hold and operate offshore and onshore
federal oil and gas leases.
Section 3.24 Operations of Oil and Gas Properties. The Mortgaged
Properties have been maintained, operated and developed in a good and
workmanlike manner and in conformity in all material respects with all
applicable laws and all rules, regulations and orders of all duly constituted
authorities having jurisdiction and in conformity in all material respects
with the provisions of all leases, subleases or other contracts comprising a
part of such Mortgaged Properties. None of the Mortgaged Property 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 wells comprising a part of the Mortgaged Properties are
deviated from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are, in fact, bottomed under
and are producing from, and the well bores are wholly within the Mortgaged
Properties (or, in the case of wells located on properties unitized therewith,
such unitized properties).
Section 3.25 Insurance. Borrower currently has in full force and
effect insurance satisfying all of the requirements of Section .
Section 3.26 Payments by Purchasers of Production. All proceeds
from the sale of the Borrower's interests in Hydrocarbons from the Mortgaged
Properties are currently being paid in full to Borrower 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 Mortgaged Properties, and none of such proceeds are currently being held
in suspense by such purchaser or any other party.
Section 3.27 South Africa. The Borrower does not directly or
indirectly have business operations or assets in South Africa or business
arrangements with the government of South Africa which would be in violation
of Section 16640, et seq., of the California Government Code.
Section 3.28 Disclosure. All of the Basic Data are accurate an
d complete in all material respects to the best of the knowledge of Borrower.
To the best of Borrower's knowledge, none of such data contains an untrue
statement of a material fact or omits to state any material fact which is
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each Reserve
Report submitted by Borrower to Lender hereunder was prepared in accordance
with customary oil and gas engineering practices and is based on historical
information which is accurate and complete in all material respects to the
best of the knowledge of Borrower; however, Borrower makes no representation
or warranty regarding the accuracy of the forecasts, projections or quantity
of reserves or producibility thereof reflected in the Reserve Reports.
Section 3.29 Purchase Agreements. All of the representations and
warranties made by the seller of any portion of the Mortgaged Properties i
n the purchase and sale agreement between such seller and Borrower pursuant
to which such Properties were sold to Borrower are true and correct to the
best of Borrower's knowledge, and Borrower has not waived any of the conditions
to closing set forth therein without the prior written consent of Lender.
ARTICLE 4.
__________
AFFIRMATIVE COVENANTS
_____________________
The Borrower will at all times comply with the covenants contained
in this Article 4, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The Borrower will
promptly furnish to the Lender from time to time upon request such information
regarding the business and affairs and financial condition of the Borrower
and the Subsidiaries as the Lender may reasonably request, and will furnish
to the Lender:
(a) Annual Reports. Promptly after becoming available
and in any event within 120 days after the end of each fiscal year of
the Borrower, the audited consolidated statements of income,
stockholders' equity and cash flow of the Borrower for such fiscal
year, and the related consolidated balance sheet of the Borrower a
s at the end of such fiscal year, and setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year, accompanied by the related opinion of KPMG Peat Marwick or
other independent public accountants of recognized standing acceptable
to the Lender which opinion shall state that said financial statements
have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly present the consolidated
financial position and results of operations of the Borrower as at
the end of, and for such fiscal year; and
(b) Quarterly Reports. Promptly after becoming available
and in any event within 60 days after the end of each of the first
three fiscal quarterly periods of each fiscal year of the Borrower,
the condensed consolidated statements of income, and cash flow of the
Borrower for such period, the condensed consolidated statements of
income and cash flow of the Borrower for the period from the beginning
of the fiscal year to the end of such period, and the related condensed
consolidated balance sheet as at the end of such period, and setting
forth, in the case of the statement of income, in comparative form the
corresponding figures for the corresponding period of the preceding
fiscal year, certified by the principal accounting officer or treasurer
of the Borrower which certificate shall state that said financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, and fairly present the
consolidated financial position and results of operations of the
Borrower as at the end of, and for such fiscal period; and
(c) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Borrower to stockholders generally, and
of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters)
in respect thereof filed by the Borrower with or received by the
Borrower in connection therewith from, any securities exchange or
the Securities and Exchange Commission or any successor agency.
(d) Year End Reserve Report. As soon as available,
but no later than 90 days after the end of each calendar year,
the Borrower shall furnish to the Lender a Reserve Report in form
and substance reasonably satisfactory to the Lender prepared by
Ryder, Scott & Co. or another independent petroleum engineering
firm acceptable to the Lender, which report shall evaluate the
Mortgaged Properties as of the end of such calendar year and which
shall set forth the proved producing, proved non-producing and
probable oil and gas reserves attributable to such Mortgaged
Properties together with a projection of the rate of production
and future net income with respect thereto as of such date and
any other information reasonably requested by the Lender. Such
report shall be accompanied by a certificate of the Borrower's vice
president in charge of operations stating that the Reserve Report
is based upon historical information which is accurate and complete
in all material respects to the best of his knowledge.
(e) Mid Year Reserve Report. As soon as available, but
no later than 60 days after June 30 of each year commencing June 30,
1994, the Borrower shall furnish to the Lender a Reserve Report in
form and substance reasonably satisfactory to the Lender prepared by
Borrower which report shall evaluate the Mortgaged Properties as of
June 30 and which shall set forth the proved producing, proved non-
producing and probable oil and gas reserves attributable to such
Mortgaged Properties together with a projection of the rate of
production and future net income with respect thereto as of such date
and any other information reasonably requested by the Lender. Such
report shall be accompanied by a certificate of the Borrower's vice
president in charge of operations stating that the Reserve Report was
prepared in accordance with generally accepted engineering practices
and is based upon historical information which is accurate and
complete in all material respects to the best of his knowledge.
(f) Title Certificate. With the delivery of each Reserve
Report, the Borrower shall provide to the Lender, a certificate from
the principal accounting officer or treasurer of the Borrower that,
to the best of his knowledge and in all material respects, (i) the
Borrower owns good and defensible title to the Mortgaged Properties
free of all Liens except for Liens permitted under Section and that
the Lender has a first and prior Lien on the Mortgaged Properties
pursuant to the Security Instruments subject only to Excepted Liens,
(ii) except as set forth on an exhibit to the certificate, on a net
basis there are no gas imbalances, take or pay or other prepayments
with respect to the Mortgaged Properties which would require Borrower
to deliver Hydrocarbons produced from Mortgaged Properties at some
future time without then or thereafter receiving full payment therefor,
(iii) no Mortgaged Properties have been sold since the date of the
last Reserve Report furnished to Lender, except as consented to in
writing by the Lender or set forth in Exhibit D, and (iv) Borrower
owns the net revenue interest in each well, unit or lease as set
forth in the most recent Reserve Report after giving effect to all
encumbrances affecting each such Property.
(g) Monthly Payment Amount Report. As soon as available
and in any event within 40 days after the end of each month, a
statement of the calculation of the Monthly Payment Amount for such
month in the form of Exhibit L, and a lease operating statement for
each Mortgaged Property setting forth quantities or volume of
production, pricing and operating expenses, a capital expenditure
summary setting forth capital expenditures for each Mortgaged
Property, and such other information with respect thereto as the
Lender may require.
(h) Litigation Report. The Borrower shall promptly give to
the Lender notice of: (i) all legal or arbitral proceedings, and of all
proceedings before any Governmental Authority, to which the Borrower
has knowledge affecting the Borrower or any Subsidiary except
proceedings which, if adversely determined, would not have a Material
Adverse Effect, and (ii) any litigation or proceeding affecting the
Borrower or any Subsidiary in which the amount involved is $100,000
or more and not covered by insurance, or in which injunctive or similar
relief is sought.
(i) Purchaser and Remitters. Promptly upon Lender's
request, Borrower will furnish Lender with a listing of those parties
and entities purchasing Hydrocarbons being produced and sold from or
allocated to the Mortgaged Properties and a listing of those companies
receiving payment and accounting for the proceeds attributable to such
Hydrocarbons from such parties or entities.
Section 4.02 Annual Certificates of Compliance. Concurrently with
the furnishing of the annual financial statements pursuant to Subsection
(a), the Borrower will furnish or cause to be furnished to the Lender a
certificate of compliance, as follows:
a certificate signed by the principal accounting officer or treasurer
of the Borrower (i) stating that a review of the activities of the
Borrower and its Subsidiaries has been made under his supervision
with a view to determining whether the Borrower has fulfilled all of
its obligations under this Agreement, the other Security Instruments
and the Note; (ii) stating that the Borrower has complied with all of
the terms of, and fulfilled its obligations under, such instruments,
or if the Borrower shall be in Default, specifying any Default and
the nature and status thereof; (iii) to the extent requested from time
to time by the Lender, specifically affirming compliance of the
Borrowerwith any of its obligations under such instruments; and (iv)
containing or accompanied by such financial or other details,
information and material as the Lender may reasonably request to
evidence such compliance.
Section 4.03 Quarterly Certificates of Compliance. Concurrently
with the furnishing of the quarterly financial statements pursuant to
Subsection (b), the Borrower will furnish or cause to be furnished to the
Lender a certificate from its principal accounting officer of treasurer in
the same form as the certificate required by Subsection 4.02 including all
the matters referred to in clauses (i) through (iv), inclusive, thereof.
Section 4.04 Taxes and Other Liens.The Borrower will pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon the income or any Property owned or used by it as
well as all claims of any kind (including claims for labor, materials,
supplies and rent) which, if unpaid, might become a Lien upon any or all of
the Mortgaged Property; provided, however, that the Borrower shall not be
required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings diligently conducted by or on behalf
of Borrower, and if Borrower shall have set up reserves therefor adequate
under GAAP.
Section 4.05 Maintenance. (a) The Borrower will (i) maintain
its corporate rights and franchises; and (ii) observe and comply (to the
extent necessary so that any failure would not have a Material Adverse
Effect) with all Governmental Requirements.
(b) The Borrower will do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order and
efficiency in accordance with good industry practices all of the Mortgaged
Properties including, without limitation, all equipment, machinery and
facilities, and from time to time will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and
condition of the Mortgaged Properties owned by them will be fully preserved
and maintained, except to the extent a portion of such Mortgaged Properties
is no longer capable of producing Hydrocarbons in economically reasonable
amounts. The Borrower will promptly pay and discharge or cause to be paid
and discharged all delay rentals, royalties, expenses and indebtedness
accruing under, and perform or cause to be performed in all material respects
each and every act, matter or thing required by, each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements affecting
the Mortgaged Properties and will do all other things necessary to keep
unimpaired their rights with respect thereto and prevent any forfeiture
thereof or a default thereunder, except to the extent a portion of the
Mortgaged Properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts. The Borrower will operate the Mortgaged
Properties or cause the Mortgaged Properties to be operated in a careful
and efficient manner in accordance with the practices of the industry and
in compliance in all material respects with all applicable contracts and
agreements and in compliance in all material respects with all Governmental
Requirements, including Environmental Laws.
Section 4.06 Further Assurances. The Borrower will cure promptly
any defects in the creation, or issuance of the Note and the execution and
delivery of the Security Instruments, including this Agreement. The Borrower
at its expense will promptly execute and deliver to the Lender upon request
all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Borrower in the Security Instruments, including this Agreement, or to further
evidence and more fully describe the Collateral intended as security for the
Note, or to correct any omissions in the Security Instruments, or more fully
to state the security obligations set out herein or in any of the Security
Instruments, or to perfect, protect or preserve any Liens created pursuant
to any of the Security Instruments, or to make any recordings, to file any
notices, or obtain any consents, all as may be necessary or appropriate in
connection therewith.
Section 4.07 Performance of Obligations. The Borrower will pay
the Note according to the terms thereof and hereof; and the Borrower will
do and perform every act and discharge all of the obligations provided to
be performed and discharged by the Borrower under the Security Instruments,
including this Agreement, at the time or times and in the manner specified.
Section 4.08 Reimbursement of Expenses. The Borrower will pay all
reasonable out-of-pocket expenses of the Lender (including legal fees and
expenses) incurred by the Lender in connection with the preparation of this
Agreement and any and all other Security Instruments contemplated hereby
(including any amendments hereto or thereto or consents or waivers hereunder
or thereunder) and will also pay all fees, charges or taxes for the recording
or filing of Security Instruments. The Borrower will also pay all reasonable
out-of-pocket expenses of the Lender (including legal fees and expenses) in
connection with any claims or adverse circumstances that may arise affecting
any of the Collateral. The Borrower will, upon request, promptly reimburse
the Lender for all amounts expended, advanced or incurred by the Lender to
satisfy any obligation of the Borrower under this Agreement or any other
Security Instrument, or to collect the Note, or to enforce the rights of the
Lender under this Agreement or any other Security Instrument, which amounts
will include all court costs, attorneys' fees (including, without limitation,
for trial, appeal or other proceedings), fees of auditors and accountants,
and investigation expenses reasonably incurred by the Lender in connection
with any such matters. Any amounts not paid or reimbursed by Borrower within
30 days after the date of written demand by the Lender for such payment or
reimbursement shall bear interest at the Past Due Rate until the date of
payment or reimbursement.
Section 4.09 Insurance. The Borrower will maintain and will
continue to maintain with financially sound and reputable insurers,
insurance with respect to the Mortgaged Properties and business against
such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated but at a minimum shall maintain
the coverage set forth on Exhibit G. Upon request of the Lender, the
Borrower will furnish or cause to be furnished to the Lender from time to
time a summary of the insurance coverage of the Borrower in form and
substance satisfactory to the Lender and if requested will furnish the
Lender copies of the applicable policies. The Borrower will cause the
loss payable clauses with respect to all property damage insurance coverin
g the Mortgaged Properties to be endorsed in favor of and made payable to
Lender as the interests of Lender may appear, and the Lender shall be named
as an additional insured with respect to all insurance providing liability
coverages. The Borrower shall cause such policies to be endorsed to provide
that they will not be cancelled without 30 days prior written notice having
been given by the insurance company to the Lender. The Lender shall have
the right to collect and Borrower hereby assigns to Lender, any and all
monies that may become payable under the policies of property damage
insurance with respect to the Mortgaged Properties. Such proceeds shall
be held as cash Collateral until applied by Lender in accordance with the
remainder of this Section. Borrower may elect to have such monies held by
Lender as cash Collateral applied toward (i) repayment of the Indebtedness
or (ii) repair or replacement of the Mortgaged Properties subject to and in
accordance with the remaining provisions of this Section. If Borrower
elects to apply such proceeds to the Indebtedness and after payment in full
of such Indebtedness should any surplus remain, said surplus shall be paid
over to the Borrower. If Borrower, in its reasonable judgment based on
prudent industry practice, determines that all or any portion of the
Mortgaged Properties subject to a casualty loss can be restored (through
repair or replacement) to an economically feasible condition and notifies
Lender that it has elected to restore or replace the Mortgaged Properties,
Lender shall disburse to Borrower out of such insurance proceeds collected
by Lender the amounts that Borrower has paid to restore (by repair or
replacement) such Mortgaged Property and upon completion of such repairs
or restoration and notice from Borrower the balance, if any, of such
insurance proceeds shall be applied to payment of the Indebtedness in such
manner as Lender may direct. Promptly upon the completion of any
restoration that Borrower has elected to perform or have performed, Buyer
shall notify Lender of such completion and thereupon, Lender may apply the
balance of such insurance proceeds in the manner as it directs. If
Borrower does not elect to restore or replace the Mortgaged Properties,
Borrower shall so notify Lender and such insurance proceeds shall be
applied to payment of the Indebtedness in such manner as the Lender shall
direct. Lender's obligation to reimburse Borrower for amounts paid to
restore such Mortgaged Property shall be subject to Lender's receipt of
reasonably satisfactory evidence of Borrower's payment of such costs.
If Borrower has not notified Lender of its intent to restore the Mortgaged
Property within 90 days after the occurrence of the casualty loss, Lender
may apply the insurance proceeds to the payment of the Indebtedness in
such manner as the Lender shall direct.
Section 4.10 Accounts and Records. The Borrower will keep books
of record and account in which full, true and correct entries will be made
of all dealings or transactions in relation to their respective business and
activities, in accordance with GAAP.
Section 4.11 Right of Inspection and Audit. The Borrower will
permit any officer, employee or agent of the Lender to visit and inspect
any of the Mortgaged Properties, examine and audit the books of record and
accounts of the Borrower, take copies and extracts therefrom, and discuss
the affairs, finances and accounts of the Borrower with the officers,
accountants and auditors of the Borrower, all at such reasonable times and
as often as the Lender may desire and all at Lender's risk. Lender shall
bear the expense of such inspection unless such inspections are made in
connection with Lender's enforcement of rights and remedies or preservation
or protection of the Collateral.
Section 4.12 Notice of Certain Events. The Borrower shall
promptly notify the Lender if it learns of the occurrence of (i) any event
which constitutes a Default, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken to cure the
effect of such Default; or (ii) the receipt of any notice from, or the taking
of any other action by, the holder of any promissory note, debenture or other
evidence of indebtedness of the Borrower or the holder of any "security"
(as defined in the Securities Act of 1933, as amended) of the Borrower with
respect to a claimed default, together with a detailed statement by a
responsible officer of the Borrower specifying the notice given or other
action taken by such holder and the nature of the claimed default and what
action the Borrower is taking or proposes to take with respect thereto;
or (iii) any dispute between the Borrower, any Subsidiary and any
governmental authority or any other Person which, if adversely determined,
would have a Material Adverse Effect; or (iv) any material default or
noncompliance of any party to any of the Designated Contracts with any of
the terms and conditions of the Designated Contracts, or any notice of
termination or other material proceedings or actions which might adversely
affect any of the Designated Contracts; or (v) any amendment (whether or
not material and whether or not permitted by this Agreement or by any
consent of the Lender to a deviation from the terms of this Agreement) of
any of the Designated Contracts, together with a copy of such amendment;
or (vi) any event or condition having a Material Adverse Effect; or (vii)
any Suspension Event.
Section 4.13 Performance of Designated Contracts. The Borrower
will perform and observe in all material respects each of the provisions of
the Designated Contracts to which it is a party on its part to be performed
or observed prior to the termination thereof. Prior to the expiration of
the option periods under the Option Agreement, the Borrower (i) will exercise
the options provided for therein to the full extent of the notional quantities
of gas covered thereby, or such lesser quantities as may be approved by
Lender in its sole discretion, and pay the premiums due in connection
therewith, or (ii) obtain other commodity price protection acceptable to
Lender and grant Lender a first priority perfected security interest in the
agreements creating such price protection. Prior to commencing sales of
Hydrocarbons from the Mortgaged Properties, Borrower will enter into with
creditworthy parties, and as long as any of the Mortgaged Properties continue
to produce Hydrocarbons Borrower will maintain in effect with the original
creditworthy parties or other creditworthy parties, Production Marketing
Agreements covering quantities produced from the Mortgaged Properties not
less than the notional quantities covered by the Price Swap providing for
the price payable each month to be a market sensitive price, adjusted at
least monthly. For the purposes of this Section , the term "creditworthy
party" means Enron Corp., any Affiliate of Enron Corp. or any third party
having a credit rating from Standard & Poors and Moodys Investor's Services,
Inc. not less than that of Enron Corp. or any other third party, regardless
of credit rating, so long as the obligations of such third party are
supported by a letter of credit or similar enhancement facility satisfactory
to Lender issued by a third party having a credit rating not less than that
of Enron Corp.
Section 4.14 Title Information. (a) Upon the request of Lender,
the Borrower in addition to the title certificate required pursuant to
Section (f) will deliver such additional title information as is reasonably
requested by Lender in form and substance acceptable to the Lender as is
necessary covering the Mortgaged Properties evaluated by such Reserve Report
so that the Lender shall have received, together with the title information
previously received by the Lender, satisfactory title information covering
Mortgaged Properties. Lender shall not be entitled to require updated title
opinions unless a title question has arisen or title change has occurred
after the date of the most recent title opinion.
(b) The Borrower shall cure any title defects or exceptions
raised by the information provided pursuant to Section 4.14(a) which are not
Excepted Liens and which Lender in its discretion believes may adversely
affect the Mortgaged Property within 90 days after a request by the Lender to
cure such defects or exceptions.
Section 4.15 Environmental Procedures. The Borrower will
establish and implement such procedures as may be necessary to continuously
determine and assure that the Mortgaged Property, and the operations conducted
thereon are in compliance with all Environmental Laws. Borrower will promptly
notify the Lender in writing of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority excluding routine
testing and corrective action in connection with any Environmental Laws that
affects any of the Mortgaged Property.
Section 4.16 Collateral. The Borrower shall subject the Mortgage
d Properties to the Security Instruments in a form acceptable to the Lender
to create a first and prior Lien on such Properties subject only to Excepted
Liens. The Borrower shall pay for all reasonable costs in connection with
the preparation and recordation of such Security Instruments and fees and
expenses of local counsel to the Lender for opinions on the enforceability
of any such Security Instruments.
Section 4.17 Capital Expenditures.Borrower agrees to make the
capital expenditures involved in and to drill, complete and equip for
production, or recomplete and rework, as the case may be, each of the wells
and to conduct each of the other Scheduled Capital Operations and Prior
Capital Operations described or referred to on Exhibit I hereto on or before
the respective dates set forth in such Exhibit as a prudent operator, except
for any such operation with respect to which Borrower can demonstrate to
Lender's satisfaction is not reasonably necessary and Lender has consented
in writing to the delay or elimination thereof. To the extent that Lender
approves the elimination of such Scheduled Capital Operation, the Initial
Capital Cost Ceiling or Secondary Capital Cost Ceiling shall reduce by 110%
of such amount.
Section 4.18 Eugene Island Block 325 Platform. On or before
January 31, 1994, Borrower agrees to cause the owners of the Eugene Island
Block 325 Platform to enter into an agreement with Borrower satisfactory to
Lender allowing Borrower to use the existing platform on Eugene Island Block
325 to service production from the Eugene Island Block 320 Property and
agrees to cause such agreement to remain in full force and effect until the
Indebtedness has been paid in full.
ARTICLE 5.
__________
NEGATIVE COVENANTS
__________________
The Borrower will at all times comply with the covenants contained
in this Article 5, from the date hereof and for so long as any part of the
Indebtedness or the Commitment is outstanding, unless otherwise agreed to by
the Lender in writing in its sole discretion:
Section 5.01 Liens. The Borrower will not create, incur, assume
or permit to exist any Lien on any of the Mortgaged Properties, except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens; and
(c) Subordinated Liens.
Section 5.02 Nature of Business. The Borrower will not permit any
material change to be made in the character of its business as carried on at
the date hereof.
Section 5.03 Mergers, Etc.. The Borrower will not merge or
consolidate with, or sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially all of
its Properties (whether now owned or hereafter acquired) to any Person.
Section 5.04 Proceeds of Note. The Borrower will not use or permit
the proceeds of the Note to be used for any purpose other than those permitted
by Section 2.02.
Section 5.05 Preservation of Designated Contracts. The Borrower
will diligently enforce all of the terms of Designated Contracts including
the collection of all amounts due thereunder and will not take any action or
permit any action to be taken by others which will release any Person from
its obligations or liabilities under any of the Designated Contracts.
Borrower will fully comply with all of the terms and conditions of the
Designated Contracts that are binding on Borrower.
Section 5.06 Sale of Properties. Except as permitted pursuant to
Section 2.15, the Borrower will not sell or otherwise transfer any Mortgaged
Property other than the sale of Hydrocarbons after they have been produced
in the ordinary course of business.
Section 5.07 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of the Mortgaged Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any remedial obligations under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevan
t facts, conditions and circumstances, if any, pertaining to such Property
where such remedial obligations would have a Material Adverse Effect. The
Borrower will not use or allow use of any of the Mortgaged Property in a
manner which will result in (i) violation of any order or requirement of any
court or Governmental Authority or any Environmental Laws, (ii) the disposal
or other release of any solid waste on or to any such Property except in
compliance with Environmental Laws, (iii) a release of a hazardous substance
on or to any such Property in a quantity equal to or exceeding that quantity
which requires reporting pursuant to Section 103 of CERCLA, or (iv) the
release of any hazardous substance on or to any such Property so as to pose
an imminent and substantial endangerment to public health or welfare or the
environment.
Section 5.10 Change in Location. The Borrower will not change
its name or identity or change the location of its chief executive office
or its chief place of business or the place where it keeps its books and
records concerning the Collateral without notifying the Lender of such
change in writing at least 30 days prior to the effective date of such
change.
Section 5.11 Change in Operatorship. Borrower will not resign
as operator of any of the Mortgaged Properties or fail to perform its
obligations under any operating agreement affecting the Mortgaged Propert
y in a manner that would allow Borrower's removal as operator thereunder.
ARTICLE 6.
__________
EVENTS OF DEFAULT
_________________
Section 6.01 Events. An "Event of Default" shall exist if any of
the following events shall occur and be continuing:
(a) The Borrower shall default in the payment or
prepayment when due of any principal of or interest on the Loan or any fees
or other amount payable by it hereunder or under any Security Instrument or
the Fee Letter; or
(b) The Borrower shall default in the payment when due of
any principal of or interest on the Debt under the Chase Loan Agreement or
any of its other Debt in an aggregate amount in excess of $10,000,000; or
any event specified in any note, agreement, indenture or other document
evidencing or relating to Debt under the Chase Loan Agreement or any such
other Debt shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Debt (or a trustee or agent on behalf of such holder or
holders) to cause, such Debt to become due prior to its stated maturity; or
(c) Any representation, warranty or certification made or
deemed made herein or in any Security Instrument by the Borrower, or any
certificate furnished to any Lender pursuant to the provisions hereof or any
Security Instrument, shall prove to have been false or misleading as of the
time made or furnished in any material respect; or
(d) The Borrower shall default in the performance of
any of its obligations under any Article of this Agreement other than under
Article 4 or 5 of this Agreement; or the Borrower shall default in the
performance of any of its obligations under Article 4 or 5 of this Agreement
and such default shall continue unremedied for a period of 30 days after the
earlier to occur of (i) notice thereof to the Borrower by the Lender, or
(ii) the Borrower otherwise becoming aware of such default; or
(e) The Borrower shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(f) The Borrower shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against
it in an involuntary case under the Federal Bankruptcy Code, or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or of
all or any substantial part of the assets, or (iii) similar relief in respect
of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or an order for
relief against the Borrower shall be entered in an involuntary case under
the Federal Bankruptcy Code; or
(h) A judgment for the payment of money in excess of
$100,000 shall be rendered by a court against the Borrower and the same
shall not be discharged (or provision shall not be made for such discharge),
or a stay of execution thereof shall not be procured, within 30 days from
the date of entry thereof and the Borrower shall not, within said period of
30 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(i) The Borrower shall default in the due observance or
performance of any of the covenants or agreements contained in any Security
Instrument other than this Agreement and such default shall continue
unremedied for a period of 30 days after the earlier to occur of (i) notice
thereof to the Borrower by the Lender, or (ii) the Borrower otherwise
becoming aware of such default; or
(j) Any Loan Document shall cease to be in full force
and effect or shall be declared null and void or the validity or enforcement
thereof shall be contested or challenged by Borrower or any of its
Affiliates, or Borrower shall deny that it has any further liability or
obligation under any of the Loan Documents; or
(k) Any violation of any Environmental Law affecting any
of Borrower's Oil and Gas Properties, whether now owned or hereafter acquired
by Borrower, shall have occurred and such violation results in a Material
Adverse Effect;
(l) The Borrower shall default in performance of any of
its obligations under the Swap Agreement, Option Agreement or any other
Price Protection Agreement; or
(m) Borrower shall pay, agree to pay, or be ordered by
a court to pay, any amount in excess of $5,000,000 in connection with the
dispute referred to in item 13 of Exhibit D (McAllen Ranch royalty claim).
Section 6.02 Remedies. (a) In the case of an Event of Default other
than one referred to in clause (e), (f) or (g) of Section , the Lender may by
notice to the Borrower, cancel the Commitment and/or declare the principal
amount then outstanding of and the accrued interest on the Loan and all other
amounts payable by the Borrower hereunder and under the Note to be forthwith
due and payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice
of acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default referred
to in clause (e), (f) or (g) of Section , the Commitment shall be automatically
cancelled and the principal amount then outstanding of, and the accrued
interest on, the Loan and all other amounts payable by the Borrower hereunder
and under the Notes shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate, notice
of acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
(c) Upon the occurrence of any Event of Default, the Lender,
subject to the limitations contained in Section 6.03, may exercise all rights
and remedies available to it in law or in equity under the Loan Documents, or
otherwise.
(d) All proceeds received after maturity of the Note, whether by
acceleration or otherwise shall be applied to the Indebtedness in such order
as the Lender in its discretion shall determine.
Section 6.03 Limited Recourse. Subject to the rest of this
Section, Borrower shall be liable for the Indebtedness, to the full extent,
but only to the extent, of, and Lender's recourse against Borrower is limited
to, the Borrower's interest in the Collateral notwithstanding any provisions
in this Agreement or the Security Instruments to the contrary. If Default
occurs in the timely and proper payment of the Note, any judicial proceedings
brought by Lender against Borrower shall be limited to the attachment,
execution, writ of process, preservation, enforcement and foreclosure against
Borrower's interest in the Collateral, and no attachment, execution of other
writ or process shall be sought, issued to or levied upon any assets,
properties or funds of Borrower. If Lender exercises any remedy which it may
have available against the Borrower's interest in the Collateral, no judgment
for any deficiency upon the Note shall be sought or obtained by Lender against
the Borrower. Notwithstanding the foregoing provisions of this Section, the
Borrower shall be fully liable to Lender to the same extent that the Borrower
would be liable absent the foregoing provisions of this Section: (a) for the
amount of damage, if any, caused by Borrower's fraud or willful misconduct;
(b) for the amount of any proceeds or other income arising with respect to
the Collateral collected or received by Borrower, and not turned over to
Lender after the date on which a Default has occurred; (c) for the reasonable
attorneys' fees and court costs incurred by Lender in the following
circumstances: (A) for enforcement of Borrower's liability as set forth
herein, or (B) if, after default by Borrower and notice of Lender's intent
to accelerate maturity and foreclose, Borrower (or anyone claiming by,
through or under Borrower) attempts to contest, interfere with, hinder or
delay the foreclosure or instigates a bankruptcy proceeding which has the
effect of staying the foreclosure; (d) for the amount of damage, if any caused
by a breach of representation, warranty or covenant by Borrower in the Loan
Documents including, but not limited to, representations and warranty of
title; and (e) for any amount owed under any indemnity by Borrower in the
Loan Documents.
Section 6.04 Suspension of Capital Expense Deductions. If a
Material Adverse Effect occurs or if a Default exists, Lender in addition to
any other remedy available to Lender may, by notice to Borrower, suspend
Borrower's right to thereafter deduct any Capital Expenses thereafter
incurred by Borrower in the calculation of the Monthly Payment Amount,
except for such Capital Expenses as are approved in writing by Lender after
the date of such notice.
ARTICLE 7.
__________
CONDITIONS OF LENDING
_____________________
Section 7.01 Conditions to Loan The obligation of the Lender to
make the Loan under this Agreement is subject to the following conditions
precedent wherein each document to be delivered to the Lender shall be in
form and substance satisfactory to it:
(a) Closing. On the date of this Agreement all
instruments, certificates and opinions referred to in this Section
shall be delivered.
(b) Note. The Borrower shall have duly and validly
issued, executed and delivered the Note to the Lender.
(c) Secretary's Certificates.
(i) The Lender shall have received certificates of the
Secretary or Assistant Secretary of the Borrower setting forth (A)
resolutions of its board of directors or executive committee of its
board of directors in form and substance satisfactory to the Lender
with respect to the authorization of the Note, this Agreement and any
other Security Instruments provided herein and the officers of the
Borrower authorized to sign such instruments, and (B) specimen
signatures of the officers so authorized.
(ii) The Lender shall also have received a copy, certified
as true by the Secretary or Assistant Secretary of the Borrower of the
certificate of incorporation and the bylaws of the Borrower.
(iii) The Lender shall have received a certificate of the
principal accounting officer or treasurer of the Borrower certifying
that Borrower has incurred, or expects to incur prior to January 1,
1994, at least $7,583,000 in capital costs to develop the Development
Properties.
(d) Opinion of Corporate and Texas Counsel. The Lender
shall have received from counsel for the Borrower acceptable to
Lender, a favorable written opinion in form and substance satisfactory
to Lender as to the matters contained in Exhibit M-1 and as to such
other matters incident to the transactions herein contemplated as the
Lender may reasonably request.
(e) Opinion of Colorado Counsel. The Lender shall have
received from Colorado counsel for the Borrower acceptable to Lender,
a favorable written opinion in form and substance satisfactory to
Lender as to the matters contained in Exhibit M-2 and as to such
other matters incident to the transactions herein contemplated as
the Lender may reasonably request.
(f) Opinion of Louisiana Counsel. The Lender shall have
received from counsel for the Borrower acceptable to Lender, a
favorable written opinion in form and substance satisfactory to Lender
as to the matters contained in Exhibit M-3 and as to such other matters
incident to the transactions herein contemplated as the Lender may
reasonably request.
(g) Other Security Instruments. The Lender shall have
received the following instruments, each duly and validly executed and
delivered by the respective parties thereto (other than the Lender),
and in sufficient executed counterparts for recording purposes when
applicable, as security for the Note and other Indebtedness:
(i) Act of Mortgage, Assignment of Production,
Security Agreement and Financing Statement covering all of the
Development Properties and the Sandefer Properties executed by the
Borrower;
(ii) Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement covering all of the Wagner
& Brown Properties executed by the Borrower;
(iii) Security Agreement covering the Price
Protection Agreements satisfactory to Lender;
(iv) Transfer Orders covering the Development
Properties and the Sandefer Properties and Wagner & Brown Properties
in form satisfactory to Lender; and
(v) Financing statements collectively covering all
the Borrower's personal Property in which the Lender shall have Liens
pursuant to the Security Instruments referred to in clauses (i), (ii)
and (iii) of this Section 7.01(g).
(h) Recordings. The Security Instruments mentioned in
Subsections 7.01(g)(i), (ii), (iii) and (v) and or other notices related
thereto if necessary or appropriate, shall have been duly delivered to the
appropriate offices for filing or recording, and the Lender shall have
received confirmations of receipt thereof by the appropriate filing or
recording offices or counsel acceptable to Lender.
(i) Title. The Borrower shall have provided title
opinions and other title information covering the Development Properties,
Sandefer Properties and Wagner & Brown Properties satisfactory to Lender.
(j) Insurance Certificate. The Lender shall have
received a certificate satisfactory to Lender evidencing that all insurance
policies required by Section 4.09 are in full force and effect and Lender
showing as an additional insured with respect to liability coverage and that
loss payable endorsements in favor of the Lender have been added thereto with
respect to all insurance policies covering damage or loss to the Collateral.
(k) Sandefer Purchase. The Borrower shall have closed
the purchase of the Sandefer Properties in accordance with the terms of the
Purchase and Sale Agreement dated as of November 1, 1993 between Borrower and
Sandefer Offshore Operating Co. et al, all assignments, conveyances, bills of
sale and other instruments necessary to convey the Sandefer Properties to
Borrower shall have been executed in form satisfactory to Lender, delivered
to Borrower and filed for record in the appropriate parish and MMS records,
and Borrower shall have paid the portion of the purchase price of the
Sandefer Properties not funded by the proceeds of the Loan.
(l) Overriding Royalty; Production Agreement. The
Borrower shall execute and deliver to Lender the Conveyance of Overriding
Royalty Interest (EI Block 326) and the Production Agreement (EI Block 326)
covering the Eugene Island Block 326 Properties and they shall have been
filed for record in the appropriate parish and MMS records. The Borrower
shall execute and deliver to Lender the Conveyance of Overriding Royalty
Interest (Wagner & Brown) and the Production Agreement (Wagner & Brown)
covering the Wagner & Brown Properties and they shall have been filed for
record in the appropriate county records.
(m) Wagner & Brown Purchase. The Borrower shall have
closed the purchase of the Wagner & Brown Properties in accordance with
the terms of the Purchase and Sale Agreement dated December 9, 1993 between
Borrower and Wagner & Brown, Ltd., and all assignments, conveyances, bills
of sale and other instruments necessary to convey the Wagner & Brown
Properties to Borrower shall have been executed in form satisfactory to
Lender, delivered to Borrower and filed for record in the appropriate county
records, and Borrower shall have paid the portion of the purchase price of
the Wagner & Brown Properties not funded directly by the proceeds of the Loan.
(n) Borrowing Request. At least one Business Day before
the Loan is made hereunder the Lender shall have received a Borrowing Request
which shall be true and correct and shall be duly and properly executed and
completed by the Borrower.
(o) Fees. The fees due and payable under the Fee Letter
shall have been paid in full.
(p) No Default. No Default shall have occurred and be
continuing or shall occur by virtue of making the Loan.
(q) Representations and Warranties. All of the
representations and warranties of the Borrower contained in this Agreement
or any other Security Instrument shall be true and correct in all material
respects on and as of the date of the Loan.
(r) No Material Adverse Effect. Since September 30,1993,
there shall have occurred no Material Adverse Effect.
(s) Compliance Certificate. The Lender shall have
received at the time such Loan is made a compliance certificate, which shall
be true and correct, in the form of Exhibit C attached hereto, duly and
properly executed by an executive officer of the Borrower, and dated as of
the date of the funding of such Loan.
(t) Other. The Lender shall have received such other
documents and information contemplated by the Loan Documents as the Lender
may reasonably request concerning the Loan.
(u) Other Representations. The borrowing hereunder shall
be deemed to be a representation and warranty by the Borrower on the date of
such borrowing as to the facts specified in Subsections (q) and (r) of this
Section.
(v) Price Protection Agreements. The Swap Agreement and
the Option Agreement shall have been executed by and delivered to the parties
thereto.
(w) Gas Contract. The Gas Purchase Contract of even date
herewith between Borrower and Enron Gas Marketing, Inc. shall have been
executed by and delivered to the parties thereto.
Section 7.02 Guerra Tract and U Sand Prospect Deferred Funding
Provisions. (a) In the event all of the conditions to funding of the Loa
n have been satisfied except the condition set forth in Section 7.01(i) is
not satisfied with respect to the portion of the Wagner & Brown Properties
referred to as the "Guerra tract", the amount to be advanced in connection
with the initial funding of the Loan will be reduced by $10,152,000 unles
s the provisions of Section 7.02(b) are applicable. In the event said
$10,152,000 is not funded by Lender in connection with the initial funding of
the Loan, then subject to the remaining provisions of this Section 7.02,
Lender will advance such $10,152,000 on the earlier of (i) Lender's receipt
of title opinions and other title information satisfactory to Lender with
respect to Borrower's title to the Guerra tract or (ii) Lender's receipt of
a letter of credit from a bank satisfactory to Lender in an amount and from
a bank that is satisfactory to Lender and containing such terms as are
satisfactory to Lender, which letter of credit shall provide security to
Lender for title defects relating to such the Guerra tract. Lender's
obligation to fund said $10,152,000 upon the occurrence of one of the two
events described in the preceding sentence shall be subject to satisfaction
of closing conditions similar to those set forth in Section 7.01, Lender's
receipt of a Borrowing Request not less than 5 but not more than 10 Business
Days before the date such additional loan amount is to be advanced and such
other information contemplated by the Loan Documents as the Lender may
reasonably request concerning the amount to be advanced.
(b) If Borrower has not satisfied the condition in Section 7.01(i)
with respect to the Guerra tract, and all other conditions to funding of the
Loan have been satisfied, the amount to be advanced in connection with the
initial funding of the Loan will not be reduced as provided in Section
7.02(a) if the following shall have occurred: (i) prior to 11:00 A.M.
Mountain Time one Business Day prior to the date of funding specified in the
initial Borrowing Request Borrower shall have furnished Lender a form of
letter of credit to be issued to Lender in an amount and from a bank
satisfactory to Lender, containing terms satisfactory to Lender and providing
security for title defects with respect to the Guerra tract, and (ii) Borrower
shall have caused such letter of credit to be issued to Lender by said bank
on said terms on or before the time of such initial funding of the Loan.
(c) If Borrower causes a letter of credit to be issued to Lender
pursuant to Section 7.02(a) or (b) which is acceptable to Lender for the
purposes of funding the $10,152,000 referred to therein, but upon termination
of such letter of credit Lender has not been furnished title opinions and
other title information satisfactory to Lender with regard to Borrower's
title to the Guerra tract and proceeds of the letter of credit for any
reason (or other voluntary prepayments of the Loan by Borrower) have not
been paid to Lender in an amount satisfactory to Lender to compensate for
any title deficiencies, (or lack of satisfactory title opinions or title
information), then at the option of Lender an Event of Default shall exist
and Lender shall be entitled to exercise all of its rights and remedies under
Article 6 of this Agreement in connection therewith. Borrower at the request
of Lender will furnish Lender any documents or instruments required to enable
Lender to demand payment under any such letter of credit. Borrower will not
consent to any settlement of any title defects in connection with the Guerra
tract unless Lender shall have consented thereto in writing. Borrower will
consult with Lender and keep Lender fully advised of all developments in
connection with the resolution of title defects with regard to the Guerra
tract and will assert any title defects requested by Lender. If as a result
of title defects which are asserted with regard to the Guerra tract, the
seller of the Wagner & Brown Properties exercises any right to rescind the
sale of the Wagner & Brown Properties, Lender shall have the option to
declare the Loan and all interest accrued thereon immediately due and
payable. If the sale of the Wagner & Brown Properties is rescinded by the
seller and the Loan, all interest accrued thereon, all amounts due in
connection with termination of the Swap Agreement and any other Price
Protection Agreements and all fees and expenses incurred in connection
herewith are paid in full, Lender agrees at the expense of Borrower to
release the Security Instruments as well as Lender's interests under the
Conveyance of Overriding Royalty (EI Block 326), Conveyance of Overriding
Royalty (Wagner & Brown), the Production Agreement (EI Block 326) and the
Production Agreement (Wagner & Brown).
(d) In addition to any reduction in the funding of the Loan pursuant
to the provisions of Section 7.02(a), the amount of the Loan to be advanced
by Lender in connection with the initial funding will be reduced by
$1,400,000. Subject to the remaining provisions of this Section 7.02(d),
said amount will be advanced by Lender upon receipt by Lender of title
opinions and other title information satisfactory to Lender showing that
Borrower owns oil and gas leases covering the "U Sand Prospect" (as described
in Exhibit Q) relating to a portion of the Guerra tract and other lands
providing Borrower with a net revenue interest in said prospect of not less
than 37.5%. If prior to June 30, 1994, Borrower furnishes Lender title
opinions and other title information satisfactory to Lender showing that
Borrower owns oil and gas leases covering the U Sand Prospect providing
Borrower with a net revenue interest in said prospect of greater than 12%
but less than 37.5%, then subject to the remaining provisions of this
Section 7.02(d), Lender will advance to Borrower $54,900 for each 1% net
revenue interest in the U Sand Prospect owned by Borrower in excess of 12%.
Lender's obligation to fund said $1,400,000, or any portion thereof, shall
be subject to satisfaction of closing conditions similar to those set forth
in Section 7.01, Lender's receipt of a Borrowing Request not less than 5 but
not more than 10 Business Days before the date such additional loan amount
is to be advanced, amendments (at the expense of Borrower) to the Security
Instruments covering the Wagner & Brown Properties, the Conveyance of
Overriding Royalty (Wagner and Brown) and the Production Agreement
(Wagner & Brown) in a manner acceptable to Lender to add all of the leases
acquired by Borrower in connection with the U Sand Prospect to the properties
covered thereby and such other information contemplated by the Loan Documents
as the Lender may reasonably request concerning the amount to be advanced.
ARTICLE 8.
__________
MISCELLANEOUS
_____________
Section 8.01 Notices. Any notice required or permitted to be
given under or in connection with this Agreement, the other Security
Instruments (except as may otherwise be expressly required therein) or the
Note shall be in writing and shall be mailed by first class or express mail,
postage prepaid, or telecopy or other similar form of rapid transmission, or
personally delivered to an officer of the receiving party. All such
communications shall be mailed, sent or delivered,
(a) if to the Borrower to the attention of Mr. Kenton M.
Scroggs at the address shown at the beginning of this Agreement for the
Borrower, or to such other address or to such individual's or department's
attention as it may have furnished the Lender in writing, or if by telecopy
to (303) 592-2515 or such other telecopy number as it may have furnished to
Lender in writing; or
(b) if to the Lender, to the attention of Mr. Andrew S.
Fastow at the address shown at the beginning of this Agreement, or to such
other address or to such individual's or department's attention as it may
have furnished the Borrower in writing, or if by telecopy to (713) 646-8174
or such other telecopy number as it may have furnished to Borrower in writing.
Any communication so addressed and mailed shall be deemed to be given when so
mailed, except that Borrowing Requests or communications related to Borrowing
Requests shall not be effective until actually received by the Lender; and
any notice so sent by telecopy shall be deemed to be given when receipt of
such transmission is acknowledged or confirmed, and any communication so
delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of the Borrower or the Lender,
as the case may be.
Section 8.02 Amendments and Waivers. Any provision of this
Agreement, the other Security Instruments or the Note may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed
by the Borrower (and/or any other Person which is a party to any Security
Instrument being amended or with respect to which a waiver is being obtained)
and the Lender.
Section 8.03 Capital Adequacy. (a) Subject to the provisions
of Section 8.03(c), the Borrower shall pay to the Lender from time to time
on request such amounts as such Lender may determine to be necessary to
compensate the Lender or its parent or holding company for any costs which
it determines are attributable to the maintenance by such Lender or its parent
or holding company, pursuant to any law or regulation or any interpretation,
directive or request (whether or not having the force of law) of any court or
governmental or monetary authority, of capital in respect of its Commitment
or making, funding or maintaining any Loans. The Lender will notify the
Borrower that it is entitled to compensation pursuant to this subparagraph
(a) as promptly as practicable after it determines to request such
compensation.
(b) Determinations and allocations by the Lender for purposes of
this Section 8.03 shall be conclusive, provided that such determinations and
allocations are made on a reasonable basis.
(c) The provisions of this Section 8.03 shall only be applicable
in the event Lender assigns this agreement to a state or federal bank or
other regulated financial institution.
Section 8.04 Payment of Expenses, Indemnities, etc. The Borrower
agrees to:
(a) (whether or not the transactions hereby contemplated
are consummated), pay all reasonable out-of-pocket expenses of the
Lender (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Lender with
respect thereto) in connection with the negotiation, investigation,
preparation, execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, this Agreement, the Note and the
other Security Instruments and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees
and disbursements of counsel for the Lender); and promptly reimburse
the Lender for all amounts expended, advanced or incurred by the
Lender to satisfy any obligation of the Borrower under this
Agreement or any Security Instrument;
(b) pay and hold the Lender harmless from and against
any and all present and future stamp and other similar taxes with
respect to the Notes, Indebtedness and Security Instruments and save
the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes,
and will indemnify the Lender for the full amount of taxes paid by
the Lender in respect of payments made or to be made hereunder and
any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such taxes were
correctly or legally asserted;
(c) INDEMNIFY THE LENDER, THE TRUSTEE AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS AND AFFILIATES FROM, HOLD EACH OF THEM HARMLESS AGAINST
AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, ANY
AND ALL ACTIONS, SUITS, PROCEEDINGS (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES), CLAIMS, DEMANDS AND CAUSES OF ACTION, AND,
IN CONNECTION THEREWITH, ALL REASONABLE COSTS, LOSSES, LIABILITIES,
DAMAGES OR EXPENSES OF ANY KIND OR NATURE WHATSOEVER (COLLECTIVELY
THE "INDEMNITY MATTERS") WHICH MAY BE INCURRED BY OR ASSERTED
AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS
DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN
ANY WAY RELATED TO (i) ANY ACTUAL OR PROPOSED USE BY THE BORROWER
OF THE PROCEEDS OF THE LOAN, (ii) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER, (iii) ANY BODILY INJURY OR DEATH OR PROPERTY
DAMAGE OCCURRING IN OR UPON OR IN THE VICINITY OF ANY PROPERTY,
(iv) ANY CLAIM BY ANY THIRD PERSON AGAINST ANY HYDROCARBONS OR
THE PROCEEDS OF HYDROCARBONS ASSIGNED TO OR PAID TO LENDER PURSUANT
TO ANY SECURITY INSTRUMENT, (v) THE FAILURE OF THE BORROWER TO
COMPLY WITH ANY GOVERNMENTAL REQUIREMENT, OR (vi) ANY OTHER ASPECT
OF THIS AGREEMENT (EXCEPT ANY CLAIMS AGAINST LENDER BY ANY ASSIGNEE
OR PARTICIPANT OF LENDER ARISING OUT OF ANY MISREPRESENTATION BY
LENDER), THE NOTE AND THE SECURITY INSTRUMENTS, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND
ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM
AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
NEGLIGENCE OF ANY INDEMNITEE BUT EXCLUDING, HOWEVER, INDEMNITY
MATTERS ARISING BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY PERSON INDEMNIFIED HEREUNDER; and
(d) indemnify and hold harmless from time to time the
Lender, the Trustee and their respective officers, directors,
employees, representatives, counsel, agents, attorneys and Affiliates
from and against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages and liabilities to
which any such Person may become subject (i) under any Environmental
Law applicable to the Borrower or any of its respective Properties,
(ii) as a result of the breach or non-compliance by the Borrower
with any Environmental Law applicable to the Borrower, (iii) due to
past ownership by the Borrower of any of their respective Properties
or past activity on any of their respective Properties or past
activity on any of their respective Properties which, though lawful
and fully permissible at the time, could result in present liability,
(iv) the presence, use, release, storage, treatment or disposal of
Hazardous Substances on or at any of the Properties owned or operated
by the Borrower, or (v) any other environmental, health or safety
condition in connection with this Agreement, the Note or any other
Security Instrument;
(e) In the case of any indemnification hereunder, the
Lender or other Person indemnified hereunder shall give notice to
the Borrower within a reasonable period of time of any such claim or
demand being made against the Lender or other indemnified Person and
the Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower provides
a defense, the indemnitee shall bear its own cost of defense unless
there is a conflict of interest between the Borrower and such
indemnitee. The provisions of this paragraph shall survive the final
payment of all Indebtedness and the termination of this Agreement and
shall continue thereafter in full force and effect.
(f) No indemnitee may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreason-
ably withheld; provided, that the indemnitor may not reasonably withhold
consent to any settlement that an indemnitee proposes, if the indemnitor
does not have the financial ability to pay all its obligations outstand-
ing and asserted against the indemnitee at that time, including the
maximum potential claims against the indemnitee to be indemnified
pursuant to this Section 8.04.
(g) This Section shall not apply to actions, suits,
proceedings, investigations, demands, losses, liabilities, claims,
damages, deficiencies, interest, judgments, costs or expenses arising
solely and directly from the acts or omissions of the Lender during
the period after which such Person, its successors or assigns shall
have acquired such Property through foreclosure or deed in lieu of
foreclosure whether or not any such acquisition has been approved by
the Minerals Management Service.
(h) The Borrower's obligations under this Section shall
survive any termination of this Agreement and the payment of the Note.
Section 8.05 Invalidity. In the event that any one or more of
the provisions contained in the Note, this Agreement or in any other Security
Instrument shall, for any reason, be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of the Note, this Agreement or any other Security
Instrument.
Section 8.06 Survival of Agreements. All representations and
warranties of the Borrower herein or in the other Security Instruments, and
all covenants and agreements herein not fully performed before the effective
date or dates of this Agreement and of the other Security Instruments, shall
survive such date or dates.
Section 8.07 Successors and Assigns. All covenants and agreements
contained by or on behalf of the Borrower under this Agreement and any other
Loan Document shall bind its successors and assigns and shall inure to the
benefit of the Lender and its successors and assigns. The Borrower shall
not, however, have the right to assign its rights under this Agreement or
any interest herein, without the prior written consent of the Lender. The
Lender may, without the consent of Borrower, sell, assign, transfer, pledge,
grant a security interest in and grant participations in all or any portion
of its interests under this Agreement and the other Loan Documents, except
that any assignment of Lender's interests under this Agreement to an entity
that is not an Affiliate of Enron Corp. or managed by Enron Corp. or one of
its Affiliates or for which neither Enron Corp. nor its Affiliates serve as
administrative agent shall be subject to Borrower's prior written consent
which shall not be unreasonably withheld. In the event that the Lender grants
participations in the Note or other Indebtedness of the Borrower incurred or
to be incurred pursuant to this Agreement, to other lenders, each of such
other lenders shall have the rights of set off against such Indebtedness and
similar rights or Liens to the same extent as may be available to the Lender.
In the event Lender's interest hereunder is assigned to more than one
assignee, Borrower shall not be required to pay fees or expenses of more
than one law firm, accounting firm or consultant to represent the interests
of all Lenders hereunder with respect to the same issue.
Section 8.08 Renewal, Extension or Rearrangement. All provisions
of this Agreement and of any other Security Instruments relating to the Note
or other Indebtedness shall apply with equal force and effect to each and all
promissory notes hereinafter executed which in whole or in part represent a
renewal, extension for any period, increase or rearrangement of any part of
the Indebtedness originally represented by the Note or of any part of such
other Indebtedness.
Section 8.09 Waivers. No course of dealing on the part of the
Lender, its officers, employees, consultants or agents, nor any failure or
delay by the Lender with respect to exercising any right, power or privilege
of the Lender under the Note, this Agreement or any other Security Instrument
shall operate as a waiver thereof, except as otherwise provided in Section
hereof.
Section 8.10 Cumulative Rights. Rights and remedies of the Lender
under the Note, this Agreement and each other Security Instrument shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 8.11 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the plural
and vice versa. The definitions of words in the singular herein shall apply
to such words when used in the plural where the context so permits and vice
versa.
Section 8.12 Construction. The parties acknowledge and agree that
Borrower's principal place of business is located in the State of Colorado,
that significant negotiations in connection herewith took place in the State
of Colorado and that material obligations, including payment of the Note and
other obligations hereunder are to be performed in the State of Colorado.
Accordingly, the parties agree that this Agreement and the loan transactions
evidenced in part by this Agreement bear a reasonable relationship to the
State of Colorado and, except to the extent the laws of any other state are
applicable to any Security Agreement covering Collateral located in or offshore
of such state, this Agreement, the Note and the rights and obligations of the
parties in connection with the loan transactions evidenced in part by this
Agreement shall be construed in accordance with and governed by the laws of
the State of Colorado, without reference to conflicts of laws rules or
principles of any other state.
Section 8.13 Interest. It is the intention of the parties hereto
to conform strictly to usury laws applicable to this transaction. Accordingly,
if the transactions contemplated hereby would be usurious under applicable
law, then, in that event, notwithstanding anything to the contrary in the
Note, this Agreement or in any other Security Instrument or agreement entered
into in connection with or as security for the Note, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to the Lender that is contracted for, taken, reserved, charged or
received under the Note, this Agreement or under any of the other aforesaid
Security Instruments or agreements or otherwise in connection with this
transaction shall under no circumstances exceed the maximum amount allowed by
such applicable law, and any excess shall be cancelled automatically and if
therefore paid shall be credited by the Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded to the Borrower);
and (ii) in the event that the maturity of the Note is accelerated by reason
of an election of the Lender resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to this transaction may never include more than the maximum amount
allowed by such applicable law, and (iii) excess interest, if any, provided
for in this Agreement or otherwise in connection with the Loans shall be
cancelled automatically and, if theretofore paid, shall be credited by the
Lender on the principal amount of the Indebtedness (or, to the extent that
the principal amount of the Indebtedness shall have been or would thereby
be paid in full, refunded by the Lender to the Borrower). The right to
accelerate the maturity of the Note does not include the right to accelerate
any interest which has not otherwise accrued on the date of such acceleration,
and the Lender does not intend to collect any unearned interest in the event
of acceleration. All sums paid or agreed to be paid to the Lender for the
use, forbearance or detention of sums included in the Indebtedness shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Note until payment in full so that the
rate or amount of interest on account of the Indebtedness does not exceed the
applicable usury ceiling, if any. As used in this Section the term
"applicable law" shall mean the laws which govern this Agreement as described
in Section (or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Agreement), or law of the
United States of America applicable to the Lender and the Loans which would
permit the Lender to contract for, charge, take, reserve or receive a greater
amount of interest than under any other applicable law.
Section 8.14 References.. The words "herein," "hereof,"
"hereunder" and other words of similar import when used in this Agreement
refer to this Agreement as a whole, and not to any particular article,
section or subsection. Any reference herein to a Section or Subsection
shall be deemed to refer to the applicable Section or Subsection of this
Agreement unless otherwise stated herein. Any reference herein to an exhibit
shall be deemed to refer to the applicable exhibit attached hereto unless
otherwise stated herein.
Section 8.15 Taxes, etc.. Any taxes (excluding income taxes)
payable or ruled payable by federal or state authority in respect of the Note,
this Agreement or the other Security Instruments shall be paid by the
Borrower, together with interest and penalties, if any.
Section 8.16 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not be obligated
to extend credit to the Borrower in an amount in violation of any limitation
or prohibition provided by any applicable statute or regulation.
Section 8.17 Entire Agreement. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDER
AND THE BORROWER AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS
WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 8.18 Exhibits. The exhibits attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for
the purposes stated herein, except that in the event of any conflict between
any of the provisions of such exhibits and the provisions of this Agreement,
the provisions of this Agreement shall prevail.
Section 8.19 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Agreement or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect
to the other content of such articles, sections, subsections or other
divisions, such other content being controlling as to the agreement between
the parties hereto.
Section 8.20 Satisfaction Requirement. If any agreement,
certificate, instrument or other writing, or any action taken or to be taken,
is by the terms of this Agreement required to be satisfactory to any party,
the determination of such satisfaction shall be made by such party in its
sole and exclusive judgment exercised in good faith.
Section 8.21 Counterparts. This Agreement may be executed in two
or more counterparts, and it shall not be necessary that the signatures of
all parties hereto be contained on any one counterpart hereof; each
counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the date first above written.
BORROWER: FOREST OIL CORPORATION
By: ___________________________
Name: William L. Dorn
Title: Chairman of the Board and
Chief Executive Officer
LENDER: JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Corp.,
its general partner
By: ___________________________
Thomas S. Glanville
Attorney-in-Fact
EXHIBIT A
PROMISSORY NOTE
$100,000,000 December 28, 1993
Forest Oil Corporation, (the "Borrower"), a New York corporation,
with offices at 950 17th Street, Colorado National Building, Denver, Colorado
80202, for value received, promises and agrees to pay to the order of Joint
Energy Development Investments Limited Partnership, a Delaware limited
partnership (the "Lender") at Norwest Bank Denver, Denver, Colorado, ABA
No. 102000076, Account No. 101-8026791, or such other account in the State of
Colorado designated by notice in writing from Lender to Borrower from time to
time, in coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts and in
immediately available funds, the principal sum of $100,000,000 or so much
thereof as may be advanced or added to principal pursuant to the Loan Agreement
hereinafter mentioned, on the dates and in the principal amount as provided in
the Loan Agreement, together with interest as provided in the Loan Agreement.
All capitalized terms which are used but not defined in this Note shall
have the same meanings as in the Loan Agreement dated December 28, 1993 between
Borrower and Lender (such Loan Agreement, together with all amendments,
modifications or supplements thereto, being the "Loan Agreement").
The date and amount of each Loan made by the Lender to the Borrower,
and each payment made on account of the principal thereof, shall be recorded
by the lender on its books and, prior to any transfer of this Note, endorsed
by the Lender on the schedules attached hereto or any continuation thereof.
This Note is issued pursuant to and is entitled to the benefits of the
Loan Agreement and the Security Instruments. Reference is made to the Loan
Agreement for provisions for the acceleration of the maturity hereof on the
occurrence of certain events specified therein for the reimbursement of
attorneys' fees or other costs of collection or enforcement and for all other
pertinent purposes.
This Note shall be construed in accordance with and governed by the
laws of the State of Colorado, without reference to conflicts of laws rules.
To the extent provided in Section 6.03 of the Loan Agreement, this
Note constitutes a limited recourse obligation of Borrower.
FOREST OIL CORPORATION
By: ________________________
Name: William L. Dorn
Title: Chairman of the Board and
Chief Executive Officer
________________________________________________________________
$100,000,000 December 28, 1993
Forest Oil Corporation
Borrower
SCHEDULE
OF
LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST ON LOAN
__________________________________________________________
Amount of Unpaid
Principal Amount of Principal
Amount of Loan or Paid or Interest Balance Notation
Date Addition to Principal Prepaid Paid of Loans Made By
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
____ __________ ______ ______ _______ _______
BORROWING REQUEST
December 28, 1993
FOREST OIL CORPORATION, a New York corporation (the
"Borrower"), hereby requests a loan on the date and in the amount
as follow:
$_____________________ under the Note
Requested funding date: December 30, 1993
pursuant to the Loan Agreement dated as of December 28, 1993 (as
the same may be amended, modified or supplemented, the "Loan
Agreement") between the Borrower and Joint Energy Development
Investments Limited Partnership. The undersigned certifies that
he is the ______________________________ of the Borrower, and
that as such he is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies,
represents and warrants on behalf of the Borrower that the
Borrower is entitled to receive the requested loan or loans under
the terms and conditions of the Loan Agreement.
FOREST OIL CORPORATION
By:__________________________
Name:
Title:
EXHIBIT C
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the Chief
Financial Officer of FOREST OIL CORPORATION, a New York
corporation (the "Borrower"), and that as such he is authorized
to execute this certificate on behalf of the Borrower. With
reference to the Loan Agreement dated December 28, 1993 (together
with all amendments or supplements thereto being the "Loan
Agreement") between the Borrower and Joint Energy Development
Investments Limited Partnership (the "Lender"), the undersigned
further certifies, represents and warrants as follows (each
capitalized term used herein having the same meaning given to it
in the Loan Agreement unless otherwise specified):
(a) The representations and warranties of the
Borrower contained in the Loan Agreement or otherwise
made in writing by or on behalf of the Borrower
pursuant to the Loan Agreement were true and correct in
all material respects when made, and are repeated at
and as of the time of delivery hereof and are true and
correct in all material respects at and as of the time
of delivery hereof.
(b) The Borrower has performed and complied with
all agreements and conditions contained in the Loan
Agreement required to be performed or complied with by
it prior to or at the time of delivery hereof.
(c) There exists, and, after giving effect to the
Loan or Loans with respect to which this certificate is
being delivered, will exist, no Default under the Loan
Agreement.
EXECUTED AND DELIVERED this 30th day of December, 1993.
FOREST OIL CORPORATION
By: __________________________
Name: David H. Keyte
Title: Vice-President and
Chief Accounting Officer
EXHIBIT "D"
Disclosure Statement
Property
________
East Cameron 109 1. Jeffery Douget v. Transco Corporation,
et al. including Forest Oil Corporation.
Case No. H-93-976, USDC Southern
District, Texas.
Vermilion 255 2. Jerry B. Hodgen, et al. v. Forest Oil
Corporation, Case Number 92-0635, USDC
Western District of Louisiana.
3. Gary B. Lewter v. Kilgore Marine, Inc.
et al. including Forest Oil Corp.
Eugene Island 273 4. Michael Scott Mire v. Forest Oil
Corporation.
5. World Hospitality, Ltd., Inc. v. Texas
Commerce Bank, et al., U.S. District
Court for the Southern District of
Texas, Houston Division, Case No. H-87-
228, filed 10/22/87.
Vintage Field 6. Jefferson Davis County Board of
Education et al vs. Amerada Hess
Corporation, et al; including Forest Oil
Corporation. Civil Action No. 92-48.
Vergara Lease 7. Ignacio B. Vergara, et al. vs. Forest
Oil Corporation.
Harbert Properties 8. National Union Fire Insurance Company of
Pittsburgh, PA. vs. Wil McOil
Corporation, et al. including Forest Oil
Company.
McAllen Ranch 9. State of Texas Natural Gas Production
Tax claim on UTTCO & Valero Settlements.
*10. MMS letter dated September 29, 1989 pertaining to
application of NGPL Valuation Paper and cost based
manufacturing allowance (time frame involved - October, 1980
- February, 1988; relates to all OCS leases MMS Docket 90-
0386-OCS). Also reference Phillips Petroleum Company v.
Nick L. Kelly et al., United States District Court -
Northern District of Texas, Dallas Division, Civil Action
No. 3-89-CV-1707-H (consolidated with 3-89-CV-2393-H,
3-89-CV-2727-H and 3-89-CV-2751-H).
*11. MMS letter dated April 6, 1993 asserting West Delta Block 97
royalty payment volume reporting discrepancies between data
reported to Production Accounting and Auditing System and
Auditing and Financial System.
*12. Consent Decree, United States v. ARCO Oil and Gas Company,
EPA Docket No. VI-89-1001, Civil Action No. 3-93-CV0408-T,
Department of Justice Ref. Case No. 90-5-1-13353, dated
March 2, 1993.
13. Letter dated December 9, 1993 alleging an underpayment of
royalties to the McAllen Ranch royalty owners.
* These items are listed to provide complete
and accurate disclosure; however, Seller is
indemnified on those items by ARCO pursuant
to Section 11.3(c) of the ARCO Purchase
Agreement.
Forest Oil Corporation
Subsidiaries
Jurisdiction Percentage
Name of Subsidiary Where Organized of Ownership
__________________ _______________ ____________
Forest Oil of Canada Ltd. Alberta, Canada 100%
Forest Canada I Development Ltd. Alberta, Canada 99%
Forest Oil of Turkey, Ltd. Delaware 100%
Forest Pipeline Company Delaware 100%
Forest Merger Corporation Delaware 100%
Forest I Development Company Delaware 100%
WHEN RECORDED MAIL TO: STATE OF LOUISIANA
VINSON & ELKINS L.L.P.
2500 First City Tower PARISH OF ST. MARY
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
EXHIBIT E1
CONVEYANCE OF
OVERRIDING ROYALTY
(Eugene Island Block 326)
This Conveyance of Overriding Royalty (this "Conveyance") is
from FOREST OIL CORPORATION, a New York corporation, whose
address is 950 17th Street, Colorado National Building, Denver,
Colorado 80202 ("Grantor"), to JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership,
whose address is 1400 Smith Street, Houston, Texas 77042
("Grantee").
WHEREAS, Grantor has agreed to convey to Grantee an
overriding royalty interest in the undivided oil and gas
leasehold interests described on Exhibit A hereto; and
WHEREAS, capitalized terms as used herein shall have the
meanings given to them in Article II hereof unless otherwise
defined herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS:
ARTICLE I
CONVEYANCE
Section 1.01 Conveyance. For and in consideration of One
Thousand and No/100 Dollars ($1000.00) and other good and
valuable consideration to Grantor cash in hand paid by Grantee,
the receipt and sufficiency of which is hereby acknowledged,
Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, SET
OVER and DELIVER unto Grantee effective as of the date hereof an
overriding royalty interest in each of the Subject Interests and
in and to the Hydrocarbons in and under and that may be produced
and saved from the Subject Interests equal to the Overriding
Royalty Percentage of the Net Profit attributable to the Subject
Interests, together with all and singular the rights and appurte
nances thereto in anywise belonging (the "Overriding Royalty").
TO HAVE AND TO HOLD the Overriding Royalty unto Grantee, its
successors and assigns forever, subject to the following terms,
provisions and conditions.
Section 1.02 Non-Operating Interest. The Overriding
Royalty conveyed hereby is a non-operating interest (being a real
right) in and to the Subject Interests and in no event shall
Grantee ever be liable or responsible in any way for payment of
any costs, expenses or liabilities attributable to the Subject
Interests (or any part thereof) or incurred in connection with
the production, saving or delivery of Subject Hydrocarbons. This
Conveyance is a conveyance of a real right.
Section 1.03 Certain Limitations. The Overriding Royalty
shall be subject to the following provisions:
(a) Grantee shall look solely to its share of the Subject
Hydrocarbons for satisfaction and discharge of the
Overriding Royalty, and Grantor shall not be personally
liable for the payment and discharge thereof.
(b) There shall not be included in the Subject Hydrocarbons
any Lease Use Hydrocarbons, or Non-Consent
Hydrocarbons, it being understood that the Overriding
Royalty shall be computed and delivered out of the
Overriding Royalty Percentage of Hydrocarbons available
after satisfaction of all of the foregoing.
Section 1.04 Royalties; Taxes. The Overriding Royalty
shall be delivered only after satisfaction of (and after
deduction for) any and all royalties and other burdens on
production. Grantor shall timely pay and deliver all such
royalties and other burdens on production, and Grantor shall
defend, indemnify and hold Grantee harmless from and against any
loss or claim with respect to any such royalties and other
burdens on production or any claim by the owners or holders of
such royalties and other burdens on production. Grantor shall
pay all Taxes with respect to the Overriding Royalty and shall
defend, indemnify and hold Grantee harmless from and against any
loss or claim with respect to Taxes.
Section 1.05 Mortgage, Assignment or Pooling by Grantor.
Unless made expressly subject and subordinate to this Conveyance
on terms satisfactory to Grantee, Grantor shall not mortgage,
pledge or hypothecate the Subject Interests or create or allow to
remain thereon any lien or security interest thereon or on any
Hydrocarbons produced therefrom, and Grantor shall not assign,
sell, convey or otherwise transfer the Subject Interests or any
part thereof unless Grantee expressly consents thereto in
writing, the transferee expressly agrees to assume and perform
all of Grantor's obligations under this Conveyance and such sale,
transfer or assignment is made and accepted expressly subject and
subordinate to this Conveyance. Any purported mortgage, pledge,
hypothecation, lien, security interest, assignment, sale,
conveyance or other transfer in contravention of the foregoing
terms shall be null and void. Grantor shall not pool,
communitize or unitize the Overriding Royalty or the Subject
Interests without the express written consent of Grantee, and any
purported pooling, communitization or unitization in
contravention of the preceding clause shall be null and void as
to Grantee and shall not have the effect of pooling or affecting
the Overriding Royalty.
Section 1.06 Title. Grantor warrants and represents that
the Leases are valid and subsisting oil and gas leases covering
the lands described in Exhibit A; that Grantor's ownership of the
Oil and Gas Interests entitles Grantor to a percentage of all
Hydrocarbons produced, saved and marketed from the Leases and of
the proceeds of such production, after giving effect to and/or
deducting all applicable royalties, overriding royalties and
other burdens or payments out of production (except for this
Conveyance), not less than the net revenue interest identified on
Exhibit A and obligates Grantor to pay a share of all costs of
operation and development of the Lease not greater than the
respective operating right or working interest identified on
Exhibit A. Grantor hereby binds itself and its legal representa
tives, successors and assigns, to warrant and forever defend all
and singular title to the Overriding Royalty and the Overriding
Royalty Hydrocarbons, subject only to the Permitted Encumbrances,
unto Grantee, its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part
thereof. There is also hereby conveyed to Grantee, by way of
substitution and subrogation, all rights of warranty and
contractual representations or covenants of any kind or nature
held by Grantor against any of Grantor's respective predecessors
in title.
Section 1.07 Payment of Proceeds. (a) On each Payment
Date Grantor shall pay to Grantee by wire transfer of immediately
available funds to such account as may be designated by Grantee
by notice to Grantor from time to time the amount by which the
Overriding Royalty Percentage of the cumulative Net Profit from
the Commencement Time through the end of the second month
preceding the Month in which each such Payment Date occurs
exceeds the payments previously made by Grantor hereunder.
(b) Any amount not paid on the date due pursuant to Section
1.08(a) shall bear interest at the Floating Rate from the date
due until paid.
ARTICLE II
DEFINITIONS
As used herein and in the exhibits hereto, the following
terms shall have the respective meanings ascribed to them below:
"Abandonment Cost Account" shall have the meaning attributed
to it in Section 3.07 hereof.
"Abandonment Costs" shall mean the actual costs of plugging
and abandoning the Subject Wells, the costs of dismantling and
salvaging platforms, pipelines and other facilities and
structures on the Subject Interests and other costs associated
with restoration of the Subject Interests in accordance with
applicable law (and, if applicable the rules and regulations of
the Minerals Management Service of the U.S. Department of the
Interior), net of estimated salvage value of any salvageable
equipment or personalty related to the Subject Interests.
"Accounting Procedure" shall mean as to each Subject
Interest the COPAS accounting procedure attached to and made a
part of the operating agreement applicable to such Subject
Interest, or in the event there is no such operating agreement,
the accounting procedure attached hereto as Exhibit B.
"Affiliate" shall mean any person or entity which either,
directly or indirectly, controls, is controlled by or is under
common control with the party. For purposes hereof "control"
means the right or power to direct the policies or the policies
of another through management authority, stock ownership,
delegated authority, voting rights or otherwise.
"Barrel" means 42 United States standard gallons of 231
cubic inches per gallon at 60 degrees Fahrenheit.
"British Thermal Unit" or "BtuBtu" means the amount of
energy required to raise the temperature of one (1) pound of pure
water one degree Fahrenheit (1F.) from fifty-nine degrees
Fahrenheit (59F.) to sixty degrees Fahrenheit (60F.) under a
constant pressure of 14.73 pounds per square inch absolute.
"Business Day" means each day other than Saturday, Sunday
and legal holidays in the State of Texas.
"Commencement Time" means 7:00 a.m. Local Time on the last
day of the second month immediately preceding the month in which
all principal and accrued interest on all loans made to Grantor
under that certain Loan Agreement of even date herewith between
Grantor, as borrower, and Grantee as lender, shall have been
paid.
"First Transporter" means the first interstate or intrastate
pipeline downstream of the wellhead.
"Floating Rate" means the Prime Rate plus 3%, but not more
than the maximum nonusurious rate permitted by applicable law.
"Gas" means natural gas and other gaseous hydrocarbons.
"Gross Proceeds" means, without duplication, the aggregate
gross revenue determined in accordance with GAAP of Grantor from
the sale of Subject Hydrocarbons (less existing royalties,
overriding royalties, net profits interests and other burdens
described in clause (a) of the definition of "Permitted
Encumbrances" below) produced from all Subject Interests after
the Commencement Time, subject to the following:
(a) If Subject Hydrocarbons are Sold pursuant to any bona
fide arm's length transaction with a Non-Affiliate of
Grantor, the Gross Proceeds of such Sale shall be the
amount realized by Grantor from such Sale;
(b) If Subject Hydrocarbons are Sold in any transaction
other than those described in clause (a), the Gross
Proceeds of such Sale shall be the Market Value of such
Subject Hydrocarbons;
(c) Gross Proceeds shall include all consideration
received, directly or indirectly, from Sales of Subject
Hydrocarbons, including without limitation advance
payments, payments under take or pay or similar
provisions of production sales agreements and payments
for natural gas liquids which may be extracted from any
Gas;
(d) If any proceeds are withheld from Grantor by a Non-
Affiliate for any reason (other than at the request of
Grantor or due to the negligence of Grantor) such
proceeds shall not be considered to be Proceeds until
such proceeds are actually received by Grantor;
provided, however the Gross Proceeds shall not include
any interest, penalty or other amount that is not
derived from the Sale of Subject Hydrocarbons, but,
instead, Grantor shall make payment directly to Grantee
of the Overriding Royalty Percentage of any such
amounts paid to Grantor by the purchaser of Subject
Hydrocarbons;
(e) If any Subject Hydrocarbons are Processed before Sale,
or by any Affiliate of Grantor, whether before or after
sale to such Affiliate, the Gross Proceeds for such
Subject Hydrocarbons shall be reduced by the amount, if
any, by which the Manufacturing Costs of such
Processing exceed the Manufacturing Proceeds arising
therefrom; and
(f) Gross Proceeds shall not include any gains or losses
realized by Grantor under any price swaps, options,
floors, caps or other similar commodity price hedge
entered into by Grantor.
"Hydrocarbons" means Oil and Gas.
"Lease" means an oil and gas described, referred to or
identified in Exhibit A attached hereto and made a part hereof
for all purposes, as to all lands and depths described in such
lease (or the applicable part or portion thereof if specifically
limited in depth and/or areal extent in Exhibit A), together with
any renewal or extension of such lease (as to all or any part or
portion thereof), and any replacement lease taken upon or in
anticipation of expiration or termination of such lease (if
executed and delivered during the term of or within one (1) year
after expiration of the predecessor lease), as to all lands and
depths described in the predecessor lease (unless the predecessor
lease is specifically limited in depth or areal extent in Exhibit
A in which event only such portion of such lease shall be
considered a renewal or extension or a replacement lease subject
to this Conveyance); and "Leases" means all such leases and all
such renewals and extensions and replacement leases.
"Lease Use Hydrocarbons" means any Hydrocarbons which are
unavoidably lost in the production thereof or used by Grantor or
the operator on the Leases or any unit in which the Leases are
pooled or unitized for drilling and production operations
conducted prudently and in good faith for the purpose of
producing Hydrocarbons from the Leases or from such unit, but
only for so long as and to the extent such Hydrocarbons are so
used.
"Local Time" means Central Standard Time or Central Daylight
Savings Time in effect on the date in question at the location of
the Subject Interest.
"Manufacturing Costs" shall mean the costs of Processing any
Subject Hydrocarbons that generate Manufacturing Proceeds.
"Manufacturing Proceeds" shall mean the excess, if any, of
(i) proceeds realized from the sale of Subject Hydrocarbons, and
any products thereof, that have been Processed or are the result
of any Processing over (ii) the part of such proceeds that
represents the Market Value of such Subject Hydrocarbons before
any Processing.
"Market Value" of any Subject Hydrocarbons shall mean:
(a) With respect to crude oil, field condensate and
other field liquids, (i) the highest price
available to Grantor for such crude oil and/or
field liquids, at the lease level, on the date of
delivery, pursuant to a bona fide offer, posted
price or other generally available marketing
arrangement from or with a Non-Affiliate
purchaser, or (ii) if subsection (a)(i) is
inapplicable, the fair market value of such crude
oil and/or field liquids, on the date of delivery,
at the lease level, determined in accordance with
other generally accepted and usual industry
practices; and
(b) With respect to any gas, gaseous substances and
other gaseous hydrocarbons, (i) the average of the
three highest prices (adjusted for all material
differences and quality) being paid at the time of
production for gas produced from the same field,
in sales between Non-Affiliated persons but, for
any gas subject to price restrictions established,
prescribed or otherwise imposed by any
governmental authority having jurisdiction over
the sale of such gas, no more than the highest
price permitted for such category or type of gas
after all applicable adjustments (including
without limitation tax reimbursement, dehydration,
compression and gathering allowance, inflation and
other permitted escalations), or (ii) if
subsection (b)(i) above is inapplicable, the fair
market value of such gas and/or substances, on the
date of delivery, at the lease level, determined
in accordance with other generally accepted and
usual industry practices.
"Month" means a calendar month.
"Net Profit" means the amount by which cumulative Gross
Proceeds exceeds cumulative Production Costs.
"Non-Affiliate" shall mean with respect to Grantor, any
person or entity who is not an Affiliate of Grantor.
"Non-Consent Hydrocarbons" means those Hydrocarbons produced
from a well during the applicable period of recoupment or
reimbursement pursuant to a Non-Consent Provision covering that
well, which Hydrocarbons have been relinquished to the consenting
party or participating party under the terms of such Non-Consent
Provision as the result of the election by Grantor not to
participate in the particular operation, provided such election
by Grantor has been made in good faith and as a prudent operator.
"Non-Consent Provision" means a contractual provision
contained in an applicable third-party operating agreement, unit
agreement, contract for development or other similar instrument
which is a Permitted Encumbrance, which provision covers so-
called non-consent operations or sole benefit operations and
provides for relinquishment of production by non-consenting or
non-participating parties during a period of recoupment or
reimbursement of costs and expenses of the consenting or
participating parties.
"Oil" means crude oil, condensate and other liquid
hydrocarbons.
"Oil and Gas Interest" means (i) the lands, Leases and other
drilling rights described, referred to or identified in Exhibit A
attached hereto and made a part hereof for all purposes, as to
all lands and depths described in such Leases or covered by such
drilling rights (or the applicable part or portion thereof if
specifically limited in depth and/or areal extent in Exhibit A),
(ii) any rights that arise by contract, operation of law or
otherwise in all lands spaced, pooled, unitized, communitized or
consolidated with such lands, Leases and drilling rights; and
(iii) all oil, condensate or natural gas wells, either located on
or attributable to such lands, Leases and drilling rights by
spacing, pooling, unitization, communization or consolidation.
"Overriding Royalty" shall have the meaning given such term
in Section 1.01 hereof.
"Overriding Royalty Percentage" means 10%.
"Payment Date" means the 15th day of each month commencing
with the 15th day of the second month after the Commencement
Time.
"Permitted Encumbrance" means the following:
(a) lessors' royalties, overriding royalties, reversionary
interests and similar burdens of record which do not reduce the
net revenue interests set forth on Exhibit A;
(b) division orders and sales contracts terminable without
penalty upon no more than thirty (30) days' notice to the
purchaser;
(c) liens for taxes or assessments not yet delinquent;
(d) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or charges
arising in the ordinary course of business securing amounts not
yet due and payable;
(e) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations;
(f) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities
affecting the Oil and Gas Interests which taken individually or
together: (i) do not secure an obligation in respect of
borrowed money; (ii) do not interfere materially with the
operation, value or use of any of the Oil and Gas Interests;
(iii) do not prevent Grantor from receiving the proceeds of
production from Oil and Gas Interests or Grantee from receiving
Subject Hydrocarbons, or the proceeds thereof; (iv) do not
reduce the net revenue interests set forth in Exhibit A; or (v)
do not increase the portion of the costs and expenses relating to
any Oil and Gas Interests that Grantor is obligated to pay above
the operating rights or working interest share set forth in
Exhibit A;
(g) the agreements, contracts and other instruments
described in Exhibit A to the extent the same are valid and
subsisting and burden or apply to the Subject Interests or any
part thereof; and
(h) conservation orders of governmental agencies having
jurisdiction over the Properties (including, without limitation,
spacing, pooling, increased density, location exception,
allowable and other similar orders).
"Prime Rate" shall mean the annual rate of interest publicly
announced from time to time by The Chase Manhattan Bank (National
Association) as its prime or base rate calculated on the basis of
a 365 day year, but not to exceed the maximum nonusurious rate
permitted by applicable law.
"Processing" means to manufacture, fractionate or refine
Subject Hydrocarbons, but such term does not mean or include the
use of normal lease or well equipment (such as dehydrators, gas
treating facilities, separators, heater-treaters, lease
compression facilities, injection or recycling equipment, tank
batteries, field gathering systems, pipelines and equipment and
so forth) or other normal operations on any of the Subject
Interests.
"Production Agreement" means that certain Production
Agreement (Eugene Island Block 326) of even date herewith between
Grantor and Grantee.
"Production Costs" means, without duplication, all of the
following costs incurred by Grantor with respect to the Subject
Interests from and after the Commencement Time determined in
accordance with GAAP:
(i) all direct costs of operating, producing, and
maintaining the Subject Interests determined in
accordance with the Accounting Procedure;
(ii) all direct costs of gathering, transporting and
marketing production from the Subject Interests
determined in accordance with the Accounting
Procedure;
(iii) all direct capital expenditures incurred in
connection with developing the Subject Interests;
(iv) all Taxes incurred by Grantor (including those
paid by Grantor under Section 1.04) with respect
to the ownership of the Subject Interests after
the Commencement Time;
(v) all insurance premiums paid by Grantor for
insurance actually carried for periods after the
Commencement Time with respect to the Subject
Interests, or incident to the operation or
maintenance of the Subject Interests after the
Commencement Time;
(vi) amounts attributable to the Subject Interests (and
attributable to periods after the Commencement
Time) and chargeable as overhead charges under the
Accounting Procedure; and
(viii) all amounts deposited by Grantor in the
"Abandonment Cost Account" pursuant to Section
3.07, and all Abandonment Costs (except for those
costs, a portion of which is paid out of the
Abandonment Cost Account).
Notwithstanding anything to the contrary set forth herein,
Production Costs shall not include any of the following:
(a) any profit or rate of return on investment, any
interest, premiums, fees or similar charges
arising out of borrowings or purchases on credit,
depreciation, depletion or amortization of costs;
(b) any general, administrative or office charges or
overhead, except as permitted under clause (vi) of
the definition of Production Costs;
(c) any expenses, penalties, interest (in excess of
the Prime Rate) or other charges which result from
the failure of Grantor to properly discharge all
costs and expenses (including Taxes) of
developing, operating and maintaining the Subject
Interests;
(d) any damages, penalties, interest or other charges
paid by Grantor to any third party or governmental
agency, commission or similar body arising from
any conduct or omission by Grantor in its capacity
as operator of any the Subject Interests and any
costs and expenses (including attorneys' fees)
incurred in defending any such action;
(e) any Manufacturing Costs (other than as provided
for in clause (e) of the definition of Gross
Proceeds) or costs of acquiring, constructing,
operating or maintaining any facility, plant,
equipment or transmission pipeline for Processing
any Subject Hydrocarbons or any other
Hydrocarbons; and
(f) all costs, expenses and damages incurred by
Grantor as the result of the failure of Grantor to
obtain or carry, or cause any applicable parties
to obtain or carry, the types or amounts of
insurance coverage agreed upon from time to time
by Grantor and Grantee, but all costs, expenses
and damages which are subject to deductible
amounts under any such insurance coverage shall be
included in Production Costs to the extent such
deductible amounts have been agreed to by Grantee.
Notwithstanding anything to the contrary set forth herein,
Production Costs shall be reduced (not below zero) by the
following:
(1) the Gross Proceeds received by Grantor from the
Sale, after the Commencement Time, of any
materials, supplies, equipments and other personal
property or fixtures, or any part thereof or
interest therein, located on or used in connection
with the Subject Interests;
(2) all insurance proceeds received by Grantor as a
consequence of the loss or damage after the
Commencement Time to the Subject Interests, or any
part thereof or interest therein, or any
materials, supplies, equipment or other personal
property or fixtures located on or used in
connection with any of the Subject Interests, or
any Subject Hydrocarbons;
(3) the proceeds of all judgments and claims received
by Grantor for damages after the Commencement Time
to the Subject Interests, or any part thereof or
interest therein, or any materials, supplies,
equipment or other personal property or fixtures,
or any part thereof or interest therein, located
on or used in connection with any of the Subject
Interests, or any Subject Hydrocarbons;
(4) all proceeds of and/or from each of the following
amounts received by Grantor (to the extent
attributable to periods after the Commencement
Time) with respect to the Subject Interests
(i) delay rentals, (ii) lease bonuses, (iii) shut-
in gas well royalties or payments, (iv) rentals
from reservoir use or storage, and (v) payments in
connection with the drilling or deferring of any
well on any of the Subject Interests;
(5) if any Subject Hydrocarbons are Processed before
Sale, or by any Affiliate of Grantor whether
before or after Sale, the amount, if any, by which
the Manufacturing Proceeds arising therefrom
exceed the Manufacturing Costs of such Processing;
and
(6) all other monies and things of value which are
received by Grantor by virtue of the ownership
after the Commencement Time of the Subject
Interests and the materials, supplies, equipment
and other personal property and fixtures located
on or used in connection with the Subject
Interests.
If the aggregate reduction to Production Costs in any Month would
reduce Production Costs below zero, the excess shall be carried
forward and applied to reduce Production Costs in subsequent
months until fully applied.
"Sale" shall mean any sale, exchange, or other disposition
for value.
"Subject Hydrocarbons" means that portion of the
Hydrocarbons that may be produced after the Commencement Time
from the Subject Interests and which are attributable to the
Subject Interests after deducting all royalties, overriding
royalties, production payments and other burdens on or out of
production from the Subject Interests; provided that there shall
be no deduction for any Hydrocarbons which are required to
satisfy any burden applicable to the Subject Interests created on
or after the date hereof or required to satisfy the Overriding
Royalty.
"Subject Interests" or "Subject Interest" means all right,
title, interest or claim of every kind and character of Grantor
in the Oil and Gas Interests and all lands now or hereafter
pooled, communitized or unitized therewith, even though Grantor's
interest be incorrectly or incompletely described in Exhibit A,
all as the same shall be enlarged by the discharge of any burdens
or by the removal of any charges or encumbrances to which any of
the same may be subject, but expressly excluding any interest in
the Oil and Gas Interests acquired by Grantor after the execution
and delivery of the Conveyance, other than by reason of or
resulting from the discharge of any burden, the reversion of any
interest or the removal of any charge or encumbrance.
"Subject Well" or "Subject Wells" means any and all wells
now located on the Leases or hereafter drilled or participated in
by Grantor on the Leases, and any other wells now or hereafter
located on lands or leases pooled, communitized or unitized with
the Leases unless otherwise specified in Exhibit A, from the
surface to the total depth to which any such well or wells may be
drilled.
"Taxes" means all ad valorem, property, occupation,
gathering, pipeline regulating, windfall profit, severance, gross
production, Btu, energy, excise and other taxes and governmental
charges and assessments (except taxes on or measured by the
income of Grantee) imposed on the Subject Interests or the
Overriding Royalty, including the Overriding Royalty
Hydrocarbons.
ARTICLE III
MISCELLANEOUS
Section 3.01 Governing Law. THIS CONVEYANCE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF LOUISIANA.
Section 3.02 Successors and Assigns. The provisions and
conditions contained in this Conveyance shall run with the land
and the respective interests of Grantor and Grantee and (subject
to the transfer restrictions set forth in Section 1.05) shall be
binding upon and inure to the benefit of Grantor and Grantee and
their respective successors and assigns. All references herein
to either Grantor or Grantee shall include their respective
successors and assigns.
Section 3.03 Counterpart Execution. This Conveyance may
be executed in multiple originals all of which shall constitute
one and the same Conveyance.
Section 3.04 Certain References. Certain agreements,
contracts and other documents are listed in Exhibit A and
included in the definition of Permitted Encumbrances. References
herein or in Exhibit A to Permitted Encumbrances are made solely
for the purpose of protecting Grantor on Grantor's warranties and
representations as to the Subject Interests, and without regard
to whether or not any Permitted Encumbrance is valid, subsisting,
legal or enforceable or affects the Overriding Royalty; and such
references are not intended to constitute and shall not
constitute any sort of recognition or acknowledgment by any party
as to the validity, legality or enforceability of the same or of
any term, provision or condition thereof or the applicability
thereof to the Overriding Royalty, and shall not revive or ratify
the same or create any rights in any third person. With respect
to the Subject Interests governed by Louisiana law no provision
in this Agreement shall be construed as an agreement or
expression of intent by Grantee to acquire the Overriding Royalty
subject to any unrecorded Permitted Encumbrances; provided
however, no breach of any warranty of title hereunder shall arise
as the result of any claim made pursuant to any unrecorded
Permitted Encumbrance.
Section 3.05 Purchase Option. Grantee hereby grants
Grantor the option to purchase the Overriding Royalty at any time
on or after the Commencement Time for a purchase price equal to
the fair market value of the Overriding Royalty, as mutually
determined by Grantee and Grantor, as of the effective date of
such purchase. Grantor may elect to exercise such option by
notifying Grantee in writing. Grantee shall have no obligation
under this Section 3.05 unless the parties shall have agreed in
writing on the fair market value of the Overriding Royalty. The
purchase price shall be payable in immediately available funds at
the closing of such purchase. At the closing of Grantor's
purchase of the Overriding Royalty, Grantee shall deliver to
Grantor an assignment of the Overriding Royalty effective as of
the effective date used to determine the purchase price and
containing a special warranty of title as to matters arising by,
through and under Grantee, but not otherwise.
Section 3.06 Partial Invalidity. Except as otherwise
expressly stated herein, in the event any provision contained in
this Agreement shall for any reason be held invalid, illegal or
unenforceable by a court or regulatory agency of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any of the remaining provisions of this
Agreement which shall remain in full force and effect.
Section 3.07 Abandonment Cost Account. In the event that,
as of the end of any month, the aggregate estimated future Net
Profit from the Subject Interests, as estimated in Grantor's most
recent reserve report, is less than 500% of the aggregate future
Abandonment Costs for all of the Subject Interests, as estimated
in such reserve report, Grantor may establish a separate account
(the "Abandonment Cost Account") and place therein an amount
equal to twenty percent (20%) of the amount otherwise payable to
Grantee hereunder (calculated without taking into account the
placing of such amounts in the Abandonment Cost Account for the
Subject Interests) for such month. At such time as the amount in
the Abandonment Cost Account for the Subject Interests exceeds
twelve percent (12%) of the aggregate estimated future Abandon
ment Costs for all of the Subject Interests, no further amount
shall be placed in such account until such time as the funds in
the Abandonment Cost Account shall be less than ten percent (10%)
of said aggregate estimated future Abandonment Costs. Any
interest accrued on the account funds shall be retained in and
added to the said Abandonment Cost Account. At any time, on or
prior to the date which any such Abandonment Costs must be
incurred and Grantor is required to expend amounts or has
expended amounts for Abandonment Costs on the Subject Interests
for which an Abandonment Cost Account has been established,
Grantor shall release from the Abandonment Cost Account the
lesser of (i) an amount equal to said Abandonment Costs or
(ii) the total amount of funds in the Abandonment Cost Account
for the Subject Interests and to pay those amounts to Grantor.
If less than all of the funds in the Abandonment Cost Account are
to be released and paid to Grantor after Grantor has incurred and
paid all Abandonment Costs relating to all of the Subject
Interests, then the amounts, if any, in the Abandonment Cost
Account shall be released to Grantee.
Section 3.08 Perpetuities. It is not the intent of
Grantor or Grantee that any provision herein violate any
applicable law regarding the rule against perpetuities, the
suspension of the absolute power of alienation, or other rules
regarding the vesting or duration of estates, and this Conveyance
shall be construed as not violating such rule to the extent the
same can be so construed consistent with the intent of the
parties. In the event however that any provision hereof is
determined to violate such rule, then such provision shall
nevertheless be effective for the maximum period (but not longer
than the maximum period) permitted by such rule that will result
in no violation. To the extent the maximum period is permitted
to be determined by reference to "lives in being," Grantor and
Grantee agree that "lives in being" shall refer to lifetime of
the last to die of the living lineal descendants of the late
Joseph P. Kennedy (father of the late President of the United
States of America).
EXECUTED in multiple originals as of the 28th day of
December, 1993.
GRANTOR:
WITNESSES FOREST OIL CORPORATION
____________________ By: ______________________________
Name: William L. Dorn
____________________ Title: Chairman of the Board and
Chief Executive Officer
GRANTEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
WITNESSES By: Enron Capital Corp., its general partner
____________________ By:____________________________
Thomas S. Glanville
____________________ Attorney-in-Fact
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary
Public duly qualified, commissioned, sworn and acting in and for
the State of ___________, hereby certify that, on this__, day of
December, 1993, there appeared before me,
________________________ of Forest Oil Corporation, a New York
corporation, whose address is 950 17th Street, Colorado National
Building, Denver, Colorado 80202.
On this day, before me, the undersigned Notary Public in and
for said State, personally appeared the above named person, to me
personally known, who, being by me duly sworn, did say that he is
the designated officers of said corporation, and that the instru
ment was signed and sealed on behalf of the corporation by
authority of its Board of Directors and that the above named
person acknowledged the instrument to be the free act and deed of
the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal in the City of_______________ , and State of ____________ ,
this ____ day of December, 1993.
________________________________
Notary Public in and for
The State of______________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary
Public duly qualified, commissioned, sworn and acting in and for
the State of Texas, hereby certify that, on this day of
December, 1993, there appeared before me, Thomas S. Glanville,
attorney-in-fact on behalf of Enron Capital Corp, a Delaware
corporation, as General Partner of Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership,
whose address is 1400 Smith Street, Houston, Texas 77002.
On this day, before me, the undersigned Notary Public in and
for said State, personally appeared the above named persons, to
me personally known, who, being by me duly sworn, did say that he
is the designated officers of said corporation, the General
Partner of said limited partnership, a Delaware limited
partnership registered as a foreign limited partnership in
Louisiana, and the above named persons acknowledged that the
instrument was signed on behalf of the corporation by authority
of the Board of Directors in its capacity as General Partner of
the aforesaid partnership and the above named persons
acknowledged the instrument to be the free act and deed of the
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal in the City of , County of Harris and State of ,
this ____ day of December, 1993.
________________________________
Notary Public in and for
The State of______________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
EXHIBITS
Exhibit A -- Description of Oil and Gas Interests; Subject
Interests; Permitted Encumbrances
Exhibit B -- Accounting Procedure
EXHIBIT E-2
WHEN RECORDED MAIL TO:
VINSON & ELKINS L.L.P.
2500 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
CONVEYANCE OF
OVERRIDING ROYALTY
(Wagner & Brown)
This Conveyance of Overriding Royalty (this "Conveyance") is
from FOREST OIL CORPORATION, a New York corporation, whose
address is 950 17th Street, Colorado National Building, Denver,
Colorado 80202 ("Grantor"), to JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited partnership,
whose address is 1400 Smith Street, Houston, Texas 77042
("Grantee").
WHEREAS, Grantor has agreed to convey to Grantee an
overriding royalty interest in the undivided oil and gas
leasehold interests described on Exhibit A hereto; and
WHEREAS, capitalized terms as used herein shall have the
meanings given to them in Article II hereof unless otherwise
defined herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS:
ARTICLE I
CONVEYANCE
Section 1.01 Conveyance. For and in consideration of One
Thousand and No/100 Dollars ($1000.00) and other good and
valuable consideration to Grantor cash in hand paid by Grantee,
the receipt and sufficiency of which is hereby acknowledged,
Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, SET
OVER and DELIVER unto Grantee effective as of the date hereof an
overriding royalty interest in each of the Subject Interests and
in and to the Hydrocarbons in and under and that may be produced
and saved from the Subject Interests equal to the Overriding
Royalty Percentage of the Net Profit attributable to the Subject
Interests, together with all and singular the rights and appurte
nances thereto in anywise belonging (the "Overriding Royalty").
TO HAVE AND TO HOLD the Overriding Royalty unto Grantee, its
successors and assigns forever, subject to the following terms,
provisions and conditions.
Section 1.02 Non-Operating Interest. The Overriding
Royalty conveyed hereby is a non-operating interest (being a real
property interest) in and to the Subject Interests and in no
event shall Grantee ever be liable or responsible in any way for
payment of any costs, expenses or liabilities attributable to the
Subject Interests (or any part thereof) or incurred in connection
with the production, saving or delivery of Subject Hydrocarbons.
This Conveyance is a conveyance of a real property interest.
Section 1.03 Certain Limitations. The Overriding Royalty
shall be subject to the following provisions:
(a) Grantee shall look solely to its share of the Subject
Hydrocarbons for satisfaction and discharge of the
Overriding Royalty, and Grantor shall not be personally
liable for the payment and discharge thereof.
(b) There shall not be included in the Subject Hydrocarbons
any Lease Use Hydrocarbons, or Non-Consent
Hydrocarbons, it being understood that the Overriding
Royalty shall be computed and delivered out of the
Overriding Royalty Percentage of Hydrocarbons available
after satisfaction of all of the foregoing.
Section 1.04 Royalties; Taxes. The Overriding Royalty
shall be delivered only after satisfaction of (and after
deduction for) any and all royalties and other burdens on
production. Grantor shall timely pay and deliver all such
royalties and other burdens on production, and Grantor shall
defend, indemnify and hold Grantee harmless from and against any
loss or claim with respect to any such royalties and other
burdens on production or any claim by the owners or holders of
such royalties and other burdens on production. Grantor shall
pay all Taxes with respect to the Overriding Royalty and shall
defend, indemnify and hold Grantee harmless from and against any
loss or claim with respect to Taxes.
Section 1.05 Mortgage, Assignment or Pooling by Grantor.
Unless made expressly subject and subordinate to this Conveyance
on terms satisfactory to Grantee, Grantor shall not mortgage,
pledge or hypothecate the Subject Interests or create or allow to
remain thereon any lien or security interest thereon or on any
Hydrocarbons produced therefrom, and Grantor shall not assign,
sell, convey or otherwise transfer the Subject Interests or any
part thereof unless Grantee expressly consents thereto in
writing, the transferee expressly agrees to assume and perform
all of Grantor's obligations under this Conveyance and such sale,
transfer or assignment is made and accepted expressly subject and
subordinate to this Conveyance. Any purported mortgage, pledge,
hypothecation, lien, security interest, assignment, sale,
conveyance or other transfer in contravention of the foregoing
terms shall be null and void. Grantor shall not pool,
communitize or unitize the Overriding Royalty or the Subject
Interests without the express written consent of Grantee, and any
purported pooling, communitization or unitization in
contravention of the preceding clause shall be null and void as
to Grantee and shall not have the effect of pooling or affecting
the Overriding Royalty.
Section 1.06 Title. Grantor warrants and represents that
the Leases are valid and subsisting oil and gas leases covering
the lands described in Exhibit A; that Grantor's ownership of the
Oil and Gas Interests entitles Grantor to a percentage of all
Hydrocarbons produced, saved and marketed from the Leases and of
the proceeds of such production, after giving effect to and/or
deducting all applicable royalties, overriding royalties and
other burdens or payments out of production (except for this
Conveyance), not less than the net revenue interest identified on
Exhibit A and obligates Grantor to pay a share of all costs of
operation and development of the Lease not greater than the
respective operating right or working interest identified on
Exhibit A. Grantor hereby binds itself and its legal representa
tives, successors and assigns, to warrant and forever defend all
and singular title to the Overriding Royalty and the Overriding
Royalty Hydrocarbons, subject only to the Permitted Encumbrances,
unto Grantee, its successors and assigns, against every person
whomsoever lawfully claiming or to claim the same or any part
thereof. There is also hereby conveyed to Grantee, by way of
substitution and subrogation, all rights of warranty and
contractual representations or covenants of any kind or nature
held by Grantor against any of Grantor's respective predecessors
in title.
Section 1.07 Payment of Proceeds. (a) On each Payment
Date Grantor shall pay to Grantee by wire transfer of immediately
available funds to such account as may be designated by Grantee
by notice to Grantor from time to time the amount by which the
Overriding Royalty Percentage of the cumulative Net Profit from
the Commencement Time through the end of the second month
preceding the Month in which each such Payment Date occurs
exceeds the payments previously made by Grantor hereunder.
(b) Any amount not paid on the date due pursuant to Section
1.08(a) shall bear interest at the Floating Rate from the date
due until paid.
Section 1.08 Termination. The Overriding Royalty shall
remain in full force and effect until the Termination Time. Upon
termination of the Overriding Royalty as above provided, all
rights, titles and interests herein conveyed shall automatically
terminate and vest in Grantor. Upon such termination and after a
request by Grantor, Grantee shall execute and deliver such
instrument or instruments as may be necessary to evidence the
termination of the Overriding Royalty.
ARTICLE II
DEFINITIONS
As used herein and in the exhibits hereto, the following
terms shall have the respective meanings ascribed to them below:
"Abandonment Cost Account" shall have the meaning attributed
to it in Section 3.07 hereof.
"Abandonment Costs" shall mean the actual costs of plugging
and abandoning the Subject Wells, the costs of dismantling and
salvaging platforms, pipelines and other facilities and
structures on the Subject Interests and other costs associated
with restoration of the Subject Interests in accordance with
applicable law (and, if applicable the rules and regulations of
the Minerals Management Service of the U.S. Department of the
Interior), net of estimated salvage value of any salvageable
equipment or personalty related to the Subject Interests.
"Accounting Procedure" shall mean as to each Subject
Interest the COPAS accounting procedure attached to and made a
part of the operating agreement applicable to such Subject
Interest, or in the event there is no such operating agreement,
the accounting procedure attached hereto as Exhibit B.
"Affiliate" shall mean any person or entity which either,
directly or indirectly, controls, is controlled by or is under
common control with the party. For purposes hereof "control"
means the right or power to direct the policies or the policies
of another through management authority, stock ownership,
delegated authority, voting rights or otherwise.
"Barrel" means 42 United States standard gallons of 231
cubic inches per gallon at 60 degrees Fahrenheit.
"British Thermal Unit" or "BtuBtu" means the amount of
energy required to raise the temperature of one (1) pound of pure
water one degree Fahrenheit (1F.) from fifty-nine degrees
Fahrenheit (59F.) to sixty degrees Fahrenheit (60F.) under a
constant pressure of 14.73 pounds per square inch absolute.
"Business Day" means each day other than Saturday, Sunday
and legal holidays in the State of Texas.
"Commencement Time" means 7:00 a.m. Local Time on the last
day of the second month immediately preceding the month in which
all principal and accrued interest on the loans made pursuant to
the Loan Agreement shall have been paid.
"Eugene Island Block 326 Conveyance" means that certain
Conveyance of Overriding Royalty Interest as of even date
herewith from Grantor to Grantee covering Grantor's interest in
United States of America Oil and Gas Lease No. OCS-G 5518, Eugene
Island Area Block 326, offshore Louisiana.
"First Transporter" means the first interstate or intrastate
pipeline downstream of the wellhead.
"Floating Rate" means the Prime Rate plus 3%, but not more
than the maximum nonusurious rate permitted by applicable law.
"Gas" means natural gas and other gaseous hydrocarbons.
"Gross Proceeds" means, without duplication, the aggregate
gross revenue determined in accordance with GAAP of Grantor from
the sale of Subject Hydrocarbons (less existing royalties,
overriding royalties, net profits interests and other burdens
described in clause (a) of the definition of "Permitted
Encumbrances" below) produced from all Subject Interests after
the Commencement Time, subject to the following:
(a) If Subject Hydrocarbons are Sold pursuant to any bona
fide arm's length transaction with a Non-Affiliate of
Grantor, the Gross Proceeds of such Sale shall be the
amount realized by Grantor from such Sale;
(b) If Subject Hydrocarbons are Sold in any transaction
other than those described in clause (a), the Gross
Proceeds of such Sale shall be the Market Value of such
Subject Hydrocarbons;
(c) Gross Proceeds shall include all consideration
received, directly or indirectly, from Sales of Subject
Hydrocarbons, including without limitation advance
payments, payments under take or pay or similar
provisions of production sales agreements and payments
for natural gas liquids which may be extracted from any
Gas;
(d) If any proceeds are withheld from Grantor by a Non-
Affiliate for any reason (other than at the request of
Grantor or due to the negligence of Grantor) such
proceeds shall not be considered to be Proceeds until
such proceeds are actually received by Grantor;
provided, however the Gross Proceeds shall not include
any interest, penalty or other amount that is not
derived from the Sale of Subject Hydrocarbons, but,
instead, Grantor shall make payment directly to Grantee
of the Overriding Royalty Percentage of any such
amounts paid to Grantor by the purchaser of Subject
Hydrocarbons;
(e) If any Subject Hydrocarbons are Processed before Sale,
or by any Affiliate of Grantor, whether before or after
sale to such Affiliate, the Gross Proceeds for such
Subject Hydrocarbons shall be reduced by the amount, if
any, by which the Manufacturing Costs of such
Processing exceed the Manufacturing Proceeds arising
therefrom; and
(f) Gross Proceeds shall not include any gains or losses
realized by Grantor under any price swaps, options,
floors, caps or other similar commodity price hedge
entered into by Grantor.
"Hydrocarbons" means Oil and Gas.
"Lease" means an oil and gas described, referred to or
identified in Exhibit A attached hereto and made a part hereof
for all purposes, as to all lands and depths described in such
lease (or the applicable part or portion thereof if specifically
limited in depth and/or areal extent in Exhibit A), together with
any renewal or extension of such lease (as to all or any part or
portion thereof), and any replacement lease taken upon or in
anticipation of expiration or termination of such lease (if
executed and delivered during the term of or within one (1) year
after expiration of the predecessor lease), as to all lands and
depths described in the predecessor lease (unless the predecessor
lease is specifically limited in depth or areal extent in Exhibit
A in which event only such portion of such lease shall be
considered a renewal or extension or a replacement lease subject
to this Conveyance); and "Leases" means all such leases and all
such renewals and extensions and replacement leases.
"Lease Use Hydrocarbons" means any Hydrocarbons which are
unavoidably lost in the production thereof or used by Grantor or
the operator on the Leases or any unit in which the Leases are
pooled or unitized for drilling and production operations
conducted prudently and in good faith for the purpose of
producing Hydrocarbons from the Leases or from such unit, but
only for so long as and to the extent such Hydrocarbons are so
used.
"Loan Agreement" means the Loan Agreement dated December 28,
1993 between Grantor, as Borrower, and Grantee, as Lender, as
amended, modified or supplemented from time to time.
"Local Time" means Central Standard Time or Central Daylight
Savings Time in effect on the date in question at the location of
the Subject Interest.
"Manufacturing Costs" shall mean the costs of Processing any
Subject Hydrocarbons that generate Manufacturing Proceeds.
"Manufacturing Proceeds" shall mean the excess, if any, of
(i) proceeds realized from the sale of Subject Hydrocarbons, and
any products thereof, that have been Processed or are the result
of any Processing over (ii) the part of such proceeds that
represents the Market Value of such Subject Hydrocarbons before
any Processing.
"Market Value" of any Subject Hydrocarbons shall mean:
(a) With respect to crude oil, field condensate and
other field liquids, (i) the highest price
available to Grantor for such crude oil and/or
field liquids, at the lease level, on the date of
delivery, pursuant to a bona fide offer, posted
price or other generally available marketing
arrangement from or with a Non-Affiliate
purchaser, or (ii) if subsection (a)(i) is
inapplicable, the fair market value of such crude
oil and/or field liquids, on the date of delivery,
at the lease level, determined in accordance with
other generally accepted and usual industry
practices; and
(b) With respect to any gas, gaseous substances and
other gaseous hydrocarbons, (i) the average of the
three highest prices (adjusted for all material
differences and quality) being paid at the time of
production for gas produced from the same field,
in sales between Non-Affiliated persons (or, if
there are not three such prices with such field,
within a 50 mile radius of such field) but, for
any gas subject to price restrictions established,
prescribed or otherwise imposed by any
governmental authority having jurisdiction over
the sale of such gas, no more than the highest
price permitted for such category or type of gas
after all applicable adjustments (including
without limitation tax reimbursement, dehydration,
compression and gathering allowance, inflation and
other permitted escalations), or (ii) if
subsection (b)(i) is inapplicable, the fair market
value of such gas and/or substances, on the date
of delivery, at the lease level, determined in
accordance with other generally accepted and usual
industry practices.
"Month" means a calendar month.
"Net Profit" means the amount by which cumulative Gross
Proceeds exceeds cumulative Production Costs.
"Non-Affiliate" shall mean with respect to Grantor, any
person or entity who is not an Affiliate of Grantor.
"Non-Consent Hydrocarbons" means those Hydrocarbons produced
from a well during the applicable period of recoupment or
reimbursement pursuant to a Non-Consent Provision covering that
well, which Hydrocarbons have been relinquished to the consenting
party or participating party under the terms of such Non-Consent
Provision as the result of the election by Grantor not to
participate in the particular operation, provided such election
by Grantor has been made in good faith and as a prudent operator.
"Non-Consent Provision" means a contractual provision
contained in an applicable third-party operating agreement, unit
agreement, contract for development or other similar instrument
which is a Permitted Encumbrance, which provision covers so-
called non-consent operations or sole benefit operations and
provides for relinquishment of production by non-consenting or
non-participating parties during a period of recoupment or
reimbursement of costs and expenses of the consenting or
participating parties.
"Oil" means crude oil, condensate and other liquid
hydrocarbons.
"Oil and Gas Interest" means (i) the lands, Leases and other
drilling rights described, referred to or identified in Exhibit A
attached hereto and made a part hereof for all purposes, as to
all lands and depths described in such Leases or covered by such
drilling rights (or the applicable part or portion thereof if
specifically limited in depth and/or areal extent in Exhibit A),
(ii) any rights that arise by contract, operation of law or
otherwise in all lands spaced, pooled, unitized, communitized or
consolidated with such lands, Leases and drilling rights; and
(iii) all oil, condensate or natural gas wells, either located on
or attributable to such lands, Leases and drilling rights by
spacing, pooling, unitization, communization or consolidation.
"Overriding Royalty" shall have the meaning given such term
in Section 1.01 hereof.
"Overriding Royalty Percentage" means 20%.
"Payment Date" means the 15th day of each month commencing
with the 15th day of the second month after the Commencement
Time.
"Permitted Encumbrance" means the following:
(a) lessors' royalties, overriding royalties, reversionary
interests and similar burdens of record which do not reduce the
net revenue interests set forth on Exhibit A;
(b) division orders and sales contracts terminable without
penalty upon no more than thirty (30) days' notice to the
purchaser;
(c) liens for taxes or assessments not yet delinquent;
(d) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or charges
arising in the ordinary course of business securing amounts not
yet due and payable;
(e) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations;
(f) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities
affecting the Oil and Gas Interests which taken individually or
together: (i) do not secure an obligation in respect of
borrowed money; (ii) do not interfere materially with the
operation, value or use of any of the Oil and Gas Interests;
(iii) do not prevent Grantor from receiving the proceeds of
production from Oil and Gas Interests or Grantee from receiving
Subject Hydrocarbons, or the proceeds thereof; (iv) do not
reduce the net revenue interests set forth in Exhibit A; or (v)
do not increase the portion of the costs and expenses relating to
any Oil and Gas Interests that Grantor is obligated to pay above
the operating rights or working interest share set forth in
Exhibit A;
(g) the agreements, contracts and other instruments
described in Exhibit A to the extent the same are valid and
subsisting and burden or apply to the Subject Interests or any
part thereof; and
(h) conservation orders of governmental agencies having
jurisdiction over the Properties (including, without limitation,
spacing, pooling, increased density, location exception,
allowable and other similar orders).
"Prime Rate" means the annual rate of interest publicly
announced from time to time by The Chase Manhattan Bank (National
Association) as its prime or base rate, calculated on the basis
of a 365 day year, but not to exceed the maximum nonusurious rate
permitted by applicable law.
"Processing" means to manufacture, fractionate or refine
Subject Hydrocarbons, but such term does not mean or include the
use of normal lease or well equipment (such as dehydrators, gas
treating facilities, separators, heater-treaters, lease
compression facilities, injection or recycling equipment, tank
batteries, field gathering systems, pipelines and equipment and
so forth) or other normal operations on any of the Subject
Interests.
"Production Agreement" means that certain Production
Agreement (Wagner & Brown) of even date herewith between Grantor
and Grantee.
"Production Costs" means, without duplication, all of the
following costs incurred by Grantor with respect to the Subject
Interests from and after the Commencement Time determined in
accordance with GAAP:
(i) all direct costs of operating, producing, and
maintaining the Subject Interests determined in
accordance with the Accounting Procedure;
(ii) all direct costs of gathering, transporting and
marketing production from the Subject Interests
determined in accordance with the Accounting
Procedure;
(iii) all direct capital expenditures incurred in
connection with developing the Subject Interests;
(iv) all Taxes (including those paid by Grantor under
Section 1.04) incurred by Grantor with respect to
the ownership of the Subject Interests after the
Commencement Time;
(v) all insurance premiums paid by Grantor for
insurance actually carried for periods after the
Commencement Time with respect to the Subject
Interests, or incident to the operation or
maintenance of the Subject Interests after the
Commencement Time;
(vi) amounts attributable to the Subject Interests (and
attributable to periods after the Commencement
Time) and chargeable as overhead charges under the
Accounting Procedure; and
(viii) all amounts deposited by Grantor in the
"Abandonment Cost Account" pursuant to Section
3.07, and all Abandonment Costs (except for those
costs, a portion of which is paid out of the
Abandonment Cost Account).
Notwithstanding anything to the contrary set forth herein,
Production Costs shall not include any of the following:
(a) any profit or rate of return on investment, any
interest, premiums, fees or similar charges
arising out of borrowings or purchases on credit,
depreciation, depletion or amortization of costs;
(b) any general, administrative or office charges or
overhead, except as permitted under clause (vi) of
the definition of Production Costs;
(c) any expenses, penalties, interest (in excess of
the Prime Rate) or other charges which result from
the failure of Grantor to properly discharge all
costs and expenses (including Taxes) of
developing, operating and maintaining the Subject
Interests;
(d) any damages, penalties, interest or other charges
paid by Grantor to any third party or governmental
agency, commission or similar body arising from
any conduct or omission by Grantor in its capacity
as operator of any the Subject Interests and any
costs and expenses (including attorneys' fees)
incurred in defending any such action;
(e) any Manufacturing Costs (other than as provided
for in clause (e) of the definition of Gross
Proceeds) or costs of acquiring, constructing,
operating or maintaining any facility, plant,
equipment or transmission pipeline for Processing
any Subject Hydrocarbons or any other
Hydrocarbons; and
(f) all costs, expenses and damages incurred by
Grantor as the result of the failure of Grantor to
obtain or carry, or cause any applicable parties
to obtain or carry, the types or amounts of
insurance coverage agreed upon from time to time
by Grantor and Grantee, but all costs, expenses
and damages which are subject to deductible
amounts under any such insurance coverage shall be
included in Production Costs to the extent such
deductible amounts have been agreed to by Grantee.
Notwithstanding anything to the contrary set forth herein,
Production Costs shall be reduced (not below zero) by the
following:
(1) the Gross Proceeds received by Grantor from the
Sale, after the Commencement Time, of any
materials, supplies, equipments and other personal
property or fixtures, or any part thereof or
interest therein, located on or used in connection
with the Subject Interests;
(2) all insurance proceeds received by Grantor as a
consequence of the loss or damage after the
Commencement Time to the Subject Interests, or any
part thereof or interest therein, or any
materials, supplies, equipment or other personal
property or fixtures located on or used in
connection with any of the Subject Interests, or
any Subject Hydrocarbons;
(3) the proceeds of all judgments and claims received
by Grantor for damages after the Commencement Time
to the Subject Interests, or any part thereof or
interest therein, or any materials, supplies,
equipment or other personal property or fixtures,
or any part thereof or interest therein, located
on or used in connection with any of the Subject
Interests, or any Subject Hydrocarbons;
(4) all proceeds of and/or from each of the following
amounts received by Grantor (to the extent
attributable to periods after the Commencement
Time) with respect to the Subject Interests
(i) delay rentals, (ii) lease bonuses, (iii) shut-
in gas well royalties or payments, (iv) rentals
from reservoir use or storage, and (v) payments in
connection with the drilling or deferring of any
well on any of the Subject Interests;
(5) if any Subject Hydrocarbons are Processed before
Sale, or by any Affiliate of Grantor whether
before or after Sale, the amount, if any, by which
the Manufacturing Proceeds arising therefrom
exceed the Manufacturing Costs of such Processing;
and
(6) all other monies and things of value which are
received by Grantor by virtue of the ownership
after the Commencement Time of the Subject
Interests and the materials, supplies, equipment
and other personal property and fixtures located
on or used in connection with the Subject
Interests.
If the aggregate reduction to Production Costs in any Month would
reduce Production Costs below zero, the excess shall be carried
forward and applied to reduce Production Costs in subsequent
months until fully applied.
"Sale" shall mean any sale, exchange, or other disposition
for value.
"Subject Hydrocarbons" means that portion of the
Hydrocarbons that may be produced after the Commencement Time
from the Subject Interests and which are attributable to the
Subject Interests after deducting all royalties, overriding
royalties, production payments and other burdens on or out of
production from the Subject Interests; provided that there shall
be no deduction for any Hydrocarbons which are required to
satisfy any burden applicable to the Subject Interests created on
or after the date hereof or required to satisfy the Overriding
Royalty.
"Subject Interests" or "Subject Interest" means all right,
title, interest or claim of every kind and character of Grantor
in the Oil and Gas Interests and all lands now or hereafter
pooled, communitized or unitized therewith, even though Grantor's
interest be incorrectly or incompletely described in Exhibit A,
all as the same shall be enlarged by the discharge of any burdens
or by the removal of any charges or encumbrances to which any of
the same may be subject, but expressly excluding any interest in
the Oil and Gas Interests acquired by Grantor after the execution
and delivery of the Conveyance, other than by reason of or
resulting from the discharge of any burden, the reversion of any
interest or the removal of any charge or encumbrance.
"Subject Well" or "Subject Wells" means any and all wells
now located on the Leases or hereafter drilled or participated in
by Grantor on the Leases, and any other wells now or hereafter
located on lands or leases pooled, communitized or unitized with
the Leases unless otherwise specified in Exhibit A, from the
surface to the total depth to which any such well or wells may be
drilled.
"Taxes" means all ad valorem, property, occupation,
gathering, pipeline regulating, windfall profit, severance, gross
production, Btu, energy, excise and other taxes and governmental
charges and assessments (except taxes on or measured by the
income of Grantee) imposed on the Subject Interests or the
Overriding Royalty, including the Overriding Royalty
Hydrocarbons.
"Termination Time" means 7:00 a.m. Local Time on the date
when the Internal Rate of Return has been achieved by Grantee.
The Internal Rate of Return shall have been achieved when the
present value of the principal and interest payments received by
Grantee under the Loan Agreement, the Overriding Royalty payments
received by Grantee under the Eugene Island Block 326 Conveyance
and the Overriding Royalty payments received by Grantee under
this Conveyance discounted in each case back from the date
received by Grantee to the date of the Loan Agreement at the rate
of 1.5% per month equals or exceeds the present value of the
loans made by Grantee under the Loan Agreement discounted in each
case back from the date advanced by Grantee to the date of the
Loan Agreement at the rate of 1.5% per month.
ARTICLE III
MISCELLANEOUS
Section 3.01 Governing Law. THIS CONVEYANCE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS.
Section 3.02 Successors and Assigns. The provisions and
conditions contained in this Conveyance shall run with the land
and the respective interests of Grantor and Grantee and (subject
to the transfer restrictions set forth in Section 1.05) shall be
binding upon and inure to the benefit of Grantor and Grantee and
their respective successors and assigns. All references herein
to either Grantor or Grantee shall include their respective
successors and assigns.
Section 3.03 Counterpart Execution. This Conveyance may
be executed in multiple originals all of which shall constitute
one and the same Conveyance.
Section 3.04 Certain References. Certain agreements,
contracts and other documents are listed in Exhibit A and
included in the definition of Permitted Encumbrances. References
herein or in Exhibit A to Permitted Encumbrances are made solely
for the purpose of protecting Grantor on Grantor's warranties and
representations as to the Subject Interests, and without regard
to whether or not any Permitted Encumbrance is valid, subsisting,
legal or enforceable or affects the Overriding Royalty; and such
references are not intended to constitute and shall not
constitute any sort of recognition or acknowledgment by any party
as to the validity, legality or enforceability of the same or of
any term, provision or condition thereof or the applicability
thereof to the Overriding Royalty, and shall not revive or ratify
the same or create any rights in any third person. No provision
in this Agreement shall be construed as an agreement or
expression of intent by Grantee to acquire the Overriding Royalty
subject to any unrecorded Permitted Encumbrances; provided
however, no breach of any warranty of title hereunder shall arise
as the result of any claim made pursuant to any unrecorded
Permitted Encumbrance.
Section 3.05 Purchase Option. Grantee hereby grants
Grantor the option to purchase the Overriding Royalty at any time
on or after the Commencement Time for a purchase price equal to
the fair market value of the Overriding Royalty, as mutually
determined by Grantee and Grantor, as of the effective date of
such purchase. All relevant market factors shall be taken into
account in determining such fair market value including the
possibility of termination as provided in Section 1.08. Grantor
may elect to exercise such option by notifying Grantee in
writing. Grantee shall have no obligation under this Section
3.05 unless the parties shall have agreed in writing on the fair
market value of the Overriding Royalty. The purchase price shall
be payable in immediately available funds at the closing of such
purchase. At the closing of Grantor's purchase of the Overriding
Royalty, Grantee shall deliver to Grantor an assignment of the
Overriding Royalty effective as of the effective date used to
determine the purchase price and containing a special warranty of
title as to matters arising by, through and under Grantee, but
not otherwise.
Section 3.06 Partial Invalidity. Except as otherwise
expressly stated herein, in the event any provision contained in
this Agreement shall for any reason be held invalid, illegal or
unenforceable by a court or regulatory agency of competent
jurisdiction, such invalidity, illegality or unenforceability
shall not affect any of the remaining provisions of this
Agreement which shall remain in full force and effect.
Section 3.07 Abandonment Cost Account. In the event that,
as of the end of any month, the aggregate estimated future Net
Profit from the Subject Interests, as estimated in Grantor's most
recent reserve report, is less than 500% of the aggregate future
Abandonment Costs for all of the Subject Interests, as estimated
in such reserve report, Grantor may establish a separate account
(the "Abandonment Cost Account") and place therein an amount
equal to twenty percent (20%) of the amount otherwise payable to
Grantee hereunder (calculated without taking into account the
placing of such amounts in the Abandonment Cost Account for the
Subject Interests) for such month. At such time as the amount in
the Abandonment Cost Account for the Subject Interests exceeds
twenty-four percent (24%) of the aggregate estimated future
Abandonment Costs for all of the Subject Interests, no further
amount shall be placed in such account until such time as the
funds in the Abandonment Cost Account shall be less than twenty
percent (20%) of said aggregate estimated future Abandonment
Costs. Any interest accrued on the account funds shall be
retained in and added to the said Abandonment Cost Account. At
any time, on or prior to the date which any such Abandonment
Costs must be incurred and Grantor is required to expend amounts
or has expended amounts for Abandonment Costs on the Subject
Interests for which an Abandonment Cost Account has been estab
lished, Grantor shall release from the Abandonment Cost Account
the lesser of (i) an amount equal to said Abandonment Costs or
(ii) the total amount of funds in the Abandonment Cost Account
for the Subject Interests and to pay those amounts to Grantor.
If less than all of the funds in the Abandonment Cost Account are
to be released and paid to Grantor after Grantor has incurred and
paid all Abandonment Costs relating to all of the Subject
Interests, then the amounts, if any, in the Abandonment Cost
Account shall be released to Grantee.
Section 3.08 Perpetuities. It is not the intent of
Grantor or Grantee that any provision herein violate any
applicable law regarding the rule against perpetuities, the
suspension of the absolute power of alienation, or other rules
regarding the vesting or duration of estates, and this Conveyance
shall be construed as not violating such rule to the extent the
same can be so construed consistent with the intent of the
parties. In the event however that any provision hereof is
determined to violate such rule, then such provision shall
nevertheless be effective for the maximum period (but not longer
than the maximum period) permitted by such rule that will result
in no violation. To the extent the maximum period is permitted
to be determined by reference to "lives in being," Grantor and
Grantee agree that "lives in being" shall refer to lifetime of
the last to die of the living lineal descendants of the late
Joseph P. Kennedy (father of the late President of the United
States of America).
EXECUTED in multiple originals as of the 28th day of
December, 1993.
GRANTOR:
FOREST OIL CORPORATION
By:_________________________
Name: William L. Dorn
Title: Chairman of the Board and
Chief Executive Officer
GRANTEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Corp., its general partner
By:_________________________
Thomas S. Glanville
Attorney-in-Fact
EXHIBITS
Exhibit A -- Description of Oil and Gas Interests; Subject
Interests; Permitted Encumbrances
Exhibit B -- Accounting Procedure
THE STATE OF___________
COUNTY OF_____________
Before me, the undersigned authority, on this date
personally appeared William L. Dorn, Chairman of the Board and
Chief Executive Officer, of Forest Oil Corporation, a New York
corporation, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me
that he executed the same for the purposes and consideration
therein expressed acting on behalf of said corporation.
Given my hand and seal this ____ day of December, 1993.
(SEAL) ____________________________
Notary Public in and for
The State of ________________
THE STATE OF___________
COUNTY OF_____________
Before me, the undersigned authority, on this date
personally appeared Thomas S. Glanville, attorney-in-fact on
behalf of Enron Capital Corp. a Delaware corporation and general
partner of Joint Energy Development Investments Limited
Partnership, a Delaware limited partnership, known to me to be
the person whose name is subscribed to the foregoing instrument,
and acknowledged to me that he executed the same for the purposes
and consideration therein expressed acting on behalf of said
corporation in its capacity as the general partner of said
partnership.
Given my hand and seal this ____ day of December, 1993.
(SEAL) ____________________________
Notary Public in and for
The State of ________________
EXHIBIT "F"
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made and
entered into this ___ day of _______________, 199__ among THE
CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), having offices at 1
Chase Manhattan Plaza, New York, New York 10081, JOINT ENERGY
DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a Delaware limited
partnership, having offices at 1400 Smith Street, Houston, Texas
77002, and FOREST OIL CORPORATION, a New York corporation, having
offices at 950 17th Street, Colorado National Building, Denver,
Colorado 80202.
For value received, the receipt and sufficiency of which is
hereby acknowledged, and to induce the Lender to make and
continue Loans to Borrower under the Loan Agreement, and at the
special insistence and request of Lender, Subordinated Creditor,
Lender and Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Definitions. As used in this
Agreement, the following terms shall have the following meanings:
"Banks" shall mean the banks which are parties to the Chase
Loan Agreement, their successors and assigns.
"Borrower" shall mean Forest Oil Corporation, a New York
corporation, its successors and permitted assigns.
"Chase" shall mean The Chase Manhattan Bank (National
Association) for itself and as agent for the Banks.
"Chase Loan Agreement" shall mean that certain Credit
Agreement dated December 1, 1993 by and among Borrower, the Banks
and Chase, as the same may be modified, amended or supplemented
from time to time.
"Chase Liens" shall mean the liens, privileges, security
interests and other rights of Chase created or arising under the
under the Chase Loan Agreement and all mortgages, security
agreements and other instruments executed pursuant thereto or in
connection therewith.
"Lender" shall mean Joint Energy Development Investments
Limited Partnership, a Delaware limited partnership, its
successors, assigns and participants.
"Jedi Loan Agreement" shall mean that certain Loan Agreement
dated December 28, 1993, between the Lender and Borrower, as the
same may be modified, amended or supplemented from time to time.
"Jedi Liens" shall mean the liens, privileges, security
interests and other rights of Lender created or arising under the
under security instruments described in Exhibit A attached
hereto.
"Subordinated Creditor" shall mean Chase, the Banks and
their respective successors and assigns.
"Subordinated Debt" shall mean any and all indebtedness,
liabilities and obligations of Borrower to the Subordinated
Creditor under the Chase Loan Agreement or secured by any of the
Chase Liens.
"Superior Indebtedness" shall mean any and all Indebtedness
of the Borrower to Lender under the Jedi Loan Agreement or any
instrument executed in connection therewith.
Section 1.02 Terms Defined In Loan Agreement. Capitalized
terms, used but not defined in this Agreement, shall have the
meaning given to such terms in the Jedi Loan Agreement.
ARTICLE 2
SUBORDINATION
Section 2.01. Consent to Liens. Subordinated Creditor
hereby consents to the granting of the Jedi Liens in favor of
Lender, subject to the provisions of this Agreement. Lender
hereby consents to the granting of the Chase Liens in favor of
Subordinated Creditor, subject to the provisions of this
Agreement.
Section 2.02. Subordination. Irrespective of the order of
recording deeds of trust, acts of mortgagor, financing statements
or other instruments, the Chase Liens shall be junior, inferior
and subordinate in all respects to the Jedi Liens.
Section 2.03. Validity and Priority. The Subordinated
Creditor agrees not to contest the validity or priority of the
Jedi Liens.
Section 2.04. No Proceedings. The Subordinated Creditor
will not commence any action or proceeding against Borrower to
recover all or any part of the Subordinated Debt or join with any
other creditor, unless Lender shall also join, in bringing any
proceedings against Borrower under any bankruptcy, reorgani
zation, readjustment of debt, arrangement of debt, receivership,
liquidation or insolvency law or statute of the Federal or any
state government unless and until all Superior Indebtedness shall
have been paid in full. Except as provided above in this Section
2.04, the Subordinated Creditor will not exercise any remedy
available to it under the Chase Agreement or at law or in equity
that affects the Mortgaged Property or any portion thereof unless
and until all of the Superior Indebtedness has been paid in full.
Section 2.05. Notice; Right to Cure. Lender shall give
Subordinated Creditor notice of any defaults under the Jedi Loan
Agreement that could reasonably be expected to result in action
by Lender to enforce its rights under the Jedi Liens.
Subordinated Creditor shall have the right, but not the
obligation, to cure such defaults at any time prior to
foreclosure by Lender under the Jedi Liens. Subordinated
Creditor shall give Lender notice of any defaults under the Chase
Loan Agreement that could reasonably be expected to result in
action by Subordinated Creditor to enforce its rights under the
Chase Liens. Lender shall have the right, but not the
obligation, to cure such defaults at any time prior to
foreclosure by Chase under the Chase Liens.
ARTICLE 3
MISCELLANEOUS PROVISIONS
Section 3.01 Obligations Absolute. Lender may, at any
time, and from time to time, without the consent of or notice to
the Subordinated Creditor, without incurring responsibility to
the Subordinated Creditor, without impairing or releasing any of
Lender's rights or any of the obligations of the Subordinated
Creditor under this Agreement:
(a) Change the amount, manner, place or terms of
payment, or change or extend for any period the time of
payment of, or renewal or otherwise alter, the Superior
Indebtedness or any instrument or agreement now or
hereafter executed evidencing, in connection with, as
security for or providing for the issuance of any of
the Superior Indebtedness in any manner, or enter into
or amend in any manner any other agreement relating to
the Superior Indebtedness (including provisions
restricting or further restricting payments of the
Subordinated Debt);
(b) Sell, exchange, release or otherwise deal
with all or any part of any property by whomsoever at
any time pledged or mortgaged to secure, howsoever
securing, the Superior Indebtedness;
(c) Release anyone liable in any manner for
payment or collection of the Superior Indebtedness;
(d) Exercise or refrain from exercising any
rights against Borrower or others (including the
Subordinated Creditor); and
(e) Apply any sums received by Lender, by
whomsoever paid and however realized, to payment of the
Superior Indebtedness in such a manner as Lender, in
its sole discretion, may deem appropriate.
Section 3.02. Further Assurances. The Subordinated
Creditor agrees to execute any and all other instruments
necessary as required by the Lender to subordinate the
Subordinated Debt to the Superior Indebtedness as herein
provided.
Section 3.03. Waiver of Notice of Acceptance. Notice of
acceptance of this Agreement is waived, acceptance on the part of
Lender being conclusively presumed by its request for this
Agreement and delivery of the same to it.
Section 3.07. Assignment by Lender. This Agreement may be
assigned by Lender in connection with any assignment or transfer
of the Superior Indebtedness.
Section 3.08. Governing Law. This Agreement shall be
construed under and governed by the laws of the State of
Louisiana, without reference to conflicts of laws rules.
WITNESS THE EXECUTION HEREOF, on the date first written
above.
SUBORDINATED CREDITOR:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), for itself
WITNESSES: and as agent for the Banks
________________________
By:___________________________
___________________
________________________ Vice President
LENDER:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
BY: Enron Capital Corp.,
WITNESSES: its general partner
________________________
By:___________________________
Andrew S. Fastow
________________________ Vice President
BORROWER:
FOREST OIL CORPORATION
WITNESSES:
________________________
By:___________________________
________________________ William L. Dorn
Chairman of the Board and
Chief Executive Officer
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the State of
, hereby certify that, on this________ , day of____________ ,_______ ,
there appeared before me,____________________________________________
of The Chase Manhattan Bank (National Association), a national banking
association, whose address is One Chase Manhattan Bank Plaza, New
York, New York 10081.
(Louisiana)
On this day, before me, the undersigned Notary Public in and for
said State, personally appeared the above named person, to me personally
known, who, being by me duly sworn, did say that he is the designated
officers of said association, and that the instrument was signed and
sealed on behalf of the association by authority of its Board of Directors
and that the above named person acknowledged the instrument to be the free
act and deed of the association.
(Texas)
This instrument was acknowledged before me on this day by the
above named person as the designated officer of said association on
behalf of said association.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in the City of______________, and State of_________ , this ____ day of
____________.
________________________________
Notary Public in and for
The State of____________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the State of
, hereby certify that, on this______ , day of_______________ ,______ ,
there appeared before me,________________ ,__________________________
of Enron Capital Corp., a Delaware corporation and general partner of
Joint Energy Development Investments Limited Partnership, a Delaware
limited partnership, whose address is 1400 Smith Street, Houston,
Texas 77002.
(Louisiana)
On this day, before me, the undersigned Notary Public in and for
said State, personally appeared the above named person, to me personally
known, who, being by me duly sworn, did say that (s)he is the designated
officer of said corporation, and that such corporation is the general
partner of said limited partnership which is registered as a foreign
limited partnership in Louisiana, and the above named person acknowledged
that the instrument was signed on behalf of the corporation by authority
of the Board of Directors in its capacity as general partner of the
aforesaid partnership and the above named person acknowledged the
instrument to be the free act and deed of the partnership.
(Texas)
This instrument was acknowledged before me on this day, by the
above named person as the designated officer, on behalf of said
corporation, as general partner of said limited partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in the City of_______________ , and State of___________ , this ____
day of__________________ ,__________ .
________________________________
Notary Public in and for
The State of____________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the State
of, hereby certify that, on this _____, day of ________, 19__, there
appeared before me, William L. Dorn, Chairman of the Board and Chief
Executive Officer, of Forest Oil Corporation, a New York corporation,
whose address is 950 17th Street, Colorado National Building, Denver,
Colorado 80202.
(Louisiana)
On this day, before me, the undersigned Notary Public in and for
said State, personally appeared the above named person, to me personally
known, who, being by me duly sworn, did say that (s)he is the designated
officer of said corporation, and that the instrument was signed and sealed
on behalf of the corporation by authority of its Board of Directors and
that the above named person acknowledged the instrument to be the free act
and deed of the corporation.
(Texas)
This instrument was acknowledged before me on this day by the above
named person as the designated officers of said corporation on behalf of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in the City of____________ , and State of _________ , this ____ day of
____________________.
________________________________
Notary Public in and for
The State of____________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
EXHIBIT G
INSURANCE REQUIREMENTS
______________________
Attached to and made a part of that Loan Agreement
dated December 28, 1993, by and between FOREST OIL
CORPORATION and JEDI
INSURANCE
Borrower shall at all times while operations are conducted
hereunder procure and maintain with responsible companies for the
benefit and protection of the parties hereto the following
insurance and such other insurance as Borrower deems appropriate:
(a) Worker's Compensation Insurance and Employer's Liability
Insurance covering the employees of Borrower engaged in
operations hereunder in compliance with all applicable state
and federal law.
Worker's Compensation Statutory
Employer's Liability $500,000 Each Accident
(b) Comprehensive General Liability Insurance with combined
single limit of not less than $1,000,000 per occurrence.
This policy shall be endorsed to provide coverage for:
explosion, collapse and underground damage hazards to
property of others; contractual liability; products and
completed operations; and all marine and offshore exposures;
(c) Comprehensive Automobile Liability Insurance covering all
owned, hired or non-owned vehicles with a combined single
limit of not less than $1,000,000 per occurrence;
(d) Excess Umbrella Liability Insurance, in excess of the
coverages required in (a), (b), and (c) above, with a
combined single limit of not less than $50,000,000 per
occurrence;
(e) Operator's Extra Expense Liability Insurance (including cost
of well control, relief wells, redrilling) in an amount not
less than $50,000,000 per occurrence, and endorsed to
provide coverage for the expense of cleanup, containment,
seepage and pollution in an amount not less than $50,000,000
or the minimum amount necessary to comply with the Outer
Continental Shelf Lands Act, whichever is greater; and
(f) Property Insurance on a replacement cost basis fully
covering the property subject to this Agreement, including
business interruption and contingent business interruption
coverage. In addition, the standard mortgagee clause will
be added (see attached) to each policy.
Additional Requirements:
________________________
Borrower shall provide to Lender from time to time as
requested a Certificate of Insurance, in form satisfactory to
Lender, as evidencing that satisfactory coverages of the type and
limits set forth hereinabove are in effect. Policies providing
such coverages shall contain provisions that no cancellation or
material changes in the policies shall become effective except on
thirty (30) days' advance written notice thereof to Lender.
Irrespective of the requirements as to insurance to be carried as
provided for herein, the insolvency, bankruptcy or failure of any
insurance company carrying insurance of Borrower, the failure of
any insurance company to pay claims accruing, or the inadequacy
of the limits of the insurance, shall not affect, negate or waive
any of the provisions of any Agreement applicable to the
property, including, without exception, the indemnity obligations
of Borrower to Lender.
Borrower agrees to require any policies of insurance, except
Workers Compensation coverage, which are in any way related to
the agreement and that are secured and maintained by Borrower to
include Lender, its parent and affiliated companies, and their
respective directors, officers, employees and agents, and
successors and assigns (hereinafter all collectively referred to
as "Lender Group"), as additional insureds and such policies of
insurance shall include waivers of subrogation as to the Lender
Group. Furthermore, underwriters shall waive all rights of
recovery against Lender Group which Borrower may have or acquire
because of deductible clauses in or inadequacy of limits of, any
policies of insurance maintained by Borrower.
STANDARD MORTGAGEE CLAUSE
_________________________
Loss or damage, if any under this Policy, shall be payable to the
mortgagees (or trustees), as designated by endorsement or by
certificates of insurance, and this insurance, as to the interest
of the mortgagee (or trustee) only therein, shall not be
invalidated by any act or neglect of the mortgagor or owner of
the within described property, nor by any foreclosure or other
proceedings or notice of sale relating to the property, nor by
any change in the title or ownership of the property, nor by the
occupation of the premises for purposes more hazardous than are
permitted by this Policy. Provided, that in the case of
mortgagor or owner neglect to pay any premium due under this
Policy, the mortgagee (or trustee) shall, on demand, pay the
same.
Provided, also, that the mortgagee (or trustee) shall notify the
Underwriter of any change of ownership or occupancy or increase
of hazard which shall come to the knowledge of said mortgagee (or
trustee) and unless permitted by this Policy, it shall be noted
thereon, and the mortgagee (or trustee) shall, on demand, pay the
premium for such increased hazard for the term of the use
thereof; otherwise this Policy shall be null and void.
The Underwriters reserve the right to cancel this Policy at any
time as provided by its terms, but in such case this Policy shall
continue in force for the benefit only of the mortgagee (or
trustee) for ten (10) days after notice to the mortgagee (or
trustee) of such cancellation, and shall then cease, and the
Underwriters shall have the right, on like notice, to cancel this
agreement.
Whenever the Underwriters shall pay the mortgagee (or trustee)
any sum for loss or damage under this Policy and shall claim
that, as to the mortgagor or owner, no liability therefore
existed, the Underwriters shall, to the extent of such payment,
be thereupon legally subrogated to all the rights of the party to
whom such payment shall be made, under all securities held as
collateral to the mortgage debt, or may at its option pay to the
mortgagee (or trustee) the whole principal due, or to grow due on
the mortgage, with interest, and shall thereupon receive a full
assignment and transfer of the mortgage and of all such other
securities; but no subrogation shall impair the right of the
mortgagee (or trustee) to recover the full amount of the claim.
EXHIBIT "H"
PART 1
Property: Eugene Island 320
Subject Interest: An undivided 66.66667% interest in the
operating rights, entitling Grantor to not less
than a 48.044434% BPO (as defined below) and
43.866698% APO (as defined below) net revenue
interest, in the following oil and gas lease:
Serial No.: OCS-G-8695
Dated: July 1, 1987
Lessor: United States of America
Lessee: Tenneco Oil Company
Description: Block 320, Eugene Island Area, OCS
Leasing Map, Louisiana Map No. 4A, INSOFAR
AND ONLY INSOFAR as said lease covers the S/2
of said Block 320 but only as to those depths
down to 6,091'
Permitted Encumbrances:
1. Farmout Agreement effective February 28, 1989, as amended,
between Chevron USA, Inc., as Farmouter, and Forest Oil
Corporation, as Farmoutee. This Agreement sets forth
interests before payout ("BPO") and after payout ("APO") as
defined therein.
2. Operating Agreement dated February 28, 1989, as amended, by
and between Forest Oil Corporation, as Operator, and Harbert
Energy Corporation, as Non-Operator.
3. Exploration Agreement dated June 1, 1988, between Forest Oil
Corporation and Harbert Energy Corporation.
4. Assignments dated May 30, 1989, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee Executive Group
(89-004 and 89-104).
5. Gas Purchase and Sales Agreement dated July 22, 1988, but
effective June 30, 1988 between Tenneco Gas Supply
Corporation, as Buyer, and Tenneco Oil Company, As Seller.
A. Ratification and Amendment dated September 8,
1988, between TOC-Gulf Coast ("Seller") and
Tenneco Gas Supply Corporation ("Buyer").
B. Second Amendment effective October 31, 1988
between TOC-Gulf of Mexico, Inc. and TOC-Gulf
Coast Inc. ("Seller") and Tenneco Gas Supply
Corporation ("Buyer").
C. Third Amendment effective November 1, 1988
between TOC-Gulf of Mexico Inc. ("Seller")
and Tenneco Gas Supply Corporation ("Buyer").
6. Production Handling Agreement between Forest Oil Corporation
and Santa Fe Energy Resources, Inc.
7. Assignments dated May 30, 1989, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee (89-004 and 88-
104).
8. Letter Agreement between Chevron U.S.A. Inc. and Forest Oil
Corporation, et al., dated August 18, 1992.
PART 2
Property: Eugene Island 326
Subject Interest: An undivided 100% interest in the operating
rights, entitling Grantor to not less than i)
72.067% net revenue interest in the E/2 of E/2 and
E/2 of W/2 of E/2 and ii) 76.667% net revenue
interest in the W/2 of W/2 of E/2, in the
following oil and gas lease:
Serial No.: OCS-G-5518
Dated: July 1, 1983
Lessor: United States of America
Lessee: Gulf Oil Corporation
Description: Block 326, Eugene Island Area, OCS
Leasing Map, Louisiana Map No. 4A, INSOFAR
AND ONLY INSOFAR as said lease covers the E/2
of said Block 326 but only as to those depths
down to 12,000'
Permitted Encumbrances:
1. Farmout Agreement dated 2-5-88 between Chevron USA, Grantor,
Adobe, and Plumb (now Harbert).
2. Operating Agreement dated 2-5-88 between Grantor, Adobe and
Plumb (now Harbert) including Gas Balancing Agreement
attached thereto as Exhibit E.
3. Gas Sales Contract effective 2-1-91 between Grantor and
TEMCO.
4. Oil & Condensate Sales Contract effective 1-1-90 between
Grantor and Chevron USA.
5. Connection Agreement dated 11-1-89 between Grantor and
Marathon Pipeline Co.
6. Transportation Agreement dated 11-1-89 between Grantor and
Marathon
7. Connection Agreement dated 10-4-89 between Grantor and
Tennessee Gas Pipeline.
8. Partial Assignment of Operating Rights effective May 4,
1988, from Chevron to Grantor, et al.
9. Assignments dated February 24, 1988, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee (88-009 and 88-
109), as to E/2 of E/2 and E/2 of W/2 of E/2.
PART 3
Property: Vermilion Block 255
Subject Interest: An undivided 20.0% operating rights
interest, entitling Grantor to not less than
a 16.25% net revenue interest, in the
following oil and gas lease:
Serial No.: OCS-G 1152
Dated: June 1, 1962
Lessor: United States of America
Lessee: Forest Oil Corporation
Description: Block 255, Vermilion Area, South
Addition, OCS Leasing Map, Louisiana Map
No. 3B, INSOFAR AND ONLY INSOFAR as said
lease covers:
N/2 of NW/4 of SW/4
N/2 of NE/4 of SW/4
SE/4 of SW/4 of NW/4
S/2 of SE/4 of NW/4
limited to the stratigraphic equivalent
of the top of the H-2 Sand at a measured
depth of 7780' as seen in the OCS-G-1152
#5 ST Well down to the base of the K-5
Sand at a measured depth of 13,085' as
seen in the OCS-G-1152 #6 Well.
Permitted Encumbrances:
1. Operating Agreement attached as Exhibit "A" to Geophysical
Exploration Agreement dated May 17, 1961 with Hope Natural
Gas Company, et al, governing non-unitized operations, per
letter agreement dated July 7, 1971 between Forest Oil
Corporation and Columbia Gas Development Corporation, et al.
2. Gas Processing Agreement with Exxon dated May 26, 1981,
covering Vermilion Block 255 and Block 256 (Bluewater Gas
Plant).
3. Assignment of overriding royalty interest from Forest Oil
Corporation to Dale H. Dorn, Nominee, on behalf of certain
Forest Oil Corporation Executive Employees.
PART 4
Property: Vermilion Block 101
Subject Interest: An undivided 76.39% leasehold interest,
entitling Grantor to not less than a
63.65833% net revenue interest, in the
following oil and gas lease:
Serial No.: OCS-G 10658
Dated: July 1, 1989
Lessor: United States of America
Lessee: TXP Operating Company
Description: Block 101, Vermilion Area, OCS
Leasing Map, Louisiana Map No. 3,
containing 4531.63 acres, INSOFAR AND
ONLY INSOFAR as said lease covers:
1) the SW/4 of SE/4 of NW/4 of said
Block 101 from the surface down to
100' below the base of the 9,300'
Sand at a measured depth of 8,710'
as seen in the OCS-G-10658 #1 (B-1)
Well, and
2) the E/2 of NW/4 of SW/4 and the
NW/4 of NE/4 of SW/4 of said Block
101 from the surface down to 100'
below the base of the 10,300' Sand
at a measured depth of 9,136' as
seen in the OCS-G-10658 #1 (B-1)
Well.
Permitted Encumbrances:
1. Offshore Operating Agreement, dated effective July 1, 1989,
between Transco Exploration and Production Company, as
Operator, and Zilkha Energy Company, as Non-Operator.
2. Gas Purchase Contract, dated August 28, 1991, between
Transco Exploration and Production Company, as Seller, and
Transco Energy Marketing Company, as Buyer.
PART 5
Property: Vermilion Block 102
Subject Interest: An undivided 100.0% interest in the
operating rights, entitling Grantor to not
less than a 83.333333% net revenue interest,
in the following oil and gas lease:
Serial No.: OCS-G 3393
Dated: January 1, 1977
Lessor: United States of America
Lessee: CNG Producing Co., et al.
Description: Block 102, Vermilion Area, OCS
Leasing Map, Louisiana Map No. 3,
INSOFAR AND ONLY INSOFAR as said lease
covers:
1) SE/4 of NW/4 of NW/4
S/2 of NE/4 of NW/4
NE/4 of SW/4 of NW/4
SE/4 of NW/4
W/2 of SW/4 of NE/4
limited to the E Sand as seen between
the measured depths of 7,366' and 7,460'
in the Electric log of the OCS-G-3393 #3
(S/T) Well.
2) SW/4 of NE/4 of NW/4
NW/4 of SE/4 of NW/4
SE/4 of NE/4 of NW/4
E/2 of SE/4 of NW/4
W/2 of SW/4 of NE/4
limited to the F Sand as seen between
the measured depths of 7,190' and 7,288'
in the Electric log of the CNG V102 OCS-
G-3393 #2 Well.
3) E/2 of SW/4 of NW/4
SE/4 of NE/4 of NW/4
NE/4 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the H Sand as seen between
the measured depths of 7,935' and 8,046'
in the Electric log of the ODECO V102
OCS-G-3303 #3 (S/T) Well.
4) E/2 of SW/4 of NW/4
NE/4 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the J Sand as seen between
the measured depths of 8,005' and 8,034'
in the OCS-G-3393 #2 Well.
5) E/2 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the M-1 Sand as seen between
the measured depths of 8,398' and 8,456'
in the Electric log of the OCS-G-3303 #3
(S/T) Well.
Permitted Encumbrances: None
PART 6
Property Eugene Island Area, Block 53 SW/4
Subject Interest: Fifty percent (50%) of six-sixths (6/6)
interest in and to the Operating Rights in the
southwest quarter (SW/4) only of that certain Oil
and Gas Lease of Submerged Lands under the Outer
Continental Shelf Lands Act bearing Serial Number
OCS 0479 dated December 1, 1954 from the United
States of America, Department of the Interior, as
Lessor, covering all of Block 53, Eugene Island
Area as shown on official leasing map, La. Map No.
4, INSOFAR AND ONLY INSOFAR as said Operating
Rights cover the depths from the surface down to
the stratigraphic equivalent of the base of the
CIB Carst Sand as seen in the EI 53 OCS-G-0479 #9
well at a measured depth of 13,092'.
Together with a like interest in and to that
particular Right of Way dated August 28, 1990 from
the Minerals Management Service bearing Serial
Number OCS-G 12373 being 200 feet in width for the
installation, operation and maintenance of a 6-5/8
inch pipeline, 3.6 miles in length from Platform B
in Block 53, to a Subsea tie-in with Trunkline Gas
Company's 22 inch pipeline (OCS-G 2817) in Block
64, all in the Eugene Island Area.
Working Interest - 50.00%
Net Revenue Interest - 41.67%
Further burdened by Net Profits Interests equal
to:
C. Dan Bump - 1.20%
Lawrence J. Cernosek - 0.80%
Permitted Encumbrances:
1. Farmout Agreement dated March 9, 1990 from Pennzoil
Exploration & Production Co. to Sandefer Offshore Co.
2. Amendment Letter to Farmout Agreement with Pennzoil dated
August 10, 1990.
3. Assignment of Operating Rights dated effective March 9, 1990
from Pennzoil Exploration & Production Co. to Sandefer
Offshore Operating Co.
4. Joint Operating Agreement between Pennzoil Exploration &
Production Co. and Sandefer Offshore Co. dated June 1, 1990
naming Sandefer Offshore Operating Co. as Operator.
5. That particular Letter Agreement dated July 18, 1990 between
Sandefer Offshore Operating Co. and Trunkline Gas Company
covering transportation of water-saturated gas.
6. That particular Condensate Separation Agreement dated
January 1, 1991 by and between Trunkline Gas Company and
Sandefer Offshore Operating Co.
7. That particular Liquid Hydrocarbon Transportation Agreement
dated January 1, 1991 by and between Trunkline Gas Company
and Sandefer Offshore Operating Co.
8. That particular Crude Oil Purchase Agreement dated May 26,
1992 by and between Amoco Production Company and Sandefer
Offshore Operating Co.
9. That particular Assignment of Net Profits Interest dated
December 17, 1990 between General Sandefer Offshore
Partnership II and Lawrence J. Cernosek (0.80%).
10. That particular Assignment of Net Profits Interest dated
December 17, 1990 between General Sandefer Offshore
Partnership II and C. Dan Bump (1.20%).
Property West Cameron Area Block 44
Subject Interest: All of the Leasehold Interest in and to that
Oil and Gas Lease bearing Serial Number OCS-G 6566
dated June 1, 1984 from the United States of
America, Department of the Interior, as Lessor, to
Union Texas Petroleum Corp., and Agip Petroleum
Co. Inc., as Lessee, covering that portion of
Block 44, West Cameron Area, OCS Leasing Map,
Louisiana Map No. 1, seaward of the line
established pursuant to Section 8(g) of the OCS
Lands Act as amended, and described more fully in
said lease, from the surface down to the
stratigraphic equivalent of the base of the
Discorbis B #6 Sand as seen between the measured
depths of 9,806' and 9,884' in the Electric log of
the Sandefer OCS-G-6566 #2 Well.
Working Interest - 100.00%
Net Revenue Interest - 75.00%
Permitted Encumbrances:
1. Farmout Agreement dated January 10, 1989 from Union Texas
Petroleum Corporation and Agip Petroleum Co. Inc. to General
Sandefer Offshore Partnership.
2. Assignment of Oil and Gas Lease dated May 22, 1989 from
Union Texas Petroleum Corporation and Agip Petroleum Co.
Inc. to General Sandefer Offshore Partnership.
3. That particular Liquid Hydrocarbon Transportation Agreement
dated October 1, 1990 by and between Stingray Pipeline
Company and Sandefer Offshore Operating Co.
4. That particular Operating Agreement for Measurement
Facilities dated July 17, 1990 by and between Stingray
Pipeline Company and Sandefer Offshore Operating Co. and
Amendment Letter of July 12, 1990.
5. That particular Liquids Purchase Agreement dated January 1,
1992 by and between Marathon Oil Company and Sandefer
Offshore Operating Co.
6. That particular Crude Oil Marketing Consulting Agreement
dated January 30, 1992 by and between Vision Resources, Inc.
and Sandefer Offshore Operating Co.
7. That particular Lease Rental Agreement dated August 1, 1993
by and between ISS Compression, Inc. and Sandefer Offshore
Operating Co.
EXHIBIT I
Prior Capital Operations
________________________
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Loma Vieja/MartinezComplete L. Lopez #1. 374 1993
EI 320 Drill and complete in CH Sand. 2727 1993
EI 326 Drill case and suspend Well #1
thru F4 (EG) Sand. 1942 1993
EI 326 Drill case and suspend Well #2
thru deep seis anomaly. 250 1993
Verm. 255 Drill, case and suspend #5. 1140 1993
Verm. 255 Drill, plug and abandon #7. 350 1993
Verm. 255 Template/soil boring. 19 1993
Verm. 255 Drill, case and suspend #6. 1029 1993
Verm. 255 Platform and facilities. 126 1993
_____
Subtotal: 7957
Scheduled Capital Operations
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Loma Vieja/Martinez Drill and complete El Peyote #5
in S Sand. 989 1994
Loma Vieja/Martinez Drill and complete Well #7
(TX 13077) in R Sand. 1043 1994
Loma Vieja/Martinez Drill and complete Queen City
Unit #2. (Queen City Prospect) 75 1994
Loma Vieja/Martinez Drill and complete Queen City
Unit #3. (Queen City Prospect) 75 1994
Loma Vieja/Martinez Lease acquisition. (U Sand Prospect) 300 1994
Loma Vieja/Martinez Drill and complete Queen City
Unit #1. (Queen City Prospect) 75 1994
Loma Vieja/Martinez Drill Well #6 (TX 13081) in Hinnant.
(Hinnant Prospect) 1375 1994
Verm. 101/102 Drill B-2 Well in Block 101
9300' Sand. 1910 1994
EI 320 Drill and complete in CH Sand. 400 1994
EI 326 Complete Well #1 as a single
in F4 (EG). 1160 1994
EI 326 Drill and complete Well #2 in F4
(EG) and Deep Sand. 4860 1994
EI 326 Platform, pipeline and facilities. 6770 1994
Verm. 255 Platform, pipeline and facilities. 1205 1994
Verm. 255 Mob/demob rig. 50 1994
Verm. 255 Tieback/sidetrack (H-1)
(dual Upr. K-5, K-3 Sands). 474 1994
Verm. 255 Tieback/complete #6 (H-2)
(single Lwr. K-5, Selec's 340 1994
K-4, K-2).
Verm. 255 Drill and complete H-3
(dual I-2, H-5 w/Selec. 1-1). 740 1994
EI 53 Sidetrack #7 Well Cib Carst, Tex L2,
Tex L, Upr. Tex L. 985 1994
EI 53 Upgrade water handling. 50 1994
______
Subtotal: 22876
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Loma Vieja/Martinez Drill and complete Well #4
(TX 13077) to Hinnant. 477 1995
Loma Vieja/Martinez Drill and complete Queen City #5.
(Queen City Prospect) 77 1995
Loma Vieja/Martinez Drill and complete Queen City #8.
(Queen City Prospect) 77 1995
Loma Vieja/Martinez Drill Well #1 (TX 13078) T6-T10. 1533 1995
Loma Vieja/Martinez Drill and complete Queen City #6.
(Queen City Prospect) 77 1995
Loma Vieja/Martinez Drill and complete new Well #1
(TX 13079) to U (includes facility
expansion). (U Sand Prospect) 2227 1995
Loma Vieja/Martinez Drill and complete Queen City #4.
(Queen City Prospect) 77 1995
Loma Vieja/Martinez Drill and complete Queen City #7.
(Queen City Prospect) 77 1995
Loma Vieja/Martinez Drill Well #8 (TX 13085) to R&S.
(Cuellar Propsect) 3399 1995
Verm. 101/102 Recomplete B1A Well in Block 101
to 10300'. 80 1995
Verm. 101/102 Drill A-2 Well in BLock 102 produce E and
M1 Sands (H, J and F behind pipe). 4530 1995
EI 320 Recomplete to CA Sand. 103 1995
Verm. 255 Wireline selective #6 (H-2)(K-4 Sand) 6 1995
EI 53 Recomplete #9 Well, produce Tex L2,
and Crisk 1. 860 1995
_____
Set up Disc 12.2 Crisk 1 L.
Subtotal: 13600
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Loma Vieja/Martinez Drill and complete El Peyote
#6 to S. 1050 1996
Loma Vieja/Martinez Drill and complete Queen City
Unit #10. (Queen City Prospect) 80 1996
Loma Vieja/Martinez Drill and complete Queen City
Unit #12. (Queen City Prospect) 80 1996
Loma Vieja/Martinez Drill Well #9 (TX 13077) R&S
(Fandango Equivalent Prospect) 1891 1996
Loma Vieja/Martinez Recomplete Loma Vieja #1A
to Hinnant. 57 1996
Loma Vieja/Martinez Drill and complete Well #5 (TX 13078)
to Hinnant. 548 1996
Loma Vieja/Martinez Drill and complete Well #2
(TX 13079) T6-T10. 1579 1996
Loma Vieja/Martinez Drill and complete Well #3
(TX 13079) T8-T10. 1437 1996
Loma Vieja/Martinez Drill and complete new Well #2
(TX 13079) to U (U Sand Prospect) 1764 1996
Loma Vieja/Martinez Drill and complete new Well #3
(TX 13079) to U (U Sand Prospect) 1764 1996
Loma Vieja/Martinez Drill and complete Queen City #9.
(Queen City Prospect) 80 1996
Loma Vieja/Martinez Drill and complete Queen City #11.
(Queen City Propsect) 80 1996
Loma Vieja/Martinez Drill and complete Queen City #13.
(Queen City Prospect) 80 1996
Verm. 101/102 Recomplete A-2 Well (J Sand). 53 1996
Verm. 101/102 Drill #5 sidetrack 2 in Block 102,
H & J Sands 2686 1996
Verm. 255 Rig workover #5 (H-1)(dual J-2B,
I-3 Sands). 254 1996
Verm. 255 Wireline plugback #6 (H-2)
(K-2 Sands). 6 1996
Verm. 255 Wireline plugback H-3 (I-1 Sand). 6 1996
EI 53 Recomplete #8 Well to Crisk and
Crisk 2. 600 1996
_____
Subtotal: 14095
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Loma Vieja/Martinez Drill and complete Queen City
Unit #14. (Queen City Prospect) 82 1997
Loma Vieja/Martinez Drill and complete Queen City
Unit #16. (Queen City Prospect) 82 1997
Loma Vieja/Martinez Drill and complete Queen City
Unit #18. (Queen City Prospect) 82 1997
Loma Vieja/Martinez Drill and complete Queen City
Unit #15. (Queen City Prospect) 82 1997
Loma Vieja/Martinez Drill and complete Queen City
Unit #17. (Queen City Prospect) 82 1997
EI 320 P&A well. 127 1997
Verm. 101/102 Abandon B platform on 101. 250 1997
Verm. 101/102 W/O A2 Well in 102 (to H Sand). 55 1997
Verm. 255 Rig workover #6 (H-2)(single K-1 Sand) 174 1997
Verm. 255 Rig workover H-3 (single H-4,
selec's H-3, H-2) 303 1997
EI 53 Recomplete #9 Well to Disc. 12.2. 27 1997
_____
Subtotal: 1346
Loma Vieja/Martinez Drill and complete Queen City Unit #19.
(Queen City Prospect) 85 1998
Loma Vieja/Martinez Drill and complete Queen City Unit #21.
(Queen City Prospect) 85 1998
Loma Vieja/Martinez Drill and complete Queen City Unit #20.
(Queen City Prospect) 85 1998
Loma Vieja/Martinez Drill and complete Queen City Unit #22.
(Queen City Prospect) 85 1998
Verm. 101/102 W/O A2 Well to F Sand. 56 1998
EI 53 W/O #9 Well to Crisk 1 L. 28 1998
W.C. 44 Abandon platform. 650 1998
____
Subtotal: 1074
Verm. 255 Wireline selective H-3 (H-3 Sand). 7 1999
____
Subtotal: 7
NET INVESTMENT
PROPERTY ACTIVITY ($000'S) YEAR
________ ________ ________ ____
Verm. 101/102 W/O AIA well to F Sand. 900 2000
___
Subtotal: 900
Verm. 255 Wireline selective H-3 (H-2 Sand). 7 2001
___
Subtotal: 7
EI 326 P&A platform. 1077 2002
Verm. 255 Abandonment. 184 2002
EI 53 Abandon field. 329 2002
_____
Subtotal: 1590
Verm. 101/102 Abandon field. 2054 2003
____
Subtotal: 2054
TOTAL: 65506
EXHIBIT J
Scheduled Principal Amounts and
Projected Twelve Month Cash Flow
Scheduled Principal Projected Twelve
Payment Date Amount ($MM) Month Cash Flow ($MM)
____________ ____________ ____________________
Each Payment Date prior
to February 15, 1996 $70.0 ----
February 15, 1996 59.0 18.0
August 15, 1996 52.0 19.0
February 15, 1997 45.0 20.0
August 15, 1997 35.0 23.0
February 15, 1998 25.0 25.0
August 15, 1998 20.0 22.0
February 15, 1999 15.0 18.0
August 15, 1999 12.5 15.0
February 15, 2000 10.0 12.0
August 15, 2000 5.0 11.0
December 31, 2000 0.0 ----
EXHIBIT K
Secondary Schedule Capital Cost Ceilings
________________________________________
Secondary Schedule Capital Capital Expenditures
Cost Ceiling Shall not Exceed ($MM)
____________ ______________________
Year ending December 31, 1996 $15.5
Year ending December 31, 1997 1.5
Year ending December 31, 1998 1.5
Year ending December 31, 1999 0.008
Year ending December 31, 2000 1.0
Exhibit L
PAGE 1
FOREST OIL CORPORATION
MONTHLY PAYMENT AMOUNT REPORT - Pursuant to Section ___ of Loan Agreement
dated ______ __, 1993
Production Month:___________, 19xx
Payment Date:_________ 15, 19xx
I.Computation of Net Operating Cash Flow (from Lease Operating
Statements)
a. Net Production Revenue
i. Total gas volume (mcf)
Average gas price ($/mcf) $ ______________
Total gas revenue ($) $
ii. Total oil volume (bbls)
Average oil price ($/bbl) $ ______________
Total oil revenue ($) $
iii. Total other products revenue
iv. Effects of hedging
v. Adjustments (including advance payments
and recoupments) ______________
vi. Net Production Revenue 0.00
b. Operating Costs
i. Direct operating expenses $
ii. Workover Expenses
iii. Overhead and Insurance
iv. Production Taxes
v. Ad Valorem Taxes
vi. Transportation Charges
vii. Adjustments ______________
viii. Total Operating Costs 0.00
c. Net Operating Cash Flow for the month 0.00
d. Times 90% applicable to Monthly Payment Amount X 90%
______________
e. Net Operating Cash Flow applicable to Monthly Payment Amount 0.00
II. Computation of Capital Expenses
a. Gross Capital Spending (from Capital Expenditure Summary)
b. Times 80% applicable to Capital Expenses X 80%
__________
c. Capital Expenses 0.00
_____________
III. Computation of Monthly Payment Amount
a. Net Operating Cash Flow less Capital Expenses
equals Monthly Payment Amount due to Enron $ 0.00
b. If Net Operating Cash Flow is less than Capital
Expenses, then amount payable to Enron equals zero. $
Exhibit L
PAGE 2
FOREST OIL CORPORATION
MONTHLY PAYMENT AMOUNT REPORT - Pursuant to Section ___ of Loan Agreement
dated ______ __, 1993
Production Month:___________, 19xx
Payment Date:_________ 15, 19xx
IV. Calculation of Interest Due
a. Outstanding principal balance on previous
Payment Date $
b. Interest at Applicable Interest Rate of
12.5% p.a. x .125
c. Number of days outstanding x 30 / 365
____________
d. Interest on previously reported principal $
V. Application of Monthly Payment Amount
a. Monthly Payment Amount $
b. Less: Cumulative Capital Spending Carryover
from prior month ___________
c. i. If positive, then equals Cash Flow
Available for Principal and Interest $ 0.00
Less: Total accrued interest _____________
Principal Amortization $ 0.00
=========
ii. If negative, then equals Capital Spending Carryover $ 0.00
=========
VI. Balances after application of proceeds
Prior Balance Current Activity Current Balance
_____________ ________________ _______________
a. Loan Principal $ $ $ 0.00
b. Cumulative Capital
Spending Carryover $ $ $ 0.00
FOREST OIL CORPORATION
CAPITAL EXPENDITURES SUMMARY
________________ , 19XX
(In Thousands)
Current
Net ITD FOC
AFE Incurred Working FOC Month FOC
AFE Property Amount Costs Interest Net FOC Net Activity
___ ________ ______ _____ ________ ___ _______ ________
Eugene Island 320 Project:
93-3190 Drill #3 Well $ 66.67%
93-3335 Eugene Island 326 Project:
Drill #3 Well 100.00%
Vermilion 255 Project:
93-2200 Design Tripod Plat. 20.00%
93-2210 Fabricate Tripod Plat. 20.00%
93-2220 Install Tripod Plat. 20.00%
93-2230 Design/insp./test- Fac. 20.00%
93-2240 Fab./Refurb. Test Fac. 20.00%
93-2250 Hookup of Test Fac. 20.00%
93-2260 Design/insp./2-6" P/Ls 20.00%
93-2270 Fabricate & Install P/Ls 20.00%
93-3280 Drill the #6 Well 20.00%
93-3045 Drill the #5 Well 20.00%
93-3240 Drill the #7 Well ______ _____ 20.00% ___ _______ _______
Total Vermilion 255 Project______ _____ ________ ___ _______ _______
Total Financed Projects ====== ===== ======== === ======= =======
EXHIBIT M-1
(713) 758-2262
December 30, 1993
Joint Energy Development Investments
Limited Partnership
1400 Smith Street
Houston, Texas 77002
Gentlemen:
We have acted as counsel to Forest Oil Corporation, a New York
corporation (the "Borrower"), in connection with the transactions covered by
that certain Loan Agreement dated December 28, 1993, between Borrower and you,
as Lender (the "Agreement"), providing for certain loans from you to Borrower.
This opinion is rendered to you pursuant to Section 7.01 of the Agreement.
Capitalized terms not otherwise defined herein and used (but not defined)
herein are defined in the Agreement.
In connection with this opinion we have examined copies of the following
documents delivered in connection with the Agreement, all of which are dated as
of December 28, 1993 and which, notwithstanding the Agreement provisions, are
referred to in this opinion as the "Principal Documents":
1. the Agreement;
2. the Note;
3. the Deed of Trust, Assignment of Production, Security Agreement,
and Financing Statement (the "Deed of Trust");
4. the Security Agreement between Borrower, as debtor, and Lender,
as secured party, (the "Security Agreement");
5. UCC-1 Financing Statement for Texas;
6. the Act of Mortgage, Assignment of Production, Security
Agreement and Financing Statement executed by the Borrower as
Mortgagor and Lender as Mortgagee;
7. the UCC-1 Financing Statement, executed by the Borrower as
debtor, in favor of the Lender, as secured party (Louisiana);
8. Conveyance of Overriding Royalty (Wagner & Brown);
9. Production Agreement (Wagner & Brown);
10. Conveyance of Overriding Royalty (Eugene Island Block 326)
11. Production Agreement (Eugene Island Block 326)
12. the Borrowing Request executed by Borrower;
13. the Compliance Certificate executed by the Borrower; and
14. Swap Agreement (Basic Swap) between Lender and Borrower.
We have discussed the matters addressed in this opinion with officers
and representatives of Borrower to the extent we have deemed appropriate to
enable us to render this opinion. In particular, but without limitation, we
have confirmed that the Borrower acknowledges, understands and agrees that the
Principal Documents as written set forth the entire understanding and agreement
of the parties thereto.
In rendering the opinions expressed below we have assumed that
obligations described in the Principal Documents have been duly authorized,
executed and delivered by, and create and constitute the legal, valid, binding
and enforceable obligations of, the Lender and parties thereto other than
Borrower. Except for the matters specifically addressed herein, we have
assumed that each representation of Borrower contained in the Principal
Documents is true and correct.
In connection with our examination in connection with this opinion,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified or photostatic copies. We have
not made any independent examination of the books and records of the Borrower.
As to factual matters and information relevant to the opinions herein stated
that are in the possession of the Borrower, we have relied solely upon
representations made by duly authorized representatives of the Borrower and
upon certificates of the Borrower and certain public officials. We have also
assumed, without verification, for purposes of this opinion that no facts
exist that would make available defenses of mutual mistake, fraud, concealment,
undue influence, duress, or criminal activity.
In rendering the opinions expressed below we have assumed that (a) a
Colorado court (or a federal court applying Colorado conflicts of laws rules)
would apply the internal laws of the State of Colorado as the laws governing
the interpretation, construction, and enforcement of the Agreement (except for
any provisions of the Agreement relating to the title to any of the Mortgaged
Properties and to the perfection, priority and enforcement of liens on and
security interests in any of the Mortgaged Properties ["Foreign Law
Provisions"]) and the determination of the rate or amount of interest which
may lawfully be paid with respect to the Note; (b) the Agreement and the
covenants of the Borrower to pay the Note and perform the obligations
described therein create and constitute the legal, valid, binding and
enforceable obligations of the Borrower and all other parties thereto under
the laws of the State of Colorado to the extent that Colorado law is intended
to apply thereto; and (c) the Note and the remaining obligations of Borrower
under the Agreement are not usurious or illegal under the laws of the State
of Colorado.
Based upon the foregoing and subject to the qualifications set forth
above and below, we are of the opinion that:
1. Borrower is a corporation organized, validly existing and in
good standing under the laws of the State of New York, has qualified and is
authorized to transact business and is in good standing as a foreign
corporation in the States of Texas and Louisiana, and has the necessary
corporate power and authority to make and to perform its obligations under
the Principal Documents.
2. The execution, delivery and performance by Borrower of the
Principal Documents (i) have been duly authorized by all necessary corporate
action by Borrower, and (ii) do not and will not (A) violate any provision of
its certificate of incorporation or by-laws as in effect on the date hereof,
(B) violate any provision of law or regulation applicable to Borrower on the
date hereof, or (C) to our knowledge, after due inquiry, result in the breach
of, or constitute a default under, any agreement or instrument to which
Borrower is a party on the date hereof or by which Borrower is bound on the
date hereof, or result in the creation or imposition of any Lien (other than
in favor of Lender).
3. The Principal Documents to which Borrower is a party have been
duly executed and delivered by Borrower. The obligations of Borrower under
each of the Principal Documents that are governed by the laws of the State of
Texas are enforceable in accordance with the respective terms of the Principal
Documents under the laws of the State of Texas.
4. There are, to the best of our knowledge, except as set forth
on Exhibit D to the Agreement, no actions, suits or proceedings pending or
threatened against the Borrower before any court or arbitrator(s), or by or
before any administrative agency or governmental authority, in which there is
a reasonable possibility of an adverse decision which could have a material
adverse effect on the financial condition or business of the Borrower or the
execution or performance of the transactions contemplated by Principal
Documents.
5. Other than (i) filings required to be made with governmental
offices necessary to properly and fully register title to Borrower's
properties in accordance with all applicable laws, and (ii) the filing of
financing statements, the filing and recording of mortgages, filings required
in connection with any enforcement proceedings and all other (including future)
filings necessary to create, perfect or continue the perfection of any lien
or security interest granted under the Principal Documents, including without
limitation the proper and timely filing of Principal Document Nos. 3 and 5
above with respect to Mortgaged Properties lying in the State of Texas, no
authorizations, consents, approvals, licenses, filings or registrations with,
any governmental or regulatory authority or agency are required of the
Borrower in connection with the execution, delivery or performance by the
Borrower of the Principal Documents.
6. According to the records of the Minerals Management Service
in Metairie, Louisiana, the Borrower is duly qualified to hold interests in
federal offshore oil and gas leases.
7. A Texas court, or a Federal court applying Texas conflicts of
laws principles, should give effect to the express choice of law provisions
contained in the Agreement and the Note and, accordingly, should apply the
internal laws of the State of Colorado to determine the legality and
enforceability of the provisions of the Agreement and the Note (other than
the Foreign Law Provisions) including the determination of whether the
Agreement and the Note taken together are usurious.
8. Neither the Borrower nor any Subsidiary is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
9. Fully executed counterparts of the Deed of Trust should be
filed for record in the offices of each Texas county wherein the Mortgaged
Properties lie. A fully executed Texas Financing Statement should be filed
in the office of the Texas Secretary of State. No other filings are
necessary or appropriate for the purposes intended to be accomplished thereby,
other than continuation statements as required by the Texas Business and
Commerce Code (the "Code") for property in Texas. Upon such filings, the Deed
of Trust, and the Texas Financing Statement will constitute as security for
the Note, (a) valid mortgage liens on the Mortgaged Property lying in Texas,
if accurately and specifically described in each of said documents as being
mortgaged thereby, and (b) a perfected security interest in all tangible
personal property and fixtures located in Texas if adequately described
therein as being covered thereby, to the extent the Code is applicable
thereto, except:
(a) In the case of proceeds, continuation of perfection of the
Lender's security interest therein is limited to the extent
set forth in the Code;
(b) Continuation statements as required by the Code must be filed
in order to maintain the effectiveness of the filings referred
to in the above paragraph;
(c) In the case of goods which are installed in or affixed to, or
become a part of a product or mass with goods, which are not
items of collateral;
(d) In the case of goods which are or become fixtures, except for
fixtures located on the real property portions of the properties
covered thereby; and
(e) In the case of property which becomes collateral after the date
hereof, Section 552 of the Federal Bankruptcy Code limits the
extent to which property acquired by a debtor after the
commencement of a case under the Federal Bankruptcy Code may be
subject to a security interest arising from a security agreement
entered into by the debtor before the commencement of such case.
We call to your attention to the fact that the perfection of the
above security interests will be terminated (i) as to any collateral (as to
which the filing of a financing statement is necessary) acquired by the
Borrower more than four (4) months after the Borrower changes its name,
identity or corporate structure so as to make the financing statements
seriously misleading, unless new appropriate financing statements indicating
the new name, identity or corporate structure of the Borrower are properly
filed before the expiration of such four (4) months and (ii) as to any
collateral consisting of accounts, general intangibles, mobile goods and (in
the case of a non-possessory security interest) chattel paper four (4)
months after the Borrower changes its chief executive office to a new
jurisdiction (or, if earlier, when perfection under the laws of the State
of Texas would have otherwise ceased) unless such security interests are
perfected in such new jurisdiction before that termination.
The foregoing opinions are subject to and in all respects qualified by
the following:
The opinions expressed herein as to validity, binding effect and
enforceability are subject to the effect of liquidation, conservatorship,
insolvency, bankruptcy, reorganization, moratorium, fraudulent conveyance
or other similar laws generally affecting the rights of creditors, the
application of equitable principles (whether in equity or at law) and the
availability of equitable remedies (whether in equity or at law) including
the concepts of materiality, reasonableness, good faith and fair dealing.
A court applying such principles of equity, among other things, might not
allow the declaration of an event of default based upon an event deemed
immaterial or might not require the Borrower to perform certain covenants.
The opinions expressed above are also qualified to the extent that any law,
statute, ordinance, rule, regulation and principle may modify, limit, render
unenforceable or delay certain of your rights or remedies under the Principal
Documents; however, the application of such principles would not substantially
diminish the practical realization of the benefits intended to be conferred
thereby, except for the economic consequences of any judicial, administrative
or procedural delay which may result from any such law, statute, ordinance,
rule, regulation and principle. No opinion is expressed as to the validity,
binding effect or enforceability of any provision releasing, exculpating or
exempting a party from, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent the action or inaction involves
gross negligence, recklessness, willful misconduct or unlawful conduct.
Enforcement of obligations or exercise of rights under the Principal
Documents may also be affected by constitutional limitations of notice and due
process requirements, the effect of Texas law and court decisions which provide
that certain suretyship rights and defenses are available to a party that
encumbers its property to secure the obligations of another,and the
requirements of the Code that you exercise your rights under the Principal
Documents in a commercially reasonable manner. Further, we express no opinion
as to the provisions in the Principal Documents for waiver of any objections
to forum non conveniens.
In connection with the opinion expressed in paragraph 7 above, we have
taken note of the fact that Borrower's chief executive office is located in
Colorado, the Principal Documents were signed in Colorado, repayments on the
Note are to be made in Colorado; and we have taken as true the recitations of
Section 8.12 of the Agreement.
We express no opinion as to the effect of the law of any jurisdiction
other than the State of Texas where an enforcement of the Principal Documents
may be sought which limits the rates of interest legally chargeable or
collectible. In rendering this opinion, we have assumed that the rate of
interest provided for in the Principal Documents is not in excess of the rate
of interest that could lawfully be collected, contracted for, charged, received
or reserved or taken under Colorado law.
We are counsel admitted to practice law in the State of Texas, and this
opinion is limited to the laws of the State of Texas, and the United States of
America, all as in effect on the date hereof. This opinion does not cover or
apply to the effect of the laws of the States of Colorado or New York on the
Agreement, the Borrower or any of the other Principal Documents.
We express no opinion with respect to the need for licenses, permits,
authorizations or approvals required in the operation of Borrower's business
including, without limitation, the operation, production and transportation of
oil and gas production from or attributable to the properties covered by the
Principal Documents.
We express no opinion as to any matter other than as expressly set
forth above, and no opinion is to or may be inferred or implied herefrom.
Specifically, no opinion on Borrower's titles, the descriptions of Borrower's
properties as affixed to the Principal Documents, or on the provisions of any
document in, or referred to in, Borrower's chain of title to any of the
properties, is expressed or is to be inferred from this opinion. This opinion
is given as of the date hereof, and we undertake no, and hereby disclaim any,
obligation to advise you of any change in any matter set forth herein.
In connection with opinions expressed herein as being limited "to our
knowledge", our examination has been limited to discussions with the officers
and representatives of Borrower as its counsel, and, with your express
permission, we have made no independent investigation as to the accuracy or
completeness of any representations, warranties, data or other information,
written or oral, made or furnished by any of them to us or to Lender. However,
based solely upon our knowledge, as defined above, we have no reason to
believe that any express representation or warranty of Borrower contained in
the Principal Documents is untrue or inaccurate in any material respect.
The opinions expressed herein are for the benefit of the Lender, its
Affiliates and any persons who are controlled or managed by Enron Corp. or any
of its Affiliates, and their respective lenders and their counsel, and may be
relied upon only by such persons. This opinion may not be published, quoted
or otherwise made available (except as required by law) to any person other
than the persons set forth in the immediately preceding sentence.
Very truly yours,
Enclosure
Opinion of Colorado Counsel
to Borrower
December __, 1993
Joint Energy Development Investments Limited Partnership
1400 Smith Street
Houston, TX 77002
Re: Loan Agreement dated as of December __, 1993 (the "Loan
Agreement"), by and among Joint Energy Development Investments
Limited Partnership, a Delaware limited partnership, as lender
("Lender"), and Forest Oil Corporation, a New York corporation,
as borrower ("Borrower").
Gentlemen:
We have acted as counsel to the Borrower in connection with
the transactions contemplated by the Loan Agreement. This opinion is rendered
to you pursuant to Section 7.01 of the Loan Agreement. Capitalized terms used
but not defined herein or on Exhibit "A" hereto are used as defined in the Loan
Agreement.
In such capacity, we have examined the documents described on
Exhibit "A" (with such documents, together with the Loan Agreement, hereinafter
collectively referred to as the "Principal Documents"). We have also examined
(i) a certificate of __________________ , President of Borrower, dated _______
_________, 1993 (the "Officer's Certificate"), (ii) certain certificates of
public officials, and (iii) copies, certified or otherwise identified to our
satisfaction, of such corporate records of the Borrower as we have deemed
necessary for the purposes of this opinion. We have relied on the Officer's
Certificate with respect to the matters contained therein that we have not
independently established. We have also assumed, without verification, for
purposes of this opinion that no facts exist that would make available defenses
of mutual mistake, fraud, concealment, undue influence, duress, or criminal
activity.
In rendering the opinions herein set forth, we have assumed
(i) the due organization and valid existence of all parties to the Principal
Documents, (ii) the due authorization, execution, and delivery of the Principal
Documents by all parties to such document and that each such document is valid,
binding and enforceable against the parties thereto (other than the Borrower),
(iii) the genuineness of all signatures, (iv) the authenticity of all documents
and instruments submitted to us as originals, (v) the conformity to original
documents of all documents submitted to us as copies, and (vi) the legal
capacity of all natural persons.
Based upon the foregoing and upon such investigation as we
have deemed necessary, and subject to the assumptions, qualifications and
limitations set forth herein, we are of the opinion that:
1. The Borrower is a corporation in good standing and
duly qualified to do business in the State of Colorado.
2. The Principal Documents to which the Borrower is a
party have been duly executed and delivered by the Borrower.
3. The Principal Documents to which the Borrower is a
party constitute valid and binding obligations of the Borrower,
enforceable in accordance with their terms.
4. The Security Agreement creates, as security for the
Indebtedness, a security interest in the Collateral (as such term is
defined in the Security Agreement). The Financing Statement is in
proper form for filing with the Office of the Secretary of State of
the State of Colorado. The Financing Statement has been filed in the
Office of the Secretary of State of the State of Colorado. No other
filings are necessary or appropriate to perfect or maintain perfection
of the security interest created by the Security Agreement, other than
continuation statements as required by the Uniform Commercial Code as
in effect in Colorado (hereinafter referred to as the "Colorado UCC").
5. Lender's security interest in the Collateral is prior
in right to the security interest of any other Person in the Collateral,
subject only to the encumbrances described in Exhibit A to the Act of
Mortgage.
6. No state or local mortgage recording tax, stamp tax or
other fee, tax or governmental charge is required to be paid in
Colorado in connection with the execution, delivery, filing or recording
of the Principal Documents, other than statutory filing and recording
fees that have been paid in connection with the filing of the Financing
Statement.
The opinions set forth above are subject in all respects to the
following qualifications, exceptions and assumptions:
[List as appropriate]
We are licensed attorneys only in the State of Colorado and, therefore,
we express opinions herein only insofar as to matters governed by the laws of
the State of Colorado and, to the extent applicable, the federal laws of the
United States of America.
This opinion is furnished to you in connection with the transactions
contemplated by the Loan Agreement. It may be relied upon solely by Lender,
its Affiliates, and any Person providing financing to Lender or its Affiliates
in connection herewith. It may not be relied upon by any other person or in
any other context without our prior written consent; provided, however, that
you may, without our consent, furnish copies of this opinion as required by
law or order of any court or governmental agency.
Very truly yours,
EXHIBIT A
Principal Documents
___________________
As used in this opinion, the term "Principal Documents" refers
collectively to the following:
1. the Loan Agreement dated as of December ___, 1993 among Lender,
Borrower, and Guarantor;
2. the Note dated as of December ___, 1993, executed by Borrower for
the benefit of Lender in the amount of $ ______________________ ;
3. the Borrowing Request dated as of _____________________, executed
by Borrower;
4. the Compliance Certificate dated as of ___________________, 1993,
executed by the Borrower;
5. the UCC-1 Financing Statement - Colorado executed by the Borrower,
as debtor, in favor of the Lender, as secured party (the "Financing
Statement");
6. the Security Agreement dated December , 1993 between Borrower, as
debtor, and Lender, as secured party (the "Security Agreement");
7. the Subordination Agreement dated December___ , 1993 among Lender,
Borrower and the Chase Group.
Opinion of Louisiana Counsel
to Borrower
December __, 1993
Joint Energy Development Investments Limited Partnership
1400 Smith Street
Houston, TX 77002
Re: Loan Agreement dated as of December __, 1993 (the "Loan
Agreement"), by and among Joint Energy Development Investments
Limited Partnership, a Delaware limited partnership, as lender
("Lender"), and Forest Oil Corporation, a New York corporation,
as borrower ("Borrower").
Gentlemen:
We have acted as counsel to the Borrower in connection with
the transactions contemplated by the Loan Agreement. This opinion is rendered
to you pursuant to Section 7.01 of the Loan Agreement. Capitalized terms used
but not defined herein or on Exhibit "A" hereto are used as defined in the Loan
Agreement.
In such capacity, we have examined the documents described on
Exhibit "A" (hereinafter collectively referred to as the "Principal
Documents"). We have also examined (i) a certificate of __________________ ,
President of Borrower, dated ________________, 1993 (the "Officer's
Certificate"), (ii) certain certificates of public officials, and (iii)
copies,certified or otherwise identified to our satisfaction, of such corporate
records of the Borrower as we have deemed necessary for the purposes of this
opinion. We have relied on the Officer's Certificate with respect to the
matters contained therein that we have not independently established. We have
also assumed, without verification, for purposes of this opinion that no facts
exist that would make available defenses of mutual mistake, fraud, concealment,
undue influence, duress, or criminal activity.
In rendering the opinions herein set forth, we have assumed
(i) the due organization and valid existence of all parties to the Principal
Documents, (ii) the due authorization, execution, and delivery of the Principal
Documents by all parties to such document and that each such document is valid,
binding and enforceable against the parties thereto (other than the Borrower),
(iii) the genuineness of all signatures, (iv) the authenticity of all documents
and instruments submitted to us as originals, (v) the conformity to original
documents of all documents submitted to us as copies, and (vi) the legal
capacity of all natural persons.
Based upon the foregoing and upon such investigation as we
have deemed necessary, and subject to the assumptions, qualifications and
limitations set forth herein, we are of the opinion that:
1. The Borrower is a corporation in good standing and
duly qualified to do business in the State of Louisiana.
2. The Principal Documents to which the Borrower is a
party have been duly executed and delivered by the Borrower.
3. The Principal Documents to which the Borrower is a
party constitute valid and binding obligations of the Borrower,
enforceable in accordance with their terms.
4. The forms of the Act of Mortgage, the acknowledgments
thereto and the Financing Statements comply with all applicable
recording, filing and registration laws of the State of Louisiana.
The property descriptions of the immovable properties situated in
Louisiana contained in the Act of Mortgage, if accurate, are legally
sufficient for the purposes of all applicable recording, filing and
registration laws of the State of Louisiana.
5. A fully executed counterpart of the Act of Mortgage
has been filed for record in the offices of the respective Clerks of
Court or Ex-Officio Recorders of the parishes listed on Exhibit B,
and a fully executed counterpart of the Financing Statement (with a
copy of the Act of Mortgage attached thereto) has been filed in
________________________ Parish, Louisiana and with the Secretary of
State of the State of Texas. No other filings are necessary or
appropriate for the purposes intended to be accomplished thereby,
other than continuation statements as required by the Uniform
Commercial Code as in effect in Louisiana (hereinafter referred to as
the "Louisiana UCC"). The Act of Mortgage constitutes, as security
for the Indebtedness (i) a valid mortgage lien on all immovable property
and interests in immovable property located in the State of Louisiana
and accurately and specifically described in the Act of Mortgage as
being mortgaged thereby, and (ii) a perfected security interest in the
Collateral (as such term is hereinafter defined).
As used herein, the term "Collateral" shall mean any of the
Borrower's accounts, general intangibles, inventory, goods, fixtures
and equipment (as such terms are defined in the Louisiana UCC), if any,
adequately described in the Act of Mortgage.
6. Lender's mortgage lien in the Mortgaged Properties is
prior in right to the lien of any other Person in the Mortgaged
Properties, subject only to the encumbrances described in Exhibit A
to the Act of Mortgage. Lender's security interest in the Collateral
is prior in right to the security interest of any other Person in the
Collateral, subject only to the encumbrances described in Exhibit A to
the Act of Mortgage.
7. Each of the Eugene Island Conveyance and the Wagner
and Brown Conveyance (the "Conveyances"), including, without limitation,
the forms of acknowledgements, exhibits and schedules thereto, complies
with all applicable recording, filing and registration laws of the State
of Louisiana. The property descriptions of the immovable property
situated in Louisiana contained in the Conveyances, if accurate, are
legally sufficient for the purposes of all applicable recording, filing
and registration laws of the State of Louisiana. Each of the
Conveyances constitutes the legal, valid and binding conveyance of the
properties described therein. A fully executed counterpart of each of
the Conveyances has been filed for record in the offices of the
respective Clerks of Court or Ex-Officio Recorders of the parishes
listed on Exhibit B.
8. Each of the Eugene Island Production Agreement and the
Wagner and Brown Production Agreement (the "Production Agreements"),
including, without limitation, the forms of acknowledgments, exhibits
and schedules thereto, complies with all applicable recording, filing
and registration laws of the State of Louisiana. A fully executed
counterpart of each of the Production Agreements has been filed for
record in the offices of the respective Clerks of Court or Ex-Officio
Recorders of the parishes listed on Exhibit B. The property
descriptions of the immovable properties described in the Production
Agreements, if accurate, are legally sufficient for the purposes of
all applicable recording, filing and registration laws of the State
of Louisiana.
9. No state or local mortgage recording tax, stamp tax
or other fee, tax or governmental charge is required to be paid in
Louisiana in connection with the execution, delivery, filing or
recording of the Principal Documents, other than statutory filing
and recording fees that have been paid in connection with the filing
and recording, as applicable, of the Act of Mortgage and the Financing
Statements.
The opinions set forth above are subject in all respects to the
following qualifications, exceptions and assumptions:
[List as appropriate]
We are licensed attorneys only in the State of Louisiana and, therefore,
we express opinions herein only insofar as to matters governed by the laws of
the State of Louisiana and, to the extent applicable, the federal laws of the
United States of America.
This opinion is furnished to you in connection with the transactions
contemplated by the Loan Agreement. It may be relied upon solely by Lender,
its Affiliates, and any Person providing financing to Lender or its Affiliates
in connection herewith. It may not be relied upon by any other person or in
any other context without our prior written consent; provided, however, that
you may, without our consent, furnish copies of this opinion as required by
law or order of any court or governmental agency.
Very truly yours,
EXHIBIT A
Principal Documents
___________________
As used in this opinion, the term "Principal Documents" refers
collectively to the following:
1. the Act of Mortgage, Assignment of Production, Security Agreement
and Financing Statement dated as of ____________________, executed
by the Borrower and Guarantor, as Mortgagor, and Lender as Mortgagee
(the "Mortgage");
2. the UCC-1 Financing Statement - Louisiana executed by the Borrower
and the Guarantor, as debtors, in favor of the Lender, as secured
party (the "Financing Statement"); and
3. the Subordination Agreement dated December ___, 1993 among Lender,
Borrower and Chase Group.
4. Conveyance of Overriding Royalty Interest of even date herewith
between Lender and Borrower and affecting the Eugene Island Block
326 Property (the "Eugene Island Conveyance").
5. Conveyance of Overriding Royalty Interest of even date herewith
between Lender and Borrower and affecting the Wagner and Brown
Properties (the "Wagner and Brown Conveyance").
6. the Production Agreement of even date herewith between Lender and
Borrower and covering the Eugene Island Block 326 Property (the
"Eugene Island Production Agreement").
7. the Production Agreement of even date herewith between Lender and
Borrower and covering the Wagner and Brown Properties (the "Wagner
and Brown Production Agreement").
EXHIBIT - N1
WHEN RECORDED MAIL TO:
VINSON & ELKINS L.L.P.
2500 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
PRODUCTION AGREEMENT
(Wagner & Brown)
This Agreement ("Agreement") is made and entered into this 28th
day of December, 1993, by and between FOREST OIL CORPORATION, a New York
corporation ("Grantor"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Grantee").
WHEREAS, by Conveyance of Overriding Royalty Interest of even date
herewith from Grantor to Grantee (the "Conveyance"), Grantee has purchased
and acquired from Grantor and Grantor has sold and conveyed to Grantee an
overriding royalty interest in the Subject Interests.
NOW, THEREFORE, as a material inducement to cause Grantee to purchase
the Overriding Royalty and in consideration of the mutual benefits and
obligations of the parties hereunder, Grantee and Grantor have agreed, and
hereby agree, as follows:
1. Definitions. Each capitalized term used herein but not
defined herein shall have the meaning given to it in the Conveyance.
2. Marketing.
(a) Grantor shall have the right and obligation to
market all Hydrocarbons produced from or attributable to the Subject
Interests, including the Hydrocarbons attributable to the Overriding
Royalty (the "Overriding Royalty Hydrocarbons"). All such Hydrocarbons
shall be sold by Grantor pursuant to arm's length contracts with parties
not affiliated with Grantor containing terms negotiated by Grantor as a
prudent operator. Grantor shall comply with the terms of all such sales
contracts and deliver Hydrocarbons thereunder at the contract prices and
on the terms applicable thereto without deduction for nonperformance of
noncompliance. Grantor will take all appropriate and reasonable measures
to enforce the performance of under each sales contract of the obligations
of the purchaser thereunder. All Hydrocarbons shall be delivered by Grantor
to the purchasers thereof into the pipelines to which the wells producing
such Hydrocarbons may be connected or to such other point of purchase as
is reasonably required in the marketing of such Hydrocarbons.
(b) All proceeds received by Grantor from the sale of
Overriding Royalty Hydrocarbons sold on behalf of Grantee pursuant to the
terms hereof are received by Grantor in trust for Grantee and shall be held
in trust by Grantor for Grantee; provided, however, Grantor shall pay such
proceeds by wire transfer to such account as Grantee shall have designated
from time to time to Grantee on each Payment Date. Grantor will diligently
enforce the terms of all sales agreements under which Subject Hydrocarbons
are sold on behalf of Grantee, including full and prompt payment of all
amounts due from such sales. In the event of any late payment by any
purchaser, Grantor shall remit to Grantee any interest or penalties collected
with respect to the sale of Overriding Royalty Hydrocarbons.
3. Rate of Production.
Grantor shall prudently operate and produce with respect to
those Subject Interests operated by Grantor, and shall use its best efforts
to cause to be prudently operated and produced, with respect to the Subject
Interests not operated by Grantor, the Subject Wells in accordance with good
engineering practices.
4. Operation of Subject Interests. At all times from the date
hereof until the termination of the Overriding Royalty and whether or not
Grantor is the operator of the Subject Interests, Grantor, at Grantor's cost
and expense, shall:
(i) Cause the Subject Interests to be maintained in full force
and effect, and to be developed, protected against drainage, and continuously
operated for the production of Hydrocarbons in a good and workmanlike manner
as would a prudent operator (and without regard to the burden of the Overriding
Royalty), all in accordance with generally accepted industry practices,
applicable operating agreements, and all applicable federal, state and local
laws, rules and regulations, and shall otherwise comply with all applicable
laws, rules and regulations;
(ii) Pay, or cause to be paid, promptly as and when due and payable,
all rentals and royalties payable in respect of the Subject Interests or the
production therefrom, and all costs, expenses and liabilities incurred in or
arising from the operation or development of the Subject Interests, or the
producing, treating, gathering, storing, marketing or transporting of
Hydrocarbons therefrom;
(iii) Cause all wells, machinery, equipment and facilities of any
kind now or hereafter located on the Subject Interests, and necessary or
useful in the operation thereof for the production of Hydrocarbons therefrom,
to be provided and to be kept in good and effective operating condition as
would a prudent operator (and without regard to the burden of the Overriding
Royalty), and all repairs, renewals, replacements, additions and improvements
thereof or thereto, useful or needful to such end, to be promptly made;
(iv) Give or cause to be given to Grantee written notice of every
adverse claim or demand made by any person affecting the Subject Interests,
the Hydrocarbons produced therefrom, the Overriding Royalty and/or the
Overriding Royalty Hydrocarbons in any manner whatsoever, and of any suit or
other legal proceeding instituted with respect thereto, and at Grantor's
expense cause all necessary and proper steps to be taken with reasonable
diligence to protect and defend the Subject Interests, the Hydrocarbons
produced therefrom, the Overriding Royalty and/or the Overriding Royalty
Hydrocarbons against any such adverse claim or demand, including (but not
limited to) the employment of counsel for the prosecution or defense of
litigation and the contest, release or discharge of such adverse claim or
demand;
(v) Cause the Subject Interests to be kept free and clear of
liens, charges and encumbrances of every character, other than (1) Taxes
constituting a lien but not due and payable, (2) the Permitted Encumbrances
and (3) the "Chase Liens" as defined and as may be permitted under that
certain Loan Agreement of even date herewith between Grantor, as borrower,
and Grantee, as lender;
(vi) Pay all Taxes when due and before they become delinquent,
and reimburse Grantee for any Taxes paid by Grantee as a result of the
Overriding Royalty or the Overriding Royalty Hydrocarbons or the production
of same;
(vii) Pay promptly when due and before they become delinquent all
operating expenses and all billings under applicable joint operating agreements
(except to the extent contested in good faith); and
(viii) Not resign as operator of any of the Subject Interests operated
by Grantor until and unless the successor operator has been approved in writing
by Grantee.
5. Insurance; Damage or Loss. Grantor shall maintain or cause
to be maintained, at its sole cost and expense and with financially sound and
reputable insurers reasonably satisfactory to Grantee, insurance covering the
Leases and all pipelines, wells, and facilities located thereon against such
liabilities, casualties, risks and contingencies, and in such types as is
customary in the case of independent oil companies engaged in operations of
similar property, including, without limitation, insurance of the types and
coverages described in Schedule 1 hereto and with limits of coverage no less
than those set out in Schedule 1. Such insurance shall name Grantee as an
additional insured as Grantee's interests appear. Grantor shall furnish
certificates of such insurance to Grantee and shall obtain endorsements to
such policies providing that the insurer will notify Grantee not less than
thirty (30) days prior to the expiration or termination of such policy of
insurance.
6. Information. (a) At all times from the date hereof until
the Termination Time, Grantor, at its own expense, shall furnish to Grantee
the following reports and information at the times indicated below.
(i) Quarterly within sixty (60) days after the end of
each fiscal quarter of Grantor and annually within one hundred twenty (120)
days after the end of each fiscal year of Grantor, Grantor shall furnish
Grantor's financial statements as of the end of and for such period, including
a balance sheet and statements of income, stockholder's equity and cash flow,
prepared in accordance with generally accepted accounting principles and,
with respect to the annual financial statements, accompanied by a report of
the Grantor's independent certified public accountants stating that their
examination was made in accordance with generally accepted auditing standards
and that in their opinion such financial statements fairly present Grantor's
financial condition, results of operations and changes in financial position
in accordance with generally accepted accounting principles consistently
applied.
(ii) Annually, as soon as available, but no later than 90
days after the end of each calendar year, (commencing with the calendar year
in which the Effective Time occurs), Grantor shall furnish an internally
prepared engineering report satisfactory to Grantee, as of January 1 of suc
h year. Each of the reports delivered hereunder shall incorporate all current
information and data available to Grantor pertinent to the estimation of oil
and gas reserves attributable to Subject Interests and setting forth the
following:
(A) an estimation of the oil and gas reserves, classified by
appropriate categories, as of such date attributable to the
Subject Interests,
(B) a projection of the rate of production of, and net income
from,such reserves,
(C) a calculation of the present worth of such net income from
suchreserves,
(D) a calculation of the present worth of such net income
discountedat a rate or rates designated from time to time
by Grantee, and
(E) a schedule or complete description of all assumptions,
estimates and projections made or used in the preparation
of such report, including without limitation estimated future
product prices, capital expenditures, operating expenses and
taxes.
Each such report shall be prepared in accordance with customary and generally
accepted standards and practices for petroleum engineers, shall be based on
such assumptions as to costs, product prices and similar factors as Grantee
shall designate from time to time. Grantee shall be furnished a copy of any
other reserve report prepared for Grantor by any independent petroleum
engineering firm covering the Properties.
(iii) Monthly, Grantor shall furnish Grantee a lease
operating statement for each Lease showing gross and net volumes of
Hydrocarbons produced and sold from the Lease, average sales prices,
severance taxes, lease operating expenses, and any other revenues and
expenses associated with each Lease, a capital expenditure summary and,
from the foregoing, a detailed statement showing the computation of the
Net Profits for such Month, and Gross Proceeds and Production Costs received
or incurred during such Month.
(iv) Upon request and to the extent available, Grantor
shall furnish Grantee copies of surface maps showing property lines and well
locations, well logs, core analysis data, flow and pressure tests, natural
gas analysis and casing programs and other similar information related to
the Subject Interests, Subject Wells and the production therefrom.
(v) Promptly upon Grantor's receipt, Grantor shall
furnish Grantee copies of all independent petroleum engineering reports
pertaining to the Subject Interests.
(vi) Upon request, Grantor shall furnish such other
information as Grantee may reasonably request.
(b) Grantee, at its expense, shall have the right from time to
time to audit the books and records of Grantor with respect to the Subject
Interests, including without limitation, all information with respect to
volumes of Hydrocarbons produced from the Leases, the sales price of
Hydrocarbons sold by Grantor, the computation of Net Profits, the calculation
of Lease Use Hydrocarbons and Non-Consent Hydrocarbons, and the payment by
Grantee of all costs and expenses incurred in connection with the Subject
Interests. Such audits shall be conducted by Grantee so as to result in a
minimum disruption in the ongoing business and affairs of Grantor and shall
be conducted during normal business hours at Grantor's offices or at the
offices where Grantor maintains the records relating to the items set forth
above. This right to audit shall be a free and unrestricted right. If, as
a result of any audit, it is determined that any amount is due Grantee as a
result of the failure of Grantor to properly deliver Grantee its share of the
Net Profits in accordance with the terms of the Conveyance and this Agreement,
Grantor shall pay Grantee Net Profits which Grantor failed to remit, together
with interest at the Floating Rate from the date that such amount should have
been paid in accordance with the terms of the Conveyance and this Agreement
to the date of payment.
7. Access to Subject Interests. Grantor shall permit the duly
authorized representatives of Grantee, at any reasonable time, but at Grantee's
risk and expense, to make such inspection of the Subject Interests and the
property, machinery, equipment and facilities used in the operation thereof
as such representatives shall deem proper.
8. Remedies of Grantee. At any time and from time to time until
the termination of the Overriding Royalty, if Grantor shall fail to perform
or observe in any material respect any of the covenants or agreements provided
herein or in the Conveyance to be performed or observed by Grantor, Grantee,
in addition to Grantee's right to recover damages and all other remedies
available to Grantee at law or in equity, may, if such failure shall continue
unremedied after fifteen (15) days after written notice thereof is delivered
to Grantor:
(i) pay, or cause to be paid, any of the costs, expenses, Taxes
(which Taxes are not being contested in good faith by the Grantor) or other
amounts which the Grantor has agreed to pay under the Conveyance which have
become delinquent, and be reimbursed on demand by Grantee for all amounts so
paid or incurred, together with interest at the Floating Rate from the date
of such payment until the date of reimbursement; and
(ii) sell, on behalf and for the account of Grantor, all of the
Hydrocarbons attributable to Grantor's interest in the Subject Interests and
apply the proceeds thereof to any amount owed by Grantor hereunder; and
(iii) setoff any amount owed by Grantor or its Affiliates to Grantee
or its Affiliates against any amount owed to Grantor hereunder; and
(iv) apply to a court of equity for the specific performance or
observance of any such covenant or condition and in aid of the execution of
any power herein granted and for the appointment of a receiver of the Subject
Interests and the Hydrocarbons produced therefrom.
Any purchaser of Hydrocarbons from or attributable to the Subject
Interests is authorized and directed to make payment to the Grantee out of
the Hydrocarbons attributable to Grantor's interest in the Subject Interests
for any amount which Grantee shall certify to such purchaser that it has paid
and which Grantor is obligated to pay hereunder. Grantor hereby designates
Grantee as its agent and attorney in fact to execute any instruments which
may be necessary or appropriate, including without limitation designations
of operator, to enable Grantee to exercise its rights under this Section 8.
This designation and appointment shall be irrevocable as long as the
Overriding Royalty remains in effect.
9. Force Majeure. In the event of either party being rendered
unable, wholly or in part, by Force Majeure to carry out its obligations
under this Agreement other than to make payments due hereunder, it is agreed
that on such party's giving notice and full particulars of such force majeure
in writing or by telecopy to the other party as soon as possible after the
occurrence of the cause relied on, then the obligations of the party giving
such notice, so far as they are affected by such force majeure, shall be
suspended during the continuance of any inability so caused but for no
longer period, and such cause shall as far as possible be remedied with all
reasonable dispatch.
10. Notices. All notices, requests, demands, instructions and
other communications required or permitted to be given hereunder shall be in
writing and shall be delivered personally, mailed by certified mail, postage
prepaid and return receipt requested or sent by telecopier, as follows:
If to Grantor, addressed to:
Forest Oil Corporation
950 17th Street
Colorado National Building
Denver, Colorado 80202
Attention: Kenton M. Scroggs
Telecopy: (303) 592-2515
If to Grantee, addressed to:
Joint Energy Development
Investments Limited Partnership
P.O. Box 1188
Houston, Texas 77251-1188
Attention: Andrew S. Fastow
Telecopy: (713) 646-8174
or to such other place within the United States of America as either party
may designate as to itself by written notice to the other. All notices given
by personal delivery or mail shall be effective on the date of actual receipt
at the appropriate address. Notice given by telecopier shall be effective
upon actual receipt if received during recipient's normal business hours or
at the beginning of the next business day after receipt if received after
the recipient's normal business hours.
11. INDEMNITY. IT IS UNDERSTOOD AND AGREED THAT UNDER NEITHER
THIS AGREEMENT NOR THE CONVEYANCE DOES GRANTEE ASSUME OR SHALL GRANTEE EVER
BE LIABLE OR RESPONSIBLE IN ANY WAY FOR THE PAYMENT OF ANY COSTS, EXPENSES
OR LIABILITIES INCURRED IN CONNECTION WITH DEVELOPING, EXPLORING, DRILLING,
EQUIPPING, TESTING, OPERATING, PRODUCING, MAINTAINING OR ABANDONING THE
SUBJECT INTERESTS OR ANY WELL OR FACILITY THEREON OR STORING, HANDLING,
TREATING OR TRANSPORTING TO EACH DELIVERY POINT PRODUCTION THEREFROM.
GRANTOR SHALL FULLY DEFEND, PROTECT, INDEMNIFY AND HOLD GRANTEE, ITS
OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, DEMANDS, SUITS AND CAUSES OF ACTION OF EVERY KIND AND
CHARACTER, INCLUDING REASONABLE ATTORNEYS' FEES AND COSTS OF DEFENSE, WHICH
MAY BE MADE OR ASSERTED BY ANY THIRD PARTY OR GOVERNMENTAL AGENCY OR ENTITY,
OR BY GRANTOR, GRANTOR'S EMPLOYEES, AGENTS, CONTRACTORS AND SUBCONTRACTORS
AND THEIR EMPLOYEES, AGENTS, ON ACCOUNT OF PERSONAL INJURY, DEATH OR PROPERTY
DAMAGE (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR POLLUTION AND ENVIRONMENTAL
DAMAGE), ANY CIVIL OR CRIMINAL FINES OR PENALTIES AND ANY CAUSES OF ACTION
ALLEGING STATUTORY LIABILITY, RELATING TO, ARISING OUT OF, OR IN ANY WAY
INCIDENTAL TO THE SUBJECT INTERESTS, THE WELLS AND FACILITIES THEREON OR USED
IN CONNECTION THEREWITH, THE OPERATION THEREOF AND THE PRODUCTION THEREFROM,
WHETHER THROUGH AN ACT OR OMISSION OF GRANTEE OR ANY OTHER PARTY HERETO OR
OTHERWISE, AND WHETHER OR NOT ARISING OUT OF THE SOLE, JOINT OR CONCURRENT
NEGLIGENCE, FAULT OR STRICT LIABILITY OF GRANTEE OR ANY OTHER PERSON OR
ENTITY INDEMNIFIED HEREUNDER; PROVIDED, THIS INDEMNITY SHALL NOT COVER MATTERS
TO THE EXTENT ATTRIBUTABLE TO GRANTEE'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. THIS INDEMNITY SHALL APPLY, WITHOUT LIMITATION, TO ANY LIABILITY
IMPOSED UPON ANY PARTY INDEMNIFIED HEREUNDER AS A RESULT OF ANY STATUTE,
RULE, REGULATION OR THEORY OF STRICT LIABILITY.
12. Successors and Assigns. All the covenants and agreements of
Grantor and Grantee herein contained shall be deemed to be covenants running
with the land and shall be binding upon the successors and assigns of Grantor's
interest in the Subject Interests and Grantee's interest in the Overriding
Royalty and shall inure to the benefit of Grantor, Grantee, and their
respective successors and permitted assigns. The foregoing notwithstanding,
nothing herein is intended to modify or shall have the effect of modifying
the restrictions on assignment set forth in the Conveyance regarding
assignments, transfer or pooling of Grantor's interest in the Subject
Interests; and the preceding sentence shall not be deemed to permit any
assignment or other transfer of the interest of Grantor in any of the Subject
Interests that is not specifically permitted by the provisions of the
Conveyance. Nothing contained in this instrument or in the Conveyance shall
in any way limit or restrict the right of Grantee, or Grantee's successors
and assigns, to sell, convey, assign or mortgage the Overriding Royalty in
whole or in part. If Grantee, or Grantee's successors and assigns, at any
time shall execute a mortgage, pledge or deed of trust covering all or any
part of the Overriding Royalty as security for any obligation, the mortgagee,
the pledgee or the trustee therein named or the holder of the obligation
secured thereby shall be entitled, to the extent such mortgage, pledge or
deed of trust so provides and upon the occurrence or existence of the event
or condition therein stated, if so conditioned, to exercise all of the
rights, remedies, powers and privileges herein conferred upon Grantee, and
to give or withhold all consents herein required or permitted to be obtained
from Grantee. No assignment by Grantee of its rights hereunder will be
binding on Grantor until Grantee shall have notified Grantee of the assignment
and furnished a copy of the same to Grantor.
13. Damages. It is recognized that Grantee will look solely to
the Overriding Royalty Hydrocarbons for satisfaction and discharge of the
Overriding Royalty, and that Grantor is not personally liable for the payment
and discharge thereof. However, the foregoing provision shall not relieve
Grantor of any obligations under this Agreement or any obligation to respond
in damages for any breach of any of the provisions hereof or of the
Conveyance.
14. Cost of Litigation. In the event of a breach of this
Agreement, or if a dispute arising hereunder is not resolved by mutual
agreement, and either party should sue the other party to enforce its rights
hereunder or for breach hereof, the party prevailing in such litigation shall
be entitled to recover its costs and reasonable attorneys' fees in addition
to any other remedy or recovery to which it may be entitled.
15. Entire Agreement; Amendments; Waiver. This Agreement
constitutes the entire agreement between the parties hereto. This Agreement
may not be amended and no rights hereunder may be waived except by a written
document signed by the duly authorized representatives of the parties. No
waiver of any of the provisions of this Agreement shall be deemed to be or
shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
16. Headings. The headings of the sections of this Agreement
are for guidance and convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.
17. Counterpart Execution; Recordation. This Agreement may be
executed in multiple originals all of which shall constitute one and the
same Agreement.
18. Partial Invalidity. Except as otherwise expressly stated
herein, in the event any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable by a court or regulatory
agency of competent jurisdiction by reason of a statutory change or enactment,
such invalidity, illegality or unenforceability shall not affect the remaining
provisions of this Agreement.
19. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
EXECUTED in multiple originals this 28th day of December, 1993.
GRANTOR:
FOREST OIL CORPORATION
By:_______________________
William L. Dorn
Chairman of the Board and
Chief Executive Officer
GRANTEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Corp.
its general partner
By:_________________________
Thomas S. Glanville
Attorney-in-Fact
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary Public duly
qualified, commissioned, sworn and acting in and for the State of_______ ,
hereby certify that, on this _____, day of December, 1993, there appeared
before me, William L. Dorn, Chairman of the Board and Chief Executive Officer,
of Forest Oil Corporation, a New York corporation, whose address is 950
17th Street, Colorado National Building, Denver, Colorado 80202.
On this day, before me, the undersigned Notary Public in and for said
State, personally appeared the above named person, to me personally known,
who, being by me duly sworn, did say that he is the designated officers of
said corporation, and that the instrument was signed and sealed on behalf of
the corporation by authority of its Board of Directors and that the above
named person acknowledged the instrument to be the free act and deed of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in
the City of_____________, and State of______ this ____ day of December, 1993.
________________________________
Notary Public in and for
The State of______________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
THE STATE OF___________
COUNTY OF_____________
BE IT REMEMBERED, that I, ___________________, a Notary Public duly
qualified, commissioned, sworn and acting in and for the State of Texas,
hereby certify that, on this _____ day of December, 1993, there appeared
before me, Thomas S. Glanville, attorney-in-fact on behalf of Enron Capital
Corp, a Delaware corporation, as General Partner of Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership, whose address
is 1400 Smith Street, Houston, Texas 77002.
On this day, before me, the undersigned Notary Public in and for
said State, personally appeared the above named persons, to me personally
known, who, being by me duly sworn, did say that he is the designated officers
of said corporation, the General Partner of said limited partnership, a
Delaware limited partnership registered as a foreign limited partnership in
Louisiana, and the above named persons acknowledged that the instrument was
signed on behalf of the corporation by authority of the Board of Directors
in its capacity as General Partner of the aforesaid partnership and the above
named persons acknowledged the instrument to be the free act and deed of the
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in
the City of ___________, County of Harris and State of______ , this ____ day
of December, 1993.
________________________________
Notary Public in and for
The State of______________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
EXHIBITS:
_________
Exhibit A -- Subject Interests
SCHEDULES:
__________
Schedule 1 -- Insurance Requirements
EXHIBIT - N2
WHEN RECORDED MAIL TO: STATE OF LOUISIANA
VINSON & ELKINS L.L.P.
2500 First City Tower PARISH OF ST MARY
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
PRODUCTION AGREEMENT
(Eugene Island Block 326)
This Agreement ("Agreement") is made and entered into this 28th day
of December, 1993, by and between FOREST OIL CORPORATION, a New York
corporation ("Grantor"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Grantee").
WHEREAS, by Conveyance of Overriding Royalty Interest of even date
herewith from Grantor to Grantee (the "Conveyance"), Grantee has purchased
and acquired from Grantor and Grantor has sold and conveyed to Grantee an
overriding royalty interest in the Subject Interests.
NOW, THEREFORE, as a material inducement to cause Grantee to purchase
the Overriding Royalty and in consideration of the mutual benefits and
obligations of the parties hereunder, Grantee and Grantor have agreed, and
hereby agree, as follows:
1. Definitions. Each capitalized term used herein but not
defined herein shall have the meaning given to it in the Conveyance.
2. Marketing.
(a) Grantor shall have the right and obligation to market
all Hydrocarbons produced from or attributable to the Subject Interests,
including the Hydrocarbons attributable to the Overriding Royalty (the
"Overriding Royalty Hydrocarbons"). All such Hydrocarbons shall be sold by
Grantor pursuant to arm's length contracts with parties not affiliated with
Grantor containing terms negotiated by Grantor as a prudent operator. Grantor
shall comply with the terms of all such sales contracts and deliver
Hydrocarbons thereunder at the contract prices and on the terms applicable
thereto without deduction for nonperformance of noncompliance. Grantor will
take all appropriate and reasonable measures to enforce the performance of
under each sales contract of the obligations of the purchaser thereunder.
All Hydrocarbons shall be delivered by Grantor to the purchasers thereof into
the pipelines to which the wells producing such Hydrocarbons may be connected
or to such other point of purchase as is reasonably required in the marketing
of such Hydrocarbons.
(b) All proceeds received by Grantor from the sale of
Overriding Royalty Hydrocarbons sold on behalf of Grantee pursuant to the
terms hereof are received by Grantor in trust for Grantee and shall be held
in trust by Grantor for Grantee; provided, however, Grantor shall pay such
proceeds by wire transfer to such account as Grantee shall have designated
from time to time to Grantee on each Payment Date. Grantor will diligently
enforce the terms of all sales agreements under which Subject Hydrocarbons
are sold on behalf of Grantee, including full and prompt payment of all
amounts due from such sales. In the event of any late payment by any
purchaser, Grantor shall remit to Grantee any interest or penalties collected
with respect to the sale of Overriding Royalty Hydrocarbons.
3. Rate of Production.
Grantor shall prudently operate and produce with respect to
those Subject Interests operated by Grantor, and shall use its best efforts
to cause to be prudently operated and produced, with respect to the Subject
Interests not operated by Grantor, the Subject Wells in accordance with good
engineering practices.
4. Operation of Subject Interests. At all times from the date
hereof and whether or not Grantor is the operator of the Subject Interests,
Grantor, at Grantor's cost and expense, shall:
(i) Cause the Subject Interests to be maintained in full force
and effect, and to be developed, protected against drainage, and continuously
operated for the production of Hydrocarbons in a good and workmanlike manner
as would a prudent operator (and without regard to the burden of the
Overriding Royalty), all in accordance with generally accepted industry
practices, applicable operating agreements, and all applicable federal, state
and local laws, rules and regulations, and shall otherwise comply with all
applicable laws, rules and regulations;
(ii) Pay, or cause to be paid, promptly as and when due and
payable, all rentals and royalties payable in respect of the Subject Interests
or the production therefrom, and all costs, expenses and liabilities incurred
in or arising from the operation or development of the Subject Interests, or
the producing, treating, gathering, storing, marketing or transporting of
Hydrocarbons therefrom;
(iii) Cause all wells, machinery, equipment and facilities of any
kind now or hereafter located on the Subject Interests, and necessary or
useful in the operation thereof for the production of Hydrocarbons therefrom,
to be provided and to be kept in good and effective operating condition as
would a prudent operator (and without regard to the burden of the Overriding
Royalty), and all repairs, renewals, replacements, additions and improvements
thereof or thereto, useful or needful to such end, to be promptly made;
(iv) Give or cause to be given to Grantee written notice of every
adverse claim or demand made by any person affecting the Subject Interests,
the Hydrocarbons produced therefrom, the Overriding Royalty and/or the
Overriding Royalty Hydrocarbons in any manner whatsoever, and of any suit or
other legal proceeding instituted with respect thereto, and at Grantor's
expense cause all necessary and proper steps to be taken with reasonable
diligence to protect and defend the Subject Interests, the Hydrocarbons
produced therefrom, the Overriding Royalty and/or the Overriding Royalty
Hydrocarbons against any such adverse claim or demand, including (but not
limited to) the employment of counsel for the prosecution or defense of
litigation and the contest, release or discharge of such adverse claim or
demand;
(v) Cause the Subject Interests to be kept free and clear of
liens, charges and encumbrances of every character, other than (1) Taxes
constituting a lien but not due and payable, (2) the Permitted Encumbrances
and (3) the "Chase Liens" as defined and as may be permitted under that
certain Loan Agreement of even date herewith between Grantor, as borrower,
and Grantee, as lender;
(vi) Pay all Taxes when due and before they become delinquent,
and reimburse Grantee for any Taxes paid by Grantee as a result of the
Overriding Royalty or the Overriding Royalty Hydrocarbons or the production
of same;
(vii) Pay promptly when due and before they become delinquent all
operating expenses and all billings under applicable joint operating agreements
(except to the extent contested in good faith); and
(viii) Not resign as operator of any of the Subject Interests
operated by Grantor until and unless the successor operator has been approved
in writing by Grantee.
5. Insurance; Damage or Loss. Grantor shall maintain or cause
to be maintained, at its sole cost and expense and with financially sound
and reputable insurers reasonably satisfactory to Grantee, insurance covering
the Leases and all pipelines, wells, and facilities located thereon against
such liabilities, casualties, risks and contingencies, and in such types as
is customary in the case of independent oil companies engaged in operations
of similar property, including, without limitation, insurance of the types
and coverages described in Schedule 1 hereto and with limits of coverage no
less than those set out in Schedule 1. Such insurance shall name Grantee as
an additional insured as Grantee's interests appear. Grantor shall furnish
certificates of such insurance to Grantee and shall obtain endorsements to
such policies providing that the insurer will notify Grantee not less than
thirty (30) days prior to the expiration or termination of such policy of
insurance.
6. Information. (a) At all times from the date hereof Grantor,
at its own expense, shall furnish to Grantee the following reports and
information at the times indicated below.
(i) Quarterly within sixty (60) days after the end of
each fiscal quarter of Grantor and annually within one hundred twenty (120)
days after the end of each fiscal year of Grantor, Grantor shall furnish
Grantor's financial statements as of the end of and for such period,
including a balance sheet and statements of income, stockholder's equity and
cash flow, prepared in accordance with generally accepted accounting
principles and, with respect to the annual financial statements, accompanied
by a report of the Grantor's independent certified public accountants stating
that their examination was made in accordance with generally accepted auditing
standards and that in their opinion such financial statements fairly present
Grantor's financial condition, results of operations and changes in financial
position in accordance with generally accepted accounting principles
consistently applied.
(ii) Annually, as soon as available, but no later than
90 days after the end of each calendar year, (commencing with the calendar
year in which the Effective Time occurs), Grantor shall furnish an internally
prepared engineering report satisfactory to Grantee, as of January 1 of such
year. Each of the reports delivered hereunder shall incorporate all current
information and data available to Grantor pertinent to the estimation of oil
and gas reserves attributable to Subject Interests and setting forth the
following:
(A) an estimation of the oil and gas reserves, classified by
appropriate categories, as of such date attributable to the Subject
Interests,
(B) a projection of the rate of production of, and net income
from, such reserves,
(C) a calculation of the present worth of such net income from
such reserves,
(D) a calculation of the present worth of such net income
discounted at a rate or rates designated from time to time by Grantee, and
(E) a schedule or complete description of all assumptions,
estimates and projections made or used in the preparation of such report,
including without limitation estimated future product prices, capital
expenditures, operating expenses and taxes.
Each such report shall be prepared in accordance with customary and generally
accepted standards and practices for petroleum engineers, shall be based on
such assumptions as to costs, product prices and similar factors as Grantee
shall designate from time to time. Grantee shall be furnished a copy of any
other reserve report prepared for Grantor by any independent petroleum
engineering firm covering the Properties.
(iii) Monthly, Grantor shall furnish Grantee a lease
operating statement for each Lease showing gross and net volumes of
Hydrocarbons produced and sold from the Lease, average sales prices,
severance taxes, lease operating expenses, and any other revenues and
expenses associated with each Lease, a capital expenditure summary, and,
from the foregoing, a detailed statement showing the computation of the
Net Profits for such Month, and Gross Proceeds and Production Costs received
or incurred during such Month.
(iv) Upon request and to the extent available, Grantor
shall furnish Grantee copies of surface maps showing property lines and well
locations, well logs, core analysis data, flow and pressure tests, natural
gas analysis and casing programs and other similar information related to
the Subject Interests, Subject Wells and the production therefrom.
(v) Promptly upon Grantor's receipt, Grantor shall
furnish Grantee copies of all independent petroleum engineering reports
pertaining to the Subject Interests.
(vi) Upon request, Grantor shall furnish such other
information as Grantee may reasonably request.
(b) Grantee, at its expense, shall have the right from time to
time to audit the books and records of Grantor with respect to the Subject
Interests, including without limitation, all information with respect to
volumes of Hydrocarbons produced from the Leases, the sales price of
Hydrocarbons sold by Grantor, the computation of Net Profits, the calculation
of Lease Use Hydrocarbons and Non-Consent Hydrocarbons, and the payment by
Grantee of all costs and expenses incurred in connection with the Subject
Interests. Such audits shall be conducted by Grantee so as to result in a
minimum disruption in the ongoing business and affairs of Grantor and shall
be conducted during normal business hours at Grantor's offices or at the
offices where Grantor maintains the records relating to the items set forth
above. This right to audit shall be a free and unrestricted right. If, as
a result of any audit, it is determined that any amount is due Grantee as a
result of the failure of Grantor to properly deliver Grantee its share of
the Net Profits in accordance with the terms of the Conveyance and this
Agreement, Grantor shall pay Grantee Net Profits which Grantor failed to
remit, together with interest at the Floating Rate from the date that such
amount should have been paid in accordance with the terms of the Conveyance
and this Agreement to the date of payment.
7. Access to Subject Interests. Grantor shall permit the duly
authorized representatives of Grantee, at any reasonable time, but at Grantee's
risk and expense, to make such inspection of the Subject Interests and the
property, machinery, equipment and facilities used in the operation thereof
as such representatives shall deem proper.
8. Remedies of Grantee. At any time and from time to time, if
Grantor shall fail to perform or observe in any material respect any of the
covenants or agreements provided herein or in the Conveyance to be performed
or observed by Grantor, Grantee, in addition to Grantee's right to recover
damages and all other remedies available to Grantee at law or in equity, may,
if such failure shall continue unremedied after fifteen (15) days after
written notice thereof is delivered to Grantor:
(i) pay, or cause to be paid, any of the costs, expenses, Taxes
(which Taxes are not being contested in good faith by the Grantor) or other
amounts which the Grantor has agreed to pay under the Conveyance which have
become delinquent, and be reimbursed on demand by Grantee for all amounts so
paid or incurred, together with interest at the Floating Rate from the date
of such payment until the date of reimbursement; and
(ii) sell, on behalf and for the account of Grantor, all of the
Hydrocarbons attributable to Grantor's interest in the Subject Interests and
apply the proceeds thereof to any amount owed by Grantor hereunder; and
(iii) setoff any amount owed by Grantor or its Affiliates to
Grantee or its Affiliates against any amount owed to Grantor hereunder; and
(iv) apply to a court of equity for the specific performance or
observance of any such covenant or condition and in aid of the execution of
any power herein granted and for the appointment of a receiver of the Subject
Interests and the Hydrocarbons produced therefrom.
Any purchaser of Hydrocarbons from or attributable to the Subject
Interests is authorized and directed to make payment to the Grantee out of
the Hydrocarbons attributable to Grantor's interest in the Subject Interests
for any amount which Grantee shall certify to such purchaser that it has paid
and which Grantor is obligated to pay hereunder. Grantor hereby designates
Grantee as its agent and attorney in fact to execute any instruments which
may be necessary or appropriate, including without limitation designations
of operator, to enable Grantee to exercise its rights under this Section 8.
This designation and appointment shall be irrevocable as long as the
Overriding Royalty remains in effect.
9. Force Majeure. In the event of either party being rendered
unable, wholly or in part, by Force Majeure to carry out its obligations
under this Agreement other than to make payments due hereunder, it is agreed
that on such party's giving notice and full particulars of such force majeure
in writing or by telecopy to the other party as soon as possible after the
occurrence of the cause relied on, then the obligations of the party giving
such notice, so far as they are affected by such force majeure, shall be
suspended during the continuance of any inability so caused but for no
longer period, and such cause shall as far as possible be remedied with all
reasonable dispatch.
10. Notices. All notices, requests, demands, instructions and
other communications required or permitted to be given hereunder shall be in
writing and shall be delivered personally, mailed by certified mail, postage
prepaid and return receipt requested or sent by telecopier, as follows:
If to Grantor, addressed to:
Forest Oil Corporation
950 17th Street
Colorado National Building
Denver, Colorado 80202
Attention: Kenton M. Scroggs
Telecopy: (303) 592-2515
If to Grantee, addressed to:
Joint Energy Development
Investments Limited Partnership
P.O. Box 1188
Houston, Texas 77251-1188
Attention: Andrew S. Fastow
Telecopy: (713) 646-8174
or to such other place within the United States of America as either party
may designate as to itself by written notice to the other. All notices given
by personal delivery or mail shall be effective on the date of actual receipt
at the appropriate address. Notice given by telecopier shall be effective
upon actual receipt if received during recipient's normal business hours or
at the beginning of the next business day after receipt if received after
the recipient's normal business hours.
11. INDEMNITY. IT IS UNDERSTOOD AND AGREED THAT UNDER
NEITHER THIS AGREEMENT NOR THE CONVEYANCE DOES GRANTEE ASSUME OR SHALL
GRANTEE EVER BE LIABLE OR RESPONSIBLE IN ANY WAY FOR THE PAYMENT OF ANY
COSTS, EXPENSES OR LIABILITIES INCURRED IN CONNECTION WITH DEVELOPING,
EXPLORING, DRILLING, EQUIPPING, TESTING, OPERATING, PRODUCING, MAINTAINING
OR ABANDONING THE SUBJECT INTERESTS OR ANY WELL OR FACILITY THEREON OR
STORING, HANDLING, TREATING OR TRANSPORTING TO EACH DELIVERY POINT
PRODUCTION THEREFROM. GRANTOR SHALL FULLY DEFEND, PROTECT, INDEMNIFY AND
HOLD GRANTEE, ITS OFFICERS, EMPLOYEES, REPRESENTATIVES AND AGENTS HARMLESS
FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS AND CAUSES OF ACTION
OF EVERY KIND AND CHARACTER, INCLUDING REASONABLE ATTORNEYS' FEES AND COSTS
OF DEFENSE, WHICH MAY BE MADE OR ASSERTED BY ANY THIRD PARTY OR GOVERNMENTAL
AGENCY OR ENTITY, OR BY GRANTOR, GRANTOR'S EMPLOYEES, AGENTS, CONTRACTORS
AND SUBCONTRACTORS AND THEIR EMPLOYEES, AGENTS, ON ACCOUNT OF PERSONAL
INJURY, DEATH OR PROPERTY DAMAGE (INCLUDING, WITHOUT LIMITATION, CLAIMS FOR
POLLUTION AND ENVIRONMENTAL DAMAGE), ANY CIVIL OR CRIMINAL FINES OR PENALTIES
AND ANY CAUSES OF ACTION ALLEGING STATUTORY LIABILITY, RELATING TO, ARISING
OUT OF, OR IN ANY WAY INCIDENTAL TO THE SUBJECT INTERESTS, THE WELLS AND
FACILITIES THEREON OR USED IN CONNECTION THEREWITH, THE OPERATION THEREOF
AND THE PRODUCTION THEREFROM, WHETHER THROUGH AN ACT OR OMISSION OF GRANTEE
OR ANY OTHER PARTY HERETO OR OTHERWISE, AND WHETHER OR NOT ARISING OUT OF
THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF
GRANTEE OR ANY OTHER PERSON OR ENTITY INDEMNIFIED HEREUNDER; PROVIDED, THIS
INDEMNITY SHALL NOT COVER MATTERS TO THE EXTENT ATTRIBUTABLE TO GRANTEE'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THIS INDEMNITY SHALL APPLY, WITHOUT
LIMITATION, TO ANY LIABILITY IMPOSED UPON ANY PARTY INDEMNIFIED HEREUNDER
AS A RESULT OF ANY STATUTE, RULE, REGULATION OR THEORY OF STRICT LIABILITY.
12. Successors and Assigns. All the covenants and agreements of
Grantor and Grantee herein contained shall be deemed to be covenants running
with the land and shall be binding upon the successors and assigns of Grantor's
interest in the Subject Interests and Grantee's interest in the Overriding
Royalty and shall inure to the benefit of Grantor, Grantee, and their
respective successors and permitted assigns. The foregoing notwithstanding,
nothing herein is intended to modify or shall have the effect of modifying
the restrictions on assignment set forth in the Conveyance regarding
assignments, transfer or pooling of Grantor's interest in the Subject
Interests; and the preceding sentence shall not be deemed to permit any
assignment or other transfer of the interest of Grantor in any of the
Subject Interests that is not specifically permitted by the provisions of
the Conveyance. Nothing contained in this instrument or in the Conveyance
shall in any way limit or restrict the right of Grantee, or Grantee's
successors and assigns, to sell, convey, assign or mortgage the Overriding
Royalty in whole or in part. If Grantee, or Grantee's successors and assigns,
at any time shall execute a mortgage, pledge or deed of trust covering all
or any part of the Overriding Royalty as security for any obligation, the
mortgagee, the pledgee or the trustee therein named or the holder of the
obligation secured thereby shall be entitled, to the extent such mortgage,
pledge or deed of trust so provides and upon the occurrence or existence of
the event or condition therein stated, if so conditioned, to exercise all
of the rights, remedies, powers and privileges herein conferred upon Grantee,
and to give or withhold all consents herein required or permitted to be
obtained from Grantee. No assignment by Grantee of its rights hereunder
will be binding on Grantor until Grantee shall have notified Grantee of the
assignment and furnished a copy of the same to Grantor.
13. Damages. It is recognized that Grantee will look solely to
the Overriding Royalty Hydrocarbons for satisfaction and discharge of the
Overriding Royalty, and that Grantor is not personally liable for the payment
and discharge thereof. However, the foregoing provision shall not relieve
Grantor of any obligations under this Agreement or any obligation to respond
in damages for any breach of any of the provisions hereof or of the
Conveyance.
14. Cost of Litigation. In the event of a breach of this
Agreement, or if a dispute arising hereunder is not resolved by mutual
agreement, and either party should sue the other party to enforce its rights
hereunder or for breach hereof, the party prevailing in such litigation shall
be entitled to recover its costs and reasonable attorneys' fees in addition
to any other remedy or recovery to which it may be entitled.
15. Entire Agreement; Amendments; Waiver. This Agreement
constitutes the entire agreement between the parties hereto. This Agreement
may not be amended and no rights hereunder may be waived except by a written
document signed by the duly authorized representatives of the parties. No
waiver of any of the provisions of this Agreement shall be deemed to be or
shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
16. Headings. The headings of the sections of this Agreement are
for guidance and convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.
17. Counterpart Execution; Recordation. This Agreement may be
executed in multiple originals all of which shall constitute one and the same
Agreement.
18. Partial Invalidity. Except as otherwise expressly stated
herein, in the event any provision contained in this Agreement shall for any
reason be held invalid, illegal or unenforceable by a court or regulatory
agency of competent jurisdiction by reason of a statutory change or enactment,
such invalidity, illegality or unenforceability shall not affect the remaining
provisions of this Agreement.
19. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA.
EXECUTED in multiple originals this 28th day of December, 1993.
GRANTOR:
WITNESSES: FOREST OIL CORPORATION
_____________________
By:______________________
_____________________ William L. Dorn
Chairman of the Board and
Chief Executive Officer
GRANTEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
WITNESSES: By: Enron Capital Corp.
its general partner
_____________________
By:______________________
_____________________ Thomas S. Glanville
Attorney-in-Fact
THE STATE OF _____________
COUNTY OF _______________
BE IT REMEMBERED, that I, ___________________, a Notary Public duly
qualified, commissioned, sworn and acting in and for the State of__________ ,
hereby certify that, on this ____, day of December, 1993, there appeared
before me, William L. Dorn, Chairman of the Board and Chief Executive Officer,
of Forest Oil Corporation, a New York corporation, whose address is 950 17th
Street, Colorado National Building, Denver, Colorado 80202.
On this day, before me, the undersigned Notary Public in and for said
State, personally appeared the above named person, to me personally known,
who, being by me duly sworn, did say that he is the designated officers of
said corporation, and that the instrument was signed and sealed on behalf of
the corporation by authority of its Board of Directors and that the above
named person acknowledged the instrument to be the free act and deed of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
in the City of_______________, and State of________ , this ____ day of
December, 1993.
________________________________
Notary Public in and for
The State of____________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
THE STATE OF _____________
COUNTY OF _______________
BE IT REMEMBERED, that I, ___________________, a Notary Public duly
qualified, commissioned, sworn and acting in and for the State of Texas,
hereby certify that, on this ____ day of December, 1993, there appeared
before me, Thomas S. Glanville, attorney-in-fact, on behalf of Enron Capital
Corp, a Delaware corporation, as General Partner of Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership, whose address
is 1400 Smith Street, Houston, Texas 77002.
On this day, before me, the undersigned Notary Public in and for said
State, personally appeared the above named persons, to me personally known,
who, being by me duly sworn, did say that he is the designated officers of
said corporation, the General Partner of said limited partnership, a Delaware
limited partnership registered as a foreign limited partnership in Louisiana,
and the above named persons acknowledged that the instrument was signed on
behalf of the corporation by authority of the Board of Directors in its
capacity as General Partner of the aforesaid partnership and the above named
persons acknowledged the instrument to be the free act and deed of the
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in
the City of_______________, County of Harris and State of____ , this ____ day
of December, 1993.
________________________________
Notary Public in and for
The State of____________________
________________________________
Printed Name of Notary Public
Residing at:
________________________________
________________________________
My Commission Expires:
________________________________
EXHIBITS:
_________
Exhibit A -- Subject Interests
SCHEDULES:
__________
Schedule 1 -- Insurance Requirements
EXHIBIT O
ACCOUNTING PROCEDURE
The following pages comprise the Accounting Procedure, the first
seven pages of which represent the Accounting Procedure for all operations
offshore or over water and the remaining pages of which represent the
Accounting Procedure for onshore (land-based) operations.
ACCOUNTING PROCEDURE
OFFSHORE JOINT OPERATIONS
I. GENERAL PROVISIONS
1. Definitions
"Joint Property" shall mean the real and personal property subject
to the Agreement to which this Accounting Procedure is attached.
"Joint Operations" shall mean all operations necessary or proper for
the development, operation, protection and maintenance of the Joint
Property.
"Joint Account" shall mean the account showing the charges paid and
credits received in the conduct of the Joint Operations and which are
to be shared by the Parties.
"Operator" shall mean the party designated to conduct the Joint
Operations.
"Non-Operators" shall mean the Parties of this Agreement other than
the Operator.
"Parties" shall mean Operator and Non-Operators.
"First Level Supervisors" shall mean those employees whose primary
function in Joint Operations is the direct supervision of other
employees and/or contract labor directly employed on the Joint
Property in a field operating capacity.
"Technical Employees" shall mean those employees having special and
specific engineering, geological or other professional skills, and
whose primary function in Joint Operations is the handling of
specific operating conditions and problems for the benefit of the
Joint Property.
"Personal Expenses" shall mean travel and other reasonable
reimbursable expenses of Operator's employees.
"Material" shall mean personal property, equipment or supplies acquired
or held for use on the Joint Property.
"Controllable Material" shall mean Material which at the time is so
classified in the Material Classification Manual as most recently
recommended by the Council of Petroleum Accountants Societies.
"Shore Base Facilities" shall mean onshore support facilities that
during drilling, development, maintenance and producing operations
provide such services to the Joint Property as receiving and
transshipment point for supplies, materials and equipment; debarkation
point for drilling and production personnel and services;
communication, scheduling and dispatching center; other associated
functions benefiting the Joint Property.
"Offshore Facilities" shall mean platforms and support systems such as
oil and gas handling facilities, living quarters, offices, shops,
cranes, electrical supply equipment and systems, fuel and water storage
and piping, heliport, marine docking installations, communication
facilities, navigation aids, and other similar facilities necessary
in the conduct of offshore operations.
4. Adjustments
Payment of any such bills shall not prejudice the right of any Non-
Operator to protest or question the correctness thereof; provided,
however, all bills and statements rendered to Non-Operators by
Operator during any calendar year shall conclusively be presumed to
be true and correct after twenty-four (24) months following the end
of any such calendar year, unless within the said twenty-four (24)
month period a Non-Operator takes written exception thereto and makes
claim on Operator for adjustment. No adjustment favorable to Operator
shall be made unless it is made within the same prescribed period.
The provisions of this paragraph shall not prevent adjustments
resulting from a physical inventory of Controllable Material as
provided for in Section V.
5. Audits
A. A Non-Operator, upon notice in writing to Operator and all
other Non-Operators, shall have the right to audit Operator's accounts
and records relating to the Joint Account for any calendar year within
the twenty-four (24) month period following the end of such calendar
year; provided, however, the making of an audit shall not extend the
time for the taking of written exception to and the adjustments of
accounts as provided for in Paragraph 4 of this Section I. Where
there are two or more Non-Operators, the Non-Operators shall make
every reasonable effort to conduct a joint audit in a manner which
will result in a minimum of inconvenience to the Operator. Operator
shall bear no portion of the Non-Operators' audit cost incurred under
this paragraph unless agreed to by the Operator. The audits shall
not be conducted more than once each year without prior approval of
Operator, except upon the resignation or removal of the Operator, and
shall be made at the expense of those Non-Operators approving such
audit.
B. The Operator shall reply in writing to an audit report within
180 days after receipt of such report.
6. Approval by Non-Operators
Where an approval or other agreement of the Parties or Non-Operators
is expressly required under other sections of this Accounting Procedure
and if the agreement to which this Accounting Procedure is attached
contains no contrary provisions in regard thereto, Operator shall
notify all Non-Operators of the Operator's proposal, and the agreement
or approval of a majority in interest of the Non-Operators shall be
controlling on all Non-Operators.
II. DIRECT CHARGES
Operator shall charge the Joint Account with the following items:
1. Rentals and Royalties
Lease rentals and royalties paid by Operator for the Joint Operations.
2. Labor
A. (1) Salaries and wages of Operator's field employees directly
employed on the Joint Property in the conduct of Joint
Operations.
(2) Salaries and wages of Operator's employees directly employed
on Shore Base Facilities or other Offshore Facilities serving
the Joint Property if such costs are not charged under
Paragraph 7 of this Section II.
(3) Salaries of First Level Supervisors in the field.
(4) Salaries and wages of Technical Employees directly employed
on the Joint Property if such charges are excluded from the
Overhead rates.
(5) Salaries and wages of Technical Employees either temporarily
or permanently assigned to and directly employed in the
operation of the Joint Property if such charges are excluded
from the overhead rates.
B. Operator's cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose
salaries and wages are chargeable to the Joint Account under
Paragraph 2A of this Section II. Such costs under this Paragraph 2B
may be charged on a "when and as paid basis" or by "percentage
assessment" on the amount of salaries and wages chargeable to the
Joint Account under Paragraph 2A of this Section II. If percentage
assessment is used, the rate shall be based on the Operator's cost
experience.
C. Expenditures or contributions made pursuant to assessments imposed
by governmental authority which are applicable to Operator's costs
chargeable to the Joint Account under Paragraphs 2A and 2B of this
Section II.
D. Personal Expenses of those employees whose salaries and wages are
chargeable to the Joint Account under Paragraph 2A of this Section
II.
3. Employee Benefits
Operator's current costs of established plans for employees' group
life insurance, hospitalization, pension, retirement, stock purchase,
thrift, bonus, and other benefit plans of a like nature, applicable
to Operator's labor cost chargeable to the Joint Account under
Paragraphs 2A and 2B of this Section II shall be Operator's actual
cost not to exceed the percent most recently recommended by the
Council of Petroleum Accountants Societies.
4. Material
Material purchased or furnished by Operator for use on the Joint
Property as provided under Section IV. Only such Material shall be
purchased for or transferred to the Joint Property as may be required
for immediate use and is reasonably practical and consistent with
efficient and economical operations. The accumulation of surplus
stocks shall be avoided.
5. Transportation
Transportation of employees and material necessary for the Joint
Operations but subject to the following limitations:
A. If Material is moved to the Joint Property from the Operator's
warehouse or other properties, no charge shall be made to the
Joint Account for a distance greater than the distance from the
nearest reliable supply store where like material is normally
available or railway receiving point nearest the Joint Property
unless agreed to by the Parties.
B. If surplus Material is moved to Operator's warehouse or other
storage point, no charge shall be made to the Joint Account for
a distance greater than the distance to the nearest reliable
supply store where like material is normally available, or railway
receiving point nearest the Joint Property unless agreed to by the
Parties. No charge shall be made to the Joint Account for moving
Material to other properties belonging to Operator, unless agreed
to by the Parties.
C. In the application of subparagraphs A and B above, the option to
equalize or charge actual trucking cost is available when the
actual charge is $400 or less excluding accessorial charges. The
$400 will be adjusted to the amount most recently recommended by
the Council of Petroleum Accountants Societies.
6. Services
The cost of contract services, equipment and utilities provided by
outside sources, except services excluded by Paragraph 9 of Section
II and Paragraphs i and ii of Section III. The cost of professional
consultant services and contract services of technical personnel
directly engaged on the Joint Property if such charges are excluded
from the overhead rates. The cost of professional consultant services
or contract services of technical personnel directly engaged in the
operation of the Joint Property shall be charged to the Joint Account
if such charges are excluded from the overhead rates.
7. Equipment and Facilities Furnished by Operator
A. Operator shall charge the Joint Account for use of Operator-owned
equipment and facilities, including Shore Base and/or Offshore
Facilities, at rates commensurate with costs of ownership and
operation. Such rates may include labor, maintenance, repairs,
other operating expense, insurance, taxes, depreciation and interest
on gross investment less accumulated depreciation not to exceed
eight percent (8%) per annum. In addition, for platforms only,
the rate may include an element of the estimated cost of platform
dismantlement. Such rates shall not exceed average commercial
rates currently prevailing in the immediate area of the Joint
Property.
B. In lieu of charges in Paragraph 7A above, Operator may elect to
use average commercial rates prevailing in the immediate area of
the Joint Property less twenty percent (20%). For automotive
equipment, Operator may elect to use rates published by the
Petroleum Motor Transport Association.
8. Damages and Losses to Joint Property
All costs or expenses necessary for the repair or replacement of
Joint Property made necessary because of damages or losses incurred
by fire, flood, storm, theft, accident, or other causes, except those
resulting from Operator's gross negligence or willful misconduct.
Operator shall furnish Non-Operator written notice of damages or
losses incurred as soon as practicable after a report thereof has
been received by Operator.
9. Legal Expense
Expense of handling, investigating and settling litigation or claims,
discharging of liens, payments of judgements and amounts paid for
settlement of claims incurred in or resulting from operations under
the Agreement or necessary to protect or recover the Joint Property,
except that no charge for services of Operator's legal staff or fees
or expense of outside attorneys shall be made unless previously agreed
to by the Parties. All other legal expense is considered to be covered
by the overhead provisions of Section III unless otherwise agreed to
by the Parties, except as provided in Section I, Paragraph 3.
10. Taxes
All taxes of every kind and nature assessed or levied upon or in
connection with the Joint Property, the operation thereof, or the
production therefrom, and which taxes have been paid by the Operator
for the benefit of the Parties. If the ad valorem taxes are based
in whole or in part upon separate valuations of each party's working
interest, then notwithstanding anything to the contrary herein,
charges to the Joint Account shall be made and paid by the Parties
hereto in accordance with the tax value generated by each party's
working interest.
11. Insurance
Net premiums paid for insurance required to be carried for the Joint
Operations for the protection of the Parties. In the event Joint
Operations are conducted at offshore locations in which Operator may
act as self-insurer for Workers' Compensation and Employer's Liability,
Operator may include the risk under its self-insurance program in
providing coverage under State and Federal laws and charge the Joint
Account at Operator's cost not to exceed manual rates.
12. Communications
Costs of acquiring, leasing, installing, operating, repairing and
maintaining communication systems including radio and microwave
facilities between the Joint Property and the Operator's nearest
Shore Base Facility. In the event communication facilities systems
serving the Joint Property are Operator-owned, charges to the Joint
Account shall be made as provided in Paragraph 7 of this Section II.
13. Ecological and Environmental
Costs incurred on the Joint Property as a result of statutory
regulations for archaeological and geophysical surveys relative to
identification and protection of cultural resources and/or other
environmental or ecological surveys as may be required by the Bureau
of Land Management or other regulatory authority. Also, costs to
provide or have available pollution containment and removal
equipment plus costs of actual control and cleanup and resulting
responsibilities of oil spills as required by applicable laws and
regulations.
14. Abandonment and Reclamation
Costs incurred for abandonment of the Joint Property, including costs
required by governmental or other regulatory authority.
15. Other Expenditures
Any other expenditure not covered or dealt with in the foregoing
provisions of this Section II, or in Section III and which is of
direct benefit to the Joint Property and is incurred by the Operator
in the necessary and proper conduct of the Joint Operations.
III. OVERHEAD
As compensation for administrative, supervision, office services and
warehousing costs, Operator shall charge the Joint Account in accordance
with this Section III.
Unless otherwise agreed to by the Parties, such charge shall be in lieu of
costs and expenses of all offices and salaries or wages plus applicable
burdens and expenses of all personnel, except those directly chargeable under
Section II. The cost and expenses of services from outside sources in
connection with matters of taxation, traffic, accounting or matters before
or involving governmental agencies shall be considered as included in the
overhead rates provided for in this Section III unless such cost and expense
are agreed to by the Parties as a direct charge to the Joint Account.
i. Except as otherwise provided in Paragraph 2 of this Section
III, the salaries, wages and Personal Expenses of Technical
Employees and/or the cost of professional consultant services
and contract services of technical personnel directly employed
on the Joint Property:
( ) shall be covered by the overhead rates.
( X ) shall not be covered by the overhead rates.
ii. Except as otherwise provided in Paragraph 2 of this Section
III, the salaries, wages and Personal Expenses of Technical
Employees and/or costs of professional consultant services and
contract services of technical personnel either temporarily or
permanently assigned to and directly employed in the operation
of the Joint Property:
( ) shall be covered by the overhead rates.
( X ) shall not be covered by the overhead rates.
1. Overhead - Drilling and Producing Operations
As compensation for overhead incurred in connection with drilling and
producing operations, Operator shall charge on either:
( X ) Fixed Rate Basis, Paragraph 1A, or
( ) Percentage Basis, Paragraph 1B.
A. Overhead - Fixed Rate Basis
(1) Operator shall charge the Joint Account at the
following rates per well per month:
Drilling Well Rate $23,500 (Prorated for less than a
full month)
Producing Well Rate $2,350 located in the Gulf of Mexico
is accepted for tow
(2) Application of Overhead - Fixed Rate Basis for Drilling
Well Rate shall be as follows:
(a) Charges for drilling wells shall begin on the
date when drilling or completion equipment
arrives on location and terminate on the date
the drilling or completion equipment moves off
location or rig is released, whichever occurs
first, except that no charge shall be made
during suspension of drilling operations for
fifteen (15) or more consecutive calendar days.
(b) Charges for wells undergoing any type of
workover or recompletion for a period of five
(5) consecutive work days or more shall be made
at the drilling well rate. Such charges shall
be applied for the period from date workover
operations, with rig or other units used in
workover, commence through date of rig or
other unit release, except that no charge shall
be made during suspension of operations for
fifteen (15) or more consecutive calendar days.
(3) Application of Overhead - Fixed Rate Basis for Producing
Well Rate shall be as follows:
(a) An active well either produced or injected into
for any portion of the month shall be considered
as a one-well charge for the entire month.
(b) Each active completion in a multi-completed well
in which production is not commingled down hole
shall be considered as a one-well charge
providing each completion is considered a
separate well by the governing regulatory
authority.
(c) An inactive gas well shut in because of
overproduction or failure of purchaser to take
the production shall be considered as a one-well
charge providing the gas well is directly
connected to a permanent sales outlet.
(d) A one-well charge shall be made for the month
in which plugging and abandonment operations
are completed on any well. This one-well
charge shall be made whether or not the well
has produced except when drilling well rate
applies.
(e) All other inactive wells (including but not
limited to inactive wells covered by unit
allowable, lease allowable, transferred
allowable, etc.) shall not qualify for an
overhead charge.
(4) The well rates shall be adjusted as of the first day
of April each year following the effective date of
the agreement to which this Accounting Procedure is
attached. The adjustment shall be computed by
multiplying the rate currently in use by the percentage
increase or decrease in the average weekly earnings of
Crude Petroleum and Gas Production Workers for the last
calendar year compared to the calendar year preceding
as shown by the index of average weekly earnings of
Crude Petroleum and Gas Fields Production Workers as
published by the United States Department of Labor,
Bureau of Labor Statistics, or the equivalent Canadian
index as published by Statistics Canada, as applicable.
The adjusted rates shall be the rates currently in use,
plus or minus the computed adjustment.
B. Overhead - Percentage Basis
(1) Operator shall charge the Joint Account at the following
rates:
(a) Development
______________ Percent ( %) of cost of
Development of the Joint Property exclusive of
costs provided under Paragraph 9 of Section II
and all salvage credits.
(b) Operating
______________ Percent ( %) of the cost of
Operating the Joint Property exclusive of costs
provided under Paragraphs 1 and 9 of Section II,
all salvage credits, the value of injected
substances purchased for secondary recovery and
all taxes and assessments which are levied,
assessed and paid upon the mineral interest in
and to the Joint Property.
(2) Application of Overhead - Percentage Basis shall be as
follows:
For the purpose of determining charges on a percentage
basis under Paragraph 1B of this Section III,
development shall include all costs in connection with
drilling, redrilling, or deepening of any or all wells,
and shall also include any remedial operations requiring
a period of five (5) consecutive work days or more on
any or all wells; also, preliminary expenditures
necessary in preparation for drilling and expenditures
incurred in abandoning when the well is not completed
as a producer, and original cost of construction or
installation of fixed assets, the expansion of fixed
assets and any other project clearly discernible as a
fixed asset, except Major Construction as defined in
Paragraph 2 of this Section III. All other costs shall
be considered as Operating except that catastrophe costs
shall be assessed overhead as provided in Section III,
Paragraph 3.
2. Overhead - Major Construction
To compensate Operator for overhead costs incurred in the construction
and installation of fixed assets, the expansion of fixed assets, and
any other project clearly discernible as a fixed asset required for the
development and operation of the Joint Property, or in the dismantling
for abandonment of platforms and related production facilities,Operator
shall either negotiate a rate prior to the beginning of construction,
or shall charge the Joint Account for overhead based on the following
rates for any Major Construction project in excess of $ 25,000:
A. If the Operator absorbs the engineering, design and drafting
costs related to the project:
(1) 6 % of total costs if such costs are more than $25,000
but less than $100,000; plus
(2) 4 % of total costs in excess of $100,000 but less than
$1,000,000; plus
(3) 2 % of total costs in excess of $1,000,000.
B. If the Operator charges engineering, design and drafting costs
related to the project directly to the Joint Account:
(1) 4 % of total costs if such costs are more than $25,000 but
less than $100,000; plus
(2) 3 % of total costs in excess of $100,000 but less than
$1,000,000; plus
(3) 2 % of total costs in excess of $1,000,000.
Total cost shall mean the gross cost of any one project. For the
purposes of this paragraph, the component parts of a single project
shall not be treated separately and the cost of drilling and workover
wells and artificial lift equipment shall be excluded.
On each project, Operator shall advise Non-Operator(s) in advance
which of the above options shall apply. In the event of any conflict
between the provisions of this paragraph and those provisions under
Section II, Paragraph 2 or Paragraph 6, the provisions of this
paragraph shall govern.
3. Overhead - Catastrophe
To compensate Operator for overhead costs incurred in the event of
expenditures resulting from a single occurrence due to oil spill,
blowout, explosion, fire, storm, hurricane, or other catastrophes
as agreed to by the Parties, which are necessary to restore the
Joint Property to the equivalent condition that existed prior to
the event causing the expenditures. Operator shall either negotiate
a rate prior to charging the Joint Account or shall charge the Joint
Account for overhead based on the following rates:
(1) 4 % of total costs through $100,000; plus
(2) 3 % of total costs in excess of $100,000 but less than
$1,000,000; plus
(3) 2 % of total costs in excess of $1,000,000.
Expenditures subject to the overheads above will not be reduced by
insurance recoveries, and no other overhead provisions of this
Section III shall apply.
4. Amendment of Rates
The overhead rates provided for in this Section III may be amended
from time to time only by mutual agreement between the Parties hereto
if, in practice, the rates are found to be insufficient, or excessive.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator's option, such Material may be supplied by the Non-
Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or Non-
Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.
1. Purchases
Material purchased shall be charged at the price paid by Operator
after deduction of all discounts received. In case of Material found
to be defective or returned to vendor for any other reasons, credit
shall be passed to the Joint Account when adjustment has been received
by the Operator.
2. Transfers and Dispositions
Material furnished to the Joint Property and Material transferred from
the Joint Property or disposed of by the Operator, unless otherwise
agreed to by the Parties, shall be priced on the following basis
exclusive of cash discounts:
A. New Material (Condition A)
(1) Tubular Goods Other than Line Pipe
(a) Tubular goods, sized 2-3/8 inches OD and larger, except
line pipe, shall be priced at Eastern mill published
carload base prices effective as of date of movement plus
transportation cost using the 80,000 pound carload weight
basis to the railway receiving point nearest the Joint
Property for which published rail rates for tubular goods
exist. If the 80,000 pound rail rate is not offered, the
70,000 pound or 90,000 pound rail rate may be used.
Freight charges for tubing will be calculated from
Lorain, Ohio and casing from Youngstown, Ohio.
(b) For grades which are special to one mill only, prices
shall be computed at the mill base of that mill plus
transportation cost from that mill to the railway
receiving point nearest the Joint Property as provided
above in Paragraph 2.A.(1)(a). For transportation cost
from points other than Eastern mills, the 30,000 pound
Oil Field Haulers Association interstate truck rate shall
be used.
(c) Special end finish tubular goods shall be priced at the
lowest published out-of-stock price, f.o.b. Houston,
Texas, plus transportation cost, using Oil Field Haulers
Association interstate 30,000 pound truck rate, to the
railway receiving point nearest the Joint Property.
(d) Macaroni tubing (size less than 2-3/8 inch OD) shall be
priced at the lowest published out-of-stock prices f.o.b.
the supplier plus transportation costs, using the Oil
Field Haulers Association interstate truck rate per
weight of tubing transferred, to the railway receiving
point nearest the Joint Property.
(2) Line Pipe
(a) Line pipe movements (except size 24 inch OD and larger
with walls 3/4 inch and over) 30,000 pounds or more shall
be priced under provisions of tubular goods pricing in
Paragraph A.(1)(a) as provided above. Freight charges
shall be calculated from Lorain, Ohio.
(b) Line pipe movements (except size 24 inch OD and larger
with walls 3/4 inch and over) less than 30,000 pounds
shall be priced at Eastern mill published carload base
prices effective as of date of shipment, plus 20 percent,
plus transportation costs based on freight rates as set
forth under provisions of tubular goods pricing in
Paragraph A.(1)(a) as provided above. Freight charges
shall be calculated from Lorain, Ohio.
(c) Line pipe 24 inch OD and over and 3/4 inch wall and larger
shall be priced f.o.b. the point of manufacture at current
new published prices plus transportation cost to the
railway receiving point nearest the Joint Property.
(d) Line pipe, including fabricated line pipe, drive pipe and
conduit not listed on published price lists shall be
priced at quoted prices plus freight to the railway
receiving point nearest the Joint Property or at prices
agreed to by the Parties.
(3) Other Material shall be priced at the current new price, in
effect at date of movement, as listed by a reliable supply store
nearest the Joint Property, or point of manufacture, plus
transportation costs, if applicable, to the railway receiving
point nearest the Joint Property.
(4) Unused new Material, except tubular goods, moved from the Joint
Property shall be priced at the current new price, in effect on
date of movement, as listed by a reliable supply store nearest
the Joint Property, or point of manufacture,plus transportation
costs, if applicable, to the railway receiving point nearest
the Joint Property. Unused new tubulars will be priced as
provided above in Paragraph 2 A (1) and (2).
B. Good Used Material (Condition B)
Material in sound and serviceable condition and suitable for reuse
without reconditioning:
(1) Material moved to the Joint Property
At seventy-five percent (75%) of current new price, as
determined by Paragraph A.
(2) Material used on and moved from the Joint Property
(a) At seventy-five percent (75%) of current new price,
as determined by Paragraph A,if Material was originally
charged to the Joint Account as new Material or
(b) At sixty-five percent (65%) of current new price, as
determined by Paragraph A, if Material was originally
charged to the Joint Account as used Material.
(3) Material not used on and moved from the Joint Property
At seventy-five percent (75%)of current new price as determined
by Paragraph A.
The cost of reconditioning, if any, shall be absorbed by the
transferring property.
C. Other Used Material
(1) Condition C
Material which is not in sound and serviceable condition and
not suitable for its original function until after
reconditioning shall be priced at fifty percent (50%) of
current new price as determined by Paragraph A. The cost of
reconditioning shall be charged to the receiving property,
provided Condition C value plus cost of reconditioning does
not exceed Condition B value.
(2) Condition D
Material, excluding junk, no longer suitable for its original
purpose, but usable for some other purpose shall be priced on
a basis commensurate with its use. Operator may dispose of
Condition D Material under procedures normally used by Operator
without prior approval of Non-Operators.
(a) Casing, tubing, or drill pipe used as line pipe shall
be priced as Grade A and B seamless line pipe of
comparable size and weight. Used casing, tubing or
drill pipe utilized as line pipe shall be priced at
used line pipe prices.
(b) Casing, tubing or drill pipe used as higher pressure
service lines than standard line pipe, e.g. power oil
lines, shall be priced under normal pricing procedures
for casing, tubing, or drill pipe. Upset tubular goods
shall be priced on a non-upset basis.
(3) Condition E
Junk shall be priced at prevailing prices. Operator may dispose
of Condition E Material under procedures normally utilized by
Operator without prior approval of Non-Operators.
D. Obsolete Material
Material which is serviceable and usable for its original function but
condition and/or value of such Material is not equivalent to that which
would justify a price as provided above may be specially priced as
agreed to by the Parties. Such price should result in the Joint
Account being charged with the value of the service rendered by such
Material.
E. Pricing Conditions
(1) Loading or unloading costs may be charged to the Joint Account
at the rate of twenty-five cents (.25) per hundred weight on
all tubular goods movements, in lieu of actual loading or
unloading costs sustained at the stocking point. The above
rate shall be adjusted as of the first day of April each year
following January 1, 1985 by the same percentage increase or
decrease used to adjust overhead rates in Section III,
Paragraph 1.A(4). Each year, the rate calculated shall be
rounded to the nearest cent and shall be the rate in effect
until the first day of April next year. Such rate shall be
published each year by the Council of Petroleum Accountants
Societies.
(2) Material involving erection costs shall be charged at
applicable percentage of the current knocked-down price of
new Material.
3. Premium Prices
Whenever Material is not readily obtainable at published or listed
prices because of national emergencies, strikes or other unusual
causes over which the Operator has no control, the Operator may charge
the Joint Account for the required Material at the Operator's actual
cost incurred in providing such Material, in making it suitable for
use, and in moving it to the Joint Property; provided notice in writing
is furnished to Non-Operators of the proposed charge prior to billing
Non-Operators for such Material. Each Non-Operator shall have the
right, by so electing and notifying Operator within ten days after
receiving notice from Operator, to furnish in kind all or part of his
share of such Material suitable for use and acceptable to Operator.
4. Warranty of Material Furnished By Operator
Operator does not warrant the Material furnished. In case of
defective Material, credit shall not be passed to the Joint Account
until adjustment has been received by Operator from the manufacturers
or their agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. Periodic Inventories, Notice and Representation
At reasonable intervals, inventories shall be taken by Operator of the
Joint Account Controllable Material. Written notice of intention to
take inventory shall be given by Operator at least thirty (30) days
before any inventory is to begin so that Non-Operators may be
represented when any inventory is taken. Failure of Non-Operators to
be represented at an inventory shall bind Non-Operators to accept the
inventory taken by Operator.
2. Reconciliation and Adjustment of Inventories
Adjustments to the Joint Account resulting from the reconciliation of
a physical inventory shall be made within six months following the
taking of the inventory. Inventory adjustments shall be made by
Operator to the Joint Account for overages and shortages, but,
Operator shall be held accountable only for shortages due to lack of
reasonable diligence.
3. Special Inventories
Special inventories may be taken whenever there is any sale, change
of interest, or change of Operator in the Joint Property. It shall
be the duty of the party selling to notify all other Parties as
quickly as possible after the transfer of interest takes place.
In such cases, both the seller and the purchaser shall be governed
by such inventory. In cases involving a change of Operator, all
Parties shall be governed by such inventory.
4. Expense of Conducting Inventories
A. The expense of conducting periodic inventories shall not be
charged to the Joint Account unless agreed to by the Parties.
B. The expense of conducting special inventories shall be
charged to the Parties requesting such inventories, except
inventories required due to change of Operator shall be
charged to the Joint Account.
ACCOUNTING PROCEDURE
JOINT OPERATIONS
I. GENERAL PROVISIONS
1. Definitions
"Joint Property" shall mean the real and personal property subject
to the Agreement to which this Accounting Procedure is attached.
"Joint Operations" shall mean all operations necessary or proper for
the development, operation, protection and maintenance of the Joint
Property.
"Joint Account" shall mean the account showing the charges paid and
credits received in the conduct of the Joint Operations and which are
to be shared by the Parties.
"Operator" shall mean the party designated to conduct the Joint
Operations.
"Non-Operators" shall mean the Parties to this Agreement other than
the Operator.
"Parties" shall mean Operator and Non-Operators.
"First Level Supervisors" shall mean those employees whose primary
function in Joint Operations is the direct supervision of other
employees and/or contract labor directly employed on the Joint
Property in a field operating capacity.
"Technical Employees" shall mean those employees having special and
specific engineering, geological or other professional skills, and
whose primary function in Joint Operations is the handling of
specific operating conditions and problems for the benefit of the
Joint Property.
"Personal Expenses" shall mean travel and other reasonable
reimbursable expenses of Operator's employees.
"Material" shall mean personal property, equipment or supplies
acquired or held for use on the Joint Property.
"Controllable Material" shall mean Material which at the time is so
classified in the Material Classification Manual as most recently
recommended by the Council of Petroleum Accountants Societies.
2. Statement and Billings
Operator shall bill Non-Operators on or before the last day of each
month for their proportionate share of the Joint Account for the preceding
month. Such bills will be accompanied by statements which identify the
authority for expenditure, lease or facility, and all charges and credits
summarized by appropriate classifications of investment and expense except
that items of Controllable Material and unusual charges and credits shall
be separately identified and fully described in detail.
4. Adjustments
Payment of any such bills shall not prejudice the right of any
Non-Operator to protest or question the correctness thereof; provided,
however, all bills and statements rendered to Non-Operators by Operator
during any calendar year shall conclusively be presumed to be true and
correct after twenty-four (24) months following the end of any such calendar
year, unless within the said twenty-four (24) month period a Non-Operator
takes written exception thereto and makes claim on Operator for adjustment.
No adjustment favorable to Operator shall be made unless it is made within
the same prescribed period. The provisions of this paragraph shall not
prevent adjustments resulting from a physical inventory of Controllable
Material as provided for in Section V.
COPYRIGHTc 1985 by the Council of Petroleum Accountants Societies.
5. Audits
A. A Non-Operator, upon notice in writing to Operator and all
other Non-Operators, shall have the right to audit Operator's accounts
and records relating to the Joint Account for any calendar year
within the twenty-four (24) month period following the end of such
calendar year; provided, however, the making of an audit shall not
extend the time for the taking of written exception to and the
adjustments of accounts as provided for in Paragraph 4 of this
Section I. Where there are two or more Non-Operators, the Non-
Operators shall make every reasonable effort to conduct a joint audit
in a manner which will result in a minimum of inconvenience to the
Operator. Operator shall bear no portion of the Non-Operators' audit
cost incurred under this paragraph unless agreed to by the Operator.
The audits shall not be conducted more than once each year without
prior approval of Operator, except upon the resignation or removal
of the Operator, and shall be made at the expense of those Non-
Operators approving such audit.
B. The Operator shall reply in writing to an audit report
within 180 days after receipt of such report.
6. Approval by Non-Operators
Where an approval or other agreement of the Parties or Non-Operators
is expressly required under other sections of this Accounting Procedure and
if the agreement to which this Accounting Procedure is attached contains no
contrary provisions in regard thereto, Operator shall notify all Non-Operators
of the Operator's proposal, and the agreement or approval of a majority in
interest of the Non-Operators shall be controlling on all Non-Operators.
II. DIRECT CHARGES
Operator shall charge the Joint Account with the following items:
1. Ecological and Environmental
Costs incurred for the benefit of the Joint Property as a result of
governmental or regulatory requirements to satisfy environmental considerations
applicable to the Joint Operations. Such costs may include surveys of an
ecological or archaeological nature and pollution control procedures as
required by applicable laws and regulations.
2. Rentals and Royalties
Lease rentals and royalties paid by Operator for the Joint Operations.
3. Labor
A. (1) Salaries and wages of Operator's field employees
directly employed on the Joint Property in the
conduct of Joint Operations.
(2) Salaries of First Level Supervisors in the field.
(3) Salaries and wages of Technical Employees directly
employed on the Joint Property if such charges are
excluded from the overhead rates.
(4) Salaries and wages of Technical Employees either
temporarily or permanently assigned to and directly
employed in the operation of the Joint Property if
such charges are excluded from the overhead rates.
B. Operator's cost of holiday, vacation, sickness and disability
benefits and other customary allowances paid to employees whose
salaries and wages are chargeable to the Joint Account under
Paragraph 3A of this Section II. Such costs under this
Paragraph 3B may be charged on a "when and as paid basis" or by
"percentage assessment" on the amount of salaries and wages
chargeable to the Joint Account under Paragraph 3A of this
Section II. If percentage assessment is used, the rate shall
be based on the Operator's cost experience.
C. Expenditures or contributions made pursuant to assessments
imposed by governmental authority which are applicable to
Operator's costs chargeable to the Joint Account under
paragraphs 3A and 3B of this Section II.
D. Personal Expenses of those employees whose salaries and wages
are chargeable to the Joint Account under Paragraph 3A of this Section II.
4. Employee Benefits
Operator's current costs of established plans for employees' group
life insurance, hospitalization, pension, retirement, stock purchase, thrift,
bonus, and other benefit plans of a like nature, applicable to Operator's
labor cost chargeable to the Joint Account under Paragraphs 3A and 3B of this
Section II shall be Operator's actual cost not to exceed the percent most
recently recommended by the Council of Petroleum Accountants Societies.
5. Material
Material purchased or furnished by Operator for use on the Joint
Property as provided under Section IV. Only such Material shall be purchased
for or transferred to the Joint Property as may be required for immediate
use and is reasonably practical and consistent with efficient and economical
operations. The accumulation of surplus stocks shall be avoided.
6. Transportation
Transportation of employees and Material necessary for the Joint
Operations but subject to the following limitations:
A. If Material is moved to the Joint Property from the Operator's
warehouse or other properties, no charge shall be made to the Joint
Account for a distance greater than the distance from the nearest
reliable supply store where like material is normally available or
railway receiving point nearest the Joint Property unless agreed to
by the Parties.
B. If surplus Material is moved to Operator's warehouse or other
storage point, no charge shall be made to the Joint Account for a
distance greater than the distance to the nearest reliable supply
store where like material is normally available, or railway receiving
point nearest the Joint Property unless agreed to by the Parties.
No charge shall be made to the Joint Account for moving Material to
other properties belonging to Operator, unless agreed to by the
Parties.
C. In the application of subparagraphs A and B above, the option
to equalize or charge actual trucking cost is available when the actual
charge is $400 or less excluding accessorial charges. The $400 will
be adjusted to the amount most recently recommended by the Council of
Petroleum Accountants Societies.
7. Services
The cost of contract services, equipment and utilities provided by
outside sources, except services excluded by Paragraph 10 of Section II and
Paragraph i, ii, and iii, of Section III. The cost of professional consultant
services and contract services of technical personnel directly engaged on the
Joint Property if such charges are excluded from the overhead rates. The cost
of professional consultant services or contract services of technical
personnel not directly engaged on the Joint Property shall not be charged to
the Joint Account unless previously agreed to by the Parties.
8. Equipment and Facilities Furnished by Operator
A. Operator shall charge the Joint Account for use of Operator
owned equipment and facilities at rates commensurate with costs of ownership
and operation. Such rates shall include costs of maintenance, repairs, other
operating expense, insurance, taxes, depreciation, and interest on gross
investment less accumulated depreciation not to exceed twelve percent (12%)
per annum. Such rates shall not exceed average commercial rates currently
prevailing in the immediate area of the Joint Property.
B. In lieu of charges in paragraph 8A above, Operator may elect
to use average commercial rates prevailing in the immediate area of the Joint
Property less 20%. For automotive equipment, Operator may elect to use rates
published by the Petroleum Motor Transport Association.
9. Damages and Losses to Joint Property
All costs or expenses necessary for the repair or replacement of Joint
Property made necessary because of damages or losses incurred by fire, flood,
storm, theft, accident, or other cause, except those resulting from Operator's
gross negligence or willful misconduct. Operator shall furnish Non-Operator
written notice of damages or losses incurred as soon as practicable after a
report thereof has been received by Operator.
10. Legal Expense
Expense of handling, investigating and settling litigation or claims,
discharging of liens, payment of judgements and amounts paid for settlement
of claims incurred in or resulting from operations under the agreement or
necessary to protect or recover the Joint Property, except that no charge
for services of Operator's legal staff or fees or expense of outside attorneys
shall be made unless previously agreed to by the Parties. All other legal
expense is considered to be covered by the overhead provisions of Section III
unless otherwise agreed to by the Parties, except as provided in Section I,
Paragraph 3.
11. Taxes
All taxes of every kind and nature assessed or levied upon or in
connection with the Joint Property, the operation thereof, or the production
therefrom, and which taxes have been paid by the Operator for the benefit of
the Parties. If the ad valorem taxes are based in whole or in part upon
separate valuations of each party's working interest, then notwithstanding
anything to the contrary herein, charges to the Joint Account shall be made
and paid by the Parties hereto in accordance with the tax value generated by
each party's working interest.
12. Insurance
Net premiums paid for insurance required to be carried for the Joint
Operations for the protection of the Parties. In the event Joint Operations
are conducted in a state in which Operator may act as self-insurer for Worker's
Compensation and/ or Employers Liability under the respective state's laws.
Operator may, at its election, include the risk under its self-insurance
program and in that event, Operator shall include a charge at Operator's cost
not to exceed manual rates.
13. Abandonment and Reclamation
Costs incurred for abandonment of the Joint Property, including costs
required by governmental or other regulatory authority.
14. Communications
Cost of acquiring, leasing, installing, operating, repairing and
maintaining communication systems, including radio and microwave facilities
directly serving the Joint Property. In the event communication
facilities/systems serving the Joint Property are Operator owned, charges to
the Joint Account shall be made as provided in Paragraph 8 of this Section II.
15. Other Expenditures
Any other expenditure not covered or dealt with in the foregoing
provisions of this Section II, or in Section III and which is of direct
benefit to the Joint Property and is incurred by the Operator in the
necessary and proper conduct of the Joint Operations.
III. OVERHEAD
1. Overhead - Drilling and Producing Operations
i. As compensation for administrative, supervision, office
services and warehousing costs, Operator shall charge drilling and
producing operations on either:
( X ) Fixed Rate Basis, Paragraph 1A, or
( ) Percentage Basis, Paragraph 1B
Unless otherwise agreed to by the Parties, such charge shall be in
lieu of costs and expenses of all offices and salaries or wages plus
applicable burdens and expenses of all personnel, except those
directly chargeable under Paragraph 3A, Section II. The cost and
expense of services from outside sources in connection with matters
of taxation, traffic, accounting or matters before or involving
governmental agencies shall be considered as included in the overhead
rates provided for in the above selected Paragraph of this Section
III unless such cost and expense are agreed to by the Parties as a
direct charge to the Joint Account.
ii. The salaries, wages and Personal Expenses of Technical
Employees and/or the cost of professional consultant, services and
contract services of technical personnel directly employed on the Joint
Property:
( ) shall be covered by the overhead rates, or
( X ) shall not be covered by the overhead rates.
iii. The salaries, wages and Personal Expenses of Technical
employees and/or costs of professional consultant. services and
contract services of technical personnel either temporarily or
permanently assigned to and directly employed in the operation of the
Joint Property:
( ) shall be covered by the overhead rates, or
( X ) shall not be covered by the overhead rates.
A. Overhead - Fixed Rate Basis
(1) Operator shall charge the Joint Account at the
following rates per well per month:
Drilling Well rate $7,000
(Prorated for less than a full month)
Producing Well Rate $750
(2) Application of Overhead - Fixed rate Basis shall be
as follows:
(a) Drilling Well Rate
(1) Charges for drilling wells shall begin
on the date the well is spudded and terminate
on the date the drilling rig, completion rig,
or other units used in completion of the well
is released, whichever is later, except that
no charge shall be made during suspension of
drilling or completion operations for fifteen
(15) or more consecutive calendar days.
(2) Charges for wells undergoing any type
of workover or recompletion for a period of
five (5) consecutive work days or more shall
be made at the drilling well rate. Such
charges shall be applied for the period from
date workover operations, with rig or other
units used in workover, commence through date
of rig or other unit release, except that no
charge shall be made during suspension of
operations for fifteen (15) or more consecutive
calendar days.
(b) Producing Well Rates
(1) An active well either produced or
injected into for any portion of the month shall
be considered as a one-well charge for the
entire month.
(2) Each active completion in a multi-
completed well in which production is not
commingled down hole shall be considered as a
one-well charge providing each completion is
considered a separate well by the governing
regulatory authority.
(3) An inactive gas well shut in because of
overproduction or failure of purchased to take
the production shall be considered as a one-well
charge providing the gas well is directly
connected to a permanent sales outlet.
(4) A one-well charge shall be made for the
month in which plugging and abandonment
operations are completed on any well. This one-
well charge shall be made whether or not the
well has produced except when drilling well rate
applies.
(5) All other inactive wells (including but
not limited to inactive wells covered by unit
allowable, lease allowable, transferred
allowable, etc.) shall not qualify for an
overhead charge.
(3) The well rates shall be adjusted as of the first day of
April each year following the effective date of the agreement
to which this Accounting Procedure is attached. The adjustment
shall be computed by multiplying the rate currently in use by
the percentage increase or decrease in the average weekly
earnings of Crude Petroleum and Gas Production Workers for the
last calendar year compared to the calendar year preceding as
shown by the index of average weekly earnings of Crude
Petroleum and Gas Production Workers as published by the United
States Department of Labor, Bureau of Labor Statistics, or the
equivalent Canadian index as published by Statistics, Canada,
as applicable. The adjusted rates shall be the rates currently
in use, plus or minus the computed adjustment.
B. Overhead - Percentage Basis
(1) Operator shall charge the Joint Account at the following rates:
(a) Development
____________ Percent ( %) of the cost of
development of the Joint Property exclusive of
costs provided under Paragraph 10 of Section II
and all salvage credits.
(b) Operating
____________ Percent ( %) of the cost of
operating the Joint Property exclusive of costs
provided under Paragraphs 2 and 10 of Section
II, all salvage credits, the value of injected
substances purchased for secondary recovery and
all taxes and assessments which are levied,
assessed and paid upon the mineral interest in
and to the Joint Property.
(2) Application of Overhead - Percentage Basis shall be as follows:
For the purpose of determining charges on a percentage
basis under Paragraph 1B of this Section III,
development shall include all costs in connection with
drilling, redrilling, deepening, or any remedial
operations on any or all wells involving the use of
drilling rig and crew capable of drilling to the
producing interval on the Joint Property; also,
preliminary expenditures necessary in preparation
for drilling and expenditures incurred in abandoning
when the well is not completed as a producer, and
original cost of construction or installation of fixed
assets, the expansion of fixed assets and any other
project clearly discernible as a fixed asset, except
Major Construction as defined in Paragraph 2 of this
Section III. All other costs shall be considered as
operating.
2. Overhead - Major Construction
To compensate Operator for overhead costs incurred in the construction
and installation of fixed assets, the expansion of fixed assets, and
any other project clearly discernible as a fixed asset required for
the development and operation of the Joint Property, Operator shall
either negotiate a rate prior to the beginning of construction, or
shall charge the Joint Account for overhead based on the following
rates for any Major Construction project in excess of $25,000:
A. 5% of first $100,000 or total cost if less, plus
B. 3% of costs in excess of $100,000 but less than $1,000,000,
plus
C. 1% of costs in excess of $1,000,000.
Total cost shall mean the gross cost of any one project. For the
purpose of this paragraph, the component parts of a single project shall not
be treated separately and the cost of drilling and workover wells and
artificial lift equipment shall be excluded.
3. Catastrophe Overhead
To compensate Operator for overhead costs incurred in the event of
expenditures resulting from a single occurrence due to oil spill, blowout,
explosion, fire, storm, hurricane, or other catastrophes as agreed to by the
Parties, which are necessary to restore the Joint Property to the equivalent
condition that existed prior to the event causing the expenditures. Operator
shall either negotiate a rate prior to charging the Joint Account or shall
charge the Joint Account for overhead based on the following rates:
A. 5% of total costs through $100,000; plus
B. 3% of total costs in excess of $100,000 but less than
$1,000,000; plus
C. 1% of total costs in excess of $1,000,000.
Expenditures subject to the overheads above will not be reduced by
insurance recoveries, and no other overhead provisions of this Section III
shall apply.
4. Amendment of Rates
The overhead rates provided for in this Section III may be amended
from time to time only by mutual agreement between the Parties hereto if, in
practice, the rates are found to be insufficient, or excessive.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
SEE ALSO IV.5 ATTACHED HERETO AND MADE A PART HEREOF.
Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator's option, such Material may be supplied by the Non-
Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or Non-
Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.
* Timely is defined herein as being thirty days from the
date of classification by Operator as "surplus" or after sixty days
of "idle" use.
1. Purchases
Material purchased shall be charged at the price paid by Operator
after deduction of all discounts received. In case of Material found to be
defective or returned to vendor for any other reasons, credit shall be passed
to the Joint Account when adjustment has been received by the Operator.
2. Transfers and Dispositions
Material furnished to the Joint Property and Material transferred
from the Joint Property or disposed of by the Operator, unless otherwise
agreed to by the Parties, shall be priced on the following basis exclusive
of cash discounts:
A. New Material (Condition A)
(1) Tubular Goods Other than Line Pipe
(a) Tubular goods, sized 2-3/4 inches OD and larger,
except line pipe, shall be priced at Eastern mill published
carload base prices effective as of date of movement plus
transportation cost using the 80,000 pound carload weight
basis to the railway receiving point nearest the Joint
Property for which published rail rates for tubular goods
exist. If the 80,000 pound rail rate is not offered, the
70,000 pound or 90,000 pound rail rate may be used. Freight
charges for tubing will be calculated from Lorain, Ohio and
casing from Youngstown, Ohio.
(b) For grades which are special to one mill only, prices
shall be computed at the mill base of that mill plus
transportation cost from that mill to the railway receiving
point nearest the Joint Property as provided above in
Paragraph 2.A.(1)(a). For transportation cost from points
other than Eastern mills, the 30,000 pound Oil Field Haulers
Association interstate truck rate shall be used.
(c) Special end finish tubular goods shall be priced at
the lowest published out-of-stock price, f.o.b. Houston, Texas,
plus transportation cost, using Oil Field Haulers Association
interstate 30,000 pound truck rate, to the railway receiving
point nearest the Joint Property.
(d) Macaroni tubing (size less than 2-3/8 inch OD) shall be
priced at the lowest published out-of-stock prices f.o.b. the
supplier plus transportation costs, using the Oil Field Haulers
Association interstate truck rate per weight of tubing
transferred, to the railway receiving point nearest the Joint
Property.
(2) Line Pipe
(a) Line pipe movements (except size 24 inch OD and larger
with walls 3/4 inch and over) 30,000 pounds or more shall be
priced under provisions of tubular goods pricing in Paragraph
A.(1)(a) as provided above. Freight charges shall be calculated
from Lorain, Ohio.
(b) Line pipe movements (except size 24 inch OD and larger
with walls 3/4 inch and over) less than 30,000 pounds shall be
priced at Eastern mill published carload base prices effective
as of date of shipment, plus 20 percent, plus transportation
costs based on freight rates as set forth under provisions of
tubular goods pricing in Paragraph A.(1)(a) as provided above.
Freight charges shall be calculated from Lorain, Ohio.
(c) Line pipe 24 inch OD and over and 3/4 inch wall and
larger shall be priced f.o.b. the point of manufacture at
current new published prices plus transportation cost to the
railway receiving point nearest the Joint Property.
(d) Line pipe, including fabricated line pipe, drive pipe
and conduit not listed on published price lists shall be priced
at quoted prices plus freight to the railway receiving point
nearest the Joint Property or at prices agreed to by the
Parties.
(3) Other Material shall be priced at the current new price, in
effect at date of movement, as listed by a reliable supply store nearest
the Joint Property, or point of manufacture, plus transportation costs,
if applicable, to the railway receiving point nearest the Joint
Property.
(4) Unused new Material, except tubular goods, moved from the Joint
Property shall be priced at the current new price, in effect on date of
movement, as listed by a reliable supply store nearest the Joint
Property, or point of manufacture, plus transportation costs, if
applicable, to the railway receiving point nearest the Joint Property.
Unused new tubulars will be priced as provided above in Paragraph
2 A (1) and (2).
B. Good Used Material (Condition B)
Material in sound and serviceable condition and suitable for reuse
without reconditioning:
(1) Material moved to the Joint Property
At seventy-five percent (75%) of current new price, as
determined by Paragraph A.
(2) Material used on and moved from the Joint Property
(a) At seventy-five percent (75%) of current new price,
as determined by Paragraph A, if Material was originally
charged to the Joint Account as new Material or
(b) At sixty-five percent (65%) of current new price,
as determined by Paragraph A, if Material was originally
charged to the Joint Account as used Material.
(3) Material not used on and moved from the Joint Property
At seventy-five percent (75%) of current new price as
determined by Paragraph A.
The cost of reconditioning, if any, shall be absorbed by the
transferring property.
C. Other Used Material
(1) Condition C
Material which is not in sound and serviceable condition and
not suitable for its original function until after reconditioning
shall be priced at fifty percent (50%) of current new price as
determined by Paragraph A. The cost of reconditioning shall be
charged to the receiving property, provided Condition C value plus
cost of reconditioning does not exceed Condition B value.
IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
5. Competitive Pricing
Notwithstanding anything herein contained to the contrary, it
is the understanding and agreement of the parties hereto that
Operator shall invoice Non-Operator for current (within
previous sixty-day period) Condition A or B Material purchases
at competitive current market prices. In addition, all
Material transferred by Operator to the Joint Property from
Operator or Non-Operator shall be invoiced at competitive
current market prices.
(2) Condition D
Material, excluding junk, no longer suitable for its original
purpose, but usable for some other purpose shall be priced on a basis
commensurate with its use. Operator may dispose of Condition D
Material under procedures normally used by Operator without prior
approval of Non-Operators.
(a) Casing, tubing, or drill pipe used as line pipe shall
be priced as Grade A and B seamless line pipe of comparable
size and weight. Used casing, tubing or drill pipe utilized
as line pipe shall be priced at used line pipe prices.
(b) Casing, tubing or drill pipe used as higher pressure
service lines than standard line pipe, e.g. power oil lines,
shall be priced under normal pricing procedures for casing,
tubing, or drill pipe. Upset tubular goods shall be priced
on a non upset basis.
(3) Condition E
Junk shall be priced at prevailing prices. Operator may
dispose of Condition E Material under procedures normally
utilized by Operator without prior approval of Non-Operators.
D. Obsolete Material
Material which is serviceable and usable for its original function
but condition and/or value of such Material is not equivalent to that which
would justify a price as provided above may be specially priced as agreed to
by the Parties. Such price should result in the Joint Account being charged
with the value of the service rendered by such Material.
E. Pricing Conditions
(1) Loading or unloading costs may be charged to the Joint Account
at the rate of twenty-five cents (.25) per hundred weight on all
tubular goods movements, in lieu of actual loading or unloading costs
sustained at the stocking point. The above rate shall be adjusted as
of the first day of April each year following January 1, 1985 by the
same percentage increase or decrease used to adjust overhead rates in
Section III, Paragraph 1.A(3). Each year, the rate calculated shall
be rounded to the nearest cent and shall be the rate in effect until
the first day of April next year. Such rate shall be published each
year by the Council of Petroleum Accountants Societies.
(2) Material involving erection costs shall be charged at
applicable percentage of the current knocked-down price of new
Material.
3. Premium Prices
Whenever Material is not readily obtainable at published or listed
prices because of national emergencies, strikes or other unusual causes over
which the Operator has no control, the Operator may charge the Joint Account
for the required Material at the Operator's actual cost incurred in providing
such Material, in making it suitable for use, and in moving it to the Joint
Property; provided notice in writing is furnished to Non-Operators of the
proposed charge prior to billing Non-Operators for such Material. Each Non-
Operator shall have the right, by so electing and notifying Operator within
ten days after receiving notice from Operator, to furnish in kind all or part
of his share of such Material suitable for use and acceptable to Operator.
4. Warranty of Material Furnished By Operator
Operator does not warrant the Material furnished. In case of
defective Material, credit shall not be passed to the Joint Account until
adjustment has been received by Operator from the manufacturers or their
agents.
V. INVENTORIES
The Operator shall maintain detailed records of Controllable Material.
1. Periodic Inventories, Notice and Representation
At reasonable intervals, inventories shall be taken by Operator of
the Joint Account Controllable Material. Written notice of intention to take
inventory shall be given by Operator at least thirty (30) days before any
inventory is to begin so that Non-Operators may be represented when any
inventory is taken. Failure of Non-Operators to be represented at an
inventory shall bind Non-Operators to accept the inventory taken by Operator.
2. Reconciliation and Adjustment of Inventories
Adjustments is to the Joint Account resulting from the reconciliation
of a physical inventory shall be made within six months following the taking
of the inventory. Inventory adjustments shall be made by Operator to the
Joint Account for overages and shortages, but, Operator shall be held
accountable only for shortages due to lack of reasonable diligence.
3. Special Inventories
Special inventories may be taken whenever there is any sale, change
of interest, or change of Operator in the Joint Property. It shall be the
duty of the party selling to notify all other Parties as quickly as possible
after the transfer of interest takes place. In such cases, both the seller
and the purchaser shall be governed by such inventory. In cases involving a
change of Operator, all Parties shall be governed by such inventory.
4. Expense of Conducting Inventories
A. The expense of conducting periodic inventories shall not be
charged to the Joint Account unless agreed to by the Parties.
B. The expense of conducting special inventories shall be
charged to the Parties requesting such inventories, except
inventories required due to change of Operator shall be charged
to the Joint Account.
Exhibit P
FOREST OIL CORPORATION
AUTHORIZATION FOR EXPENDITURE
DRILLING WORKSHEET
LOCATION: DATE: 12/13/93
LEASE: STATE:
SUR LOC: WELL NUMBER:
PBHL:
DESC OF
WORK:
PREPARED BY: AFE NUMBER:
<TABLE>
<CAPTION>
CODE DESCRIPTION DRY HOLE CASE/SUSPEND T & A COMPLETION TOTAL
____ ___________ ________ ____________ ______ __________ _____
<C> <S> <C> <C> <C> <C> <C>
011 ROADS/LOCATION/PILINGS
012 RIG MOVE
021 FOOTAGE/TURNKEY
022 DAYWORK
031 BITS/COREHEADS
033 DRILLING/COMPLETION FLUIDS
035 FUEL/LUBRICANTS
037 FISHING & EQUIPMENT LEFT IN HOLE
038 MISCELLANEOUS SUPPLIES
041 EQUIPMENT RENTAL & REPAIRS
043 DIRECTIONAL EQPT & SURVEYS
044 CASING/TUBING CREW & EQUIPMENT
051 CEMENT SERVICE & TOOLS
052 OPEN HOLE EVALUATION
057 CONTRACT LABOR
061 CASED HOLE LOGGING
062 SERVICE/COMPLETION UNITS
063 SAND CONTROL/SIMULATION
071 TRUCKING
072 BOATS
073 HELICOPTERS
086 SAFETY/ENVIRONMENTAL
091 LEGAL/DAMAGES
095 OVERHEAD/COMPANY LABOR
00 TOTAL INTANGIBLES $0 $0 $0 $0 $0
TANGIBLES
WELL AND LEASE EQUIPMENT
310 CASING & TUBULARS
313 OTHER SUBSURFACE EQUIPMENT
381 WELLHEADS/MUDLINE HANGERS
385 PRODUCTION/SURFACE EQUIPMENT
TOTAL TANGIBLES $0 $0 $0 $0 $0
TOTAL COST $0 $0 $0 $0 $0
</TABLE>
EXHIBIT Q
WAGNER & BROWN PROSPECTS, RELEASE PRICES
AND REDUCTIONS TO CAPITAL COST CEILINGS
1. Hinnant Prospect
Jim Hogg County, Texas
All of Borrower's leasehold interest in the S.R. Peebles Survey, A-243,
Patent No. 607 in depths 100' below the stratigraphic equivalent of the
Queen City formation as seen from a measured depth of 5,105' to a
measured depth of 6,651' in the Shell Lopez #1 Well.
Release Price: $2,000,000
2. Cuellar Tract Prospect
Zapata County, Texas
All of Borrower's leasehold interest in the J.M. Cuellar Survey No. 278,
A-423 in depths below the stratigraphic equivalent of the Queen City
formation as seen from a measured depth of 5,105' to a measured depth
of 6,651' in the Shell Lopez #1 Well.
Release Price: $5,200,000
3. Fandango Equivalent Prospect
Jim Hogg and Zapata Counties, Texas
All of Borrower's leasehold interest in:
(1) South 1/2 of the A. Stehle Survey No. 624, A-500, which is
defined as that acreage south of a line 2,500', more or less, south
and parallel to the north boundary of A-500.
(2) S/2 of the B.S.& F. (F.C. Guerra) Survey No. 86, A-142 (Jim
Hogg Co.) and A-436 (Zapata Co.), which is defined as that acreage
south of a line 2,500', more or less, south and parallel to the north
boundary of A-142 and A-436.
(3) North 1/2 of the A. Stehle Survey No. 624, A-500 as to all
depths except 100' above and 100' below the stratigraphic equivalent
of the T5-T10 Sands as seen in the Loma Vieja #1 from a measured depth
of 13,085' to a measured depth of 14,660' (which is part of the
producing reservoirs included in the Wilcox T5-T10 Sands dedication.
(4) N/2 of the B.S.& F. (F.C. Guerra) Survey No. 86, A-142 (Jim
Hogg Co.) and A-436 (Zapata Co.) as to all depths except 100' above
and 100' below the stratigraphic equivalent of the T5-T10 Sands as
seen in the Loma Vieja #1 from a measured depth of 13,085' to a
measured depth of 14,660' (which is part of the producing reservoirs
included in the Wilcox T5-T10 Sands dedication.
Release Price: $300,000
4. Queen City Prospect
Jim Hogg and Zapata Counties, Texas
Limited to 100' above and 100' below the stratigraphic equivalent of
the Queen City Sand as seen from a measured depth of 5,105' to a measured
depth of 6,651' in the Shell Lopez #1 Well, all of Borrower's leasehold
interest in the Loma Vieja/Martinez area, as follows:
J. M. Cuellar A-423
A. Stehle A-499
H. & G. N. R.R. A-51 (Zapata Co.)
H. & G. N. R.R. A-193 (Jim Hogg Co.)
J. Teodoro A-548 (Zapata Co.)
J. Teodoro A-362 (Jim Hogg Co.)
T. & N. O. R.R. A-100 (Zapata Co.)
T. & N. O. R.R. A-318 (Jim Hogg Co.)
F. C. Guerra A-436 (Zapata Co.)
F. C. Guerra A-142 (Jim Hogg Co.)
Release Price: $1,000,000
5. U Sands Prospect
Jim Hogg and Zapata Counties, Texas
Limited to 100' above and 100' below the stratigraphic equivalent of
the U Sands as seen in the Shell #1 Lopez Well from a measured depth of
15,100' to a measured depth of 18,000', all of Borrower's leasehold interest
in the B.S.& F. (F.C. Guerra) Survey No. 86, A-142 (Jim Hogg Co.) and A-436
(Zapata Co.); the A. Stehle Survey No. 624, A-500; Sabas De La Garza Survey
No. 614, A-117, and the Sabas De La Garza Survey No. 84, A-116.
Release Price: $2,000,000
Exhibit 4.2
WHEN RECORDED MAIL TO:
VINSON & ELKINS L.L.P.
2500 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
__________________________________________
THIS DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT AND
FINANCING STATEMENT (this "Mortgage") entered into as of the effective time
and date hereinafter stated (the "Effective Date") by and between FOREST OIL
CORPORATION, a New York corporation, whose address for notice hereunder is 950
17th Street, Colorado National Building, Denver, Colorado 80202 (the
"Mortgagor"), and JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP, a
Delaware limited partnership, with offices at 1400 Smith Street, Houston,
Texas 77002 (the "Beneficiary").
W I T N E S S E T H:
____________________
I.
To secure payment of the Indebtedness (as hereinafter defined) and the
performance of the covenants and obligations herein contained and in
consideration of the sum of One Thousand Dollars ($1,000.00) and other
valuable consideration in hand paid by Beneficiary to Mortgagor and in
consideration of the debts and trusts hereinafter mentioned, the receipt and
sufficiency of all of which are hereby acknowledged, Mortgagor does by these
presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, TRANSFER and CONVEY
unto Andrew S. Fastow of Houston, Texas, as Trustee, whose address for notice
hereunder is 1400 Smith Street, Houston, Texas 77002 ("Trustee") and his
successors and substitutes in trust hereunder, for the use and benefit of
Beneficiary, the following described real and personal property, rights,
titles, interests and estates (collectively called the "Mortgaged Property"),
to-wit:
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to the undivided interests in and to the oil and
gas leases and/or oil, gas and other mineral leases and other interests and
estates (such interests collectively called the "Leases") which are described
on Exhibit A hereto or which Leases are otherwise referred to herein.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) the properties now or hereafter pooled or
unitized with the Leases; (ii) all presently existing or future unitization,
communitization, pooling agreements and declarations of pooled units and the
units created thereby (including, without limitation, all units created under
orders, regulations, rules or other official acts of any Federal, State or
other governmental body or agency having jurisdiction and any units created
solely among working interest owners pursuant to operating agreements or
otherwise) which may affect all or any portion of the Leases including,
without limitation, those units which may be described or referred to on
attached Exhibit A; and (iii) all operating agreements, production sales or
other contracts, farmout agreements, farm-in agreements, area of mutual
interest agreements, equipment leases and other agreements described or
referred to in this Mortgage or which relate to any of the Leases or interests
in the Leases described or referred to herein or on attached Exhibit A or to
the production, sale, purchase, exchange, processing, transporting or
marketing of the Hydrocarbons (hereinafter defined) from or attributable to
such Leases or interests.
(c) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the "Hydrocarbons") in
and under and which may be produced and saved from or attributable to the
Leases, the lands covered thereby and Mortgagor's interests therein, including
all oil in tanks and all rents, issues, profits, proceeds, products, revenues
and other income from or attributable to the Leases, the lands covered thereby
and Mortgagor's interests therein which are subjected or required to be
subjected to the liens and security interests of this Mortgage and including
specifically but without limitation all liens and security interests in such
Hydrocarbons securing payment of proceeds resulting from the sale of
Hydrocarbons.
(d) All tenements, hereditaments, appurtenances and properties in
anywise appertaining, belonging, affixed or incidental to the rights, titles,
interests and estates described or referred to in paragraphs (a), (b) and (c)
above, which are now owned or which may hereafter be acquired by Mortgagor,
including, without limitation, any and all property, real or personal, now
owned or hereafter acquired and situated upon, used, held for use, or useful
in connection with the operating, working or development of any of such Leases
(excluding drilling rigs, trucks, automotive equipment or other personal
property which may be taken to the premises for the purpose of drilling a well
or for other similar temporary uses) and including any and all oil wells, gas
wells, injection wells or other wells, buildings, structures, field
separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes and licenses together
with all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by delivery or
by writing of any kind, be subjected to the lien and security interest hereof
by Mortgagor or by anyone on Mortgagor's behalf; and the Trustee is hereby
authorized to receive the same at any time as additional security hereunder.
(f) All of the rights, titles and interests of every nature
whatsoever now owned or hereafter acquired by Mortgagor in and to the Leases
and every part and parcel thereof, including, without limitation, all rights,
titles, interests or estates in and to the Leases as the same may be enlarged
by the discharge of any payments out of production or by the removal of any
charges or Encumbrances (as hereinafter defined) to which any of the Leases are
subject, or otherwise; together with any and all renewals and extensions of
any of the Leases; all contracts and agreements supplemental to or amendatory
of or in substitution for the contracts and agreements described or mentioned
above; and any and all additional interests of any kind hereafter acquired by
Mortgagor in and to the Leases, less and except any overriding royalty
interests hereafter acquired by Mortgagor in and to the Leases.
(g) All accounts, contract rights, inventory and general intangibles
constituting a part of, relating to or arising out of those portions of the
Mortgaged Property which are described in paragraphs (a) through (f) above and
all proceeds and products of all such portions of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness
(hereinafter defined) and to secure the performance of the covenants,
agreements, and obligations of the Mortgagor herein contained.
II.
This Mortgage is executed and delivered by Mortgagor to secure and
enforce the Indebtedness described below:
(a) All Indebtedness as such term is defined in that certain Loan
Agreement dated December 28, 1993 by and among Mortgagor and Beneficiary (as
amended or restated from time to time, the "Loan Agreement"), providing for
loans and advances to be made from time to time by Beneficiary to Mortgagor
including without limitation all amounts evidenced and to be evidenced by the
Note as said term is defined in the Loan Agreement in the aggregate principal
amount of $100,000,000.
(b) The indebtedness evidenced by the Note in the principal amount
and with interest, collection and attorney's fees, all as provided therein; all
renewals, modifications, rearrangements or extensions of the Note, in whole or
in part; any sums which may be advanced or paid by Beneficiary or Trustee
under the terms hereof on account of the failure of Mortgagor to comply with
the covenants of Mortgagor contained herein; and all other indebtedness of
Mortgagor arising pursuant to the provisions of this Mortgage.
(c) Any additional loans or advances made by Beneficiary to or for
the benefit of Mortgagor pursuant to the Loan Agreement or any other instrument
executed in connection therewith. It is contemplated that Beneficiary may
lend additional sums to Mortgagor from time to time, but shall not be
obligated to do so, and Mortgagor agrees that any such additional loans shall
be secured by this Mortgage.
(d) Any amounts due or which become due by Mortgagor under that
certain Swap Agreement (Basic Swap) between Mortgagor and Beneficiary dated
December 28, 1993 or any other Price Protection Agreement, as defined in the
Loan Agreement entered into between Mortgagor and Beneficiary, as the same may
be amended or restated from time to time.
The term "Indebtedness" as used herein shall mean and include the Note
and all other indebtedness described, referred to or mentioned in
paragraphs (a) through (d), inclusive, of this Section II, whether now
existing or hereafter arising.
The Indebtedness secured hereby is payable on or before December 31,
2000.
III.
Mortgagor hereby represents, warrants and covenants as follows:
(a) To the extent of the undivided interests specified on attached
Exhibit A, Mortgagor has good and marketable title to and is possessed of the
Mortgaged Property; the Mortgaged Property is free of any and all liens,
encumbrances, security interests, contracts, agreements, preferential purchase
rights, unitization agreements or unitization orders or other restrictions or
limitations of any nature or kind (collectively called the "Encumbrances")
except those permitted Encumbrances which may be specified herein or on
attached Exhibit A; that Mortgagor's ownership of the Leases and the undivided
interests therein as specified on attached Exhibit A will, after giving full
effect to all Encumbrances, afford Mortgagor not less than those net interests
in the production from or which is allocated to such Leases as specified on
attached Exhibit A and will cause Mortgagor to bear not more than that portion
of the costs of drilling, developing and operating the wells identified on
Exhibit A as such portion is specified on said Exhibit; none of the
Encumbrances include any "take or pay," gas balancing or other similar
provisions in accordance with which Hydrocarbons have been or may be produced
and delivered without Mortgagor then or thereafter receiving full payment
therefor and no gas imbalances presently exist; except as otherwise disclosed
by Mortgagor to Beneficiary in writing, none of the Mortgaged Property is
subject to any contractual or other arrangement whereby payment for production
therefrom is to be deferred for a substantial period of time after the month
in which such production is delivered (i.e., in the case of oil, not in excess
of 60 days, and in the case of gas, not in excess of 90 days); none of the
Mortgaged Property is subject to a gas sales contract which contains terms
which are not customary in the industry; none of the Mortgaged Property is
subject at present to any regulatory refund obligation and to Mortgagor's
knowledge no facts exist which might cause the same to be imposed;
Hydrocarbons currently being produced and sold from or allocated to the
Mortgaged Property are being purchased by those parties and entities
identified as "Purchaser" on attached Exhibit A and Mortgagor is currently
receiving payment and accounting for the proceeds attributable to such
Hydrocarbons from those parties or entities identified as "Remitter" on said
attached Exhibit A.
(b) Mortgagor will warrant and defend the title to the Mortgaged
Property against the claims and demands of all other persons whomsoever and
will maintain and preserve the lien created hereby so long as any of the
Indebtedness secured hereby remains unpaid. Should an adverse claim be made
against or a cloud develop upon the title to any part of the Mortgaged
Property, Mortgagor agrees it will immediately defend against such adverse
claim or take appropriate action to remove such cloud at Mortgagor's cost and
expense, and Mortgagor further agrees that the Trustee and/or Beneficiary may
take such other action as they deem advisable to protect and preserve their
interests in the Mortgaged Property, and in such event Mortgagor will
indemnify the Trustee and Beneficiary against any and all cost, attorney's
fees and other expenses which they may incur in defending against any such
adverse claim or taking action to remove any such cloud. Such obligation of
Mortgagor shall be payable as provided in the Loan Agreement. Except for
sales of Hydrocarbons as and when produced and in the ordinary course of
Mortgagor's business or as may be otherwise provided for in writing, Mortgagor
will not sell, convey or in any manner dispose of the Mortgaged Property or
any portion thereof without first securing the written consent of the
Beneficiary.
(c) This Mortgage is, and always will be kept, a direct first lien
and security interest upon the Mortgaged Property subject only to the permitted
Encumbrances described on Exhibit A and Mortgagor will not create or suffer to
be created or permit to exist any lien, security interest or charge prior or
junior to or on a parity with the lien and security interest of this Mortgage
upon the Mortgaged Property or any part thereof or upon the rents, issues,
revenues, profits and other income therefrom, and Mortgagor will, from time to
time, pay or cause to be paid as they become due and payable all taxes,
assessments and governmental charges lawfully levied or assessed upon the
Mortgaged Property or any part thereof, or upon or arising from any of the
rents, issues, revenues, profits and other income from the Mortgaged Property,
or incident to or in connection with the production of Hydrocarbons or other
minerals therefrom, or the operation and development thereof; provided, that
the foregoing covenant shall be suspended so long as the amount, applicability
or validity of any such charges is being diligently contested in good faith by
appropriate proceedings and if Mortgagor shall have set up reserves therefor
which are adequate under generally accepted accounting principles.
(d) Mortgagor will at its own expense do or cause to be done all
things necessary to preserve and keep in full repair, working order and
efficiency all of the Mortgaged Property, including, without limitation, all
equipment, machinery and facilities, and from time to time will make all the
needful and proper repairs, renewals and replacements so that at all times the
state and condition of the Mortgaged Property will be fully preserved and
maintained in accordance with generally accepted practices in the industry.
(e) Mortgagor will promptly pay and discharge its share of all
rentals, delay rentals, royalties and indebtedness accruing under, and
Mortgagor will perform or cause to be performed each and every act, matter or
thing required by, each and all of the assignments, deeds, leases, subleases,
contracts and agreements described or referred to herein or affecting
Mortgagor's interests in the Mortgaged Property, and will do all other things
necessary to keep unimpaired Mortgagor's rights with respect thereto and
prevent any forfeiture thereof or default thereunder. Mortgagor will operate
the Mortgaged Property in a careful and efficient manner in accordance with
the practices of the industry and in compliance with all applicable contracts
and agreements and in compliance in all material respects with all applicable
proration and conservation laws of the jurisdiction in which the Mortgaged
Property is situated, and all applicable laws, rules and regulations of every
other agency and authority from time to time constituted to regulate the
development and operation of the Mortgaged Property and the production and
sale of Hydrocarbons and other minerals therefrom. Mortgagor will do or cause
to be done such development work as may be reasonably necessary to the prudent
and economical operation of the Mortgaged Property in accordance with the
approved practices of operators in the industry, including all that which may
be appropriate to be done to protect from diminution the productive capacity
of the Mortgaged Property and each producing well thereon including, without
limitation, cleaning out and reconditioning each well from time to time,
plugging and completing at a different interval or zone each such well,
drilling a substitute well to conform to changed spacing regulations and to
protect the Mortgaged Property against drainage whenever and as often as is
necessary.
(f) Mortgagor will maintain the insurance coverages as specified in
Section 4.09 of the Loan Agreement. The loss payable clauses with respect to
all property damage coverage shall be endorsed in favor of and made payable to
the Beneficiary as the interests of the Beneficiary may appear and the
Beneficiary shall be named as an additional insured with respect to all
insurance providing liability coverages. The Beneficiary shall have the right
to collect, and Mortgagor hereby assigns to the Beneficiary, any and all
monies that may become payable under any policies of property damage insurance
and the Beneficiary may apply all or any part of the sums so collected at the
Beneficiary's election toward payment of the Indebtedness, whether or not such
Indebtedness is then due and payable. If Beneficiary elects to apply such
proceeds to the Indebtedness and after payment in full of such Indebtedness
should any surplus remain, said surplus shall be paid over to Mortgagor.
(g) Mortgagor will permit the Trustee and/or the Beneficiary and the
agents of either of them to visit and inspect any of the Mortgaged Property at
their sole risk, to examine the books of account of Mortgagor and to discuss
the affairs, finances or accounts of Mortgagor, and to be advised as to the
same by any officer or employee of Mortgagor, all at such reasonable times or
intervals as the Trustee or the Beneficiary may desire.
(h) Mortgagor will, upon request by Beneficiary, furnish or cause to
be furnished to the Beneficiary reports prepared by or for Mortgagor
concerning the productivity and the productive life of all or any wells
included in the Mortgaged Property; the quantity of the Hydrocarbons and other
minerals recoverable therefrom; the projected income and expense attributable
to the Mortgaged Property; and the expediency of any change in methods of
treatment or operation of all of any well included in the Mortgaged Property;
any new drilling or development; any abandonment or proposed abandonment of
any well; any plugging of any well or reopening of same at a different
interval or zone; any method of repressuring in the field or any other action
with respect to the Mortgaged Property; and further upon request of the
Beneficiary, will furnish a report of Ryder, Scott & Co. or another
independent engineer acceptable to the Beneficiary covering such of the
foregoing matters as shall be so requested. Mortgagor will, also upon request
by the Beneficiary, furnish the Beneficiary within thirty (30) days after the
end of Mortgagor's fiscal quarter a report showing for such fiscal quarter the
gross proceeds of the sale of Hydrocarbons and other minerals from the
Mortgaged Property, the quantities so sold, the taxes deducted from or paid
out of such proceeds, the number of wells operated, drilled and abandoned and
such other information as the Beneficiary may reasonably request.
(i) Mortgagor will comply with the obligations of Sections 4.08 and
8.04 of the Loan Agreement with respect to payment of or reimbursement for
expenses and indemnification made by the Mortgagor to or for the benefit of
Beneficiary. Any amount to be paid hereunder by Mortgagor to the Trustee or
the Beneficiary shall be a demand obligation owing by Mortgagor (which
obligation Mortgagor hereby expressly promises to pay) to the Trustee or the
Beneficiary (as the case may be) and shall bear interest as set for in the
Loan Agreement.
(j) Mortgagor will execute and deliver such further instruments and
do such further acts as may be necessary or desirable or as may be reasonably
requested by the Trustee or the Beneficiary to carry out more effectively the
purposes of this Mortgage and to subject to the lien created hereby any
properties, rights and interests covered or intended to be covered hereby. At
the request of the Beneficiary, Mortgagor will deliver to Beneficiary an
inventory and/or financing statements describing and showing the make, model,
serial number and location of all equipment and machinery forming a part of
the Mortgaged Property.
(k) If any tax is levied or assessed against the Indebtedness
described herein or any part thereof, or against this Mortgage, or against the
Beneficiary with respect to the Indebtedness or any part thereof or this
Mortgage, Mortgagor shall promptly pay the same.
(l) All or portions of the Mortgaged Property may be comprised of
interests in the Leases which are other than working interests or which may be
operated by a party or parties other than Mortgagor and with respect to all or
any such Leases as may be comprised of interests other than working interests
or which may be operated by parties other than Mortgagor, Mortgagor's
covenants as expressed in paragraphs (d) through (g) inclusive of this
Section III are modified to require that Mortgagor use its best efforts to
obtain compliance with such covenants by the working interest owners or the
operator or operators of such Leases.
(m) Mortgagor agrees that if Mortgagor fails to perform any act or
to take any action which Mortgagor is required to perform or take hereunder or
pay any money which Mortgagor is required to pay hereunder, the Trustee and/or
the Beneficiary in Mortgagor's name or its own name may, but shall not be
obligated to, perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by the Trustee or the Beneficiary and
any money so paid by the Trustee or the Beneficiary shall be a demand
obligation owing by Mortgagor to the Trustee or the Beneficiary and the
Trustee or the Beneficiary, upon making such payment, shall be subrogated to
all of the rights of the person, corporation or body politic receiving such
payment. Each amount due and owing by Mortgagor to holders of the
Indebtedness and/or the Trustee pursuant to this Mortgage shall bear interest
from the date of such expenditure or payment or other occurrence which gives
rise to such amount being owed to the Trustee or the Beneficiary until paid as
provided in the Loan Agreement, and all such amounts together with such
interest thereon shall be a part of the Indebtedness and shall be secured by
this Mortgage.
(n) Mortgagor is not a "foreign person" within the meaning of (i)
the Internal Revenue Code of 1986, as amended (hereinafter called the "Code"),
Sections 1445 and 7701 (i.e., Mortgagor is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those
terms are defined in the Code and any regulations promulgated thereunder), or
(ii) 22 U.S.C.A. Section 3101 et seq. (International Investment Survey Act of
1976).
IV.
(a) Upon the occurrence of any Event of Default as defined in
Section 6.01 of the Loan Agreement, Beneficiary may, in accordance with the
provisions of the Loan Agreement declare the Note to be due and payable
whereupon said Note shall become immediately due and payable without notice of
any kind; provided, however, that the occurrence of an Event of Default as
described in Section 6.01(e), (f) and (g) of the Loan Agreement shall result in
the immediate and automatic acceleration of maturity of the Note and all other
Indebtedness. All costs and expenses (including attorneys' fees) incurred by
the Beneficiary in protecting and enforcing its rights hereunder shall
constitute a demand obligation owing by Mortgagor and shall bear interest as
provided in the Loan Agreement and shall constitute a portion of the
indebtedness secured hereby and shall have the benefit of the lien, privilege
and security interest hereby created.
(b) If the Note or any of the Indebtedness shall become due and
payable, and Mortgagor shall not promptly pay the same, the Beneficiary shall
have the right and option to proceed with foreclosure by directing the
Trustee, or his successors or substitutes in trust, to proceed with
foreclosure and to sell, to the extent permitted by law, all or any portion of
the Mortgaged Property at one or more sales, as an entirety or in parcels, at
such place or places and otherwise in such manner and upon such notice as may
be required by law, or, in the absence of any such requirement, as the Trustee
may deem appropriate, and to make conveyance to the purchaser or purchasers.
Any sale of any part of the Mortgaged Property located in the State of Texas
shall be made at the area designated by the Commissioner's Court (or if no
area is designated by the Commissioners Court, the area designated in the
notice of sale at the courthouse of the county in which such part of the
Mortgaged Property to be sold at such sale is located), on the first Tuesday
in any month, between the hours of 10:00 o'clock A.M. and 4:00 o'clock P.M. to
the highest bidder for cash at public auction, after the Trustee shall have
given notice of sale in accordance with the statutes of the State of Texas
then in force governing sales of real estate under powers conferred by deed of
trust. Where any part of the Mortgaged Property is situated in more than one
county, notices as above provided shall be posted and filed in all such
counties, and all such Mortgaged Property may be sold in any such county and
such notice shall designate the county where such Mortgaged Property is to be
sold. The affidavit of any person having knowledge of the facts to the effect
that such notice was completed shall be prima facie evidence of the fact of
notice. In the event any sale hereunder is not completed or is defective in
the opinion of the Beneficiary, such sale shall not exhaust the power of sale
hereunder, and the Beneficiary shall have the right to cause a subsequent sale
or sales to be made by the Trustee. Upon receipt of the sale price in the
case of a third party purchase or upon the crediting of the Indebtedness to
the sales price if the purchaser is the Beneficiary, the Trustee is hereby
authorized, empowered and directed to make due conveyance to the purchaser or
purchasers, with general warranty binding upon Mortgagor and the heirs,
successors and assigns of Mortgagor subject to the matters set forth on
Exhibit A. The right of sale hereunder shall not be exhausted by one or more
such sales, and the Trustee may make other and successive sales until all of
the Mortgaged Property be legally sold or the Note and all of the Indebtedness
shall have been paid. Mortgagor hereby irrevocably appoints the Trustee to be
the attorney of Mortgagor and in the name and on behalf of Mortgagor to
execute and deliver any deeds, transfers, conveyances, assignments, assurances
and notices which Mortgagor ought to execute and deliver and do and perform
any and all such acts and things which Mortgagor ought to do and perform under
the covenants herein contained and generally, to use the name of Mortgagor in
the exercise of all or any of the powers hereby conferred on the Trustee. Upon
any sale, whether under the power of sale hereby given or by virtue of
judicial proceedings, it shall not be necessary for the Trustee or any public
officer acting under execution or order of court to have physically present or
constructively in his possession any of the Mortgaged Property, and Mortgagor
hereby agrees to deliver all of such personal property to the purchasers at
such sale on the date of sale, and if it should be impossible or impracticable
to make actual delivery of such property, then the title and right of
possession to such property shall pass to the purchaser at such sale as
completely as if the same had been actually present and delivered. Recitals
contained in any conveyance made by the Trustee to any purchaser at any sale
made pursuant hereto shall conclusively establish the truth and accuracy of
the matters therein treated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, or the interest accrued
on, the Note or any of the Indebtedness after the same has become due and
payable, advertisement and conduct of such sale in the manner provided herein
and appointment of any successor trustee hereunder. Upon any sale, whether
made under the power of sale hereby given or by virtue of judicial
proceedings, the receipt of the Trustee, or of the officer making a sale under
judicial proceedings, shall be a sufficient discharge to the purchaser or
purchasers at any sale for his or their purchase money, and such purchaser or
purchasers, his or their assigns or personal representatives, shall not, after
paying such purchase money and receiving such receipt of the Trustee or of
such officer therefor, be obliged to see to the application of such purchase
money, or be in anywise answerable for any loss, misapplication or
nonapplication thereof. The Trustee or his successor or substitute may
appoint or delegate any one or more persons as agent to perform any act or
acts necessary or incident to any sale held by Trustee, including the posting
of notices and the conduct of sale, but in the name and on behalf of Trustee,
his successor or substitute. If Trustee or his successor or substitute shall
have given notice of sale hereunder, any successor or substitute trustee
thereafter appointed may complete the sale and the conveyance of the property
pursuant thereto as if such notice had been given by the successor or
substitute trustee conducting the sale. The Beneficiary shall have the right
to become the purchaser at any sale held by the Trustee or by any receiver or
public officer and shall have the right to have the amount of Indebtedness
then owing to the Beneficiary credited against the amount of the bid made by
the Beneficiary at such sale.
(c) If the Note or any of the Indebtedness shall become due and
payable and shall not be promptly paid, the Trustee or the Beneficiary shall
have the right and power to proceed by a suit or suits in equity or at law,
whether for the specific performance of any covenant or agreement herein
contained or in aid of the execution of any power herein granted, or for any
foreclosure hereunder or for the sale of the Mortgaged Property under the
judgment or decree of any court or courts of competent jurisdiction, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property under the order of a court or courts of competent
jurisdiction or under other legal process, or for the enforcement of any other
appropriate legal or equitable remedy. Any money advanced by the Trustee
and/or the Beneficiary in connection with any such receivership shall be a
demand obligation (which obligation Mortgagor hereby expressly promises to
pay) owing by Mortgagor to the Trustee and/or the Beneficiary and shall bear
interest from the date of making such advance by the Trustee and/or the
Beneficiary until paid as provided in the Loan Agreement. Mortgagor agrees to
the full extent that it lawfully may, that, in case one or more of the Events
of Default shall have occurred and shall not have been remedied, then, and in
every such case, the Trustee or Beneficiary shall have the right and power to
enter into and upon and take possession of all or any part of the Mortgaged
Property in the possession of Mortgagor, its successors or assigns, or its or
their agents or servants, and may exclude Mortgagor, its successors or
assigns, and all persons claiming under Mortgagor, and its or their agents or
servants wholly or partly therefrom; and, holding the same, the Trustee may
use, administer, manage, operate and control the Mortgaged Property and
conduct the business thereof to the same extent as Mortgagor, its successors
or assigns, might at the time do and may exercise all rights and powers of
Mortgagor, in the name, place and stead of Mortgagor, or otherwise as the
Trustee shall deem best. All reasonable costs, expenses and liabilities of
every character incurred by the Trustee and/or the Beneficiary in
administering, managing, operating, and controlling the Mortgaged Property
shall constitute a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to the Trustee and/or the
Beneficiary and shall bear interest from date of expenditure until paid as
provided in the Loan Agreement, all of which shall constitute a portion of the
Indebtedness and shall be secured by this Mortgage and by any other instrument
securing the Indebtedness. In connection with any action taken by the Trustee
and/or the Beneficiary pursuant to this paragraph (c), the Trustee and/or the
Beneficiary shall not be liable for any loss sustained by Mortgagor resulting
from any act or omission of the Trustee and/or the Beneficiary in
administering, managing, operating or controlling the Mortgaged Property
unless such loss is caused by its own willful misconduct and/or bad faith, nor
shall the Trustee and/or the Beneficiary be obligated to perform or discharge
any obligation, duty or liability of Mortgagor. Mortgagor shall and does
hereby agree to indemnify the Trustee and/or the Beneficiary for, and to hold
the Trustee and/or the Beneficiary harmless from, any and all liability, loss
or damage which may or might be incurred by the Trustee and/or the Beneficiary
(except for liability, loss or damage resulting by reason of the willful
misconduct and/or bad faith of the Trustee and/or the Beneficiary) or the
exercise of rights or remedies hereunder; should the Trustee and/or the
Beneficiary make any expenditure on account of any such liability, loss or
damage, the amount thereof, including costs, expenses and reasonable
attorneys' fees, shall be a demand obligation (which obligation Mortgagor
hereby expressly promises to pay) owing by Mortgagor to the Trustee and/or the
Beneficiary and shall bear interest from the date expended until paid as
provided in the Loan Agreement, shall be a part of the Indebtedness and shall
be secured by this Mortgage and any other instrument securing the secured
indebtedness. Mortgagor hereby assents to, ratifies and confirms any and all
actions of the Trustee and/or the Beneficiary with respect to the Mortgaged
Property taken under this paragraph (c), except as otherwise provided herein.
(d) Every right, power and remedy herein given to the Trustee or the
Beneficiary shall be cumulative and in addition to every other right, power
and remedy herein specifically given or now or hereafter existing in equity,
at law or by statute; and each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and so often and in such order as may be deemed expedient by the Trustee
or the Beneficiary, and the exercise, or the beginning of 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 the Trustee or the Beneficiary in the exercise of any
right, power or remedy shall 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.
(e) Any sale or sales of the Mortgaged Property or any part thereof,
whether under the power of sale herein granted and conferred or under and by
virtue of judicial proceedings, shall operate to divest all right, title,
interest, claim and demand whatsoever, either at law or in equity, of
Mortgagor of, in and to the premises and the property sold, and shall be a
perpetual bar, both at law and in equity, against Mortgagor, its successors
and assigns, and against any and all persons claiming or who shall thereafter
claim all or any of the property sold from, through or under Mortgagor, its
successors and assigns subject to the matters set forth on Exhibit A; and
Mortgagor, if requested by the Trustee or the Beneficiary so to do, shall join
in the execution and delivery of all proper conveyances, assignments and
transfers of the properties so sold. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other moneys received by the
Trustee in any proceedings for the enforcement hereof, whose application has
not elsewhere herein been specifically provided for, shall be applied first,
to the payment of all reasonable expenses incurred by the Trustee or the
Beneficiary incident to the enforcement of this Mortgage, the Note or any of
the Indebtedness (including, without limiting the generality of the foregoing,
reasonable expenses of any entry or taking of possession, of any sale, of
advertisement thereof, and of conveyances, and court costs, compensation of
agents and employees, legal fees and a reasonable commission to the Trustee
acting), and to the payment of all other reasonable charges, expenses,
liabilities and advances incurred or made by the Trustee or the Beneficiary
under this Mortgage or in executing any trust or power hereunder; and then to
payment of the Note and the Indebtedness in such order and manner as the
Beneficiary may elect. The Beneficiary may resort to any security given by
this Mortgage or to any other security now existing or hereafter given to
secure the payment of any of the Indebtedness secured hereby, in whole or in
part, and in such portions and in such order as may seem best to the
Beneficiary in its sole and uncontrolled discretion, and any such action shall
not in anywise be considered as a waiver of any of the rights, benefits or
liens created by this Mortgage. Should any surplus or balance remain from any
sale of the Mortgaged Property after the payment in full of the Indebtedness,
any such surplus or balance shall be paid to Mortgagor. Mortgagor agrees, to
the full extent that it may lawfully so agree, that it will not at any time
insist upon or plead or in any manner whatever claim or take the benefit or
advantage of any appraisement, valuation, stay, extension or redemption law
now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the absolute sale of the Mortgaged Property or
the possession thereof by any purchaser at any sale made pursuant to any
provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, for itself and all who may claim through or under
it, so far as it or they now or hereafter lawfully may, hereby waives the
benefit of all such laws. Mortgagor, for itself and all who may claim through
or under it, waives to the extent that it may lawfully do so, any and all
right to have the property included in the Mortgaged Property marshaled upon
any foreclosure of the lien hereof, and agrees that the Trustee or any court
having jurisdiction to foreclose such lien may sell the Mortgaged Property as
an entirety or in parcels. If any law referred to herein and now in force, of
which Mortgagor or its successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in force,
such law shall not thereafter be deemed to constitute any part of the contract
herein contained or to preclude the operation or application of the provisions
hereof.
V.
(a) Mortgagor has absolutely and unconditionally assigned,
transferred, and conveyed, and does hereby absolutely and unconditionally
assign, transfer and convey unto Beneficiary, its successors and assigns,
Mortgagor's net revenue interest share as set forth in Exhibit A of all of the
Hydrocarbons and all products obtained or processed therefrom, and the
revenues and proceeds now and hereafter attributable to the Hydrocarbons and
said products and all payments in lieu of the Hydrocarbons such as "take or
pay" payments or settlements. The Hydrocarbons and products are to be
delivered into pipe lines connected with the Mortgaged Property, or to the
purchaser thereof, to the credit of the Beneficiary, free and clear of all
taxes, charges, costs, and expenses; and all such revenues and proceeds shall
be paid directly to the Beneficiary, for deposit to the Lender's Account as
defined in the Loan Agreement, with no duty or obligation of any party paying
the same to inquire into the rights of the Beneficiary to receive the same,
what application is made thereof, or as to any other matter. Mortgagor agrees
to perform all such acts, and to execute all such further assignments,
transfers and division orders, and other instruments as may be required or
desired by the Beneficiary or any party in order to have said proceeds and
revenues so paid to the Beneficiary. The Beneficiary is fully authorized to
receive and receipt for said revenues and proceeds; to endorse and cash any
and all checks and drafts payable to the order of Mortgagor or the Beneficiary
for the account of Mortgagor received from or in connection with said revenues
or proceeds and apply the proceeds thereof to the payment of the Indebtedness,
when received, regardless of the maturity of any of the Indebtedness, or any
installment thereof; and to execute transfer and division orders in the name
of Mortgagor, or otherwise, with warranties binding Mortgagor. The
Beneficiary shall not be liable for any delay, neglect, or failure to effect
collection of any proceeds or to take any other action in connection therewith
or hereunder; but the Beneficiary shall have the right, at its election, in
the name of Mortgagor or otherwise, to prosecute and defend any and all
actions or legal proceedings deemed advisable by the Beneficiary in order to
collect such funds and to protect the interests of the Beneficiary, and/or
Mortgagor, with all costs, expenses and attorneys' fees incurred in connection
therewith being paid by Mortgagor. Mortgagor hereby agrees to indemnify the
Beneficiary against all claims, actions, liabilities, judgments, costs,
charges and attorneys' fees made against or incurred by it based on the
assertion that the Beneficiary has received funds from the production of
Hydrocarbons claimed by third persons either before or after the payment in
full of the Indebtedness. The Beneficiary shall have the right to defend
against any such claims, actions and judgments, employing its attorneys
therefor, and if the Beneficiary is not furnished with reasonable indemnity,
it shall have the right to compromise and adjust any such claims, actions and
judgments. Mortgagor agrees to indemnify and pay to the Beneficiary any and
all such claims, judgments, costs, charges and attorney's fees as may be paid
in any judgment, release or discharge thereof or as may be adjudged against
the Beneficiary. Such obligation shall be payable on demand and shall bear
interest from the date of demand therefor until paid as provided in the Loan
Agreement. Mortgagor hereby appoints Beneficiary as its attorney-in-fact to
pursue any and all rights of Mortgagor to liens on and security interests in
the Hydrocarbons securing payment of proceeds of runs attributable to the
Hydrocarbons, including but not limited to those liens and security interests
provided for by Section 9.319 of the Texas Business and Commerce Code and/or
any similar laws of any other states in which the Mortgaged Property or any
part thereof may be located. In addition to the rights granted to Trustee
and/or Beneficiary in Section I (c) of this Mortgage, Mortgagor hereby further
transfers and assigns to Beneficiary any and all such liens, security
interests, financing statements or similar interests of Mortgagor attributable
to its interest in the Hydrocarbons and proceeds of runs therefrom arising
under or created by said statutory provision, judicial decision or otherwise.
The power of attorney granted to Beneficiary in this paragraph, being coupled
with an interest, shall be irrevocable so long as the Indebtedness or any part
thereof remains unpaid.
Notwithstanding anything to the contrary in the foregoing provisions in
this Article, for so long as no Suspension Event as defined in the Loan
Agreement shall exist, Mortgagor shall have the license to collect all of the
revenues attributable to the Mortgaged Property; and no such payment shall
affect or impair the lien of this Mortgage or the validity and effect of the
assignment contained in this Article V(a). During a Suspension Event, such
license shall be revoked and all proceeds of the sale of oil, gas or other
minerals in and under or produced from the Mortgaged Property assigned
hereunder shall be paid directly to Mortgagee in the manner provided in
Article V(a). In the event payments are made directly to Mortgagee and then,
at the request of Mortgagee, payments are, for periods of time, paid to
Mortgagor, Mortgagee shall nevertheless have the right, effective upon written
notice, to require that future payments be again made to it.
(b) Nothing herein contained shall modify or otherwise alter the
obligation of Mortgagor to make prompt payment of all principal and interest
owing on the Note and all other Indebtedness when and as the same become due
regardless of whether the proceeds of the Hydrocarbons are sufficient to pay
the same and the rights provided in accordance with the foregoing assignment
provision shall be cumulative of all other security of any and every character
now or hereafter existing to secure payment of the Indebtedness.
(c) To further secure the Indebtedness, Mortgagor hereby grants to
the Beneficiary a security interest in and to the Mortgaged Property insofar as
the Mortgaged Property consists of equipment, accounts, contract rights,
general intangibles, inventory, Hydrocarbons, fixtures and any and all other
personal property of any kind or character defined in and subject to the
provisions of the Texas Uniform Commercial Code, including the proceeds and
products from any and all of such personal property. Upon the happening of
any of the Events of Default, the Beneficiary is and shall be entitled to all
of the rights, powers and remedies afforded a secured party by the applicable
Uniform Commercial Code with reference to the personal property and fixtures
in which the Beneficiary has been granted a security interest herein, or the
Trustee or the Beneficiary may proceed as to both the real and personal
property covered hereby in accordance with the rights and remedies granted
under this Mortgage in respect of the real property covered hereby. Such
rights, powers and remedies shall be cumulative and in addition to those
granted to the Trustee or the Beneficiary under any other provision of this
instrument or under any other instrument executed in connection with or as
security for the Note or any of the Indebtedness. Written notice mailed to
Mortgagor as provided herein at least five business (5) days prior to the date
of public sale of any part of the Mortgaged Property which is personal
property subject to the provisions of the Uniform Commercial Code, shall
constitute reasonable notice.
(d) Without in any manner limiting the generality of any of the
other provisions of this Mortgage: (i) some portions of the goods described or
to which reference is made herein are or are to become fixtures on the land
described or to which reference is made herein or on attached Exhibit A;
(ii) the security interests created hereby under applicable provisions of the
Uniform Commercial Code of one or more of the jurisdictions in which the
Mortgaged Property is situated will attach to Hydrocarbons (minerals including
oil and gas) or the accounts resulting from the sale thereof at the wellhead
or minehead located on the land described or to which reference is made
herein; (iii) this instrument is to be filed of record in the real estate
records as a financing statement, and (iv) Mortgagor is the record title owner
of the real estate or interests in the real estate comprised of the Mortgaged
Property.
VI.
(a) It shall be no part of the duty of the Trustee to see to any
recording, filing or registration of this Mortgage or any other instrument in
addition or supplemental thereto, or to give any notice thereof, or to see to
the payment of or be under any duty in respect of any tax or assessment or
other governmental charge which may be levied or assessed on the Mortgaged
Property, or any part thereof, or against Mortgagor, or to see to the
performance or observance by Mortgagor of any of the covenants and agreements
contained herein. The Trustee shall not be responsible for the execution,
acknowledgment or validity of this Mortgage or of any instrument in addition
or supplemental hereto or for the sufficiency of the security purported to be
created hereby, and makes no representation in respect thereof or in respect
of the rights of the Beneficiary. The Trustee shall have the right to advise
with counsel upon any matters arising hereunder and shall be fully protected
in relying as to legal matters on the advice of counsel. The Trustee shall
not incur any personal liability hereunder except for his own willful
misconduct and/or bad faith; and the 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 him hereunder, believed by him in good faith
to be genuine.
(b) The Trustee may resign by written notice addressed to or be
removed at any time with or without cause by an instrument in writing duly
executed on behalf of the Beneficiary. In case of the death, resignation or
removal of the Trustee, a successor trustee may be appointed by the
Beneficiary by instrument of substitution complying with any applicable
requirements of law, or, in the absence of any such requirement, without other
formality than appointment and designation in writing. Written notice of such
appointment and designation shall be given by the Beneficiary to Mortgagor,
but the validity of any such appointment shall not be impaired or affected by
failure to give such notice or by any defect therein. Such appointment and
designation shall be full evidence of the right and authority to make the same
and of all the facts therein recited, and, upon the making of any such
appointment and designation, this Mortgage shall vest in the successor trustee
named all the estate and title in and to all of the Mortgaged Property, and he
shall thereupon succeed to all of the rights, powers, privileges, immunities
and duties hereby conferred upon the Trustee named herein, and one such
appointment and designation shall not exhaust the right to appoint and
designate a successor trustee hereunder but such right may be exercised
repeatedly as long as any Indebtedness remains unpaid hereunder. If no
successor Trustee shall have been appointed as contemplated by the foregoing
provisions, or if appointed shall not have accepted the appointment, within 30
days after the resignation of, or the occurrence of a vacancy in the office
of, the Trustee, then upon application of the Beneficiary or the retiring
Trustee, a successor trustee may be appointed by any court of competent
jurisdiction. In case the Note or any or all of the Indebtedness shall become
due and payable and shall not promptly be paid, then upon request of the
Beneficiary, the Trustee shall give security, satisfactory to the Beneficiary,
for the faithful performance and discharge of his duties hereunder. The cost
of, or premium paid for, any bond which may be given as all or part of such
security shall be an expense of the Trustee for which he is entitled to
reimbursement as provided herein. To facilitate the administration of the
duties hereunder, the Beneficiary may appoint multiple trustees to serve in
such capacity or in such jurisdictions as the Beneficiary may designate.
VII.
(a) If all Indebtedness secured hereby shall be paid, this Mortgage
shall become null and void and the Mortgaged Property shall revert to
Mortgagor, and the Beneficiary shall forthwith cause satisfaction and
discharge of this Mortgage to be entered upon the record at the expense of
Mortgagor and shall execute and deliver or cause to be executed and delivered
such instruments of satisfaction and reassignment as may be appropriate.
Otherwise, this Mortgage shall remain and continue in full force and effect.
(b) If any provision hereof is invalid or unenforceable in any
jurisdiction, the other provisions hereof shall remain in full force and
effect in such jurisdiction and the remaining provisions hereof shall be
liberally construed in favor of the Trustee and the Beneficiary in order to
effectuate the provisions hereof, and the invalidity or unenforceability of
any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
(c) This instrument may be construed as a mortgage, deed of trust,
chattel mortgage, conveyance, assignment, security agreement, pledge,
financing statement, hypothecation or contract, or any one or more of them, in
order fully to effectuate the lien hereof and the purposes and agreements
herein set forth.
(d) The term "Mortgagor" as used herein shall mean and include all
and each of the individuals, partnerships, corporations or other legal entities
or persons executing this Mortgage. The number and gender of pronouns used in
referring to Mortgagor shall be construed to mean and correspond with the
number and gender of the individuals, partnerships, corporations or other
legal entities or persons executing this Mortgage as Mortgagor. The term
"Beneficiary" as used herein shall mean and include any legal owner, holder,
assignee or pledgee of any of the Indebtedness secured hereby. The terms used
to designate Trustee, Beneficiary and Mortgagor shall be deemed to include the
respective heirs, legal representatives, successors and assigns of such
parties.
(e) To the extent that proceeds of the Note are used to pay
indebtedness secured by any outstanding lien, security interest, charge or
prior encumbrance against the Mortgaged Property, such proceeds have been
advanced by the Beneficiary at Mortgagor's request, and the Beneficiary shall
be subrogated to any and all rights, security interests and liens owned by any
owner or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges
or encumbrances are released, and it is expressly understood that, in
consideration of the payment of such other indebtedness by the Beneficiary,
Mortgagor hereby waives and releases all demands and causes of action for
offsets and payments to, upon and in connection with the said indebtedness.
(f) This instrument is made with full substitution and subrogation of
the Trustee and his successors in this trust and his and their assigns in and
to all covenants and warranties by others heretofore given or made in respect
of the Mortgaged Property or any part thereof.
(g) The covenants and agreements herein contained shall constitute
covenants running with the land and interests covered or affected hereby and
shall be binding upon the heirs, legal representatives, successors and assigns
of the parties hereto.
(h) All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by registered or certified
United States mail, postage prepaid, or by personal service (including express
or courier service) at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party
whose address is to be changed). Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery at the address and in the manner provided herein, upon
receipt; provided that, service of notice as required by Texas Property
Code Section 51.002, as amended, or as required by any laws of any other
state in which portions of the Mortgaged Property may be situated shall for
all purposes be deemed appropriate and sufficient with the giving of such
notice.
(i) In the event there is a foreclosure sale hereunder and at the
time of such sale Mortgagor or Mortgagor's representatives, successors or
assigns or any other person claiming any interest in the Mortgaged Property by,
through or under Mortgagor, are occupying or using the Mortgaged Property or
any part thereof, each and all shall immediately become the tenant of the
purchaser at such sale, which tenancy shall be a tenancy from day to day,
terminable at the will of either the landlord or tenant, or at a reasonable
rental per day based upon the value of the property occupied, such rental to
be due daily to the purchaser; to the extent permitted by applicable law, the
purchaser at such sale shall, notwithstanding any language herein apparently
to the contrary, have the sole option to demand immediate possession following
the sale or to permit the occupants to remain as tenants at will. In the
event the tenant fails to surrender possession of said property upon demand,
the purchaser shall be entitled to institute and maintain a summary action for
possession of the Mortgaged Property (such as an action for forcible entry and
detainer) in any court having jurisdiction. The purchaser or purchasers at
foreclosure shall have the right to affirm or disaffirm any lease of the
Mortgaged Property or any part thereof.
(j) This instrument shall be governed by and enforced in accordance
with the laws of the State of Texas. Mortgagor and Beneficiary expressly
acknowledge, agree and confirm, however, that the Note and the Loan Agreement
are and shall be construed in accordance with and governed by the law of the
State of Colorado.
(k) THE PARTIES HERETO SPECIFICALLY AGREE THAT THEY HAVE A DUTY TO
READ THIS MORTGAGE AND AGREE THAT THEY ARE CHARGED WITH NOTICE AND KNOWLEDGE
OF THE TERMS HEREOF; THAT SUCH PARTIES HAVE IN FACT READ THIS AGREEMENT AND
ARE FULLY INFORMED AND HAVE FULL NOTICE AND KNOWLEDGE OF THE TERMS CONDITIONS
AND AFFECTS OF THIS AGREEMENT; THAT EACH HAS BEEN REPRESENTED BY INDEPENDENT
LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING EXECUTION
HEREOF AND EACH HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
MORTGAGE. EACH PARTY HERETO RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS
MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS
OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR
SUCH LIABILITY. EACH PARTY HERETO COVENANTS AND AGREES THAT IT WILL NOT
CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS
MORTGAGE ON THE BASIS THAT SUCH PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
(l) This instrument is being executed in multiple counterparts each of
which is an original and all of which are identical, containing all property
descriptions included in Exhibit A. One of such counterpart originals has
been delivered to each of the Mortgagor and the Beneficiary.
WITNESS THE EXECUTION HEREOF, as of the 28th day of December, 1993.
MORTGAGOR:
FOREST OIL CORPORATION
By: ____________________________
Name: William L. Dorn
Title: Chairman of the Board and
Chief Executive Officer
MORTGAGEE:
JOINT ENERGY DEVELOPMENT
INVESTMENTS LIMITED PARTNERSHIP
By: Enron Capital Corp., its
general partner
By: ____________________________
Thomas S. Glanville
Attorney-in-Fact
The name and address of the Debtor is:
Forest Oil Corporation
950 17th Street
Colorado National Building
Denver, Colorado 80202
The name and address of the Secured Party is:
Joint Energy Development Investments Limited Partnership
1400 Smith Street
Houston, Texas 77002
THE STATE OF _________
COUNTY OF ____________
THIS INSTRUMENT was acknowledged before me on December ______, 1993 by
William L. Dorn, Chairman of the Board and Chief Executive Officer of Forest
Oil Corporation, a New York corporation, on behalf of such corporation.
_____________________________
Notary Public in and for the
State of ____________________
Printed Name:________________
My Commission Expires:
_____________________________
THE STATE OF _________
COUNTY OF ____________
THIS INSTRUMENT was acknowledged before me on December _____, 1993 by
Thomas S. Glanville, attorney-in-fact on behalf of Enron Capital Corp., a
Delaware corporation, in its capacity as general partner of Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership,
on behalf of said partnership.
_____________________________
Notary Public in and for the
State of ____________________
Printed Name:________________
My Commission Expires:
_____________________________
___________________________________________________________________________
EXHIBIT "A"
___________
"LEASES"
________
OIL AND GAS LEASES
__________________
<TABLE>
<CAPTION>
Recording Data
______________
W.I or Jim Hogg County Zapata County
W & B Ownership _______________________________
Lease No. Lessor Lessee Date Lease Interest NRI Vol. Page Vol. Page
_______________________________________________________________________________________________________________________________
<S><C> <S> <C> <C> <C> <C> <C> <C> <C>
TX13077 El Peyote Mineral Trust EDC 06/02/86 0.356430 0.2673225 --- --- 348 141-163
TX13078 Eulalia Vela et al EDC 04/18/88 0.356430 0.2673225 124 279 395 588
07/27/88
TX13079 William K. Morgan et ux EDC 03/26/88 0.356430 0.2673225 123 393 389 368
TX13079-A William K. Morgan et al EDC 03/26/88 0.356430 0.2673225 123 388 389 362
TX13079-B Felipe F. Suarez EDC 05/02/92 0.356430 0.2851440 139 355 461 511
TX13079-E Dorothy Bryan W&B, Ltd. 08/18/93 0.356430 0.2584120 143 392 488 74
TX13079-F Carroll Hadlock W&B, Ltd. 08/18/93 0.356430 0.2584120 143 410 488 76
TX13079-H Wilbur Hadlock W&B, Ltd. 08/18/93 0.356430 0.2584120 143 395 488 78
TX13079-I Alicia S. Morales W&B, Ltd. 09/02/93 0.356430 0.2851440 143 407 488 80
TX13079-K Juan Ramon Cuellar W&B, Ltd. 08/18/93 0.356430 0.2851440 143 398 488 82
TX13079-M James F. Frank W&B, Ltd. 08/18/93 0.356430 0.2584120 143 404 488 84
TX13079-N Frank Family Trust W&B, Ltd. 08/18/93 0.356430 0.2584120 143 401 488 86
TX13079-Q Belinda S. Canales EDC 05/02/92 0.356430 0.2851440 139 436 462 317
TX13079-R Leticia Suarez Gonzales EDC 05/02/92 0.356430 0.2851440 139 432 462 312
TX13079-S Olinda S. Guerra EDC 05/02/92 0.356430 0.2851440 139 428 462 307
TX13080 Lauro Lopez et al J.L. Schneider 04/20/90 0.356430 0.2673225 --- --- 424 645
TX13081 Eulalia Vela et al W&B 05/02/91 1.000000 0.7500000 136 252 --- ---
TX13085-A-GRafael San Miguel et al W&B, Ltd. 09/09/93 1.000000 0.7500000 --- --- 489 404-446
</TABLE>
<TABLE>
<CAPTION>
SURFACE LEASES/EASEMENTS
________________________
<S><C> <S> <C> <C> <C> <S> <C> <C> <C> <C>
TX13077-S Est of Antonia G Saldana,etalEDC 09/07/90 0.356430 N/A 152 352 457 837
TX13078-S Alan Holbein EDC 03/15/88 0.356430 N/A Unrecorded Unrecorded
</TABLE>
<TABLE>
<CAPTION>
NON-PARTICIPATING ROYALTY
_________________________
<S><C> <S> <C> <S> <C> <S><C> <C> <C> <C> <C> <C> <C> <C>
TX13084 Brian S. Calhoun et ux W&B et al 07/23/91 504ac 1.000000 0.0011186 148 316 446 480
1596.7ac 0.289600 0.0009050
249.475ac 0.356430 0.0011138
TX13084-A Virginia Goodwin et vir W&B et al 04/08/93 504ac 0.356430 0.0023923 157 168 476 577
1596.725ac 0.356430 0.0066831
249.475ac 0.356430 0.0066831
</TABLE>
"LAND"
1. All of the J. M. Cuellar Survey No. 278, Abstract No. 423 containing
686.8 acres more or less.
2. The North Five Hundred Eight (508) acres of the A. Stehle Survey No. 4,
Abstract No. 499, Certificate 12/2542, Original Grantee H & G. N. RY.
CO. The North 508 acres of said Survey No. 4 is described by metes and
bounds in a Deed from Antonio G. Saldana to Francisco Garcia Trevino, et
al., dated August 19, 1943 and recorded in Volume 51, Page 118-119 of
the Deed Records of Zapata County, Texas
3. FIRST TRACT: The South 124.9 acres out of the A. Stehle Survey No. 4,
Abstract No. 499, with the South line of this 124.9 acre tract being the
South line of said Survey No. 4, the East line of this tract being a
portion of the East line of said Survey No. 4, the West line of this
tract being a portion of the West line of said Survey 4, and the North
line of this tract being a line parallel to the South line of Survey No.
4, and a sufficient distance removed therefrom to the North so as to
encompass exactly 124.9 acres of land;
SECOND TRACT: The North 485 acres of the A. Stehle Survey No. 6,
Abstract No. 497, being described as having as its North line the entire
North line of said Survey No. 6, as its East line, a portion of the East
line of said Survey No. 6, as its West lines a portion of the West lines
of said Survey No. 6, and as its South line, a line parallel to the
North line of said Survey No. 6, and a sufficient distance removed
therefrom to the South so as to encompass exactly 485 acres;
THIRD TRACT: All of the A. Stehle Survey No. 624, Abstract No. 500,
containing 482.1 acres, more or less;
FOURTH TRACT: The South 157.90 acres of the A. Stehle Survey No. 6,
Abstract No. 497, with the South line of said 157.90 acre tract being
the South line of said Survey No. 6, the East line of said 157.90 acre
tract being a portion of the East line of said Survey No. 6, the West
line of said 157.90 acre tract coinciding with the North or Northeast
line of the Cerrito Blanco Grant, and the North line of said 157.90 acre
tract being parallel to the South line of said Survey No. 6, and a
sufficient distance removed therefrom to the North so as to encompass
exactly 157.90 acres and containing 1249.9 acres, more or less.
4. FIRST TRACT: All of the Jose Fedoro Vela Survey No. 108, Abstract No.
548 in Zapata County, Texas, and Abstract No. 362 in Jim Hogg County,
Texas covering 67.25 acres;
SECOND TRACT: All of the H.&G.N.R.R. Co. Survey No. 3, Abstract No. 51
in Zapata County, Texas, and Abstract No. 183 in Jim Hogg County, Texas
covering 640 acres;
THIRD TRACT: All of the T.&N.O.R.R. Co. Survey No. 5, Abstract No. 100
in Zapata County, Texas, and Abstract No. 318 in Jim Hogg County, Texas
covering 640 acres and containing 1,347.25 acres, more or less.
5. All of the B.S. & F. (F.C. Guerra) Survey No. 86, Abstract No. 142, in
Jim Hogg County, Texas and Abstract No. 436 in Zapata County, Texas and
containing 640 acres, more or less.
6. A tract of land comprised of 249.475 acres, being the Northeast portion
at a 2100.725 acre tract as described in Partition Deed dated September
11, 1951 to Hector Vela recorded in Volume 32, Page 463-465, Deed
Records of Jim Hogg County, Texas and being the south 9.835 acres out of
Survey No. 581, E. P. Ashley, Jim Hogg County, Abstract No. 5, Patent
No. 598 dated December 16, 1885 and all of a 735.28 acre tract out of
Survey No. 582, S. R. Peebles, Jim Hogg County, Abstract No. 243, Patent
No. 607, dated December 16, 1885 save and except for that portion of
said 735.28 acre tract which is located within the exterior boundary of
the Inexco-Vela No. 1 Gas Unit, described in Unit Declaration dated
October 28, 1981 and recorded in Volume 89, Page 363 Oil and Gas Lease
Records at Jim Hogg County, Texas.
7. All of a 735.28 acre tract out of Survey No. 582, S. R. Peebles Survey,
Abstract No. 2113, Patent No. 607, dated December 16, 1885, save and
except for that portion of said 735.28 acre tract which is located
outside of the exterior boundary of the Inexco-Vela No. 1 Gas Unit as
described in Unit Declaration dated October 28, 1981, and recorded in
Volume 89, Page 363 of the Oil and Gas Lease Records of Jim Hogg County,
Texas and containing 504 acres more or less.
"WELLS"
_______
<TABLE>
<CAPTION>
Well Name Location Working Interest NRI
_________________________________________________________________________________________________________________
<S> <C> <C> <S> <C> <S><C> <S> <C> <C> <C>
El Peyote No. 1 1400' FEL & 2100' FSL, T.&N.O.R.R. Svy No. 5 0.35643 0.2673225
El Peyote No. 2 1300' FNL & 2100' FEL, A. Stehle Svy No. 6 0.35643 0.2673225
El Peyote No. 3 917' FWL & 1740' FSL, A. Stehle Svy No. 6 0.35643 0.2673225
El Peyote No. 4 370' FNL & 2161' FWL, A. Stehle Svy No. 6 0.35643 0.2673225
Loma Vieja No. 1 2500' FSL & 800' FNL, T.&N.O.R.R. Svy No. 5 0.35643 0.2749106
Loma Vieja No. 2 1825' FSL & 2050' FEL, H.&G.N.R.R., Svy No. 3 0.35643 0.2749106
Loma Vieja No. 3 3250' FSL & 2800' FEL, H.&G.N.R.R., Svy No. 3 0.35643 0.2749106
Loma Vieja No. 4 913' FEL & 933' FWL, T.&N.O.R.R., Svy No. 5 0.35643 0.2749106
Lopez No. 1 933' FEL & 2000' FSL, A Stehle, Svy No. 4 0.35643 0.2673225
E. Vela No. 1 Approx. 4025' FSL & 1025' FWL, S.P. Peebles, Svy No. 582 0.00000 0.0035109
</TABLE>
"PERMITTED ENCUMBRANCES"
________________________
Letter Agreement between Energy Development Corporation and Wagner & Brown,
dated September 2, 1988, Re: Martinez Prospect, Zapata & Jim Hogg Counties,
Texas, as amended.
Operating Agreement between Energy Development Corporation as Operator and
Wagner & Brown as Non-Operator, dated September 2, 1988.
--
Exhibit 4.3
WHEN RECORDED MAIL TO:
VINSON & ELKINS L.L.P.
2500 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: Lauren Hagerty
ACT OF MORTGAGE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
__________________________________________
BE IT KNOWN, that before us, Notary Publics, duly
commissioned as such and in the presence of the undersigned
competent witnesses,
PERSONALLY CAME AND APPEARED:
Forest Oil Corporation, a New York corporation, whose
Federal tax identification number is 25-0484900, with
principal offices at 950 17th Street, Colorado National
Building, Denver, Colorado 80202, being represented by
William L. Dorn, its duly authorized Chairman of the Board
and Chief Executive Officer, acting pursuant to resolutions
of the Board of Directors of said Corporation a certified
copy of which is attached hereto and made a part hereof
("Mortgagor"), and
Joint Energy Development Investments Limited Partnership,
whose Federal tax identification number is 76-0407964 with
offices at 1400 Smith Street, Houston, Texas 77002, herein
represented by Thomas S. Glanville, attorney-in-fact, on
behalf of Enron Capital Corp., the General Partner of Joint
Energy Development Investments Limited Partnership (the
"Mortgagee"),
which said Mortgagor and Mortgagee did acknowledge and
declare as follows:
I.
To secure payment of the Indebtedness (as hereinafter
defined) and the performance of the covenants and obligations
herein contained, Mortgagor does by these presents hereby
specially MORTGAGE, PLEDGE AND HYPOTHECATE and grant a continuing
security interest unto and in favor of the Mortgagee in and to
the Mortgaged Property (as hereinafter defined), and the
following described immovable and movable property, rights,
titles, and interests (collectively called the "Mortgaged
Property"), to-wit:
(a) All rights, titles, and interests now owned or
hereafter acquired by Mortgagor in and to the undivided interests
in and to the oil and gas leases and/or oil, gas and other
mineral leases and other interests and estates (collectively
called the "Leases") which are described on Exhibit A hereto or
which Leases are otherwise referred to herein.
(b) All rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to (i) the properties now
or hereafter pooled or unitized with the Leases; (ii) all
presently existing or future unitization, communitization,
pooling agreements and declarations of pooled units and the units
created thereby (including, without limitation, all units created
under orders, regulations, rules or other official acts of any
Federal, State or other governmental body or agency having
jurisdiction and any units created solely among working interest
owners pursuant to operating agreements or otherwise) which may
affect all or any portion of the Leases including, without
limitation, those units which may be described or referred to on
attached Exhibit A; and (iii) all operating agreements,
production sales or other contracts, farmout agreements, farm-in
agreements, area of mutual interest agreements, equipment leases
and other agreements described or referred to in this Mortgage or
which relate to any of the Leases or interests in the Leases
described or referred to herein or on attached Exhibit A or to
the production, sale, purchase, exchange, processing,
transporting or marketing of the Hydrocarbons (as hereinafter
defined) and specifically, but without limitation, all of
Mortgagor's interest in or under all gas or liquid hydrocarbon
purchase agreements and all payments made thereunder including
take or pay payments and/or take or pay settlement payments from
or attributable to such Leases or interests.
(c) All rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to all oil, gas,
casinghead gas, drip gasoline, natural gasoline, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined therefrom and all other minerals (collectively
called the "Hydrocarbons") in and under and which may be produced
and saved from or attributable to the Leases, the lands covered
thereby and Mortgagor's interests therein, including all oil in
tanks and all rents, issues, profits, proceeds, products,
revenues and other income from or attributable to the Leases, the
lands covered thereby and Mortgagor's interests therein which are
subjected or required to be subjected to the liens and security
interests of this Mortgage and including specifically, but
without limitation, all liens and security interests in such
Hydrocarbons securing payment of proceeds resulting from the sale
of Hydrocarbons.
(d) All tenements, hereditaments, appurtenances and
properties in anywise appertaining, belonging, affixed or
incidental to the rights, titles, interests and estates described
or referred to in paragraphs (a), (b) and (c) above, which are
now owned or which may hereafter be acquired by Mortgagor,
including, without limitation, any and all property, corporeal or
incorporeal, movable or immovable, now owned or hereafter
acquired and situated upon, used, held for use, or useful in
connection with the operating, working or development of any of
such Leases (excluding drilling rigs, trucks, automotive
equipment or other personal property which may be taken to the
premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells,
injection wells or other wells, petroleum and/or natural gas
wells, buildings, structures, field separators, liquid
extractors, plant compressors, pumps, pumping units, field
gathering systems, salt water disposal facilities, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts,
engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and
rods, power, telephone and telegraph lines, surface leases,
rights-of-way, easements and servitudes and licenses together
with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by
delivery or by writing of any kind, be subjected to the lien and
security interest or privilege hereof by Mortgagor or by anyone
acting on Mortgagor's behalf; and the Mortgagee is hereby
authorized to receive the same at any time as additional security
hereunder.
(f) All of the rights, titles and interests of every nature
whatsoever now owned or hereafter acquired by Mortgagor in and to
the Leases rights, titles, interests and estates and every part
and parcel thereof, including, without limitation, all rights,
titles, interests or estates in and to the Leases as the same may
be enlarged by the discharge of any payments out of production or
by the removal of any charges or Encumbrances (as hereinafter
defined) to which any of the Leases are subject, or otherwise;
together with any and all renewals and extensions of any of the
Leases; all contracts and agreements supplemental to or
amendatory of or in substitution for the contracts and agreements
described or mentioned above; and any and all additional
interests of any kind hereafter acquired by Mortgagor in and to
the Leases, less and except any overriding royalty interests
hereafter acquired by Mortgagor in and to the Leases.
(g) All accounts arising from the sale of Hydrocarbons at
the wellhead, accounts arising from the sale of Hydrocarbons at
some point other than the wellhead, equipment, contract rights,
inventory and general intangibles constituting a part of,
relating to or arising out of those portions of the Mortgaged
Property which are described in paragraphs (a) through (f) above
and all proceeds and products of all such portions of the
Mortgaged Property.
II.
This Mortgage is executed and delivered by Mortgagor to
secure and enforce the Indebtedness described below:
(a) All Indebtedness as such term is defined in that
certain Loan Agreement dated December 28, 1993 by and between
Mortgagor and Mortgagee (as amended or restated from time to
time, the "Loan Agreement"), providing for loans and advances to
be made from time to time by Mortgagee to Mortgagor including
without limitation all amounts evidenced and to be evidenced by
the Note as said term is defined in the Loan Agreement in the
aggregate principal amount of $100,000,000 (the "Note").
(b) The indebtedness evidenced by the Note in the principal
amount and with interest, collection and attorney's fees, all as
provided therein; all renewals, modifications, rearrangements or
extensions of the Note, in whole or in part; any sums which may
be advanced or paid by Mortgagee under the terms hereof on
account of the failure of Mortgagor to comply with the covenants
of Mortgagor contained herein; and all other indebtedness of
Mortgagor arising pursuant to the provisions of this Mortgage.
(c) Any additional loans or advances made by Mortgagee to
or for the benefit of Mortgagor pursuant to the Loan Agreement,
or pursuant to any other instrument executed in connection
therewith.
(d) Any amounts due or which become due by Mortgagor under
that certain Swap Agreement (Basic Swap) between Mortgagor and
Mortgagee dated December 28, 1993 or any other Price Protection
Agreement, as defined in the Loan Agreement, entered into between
Mortgagor and Mortgagee, as the same may be amended or restated
from time to time.
The term "Indebtedness" as used herein shall mean and
include the Note and all other indebtedness described, referred
to or mentioned in paragraphs (a) through (d), inclusive, of this
Section II, whether now existing or hereafter arising.
This Mortgage secures all future advances and obligations
constituting Indebtedness. The total amount of obligations and
advances secured hereby may decrease or increase from time to
time, but at no time shall the total amount of obligations and
advances secured hereby exceed the sum of $200,000,000.
The Indebtedness secured hereby is payable on or before
December 31, 2000.
III.
Mortgagor hereby represents, warrants and covenants as
follows:
(a) To the extent of the undivided interests specified on
attached Exhibit A, Mortgagor has good and marketable title to
and is possessed of the Mortgaged Property; the Mortgaged
Property is free of any and all liens, encumbrances, security
interests, contracts, agreements, preferential purchase rights,
unitization agreements or unitization orders or other
restrictions or limitations of any nature or kind (collectively
called the "Encumbrances") except those permitted Encumbrances
which may be specified herein or on attached Exhibit A; that
Mortgagor's ownership of the Leases and the undivided interests
therein as specified on attached Exhibit A will, after giving
full effect to all Encumbrances, afford Mortgagor not less than
those net interests, as specified on attached Exhibit A as in the
production from those wells and/or units (identified on Exhibit
A) located on the Mortgaged Property (or properties now or
hereafter pooled or unitized therewith), or production which is
allocated to such Leases, and will cause Mortgagor to bear not
more than that portion, as specified on attached Exhibit A as, of
the costs of drilling, developing and operating such wells and/or
units as specified on Exhibit A; none of the Mortgaged Property
is subject to a gas sales contract which contains terms which are
not customary in the industry; none of the Mortgaged Property is
subject at present to any regulatory refund obligation and to
Mortgagor's knowledge no facts exist which might cause the same
to be imposed; Hydrocarbons currently being produced and sold
from or allocated to the Mortgaged Property are being purchased
by those parties and entities identified as "Purchaser" on
attached Exhibit A and Mortgagor is currently receiving payment
and accounting for the proceeds attributable to such Hydrocarbons
from those parties or entities identified as "Remitter" on said
attached Exhibit A.
(b) Mortgagor will warrant and defend the title to the
Mortgaged Property against the claims and demands of all other
persons whomsoever and will maintain and preserve the lien and
privilege created hereby so long as any of the Indebtedness
secured hereby remains unpaid. Should an adverse claim be made
against or a cloud develop upon the title to any part of the
Mortgaged Property, Mortgagor agrees that it will immediately
defend against such adverse claim or take appropriate action to
remove such cloud at Mortgagor's cost and expense, and Mortgagor
further agrees that the Mortgagee may take such other action as
it deems advisable to protect and preserve its interests in the
Mortgaged Property, and in such event Mortgagor will indemnify
the Mortgagee against any and all costs, attorneys' fees and
other expenses which it may incur in defending against any such
adverse claim or taking action to remove any such cloud. Such
obligation of Mortgagor shall be payable as provided in the Loan
Agreement. Except for sales of Hydrocarbons as and when
produced and in the ordinary course of Mortgagor's business or as
may be otherwise provided for in writing, Mortgagor will not
sell, convey or in any manner dispose of the Mortgaged Property
or any portion thereof without first securing the written consent
of the Mortgagee.
(c) This Mortgage is, and always will be kept, a direct
first lien, privilege and security interest upon the Mortgaged
Property subject only to the permitted Encumbrances described on
Exhibit A and Mortgagor will not create or suffer to be created
or permit to exist any lien, security interest or privilege, or
charge prior or junior to or on a parity with the lien and
security interest of this Mortgage upon the Mortgaged Property or
any part thereof or upon the rents, issues, revenues, profits and
other income therefrom, and Mortgagor will, from time to time,
pay or cause to be paid as they become due and payable all taxes,
assessments and governmental charges lawfully levied or assessed
upon the Mortgaged Property or any part thereof, or upon or
arising from any of the rents, issues, revenues, profits and
other income from the Mortgaged Property, or incident to or in
connection with the production of Hydrocarbons or other minerals
therefrom, or the operation and development thereof; provided,
that the foregoing covenant shall be suspended so long as the
amount, applicability or validity of any such charges is being
diligently contested in good faith by appropriate proceedings and
if Mortgagor shall have set up reserves therefor which are
adequate under generally accepted accounting principles.
Mortgagor will not change its name, identity or corporate
structure, or change the location of its chief executive office
or its chief place of business or the place where it keeps its
books and records concerning the Mortgaged Property (including,
particularly, the proceeds from the sale of Hydrocarbons) without
notifying the Mortgagee of such change in writing at least thirty
(30) days prior to the effective date of such change.
(d) Mortgagor will at its own expense do or cause to be
done all things necessary to preserve and keep in full repair,
working order and efficiency all of the Mortgaged Property,
including, without limitation, all equipment, machinery and
facilities, and from time to time will make all the needful and
proper repairs, renewals and replacements so that at all times
the state and condition of the Mortgaged Property will be fully
preserved and maintained in accordance with generally accepted
practices in the industry.
(e) Mortgagor will promptly pay and discharge its share of
all rentals, delay rentals, royalties and indebtedness accruing
under, and Mortgagor will perform or cause to be performed each
and every act, matter or thing required by, each and all of the
assignments, deeds, leases, subleases, contracts and agreements
described or referred to herein or affecting Mortgagor's
interests in the Mortgaged Property, and will do all other things
necessary to keep unimpaired Mortgagor's rights with respect
thereto and prevent any forfeiture thereof or default thereunder.
Mortgagor will operate the Mortgaged Property in a careful and
efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements
and in compliance in all material respects with all applicable
proration and conservation laws of the jurisdiction in which the
Mortgaged Property is situated, and all applicable laws, rules
and regulations of every other agency and authority from time to
time constituted to regulate the development and operation of the
Mortgaged Property and the production and sale of Hydrocarbons
and other minerals therefrom. Mortgagor will do or cause to be
done such development work as may be reasonably necessary to the
prudent and economical operation of the Mortgaged Property in
accordance with the most approved practices of operators in the
industry, including all which may be appropriate to be done to
protect from diminution the productive capacity of the Mortgaged
Property and each producing well thereon including, without
limitation, cleaning out and reconditioning each well from time
to time, plugging and completing at a different interval or zone
each such well, drilling a substitute well to conform to changed
spacing regulations and to protect the Mortgaged Property against
drainage whenever and as often as is necessary.
(f) Mortgagor will maintain the insurance coverages as
specified in Section 4.09 of the Loan Agreement. The loss
payable clauses with respect to all property damage coverage
shall be endorsed in favor of and made payable to the Mortgagee
as the interests of the Mortgagee may appear and the Mortgagee
shall be named as an additional insured with respect to all
insurance providing liability coverages. The Mortgagee shall
have the right to collect, and Mortgagor hereby assigns to the
Mortgagee, any and all monies that become payable under any
policies of property damage insurance and the Mortgagee shall
hold and apply the sums so collected in accordance with Section
4.09 of the Loan Agreement.
(g) Mortgagor will permit the Mortgagee and its agents to
visit and inspect any of the Mortgaged Property at their sole
risk, to examine the books of account of Mortgagor and to discuss
the affairs, finances or accounts of Mortgagor, and to be advised
as to the same by any officer or employee of Mortgagor, all at
such reasonable times or intervals as the Mortgagee may desire.
(h) Mortgagor will, upon request by Mortgagee, furnish or
cause to be furnished to the Mortgagee reports prepared by or for
Mortgagor concerning the productivity and the productive life of
all or any wells included in the Mortgaged Property; the quantity
of the Hydrocarbons and other minerals recoverable therefrom; the
projected income and expense attributable to the Mortgaged
Property; and the expediency of any change in methods of
treatment or operation of all of any well included in the
Mortgaged Property; any new drilling or development; any
abandonment or proposed abandonment of any well; any plugging of
any well or reopening of same at a different interval or zone;
any method of repressuring in the field or any other action with
respect to the Mortgaged Property; and further upon request of
the Mortgagee, will furnish a report of Ryder, Scott & Co., or
another independent engineer acceptable to the Mortgagee covering
such of the foregoing matters as shall be so requested.
Mortgagor will, also upon request of the Mortgagee, furnish the
Mortgagee within thirty (30) days after the end of Mortgagor's
fiscal quarter a report showing for such fiscal quarter the gross
proceeds of the sale of Hydrocarbons and other minerals from the
Mortgaged Property, the quantities so sold, the taxes deducted
from or paid out of such proceeds, the number of wells operated,
drilled and abandoned and such other information as the Mortgagee
may reasonably request.
(i) Mortgagor will comply with the obligations of
Sections 4.08 and 8.04 of the Loan Agreement with respect to
payment of or reimbursement for expenses and indemnifications
made by the Mortgagor to or for the benefit of the Mortgagee.
Any amount to be paid hereunder by Mortgagor to the Mortgagee
shall be a demand obligation owing by Mortgagor (which obligation
Mortgagor hereby expressly promises to pay) to the Mortgagee and
shall bear interest as provided in the Loan Agreement.
(j) Mortgagor will execute and deliver such further
instruments and do such further acts as may be necessary or
desirable or as may be reasonably requested by the Mortgagee to
carry out more effectively the purposes of this Mortgage and to
subject to the lien and security interest or privilege created
hereby any properties, rights and interests covered or intended
to be covered hereby. At the request of the Mortgagee, Mortgagor
will deliver to Mortgagee an inventory and/or financing
statements describing and showing the make, model, serial number
and location of all equipment and machinery forming a part of the
Mortgaged Property.
(k) If any tax is levied or assessed against the
Indebtedness described herein or any part thereof, or against
this Mortgage, or against the Mortgagee with respect to the
Indebtedness or any part thereof or this Mortgage, Mortgagor
shall promptly pay the same.
(l) All or portions of the Mortgaged Property may be
comprised of interests in the Leases which are other than working
interests or which may be operated by a party or parties other
than Mortgagor and with respect to all or any such Leases as may
be comprised of interests other than working interests or which
may be operated by parties other than Mortgagor, Mortgagor's
covenants as expressed in paragraphs (d) through (g) inclusive of
this Section III are modified to require that Mortgagor use its
best efforts to obtain compliance with such covenants by the
working interest owners or the operator or operators of such
Leases.
(m) Mortgagor agrees that if Mortgagor fails to perform any
act or to take any action which Mortgagor is required to perform
or take hereunder or pay any money which Mortgagor is required to
pay hereunder, the Mortgagee in Mortgagor's name or its own name
may, but shall not be obligated to, perform or cause to perform
such act or take such action or pay such money, and any expenses
so incurred by the Mortgagee and any money so paid by the
Mortgagee shall be a demand obligation owing by Mortgagor to the
Mortgagee and the Mortgagee, upon making such payment, shall be
subrogated to all of the rights of the person, corporation or
body politic receiving such payment. Each amount due and owing
by Mortgagor to holders of the Indebtedness and/or Mortgagee
pursuant to this Mortgage shall bear interest from the date of
such expenditure or payment or other occurrence which gives rise
to such amount being owed to the Mortgagee until paid as provided
in the Loan Agreement, and all such amounts together with such
interest thereon shall be a part of the Indebtedness and shall be
secured by this Mortgage.
IV.
(a) Upon the occurrence of any Event of Default, as defined
in Section 6.01 of the Loan Agreement, Mortgagee may, in
accordance with the provisions of the Loan Agreement, declare the
Note to be due and payable whereupon said Note shall become
immediately due and payable without notice of any kind; provided,
however, that the occurrence of an Event of Default as described
in Section 6.01(e), (f) and (g) of the Loan Agreement shall
result in the immediate and automatic acceleration of maturity of
the Note and all other Indebtedness mentioned or referred to
herein. All costs and expenses (including attorneys' fees)
incurred by the Mortgagee in protecting and enforcing their
rights hereunder shall constitute a demand obligation owing by
Mortgagor and shall bear interest as provided in the Loan
Agreement and shall constitute a portion of the indebtedness
secured hereby and shall have the benefit of the lien, privilege
and security interest hereby created.
(b) If the Note or any of the Indebtedness shall become due
and payable and shall not be promptly paid, the Mortgagee shall
have the right and power to proceed by a suit or suits in equity
or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any
power herein granted, or for any foreclosure hereunder or for the
sale of the Mortgaged Property under the judgment or decree of
any court or courts of competent jurisdiction, or for the
appointment of a receiver pending any foreclosure hereunder or
the sale of the Mortgaged Property under the order of a court or
courts of competent jurisdiction or under executory or other
legal process, or for the enforcement of any other appropriate
legal or equitable remedy. Any money advanced by the Mortgagee
in connection with any such receivership shall be a demand
obligation (which obligation Mortgagor hereby expressly promises
to pay) owing by Mortgagor to the Mortgagee and shall bear
interest from the date of making such advance by the Mortgagee
until paid as provided in the Loan Agreement. Mortgagor agrees
to the full extent that it lawfully may, that, in case one or
more of the Events of Default shall have occurred and shall not
have been remedied, then, and in every such case, the Mortgagee
shall have the right and power to enter into and upon and take
possession of all or any part of the Mortgaged Property in the
possession of Mortgagor, its successors or assigns, or its or
their agents or servants, and may exclude Mortgagor, its
successors or assigns, and all persons claiming under Mortgagor,
and its or their agents or servants wholly or partly therefrom;
and, holding the same, the Mortgagee may use, administer, manage,
operate and control the Mortgaged Property and conduct the
business thereof to the same extent as Mortgagor, its successors
or assigns, might at the time do and may exercise all rights and
powers of Mortgagor, in the name, place and stead of Mortgagor,
or otherwise as the Mortgagee shall deem best. All reasonable
costs, expenses and liabilities of every character incurred by
the Mortgagee in administering, managing, operating, and
controlling the Mortgaged Property shall constitute a demand
obligation (which obligation Mortgagor hereby expressly promises
to pay) owing by Mortgagor to the Mortgagee and shall bear
interest from date of expenditure until paid as provided in the
Loan Agreement, all of which shall constitute a portion of the
Indebtedness and shall be secured by this Mortgage and by any
other instrument securing the Indebtedness. In connection with
any action taken by the Mortgagee pursuant to this paragraph (b),
the Mortgagee shall not be liable for any loss sustained by
Mortgagor resulting from any act or omission of the Mortgagee in
administering, managing, operating or controlling the Mortgaged
Property unless such loss is caused by its willful misconduct
and/or bad faith, nor shall the Mortgagee be obligated to perform
or discharge any obligation, duty or liability of Mortgagor.
Mortgagor shall and does hereby agree to indemnify the Mortgagee
for, and to hold the Mortgagee harmless from, any and all
liability, loss or damage which may or might be incurred by the
Mortgagee (except for liability, loss or damage resulting by
reason of the willful misconduct and/or bad faith of the
Mortgagee or the exercise of rights or remedies hereunder; should
the Mortgagee make any expenditure on account of any such
liability, loss or damage, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be a demand
obligation (which obligation Mortgagor hereby expressly promises
to pay) owing by Mortgagor to the Mortgagee and shall bear
interest from the date expended until paid as provided in the
Loan Agreement, shall be a part of the Indebtedness and shall be
secured by this Mortgage and any other instrument securing the
secured indebtedness. Mortgagor hereby assents to, ratifies and
confirms any and all actions of the Mortgagee with respect to the
Mortgaged Property taken under this paragraph (b). In connection
with each and all of the foregoing and acting pursuant to the
authority granted under Louisiana Revised Statutes 9:5131, et
seq., Mortgagor hereby expressly designates Mortgagee, or its
agents, servants or employees as Keeper of each and all of the
Mortgaged Property. Mortgagor for itself, its successors and
assigns does by these presents agree and stipulate that it shall
be lawful for and Mortgagor does hereby authorize Mortgagee
without making a demand or putting in default, putting in default
being expressly waived, to cause all and singular the Mortgaged
Property to be seized and sold subject to the matters set forth
on Exhibit A by executory or other legal process without
appraisement (appraisement being hereby expressly waived) either
in its entirety or in lots, or parcels as Mortgagee may determine
to the highest bidder for cash or on such terms as Mortgagee may
direct, Mortgagor for itself, its successors and assigns hereby
confessing judgment for the full amount of the Note in principal
and interest and all other Indebtedness secured and to be secured
hereby. Mortgagor hereby expressly waives: (a) the benefit of
appraisement as provided for in Articles 2332, 2336, 2723 and
2724 of the Louisiana Code of Civil Procedure and all other laws
conferring the same; (b) the demand and 3 days delay accorded by
Articles 2639 and 2721 of the Louisiana Code of Civil Procedure;
(c) the notice of seizure required by Articles 2293 and 2721 of
the Louisiana Code of Civil Procedure; (d) the benefit of any
other provisions of Articles 2331, 2722 and 2723 of the Louisiana
Code of Civil Procedure; and Mortgagor agrees to the immediate
seizure of the property subject hereto in the event of suit
hereon.
(c) Every right, power and remedy herein given to the
Mortgagee shall be cumulative and in addition to every other
right, power and remedy herein specifically given or now or
hereafter existing in equity, at law or by statute; and each and
every right, power and remedy whether specifically herein given
or otherwise existing may be exercised from time to time and so
often and in such order as may be deemed expedient by the
Mortgagee, and the exercise, or the beginning of 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 the Mortgagee in
the exercise of any right, power or remedy shall 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.
(d) Any sale or sales of the Mortgaged Property or any part
thereof, shall operate to divest all right, title, interest,
claim and demand whatsoever, either at law or in equity, of
Mortgagor of, in and to the premises and the property sold, and
shall be a perpetual bar, against Mortgagor, its successors and
assigns, and against any and all persons claiming or who shall
thereafter claim all or any of the property sold from, through or
under Mortgagor, its successors and assigns; and Mortgagor, if
requested by the Mortgagee so to do, shall join in the execution
and delivery of all proper conveyances, assignments and transfers
of the properties so sold. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other moneys
received by the Mortgagee in any proceedings for the enforcement
hereof, whose application has not elsewhere herein been
specifically provided for, shall be applied first, to the payment
of all reasonable expenses incurred by the Mortgagee incident to
the enforcement of this Mortgage, the Note or any of the
Indebtedness (including, without limiting the generality of the
foregoing, reasonable expenses of any entry or taking of
possession, of any sale, of advertisement thereof, and of
conveyances, and court costs, compensation of agents and
employees, and legal fees), and to the payment of all other
reasonable charges, expenses, liabilities and advances incurred
or made by the Mortgagee under this Mortgage; and then to payment
of the Note and the Indebtedness in such order and manner as the
Mortgagee may elect. The Mortgagee may resort to any security
given by this Mortgage or to any other security now existing or
hereafter given to secure the payment of any of the Indebtedness
secured hereby, in whole or in part, and in such portions and in
such order as may seem best to the Mortgagee in its sole and
uncontrolled discretion, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits or liens
created by this Mortgage. Should any surplus or balance remain
from any sale of the Mortgaged Property after the payment in full
of the Indebtedness, any such surplus or balance shall be paid to
Mortgagor. Mortgagor agrees, to the full extent that it may
lawfully so agree, that it will not at any time insist upon or
plead or in any manner whatever claim or take the benefit or
advantage of any appraisement, valuation, stay, extension or
redemption law now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this Mortgage or the
absolute sale of the Mortgaged Property or the possession thereof
by any purchaser at any sale made pursuant to any provision
hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, for itself and all who may claim
through or under it, so far as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws.
Mortgagor, for itself and all who may claim through or under it,
waives to the extent that it may lawfully do so, any and all
right to have the property included in the Mortgaged Property
marshaled upon any foreclosure of the lien hereof, and agrees
that the Mortgagee or any court having jurisdiction to foreclose
such lien may sell the Mortgaged Property as an entirety or in
parcels. If any law referred to herein and now in force, of
which Mortgagor or its successor or successors might take
advantage despite the provisions hereof, shall hereafter be
repealed or cease to be in force, such law shall not thereafter
be deemed to constitute any part of the contract herein contained
or to preclude the operation or application of the provisions
hereof. Mortgagee or any future holder or holders of the Note
may at any time and from time to time release to Mortgagor or its
order all or any portion of the funds received from the proceeds
of oil, gas or other minerals as hereinafter provided without in
anywise impairing, releasing or discharging the lien, privilege
and security of this Mortgage or affecting the validity thereof.
V.
(a) Mortgagor has absolutely and unconditionally assigned,
transferred, and conveyed, and does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its
successors and assigns, all of the Hydrocarbons and all products
obtained or processed therefrom, and the revenues and proceeds
now and hereafter attributable to the Hydrocarbons and said
products and all payments in lieu of the Hydrocarbons such as
"take or pay" payments or settlements. The Hydrocarbons and
products are to be delivered into pipe lines connected with the
Mortgaged Property, or to the purchaser thereof, to the credit of
the Mortgagee, free and clear of all taxes, charges, costs, and
expenses; and all such revenues and proceeds shall be paid
directly to the Mortgagee, for deposit to the Lender's Account as
defined in the Loan Agreement, with no duty or obligation of any
party paying the same to inquire into the rights of the Mortgagee
to receive the same, what application is made thereof, or as to
any other matter. Mortgagor agrees to perform all such acts, and
to execute all such further assignments, transfers and division
orders, and other instruments as may be required or desired by
the Mortgagee or any party in order to have said proceeds and
revenues so paid to the Mortgagee. The Mortgagee is fully
authorized to receive and receipt for said revenues and proceeds;
to endorse and cash any and all checks and drafts payable to the
order of Mortgagor or the Mortgagee for the account of Mortgagor
received from or in connection with said revenues or proceeds and
apply the proceeds thereof to the payment of the Indebtedness,
when received, regardless of the maturity of any of the
Indebtedness, or any installment thereof; and to execute transfer
and division orders in the name of Mortgagor, or otherwise, with
warranties binding Mortgagor. The Mortgagee shall not be liable
for any delay, neglect, or failure to effect collection of any
proceeds or to take any other action in connection therewith or
hereunder; but the Mortgagee shall have the right, at its
election, in the name of Mortgagor or otherwise, to prosecute and
defend any and all actions or legal proceedings deemed advisable
by the Mortgagee in order to collect such funds and to protect
the interests of the Mortgagee, and/or Mortgagor, with all costs,
expenses and attorneys' fees incurred in connection therewith
being paid by Mortgagor. Mortgagor hereby agrees to indemnify
the Mortgagee against all claims, actions, liabilities,
judgments, costs, charges and attorneys' fees made against or
incurred by it based on the assertion that the Mortgagee has
received funds from the production of Hydrocarbons claimed by
third persons either before or after the payment in full of the
Indebtedness. The Mortgagee shall have the right to defend
against any such claims, actions and judgments, employing its
attorneys therefor, and if the Mortgagee is not furnished with
reasonable indemnity, it shall have the right to compromise and
adjust any such claims, actions and judgments. Mortgagor agrees
to indemnify and pay to the Mortgagee any and all such claims,
judgments, costs, charges and attorney's fees as may be paid in
any judgment, release or discharge thereof or as may be adjudged
against the Mortgagee. Such obligation shall be payable on
demand and shall bear interest from the date of demand therefor
until paid as provided in the Loan Agreement. In addition to the
rights granted to Mortgagee in Section I (c) of this Mortgage,
Mortgagor hereby further transfers and assigns to Mortgagee any
and all such liens, security interests, financing statements or
similar interests of Mortgagor attributable to its interest in
the Hydrocarbons and proceeds of runs therefrom arising under or
created by said statutory provision, judicial decision or
otherwise. The power of attorney granted to Mortgagee in this
paragraph, being coupled with an interest, shall be irrevocable
so long as the Indebtedness or any part thereof remains unpaid.
Notwithstanding anything to the contrary in the foregoing
provisions in this Article, for so long as no Suspension Event as
defined in the Loan Agreement shall exist, Mortgagor shall have
the license to collect all of the revenues attributable to the
Mortgaged Property; and no such payment shall affect or impair
the lien of this Mortgage or the validity and effect of the
assignment contained in this Article V(a). During a Suspension
Event, such license shall be revoked and all proceeds of the sale
of oil, gas or other minerals in and under or produced from the
Mortgaged Property assigned hereunder shall be paid directly to
Mortgagee in the manner provided in Article V(a). In the event
payments are made directly to Mortgagee and then, at the request
of Mortgagee, payments are, for periods of time, paid to
Mortgagor, Mortgagee shall nevertheless have the right, effective
upon written notice, to require that future payments be again
made to it.
(a) Nothing herein contained shall modify or otherwise
alter the obligation of Mortgagor to make prompt payment of all
principal and interest owing on the Note and all other
Indebtedness when and as the same become due regardless of
whether the proceeds of the Hydrocarbons are sufficient to pay
the same and the rights provided in accordance with the foregoing
assignment provision shall be cumulative of all other security of
any and every character now or hereafter existing to secure
payment of the Indebtedness.
(b) To further secure the Indebtedness, Mortgagor hereby
grants to the Mortgagee a security interest in and to the
Mortgaged Property insofar as the Mortgaged Property consists of
equipment, accounts, contract rights, general intangibles,
inventory, Hydrocarbons, fixtures and any and all other personal
property of any kind or character defined in and subject to the
provisions of the Louisiana Commercial Laws (the "Uniform
Commercial Code"), including the proceeds and products from any
and all of such personal property. Upon the happening of any of
the Events of Default, the Mortgagee is and shall be entitled to
all of the rights, powers and remedies afforded a secured party
by the Uniform Commercial Code with reference to the personal
property and fixtures in which the Mortgagee has been granted a
security interest herein, or the Mortgagee may proceed as to both
the real and personal property covered hereby in accordance with
the rights and remedies granted under this Mortgage in respect of
the real property covered hereby. Mortgagor acknowledges that
the provisions of Article IV hereof, including but not limited to
the confession of judgment and appointment of a keeper, are
applicable to the security interest affecting such personal
property and fixtures. Such rights, powers and remedies shall be
cumulative and in addition to those granted to the Mortgagee
under any other provision of this instrument or under any other
instrument executed in connection with or as security for the
Note or any of the Indebtedness. Written notice mailed to
Mortgagor as provided herein at least five (5) business days
prior to the date of public sale of any part of the Mortgaged
Property which is personal property subject to the provisions of
the Uniform Commercial Code shall constitute reasonable notice.
(c) Without in any manner limiting the generality of any of
the other provisions of this Mortgage: (i) some portions of the
goods described or to which reference is made herein are or are
to become fixtures on the land described or to which reference is
made herein or on attached Exhibit A; (ii) the security interests
created hereby under applicable provisions of the Uniform
Commercial Code will attach to Hydrocarbons (minerals including
oil and gas) or the accounts resulting from the sale thereof at
the wellhead or minehead located on the land described or to
which reference is made herein; (iii) Mortgagor is the record
title owner of the real estate or interests in the real estate
comprised of the Mortgaged Property.
VI.
(a) If all Indebtedness secured hereby is paid and all of
the covenants, warranties, undertakings, and agreements made in
this Mortgage are kept and performed, and if neither the
Mortgagor nor the Mortgagee is bound to the other or to any third
person to permit any obligation or Indebtedness to be incurred
then or thereafter, then, upon sixty (60) days prior written
notice, the Mortgagor may request the Mortgagee to terminate this
Mortgage. Upon such termination, Mortgagor may further request
the Mortgagee to provide a written act of release of this
Mortgage. Mortgagee agrees to deliver such an act of release
(subject to the foregoing limitation), all at the cost and
expense of Mortgagor, within sixty (60) days of receiving such
request, unless Mortgagee, in good faith, has cause to believe
the Mortgagor is not entitled to a termination of this Mortgage.
(b) If any provision hereof is invalid or unenforceable in
any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining
provisions hereof shall be liberally construed in favor of the
Mortgagee and the Mortgagee in order to effectuate the provisions
hereof, and the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
(c) This instrument may be construed as a mortgage, deed of
trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or
contract, or any one or more of them, in order fully to
effectuate the lien hereof and the purposes and agreements herein
set forth.
(d) The term "Mortgagor" as used herein shall mean and
include all and each of the individuals, partnerships,
corporations or other legal entities or persons executing this
Mortgage (excluding the witnesses and Notary hereto). The number
and gender of pronouns used in referring to Mortgagor shall be
construed to mean and correspond with the number and gender of
the individuals, partnerships, corporations or other legal
entities or persons executing this Mortgage as Mortgagor. The
term "Mortgagee" as used herein shall mean and include any legal
owner, holder, assignee or pledgee of any of the Indebtedness
secured hereby. The terms used to designate Mortgagee and
Mortgagor shall be deemed to include the respective heirs, legal
representatives, successors and assigns of such parties.
(e) This instrument is made with full substitution and
subrogation of the Mortgagee and its assigns in and to all
covenants, warranties and representations by others heretofore
given or made in respect of the Mortgaged Property or any part
thereof, whether by contract or otherwise, recorded or
unrecorded.
(f) The covenants and agreements herein contained shall
constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal
representatives, successors and assigns of the parties hereto.
(g) All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed sufficiently given or furnished if
delivered by registered or certified United States mail, postage
prepaid, or by personal service (including express or courier
service) at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such
notice or communication shall be deemed to have been given either
at the time of personal delivery or, in the case of delivery at
the address and in the manner provided herein, upon receipt;
provided that, service of notice as required by any laws of the
State of Louisiana shall for all purposes be deemed appropriate
and sufficient with the giving of such notice.
(h) The lien and rights of Mortgagee hereunder shall not be
impaired by any indulgence, moratorium or release granted by
Mortgagee including, but not limited to, any renewal, extension
or modification which Mortgagee may grant with respect to any
Indebtedness, or any surrender, compromise, release, renewal,
extension, exchange or substitution which Mortgagee may grant in
respect of the Mortgaged Property, or any part thereof or any
interest therein, or any release or indulgence granted to any
endorser or surety of any Indebtedness.
(i) In the event the ownership of the Mortgaged Property or
any part thereof becomes vested in a person other than Mortgagor,
Mortgagee may, without notice to Mortgagor, deal with such
successor or successors in interest with reference to this
Mortgage and to the Indebtedness in the same manner as with
Mortgagor, without in any way vitiating or discharging the
Mortgagor's liability hereunder or for the payment of the
Indebtedness or performance of the obligations secured hereby. No
transfer of the Mortgaged Property, no forbearance on the part of
the Mortgagee, and no extension of the time for the payment of
the Indebtedness given by any holder of the Indebtedness, in
whole or in part, shall vitiate or discharge the liability of
Mortgagor hereunder or for obligations secured hereby or the
liability of any other person hereunder or for obligations
secured hereby or the liability of any other person hereunder or
for the payment of the Indebtedness.
(j) This instrument is being executed in multiple
counterparts, each of which is an original, and all of which are
identical, containing all property descriptions included in
Exhibit A. Each of such counterparts shall be deemed an original
and all such counterparts shall together constitute but one and
the same instrument.
(k) Mortgagor and Mortgagee acknowledge that none of the
Indebtedness has been presented to the undersigned notary public
to be paraphed for identification herewith. Further,
notwithstanding any reference to the Loan Agreement or any other
document referred to herein, all persons dealing with the
Mortgaged Property shall be entitled to rely upon any document or
certificate of Mortgagee as to the occurrence of an event, such
as an Event of Default, and shall not be charged with and shall
not be forced to review any provision of any other instrument
referred to herein to determine the accuracy thereof.
(l) By execution of this instrument, the Mortgagee
expressly makes and accepts this Mortgage subject and subordinate
to that certain Assignment of Operating Rights dated and
effective December 1, 1993 by and between Chevron U.S.A. Inc., as
Assignor, and Forest Oil Corporation, as Assignee, relative to
OCS-G 5518 covering the E 1/2 of Block 326, Eugene Island Area,
South Addition; and that certain Partial Assignment of Operating
Rights effective September 20, 1989 by and between Chevron U.S.A.
Inc., as Assignor and Forest Oil Corporation and Harbert Energy
Corporation, as Assignees, relative to OCS-G 8695 covering the S
1/2 of Block 320, Eugene Island Area, South Addition, which said
assignment is subject to that certain Farmout Agreement effective
February 28, 1989, as amended, between Chevron U.S.A. Inc. and
Forest Oil Corporation.
Upon the occurrence of an Event of Default hereunder, the
rights and powers of the Mortgagee relative to the portions of
and interests in OCS-G 5518 and OCS-G 8695 described in the above
referenced instruments are expressly subject and subordinate to
the rights of Chevron U.S.A. Inc. thereunder; and upon the
occurrence of an Event of Default, the Mortgagee and its
successors, shall expressly agree to assume, perform and comply
with all of Mortgagor's obligations under said agreements and
failure to so comply therewith or perform thereunder shall
entitle Chevron U.S.A. Inc. to assert the rights and remedies
provided under said Agreements.
In the event of a conflict between the provisions of this
paragraph VI(l) and any other term or provision of this Mortgage,
the terms of this paragraph VI(l) shall prevail.
(m) This instrument shall be governed by and enforced in
accordance with the laws of the State of Louisiana. Mortgagor
and Mortgagee expressly acknowledge, agree and confirm, however,
that the Note and Loan Agreement are and shall be construed in
accordance with and governed by the laws of the State of
Colorado.
THUS DONE AND PASSED on this day of December, 1993 by
Forest Oil Corporation in the presence of the undersigned and me,
said Notary Public, after a due reading of the whole.
WITNESSES: MORTGAGOR:
FOREST OIL CORPORATION
___________________________
By:_________________________________
Name:_____________________ Name: William L. Dorn
Title: Chairman of the Board and
Chief Executive Officer
___________________________
Name:_____________________
_______________________________
Notary Public
Printed Name:_________________
My Commission Expires:
________________________
THUS DONE AND PASSED on this ___ day of December, 1993 by
JOINT ENERGY DEVELOPMENT INVESTMENTS LIMITED PARTNERSHIP in the
presence of the undersigned and me, said Notary Public, after a
due reading of the whole.
WITNESSES: MORTGAGEE:
JOINT ENERGY DEVELOPMENT
___________________________ INVESTMENTS LIMITED PARTNERSHIP
Name: _____________________
By:Enron Capital Corp, its general partner
__________________________
Name: ____________________ By: ___________________________
Thomas S. Glanville
Attorney-in-Fact
_______________________________
Notary Public
Printed Name:__________________
My Commission Expires:
________________________
THE STATE OF_________________
COUNTY OF ___________________
BE IT REMEMBERED, that I, ___________________, a Notary
Public duly qualified, commissioned, sworn and acting in and for
the State of _________________ , hereby certify that, on this
___, day of December, 1993, there appeared before me, William L.
Dorn, Chairman of the Board and Chief Executive Officer, of
Forest Oil Corporation, a New York corporation, whose address is
950 17th Street, Colorado National Building, Denver, Colorado
80202.
On this day, before me, the undersigned Notary Public in and
for said State, personally appeared the above named person, to me
personally known, who, being by me duly sworn, did say that they
are the designated officers of said corporation, and that the
seal affixed to said instrument is the corporate seal of said
corporation and that the instrument was signed and sealed on
behalf of the corporation by authority of its Board of Directors
and that the above named persons acknowledged the instrument to
be the free act and deed of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal in the City of ______________ , and State of _____________ ,
this ____ day of December, 1993.
______________________________
Notary Public in and for The
State of______________________
Printed Name of Notary Public
Residing at:
______________________________
______________________________
My Commission Expires:
______________________________
THE STATE OF ________________
COUNTY OF ___________________
BE IT REMEMBERED, that I, ___________________, a Notary
Public duly qualified, commissioned, sworn and acting in and for
the State of_______ , hereby certify that, on this _____ day of
December, 1993, there appeared before me, Thomas S. Glanville,
attorney-in-fact on behalf of Enron Capital Corp, a Delaware
corporation, as General Partner of Joint Energy Development
Investments Limited Partnership, a Delaware limited partnership,
whose address is 1400 Smith Street, Houston, Texas 77002.
On this day, before me, the undersigned Notary Public in and
for said State, personally appeared the above named persons, to
me personally known, who, being by me duly sworn, did say that
they are the designated officers of said corporation, the General
Partner of said limited partnership, a Delaware limited
partnership registered as a foreign limited partnership in
Louisiana, and the above named persons acknowledged that the
instrument was signed on behalf of the corporation by authority
of the Board of Directors in its capacity as General Partner of
the aforesaid partnership and the above named persons
acknowledged the instrument to be the free act and deed of the
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal in the City of______________ , State of___________ , this
____ day of December, 1993.
______________________________
Notary Public in and for
The State of _________________
______________________________
Printed Name of Notary Public
Residing at:
______________________________
______________________________
My Commission Expires:
______________________________
EXHIBIT "A"
Property: Eugene Island 320
Subject Interest: An undivided 66.66667% interest in the
operating rights, entitling Grantor to not less
than a 48.044434% BPO (as defined below) and
43.866698% APO (as defined below) net revenue
interest, in the following oil and gas lease:
Serial No.: OCS-G-8695
Dated: July 1, 1987
Lessor: United States of America
Lessee: Tenneco Oil Company
Description: Block 320, Eugene Island Area, OCS
Leasing Map, Louisiana Map No. 4A, INSOFAR
AND ONLY INSOFAR as said lease covers the S/2
of said Block 320 but only as to those depths
down to 6,091'
Permitted Encumbrances:
1. Farmout Agreement effective February 28, 1989, as amended,
between Chevron USA, Inc., as Farmouter, and Forest Oil
Corporation, as Farmoutee. This Agreement sets forth
interests before payout ("BPO") and after payout ("APO") as
defined therein.
2. Operating Agreement dated February 28, 1989, as amended, by
and between Forest Oil Corporation, as Operator, and Harbert
Energy Corporation, as Non-Operator.
3. Exploration Agreement dated June 1, 1988, between Forest Oil
Corporation and Harbert Energy Corporation.
4. Assignments dated May 30, 1989, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee Executive Group
(89-004 and 89-104).
5. Gas Purchase and Sales Agreement dated July 22, 1988, but
effective June 30, 1988 between Tenneco Gas Supply
Corporation, as Buyer, and Tenneco Oil Company, As Seller.
A. Ratification and Amendment dated September 8,
1988, between TOC-Gulf Coast ("Seller") and
Tenneco Gas Supply Corporation ("Buyer").
B. Second Amendment effective October 31, 1988
between TOC-Gulf of Mexico, Inc. and TOC-Gulf
Coast Inc. ("Seller") and Tenneco Gas Supply
Corporation ("Buyer").
C. Third Amendment effective November 1, 1988
between TOC-Gulf of Mexico Inc. ("Seller")
and Tenneco Gas Supply Corporation ("Buyer").
6. Production Handling Agreement between Forest Oil Corporation
and Santa Fe Energy Resources, Inc.
7. Assignments dated May 30, 1989, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee (89-004 and 88-
104).
8. Letter Agreement between Chevron U.S.A. Inc. and Forest Oil
Corporation, et al., dated August 18, 1992.
Property: Eugene Island 326
Subject Interest: An undivided 100% interest in the operating
rights, entitling Grantor to not less than i)
72.067% net revenue interest in the E/2 of E/2 and
E/2 of W/2 of E/2 and ii) 76.667% net revenue
interest in the W/2 of W/2 of E/2, in the
following oil and gas lease:
Serial No.: OCS-G-5518
Dated: July 1, 1983
Lessor: United States of America
Lessee: Gulf Oil Corporation
Description: Block 326, Eugene Island Area, OCS
Leasing Map, Louisiana Map No. 4A, INSOFAR
AND ONLY INSOFAR as said lease covers the E/2
of said Block 326 but only as to those depths
down to 12,000'
Permitted Encumbrances:
1. Farmout Agreement dated 2-5-88 between Chevron USA, Grantor,
Adobe, and Plumb (now Harbert).
2. Operating Agreement dated 2-5-88 between Grantor, Adobe and
Plumb (now Harbert) including Gas Balancing Agreement
attached thereto as Exhibit E.
3. Gas Sales Contract effective 2-1-91 between Grantor and
TEMCO.
4. Oil & Condensate Sales Contract effective 1-1-90 between
Grantor and Chevron USA.
5. Connection Agreement dated 11-1-89 between Grantor and
Marathon Pipeline Co.
6. Transportation Agreement dated 11-1-89 between Grantor and
Marathon
7. Connection Agreement dated 10-4-89 between Grantor and
Tennessee Gas Pipeline.
8. Partial Assignment of Operating Rights effective May 4,
1988, from Chevron to Grantor, et al.
9. Assignments dated February 24, 1988, between Forest Oil
Corporation and Jack C. Oeffinger, Trustee (88-009 and 88-
109), as to E/2 of E/2 and E/2 of W/2 of E/2.
Property: Vermilion Block 255
Subject Interest: An undivided 20.0% operating rights
interest, entitling Grantor to not less than
a 16.25% net revenue interest, in the
following oil and gas lease:
Serial No.: OCS-G 1152
Dated: June 1, 1962
Lessor: United States of America
Lessee: Forest Oil Corporation
Description: Block 255, Vermilion Area, South
Addition, OCS Leasing Map, Louisiana Map
No. 3B, INSOFAR AND ONLY INSOFAR as said
lease covers:
N/2 of NW/4 of SW/4
N/2 of NE/4 of SW/4
SE/4 of SW/4 of NW/4
S/2 of SE/4 of NW/4
limited to the stratigraphic equivalent
of the top of the H-2 Sand at a measured
depth of 7780' as seen in the OCS-G-1152
#5 ST Well down to the base of the K-5
Sand at a measured depth of 13,085' as
seen in the OCS-G-1152 #6 Well.
Permitted Encumbrances:
1. Operating Agreement attached as Exhibit "A" to Geophysical
Exploration Agreement dated May 17, 1961 with Hope Natural
Gas Company, et al, governing non-unitized operations, per
letter agreement dated July 7, 1971 between Forest Oil
Corporation and Columbia Gas Development Corporation, et al.
2. Gas Processing Agreement with Exxon dated May 26, 1981,
covering Vermilion Block 255 and Block 256 (Bluewater Gas
Plant).
3. Assignment of overriding royalty interest from Forest Oil
Corporation to Dale H. Dorn, Nominee, on behalf of certain
Forest Oil Corporation Executive Employees.
Property: Vermilion Block 101
Subject Interest: An undivided 76.39% leasehold interest,
entitling Grantor to not less than a
63.65833% net revenue interest, in the
following oil and gas lease:
Serial No.: OCS-G 10658
Dated: July 1, 1989
Lessor: United States of America
Lessee: TXP Operating Company
Description: Block 101, Vermilion Area, OCS
Leasing Map, Louisiana Map No. 3,
containing 4531.63 acres, INSOFAR AND
ONLY INSOFAR as said lease covers:
1) the SW/4 of SE/4 of NW/4 of said
Block 101 from the surface down to
100' below the base of the 9,300'
Sand at a measured depth of 8,710'
as seen in the OCS-G-10658 #1 (B-1)
Well, and
2) the E/2 of NW/4 of SW/4 and the
NW/4 of NE/4 of SW/4 of said Block
101 from the surface down to 100'
below the base of the 10,300' Sand
at a measured depth of 9,136' as
seen in the OCS-G-10658 #1 (B-1)
Well.
Permitted Encumbrances:
1. Offshore Operating Agreement, dated effective July 1, 1989,
between Transco Exploration and Production Company, as
Operator, and Zilkha Energy Company, as Non-Operator.
2. Gas Purchase Contract, dated August 28, 1991, between
Transco Exploration and Production Company, as Seller, and
Transco Energy Marketing Company, as Buyer.
Property: Vermilion Block 102
Subject Interest: An undivided 100.0% interest in the
operating rights, entitling Grantor to not
less than a 83.333333% net revenue interest,
in the following oil and gas lease:
Serial No.: OCS-G 3393
Dated: January 1, 1977
Lessor: United States of America
Lessee: CNG Producing Co., et al.
Description: Block 102, Vermilion Area, OCS
Leasing Map, Louisiana Map No. 3,
INSOFAR AND ONLY INSOFAR as said lease
covers:
1) SE/4 of NW/4 of NW/4
S/2 of NE/4 of NW/4
NE/4 of SW/4 of NW/4
SE/4 of NW/4
W/2 of SW/4 of NE/4
limited to the E Sand as seen between
the measured depths of 7,366' and 7,460'
in the Electric log of the OCS-G-3393 #3
(S/T) Well.
2) SW/4 of NE/4 of NW/4
NW/4 of SE/4 of NW/4
SE/4 of NE/4 of NW/4
E/2 of SE/4 of NW/4
W/2 of SW/4 of NE/4
limited to the F Sand as seen between
the measured depths of 7,190' and 7,288'
in the Electric log of the CNG V102 OCS-
G-3393 #2 Well.
3) E/2 of SW/4 of NW/4
SE/4 of NE/4 of NW/4
NE/4 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the H Sand as seen between
the measured depths of 7,935' and 8,046'
in the Electric log of the ODECO V102
OCS-G-3303 #3 (S/T) Well.
4) E/2 of SW/4 of NW/4
NE/4 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the J Sand as seen between
the measured depths of 8,005' and 8,034'
in the OCS-G-3393 #2 Well.
5) E/2 of SE/4 of NW/4
NW/4 of SW/4 of NE/4
limited to the M-1 Sand as seen between
the measured depths of 8,398' and 8,456'
in the Electric log of the OCS-G-3303 #3
(S/T) Well.
Permitted Encumbrances: None
Property Eugene Island Area, Block 53 SW/4
Subject Interest: Fifty percent (50%) of six-sixths (6/6)
interest in and to the Operating Rights in the
southwest quarter (SW/4) only of that certain Oil
and Gas Lease of Submerged Lands under the Outer
Continental Shelf Lands Act bearing Serial Number
OCS 0479 dated December 1, 1954 from the United
States of America, Department of the Interior, as
Lessor, covering all of Block 53, Eugene Island
Area as shown on official leasing map, La. Map No.
4, INSOFAR AND ONLY INSOFAR as said Operating
Rights cover the depths from the surface down to
the stratigraphic equivalent of the base of the
CIB Carst Sand as seen in the EI 53 OCS-G-0479 #9
well at a measured depth of 13,092'.
Together with a like interest in and to that
particular Right of Way dated August 28, 1990 from
the Minerals Management Service bearing Serial
Number OCS-G 12373 being 200 feet in width for the
installation, operation and maintenance of a 6-5/8
inch pipeline, 3.6 miles in length from Platform B
in Block 53, to a Subsea tie-in with Trunkline Gas
Company's 22 inch pipeline (OCS-G 2817) in Block
64, all in the Eugene Island Area.
Working Interest - 50.00%
Net Revenue Interest - 41.67%
Further burdened by Net Profits Interests equal
to:
C. Dan Bump - 1.20%
Lawrence J. Cernosek - 0.80%
Permitted Encumbrances:
1. Farmout Agreement dated March 9, 1990 from Pennzoil
Exploration & Production Co. to Sandefer Offshore Co.
2. Amendment Letter to Farmout Agreement with Pennzoil dated
August 10, 1990.
3. Assignment of Operating Rights dated effective March 9, 1990
from Pennzoil Exploration & Production Co. to Sandefer
Offshore Operating Co.
4. Joint Operating Agreement between Pennzoil Exploration &
Production Co. and Sandefer Offshore Co. dated June 1, 1990
naming Sandefer Offshore Operating Co. as Operator.
5. That particular Letter Agreement dated July 18, 1990 between
Sandefer Offshore Operating Co. and Trunkline Gas Company
covering transportation of water-saturated gas.
6. That particular Condensate Separation Agreement dated
January 1, 1991 by and between Trunkline Gas Company and
Sandefer Offshore Operating Co.
7. That particular Liquid Hydrocarbon Transportation Agreement
dated January 1, 1991 by and between Trunkline Gas Company
and Sandefer Offshore Operating Co.
8. That particular Crude Oil Purchase Agreement dated May 26,
1992 by and between Amoco Production Company and Sandefer
Offshore Operating Co.
9. That particular Assignment of Net Profits Interest dated
December 17, 1990 between General Sandefer Offshore
Partnership II and Lawrence J. Cernosek (0.80%).
10. That particular Assignment of Net Profits Interest dated
December 17, 1990 between General Sandefer Offshore
Partnership II and C. Dan Bump (1.20%).
Property West Cameron Area Block 44
Subject Interest: All of the Leasehold Interest in and to that
Oil and Gas Lease bearing Serial Number OCS-G 6566
dated June 1, 1984 from the United States of
America, Department of the Interior, as Lessor, to
Union Texas Petroleum Corp., and Agip Petroleum
Co. Inc., as Lessee, covering that portion of
Block 44, West Cameron Area, OCS Leasing Map,
Louisiana Map No. 1, seaward of the line
established pursuant to Section 8(g) of the OCS
Lands Act as amended, and described more fully in
said lease, from the surface down to the
stratigraphic equivalent of the base of the
Discorbis B #6 Sand as seen between the measured
depths of 9,806' and 9,884' in the Electric log of
the Sandefer OCS-G-6566 #2 Well.
Working Interest - 100.00%
Net Revenue Interest - 75.00%
Permitted Encumbrances:
1. Farmout Agreement dated January 10, 1989 from Union Texas
Petroleum Corporation and Agip Petroleum Co. Inc. to General
Sandefer Offshore Partnership.
2. Assignment of Oil and Gas Lease dated May 22, 1989 from
Union Texas Petroleum Corporation and Agip Petroleum Co.
Inc. to General Sandefer Offshore Partnership.
3. That particular Liquid Hydrocarbon Transportation Agreement
dated October 1, 1990 by and between Stingray Pipeline
Company and Sandefer Offshore Operating Co.
4. That particular Operating Agreement for Measurement
Facilities dated July 17, 1990 by and between Stingray
Pipeline Company and Sandefer Offshore Operating Co. and
Amendment Letter of July 12, 1990.
5. That particular Liquids Purchase Agreement dated January 1,
1992 by and between Marathon Oil Company and Sandefer
Offshore Operating Co.
6. That particular Crude Oil Marketing Consulting Agreement
dated January 30, 1992 by and between Vision Resources, Inc.
and Sandefer Offshore Operating Co.
7. That particular Lease Rental Agreement dated August 1, 1993
by and between ISS Compression, Inc. and Sandefer Offshore
Operating Co.
CERTIFICATE
The undersigned, K. W. Smith, Assistant Secretary of Forest
Oil Corporation, a New York corporation (this "Corporation")
hereby certifies that the following is a true and correct copy of
resolutions duly adopted by the Board of Directors of this
Corporation in accordance with the articles and by-laws of this
Corporation and that same have not been amended or rescinded and
are in full force and effect.
RESOLVED, that this Corporation may borrow from
Joint Energy Development Investments Limited
Partnership (the "Lender") the principal amount of up
to $100,000,000.00 (the "Loan") pursuant to the terms
and conditions of a Loan Agreement (the "Loan
Agreement") to be made by and among the Lender and this
Corporation; and
FURTHER RESOLVED, that William L. Dorn, Chairman
of the Board and Chief Executive Officer of this
Corporation (the "Officer"), be and he is hereby
authorized and directed at any time and from time to
time in the name of and on behalf of this Corporation
and as security and collateral for the Loan under the
provisions of the Loan Agreement to mortgage, pledge,
assign, hypothecate, deliver or grant a security
interest in any or all of the assets or properties of
this Corporation of any nature whatsoever, whether
immovable or movable, corporeal or incorporeal, both
now owned and hereafter acquired, together with all
products and proceeds thereof, to the Lender upon such
terms and conditions as may be agreed upon between said
Officer and the Lender; and
FURTHER RESOLVED, that the Officer of this
Corporation be and he hereby is authorized and directed
to execute and deliver the Loan Agreement to the Lender
in such form, substance and content as may be necessary
or desirable in order to obtain the Loan, together with
one or more promissory notes in the amount of the Loan,
with interest thereon, and all other instruments,
documents, agreements and certificates as may be now or
hereafter required by the Lender from time to time to
evidence the Loan made pursuant to the Loan Agreement,
all such instruments, documents, agreements and
certificates to contain such terms, covenants and
conditions as said Officer may deem necessary or
appropriate, said Officer's execution and delivery
thereof on behalf of this Corporation to be conclusive
evidence of said Officer's approval; and
FURTHER RESOLVED, that the Officer of this
Corporation be and he hereby is authorized and directed
to execute and deliver to the Lender one or more
mortgages, in conventional or collateral form, security
agreements, pledge agreements, assignments, deeds of
trust, financing statements, agreements and
certificates as may be now or hereafter required by the
Lender from time to time to secure the Loan made
pursuant to the Loan Agreement, including without
limitation supplemental or additional collateral
documents encumbering assets and properties of this
Corporation in the future, all such mortgages, security
agreements, pledge agreements, assignments, deeds of
trust, financing statements, agreements and
certificates to contain such terms, covenants and
conditions as may be approved by the Officer of this
Corporation, said Officer's execution and delivery
thereof on behalf of this Corporation to be conclusive
evidence of said Officer's approval; and
FURTHER RESOLVED, that the documents described in
the above paragraphs may contain a confession of
judgment, authorization of executory process, waiver of
appraisal, consent to private sale and other remedial
clauses as determined by the Officer and the Lender;
and
FURTHER RESOLVED, that in express contemplation of
action by the Lender in reliance hereon, the Assistant
Secretary of this Corporation be and is hereby
authorized and empowered to certify to the Lender a
copy of these Resolutions, and that the Lender may
consider the Officer to continue in the office and
these Resolutions to remain in full force and effect
until written notice to the contrary shall be received
by the Lender from this Board of Directors.
IN WITNESS WHEREOF, I have signed this Certificate this 28th
day of December, 1993.
______________________________
K. W. Smith
Assistant Secretary
