SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT UNDER TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): August 12, 1998
Commission File Number: 0-14096
FORELAND CORPORATION
(Exact Name of Registrant as Specified in its Charter)
NEVADA 87-0422812
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12596 W. BAYAUD AVENUE
SUITE 300, LAKEWOOD, COLORADO 80228
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(303) 988-3122
N/A
(Former name, former address, and formal fiscal year, if changed since
last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired. The following financial
statements respecting the acquired assets are included as part of this report:
Independent Auditor's Report
Statements of Assets and Liabilities June 30, 1998 (unaudited) and
December 31, 1997 and 1996
Statements of Revenues and Direct Expenses for the six months ended
June 30, 1998 and 1997 (unaudited) and for the years ended December
31, 1997, 1996, and 1995
Notes to Financial Statements
(b) Pro forma financial information. The following pro forma financial
information is included as part of this report:
Introduction to Pro Forma Financial Information
Pro Forma Balance Sheet June 30, 1998 (unaudited)
Pro Forma Statement of Operations (unaudited) for the year ended
December 31, 1997
Pro Forma Statement of Operations (unaudited) for the six months ended
June 30, 1998
Notes to Pro Forma
(c) Exhibits. The following exhibit is included as part of this report:
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
- ------- --------- -------------------------------------------- -----------------
Item 2. Plan of Acquisition, Reorganization, Arrangement,
Liquidation, or Succession
- --------------------------------------------------------------
2.01 2 Option and Purchase Agreement between Incorporated by
Foreland Corporation, Petro Source Reference(1)
Corporation, Petrosource Refining
Corporation, and Petrosource Transportation
dated December 31, 1997
2.02 2 Amendment to Option and Purchase Agreement Original filing(2)
between Foreland Corporation, Petro Source
Corporation, Foreland Refining Corporation,
and Petrosource Transportation dated August
11, 1998*
Item 3. Instruments Defining the Rights of Security
Holders
- --------------------------------------------------------------
3.01 3 Designation of Rights, Privileges and Original filing(2)
Preferences for 1998 Series Convertible
Preferred Stock
3.02 3 Registration Rights Agreement between Energy Original filing(2)
Income Fund, L.P., and Foreland
Corporation, dated as of August 10, 1998
Item 10. Material Contracts
- --------------------------------------------------------------
10.01 10 Form of Deed of Trust, Security Agreement, This filing
Assignment of Rents, Profits and Proceeds,
Financing Statement, and Fixture Filing
from Foreland Corporation, Foreland
Refining Corporation, and Foreland Asset
Corporation
10.02 10 First Amendment to Financing Agreement Original filing(2)
between Foreland Corporation, Eagle Springs
Production Limited Liability Company,
Foreland Refining Corporation, Foreland
Asset Corporation, Petrosource
Transportation, and Energy Income Fund,
L.P., dated August 10, 1998*
10.03 10 Common Stock Purchase Warrant to purchase Original filing(2)
750,000 shares of common stock of Foreland
Corporation at $6.00 per share
10.04 10 Stock Purchase Agreement dated August 10, Original filing(2)
1998, between Energy Income Fund, L.P., and
Foreland Corporation
10.05 10 First Allonge to Acquisition Note in the Original filing(2)
original principal amount of $2,327,000,
dated as of August 10, 1998
10.06 10 First Allonge to Development Note in the Original filing(2)
original principal amount of $13,893,000,
dated as of August 10, 1998
10.07 10 First Allonge to Refinancing Note in the Original filing(2)
original principal amount of $680,000,
dated as of August 10, 1998
10.08 10 Environmental Indemnity Agreement between Original filing(2)
Petro Source Corporation, Petrosource
Investments, Inc., Foreland Corporation,
Foreland Refining Corporation, Foreland
Asset Corporation, and Petrosource
Transportation dated August 11, 1998
10.09 10 Second Amendment to Deed of Trust, Security Original filing(2)
Agreement, Assignment of Production and
Proceeds, Financing Statement and Fixture
Filing dated as of August 11, 1998, by and
among Foreland Corporation, Eagle Springs
Production Limited Liability Company,
First American Title Company of Nevada,
and Energy Income Fund, L.P. *
- -------------
(1) Incorporated by reference from the Company's report on Form 8-K dated
January 6, 1998.
(2) Filed as an exhibit to the Company's original report on Form 8-K dated
August 12, 1998.
* Omitted schedules and similar attachments to these exhibits that are listed
and briefly identified in such exhibits will be furnished supplementally to
the Commission upon request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: October 26, 1998
FORELAND CORPORATION
By/s/N. Thomas Steele, President
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITOR'S REPORT................................................2
STATEMENTS OF ASSETS AND LIABILITIES - June 30, 1998 (Unaudited),
December 31, 1997 and 1996 ............................................3
STATEMENT OF REVENUES AND DIRECT EXPENSES - For the Six Months Ended
June 30, 1998 (Unaudited) and 1997 and For the Years
Ended December 31, 1997, 1996, and 1995................................4
NOTES TO FINANCIAL STATEMENTS...............................................5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Foreland Refining Corporation
We have audited the accompanying statements of assets and liabilities acquired
by Foreland Refining Corporation as of December 31, 1997 and 1996, and the
related statements of direct revenues and expenses for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 1 and are not intended to be a complete presentation of the
revenues and expenses related to the net assets acquired.
In our opinion, such financial statements present fairly, in all material
respects, the assets and liabilities acquired by Foreland Refining Corporation
as of December 31, 1997 and 1996, and their direct revenues and expenses for
each of the years in the three-year period ended December 31, 1997 in conformity
with generally accepted accounting principles.
HEIN + ASSOCIATES LLP
Denver, Colorado
October 2, 1998
<PAGE>
NET ASSETS ACQUIRED BY
FORELAND REFINING CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, DECEMBER 31,
----------- ---------------------------
1998 1997 1996
----------- ------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 29,174 $ 2,850 $ 2,850
Accounts receivable:
Trade, net of allowance for
doubtful accounts of $20,000 2,852,746 3,267,941 1,897,141
Affiliates 632,816 52,836 -
Inventory 1,133,445 1,260,227 1,365,830
Prepaid expenses 77,131 184,483 178,964
------------ ------------ ------------
Total current assets 4,725,312 4,768,337 3,444,785
PROPERTY, PLANT AND EQUIPMENT, net 3,318,257 3,683,136 3,733,425
OTHER ASSETS, net 202,371 279,573 10,955
------------ ------------ ------------
TOTAL ASSETS $ 8,245,940 $ 8,731,046 $ 7,189,165
------------ ------------ ------------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable:
Trade $ 1,797,960 $ 1,856,175 $ 1,370,014
Affiliates - - 520,543
Other liabilities 265,269 212,377 149,249
------------ ------------ ------------
Total current liabilities 2,063,229 2,068,552 2,039,806
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
NET ASSETS $ 6,182,711 $ 6,662,494 $ 5,149,359
============ ============ ============
SEE ACCOMPANYING NOTES TO THESE COMBINED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS ACQUIRED BY
FORELAND REFINING CORPORATION
STATEMENTS OF DIRECT REVENUES AND EXPENSES
FOR THE SIX
MONTHS
ENDED FOR THE YEARS ENDED
----------------------- --------------------------------------
JUNE 30, JUNE 30, DECEMBER 31,
1998 1997 1997 1996 1995
----------- ----------- ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Refining revenue $10,527,013 $9,827,225 $23,874,848 $17,126,849 $15,516,811
Transportation revenue 732,253 620,365 1,686,935 2,201,839 3,317,147
----------- ----------- ------------ ------------ ------------
Total revenue 11,259,266 10,447,590 25,561,783 19,328,688 18,833,958
COSTS AND EXPENSES:
Costs of sales 9,124,025 8,553,981 20,407,896 14,933,310 13,793,934
Operating expenses 2,036,603 1,956,622 4,148,559 3,530,445 3,958,108
----------- ----------- ------------ ------------ ------------
Total costs and expenses 11,160,628 10,510,603 24,556,455 18,463,755 17,752,042
----------- ----------- ------------ ------------ ------------
EXCESS OF DIRECT REVENUES
OVER EXPENSES $ 98,638 $(63,013) $1,005,328 $ 864,933 $1,081,916
=========== =========== ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE COMBINED FINANCIAL STATEMENTS.
<PAGE>
NET ASSETS ACQUIRED BY
FORELAND REFINING CORPORATION
NOTES TO FINANCIAL STATEMENTS
1 BASIS OF PRESENTATION:
The accompanying financial statements present the assets and liabilities of
certain refineries and transportation equipment (the "Net Assets" or the
"Refineries") which were owned by Petro Source Corporation and subsidiaries
(collectively referred to herein as "Petro Source") and their historical
direct revenues and expenses. Most of the assets are located in Nevada. As
discussed in Note 6, the Net Assets were acquired by Foreland Corporation on
August 12, 1998.
These financial statements present the assets acquired and liabilities
assumed at their historical cost basis, and the direct revenues and expenses
of these assets on the accrual basis. They are not intended to be a
complete presentation of the financial position and results of operations of
Petro Source.
Unaudited Information - The accompanying financial statements as of June 30,
1998 and for the six-month periods ended June 30, 1998 and 1997 are included
herein without audit. In the opinion of management, these financial
statements contain all adjustments (consisting only of normal recurring
items) necessary to present fairly the financial position and the results of
operations for the periods presented. The results of operations as of and
for the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
2 NATURE OF OPERATIONS:
The Refineries produce diesel fuel, residual fuel oil, asphalts, and other
petroleum products; and market and transport such products.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash Equivalents - All highly liquid investments purchased with an original
maturity of three months or less are considered to be cash equivalents.
Concentrations of Credit Risk - Financial instruments which are subject to
concentrations of credit risk consist principally of trade receivables. The
Refineries' policy is to evaluate, prior to shipment, each customer's
financial condition and determine the amount of open line credit to be
extended. It is also the Refineries' policy to obtain adequate letters of
credit or other acceptable security as collateral for amounts in excess of
the open line.
At December 31, 1997, trade receivables were predominantly from customers in
the Intermountain West region of the United States. The trade receivables
were from mining, manufacturing, construction, utility, and refining
companies.
Inventory - Inventories consist principally of hydrocarbons and chemical
supplies which are valued at the lower of cost (first-in, first-out) or
market.
Affiliates - Receivables from and payables to affiliates are to be settled
as part of the closing of the sale of the net assets (see Note 6).
Property, Plant and Equipment - Property, plant and equipment include
refinery, transportation and other equipment, as well as computer equipment,
furniture and fixtures. Such items are stated at cost when purchased.
Depreciation of property, plant and equipment, and amortization of capital
leases are computed using the straight-line method of accounting with
estimated economic lives ranging from 3 to 20 years. Maintenance, repairs,
and minor replacements are charged to expense as incurred.
Deferred Turnaround Charges - Included in other assets are net deferred
turnaround charges which consist of major refurbishing and other upgrades
which extend the life of the refineries totaling $255,821 and $-0- at
December 31, 1997 and 1996, respectively. Deferred turnarounds are
amortized over 3 years.
4 PROPERTY, PLANT AND EQUIPMENT:
1997 1996
------------ ------------
Property, plant and equipment:
Building and refineries $ 7,216,245 $7,216,245
Computer equipment, furniture and fixtures 189,969 174,404
Transportation and other equipment 1,108,502 569,898
Less accumulated depreciation and
amortization (4,831,580) (4,227,122)
------------ ------------
$ 3,683,136 $3,733,425
============ ============
Depreciation expense was approximately $326,926 (unaudited) and $310,420
(unaudited) for the six months ended June 30, 1998 and 1997, respectively,
and $588,922, $590,817, and $622,208 for the years ended December 31, 1997,
1996, and 1995, respectively.
5 COMMITMENTS AND CONTINGENCIES:
Lease Commitments - The Refineries' leasing arrangements consist primarily
of premises, equipment and truck leases that are classified as operating
leases. Rental expense for all operating leases for the periods ended
December 31, 1997, 1996, and 1995 was approximately $597,000, $525,000, and
$746,000, respectively.
Future minimum lease payments under such arrangements are as follows for the
years ending December 31:
Operating
Leases
------------
1998 $ 309,492
1999 61,761
2000 27,854
2001 13,050
2002 13,050
Thereafter 531,025
-----------
$ 956,232
===========
Environmental - The refineries are subject to environmental issues which are
considered routine for its business activities. In the opinion of
management the ultimate liability to the refineries of such issues will not
have a material adverse impact on its financial position. The seller of the
refineries assets has agreed to indemnify the purchaser for all
environmental liabilities (see Note 6).
6 SUBSEQUENT EVENT:
On August 12, 1998, Foreland Corporation completed the purchase from Petro
Source of two refineries and certain transportation equipment used to gather
crude oil and distribute refined products. Foreland Corporation issued
864,000 shares of common stock valued at $3,007,322 and paid $5,000,000
(subject to adjustment) in cash. Foreland also incurred approximately
$51,000 in costs associated with the acquisition. The purchase of the
refinery and transportation assets and related operations was effective for
accounting purposes as of June 1, 1998. The acquisition will be accounted
for as a purchase.
<PAGE>
FORELAND CORPORATION
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
On August 12, 1998, Foreland Corporation completed the purchase from Petro
Source of two refineries and certain transportation equipment used to gather
crude oil and distribute refined products. Foreland Corporation issued
864,000 shares of common stock valued at $3,007,322 and paid $5,000,000
(subject to adjustment) in cash. Foreland also incurred approximately
$51,000 in costs associated with the acquisition. The purchase of the
refinery and transportation assets and related operations was effective for
accounting purposes as of June 1, 1998. The acquisition will be accounted
for as a purchase.
The cash purchase price was funded by a $5,000,000 draw on Foreland's long-term
debt financing arrangement. The Company also sold to the holder of the long-
term debt 2,000 shares of convertible preferred stock for $2,000,000.
The accompanying pro forma combined balance sheet is presented as if the
acquisition had occurred on June 30, 1998. The accompanying pro forma combined
statements of operations are presented as if the acquisition had occurred as of
January 1, 1997.
These statements are not necessarily indicative of future operations or the
actual results that would have occurred had the acquisition been consummated at
the beginning of the periods indicated. Furthermore, the financial information
of the assets acquired include only direct revenue and operating expenses. It
is highly probable Foreland will incur additional indirect expense amounts with
the acquisition which are not reflected in the accompany pro forma financial
information. Such additional indirect costs cannot be estimated. The pro forma
combined financial statements should be read in conjunction with the historical
financial statements and notes thereto of Foreland Corporation and the Net
Assets Acquired by Foreland Refining Corporation, included elsewhere in this
document and in Foreland's annual report on Form 10-K and quarterly report on
Form 10-Q.
<PAGE>
<TABLE>
<CAPTION>
FORELAND CORPORATION
PRO FORMA BALANCE SHEETS
JUNE 30, 1998
(Unaudited)
NET ASSETS PRO FORMA PRO FORMA
FORELAND ACQUIRED ADJUSTMENTS COMBINED
------------ ------------ -------------------------- ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $1,317,994 $ 29,174 $7,000,000(a) $(5,000,000)(b) $ 3,347,168
Accounts receivable:
Trade 147,072 2,852,747 2,999,819
Affiliate 632,816 632,816
Inventory 140,863 1,133,445 1,274,308
Prepaid expenses and other 4,754 77,130 81,884
------------ ------------ ------------ ------------ ------------
Total current assets 1,610,683 4,725,312 7,000,000 (5,000,000) 8,335,995
PROPERTY AND EQUIPMENT, net 7,731,489 3,318,257 2,441,100 (b) 13,490,846
OTHER ASSETS:
Option to acquire Petro
Source assets 571,572 - (571,572)(b) -
Deposits and other 761,346 202,371 963,717
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS $10,675,090 $8,245,940 $7,000,000 $(3,130,472) $22,790,558
============ ============ ============ ============ ============
IABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 576,177 $2,068,146 $ $ $ 2,644,323
Officers' salaries payable 408,889 408,889
Oil and gas sales payable 26,950 26,950
Current portion of
long-term debt 1,076,240 40,000 1,116,240
------------ ------------ ------------ ------------ ------------
Total current liabilities 2,088,256 2,108,146 4,196,402
LONG-TERM DEBT 3,420,222 - 5,000,000(a) 8,420,222
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value;
5,000,000 shares authorized:
1991 convertible preferred stock 40 40
1994 convertible preferred stock 153 153
1995 convertible preferred stock 361 361
1998 convertible preferred stock 2(a) 2
Common stock, $0.001 par value;
50,000,000 shares authorized;
8,548,922 shares issued and
outstanding 8,549 864(b) 9,413
Additional paid-in capital 33,698,965 1,999,998(a) 3,006,458(b) 38,705,421
Net assets 6,137,794 (6,137,794)(b) -
Less note and stock subscriptions
receivable (324,670) (324,670)
Accumulated deficit (28,216,786) (28,216,786)
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 5,166,612 6,137,794 2,000,000 (3,130,472) 10,173,934
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,675,090 $8,245,940 $7,000,000 $(3,130,472) $22,790,558
============ ============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA.
<PAGE>
<TABLE>
<CAPTION>
FORELAND CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
NET ASSETS PRO FORMA PRO FORMA
FORELAND ACQUIRED ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Oil sales $2,213,336 $ $ $2,213,336
Refinery sales 23,874,848 23,874,848
Transportation revenue 1,686,935 1,686,935
Operator and well service revenue 72,782 72,782
Other income, net 14,626 14,626
------------ ------------ ------------ ------------
Total revenue 2,300,744 25,561,783 27,862,527
EXPENSES:
Oil production 907,332 907,332
Oil exploration 1,252,838 1,252,838
Dry hole, abandonment, and impairment costs 578,888 578,888
Cost of refinery and transportation sales 20,407,896 20,407,896
Refining and transportation operating 4,148,559 122,000(c) 4,270,559
expenses
General and administrative 925,287 925,287
Shareholder/investor services 192,664 192,664
Below market stock options 185,371 185,371
Bad debt expense 36,241 36,241
Depreciation, depletion and amortization 1,288,780 1,288,780
------------ ------------ ------------ ------------
Total expenses 5,367,401 24,556,455 122,000 30,045,856
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (3,066,657) 1,005,328 (122,000) (2,183,329)
OTHER INCOME (EXPENSE):
Interest income 113,407 113,407
Interest expense (169,176) (600,000)(d) (769,176)
Loss on sale of oil and gas properties (7,474) (7,474)
------------ ------------ ------------ ------------
NET LOSS (3,129,900) 1,005,328 (722,000) (2,846,572)
PREFERRED STOCK DIVIDENDS:
Converted to common stock (164,029) (164,029)
Accrued (240,000)(e) (240,000)
Imputed (216,000) (216,000)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(3,509,929) $ 1,005,328 $ (962,000) $(3,466,601)
============ ============ ============ ============
NET LOSS PER COMMON SHARE $ (.46) $ (.41)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,656,400 864,000(b) 8,520,400
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA.
<PAGE>
<TABLE>
<CAPTION>
FORELAND CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
NET ASSETS PRO FORMA PRO FORMA
FORELAND ACQUIRED ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE:
Oil and gas sales $ 730,306 $ - $ - $ 730,306
Refinery sales 10,527,013 10,527,013
Transportation revenue 732,253 732,253
Operator and well service revenue - - -
Other income, net 1,104 - 1,104
------------ ------------ ------------ ------------
Total revenue 731,410 11,259,266 11,990,676
EXPENSES:
Oil and gas production 891,624 891,624
Oil and gas exploration 476,267 476,267
Well service costs 2,465 2,465
Dry hole and abandonment costs 490,465 490,465
Cost of refinery and transportation sales - 9,124,025 9,124,025
Refining and transportation operating - 2,036,603 61,000(c) 2,097,603
expenses
General and administrative 369,894 369,894
Shareholder/investor services 70,979 70,979
Compensation - below market options 12,344 12,344
Depreciation, depletion and amortization 379,280 379,280
------------ ------------ ------------ ------------
Total expenses 2,693,318 11,160,628 61,000 13,914,946
------------ ------------ ------------ ------------
OPERATING LOSS (1,961,908) 98,638 (61,000) (1,924,270)
OTHER INCOME (EXPENSE):
Gain (loss) on sale of asset 3,460 3,460
Interest income 81,988 81,988
Interest expense (650,521) - (300,000)(d) (950,521)
------------ ------------ ------------ ------------
NET LOSS (2,526,981) 98,638 (361,000) (2,789,343)
PREFERRED STOCK DIVIDENDS (120,000)(e) (120,000)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(2,526,981) $ 98,638 $(481,000) $(2,909,343)
============ ============ ============ ============
NET LOSS PER COMMON SHARE $ (.30) $ (.31)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 8,508,800 864,000(b) 9,372,800
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES FOR PRO FORMA.
<PAGE>
FORELAND CORPORATION
NOTES TO PRO FORMA
a.To record the issuance of $5,000,000 in long-term debt and $2,000,000 in
convertible preferred stock.
b.To record the acquisition of the net assets for cash of $5,000,000,
application of the option price of $571,572, and issuance of 864,000
additional shares of common stock valued at $3,007,322.
c.To record additional depreciation expense based upon allocation of the
purchase price.
d.To record interest expense related to issuance of additional long-term debt.
e.To record accrued dividends on the 1998 convertible preferred stock at 12%
per annum.
WHEN RECORDED AND/OR
FILED RETURN TO:
Peter O. Hansen, Esq.
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF RENTS, PROFITS AND PROCEEDS,
FINANCING STATEMENT AND FIXTURE FILING
from
FORELAND CORPORATION
(Taxpayer I.D. No. 87-0422812),
FORELAND REFINING CORPORATION
(Taxpayer I.D. No. 74-2881250)
and
FORELAND ASSET CORPORATION
(Taxpayer I.D. No. 84-1469802),
AS DEBTORS
to
FIRST AMERICAN TITLE COMPANY OF NEVADA, AS TRUSTEE
and to and for the benefit of
ENERGY INCOME FUND, L.P., AS SECURED PARTY
(Taxpayer I.D. No. 04-3309082)
Dated as of August 11, 1998
THIS INSTRUMENT SHALL BE GOVERNED BY THE PROVISIONS OF SECTIONS 106.300 THROUGH
106.400 OF THE NEVADA REVISED STATUTES.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
EXHIBIT "A" CONTAINS A LEGAL DESCRIPTION OF THE REAL ESTATE CONCERNED. DEBTORS
HAVE AN INTEREST OF RECORD IN THE REAL ESTATE. SOME OF THE PERSONAL PROPERTY
CONSTITUTING A PORTION OF THE COLLATERAL IS OR IS TO BECOME FIXTURES RELATED TO
THE REAL ESTATE.
THIS INSTRUMENT COVERS FIXTURES.
THIS INSTRUMENT IS TO BE RECORDED IN THE REAL ESTATE RECORDS OF THE COUNTY
RECORDER IN EACH COUNTY WHERE THE REAL ESTATE IS LOCATED.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY ALLOW
SECURED PARTY OR THE TRUSTEE TO TAKE THE COLLATERAL AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION.
<PAGE>
DEED OF TRUST,
SECURITY AGREEMENT,
ASSIGNMENT OF RENTS, PROFITS AND PROCEEDS,
FINANCING STATEMENT
AND FIXTURE FILING
This Deed of Trust, Security Agreement, Assignment of Rents, Profits
and Proceeds, Financing Statement and Fixture Filing (this "Instrument"), dated
as of August 11, 1998, is from FORELAND CORPORATION, a Nevada corporation
("Foreland Corp.") FORELAND REFINING CORPORATION, a Texas corporation ("Foreland
Refining") and FORELAND ASSET CORPORATION, a Nevada corporation ("Foreland
Asset") (Foreland Corp., Foreland Refining and Foreland Asset shall be referred
to collectively as "Debtors"), all with an address of 12596 West Bayaud,
Suite 300,
Lakewood, Colorado 80228, to FIRST AMERICAN TRUST COMPANY OF NEVADA, a Nevada
corporation ("Trustee"), and to and for the benefit of ENERGY INCOME FUND, L.P.,
a Delaware limited partnership ("Secured Party"), with an address of 136 Dwight
Road, Longmeadow, Massachusetts 01106.
COLLATERAL
All of the property described in paragraphs 1 through 6 below is herein
collectively called the "Collateral":
1. All right, title and interest of Debtors in and to all refining,
fractionating, treatment, storage, marketing, purchase, sale,
transportation, exchange, manufacturing and processing facilities and the
property, interests and rights related thereto or used or held in connection
therewith, including without limitation, the entire interest in and to
(a) the crude oil refinery/asphalt manufacturing plant and related
facilities located in part in the E/2 SE/4 of Section 24, T. 9 N., R. 56 E.,
M.D.M., County of Nye, State of Nevada, and sometimes referred to as the
Eagle Springs Refinery, and (b) the crude oil and/or transmix refinery
facility producing diesel fuel, residual fuel oil and/or gasoline and
related facilities located in part on 63 acres within or adjacent to the
Tonopah Airport, County of Nye, State of Nevada (collectively, the "Refinery
Facilities"), and the accounts, inventory, goods, contract rights and
general intangibles relating thereto or to the operation thereof; including
without limitation, the following:
(i) The entire estates in and to the leases and rights-of-way
described in Exhibit "A" (collectively, the "Leases") and in and to the
land described in Exhibit "A" or described in the Leases (collectively,
the "Land"); together with all property, interests and rights of
whatever kind or character (whether now owned or hereafter acquired by
operation of law or otherwise) in and to all presently existing and
hereafter created leases, licenses, subleases, sublicenses, permits,
easements, rights-of-way, servitudes, franchises, grants, certificates,
immunities and privileges and other rights to use the surface or
subsurface of the Land or attributable to the Refining Facilities,
arising in connection therewith or otherwise relating thereto or used
or held in connection therewith, and any and all other right, title and
interest of Debtors of whatever kind or character (whether now owned or
hereafter acquired by operation of law or otherwise) in, to and under
or that covers, affects or otherwise relates to the Land, the Leases or
the Refinery Facilities or to any of the estates, property, interests
or rights described or referred to above or herein;
(ii) The entire interests and rights created by the purchase,
sales, transporting, refining and processing contracts and agreements
described on Exhibit "B" attached hereto (collectively, the
"Contracts"); together with all property, interests and rights of
whatever kind or character (whether now owned or hereafter acquired by
operation of law or otherwise) in and to all presently existing and
hereafter created contracts and agreements relating to the refining,
fractionating, treatment, storage, marketing, purchase, sale,
transportation, exchange, manufacture or processing of oil, gas,
natural gas, natural gas liquids, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and other liquid and gaseous
hydrocarbons of whatever kind or character and in whatever form or
phase, and all products, by-products and all other substances derived
therefrom or the processing thereof (collectively, "Hydrocarbons"),
covering, affecting or otherwise relating to the Refining Facilities or
attributable thereto or arising in connection therewith or otherwise
relating thereto or used or held in connection therewith or the
operation thereof;
(iii) The entire interests and rights in the units, toners,
motors, pumps exchangers, heaters, drums, joints, tanks and tank farms,
liners, power lines, water ponds and wells, fractionators, racks,
generators, backhoes, buildings, telephones and communication systems,
copiers, monitors, control processing units and computers, welders,
laboratory equipment, tracks, trailers, tractors, wash systems, stills,
columns, steppers, accumulators, boilers, skids, and other items of
equipment and property described on Exhibit "C" attached hereto
(collectively, the "Equipment"); together with all property, interests
and rights of whatever kind or character (whether now owned or
hereafter acquired by operation of law or otherwise) in, to and under
all facilities, buildings, structures, materials, supplies, equipment,
fixtures, improvements and other property (including without
limitation, all surface and subsurface machinery and all lines and
pipelines, pipe, piping, line pipe and pipe connections, fittings,
flanges, engagers, meters, valves, fittings, welds or interconnects,
tanks and storage facilities and units, shipping facilities, terminals,
buildings, control equipment, regulators, drips, meters and metering
stations, pumps and pump equipment, cracking units and cracking
equipment, fractionators and fractionator equipment, condensers and
condenser equipment, scrubbers and scrubber equipment, chitters and
chitter equipment, exchangers and exchanger equipment, accumulators and
accumulator equipment, economizers and economizer equipment,
stabilizers and stabilizer equipment, collectors and collector
equipment, pumps, pumphouses and pumping stations, treaters and
treating equipment, dehydrators and dehydration equipment, separators
and separation equipment, and processors and processing equipment) now
or hereafter located in, on, under, through or used or held for use in
connection with the Refining Facilities or the operation thereof;
(iv) The entire interests and rights created by the permits,
licenses, orders, franchises, certificates, similar authorizations and
related instruments and rights described on Exhibit "D" attached hereto
(collectively, the "Permits") together with all property, interests and
rights of whatever kind or character (whether now owned or hereafter
acquired by operation of law or otherwise) in, to and under all
licenses, technology, franchises, servitudes, grants, secrets,
inventions, designs, patents, trademarks, trade names, copyrights,
permits, immunities and privileges attributable to the Refining
Facilities, or arising or otherwise used or held in connection
therewith or the operation thereof;
(v) All of the accounts, contract rights and general intangibles
now or hereafter arising in connection with the refining,
fractionating, treatment, storage, marketing, purchase, sale,
transportation, exchange, manufacturing and processing of Hydrocarbons
in, on, under, through or by the Refining Facilities;
(vi) All inventory and goods relating to or used or held for use
in connection with the Refining Facilities, including without
limitation, Hydrocarbons at any time on or in the Refining Facilities
or in storage (whether in storage on or adjacent to the Land or other
land wherever located);
(vii) All water and water rights, timber, crops and mineral
interests relating or pertaining to the Land or the Refining Facilities
or used or held in connection therewith;
(viii) All technical, scientific, engineering, accounting,
legal and other data and information and all plans, specifications,
tests, reports and studies relating or otherwise used or held in
connection with the Refining Facilities, and all rights therein and
thereto in the possession of Debtors or to which Debtors have access or
have any rights therein concerning the estates, property, interests or
rights described or referred to above or herein, and all magnetic media
and computer data relating to the estates, property, interests or
rights described or referred to above or herein; and
(ix) All property, rights and interests (present and future,
personal and real, tangible and intangible) of Debtors (whether now
owned or hereafter acquired by operation of law or otherwise), or in
which Debtors otherwise (whether now or hereafter) have any rights,
located in, on, under, affixed, allocated or attributed to or obtained
or used in connection with the Refining Facilities, including without
limitation, all fixtures, accounts, goods, inventory, instruments,
equipment, chattel paper, documents and general intangibles (as such
terms are defined in the Uniform Commercial Code);
2. All rights of Debtors to liens and security interests securing
payment of proceeds from the sales from the estates, property, interests or
rights described or referred to above or herein;
3. All of Debtors' right, title and interest, whether now owned or
hereafter acquired, in and to (a) that certain Escrow Agreement, dated as
of January 6, 1998, among Foreland Corp. and Eagle Springs Production
Limited-Liability Company, as Borrower, Secured Party, as Lender, and
Peoples Bank, Holyoke, Massachusetts, as Escrow Agent, as amended and as may
be amended from time to time, (b) all funds deposited and held by the Escrow
Agent in the escrow account established pursuant to such Escrow Agreement,
and (c) all distributions and proceeds therefrom and thereof;
4. All renewals, extensions and restatements of, modifications,
changes, amendments and supplements to, and substitutions for the estates,
property, interests and rights described or referred to in paragraphs 1
through 3 above, and all additions and accessions thereto;
5. All of the rights, privileges, benefits, hereditaments and
appurtenances in any way belonging, incidental or appertaining to the
estates, property, interests and rights described or referred to in
paragraphs 1 through 4 above; and
6. All of the proceeds and products of the estates, property,
interests and rights described or referred to in paragraphs 1 through 5
above, including without limitation, condemnation awards and the proceeds of
any and all insurance policies (including title insurance policies as well
as other types of insurance policies) covering all or any part of said
estates, property, interests or rights and, to the extent they may
constitute proceeds, instruments, accounts, securities, general intangibles,
contract rights, goods, documents, money and inventory.
GRANTING CLAUSES
In consideration of ten dollars and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Debtors, and the matters hereinafter set forth, Debtors hereby irrevocably:
A. Real Property. Grant, bargain, sell, assign, transfer and convey
to Trustee, with POWER OF SALE, for the benefit of Secured Party, that part
of the Collateral that is real property (including any fixtures that are
real property under applicable state law), subject to the assignment made
under paragraph C below; TO HAVE AND TO HOLD all of the Collateral that is
real property (including any fixtures that are real property under
applicable state law), together with all of the rights, privileges,
benefits, hereditaments and appurtenances in any way belonging, incidental
or pertaining thereto, to Trustee and its successors and assigns, forever,
IN TRUST, NEVERTHELESS, for the security and benefit of Secured Party and
its successors and assigns, subject to all of the terms, conditions,
covenants, agreements and trusts herein set forth;
B. Personal Property. Grant to Secured Party a security interest in
that part of the Collateral that is personal property (including any
fixtures that are personal property under applicable state law); and
C. Assignment of Rents. Absolutely assign, grant and transfer to
Secured Party all of the rents, royalties, issues, profits and income
("Rents") relating, allocated or attributed to any of the Collateral or any
other interest of Debtors (whether now owned or hereafter acquired by
operation of law or otherwise) in, to and under or that covers, affects or
otherwise relates to the Refining Facilities or to any of the estates,
property rights or other interests described or referred to above or herein,
together with all of the proceeds, thereof and therefrom and payments in
lieu thereof.
ARTICLE I
OBLIGATIONS
Section 1.1 Obligations Secured. This Instrument is executed,
acknowledged and delivered by Debtors to secure and enforce the following
indebtedness, liabilities and obligations (the "Obligations"):
A. Notes. All indebtedness (including principal, interest, fees
and penalties), liabilities and obligations under or pursuant to the
following described notes, and any renewals, extensions or restatements
thereof, modifications, changes, amendments or supplements thereto and
substitutions therefor (collectively, the "Notes"):
1. Refinancing Note, dated as of January 6, 1998, in the
maximum principal amount of $680,000 made by Foreland Corp. and Eagle
Springs Production Limited Liability Company ("Eagle Springs") and
payable to the order of Secured Party on or before January 1, 2002,
together with interest until maturity or default at the rate of 12% per
annum (the "Standard Interest Rate"), and after maturity or default at
the rate of 15% per annum (the "Default Rate"), as amended and
supplemented by First Allonge to Refinancing Note, dated as of August
10, 1998, and executed by Foreland Corp., Eagle Springs, Foreland
Refining, Foreland Asset, Foreland Asphalt Corporation, a Utah
corporation ("Foreland Asphalt") and Petrosource Transportation, a Utah
corporation ("Transportation") (collectively, the "Foreland Group"),
which added Foreland Refining, Foreland Asset, Foreland Asphalt and
Transportation as makers and obligors and decreased the principal
amount to $674,279.34;
2. Acquisition Note, dated as of January 6, 1998, in the
maximum principal amount of $2,327,000 made by Foreland Corp. and Eagle
Springs and payable to the order of Secured Party on or before January
1, 2002, together with interest until maturity at the Standard Interest
Rate, and after maturity or default at the Default Rate, as amended and
supplemented by First Allonge to Acquisition Note, dated as of
August 10, 1998, and executed by the Foreland Group, which added
Foreland Refining, Foreland Asset, Foreland Asphalt and Transportation
as makers and obligors and increased the principal amount to
$9,050,000.00;
3. Development Note, dated as of January 6, 1998, in the
maximum principal amount of $13,893,000 made by Foreland Corp. and
Eagle Springs and payable to the order of Secured Party on or before
January 1, 2002, together with interest until maturity or default at
the Standard Interest Rate, and after maturity or default at the
Default Rate, as amended and supplemented by First Allonge to
Development Note, dated as of August 10, 1998 and executed by the
Foreland Group, which added Foreland Refining, Foreland Asset, Foreland
Asphalt and Transportation as makers and obligors and decreased the
principal amount to $7,175,720.66;
B. Loan Agreement. All indebtedness, liabilities and
obligations of whatever kind or character, now existing or hereafter created
or arising under or pursuant to that certain Financing Agreement (the "Loan
Agreement"), dated as of January 6, 1998, among Foreland Corp., Eagle
Springs and Secured Party, as amended by First Amendment to Financing
Agreement, dated as of August 10, 1998, among the Foreland Group and Secured
Party, as amended and as may be amended from time to time;
C. This Instrument. All indebtedness, liabilities and
obligations of Debtors to Secured Party of whatever kind or character, now
existing or hereafter created or arising under or pursuant to this
Instrument, including, without limitation, those arising under or pursuant
to the representations, warranties, covenants and indemnities contained
herein and any and all amounts advanced to protect the liens and security
interests herein granted and all reasonable attorneys fees, court costs, and
expenses of whatever kind or character now existing or hereafter created or
arising, incident thereto or to the collection of the indebtedness,
liabilities and obligations hereby secured and enforcement of the liens and
security interests herein granted and created;
D. Other Obligations. All other indebtedness, liabilities and
obligations of Debtors or the other members of the Foreland Group to Secured
Party of whatever kind or character now existing or hereafter created or
arising, whether fixed, absolute or contingent, direct or indirect, primary
or secondary, joint, several or joint and several, due or to become due, and
however evidenced whether by note, open account, overdraft, endorsement,
surety agreement, guarantee or otherwise, it being contemplated that Debtors
and the other members of the Foreland Group may hereafter become indebted to
Secured Party in such further sum or sums; and
E. Renewals, Extensions and Amendments. All indebtedness,
liabilities and obligations of whatever kind or character, now existing or
hereafter created or arising under or pursuant to all renewals, extensions
and restatements of, modifications, changes, amendments and supplements to
and substitutions for, all or any part of the foregoing.
Section 1.2 Maximum Indebtedness Secured. This Instrument shall be
governed by the provisions of Sections 106.300 through 106.400 of the Nevada
Revised Statutes, as may be amended from time to time. Debtors, Secured Party
and Trustee agree and acknowledge that Secured Party may elect to make
additional advances under the terms of the Notes, the Loan Agreement or
otherwise, and that any such future advances shall be subject to, and secured
by, this Instrument. Should the Obligations decrease or increase pursuant to
the terms of the Notes, the Loan Agreement or otherwise, at any time or from
time to time, this Instrument shall retain its priority position of record until
the termination of the Loan Agreement and until full, final and complete payment
of all the Obligations. The aggregate unpaid principal amount of the
Obligations outstanding at any particular time (after having given effect to all
advances and all repayments made prior to such time) which is secured by the
Collateral shall not aggregate in excess of One-Hundred Million Dollars
($100,000,000). Such amount does not in any way imply that Secured Party is
obligated to make any future advances to Debtors at any time unless specifically
so provided in the Loan Agreement or any other loan document.
Section 1.3 Recourse. Except as otherwise provided herein, in no
event shall Debtors have any personal liability for payment of principal and
interest on the Notes. Secured Party shall look solely to the Collateral for
the payment of such principal and interest and shall not seek a deficiency or
other personal judgment against Debtors for such principal and interest in the
event that any sale of the Collateral shall be insufficient to satisfy the
Notes. Nothing herein contained shall, however, impair any right, remedy or
security of Secured Party with respect to the Collateral under this Instrument,
the Notes, the Loan Agreement or any other documents or instruments evidencing,
securing or relating to the Obligations, nor limit Debtors' obligations to
perform any of Debtors' other obligations under this Instrument, the Notes, the
Loan Agreement or any other documents or instruments evidencing, securing or
relating to the Obligations, including without limitation, Debtors' obligation
to indemnify Secured Party as set forth herein and in the Loan Agreement.
Notwithstanding the foregoing limitation of recourse, Debtors will remain fully
liable for:
A. Fraud, breach of trust, or any material misrepresentation by
Debtors in this Instrument, the Notes, the Loan Agreement or any other
documents or instruments evidencing, securing or relating to any of the
Obligations;
B. Waste of a material nature to any part of the Collateral caused
by Debtors' gross negligence or willful and wanton neglect or abuse of the
Collateral or, with respect to Collateral that is not operated by a member
of the Foreland Group or an affiliated thereof, failure to exert reasonable
control appropriate for an owner that is not also the operator;
C. Failure to pay taxes, insurance, assessments, charges for labor
or materials, or other charges, fees or assessments that can create or
result in liens on any portion of the Collateral;
D. Any breaches of warranty or defects of title to the Collateral;
E. Any breach of a warranty or representation contained in this
Instrument or any other instrument securing any of the Obligations, failure
to perform any covenant or other agreement contained in this Instrument or
any other instrument securing the Obligations, or any indemnity contained in
this Instrument or any other instrument evidencing, securing or otherwise
relating to any of the Obligations;
F. Any attempt to communicate in any manner with the purchasers of
Hydrocarbons or other products from the Collateral after the delivery to
such purchasers of a notice directing payments to be made directly to
Secured Party (as set forth in Section 3.1), in an attempt to hinder or
interfere with the rights of Secured Party;
G. The return of, or reimbursement for, all monies received by
Debtors from the purchasers of production for monies attributable to
production after receipt by any such purchaser of a notice directing
payments to be made directly to Secured Party (as set forth in Section 3.1);
H. Any attempt to hinder or interfere with the foreclosure of or
other realization on, the Collateral (whether by judicial action, power of
sale, trustee's sale or otherwise), including without limitation the filing
of a lis pendens, the initiation of any lawsuit or the requesting of
injunctive relief from any court or tribunal, having the effect of hindering
or delaying the exercise by Secured Party or Trustee of any right or remedy
under this Instrument or any other instrument evidencing, securing or
otherwise relating to any of the Obligations; and
I. After an Event of Default (as hereinafter defined), Debtors
shall fail or refuse to execute and deliver to Secured Party any instrument
reasonably requested by Secured Party and prepared at Debtors' expense,
which is necessary to fully vest title to the Collateral in Secured Party or
the purchaser(s) of all or part of the Collateral pursuant to any sale as
provided for in this Instrument or any other instrument securing any of the
Obligations.
Debtors shall be fully and personally liable for all attorneys'
fees and costs and expenses incurred by Secured Party arising out of any of
the foregoing paragraphs A through I.
For purposes of this Section 1.3 only, the term "Collateral" shall
mean the Collateral under this Instrument and all property rights and
interests (present and future, personal and real, tangible and intangible)
that now or hereafter constitute security for any of the Obligations under
any documents or instruments, evidencing, securing or relating to the
Obligations.
ARTICLE II
WARRANTIES, REPRESENTATIONS, COVENANTS
AND INDEMNITIES
Section 2.1 Representations and Warranties. Debtors warrant and
represent as follows:
A. Power and Authority. Debtors have the full power and authority
to grant, bargain, sell, assign and convey the Collateral as provided
herein.
B. Title. Debtors are the lawful owners of the entire legal,
equitable and beneficial title to the Collateral; and Debtors have good and
marketable title to the Leases, free and clear of all burdens, charges,
liens, security interests, encumbrances, agreements, contracts, assignments
and other matters. The Leases are valid and subsisting and are in full
force and effect. All rents and other amounts due and payable under the
Leases, have been paid. All operations on the Leases and the Land have been
in conformity with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction. Debtors warrant and will
forever defend the title to the Collateral against the claims of all persons
claiming or attempting to claim the same or any part thereof.
C. Operations. The Collateral has been maintained, operated and
developed in a good and workmanlike manner and in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
federal, state, tribal and local governmental bodies, authorities and
agencies and in conformity in all material respects with the provisions of
all leases, licenses, subleases, sublicenses, permits, easements, rights-of-
way, servitudes, franchises, grants, certificates and authorizations or
other contracts and agreements comprising a part of the Collateral.
D. Condition of Personal Property. The inventory, equipment,
fixtures and other tangible personal property and fixtures forming a part of
the Collateral (including, without limitation, the Equipment), are in good
repair and condition and are adequate for the normal operation of the
Collateral in accordance with prudent industry standards, and the Collateral
includes all equipment necessary or advisable for the proper and efficient
operation of the Refinery Facilities. All of such Collateral is located on
the Land.
E. Consents and Preferential Rights to Purchase. There are no
preferential rights to purchase all or any portion of the Collateral, and
there are no rights of third parties to consent to the transfer (including
transfer upon foreclosure of the liens and security interests created by
this Instrument or any transfer or deed-in-lieu thereof) of all or any
portion of the Collateral, other than those that have been previously
obtained.
F. Contracts and Agreements. The Contracts include all operating
agreements, equipment leases, production sales, purchase, exchange or
processing agreements, transportation agreements, disposal agreements, and
other contracts and agreements that cover, affect or otherwise relate to the
Collateral or the Refinery Facilities or to operations thereon, or the
refining, fractionating, treatment, marketing, purchase, sale,
transportation, exchange, manufacturing or processing of Hydrocarbons. All
of the Contracts are in full force and effect, Debtors and the Refining
Facilities are in full compliance therewith and neither Debtors nor any
predecessor in interest have been advised of any default thereunder.
Debtors have not received prepayments for any Hydrocarbons which would be
included in the Collateral. All Contracts under which Debtors are refining,
fractionating, storing, marketing, purchasing, selling, transporting,
exchanging, manufacturing, processing or otherwise dealing with Hydrocarbons
in, on, under, through or by the Refining Facilities or in connection
therewith or the operation thereof contain terms and provisions and are for
contract terms that are customary in the industry.
G. Permits. The Permits include all permits, licenses, orders,
franchises, certificates and authorizations necessary or appropriate for the
operation of the Refining Facilities in conformity with all laws, rules,
regulation and orders of all federal, state, tribal and local governmental
bodies, authorities and agencies and the rights of third parties. All of
the Permits are in full force and effect, Debtors and the Refining
Facilities are in full compliance therewith and neither Debtors nor any
predecessor in interest have been advised of any violation thereof or
default thereunder.
H. Taxes. All ad valorem, property, production, severance, excise
and similar taxes and assessments relating to the Collateral that have
become due and payable have been properly and timely paid.
I. Duly Qualified. Debtors are duly qualified to own, hold and
operate all of the property, interest and rights included within the
Collateral, and to conduct their business as contemplated and to otherwise
operate the Refinery Facilities.
J. Environmental. (1) The Collateral is, and, except as
previously disclosed to Secured Party in writing, to the best of Debtors'
knowledge, at all times has been, operated in compliance with all applicable
Environmental Laws (as hereinafter defined); and, except as previously
disclosed to Secured Party in writing, to the best of Debtors' knowledge, no
condition exists with respect to the Collateral or other property owned or
operated by Debtors or any affiliate of or party related to Debtors that
would or could reasonably be expected to subject Debtors, any affiliate of
or party related to Debtors, or Secured Party to any damages (including
without limitation, actual, consequential, exemplary and punitive damages),
material liability (absolute or contingent, determined or determinable),
penalties, injunctive relief or cleanup costs under any applicable
Environmental Laws, or that require or could reasonably be expected to
require cleanup, removal, remedial action or other response by Debtors, any
affiliate of or party related to Debtors, or Secured Party pursuant to any
applicable Environmental Laws.
(2) Debtors have not received and, to the best of Debtors'
knowledge, none of their affiliates have received, and none of Debtors' or
their affiliates' or related parties' predecessors in title to the
Collateral have received, any notice from a governmental agency asserting or
alleging a violation of any Environmental Laws as they relate to the
Collateral.
(3) There are no pending or threatened suits, actions, claims
or proceedings against Debtors or their affiliates or related parties or, to
the best of Debtors' knowledge, Debtors' or their affiliates' predecessors
in title, arising from or related to, directly or indirectly, any
Environmental Laws as they relate to the Collateral.
(4) Neither Debtors, any affiliate of or party related to
Debtors, any part of the Collateral, nor, to the best of Debtors' knowledge,
Debtors' or any affiliate's or related parties' predecessors are subject to
any judgment, decree, order or citation related to or arising out of any
Environmental Laws, and neither Debtors nor any affiliate or party related
to Debtors have been named or listed as a potentially responsible party by
any governmental or other entity in a matter arising under or relating,
directly or indirectly, to any Environmental Laws.
(5) Debtors have obtained or caused to be obtained all
permits, licenses, and approvals required under all Environmental Laws to
operate the Collateral.
(6) Except as previously disclosed to Secured Party in
writing, there are not now, nor to the best of Debtors' knowledge have there
ever been, Hazardous Materials (as hereinafter defined) discharged, leaked,
spilled or released in, on, to, from or at the Collateral or other
properties owned or operated by Debtors or any of their affiliates or
stored, treated, or recycled at or in tanks or other facilities thereon or
related thereto which give rise or could reasonably be expected to give rise
to material liability under any Environmental Laws.
(7) The use which Debtors make and intend to make of the
Collateral will not result in: (a) the use or storage of any Hazardous
Materials on, in or in connection with the Collateral, or disposal of any
Hazardous Materials from the Collateral except in compliance with all
applicable Environmental Laws, or (b) the treatment, processing, discharge
or release of any Hazardous Materials on, in, to or from the Collateral
except in compliance with all applicable Environmental Laws.
(8) There are no underground storage tanks, surface
impoundments, or wastewater injection wells located on or in the Collateral.
As used herein, the term "Environmental Laws" shall mean any one
or more of the following: (i) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq.
("CERCLA"); (ii) the Resource Conservation and Recovery Act, as amended by
the Hazardous and Solid Waste Amendment of 1984, 42 U.S.C. Section 6901
et seq. ("RCRA"); (iii) the Clean Air Act, 42 U.S.C. Section 7401 et seq.;
(iv) the Federal Water Pollution Control Act, 33 U.S.C. Section 1251
et seq.; (v) the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq.; (vi) the Federal Safe Drinking Water Act, 42 U.S.C.
SectionSection 300f to 300j-11; (vii) the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section 1101 et seq.; (viii) the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; and
(ix) all other foreign, federal, state, tribal and local laws (whether
common or statutory), rules, regulations, consent agreements, compliance
schedules, and orders directly and/or indirectly relating to public health
and safety, air pollution, water pollution, noise control, wetlands, oceans,
waterways, and/or the presence, use, generation, manufacture,
transportation, processing, treatment, handling, discharge, release,
disposal, or recovery of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or materials and/or underground storage tanks,
including, without limitation, all rules, regulations and orders of all
state and local governmental bodies, authorities and agencies pertaining or
relating to the exploration, development, regulation and conservation of oil
and gas resources, as each of the foregoing laws, rules, regulations,
consent agreements, compliance schedules and orders may be enacted, amended,
supplemented, or reauthorized from time to time.
As used herein, the term "Hazardous Materials" shall mean any one
or more of the following substances, wastes and materials: (i) any
substance, waste or material defined as a "hazardous substance," "hazardous
material," "hazardous waste," "pollutant," "contaminant," "toxic material,"
or "toxic substance," in any of the applicable Environmental Laws, or in the
standards, criteria, rules and/or regulations promulgated pursuant to any of
said Environmental Laws (including without limitation Hydrocarbons); and
(ii) any substance, waste or material, the presence of which requires
investigation or remediation under any Environmental Laws.
K. Non-Foreign Person Status. Debtors are not "foreign persons"
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"), Sections 1445 and 7701; that is, Debtors are not nonresident
aliens, foreign corporations, foreign partnerships, foreign trusts or
foreign estates as those terms are defined in the Code and any regulations
promulgated thereunder.
L. Utilities and Roads. The Refinery Facilities are adequately
served by telephone, electric, gas, storm and sanitary sewer, water and
other utilities required for the present use thereof, all licenses,
agreements, easements, rights-of-way, streets and alleys necessary to serve
the Refinery Facilities for such use have been completed and are
serviceable.
M. Litigation. There are no actions, suits, proceedings or
governmental investigations or inquiries pending or, to the knowledge of
Debtors, threatened against any Debtor or any other member of the Foreland
Group or any of their affiliates or the Collateral which do or may
reasonably be expected to materially affect the Collateral or otherwise
relate to Debtors' title thereto.
N. Location of Debtor, Collateral, and Records. Debtors' chief
executive offices and principal place of business and the office where the
records concerning the Collateral are kept is located at 12596 West Bayaud,
Suite 300, Lakewood, Colorado 80228. The Collateral is located at the
Refinery Facilities in Nye County, Nevada.
Section 2.2 Covenants. Debtors covenant and agree as follows:
A. Obligations. Debtors and the other members of the Foreland
Group shall pay when due and perform the Obligations in accordance with the
terms thereof and hereof.
B. Recording and Filing. Debtors shall (1) promptly and at
Debtors' own expense, file or cause to be filed in such offices, at such
times and as often as may be necessary, this Instrument and every other
instrument in addition or supplemental hereto, including applicable
financing statements, as may be necessary to create, perfect, maintain and
preserve the first priority of the liens and security interests intended to
be created hereby and the rights and remedies of Secured Party and Trustee
hereunder; (2) promptly furnish to Secured Party evidence satisfactory to
Secured Party of all such filings; and (3) otherwise do all things necessary
or expedient to be done effectively to create, perfect, maintain and
preserve the priority of the liens and security interests intended to be
created hereby as a first lien on real property and fixtures and a first
priority security interest in personal property and fixtures.
C. Modifications and Dispositions. Without the prior written
consent of Secured Party, Debtors shall not (1) amend, modify or otherwise
revise any lease, license or other agreement included within the Collateral,
including, without limitation, the Leases, the Contracts and the Permits;
(2) release, surrender, abandon or forfeit the Collateral or any part
thereof, including, without limitation, the Equipment; (3) sell, convey,
assign, lease, sublease, alienate, mortgage or grant security interests in
or otherwise dispose of or encumber the Collateral or any part thereof,
except to the extent explicitly permitted by the Loan Agreement and except
sales of Hydrocarbons in the ordinary course of Debtors' business and for
fair consideration, and except for the liens and security interests created
by this Instrument and liens for taxes, assessments and governmental charges
not delinquent; or (4) consent to, permit or authorize any such act by
another party with respect to the Land, the Collateral or any part thereof.
D. Maintenance of Collateral. Debtors shall, at Debtors' own
expense, (1) keep in full force and effect all of the Leases and all other
leases, licenses, subleases, sublicenses, permits, easements, rights-of-way,
servitudes, franchises, grants, certificates, immunities and privileges
necessary or appropriate for the proper operation of such Leases and the
Refinery Facilities by the proper payment of all rentals and other amounts
due thereunder and the proper performance of all obligations and other acts
required thereunder; (2) keep in full force and effect all of the Permits
and all other permits, licenses, orders, franchises, certificates and
authorizations necessary or appropriate for the proper and legal operation
of the Refinery Facilities; (3) keep in full force and effect all of the
Contracts and all other contracts and agreements relating to the refining,
fractionating, treatment, storage, marketing, purchase, sale,
transportation, exchange, manufacture or processing of Hydrocarbons, and
keep and perform all obligations thereunder; (4) cause the Collateral to be
properly maintained, developed and continuously operated in a good and
workmanlike manner as a prudent operator would in accordance with good
industry practice and all applicable federal, state, tribal and local laws,
rules, regulations and orders; (5) pay or cause to be paid when due all
expenses incurred in connection with such maintenance, development,
operation and protection of the Collateral; (6) keep all goods, including
equipment, inventory and fixtures included in the Collateral in good and
effective repair, working order and operating condition and make all
repairs, renewals, replacements, substitutions, additions and improvements
thereto and thereof as are necessary and proper; (7) comply with all
applicable laws, rules, regulations and orders of all federal, state, tribal
and local governmental bodies, authorities and agencies in all material
respects; (8) permit Secured Party, and its respective agents, employees,
contractors, designees and consultants, at reasonable times and upon prior
notice to enter upon the Collateral for the purpose of investigating and
inspecting the condition and operation of the Collateral, and do all things
necessary or proper to enable Secured Party to exercise this right whenever
Secured Party so desires; and (9) do all other things necessary to keep
unimpaired Secured Party's and Trustee's interests in the Collateral.
E. Notification of Breach. Debtors shall promptly notify
Secured Party (1) if any representation or warranty of Debtors contained in
this Agreement is discovered to be or becomes untrue, or (2) if Debtors fail
to perform or comply with any covenant or agreement contained in this
Agreement or it is reasonably anticipated that Debtors will be unable to
perform or comply with any covenant or agreement contained in this
Agreement. Debtors shall cause all the representations and warranties of
Debtors contained in this Agreement to be true and correct in all material
respects from time to time and all times.
F. Defense of Title. If the title or interest of Debtors,
Trustee or Secured Party to the Collateral or any part thereof, or the lien
or encumbrance created by this Instrument, or the rights or powers of
Secured Party or Trustee hereunder, shall be attacked, either directly or
indirectly, or if any legal proceedings are commenced against Debtors,
Secured Party or Trustee or the Collateral, Debtors shall promptly give
written notice thereof to Secured Party and at Debtors' own expense shall
take all reasonable steps diligently to defend against any such attack or
proceedings, employing attorneys reasonably acceptable to Secured Party.
Secured Party and Trustee may take such independent action in connection
therewith as they may in their reasonable discretion deem advisable, and all
costs and expenses, including without limitation, attorneys' fees and legal
expenses, incurred by or on behalf of Secured Party and by Trustee in
connection therewith shall be a demand obligation owing by Debtors to
Secured Party and shall bear interest at the Default Rate until paid, and
shall constitute a part of the Obligations and be indebtedness secured and
evidenced by this Instrument.
G. Environmental. (1) Debtors shall comply with all applicable
Environmental Laws as they relate to the Collateral and shall maintain and
obtain, or cause to be maintained and obtained, all permits, licenses, and
approvals now or hereafter required under all applicable Environmental Laws
as they relate to the Collateral.
(2) Debtors shall not do or permit anything to be done that
will subject the Collateral, Debtors or Secured Party to any material
liability under any applicable Environmental Laws as they relate to the
Collateral, assuming disclosure to governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Collateral.
(3) Debtors shall promptly notify Secured Party in writing
of any citation, complaint, demand, order or notice relating to the
Collateral which is known to Debtors, or any other existing, pending or
threatened investigation or inquiry by any governmental authority relating
to the Collateral known to Debtors and in connection with any applicable
Environmental Laws.
(4) Debtors shall take, or cause to be taken, all steps
necessary to determine that no Hazardous Materials have been: (a) used or
stored on, in or in connection with any Collateral that Debtors acquire with
funds that Debtors receive from Secured Party in accordance with the Loan
Agreement, or disposed from such Collateral, or (b) treated, processed,
discharged or released on, to, in or from such Collateral, except, in each
case, in full compliance with all applicable Environmental Laws.
(5) Debtors shall not cause or permit: (a) the use or
storage of Hazardous Materials on, in or in any manner in connection with
the Collateral, or (b) the treatment, processing, discharge or release of
any Hazardous Materials on, to, in or from the Collateral, except in each
case, in full compliance with all Environmental Laws.
(6) Except in full compliance with all applicable
Environmental Laws, Debtors shall not keep, or cause or allow to be kept,
Hazardous Materials in, on or under the Collateral, and shall remove the
same (or if removal is prohibited by applicable law, shall take whatever
action is required by applicable law) promptly upon discovery of such
Hazardous Materials, all at Debtors' sole cost and expense.
(7) Debtors shall provide, upon Secured Party's reasonable
request, at any time, and from time to time (but not more often than once a
year), inspections, tests and audits of the Collateral from an engineering
or consulting firm approved by Secured Party indicating the presence or
absence of Hazardous Materials on the Collateral and compliance with all
applicable Environmental Laws. The cost of all inspections, tests and
audits of the Collateral performed pursuant to this Section shall be shared
equally by Debtors and Secured Party. Nothing contained herein shall
relieve Debtors from conducting their own inspections, tests and audits or
taking any other steps necessary to comply with all Environmental Laws, nor
shall anything contained herein be construed to imply or impose any duty on
Secured Party concerning Debtors' compliance or noncompliance therewith.
H. Possession of Collateral. Debtors shall not cause or permit
the removal of any item of the Collateral from its possession, control or
risk of loss, nor shall Debtors cause or permit the removal of any item of
the Collateral from the location specified herein other than removal in
connection with (i) sales, other than during the continuance of an Event of
Default, of Hydrocarbons in the ordinary course of business; or (ii)
possession of Collateral by Secured Party or by a bailee selected by Secured
Party who is holding the Collateral for the benefit of Secured Party.
I. Financing Statement Filings. Debtors recognize that
financing statements pertaining to the Collateral have been or may be filed
where any Debtor maintains any Collateral, has its records concerning any
Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, each Debtor shall not cause
or permit any change to be made in its name, identity or corporate
structure, or any change to be made to a jurisdiction other than as
represented in Section 2.1 N. in (i) the location of any Collateral, (ii)
the location of any records concerning any Collateral, or (iii) the location
of its chief executive office or principal place of business, unless such
Debtor has notified Secured Party of such change at least thirty days prior
to the effective date of such change, and shall have first taken all action
required by Secured Party for the purpose of further perfecting or
protecting the security interest in favor of Secured Party in the
Collateral. Each notice furnished to Secured Party pursuant to this
subsection shall expressly state that the notice is required by this
Instrument and contains facts that may require additional filings of
financing statements or other notices for the purposes of continuing
perfection of Secured Party's security interest in the Collateral.
J. Further Assurances. Debtors shall execute, acknowledge and
deliver, or cause to be executed, acknowledged or delivered, to Secured
Party such other and further instruments and do such other acts as in the
reasonable opinion of Secured Party may be necessary or desirable to effect
the intent of this Instrument, promptly upon request of Secured Party and at
Debtors' expense.
Section 2.3 Costs, Expenses and Indemnities. Debtors agree to
reimburse, pay, indemnify, defend and hold harmless Secured Party and Trustee as
follows:
A. Costs and Expenses. Debtors shall reimburse and pay Secured
Party for all fees, costs and expenses (including without limitation,
reasonable attorneys' fees, court costs and legal expenses and consultant's
and expert's fees and expenses), incurred or expended by Secured Party or
Trustee in connection with (1) the breach by Debtors of any representation
or warranty contained in this Instrument, the Loan Agreement, the Notes or
any other documents and instruments evidencing, securing or otherwise
relating to the Obligations, (2) the failure by Debtors to perform any
agreement, covenant, condition, indemnity or obligation contained in this
Instrument, the Loan Agreement, the Notes or any other documents and
instruments evidencing, securing or otherwise relating to the Obligations,
(3) Secured Party's or Trustee's exercise of any of its rights and remedies
under this Instrument, the Loan Agreement, the Notes and the other documents
and instruments evidencing, securing or otherwise relating to the
Obligations, or (4) the protection of the Collateral and the liens thereon
and security interests therein. All such fees, costs and expenses shall be
a demand obligation owing by Debtors to Secured Party and shall bear
interest at the Default Rate until paid, and shall constitute a part of the
Obligations and be indebtedness secured and evidenced by this Instrument.
The foregoing agreements shall be perpetual and shall survive the payment or
satisfaction of the Obligations and the release and reconveyance of this
Instrument and the foreclosure or other termination of the liens and
security interest created by this Instrument.
B. Environmental Indemnity. Debtors agree to indemnify, defend,
and hold harmless Secured Party, its affiliates and related parties, and
their respective directors, officers, shareholders, partners, members,
employees, consultants and agents (individually, an "Indemnified Party," and
collectively, "Indemnified Parties") from and against, and shall reimburse
and pay Indemnified Parties with respect to, any and all claims, demands,
liabilities, losses, damages (including without limitation actual,
consequential, exemplary and punitive damages), causes of action, judgments,
penalties, fees, costs and expenses (including without limitation attorneys'
fees, court costs and legal expenses and consultant's and expert's fees and
expenses) of any and every kind or character, known or unknown, fixed or
contingent, that may be imposed upon, asserted against, or incurred or paid
by or on behalf of any Indemnified Party on account of, in connection with,
or arising out of (1) the breach of any representation or warranty of
Debtors relating to Environmental Laws or Hazardous Materials or any matter
that would, but for the disclosure of such matter to Secured Party in
writing in accordance with Section 2.1 J, constitute or give rise to the
breach of any representation or warranty of Debtors relating to
Environmental Laws or Hazardous Materials, (2) the failure of Debtors to
perform any agreement, covenant or obligation required to be performed by
Debtors relating to Environmental Laws or Hazardous Materials, (3) any
violation of or failure to comply with any Environmental Law now existing or
hereafter occurring, (4) the removal of Hazardous Materials from the
Collateral (or if removal is prohibited by law, the taking of whatever
action is required by law), (5) any act, omission, event or circumstance
existing or occurring or resulting from or in connection with the ownership,
construction, occupancy, operation, use or maintenance of the Collateral,
regardless of whether the act, omission, event or circumstance constituted a
violation of or failure to comply with any Environmental Law at the time of
its existence or occurrence, and (6) any and all claims or proceedings
(whether brought by private party or governmental agency) for bodily injury,
property damage, abatement or remediation, environmental damage, or
impairment or any other injury or damage resulting from or relating to any
Hazardous Material located upon or migrating into, on, from or through the
Collateral (whether or not any or all of the foregoing was caused by
Debtors, a prior owner of the Collateral, an operator or prior operator of
the Collateral, their respective tenants or subtenants, or any third party
and whether or not the alleged liability is attributable to the handling,
storage, use, treatment, processing, distribution, manufacture, generation,
discharge, transportation or disposal of such Hazardous Material or the mere
presence of such Hazardous Material on the Collateral). Without limiting
the generality of the foregoing, it is the intention of Debtors and Debtors
agree that the foregoing indemnities shall apply to each Indemnified Party
with respect to claims, demands, liabilities, losses, damages (including
without limitation actual, consequential, exemplary and punitive damages),
causes of action, judgments, penalties, fees, costs, court costs and legal
expenses and consultant's and expert's fees and expenses, of any kind or
character, known or unknown, fixed or contingent, that in whole or in part
are caused by or arise out of the negligence of such Indemnified Party;
however, such indemnities shall not apply to any Indemnified Party to the
extent the subject of the indemnification is caused by or arises out of the
gross negligence or willful misconduct of such Indemnified Party. Any
amount to be paid hereunder by Debtors to Secured Party or for which Debtors
have indemnified an Indemnified Party shall be a demand obligation owing by
Debtors to Secured Party and shall bear interest at the Default Rate until
paid, and shall constitute a part of the Obligations and shall be
indebtedness secured and evidenced by this Instrument. The foregoing
agreements shall be perpetual and shall survive the payment or satisfaction
of the Obligations and the release and reconveyance of this Instrument and
the foreclosure or other termination of the liens and security interests
created by this Instrument.
C. General Indemnity. Debtors agree to indemnify, defend and
hold harmless Secured Party upon demand, from and against any and all
liabilities, obligations, penalties, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
Subsection, collectively called "liabilities and costs") which to any extent
(in whole or in part) may be imposed on, incurred by, or asserted against
Secured Party growing out of, resulting from or in any other way associated
with any of the Collateral, this Instrument, the Notes, the Loan Agreement
or any other documents or instruments evidencing, securing or relating to
the Obligations, or the transactions and events (including the enforcement
or defense thereof) at any time associated therewith or provided for
therein. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN
PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY SECURED PARTY,
provided only the Secured Party shall not be entitled under this Subsection
to receive indemnification for that portion, if any, of any liabilities and
costs which is proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment. If any person or
entity (including Debtors or any of their affiliates or related parties)
ever alleges such gross negligence or willful misconduct by Secured Party,
the indemnification provided for in this Subsection shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to the
extent and effect of the alleged gross negligence or willful misconduct.
Any amount to be paid hereunder by Debtors to Secured Party or for which
Debtors have indemnified any person or entity hereunder shall be a demand
obligation owing by Debtors to Security Party and shall bear interest at the
Default Rate until paid, and shall constitute a part of the Obligations and
the indebtedness secured and evidenced by this Instrument. As used in this
Subsection the term "Secured Party" shall refer not only to the entity
defined as such in the Preamble to this Instrument but also to each
director, officer, partner, member, agent, attorney, employee,
representative and affiliate of, and person or entity related to, such
entity. The foregoing agreements shall be perpetual and shall survive the
payment or satisfaction of the Obligations and the release and reconveyance
of this Instrument and the foreclosure or other termination of the liens and
security interests created by this Instrument.
Section 2.4 Performance by Secured Party. Debtors agree that, if
Debtors fail to perform any act which Debtors are required to perform hereunder,
Secured Party and Trustee may, but shall not be obligated to, perform or cause
to be performed such act, and any expense so incurred by Secured Party or by
Trustee in connection therewith shall be a demand obligation owing by Debtors to
Secured Party and shall bear interest at the Default Rate until paid, and shall
constitute a part of the Obligations and be indebtedness secured and evidenced
by this Instrument, and Secured Party shall be subrogated to all of the rights
of the party receiving such payment. Debtors hereby irrevocably appoint Secured
Party as Debtors' attorney-in-fact and proxy, with full authority in the place
and stead of Debtors and in the name of Debtors or otherwise, from time to time
to take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the foregoing and the other purposes of
this Instrument. Such appointment is coupled with an interest and shall be
irrevocable from the date hereof and so long as any part of the Obligations is
outstanding.
ARTICLE III
COLLECTION OF RENTS
Section 3.1 Assignment of Rents. Pursuant to Paragraph C of the
Granting Clauses of this Instrument, Secured Party is absolutely assigned,
granted and transferred and entitled to receive all of the Rents, relating,
allocated or attributed to all of the Collateral, together with all of the
proceeds thereof and therefrom and payments in lieu thereof. Debtors
acknowledge and agree that said assignment is intended to be an absolute and
unconditional assignment and not merely a pledge of or creation of a security
interest in said Rents and proceeds and payments or an assignment as additional
security. Debtors shall execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered notices to all purchasers of Hydrocarbons
directing them to make payments directly to Secured Party. All parties
producing, purchasing, receiving or having in their possession any such Rents or
proceeds or payments are hereby authorized and directed by Debtors to treat and
regard Secured Party as the party entitled in Debtors' place and stead to
receive such Rents and proceeds; and said parties shall be fully protected in so
treating and regarding Secured Party and shall be under no obligation to see to
the application by Secured Party of any such Rents or proceeds received by it.
For its convenience, Secured Party may, with respect to any or all such Rents or
proceeds, permit Debtors to receive such Rents or proceeds until such time as
Secured Party shall have made written demand therefor. Such election by Secured
Party shall not in any way waive the right of Secured Party to demand and
receive such Rents and proceeds thereafter allocated or attributed to the
Collateral and shall not in any way diminish the absolute and unconditional
right of Secured Party to receive all of such Rents and proceeds and cash
proceeds not theretofore expended or distributed by Debtors. Any such Rents or
proceeds received by Debtors shall, when received, constitute trust funds in
Debtors' hands and shall be held by Debtors upon an express trust for the
benefit of Secured Party. Debtors hereby agree that upon the first to occur of
either (i) written demand of Secured Party, or (ii) the occurrence of any event
which constitutes an Event of Default (as hereinafter defined) or which upon the
giving (or receiving) of notice or lapse of time, or both, would constitute such
an Event of Default, all cash, proceeds, instruments and other property, of
whatever kind or character, received by Debtors on account of the Collateral,
whether received by Debtors in the exercise of its collection rights hereunder
or otherwise, shall, in accordance with instructions then given by Secured
Party, be remitted to Secured Party or deposited to an account designated by
Secured Party, in the form received (properly assigned or endorsed to the order
of Secured Party or for collection and in accordance with Secured Party's
instructions) not later than the first banking business day following the day of
receipt, to be applied as provided in Section 3.2 hereof and, until so applied,
may be held by Secured Party in a separate account on which Debtors may not
draw. Debtors agree not to commingle any such property with any of their other
funds or property and agrees to hold the same upon an express trust for Secured
Party until remitted to Secured Party.
Section 3.2 Application of Rents. Secured Party shall apply all of
the Rents, and proceeds received pursuant to Section 3.1 hereof in satisfaction
of the Obligations as provided below, unless otherwise agreed to by Secured
Party and Debtors. All such proceeds received and to be applied by Secured
Party up to the close of business on the last day of each calendar month shall
be applied by Secured Party on or before the fifth business day of the next
succeeding calendar month as follows (with any balance remaining after such
application to be paid to Debtors):
A. First, to the payment to Secured Party and Trustee of all
outstanding or unreimbursed fees, costs and expenses incurred by Secured
Party or Trustee pursuant hereto, and any part of the Obligations not
evidenced by written instrument, including without limitation, all charges
and penalties, including interest thereon, due Secured Party;
B. Second, to the payment or prepayment of all interest accrued
on the Obligations; and
C. Third, to the payment or prepayment of the principal of the
Obligations in any order the Secured Party may elect from time to time.
If any date of application specified above shall be a Saturday, Sunday or legal
holiday, the Rents and proceeds to be applied by Secured Party pursuant to this
Section 3.2 shall be applied on the business day next succeeding such date which
is not a Saturday, Sunday or legal holiday, and the amount to be applied as
described above shall be the amount accrued up to such date. If the Rents and
proceeds received by Secured Party pursuant to Section 3.1 during any month are
not sufficient to make the minimum payments of principal of and interest on the
Obligations required by the terms of the Loan Agreement or the Notes, then
Debtors on or before the due date shall make payment to Secured Party of an
amount sufficient when added to such proceeds received to make the minimum
required payments of principal and interest of the Obligations.
Section 3.3 Inclusion in Sale. Upon any sale of any of the Collateral
pursuant to Article V hereof and expiration of any mandatory redemption periods,
the Rents attributed to the part of the Collateral so sold, and the proceeds
thereof, shall be included in such sale and shall pass to the purchaser free and
clear of the provisions of this Article III.
Section 3.4 No Liability in Secured Party. Secured Party is hereby
absolved from all liability for failure to enforce collection of any such Rents
and proceeds and from all other responsibility in connection therewith, except
the responsibility to account to Debtors for proceeds actually received.
Section 3.5 Indemnity. Debtors shall indemnify, defend and hold
harmless Secured Party against all claims, actions, liabilities, judgments,
costs, reasonable attorneys' fees or other charges of every kind or nature
("Claims") made against or incurred by Secured Party as a consequence of the
assertion, either before or after the payment in full of the Obligations, that
Secured Party received Rents or proceeds pursuant to this Article III which were
claimed by third persons. Secured Party shall have the right to employ
attorneys and to defend against any Claims, and unless furnished with reasonable
indemnity, Secured Party shall have the right to pay or compromise and adjust
all Claims. Debtors shall indemnify and pay to Secured Party all such amounts
as may be paid with respect thereto or as may be successfully adjudicated
against Secured Party, and such amounts shall be a demand obligation owing by
Debtors to Secured Party and shall bear interest at the Default Rate until paid,
and shall constitute a part of the Obligations and be indebtedness secured and
evidenced by this Instrument. The foregoing shall survive the payment or
satisfaction of the Obligations and the release and reconveyance of this
Instrument and the foreclosure or other termination of the liens and security
interests created by this Instrument.
Section 3.6 Rights of Secured Party. Secured Party shall have the
immediate and continuing right to demand, collect, receive and receipt for all
production, proceeds and payments assigned hereunder, and Secured Party is
hereby appointed agent and attorney-in-fact of Debtors (which appointment is
coupled with an interest and is irrevocable) for the purpose of executing any
release, receipt, division order, transfer order, relinquishment or other
instrument that Secured Party deems necessary in order for Secured Party to
collect and receive such production, proceeds and payments. In addition,
Debtors agree that, upon the request of Secured Party, they will promptly
execute and deliver to Secured Party such transfer orders, payment orders,
division orders and other instruments as Secured Party may deem necessary,
convenient or appropriate in connection with the payment and delivery directly
to Secured Party of all proceeds, production, and payments assigned hereunder.
Debtors hereby authorize and direct that, upon the request of Secured Party, all
pipeline companies, purchasers, transporters and other parties now or hereafter
purchasing Hydrocarbons produced from or allocated or attributed to the
Collateral or any other interest of Debtors (whether now owned or hereafter
acquired by operation of law or otherwise), in, to or relating to the Refining
Facilities or to any of the estates, property, rights or other interests
included in the Collateral, or any part thereof, or now or hereafter having in
their possession or control any production from or allocated to the Collateral
or any other interest of Debtors (whether now owned or hereafter acquired by
operation of law or otherwise), in, to or relating to the Refining Facilities or
to any of the estates, property, rights or other interests included in the
Collateral, or any part thereof, or the proceeds therefrom, or now or hereafter
otherwise owing monies to Debtors under contracts and agreements herein
assigned, shall, until Secured Party directs otherwise, pay and deliver such
proceeds, production or amounts directly to Secured Party at Secured Party's
address set forth in the introduction to this Instrument, or in such other
manner as Secured Party may direct such parties in writing, and this
authorization shall continue until the assignment of production and proceeds
contained herein is released and reassigned. Debtors agree that all division
orders, transfer orders, receipts and other instruments that Secured Party may
from time to time execute and deliver for the purpose of collecting and
receipting for such proceeds, production or payments may be relied upon in all
respects, and that the same shall be binding upon Debtors and their successors
and assigns. No payor making payments to Secured Party at its request under the
assignment of production and proceeds contained herein shall have any
responsibility to see to the application of any of such funds, and any party
paying or delivering proceeds, production or amounts to Secured Party under such
assignments shall be released thereby from any and all liability to Debtors to
the full extent and amount of all payments, production or proceeds so delivered.
Debtors agree to indemnify and hold harmless any and all parties making payments
to Secured Party, at the request of the Secured Party under the assignment of
production and proceeds contained herein, against any and all liabilities,
actions, claims, judgments, costs, charges and attorneys' fees and legal
expenses resulting from the delivery of such payments to Secured Party. The
indemnity agreement contained in the previous sentence is made for the direct
benefit of and shall be enforceable by all such persons and shall survive the
termination of this Instrument. Should Secured Party bring suit against any
third party for collection of any amounts or sums included within the assignment
of production and proceeds contained herein (and Secured Party shall have the
right to bring any such suit), it may sue either in its own name or in the name
of Debtors, or both.
Section 3.7 No Delegation or Assumption. Nothing in this Instrument
shall be deemed or construed to create a delegation to or assumption by Secured
Party, of the duties and obligations of Debtors under any agreement or contract
relating to the Collateral or any portion thereof, and all of the parties to any
such contract shall continue to look to Debtors for performance of all covenants
and other obligations and the satisfaction of all representations, warranties,
covenants, indemnities and other agreements of Debtors thereunder,
notwithstanding the assignment of production and proceeds contained herein or
the exercise by Secured Party, prior to foreclosure, of any of its rights
hereunder or under applicable law.
Section 3.8 Cumulative. The assignment of Rents and proceeds
contained herein shall not be construed to limit in any way the other rights and
remedies of Secured Party hereunder, including without limitation, its right to
accelerate the indebtedness evidenced by the Obligations upon an Event of
Default and the other rights and remedies herein conferred, conferred in the
other documents and instruments evidencing, securing or relating to the
Obligations, or conferred by operation of law. Monies received under the
assignment of production and proceeds contained herein shall not be deemed to
have been applied in payment of the Obligations unless and until such monies
actually are applied thereto by Secured Party.
ARTICLE IV
TERMINATION AND RELEASE
Section 4.1 Release Upon Termination. If all of the Obligations shall
be paid in full and otherwise satisfied pursuant to the terms and conditions of
this Instrument and the other documents and instruments evidencing, securing or
relating to the Obligations, and if Debtors shall have well and truly performed
all of the covenants and agreements herein contained, and if Secured Party has
no further obligation to advance any amounts to Debtors, then all of the
Collateral shall revert to Debtors, the liens and security interests created by
this Instrument shall terminate and Secured Party or Trustee, or both, as
required by applicable law, shall, promptly after the request of Debtors or as
otherwise required by applicable law, execute, acknowledge and deliver to
Debtors a release or reconveyance of this Instrument and such other instruments
as may be necessary to evidence the termination of the liens and security
interests created by this Instrument.
Section 4.2 Partial Release. No partial release or reconveyance from
the liens and security interests created by this Instrument of any part of the
Collateral by Trustee or Secured Party shall in any way alter, vary or diminish
the force or effect of this Instrument or impair, release or subordinate the
liens and security interests created by this Instrument on the remainder of the
Collateral. Except as specifically provided in any such partial release or
reconveyance (i) this Instrument and liens and security interests created hereby
shall remain in full force and effect, (ii) such partial release or reconveyance
will not modify or affect the terms, conditions or provisions of this
Instrument, and (iii) nothing contained in any such partial release or
reconveyance shall be deemed to be, or construed as, a waiver of any such terms,
conditions or provisions or as a waiver of any other term, condition or
provision.
Section 4.3 Execution. Except as may be required by applicable law,
Secured Party shall have full power and authority to execute, acknowledge and
deliver any release or reconveyance of this Instrument without the joinder
therein or execution thereof by Trustee, and any such release or reconveyance
shall be binding upon Secured Party and Trustee. All releases and reconveyances
executed in connection with this Instrument shall be without warranty of any
kind, express, implied or statutory.
Section 4.4 Costs, Expenses and Effect. Debtors shall pay all legal
fees and other fees, costs and expenses incurred by Secured Party and Trustee
for preparing and reviewing instruments of termination and release or
reconveyance and the execution and delivery thereof and Secured Party may
require payment of the same prior to delivery of such instruments. The release
and reconveyance of this Instrument and the termination of the liens and
security interests created by this Instrument, in whole or in part, shall not
terminate or otherwise affect Secured Party's right or ability to exercise any
right, power or remedy relating to any claim for breach of warranty or
representation, for failure to perform any covenant or other agreement, under
any indemnity or for fraud, deceit or other misrepresentation or omission.
ARTICLE V
DEFAULT
Section 5.1 Events of Default. The occurrence of any of the following
events shall constitute an event of default ("Event of Default") and upon the
occurrence thereof the liens and security interests created hereby shall be
subject to foreclosure in any manner provided for herein or provided for by
applicable law:
A. Failure of Debtors to pay any fee or other amount due Secured
Party or Trustee under this Instrument within 10 days after the date that
any such payment is due;
B. Failure of Debtors to perform or observe any covenant,
agreement, indemnity, condition or provision in this Instrument and such
failure shall continue for 30 days after written notice of such failure has
been given to Debtors;
C. Any of Debtors' representations or warranties made in this
Instrument or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in
any material respect as of the date made or deemed made; or
D. An "Event of Default" as defined in the Loan Agreement shall
occur.
Section 5.2 Treatment of Fixtures. Upon the occurrence of any Event
of Default, or at any time thereafter, if deemed appropriate by Secured Party or
if required by applicable law, Secured Party may elect to treat the fixtures
included in the Collateral either as real property or as personal property, or
both, and proceed to exercise such rights as apply to the type of property
selected.
Section 5.3 Acceleration and Foreclosure. Upon the occurrence of any
Event of Default, or at any time thereafter, in addition to any other rights,
powers and remedies herein conferred or conferred by operation of law, Secured
Party and Trustee shall have all of the rights, powers and remedies of a secured
party, a beneficiary under a deed of trust, and a trustee under a deed of trust
granted under applicable law. Secured Party may, without notice, demand or
declaration of default, which are hereby waived by Debtors to the extent such
waiver is not prohibited by applicable law, declare all indebtedness secured
hereby due and payable, and whether or not Secured Party exercises such option,
it may, at its option and in its sole discretion, without any prior notice to or
demand upon Debtors, proceed by one or more actions in equity or at law for the
seizure and sale of the Collateral or any portion thereof, for the foreclosure
or sale of the Collateral or any portion thereof by judicial foreclosure by
appropriate proceedings in any court of competent jurisdiction, by the power of
sale granted herein, by a trustee's sale, or in any other manner then permitted
by law, for the specific performance of any covenant or agreement of Debtors
herein contained or in aid of the execution of any right, power or remedy herein
granted, or for the enforcement of any other appropriate equitable or legal
remedy and to recover judgment against Debtors. In furtherance, and not in
limitation, thereof:
A. Deed of Trust. This Instrument shall constitute a trust deed
under applicable law, as amended and as may be amended from time to time, or
any future law containing provisions under which the sale of property
securing debts is authorized or permitted; and upon an Event of Default, or
any time thereafter, Trustee shall, whenever requested by Secured Party,
cause the Collateral to be sold in accordance with the provisions thereof
and hereof. In addition, upon the occurrence of an Event of Default, or at
any time thereafter, this Instrument may be foreclosed as to any of the
Collateral by judicial action or in any manner then permitted by applicable
law.
B. Election. In the event a sale of the Collateral under the
power of sale shall be commenced by Trustee, Secured Party may at any time
before the sale of the Collateral, elect to abandon the sale, and Secured
Party may then institute a suit for the collection of the Obligations and
for the foreclosure of this Instrument by judicial action. It is agreed
that if Secured Party should institute a suit for the foreclosure of this
Instrument by judicial action, Secured Party may at any time before the
entry of a final judgment, dismiss such suit, and then sell, cause to be
sold or direct Trustee to sell, the Collateral under the power of sale
herein granted in accordance with the provisions of this Instrument.
C. Additional Actions. This Instrument shall also constitute
and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement and security agreement, and
from time to time as any one or more thereof as appropriate under applicable
law. Secured Party shall be entitled to all of the rights, remedies and
benefits of a secured party and a beneficiary granted under applicable law;
and, to the fullest extent of such law, shall be entitled to enforce such
rights, remedies and benefits. Debtors intend and hereby grant to Secured
Party all rights, powers and remedies accorded a secured party and a
beneficiary under applicable law whether or not such rights, powers and
remedies are expressly granted or reserved herein.
D. Notice, Place and Manner of Sale. Any sale of the Collateral
under this Article V shall take place at such place or places and otherwise
in such manner and upon such notice as may be required by law; or, in the
absence of any such requirement, as Secured Party may deem appropriate.
Debtors expressly agree that, except as may be required by applicable law,
Secured Party or Trustee may offer the Collateral as a whole or in such
parcels or lots as Secured Party or Trustee elects, regardless of the manner
in which the Collateral may be described.
E. Postponement of Sale. Any sale of the Collateral conducted
under this Article V may be postponed from time to time as provided by
applicable law; or, in the absence of any such provisions, Secured Party may
postpone the sale of the Collateral or any part thereof by public
announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made at the
time of sale fixed by the preceding postponement. Sale of a part of the
Collateral will not exhaust the power of sale, and sales may be made from
time to time until all Collateral is sold or the Obligations are paid in
full.
F. Secured Party's Right to Purchase. Secured Party shall have
the right to bid or to become the purchaser at any sale made pursuant to the
provisions of this Article V, and shall have the right to credit upon the
amount of the bid made therefor the amount payable to it out of the net
proceeds of such sale.
G. Conveyance to Purchaser. Any deed, bill of sale or other
conveyance executed by or on behalf of Trustee, Secured Party, the sheriff
or other official or party responsible for conducting the sale shall be
prima facie evidence of the compliance with all statutory requirements for
the sale and execution of such deed, bill of sale or other conveyance and
will conclusively establish the truth and accuracy of the recitals and other
matters stated therein, including, without limitation, nonpayment or
nonperformance of the Obligations, violation of the terms and covenants
contained herein, and the advertisement and conduct of such sale in the
manner provided herein or as provided by applicable law. Debtors do hereby
ratify and confirm all legal acts that Trustee and Secured Party may do in
carrying out the provisions of this Instrument. Any sale of the Collateral
or any portion thereof pursuant to the provisions of this Article V will
operate to divest all right, title, interest, claim and demand of Debtors in
and to the property sold and will be a perpetual bar against Debtors and
shall, subject to applicable law, vest title in the purchaser free and clear
of all liens, security interests and encumbrances, including without
limitation, liens, security interests and encumbrances junior or subordinate
to the liens, security interests and encumbrances created by this
Instrument. Upon any sale of the Collateral or any portion thereof pursuant
to the provisions of this Article V, the receipt by Secured Party, Trustee,
the sheriff or other official or party responsible for conducting the sale,
shall be sufficient discharge to the purchaser or purchasers at any sale for
the purchase money, and such purchaser or purchasers and the heirs,
devisees, personal representatives, successors and assigns thereof shall
not, after paying such purchase money and receiving such receipt of Secured
Party, Trustee, the sheriff or such other official or party, be obliged to
see to the application thereof or be in anywise answerable for any loss,
misapplication or nonapplication thereof. Any purchaser at a sale will,
subject to mandatory redemption periods, if any, receive immediate
possession of the Collateral purchased, and Debtors agree that if Debtors
retain possession of the Collateral or any part thereof subsequent to such
sale, Debtors will be considered a tenant at sufferance of the purchaser,
and will, if Debtors remain in possession after demand to remove, be guilty
of forcible detainer, and will be subject to eviction and removal, forcible
or otherwise, with or without process of law and all damages to Debtors by
reason thereof are hereby expressly waived by Debtors.
H. Federal Transfers. Upon a sale conducted pursuant to this
Article V of all or any portion of the Collateral consisting of interests
(the "Federal Interests") in leases, easements, rights-of-way, agreements or
other documents and instruments covering, affecting or otherwise relating to
federal lands (including, without limitation, leases, easements and rights-
of-way issued by the Bureau of Land Management); Debtors agree to take all
action and execute all instruments necessary or advisable to transfer the
Federal Interests to the purchaser at such sale, including without
limitation, to execute, acknowledge and deliver assignments of the Federal
Interests on officially approved forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements, to seek and request
approval thereof and to take all other action necessary or advisable in
connection therewith. Debtors hereby irrevocably appoint Secured Party as
Debtors' attorney-in-fact and proxy, with full power and authority in the
place and steed of Debtors, in the name of Debtors or otherwise, to take any
such action and to execute any such instruments on behalf of Debtors that
Secured Party may deem necessary or advisable to so transfer the Federal
Interests, including without limitation, the power and authority to execute,
acknowledge and deliver such assignments, to seek and request approval
thereof and to take all other action deemed necessary or advisable by
Secured Party in connection therewith; and Debtors hereby adopt, ratify and
confirm all such actions and instruments. By separate instruments Debtors
has also irrevocably appointed Secured Party as Debtors' attorney-in-fact
and proxy, with full power and authority in the place and steed of Debtors,
in the name of Debtors or otherwise, to take any such action and to execute
any such instruments on behalf of Debtors that Secured Party may deem
necessary or advisable to so transfer the Federal Interests, including
without limitation, the power and authority to execute, acknowledge and
deliver such assignments, to seek and request approval thereof and to take
all other action deemed necessary or advisable by Secured Party in
connection therewith; and by such separate instruments Debtors have adopted,
ratified and confirmed all such actions and instruments. Such powers of
attorney and proxies are coupled with an interest, shall survive the
dissolution, termination, reorganization or other incapacity of Debtors and
shall be irrevocable. No action taken by Secured Party shall constitute
acknowledgment of, or assumption of liabilities relating to, the Federal
Interests, and neither Debtors nor any other party may claim that Secured
Party is bound, directly or indirectly, by any such action.
Section 5.4 Personal Property. Upon the occurrence of any Event of
Default, or at any time thereafter, in addition to all other rights, powers and
remedies herein conferred or conferred by operation of law, Secured Party shall
have all of the rights and remedies of an assignee and secured party granted by
applicable law, including without limitation, the applicable Uniform Commercial
Code as then in effect, and shall, to the extent permitted by applicable law,
have the right and power, but not the obligation, to take possession of the
personal property included in the Collateral and any proceeds thereof wherever
located, and for that purpose Secured Party may enter upon any premises on which
any or all of such personal property is located and take possession of and
operate such personal property or remove the same therefrom. Secured Party may
require Debtors to assemble such personal property and make it available to
Secured Party at a place to be designated by Secured Party that is reasonably
convenient to both parties. The following presumptions shall exist and shall be
deemed conclusive with regard to the exercise by Secured Party of any of its
remedies with respect to personal property:
A. If notice is required by applicable law, Debtors agree that
five days' prior written notice of the time and place of any public sale or
of the time after which any private sale or any other intended disposition
thereof is to be made shall be deemed reasonable notice to Debtors. No such
notice is necessary if such property is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market.
B. If Secured Party in good faith believes that the Securities
Act of 1933 or any other state or federal law prohibits or restricts the
customary manner of sale or distribution of any of such property, Secured
Party may sell such property privately or in any other manner deemed
advisable by Secured Party at such price or prices as Secured Party
determines in its sole discretion. Debtors recognize that such prohibition
or restriction may cause such property to have less value than it otherwise
would have and that, consequently, such sale or disposition by Secured Party
may result in a lower sales price than if the sale were otherwise held.
Section 5.5 Possession. Upon the occurrence of any Event of Default,
or at any time thereafter, in addition to all other rights, powers and remedies
herein conferred or conferred by operation of law, Secured Party shall, to the
extent not prohibited by applicable law, have the right and power, but not the
obligation, to enter upon and take immediate possession of the Collateral or any
portion thereof, to exclude Debtors therefrom, to hold, use, operate, manage,
enjoy and control such Collateral, to make all such repairs, replacements,
alterations, additions and improvements to the same as Secured Party may deem
proper or expedient, to sell all of the severed and extracted Hydrocarbons
included in the same subject to the provisions of Article III hereof, to demand,
collect and retain all other earnings, rents, issues, profits, proceeds and
other sums due or to become due with respect to such Collateral accounting for
and applying to the payment of the Obligations only the net earnings arising
therefrom after charging against the receipts therefrom all fees, costs,
expenses, charges, damages and losses incurred by reason thereof plus interest
thereon at the Default Rate without any liability to Debtors in connection
therewith. Such possession shall at once be delivered to Secured Party upon
request, and on refusal or failure to so deliver possession, the delivery of
such possession may be enforced by Secured Party by any appropriate civil suit,
proceeding or other action.
Section 5.6 Appointment of Receiver. Upon the occurrence of any Event
of Default, or at any time thereafter, in addition to all other rights, powers
and remedies herein conferred or conferred by operation of law, Secured Party
shall be entitled to the appointment of a receiver of the Collateral without the
necessity of the posting of a bond or notice; and shall, to the extent not
prohibited by applicable law, be entitled to such receiver as a matter of right,
without regard to the solvency or insolvency of Debtors, the value or adequacy
of the Collateral or the Collateral being in danger of being materially injured
or reduced in value as security by removal, destruction, deterioration,
accumulation of prior liens or otherwise; and such receiver may be appointed by
any court of competent jurisdiction upon ex parte application, and without
notice, notice being expressly waived by Debtors to the extent such waiver is
not prohibited by applicable law. Debtors do hereby consent to the appointment
of such receiver or receivers, waive any and all defenses to such appointment,
and agree not to oppose any application therefor by Secured Party, and agrees
that such appointment shall in no manner impair, prejudice or otherwise affect
the rights of Secured Party under this Article V. Nothing herein is to be
construed to deprive Secured Party of any other right, remedy or privilege it
may now or hereafter have under law to have a receiver appointed. Any money
advanced by Secured Party in connection with any such receivership shall be a
demand obligation owing by Debtors to Secured Party and shall bear interest,
from the date of making such advancement until paid, at the Default Rate. Any
such receiver shall have all powers conferred by the court appointing such
receiver, which powers shall, to the extent not prohibited by applicable law
include, without limitation, the right to enter upon and take immediate
possession of the Collateral or any part thereof, to exclude Debtors therefrom,
to hold, use, operate, manage and control such Collateral, to make all such
repairs, replacements, alterations, additions and improvements to the same as
such receiver or Secured Party may deem proper or expedient, to sell all of the
Hydrocarbons included in the same subject to the provisions of Article III
hereof, to demand and collect all of the other earnings, rents, issues, profits,
proceeds and other sums due or to become due with respect to such Collateral,
accounting for only the net earnings arising therefrom after charging against
the receipts therefrom all fees, costs, expenses, charges, damages and losses
incurred by reason thereof plus interest thereon at the Default Rate without any
liability to Debtors in connection therewith which net earnings shall be turned
over by such receiver to Secured Party to be applied by Secured Party to the
payment of the Obligations in the order set forth in Section 5.10.
Section 5.7 Waiver by Debtors. To the extent not prohibited by
applicable law, Debtors agree that Debtors shall not at any time have, invoke,
utilize or assert any right under any laws pertaining to the marshaling of
assets or liens, the sale of property in the inverse order of alienation, the
exemption of homesteads, the administration of estates of decedents,
appraisement, moratorium, valuation, stay, extension or redemption now or
hereafter in force, and Debtors hereby waive the benefit of all such laws to the
fullest extent not prohibited by applicable law.
Section 5.8 Remedies Cumulative. All rights, powers and remedies
herein conferred are cumulative, and not exclusive, of (a) any and all other
rights and remedies herein conferred, (b) any and all rights, powers and
remedies existing at law or in equity, and (c) any and all other rights, powers
and remedies provided for in any other documents or instruments evidencing,
securing or relating to the Obligations, and Secured Party shall, in addition to
the rights, powers and remedies herein conferred, be entitled to avail itself of
all such other rights, powers and remedies as may now or hereafter exist at law
or in equity for the collection of and enforcement of the Obligations and the
enforcement of the warranties, representations, covenants, indemnities and other
agreements contained in this Instrument and the other documents and instruments
evidencing, securing or relating to the Obligations and the foreclosure of the
liens and security interests created by this Instrument. Each and every such
right, power and remedy may be exercised from time to time and as often and in
such order as may be deemed expedient by Secured Party and the exercise of any
such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter, any other right, power or remedy. No
delay or omission by Secured Party or by Trustee, the sheriff or other official
or person in the exercise of any right, power or remedy will impair any such
right, power or remedy or operate as a waiver thereof or of any other right,
power or remedy then or thereafter existing.
Section 5.9 Costs and Expenses. All fees, costs and expenses
(including, without limitation, reasonable attorneys' fees and legal expenses,
court costs, filing fees, and mortgage, transfer, stamp and other excise taxes,
inspection fees, appraisers' fees, outlays for documentary and expert evidence,
stenographers' charges, publication, notice and advertising costs, postage,
photocopies, telephone charges and costs of procuring all abstracts of title,
title searches and examinations, title opinions, title insurance policies and
similar title data and assurances as Secured Party or Trustee may deem
appropriate either to prosecute such suit or to evidence to bidders at the sales
that may be had pursuant to such proceeding the condition of the title to or the
value of the Collateral, trustee's fees and expenses, sheriff's fees and
expenses, receiver's fees and expenses, and fees and expenses of agents of
Secured Party and Trustee, costs and expenses of defending, protecting and
maintaining the Collateral and Secured Party's and Trustee's interest therein
including repair and maintenance costs and expenses and costs and expenses of
protecting and securing the Collateral including insurance costs and all other
fees, costs and expenses provided for or authorized by applicable law), incurred
by or on behalf of Secured Party or Trustee in protecting and enforcing their
rights hereunder or incident to the enforcement of this Instrument and the liens
and security interests created hereby, shall be a demand obligation owing by
Debtors to Secured Party and shall bear interest at the Default Rate until paid,
and shall constitute a part of the Obligations and be indebtedness secured and
evidenced by this Instrument.
Section 5.10 Application of Proceeds. The proceeds of any sale of the
Collateral or any part thereof made pursuant to this Article V shall be applied
as may be required by applicable law, or, in the absence of any such
requirements, as follows:
A. First, to the payment of all fees, costs and expenses
incident to the enforcement of this Instrument and the liens and security
interests created hereby, including without limitation, the fees, costs and
expenses described in Section 5.9 hereof;
B. Second, to the payment or prepayment of accrued interest
remaining unpaid on the Notes;
C. Third, to the payment or prepayment of principal remaining
unpaid on the Notes in such order as Secured Party may elect;
D. Fourth, to the payment or prepayment of the Obligations other
than the Obligations evidenced by the Notes in such order as Secured Party
may elect; and
E. Fifth, the remainder, if any, shall be paid to Debtors or
such other person or persons as may be legally entitled thereto.
Section 5.11 Waiver of Statute of Limitations. Debtors hereby waive
the right to assert any statute of limitations as a defense to the Obligations
(including, without limitation, the indebtedness, liabilities and obligations
under and pursuant to this Instrument, the Notes, the Loan Agreement and any
other instrument evidencing, securing or otherwise relating to the Obligations),
to the fullest extent permitted by applicable law.
Section 5.12 Limitation on Rights and Waivers. All rights, powers and
remedies herein conferred shall be exercisable by Trustee and Secured Party only
to the extent not prohibited by applicable law; and all waivers and
relinquishments of rights and similar matters shall only be effective to the
extent such waivers or relinquishments are not prohibited by applicable law.
ARTICLE VI
TRUSTEE
Section 6.1 Resignation and Removal of Trustee. Trustee may resign in
writing addressed to Secured Party, or be removed at any time with or without
cause by an instrument in writing duly executed by Secured Party, and such
resignation or removal shall be effective upon the appointment of a successor
Trustee. In case of the death, resignation or removal of Trustee, a successor
Trustee may be appointed by Secured Party as may be required by applicable law
or, in the absence of any such requirement, by Secured Party without formality
other than an appointment and designation in writing. Such appointment and
designation will be full evidence of the right and authority to make the same
and of all facts therein recited, and upon the making of any such appointment
and designation, this Instrument will vest in the named successor trustee all
the right, title and interest of Trustee in and to all of the Collateral, and
said successor will thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon Trustee. All references herein to
Trustee shall be deemed to refer to the Trustee from time to time acting
hereunder.
Section 6.2 Substitute Trustees and Agents. To the extent not
prohibited by applicable law, Trustee may appoint or delegate any one or more
persons as agents to perform any act or acts of Trustee under this Instrument in
the name and on behalf of Trustee, including any act or acts necessary or
incident to any sale conducted by Trustee. If Trustee shall have given notice
of sale hereunder, any successor trustee may complete the sale and the
conveyance of the Collateral pursuant thereto as if such notice had been given
by the successor trustee conducting the sale. To facilitate the administration
of the Trustees' duties under this Instrument, Secured Party may appoint
multiple trustees to serve in such capacity or in such jurisdictions as Secured
Party may designate.
Section 6.3 Liability of Trustee. Trustee shall not be liable for any
error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Trustee's gross negligence, willful misconduct or bad faith. Trustee shall have
the right to rely on any instrument, document or signature authorizing or
supporting any action taken or proposed to be taken by Trustee hereunder,
believed by Trustee in good faith to be genuine. All monies received by Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received but need not be segregated in any manner
from any other monies except to the extent required by law, and Trustee shall be
under no liability for interest on any monies received by Trustee hereunder
except as may be provided by applicable law. Debtors hereby ratify and confirm
any and all acts Trustee shall do lawfully by virtue hereof.
Section 6.4 Indemnification of Trustee. Debtors shall reimburse
Trustee for, and indemnify, defend and hold harmless Trustee against, any and
all liability and expenses which may be incurred by Trustee in the performance
of Trustee's duties, except to the extent attributable to Trustee's gross
negligence, willful misconduct or bad faith. In addition, Debtors shall
indemnify, defend and hold harmless Trustee against any and all claims, actions,
liabilities, judgments, costs, expenses, attorneys' fees or other charges of
whatsoever kind or nature made against or incurred by Trustee, and arising out
of, or in any way relating to, Trustee performing the duties of Trustee
hereunder, except to the extent attributable to Trustee's gross negligence,
willful misconduct or bad faith.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Waiver. Any and all covenants of Debtors in this
Instrument may from time to time, be waived by Secured Party by an instrument in
writing signed by Secured Party to such extent and in such manner as Secured
Party may desire, but no such waiver will ever affect or impair Secured Party's
rights hereunder, except to the extent specifically stated in such written
instrument. All changes to, amendments and modifications of this Instrument
must be in writing and signed by Secured Party.
Section 7.2 Severability. If any provision of this Instrument or of
any of the instruments and documents evidencing, securing or relating to the
Obligations is invalid or unenforceable in any jurisdiction, such provision
shall be fully severable from this Instrument and the other provisions hereof
and of said instruments and documents shall remain in full force and effect in
such jurisdiction and the remaining provisions hereof shall be liberally
construed in favor of Secured Party and Trustee in order to carry out the
provisions and intent hereof. The invalidity of any provision of this
Instrument in any jurisdiction shall not affect the validity or enforceability
of any such provision in any other jurisdiction.
Section 7.3 Subrogation. This Instrument is made with full
substitution and subrogation of Secured Party and Trustee in and to all
covenants and warranties by others heretofore given or made with respect to the
Collateral or any part thereof.
Section 7.4 Financing Statement. This Instrument shall be deemed to
be and may be enforced from time to time as an assignment, contract, deed of
trust, financing statement or security agreement, and from time to time as any
one or more thereof is appropriate under applicable state law. A carbon,
photographic or other reproduction of this Instrument or of any financing
statement in connection herewith shall be sufficient as a financing statement
for any and all purposes.
Section 7.5 Rate of Interest. All interest required hereunder and
under the Obligations shall be calculated on the basis of a year of 360 days.
Section 7.6 Recording. All recording references in the
Exhibits hereto are to the official real property records of the county in which
the affected Land is located and in which records such documents are or in the
past have been customarily recorded, whether real estate records, deed records,
oil and gas records, oil and gas lease records or other records. The references
in this Instrument and in the Exhibits hereto to liens, encumbrances and other
burdens are for the purposes of defining the nature and extent of Debtors'
warranties and shall not be deemed to ratify, recognize or create any rights in
third parties.
Section 7.7 Execution in Counterparts. This Instrument may be
executed in one or more original counterparts. To facilitate filing and
recording, there may be omitted from any counterpart the parts of the Exhibits
hereto containing specific descriptions of the Collateral that relate to land
located in counties other than the county in which the particular counterpart is
to be filed or recorded. Each counterpart shall be deemed to be an original for
all purposes, and all counterparts shall together constitute but one and the
same instrument.
Section 7.8 Notices. All notices and other communications made or
required to be given pursuant to this Instrument shall be in writing and shall
be deemed given if delivered personally or by facsimile transmission (if receipt
is confirmed by the facsimile operator of the recipient), or delivered by
overnight courier service or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice;
provided that notices of a change of address shall be effective only upon
receipt thereof):
To Debtors:
Foreland Corporation
Foreland Refining Corporation
Foreland Asset Corporation
12596 West Bayaud, Suite 300
Lakewood, CO 80228
Attn: N. Thomas Steele
Facsimile No. (303) 988-3234
To Secured Party:
Energy Income Fund, L.P.
136 Dwight Road
Longmeadow, Massachusetts 01106
Attn: Robert D. Gershen
Facsimile No.: (713) 567-7926
Any notice hereunder delivered in person or by facsimile (if receipt is
confirmed by the facsimile operator of the recipient) shall be deemed given on
the date thereof, any notice by registered or certified mail shall be deemed
given three days after the date of mailing; and any notice by overnight courier
shall be deemed given two days after shipment or the date of receipt, whichever
is earlier.
Section 7.9 Binding Effect. This Instrument shall bind and inure to
the benefit of the respective successors and assigns of Debtors, Secured Party
and Trustee. Notwithstanding any other provision of this Instrument, if any
right, interest or estate in property granted by this Instrument or pursuant
hereto does not vest upon the date hereof, such right, interest or estate shall
vest, if at all, within 21 years less 1 day after the death of the last
surviving descendant of Joseph P. Kennedy, father of John F. Kennedy, former
President of the United States of America, who is living on the date of the
execution of this Instrument by Debtors or the effective date hereof, whichever
is earlier.
Section 7.10 References. All references in this Instrument to
Exhibits, Articles, Sections, Subsections, paragraphs, subparagraphs and other
subdivisions refer to the Exhibits, Articles, Sections, Subsections, paragraphs,
subparagraphs and other subdivisions of this Instrument unless expressly
provided otherwise. Titles and headings appearing at the beginning of any
subdivision are for convenience only and do not constitute any part of any such
subdivision and shall be disregarded in construing the language contained in
this Instrument. The words "this Instrument," "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Instrument as a whole and
not to any particular subdivision unless expressly so limited. The phrases
"this Section," "this Subsection" "this paragraph," "this subparagraph" and
similar phrases refer only to the Sections, Subsections, paragraphs or
subparagraphs hereof in which the phrase occurs. Capitalized terms used
herein without definition shall have the meanings ascribed thereto in the
Loan Agreement. The word "or" is not exclusive. All references to days are
to calendar days unless otherwise specifically stated. Pronouns in masculine,
feminine and neuter gender shall be construed to include any other gender.
Words in the singular form shall be construed to include the plural and words
in the plural form shall be construed to include the singular, unless the
context otherwise requires.
Section 7.11 Filing. Some of the above described goods are or are to
become fixtures on the Land described in Exhibit "A". This Instrument is to be
filed for record in, among other places, the real estate records of each county
identified in Exhibit "A". This Instrument covers fixtures. Debtors are the
owner of an interest of record in the real estate concerned.
Section 7.12 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. DEBTORS
HEREBY: (A) KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY WITH RESPECT TO ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT
ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS INSTRUMENT, THE NOTES,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING, SECURING
OR RELATING TO THE OBLIGATIONS OR ANY TRANSACTION PROVIDED FOR THEREIN OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) IRREVOCABLY WAIVE, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THEY MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(D) ACKNOWLEDGES THAT THEY HAVE BEEN INDUCED TO ENTER INTO THIS INSTRUMENT, THE
NOTES, THE LOAN AGREEMENT AND ANY OTHER DOCUMENTS AND INSTRUMENTS EVIDENCING,
SECURING OR RELATING TO THE OBLIGATIONS AND THE TRANSACTIONS PROVIDED FOR HEREIN
AND THEREIN, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.
Section 7.13 USURY SAVINGS. IT IS THE INTENTION OF THE PARTIES HERETO
TO COMPLY WITH ALL APPLICABLE USURY LAWS; ACCORDINGLY, IT IS AGREED THAT
NOTWITHSTANDING ANY PROVISIONS TO THE CONTRARY IN THIS INSTRUMENT, THE NOTES,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR
OTHERWISE RELATING TO THE OBLIGATIONS, IN NO EVENT SHALL SUCH DOCUMENTS OR
INSTRUMENTS REQUIRE THE PAYMENT OR PERMIT THE COLLECTION OF INTEREST (WHICH
TERM, FOR PURPOSES HEREOF, SHALL INCLUDE ANY AMOUNT WHICH, UNDER APPLICABLE LAW,
IS DEEMED TO BE INTEREST, WHETHER OR NOT SUCH AMOUNT IS CHARACTERIZED BY THE
PARTIES AS INTEREST) IN EXCESS OF THE MAXIMUM AMOUNT PERMITTED BY SUCH LAWS. IF
ANY EXCESS INTEREST IS UNINTENTIONALLY CONTRACTED FOR, CHARGED OR RECEIVED UNDER
THE NOTES OR UNDER THE TERMS OF THIS INSTRUMENT, THE LOAN AGREEMENT OR ANY OTHER
DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR RELATING TO THE OBLIGATIONS, OR
IN THE EVENT THE MATURITY OF THE INDEBTEDNESS EVIDENCED BY THE NOTES IS
ACCELERATED IN WHOLE OR IN PART, OR IN THE EVENT THAT ALL OR PART OF THE
PRINCIPAL OR INTEREST OF THE NOTES SHALL BE PREPAID, SO THAT THE AMOUNT OF
INTEREST CONTRACTED FOR, CHARGED OR RECEIVED UNDER THE AMOUNT OF INTEREST
CONTRACTED FOR, CHARGED OR RECEIVED UNDER THE NOTES OR UNDER THIS INSTRUMENT,
THE LOAN AGREEMENT OR ANY OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR
RELATING TO THE OBLIGATIONS, ON THE AMOUNT OF PRINCIPAL ACTUALLY OUTSTANDING
FROM TIME TO TIME UNDER THE NOTES SHALL EXCEED THE MAXIMUM AMOUNT OF INTEREST
PERMITTED BY THE APPLICABLE USURY LAWS, THEN IN ANY SUCH EVENT (A) THE
PROVISIONS OF THIS SECTION SHALL GOVERN AND CONTROL, (B) NEITHER DEBTORS NOR ANY
OTHER PERSON OR ENTITY NOW OR HEREAFTER LIABLE FOR THE PAYMENT THEREOF, SHALL BE
OBLIGATED TO PAY THE AMOUNT OF SUCH INTEREST TO THE EXTENT THAT IT IS IN EXCESS
OF THE MAXIMUM AMOUNT OF INTEREST PERMITTED BY SUCH APPLICABLE USURY LAWS,
(C) ANY SUCH EXCESS WHICH MAY HAVE BEEN COLLECTED SHALL BE EITHER APPLIED AS A
CREDIT AGAINST THE THEN UNPAID PRINCIPAL AMOUNT THEREOF OR REFUNDED TO DEBTORS
AT SECURED PARTY'S OPTION, AND (D) THE EFFECTIVE RATE OF INTEREST SHALL BE
AUTOMATICALLY REDUCED TO THE MAXIMUM LAWFUL RATE OF INTEREST ALLOWED UNDER THE
APPLICABLE USURY LAWS AS NOW OR HEREAFTER CONSTRUED BY THE COURTS HAVING
JURISDICTION THEREOF. IT IS FURTHER AGREED THAT WITHOUT LIMITATION OF THE
FOREGOING, ALL CALCULATIONS OF THE RATE OF INTEREST CONTRACTED FOR, CHARGED OR
RECEIVED UNDER THE NOTES OR UNDER THIS INSTRUMENT, THE LOAN AGREEMENT OR ANY
OTHER DOCUMENTS OR INSTRUMENTS EVIDENCING, SECURING OR RELATING TO THE
OBLIGATIONS WHICH ARE MADE FOR THE PURPOSE OF DETERMINING WHETHER SUCH RATE
EXCEEDS THE MAXIMUM LAWFUL RATE OF INTEREST, SHALL BE MADE, TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAWS, BY AMORTIZING, PRORATING, ALLOCATING AND
SPREADING IN EQUAL PARTS DURING THE PERIOD OF THE FULL STATED TERM OF THE
OBLIGATIONS EVIDENCED THEREBY, ALL INTEREST AT ANY TIME CONTRACTED FOR, CHARGED
OR RECEIVED FROM DEBTORS OR OTHERWISE BY SECURED PARTY IN CONNECTION WITH THE
OBLIGATIONS.
Section 7.14 GOVERNING LAW. THIS INSTRUMENT AND ALL MATTERS ARISING
UNDER OR GROWING OUT HEREOF SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
ITS PRINCIPLES OF CONFLICTS OF LAWS, AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT THAT THE LAW OF THE STATE OF NEVADA SHALL GOVERN WITH RESPECT TO
PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE VALIDITY, CREATION,
PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS AND
REMEDIES OF THIS INSTRUMENT GRANTED HEREIN AS TO THAT PORTION OF THE COLLATERAL
LOCATED IN THE STATE OF NEVADA. EXCEPT AS TO THE VALIDITY, CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED HEREBY, DEBTORS AND
SECURED PARTY AGREE THAT THE TRANSACTIONS PROVIDED FOR HEREIN BEAR A REASONABLE
RELATIONSHIP TO THE COMMONWEALTH OF MASSACHUSETTS AND THAT THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS GOVERNS (A) ISSUES RELATING TO THE TRANSACTIONS
PROVIDED FOR HEREIN, INCLUDING THE VALIDITY AND ENFORCEABILITY OF AN AGREEMENT
RELATING TO SUCH TRANSACTIONS OR A PROVISION OF AN AGREEMENT, AND (B) THE
INTERPRETATION OR CONSTRUCTION OF AN AGREEMENT RELATING TO SUCH TRANSACTIONS OR
A PROVISION OF AN AGREEMENT.
Executed as of the date first above written.
DEBTORS:
FORELAND CORPORATION,
a Nevada corporation
By:
N. Thomas Steele, President
Tax I.D. No. 87-0422812
FORELAND REFINING CORPORATION,
a Texas corporation
By:
N. Thomas Steele, President
Tax I.D. No. 74-2881250
FORELAND ASSET CORPORATION,
a Nevada corporation
By:
N. Thomas Steele, President
Tax I.D. No. 84-1469802
ACKNOWLEDGMENT CERTIFICATES
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This instrument was acknowledged before me on August , 1998, by N. THOMAS
STEELE, as President of FORELAND CORPORATION, a Nevada corporation.
Notary Public
My commission expires:
(NOTARIAL SEAL)
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This instrument was acknowledged before me on August , 1998, by N. THOMAS
STEELE, as President of FORELAND REFINING CORPORATION, a Texas corporation.
Notary Public
My commission expires:
(NOTARIAL SEAL)
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
This instrument was acknowledged before me on August , 1998, by N. THOMAS
STEELE, as President of FORELAND ASSET CORPORATION, a Nevada corporation.
Notary Public
My commission expires:
(NOTARIAL SEAL)
<PAGE>
EXHIBIT "A"
Attached to and made a part of that certain
Deed of Trust,
Security Agreement, Assignment of Rents, Profits and Proceeds,
Financing Statement and Fixture Filing,
dated as of August 10, 1998 (the "Deed of Trust"),
from Foreland Corporation, Foreland Refining Corporation and
Foreland Asset Corporation, as Debtors,
to First American Title Company of Nevada, as Trustee,
and to and for the benefit of
Energy Income Fund, L.P.,
as Secured Party
1. Capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Deed of Trust.
2. The Deed of Trust covers all right, title and interest of Debtors (whether
now owned or hereafter acquired by operation of law or otherwise) in and to
the land specifically described in this Exhibit "A" and the land described
in or covered by the leases, rights-of-way and other documents and
instruments described in this Exhibit "A" whether or not such land is
specifically described in this Exhibit "A"; and nothing contained herein
shall be deemed to limit or restrict the interests covered by the Deed of
Trust or the liens and security interests created thereby.
3. This Exhibit "A" consists of this page and 2 pages numbered A-1 through A-2.
<PAGE>
EXHIBIT "B"
Attached to and made a part of that certain
Deed of Trust,
Security Agreement, Assignment of Rents, Profits and Proceeds,
Financing Statement and Fixture Filing,
dated as of August 10, 1998 (the "Deed of Trust"),
from Foreland Corporation, Foreland Refining Corporation and
Foreland Asset Corporation, as Debtors,
to First American Title Company of Nevada, as Trustee,
and to and for the benefit of
Energy Income Fund, L.P.,
as Secured Party
CONTRACTS
1. Capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Deed of Trust.
2. This Exhibit "B" consists of this page and 2 pages numbered B-1 through B-
2.
<PAGE>
EXHIBIT "C"
Attached to and made a part of that certain
Deed of Trust,
Security Agreement, Assignment of Rents, Profits and Proceeds,
Financing Statement and Fixture Filing,
dated as of August 10, 1998 (the "Deed of Trust"),
from Foreland Corporation, Foreland Refining Corporation and
Foreland Asset Corporation, as Debtors,
to First American Title Company of Nevada, as Trustee,
and to and for the benefit of
Energy Income Fund, L.P.,
as Secured Party
EQUIPMENT
1. Capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Deed of Trust.
2. This Exhibit "C" consists of this page and 5 pages numbered C-1 through C-5.
<PAGE>
EXHIBIT "D"
Attached to and made a part of that certain
Deed of Trust,
Security Agreement, Assignment of Rents, Profits and Proceeds,
Financing Statement and Fixture Filing,
dated as of August 10, 1998 (the "Deed of Trust"),
from Foreland Corporation, Foreland Refining Corporation
and Foreland Asset Corporation, as Debtors,
to First American Title Company of Nevada, as Trustee,
and to and for the benefit of
Energy Income Fund, L.P.,
as Secured Party
PERMITS
1. Capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Deed of Trust.
2. This Exhibit "D" consists of this page and 2 pages numbered D-1 through D-2.
