LETTER OF UNDERSTANDING
FUNDING AGREEMENT &
REFINANCING OF EXISTING SECURED
PROMISSORY NOTES
March 31, 2001 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Whereas Energy Producers, Inc. (a Nevada Corporation) (EPI) seeks to refinance
and extend the maturity of two promissory notes identified as: 1) Note dated
September 29, 2000 between EPI and Royal Crest, LLC (an Arizona Limited
Liability Company, hereafter called Royal Crest) and 2) Note dated May 12, 2000
between EPI and The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Living Trust, UTD 06/09/99
(Sparks Note).
Whereas Royal Crest agrees to refinance the Note identified above and labeled as
(1), and to extend additional credit to EPI in excess of the current line of
credit, currently $292,000. Royal Crest proposes to combine loan (1) and loan
(2) into a new loan agreement subject to the following provisions:
The beneficiary of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Living Trust, UTD 06/09/99
has agreed to release EPI from all repayment obligations, both past and future;
reference the Sparks Note. A signed release will be provided to EPI.
Additionally, the beneficiary of the Sparks Note has agreed to return to EPI,
the 250,000 restricted shares of EPI common stock (as represented by certificate
no. 1102) previously provided as collateral for the Sparks loan.
Royal Crest will now assume the risk and obligation of repaying the principal
and all interest due on the Sparks Note. Royal Crest is free to negotiate a
repayment plan with the beneficiary of the Sparks Note.
The term of the new loan shall begin March 31, 2001 and mature on January 31,
2003. The loan amount shall be $342,500.00 (see Schedule 1 attached). The
interest rate shall be 20% per annum. Interest-only payments shall be due and
payable beginning April 30, 2001. The monthly interest payment shall be
determined and based on a 365 day, calendar year. Under the terms of the new
loan agreement, upon maturity all penalties, outstanding accrued interest, and
principal shall be due and payable to Royal Crest on January 31, 2003.
Monthly interest payments shall be due and payable no later than the
twenty-fifth day of each month. Receipt of payment after the twenty-fifth day of
the month shall be deemed to be late. A one-time 5% (five percent) penalty shall
be assessed on any accrued interest not paid by the twenty-fifth day of the
month.
EPI may prepay the loan at any time. There shall be no prepayment penalties.
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In addition to any penalty or monthly interest payment due Royal Crest, Royal
Crest shall also collect $852.00 from the oil production proceeds received from
EPI's agent, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ or Baseline Capital, Ltd. The $852.00 shall be
deposited into an escrow account for the purpose of accumulating sufficient
funds in anticipation of paying the annual property taxes assessed by Young
County, Texas. In the event the payment received from EPI's agent is
insufficient to cover the minimum interest payment due plus $852.00 each month,
then future monthly receipts received from ▇▇. ▇▇▇▇▇▇ will be first used to pay
down any penalties, next accrued interest, and finally the amount designated for
the escrow account.
In the event the oil production proceeds received by Royal Crest in any month
exceed the amount required to bring EPI current with its payments, then EPI
shall have the choice of applying the excess funds toward paying down principal
or having the excess funds deposited in its general fund.
This new loan agreement shall be secured by the deed of trust, previously filed
December 22, 2000 at Volume 883; Page 865 in the Official Public Records of
Young County, Texas and shall be incorporated into this agreement by reference.
Additionally, EPI agrees to assign and to transfer title of 250,000 restricted,
common shares of EPI to Royal Crest, currently titled in the in the name of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
EPI shall instruct the transfer agent to cancel stock certificate number
1102(see above) and to reissue five replacement stock certificates titled in the
name of Royal Crest, LLC. Each stock certificate shall represent 50,000
restricted shares of Energy Producers, Inc. common stock. Royal Crest shall take
title to these five certificates and shall have earned three of these
certificates representing 150,000 of restricted, common shares upon the signing
of this agreement.
Upon maturity of the new loan on January 31, 2003, Royal Crest shall transfer
the title back to and assign two of the certificates representing 100,000 shares
to EPI and release all liens and rights to the Olney oil lease properties and
equipment, provided no defaults of any kind have occurred during the term of the
loan. In the event of default, EPI shall forfeit all rights to the 100,000
shares which shall then become the property of Royal Crest.
Acknowledged:
/s/▇▇▇ ▇▇▇▇▇▇
---------------------
Authorizing Officer
of Energy Producers, Inc.
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
-----------------------
Manager of ▇▇▇▇▇▇▇▇▇▇ Tax & Asset Mgmt., LLC for
Royal Crest, LLC
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SCHEDULE OF NEW LOAN PRINCIPAL
MARCH 31, 2001
A. CURRENT PRINCIPAL OUTSTANDING-LOAN (1) $ 282,736.51
B. ACCRUED INTEREST OUTSTANDING-MARCH, 2001 7,733.43
C. CURRENT PRINCIPAL OUTSTANDING- LOAN (2) 50,000.00
D. ACCRUED INTEREST OUTSTANDING- MARCH 15
THRU MARCH 31, 2001 375.00
E. FEES TO REFINANCE LOAN & PROCESS PAPERWORK 1,655.06
-----------
F. TOTAL PRINCIPAL - NEW LOAN AGREEMENT $ 342,500.00
==============
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SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, Energy Producers, Inc.(A Nevada
Corporation) (hereinafter together with its successors in title, called
"Maker"), promises to pay to the order of Royal Crest, LLC. (An Arizona Limited
Liability Company)(hereinafter called "Payee"), or its assigns, to the address
set forth below, the principal sum of Three Hundred Forty-Two Thousand Five
Hundred and No/100 Dollars ($342,500.00) in currency of the United States plus
150,000 restricted, common shares of Energy Producers, Inc. (See Schedule 1,
attached and made part of this agreement by reference).
Said sum shall be paid in the following matter: Interest-only payments shall be
made on the principal sum outstanding hereunder from time to time from the date
hereof until the principal sum or the unpaid portion thereof has been paid in
full, at a rate of twenty percent (20%) per annum. Monthly interest payments
shall become due and payable beginning April 30, 2001 and continuing through
January 31, 2003. All payments are due by the twenty-fifth day of the month.
Receipt of payment after the twenty-fifth day of the month shall be considered
late. A late payment penalty of five (5%) of the amount of interest due and
payable shall be assessed. A final or balloon payment including all penalties,
accrued interest plus the outstanding principal balance shall be due and payable
on or before January 31, 2003. Monthly interest payments shall be determined and
based on a 365 day, calendar year.
In addition to the monthly interest payment, a sum equal to $852.00 monthly
shall be paid to Royal Crest, LLC. Royal Crest, LLC shall deposit the $852.00
into an escrow account. This account shall be established for the purpose of
accumulating the necessary funds to satisfy the annual property taxes imposed by
Young County, Texas. These taxes are assessed upon the leases owned, in part, by
the Maker. Royal Crest, LLC assumes the responsibility of making those property
tax payments to the Young County assessors office in a timely manner provided
the funds necessary to meet the annual property tax assessment are on deposit in
the escrow account.
Any and all payments made to Royal Crest, LLC shall be first applied to
penalties, next to accrued interest, and finally applied to the sum of $852.00,
the property tax assessment, which shall be deposited into the escrow account.
Maker shall pay the amounts due hereunder to the Payee at the following address:
Royal Crest, LLC
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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Page 2 of 4
Maker has previously instructed its agent, ▇▇▇▇ ▇▇▇▇▇▇ and/or Baseline Capital,
Ltd. to forward all oil production payments made payable to Royal Crest, LLC and
whose address appears above. The agent shall be instructed to continue sending
those oil production payments to Royal Crest, LLC.
The monthly payment, defined above, shall be paid from the Maker=s net
production proceeds@; from those certain oil and/or gas producing properties
located in Young County, Texas and more fully described in the Deed of Trust
which secures this note. As used herein net production proceeds means all
revenue received by or otherwise credited to Maker=s interests in, and to the
oil and gas Properties located in Young County, Texas, from the sale of
hydrocarbons in, under or produced from the Properties after deducting
royalties, existing overriding royalties, normal and reasonable operating
expenses, the management, administrative and operating fees, and severance, ad
valorem and excise taxes.
In the event that the net production proceeds received by or otherwise credited
to the Maker's interests are insufficient to cover any monthly interest amount
due and payable, the Payee is allowed to collect prior unpaid penalties, accrued
interest, and property tax assessments from future oil production payments.
If this note is not paid when due and is placed in the hands of an attorney for
collection, or suit is filed hereon, or proceedings are made in probate,
bankruptcy, receivership, arrangement or otherwise for collection hereof, Maker
and each endorser, guarantor and surety liable upon or for payment of this note
agree to pay all reasonable expenses and costs incurred by Payee in connection
with such collection, suit or proceedings, including without limitations,
reasonable attorney fees.
Maker reserves the right to prepay all or any portion of the remaining principal
balance due at any time, and from time to time, without penalty or fee. Any
prepayment hereunder shall be applied first to accrued, unpaid interest, if any,
owing on this note and the balance to principal.
Upon any default in payment of this note or any default or event of default
under the Deed of Trust securing this Note (as herein defined) or any other
document or instrument executed in connection herewith or therewith including
100,000 restricted shares of the Makers common stock securing this instrument
(see Schedule 1), Payee shall be entitled to all rights and remedies under the
Deed of Trust and the laws of the State of Arizona, including without
limitation, the right to declare all amounts under the note immediately due and
payable.
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Page 3 of 4
In the event Maker sells, trades, or otherwise transfers its ownership interest
in the properties more fully described in the Deed of Trust which secures this
Note, then this Note and all accrued unpaid interest becomes immediately due and
payable to the Payee.
Maker, as well as any persons or entities which become liable for the payment of
this note, hereby expressly (a) waives (i) presentment for payment of this note,
(ii) protest, bringing of suit or diligence in collection, (iii) notice of
default, demand, notice of intent to accelerate and notice of acceleration
and/or (iv) any defense on account of the extension of time payments; (b)
consents to any release of any party primarily or secondarily liable hereon; and
(c) agrees that (i) the acceptance of late payment(s) hereunder by Payee hereof,
(ii) waiver of any event(s) of default hereunder and/or any instrument securing
or guaranteeing the payment hereof or (iii) other forgiveness of any other
defaults by the Maker, shall not constitute a waiver by the payee hereof of any
subsequent defaults, late payments or other violations of Maker=s obligations
hereunder and/or in the terms of any instrument securing or guaranteeing the
payment hereof.
This note is being executed, delivered, and secured by that certain Deed of
Trust filed December 22, 2000 at Volume 883; Page 865 in the Official Public
Records of Young County, Texas herewith executed by Maker for the benefit of
Payee (the Deed of Trust@).
Any check, draft, money order or other instruments given in payment of all or
any portion of this note may be accepted by the Payee and handled for collection
in the customary manner, but that actual cash proceeds of such instruments are
unconditionally received by the Payee and applied to this Note in the manner
herein above provided.
This note shall be construed in accordance with the laws of the state of Arizona
except for conflicts of laws or principals which would result in the laws of
another jurisdiction to apply.
IN WITNESS WHEREOF, Maker has executed this note as of the 31st day of March,
2001. Energy Producers, Inc. ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇
BY: /s/▇▇▇ ▇▇▇▇▇▇
-------------------
For Energy Producers, Inc.
Authorized signature of corporate officer is required
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Chairman and CEO
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SCHEDULE 1
MARCH 31, 2001
CURRENT PRINCIPAL OUTSTANDING;
LOAN DATED SEPTEMBER 29, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, LLC. $ 282,736.51
ACCRUED INTEREST OUTSTANDING;
LOAN DATED SEPTEMBER 29, 2000. 7,733.43
CURRENT PRINCIPAL OUTSTANDING;
LOAN DATED MAY 12, 2000 BETWEEN EPI AND
THE ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE LIVING
TRUST, U/A 06/09/99. 50,000.00
ACCRUED INTEREST OUTSTANDING;
LOAN DATED MAY 12, 2000. 375.00
FEES TO REFINANCE LOANS & PROCESS
PAPERWORK. 1,655.06
------------
TOTAL PRINCIPAL - NEW LOAN AGREEMENT $ 342,500.00
============
STOCK CERTIFICATE NO. 1102 REPRESENTING 250,000 COMMON, RESTRICTED SHARES
OF ENERGY PRODUCERS, INC. STOCK (CUSIP 29270L 10 5) IS TITLED IN THE NAME
OF ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. THE MAKER AGREES THAT IN RETURN FOR ROYAL CREST, LLC
EXTENDING ADDITIONAL CREDIT AND ASSUMING THE LIABILITY OF REPAYING $50,000
OF PRINCIPAL PLUS INTEREST OWED TO THE ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE LIVING
TRUST U/A 06/09/99, ROYAL CREST, LLC SHALL RECEIVE, IN ADDITION TO THE
PAYMENT OF ALL INTEREST AND PRINCIPAL PROVIDED FOR IN THIS NOTE, TITLE TO
150,000 OF THE MAKER=S RESTRICTED SHARES OF COMMON STOCK. THE REMAINING
100,000 SHARES OF STOCK SHALL BE ASSIGNED AND TITLED IN THE NAME OF ROYAL
CREST, LLC THROUGHOUT THE LIFE OF THE LOAN AGREEMENT. PROVIDING ALL
PROVISIONS OF THE LOAN AGREEMENT ARE SATISFACTORILY COMPLIED WITH AND NO
DEFAULT OCCURS, THEN THE 100,000 SHARES OF STOCK SHALL BE RETURNED TO THE
MAKER. IN THE EVENT OF DEFAULT ON THE LOAN, ROYAL CREST SHALL HAVE THE
RIGHT TO TAKE PERMANENT TITLE TO THESE SHARES OF STOCK.
EPI AGREES TO INSTRUCT THE COMPANY'S TRANSFER AGENT TO REPLACE CERTIFICATE
NO. 1102 WITH FIVE CERTIFICATES, EACH REPRESENTING 50,000 COMMON,
RESTRICTED SHARES OF ENERGY PRODUCERS, INC. AND TITLED IN THE NAME OF ROYAL
CREST, LLC.
THE FIVE CERTIFICATES SHALL BE FORWARDED TO ROYAL CREST, LLC FOR
SAFEKEEPING AND ARE MADE PART OF THIS LOAN AGREEMENT.
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DEED OF TRUST
THIS DEED OF TRUST (Security Instrument is made on September 29, 2000. The
trustor is ENERGY PRODUCERS, INC., a Nevada Corporation (herein called Borrower)
whose address is ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. The
trustee is ROYAL CREST, LLC, an Arizona Limited Liability Company, (herein
called Trustee@) whose address is: c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The beneficiary is ROYAL CREST, LLC, an Arizona
Limited Liability Company, and whose address is the same as listed above (herein
called lender).
Borrower owes Lender the principal sum of TWO HUNDRED NINETY-TWO THOUSAND
DOLLARS AND NO/100 Dollars (U.S. $292,000). This debt is evidenced by Borrower=s
Note dated the same date as this Security Instrument (Note), which provides for
interest-only, monthly payments, with the full debt, if not paid earlier, due
and payable on October 1, 2001. This Security Instrument secures to the Lender:
(a) the repayment of the debt evidenced by the Note, with interest, and all
renewals, extensions and modifications of the Note; (b) the payment of all other
sums, with interest, advanced under paragraph 6 to protect the security of this
Security Instrument; and (c) the performance of Borrower=s covenants and
agreements under this Security Instrument and the Note. For this purpose,
Borrower irrevocably grants and conveys to Trustee, in trust, with power of
sale, the following described property located in Young County, Texas;
See Exhibit `AA' attached hereto and by Reference made a part hereof
TOGETHER WITH all the improvements now or hereafter erected on the property, and
all easements, appurtenances, and fixtures now or hereafter a part of the
property. All oil and/or gas production and all rights attributable to those
leases as described in Exhibit A. All replacements and additions shall also be
covered by this Security Instrument. All of the foregoing is referred to in this
Security Instrument as the Property.
Borrower covenants that Borrower is lawfully seized of the Property hereby
conveyed and has the right to grant and convey the Property and that the
Property is unencumbered, except for encumbrances of record.
Borrower warrants and will defend generally the title to the Property against
all claims and demands, subject to any encumbrances of record.
UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:
1. Payment of Interest, Late Charges, and Principal. Borrower shall promptly pay
when due the interest and principal on the debt evidenced by the Note and late
charges due under the Note.
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2. Application of Payments. Unless applicable law provides otherwise, all
payments received by Lender under paragraph 1 shall be applied; first, to
accrued interest past due; second, to any late charges due under the Note;
third, to interest due in the most recent month; fourth, to any prepayment of
principal.
3. Charges, Liens. Borrower shall pay all taxes, assessments, charges, fines,
impositions, principal and interest payments which may have or attain priority
over this Security Instrument, and leasehold payments or ground rents, if any.
Borrower shall pay all obligations referred to herein this paragraph on time and
directly to the entity or person owed payment.
4. Hazard/Property Insurance. Borrower shall keep all improvements now existing
or hereafter erected on the Property insured against hazards. This insurance
shall be maintained in the amount and for the periods mandated by Baseline
Capital, Ltd. If Borrower fails to maintain coverage described above, Lender
may, at Lender=s option, obtain coverage to protect Lender=s rights in the
Property in accordance with paragraph 6.
If Lender requires, Borrower shall promptly give to Lender all receipts of paid
premiums and renewal notices. In the event of a loss, Borrower shall give prompt
notice to the Lender and to the insurance carrier. Lender may make proof of loss
if not made promptly by Borrower.
Unless Lender and Borrower otherwise agree in writing, insurance proceeds shall
be applied to restoration or repair of the Property damaged, if the restoration
or repair is economically feasible and the Lender=s security is not lessened. If
the restoration or repair is not economically feasible or the Lender=s security
would be lessened, the insurance proceeds shall be applied to the sums secured
by this Security Instrument, whether or not then due, with any excess paid to
Borrower. If Borrower abandons the Property, or does not answer within 30 days a
notice from Lender that the insurance carrier has offered to settle a claim,
then Lender may collect the insurance proceeds. Lender may use the proceeds to
repair or restore the Property or to pay sums secured by this or any other
Security Instrument having priority over this Instrument, whether or not then
due. The 30-day period will begin when the notice is given.
Unless Lender and Borrower otherwise agree in writing, any application of
proceeds to principal shall not extend or postpone the due date of the monthly
payments referred to in paragraph 1 or change the amount of the payments. If
under paragraph 18 the Property is acquired by Lender, Borrower=s right to any
insurance policies and proceeds resulting from damage to the Property prior to
the acquisition shall pass to Lender to the extent of the sums secured by this
Security Instrument immediately prior to the acquisition.
5. Preservation, Maintenance & Protection of the Property.
Borrower shall establish and use the Property for the purposes of drilling for,
exploring for, and the recovery of oil, oil byproducts, and/or natural gas for
the purposes of reselling the product in the marketplace. Borrower shall not
destroy, damage, or impair the Property, allow the Property to deteriorate, or
commit waste on the Property. Borrower shall be in default if any forfeiture
action or proceeding, whether civil or criminal, is begun that in the Lender=s
good faith judgment could result in a forfeiture of the Property or otherwise
materially impair the lien created by this Security Instrument or Lender=s
security interest.
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6. Protection of Lenders Rights in the Property.
If Borrower fails to perform the covenants and agreements contained in this
Security Instrument, or there is a legal proceeding that may significantly
affect Lender=s rights in the Property (such as proceeding in bankruptcy,
probate, for condemnation or forfeiture or to enforce laws or regulations), then
Lender may do and pay for whatever is necessary to protect the value of the
Property and Lender=s rights in the Property.
If there are liens upon the Property which are prior in time or prior in right,
then Borrower promises to comply with the terms of these prior liens. If
Borrower fails to comply with such terms and defaults on these obligations or
liens, such default shall also be considered a default of this Deed of Trust.
Lender=s actions may include paying any sums secured by a lien which has
priority over this Secured Instrument, appearing in Court, paying reasonable
attorneys= fees and entering on the Property to make repairs. Although Lender
may take action under this paragraph, Lender does not have to do so.
Any amounts disbursed by Lender under this paragraph 6, shall become additional
debt of Borrower secured by this Security Instrument. Unless Borrower and Lender
agree to other terms of payment, these amounts shall bear interest from the date
of disbursement at the Note rate and shall be payable, with interest, upon
notice from Lender to Borrower requesting payment.
7. Inspection. Lender or its agent make reasonable entries upon and inspections
of the Property. Lender shall give Borrower notice at the time of or prior to an
inspection specifying reasonable cause for the inspection.
8. Condemnation. The proceeds of any award or claim for damages, direct or
consequential, in connection with any condemnation or other taking of any part
of the Property, or for conveyance in lieu of condemnation, are hereby assigned
and shall be paid to Lender.
In the event of a total taking of the Property, the proceeds shall be applied to
the sums secured by this Security Instrument, whether or not then due, with any
excess paid to Borrower. In the event of a partial taking of the Property in
which the fair market value of the Property immediately before the taking is
equal to or greater than the amount of the sums secured by this Security
Instrument immediately before the taking, unless Borrower and Lender otherwise
agree in writing, the sums secured by this Security Instrument shall be reduced
by the amount of the proceeds multiplied by the following fraction: (a) the
total amount of the sums secured immediately before the taking, divided by (b)
the fair market value of the Property immediately before the taking. Any balance
shall be paid to Borrower. In the event of a partial taking of the Property in
which the fair market value of the Property immediately before the taking is
less than the amount of the sums secured immediately before the taking, unless
Borrower and Lender otherwise agree in writing or unless applicable law
otherwise provides, the proceeds shall be applied to the sums secured by the
Security Instrument whether or not the sums are then due.
If the Property is abandoned by Borrower, or if, after notice by Lender to
Borrower that the condemner offers to make an award or settle a claim for
damages, Borrower fails to respond to Lender within 30 days after the date the
notice is given, Lender is authorized to collect and apply the proceeds, at its
option, either to restoration or repair of the Property or to the sums secured
by this Security Instrument, whether or not then due.
Unless Lender and Borrower otherwise agree in writing, any application of the
proceeds to principal shall not extend or postpone the due date of the monthly
payments referred to in paragraph 1 or change the amount of such payments.
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9. Borrower Not Released; Forbearance By Lender Not a Waiver. Extension of time
for payment or modification of the sums secured by this Security Instrument
granted by Lender to any successor in interest of Borrower shall not operate to
release the liability of the original Borrower or Borrowers successors in
interest. Lender shall not be required to commence proceedings against any
successor in interest or refuse to extend time for payment or otherwise modify
the sums secured by this Security Instrument by reason of any demand made by the
original Borrower or Borrower=s successors in interest. Any forbearance by
Lender in exercising any right or remedy shall not be a waiver of or preclude
the exercise of any right or remedy.
10. Successors and Assigns Bound. The covenants and agreements of this Security
Instrument shall bind and benefit the successors and assigns of Lender and
Borrower, subject to the provisions of paragraph 15.
11. Loan Charges. If the loan secured by this Security Instrument is subject to
a law which sets maximum loan charges, and that law is finally interpreted so
that the interest or other loan charges collected or to be collected in
connection with the loan exceed the permitted limits, then: (a) any such loan
charge shall be reduced by the amount necessary to reduce the charge to the
permitted limit; and (b) any sums already collected from Borrower which exceeded
permitted limits will be refunded to Borrower. Lender may choose to make this
refund by reducing the principal owed under the Note or by making a direct
payment to Borrower. If a refund reduces principal, the reduction will be
treated as a partial prepayment without any prepayment charge under the Note.
12. Notices. Any notice to Borrower provided for in this Security Instrument
shall be given by delivering it or by mailing it by first class mail unless
applicable law requires use of another method. The notice shall be directed to
the Borrower=s address or any other address Borrower designates by notice to
Lender. Any notice to Lender shall be given by first class mail to Lender=s
address stated herein or any other address Lender designates by notice to
Borrower. Any notice provided for in this Security Instrument shall be deemed to
have been given to Borrower or Lender when given as provided in this paragraph.
13. Governing Law; Severability. This Security Instrument shall be governed by
federal law and the law of the jurisdiction in which the Property is located. In
the event that any provision or clause of this Security Instrument or the Note
conflicts with applicable law, such conflict shall not affect other provisions
of this Security Instrument or the Note which can be given effect without the
conflicting provision. To this end the provisions of this Security Instrument
and the Note are declared to be severable.
14. Borrowers Copy. Borrower shall be given one conformed copy of the Note and
of this Security Instrument.
15. Transfer of the Property. If all or any part of the Property or any interest
in it is sold or transferred without the Lenders prior written consent, Lender
may, at its option, require immediate payment in full of all sums secured by
this Security Instrument. However, this option shall not be exercised by Lender
if exercise is prohibited by federal law as of the date of this Security
Instrument. If Lender exercises this option, Lender shall give Borrower notice
of acceleration. The notice shall provide a period of not less than 30 days from
the date the notice is delivered or mailed within which Borrower must pay all
sums secured by this Security Instrument. If Borrower fails to pay these sums
prior to the expiration of this period, Lender may invoke any remedies permitted
by this Security Instrument without further notice or demand on Borrower.
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16. Borrowers right to Reinstate. If Borrower meets certain conditions, Borrower
shall have the right to have enforcement of this Security Instrument
discontinued at any time prior to the earlier of: (a) 5 days (or such other
period as applicable law may specify for reinstatement) before sale of the
Property pursuant to any power of sale contained in this Security Instrument; or
(b) entry of a judgment enforcing this Security Instrument. Those conditions are
that Borrower:(a) pays Lender all sums which then would be due under this
Security Instrument and the Note as if no acceleration had occurred; (b) cures
any default of any other covenants or agreements: (c) pays all expenses incurred
in enforcing this Security Instrument, including, but not limited to, reasonable
attorney=s fees; and (d) takes such action as Lender may reasonably require to
assure that the lien of this Security Instrument, Lenders rights in the Property
and Borrower=s obligation to pay the sums secured by this Security instrument
shall continue unchanged. Upon reinstatement by Borrower, this Security
Instrument and the obligations secured hereby shall remain fully effective as if
no acceleration had occurred. However, this right to reinstate shall not apply
in the case of acceleration under paragraph 15.
17. Sale of Note. The Note or a partial interest in the Note (together with this
Security Instrument) may be sold one or more times without prior notice to
Borrower. A sale may result in a change in the entity that collects monthly
payments due under the Note and this Security Instrument. If there is a sale of
the Note, the Borrower will be given written notice of the change in accordance
with paragraph 12 and applicable law. The notice will state the name and address
to which payments should be made. The notice will also contain any other
information required by applicable law.
NON-UNIFORM COVENANTS. Borrower and Lender further agree as follows:
18. Acceleration: Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower=s breach of any covenant or agreement in this
Security Instrument (but not prior to acceleration under paragraph 15 unless
applicable law provides otherwise). The notice shall specify: (a) the default;
(b) the action required to cure the default; (c) a date, not less than 30 days
from the date the notice is given to Borrower, by which the default must be
cured; and (d) that failure to cure the default on or before the date specified
in the notice may result in acceleration of the sums secured by this Security
Instrument and sale of the Property. The notice shall further inform Borrower of
the right to reinstate after acceleration and the right to bring a court action
to assert the non-existence of a default or any other defense of Borrower to
acceleration and sale. If the default is not cured on or before the date
specified in the notice, Lender at its option may require immediate payment in
full of all sums secured by this Security Instrument without further demand and
may invoke the power of sale and any other remedies permitted by applicable law.
Lender shall be entitled to collect all expenses incurred in pursuing the
remedies provided in this paragraph 18, including, but not limited to,
reasonable attorneys= fees and cost of title evidence.
If the Lender invokes the power of sale, Lender shall give written notice to
Trustee of the occurrence of an event of default and of Lender=s election to
cause the Property to be sold. Trustee shall record a notice of sale in each
county in which any part of the Property is located and shall mail copies of the
notice as prescribed by applicable law to Borrower and to the other persons
prescribed by applicable law.
12
After the time required by applicable law and after publication and posting of
the notice of sale, Trustee, without demand on Borrower, shall sell the Property
at public auction to the highest bidder for cash at the time and place
designated in the notice of sale. Trustee may postpone sale of the Property by
public announcement at the time and place of any previously scheduled sale.
Lender or its designee may purchase the Property at any sale.
Trustee shall deliver to the purchaser Trustees deed conveying the Property
without covenant or warranty, expressed or implied. The recitals in the Trustees
deed shall be prima facie evidence of the truth of the statements made therein.
Trustee shall apply the proceeds of the sale in the following order: (a) to all
expenses of the sale, including, but not limited to, reasonable Trustees and
attorneys fees; (b) to any sums secured by this Security Instrument; and (c) any
excess to the person or persons legally entitled to it or to the clerk of the
superior court of the county in which the sale took place.
19. Release. Upon payment of all sums secured by this Security Instrument,
Lender shall release this Security Instrument without charge to Borrower.
Borrower shall pay any recordation costs.
20. Substitute Trustee. Lender may, for any reason or cause, from time to time
remove Trustee and appoint a successor trustee to any Trustee appointed
hereunder. Without conveyance of the Property, the successor trustee shall
succeed to all the title, power and duties conferred upon Trustee herein and by
applicable law.
21. Time of Essence. Time is of the essence in each covenant of this Security
Instrument.
22. Mailing Address. Borrowers mailing address is ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇;
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Trustees mailing address is Royal Crest, LLC; c/o ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇; ▇▇ ▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants
contained in this Security Instrument.
Borrower: ENERGY PRODUCERS, INC.
BY: /s/ ▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------- -------------------
▇▇▇ ▇▇▇▇▇▇, Chairman & CEO ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
STATE OF ARIZONA )
)ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this______ day
of December, 2000, by__________________________
My Commission expires:
_______________________________
Notary Public
14
EXHIBIT AA
Attached and made part of that certain
Deed of Trust dated September 29, 2000
1. ▇▇▇▇▇▇▇▇ Shallow Lease (Railroad Commission Lease #29533) and ▇▇▇▇▇▇▇▇ Deep
Lease (Railroad Commission Lease #29481): Oil and Gas Lease dated 08/29/47,
recorded in Volume 233, Page 495 of the Deed of Records of Young County, Texas
from ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ as Lessor and Wm. ▇. ▇▇▇▇▇▇ as Lessee, covering 160
acres, more or less, in the North one-half of the T.E.& L. Co. Survey ▇▇. ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇.
The above said lease is conveyed SAVE AND EXCEPT the rights from the surface
down through the ▇▇▇▇▇▇ Pay interval in the 20 acre tract which is in the form
of a square centered around the ▇▇▇▇▇▇▇▇ #1B well which is owned by ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. The ▇▇▇▇▇▇ Pay interval is defined as the interval from 3300
feet to 3400 feet below the surface in the ▇▇▇▇▇▇▇▇ #1B well. The rights to all
depths below the ▇▇▇▇▇▇ Pay interval within the 20 acre tract are conveyed.
The above said lease is conveyed SAVE AND EXCEPT the rights below 1500 feet for
a 10 acre tract in the northwest corner of the Survey that is committed to the
K-W Unit. The 10 acre tract reserved to the K-W Unit is more particularly
described as follows:
10 acres out of the T.E.& ▇ ▇▇. ▇▇▇▇▇▇ #▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇;
Beginning at a point in the North Survey line of said Survey at a distance of
300 feet East of the Northwest corner of the Survey as the Northwest corner of
the tract; Thence South in a direction parallel to the West line of the Survey
for a distance of 660 feet to a point as the Southwest corner of the tract;
Thence East in a direction parallel to the North line of the Survey for a
distance of 660 feet to a point in the Southeast corner of the tract; Thence
North in a direction parallel to the West line of the Survey for a distance of
660 feet to a point in the North line of the Survey for the Northeast corner of
the tract; Thence West along the North line of the Survey for a distance of 660
feet to the place of beginning.
This conveyance is for all of Assignors= working interests. The Assignee is to
receive working interests of 100% and net revenue interests of 80% for the
conveyed leases.
2. K-W Unit (railroad Commission Lease #29637): The K-W Unit is comprised of 20
acres consisting of 10 acres from the ▇. ▇▇▇▇▇▇▇▇ Survey, Abstract 1701 and 10
acres from the T.E.& L. Co. Survey #173, Abstract 420, more particularly
described as follows:
10 acres out of Oil and Gas Lease dated August 5, 1998, recorded in Volume 835,
pages 589 and 590 in Young County Deed of Records, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as
Lessor and ▇▇▇▇ ▇▇▇▇▇▇ as Lessee covering 40 acres from the ▇. ▇▇▇▇▇▇▇▇ Survey,
Abstract 1701, Young County, Texas; The 10 acres designated to the K-W Unit are
described as follows: (CONTINUED)
15
Beginning at a point in the South Survey line of said Survey at a distance of
560 feet East of the Southwest corner of the Survey as the Southwest corner of
the tract; Thence North in a direction parallel to the West line of the Survey
for a distance of 660 feet to a point as the Northwest corner of the tract;
Thence East in a direction parallel to the South line of the Survey for a
distance of 660 feet to a point for the Northeast corner of the tract; Thence
South in a direction parallel to the West line of the Survey for a distance of
660 feet to a point in the South line of the Survey for the Southeast corner of
the tract; Thence West along the South line of the Survey for a distance of 660
feet to the place of beginning.
10 acres out of Oil and Gas Lease dated 08/29/47, recorded in Volume 233, Page
495 of the Deed of Records of Young County, Texas from ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ as
Lessor and Wm. ▇. ▇▇▇▇▇▇ as Lessee, covering 160 acres, more or less, in the
North one-half of the T.E.& L. Co. Survey ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇. The 10
acres designated to the K-W Unit are described as follows: Beginning at a point
in the North Survey line of said Survey at a distance of 300 feet East of the
Northwest corner of the Survey as the Northwest corner of the tract; Thence
South in a direction parallel to the West line of the Survey for a distance of
660 feet to a point as the Southwest corner of the tract; Thence East in a
direction parallel to the North line of the Survey for a distance of 660 feet to
a point for the Southeast corner of the tract; Thence North in a direction
parallel to the West line of the Survey for a distance of 660 feet to a point in
the North line of the Survey for the Northeast corner of the tract; Thence West
along the North line of the Survey for a distance of 660 feet to the place of
beginning.
The above described K-W Unit and conveyance is limited to depths below 1500 feet
subsurface. This conveyance is for all of Assignors= working interest. The
Assignee is to receive working interests of 100% and net revenue interests of
not less than 78.867797% in the K-W Unit. The net working interest is comprised
of 40% contributed from the ▇▇▇▇▇▇▇▇ lease and the balance from the ▇▇▇▇▇▇
lease.
3. ▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇) Lease (Railroad Commission Lease #07289): Assignors are
conveying a 20 acre lease out of an Oil and Gas Lease dated 08/29/47, recorded
in Volume 233, Page 495 of the Deed of Records of Young County, Texas from ▇▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇ as Lessor and Wm. ▇. ▇▇▇▇▇▇ as Lessee, covering 160 acres, more or
less, in the North one-half of the T.E. & L. Co. Survey ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇.
The 20 acre lease conveyed is more particularly described as the rights from the
surface down through the ▇▇▇▇▇▇ Pay interval in a 20 acre tract which is in the
form of a square centered around the ▇▇▇▇▇▇▇▇ #1B well. The ▇▇▇▇▇▇ Pay interval
is defined as the interval from 3300 feet to 3400 feet below the surface in the
▇▇▇▇▇▇▇▇ #1B well. The rights to all depths below the ▇▇▇▇▇▇ Pay interval within
the 20 acre tract are not conveyed herein.
This conveyance is for all of Assignors= working interests. The Assignee is to
receive working interests of 100% and net revenue interests of 80% for the
conveyed leases.
16
4. Oil and Gas Lease dated March 29, 1998, recorded in Volume 835, Pages 423 and
424, in the Deed of Records of Young County, Texas from ▇.▇. ▇▇▇▇▇▇ as agent for
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Lessor, and ▇▇▇▇▇▇ Drilling Company as Lessee, covering the
following described lands in Young County, Texas:
Being all of the south half (S/2) of the T.E. & L. Company Survey ▇▇. ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇, lying north of state Highway 114, Save and Except a 3 acre tract
conveyed to ▇▇▇▇ ▇▇▇▇▇▇ and a portion conveyed for lodge use all as shown of
record.
This conveyance is for all Assignors= working interests. The Assignee is to
receive working interests of 100% and net revenue interests of 82% for the
Subject Lease.
5. A certain Oil and Gas Lease dated May 29, 1981, between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, et
al, as Lessors, and Petrobid, as Lessee, covering the following described lands
in Young County, Texas as follows:
93 acres out of T.E.& L. Co. Survey 158, Abstract 405 and 166 acres out of T.E.&
L. Co. Survey 159, Abstract 406;
Said Lease being of record in Volume 585, Page 52 of the Deed of Records of
Young County, Texas, and amended by instrument of record in Volume 631, Page 588
of the Deed of Records of Young County, Texas.
6. A certain Oil and Gas Lease dated March 28, 1983 between ▇.▇. ▇▇▇▇▇▇▇, ▇▇, as
Lessor, and ▇▇▇▇ ▇▇▇▇▇▇ Drilling Company, as Lessee, covering the following
described lands in Young County, Texas as follows:
50 acres, more or less, out of Block 4 of the Dieter Subdivision of the T.E. &L.
Co. Survey 159, Abstract 406, being the same tract conveyed to ▇.▇. ▇▇▇▇▇▇▇ by
▇.▇. ▇▇▇▇▇▇▇▇▇ and wife by deed dated October 19, 1917, and recorded in Volume
65, Page 297 of the Deed of Records of Young County, Texas.
Said lease is recorded in Volume 620, Page 448 of the Deed of Records, Young
County, Texas, with an Addendum to said lease recorded in Volume 631, Page 807
of the Deed of Records of Young County, Texas.
7. A certain Oil and Gas Lease dated March 28, 1983 between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Shore, as Lessor, and ▇▇▇▇ ▇▇▇▇▇▇ Drilling Company, as Lessee, covering the
following described lands in Young County, Texas as follows:
50 acres, more or less, out of Block 4 of the Dieter Subdivision of the T.E. &L.
Co. Survey 159, Abstract 406, being the same tract conveyed to ▇.▇. ▇▇▇▇▇▇▇ by
▇.▇. ▇▇▇▇▇▇▇▇▇ and wife by deed dated October 19, 1917, and recorded in Volume
65, Page 297 of the Deed of Records of Young County, Texas.
Said lease is recorded in Volume 620, Page 450 of the Deed of Records, Young
County, Texas, with an Addendum to said lease recorded in Volume 631, Page 643
of the Deed of Records of Young County, Texas.
17
8. A certain Oil and Gas Lease dated June 1, 1983 between ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, el
al, as Lessors, and ▇▇▇▇ ▇▇▇▇▇▇ Drilling Company, as Lessee, covering the
following described lands in Young County, Texas as follows:
50 acres, more or less, out of Block 4 of the Dieter Subdivision of the T.E. &L.
Co. Survey 159, Abstract 406, being the same tract conveyed to ▇.▇. ▇▇▇▇▇▇▇ by
▇.▇. ▇▇▇▇▇▇▇▇▇ and wife by deed dated October 19, 1917, and recorded in Volume
65, Page 297 of the Deed of Records of Young County, Texas.
Said lease is recorded in Volume 628, Page 327 of the Deed of Records, Young
County, Texas, with an Addendum to said lease recorded in Volume 631, Page 643
of the Deed of Records of Young County, Texas.
Whereas, 40 acres from the lease first above described and 40 acres from the
latter three leases above mentioned have been included in the ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇
80 acre unit. The ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Unit is more particularly described as
follows:
Being 80 acres out of Blocks 2 and 4 of the Dieter Subdivision of the T.E. & L.
Co. Survey 159, Abstract 406, in Young County, Texas; Beginning at a point in
the West Boundary Line of Block 4 of the Dieter Subdivision of the T.E. & L. Co.
Survey 159, Abstract 406, said point being____ feet South of the Northwest
corner of said Block 4; Thence East 1320 feet for the Northeast corner of said
80 acre tract; Thence South 1320 feet past the West Boundary Line of Block 4 of
the Dieter Subdivision and the East Line of Block 2 of the Dieter Subdivision,
2, 640 feet in all to a point in Block 2 of the Dieter Subdivision and the
Southwest corner of the 80 acre tract; Thence North 1320 feet to the Northwest
corner of said 80 acre tract; Thence East 1320 feet to the Place of Beginning.
This conveyance covers and includes oil and gas rights below the depth of 1600
feet from the surface only. The conveyance is for all of the Assignors working
interest. The Assignee is to receive working interests of 100% and net revenue
interests of 78.125% for the Subject Lease.
18