EXHIBIT 4.7
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FORM OF
TREASURE ISLAND ROYALTY TRUST
AMENDED AND RESTATED ROYALTY TRUST AGREEMENT
_______, 2002
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................................................................2
Section 1.1. Defined Terms................................................................................2
ARTICLE II. NAME AND PURPOSE OF THE TRUST.........................................................................5
Section 2.1. Name.........................................................................................5
Section 2.2. Purposes.....................................................................................5
Section 2.3. Nature of the Trust..........................................................................5
Section 2.4. Transfer of Trust Property to the Trust......................................................6
Section 2.5. Issuance of Units............................................................................6
ARTICLE III. ADMINISTRATION OF THE TRUST..........................................................................6
Section 3.1. General......................................................................................6
Section 3.2. Limited Power to Dispose of Royalties........................................................6
Section 3.3. No Power to Engage in Business, Make Investments or Enter into Certain Contracts.............7
Section 3.4. Interest on Cash on Hand.....................................................................8
Section 3.5. Power to Settle Claims.......................................................................8
Section 3.6. Power to Contract for Services...............................................................8
Section 3.7. Payment of Liabilities of Trust..............................................................9
Section 3.8. Establishment of Reserves....................................................................9
Section 3.9. Limited Power to Borrow......................................................................9
Section 3.10. Income and Principal.....................................................................10
Section 3.11. Term of Contracts........................................................................10
Section 3.12. Transactions between Related Parties.....................................................10
Section 3.13. No Bond Required.........................................................................10
Section 3.14. Timing of Trust Income and Expenses......................................................10
Section 3.15. Divestiture of Units.....................................................................10
Section 3.16. Filing of Registration Statement.........................................................12
Section 3.17. Reserve Reports..........................................................................13
Section 3.18. Miscellaneous............................................................................14
Section 3.19. Unitholders..............................................................................14
ARTICLE IV. BENEFICIAL SHARES AND CERTIFICATES...................................................................14
Section 4.1. Creation and Distribution...................................................................14
Section 4.2. Beneficial Interest of Unitholders..........................................................14
Section 4.3. Execution of Certificates...................................................................15
Section 4.4. Registration and Transfer of Units..........................................................15
Section 4.5. Mutilated, Lost, Stolen and Destroyed Certificates..........................................16
Section 4.6. Protection of Trustee.......................................................................16
Section 4.7. Determination of Ownership of Certificates..................................................16
ARTICLE V. ACCOUNTING AND DISTRIBUTION; REPORTS..................................................................17
Section 5.1. Fiscal Year and Accounting Method...........................................................17
Section 5.2. Distributions...............................................................................17
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Section 5.3. Income Tax Reporting........................................................................17
Section 5.4. Reports to Unitholders......................................................................17
Section 5.5. Filings.....................................................................................18
Section 5.6. Information to be Supplied by Grantor and Trustee...........................................18
Section 5.7. Reliance on Information.....................................................................18
ARTICLE VI. LIABILITY OF TRUSTEE, INDEMNIFICATION AND METHOD OF SUCCESSION.......................................19
Section 6.1. Liability of Trustee........................................................................19
Section 6.2. Indemnification of Trustee..................................................................19
Section 6.3. Priority and Continuity of Indemnification Obligations......................................19
Section 6.4. Contribution................................................................................20
Section 6.5. Indemnification Procedures..................................................................20
Section 6.6. Resignation of Trustee......................................................................21
Section 6.7. Removal of Trustee..........................................................................21
Section 6.8. Appointment of Successor Trustee............................................................21
Section 6.9. Laws of Other Jurisdictions.................................................................22
Section 6.10. Force Majeure............................................................................23
ARTICLE VII. COMPENSATION OF THE TRUSTEE.........................................................................23
Section 7.1. Compensation of Trustee.....................................................................23
Section 7.2. Expenses....................................................................................23
Section 7.3. Other Services..............................................................................23
Section 7.4. Source of Funds.............................................................................23
Section 7.5. Funding.....................................................................................24
Section 7.6. Ownership of Units by Trustee...............................................................24
ARTICLE VIII. MEETINGS OF UNITHOLDERS............................................................................24
Section 8.1. Purpose of Meetings.........................................................................24
Section 8.2. Call and Notice of Meetings.................................................................24
Section 8.3. Voting......................................................................................25
Section 8.4. Conduct of Meetings.........................................................................25
Section 8.5. Unitholder Proposals........................................................................26
Section 8.6. Action Without Meeting......................................................................26
Section 8.7. Units Owned by Grantor Deemed Not Outstanding...............................................26
ARTICLE IX. DURATION, REVOCATION AND TERMINATION OF TRUST........................................................27
Section 9.1. Revocation..................................................................................27
Section 9.2. Termination.................................................................................27
Section 9.3. Disposition and Distribution of Properties..................................................27
ARTICLE X. AMENDMENTS............................................................................................28
Section 10.1. Prohibited...............................................................................28
Section 10.2. Permitted................................................................................28
ARTICLE XI. ARBITRATION..........................................................................................29
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ARTICLE XII. MISCELLANEOUS.......................................................................................31
Section 12.1. Inspection of Trustee's Books............................................................31
Section 12.2. Trustee's Employment of Experts..........................................................31
Section 12.3. Merger or Consolidation of Trustee.......................................................31
Section 12.4. Filing of this Agreement.................................................................32
Section 12.5. Severability.............................................................................32
Section 12.6. Notices..................................................................................32
Section 12.7. Counterparts.............................................................................33
Section 12.8. Successors...............................................................................33
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TREASURE ISLAND AMENDED AND RESTATED
ROYALTY TRUST AGREEMENT
This Amended and Restated
Royalty Trust Agreement ("AGREEMENT") of
Treasure Island Royalty Trust (the "TRUST") is entered into as of [_________],
2002, between Newfield Exploration Company, a Delaware corporation ("GRANTOR"),
as Grantor, and Wachovia Bank, National Association, a national banking
association organized under the laws of the United States (the "BANK"), as
trustee.
WHEREAS, EEX Corporation, a Texas corporation ("EEX") is engaged in the
business of exploring for, developing and producing oil and gas and owns
leasehold working interests in properties located in the U.S. Gulf of Mexico on
the federal Outer Continental Shelf that may contain reserves of oil and gas,
but which are not currently producing oil and gas;
WHEREAS, Grantor, Newfield Operating Company ("Grantor Merger Sub") and
EEX are parties to an Agreement and Plan of Merger dated May 29, 2002 (the
"MERGER AGREEMENT") pursuant to which, and subject to satisfaction of the
conditions precedent thereto, Grantor Merger Sub will merge with and into EEX,
with the result that EEX shall become a wholly owned subsidiary of Grantor;
WHEREAS, as provided in the Merger Agreement, holders of shares of the
Common Stock of EEX may elect to receive, as a part of the Merger Consideration
(as defined in the Merger Agreement), Units (hereinafter defined) (such electing
holders, the "ELECTING HOLDERS");
WHEREAS, pursuant to the Merger Agreement, Grantor has agreed to cause
EEX to convey, after the Effective Time but on or before the Issuance Date, the
Royalties (hereinafter defined) to the Trust pursuant to the Conveyances
(hereinafter defined) in consideration for the issuance by the Trust to Grantor
upon the execution hereof of 42,574,298 Units representing in the aggregate
ownership of the entire Beneficial Interest (hereinafter defined) in the assets
of the Trust, which conveyance shall be effective as of the Effective Time;
WHEREAS, pursuant to the Merger Agreement, at the Issuance Date,
Grantor is required to distribute Units to the Electing Holders;
WHEREAS, as of June 17, 2002, certain individuals, as Trustees (the
"ORIGINAL TRUSTEES") and Grantor entered into a Trust Agreement (the "ORIGINAL
TRUST AGREEMENT") pursuant to which the Trust was formed under the terms and
conditions set forth therein;
WHEREAS, the merger transaction contemplated by the Merger Agreement
has been consummated, and the Effective Time (as hereinafter defined) has
occurred;
WHEREAS, each of the original Trustees under the Original Trust
Agreement has resigned his position as Trustee for the Trust and the Bank has
been appointed and has agreed to act as the new Trustee of the Trust; and
WHEREAS, the Bank and Grantor desire to amend and restate the Original
Trust Agreement in its entirety.
NOW, THEREFORE, in furtherance of forming the Trust, Grantor has
heretofore delivered to the Original Trustees, on behalf of the Trust, One
Hundred Dollars ($100.00) upon execution of the Original Trust Agreement, which
the Bank now accepts and agrees to hold in trust, together with the Royalties to
be received hereunder, for the purposes, and in accordance with the duties,
terms and conditions hereof.
ARTICLE I.
DEFINITIONS
Section 1.1. Defined Terms. In addition to certain other terms defined
elsewhere in this Agreement, as used herein, the following terms are used with
the meanings indicated:
"AFFILIATE" of a Person means another Person controlled by, controlling
or under common control with such Person. As used herein, "control" (including
the terms "controlling," "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this instrument, as originally executed, or, if
amended or supplemented, as so amended or supplemented.
"BANK" has the meaning set forth in the introductory paragraph of this
Agreement.
"BENEFICIAL INTEREST" means the aggregate equitable interest of the
Unitholders in the Trust Estate as expressly set out in this Agreement and all
other rights of beneficiaries of express trusts created under the Texas Trust
Code, subject to the limitations set forth in this Agreement.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which national banking institutions in the City of Houston, Texas, are
closed as authorized or required by law.
"CERTIFICATE" means a certificate issued by the Trustee pursuant to
Article IV evidencing the ownership of one or more Units.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONVEYANCES" means, collectively, the Master Conveyance and each
Recordable Conveyance.
"DISTRIBUTION DATE" means the date of a distribution, which shall be on
or before ten (10) Business Days after the Quarterly Record Date.
"EEX" has the meaning set forth in the recitals of this Agreement.
"EFFECTIVE TIME" has the meaning given thereto in the Merger Agreement.
"ELECTING HOLDERS" has the meaning set forth in the recitals of this
Agreement.
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"ENVIRONMENTAL LAWS" means all applicable federal, state and local
laws, regulations, ordinances, rules, orders, permits and governmental
restrictions relating to the environment, the effect of the environment on human
health or safety, pollutants, contaminants, hazardous substances, or hazardous
waste, in effect on the date of this Agreement, and all binding judicial and
administrative interpretations thereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE ACT REGISTRATION STATEMENT" means the registration statement
by which the Units may be registered under Section 12 of the Exchange Act.
"EXPENSES" has the meaning set forth in Section 3.16(f) of this
Agreement.
"GRANTOR" has the meaning set forth in the introductory paragraph of
this Agreement.
"GRANTOR LOANS" has the meaning set forth in Section 3.9(a) of this
Agreement.
"ISSUANCE DATE" means the date, which shall not be later than sixty
(60) days after the Effective Time, on which Units are distributed by Grantor to
Electing Holders as provided in, and pursuant to the terms of, the Merger
Agreement.
"MASTER CONVEYANCE" means the non-recordable Master Conveyance of
Overriding Royalty Interest between EEX and/or its Affiliates, on the one hand,
and the Trust, on the other, pursuant to which the Royalties are to be conveyed
to the Trust effective as of the Effective Time.
"MERGER AGREEMENT" has the meaning set forth in the recitals of this
Agreement.
"ORIGINAL TRUSTEES" has the meaning set forth in the recitals of this
Agreement.
"PERSON" means an individual, a corporation, partnership, limited
liability company, trust, estate or other organization.
"QUARTER" means, for the initial period, the period which commences on
the Effective Time and continues through and includes the Quarterly Record Date
for the applicable calendar quarter during which the Effective Time occurs, and
for succeeding periods the period which commences on the day following a
Quarterly Record Date and continues through and includes the next succeeding
Quarterly Record Date.
"QUARTERLY DISTRIBUTION AMOUNT" means for each Quarter an amount
determined by the Trustee (pursuant to Section 5.2 hereof) to be equal to the
excess, if any, of (a) the cash received by the Trustee during the Quarter
attributable to the Royalties, plus any cash available for distribution as a
result of the reduction or elimination during the Quarter of any existing cash
reserve created pursuant to Section 3.8 hereof to provide for the payment of
liabilities of the Trust, plus any other cash receipts of the Trust during the
Quarter including any cash received from interest earned pursuant to Section
3.4, other than interest earned on deposits of the Quarterly Distribution Amount
for any prior Quarter pending distribution of such amount, over (b) the
liabilities of the Trust paid during the Quarter, plus the amount of any cash
used pursuant
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to Section 3.8 hereof in the Quarter to establish or increase a cash reserve for
the payment of any accrued, future or contingent liabilities of the Trust. If
the Quarterly Distribution Amount determined in accordance with the preceding
sentence shall for any Quarter be a negative amount, then the Quarterly
Distribution Amount shall be zero, and such negative amount shall reduce the
next Quarterly Distribution Amount. If the Quarterly Distribution Amount
determined in accordance with the second preceding sentence is less than 92% of
the amount of cash received by the Trustee during the Quarter attributable to
the Royalties and the amount of administrative expenses incurred by the Trustee
pursuant to Section 7.2 is greater than 8% of such amount, the Quarterly
Distribution Amount will include funds borrowed from Grantor pursuant to the
second sentence of Section 7.4.
"QUARTERLY RECORD DATE" for each quarter means the close of business on
the last Business Day of such quarter.
"RECORDABLE CONVEYANCE" means each recordable Conveyance of Overriding
Royalty Interests between EEX and/or its Affiliates and the Trust contemplated
by the Master Conveyance pursuant to which Royalties are to be conveyed to the
Trust.
"RESERVE REPORT" means a report of estimated proved reserves
attributable to the Royalties and the present value thereof prepared on the
basis required by the SEC for inclusion in financial statements filed with the
SEC.
"ROYALTIES" means the overriding royalty interests conveyed to the
Trustee pursuant to the Conveyances.
"SEC" means the Securities and Exchange Commission and any agency which
may succeed to its responsibilities and functions after the date hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES ACT REGISTRATION STATEMENT" means the registration
statement on Form S-4 and complying with the requirements of the Securities Act,
and the rules and regulations thereunder, to be filed with the SEC by Grantor
and the Trust and by which, among other things, the Units may be offered under
the Securities Act.
"SUBJECT INTERESTS" has the meaning set forth in the Conveyances.
"TRANSFEREE," as to any Unitholder or former Unitholder, means any
Person succeeding to the interest of such Unitholder or former Unitholder in one
or more Units of the Trust, whether as purchaser, donee, legatee or otherwise.
"TRUST" means the express trust created hereby which shall be held and
administered as provided herein and in accordance with the terms and provisions
(not inconsistent with any terms and provisions hereof) of the Texas Trust Code.
"TRUST ESTATE" means the assets held by the Trustee under this
Agreement, and shall include both income and principal if separate accounts or
records are kept therefor.
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"TRUST ORRI PERCENTAGE" has the meaning set forth in Section 3.2(b) of
this Agreement.
"TRUST PROPERTY PERCENTAGE" has the meaning set forth in Section 3.2(b)
of this Agreement.
"TRUSTEE" means the initial trustee under this instrument, or any
successor, during the period it is so serving in such capacity.
"UNIT" means an undivided fractional interest in the Beneficial
Interest, determined as hereinafter provided.
"UNITHOLDER" means the owner of one or more Units as reflected on the
books of the Trustee pursuant to Article IV.
ARTICLE II.
NAME AND PURPOSE OF THE TRUST
Section 2.1. Name. The Trust shall be known as the Treasure Island
Royalty Trust, and the Trustee may transact the affairs of the Trust in that
name.
Section 2.2. Purposes. The purposes of the Trust are:
(a) to receive, hold, protect and conserve, for the benefit of the
Unitholders, the Trust Estate;
(b) to convert the Royalties to cash either (1) by retaining them and
collecting the proceeds from production payable with respect thereto until
production has ceased or the Royalties have otherwise terminated or (2) by
selling or otherwise disposing of all or a part of the Royalties in accordance
with and subject to the terms of this Agreement;
(c) to pay, or provide for the payment of, any costs and liabilities
incurred in carrying out the purposes of the Trust, and thereafter to distribute
the remaining amounts of cash received by the Trust to the Unitholders pro rata
based on the number of Units owned; and
(d) subject to Section 3.3 of this Agreement, to engage in such other
activities as are necessary or convenient for the attainment of any of the
foregoing or are incident thereto and which may be engaged in or carried out by
a trust under the Texas Trust Code.
Section 2.3. Nature of the Trust. It is the intention and agreement of
Grantor and the Trustee to create an express trust within the meaning of Section
111.004(4) of the Texas Trust Code, for the benefit of the owners of Units, and
a grantor trust for federal income tax purposes of which the owners of Units are
the grantors. As set forth above and amplified herein, the Trust is intended to
be limited to the receipt of revenues attributable to the Royalties and the
distribution of such revenues, after payment of or provision for Trust expenses
and liabilities, to the Unitholders. It is neither the purpose nor the intention
of the parties hereto to create, and nothing in this Trust Agreement shall be
construed as creating, a partnership, joint venture, joint stock company or
business association between or among Unitholders, present or future, or among
or between Unitholders, or any of them, and the Trustee or Grantor.
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Section 2.4. Transfer of Trust Property to the Trust. Grantor has (a)
paid to the Trustee, in trust, and the Trustee has accepted, for the uses and
purposes provided herein, the sum of One Hundred Dollars ($100) in consideration
for 42,574,298 Units to be issued by the Trust to Grantor, which Units shall
collectively represent the entire Beneficial Interest in accordance with Section
4.1 of this Agreement and (b) pursuant to the Merger Agreement, agreed to cause
EEX and/or its Affiliates, after the Effective Time but on or before the
Issuance Date to enter into the Master Conveyance and to grant, bargain, sell,
convey and assign the Royalties to the Trust as provided for in the Master
Conveyance, effective as of the Effective Time, for the uses and purposes
provided herein and for the benefit of the Unitholders, pursuant to the
Conveyances.
Section 2.5. Issuance of Units. The Units to be issued by the Trust to
Grantor in accordance with Section 2.4 shall be evidenced by a single temporary
Certificate. Upon receipt of written transfer instructions from Grantor, the
Trustee shall prepare Certificates (which may be temporary Certificates) in
proper form duly executed and countersigned in accordance with Section 4.3 of
this Agreement in such names and in such denominations as Grantor may request in
writing not less than two (2) full Business Days before the Issuance Date. The
Trustee shall deliver such Certificates to such location and at such time as is
stated in the written transfer instructions from Grantor and shall release such
Certificates (a) upon the receipt from Grantor of the Certificate referred to in
the first sentence of this Section 2.5, duly endorsed for transfer and (b) in
accordance with the instructions of Grantor.
ARTICLE III.
ADMINISTRATION OF THE TRUST
Section 3.1. General. The Trustee accepts the Trust created by this
Agreement and agrees to perform its duties in accordance with the terms of this
Agreement. Subject to the limitations set forth in this Agreement, the Trustee
is authorized to take such action as in its judgment is necessary or advisable
best to achieve the purposes of the Trust, including the authority to enter into
the Conveyances, to agree to modifications or settlements of the terms of the
Conveyances or to settle disputes with respect thereto, so long as such
modifications or settlements do not alter the nature of the Royalties as rights
to receive a share of the proceeds of oil and gas produced from the properties
presently burdened by such Royalties which are free of any obligation for
drilling, development or operating expenses and as rights which do not possess
any operating rights or obligations. The Trustee may not dispose of all or any
portion of the Royalties except as provided in Sections 3.2, 3.5, 3.9 and 9.3 of
this Agreement.
Section 3.2. Limited Power to Dispose of Royalties.
(a) In the event the Trustee determines it to be in the best interest
of the Unitholders the Trustee may sell, at any time and from time to time, all
or any part of any of the Royalties for cash in such a manner as it deems in the
best interest of the Unitholders if approved by the Unitholders present or
represented at a meeting held in accordance with the requirements of Article
VIII. This Section 3.2(a) shall not be construed to require approval of the
Unitholders for any sale or other disposition of all or any part of the
Royalties pursuant to Sections 3.2(b), 3.5, 3.9 or 9.3. The Trustee is
authorized to retain any of the Royalties in the form in which such
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property was transferred to the Trustee, without regard to any requirement to
diversify investments or other requirements.
(b) Following commencement of commercial production of any of the
Subject Interests, Grantor may thereafter at any time and from time to time
notify the Trustee that it desires to sell for cash any of such Subject
Interests in commercial production to any Person other than the Grantor or an
Affiliate of Grantor free of and unburdened by the Royalties, and upon receipt
of such notice the Trustee shall be required to join in such sale and execute
and deliver a partial release, assignment or such other instrument as Grantor
may reasonably request to evidence that such Subject Interest is being sold free
and unburdened by the Royalties; provided, however, that the Trustee shall not
be required to join in such sale if (i) the value of the Royalties (determined
as provided below) associated with the Subject Interests to be so sold in any
calendar year pursuant to this Section 3.2(b) exceeds ten percent (10%) of the
value of all the Royalties then attributed with proved reserves (determined as
provided below) before such sale or (ii) the value of the Royalties (determined
as provided below) associated with the Subject Interests to be sold pursuant to
this Section 3.2(b) when added to the value of all the Royalties (determined as
provided below) sold pursuant to this Section 3.2(b) exceeds twenty-five percent
(25%) of the value of all the Royalties then attributed with proved reserves
(determined as provided below). The net proceeds from any sale pursuant to this
Section 3.2(b) shall be allocated to the Trust in a percentage equal to the
Overriding Royalty Percentage (as such term is defined in the applicable
Recordable conveyance with respect to the Subject Interest being sold, the
"Trust ORRI Percentage") divided by the sum of (x) the Trust ORRI Percentage
plus (y) the total net revenue interest of Grantor or any affiliate of Grantor
with respect to the Subject Interest being sold (the "Trust Property
Percentage") and to the Grantor in a percentage equal to the difference between
one hundred percent (100%) less the Trust Property Percentage applicable to the
Subject Interests being sold. For purposes of this Section 3.2(b), the value of
the Royalties associated with the Subject Interests to be sold and of all the
Royalties then attributed with proved reserves shall be the discounted present
value (using a discount rate of ten percent (10%) or such other rate required by
the SEC) of the future net revenues (calculated in accordance with criteria
prescribed by the SEC) attributable to the proved reserves attributable to such
Royalties, respectively, as determined by reference to the Reserve Report as of
December 31 of the year preceding the closing of the sale. The use of such
values is solely for the purpose of determining compliance with this Section
3.2(b) and it is recognized that the proceeds of sale may be greater or lesser
than the value so determined.
Section 3.3. No Power to Engage in Business, Make Investments or Enter
into Certain Contracts. The Trustee shall not, in its capacity as Trustee under
the Trust, engage in any business or commercial activity of any kind whatsoever
and shall not, under any circumstances, use any portion of the Trust Estate to
acquire any oil and gas lease, royalty or other mineral interest other than the
Royalties, or, except as permitted in Sections 3.4 and 3.15, acquire any other
asset. The Trustee shall have no right or duty to operate the Subject Interests
burdened by the Royalties or to market any production therefrom. The Trustee
shall not accept contributions to the Trust other than the Royalties and the
initial cash deposit. The Trustee shall have no authority to, and shall not,
enter into any contract or undertaking in its capacity as Trustee under the
Trust that does not expressly provide that (i) any liability of the Trust
arising out of such contract shall be satisfiable only out of the Trust Estate
and (ii) in any event, including the
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exhaustion of the Trust Estate, such liability shall not be satisfiable out of
any amounts at any time distributed to any Unitholder or out of any other assets
of any Unitholder.
Section 3.4. Interest on Cash on Hand. Cash being held by the Trustee
as a reserve for liabilities (other than current routine administrative costs
payable pursuant to Article VII) or for distribution at the next Distribution
Date shall be invested (in the Trustee's discretion) in: (a) a money market or
similar account payable on demand without penalty, (b) obligations issued (or
unconditionally guaranteed) by the United States of America or any agency or
instrumentality thereof (provided such agency or instrumentality obligations are
secured by the full faith and credit of the United States of America), (c)
repurchase agreements secured by obligations qualifying under subparagraph (b)
above, (d) certificates of deposit of any bank having capital, surplus and
undivided profits in excess of $100,000,000, or (e) money market mutual funds
comprised solely of securities described in clauses (b) and (c). The interest
rate on reserves placed with any bank or financial institution serving as
Trustee shall be the interest rate that such bank or financial institution pays
in the normal course of business on amounts placed with it, taking into account
the amounts involved, the period held and other relevant factors and (ii) the
rate of interest paid on obligations qualifying under subparagraph (a) above.
Any such government obligations, repurchase agreements or certificates of
deposit representing funds to be distributed at the next Distribution Date must
mature on or before the next succeeding Distribution Date and must be held to
maturity. To the extent not prohibited by Section 113.057 of the Texas Trust
Code, any such cash may be placed with the Bank or any successor bank serving as
Trustee.
Section 3.5. Power to Settle Claims. Subject to the limitations
specified in Article XI, the Trustee is authorized to prosecute or defend, or to
settle by arbitration or otherwise, any claim of or against the Trustee, the
Trust or the Trust Estate, to waive or release rights of any kind and to pay or
satisfy any debt, tax or claim upon any evidence by it deemed sufficient,
without the joinder or consent of any Unitholder. Such authority shall include,
but not be limited to, the authority to dispose of or relinquish title to any of
the Royalties that are the subject of such a dispute upon receipt of such
evidence. The Trustee agrees to respond definitively to, and within a
commercially reasonable time period following its receipt of, any written
request by Grantor relating to any such claim and complying with the last
sentence of this Section 3.5, and the failure of the Trustee so to respond
definitively and timely shall conclusively estop the Trustee from thereafter
claiming a right that is inconsistent with the stated intent as set forth in the
notice and materially detrimental to Grantor or its Affiliates with respect to
such requested matter. Any request made by Grantor intended to be governed by
this Section 3.5 shall specifically reference this Section.
Section 3.6. Power to Contract for Services. In the administration of
the Trust, the Trustee is empowered to employ oil and gas consultants,
independent reservoir engineers, accountants (who may be the same accounting
firm who are engaged as outside auditors for Grantor), attorneys (who may be
counsel to Grantor unless Grantor otherwise notifies the Trustee in writing),
transfer agents and other professional and expert Persons and to employ or
contract for clerical and other administrative assistance (including assistance
from Grantor or its Affiliates) and to make payments of all fees for services or
expenses in any manner thus incurred out of the Trust Estate.
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Section 3.7. Payment of Liabilities of Trust. The Trustee shall, to the
extent that funds of the Trust are available therefor (which shall not include
funds previously set aside for payment of a Quarterly Distribution Amount), make
payment of all liabilities of the Trust, including, but without limiting the
generality of the foregoing, all expenses, taxes, liabilities of all kinds,
including compensation to it for its services hereunder, and compensation to
such Persons as may be employed as provided for in Section 3.6 hereof.
Section 3.8. Establishment of Reserves. With respect to any liability
that which is contingent or uncertain in amount or that otherwise is not
currently due and payable, the Trustee in its sole discretion may, but is not
obligated to, establish a cash reserve for the payment of such liability.
Section 3.9. Limited Power to Borrow.
(a) If at any time the cash on hand and to be received by the Trust and
available to pay liabilities (other than compensation payable to the Trustee
pursuant to Section 7.1 and administrative expenses incurred pursuant to Section
7.2, such amounts to be funded by Grantor or an affiliate of Grantor through
loans to the trust as required by Section 7.5 ("GRANTOR LOANS")) is not, or will
not be, in the judgment of the Trustee, sufficient to pay such liabilities of
the Trust as they become due or to purchase Units if required under Section
3.15(b), the Trustee is authorized to borrow the funds required to pay such
liabilities or make such purchases. Provided, if Grantor or its Affiliates fails
to make any Grantor Loans, Trustee is authorized to borrow such funds as would
have been received from the Grantor Loans from any other Person. If the Trust
borrows any amounts pursuant to this Section, no further distributions will be
made to Unitholders (except in respect of previously determined Quarterly
Distribution Amounts) until the indebtedness created by such borrowing has been
paid in full. Such funds may be borrowed from any Person, including, without
limitation, Grantor or any Affiliate of Grantor, or the Bank or any other
fiduciary hereunder. To secure payment of such indebtedness, the Trustee is
authorized to mortgage, pledge, grant security interests in or otherwise
encumber (and to include as a part thereof any and all terms, powers, remedies,
covenants and provisions deemed necessary or advisable in the Trustee's
discretion, including, without limitation, the power of sale with or without
judicial proceedings) the Trust Estate, or any portion thereof, including the
Royalties, and to carve out and convey production payments.
(b) Trustee is authorized to borrow funds from Grantor or any Affiliate
of Grantor, directly or indirectly, for the purposes described in Sections 7.4
or 7.5, and to the extent Trustee borrows such funds, such loans (and accrued
interest thereon) shall be repaid in quarterly installments only from the
excess, if any, of (i) the product of (A) the cash received by the Trustee
during the applicable Quarter and (B) .08 over (ii) all compensation,
reimbursements and other charges owing and paid to the Trustee for such Quarter
pursuant to Article VII. In the event that upon termination of the Trust, any
such loans remain outstanding, such loans, together with all accrued and unpaid
interest thereon, will be and be deemed forgiven, cancelled and discharged by
Grantor, or its Affiliates, as applicable, without the necessity of further act
or evidence. Such limitations shall not be applicable to any loans made by
Grantor or an Affiliate of Grantor pursuant to Section 3.9(a) above and such
loans by Grantor or its Affiliates pursuant to such Section shall be treated in
the same manner as a loan from a third party.
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Section 3.10. Income and Principal. The Trustee shall not be required
to keep separate accounts or records for income and principal or maintain any
reserves for depletion of the Royalties. However, if the Trustee does keep such
separate accounts or records, then the Trustee is authorized to treat all or any
part of the receipts from the Royalties as income or principal, and in general
to determine all questions as between income and principal and to credit or
charge to income or principal or to apportion between them any receipt or gain
and any charge, disbursement or loss as is deemed advisable under the
circumstances of each case. Regardless of any such characterization, however,
the Trustee shall not make any distribution, accumulate any funds, or maintain
any reserve except as expressly provided in this Agreement.
Section 3.11. Term of Contracts. In exercising the rights and powers
granted hereunder, subject to Section 3.3, the Trustee is authorized to make the
term of any transaction or contract or other instrument extend beyond the term
of the Trust.
Section 3.12. Transactions between Related Parties. The Trustee shall
not be prohibited in any way in exercising its powers from making contracts or
having dealings with itself in any other capacity (fiduciary or otherwise) or
with Grantor.
Section 3.13. No Bond Required. The Trustee shall not be required to
furnish any bond or security of any kind.
Section 3.14. Timing of Trust Income and Expenses. The Trustee will use
all reasonable efforts to cause the Trust and the Unitholders to recognize
income and expenses on Quarterly Record Dates. The Trustee will invoice the
Trust for services rendered by the Trustee only on a Quarterly Record Date and
shall cause the Trust to pay any such invoices only on the Quarterly Record Date
on which an invoice is rendered and will use all reasonable efforts to cause all
Persons to whom the Trust becomes liable to invoice the Trust for such liability
on a Quarterly Record Date and to cause the Trust to pay any such liabilities on
the Quarterly Record Date on which such liability is invoiced. In connection
with the requirements of any securities exchange on which the Units are listed
or market system through which Units are traded, the Trustee will, if required
by such securities exchange or market system, use all reasonable efforts to
determine the Quarterly Distribution Amount and report such amount to the
exchange or market system at such time as may be required by such securities
exchange or market system. Nothing in this Section 3.14 shall be construed as
requiring the Trustee to cause payment to be made for Trust liabilities on any
date other than on such date as in its sole discretion it shall deem to be in
the best interest of the Unitholders.
Section 3.15. Divestiture of Units. If at any time the Trust or the
Trustee is named a party in any judicial or administrative proceeding which
seeks the cancellation or forfeiture of any property in which the Trust has an
interest because of the nationality, or any other status, of any one or more
Unitholders, the following procedures will be applicable:
(a) The Trustee will promptly give written notice ("NOTICE") to each
Unitholder ("INELIGIBLE HOLDER") whose nationality or other status is an issue
in the proceeding as to the existence of such controversy related to the
Royalties, the Trust or the Units. The Notice will contain a reasonable summary
of such controversy and will constitute a demand to each
10
Ineligible Holder that he dispose of his Units to a party which would not be an
Ineligible Holder within 30 days after the date of the Notice.
(b) If any Ineligible Holder fails to dispose of his Units as required
by the Notice, the Trustee will have the right to purchase, and will purchase,
any such Units at any time during the 90 days after the expiration of the 30-day
period specified in the Notice. The purchase price on a per Unit basis will be
determined as of the last Business Day ("DETERMINATION DAY") preceding the end
of the 30-day period specified in the Notice and will equal the following per
Unit amount: (i) if the Units are then listed on a securities exchange the price
will equal the closing price of the Units on such exchange (or, if the Units are
then listed on more than one exchange, on the largest such exchange in terms of
the volume of Units traded thereon during the preceding twelve months) on the
determination day if any Units were sold on such exchange on such day or, if
not, on the last preceding day on which any Units were sold on such exchange or
(ii) if the Units are not then listed on any securities exchange, but are traded
through a market system, the price will equal the mean between the closing bid
and asked prices for the Units in such market system on the determination day if
quotations for such prices on such day are available or, if not, on the last
preceding day for which such quotations are available or (iii) if the Units are
not then listed on any stock exchange or traded through any market system, the
price will be determined by dividing the present value of the estimated future
net revenues attributable to proved reserves of the Royalties as reflected in
the latest Reserve Report prepared for the Trust, prepared using a discount rate
of ten percent (10%) or such other rate required by the SEC and otherwise in
accordance with such other criteria as shall then be prescribed by the SEC as
contemplated by Section 3.17 (minus all liabilities of the Trust) by the number
of Units (including the Units to be purchased) then outstanding. Such purchase
will be accomplished by tender of the above cash price to the Ineligible Holder
at his address as shown on the records of the Trustee, either in person or by
mail as provided in Section 12.6, accompanied by notice of cancellation.
Concurrently with such tender the Trustee shall cancel or cause to be cancelled
all Certificates representing Units then owned by such Ineligible Holder and for
which tender has been made, and the Trustee shall issue or cause to be issued to
itself a Certificate or Certificates representing the same number of Units as
were so cancelled. Upon such cancellation, the Ineligible Holder shall part with
the Beneficial Interest attributable to the Units theretofore owned by him and
all interests, rights and benefits of the Ineligible Holder as a Unitholder
shall terminate. In the event the tender is refused by the Ineligible Holder or
if he cannot be located after reasonable efforts to do so, the tendered sum
shall be held by the Trustee in an interest bearing account for the benefit of
such Ineligible Holder, until proper claim for same (together with interest
accrued thereon) has been made by such Holder, but subject to applicable laws
concerning unclaimed property. If a determination day shall occur prior to the
earliest date at which a Reserve Report is available to the Trust and at such
time, the Units are not then listed on any stock exchange or traded through any
market system, the price will be determined by the good faith resolution of
Grantor's Board of Directors, a copy of which, certified by Grantor's Secretary,
will be provided by Grantor to the Trustee promptly upon the adoption thereof.
(c) The Trustee may, in its sole discretion, cancel any Units acquired
in accordance with the foregoing procedures or may sell such Units, either
publicly or privately, in accordance with all applicable laws. The proceeds of
any such sale of Units, less the expenses of such sale, will constitute revenues
of the Trust.
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Section 3.16. Filing of Registration Statement.
(a) The Trustee shall, in connection with the distribution of the Units
by Grantor to Electing Holders and otherwise, upon the request of Grantor, on
behalf of the Trust, cooperate with Grantor and otherwise use its best efforts
to cause:
(i) the Securities Act Registration Statement to be prepared,
signed, filed and declared effective by the SEC;
(ii) an Exchange Act Registration Statement to be prepared,
signed, filed and become effective; and
(iii) the Units to be qualified or exempted from qualification
under the securities or Blue Sky laws of the several states
(b) Grantor shall be obligated and entitled, at its own expense except
as otherwise herein provided, to take or cause to be taken all steps customary
or appropriate to the accomplishment of the objectives set forth above
including, without limitation, engaging counsel for itself and approving special
counsel for the Trust, engaging accountants for the Trust, contracting for all
printing and engraving services, making all filings and applications necessary
to the foregoing and paying all filing and application fees associated
therewith. The Trustee shall execute, by and on behalf of the Trust, any
documents incidental or related to the foregoing as reasonably requested by
Grantor. Notwithstanding anything in this Section 3.16 to the contrary, unless
required by the SEC, the Trustee shall not be required to sign any Securities
Act Registration Statement or Exchange Act Registration Statement in connection
with the distribution of Units by Grantor to Electing Holders. If the Trustee
does not sign any Securities Act Registration Statement or Exchange Act
Registration Statement on behalf of the Trust in connection with such
distribution of Units by Grantor to Electing Holders, then Grantor may sign on
behalf of the Trust.
(c) Except as precluded in Article VI, the reasonable fees, charges,
expenses, disbursements and other costs incurred by the Trustee in connection
with the discharge of its duties under this Section 3.16 shall be paid by the
Trust.
(d) The Trustee shall cooperate with and assist Grantor in every
reasonable way and in good faith in accomplishing the foregoing. Among other
things, the Trustee shall permit counsel, special counsel and accountants
engaged by Grantor and other representatives of Grantor reasonable access to
information responsive to the requirements of the Securities Act, the Exchange
Act, the securities or Blue Sky laws of the several states and to Trustee
personnel having such information, as fully and to the same extent as if the
Trustee were proceeding for its own purposes to accomplish such objectives. The
Trustee agrees to provide Grantor with the authority and, if required pursuant
to Section 3.16(b) above, the signatures required for the filing of the
Securities Act Registration Statement, the Exchange Act Registration Statement
and any registration statements, notices of exemption, applications for
exemption, consents to service of process and all other documents necessary to
comply with the Blue Sky laws of the several states The Trustee shall also
provide Grantor upon request with a Unitholders' list as of the latest Quarterly
Record Date in such form as Grantor may reasonably request.
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(e) After the registration of the Units pursuant to the Exchange Act,
the Trustee, on behalf of the Trust, shall cause the Trust to comply with all of
the rules, orders and regulations of the SEC and take all such other actions
necessary for the Units to remain so registered until the Trust is terminated.
(f) To the fullest extent permitted by law, Grantor agrees to defend,
indemnify and hold the Trust and the Trustee and its officers, employees, agents
and controlling persons harmless from and against any liabilities, obligations,
suits, costs, expenses, claims, damages, losses, penalties, taxes, fees and
other charges (collectively, "EXPENSES"), joint or several, or any action in
respect thereof, to which the Trust or the Trustee or the officers, employees or
agents of the Trustee or any controlling person of the Trustee becomes subject,
under or with respect to the Securities Act, the Exchange Act, any other federal
or state securities law or otherwise, insofar as such Expenses arise out of, or
are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Securities Act Registration Statement or Exchange
Act Registration Statement, listing application with any national securities
exchange or the National Association of Securities Dealers Automated Quotation
System, or any other document filed by or on behalf of Grantor with the SEC or
pursuant to any other federal or state securities law, or any other statement
publicly made by or on behalf of Grantor, or (ii) the omission or alleged
omission to state in any Securities Act Registration Statement or Exchange Act
Registration Statement listing application with any national securities exchange
or the National Association of Securities Dealers Automated Quotation System, or
any other document, or any other statement publicly made by or on behalf of
Grantor, any material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that Grantor shall not
be liable in any case to the extent that any Expense arises out of, or is based
upon, (A) any fraudulent misrepresentation, gross negligence or willful
misconduct of the Trustee or (B) any untrue statement or alleged untrue
statement or omission or alleged omission included in any such Securities Act
Registration Statement or Exchange Act Registration Statement, or any other
document filed by or on behalf of Grantor, the Trust or the Trustee with the
SEC, or any other statement publicly made by or on behalf of Grantor, the Trust
or the Trustee in reliance upon and in conformity with written information
furnished by or on behalf of the Trustee specifically for inclusion therein.
This provision shall in no way limit the general rights to indemnification and
contribution and limitations on liability of the Trust and Trustee set forth in
Article VI of this Agreement or elsewhere herein. Grantor shall promptly
reimburse the Trustee for, or advance to the Trustee, any fees or expenses,
including reasonable legal expenses, incurred by the Trustee in connection with
the investigation or defense of any Expenses with respect to which the Trustee
is entitled to indemnity by Grantor under this Section 3.16(f).
Section 3.17. Reserve Reports. Provided that the Royalties have
quantifiable reserves related to them as of December 31 of any year, the Trustee
shall cause a Reserve Report for the Royalties to be prepared as of December 31
of such year, in accordance with criteria established by the SEC showing
estimated proved oil and gas reserves attributable to the Royalties as of
December 31 of such year and other reserve information required in order for the
Trustee to furnish the information required in Sections 5.3 and 5.4 of this
Agreement. The Reserve Reports shall be prepared by a firm of independent
petroleum engineers selected by the Trustee. Such Reserve Report shall also show
estimated future net revenues and the net present value (discounted at ten
percent (10%) or such other rate required by the SEC) of the estimated future
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net revenues (calculated in accordance with criteria established by the SEC) of
proved reserves attributable to the Royalties. The costs of such Reserve
Reports, whether provided by Grantor or obtained by the Trustee, shall
constitute an administrative expense of the Trust payable out of the Trust
Estate pursuant to Section 3.7. Grantor shall assist the Trustee in the
preparation of the Reserve Reports by furnishing all current and existing
reserve, production and geophysical data in its possession relating to the
Royalties reasonably requested by or on behalf of the independent petroleum
engineers selected by the Trustee as necessary to prepare such Reserve Reports;
provided, however, that Grantor shall not be required to disclose or produce any
information, documents or other materials which (a) were generated for analysis
or discussion purposes or contain interpretative data or (b) are subject to the
attorney-client or attorney-work product privileges, or any other privileges to
which Grantor may be entitled pursuant to applicable law.
Section 3.18. Miscellaneous. Except as otherwise provided in this
Agreement, this Agreement and the Trust shall be governed, construed,
administered and controlled by and under the laws of the State of Texas, and the
rights, powers, duties and liabilities of the Trustee shall be in accordance
with and governed by the terms and provisions of the Texas Trust Code and other
applicable laws of the State of Texas as in effect at any applicable time.
Section 3.19. Unitholders. Trustee shall provide to any Unitholder a
list of each Unitholder of record as of the immediately preceding Quarterly
Distribution Date prior to the date of receipt of such request. By accepting the
Units, each Unitholder consents to Trustee providing such listing of Unitholders
to other Unitholders.
ARTICLE IV.
BENEFICIAL SHARES AND CERTIFICATES
Section 4.1. Creation and Distribution. The entire Beneficial Interest
shall be divided into 42,574,298 Units. The ownership of the Units shall be
evidenced by Certificates in substantially the form of Schedule 1 attached to
this Agreement, containing such changes or alterations of form, but not
substance, as the Trustee shall from time to time, in its discretion, deem
necessary or desirable.
Section 4.2. Beneficial Interest of Unitholders. Each Unit shall
represent pro rata undivided ownership of the Beneficial Interest and shall
entitle its holder to participate pro rata in the rights and benefits of the
Unitholders under this Agreement. A Unitholder (by assignment or otherwise)
shall take and hold each Unit subject to all the terms and provisions of this
Agreement and the Conveyances, which shall be binding upon and inure to the
benefit of the heirs, personal representatives, successors and assigns of the
Unitholder. By an assignment or transfer of one or more Units represented by a
Certificate, the assignor thereby shall, effective as of the close of business
on the date of transfer and with respect to such assigned or transferred Unit or
Units, part with, except as provided in Section 4.4 in the case of a transfer
after a Quarterly Record Date and prior to the corresponding quarterly payment
date, (i) all his Beneficial Interest attributable thereto; (ii) all his rights
in, to and under such Certificate; and (iii) all interests, rights and benefits
under this Trust of a Unitholder which are attributable to such Unit or Units as
against all other Unitholders and the Trustee. The Certificates, the Units and
the rights, benefits and interests evidenced by either or both (including,
without limiting the
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foregoing, the entire Beneficial Interest) are and shall be held and construed
to be in all respects intangible personal property, and the Certificates and
Units evidenced thereby shall be bequeathed, assigned, disposed of and
distributed as intangible personal property. No Unitholder as such shall have
any legal or equitable title in or to any real or personal property interest
which is a part of the Trust Estate, including, without limiting the foregoing,
the Royalties or any part thereof, but the sole interest of each Unitholder
shall be such Unitholder's Beneficial Interest and the obligation of the Trustee
to hold, manage and dispose of the Trust Estate and to account for the proceeds
thereof as herein provided. No Unitholder shall have the right to call for or
demand or secure any partition or distribution of the Royalties during the
continuance of the Trust or during the period of liquidation and winding up
under Section 9.3 of this Agreement.
Section 4.3. Execution of Certificates.
(a) All Certificates shall be signed by a duly authorized officer of
the Trustee. Certificates may be signed on behalf of the Trustee by such persons
as at the actual date of the signing of such Certificates shall be the proper
officers of the Trustee, although at the nominal date of such Certificates any
such person shall not have been such officer of the Trustee. Any such signature
may be the manual or facsimile signature (to the extent permitted by law or the
rules or regulations of any stock exchange or quotation system on which the
Units are listed or traded) of such officers and may be affixed, imprinted or
otherwise reproduced on the Certificate.
(b) Pending the preparation of definitive Certificates, the Trustee
shall execute, and the transfer agent and registrar for the Units appointed in
accordance with Section 3.6 of this Agreement shall countersign and register,
temporary Certificates, as directed in a certificate of an officer of Grantor.
Temporary Certificates may contain such references to any provisions of this
Agreement as may be appropriate. Each temporary Certificate shall be executed by
the Trustee and signed and registered upon the same conditions and in
substantially the same manner, and with like effect as the definitive
Certificates.
(c) As promptly as practicable, the Trustee shall execute and furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge to the Unitholders at the principal office
of the transfer agent at which Certificates may be presented for transfer
pursuant to Section 4.4 hereof, and the Trustee (or the transfer agent and
registrar if the Trustee is not serving in such capacities) shall sign and
register in exchange for such temporary Certificates a like aggregate amount of
definitive Certificates. Until so exchanged, the temporary Certificates shall be
entitled to the same benefits under this Agreement as definitive Certificates.
Section 4.4. Registration and Transfer of Units. The Units shall be
transferable as against the Trustee as provided herein, and then only on the
records of the Trustee and, except as provided in Section 3.15 hereof, upon the
surrender of Certificates, if any, and compliance with such reasonable
regulations as it may prescribe. No service charge shall be made to Unitholders
or Transferees for any transfer of a Unit, but the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto. Until any such transfer is completed, the Trustee
may treat the owner of any Unit as shown by its records as the owner of the Unit
for all purposes and shall not be charged with notice of any claim or
15
demand respecting such Unit or the Beneficial Interest represented thereby by
any other Person. Any such transfer of a Unit shall, as to the Trustee, transfer
to the Transferee as of the close of business on the date of transfer all of the
Beneficial Interest of the transferor; provided, however, that a transfer of a
Unit after any Quarterly Record Date shall not transfer to the Transferee the
right of the transferor to any sum payable to such transferor as title holder of
the Certificate of record on such Quarterly Record Date. As to matters affecting
the title, ownership, warranty or transfer of Units and Certificates, except as
provided to the contrary herein, Article 8 of the Uniform Commercial Code, the
Texas Uniform Act for Simplification of Fiduciary Security Transfers under
Chapter 33 of the Texas Business and Commerce Code and other statutes and rules
with respect to the transfer of securities, each as adopted and then in force in
the State of Texas, shall govern and apply. The death of any Unitholder shall
not entitle the Transferee to an accounting or valuation for any purpose, but
such Transferee shall succeed to all rights of the deceased Unitholder under
this Agreement upon proper proof of title satisfactory to the Trustee.
Section 4.5. Mutilated, Lost, Stolen and Destroyed Certificates. If any
Certificate is lost, stolen, destroyed or mutilated, the Trustee, in its
discretion and upon proof satisfactory to the Trustee, together with receipt by
the Trustee of a surety bond sufficient in the opinion of the Trustee to
indemnify the Trustee and the Trust against all losses and expenses that may
reasonably be expected to be incurred in connection therewith (if deemed
advisable by the Trustee), and surrender of the mutilated Certificate, will
issue a new Certificate to the holder of such lost, stolen, destroyed or
mutilated Certificate as shown by the records of the Trustee, upon payment of a
reasonable charge of the Trustee and any reasonable expenses incurred by it in
connection therewith.
Section 4.6. Protection of Trustee. The Trustee shall be protected in
acting or relying upon any notice, certificate, assignment or other document or
instrument believed by the Trustee to be genuine and to be signed by the proper
party or parties, including, without limitation, any instructions or documents
received from Grantor in connection with this Agreement. Except as provided
herein to the contrary, the Trustee is specifically authorized to rely upon the
application of Article 8 of the Uniform Commercial Code, the application of the
Texas Uniform Act for Simplification of Fiduciary Security Transfers under
Chapter 33 of the Texas Business and Commerce Code and the application of other
statutes and rules with respect to the transfer of securities, each as adopted
and then in force in the State of Texas, as to all matters affecting title,
ownership, warranty or transfer of the Certificates and the Units represented
thereby, without any personal liability for such reliance, and the indemnity
granted under Section 6.2 of this Agreement shall specifically extend to any
matters arising as a result thereof.
Section 4.7. Determination of Ownership of Certificates. In the event
of any disagreement between Persons claiming to be Transferees of any Unit, and
in addition to any other rights it may have under applicable law, the Trustee
shall be entitled, at its option, to refuse to recognize any such claim so long
as such disagreement shall continue. In so refusing, the Trustee may elect to
make no delivery or other disposition of the interest represented by the
Certificate involved, or any part thereof, or of any sum or sums of money,
accrued or accruing thereunder, and, in so doing, the Trustee shall not be or
become liable to any Person for the failure or refusal of the Trustee to comply
with such conflicting claims, and the Trustee shall be entitled to continue so
to refrain and refuse so to act, until
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(a) the rights of the adverse claimants have been adjudicated by
arbitration (pursuant to Article XI) or by a final nonappealable judgment of a
court assuming and having jurisdiction of the parties and the interest and money
involved, or
(b) all differences have been resolved by valid agreement between such
parties and the Trustee shall have been notified thereof in writing signed by
all of the interested parties.
ARTICLE V.
ACCOUNTING AND DISTRIBUTION; REPORTS
Section 5.1. Fiscal Year and Accounting Method. The fiscal year of the
Trust shall be the calendar year. The Trustee shall maintain its books in
accordance with generally accepted accounting principles or such other method as
will provide appropriate financial data responsive to the needs of the
Unitholders and which shall comply with Sections 5.3 and 5.4.
Section 5.2. Distributions. The Trustee shall determine the Quarterly
Distribution Amount for each Quarter and shall establish a cash reserve equal to
such amount on the Quarterly Record Date for such Quarter. On the Distribution
Date for such Quarterly Distribution Amount, the Trustee will distribute pro
rata to the Unitholders of record on such Quarterly Record Date such Quarterly
Distribution Amount. Notwithstanding anything herein to the contrary, Trustee
shall not make any distribution to the Unitholders unless and until the Trust
has received revenues generated from the Royalties.
Section 5.3. Income Tax Reporting. For federal or state income tax
purposes, the Trustee shall file for the Trust such returns and statements as in
its judgment are required to comply with applicable provisions of the Code and
regulations and any applicable state laws and regulations, in either case to
permit each Unitholder to report such Unitholder's share of the income and
deductions of the Trust. The Trustee will treat all income and deductions of the
Trust for each Quarter as having been realized on the Quarterly Record Date for
such month unless otherwise advised by its counsel or the Internal Revenue
Service. The Trustee will report as a grantor trust until and unless it receives
an opinion of tax counsel that such reporting is no longer proper. Within 75
days following the end of each fiscal year, the Trustee shall mail, to each
Unitholder of record on a Quarterly Record Date during such fiscal year, a
report which shall show in reasonable detail such information as is necessary to
permit all holders of record of Units on a Quarterly Record Date during such
fiscal year to make calculations necessary for tax purposes, including
depletion.
Section 5.4. Reports to Unitholders. As promptly as practicable
following the end of each calendar quarter except the fourth calendar quarter,
(a) the Trustee shall mail to each Person who was a Unitholder of record on a
Quarterly Record Date during such quarter a report which shall show in
reasonable detail such information as is necessary to permit holders of Units to
make all calculations necessary for tax purposes including depletion, and (b)
the Trustee shall mail to each Person who was a Unitholder of record on the last
Quarterly Record Date during such calendar quarter a report, which may be a copy
of the Trust's report on Form 10-Q under the Exchange Act, which shall show the
assets and liabilities of the Trust at the end of such quarter and distributable
income of the Trust for such quarter. Within 120 days following the end of each
fiscal year, the Trustee shall mail, to each Unitholder of record on a date to
be
17
selected by the Trustee, an annual report containing financial statements
audited by a nationally recognized firm of public accountants selected by the
Trustee. Notwithstanding the foregoing, the Trustee will furnish to the
Unitholders such reports, in such manner and at such times, as are at any time
required by law or by rules or regulations of any securities exchange or
quotation system on which the Units are listed or admitted for trading, if
applicable.
Section 5.5. Filings. The Trustee is authorized to make all Exchange
Act filings on behalf of the Trust required by applicable law or regulation.
Grantor shall prepare and file all filings and reports required under state
securities or Blue Sky laws. The Trustee is authorized to and shall take all
reasonable actions to prepare and mail to Unitholders any reports, press
releases or statements, financial or otherwise, that Grantor notifies the
Trustee in writing are required to be provided by the Trust to Unitholders by
law or governmental regulation or the requirements of any securities exchange or
quotation system on which the Units are listed or admitted for trading, if
applicable, subject to receipt by the Trustee of a satisfactory opinion of
counsel confirming the necessity of such reports, if such an opinion is deemed
necessary by the Trustee.
Section 5.6. Information to be Supplied by Grantor and Trustee. Grantor
shall provide, or cause to be provided, to the Trustee on a timely basis (a)
annual audited financial statements of the Trust and quarterly unaudited
financial statements of the Trust in each case as shall be necessary for Trustee
to comply with the reporting obligations of the Trust pursuant to the Exchange
Act and/or the requirements of any securities exchange or quotation system on
which the Units are listed or admitted for trading and (b) such other
information as is not known to the Trustee or is otherwise more easily available
to Grantor than to the Trustee concerning the Royalties (including information
with respect to the properties burdened by the Royalties) and related matters as
shall be necessary for Trustee to comply with the reporting obligations of the
Trust pursuant to the Exchange Act, the requirements of any securities exchange
or quotation system on which the Units are listed or admitted for trading and
this Agreement, if applicable, including, without limitation, Sections 5.3, 5.4
and 5.5 hereof. For purposes of this Section 5.6, the phrase "timely basis"
shall mean not less than 10 days prior to the date on which the Trustee is
required to comply with such reporting obligations of the Trust. In addition,
Grantor shall provide to the Trustee on a timely basis, for use in connection
with the Trust's Form 10-K annual report and Form 10-Q quarterly report, a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" relating to such financial statements. Notwithstanding any provision
to the contrary in this Agreement or the Conveyances, Grantor and its Affiliates
shall not be required to disclose, produce or prepare any information, documents
or other materials which (i) were generated for analysis or discussion purposes
or contain interpretative data or (ii) are subject to the attorney-client or
attorney-work-product privileges, or any other privileges to which they may be
entitled pursuant to applicable law.
Section 5.7. Reliance on Information. The Trustee, so long as acting in
good faith, shall be entitled to rely, without investigation, on all information
provided to it by Grantor for purposes of complying with the reporting
obligations of the Trust as contemplated by Section 5.6, including, without
limitation, information regarding depletion and entitlement to tax credits under
Section 29 of the Code. Notwithstanding any time limit imposed by applicable
laws or regulations or by the provisions of this Agreement, if, due to the
unavailability prior to the expiration of any such time limit of information
necessary, or a delay in receipt by the Trustee of
18
information necessary, for preparation of a report required to be filed, made or
delivered by the Trustee, the Trustee shall be unable to prepare and file or
mail such report within such time limit, the Trustee shall prepare and file or
mail such report as soon as practicable after such information is received.
ARTICLE VI.
LIABILITY OF TRUSTEE, INDEMNIFICATION
AND METHOD OF SUCCESSION
Section 6.1. Liability of Trustee. The Trustee, in carrying out its
powers and performing its duties, may act in its discretion directly, or at the
expense of the Trust, through agents or attorneys pursuant to agreements entered
into with any of them, and shall be personally or individually liable only for
fraud or gross negligence or for acts or omissions in bad faith as adjudicated
by arbitration or a final, nonappealable judgment of a court of competent
jurisdiction and shall not individually or personally be liable for any act or
omission of any agent or employee of the Trustee unless the Trustee has acted in
bad faith or with gross negligence in the selection and retention of such agent
or employee.
Section 6.2. Indemnification of Trustee. The Trustee and its officers,
agents and employees when acting in such capacity shall be indemnified and held
harmless by, and receive reimbursement from, the Trust Estate and the Grantor,
jointly and severally, against and from any and all Expenses incurred by it
individually or as Trustee in the administration of the Trust and the Trust
Estate or any part or parts thereof, including, without limitation, any Expenses
arising out of or in connection with any liability under Environmental Laws, or
in the doing of any act done or performed or omission occurring on account of
its being Trustee or acting in such capacity, except such Expenses to which it
is liable under Section 6.1. Trustee shall have a lien upon the Trust Estate to
secure it for such indemnification and reimbursement and for compensation to be
paid to Trustee. Except as provided in Section 4.5, neither the Trustee nor any
officer, agent or employee of the Trustee shall be entitled to any reimbursement
or indemnification from any Unitholder for any Expenses incurred by the Trustee
or any such officer, agent or employee, their right of reimbursement and
indemnification, if any, being limited solely to the Trust Estate (and Grantor
pursuant to Section 6.3), whether or not the Trust Estate is exhausted without
full reimbursement or indemnification of the Trustee or any such officer, agent
or employee. The Trust Estate or the Grantor shall promptly reimburse the
Trustee for, or advance to the Trustee, any fees or expenses, including
reasonable legal expenses, incurred by the Trustee in connection with the
investigation or defense of any Expenses with respect to which the Trustee is
entitled to indemnity by Grantor under this Section 6.2.
Section 6.3. Priority and Continuity of Indemnification Obligations.
Any Expenses for which the Trustee or any officer, agent, employee or
controlling person of the Trustee may be entitled to indemnification under
Section 6.2 shall be first satisfied out of the Trust Estate prior to any
indemnification from Grantor; provided, Grantor shall be required to provide
such indemnification at any time and from time to time that cash in the Trust
Estate or cash reasonably anticipated to be available is inadequate to satisfy
and discharge such Expenses. The obligations of the Trust Estate and Grantor to
indemnify the Trustee and its officers, agents, employees or controlling persons
under Sections 3.16(f) and 6.2 shall survive the resignation or removal of the
Trustee and the termination of the Trust and this Agreement.
19
Section 6.4. Contribution. If the indemnification provided for in this
Agreement shall for any reason (including, without limitation, due to violation
of public policy) be unavailable to or insufficient to hold harmless the Trustee
in respect of any liability, expense, claims, damages or loss as to which the
Trustee would otherwise be entitled to indemnification pursuant to Sections
3.16(f) or 6.2, then Grantor and the Trust shall, in lieu of indemnifying the
Trustee, contribute to the amount paid or payable by the Trustee as a result of
such liability, expense, claims, damages or loss, in such proportion as shall be
appropriate to reflect the relative fault of Grantor (with respect to
contribution by the Trust or Grantor) or the Trustee with respect to the events,
acts or circumstances giving rise to the liability, expense, claims, damages or
loss, as well as any other relevant equitable considerations. For purposes of
determining contribution liability with respect to claims based upon the
Exchange Act, relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by Grantor or
by the Trustee. The Trustee shall look first to the Trust Estate for
contribution under this Section 6.4, and then to Grantor to the extent the
assets of the Trust Estate are not sufficient to reimburse the Trustee fully for
all such liability, expense, claims, damages or loss.
Section 6.5. Indemnification Procedures. If any action or proceeding
shall be brought or asserted against the Trust, or the Trustee or any officer,
agent or employee thereof (each referred to as an "INDEMNIFIED PARTY" and,
collectively, the "INDEMNIFIED PARTIES") in respect of which indemnity may be
sought from Grantor or the Trust (the "INDEMNIFYING PARTY") pursuant to Sections
3.16(f) or 6.2 of this Agreement, of which the Indemnified Party shall have
received notice, the Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all costs and expenses; provided, however, that the
failure so to notify the Indemnifying Party of the commencement of any such
action or proceeding shall not relieve the Indemnifying Party from any liability
that it may have to any Indemnified Party except to the extent that the
Indemnifying Party is prejudiced or damaged by the failure to receive prompt
notice. The Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party unless
(a) the Indemnifying Party has agreed to pay such fees and expenses, (b) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel reasonably satisfactory (including the
qualifications of such counsel) to the Indemnified Party on any such action or
proceeding or (c) the named parties to any such action or proceeding include
both the Indemnified Party and the Indemnifying Party and the Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or in addition to
those available to the Indemnifying Party or any other Indemnified Party (in
which case, if the Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of the Indemnified Party and the Indemnified
Party may employ such counsel for the defense of such action or proceeding as is
reasonably satisfactory to the Indemnifying Party; it being understood, however,
that except in the case of the addition of counsel caused by the existence or
development of a conflict rendering unified representation impermissible or
unadvisable, the Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same
20
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys for
the Indemnified Parties at any time). The Indemnifying Party shall not be liable
for any settlement of any such action or proceeding effected without the written
consent of the Indemnifying Party, but, if settled with such written consent, or
if there be a final judgment for the plaintiff in any such action or proceeding,
the Indemnifying Party agrees (to the extent stated above) to indemnify and hold
harmless the Indemnified Party from and against any Expenses by reason of such
settlement or judgment. The Indemnified Party and the Indemnifying Party (if not
Grantor) shall, if so requested by Grantor, provide reports to Grantor on the
status of such actions or proceedings.
Section 6.6. Resignation of Trustee. The Trustee may resign, with or
without cause, at any time by notice to Grantor and each of the then Unitholders
of record. Such notice shall specify a date when such resignation shall take
effect, which shall be a Business Day not fewer than sixty (60) days after the
date such notice is mailed; provided, however, that in no event shall any
resignation of the Trustee be effective until a qualified successor Trustee has
accepted appointment as successor Trustee. In case of such resignation, the
Trustee will use its reasonable efforts to nominate a successor, and will call a
meeting of Unitholders for the purpose of appointing a successor, and will
solicit proxies for such meeting. If the Trustee has given notice of resignation
in accordance with this Section 6.6 and a successor has not accepted its
appointment as successor Trustee during the 180-day period following the receipt
by Grantor of such notice of resignation, then Grantor will use its best efforts
to nominate a successor, and will request the resigning Trustee to call a
meeting for the purpose of appointing such nominee and Grantor will solicit
proxies for such meeting. If the Trustee has given notice of resignation in
accordance with this Section 6.6 and a successor has not accepted its
appointment as successor Trustee during the 180-day period following the receipt
by Grantor of such notice of resignation, the annual fee payable to the Trustee
in accordance with Section 7.1 of this Agreement to such resigning Trustee in
accordance with Schedule 2 hereto shall be increased as of the end of such
180-day period by 1%, and shall be further increased by 1% for each month or
portion thereof thereafter (to a maximum of three times the fee payable at the
time the notice of resignation was received by Grantor) until a successor has
accepted its appointment as successor Trustee.
Section 6.7. Removal of Trustee. The Trustee may be removed, with or
without cause, at a meeting held in accordance with the requirements of Article
VIII by the affirmative vote of the holders of a majority of all the Units then
outstanding; provided, however, that any removal of the Trustee shall be
effective only at such time as a qualified successor Trustee has accepted
appointment as successor Trustee.
Section 6.8. Appointment of Successor Trustee. In the event of a
vacancy in the position of Trustee or if the Trustee has given notice of its
intention to resign, the Unitholders present or represented at a meeting held in
accordance with the requirements of Article VIII may appoint a successor
Trustee. Nominees for appointment may be made by (a) the resigned, resigning or
removed Trustee, (b) any Unitholder or Unitholders owning of record at least
fifteen percent (15%) of the Units then outstanding or (c) Grantor. Any such
successor Trustee shall be a bank or trust company having a capital, surplus and
undivided profits (as of the end of its last fiscal year prior to its
appointment) of at least $100,000,000. In the event that a new Trustee has not
been approved within sixty (60) days after the notice of resignation, a vote of
a majority of the holders of Units removing the Trustee, or other occurrence of
a vacancy in the position of
21
Trustee, a successor Trustee may be appointed by any State or Federal District
Court having jurisdiction in ▇▇▇▇▇▇ County, Texas, upon the application of
Grantor, any Unitholder or the Trustee tendering its resignation as Trustee, and
in the event any such application is filed, such court may appoint a temporary
trustee at any time after such application is filed, which shall, pending the
final appointment of a Trustee, have such powers and duties as the court
appointing such temporary trustee shall provide in its order of appointment,
consistent with the provisions of this Agreement.
Immediately upon the appointment of any successor Trustee, all rights,
titles, duties, powers and authority of the predecessor Trustee hereunder
(except for the predecessor Trustee's rights to amounts payable under Article
VII prior to the appointment of such successor Trustee) shall be vested in and
undertaken by the successor Trustee, which shall be entitled to receive from the
predecessor Trustee all of the Trust Estate held by it hereunder and all records
and files in connection therewith. Any resigning or removed Trustee shall
account to its successor for its administration of the Trust. No successor
Trustee shall be obligated to examine or seek alteration of any account of any
preceding Trustee, nor shall any successor Trustee be liable personally for
failing to do so or for any act or omission of any preceding Trustee. The
preceding sentence shall not prevent any successor Trustee or anyone else from
taking any action otherwise permissible in connection with any such account.
Section 6.9. Laws of Other Jurisdictions. If, notwithstanding the other
provisions of this Agreement, the laws of jurisdictions other than Texas (each
being referred to below as "SUCH JURISDICTION") apply to the administration of
properties under this Agreement, the following provisions shall apply. If it is
necessary or advisable for a trustee to serve in such jurisdiction and if the
Trustee is disqualified from serving in such jurisdiction or for any other
reason fails or ceases to serve there, an ancillary trustee which need not meet
the requirements set forth in the third sentence of Section 6.8 shall be
designated in writing by the Trustee. To the extent permitted under the laws of
such jurisdiction, the Trustee may remove the ancillary trustee in such
jurisdiction, without cause and without necessity of court proceeding or
Unitholder approval, and may or may not appoint a successor ancillary trustee in
such jurisdiction from time to time. The ancillary trustee serving in such
jurisdiction is requested and authorized, to the extent not prohibited under the
laws of such jurisdiction, to appoint the Trustee to handle the details of
administration in such jurisdiction. The ancillary trustee in such jurisdiction
shall have all rights, powers, discretions, responsibilities and duties as are
delegated in writing by the Trustee, subject to such limitations and directions
as shall be specified by the Trustee in the instrument evidencing such
appointment. Any ancillary trustee in such jurisdiction shall be responsible for
all assets with respect to which such trustee is empowered to act. To the extent
the provisions of this Agreement and Texas law cannot be made applicable to the
administration in such jurisdiction, the rights, powers, duties and liabilities
of the ancillary trustee in such jurisdiction shall be the same (or as near the
same as permitted under the laws of such jurisdiction if applicable) as if
governed by Texas law. In all events, the administration in such jurisdiction
shall be as free and independent of court control and supervision as permitted
under the laws of such jurisdiction. Whenever the term "Trustee" is applied in
this Agreement to the administration in such jurisdiction, it shall refer only
to the trustee then serving in such jurisdiction. The fees and expenses of any
ancillary trustee shall constitute expenses that are reimbursable to the Trustee
pursuant to Section 7.2. Without limiting the generality of Sections 6.1 and
6.2, the Trustee shall never have any personal liability for taking or failing
to take any
22
action authorized or contemplated by this Section 6.9, or for any action or
inaction thereof by any ancillary trustee appointed hereunder.
Section 6.10. Force Majeure. No party to this Agreement (or its
Affiliates) shall incur any liability to any other party to this Agreement or to
any Unitholder if, by reason of any current or future law or regulation
thereunder of the federal government or any other governmental authority, or by
reason of any act of God, war or other circumstance beyond its control, such
party is prevented or forbidden from doing or performing any act or thing
required by the terms hereof to be done or performed; nor shall any party to
this Agreement incur any liability to any other party to this Agreement or any
Unitholder by reason of any nonperformance or delay caused as aforesaid in the
performance of any act or thing required by the terms hereof to be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for herein caused as set forth above.
ARTICLE VII.
COMPENSATION OF THE TRUSTEE
Section 7.1. Compensation of Trustee. The Trustee shall receive
compensation for its services as Trustee hereunder and as transfer agent as set
forth in Schedule 2 attached hereto.
Section 7.2. Expenses. The reasonable out-of-pocket costs incurred by
the Trustee, including, but not limited to, charges for SEC and other fees,
Reserve Reports, audits, long distance telephone calls, overtime necessitated by
rush orders, travel, legal, accounting and other professional services,
printing, stationery, binders, envelopes, ledger sheets, transfer sheets,
checks, Certificate list sheets, postage and insurance will be reimbursed to the
Trustee at actual cost. The Trustee shall be reimbursed for actual reasonable
expenditures made on account of the performance of its duties in connection with
matters pertaining to the Trust, and the compensation and expenses of its
counsel, accountants or other skilled Persons and of all other Persons not
regularly in its employ.
Section 7.3. Other Services. In the event of litigation involving the
Trust, audits or inspection of the records of the Trust pertaining to the
transactions affecting the Trust or any other unusual or extraordinary services
rendered in connection with the administration of the Trust, the Trustee shall
be entitled to receive reasonable compensation for the services rendered,
including but not limited to, the payment of the Trustee's standard rate or $100
per hour for all time spent by Trust personnel on such matters; provided,
however, the Trustee shall not be entitled to reimbursement or compensation for
services that unreasonably duplicate services provided by or through Grantor.
Section 7.4. Source of Funds. All compensation, reimbursements and
other charges owing to the Trustee shall constitute indebtedness under this
Agreement and will be payable by the Trust out of the Trust Estate, and the
Trustee shall have a lien on the Trust Estate for the payment of such
compensation, reimbursements, and other changes, entitling the Trustee under
this Agreement to priority as to payment thereof over payment to any other
Person. If the amount equal to the product of (i) funds held by the Trustee in
the Trust Estate at a Quarterly Record Date and (ii) .08 are insufficient to
satisfy in full all such amounts owing to the Trustee under Section 7.1 and
Section 7.2 for the applicable Quarter, Grantor shall make loans available
23
to the Trustee, for the use and benefit of the Trust, pursuant to Section 3.9 in
such amounts as may be necessary from time to time to satisfy any deficiencies.
Section 7.5. Funding. From time to time as the Trustee deems reasonably
necessary to assure adequate funding for the routine administration of the Trust
until such time as cash proceeds generated by the Royalties, or any of them,
that are received by the Trustee on behalf of the Trust are sufficient for such
purpose, the Trustee may request Grantor to make loans (and Grantor agrees to
make such loans), in amounts estimated by the Trustee to be required to cover
routine administrative expenses expected to be incurred within the 90-day period
following the date each such loan is made. All such loans shall be senior
unsecured obligations of the Trust, shall bear interest at the rate of eight
percent (8%) per annum and shall be repaid in accordance with, and otherwise be
subject to and entitled to the benefits of, Section 3.9(b).
Section 7.6. Ownership of Units by Trustee. The Trustee, in its
individual or other capacities, may become the owner or pledgee of Units with
the same rights as it would have if it were not a Trustee hereunder.
ARTICLE VIII.
MEETINGS OF UNITHOLDERS
Section 8.1. Purpose of Meetings. A meeting of the Unitholders may be
called at any time and from time to time pursuant to the provisions of this
Article VIII to transact any matter that the Unitholders may be authorized to
transact.
Section 8.2. Call and Notice of Meetings. Any such meeting of the
Unitholders may be called by the Trustee in its discretion and will be called by
the Trustee at the written request of Grantor or Unitholders owning of record
not less than fifteen percent (15%) in number of the Units then outstanding. All
such meetings shall be held at such time and at such place in ▇▇▇▇▇▇ County,
Texas, as the notice of any such meeting may designate. Except as may otherwise
be required by applicable law or by any securities exchange or market system on
which the Units are admitted for trading, as applicable, written notice of every
meeting of the Unitholders signed by the Trustee setting forth the time and
place of the meeting and in general terms the matters proposed to be acted upon
at such meeting shall be given in person or by mail not more than sixty (60) nor
less than twenty (20) days before such meeting is to be held to all of the
Unitholders of record as of a record date set by the Trustee (the "RECORD DATE
UNITHOLDERS"), which shall be not more than sixty (60) days before the date of
such mailing. No matter other than that stated in the notice shall be acted upon
at any meeting. If such notice is given to any Unitholder by mail, it shall be
directed to him at his last address as shown by the ownership ledger of the
Trustee and shall be deemed duly given when so addressed and deposited in the
United States mail, postage paid. Only Record Date Unitholders shall be entitled
to notice of and to exercise rights at or in connection with the meeting. Except
as provided in Section 8.6, any action required by this Agreement to be taken at
a meeting of the Unitholders, or any action which may be taken at a meeting of
the Unitholders, may not be taken and shall not be effective without an actual
meeting of the Unitholders, prior written notice to the Unitholders thereof and
a vote by the Unitholders with respect thereto.
24
Section 8.3. Voting. Each Record Date Unitholder shall be entitled to
one vote for each Unit owned by him, and any Record Date Unitholder may vote in
person or by duly executed written proxy. At any such meeting the presence in
person or by proxy of Record Date Unitholders holding a majority of the Units
outstanding at the record date shall constitute a quorum, and, except as
otherwise specifically provided herein, any matter shall be deemed to have been
approved by the Unitholders if it is approved by the vote of a majority in
interest of such Record Date Unitholders constituting a quorum, although less
than a majority of all of the Units at the time outstanding, except that the
affirmative vote by the Record Date Unitholders of
(a) eighty percent (80%) or more of all the Units outstanding at the
record date shall be required to:
(i) approve or authorize any sale or other disposition of all
or substantially all of the assets of the Trust, in a single
transaction or series of transactions (including sales or dispositions
authorized by Section 9.3); or
(ii) terminate the Trust pursuant to Section 9.2(c); or
(iii) approve any amendment to or affecting this Section
8.3(a);
(b) sixty percent (60%) or more of all the Units outstanding at the
record date shall be required to:
(i) approve or authorize any transaction with (i) Grantor or
any Affiliate of Grantor, (ii) any Unitholder that is not an Affiliate
of Grantor or (iii) any third Person not an Affiliate of Grantor that
owns a leasehold working interest in any lease burdened by a Royalty;
(ii) approve or authorize any sale or other disposition of
assets of the Trust (excluding sales or dispositions referred to in
Section 8.3(a)(i) and sales or dispositions authorized under Sections
3.2(b), 3.5, 3.9 or 9.3); or
(iii) approve any amendment to or affecting this Agreement
other than amendments with respect to Section 8.3(a), except that
amendments prohibited by Section 10.1 shall not be effected in any
event and amendments authorized by Section 10.2 shall not require the
approval of any Unitholder.
Section 8.4. Conduct of Meetings. The Trustee may make such reasonable
regulations consistent with the provisions hereof as it may deem advisable for
any meeting of the Unitholders, including regulations covering the closing of
the transfer books of the Trustee for purposes of determining Unitholders
entitled to notice of or to vote at any meeting, the appointment of proxies, the
appointment and duties of inspectors of votes, the submission and examination of
proxies, Certificates and other evidence of the right to vote, the preparation
and use at the meeting of a list authenticated by or on behalf of the Trustee of
the Unitholders entitled to vote at the meeting and such other matters
concerning the calling and conduct of the meeting as it shall deem advisable.
25
Section 8.5. Unitholder Proposals. In the event a meeting of
Unitholders is called for any purpose or a written consent is executed pursuant
to Section 8.6 at the request of any Unitholder or Unitholders pursuant to the
provisions of this Article VIII and the Trust remains subject to the
requirements of Section 12 of the Exchange Act, the Unitholder or Unitholders
requesting such meeting or executing such written consent shall be required to
prepare and file a proxy or information statement with the SEC regarding such
meeting or written consent in satisfaction of all applicable SEC rules and
regulations and at the expense of such requesting Unitholder or Unitholders. The
Unitholder or Unitholders requesting such meeting or executing such written
consent shall bear the expense of distributing to Unitholders the notice of
meeting and the proxy or information statement related thereto. The Trustee
shall cooperate in the preparation of any such proxy or information statement
and any related materials and shall provide such information for inclusion
therein as and to the extent reasonably necessary at the expense of the Trust.
Section 8.6. Action Without Meeting. Any action required or permitted
to be authorized or taken at any meeting of Unitholders may be taken without a
meeting, without prior notice and without a vote if a consent in writing setting
forth the authorization or action as taken is signed by Unitholders holding
Units representing not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all Units
entitled to vote thereon were present and voted. Prompt notice of the
authorization or taking of any action pursuant to this Section 8.6 shall be
given to those Unitholders who have not consented in writing.
Section 8.7. Units Owned by Grantor Deemed Not Outstanding. In
determining whether Unitholders holding the requisite number of Units have
concurred in any vote, direction, consent or waiver under this Agreement, Units
which are beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) by Grantor or by any Affiliate of Grantor or, for purposes of
Section 8.3(a)(ii) and 8.3(b)(iii), any third Person not an Affiliate of Grantor
that owns a leasehold working interest in any lease burdened by a Royalty, or,
for purposes of Section 8.3(b)(ii), the Unitholder proposing to enter into a
transaction with the Trustee for the benefit of the Trust that is the subject of
the required vote shall be disregarded and deemed not to be outstanding for the
purpose of any such vote or determination, except that for the purpose of
determining whether the Trustee shall be protected in relying on any such vote,
direction, consent or waiver only Units which the Trustee actually knows are so
owned shall be so disregarded. In case of a dispute as to such right, the advice
of counsel shall be full protection in respect of any decision made by the
Trustee in accordance with such advice. Upon request of the Trustee, Grantor
shall furnish to the Trustee promptly an officer's certificate listing and
identifying all Units so owned by Grantor or any of its Affiliates, if any; all
Units actually known by employees of Grantor servicing the Trust (i) to be so
owned or held by or for the account of any third Person not an Affiliate of
Grantor that owns a leasehold working interest in any lease burdened by a
Royalty, if any; and/or (ii) all Units so owned by any Unitholder proposing to
enter into a transaction with the Trustee for the benefit of the Trust; and,
subject to Section 6.1, the Trustee shall be entitled to accept such officer's
certificate as conclusive evidence of the facts therein set forth and of the
fact that all Units not listed therein are outstanding for the purpose of any
such determination.
26
ARTICLE IX.
DURATION, REVOCATION AND TERMINATION OF TRUST
Section 9.1. Revocation. The Trust is and shall be irrevocable and
Grantor, as such, retains no power to alter, amend or terminate the Trust. The
Trust shall be terminable only as provided in Section 9.2, and shall continue
until so terminated.
Section 9.2. Termination. The Trust shall terminate upon the first to
occur of the following events:
(a) the disposition of all of the Royalties pursuant to the terms of
this Agreement;
(b) at such time as the aggregate cash proceeds received by the Trustee
with respect to the Royalties for each of two successive years after the first
full year during which any of the Subject Interests produce Hydrocarbons (as
defined in the Conveyances) in commercial quantities is less than $1,000,000 per
year;
(c) the Trustee shall have failed to receive any aggregate cash
proceeds attributable to the Royalties during the period commencing on the
Effective Time through the third anniversary after the date that none of the
Subject Interests remain in their respective primary terms (including by way of
maintenance of any Subject Interest in the absence of production beyond its
stated primary term through Suspension of Production orders or other regulatory
relief granted by the federal Minerals Management Service or successor agency);
(d) a vote in favor of termination by the Unitholders present or
represented at a meeting and entitled to vote thereon, held in accordance with
the requirements of Article VIII; or
(e) the expiration of twenty-one years after the death of the last
survivor of the lawful descendants of any degree of the signers of the
Declaration of Independence in being on the date of execution hereof.
provided, however, that notwithstanding anything else in this Agreement to the
contrary, in no event shall the Trust be terminable or terminated if any Subject
Interest remains in its primary term (including by way of maintenance of such
Subject Interest in the absence of production beyond its stated primary term
through a Suspension of Production order or other regulatory relief granted by
the federal Minerals Management Service or successor agency).
Section 9.3. Disposition and Distribution of Properties. For the
purpose of liquidating and winding up the affairs of the Trust at its
termination, the Trustee shall continue to act as such and exercise each power
until its duties have been fully performed and the Trust Estate finally
distributed. Upon the termination of the Trust, the Trustee shall sell for cash
in one or more sales all the properties other than cash then constituting the
Trust Estate. The Trustee shall as promptly as possible distribute the proceeds
of any such sales and any other cash in the Trust Estate according to the
respective interests and rights of the Unitholders, after paying, satisfying and
discharging all of the liabilities of the Trust, or, when necessary, setting up
reserves in such amounts as the Trustee in its discretion deems appropriate for
contingent liabilities. In the event that any property which the Trustee is
required to sell is not sold by the Trustee within two years after the
termination of the Trust, the Trustee shall cause such property to be sold at
public
27
auction to the highest cash bidder. Notice of such sale by auction shall be
mailed at least thirty (30) days prior to such sale to each Unitholder of record
as of a date set by the Trustee at such Unitholder's address as it appears upon
the books of the Trustee. Grantor may purchase all or any portion of the Trust
Estate properties at any sale pursuant to this Section 9.3. The Trustee shall
not be required to obtain approval of the Unitholders prior to selling property
pursuant to this Section 9.3. In connection with sales pursuant to this Section
9.3, the Trustee may accept any offer to purchase the properties constituting
the Trust Estate that it deems reasonable in its discretion and shall have no
liability in connection with any such sales except under the circumstances
described in Section 6.1(a). The Trustee may engage the services of one or more
investment advisers or other parties deemed by the Trustee to be qualified as
experts on such matters to assist with such sales and shall be entitled to rely
on the advice of such professionals as contemplated by Section 12.2. Upon making
final distribution to the Unitholders, the Trustee shall be under no further
liability except as provided in Section 6.1(b).
ARTICLE X.
AMENDMENTS
Section 10.1. Prohibited. No amendment may be made to any provision of
the Agreement which would
(a) alter the purposes of the Trust or permit the Trustee to engage in
any business or investment activities or any activity substantially different
from that specified herein;
(b) alter the rights of the Unitholders vis-a-vis each other;
(c) permit the Trustee to distribute the Royalties in kind either
during the continuation of the Trust or during the period of liquidation or
winding up under Section 9.3; or
(d) adversely affect the rights and duties of the Trustee under this
Agreement, unless such amendment has been approved, in writing, by the Trustee.
Section 10.2. Permitted. Grantor and the Trustee may, jointly, from
time to time, supplement or amend this Agreement, without the approval of the
Unitholders, in order to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other provision
hereof, or to change the name of the Trust, provided that such supplement or
amendment does not adversely affect the interests of the Unitholders. All other
amendments to the provisions of the Agreement shall be made only by a vote of
the Unitholders present or represented at a meeting held in accordance with the
requirements of Article VIII. The Trustee shall approve all amendments permitted
under this Section 10.2, provided all prior conditions are satisfied and there
is no adverse effect on the Trust or the Trustee. In connection with any request
by Grantor to supplement or amend this Agreement to cure any ambiguity, defect
or inconsistency, Grantor shall provide to the Trustee, and it shall be a
condition to the Trustee's approval thereof, an officer's certificate and an
opinion of counsel deemed satisfactory to the Trustee to support a determination
of the existence of an ambiguity, defect or inconsistency that may properly be
cured under this Section 10.2 and applicable law. The Trustee shall be entitled
to rely on such officer's certificate and opinion, and such officer's
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certificate and opinion shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder in good faith and in
accordance therewith.
ARTICLE XI.
ARBITRATION
THE PARTIES TO THIS AGREEMENT AGREE THAT ANY DISPUTE, CONTROVERSY OR
CLAIM THAT MAY ARISE BETWEEN OR AMONG GRANTOR (ON THE ONE HAND) AND THE TRUST OR
THE TRUSTEE (ON THE OTHER HAND) IN CONNECTION WITH OR OTHERWISE RELATING TO THIS
AGREEMENT OR THE CONVEYANCES OR THE APPLICATION, IMPLEMENTATION, VALIDITY OR
BREACH OF THIS AGREEMENT OR THE CONVEYANCES OR ANY PROVISION OF THIS AGREEMENT
OR THE CONVEYANCES (INCLUDING, WITHOUT LIMITATION, CLAIMS BASED ON CONTRACT,
TORT OR STATUTE), SHALL BE FINALLY, CONCLUSIVELY AND EXCLUSIVELY SETTLED BY
BINDING ARBITRATION IN HOUSTON, TEXAS IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES (THE "RULES") OF THE AMERICAN ARBITRATION ASSOCIATION OR ANY
SUCCESSOR THERETO ("AAA") THEN IN EFFECT. THE PARTIES TO THIS AGREEMENT (AND ON
BEHALF OF THE TRUST) HEREBY EXPRESSLY WAIVE THEIR RIGHT TO SEEK REMEDIES IN
COURT, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TRIAL BY JURY, WITH RESPECT
TO ANY MATTER SUBJECT TO ARBITRATION PURSUANT TO THIS ARTICLE XI. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING, WITHOUT LIMITATION, A SUMMARY OR
EXPEDITED PROCEEDING, IN ANY COURT HAVING JURISDICTION, TO COMPEL ARBITRATION OF
ANY DISPUTE, CONTROVERSY OR CLAIM TO WHICH THIS ARTICLE XI APPLIES. EXCEPT WITH
RESPECT TO THE FOLLOWING PROVISIONS (THE "SPECIAL PROVISIONS"), WHICH SHALL
APPLY WITH RESPECT TO ANY ARBITRATION PURSUANT TO THIS ARTICLE XI, THE
INITIATION AND CONDUCT OF ARBITRATION SHALL BE AS SET FORTH IN THE RULES, WHICH
RULES ARE INCORPORATED IN THIS AGREEMENT BY REFERENCE WITH THE SAME EFFECT AS IF
THEY WERE SET FORTH IN THIS AGREEMENT.
(a) In the event of any inconsistency between the Rules and the Special
Provisions, the Special Provisions shall control. References in the Rules to a
sole arbitrator shall be deemed to refer to the tribunal of arbitrators provided
for under subparagraph (c) below in this Article XI.
(b) The arbitration shall be administered by AAA.
(c) The arbitration shall be conducted by a tribunal of three
arbitrators. Within ten (10) days after arbitration is initiated pursuant to the
Rules, the initiating party or parties (the "CLAIMANT") shall send written
notice to the other party or parties (the "RESPONDENT"), with a copy to the
Houston office of AAA, designating the first arbitrator (who shall not be a
representative or agent of any party but may or may not be an AAA panel member
and, in any case, shall be reasonably believed by the Claimant to possess the
requisite experience, education and expertise in respect of the matters to which
the claim relates to enable such person to completely perform arbitral duties).
Within ten (10) days after receipt of such notice, the Respondent shall send
written notice to the Claimant, with a copy to the Houston office of AAA
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and to the first arbitrator, designating the second arbitrator (who shall not be
a representative or agent of any party, but may or may not be an AAA panel
member and, in any case, shall be reasonably believed by the Respondent to
possess the requisite experience, education and expertise in respect of the
matters to which the claim relates to enable such person to competently perform
arbitral duties). Within ten (10) days after such notice from the Respondent is
received by the Claimant, the Respondent and the Claimant shall cause their
respective designated arbitrators to select any mutually agreeable AAA panel
member as the third arbitrator. If the respective designated arbitrators of the
Respondent and the Claimant cannot so agree within such ten (10) day period,
then the third arbitrator will be determined pursuant to the Rules. For purposes
of this Article XI, Grantor (on the one hand) and the Trust and the Trustee (on
the other hand) shall each be entitled to the selection of one (1) arbitrator.
Prior to commencement of the arbitration proceeding, each arbitrator shall have
provided the parties with a resume outlining such arbitrator's background and
qualifications and shall certify that such arbitrator is not a representative or
agent of any of the parties. If any arbitrator shall die, fail to act, resign,
become disqualified or otherwise cease to act, then the arbitration proceeding
shall be delayed for fifteen (15) days and the party by or on behalf of whom
such arbitrator was appointed shall be entitled to appoint a substitute
arbitrator (meeting the qualifications set forth in this Article XI) within such
fifteen (15) day period; provided, however, that if the party by or on behalf of
whom such arbitrator was appointed shall fail to appoint a substitute arbitrator
within such fifteen (15) day period, the substitute arbitrator shall be a
neutral arbitrator appointed by the AAA arbitrator within fifteen (15) days
thereafter.
(d) All arbitration hearings shall be commenced within one hundred
twenty (120) days after arbitration is initiated pursuant to the Rules, unless,
upon a showing of good cause by a party to the arbitration, the tribunal of
arbitrators permits the extension of the commencement of such hearing; provided,
however, that any such extension shall not be longer than sixty (60) days.
(e) All claims presented for arbitration shall be particularly
identified and the parties to the arbitration shall each prepare a statement of
their position with recommended courses of action. These statements of position
and recommended courses of action shall be submitted to the tribunal of
arbitrators chosen as provided hereinabove for binding decision. The tribunal of
arbitrators shall not be empowered to make decisions beyond the scope of the
position papers.
(f) The arbitration proceeding will be governed by the substantive laws
of the State of Texas and will be conducted in accordance with such procedures
as shall be fixed for such purpose by the tribunal of arbitrators, except that
(i) discovery in connection with any arbitration proceeding shall be conducted
in accordance with the Federal Rules of Civil Procedure and applicable case law,
(ii) the tribunal of arbitrators shall have the power to compel discovery and
(iii) unless the parties otherwise agree and except as may be provided in this
Article XI, the arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. Sections 1- 16, to the exclusion of any provision of state law or
other applicable law or procedure inconsistent therewith or which would produce
a different result. The parties shall preserve their right to assert and to
avail themselves of the attorney-client and attorney-work-product privileges,
and any other privileges to which they may be entitled pursuant to applicable
law. No party to the arbitration or any arbitrator may compel or require
mediation and/or settlement conferences without the prior written consent of all
such parties and the tribunal of arbitrators.
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(g) The tribunal of arbitrators shall make an arbitration award as soon
as possible after the later of the close of evidence or the submission of final
briefs, and in all cases the award shall be made not later than thirty (30) days
following submission of the matter. The finding and decision of a majority of
the arbitrators shall be final and shall be binding upon the parties. Judgment
upon the arbitration award or decision may be entered in any court having
jurisdiction thereof or application may be made to any such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. The
tribunal of arbitrators shall have the authority to assess liability for
pre-award and post-award interest on the claims, attorneys' fees, expert witness
fees and all other expenses of arbitration as such arbitrators shall deem
appropriate based on the outcome of the claims arbitrated. Unless otherwise
agreed by the parties to the arbitration in writing, the arbitration award shall
include findings of fact and conclusions of law.
(h) Nothing in this Article XI shall be deemed to (i) limit the
applicability of any otherwise applicable statute of limitations or repose or
any waivers contained in this Agreement, (ii) constitute a waiver by any party
hereto of the protections afforded by 12 U.S.C. Section 91 or any successor
statute thereto or any substantially equivalent state law or (iii) restrict the
right of the Trustee to make application to any state or federal district court
having jurisdiction in ▇▇▇▇▇▇ County, Texas, to appoint a successor Trustee or
to request instructions with regard to any provision in this Agreement when the
Trustee is unsure of its obligations thereunder.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Inspection of Trustee's Books. Each Unitholder and such
Unitholder's duly authorized agents, attorneys and auditors shall have the
right, at such Unitholder's own expense and during reasonable business hours, to
examine and inspect the records of the Trust and the Trustee, including lists of
Unitholders, for any proper purpose in reference thereto. For purposes of
determining whether a purpose asserted by a Unitholder is a "proper purpose",
the Trustee, in the absence of controlling precedent applicable to trusts
organized under the Texas Trust Code, may rely on any reasonably analogous
precedent, including laws and court decisions relating to corporations of the
State of Texas or other jurisdictions.
Section 12.2. Trustee's Employment of Experts. The Trustee may, but
shall not be required to, consult with counsel, who may be its own counsel,
accountants, geologists, engineers and other parties deemed by the Trustee to be
qualified as experts on the matters submitted to them, and the opinion or advice
of any such parties on any matter submitted to them by the Trustee shall be full
and complete authorization and protection in respect of any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of any
such party. The Trustee is authorized to make payments of all reasonable and
necessary fees billed by third parties for services or expenses thus incurred
out of the Trust Estate.
Section 12.3. Merger or Consolidation of Trustee. Neither a change of
name of the Trustee nor any merger or consolidation of it or of its corporate
powers with another bank or with a trust company shall affect its right or
capacity to act hereunder. Upon any merger, consolidation, sale of assets or
other transaction involving the Trustee in which the Trustee is not the
surviving entity, the surviving entity in such transaction shall automatically
become Trustee of the Trust and succeed to all rights, titles, duties, powers
and authority of the predecessor
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Trustee hereunder, without the requirement of Unitholder approval or any other
action, provided such surviving entity has succeeded to the rights and
obligations of the predecessor Trustee in accordance with applicable law and is
a bank or trust company having capital, surplus and undivided profits (as of the
end of its last fiscal year prior to the consummation of such transaction) of at
least $100,000,000.
Section 12.4. Filing of this Agreement. Neither this Agreement nor any
executed copy hereof need be filed in any county in which any of the Trust
Estate is located, but the same may be filed for record in any county by the
Trustee. In order to avoid the necessity of filing this Agreement for record,
the Trustee agrees that for the purpose of vesting the record title to the
Royalties in any successor Trustee, the succeeded Trustee will, upon appointment
of any successor Trustee, execute and deliver to such successor Trustee
appropriate assignments or conveyances.
Section 12.5. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstances shall be finally determined
by a court of proper jurisdiction to be illegal, invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision to
Persons or circumstances, other than those as to which it is held illegal,
invalid or unenforceable, shall not be affected thereby, and every provision of
this Agreement shall be valid and enforced to the fullest extent permitted by
law.
Section 12.6. Notices. Any and all notices or demands permitted or
required to be given under this Agreement shall be in writing and shall be
validly given or made if (a) personally delivered, (b) delivered and confirmed
by telecopier or like instantaneous transmission service, or by Federal Express
or other overnight courier delivery service, which shall be effective as of
confirmation of receipt by the courier at the address for notice hereinafter
stated, (c) solely in the case of notice to any Unitholder, by press release in
a nationally recognized and distributed media, or (d) deposited in the United
States mail, first class, postage prepaid, certified or registered, return
receipt requested, addressed as follows:
If to the Trustee, to:
Wachovia Bank, National Association
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Group
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
If to Grantor, to:
Newfield Exploration Company
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No.: (___)___-_____
32
If to a Unitholder, to:
the Unitholder
at its last address as shown on the
ownership records maintained by the Trustee
Notice which is mailed in the manner specified shall be conclusively
deemed given three (3) days after the date postmarked or upon receipt, whichever
is sooner. Any party to this Agreement may change its address for the purpose of
receiving notices or demands by notice given as provided in this Section 12.6.
Section 12.7. Counterparts. This Agreement may be executed in a number
of counterparts, each of which shall constitute an original, but such
counterparts shall together constitute but one and the same instrument.
Section 12.8. Successors. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
[Signature Page Follows]
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IN WITNESS WHEREOF, Grantor and Trustee have caused this Agreement to
be duly executed the day and year first above written at Houston, ▇▇▇▇▇▇ County,
Texas.
NEWFIELD EXPLORATION COMPANY,
as Grantor
By
-----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
WACHOVIA BANK, NATIONAL
ASSOCIATION, as Trustee
By
-----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SCHEDULE 2
TRUSTEE COMPENSATION
A. Administrative Fee
1. For all administrative and other services to be provided by the
Trustee under the Agreement including, but not limited to, costs of Trustee's
personnel, the Trustee will be paid, from the Trust Estate, the sum of
$[_________] per year, with such fee to be paid in equal monthly installments.
2. The Administrative Fee provided above will be adjusted annually,
beginning [_________], 2003. The adjustment shall be computed by multiplying the
current Administrative Fee by the percentage increase or decrease in the average
weekly earnings of Crude Petroleum and Gas Production Workers for the last
calendar year compared to the calendar year preceding as shown by the index of
average weekly earnings of Crude Petroleum and Gas Production Workers as
published by the United States Department of Labor, Bureau of Labor Statistics.
The adjusted Administrative Fee shall be the Administrative Fee currently in
use, plus or minus the computed adjustment.
B. Termination Fee
Upon termination of the Trust, the Trustee shall be paid a Termination
Fee of $[__________].
C. The fees provided above are in addition to out-of-pocket cost reimbursements
permitted under the Agreement.