SECURITY INSTRUMENTS EXECUTED AS OF THE DATE OF
THIS AGREEMENT AS ARE REQUESTED BY AGENT.
AS TO ANY OIL AND GAS PROPERTIES
HEREAFTER PLEDGED TO AGENT FOR THE RATABLE BENEFIT OF
-33-
BANKS, BORROWER OR GUARANTOR WILL PROMPTLY (BUT IN NO EVENT MORE THAN ONE
HUNDRED TWENTY (120) DAYS FOLLOWING SUCH PLEDGES), FURNISH AGENT WITH TITLE
OPINIONS REASONABLY SATISFACTORY TO AGENT, SHOWING GOOD AND DEFENSIBLE TITLE OF
BORROWER OR GUARANTOR TO SUCH OIL AND GAS PROPERTIES SUBJECT ONLY TO PERMITTED
LIENS.
(O)
CURATIVE MATTERS.
WITHIN NINETY (90) DAYS AFTER RECEIPT BY
BORROWER OR GUARANTOR FROM AGENT OR ITS COUNSEL OF WRITTEN NOTICE OF TITLE
DEFECTS THE AGENT REASONABLY REQUIRES TO BE CURED, BORROWER OR GUARANTOR WILL
EITHER (I) PROVIDE SUCH CURATIVE INFORMATION, IN FORM AND SUBSTANCE SATISFACTORY
TO BANKS, OR (II) SUBSTITUTE OIL AND GAS PROPERTIES OF VALUE AND QUALITY
SATISFACTORY TO THE BANKS FOR ALL OIL AND GAS PROPERTIES FOR WHICH SUCH TITLE
CURATIVE WAS REQUESTED BUT UPON WHICH BORROWER OR GUARANTOR ELECTED NOT TO
PROVIDE SUCH TITLE CURATIVE INFORMATION, AND, WITHIN SIXTY (60) DAYS OF SUCH
SUBSTITUTION, PROVIDE TITLE OPINIONS SATISFACTORY TO THE BANKS COVERING THE OIL
AND GAS PROPERTIES SO SUBSTITUTED.
(P)
ADDITIONAL COLLATERAL.
BORROWER AGREES TO REGULARLY MONITOR
ENGINEERING DATA COVERING ALL PRODUCING OIL AND GAS PROPERTIES AND INTERESTS
ACQUIRED BY BORROWER OR GUARANTOR ON OR AFTER THE DATE HEREOF AND TO PLEDGE OR
CAUSE TO BE PLEDGED SUCH OF THE SAME TO AGENT FOR THE RATABLE BENEFIT OF THE
BANKS IN SUBSTANTIALLY THE FORM OF THE SECURITY INSTRUMENTS, AS APPLICABLE, TO
THE EXTENT THAT THE BANKS SHALL AT ALL TIMES DURING THE EXISTENCE OF THE
REVOLVING COMMITMENT BE SECURED BY PERFECTED LIENS AND SECURITY INTERESTS
COVERING (I) NOT LESS THAN NINETY PERCENT (90%) OF THE ENGINEERED VALUE OF ALL
PRODUCING OIL AND GAS PROPERTIES OF BORROWER AND GUARANTOR IN THE AGGREGATE; AND
(II) EACH AND ALL SUCH PROPERTIES WHICH HAVE AN ENGINEERED VALUE OF $100,000 OR
MORE.
FOR THE PURPOSES OF THIS SECTION 12(P), "ENGINEERED VALUE" SHALL MEAN
FUTURE NET REVENUE DISCOUNTED AT EIGHT PERCENT (8%) PER ANNUM UTILIZING THE SET
OF PRICING PARAMETERS USED IN THE MOST CURRENT ENGINEERING REPORT REQUIRED
PURSUANT TO SECTION 12(A)(III) HEREOF.
13.
NEGATIVE COVENANTS.
A DEVIATION FROM THE PROVISIONS OF THIS
SECTION 13 SHALL NOT CONSTITUTE AN EVENT OF DEFAULT UNDER THIS AGREEMENT IF SUCH
DEVIATION IS CONSENTED TO IN WRITING BY MAJORITY
BANKS.
WITHOUT THE PRIOR
WRITTEN CONSENT OF MAJORITY BANKS, BORROWER AND GUARANTOR (TO THE EXTENT
APPLICABLE THERETO) WILL AT ALL TIMES COMPLY WITH THE COVENANTS CONTAINED IN
THIS SECTION 13 FROM THE DATE HEREOF AND FOR SO LONG AS ANY INDEBTEDNESS OR
OBLIGATION OF BORROWER UNDER THE LOAN DOCUMENTS IS OUTSTANDING OR ANY PART OF
THE REVOLVING COMMITMENT IS IN EXISTENCE.
(A)
LIENS.
NEITHER BORROWER NOR GUARANTOR WILL CREATE, INCUR, ASSUME
OR PERMIT TO EXIST ANY LIEN, SECURITY INTEREST OR OTHER ENCUMBRANCE ON ANY OF
ITS ASSETS OR PROPERTIES EXCEPT PERMITTED LIENS.
(B)
DEBTS, GUARANTIES AND OTHER OBLIGATIONS.
NEITHER BORROWER NOR ANY
OF ITS SUBSIDIARIES