EXHIBIT 10.8
(LA, MT, ND, OK, TX, WY)
DEED OF TRUST, MORTGAGE, LINE OF CREDIT MORTGAGE
ASSIGNMENT, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
FROM
ST. MARY LAND & EXPLORATION COMPANY
(Taxpayer I.D. No. 41-05 18430)
ST. MARY ENERGY COMPANY
(Taxpayer I.D. No. 76-0554924)
NANCE PETROLEUM CORPORATION
(Taxpayer I.D. No. 8 1-0309883)
NPC INC.
(Taxpayer I.D. No. 11-3668557)
TO
JAY CHERNOSKY, TRUSTEE
AND
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent
Dated Effective as of April 7, 2005
A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF
FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.
THIS INSTRUMENT COVERS, AMONG OTHER THINGS, (A) GOODS WHICH ARE OR ARE TO BECOME
FIXTURES RELATED TO THE REAL PROPERTY DESCRIBED HEREIN, AND (B) AS-EXTRACTED
COLLATERAL RELATED TO THE REAL PROPERTY DESCRIBED HEREIN (INCLUDING WITHOUT
LIMITATION, OIL, GAS, OTHER MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH AND ACCOUNTS ARISING OUT OF THE SALE AT THE WELLHEAD OR
MINEHEAD THEREOF). THIS INSTRUMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES AND/OR PARISHES
REFERENCED IN EXHIBIT A HERETO AND SUCH FILING SHALL SERVE, AMONG OTHER
PURPOSES, AS A FIXTURE FILING AND AS A FINANCING STATEMENT COVERING AS-EXTRACTED
COLLATERAL. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND/OR
IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN SECTION 1.1 OF THIS
INSTRUMENT.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. APOWER OF SALE MAY ALLOW
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AGENT (AS HEREINAFTER DEFINED) OR TI-IF TRUSTEE (AS HEREINAFTER DEFINED) TO TAKE
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THE MORTGAGED PROPERTIES AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE
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ACTION UPON DEFAULT BY THE MORTGAGOR (AS HEREINAFTER DEFINED) UNDER THIS
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MORTGAGE.
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WHEN RECORDED OR FILED RETURN TO: THIS DOCUMENT PREPARED BY:
Vinson & Elkins L.L.P. Craig W. Murray
2300 First City Tower Vinson & Elkins L.L.P.
Houston, Texas 77002 2300 First City Tower
Attention: Brian R. Howard Houston, Texas 77002
DEED OF TRUST, MORTGAGE, LINE OF CREDIT MORTGAGE
ASSIGNMENT, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
(this "Mortgage")
ARTICLE I.
Granting Clauses: Secured Indebtedness
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Section 1.1 Grant and Mortgage. St. Mary Land & Exploration Company, a
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Delaware corporation ("Parent"), St. Mary Energy Company, a Delaware corporation
("Energy"), Nance Petroleum Corporation, a Montana corporation ("Nance"), and
NPC Inc., a Colorado corporation ("NPC"); Parent, Energy, Nance and NPC being
herein collectively called "Mortgagor" and Energy, Nance and NPC being herein
sometimes collectively called a "Subsidiary Mortgagor"), for and in
consideration of the sum of Ten Dollars ($10.00) to Mortgagor in hand paid, and
in order to secure the payment of the secured indebtedness hereinafter referred
to and the performance of the obligations, covenants, agreements, warranties and
undertakings of Mortgagor hereinafter described, does hereby (a) GRANT, BARGAIN,
SELL, CONVEY, TRANSFER, ASSIGN AND SET OVER to Trustee (as hereinafter defined),
and grant to Trustee a POWER OF SALE (pursuant to this Mortgage and applicable
law) with respect to, those of the following described properties, rights and
interests which are located in (or cover properties located in) the State of
Texas or which are located within (or cover properties located within) the
offshore area over which the United States of America asserts jurisdiction and
to which the laws of any such state are applicable with respect to this Mortgage
and/or the liens or security interests created hereby (the "Deed of Trust
Mortgaged Properties"), and (b) MORTGAGE, ASSIGN, WARRANT, PLEDGE AND
HYPOTHECATE to Agent (as defined in Section 1.3(a) below), and grant to Agent a
POWER OF SALE (pursuant to this Mortgage and applicable law) with respect to,
all of the following described rights, interests and properties which were not
granted to Trustee in clause (a) above (including, without limitation, those of
the following described properties, rights and interests which are located in
(or cover properties located in ) the States of Louisiana, Montana, North
Dakota, Oklahoma or Wyoming or which are located within (or cover properties
located within) the offshore area over which the United States of America
asserts jurisdiction and to which the laws of any such state are applicable with
respect to this Mortgage and/or the liens or security interests created hereby)
(the "Other Mortgaged Properties"):
A. The oil, gas and/or other mineral properties, mineral servitudes,
and/or mineral rights which are described in Exhibit A attached hereto and made
a part hereof;
B. Without limitation of the foregoing, all other right, title and
interest of Mortgagor of whatever kind or character (whether now owned or
hereafter acquired by operation of law or otherwise) in and to (i) the oil, gas
and/or mineral leases or other agreements described in Exhibit A hereto, (ii)
the lands described or referred to in Exhibit A (or described in any of the
instruments described or referred to in Exhibit A), without regard to any
limitations as to specific lands or depths that may be set forth in Exhibit A
hereto or in any of the leases or other agreements described in Exhibit A hereto
and (iii) any other lands (including submerged lands) located anywhere in the
United States of America or located offshore the United States of America but
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within the offshore area over which the United States of America or any State
thereof asserts jurisdiction;
C. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all presently existing and
hereafter created oil, gas and/or mineral unitization, pooling and/or
communitization agreements, declarations and/or orders, and in and to the
properties, rights and interests covered and the units created thereby
(including, without limitation, units formed under orders, rules, regulations or
other official acts of any federal, state or other authority having
jurisdiction), which cover, affect or otherwise relate to the properties, rights
and interests described in clause A or B above;
D. All of Mortgagor's interest in and rights under (whether now owned
or hereafter acquired by operation of law or otherwise) all presently existing
and hereafter created operating agreements, equipment leases, production sales
contracts, processing agreements, transportation agreements, gas balancing
agreements, farmout and/or farm-in agreements, salt water disposal agreements,
area of mutual interest agreements, and other contracts and/or agreements which
cover, affect, or otherwise relate to the properties, rights and interests
described in clause A, B or C above or to the operation of such properties,
rights and interests or to the treating, handling, storing, processing,
transporting or marketing of oil, gas, other hydrocarbons, or other minerals
produced from (or allocated to) such properties, rights and interests
(including, but not limited to, those contracts listed in Exhibit A hereto), as
same may be amended or supplemented from time to time;
E. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all improvements, fixtures,
movable or immovable property and other real and/or personal property
(including, without limitation, all wells, pumping units, wellhead equipment,
tanks, pipelines, flow lines, gathering lines, compressors, dehydration units,
separators, meters, buildings, injection facilities, salt water disposal
facilities, and power, telephone and telegraph lines), and all easements,
servitudes, rights-of-way, surface leases, licenses, permits and other surface
rights, which are now or hereafter used, or held for use, in connection with the
properties, rights and interests described in clause A, B or C above, or in
connection with the operation of such properties, rights and interests, or in
connection with the treating, handling, storing, processing, transporting or
marketing of oil, gas, other hydrocarbons, or other minerals produced from (or
allocated to) such properties, rights and interests; and
F. All rights, estates, powers and privileges appurtenant to the
foregoing rights, interests and properties.
TO HAVE AND TO HOLD (a) the Deed of Trust Mortgaged Properties unto the
Trustee, and its successors or substitutes in this trust, and to its or their
successors and assigns, in trust, however, upon the terms, provisions and
conditions herein set forth, and (b) the Other Mortgaged Properties unto Agent,
and Agent's successors and assigns, upon the terms, provisions and conditions
herein set forth (the Deed of Trust Mortgaged Properties and the Other Mortgaged
Properties are herein sometimes collectively called the "Mortgaged Properties").
As used throughout this Mortgage, the term "Trustee" shall mean Jay Chernosky
whose address is 1001 Fannin Street, Suite 2255, Houston, Texas 77002.
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Section 1.2 Grant of Security Interest. In order to further secure the
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payment of the secured indebtedness hereinafter referred to and the performance
of the obligations, covenants, agreements, warranties, and undertakings of
Mortgagor hereinafter described, Mortgagor hereby grants to Agent (as defined in
Section 1.3(a) below) a security interest in the entire interest of Mortgagor
(whether now owned or hereafter acquired by operation of law or otherwise) in
and to:
(a) to the extent a security interest may be created therein, the Mortgaged
Properties;
(b) all oil, gas, other hydrocarbons, and other minerals produced from or
allocated to the Mortgaged Properties, and any products processed or obtained
therefrom (herein collectively called the "Production"), together with all
proceeds of Production (regardless of whether Production to which such proceeds
relate occurred on or before or after the date hereof), and together with all
liens and security interests securing payment of the proceeds of the Production,
including, but not limited to, those liens and security interests provided for
under (i) statutes enacted in the jurisdictions in which the Mortgaged
Properties are located, or (ii) statutes made applicable to the Mortgaged
Properties under federal law (or some combination of federal and state law);
(c) without limitation of any other provisions of this Section 1.2, all
payments received in lieu of production from the Mortgaged Properties
(regardless of whether such payments accrued, and/or the events which gave rise
to such payments occurred, on or before or after the date hereof), including,
without limitation, "take or pay" payments and similar payments, payments
received in settlement of or pursuant to a judgment rendered with respect to
take or pay or similar obligations or other obligations under a production sales
contract, payments received in buyout or buydown or other settlement of a
production sales contract, and payments received under a gas balancing or
similar agreement as a result of (or received otherwise in settlement of or
pursuant to judgment rendered with respect to) rights held by Mortgagor as a
result of Mortgagor (and/or its predecessors in title) taking or having taken
less gas from lands covered by a Mortgaged Property (or lands pooled or unitized
therewith) than their ownership of such Mortgaged Property would entitle them to
receive (the payments described in this subsection (c) being herein called
"Payments in Lieu of Production");
(d) all equipment, inventory, improvements, fixtures, accessions, goods and
other personal property or movable property of whatever nature now or hereafter
located on or used or held for use in connection with the Mortgaged Properties
(or in connection with the operation thereof or the treating, handling, storing,
processing, transporting, or marketing of Production), and all licenses and
permits of whatever nature now or hereafter used or held for use in connection
with the Mortgaged Properties (or in connection with the operation thereof or
the treating, handling, storing, processing, transporting, or marketing of
Production), and all renewals or replacements of the foregoing or substitutions
for the foregoing;
(e) all contract rights, choses in action (i.e., rights to enforce
contracts or to bring claims thereunder), commercial tort claims and other
general intangibles (regardless of whether the same arose, and/or the events
which gave rise to the same occurred, on or before or after the date hereof)
related to the Mortgaged Properties, the operation thereof (whether Mortgagor is
operator or non-operator), or the treating, handling, storing, processing,
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transporting, or marketing of Production (including, without limitation, any of
the same relating to payment of proceeds of Production or to payment of amounts
which could constitute Payments in Lieu of Production);
(f) Without limitation of the generality of the foregoing, any rights and
interests of Mortgagor under any present or future hedge or swap agreements,
cap, floor, collar, exchange, forward or other hedge or protection agreements or
transactions relating to crude oil, natural gas or other hydrocarbons, or any
option with respect to any such agreement or transaction now existing or
hereafter entered into by or on behalf of Mortgagor;
(g) all geological, geophysical, engineering, accounting, title, legal, and
other technical or business data concerning the Mortgaged Properties, the
Production or any other item of Property (as hereinafter defined) which are now
or hereafter in the possession of Mortgagor or in which Mortgagor can otherwise
grant a security interest, and all books, files, records, magnetic media,
software and other forms of recording or obtaining access to such data;
(h) all money, documents, instruments, chattel paper (including without
limitation, electronic chattel paper and tangible chattel paper), rights to
payment evidenced by chattel paper, securities, accounts, payment intangibles,
general intangibles, letters of credit, letter-of-credit rights, supporting
obligations and rights to payment of money arising from or by virtue of any
transaction (regardless of whether such transaction occurred on or before or
after the date hereof) related to the Mortgaged Properties, the Production or
any other item of Property;
(i) all rights, titles and interests now owned or hereafter acquired by
Mortgagor in any and all goods, inventory, equipment, as-extracted collateral,
documents, money, instruments, intellectual property, certificated securities,
uncertificated securities, investment property, letters of credit, rights to
proceeds of written letters of credit and other letter-of-credit rights,
commercial tort claims, deposit accounts, payment intangibles, general
intangibles, contract rights, chattel paper (including, without limitation,
electronic chattel paper and tangible chattel paper), rights to payment
evidenced by chattel paper, software, supporting obligations and accounts,
wherever located, and all rights and privileges with respect thereto (all of the
properties, rights and interests described in subsections (a), (b), (c), (d),
(e), (f), (g) and (h) above and this subsection (i) being herein sometimes
collectively called the "Collateral"); and
(j) all proceeds of the Collateral, whether such proceeds or payments are
goods, money, documents, instruments, chattel paper, securities, accounts,
payment intangibles, general intangibles, fixtures, real/immovable property,
personal/ movable property or other assets (the Mortgaged Properties, the
Collateral and the proceeds of the Collateral being herein sometimes
collectively called the "Property").
Except as otherwise expressly provided in this Mortgage, all terms in this
Mortgage relating to the Collateral and the grant of the foregoing security
interest which are defined in the Texas Uniform Commercial Code (the "UCC")
shall have the meanings assigned to them in Article 9 (or, absent definition in
Article 9, in any other Article) of the UCC, as those meanings may be amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the UCC have, at
all times, the broadest and most inclusive meanings possible. Accordingly, if
the UCC shall in the future be amended or held by a court to define any term
used herein more broadly or inclusively than the UCC in effect on the date of
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this Mortgage, then such term, as used herein, shall be given such broadened
meaning. If the UCC shall in the future be amended or held by a court to define
any term used herein more narrowly, or less inclusively, than the UCC in effect
on the date of this Mortgage, such amendment or holding shall be disregarded in
defining terms used in this Mortgage
Section 1.3 Secured Indebtedness. This Mortgage is executed and delivered
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by the Mortgagor to secure and enforce the payment and performance of the
following:
(a) Payment of and performance of any and all indebtedness, obligations and
liabilities, including interest (including, without limitation, interest
accruing after the maturity of the "Loans" (as defined in the hereinafter
defined Credit Agreement) made by each Lender and interest accruing after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Parent, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
of the Parent whether now existing or hereafter arising under or in connection
with that certain Amended and Restated Credit Agreement dated as of April 7,
2005, by and among Parent, Wachovia Bank, National Association, as
Administrative Agent (in such capacity, the "Agent") and the Lenders as the same
may from time to time be amended or supplemented, the "Credit Agreement") or any
other "Loan Document" (as defined in the Credit Agreement), including, without
limitation, the "Notes" (as defined in the Credit Agreement) in the aggregate
original principal amount of $500,000,000 with final maturity on or before April
7, 2010.
(b) Payment and performance of any and all indebtedness, obligations and
liabilities of Energy, Nance and NPC whether now existing or hereafter arising
under or in connection with the "Guaranty Agreement" (as defined in the Credit
Agreement).
(c) Any sums which may be advanced or paid by the Agent or any Lender under
the terms hereof or of the Credit Agreement or any Loan Document on account of
the failure of the Mortgagor to comply with the covenants of the Mortgagor
contained herein or in the Credit Agreement or any other Loan Document; and all
other indebtedness of the Mortgagor arising pursuant to the provisions of this
Mortgage.
(d) Payment of and performance of any and all present or future obligations
of the Mortgagor according to the terms of any present or future interest rate
or currency swap, rate cap, rate floor, rate collar, forward rate agreement or
other exchange or rate protection agreements or any option with respect to any
such transaction now existing or hereafter entered into between the Mortgagor
and any Lender (or any Affiliate of such Lender).
(e) Payment of and performance of any and all present or future obligations
of the Mortgagor according to the terms of any present or future swap
agreements, cap, floor, collar, forward agreement or other exchange or
protection agreements relating to crude oil, natural gas or other hydrocarbons
or any option with respect to any such transaction now existing or hereafter
entered into between the Mortgagor and any Lender (or any Affiliate of such
Lender).
(f) Performance of all "Letter of Credit Agreements" (as defined in the
Credit Agreement) executed from time to time by the Parent or any Subsidiary of
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the Parent under or pursuant to the Credit Agreement and all reimbursement
obligations for drawn or undrawn portions under any "Letter of Credit" (as
defined in the Credit Agreement) now outstanding or hereafter issued under or
pursuant to the Credit Agreement.
Section 1.4 Secured Indebtedness. The indebtedness referred to in Section
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1.3, and all renewals, extensions and modifications thereof, and all
substitutions therefor, in whole or in part, are herein sometimes referred to as
the "secured indebtedness" or the "indebtedness secured hereby". It is
contemplated and acknowledged that the secured indebtedness may include
revolving credit loans and advances from time to time, and that this Mortgage
shall have effect, as of the date hereof, to secure all secured indebtedness,
regardless of whether any amounts are advanced on the date hereof or on a later
date or, whether having been advanced, are later repaid in part or in whole and
further advances made at a later date.
Section 1.5 MAXIMUM SECURED AMOUNT. NOTWITHSTANDING ANY PROVISION HEREOF TO
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THE CONTRARY, THE OUTSTANDING INDEBTEDNESS SECURED BY PROPERTY LOCATED IN THE
STATES OF LOUISIANA OR MONTANA SHALL NOT, AT ANY TIME OR FROM TIME TO TIME,
EXCEED AN AGGREGATE MAXIMUM AMOUNT OF $600,000,000.
Section 1.6 Intentionally Left Blank.
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Section 1.7 Limit on Secured Indebtedness and Collateral. It is the
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intention of each Subsidiary Mortgagor, Agent and Lenders that this Mortgage not
constitute a fraudulent transfer or fraudulent conveyance under any state or
federal law that may be applied hereto. Each Subsidiary Mortgagor and, by its
acceptance hereof, Agent hereby acknowledge and agree that, notwithstanding any
other provision of this Mortgage: (a) the indebtedness secured hereby by such
Subsidiary Mortgagor shall be limited to the maximum amount of indebtedness that
can be incurred or secured by such Subsidiary Mortgagor without rendering this
Mortgage subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of any applicable state or federal law, and
(b) the Property granted by such Subsidiary Mortgagor hereunder shall be limited
to the maximum amount of Property that can be granted by such Subsidiary
Mortgagor without rendering this Mortgage subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provisions of any
applicable state or federal law.
ARTICLE II.
Representations, Warranties and Covenants
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Section 2.1 Mortgagor represents, warrants, and covenants as follows:
(a) Title and Permitted Encumbrances. Mortgagor has, and Mortgagor
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covenants to maintain, good and defensible title to the Property, free and clear
of all liens, security interests, and encumbrances except for (i) the contracts,
agreements, burdens, encumbrances and other matters set forth in the
descriptions of certain of the Mortgaged Properties on Exhibit A hereto, (ii)
the liens and security interests evidenced by this Mortgage, (iii) statutory
liens for taxes which are not yet delinquent, (iv) liens under operating
agreements, pooling orders and unitization agreements, and mechanics' and
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materialmen's liens, with respect to obligations which are not yet due, and (v)
other liens and security interests (if any) in favor of Agent (the matters
described in the foregoing clauses (i), (ii), (iii), (iv), and (v) being herein
called the "Permitted Encumbrances"); Mortgagor will warrant and defend title to
the Property, subject as aforesaid, against the claims and demands (including
claims which would be a Permitted Encumbrance under item (vi) above) of all
persons claiming or to claim the same or any part thereof. Without limitation of
the foregoing, the ownership by Mortgagor of the Mortgaged Properties does and
will, with respect to each well or unit identified on Schedule I, attached
hereto and made a part hereof, entitle Mortgagor to receive (subject to the
terms and provisions of this Mortgage) a decimal or percentage share of the oil,
gas and other hydrocarbons produced from, or allocated to, such well or unit
equal to not less than the decimal or percentage share set forth, for such well
or unit, in the column headed "Net Revenue Interest" (or words of similar
import) on Schedule I, and cause Mortgagor to be obligated to bear a decimal or
percentage share of the cost of operation of such well or unit equal to not more
than the decimal or percentage share set forth, for such well or unit, in the
column headed "Working Interest" (or words of similar import) on Schedule I. The
above-described shares of production which Mortgagor is entitled to receive and
shares of expenses which Mortgagor is obligated to bear are not and will not be
subject to change (other than changes which arise pursuant to non-consent
provisions of operating agreements described in Exhibit A in connection with
operations hereafter proposed), except, and only to the extent that, such
changes are reflected in Schedule I. There is not and will not be any unexpired
financing statement covering any part of the Property on file in any public
office naming any party other than Agent as secured party. Upon request by
Agent, Mortgagor will deliver to Agent schedules of all internal and third party
information identifying the Mortgaged Properties (such as, for example, lease
names and numbers assigned by Mortgagor or the operator of any Mortgaged
Property, well and/or unit and/or property names and numbers assigned by
purchasers of Production, and internal identification names and numbers used by
Mortgagor in accounting for revenues, costs, and joint interest transactions
attributable to the Mortgaged Properties). The listing of Permitted Encumbrances
above is made for the purpose of limiting certain warranties and covenants made
by Mortgagor herein; such listing is not intended to affect the description
herein of the Mortgaged Properties nor to subordinate the liens and security
interests hereunder to any Permitted Encumbrances.
(b) Leases and Contracts; Performance of Obligations. The oil, gas and/or
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mineral leases, contracts, servitudes and other agreements forming a part of the
Property, to the extent the same cover or otherwise relate to the Property, are
in full force and effect, and Mortgagor agrees to so maintain them in full force
and effect. All rents, royalties and other payments due and payable under such
leases, contracts, servitudes and other agreements, or under the Permitted
Encumbrances, or otherwise attendant to the ownership or operation of the
Property, have been, and will continue to be, properly and timely paid.
Mortgagor is not in default with respect to Mortgagor's obligations (and
Mortgagor is not aware of any default by any third party with respect to such
third party's obligations) under such leases, contracts, servitudes and other
agreements, or under the Permitted Encumbrances, or otherwise attendant to the
ownership or operation of any part of the Property, where such default could
adversely affect the ownership or operation of the Property; Mortgagor will
fulfill all such obligations coming due in the future. There are no situations
where Mortgagor is aware that a contingent liability may exist to account on a
basis less favorable to Mortgagor than on the basis on which Mortgagor is
currently accounting.
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(c) Sale of Production. No Mortgaged Property is or will become subject to
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any contractual or other arrangement (i) whereby payment for production is or
can be deferred for a substantial period after the month in which such
production is delivered (i.e., for wells in pay status, in the case of oil, not
in excess of 60 days, and in the case of gas, not in excess of 90 days, and for
wells not in pay status, the time period provided by statute) or (ii) whereby
payments are made to Mortgagor other than by checks, drafts, wire transfer
advises or other similar writings, instruments or communications for the
immediate payment of money. Except for production sales contracts, processing
agreements or transportation agreements (or other agreements relating to the
marketing of Production) listed on Exhibit A (in connection with the Mortgaged
Properties to where they relate), (1) except for the contracts and Mortgaged
Properties associated therewith as set forth on Schedule 2.1 (c)A, no Mortgaged
Property is or will become subject to any contractual or other arrangement for
the sale, processing or transportation of Production (or otherwise related to
the marketing of Production) which cannot be cancelled on 120 days' (or less)
notice and (ii) all contractual or other arrangements for the sale, processing
or transportation of Production (or otherwise related to the marketing of
Production) shall be bona fide transactions, and except for contractual and
other arrangements with Four Winds Marketing, LLC, will be with third parties
not affiliated with Mortgagor, and shall, with respect to all contracts and
other arrangements be at the best price (and on the best terms) then available
(such price shall, in the case of Production sales which are subject to price
controls, be determined giving consideration to such fact). Mortgagor is
presently receiving a price for all production from (or attributable to) each
Mortgaged Property covered by a production sales contract listed on Exhibit A as
computed in accordance with the terms of such contract, and is not having
deliveries of production from such Mortgaged Property curtailed substantially
below such property's delivery capacity. Neither Mortgagor, nor any of its
predecessors in title, has received prepayments (including, but not limited to,
payments for gas not taken pursuant to "take or pay" or other similar
arrangements) for any oil, gas or other hydrocarbons produced or to be produced
from the Mortgaged Properties after the date hereof, and Mortgagor hereby
covenants not to enter into any such advance or prepayment arrangements whereby
it accepts consideration for oil, gas or other hydrocarbons not yet produced. No
Mortgaged Property is or will become subject to any "take or pay" or other
similar arrangement (i) which can be satisfied in whole or in part by the
production or transportation of gas from other properties or (ii) as a result of
which production from the Mortgaged Properties may be required to be delivered
to one or more third parties without payment (or without full payment) therefor
as a result of payments made, or other actions taken, with respect to other
properties. To the best of Mortgagor's knowledge, the gas imbalances set forth
in Schedule 7.19 of the Credit Agreement reflects the gas balancing position of
the Mortgaged Properties as of January 27, 2003. Except as otherwise disclosed
to Agent in writing, as of December 31, 2001, there is no Mortgaged Property
with respect to which Mortgagor, or its predecessors in title, has, prior to
such date, taken more ("overproduced"), or less ("underproduced"), gas from the
lands covered thereby (or pooled or unitized therewith) than its ownership
interest in such Mortgaged Property would entitle it to take which has resulted,
on such date, in Mortgagor being materially overproduced or materially
underproduced with respect to such Mortgaged Property. Mortgagor will not after
the date hereof become "overproduced" (as above defined) with respect to any
well on the Mortgaged Properties (or on any unit in which the Mortgaged
Properties participate), in an amount in excess of Mortgagor's share of gas
produced from such well during the preceding four calendar months. No Mortgaged
Property is or will become subject to a gas balancing arrangement under which
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one or more third parties may take a portion of the production attributable to
such Mortgaged Property without payment (or without full payment) therefor as a
result of production having been taken from, or as a result of other actions or
inactions with respect to, other properties. No Mortgaged Property is subject at
the present time to any regulatory refund obligation and, to the best of
Mortgagor's knowledge, no facts exist which might cause the same to be imposed.
(d) Condition of Personal or Movable Property. The equipment, inventory,
------------------------------------------
improvements, fixtures, goods and other tangible personal/movable property
forming a part of the Property are and will remain (and with respect to Property
not operated by Mortgagor, to the best of Mortgagor's knowledge, such equipment,
inventory, fixtures, goods and other tangible personal/movable property are and
will remain) in good repair and condition and are and will be adequate for the
normal operation of the Property in accordance with prudent industry standards;
all of such Property is, and will remain, located on the Mortgaged Properties,
except for that portion thereof which is or shall be located elsewhere
(including that usually located on the Mortgaged Properties but temporarily
located elsewhere) in the course of the normal operation of the Property, or
which is hereafter sold or otherwise disposed of as permitted under the Credit
Agreement.
(e) Operation of Mortgaged Properties. The Mortgaged Properties, and with
---------------------------------
respect to Mortgaged Properties not operated by Mortgagor, to the best of
Mortgagor's knowledge, such non-operated Mortgaged Properties, (and properties
unitized therewith) are being (and, to the extent the same could adversely
affect the ownership or operation of the Mortgaged Properties after the date
hereof, have in the past been), and hereafter will be, maintained, operated and
developed in a good and workmanlike manner, in accordance with prudent industry
standards and in conformity with all applicable laws and all rules, regulations
and orders of all duly constituted authorities having jurisdiction and in
conformity with all oil, gas and/or other mineral leases and other contracts and
agreements forming a part of the Property and in conformity with the Permitted
Encumbrances; specifically in this connection, (i) no Mortgaged Property is
subject to having allowable production after the date hereof reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time)
prior to the date hereof and (ii) none of the wells located on the Mortgaged
Properties (or properties unitized therewith) are or will be deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, and such wells are, and will remain, bottomed under and producing
from, with the well bores wholly within, the Mortgaged Properties (or, in the
case of wells located on properties unitized therewith, such unitized
properties). There are no wells listed on Schedule I hereto ("Schedule I Wells")
being redrilled, deepened, plugged back or reworked, and no other operations are
being conducted for which consent is required under the applicable operating
agreement (or which are other than normal operation of existing wells on the
Mortgaged Properties); except as otherwise disclosed to Agent in writing, there
are no proposals in excess of $500,000 net to Mortgagor's interest currently
outstanding (whether made by Mortgagor or by any other party) to re-drill,
deepen, plug back, or rework Schedule I Wells, or to conduct any other
operations under the applicable joint operating agreement, or to abandon any
Schedule I Wells (nor are there any such proposals which have been approved
either by Mortgagor or any other party, with respect to which the operations
covered thereby have not been commenced). Except as otherwise disclosed to Agent
in writing, there are no dry holes, or otherwise inactive wells, located on the
Mortgaged Properties or on lands pooled or unitized therewith (including,
without limitation, any wells which would, if located in Texas, require
-9-
compliance with Railroad Commission Rule 14(b)(2)) that in the aggregate will
cost more than $500,000, net to Mortgagor's interest and net of salvage
proceeds, to plug and abandon, except for wells that have been properly plugged
and abandoned. Mortgagor has, and will have in the future, all governmental
licenses and permits necessary or appropriate to own and operate the Property;
Mortgagor has not received notice of any violations in respect of any such
licenses or permits.
(f) Sale or Disposal.Mortgagor will not, without the prior written consent
----------------
of Agent, sell, exchange, lease, transfer, or otherwise dispose of any part of,
or interest in, the Property other than (i) sales, transfers and other
dispositions of machinery, equipment and other personal/ movable property and
fixtures made in connection with a release, surrender or abandonment of a lease,
(ii) sales, transfers and other dispositions of machinery, equipment and other
personal/movable property and fixtures in connection with the abandonment of a
well, (iii) sales, transfers and other dispositions of machinery, equipment and
other personal/movable property and fixtures which are (A) obsolete for their
intended purpose and disposed of in the ordinary course of business or (B)
replaced by articles of at least equal suitability and value owned by Mortgagor
free and clear of all liens except this Mortgage and the Permitted Encumbrances,
(iv) sales of Production which are made in the ordinary course of business and
in compliance with Section 2.1(c) hereof; provided that nothing in clause (iv)
shall be construed as limiting Agent's rights under Article III of this
Mortgage, and (v) sales, transfers and other dispositions of oil and gas leases,
but only to the extent such sale, transfer or other disposition is in the
ordinary course of business and does not materially and adversely affect the
value of the Property in the aggregate. In the event and during the continuation
of a default (as hereinafter defined), Mortgagor shall at all times keep the
Property and its proceeds separate and distinct from other property of Mortgagor
and shall keep accurate and complete records of the Property and its proceeds.
(g) Suits and Claims. Except as otherwise disclosed to Agent in writing,
----------------
there are no Suits, actions, claims, investigations, inquiries, proceedings or
demands pending (or. to the best of Mortgagor's knowledge, threatened) which
affect the Properties (including, without limitation, any which challenge or
otherwise pertain to Mortgagor's title to the Properties) and no judicial or
administrative actions, suits or proceedings pending (or, to the best of
Mortgagor's knowledge, threatened) against Mortgagor. Notwithstanding the
foregoing, Mortgagor's representation in this Section with respect to pending
suits, actions, claims, investigations, inquiries, proceedings or demands which
affect Properties which are not operated by Mortgagor, except those pertaining
to Mortgagor's title to such non-operated Properties, will be limited to the
best of Mortgagor's knowledge.
(h) Environmental.
-------------
(A) Current Status. The Property (and with respect to Property not
---------------
operated by Mortgagor, to the best of Mortgagor's knowledge, such
non-operated Property) and Mortgagor are not in material violation of
Applicable Environmental Laws (below defined), or subject to any existing,
pending or, to the best knowledge of Mortgagor, threatened investigation or
inquiry by any governmental authority or any other person under or with
respect to Applicable Environmental Laws, or subject to any remedial
obligations under Applicable Environmental Laws, and are in compliance with
all permits and licenses required under Applicable Environmental Laws, and
-10-
this representation will continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Property and
Mortgagor. "Applicable Environmental Laws" shall mean any applicable laws,
orders, rules, or regulations (including, without limitation, the common
law) pertaining to safety, health or the environment, as such laws, orders,
rules or regulations now exist or are hereafter enacted and/or amended.
Applicable Environmental Laws include, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 (as amended, hereinafter called "CERCLA"), the Resource Conservation
and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980,
the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA") and
applicable state and local law). Mortgagor undertook, at the time of
acquisition of the Property, all appropriate inquiry into the previous
ownership and uses of the Property consistent with good commercial or
customary practice. Mortgagor has taken all commercial and reasonable steps
necessary to determine and has determined that no hazardous substances or
solid wastes have been disposed of or otherwise released at, into, upon or
under the Property. The use which Mortgagor makes and intends to make of
the Property will not result in the use, treatment, storage or disposal or
other release of any hazardous substance or solid waste at, into, upon or
under the Property, except such usage, and temporary storage in
anticipation of usage, as is in the ordinary course of business and in
compliance with Applicable Environmental Laws. The terms "hazardous
substance" and "release" as used in this Mortgage shall have the meanings
specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") shall have the meanings specified in RCRA; provided, in the
event either CERCLA or RCRA is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and provided further, to the extent that
the laws of the states in which the Mortgaged Properties are located
establish a meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader than that specified in either CERCLA or RCRA,
such broader meaning shall apply. The "Associated Property' (as such term
is hereinafter defined) is not in violation of any Applicable Environmental
Laws for which Mortgagor or its predecessors in the Property would be
responsible. The term "Associated Property" as used in this Mortgage shall
mean any and all interests in and to (and or carved out of) the lands which
are described or referred to in Exhibit A hereto, or which are otherwise
described in any of the oil, gas and/or mineral leases or other instruments
described in or referred to in such Exhibit A, whether or not such property
interests are owned by Mortgagor.
(B) Future Performance. Mortgagor will use its best efforts not to
-------------------
cause or permit the Property or the Associated Property or Mortgagor to be
in material violation of, or do anything or permit anything to be done
which will subject the Property or the Associated Property to any material
remedial obligations under, or result in material noncompliance with
applicable permits and licenses under, any Applicable Environmental Laws,
assuming disclosure to the applicable governmental authorities of all
relevant facts, conditions and circumstances, if any, pertaining to the
-11-
Property or the Associated Property and Mortgagor will promptly notify
Agent in writing of any existing, pending or, to the best knowledge of
Mortgagor, threatened investigation, claim, suit or inquiry by any
governmental authority or any person in connection with any Applicable
Environmental Laws, provided that, with respect to Properties not operated
by Mortgagor, Mortgagor shall notify Agent of any investigations, claims,
suits or inquiries, whether existing, pending, or threatened, of which
Mortgagor becomes aware. Mortgagor will take all steps reasonably necessary
to determine that no hazardous substances or solid wastes have been
disposed of or otherwise released on or to the Property or the Associated
Property. Mortgagor will use commercial and reasonable efforts not to cause
or permit the disposal or other release of any hazardous substance or solid
waste at, into, upon or under the Property or the Associated Property and
covenants and agrees to keep or cause the Property and/or the Associated
Property to be kept free of any hazardous substance or solid waste (except
such use, and temporary storage in anticipation of use, as is required in
the ordinary course of business, all while in compliance with Applicable
Environmental Laws), and to remove the same (or if removal is prohibited by
law, to take whatever action is required by law) promptly upon discovery at
its sole expense. Upon Agent's reasonable request, at any time and from
time to time during the existence of this Mortgage, Mortgagor will provide
at Mortgagor's sole expense an inspection or audit of the Property and the
Associated Property from an engineering or consulting firm approved by
Agent, indicating the presence or absence of hazardous substances and solid
waste on the Property and/or the Associated Property and compliance with
Applicable Environmental Laws. In the event of a violation, Mortgagor will
diligently work to cure such violation, including remediation, if
necessary, and so long as Mortgagor diligently prosecutes efforts to cure
the violation, Mortgagor will not be in breach of this provision.
(i) Not Abandon Wells; Participate in Operations. Mortgagor will not,
-----------------------------------------------
without prior written consent of Agent, abandon, or consent to the abandonment
of, any well producing from the Mortgaged Properties (or properties unitized
therewith) so long as such well is capable (or is subject to being made capable
through drilling, reworking or other operations which it would be commercially
feasible to conduct) of producing oil, gas, or other hydrocarbons or other
minerals in commercial quantities (as determined without considering the effect
of this Mortgage). In the event and during the continuation of a default,
Mortgagor will not, without prior written consent of Agent, elect not to
participate in a proposed operation on the Mortgaged Properties where the effect
of such election would be the forfeiture either temporarily (i.e. until a
certain sum of money is received out of the forfeited interest) or permanently
of any material interest in the Mortgaged Properties.
(j) Defense of Mortgage.If the validity or priority of this Mortgage or of
-------------------
any rights, titles, liens or security interests created or evidenced hereby with
respect to the Property or any part thereof or the title of Mortgagor to the
Property shall be endangered or questioned or shall be attacked directly or
indirectly or if any legal proceedings are instituted against Mortgagor with
respect thereto, Mortgagor will give prompt written notice thereof to Agent and
at Mortgagor's own cost and expense will diligently endeavor to cure any defect
that may be developed or claimed, and will take all necessary and proper steps
for the defense of such legal proceedings, including, but not limited to, the
employment of counsel, the prosecution or defense of litigation and the release
or discharge of all adverse claims, and Trustee and Agent, or either of them
(whether or not named as parties to legal proceedings with respect thereto), are
-12
hereby authorized and empowered to take such additional steps as in their
judgment and discretion may be necessary or proper for the defense of any such
legal proceedings or the protection of the validity or priority of this Mortgage
and the rights, titles, liens and security interests created or evidenced
hereby, including but not limited to the employment of independent counsel, the
prosecution or defense of litigation, the compromise or discharge of any adverse
claims made with respect to the Property, the purchase of any tax title and the
removal of prior liens or security interests, and all reasonable expenditures so
made of every kind and character shall be a demand obligation (which obligation
Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent or
Trustee (as the case may be) and shall bear interest from the date expended
until paid at the rate described in Section 2.3 hereof, and the party incurring
such expenses shall be subrogated to all rights of the person receiving such
payment.
(k) Fees and Expenses; Indemnity. Mortgagor will pay all reasonable
-------------------------------
appraisal fees, recording fees, taxes, brokerage fees and commissions, abstract
and other records search fees, attorneys' fees and expenses and all other
reasonable costs and expenses of every character incurred by Mortgagor or Agent
or any Lender in connection with the closing of the loan or loans evidenced by
the Loan Documents and any and all amendments, supplements or modifications to
such loan transaction or transactions. Mortgagor will reimburse Trustee, Agent
and each Lender (for purposes of this paragraph, the terms "Trustee", "Agent"
and "Lender" shall include the directors, officers, partners, employees and
agents of Trustee, Agent or any Lender, respectively, and any persons or
entities owned or controlled by or affiliated with Trustee, Agent or any Lender,
respectively) for all expenditures, including reasonable attorneys' fees and
expenses, incurred or expended in connection with (i) the breach by Mortgagor of
any covenant, agreement or condition contained herein or in any other Loan
Document, (ii) the exercise of any rights and remedies hereunder or under any
other Loan Document, and (iii) the protection of the Property and/or liens and
security interests therein. Mortgagor will indemnify and hold harmless Trustee,
Agent and each Lender from and against (and will reimburse such indemnified
parties for) all claims, demands, liabilities, losses, damages (including
without limitation consequential damages), causes of action, judgments,
penalties, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) which may be imposed upon, asserted against or
incurred or paid by the Trustee, the Agent or any Lender on account of, in
connection with, or arising out of (A) any bodily injury or death or natural
resource, human health or property damage occurring in, at, into, under or upon
(or, to the extent such injury, death or damage is related to Mortgagor or
Mortgagor's ownership or operation of the Property, in the vicinity of) the
Property through any cause whatsoever, (B) any act performed or omitted to be
performed hereunder or the breach of any representation or warranty herein, (C)
the exercise of any rights and remedies hereunder or under any other Loan
Document, (D) any transaction, act, omission, event or circumstance arising out
of or in any way connected with the Property or with this Mortgage or any other
Loan Document, (E) any violation on or prior to the Release Date (as hereinafter
defined) of any Applicable Environmental Law, (F) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date (including
without limitation the presence on or under the Property or the Associated
Property or release at, into, upon, under or from the Property or the Associated
Property of hazardous substances or solid wastes disposed of or otherwise
released) resulting from or in connection with the ownership, construction,
occupancy, operation, use and/or maintenance of the Property or the Associated
Property, regardless of whether the act, omission, event or circumstance
constituted a violation of any Applicable Environmental Law at the time of its
existence or occurrence, and (G) any and all claims or proceedings (whether
-13
brought by private party or governmental agencies) for human health, bodily
injury, property damage, abatement or remediation. environmental damage.
cleanup. mitigation, removal, natural resource damage or impairment or any other
injury or damage resulting from or relating to any hazardous or toxic substance,
solid waste or contaminated material located upon or migrating into, from or
through the Property or the Associated Property (whether or not the release of
such materials was caused by Mortgagor, a tenant or subtenant or a prior owner
or tenant or subtenant on the Property or the Associated Property and whether or
not the alleged liability is attributable to the use, treatment, handling,
storage, generation, transportation, removal or disposal of such substance,
waste or material or the mere presence of such substance, waste or material on
or under the Property or the Associated Property), which the Trustee and/or the
Agent and/or any Lender may have liability with respect to due to the making of
the loan or loans evidenced by any Notes, the granting of this Mortgage, the
exercise of any rights under the Loan Documents, or otherwise. Agent shall have
the right to compromise and adjust any such claims, actions and judgments. and
in addition to the rights to be indemnified as herein provided, all amounts paid
in compromise, satisfaction or discharge of any such claim, action or judgment,
and all court costs, reasonable attorneys' fees and other expenses of every
character expended by Agent, Trustee or any Lender pursuant to the provisions of
this section shall be a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to the applicable party or
parties. The "Release Date" as used herein shall mean the earlier of the
following two dates: (i) the date on which the indebtedness and obligations
secured hereby have been paid and performed in full, or (ii) the date on which
the lien of this Mortgage is foreclosed or a deed in lieu of such foreclosure is
fully effective and recorded. WITHOUT LIMITATION, IT IS THE INTENTION OF
MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO
EACH INDEMNIFIED PARTY WITH RESPECT TO CLAIMS, DEMANDS, LIABILITIES, LOSSES,
DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING
WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES) WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED
PARTY. However, such indemnities shall not apply to any particular indemnified
party (but shall apply to the other indemnified parties) to the extent the
subject of the indemnification is caused by or arises out of the gross
negligence or willful misconduct of such particular indemnified party. The
foregoing indemnities shall not terminate upon the Release Date or upon the
release, foreclosure or other termination of this Mortgage but will survive the
Release Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure,
and the repayment of the secured indebtedness and the discharge and release of
this Mortgage and the other documents evidencing and/or securing the secured
indebtedness. Any amount to be paid hereunder by Mortgagor to Agent, Trustee
and/or any Lender shall be a demand obligation owing by Mortgagor to the
applicable party or parties and shall be subject to and covered by the
provisions of Section 2.3 hereof.
(l) Insurance. Mortgagor will keep (and with respect to Property not
---------
operated by Mortgagor, will use its best efforts to keep) such part of the
Property which is of an insurable nature and of a character usually insured by
persons operating similar properties, insured with companies of recognized
responsibility satisfactory to Agent and in such amounts as are acceptable to
Agent (and in the absence of specification of such amounts by Agent, in the
amount of the full value of such property, less reasonable deductibles not to
-14
exceed deductibles customary in the industry for similarly situated businesses
and properties), against loss or damage by fire, casualty and from other hazards
customarily insured against by persons operating similar properties. Mortgagor
shall also provide such other insurance as Agent may from time to time
reasonably require; such coverage to be carried with companies of recognized
responsibility satisfactory to Agent. All policies evidencing such insurance
shall contain clauses providing that the proceeds thereof shall be payable to
Agent as its interest may appear and providing that such policies may not be
cancelled, reduced or otherwise affected without at least thirty (30) days prior
written notice to Agent. Upon request by Agent, Mortgagor shall deliver to Agent
the original policies, evidence of payment of premiums, certificates evidencing
renewals, and such other information regarding such insurance as Agent may
request. In the event of any loss under any insurance policies so carried by
Mortgagor, Agent shall have the right (but not the obligation) to make proof of
loss and collect the same, and all amounts so received shall be applied toward
costs, charges and expenses (including reasonable attorneys' fees), if any,
incurred in the collection thereof, then to the payment, in the order determined
by Agent in its own discretion, of the secured indebtedness, and any balance
remaining shall be subject to the order of Mortgagor. Agent is hereby authorized
but not obligated to enforce in its name or in the name of Mortgagor payment of
any or all of said policies or settle or compromise any claim in respect
thereof, and to collect and make receipts for the proceeds thereof and Agent is
hereby appointed Mortgagor's agent and attorney-in-fact to endorse any check or
draft payable to Mortgagor in order to collect the proceeds of insurance. In the
event of foreclosure of this Mortgage, or other transfer of title to the
Property in extinguishment in whole or in part of the secured indebtedness, all
right, title and interest of Mortgagor in and to such policies then in force
concerning the Property and all proceeds payable thereunder shall thereupon vest
in the purchaser at such foreclosure or other transferee in the event of such
other transfer of title. Mortgagor shall at all times maintain adequate
insurance against its liability on account of damages to persons or property,
which insurance shall be carried by companies of recognized responsibility
satisfactory to Agent, and shall be for such amounts and insure against such
risks as are customary in the industry for similarly situated businesses and
properties. Mortgagor shall at all times maintain cost of regaining control of
well insurance and similar insurance to the extent customary in the industry in
the pertinent area of operations.
(m) Further Assurances. Mortgagor will, on request of Agent, (i) promptly
-------------------
correct any defect, error or omission which may be discovered in the contents of
this Mortgage, or in any other Loan Document, or in the execution or
acknowledgment of this Mortgage or any other Loan Document; (ii) execute,
acknowledge, deliver and record and/or file such further instruments (including,
without limitation, further deeds of trust, mortgages, security agreements,
financing statements, continuation statements, and assignments of production,
accounts, funds, contract rights, general intangibles, and proceeds) and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and the other Loan Documents and to
more fully identify and subject to the liens and security interests hereof any
property intended to be covered hereby, including specifically, but without
limitation, any renewals, additions, substitutions, replacements, or
appurtenances to the Property; and (iii) execute, acknowledge, deliver, and file
and/or record any document or instrument (including specifically any financing
statement) desired by Agent to protect the lien or the security interest
hereunder against the rights or interests of third persons. Mortgagor shall pay
all costs connected with any of the foregoing.
-15
(n) Name and Place of Business and Formation. Except as disclosed in the
------------------------------------------
Credit Agreement, Mortgagor has not, during the preceding five years, been known
by or used any other corporate or partnership, trade or fictitious name.
Mortgagor will not cause or permit any change to be made in its name, identity,
state of formation or corporate or partnership structure, or its federal
employer identification number unless Mortgagor shall have notified Agent of
such change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all action required by Agent for the purpose
of further perfecting or protecting the liens and security interests in the
Property created hereby. Mortgagor's exact name is the name set forth in this
Mortgage. Mortgagor's location is as follows:
Mortgagor is a registered organization which is organized
under the laws of one of the states comprising the United
States (e.g. corporation, limited partnership, registered
limited liability partnership or limited liability company).
Mortgagor is located (as determined pursuant to the UCC) in
the state under the laws which it was organized, as follows:
Name of Mortgagor State of Organization
---------------------------------------------------------
Parent Delaware
Energy Delaware
Nance Montana
NPC Colorado
Mortgagor's principal place of business and chief executive
office, and the place where Mortgagor keeps its books and
records concerning the Property (including, particularly, the
records with respect to "Production Proceeds", as defined in
Section 3.1 hereof, from the Mortgaged Properties) has for the
preceding four months, been, and will continue to be (unless
Mortgagor notifies Agent of any change in writing at least
thirty (30) days prior to the date of such change), the
address set forth opposite the signature of Mortgagor to this
Mortgage.
(o) Not a Foreign Person. Mortgagor is not a "foreign person" within the
---------------------
meaning of the Internal Revenue Code of 1986, as amended, (hereinafter called
the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in the Code and any regulations promulgated thereunder).
Section 2.2 Compliance by Operator. As to any part of the Mortgaged
------------------------
Properties which is not a working interest, Mortgagor agrees to take all such
commercial and reasonable action and to exercise all rights and remedies as are
reasonably available to Mortgagor to cause the owner or owners of the working
interest in such properties to comply with the covenants and agreements
contained herein; and as to any part of the Mortgaged Properties which is a
working interest but which is operated by a party other than Mortgagor,
Mortgagor agrees to take all such commercial and reasonable action and to
exercise all rights and remedies as are reasonably available to Mortgagor
(including, but not limited to, all rights under any operating agreement) to
-16-
cause the party who is the operator of such property to comply with the
covenants and agreements contained herein.
Section 2.3 Performance on Mortgagor's Behalf. Mortgagor agrees that, if
----------------------------------
Mortgagor fails to perform any act or to take any action which hereunder
Mortgagor is required to perform or take, or to pay any money which hereunder
Mortgagor is required to pay, Agent, in Mortgagor's name or its own name, may,
but shall not be obligated to, perform or cause to be performed such act or take
such action or pay such money, and any expenses so incurred by Agent and any
money so paid by Agent shall be a demand obligation owing by Mortgagor to Agent
(which obligation Mortgagor hereby expressly promises to pay) and Agent, upon
making such payment, shall be subrogated to all of the rights of the person,
corporation or body politic receiving such payment. Each amount due and owing by
Mortgagor to Trustee and/or Agent and/or any Lender pursuant to this Mortgage
shall bear interest each day, from the date of such expenditure or payment until
paid, at a rate equal to the rate as provided for past due principal under the
Notes (provided that, should applicable law provide for a maximum permissible
rate of interest on such amounts, such rate shall not be greater than such
maximum permissible rate); all such amounts, together with such interest
thereon, shall be a part of the secured indebtedness and shall be secured by
this Mortgage.
ARTICLE III.
Assignment of Production, Accounts and Proceeds
-----------------------------------------------
Section 3.1 Assignment of Production. Mortgagor does hereby absolutely and
------------------------
unconditionally assign, transfer and set over to Agent all Production which
accrues to Mortgagor's interest in the Mortgaged Properties, all proceeds of
such Production and all Payments in Lieu of Production (herein collectively
referred to as the "Production Proceeds"), together with the immediate and
continuing right to collect and receive such Production Proceeds. Mortgagor
directs and instructs any and all purchasers of any Production to pay to Agent
all of the Production Proceeds accruing to Mortgagor's interest until such time
as such purchasers have been furnished with evidence that all secured
indebtedness has been paid and that this Mortgage has been released. Mortgagor
agrees that no purchasers of the Production shall have any responsibility for
the application of any funds paid to Agent.
Section 3.2 Effectuating Payment of Production Proceeds to Agent.
--------------------------------------------------------------
Independent of the foregoing provisions and authorities herein granted,
Mortgagor agrees to execute and deliver any and all transfer orders, division
orders and other instruments that may be requested by Agent or that may be
required by any purchaser of any Production for the purpose of effectuating
payment of the Production Proceeds to Agent. If under any existing sales
agreements, other than division orders or transfer orders, any Production
Proceeds are required to be paid by the purchaser to Mortgagor so that under
such existing agreements payment cannot be made of such Production Proceeds to
Agent, Mortgagor's interest in all Production Proceeds under such sales
agreements and in all other Production Proceeds which for any reason may be paid
to Mortgagor shall, when received by Mortgagor, constitute trust funds in
Mortgagor's hands and shall be immediately paid over to Agent. Without
limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints
Agent as Mortgagor's special attorney in-fact (with full power of substitution,
either generally or for such periods or purposes as Agent may from time to time
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prescribe) in the name, place and stead of Mortgagor to do any and every act and
exercise any and every power that Mortgagor might or could do or exercise
personally with respect to all Production and Production Proceeds (the same
having been assigned by Mortgagor to Agent pursuant to Section 3.1 hereof),
expressly inclusive, but not limited to, the right, power and authority to:
(a) Execute and deliver in the name of Mortgagor any and all transfer
orders, division orders, letters in lieu of transfer orders, indemnifications,
certificates and other instruments of every nature that may be requested or
required by any purchaser of Production from any of the Mortgaged Properties for
the purposes of effectuating payment of the Production Proceeds to Agent or
which Agent may otherwise deem necessary or appropriate to effect the intent and
purposes of the assignment contained in Section 3.1; and
(b) If under any product sales agreements other than division orders or
transfer orders, any Production Proceeds are required to be paid by the
purchaser to Mortgagor so that under such existing agreements payment cannot be
made of such Production Proceeds to Agent, to make, execute and enter into such
sales agreements or other agreements as are necessary to direct Production
Proceeds to be payable to Agent;
giving and granting unto said attorney-in-fact full power and authority to do
and perform any and every act and thing whatsoever necessary and requisite to be
done as fully and to all intents and purposes, as Mortgagor might or could do if
personally present; and Mortgagor shall be bound thereby as fully and
effectively as if Mortgagor had personally executed, acknowledged and delivered
any of the foregoing certificates or documents. The powers and authorities
herein conferred upon Agent may be exercised by Agent through any person who, at
the time of the execution of the particular instrument, is an officer of Agent.
The power of attorney herein conferred is granted for valuable consideration and
hence is coupled with an interest and is irrevocable so long as the secured
indebtedness, or any part thereof, shall remain unpaid. All persons dealing with
Agent or any substitute shall be fully protected in treating the powers and
authorities conferred by this paragraph as continuing in full force and effect
until advised by Agent that all the secured indebtedness is fully and finally
paid. Agent may, but shall not be obligated to, take such action as it deems
appropriate in an effort to collect the Production Proceeds and any reasonable
expenses (including reasonable attorney's fees) so incurred by Agent shall be a
demand obligation of Mortgagor and shall be part of the secured indebtedness,
and shall bear interest each day, from the date of such expenditure or payment
until paid, at the rate described in Section 2.3 hereof.
Section 3.3 Change of Purchaser. To the extent a default has occurred
--------------------
hereunder and is continuing, should any person now or hereafter purchasing or
taking Production fail to make payment promptly to Agent of the Production
Proceeds, Agent shall, subject to then existing contractual prohibitions, have
the right to make, or to require Mortgagor to make, a change of purchaser, and
the right to designate or approve the new purchaser, and Agent shall have no
liability or responsibility in connection therewith so long as ordinary care is
used in making such designation.
Section 3.4 Application of Production Proceeds. So long as no default has
-----------------------------------
occurred hereunder, the Production Proceeds received by Agent during each
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calendar month shall on the first business day of the next succeeding calendar
month (or, at the option of Agent, on any earlier date) be applied by Agent as
follows:
FIRST, to the payment of all secured indebtedness then due and
-----
payable, in such manner and order as Agent deems advisable;
SECOND, to the prepayment of the remainder of the secured indebtedness
------
in such manner and order and to such extent as Agent deems advisable; and
THIRD, the remainder, if any, of the Production Proceeds shall be paid
-----
over to Mortgagor or to Mortgagor's order or to such other parties as may
be entitled thereto by law.
After a default hereunder has occurred, all Production Proceeds from time to
time in the hands of Agent shall be applied by it toward the payment of all
secured indebtedness (principal, interest, attorneys' fees and other fees and
expenses) at such times and in such manner and order and to such extent as Agent
deems advisable.
Section 3.5 Release From Liability; Indemnification. Agent and its
------------------------------------------
successors and assigns are hereby released and absolved from all liability for
failure to enforce collection of the Production Proceeds and from all other
responsibility in connection therewith, except the responsibility of each to
account to Mortgagor for funds actually received by each. Mortgagor agrees to
indemnify and hold harmless Agent (for purposes of this paragraph, the term
"Agent" shall include the directors, officers, partners, employees and agents of
Agent and any persons or entities owned or controlled by or affiliated with
Agent) from and against all claims, demands, liabilities, losses, damages
(including without limitation consequential damages), causes of action,
judgments, penalties, costs and expenses (including without limitation
reasonable attorneys' fees and expenses) imposed upon, asserted against or
incurred or paid by Agent by reason of the assertion that Agent received, either
before or after payment in full of the secured indebtedness, funds from the
production of oil, gas, other hydrocarbons or other minerals claimed by third
persons (and/or funds attributable to sales of production which (i) were made at
prices in excess of the maximum price permitted by applicable law or (ii) were
otherwise made in violation of laws, rules, regulations and/or orders governing
such sales), and Agent shall have the right to defend against any such claims or
actions, employing attorneys of its own selection, and if not furnished with
indemnity satisfactory to it, Agent shall have the right to compromise and
adjust any such claims, actions and judgments, and in addition to the rights to
be indemnified as herein provided, all amounts paid by Agent in compromise,
satisfaction or discharge of any such claim, action or judgment, and all court
costs, reasonable attorneys' fees and other expenses of every character expended
by Agent pursuant to the provisions of this section shall be a demand obligation
(which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor
to Agent and shall bear interest, from the date expended until paid, at the rate
described in Section 2.3 hereof. The foregoing indemnities shall not terminate
upon the Release Date or upon the release, foreclosure or other termination of
this Mortgage but will survive the Release Date, foreclosure of this Mortgage or
conveyance in lieu of foreclosure, and the repayment of the secured indebtedness
and the discharge and release of this Mortgage and the other documents
evidencing and/or securing the secured indebtedness. WITHOUT LIMITATION, IT IS
THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES AND
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INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS,
DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT LIMITATION
CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES)
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
(AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not apply
to any particular indemnified party (but shall apply to the other indemnified
parties) to the extent the subject of the indemnification is caused by or arises
out of the gross negligence or willful misconduct of such particular indemnified
party.
Section 3.6 Mortgagor's Absolute Obligation to Pay Notes. Nothing herein
----------------------------------------------
contained shall detract from or limit the obligations of Mortgagor to make
prompt payment of the Notes, and any and all other secured indebtedness, at the
time and in the manner provided herein and in the Loan Documents, regardless of
whether the Production and Production Proceeds herein assigned are sufficient to
pay same, and the rights under this Article III shall be cumulative of all other
rights under the Loan Documents.
Section 3.7 Rights Under Oklahoma Oil and Gas Owners' Lien Act. Mortgagor
---------------------------------------------------
hereby grants, sells, assigns and sets over unto Agent during the term hereof,
all of Mortgagor's rights and interests pursuant to the provisions of the Oil
and Gas Owners' Lien Act (OKLA. STAT. tit. 52, ss.ss. 548.l-548.6 (the "Oklahoma
Act"), hereby vesting in Agent all of Mortgagor's rights as an interest owner to
the continuing security interest in and lien upon the oil or gas severed or the
proceeds of sale. Agent may, at its option, file the verified notice of lien in
order to perfect such lien, but shall not be obligated to make such filing and
shall not be held liable to Mortgagor for any act or omission pursuant to the
Oklahoma Act.
Section 3.8 Intentionally Left Blank.
------------------------
Section 3.9 Rights Under Wyoming Statutes. Mortgagor hereby appoints Agent
-----------------------------
as its attorney-in-fact to pursue any and all lien rights of the Mortgagor to
liens and security interests in the Mortgaged Properties securing payment of
Production Proceeds attributable to the Mortgaged Properties, including, without
limitation, those liens and security interests provided for by Section 34.1-9-3
19, Wyoming Statutes Annotated, 1988 Republished Edition (June 1991), as amended
or recodified. Mortgagor further assigns to Agent any and all such liens,
security interests, financing statements, or similar interests of Mortgagor
attributable to its interests in the Mortgaged Properties or Production Proceeds
therefrom arising under or created by statutory provision, judicial decision, or
otherwise.
ARTICLE IV.
Remedies Upon Default
---------------------
Section 4.1 Default. The term "default" as used in this Mortgage shall mean
-------
the occurrence of any of the following events:
-20-
(a) the occurrence of an "Event of Default" as defined in the Credit
Agreement; or
(b) the failure of Mortgagor to make due and punctual payment of any Note
or of any other secured indebtedness or of any installment of principal thereof
or interest thereon, or any part thereof, as the same shall become due and
payable (taking into account any applicable grace period, if any, provided in
the Loan Documents), whether at a date for payment of a fixed installment or
contingent or other payment, or as a result of acceleration, or otherwise; or
(c) the failure of Mortgagor to pay over to Agent any Production Proceeds
which are receivable by Agent under this Mortgage but which are paid to
Mortgagor rather than Agent (either as provided for in Section 3.2 hereof or
otherwise), except Production Proceeds paid over to Mortgagor by Agent under
clause THIRD of Section 3.4; or
(d) the failure of Mortgagor timely and properly to observe, keep or
perform any covenant, agreement, warranty or condition herein or in any other
Loan Document required to be observed, kept or performed, if such failure is not
remedied within the applicable grace period provided for in such Loan Document
or, if such Loan Document does not provide for such a grace period, within 30
days after written notice and demand by Agent for the performance of such
covenant, agreement, warranty or condition; or
(e) any representation contained herein (or in any certificate delivered by
Mortgagor in connection herewith) or contained in any other Loan Document, or
otherwise heretofore or hereafter made by or on behalf of Mortgagor, shall prove
to have been false or misleading in any material respect on the date made (or on
the date as of which made); or
(f) the occurrence of a "default" or "event of default" under any Loan
Document other than this Mortgage, which default is not cured within the
applicable grace period (if any) provided for in such other Loan Document; or
(g) Mortgagor suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law of
any jurisdiction now or hereafter in effect, including the United States
Bankruptcy Code, as from time to time amended, or has such a proceeding
commenced against it which remains undismissed for a period of 30 days; or
(h) Mortgagor commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the United
States Bankruptcy Code, as from time to time amended, or applies for or consents
to the entry of an order for relief in an involuntary case under any such law;
or Mortgagor makes a general assignment for the benefit of creditors or fails to
pay (or admits in writing its inability to pay) its debts as such debts become
due; or Mortgagor takes corporate or other action in furtherance of any of the
foregoing; or
(i) Mortgagor suffers the appointment of or taking of possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for a substantial part of its assets or for any part of the Property in
a proceeding brought against or initiated by it and (1) such appointment or
-21
taking is neither made ineffective nor discharged within 30 days after the
making of such appointment or within 30 days after such taking, or (2) such
appointment or taking is consented to, requested by, or acquiesced to by
Mortgagor; or
(j) Mortgagor suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part of its
assets or any part of the Property, and such writ or warrant of attachment or
any similar process is not stayed or released within 30 days after the entry or
levy thereof or after any stay is vacated or set aside; or
(k) Any of the events referred to above in subsections (g), (h), (i) or (j)
shall occur with respect to any guarantor of the secured indebtedness and shall
not be remedied within the applicable grace period (if any) set forth in such
subsections.
Section 4.2 Acceleration of Secured Indebtedness. Upon the occurrence of a
------------------------------------
default described in subsection (g), (h), (i) or (j) of Section 4.1 above, all
of the secured indebtedness shall thereupon be immediately due and payable,
without presentment, demand, protest, notice of protest, declaration or notice
of acceleration or intention to accelerate, putting the Mortgagor in default,
dishonor, notice of dishonor or any other notice or declaration of any kind, all
of which are hereby expressly waived by Mortgagor, and the liens evidenced
hereby shall be subject to foreclosure in any manner provided for herein or
provided for by law as Agent may elect. During the continuance of any other
default, Agent at any time and from time to time may without notice to Mortgagor
or any other person declare any or all of the secured indebtedness immediately
due and payable and all such secured indebtedness shall thereupon be immediately
due and payable, without presentment, demand, protest, notice of protest,
declaration or notice of acceleration or intention to accelerate, putting the
Mortgagor in default, dishonor, notice of dishonor or any other notice or
declaration of any kind, all of which are hereby expressly waived by Mortgagor,
and the liens evidenced hereby shall be subject to foreclosure in any manner
provided for herein or provided for by law as Agent may elect.
Section 4.3 Pre-Foreclosure Remedies. Upon the occurrence of a default, or
-------------------------
any event or circumstance which, with the lapse of time or the giving of notice,
or both, would constitute a default hereunder, and following any period to
attempt to cure such default, if any, provided in the Credit Agreement, Agent is
authorized, prior or subsequent to the institution of any foreclosure
proceedings, to enter upon the Property, or any part thereof, and to take
possession of the Property and all books and records relating thereto, and to
exercise without interference from Mortgagor any and all rights which Mortgagor
has with respect to the management, possession, operation, protection or
preservation of the Property. If necessary to obtain the possession provided for
above, Agent may invoke any and all remedies to dispossess Mortgagor, including,
without limitation, summary proceeding or restraining order, Mortgagor agrees to
peacefully surrender possession of the Property upon default. All costs,
expenses and liabilities of every character incurred by Agent in managing,
operating, maintaining, protecting or preserving the Property shall constitute a
demand obligation (which obligation Mortgagor hereby expressly promises to pay)
owing by Mortgagor to Agent and shall bear interest from date of expenditure
until paid at the rate described in Section 2.3 hereof, all of which shall
constitute a portion of the secured indebtedness and shall be secured by this
Mortgage and by any other instrument securing the secured indebtedness. In
connection with any action taken by Agent pursuant to this Section 4.3, AGENT
SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY ACT
OR OMISSION OF AGENT (INCLUDING AGENT'S OWN NEGLIGENCE) IN MANAGING THE PROPERTY
-22-
UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF
AGENT, nor shall Agent be obligated to perform or discharge any obligation, duty
or liability of Mortgagor arising under any agreement forming a part of the
Property or arising under any Permitted Encumbrance or otherwise arising.
Mortgagor hereby assents to, ratifies and confirms any and all actions of Agent
with respect to the Property taken under this Section 4.3.
Section 4.4 Foreclosure.
-----------
(a) Upon the occurrence of a default, Trustee is authorized and empowered
and it shall be Trustee's special duty at the request of Agent to sell the Deed
of Trust Mortgaged Properties, or any part thereof, as an entirety or in parcels
as Agent may elect, at such place or places and otherwise in the manner and upon
such notice as may be required by law or, in the absence of any such
requirement, as Trustee may deem appropriate. If Trustee shall have given notice
of sale hereunder, any successor or substitute Trustee thereafter appointed may
complete the sale and the conveyance of the property pursuant thereto as if such
notice had been given by the successor or substitute Trustee conducting the
sale. Cumulative of the foregoing and the other provisions of this Section 4.4:
(i) As to any portion of the Deed of Trust Mortgaged Properties
located in the State of Texas (or within the offshore area over which the
United States of America asserts jurisdiction and to which the laws of such
state are applicable with respect to this Mortgage and/or the liens or
security interests created hereby), such sales of all or any part of such
Deed of Trust Mortgaged Properties shall be conducted at the courthouse of
any county (whether or not the counties in which such Deed of Trust
Mortgaged Properties are located are contiguous) in the State of Texas in
which any part of such Deed of Trust Mortgaged Properties is situated or
which lies shoreward of any Deed of Trust Mortgaged Property (i.e., to the
extent a particular Deed of Trust Mortgaged Property lies offshore within
the reasonable projected seaward extension of the relevant county
boundary), at public venue to the highest bidder for cash between the hours
of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any month
or at such other place, time and date as provided by the statutes of the
State of Texas then in force governing sales of real estate under powers
conferred by deed of trust, after having given notice of such sale in
accordance with such statutes.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY
----------------------------------------------------------------------
ALLOW TRUSTEE TO TAKE THE MORTGAGED PROPERTIES AND SELL THEM WITHOUT GOING
---------------------------------------------------------------------------
TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS
---------------------------------------------------------------------------
MORTGAGE.
---------
(b) Upon the occurrence of a default, this Mortgage may be foreclosed as to
the Other Mortgaged Properties, or any part thereof, in any manner permitted by
applicable law. Cumulative of the foregoing and the other provisions of this
Section 4.4:
-23
(i) As to Other Mortgaged Properties located in the State of Louisiana
(or within the offshore area over which the United States of America
asserts jurisdiction and to which the laws of such state are applicable
with respect to this Mortgage and/or the liens or security interests
created hereby), Agent may foreclose this Mortgage by executory process, or
any other process, subject to, and on the terms and conditions required or
permitted by, applicable law, and shall have the right to appoint a keeper
of such Other Mortgaged Properties.
(ii) As to Other Mortgaged Properties located in the State of
Oklahoma, Mortgagor hereby confers on Agent the power to sell the Mortgaged
Properties in accordance with the Oklahoma Power of Sale Mortgage
Foreclosure Act (OKLA. STAT. tit. 46, ss.ss. 41-49), as the same maybe
amended from time to time. Mortgagor hereby represents and warrants that
this Mortgage transaction does not involve a consumer loan as said term is
defined in Section 3-104 of Title 14A of the Oklahoma Statutes, that this
Mortgage does not secure an extension of credit made primarily for
agricultural purposes as defined in paragraph 4 of Section 1-301 of Title
14A of the Oklahoma Statutes, and that this Mortgage is not a mortgage on
the Mortgagor's homestead.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF
-----------------------------------------------------------------
SALE MAY ALLOW AGENT TO TAKE THE MORTGAGED PROPERTIES AND SELL THEM
----------------------------------------------------------------------
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY
----------------------------------------------------------------------
MORTGAGOR UNDER THIS MORTGAGE.
------------------------------
(c) Upon the occurrence of a default, Agent may exercise its rights of
enforcement with respect to the Collateral under the Texas Business and Commerce
Code, as amended, the Louisiana Commercial Laws, as amended, the Uniform
Commercial Code of the State of Oklahoma, as amended, or under the Uniform
Commercial Code or any other statute in force in any state to the extent the
same is applicable law. Cumulative of the foregoing and the other provisions of
this Section 4.4:
(i) To the extent permitted by law, Agent may enter upon the Mortgaged
Properties or otherwise upon Mortgagor's premises to take possession of,
assemble and collect the Collateral or to render it unusable; and
(ii) Agent may require Mortgagor to assemble the Collateral and make
it available at a place Agent designates which is mutually convenient to
allow Agent to take possession or dispose of the Collateral; and
(iii) Written notice mailed to Mortgagor as provided herein at least
five (5) days prior to the date of public sale of the Collateral or prior
to the date after which private sale of the Collateral will be made shall
constitute reasonable notice; and
(iv) in the event of a foreclosure of the liens and/or security
interests evidenced hereby, the Collateral, or any part thereof, and the
Mortgaged Properties, or any part thereof, may, at the option of Agent, be
sold, as a whole or in parts, together or separately (including, without
-24-
limitation, where a portion of the Mortgaged Properties is sold, the
Collateral related thereto may be sold in connection therewith); and
(v) the expenses of sale provided for in clause FIRST of Section 4.7
shall include the reasonable expenses of retaking the Collateral, or any
part thereof, holding the same and preparing the same for sale or other
disposition; and
(vi) should, under this subsection, the Collateral be disposed of
other than by sale, any proceeds of such disposition shall be treated under
Section 4.7 as if the same were sales proceeds; and
(vii) as to the Collateral located in or otherwise subject to the laws
of the State of Louisiana, Agent may foreclose this Mortgage as a security
agreement affecting the Collateral by executory process, or any other
process, subject to, and on the terms and conditions required or permitted
by applicable law, and shall have the right to appoint a keeper of such
Collateral.
(d) To the extent permitted by applicable law, the sale hereunder of less
than the whole of the Property shall not exhaust the powers of sale herein
granted or the right to judicial foreclosure, and successive sale or sales may
be made until the whole of the Property shall be sold, and, if the proceeds of
such sale of less than the whole of the Property shall be less than the
aggregate of the indebtedness secured hereby and the expense of conducting such
sale, this Mortgage and the liens and security interests hereof shall remain in
full force and effect as to the unsold portion of the Property just as though no
sale had been made; provided, however, that Mortgagor shall never have any right
to require the sale of less than the whole of the Property. In the event any
sale hereunder is not completed or is defective in the opinion of Agent, such
sale shall not exhaust the powers of sale hereunder or the right to judicial
foreclosure, and Agent shall have the right to cause a subsequent sale or sales
to be made. Any sale may be adjourned by announcement at the time and place
appointed for such sale without further notice except as may be required by law.
The Trustee or his successor or substitute, and the Agent acting under power of
sale, may appoint or delegate any one or more persons as agent to perform any
act or acts necessary or incident to any sale held by it (including, without
limitation, the posting of notices and the conduct of sale), and such
appointment need not be in writing or recorded, Any and all statements of fact
or other recitals made in any deed or deeds, or other instruments of transfer,
given in connection with a sale as to nonpayment of the secured indebtedness or
as to the occurrence of any default, or as to all of the secured indebtedness
having been declared to be due and payable, or as to the request to sell, or as
to notice of time, place and terms of sale and the properties to be sold having
been duly given, or, with respect to any sale by the Trustee, or any successor
or substitute trustee, as to the refusal, failure or inability to act of Trustee
or any substitute or successor trustee or the appointment of any substitute or
successor trustee, or as to any other act or thing having been duly done, shall
be taken as prima facie evidence of the truth of the facts so stated and
recited. Notwithstanding any reference herein to the Notes or the Credit
Agreement or any other Loan Document, all persons dealing with the Mortgaged
Properties shall be entitled to rely on any document, or certificate, of the
Agent as to the occurrence of an event, such as an Event of Default, and shall
not be charged with or forced to review any provision of any other document to
determine the accuracy thereof. With respect to any sale held in foreclosure of
the liens and/or security interests covered hereby, it shall not be necessary
for the Trustee, Agent, any public officer acting under execution or order of
-25-
the court or any other party to have physically present or constructively in
his/her or its possession, either at the time of or prior to such sale, the
Property or any part thereof.
(e) As to Property now or hereafter located in, or otherwise subject to the
laws of, the State of Louisiana, Mortgagor acknowledges the secured
indebtedness, whether now existing or to arise hereafter, and for Mortgagor,
Mortgagor's heirs, devisees, personal representatives, successors and assigns,
hereby confesses judgment for the full amount of the secured indebtedness in
favor of the Lender. Mortgagor further agrees that the Agent may cause all or
any part of the Property to be seized and sold after due process of law, the
Mortgagor waiving the benefit of all laws or parts of laws relative to the
appraisement of property seized and sold under executory process or other legal
process, and consenting that all or any part of the Property may be sold without
appraisement, either in its entirety or in lots and parcels, as the Agent may
determine, to the highest bidder for cash or on such terms as the plaintiff in
such proceedings may direct. Mortgagor hereby waives (i) the benefit of
appraisement provided for in articles 2332, 2336, 2723, and 2724 of the
Louisiana Code of Civil Procedure and all other laws conferring the same; (ii)
the demand and three (3) days notice of demand as provided in articles 2639 and
2721 of the Louisiana Code of Civil Procedure; (iii) the notice of seizure
provided for in articles 2293 and 2721 of the Louisiana Code of Civil Procedure;
(iv) the three (3) days delay provided for in articles 2331 and 2722 of the
Louisiana Code of Civil Procedure; and (v) all other laws providing rights of
notice, demand, appraisement, or delay. Mortgagor expressly authorizes and
agrees that Agent shall have the right to appoint a keeper of such Property
pursuant to the terms and provisions of La. R.S. 9:5131 et seq. and La. R.S.
9:5136 et seq., which keeper may be the Agent, any agent or employee thereof, or
any other person, firm, or corporation. Compensation for the services of the
keeper is hereby fixed at five percent (5%) of the amount due or sued for or
claimed or sought to be protected, preserved, or enforced in the proceeding for
the recognition or enforcement of this Mortgage and shall be secured by the
liens and security interests of this Mortgage.
Section 4.5 Effective as Mortgage. As to the Deed of Trust Mortgaged
-----------------------
Properties, this instrument shall be effective as a mortgage as well as a deed
of trust and upon the occurrence of a default may be foreclosed as to the Deed
of Trust Mortgaged Properties, or any portion thereof, in any manner permitted
by applicable law, and any foreclosure suit may be brought by Trustee or by
Agent. To the extent, if any, required to cause this instrument to be so
effective as a mortgage as well as a deed of trust, Mortgagor hereby mortgages
the Deed of Trust Mortgaged Properties to Agent. In the event a foreclosure
hereunder as to the Deed of Trust Mortgaged Properties, or any part thereof,
shall be commenced by Trustee, or his substitute or successor, Agent may at any
time before the sale of such properties direct Trustee to abandon the sale, and
may then institute suit for the foreclosure of this Mortgage as to such
properties. It is agreed that if Agent should institute a suit for the
foreclosure of this Mortgage, Agent may at any time before the entry of a final
judgment in said suit dismiss the same, and require Trustee, its substitute or
successor, to sell the Deed of Trust Mortgaged Properties, or any part thereof,
in accordance with the provisions of this Mortgage.
Section 4.6 Receiver. In addition to all other remedies herein provided
--------
for, Mortgagor agrees that, upon the occurrence of a default or any event or
circumstance which, with the lapse of time or the giving of notice, or both,
would constitute a default hereunder, Agent shall as a matter of right be
-26-
entitled to the appointment of a receiver or receivers for all or any part of
the Property, whether such receivership be incident to a proposed sale (or
sales) of such property or otherwise, and without regard to the value of the
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Mortgagor does hereby consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, and agrees not to oppose any application therefor by Agent, and
agrees that such appointment shall in no manner impair, prejudice or otherwise
affect the rights of Agent under Article III hereof. Mortgagor expressly waives
notice of a hearing for appointment of a receiver and the necessity for bond or
an accounting by the receiver. Nothing herein is to be construed to deprive
Agent or any Lender of any other right, remedy or privilege it may now or
hereafter have under the law to have a receiver appointed. Any money advanced by
Agent in connection with any such receivership shall be a demand obligation
(which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor
to Agent and shall bear interest, from the date of making such advancement by
Agent until paid, at the rate described in Section 2.3 hereof.
Section 4.7 Proceeds of Foreclosure. The proceeds of any sale held in
-------------------------
foreclosure of the liens and/or security interests evidenced hereby shall be
applied:
FIRST, to the payment of all necessary costs and expenses incident to
-----
such foreclosure sale, including but not limited to all court costs and
charges of every character in the event foreclosed by suit or any judicial
proceeding and including but not limited to a reasonable fee to the Trustee
if such sale was made by the Trustee acting under the provisions of Section
4.4(a) and including but not limited to the compensation of the keeper, if
any;
SECOND, to the payment of the secured indebtedness (including
------
specifically without limitation the principal, interest and attorneys' fees
due and unpaid on the Notes and the amounts due and unpaid and owed under
this Mortgage) in such manner and order as Agent may elect; and
THIRD, the remainder, if any there shall be, shall be paid to
-----
Mortgagor, or to Mortgagor's heirs, devisees, representatives, successors
or assigns, or such other persons as may be entitled thereto by law.
Section 4.8 Lender as Purchaser. Any Lender shall have the right to become
-------------------
the purchaser at any sale held in foreclosure of the liens and/or security
interests evidenced hereby, and any Lender purchasing at any such sale shall
have the right to credit upon the amount of the bid made therefor, to the extent
necessary to satisfy such bid, the secured indebtedness owing to such Lender, or
if such Lender holds less than all of such indebtedness, the pro rata part
thereof owing to such Lender, accounting to all other Lenders not joining in
such bid in cash for the portion of such bid or bids apportionable to such
non-bidding Lender or Lenders.
Section 4.9 Foreclosure as to Matured Debt. Upon the occurrence of a
--------------------------------
default, Agent shall have the right to proceed with foreclosure of the liens
and/or security interests evidenced hereby without declaring the entire secured
indebtedness due, and in such event, any such foreclosure sale may be made
subject to the unmatured part of the secured indebtedness and shall not in any
manner affect the unmatured part of the secured indebtedness, but as to such
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unmatured part, this Mortgage shall remain in full force and effect just as
though no sale had been made. The proceeds of such sale shall be applied as
provided in Section 4.7 except that the amount paid under clause SECOND thereof
shall be only the matured portion of the secured indebtedness and any proceeds
of such sale in excess of those provided for in clauses FIRST and SECOND
(modified as provided above) shall be applied as provided in clause SECOND AND
THIRD of Section 3.4 hereof. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the secured indebtedness.
Section 4.10 Remedies Cumulative. All remedies herein provided for are
--------------------
cumulative of each other and of all other remedies existing at law or in equity
and are cumulative of any and all other remedies provided for in any other Loan
Document, and, in addition to the remedies herein provided, there shall continue
to be available all such other remedies as may now or hereafter exist at law or
in equity for the collection of the secured indebtedness and the enforcement of
the covenants herein and the foreclosure of the liens and/or security interests
evidenced hereby, and the resort to any remedy provided for hereunder or under
any such other Loan Document or provided for by law shall not prevent the
concurrent or subsequent employment of any other appropriate remedy or remedies.
Section 4.11 Discretion as to Security. Agent may resort to any security
--------------------------
given by this Mortgage or to any other security now existing or hereafter given
to secure the payment of the secured indebtedness, in whole or in part, and in
such portions and in such order as may seem best to Agent in its sole and
uncontrolled discretion, and any such action shall not in any way be considered
as a waiver of any of the rights, benefits, liens or security interests
evidenced by this Mortgage.
Section 4.12 Mortgagor's Waiver of Certain Rights. To the full extent
--------------------------------------
Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter
in force providing for any appraisement, valuation, stay, extension or
redemption, and Mortgagor, for Mortgagor, Mortgagor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the extent permitted by applicable
law, hereby waives and releases all rights of appraisement, valuation, stay of
execution, redemption, notice of intention to mature or declare due the whole of
the secured indebtedness, notice of election to mature or declare due the whole
of the secured indebtedness and all rights to a marshaling of assets of
Mortgagor, including the Property, or to a sale in inverse order of alienation
in the event of foreclosure of the liens and/or security interests hereby
created. Mortgagor shall not have or assert any right under any statute or rule
of law pertaining to the marshaling of assets, sale in inverse order of
alienation, the exemption of homestead, the administration of estates of
decedents, or other matters whatever to defeat, reduce or affect the right under
the terms of this Mortgage to a sale of the Property for the collection of the
secured indebtedness without any prior or different resort for collection, or
the right under the terms of this Mortgage to the payment of the secured
indebtedness out of the proceeds of sale of the Properly in preference to every
other claimant whatever. If any law referred to in this section and now in
force, of which Mortgagor or Mortgagor's heirs, devisees, representatives,
successors or assigns or any other persons claiming any interest in the
Mortgaged Properties or the Collateral might take advantage despite this
section, shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to preclude the application of this section.
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Section 4.13 Mortgagor as Tenant Post-Foreclosure. In the event there is a
------------------------------------
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor's
heirs, devisees, representatives, successors or assigns or any other persons
claiming any interest in the Property by, through or under Mortgagor are
occupying or using the Property, or any part thereof, each and all shall
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day to day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser. To the extent permitted
by applicable law, the purchaser at such sale shall, notwithstanding any
language herein apparently to the contrary, have the sole option to demand
immediate possession following the sale or to permit the occupants to remain as
tenants at will. In the event the tenant fails to surrender possession of said
property upon demand, the purchaser shall be entitled to institute and maintain
a summary action for possession of the property (such as an action for forcible
entry and detainer) in any court having jurisdiction.
Section 4.14 Waiver of Oklahoma Appraisement. As to Property situated in or
-------------------------------
otherwise subject to the laws of the State of Oklahoma, appraisement of the
Property is hereby waived (or not) at the option of Agent, such option to be
exercised at the time judgment is rendered in any foreclosure hereof or at any
time prior thereto.
ARTICLE V.
Miscellaneous
-------------
Section 5.1 Scope of Mortgage. This Mortgage is a deed of trust and
------------------
mortgage of both real/immovable and personal/movable property, a security
agreement, a financing statement and an assignment, and also covers proceeds and
fixtures.
Section 5.2 Effective as a Financing Statement. This Mortgage, among other
----------------------------------
things, covers goods which are or are to become fixtures related to the real
property described herein, and covers as-extracted collateral related to the
real property described herein. This Mortgage shall be effective as a financing
statement (i) filed as a fixture filing with respect to all fixtures included
within the Property, (ii) covering as-extracted collateral with respect to all
as-extracted collateral included within the Property (including, without
limitation, all oil, gas, other minerals and other substances of value which may
be extracted from the earth and all accounts arising out of the sale at the
wellhead or minehead thereof), and (iii) covering all other Property. This
Mortgage is to be filed for record in the real/immovable property records of
each county or parish where any part of the Mortgaged Properties is situated or
which lies shoreward of any Mortgaged Property (i.e., to the extent a Mortgaged
Property lies offshore within the projected seaward extension of the relevant
county or parish boundaries), and may also be filed in the offices of the Bureau
of Land Management, the Minerals Management Service, the General Land Office or
any relevant federal, state, local or tribal agency (or any successor agencies).
The mailing address of Mortgagor is the address of Mortgagor set forth at the
end of this Mortgage and the address of Agent from which information concerning
the security interests hereunder may be obtained is the address of Agent set
forth at the end of this Mortgage. Nothing contained in this paragraph shall be
construed to limit the scope of this Mortgage nor its effectiveness as a
financing statement covering any type of Property.
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Section 5.3 Reproduction of Mortgage as Financing Statement; Authorization
---------------------------------------------------------------
to File. A carbon, photographic, facsimile or other reproduction of this
- --------
Mortgage or of any financing statement relating to this Mortgage shall be
sufficient as a financing statement for any purpose. Without limiting any other
provision herein, Mortgagor hereby authorizes Agent to file, in any filing or
recording office, one or more financing statements and any renewal or
continuation statements thereof, describing the Property, including, without
limitation, a financing statement covering "all assets of Mortgagor, all
proceeds therefrom and all rights and privileges with respect thereto."
Section 5.4 Notice to Account Debtors. In addition to, but without
---------------------------
limitation of, the rights granted in Article III hereof, Agent may, at any time
after a default has occurred that is continuing, notify the account debtors or
obligors of any accounts, chattel paper, negotiable instruments or other
evidences of indebtedness included in the Collateral to pay Agent directly.
Section 5.5 Waivers. Agent may at any time and from time to time in writing
-------
waive compliance by Mortgagor with any covenant herein made by Mortgagor to the
extent and in the manner specified in such writing, or consent to Mortgagor's
doing any act which hereunder Mortgagor is prohibited from doing, or to
Mortgagor's failing to do any act which hereunder Mortgagor is required to do,
to the extent and in the manner specified in such writing, or release any part
of the Property or any interest therein or any Production Proceeds from the lien
and security interest of this Mortgage, without the joinder of Trustee. Any
party liable, either directly or indirectly, for the secured indebtedness or for
any covenant herein or in any other Loan Document may be released from all or
any part of such obligations without impairing or releasing the liability of any
other party. No such act shall in any way impair any rights or powers hereunder
except to the extent specifically agreed to in such writing.
Section 5.6 No Impairment of Security. The lien, security interest and
---------------------------
other security rights hereunder shall not be impaired by any indulgence,
moratorium or release which may be granted, including, but not limited to, any
renewal, extension or modification which may be granted with respect to any
secured indebtedness, or any surrender, compromise, release, renewal, extension,
exchange or substitution which maybe granted in respect of the Property
(including without limitation Production Proceeds), or any part thereof or any
interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any secured indebtedness.
Section 5.7 Acts Not Constituting Waiver. Any default may be waived without
----------------------------
waiving any other prior or subsequent default. Any default may be remedied
without waiving the default remedied. Neither failure to exercise, nor delay in
exercising, any right, power or remedy upon any default shall be construed as a
waiver of such default or as a waiver of the right to exercise any such right,
power or remedy at a later date. No single or partial exercise of any right,
power or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may be
exercised at any time and from time to time, No modification or waiver of any
provision hereof nor consent to any departure by Mortgagor therefrom shall in
any event be effective unless the same shall be in writing and signed by Agent
and then such waiver or consent shall be effective only in the specific
instances, for the purpose for which given and to the extent therein specified.
No notice to nor demand on Mortgagor in any case shall of itself entitle
Mortgagor to any other or further notice or demand in similar or other
-30-
circumstances. Acceptance of any payment in an amount less than the amount then
due on any secured indebtedness shall be deemed an acceptance on account only
and shall not in any way excuse the existence of a default hereunder.
Section 5.8 Mortgagor's Successors. In the event the ownership of the
-----------------------
Property or any part thereof becomes vested in a person other than Mortgagor,
then, without notice to Mortgagor, such successor or successors in interest may
be dealt with, with reference to this Mortgage and to the indebtedness secured
hereby, in the same manner as with Mortgagor, without in any way vitiating or
discharging Mortgagor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Property, no forbearance, and no extension of the time for the payment of
the indebtedness secured hereby shall operate to release, discharge, modify,
change or affect, in whole or in part, the liability of Mortgagor hereunder or
for the payment of the indebtedness or performance of the obligations secured
hereby or the liability of any other person hereunder or for the payment of the
indebtedness secured hereby.
Section 5.9 Place of Payment. All secured indebtedness which may be owing
----------------
hereunder at any time by Mortgagor shall be payable at the place designated in
the Credit Agreement (or if no such designation is made, at the address of Agent
indicated at the end of this Mortgage), or at such other place as Agent may
designate in writing.
Section 5.10 Subrogation to Existing Liens. To the extent that proceeds of
-----------------------------
the Notes are used to pay indebtedness secured by any outstanding lien, security
interest, charge or prior encumbrance against the Property, such proceeds have
been advanced at Mortgagor's request, and the party or parties advancing the
same shall be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security interests,
charges or encumbrances, irrespective of whether said liens, security interests,
charges or encumbrances are released, and it is expressly understood that, in
consideration of the payment of such indebtedness, Mortgagor hereby waives and
releases all demands and causes of action for offsets and payments to, upon and
in connection with the said indebtedness.
Section 5.11 Application of Payments to Certain Indebtedness. If any part
------------------------------------------------
of the secured indebtedness cannot be lawfully secured by this Mortgage or if
any part of the Property cannot be lawfully subject to the lien and security
interest hereof to the full extent of such indebtedness, then all payments made
shall be applied on said indebtedness first in discharge of that portion thereof
which is not secured by this Mortgage.
Section 5.12 Compliance With Usury Laws. It is the intent of Mortgagor,
---------------------------
Lender and all other parties to the Loan Documents to contract in strict
compliance with applicable usury law from time to time in effect. In furtherance
thereof, it is stipulated and agreed that none of the terms and provisions
contained herein or in the other Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged by
applicable law from time to time in effect.
Section 5.13 Substitute Trustee. The Trustee may resign by an instrument in
------------------
writing addressed to Agent, or Trustee may be removed at any time with or
-31-
without cause by an instrument in writing executed by Agent. In case of the
death, resignation, removal, or disqualification of Trustee, or if for any
reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without other
formality than appointment and designation in writing executed by Agent and the
authority hereby conferred shall extend to the appointment of other successor
and substitute trustees successively until the indebtedness secured hereby has
been paid in full, or until the Property is sold hereunder. In the event the
secured indebtedness is owned by more than one person or entity, the holder or
holders of not less than a majority in the amount of such indebtedness shall
also have the right and authority to make the appointment of a successor or
substitute trustee as provided for in the preceding sentence or to remove
Trustee as provided in the first sentence of this section, Such appointment and
designation by Agent shall be full evidence of the right and authority to make
the same and of all facts therein recited. If Agent is a corporation or
association and such appointment is executed in its behalf by an officer of such
corporation or association, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the corporation
or association. Agent may act through an agent or attorney-in-fact in
substituting trustees. Upon the making of any such appointment and designation,
all of the estate and title of Trustee in the Deed of Trust Mortgaged Properties
shall vest in the named successor or substitute Trustee and such successor or
substitute shall thereupon succeed to, and shall hold, possess and execute, all
the rights, powers, privileges, immunities and duties herein conferred upon
Trustee; but nevertheless, upon the written request of Agent or of the successor
or substitute Trustee, the Trustee ceasing to act shall execute and deliver an
instrument transferring to such successor or substitute Trustee all of the
estate and title in the Deed of Trust Mortgaged Properties of the Trustee so
ceasing to act, together with all the rights, powers, privileges, immunities and
duties herein conferred upon the Trustee, and shall duly assign, transfer and
deliver any of the properties and moneys held by said Trustee hereunder to said
successor or substitute Trustee, All references herein to Trustee shall be
deemed to refer to Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting hereunder.
Section 5.14 No Liability for Trustee. THE TRUSTEE SHALL NOT BE LIABLE FOR
------------------------
ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE
RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, THE TRUSTEE'S NEGLIGENCE), EXCEPT FOR TRUSTEE'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. The Trustee shall have the right to rely on
any instrument, document or signature authorizing or supporting any action taken
or proposed to be taken by the Trustee hereunder, believed by the Trustee in
good faith to be genuine. All moneys received by Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated in any manner from any other moneys
(except to the extent required by law), and Trustee shall be under no liability
for interest on any moneys received by him hereunder. Mortgagor hereby ratifies
and confirms any and all acts which the herein named Trustee or its successor or
successors, substitute or substitutes, shall do lawfully by virtue hereof.
Mortgagor will reimburse Trustee for, and indemnify and save Trustee harmless
against, any and all liability and expenses (including attorneys fees) which may
be incurred by Trustee in the performance of his duties. The foregoing
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indemnities shall not terminate upon the release, foreclosure or other
termination of this Mortgage but will survive such release, termination and/or
foreclosure of this Mortgage, or conveyance in lieu of foreclosure, and the
repayment of the secured indebtedness and the discharge and release of this
Mortgage and the other documents evidencing and/or securing the secured
indebtedness. Any amount to be paid hereunder by Mortgagor to Trustee shall be a
demand obligation owing by Mortgagor to Trustee and shall be subject to and
covered by the provisions of Section 2.3 hereof.
Section 5.15 Release of Mortgage. If all of the secured indebtedness be
-------------------
paid as the same becomes due and payable, all other requirements of the Credit
Agreement are satisfied and all of the covenants, warranties, undertakings and
agreements made in this Mortgage are kept and performed, and if neither the
Mortgagor nor any Lender is bound to the other or to any third person to permit
any obligation or secured indebtedness to be incurred then or thereafter, then,
upon sixty (60) days prior written notice (or such lesser number of days as may
be mandated by applicable law), the Mortgagor may request that this Mortgage be
terminated. Upon such termination the Mortgagor may further request that a
written act of release of this Mortgage be provided (except this Mortgage shall
be reinstated to the extent expressly provided herein, and will continue with
respect to indemnification and other rights which are to continue following the
release hereof). Agent agrees to deliver such an act of release (subject to the
foregoing limitation), all at the cost and expense of the Mortgagor, within
thirty (30) days (or such lesser number of days as may be mandated by applicable
law) of receiving such request unless Agent in good faith, has cause to believe
that Mortgagor is not entitled to a termination of this Mortgage.
Notwithstanding the foregoing, it is understood and agreed that certain
indemnifications, and other rights, which are provided herein to continue
following the release hereof, shall continue in effect notwithstanding such
release; and provided that if any payment to Lender, or Agent, is held to
constitute a preference or a voidable transfer under applicable state or federal
laws or if for any other reason Lender, or Agent, is required to refund such
payment to the payor thereof or to pay the amount thereof to any third party,
this Mortgage shall be reinstated to the extent of such payment or payments.
Section 5.16 Notices. All notices, requests, consents, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, at the addresses specified at the
end of this Mortgage (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery at the
address and in the manner provided herein, (b) in the case of telecopy, upon
receipt, and (c) in the case of registered or certified United States mail,
three days after deposit in the mail. Notwithstanding the foregoing, or anything
else in the Loan Documents which may appear to the contrary, any notice given in
connection with a foreclosure of the liens and/or security interests created
hereunder, or otherwise in connection with the exercise by Agent, any Lender or
Trustee of their respective rights hereunder or under any other Loan Document,
which is given in a manner permitted by applicable law shall constitute proper
notice; without limitation of the foregoing, notice given in a form required or
permitted by statute shall (as to the portion of the Property to which such
statute is applicable) constitute proper notice.
-33-
Section 5.17 Invalidity of Certain Provisions. A determination that any
---------------------------------
provision of this Mortgage is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Mortgage to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
Section 5.18 Gender; Titles. Within this Mortgage, words of any gender
---------------
shall be held and construed to include any other gender, and words in the
singular number shall be held and construed to include the plural, unless the
context otherwise requires. Titles appearing at the beginning of any
subdivisions hereof are for convenience only, do not constitute any part of such
subdivisions, and shall be disregarded in construing the language contained in
such subdivisions.
Section 5.19 Recording. Mortgagor will cause this Mortgage and all
---------
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating thereto to be recorded, filed,
re-recorded and refiled in such manner and in such places as Trustee or Agent
shall reasonably request and will pay all such recording, filing, re-recording
and refiling taxes, fees and other charges.
Section 5.20 Reporting Compliance. Mortgagor agrees to comply with any and
--------------------
all reporting requirements applicable to the transaction evidenced by the Notes
and secured by this Mortgage which are set forth in any law, statute, ordinance,
rule, regulation, order or determination of any governmental authority, and
further agrees upon request of Agent to furnish Agent with evidence of such
compliance.
Section 5.21 Certain Consents. Except where otherwise expressly provided
----------------
herein, in any instance hereunder where the approval, consent or the exercise of
judgment of Agent or any Lender is required, the granting or denial of such
approval or consent and the exercise of such judgment shall be within the sole
discretion of such party, and such party shall not, for any reason or to any
extent, be required to grant such approval or consent or exercise such judgment
in any particular manner, regardless of the reasonableness of either the request
or the judgment of such party.
Section 5.22 Certain Obligations of Mortgagor. Without limiting Mortgagor's
--------------------------------
obligations hereunder, Mortgagor's liability hereunder and the indebtedness
secured hereby shall extend to and include all post petition interest, expenses,
and other duties and liabilities with respect to Mortgagor's obligations
hereunder which would be owed but for the fact that the same may be
unenforceable due to the existence of a bankruptcy, reorganization or similar
proceeding.
Section 5.23 Authority of Agent. The persons constituting Lender may, by
------------------
agreement among them, provide for and regulate the exercise of rights and
remedies hereunder, but, unless and until modified to the contrary in writing
signed by all such persons and recorded in the same counties and parishes as
this Mortgage is recorded, (i) all persons other than Mortgagor and its
affiliates shall be entitled to rely on the releases, waivers, consents,
approvals, notifications and other acts (including, without limitation,
appointment of substitute or successor trustee, or trustees, hereunder and the
bidding in of all or any part of the secured indebtedness held by any one or
more Lenders, whether the same be conducted under the provisions hereof or
otherwise) of Agent, without inquiry into any such agreements or the existence
of required consent or approval of any persons constituting Lender and without
-34-
the joinder of any party other than Agent in such releases, waivers, consents,
approvals, notifications or other acts and (ii) all notices, requests, consents,
demands and other communications required or permitted to be given hereunder may
be given to Agent.
Section 5.24 Counterparts. This Mortgage may be executed in several
------------
counterparts, all of which are identical, except that, (a) to facilitate
recordation, certain counterparts hereof may include only that portion of
Exhibit A which contains descriptions of the properties located in (or otherwise
subject to the recording or filing requirements and/or protections of the
recording or filing acts or regulations of) the recording jurisdiction in which
the particular counterpart is to be recorded, and other portions of Exhibit A
shall be included in such counterparts by reference only and (b) Schedule I is
attached only to the master counterparts hereof being retained by Mortgagor and
Agent, (c) only those counterparts hereof being retained by Agent and Mortgagor
or otherwise containing counterpart descriptions of Mortgaged Properties located
in (or otherwise subject to the recording or filing requirements and/or
protections of the recording or filing acts or regulations of) the State of
Louisiana will have Annex I attached thereto, Annex I is included in all other
counterparts by reference only, and (d) the execution of this Mortgage by
Mortgagor may not be witnessed on those counterparts hereof containing
descriptions of Mortgaged Properties located in states where witnesses are not
required and/or encouraged by applicable law. All of such counterparts together
shall constitute one and the same instrument.
Section 5.25 Multiple Parties Constituting Mortgagor. Unless the context
-----------------------------------------
clearly indicates otherwise, as used in this Mortgage, "Mortgagor" means the
Mortgagors named in Section 1.1 hereof or any of them. The obligations of
Mortgagor hereunder shall be joint and several.
Section 5.26 Successors and Assigns. The terms, provisions, covenants,
-----------------------
representations, indemnifications and conditions hereof shall be binding upon
Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the
benefit of Agent, Trustee and each person constituting Lender and their
respective successors and assigns, and shall constitute covenants running with
the Mortgaged Properties. Should the agency under which Agent serves be
terminated, or otherwise cease to exist, Lenders (including the respective
successors and assigns of each person constituting Lender named herein) shall be
deemed to be the successors to Agent. All references in this Mortgage to
Mortgagor, Agent, Trustee or Lenders shall be deemed to include all such
successors and assigns.
Section 5.27 FINAL AGREEMENT OF THE PARTIES. THE WRITTEN LOAN DOCUMENTS
--------------------------------------------------------------
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
- --------------------------------------------------------------------------------
EVIDENCE OF PRIOR. CONTEMPORANEOUS. OR SUBSEQUENT ORAL AGREEMENTS OF THE
- --------------------------------------------------------------------------------
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
- --------------------------------------------------------------------
Section 5.28 CHOICE OF LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
-------------
LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO
-35-
BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION OF
THE PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE
PROPERTY) NECESSARILY OR, IN THE SOLE DISCRETION OF LENDER, APPROPRIATELY
GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE
CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER
RIGHTS AND REMEDIES OF THE TRUSTEE OR THE LENDER GRANTED HEREIN, THE LAW OF SUCH
STATE SHALL APPLY AS TO THAT PORTION OF THE PROPERTY LOCATED IN (OR WHICH IS
OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.
Section 5.29 Reliance on Certificate or Statement of Agent. All third
-------------------------------------------------
parties may rely upon a certificate or statement of the Agent as to the
occurrence of any act or event, including, but not limited to, the occurrence of
a default hereunder, or the occurrence of an Event of Default under the Credit
Agreement.
Section 5.30 Appearance. Resolutions, For purposes of Louisiana law,
----------
including but not limited to the availability of executory process, Mortgagor
has appeared on this date before the undersigned Notary Public and witnesses in
order to execute this Mortgage. Mortgagor attaches, as Annex I, to counterparts
hereof being recorded in Louisiana certified resolutions of its Board of
Directors authorizing the execution and delivery of this Mortgage.
Section 5.31 Paraph. Mortgagor acknowledges that no promissory note or
------
other instrument has been presented to the undersigned Notary Public to be
paraphed for identification herewith.
Section 5.32 Acceptance by Agent. In accordance with the provisions of
--------------------
Louisiana Civil Code article 3289, Agent has accepted the benefits of the
Mortgage without the necessity of execution by Agent.
[Signatures Begin on Next Page]
THUS DONE AND PASSED this 7 day of April, 2005, to be effective, however,
-
as of April 7, 2005, in my presence and in the presence of the undersigned
competent witnesses who hereunto sign their names with Mortgagor and me, Notary,
after reading of the whole.
WITNESSES: ST. MARY LAND & EXPLORATION
COMPANY
/S/ DEBRA J. ARROYO
- -------------------
Name: Debra J. Arroyo
---------------
By: /S/ DAVID W. HONEYFIELD
-----------------------
David W. Honeyfield
/S/ MOLLY DOLTON Vice President - Finance, Secretary and
- ---------------- Treasurer
Name: Molly Dolton
------------
/S/ JAMES C. ROBERTSON
James C. Robertson
------------------
NOTARY PUBLIC
The address and tax identification number of Parent are:
1776 Lincoln Street, Suite 700
Denver, Colorado 80203
(Denver County)
Taxpayer I.D. No. 41-05 18430
The address of Agent is:
201 South College Street
8th Floor NC 0680
Charlotte, NC 28288
The addresses of Trustee is:
Jay Chernosky
1001 Fannin Street, Suite 2255
Houston, Texas 77002
This instrument prepared by:
Craig W. Murray
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, TX 77002
STATE OF COLORADO ss.
ss.
COUNTY OF DENVER ss.
BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, and being authorized in such county and state to take
acknowledgments, hereby certify that, on this 7 day of April, 2005, THERE
-
personally appeared before me: David W. Honeyfield, the Vice President -
Finance, Secretary and Treasurer of St. Mary Land & Exploration Company, a
Delaware corporation, known to me to be such officer, such corporation being a
party to the foregoing instrument.
The foregoing instrument was acknowledged before me on this day,
by such person, the above designated officer of the corporation
specified following such person's name, on behalf of said
corporation.
On this date before me, the undersigned authority, personally
came and appeared such person, to me personally known and known
by me to be the person whose genuine signature is affixed to the
foregoing document as the above designated officer of the
corporation specified following such person's name, who signed
said document before me in the presence of the two witnesses,
whose names are thereto subscribed as such, being competent
witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and
foregoing document as his own free act and deed on behalf of such
corporation by authority of its board of directors and as the
free act and deed of such corporation and for the uses and
purposes therein set forth and apparent.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in the
City of Denver, Denver County, Colorado on the day and year first above written.
/S/ JAMES C. ROBERTSON
----------------------
NOTARY PUBLIC, in and for the State of Colorado
James C. Robertson
------------------
My commission expires: (printed name)
February 14, 2009
- -----------------
[SEAL]
THUS DONE AND PASSED this 7 day of April, 2005, to be effective, however,
-
as of April 7, 2005, in my presence and in the presence of the undersigned
competent witnesses who hereunto sign their names with Mortgagor and me, Notary,
after reading of the whole.
WITNESSES: ST. MARY ENERGY COMPANY
/S/ DEBRA J. ARROYO
- -------------------
Name: Debra J. Arroyo
---------------
By: /S/ DAVID W. HONEYFIELD
-----------------------
David W. Honeyfield
/S/ MOLLY DOLTON Vice President - Finance, Secretary and
- ---------------- Treasurer
Name: Molly Dolton
------------
/S/ JAMES C. ROBERTSON
James C. Robertson
------------------
NOTARY PUBLIC
The address and tax identification number of Energy are:
580 Westlake Park Blvd., Suite 600
Houston, Texas 77079
(Harris County)
Taxpayer ID. No. 76-0554924
STATE OF COLORADO ss.
ss.
COUNTY OF DENVER ss.
BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, and being authorized in such county and state to take
acknowledgments, hereby certify that, on this 7 day of April, 2005, there
-
personally appeared before me: David W. Honeyfield, the Vice President -
Finance, Secretary and Treasurer of St. Mary Energy Company, a Delaware
corporation, known to me to be such officer, such corporation being a party to
the foregoing instrument.
The foregoing instrument was acknowledged before me on this day,
by such person, the above designated officer of the corporation
specified following such person's name, on behalf of said
corporation.
On this date before me, the undersigned authority, personally
came and appeared such person, to me personally known and known
by me to be the person whose genuine signature is affixed to the
foregoing document as the above designated officer of the
corporation specified following such person's name, who signed
said document before me in the presence of the two witnesses,
whose names are thereto subscribed as such, being competent
witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and
foregoing document as his own free act and deed on behalf of such
corporation by authority of its board of directors and as the
free act and deed of such corporation and for the uses and
purposes therein set forth and apparent.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in the
City of Denver, Denver County, Colorado on the day and year first above written.
/S/ JAMES C. ROBERTSON
----------------------
NOTARY PUBLIC, in and for the State of Colorado
James C. Robertson
------------------
My commission expires: (printed name)
February 14, 2009
- -----------------
[SEAL]
THUS DONE AND PASSED this 7 day of April, 2005, to be effective, however,
-
as of April 7, 2005, in my presence and in the presence of the undersigned
competent witnesses who hereunto sign their names with Mortgagor and me, Notary,
after reading of the whole.
WITNESSES: NANCE PETROLEUM CORPORATION
/S/ DEBRA J. ARROYO
- -------------------
Name: Debra J. Arroyo
---------------
By: /S/ DAVID W. HONEYFIELD
-----------------------
David W. Honeyfield
/S/ MOLLY DOLTON Vice President - Finance
- ----------------
Name: Molly Dolton
------------
/S/ JAMES C. ROBERTSON
James C. Robertson
------------------
NOTARY PUBLIC
The address and tax identification number of Nance are:
550 North 31st Street, Suite 500
Billings, Montana 59101
(Yellowstone County)
Taxpayer I.D. No. 8 1-0309883
STATE OF COLORADO ss.
ss.
COUNTY OF DENVER ss.
BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, and being authorized in such county and state to take
acknowledgments, hereby certify that, on this 7 day of April, 2005, there
-
personally appeared before me: David W. Honeyfield, the Vice President - Finance
of Nance Petroleum Corporation, a Montana corporation, known to me to be such
officer, such corporation being a party to the foregoing instrument.
The foregoing instrument was acknowledged before me on this day,
by such person, the above designated officer of the corporation
specified following such person's name, on behalf of said
corporation.
On this date before me, the undersigned authority, personally
came and appeared such person, to me personally known and known
by me to be the person whose genuine signature is affixed to the
foregoing document as the above designated officer of the
corporation specified following such person's name, who signed
said document before me in the presence of the two witnesses,
whose names are thereto subscribed as such, being competent
witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and
foregoing document as his own free act and deed on behalf of such
corporation by authority of its board of directors and as the
free act and deed of such corporation and for the uses and
purposes therein set forth and apparent.
IN WITNESS WHEREOF. I have hereunto set my hand and official seal in the
City of Denver, Denver County, Colorado, on the day and year first above
written.
/S/ JAMES C. ROBERTSON
----------------------
NOTARY PUBLIC, in and for the State of Colorado
James C. Robertson
------------------
My commission expires: (printed name)
February 14, 2009
- -----------------
[SEAL]
THUS DONE AND PASSED this 7 day of April, 2005, to be effective, however,
-
as of April 7, 2005, in my presence and in the presence of the undersigned
competent witnesses who hereunto sign their names with Mortgagor and me, Notary,
after reading of the whole.
WITNESSES: NPC INC.
/S/ DEBRA J. ARROYO
- -------------------
Name: Debra J. Arroyo
---------------
By: /S/ DAVID W. HONEYFIELD
-----------------------
David W. Honeyfield
/S/ MOLLY DOLTON Vice President - Finance
- ----------------
Name: Molly Dolton
------------
/S/ JAMES C. ROBERTSON
James C. Robertson
------------------
NOTARY PUBLIC
The address and tax identification number of Operating are:
550 North 31st Street, Suite 500
Billings, Montana 59101
(Yellowstone County)
Taxpayer I.D. No. 11-3668557
STATE OF COLORADO ss.
ss.
COUNTY OF DENVER ss.
BE IT REMEMBERED THAT I, the undersigned authority, a notary public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, and being authorized in such county and state to take
acknowledgments, hereby certify that, on this 7 day of April, 2005, there
-
personally appeared before me: David W. Honeyfield, the Vice President - Finance
of NPC Inc., a Colorado corporation. known to me to be such officer, such
corporation being a party to the foregoing instrument.
The foregoing instrument was acknowledged before me on this day,
by such person, the above designated officer of the corporation
specified following such person's name, on behalf of said
corporation.
On this date before me, the undersigned authority, personally
came and appeared such person, to me personally known and known
by me to be the person whose genuine signature is affixed to the
foregoing document as the above designated officer of the
corporation specified following such person's name, who signed
said document before me in the presence of the two witnesses,
whose names are thereto subscribed as such, being competent
witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and
foregoing document as his own free act and deed on behalf of such
corporation by authority of its board of directors and as the
free act and deed of such corporation and for the uses and
purposes therein set forth and apparent.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal in the
City of Denver, Denver County, Colorado, on the day and year first above
written.
/S/ JAMES C. ROBERTSON
----------------------
NOTARY PUBLIC, in and for the State of Colorado
James C. Robertson
------------------
My commission expires: (printed name)
February 14, 2009
[SEAL]
EXHIBIT A
[Description of leases and lands, grouped with wells]
Need actual land descriptions for the States of North Dakota, Oklahoma and
Wyoming -references to recorded instruments containing descriptions sufficient
for all other states
SCHEDULE I
[List of Wells with corresponding Working Interests and Net Revenue
interests]