EXHIBIT 10.6
CREDIT AGREEMENT
between
PETROREAL OF LOUISIANA, L.L.C. ("Borrower"),
and
WHITNEY NATIONAL BANK ("Lender")
May 6, 2004
TABLE OF CONTENTS
Page No.
ARTICLE I - DEFINITIONS AND INTERPRETATION...................................1
1.1 Terms Defined Above..............................................1
1.2 Additional Defined Terms ........................................1
1.3 References......................................................10
1.4 Articles and Sections...........................................11
1.5 Number and Gender...............................................11
1.6 Incorporation of Exhibits.......................................11
ARTICLE II - TERMS OF THE FACILITIES........................................11
2.1 Revolving Line of Credit........................................11
2.2 Term Loan.......................................................11
2.3 Use of Loan Proceeds............................................12
2.4 Interest........................................................12
2.5 Repayment of Loans and Interest.................................12
2.6 General Terms...................................................12
2.7 Time, Place and Method of Payments..............................13
2.8 Letters of Credit...............................................13
2.9 Reimbursement...................................................13
2,10 Borrowing Base Determination....................................15
2.11 Mandatory Prepayments...........................................15
2.12 Voluntary Prepayments...........................................16
2.13 Facility Fees...................................................16
2.14 Letter of Credit Fee............................................16
2.15 Commitment Fee..................................................16
2.16 Engineering Fee.................................................16
2.17 Loans to Satisfy Obligations of Borrower........................16
2.18 Security Interest in Accounts; Right of Offset..................16
2.19 General Provisions Relating to Interest.........................17
2.20 Taxes...........................................................18
2.21 Deposit Accounts................................................18
ARTICLE 3 - CONDITIONS......................................................18
3.1 Conditions Precedent to Loans...................................18
3.2 Conditions Precedent to Each Advance............................19
3.3 Conditions Precedent to the Term Loan...........................20
3.4 Collateral......................................................21
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES..................................21
4.1 Existence of Borrower...........................................21
4.2 Due Authorization...............................................22
4.3 Valid and Binding Obligations...................................22
4.4 Scope and Accuracy of Financial Statements......................22
4.5 Liabilities, Litigation and Restrictions........................22
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4.6 Title to Properties.............................................22
4.7 Compliance with Federal Reserve Regulations.....................22
4.8 Authorizations and Consents.....................................23
4.9 Compliance with Laws, Rules, Regulations and Orders.............23
4.10 Proper Filing of Tax Returns and Payment of Taxes Due...........23
4.11 ERISA...........................................................23
4.12 Take-or-Pay; Gas Imbalances.....................................23
4.13 Refunds.........................................................24
4.14 Casualties or Taking of Property................................24
4.15 Locations of Business and Offices...............................24
4.16 Environmental Compliance........................................24
4.17 Investment Company Act Compliance...............................24
4.18 Public Utility Holding Company Act Compliance...................24
4.19 No Material Misstatements.......................................25
4.20 Subsidiaries....................................................25
4.21 Defaults........................................................25
4.22 Maintenance of Properties.......................................25
4.23 Collateral......................................................25
ARTICLE 5 - AFFIRMATIVE COVENANTS...........................................25
5.1 Maintenance and Access to Records...............................25
5.2 Quarterly Financial Statements..................................25
5.3 Annual Financial Statements of Borrower.........................26
5.4 Compliance Certificate..........................................26
5.5 Oil and Gas Reserve Reports.....................................26
5.6 Notices.........................................................26
5.7 Additional Information..........................................28
5.8 Payment of Assessments and Charges..............................28
5.9 Compliance with Laws............................................28
5.10 ERISA Information and Compliance................................28
5.11 Hazardous Substances Indemnification............................28
5.12 Further Assurances..............................................29
5.13 Fees and Expenses of Lender.....................................29
5.14 Indemnification of Lender.......................................30
5.15 Maintenance of Existence and Good Standing......................30
5.16 Maintenance of Tangible Property................................30
5.17 Maintenance of Insurance........................................31
5.18 Inspection of Tangible Property.................................31
5.19 Payment of Notes and Performance of Obligations.................31
5.20 Operation of Oil and Gas Properties.............................31
5.21 Performance of Designated Contracts.............................31
ARTICLE 6 - NEGATIVE COVENANTS OF BORROWER..................................31
6.1 Indebtedness; Contingent Obligations............................31
6.2 Loans and Advances..............................................31
6.3 Mortgages or Pledges of Assets..................................32
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6.4 Sales of Properties; Operations.................................32
6.5 Subsidiaries....................................................32
6.6 Changes in Capital Structure....................................32
6.7 Rental or Lease Agreements......................................32
6.8 Lines of Business...............................................32
6.9 Sale or Discount of Receivables.................................32
6.10 Dividends and Distributions.....................................32
6.11 Transactions With Affiliates....................................33
6.12 Negative Pledges................................................33
ARTICLE 7 - FINANCIAL COVENANTS.............................................33
7.1 Tangible Net Worth..............................................33
7.2 Current Ratio...................................................33
7.3 EBITDAX Ratio...................................................33
7.4 Funded Senior Debt to EBITDAX Ratio.............................33
ARTICLE 8 - EVENTS OF DEFAULT...............................................33
8.1 Enumeration of Events of Default................................33
8.2 Rights Upon Default.............................................35
ARTICLE 9 - MISCELLANEOUS...................................................35
9.1 Assignments; Participations.....................................35
9.2 Amendments and Waivers..........................................36
9.3 Survival of Representations, Warranties and Covenants...........36
9.4 Notices and Other Communications................................37
9.5 Parties in Interest.............................................37
9.6 No Waiver; Rights Cumulative....................................37
9.7 Survival........................................................37
9.8 Rights of Third Parties.........................................37
9.9 Controlling Agreement...........................................37
9.10 Integration.....................................................37
9.11 Jurisdiction and Venue..........................................38
9.12 Waiver of Rights to Jury Trial..................................38
9.13 Governing Law...................................................38
9.14 Counterparts....................................................38
9.15 No Joint Venture................................................38
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EXHIBITS
Exhibit IA Form of Promissory Note
Exhibit IB Form of Promissory Note
Exhibit II Form of Assignment and Acceptance
Exhibit III Form of Borrowing Request
Exhibit IV Form of Compliance Certificate
Exhibit V Disclosures
Exhibit VI Form of Borrower's Counsel Opinion
Exhibit VII [Reserved]
Exhibit VIII Form of Application and Agreement for Letter of Credit
(Doc. #59221)
Exhibit IX Description of Collateral
Exhibit X Form of Mortgage, Assignment of Productions, Security Agreement,
Fixture Filing and Financing Statement
Exhibit A Description of Leases
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is made and entered into as of
May 6, 2004, by and between PetroReal of Louisiana, L.L.C., a Louisiana limited
liability company ("Borrower") and Whitney National Bank, a national banking
association ("Lender").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, the terms "Agreement,"
"Borrower," and "Lender" shall have the meanings set forth above.
1.2 Additional Defined Terms. As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise
requires:
"Advance" shall mean any advance to or for the benefit of the
Borrower pursuant to the Line of Credit Facility.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under common control with the Borrower,
including each affiliate and subsidiary (within the meaning of the
regulations promulgated pursuant to the Securities Act of 1933, as
amended) of the Borrower.
"Agreement" shall mean this Credit Agreement, as amended, restated
or supplemented from time to time.
"Applicable Lending Office" shall mean the lending office of Lender
(or an affiliate of Lender) designated on the signature pages hereof or
such other office of Lender (or an affiliate of Lender) as Lender may from
time to time specify to the Borrower as the office by which its Loans of
such type are to be made and maintained.
"Applicable Period" shall mean, for any applicable interest period,
a period of 30, 60, 90 or 180 days as selected by the Borrower and notice
of which is given to the Lender no later than two Business Days prior to
the commencement of an interest period. If the Borrower fails to timely
select an interest period, the Applicable Period shall be 30 days.
"Applications and Agreements for Letters of Credit" means,
collectively, the applications and agreements for letters of credit on
forms issued by Lender and executed by the Borrower from time to time to
support the issuance of Letters of Credit.
"Assignment Agreement" shall mean an Assignment Agreement,
substantially in the form of Exhibit II, with appropriate insertions.
"Borrowing Base" shall mean, at any time, an amount equal to the sum
of the Mortgaged Properties, for loan purposes, as determined by the
Lender from time to time in accordance with Section 2.10.
"Borrowing Request" shall mean each written request, in
substantially the form attached hereto as Exhibit III, by the Borrower to
the Lender for a borrowing pursuant to Section 2.1, each of which shall:
(a) be signed by a Responsible Officer;
(b) specify the amount of Advance requested and the date of the borrowing
(which shall be a Business Day); and
(c) be delivered to the Lender no later than 11:00 a.m., Central Standard
or Daylight Savings Time, as the case may be, on the Business Day of the
requested borrowing or conversion.
"Business Day" shall mean a day other than a day when Lender is
authorized or required to close.
"Closing Date" shall mean May 6, 2004.
"Commitment Amount" shall mean the then outstanding amount of the
Term Loan plus the amount available under the Line of Credit Facility.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean May 31, 2006.
"Commitments" shall mean the Line of Credit Facility and the Term
Loan.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower within the meaning of Section 4001 of
ERISA.
"Compliance Certificate" shall mean each certificate substantially
in the form attached hereto as Exhibit IV, signed by any Responsible
Officer and furnished to the Lender from time to time in accordance with
the terms hereof.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "primary obligation") in any manner, whether
directly or indirectly, including any obligation of such Person,
regardless of whether such obligation is contingent, (a) to purchase any
primary obligation or any Property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the purchase or
payment of any primary obligation, or (ii) to maintain working or equity
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capital of any other Person in respect of any primary obligation, or
otherwise to maintain the net worth or solvency of any other Person, (c)
to purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
"Current Assets" shall mean all assets which would, in accordance
with GAAP, be included as current assets on a consolidated balance sheet
of the Borrower and its Subsidiaries as of the date of calculation, plus
unused availability under this Agreement.
"Current Liabilities" shall mean all liabilities which would, in
accordance with GAAP, be included as current liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries as of the date of
calculation, but excluding current maturities in respect of the Loans.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the
Prime Rate from time to time in effect plus three percent (3%), such rate
to be computed on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed (including the first day but excluding the
last day) during the period for which payable, but in no event shall such
rate exceed the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the
United States of America.
"EBITDAX" shall mean the Borrower's earnings before interest
expense, income taxes, depreciation, amortization and exploration
expenditures, calculated on a trailing four quarters basis, all as
determined in accordance with GAAP consistently applied; provided,
however, that prior to January 1, 2005, EBITDAX shall be calculated pro
rata, based on the number of months elapsed in 2004.
"Environmental Complaint" shall mean any written complaint, order,
directive, claim, citation, notice of investigation or other notice by any
Governmental Authority or any other Person with respect to (a) air
emissions, (b) spills, releases, or discharges to soils or any
improvements located thereon, surface water, groundwater or the sewer,
septic system or waste treatment, storage or disposal systems servicing
any of the Mortgaged Properties, (c) solid or liquid waste disposal, (d)
the use, generation, storage, transportation or disposal of any Hazardous
Substance, or (e) other environmental, health or safety matters affecting
of any of the Mortgaged Properties.
"Environmental Laws" shall mean (a) the following federal laws as
they may be cited, referenced, and amended from time to time: the Clean
Air Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Hazardous
Materials Transportation Act of 1986, the Occupational Safety and Health
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act of 1976, the Safe Drinking Water Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of the
Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted
pursuant to the above federal and state laws; and (d) any other equivalent
federal, state, or local statute or any requirement, rule, regulation,
code, ordinance, or order adopted pursuant thereto, including those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling, or release of Hazardous Substances.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
8.1.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, and member's equity, all of which, unless otherwise indicated,
shall be prepared in comparative form with respect to the corresponding
period of the preceding fiscal period.
"Funded Senior Debt" shall mean the total monetary amount owed to
the Lender under the Line of Credit Facility and the Term Loan, as well as
any other advances made to Borrower pursuant to Section 2.17.
"GAAP" shall mean generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality
or other political subdivision and any court, governmental department or
authority, commission, board, bureau, agency, arbitrator or
instrumentality thereof and any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or
related materials, or any substances defined as "contaminants," "hazardous
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substances," "hazardous materials," "hazardous wastes" or "toxic
substances" under any Environmental Law now or hereafter enacted or
promulgated by any Governmental Authority.
"Hedging Agreement" shall mean (a) any interest rate or currency
swap, rate cap, rate floor, rate collar, forward agreement, or other
exchange or rate protection agreement or any option with respect to any
such transaction and (b) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection agreement
relating to hydrocarbons or any option with respect to any such
transaction.
"Highest Lawful Rate" shall mean the maximum non usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable law by Lender, as such
laws are presently in effect or, to the extent allowed by applicable law,
as such laws may hereafter be in effect and which allow a higher maximum
non usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication,
(a) all liabilities as shown on the liability side of a balance sheet, (b)
all obligations of such Person evidenced by bonds, debentures, promissory
notes, or similar evidences of indebtedness, (c) all other indebtedness of
such Person for borrowed money, (d) all obligations of others, to the
extent any such obligation is secured by a Lien on the assets of such
Person (whether or not such Person has assumed or become liable for the
obligation secured by such Lien), and (e) all obligations under any
Hedging Agreement.
"Insolvency Proceeding" shall mean application whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the
United States, or any other jurisdiction.
"Investment" shall mean, as to any Person, any stock, bond, note or
other evidence of Indebtedness or any other security (other than current
trade and customer accounts) of, investment or partnership interest in or
loan to, such Person.
"Letter of Credit Issuer" means the Lender.
"Letters of Credit" means, collectively, all letters of credit
issued by a Lender pursuant to Article 2 for the account of the Borrower,
and "Letter of Credit" means, separately, any one of the Letters of
Credit.
"Letters of Credit Outstanding" means all undrawn amounts of Letters
of Credit plus all Reimbursement Obligations with respect to Letters of
Credit.
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"Lien" shall mean any lien, burden or encumbrance affecting
Borrower's title to a Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest
is based on common law, statute, or contract, and including the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt, or a lease, consignment or
bailment for security purposes and encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting a Property which secure an
obligation owed to, or a claim by, a Person other than the owner of such
Property (for purposes of this Agreement, the Borrower shall be deemed to
be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant
to which title to the Property has been retained by or vested in some
other Person for security purposes), and the filing or recording of any
financing statement or other security instrument in any public office.
"LIBOR" shall mean the rate per annum equal to the rate determined
by the Lender to be the offered rate that appears on the page of the
Telerate screen (or any successor thereto) that displays an average
British Bankers Association Interest Settlement Rate for deposits in
dollars (for delivery on the first day of such interest period) with a
term equivalent to such Applicable Period, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of such service, as determined by the
Lender from time to time for purposes of providing quotations of interest
rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such interest period, as the rate for dollar deposits
equivalent to such Applicable Period. In the event the rates referenced in
the preceding sentence are not available, the rate per annum determined by
the Lender as the rate of interest at which deposits in dollars for
delivery on the first day of such Applicable Period in same day funds in
the approximate amount of the Loan being made, continued or converted by
the Lender and with a term equivalent to such Applicable Period would be
offered by any of Citibank's, Bank of America's or JPMorgan Chase's London
Branch to major banks in the London interbank Eurodollar market at their
request at approximately 4:00 p.m. (London time) two Business Days prior
to the first day of such interest period.
"Limitation Period" shall mean any period while any amount remains
owing on any Note payable to Lender and during which interest on such
amount calculated at the applicable interest rate plus any fees or other
sums payable to Lender under any Loan Document and deemed to be interest
under applicable law, would exceed the amount of interest which would
accrue at the Highest Lawful Rate.
"Line of Credit Facility" shall be a non-revolving line of credit in
the Line of Credit Facility Amount. The Borrower shall also be entitled to
request Letters of Credit to be issued under the Line of Credit Facility.
"Line of Credit Facility Amount" shall be $1,000,000.00.
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"Line of Credit Note" shall mean that certain promissory note of the
Borrower payable to the Lender in the amount of the Line of Credit
Facility Amount in the form attached hereto as Exhibit IA, with
appropriate insertions, together with all renewals, extensions, for any
period, increases, and rearrangements thereof.
"Loan Balance" shall mean, at any time, the aggregate outstanding
principal balance of the Line of Credit Facility and the Term Loan, as the
case may be, at such time.
"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents, and all other documents, instruments and agreements now or
hereafter delivered pursuant to the terms of or in connection with this
Agreement, the Notes, or the Security Documents, and all renewals,
extensions, amendments, supplements and restatements thereof.
"Loans" shall mean the Line of Credit Facility and the Term Loan, as
well as any other advances made to Borrower pursuant to Section 2.17.
"Material Adverse Effect" shall mean any material and adverse effect
on (a) the assets, liabilities, financial condition, business, operations
or prospects of the Borrower, or the Borrower and its Subsidiaries on a
consolidated basis, (b) the ability of the Borrower to carry out its or
their business as conducted as of the date of this Agreement, or (c) the
ability of the Borrower to meet its obligations generally, or to meet its
obligations under the Loan Documents on a timely basis as provided
therein.
"Mortgaged Properties" means those properties, including Oil and Gas
Properties, as to which the Lender has a first priority security interest
in or mortgage lien on pursuant to the Security Documents to secure the
Loans.
"Multi employer Plan" shall mean a Plan which is a multi employer
plan as defined in Section 4001(a)(3) of ERISA.
"Notes" shall mean the Line of Credit Note and the Term Note.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the obligation of the Borrower to provide to
or reimburse the Lender for amounts payable, paid, or incurred under any
Security Document, (c) the obligations of the Borrower under the Security
Documents (d) the obligation of the Borrower for the payment of fees and
expenses pursuant to the Loan Documents, and (e) all other obligations and
liabilities of the Borrower to the Lender, now existing or hereafter
incurred, under, arising out of or in connection with any Loan Document,
and to the extent that any of the foregoing includes or refers to the
payment of amounts deemed or constituting interest, only so much thereof
as shall have accrued, been earned and which remains unpaid at each
relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold or other
interests, now existing or hereafter acquired, in or under mineral estates
or oil, gas and other liquid or gaseous hydrocarbon leases with respect to
Properties situated in the United States or offshore from any State of the
United States, including overriding royalty and royalty interests,
leasehold estate interests, net profits interests, production payment
interests and mineral fee interests, together with contracts executed in
connection therewith and all tenements, hereditaments, appurtenances and
Properties appertaining, belonging, affixed or incidental thereto.
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"Parent" shall mean PetroReal of America, Inc., a Nevada
corporation.
"Permitted Liens" shall mean (a) Liens for taxes, assessments or
other governmental charges or levies not yet delinquent or which (if
foreclosure, distraint, sale, or other similar proceedings shall not have
been initiated) are being contested in good faith by appropriate
proceedings diligently conducted, if appropriate reserves if required by
GAAP have been made therefor; (b) Liens in connection with workers'
compensation, unemployment insurance or other social security (other than
Liens created by Section 4068 of ERISA), old age pension or public
liability obligations which are not yet delinquent or which are being
contested in good faith by appropriate proceedings diligently conducted,
if appropriate reserves if required by GAAP have been made therefor; (c)
Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics,
workers, or materialmen, and construction or other similar Liens arising
by operation of law in the ordinary course of business or incident to the
construction or improvement of any Property in respect of obligations
which are not yet delinquent or which are being contested in good faith by
appropriate proceedings diligently conducted, if appropriate reserves if
required by GAAP have been made therefor; (d) Liens securing the purchase
price of equipment of the Borrower outside the ordinary course of
business, provided that (i) such Liens shall not extend to or cover any
other Property of the Borrower, and (ii) the aggregate unpaid purchase
price secured by all such Liens shall not exceed $50,000; (e) Liens on
assets, excluding Oil and Gas Properties and production and proceeds
therefrom, in an aggregate amount not to exceed $100,000; (f) Liens to
operators and non operators under joint operating agreements arising in
the ordinary course of business to secure amounts owing to operators,
which amounts are not yet delinquent or are being contested in good faith
by appropriate proceedings diligently conducted; (g) Liens under
production sales agreements, division orders, operating agreements and
other agreements customary in the oil and gas industry for processing,
producing, and selling hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment
therefor in the ordinary course of business; (h) the currently existing
Liens described on Exhibit V under the heading "Liens"; (i) easements,
rights of way, restrictions and other similar encumbrances, and minor
defects in the chain of title which are customarily accepted in the oil
and gas financing industry, none of which interfere with the ordinary
conduct of the business of the Borrower or materially detract from the
value or use of the Property to which they apply; (j) Liens created
pursuant to the Security Documents; and (k) "Permitted Encumbrances" as
defined in the Security Documents.
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"Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority, or any other form of
entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or any Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" shall mean the prime rate of interest as reported in
The Money Rates table of The Wall Street Journal, which Prime Rate shall
change upon each change in such prime rate and may not be the lowest
interest rate charged by Lender.
"Principal Office" shall mean the principal office of the Lender in
New Orleans, Louisiana presently located at ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal, or mixed, tangible or intangible.
"Reimbursement Obligation" shall mean at any time, the obligation of
the Borrower with respect to any Letter of Credit to reimburse the Lender
for amounts theretofore paid by the Lender pursuant to a drawing under a
Letter of Credit.
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal or discharge, except in accordance with a valid permit,
license, certificate or approval of the relevant Governmental Authority,
of any reportable quantity of Hazardous Substance into or upon (a) the
air, (b) soils or any improvements located thereon, (c) surface water or
groundwater, or (d) the sewer, septic system or waste treatment, storage
or disposal system servicing any of any of the Mortgaged Properties.
"Requirement of Law" shall mean, as to any Person, any applicable
law, treaty, ordinance, order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other Governmental Authority,
including rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or authorizations, in each case as
such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Report" shall mean each report provided by the Borrower
pursuant to Section 5.5.
"Responsible Officer" shall mean any member of Borrower or such
other authorized representative of the Borrower as designated from time to
time pursuant to written designation by the Borrower.
9
"Security Documents" means any and all deeds of trust, mortgages,
security agreements, assignments and pledge agreements pursuant to which
Borrower grants a security interest or lien to the Lender, including as of
the Closing Date Security Documents covering the Borrower's Oil and Gas
Properties in West Bay Field (Plaquemines Parish), Little White Lake Field
(Vermilion Parish) and Cloverly Field (Lafourche Parish).
"Subsidiary" shall mean, as to any Person, any corporation, limited
liability company, or other entity of which shares of stock (or ownership
interests) having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such entity are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person.
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action,
or any comparable state registries or list in any state of the United
States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower and its Subsidiaries prepared
on a consolidated basis and in accordance with GAAP, exclusive of
experimental or organization expenses, franchises, licenses, permits, and
other intangible assets, treasury stock, unamortized underwriters' debt
discount and expenses, and goodwill minus (b) total liabilities, as would
be reflected on a balance sheet of the Borrower prepared on a consolidated
basis and in accordance with GAAP.
"Taxes" shall have the meaning assigned to such term in Section
2.20.
"Term Loan" shall mean a $975,000.00 term loan to be advanced by
Lender to Borrower on the Closing Date.
"Term Loan Final Maturity" shall mean May 31, 2006.
"Term Note" shall mean that certain promissory note of the Borrower
payable to the Lender in the amount of the Term Loan in the form attached
hereto as Exhibit IB, with appropriate insertions, together with all
renewals, extensions, for any period, increases, and rearrangements
thereof.
1.3 References. References in this Agreement to Article, Section, or
Exhibit numbers shall be to Articles, Sections, and Exhibits of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinabove," "hereinafter," "hereinbelow," "hereof,"
"hereunder," and words of similar import shall be to this Agreement in its
entirety and not only to the particular Article, Section or Exhibit in which
such reference appears. References in this Agreement to "includes" or
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"including" shall mean "includes, without limitation," or "including, without
limitation," as the case may be. References in this Agreement to statutes,
sections, or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending, replacing, succeeding or
supplementing such statutes, sections, or regulations.
1.4 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.5 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular. Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative.
1.6 Incorporation of Exhibits. The Exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for all
purposes.
ARTICLE 2.
TERMS OF THE FACILITIES
2.1 Revolving Line of Credit.
(a) Upon the terms and conditions and relying on the representations and
warranties contained in this Agreement, Lender agrees to make Advances during
the Commitment Period to or for the benefit of the Borrower in an aggregate
principal amount not to exceed the Line of Credit Facility Amount. Loans shall
be made from time to time on any Business Day designated by the Borrower in its
Borrowing Request. The Line of Credit Facility shall not be activated until the
Borrower pays the Facility Fee required by Section 2.13. The minimum amount of
the Line of Credit Facility that can be activated is $100,000.00.
(b) Subject to the terms of this Agreement, during the Commitment Period, the
Borrower may repay and reborrow Advances under the Line of Credit Facility, as
the line of credit is revolving.
(c) Not later than 2:00 p.m., Central Standard or Daylight Savings Time, as the
case may be, on the date specified for each borrowing, Lender shall make the
Loan amount for that date available to the Borrower.
2.2 Term Loan. Upon the terms and conditions and relying on the representations
and warranties contained in this Agreement, on the Closing Date the Lender
agrees to make a Term Loan to or for the benefit of the Borrower in an aggregate
principal amount of NINE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100 DOLLARS
($975,000.00).
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2.3 Use of Loan Proceeds. Proceeds of the Term Loan shall be used by the
Borrower to acquire a twenty-five percent (25%) interest from ORX Resources,
Inc. in the Oil and Gas Properties in West Bay Field, Plaquemines Parish,
Louisiana. Proceeds of all Advances may be used to finance the seismic testing,
acquisition, operation, development and exploitation activities and ownership of
the Oil and Gas Properties located in Louisiana, and such other properties to
the extent approved in writing by the Lenders.
2.4 Interest. Interest on the Term Loan shall accrue and be payable at a
rate per annum equal to the LIBOR Rate plus two and one-half (2.5%) percent.
Interest on the Line of Credit Note shall accrue and be payable at a rate per
annum equal to the LIBOR Rate plus two and one-half (2.5%) percent. However, to
the extent that the Loan Balance is greater than 40% but less than 80% of the
value of the then current Borrowing Base, all Loans shall accrue and be payable
at a rate per annum equal to the LIBOR Rate plus three (3.0%) percent. Further,
to the extent that the Loan Balance is greater than 80% of the value of the then
current Borrowing Base, all Loans shall accrue and be payable at a rate per
annum equal to the LIBOR Rate plus three and one-half (3.5%) percent. The
Borrower may elect an Applicable Period for a LIBOR Rate by sending a written
notice thereof to the Lender. Notwithstanding the foregoing, interest on
past-due principal and, to the extent permitted by applicable law, past-due
interest shall accrue at the Default Rate and shall be payable upon demand by
the Lender at any time as to all or a portion of such interest.
2.5 Repayment of Loans and Interest.
(a) Accrued and unpaid interest on outstanding Loans shall be due and payable
monthly, in arrears, commencing June 30, 2004, and continuing on the last day of
each month thereafter while any of the Loans remains outstanding, the payment in
each instance to be the amount of interest which has accrued and remains unpaid
with respect to the balance of the Notes. Interest shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed.
(b) Principal payments on the Term Loan will be made monthly on the last day of
each calendar month commencing June 30, 2004, and continuing on the last day of
each month thereafter in an amount equal to $62,500.00, until the earlier of (i)
May 31, 2006, (ii) a change in the principal repayment amount required by
Section 2.10(b), or (iii) such time as all of the principal has been repaid.
(c) Upon Term Loan Final Maturity, the outstanding principal balance of the Term
Note together with all accrued and unpaid interest shall be due and payable.
(d) All unpaid Advances under the Line of Credit together with all accrued and
unpaid interest shall be due and payable on the Commitment Termination Date.
2.6 General Terms. Absent manifest error, the outstanding principal balance
of the Notes reflected in the records of Lender shall be deemed rebuttably
presumptive evidence of the principal amount owing on such Note; provided,
however, the liability for payment of principal and interest evidenced by the
Notes shall be limited to principal amounts actually advanced and outstanding
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pursuant to this Agreement and interest on such amounts calculated in accordance
with this Agreement.
2.7 Time, Place, and Method of Payments. All payments required pursuant to
this Agreement or the Notes shall be made without set off or counterclaim in
Dollars and in immediately available funds. All payments by the Borrower shall
be deemed received on the next Business Day following receipt if such receipt is
after 2:00 p.m., Central Standard or Daylight Savings Time, as the case may be,
on any Business Day, and shall be made to the Lender at the Principal Office.
Except as provided to the contrary herein, if the due date of any payment
hereunder or under any Note would otherwise fall on a day which is not a
Business Day, such date shall be extended to the next succeeding Business Day,
and interest shall be payable for any principal so extended for the period of
such extension. 2.8 Letters of Credit. Lender hereby agrees, subject to the
terms and conditions of this Agreement, upon request and for the account of
Borrower, to issue from time to time Letters of Credit under the Line of Credit
Facility upon delivery to Lender of an Application and Agreement for Letter of
Credit in the form attached as Exhibit VIII; provided, that the Letters of
Credit Outstanding shall not exceed the Line of Credit Facility Amount. No
Letter of Credit shall be issued by a Lender with an expiry date or payment date
occurring in excess of one year from the date of issuance or subsequent to the
fifth Business Day preceding the Commitment Termination Date. Notwithstanding
any of the foregoing, Lender shall not be required to issue any Letter of Credit
if the Loan Balance, when added to the face amount of any requested Letter of
Credit, exceeds the lesser of: (i) the Line of Credit Facility Amount, or (ii)
the Borrowing Base. 2.9 Reimbursement.
(a) The Borrower hereby unconditionally and irrevocably agrees to pay to the
Lender, pursuant to Section 2.5 of this Agreement, all amounts required to
pay all drafts drawn or purporting to be drawn under the Letters of Credit
and all reasonable expenses incurred by the Lender in connection with the
Letters of Credit and in any event and without demand to place in
possession of the Lender, sufficient funds to pay all debts and liabilities
arising under any Letter of Credit. The Borrower's obligations to pay
Lender under this Section 2.9, and the applicable Lender's right, as Letter
of Credit Issuer, to receive the same, shall be absolute, irrevocable and
unconditional and shall not be affected by any circumstance whatsoever. The
Borrower agrees that Lender may, in its sole discretion, accept or pay, as
complying with the terms of any Letter of Credit, any drafts or other
documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, attorney in
fact or other legal representative of a party who is authorized under such
Letter of Credit to draw or issue any drafts or other documents.
(b) Lender, as a Letter of Credit Issuer, agrees to give the Borrower written
notice of any request for a draw under a Letter of Credit, but failure to
give such notice shall not be deemed to release or affect in any manner
Borrower's obligation to immediately reimburse Lender for drawings made
under Letter of Credit.
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(c) The issuance by Lender of any and each Letter of Credit shall, in addition
to the conditions precedent set forth in Section 3.1 hereof, be subject to
the conditions that such Letter of Credit be in such form and contain such
terms as shall be reasonably satisfactory to the Lender consistent with the
then current practices and procedures of the Lender with respect to similar
letters of credit, and the Borrower shall have executed and delivered such
other instruments and agreements relating to such Letters of Credit as the
Lender shall have reasonably requested consistent with such practices and
procedures.
(d) Without duplication of Section 5.14 hereof, the Borrower hereby agrees to
defend, indemnify and hold harmless, the Lender, as the Letter of Credit
Issuer, from and against any and all claims and damages, losses,
liabilities, reasonable costs and expenses which the Lender may incur (or
which may be claimed against the Lender, as Letter of Credit Issuer) by any
Person by reason of or in connection with the issuance or transfer of or
payment or failure to pay under any Letter of Credit, unless such claims,
damages, losses or liabilities arise from the gross negligence or willful
misconduct of Lender. The provisions of this Section 2.9 (d) shall survive
repayment of the Obligations and expiration or termination of this
Agreement.
(e) The obligation of the Borrower to reimburse the Lender for drawings made
under Letters of Credit shall be absolute, unconditional and irrevocable
(absent the gross negligence or willful misconduct of Lender), and shall be
performed strictly in accordance with the terms of this Agreement and such
Letters of Credit and the related Applications and Agreements for Letters
of Credit, under the following circumstances:
(1) any lack of validity or enforceability of the Letter of Credit, the
obligation supported by the Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "Related Documents");
(2) any amendment or waiver of or any consent to or departure from all or
any of the Related Documents;
(3) the existence of any claim, setoff, defense or other rights which the
Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), Lender or any other
Person, whether in connection with the Loan Documents, the Related
Documents or any unrelated transaction;
(4) any breach of contract or other dispute between the Borrower and any
beneficiary or any transferee of a Letter of Credit (or any persons or
entities for whom such beneficiary or any such transferee may be
acting), Lender or any other Person;
(5) any draft, statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
14
(6) any delay, extension of time, renewal, compromise or other indulgence
or modification granted or agreed to by Agent, with or without notice
to or approval by the Borrowers in respect of any of Borrowers'
Obligations under this Agreement; or
(7) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
2.10 Borrowing Base Determinations.
(a) The Borrowing Base as of December 31, 2003, and the Closing Date is
acknowledged by the Borrower and the Lender to be $975,000.00 unless and until
the Borrowing Base has been redetermined. As of the Closing Date there is no
availability under the Line of Credit Facility.
(b) Lender may elect to redetermine the Borrowing Base at any time. In
addition, the Borrower, at its discretion, may request an additional
redetermination once during each calendar year. The Borrowing Base shall reduce
monthly by an amount based on the Lender's determination of the then current
engineering and commodity information relevant to the Oil and Gas Properties.
The amount of monthly reduction shall be determined by the Lender at least
semi-annually or such more frequent period as the Lender may reasonably
determine is necessary.
(c) Upon each determination of the Borrowing Base, the Lender shall notify
the Borrower orally (confirming such notice promptly in writing) of such
determination, and the Borrowing Base so communicated to the Borrower shall
become effective upon such oral notification and shall remain in effect until
the next subsequent determination of the Borrowing Base.
(d) The Borrowing Base shall represent the determination of the Lender
(acting in its sole discretion), in accordance with its then current procedures
for evaluating oil and gas reserves and other related assets at the time of
determination, of the value, for loan purposes, of the Mortgaged Properties
subject, in the case of any increase in the Borrowing Base, to the credit
approval processes of the Lender. In determining the Borrowing Base, the Lender
may consider such credit factors (including the assets, liabilities, cash flow,
price exposure, business, properties, prospects, management and ownership of
Borrower) as Lender in its sole discretion may deem significant. Furthermore,
the Borrower acknowledges that the Lender has no obligation to increase the
Borrowing Base and may reduce the Borrowing Base, in either case, as a result of
any circumstance and further acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lender. Lender shall provide Borrower a copy of its Borrowing
Base calculation upon request of Borrower.
2.11 Mandatory Prepayments. If at any time the Loan Balance exceeds the
lesser of the Commitment Amount or the Borrowing Base then in effect (a
"Deficiency"), the Borrower shall remedy the Deficiency within sixty days of
notice from the Lender of such occurrence, by either (i) prepaying the amount of
15
such excess for application on the Loan Balance or (ii) furnishing the Lender
additional collateral in the form of readily available funds to be held by
Lender in a controlled depositary account. In either case, the Borrower shall
provide a sufficient remedy for at least fifty (50%) percent of the Deficiency
within thirty days of notice from the Lender of such occurrence. In the event
that a mandatory prepayment is required under this Section and the Loan Balance
is less than the amount required to be prepaid, the Borrower shall repay the
entire Loan Balance.
2.12 Voluntary Prepayments. Subject to applicable provisions of this
Agreement, the Borrower shall have the right at any time or from time to time
without penalty to prepay Loans; provided, however, that (a) the Borrower shall
give the Lender notice of each such prepayment no less than one Business Day
prior to prepayment, and (b) no such prepayment shall serve to postpone the
repayment when due of any Obligation remaining unpaid.
2.13 Facility Fees. To induce the Lender to enter into this Agreement, the
Borrower shall pay to the Lender on the Closing Date a fee for the Term Loan in
an amount equal to one-half (1/2%) percent of the Term Loan. The Borrower shall
also pay to the Lender, an amount equal to one-half (1/2%) percent of the amount
of availability (or increase in availability, as the case may be) under the Line
of Credit that the Borrower elects to activate as of any time.
2.14 Letter of Credit Fee. To compensate the Lender for issuing a standby
letter of credit, the Borrower shall pay Lender an annual fee in the amount of
one and three quarters (1 3/4%) percent of each Letter of Credit issued by
Lender on behalf of Borrower. The letter of credit fee shall be payable in
quarterly equal installments commencing on the issuance date of an applicable
letter of credit.
2.15 Commitment Fee. To compensate the Lender for making funds available
under the Line of Credit Facility, the Borrower shall pay to the Lender a
commitment fee per annum equal to one-half (1/2%) percent times the average
daily amount by which the amount activated and available under the Line of
Credit Facility exceeds the Loan Balance under the Line of Credit Facility, from
the Closing Date until the Commitment Termination Date. The commitment fees
shall be due and payable quarterly in arrears on the last day of each June,
September, December and March during the term of this Agreement.
2.16 Engineering Fee. The Borrower shall pay Lender an engineering fee of
$5,000 on the Closing Date and $5,000 at the time of any redetermination of the
Borrowing Base
2.17 Loans to Satisfy Obligations of Borrower. The Lender may (and shall
endeavor to provide Borrower three (3) days notice prior thereto when reasonably
practicable under the circumstances), but shall not be obligated to, make Loans
for the benefit of the Borrower and apply proceeds thereof to the satisfaction
of any condition, warranty, representation, or covenant of the Borrower
contained in this Agreement or any other Loan Document. Such Loans shall be
evidenced by the Notes, shall bear interest at the Default Rate and shall be
payable upon demand.
2.18 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby assigns, and
pledges to the Lender and grants to the Lender a security interest in all funds
of the Borrower now or hereafter or from time to time on deposit with the Lender
16
with such interest of the Lender to be reassigned, and/or released at the
reasonable expense of the Borrower upon payment in full and complete performance
of all Obligations and the termination of the Commitments. All remedies as
secured party or assignee of such funds shall be exercisable by the Lender upon
the occurrence of any Event of Default, regardless of whether the exercise of
any such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof. Furthermore, the Borrower hereby grants to the Lender the
right, exercisable at such time as any Event of Default shall occur, of offset
or banker's lien against all funds of the Borrower now or hereafter or from time
to time on deposit with the Lender, regardless of whether the exercise of any
such remedy would result in any penalty or loss of interest or profit with
respect to any withdrawal of funds deposited in a time deposit account prior to
the maturity thereof. The security interests and rights granted pursuant to this
Section 2.18 shall be in addition to any rights afforded by the Security
Documents.
2.19 General Provisions Relating to Interest.
(a) It is the intention of the parties hereto to comply strictly with all
applicable usury laws. In this connection, there shall never be
collected, charged, or received on the sums advanced hereunder
interest in excess of that which would accrue at the Highest Lawful
Rate. The Borrower acknowledges that the Loans are for a commercial or
business purpose as contemplated by La. R.S. 9:3509.
(b) Notwithstanding anything herein or in the Notes to the contrary,
during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Notes shall be the Highest Lawful Rate, and
the obligation, if any, of the Borrower for the payment of fees or
other charges deemed to be interest under applicable law shall be
suspended. During any period or periods of time following a Limitation
Period, to the extent permitted by applicable laws, the interest rate
to be charged hereunder shall remain at the Highest Lawful Rate until
such time as there has been paid to the Lender (i) the amount of
interest in excess of that accruing at the Highest Lawful Rate that
the Lender would have received during the Limitation Period had the
interest rate remained at the otherwise applicable rate, and (ii) all
interest and fees that the Lender would otherwise have been entitled
to receive under this Agreement but for the effect of such Limitation
Period.
(c) If, under any circumstances, the aggregate amounts paid on the Notes
or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount
permitted if the Highest Lawful Rate were in effect, the Borrower
stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable laws, the
result of mathematical error on the part of the Borrower or the
Lender; and the Lender shall promptly refund the amount of such excess
(to the extent only of such interest payments in excess of that which
would have accrued and been payable on the basis of the Highest Lawful
Rate) upon discovery of such error by such party or notice thereof
17
from the Borrower. In the event that the maturity of any Obligation is
accelerated, by reason of an election by the Lender or otherwise, or
in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid which by law
a re deemed interest, if any, shall be credited by the Lender on the
principal amount of the Obligations, or if the principal amount of the
Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the proceeds of any advance hereunder
shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term hereof until
paid in full so that the actual rate of interest is uniform but does
not exceed the lower of (i) the Highest Lawful Rate or (ii) the
amounts otherwise due Lender pursuant to the terms of this Agreement
throughout the full term hereof.
2.20 Taxes. All payments made by the Borrower under this Agreement shall be
made free and clear of, and without reduction or withholding for or on account
of, present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority on the basis of any change
after the date hereof in any applicable treaty, law, rule, guideline or
regulations or in the interpretation or administration thereof, excluding, in
the case of the Lender, net income and franchise taxes or similar taxes imposed
on the Lender by the jurisdiction under the laws of which the Lender is
organized or any political subdivision or taxing authority thereof or therein,
or by any jurisdiction in which the Lender's lending office is located or any
political subdivision or taxing authority thereof or therein (all such non
excluded taxes, levies, imposts, deductions, charges or withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld from any
amounts payable to the Lender hereunder or under any other Loan Document, the
amounts so payable to the Lender shall be increased to the extent necessary to
yield to the Lender (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the other Loan Documents. Whenever any Taxes are payable by the
Borrower, upon the reasonable request of Lender and as promptly as possible
thereafter, the Borrower shall send to the Lender evidence showing payment
thereof. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender proof thereof, the Borrower
shall indemnify the Lender for any incremental taxes, interest or penalties that
may become payable by the Lender as a result of any such failure. The agreements
in this Section shall survive the termination of this Agreement and the payment
of all Obligations.
2.21 Deposit Accounts. Borrower will maintain all of its operating deposit
accounts with Lender.
ARTICLE 3.
CONDITIONS
3.1 Conditions Precedent to Loans. The Lender shall have no obligation to
make any Loan unless and until all matters incident to the consummation of the
transactions contemplated herein shall be reasonably satisfactory to the Lender,
and the Lender shall have received, reviewed, and approved the following
documents and other items, appropriately executed when necessary and, where
applicable, acknowledged by one or more authorized officers of the Borrower, all
in form and substance satisfactory to the Lender and dated, where applicable, of
even date herewith or a date prior hereto and acceptable to the Lender:
(a) multiple counterparts of this Agreement;
(b) the Line of Credit Note;
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(c) the Term Note;
(d) the Security Documents;
(e) copies of the Articles of Organization and all amendments thereto and the
Operating Agreement and/or bylaws and all amendments thereto of the Borrower,
accompanied by a certificate issued by a manager of the Borrower, to the effect
that each such copy is correct and complete;
(f) certificates of incumbency and signatures of all officers of each of the
entities referred to above who are authorized to execute Loan Documents, each
such certificate being executed by the secretary or an assistant secretary of
each such entity;
(g) unaudited Financial Statements of the Borrower as of March 31, 2004, and pro
forma Financial Statements of the Borrower as of December 31, 2004;
(h) certificates dated as of a recent date from the Secretary of State of the
State of Louisiana evidencing the existence or qualification and good standing
of Borrower;
(i) reserve data in a form and containing such information as may be reasonably
satisfactory to the Lender covering the Mortgaged Properties;
(j) the opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P., counsel to the Borrower, in
the form attached hereto as Exhibit VI, with such changes thereto as may be
approved by the Lender;
(k) the title opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel to the
Borrower, confirming that the Security Documents create first priority liens
(subject to only Permitted Liens) on a minimum of 90% of the present value of
the Mortgaged Properties; provided, however, that the Lender may accept
preliminary title opinions at Closing with final title opinions to be delivered
no later than 30 days following Closing;
(l) evidence of the insurance required by Section 5.17 hereof;
(m) repayment of any loan previously made by Lender or any other Person to
Borrower with respect of the Mortgaged Properties; and
(n) such other agreements, documents, instruments, opinions, certificates,
waivers, consents, and evidence as the Lender may reasonably request.
3.2 Conditions Precedent to Each Advance. The obligations of the Lender to
make each Advance are subject to the satisfaction of the following additional
conditions precedent:
(a) the Borrower shall have delivered to the Lender a Borrowing Request at
least the requisite time prior to the requested date for the relevant
Advance; and each statement or certification made in such Borrowing Request
shall be true and correct in all material respects on the requested date
for such Loan;
19
(b) no Default or Event of Default shall exist or will occur as a result of the
making of the requested Advance;
(c) if reasonably requested by the Lender, the Borrower shall have delivered
evidence reasonably satisfactory to the Lender substantiating any of the
matters contained in this Agreement which are necessary to enable the
Borrower to qualify for such Advance;
(d) the Lender shall have received, reviewed, and approved such additional
documents and items as described in Section 3.1 as may be reasonably
requested by the Lender with respect to such Advance;
(e) no Material Adverse Effect shall have occurred;
(f) each of the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
and shall be deemed to be repeated by the Borrower as if made on the
requested date for such Advance;
(g) neither the consummation of the transactions contemplated hereby nor the
making of such Advance shall contravene, violate, or conflict with any
Requirement of Law;
(h) the Lender shall have received the payment of all fees payable by the
Borrower hereunder and reimbursement for all reasonable fees and expenses
of counsel to the Lender for which the Borrower is responsible pursuant to
applicable provisions of this Agreement and for which invoices have been
presented as of or prior to the date of the relevant Advance; and
(i) all matters incident to the consummation of the transactions hereby
contemplated shall be satisfactory to the Lender.
3.3 Conditions Precedent to the Term Loan. The obligation of the Lender to
make the Term Loan is subject to the satisfaction of the following additional
conditions precedent:
(a) the Borrower shall have delivered to the Lender a Borrowing Request at
least the requisite time prior to the requested date for the Term Loan, and
each statement or certification made in such Borrowing Request shall be
true and correct in all material respects on the requested date for the
Term Loan;
(b) no Default or Event of Default shall exist or will occur as a result of the
making of the Term Loan;
(c) if reasonably requested by the Lender, the Borrower shall have delivered
evidence reasonably satisfactory to the Lender substantiating any of the
matters contained in this Agreement which are necessary to enable the
Borrower to qualify for the Term Loan;
(d) the Lender shall have received, reviewed, and approved such additional
documents and items as described in Section 3.1 as may be reasonably
requested by the Lender with respect to the Term Loan;
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(e) no Material Adverse Effect shall have occurred;
(f) each of the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects
and shall be deemed to be repeated by the Borrower as if made on the
requested date for the Term Loan;
(g) neither the consummation of the transactions contemplated hereby nor the
making of the Term Loan shall contravene, violate, or conflict with any
Requirement of Law;
(h) the Lender shall have received the payment of all fees payable by the
Borrower hereunder and reimbursement for all reasonable fees and expenses
of counsel to the Lender for which the Borrower is responsible pursuant to
applicable provisions of this Agreement and for which invoices have been
presented as of or prior to the date of the Term Loan;
(i) all matters incident to the consummation of the transactions hereby
contemplated shall be reasonably satisfactory to the Lender; and
(j) the Lender shall have received the third-party engineering report described
in Section 5.5, and the information contained in such report shall have
been satisfactory to the Lender.
3.4 Collateral. The Loans and all Obligations shall be secured by the
Security Documents. In connection therewith, the Borrower agrees to grant to the
Lender, and does hereby grant to the Lender, a first priority continuing
security interest in all of the Borrower's interests in the Mortgaged Properties
and all personal property directly related thereto including all accounts,
chattel paper, deposit accounts, securities accounts, software, commercial tort
claims, documents, equipment, fixtures, general intangibles, instruments,
inventory, investment property, payment intangibles, and supporting obligations,
and all proceeds of the foregoing. The Borrower agrees to take such actions, and
execute such documentation, as the Lender may request or require in order to
confirm the creation and perfection of the security interests required pursuant
to the terms of this Agreement. Upon the indefeasible payment of all the
Obligations, the Lender agrees, at the expense of the Borrower, to grant a
release of all liens and security interests granted pursuant to the provisions
of this Agreement. ARTICLE 4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to extend credit to
the Borrower, the Borrower represents and warrants to the Lender (which
representations and warranties shall survive the delivery of the Notes) that:
4.1 Existence of Borrower. The Borrower is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
state of its organization and is authorized to do business and in good standing
as a foreign limited liability company in every jurisdiction in which it owns or
leases real property or in which the nature of its business requires it to be so
qualified, except where the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
21
4.2 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder; the execution and delivery by the
Borrower of the Notes and the other Loan Documents; the repayment by the
Borrower of the Indebtedness evidenced by the Notes and interest and fees, if
any, provided in the Notes and the other Loan Documents are within the power of
the Borrower; have been duly authorized by all necessary action; and do not and
will not (a) require the consent of any Governmental Authority, (b) contravene
or conflict with any Requirement of Law or the Articles of Organization, bylaws,
or other organizational or governing documents of the Borrower, (c) contravene
or conflict with any indenture, instrument or other agreement to which the
Borrower is a party or by which the Property of the Borrower is bound or
encumbered, or (d) result in or require the creation or imposition of any Lien
upon any of the Properties of the Borrower other than as contemplated in the
Loan Documents.
4.3 Valid and Binding Obligations. This Agreement and the other Loan
Documents, when duly executed and delivered, will be legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, subject to any applicable bankruptcy, insolvency or
other laws of general application affecting creditors' rights and judicial
decisions interpreting any of the foregoing.
4.4 Scope and Accuracy of Financial Statements. The unaudited Financial
Statements of the Borrower as of March 31, 2004, and the unaudited pro forma
Financial Statements of the Borrower as of December 31, 2004, were based on
reasonable assumptions and information available to the Borrower. No event or
circumstance has occurred since March 31, 2004, that has resulted or could
reasonably be expected to result in a Material Adverse Effect to the Borrower.
4.5 Liabilities, Litigation and Restrictions. Except for the liabilities
shown in the Financial Statements provided to the Lender prior to the Closing
Date, the Borrower does not have any liabilities, direct or contingent, which
may reasonably be expected to result in a Material Adverse Effect. Except as
disclosed on Exhibit V hereto, no litigation or other action of any nature
affecting the Borrower is pending before any Governmental Authority or, to the
knowledge of the Borrower, threatened against or affecting any of the Borrower,
which might reasonably be expected to result in a Material Adverse Effect. To
the knowledge of the Borrower, no unusual or unduly burdensome restriction,
restraint or hazard that may reasonably be expected to result in a Material
Adverse Effect exists by contract, law, governmental regulation or otherwise
relative to the business or material Properties of the Borrower other than such
as relate generally to Persons engaged in the business activities similar to
those conducted by the Borrower.
4.6 Title to Properties. The Borrower will use the proceeds of the Term
Loan to acquire good and marketable title to all of the Mortgaged Properties,
free and clear of all Liens other than Permitted Liens. The Security Documents
when duly recorded in all appropriate jurisdictions will create first priority
liens on the properties described on Exhibit IX (and all after-acquired title
related thereto) subject only to Permitted Liens.
4.7 Compliance with Federal Reserve Regulations. The Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
22
the meaning of Regulations G, U or X of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any extension of credit under this
Agreement will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock. No transaction contemplated by the Loan Documents is in violation of any
regulations promulgated by the Board of Governors of the Federal Reserve System,
including Regulations G, O, T, U or X.
4.8 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any Governmental
Authority or other Person is required to authorize, or is otherwise required in
connection with, the valid execution and delivery by the Borrower of this
Agreement and the other Loan Documents or the repayment and performance by the
Borrower of the Obligations.
4.9 Compliance with Laws, Rules, Regulations and Orders. To the knowledge
of the Borrower, neither the business nor any of the activities of the Borrower,
as presently conducted, violates any Requirement of Law the result of which
violation could reasonably be expected to result in a Material Adverse Effect.
The Borrower possesses all licenses, approvals, registrations, permits and other
authorizations necessary to enable it to carry on its business in all material
respects as now conducted; all such licenses, approvals, registrations, permits
and other authorizations are in full force and effect; and the Borrower has no
reason to believe that it will be unable to obtain the renewal of any such
licenses, approvals, registrations, permits and other authorizations.
4.10 Proper Filing of Tax Returns and Payment of Taxes Due. The Borrower
has duly and properly filed all United States income tax returns and all other
tax returns which are required to be filed and has paid all taxes due, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been made. The charges and reserves on the books of the
Borrower, if any, with respect to taxes and other governmental charges are
adequate.
4.11 ERISA. The Borrower is in compliance in all material respects with the
applicable provisions of ERISA. The Borrower does not maintain any Plan. The
Borrower has not incurred nor does it expect to incur any material liability to
the Pension Benefit Guaranty Corporation or any Plan. The Borrower has no
obligation to contribute to, or has at any time contributed to, or had an
obligation to contribute to, any Multi-employer Plan.
4.12 Take-or-Pay; Gas Imbalances. Except as disclosed in writing to the
Lender prior to the Closing Date, the Borrower is not obligated in any material
respect by virtue of any prepayment made under any contract containing a "take
or pay" or "prepayment" provision or under any similar agreement to deliver any
material quantity of hydrocarbons produced from or allocated to any of its Oil
and Gas Properties at some future date without receiving full payment therefor
at the time of delivery. Except as disclosed in writing to the Lender prior to
the Closing Date, the Borrower has not produced gas, in any material amount,
subject to balancing rights of third parties or subject to balancing duties
under governmental requirements, except as to such matters for which the
Borrower has established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts or as to which
the Borrower would not suffer a Material Adverse Effect because of the exercise
of balancing rights or duties.
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4.13 Refunds. No orders of, proceedings pending before, or other
requirements of, the Federal Energy Regulatory Commission, the Louisiana
Conservation Commission, or any other Governmental Authority exist which could
result in the Borrower being required to refund any material portion of the
proceeds received or to be received from the sale of hydrocarbons constituting
part of its Oil and Gas Properties.
4.14 Casualties or Taking of Property. Except as disclosed to the Lender in
writing prior to the Closing Date, neither the business of the Borrower nor any
Mortgaged Property has been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition of taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God.
4.15 Locations of Business and Offices. The principal place of business and
chief executive office of the Borrower is located at the address for the
Borrower set forth on the signature pages hereof or at such other location as
the Borrower may have, with prior written notice, advised the Lender.
4.16 Environmental Compliance. Except as has been disclosed to the Lender
in writing prior to the Closing Date or which would not reasonably be expected
to have a Material Adverse Effect:
(a) no Property of any of the Borrower is currently on, or, to the best
knowledge of the Borrower after due inquiry made in accordance with good
commercial practices, has ever been on, any federal or state list of
Superfund Sites;
(b) except in compliance with all applicable Requirements of Law, no Hazardous
Substances have been generated, transported and/or disposed of by the
Borrower at a site which was, at the time of such generation,
transportation and/or disposal, or has since become, a Superfund Site;
(c) no Release of Hazardous Substances by any of the Borrower or, to the best
knowledge of the Borrower after due inquiry made in accordance with good
commercial practices, from, affecting or related to any of the Mortgaged
Properties has occurred; and
(d) no unresolved, open or pending Environmental Complaint has been received by
the Borrower.
4.17 Investment Company Act Compliance. The Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.18 Public Utility Holding Company Act Compliance. The Borrower is not a
"holding company," or a "subsidiary company" of a "holding company" or an
24
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
4.19 No Material Misstatements. No information, exhibit or report prepared
by or at the direction or with the supervision of the Borrower and furnished to
the Lender in connection with the negotiation and preparation of this Agreement
or any Loan Document contains any material misstatements of fact or omits to
state a material fact necessary to make the statements contained therein not
misleading as of the date made or deemed made.
4.20 Subsidiaries. The Borrower has no Subsidiaries.
4.21 Defaults. The Borrower is not in default now or at the time of any
borrowing, nor has any event or circumstance occurred which, but for the passage
of time or the giving of notice, or both, would constitute a default, under any
loan or credit agreement, indenture, mortgage, deed of trust, security agreement
or other instrument or agreement evidencing or pertaining to any Indebtedness of
the Borrower or under any other material agreement or instrument to which the
Borrower is a party or by which Borrower or its Property is bound, including
agreements and instruments relating to the Oil and Gas Properties, the effect of
which would be a Material Adverse Effect. No Default or Event of Default exists.
4.22 Maintenance of Properties. Borrower has maintained its Properties in
good and workable condition, ordinary wear and tear excepted, and in compliance
in all material respects with all applicable Requirements of Law, except to the
extent the failure to do so would not reasonably be expected to have a material
adverse effect.
4.23 Collateral. The Security Documents encumber Borrower's interest in all
leases attributable to any activity by Borrower in the fields, prospects or
areas described on Exhibit IX attached hereto. ARTICLE 5. AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower shall:
5.1 Maintenance and Access to Records. Keep adequate records in accordance
with its historical accounting practices, of all of its transactions so that at
any time, and from time to time, its financial condition may be readily
determined and, at the reasonable request of the Lender, make such records
available for inspection and permit the Lender to make and take away copies
thereof.
5.2 Quarterly Financial Statements. Deliver to Lender, on or before the
45th day after the end of each calendar quarter of the Borrower, the unaudited
Financial Statements of the Borrower, if any, as the end of such period and from
the beginning of such fiscal year to the end of such period, as applicable,
which unaudited Financial Statements shall be certified by a manager of the
Borrower as having been prepared in accordance with historical accounting
practices, and as a fair presentation of the condition of the Borrower, if any,
subject to changes resulting from normal year end audit adjustments.
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5.3 Annual Financial Statements of Borrower. Deliver to Lender, as soon as
available but not later than the 90th day after the close of each fiscal year of
the Borrower, a copy of the annual audited Financial Statements of the Borrower,
including a balance sheet, income statement, and supporting schedules. The
Borrower shall also furnish the Lender within 30 days after filing its federal
income tax returns, but not later than November 15 of each calendar year, copies
of such returns and supporting schedules as Lender may reasonably request.
5.4 Compliance Certificate. Concurrently with the furnishing of the
Financial Statements submitted pursuant to Section 5.2 and 5.3, provide the
Lender a Compliance Certificate.
5.5 Oil and Gas Reserve Reports.
(a) Deliver to the Lender on or before June 15, 2004 (and April 1 of each
succeeding year), a third-party engineering report in usual and customary
form and substance, certified by any nationally, or regionally, recognized
independent consulting petroleum engineers reasonably acceptable to the
Lender as fairly and accurately setting forth (i) the proven and producing,
shut in, behind pipe and undeveloped oil and gas reserves (separately
classified as such) attributable to the Mortgaged Properties as of June 30,
2004 (or April 30 of each succeeding year), (ii) the aggregate present
value of the future net income with respect to the Mortgaged Properties,
discounted at a stated per annum discount rate of proven and producing
reserves, and (iii) projections of the annual rate of production, gross
income and net income with respect to such proven and producing reserves.
(b) Deliver to the Lender no later than October 1 of each year during the term
of this Agreement, updated engineering reports in form and substance
satisfactory to the Lender prepared by or under the supervision of the
chief petroleum engineer of the Borrower evaluating the Mortgaged
Properties as of October 31 of the year for which such reserve reports are
furnished and updating information provided in the reports pursuant to
Section 5.5(a).
(c) Deliver to the Lender, at Lender's request, monthly production reports and
lease expense reports, all for the Oil and Gas Properties and in form and
substance reasonably satisfactory to the Lender.
(d) Deliver to the Lender such additional data concerning pricing, quantities
of production from the Oil and Gas Properties, purchasers of production,
daily drilling and workover reports, any material "take or pay,"
"prepayment" and gas balancing liabilities of the Borrower, and such other
information and engineering and geological data with respect thereto as the
Lender may reasonably request. To the extent relevant and practicable, all
such information shall set forth the interests of the Borrower in the Oil
and Gas Properties and separately designate the Oil and Gas Properties by
field.
5.6 Notices. Deliver to Lender, promptly upon any officer of the Borrower
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a manager of
the Borrower, or other authorized representative of the Borrower designated from
26
time to time pursuant to written designation by the Borrower delivered to the
Lender, advising the Lender of the occurrence of such event or circumstance and
the steps, if any, being taken by the Borrower with respect thereto:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation of the
Borrower, or any litigation, investigation or proceeding between the
Borrower and any Governmental Authority which, in either case, if not cured
or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving any of the Mortgaged Properties and
in which the amount involved is $50,000 or more and which is not covered by
insurance or in which material injunctive or similar relief is sought;
(d) the receipt by the Borrower of any Environmental Complaint or any formal
request from any Governmental Authority or other Person for information
(other than requirements for compliance reports) regarding any Release of
Hazardous Substances by the Borrower or from, affecting or related to any
Property of the Borrower or adjacent to any Property of the Borrower, to
the extent any of the same, could reasonably be expected to have a Material
Adverse Effect;
(e) any actual, proposed or threatened testing or other investigation by any
Governmental Authority or other Person concerning the environmental
condition of, or relating to, any Property of the Borrower or adjacent to
any Property of the Borrower following any allegation of a violation of any
Requirement of Law which could reasonably be expected to have a Material
Adverse Effect; (f) any Release of Hazardous Substances by the Borrower or
from, affecting or related to any Mortgaged Property which could reasonably
be expected to have a Material Adverse Affect;
(g) the violation of any Environmental Law or the revocation, suspension or
forfeiture of or failure to renew, any permit, license, registration,
approval or authorization which could reasonably be expected to have a
Material Adverse Effect;
(h) the institution by the Borrower or any of its Affiliates of any Multi
employer Plan or the withdrawal or partial withdrawal by the Borrower or
any of its Affiliates from any Multi employer Plan;
(i) the sale or other transfer of any interest in the Mortgaged Properties to
any Person other than (a) the sale of oil and gas production, (b) the
abandonment of Oil and Gas Properties that in the Borrower's judgment are
not, or are no longer, capable of producing hydrocarbons in paying
quantities, the farmout (or similar contractual arrangement) of Oil and Gas
Properties on terms deemed commercially reasonable between the Borrower and
a Non-Affiliate, or (c) the sale of Mortgaged Properties having a value of
$100,000 or less in the aggregate; and
27
(j) any other event or condition which could reasonably be expected to have a
Material Adverse Effect.
5.7 Additional Information. Furnish to the Lender, promptly upon the
request of the Lender, such additional financial or other information, including
income tax returns, concerning the assets, liabilities, operations and
transactions of the Borrower as the Lender may from time to time reasonably
request, certified as being true and correct by the entity furnishing the
information.
5.8 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a Lien against any of its Property, except any of
the foregoing being contested in good faith and as to which adequate reserves
have been established or unless failure to pay would not have a Material Adverse
Effect.
5.9 Compliance with Laws. Comply in all material respects with all
Requirements of Law, including (a) the Natural Gas Policy Act of 1978, as
amended, (b) Environmental Laws, and (c) all permits, licenses, registrations,
approvals and authorizations (i) related to any natural or environmental
resource or media located on, above, within, in the vicinity of, related to or
affected by any of its Property, (ii) required for the performance or conduct of
its operations, including OCS operator status, or (iii) applicable to the use,
generation, handling, storage, treatment, transport or disposal of Hazardous
Substances; and exercise all commercially reasonable efforts to cause all of its
employees, agents, contractors, subcontractors and future lessees (pursuant to
appropriate lease provisions), while such Persons are acting within the scope of
their relationship with the Borrower to comply with all applicable Requirements
of Law as may be necessary or appropriate to enable the Borrower or to so
comply.
5.10 ERISA Information and Compliance. Furnish to each Lender upon request,
copies of each annual and other report with respect to each Plan or any trust
created thereunder filed with the United States Secretary of Labor or the
Pension Benefit Guaranty Corporation; fund all current service pension
liabilities as they are incurred under the provisions of all Plans and Multi
employer Plans; and comply with all applicable provisions of ERISA.
5.11 Hazardous Substances Indemnification. INDEMNIFY AND HOLD LENDER AND
ALL OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS IN FACT AND AFFILIATES OF
LENDER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES,
LIABILITIES, FINES, PENALTIES, CHARGES, JUDICIAL PROCEEDINGS AND ORDERS,
JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND,
AND ALL COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING
ATTORNEYS' FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, FROM THE RELATIONSHIP ARISING OR THE RIGHTS OF LENDER UNDER THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT RELATING TO (A) THE PRESENCE OF ANY
HAZARDOUS SUBSTANCE ON, UNDER OR FROM THE PROPERTY OF THE BORROWER, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON
OR OFF THE PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF,
AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE OR ANY EMPLOYEES,
AGENTS, CONTRACTORS OR SUB CONTRACTORS OF THE BORROWER OR ANY PREDECESSOR IN
TITLE, OR ANY THIRD PERSONS AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTIES,
28
IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE AT ANY TIME
LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON
OR UNDER THE PROPERTY OF THE BORROWER, OR (D) ANY CONTAMINATION OF ANY PROPERTY
OR NATURAL RESOURCES ARISING IN CONNECTION WITH OR RESULTING FROM THE
GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCE BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR OR SUBCONTRACTOR OF
THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR
RELATIONSHIP WITH THE BORROWER, AS THE CASE MAY BE, IRRESPECTIVE OF WHETHER ANY
OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH REQUIREMENTS OF
LAW, INCLUDING ANY OF THE FOREGOING ARISING FROM NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, OF ANY LENDER OR THE LENDER OR ANY OF THEIR OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS IN FACT AND AFFILIATES. THE FOREGOING INDEMNITY
SHALL SURVIVE SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
5.12 Further Assurances. Promptly cure any defects, errors, or omissions in
the execution and delivery of any of the Loan Documents and all agreements
contemplated thereby, and upon notice, promptly execute and deliver to the
Lender all such other assurances and instruments as shall, in the reasonable
opinion of the Lender, be necessary to fulfill the terms of the Loan Documents.
5.13 Fees and Expenses of Lender. Upon request by the Lender, promptly
reimburse the Lender for all amounts reasonably expended, advanced or incurred
by the Lender in connection with the development, preparation and execution of
this Agreement, and the other Loan Documents and all amendments, restatements,
supplements and modifications hereto and thereto and the consummation of the
transactions contemplated hereby and thereby and all amounts reasonably
expended, advanced or incurred by the Lender to collect the Notes and enforce
the rights of the Lender under this Agreement and the other Loan Documents,
which amounts shall be deemed compensatory in nature and liquidated as to amount
upon notice to the Borrower by the Lender as applicable and which amounts will
include, but not be limited to, (a) attorneys' fees, (b) all court costs, (c)
fees of auditors and accountants, (d) investigation expenses, (e) fees and
expenses incurred in connection with the participation of the Lender as a member
of the creditors' committee in a case commenced under Title 11 of the United
States Code or other similar law of the United States, the State of Louisiana or
any other jurisdiction, incurred by the Lender in connection with the collection
of the Obligations, and (f) any and all search, registration, recording and
filing fees and any and all liabilities with respect to stamp, excise and other
taxes, together with interest at the LIBOR rate, calculated on the basis of a
year of 365 or 366 days, as the case may be, on each such amount from forty-five
(45) days after the date of notification to the Borrower that the same was
expended, advanced or incurred by the Lender until the date it is repaid to the
29
Lender. To the extent permitted under applicable laws, the obligations of the
Borrower under this Section shall survive the nonassumption of this Agreement in
a case commenced under Title 11 of the United States Code or other similar law
of the United States, the State of Louisiana or any other jurisdiction and be
binding upon the Borrower and any trustee, receiver or liquidator of the
Borrower appointed in any such case.
5.14 Indemnification of Lender. INDEMNIFY AND HOLD LENDER AND ALL OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS IN FACT AND AFFILIATES OF LENDER (EACH
SUCH PERSON AN "INDEMNITEE") HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING REASONABLE ATTORNEYS'
FEES AND DISBURSEMENTS) INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING
OUT OF, IN ANY WAY CONNECTED WITH, OR AS A RESULT OF (A) ANY CLAIM BY A PERSON
(WHO IS NOT AN AFFILIATE) ARISING FROM (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (ii) THE PERFORMANCE BY THE PARTIES TO
THE LOAN DOCUMENTS OF THEIR RESPECTIVE OBLIGATIONS THEREUNDER OR THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR (B) THE ENFORCEMENT OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (ALL THE FOREGOING IN THIS SECTION,
COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), INCLUDING INDEMNIFIED LIABILITIES
ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY INDEMNITEE;
PROVIDED THAT THE BORROWER SHALL HAVE NO OBLIGATION UNDER THIS SECTION TO ANY
INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES THAT ARE DETERMINED BY A
COURT OF COMPETENT JURISDICTION BY FINAL AND NON APPEALABLE JUDGMENT TO HAVE
RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR
FROM THE BREACH BY SUCH INDEMNITEE OF ITS OBLIGATIONS UNDER ANY LOAN DOCUMENT.
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE OBLIGATIONS OF THE BORROWER
UNDER THIS SECTION SHALL SURVIVE THE SATISFACTION OF ALL OBLIGATIONS, THE
TERMINATION OF THIS AGREEMENT AND THE NONASSUMPTION OF THIS AGREEMENT IN A CASE
COMMENCED UNDER TITLE 11 OF THE UNITED STATES CODE OR OTHER SIMILAR LAW OF THE
UNITED STATES, THE STATE OF LOUISIANA OR ANY OTHER JURISDICTION AND BE BINDING
UPON THE BORROWER AND ANY TRUSTEE, RECEIVER OR LIQUIDATOR OF THE BORROWER
APPOINTED IN ANY SUCH CASE.
5.15 Maintenance of Existence and Good Standing. Maintain its limited
liability company existence and maintain its qualification and good standing in
all jurisdictions wherein the Property now owned or hereafter acquired or the
business now or hereafter conducted necessitates same, except where the failure
to so maintain such qualification and good standing would not have a Material
Adverse Effect.
5.16 Maintenance of Tangible Property. Maintain all of its material
tangible Property in good repair and condition and make all necessary
replacements thereof and operate such Property in a good and workmanlike manner,
except to the extent that the failure to do so would not have a Material Adverse
Effect.
30
5.17 Maintenance of Insurance. Maintain, or cause to be maintained,
insurance with respect to the properties and business of the Borrower against
such liabilities, casualties, risks and contingencies and in such amounts as
Lender may reasonably require with companies reasonably acceptable to Lender,
including risk, hazard, general liability, loss of platform, pollution, Oil
Spill Financial Responsibility (OSFR) coverage and operator's extra expense
coverage, and furnish to the Lender, at the execution of this Agreement and at
the request of Lender thereafter, certificates evidencing such insurance. The
Lender agrees that if there is a casualty or other loss resulting in insurance
proceeds being paid to Lender, the Lender will deliver the insurance proceeds to
the Borrower for use in the Borrower's operations if the casualty or other loss
does not adversely affect the Borrower's operations.
5.18 Inspection of Tangible Property. Permit any authorized representative
of Lender, at the sole risk of such party and such authorized representatives,
to visit and inspect, audit, verify and check any tangible Property of the
Borrower, at Borrower's expense.
5.19 Payment of Notes and Performance of Obligations. Pay the Notes
according to the reading, tenor and effect thereof, as modified by this
Agreement, and pay and perform all Obligations.
5.20 Operation of Oil and Gas Properties. Develop, maintain and operate the
Mortgaged Properties in a prudent and workmanlike manner in accordance with
industry standards to the extent that the same are operated by Borrower, and to
the extent that Borrower is not the operator of a Mortgaged Property, the
Borrower shall exercise its rights in a commercially reasonable manner to cause
the operator thereof to develop, maintain and operate such Mortgaged Property in
a prudent workmanlike manner in accordance with industry standards.
5.21 Performance of Designated Contracts. Perform and observe in all material
respects all of its obligations under all material agreements and contracts of
such Person.
ARTICLE 6.
NEGATIVE COVENANTS OF BORROWER
So long as any Obligation remains outstanding or any Commitment exists,
without the prior written consent of the Lender, the Borrower will not:
6.1 Indebtedness; Contingent Obligations. Create, incur, assume or permit
to exist any Indebtedness or Contingent Obligations; provided, however, the
foregoing restrictions shall not apply to (i) unsecured accounts payable
incurred in the ordinary course of business, which are not unpaid in excess of
90 days beyond invoice date or are being contested in good faith and as to which
adequate reserves if required by GAAP have been made, and (ii) accrued expenses
reflecting amounts reasonably reserved.
6.2 Loans or Advances. Make or agree to make or allow to remain outstanding
any loans or advances to any Person; provided, however, the foregoing
restrictions shall not apply to (a) advances or extensions of credit in the form
of accounts receivable incurred in the ordinary course of business and upon
31
terms common in the industry for such accounts receivable, (b) loans, advances
or extensions of credit to suppliers or contractors under applicable contracts
or agreements in connection with oil and gas development activities of the
Borrower, and (c) contributions or loans to partnerships, joint ventures or
other entities in response to contributions not made by other participants
therein, to the extent necessary in the ordinary course of business or to
prevent a Material Adverse Effect.
6.3 Mortgages or Pledges of Assets. Create, incur, assume or permit to
exist, any Lien on any of the Mortgaged Properties; provided, however, the
foregoing restriction in this section shall not apply to Permitted Liens.
6.4 Sales of Properties; Operations. Sell, transfer or otherwise dispose of
any of the Mortgaged Properties, or cease operating the Mortgaged Properties, or
transfer any of the operations of the Mortgaged Properties to any other Person
except for sales, transfers or dispositions as to which Borrower is not required
to give Lender notice pursuant to Section 5.6 hereof or sales permitted by the
Security Documents.
6.5 Subsidiaries. Create, establish or acquire any Subsidiary.
6.6 Changes in Capital Structure. Enter into any transaction of
consolidation, merger or amalgamation unless the Borrower is the surviving
entity of any such consolidation, merger or amalgamation and no Default or Event
of Default exists or will occur as a result thereof; or liquidate, wind up or
dissolve or suffer any liquidation or dissolution.
6.7 Rental or Lease Agreements. Enter into any contract to rent or lease
any of the Mortgaged Properties other than in the ordinary course of business.
6.8 Lines of Business. Expand, on its own or through an Affiliate, into any
line of business other than (a) those in which the Borrower is engaged as of the
date hereof and (b) other lines of business related to the production of oil,
gas and other hydrocarbons; or permit any material change to be made in the
character of its business as conducted as of the date hereof.
6.9 Sale or Discount of Receivables. Except to minimize losses on bona fide
debts previously contracted, discount or sell with recourse, or sell for less
than the greater of the face or market value thereof, any of its notes
receivable or accounts receivable in excess of $25,000 in the aggregate.
6.10 Dividends and Distributions. Declare, pay or make, whether in cash or
other Property, any dividend or distribution on any membership interest in the
Borrower; or purchase, redeem or otherwise acquire, directly or indirectly, for
value or set apart in any way for redemption, retirement or other acquisition,
directly or indirectly, any of its membership interests now or hereafter
outstanding; return any capital to its members; or make any distribution
(whether by reduction of capital or otherwise) of its assets to its members if
such dividend or distribution would, on a pro-forma basis, place Borrower in
non-compliance with the terms of this Agreement, including but not limited to,
the financial covenants contained in Article 7 of this Agreement.
32
6.11 Transactions With Affiliates. Enter into any transaction with an
Affiliate that involves the Mortgaged Properties and that is either (i) not in
the ordinary course of business or (ii) inconsistent with Borrower's historical
practices.
6.12 Negative Pledges. Except for Liens granted to the Lender pursuant to
this Agreement, enter into or permit to exist any Lien on any assets or property
of the Borrower (other than Permitted Liens).
ARTICLE 7.
FINANCIAL COVENANTS
So long as any Obligation remains outstanding or any Commitment exists,
the Borrower shall comply with the following financial covenants and ratios.
7.1 Tangible Net Worth. The Borrower shall not permit Tangible Net Worth as
of the close of any fiscal quarter to be less than the sum of (i) amount equal
to ninety (90%) percent of Tangible Net Worth on Closing Date, plus (ii) an
amount equal to 50% of the cumulative consolidated quarterly net income of the
Borrower from May 2004 through the end of the Borrower's most recently ended
fiscal quarter, but excluding consolidated net income for any quarter in which
consolidated net income is not positive, plus (iii) an amount equal to 50% of
any advances or capital contributions by Parent to Borrower after Closing Date.
7.2 Current Ratio. The Borrower shall, at all times, maintain a ratio of
Current Assets to Current Liabilities of 1.0 to 1.0.
7.3 EBITDAX Ratio. The Borrower shall not permit, at any time, its ratio of
EBITDAX to interest expenses to be less than 2.5 to 1.0.
7.4 Funded Senior Debt to EBITDAX Ratio. The Borrower shall not permit, at
any time commencing on the first anniversary of achieving production in paying
quantities from the Mortgaged Properties, and continuing on a rolling (4)
quarters basis thereafter, its ratio of Funded Senior Debt to EBITDAX to exceed
1.0 to 1.0.
ARTICLE 8.
EVENTS OF DEFAULT
8.1 Enumeration of Events of Default. Any of the following events shall be
considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment when due of any
installment of principal or interest under this Agreement or any Note or any
fees or other sums payable hereunder or under any other Loan Document, including
any Security Document;
(b) Default shall be made by the Borrower in the due observance or performance
of any covenant in Articles 5 or 6 herein or any other material agreement set
forth in any of this Agreement or any other Loan Document and such default shall
continue for in excess of 30 days after the earlier of notice thereof by the
Lender to the Borrower or knowledge thereof by the Borrower;
33
(c) Any representation or warranty made by any of the Borrower in this Agreement
or any other Loan Document proves to have been untrue in any material respect
when made or deemed to have been made, or any representation, warranty,
statement (including Financial Statements), certificate or data furnished or
made by the Borrower to the Lender in connection herewith proves to have been
untrue in any material respect as of the date the facts therein set forth were
stated or certified unless the subject of the representation can be remedied and
is remedied within 30 days;
(d) Default shall be made by any of the Borrower in the payment or performance
of any material bond, debenture, note, security (as defined in the Securities
Act of 1933, as amended), or other material evidence of Indebtedness, or under
any credit agreement, loan agreement, indenture, promissory note, or similar
agreement or instrument executed in connection with any of the foregoing, and
such default shall remain unremedied for in excess of the period of grace, if
any, with respect thereto, and the effect of such default is to cause, or permit
the holders of such material Indebtedness or security to cause, the acceleration
of the maturity of any such Indebtedness, provided, however, that the same shall
not apply with respect to matters which the Borrower is contesting in good faith
by appropriate proceedings and has established adequate reserves in accordance
with GAAP with respect thereto;
(e) The Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, or liquidator of it or all or a substantial part of its
assets, (ii) file a voluntary petition commencing an Insolvency Proceeding,
(iii) make a general assignment for the benefit of creditors, (iv) be unable, or
admit in writing its inability, to pay its debts generally as they become due,
or (v) file an answer admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(f) An order, judgment or decree shall be entered against the Borrower by any
court of competent jurisdiction or by any other duly authorized authority, on
the petition of a creditor or otherwise, granting relief in any Insolvency
Proceeding against the Borrower or approving a petition seeking reorganization
or an arrangement of its debts or appointing a receiver, trustee, conservator,
custodian, or liquidator of it or all or any substantial part of its assets, and
such order, judgment, or decree shall not be dismissed or stayed within 30 days;
(g) The Borrower shall have (i) concealed, removed, or permitted to be concealed
or removed, any material part of its Property, with intent to hinder, delay, or
defraud its creditors or any of them, (ii) made or suffered a transfer of any
material portion of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance, or similar law and not otherwise permitted under the
provisions of this Agreement, or (iii) made any material transfer of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid;
(h) The levy against any material portion of the Property of any of the Borrower
or any execution, garnishment, attachment, sequestration, or other writ or
similar proceeding which is not permanently dismissed or discharged within 60
days;
(i) A final and non-appealable order, judgment, or decree shall be entered
against Borrower for money damages and/or Indebtedness due in an amount in
34
excess of $100,000 which excess is not adequately covered by insurance and such
order, judgment, or decree shall not be dismissed or stayed within 60 days; or
(j) Lender determines, in its reasonable discretion, that a material adverse
change has occurred in the financial condition of Borrower, and after notice of
same, the Borrower fails to furnish sufficient additional Collateral to the
Lender to protect the Lender's interest in the Loan.
8.2 Rights Upon Default.
(a) Upon the occurrence of any Event of Default specified in Sections 8.1 (e) or
(f), immediately and without notice, (i) all Obligations shall become due and
payable, without presentment, demand, protest, notice of protest or dishonor,
notice of intent to accelerate maturity, notice of acceleration of maturity or
other notice of any kind, all of which are expressly waived by the Borrower,
(ii) the Commitments shall immediately terminate unless and until the Lender
shall reinstate the same in writing, and (iii) Lender is hereby authorized at
any time and from time to time, without notice to the Borrower (any such notice
being expressly waived by the Borrower), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by
Lender of the Borrower and any and all other indebtedness at any time owing by
Lender to or for the credit or account of the Borrower against any and all
Obligations.
(b) Upon the occurrence of any other Event of Default and after the expiration
of any cure or notice period, (i) the Lender may declare all Obligations
immediately due and payable, without presentment, demand, protest, notice of
protest or dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity or other notice of any kind, all of which are hereby
expressly waived by the Borrower, (ii) the Lender may declare the Commitments
terminated, whereupon the Commitments shall immediately terminate unless and
until the Lender shall reinstate the same in writing, and (iii) the Lender is
hereby authorized at any time and from time to time, without notice to the
Borrower (any such notice being expressly waived by the Borrower), to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) held by the Lender and any and all other indebtedness at any time
owing by the Lender to or for the credit or account of the Borrower against any
and all Obligations.
(c) In addition to the foregoing, upon the occurrence of any Event of Default
and after the expiration of any cure or notice period, Lender in accordance with
the provisions of this Agreement may exercise any or all of their rights and
remedies provided by law (including all rights of a secured party under the
Uniform Commercial Code) or pursuant to the Loan Documents.
ARTICLE 9.
MISCELLANEOUS
9.1 Assignments; Participations.
(a) The Borrower may not assign any of its rights or obligations under any Loan
Document without the prior consent of the Lender.
35
(b) Lender may not assign all or a portion of its rights and obligations under
this Agreement without the Borrower's prior consent. Any permitted consent shall
be pursuant to an Assignment Agreement.
(c) The Lender shall send to the Borrower a copy of such executed Assignment
Agreement. Promptly following receipt of such executed Assignment Agreement, the
Borrower shall execute and deliver new Notes to the assignee and, if applicable,
the assignor, in accordance with their respective interests, whereupon the prior
Notes of the assignor and, if applicable, the assignee, shall be cancelled and
returned to the Borrower.
(d) If consented to by Borrower, Lender may transfer, grant, or assign
participations in all or any portion of its interests hereunder to any Person
pursuant to this Section 9.1(d), provided that Lender shall remain bound for all
purposes of this Agreement. In the case of any such permitted participation, the
participant shall not have any rights under any Loan Document, the rights of the
participant in respect of such participation to be against the Lender as set
forth in the agreement with Lender creating such participation, and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation.
(e) The Lender may furnish any information concerning the Borrower in the
possession of the Lender from time to time to any permitted assignees and
participants and, upon Borrower's prior written consent, to any prospective
assignees and participants.
(f) Notwithstanding anything in this Section to the contrary and without any
consent of Borrower, Lender may assign and pledge all or any of its Notes or any
interest therein to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
System and/or such Federal Reserve Bank. No such assignment or pledge shall
release the Lender from its obligations hereunder.
(g) Notwithstanding any other provisions of this Section, no transfer or
assignment of the interests or obligations of Lender or grant of participations
therein shall be permitted if such transfer, assignment, or grant would require
the Borrower to file a registration statement with the Securities and Exchange
Commission or any successor Governmental Authority or qualify the Loans under
the "Blue Sky" laws of any state.
9.2 Amendments and Waivers. Neither this Agreement nor any of the other Loan
Documents nor any terms hereof or thereof may be amended, supplemented or
modified except in writing and executed by Borrower and Lender. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
9.3 Survival of Representations, Warranties and Covenants. All representations
and warranties of the Borrower and all covenants and agreements herein made
shall survive the execution and delivery of the Notes and this Agreement and
shall remain in force and effect so long as any Obligation remains outstanding
or any Commitment exists.
36
9.4 Notices and Other Communications. Except as to oral notices expressly
authorized herein, which oral notices shall be confirmed in writing, all
notices, requests, and communications hereunder shall be in writing (including
by telecopy). Unless otherwise expressly provided herein, any such notice,
request, demand, or other communication shall be deemed to have been duly given
or made when delivered by hand, or, in the case of delivery by mail, two
Business Days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed to
each party at the "Address for Notices" specified below its name on the
signature pages hereof or at such other address as shall be designated by such
party in a properly given notice; provided, that notice, request or
communication to or upon the Lender pursuant to Section 2.1 shall not be
effective until actually received.
9.5 Parties in Interest. All covenants and agreements herein contained by
or on behalf of the Borrower and the Lender shall be binding upon and inure to
the benefit of the Borrower or the Lender, as the case may be, and their
respective legal representatives, successors and assigns.
9.6 No Waiver; Rights Cumulative. No course of dealing on the part of Lender or
the officers or employees of the Lender, nor any failure or delay by the Lender
with respect to exercising any of their rights, powers or privileges under this
Agreement or any other Loan Document shall operate as a waiver thereof. The
rights and remedies of the Lender under this Agreement and the other Loan
Documents shall be cumulative, and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy. No
making of a Loan shall constitute a waiver of any of the covenants or warranties
of the Borrower contained herein or of any of the conditions to the obligation
of the Lender to make other Loans. In the event the Borrower is unable to
satisfy any such covenant, warranty or condition, no such Loan shall have the
effect of precluding the Lender from thereafter declaring such inability to be
an Event of Default as hereinabove provided.
9.7 Survival. In the event any one or more of the provisions contained in this
Agreement or any other Loan Document shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof or of any other
Loan Document.
9.8 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Lender, the Borrower, and no other Person
shall have standing to require satisfaction of such provisions in accordance
with their terms or be entitled to assume that the Lender will refuse to make
Loans in the absence of strict compliance with any or all of such provisions;
and any or all of such provisions may, subject to the provisions of Section 9.2
as to the rights of the Lender, be freely waived in whole or in part by the
Lender at any time if in its sole discretion it deems it advisable to do so.
9.9 Controlling Agreement. In the event of a conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control.
9.10 Integration. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF. THIS AGREEMENT SUPERSEDES ANY
37
PRIOR AGREEMENT AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO
THE SUBJECT HEREOF. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
9.11 Jurisdiction and Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING
DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, IN COURTS HAVING SITUS IN
ORLEANS PARISH, LOUISIANA. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN ORLEANS PARISH, LOUISIANA, AND
HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR
VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS
SECTION.
9.12 Waiver of Rights to Jury Trial. THE BORROWER AND THE LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR
OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF
ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
9.13 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE CONTRACTS
MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF LOUISIANA WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW.
9.14 Counterparts. For the convenience of the parties, this Agreement may be
executed in multiple counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which together shall constitute one and the same agreement.
9.15 No Joint Venture. Nothing in this Agreement shall be construed to create a
joint venture, partnership or other collaboration between and among the parties
hereto.
[SIGNATURE PAGES FOLLOW]
38
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first above written.
BORROWER
PetroReal of Louisiana, L.L.C.,
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Manager
Address for Notices:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with copies to:
M. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, III, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
WHITNEY NATIONAL BANK, as Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
39
EXHIBIT IA
FORM OF PROMISSORY NOTE
$1,000,000.00..... New Orleans, Louisiana
Date: May 6, 2004
FOR VALUE RECEIVED and without grace, the undersigned ("Maker") promises
to pay to the order of WHITNEY NATIONAL BANK ("Payee"), at its main office, in
New Orleans, Louisiana, the sum of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), or so much thereof as may be advanced against this Note
pursuant to the Credit Agreement dated as of May 6, 2004, by and between Maker
and Whitney National Bank (as amended, restated or supplemented from time to
time, the "Credit Agreement"), together with interest at the rates and
calculated as provided in the Credit Agreement. The indebtedness evidenced by
this Note, both principal and interest, is payable as provided in the Credit
Agreement.
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
Lender to accelerate the maturity of all amounts due hereon. Capitalized terms
used but not defined in this Note shall have the meanings assigned to such terms
in the Credit Agreement.
This Note is the Line of Credit Note as defined in the Credit Agreement.
This note matures on May 31, 2006.
The provisions of this Note may not be waived or modified except in
writing, signed by Payee. No failure or delay of Payee in exercising its rights
shall be construed as a waiver. If any provision of this Note shall be held to
be legally invalid or unenforceable by any court of competent jurisdiction, all
remaining provisions of this Note shall remain in full force and effect.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
LOUISIANA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW).
PetroReal of Louisiana, L.L.C.,
By:
---------------------------------
Name:
-------------------------
Title:
------------------------------
40
EXHIBIT IB
FORM OF PROMISSORY NOTE
$975,000.00 New Orleans, Louisiana
Date: May 6, 2004
FOR VALUE RECEIVED and without grace, the undersigned ("Maker") promises
to pay to the order of WHITNEY NATIONAL BANK ("Payee"), at its main office, in
New Orleans, Louisiana, the sum of NINE HUNDRED SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($975,000.00), together with interest at the rates and calculated as
provided in the Credit Agreement (as defined below). The indebtedness evidenced
by this Note, including both principal and interest, is payable as provided in
the Credit Agreement dated as of May 6, 2004, by and between Maker and Whitney
National Bank (as amended, restated or supplemented from time to time, the
"Credit Agreement").
Reference is hereby made to the Credit Agreement for matters governed
thereby, including, without limitation, certain events which will entitle the
Lender to accelerate the maturity of all amounts due hereon. Capitalized terms
used but not defined in this Note shall have the meanings assigned to such terms
in the Credit Agreement.
This Note is the Term Note as defined in the Credit Agreement. This note
matures on May 31, 2006.
The provisions of this Note may not be waived or modified except in
writing, signed by Payee. No failure or delay of Payee in exercising its rights
shall be construed as a waiver. If any provision of this Note shall be held to
be legally invalid or unenforceable by any court of competent jurisdiction, all
remaining provisions of this Note shall remain in full force and effect.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF
LOUISIANA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW).
PetroReal of Louisiana, L.L.C.,
By:
---------------------------------
Name:
-------------------------
Title:
------------------------------
41
EXHIBIT II
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT
Reference is made to the Credit Agreement, dated as of May 6, 2004 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), between PetroReal of Louisiana, L.L.C., a Louisiana limited
liability company ("Borrower"), and Whitney National Bank ("Lender").
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
1. _________________ (the "Assignor") sells and assigns, without recourse,
to _______________________ (the "Assignee"), and the Assignee hereby purchases
and assumes, without recourse, from the Assignor, effective as of the Effective
Date set forth below, the interests set forth below (the "Assigned Interest") in
the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the percentages and amounts set forth on the reverse hereof
of (a) the Commitments of the Assignor on the Effective Date and (b) the Loans
and Obligations owing to the Assignor that are outstanding on the Effective
Date. The Assignee hereby acknowledges receipt of a copy of the Credit
Agreement. From and after the Effective Date (a) the Assignee shall be a party
to and be bound by the provisions of the Credit Agreement and, to the extent of
the interests assigned by this Assignment, have the rights and obligations of
the Lender thereunder and under the Loan Documents and (b) the Assignor shall,
to the extent of the interests assigned by this Assignment, relinquish its
rights and be released from its obligations under the Credit Agreement (and in
the event that this Assignment covers all or the remaining portion of the
Assignor's rights and obligations under the Credit Agreement, the Assignor shall
cease to be a party thereto but shall continue to be entitled to the benefits of
Sections 2.18, 5.11, 5.14, and 9.8 thereof, as well as to any fees accrued for
its account and not yet paid).
2. This Agreement and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Louisiana.
Date of Assignment:
Legal Name of Assignee:
Legal Name of Assignor:
Assignee's Address for Notices:
Effective Date of Assignment (may not be fewer than five Business Days
after the Date of Assignment):
42
Commitment Principal Amount Assigned
Loans:
Loan Commitments:
The terms set forth above are agreed to:
[ ]
-----------------------
as Assignor,
By:
-------------------------------
Name:
-------------------------
Title:
------------------------------
[ ]
-----------------------
as Assignee,
By:
---------------------------------
Name:
-------------------------
Title:
------------------------------
43
EXHIBIT III
FORM OF BORROWING REQUEST
[Date]
Whitney National Bank
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Credit Agreement dated as of May 6, 2004, between PetroReal of
Louisiana, L.L.C. and Whitney National Bank (as amended, restated
or supplemented from time to time, the "Credit Agreement").
Ladies and Gentlemen:
The undersigned, being the duly authorized manager of PetroReal of
Louisiana, L.L.C., hereby makes the requests indicated below:
1. Advances
(a) Aggregate amount of new Advances to be $ :
(b) Requested funding date is , 200__.
(c) Applicable Period for LIBOR:
The undersigned certifies that [s]he is the [Manager] of PetroReal of
Louisiana, L.L.C., and that as such [s]he is authorized to execute this
certificate on behalf of the Borrower. The undersigned further certifies,
represents and warrants on behalf of the Borrower that (a) the Borrower is
entitled to receive the requested borrowing, continuation or conversion under
the terms and conditions of the Credit Agreement, (b) no Default or Event of
Default exists as of the date hereof or will occur as a result of the requested
borrowing, continuation or conversion, (c) the representations and warranties
contained in the Loan Documents are true and correct, and (d) the information
set forth below is true and correct:
(i) The Loan Balance as of the date hereof is $___________; and
(ii) The sum of the Loan Balance and the amount of any new Loan
requested herein is $________________.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
44
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
[Date]
Whitney National Bank
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Credit Agreement dated as of May 6, 2004, between PetroReal of
Louisiana, L.L.C. and Whitney National Bank (as amended, restated
or supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as the duly authorized manager of PetroReal of Louisiana, L.L.C.,
hereby certifies to you, as Lender, the following information as true and
correct as of the date hereof or for the period indicated, as the case may be,
to wit:
1. A review of the activities of the Borrower has been made under the
supervision of the undersigned with a view to determining whether the Borrower
has fulfilled all of its obligations under the Credit Agreement and the other
Loan Documents.
[2. To the best knowledge of the undersigned, no Default or Event of
Default exists or has occurred since the date of our previous certification, if
any, to you.]
[2. To the best knowledge of the undersigned, the following Defaults or
Events of Default exist or have occurred since the date of our previous
certification, if any, to you, and the actions set forth below are being taken
to remedy such circumstances:]
3. To the best knowledge of undersigned, no Material Adverse Effect has
occurred since the date of the Financial Statements dated as of _______________.
4. The Tangible Net Worth as of the close of the fiscal quarter ended
____________, 200__ is (or is not) less than the sum of (i) an amount equal to
ninety (90%) percent of Tangible Net Worth on Closing Date (or $_________), plus
(ii) an amount equal to 50% of the cumulative consolidated quarterly net income
of the Borrower from May 2004 through the end of the Borrower's most recently
ended fiscal quarter, but excluding consolidated net income for any quarter in
which consolidated net income is not positive, plus (iii) an amount equal to 50%
of any advances or capital contributions by Parent to Borrower after Closing
Date.
5. The Borrower has (or has not) maintained a ratio of Current Assets
($_________) to Current Liabilities ($__________) of 1.0 to 1.0.
45
6. The ratio of the Borrower's EBITDAX ($__________) to interest expenses
($__________) is (or is not) less than 2.5 to 1.0.
[7. The Borrower's ratio of Funded Senior Debt ($__________) to EBITDAX
($__________) did (or did not) exceed 1.0 to 1.0.] *
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
* See Section 7.4 of the Credit Agreement for effective date of this covenant.
46
EXHIBIT V
DISCLOSURES
None.
47
EXHIBIT VI
FORM OF BORROWER'S COUNSEL OPINION
1. The Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of Louisiana.
2. The Borrower has all corporate power and authority to own the
properties and assets it purports to own and to perform all of its obligations
under the Credit Agreement.
3. The Loan Documents have been duly executed and delivered by the
Borrower and constitute the valid, legal and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and except that we render no opinion with respect to the
effect or availability of rules of law governing specific performance,
injunctive relief or other equitable remedies (regardless of whether any such
remedy is considered in a proceeding at law or in equity).
4. The execution, delivery and performance of and compliance by the
Borrower with the Loan Documents does not breach or violate: (a) any provision
of any constituent documents, or (b) to the best of our knowledge, any law,
regulation, rule or administrative regulation normally applicable to the
transactions of the type contemplated by the Loan Agreement and applicable to
the Borrower or any judgment, decree, injunction or order applicable to the
Borrower.
5. Except as set forth in the Credit Agreement, no consent, approval,
authorization of or designation, declaration or filing with any governmental
authority is required in connection with the valid execution, delivery and
performance by Borrower of the Loan Documents.
48
EXHIBIT VII
[RESERVED]
49
EXHIBIT VIII
FORM OF APPLICATION AND AGREEMENT FOR LETTER OF CREDIT
50
EXHIBIT IX
DESCRIPTION OF COLLATERAL
51
EXHIBIT X
FORM OF MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
FROM
PETROREAL OF LOUISIANA, L.L.C.
TO
WHITNEY NATIONAL BANK
(Taxpayer I.D. No. ▇▇-▇▇▇▇▇▇▇)
Dated: May 6 , 2004
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 MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS), AND THE
ACCOUNTS RELATED THERETO, WHICH WILL BE FINANCED AT THE WELLHEADS OR MINEHEADS
OF THE ▇▇▇▇▇ OR MINES LOCATED ON THE PROPERTIES DESCRIBED IN SECTION 1.1 OF THIS
INSTRUMENT. THIS INSTRUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES ON
THE REAL PROPERTY DESCRIBED HEREIN. THIS INSTRUMENT IS TO BE FILED FOR RECORD,
AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES
REFERENCED IN EXHIBIT A HERETO AND SUCH FILING SHALL SERVE, AMONG OTHER
PURPOSES, AS A FIXTURE FILING.
THIS INSTRUMENT SECURES AN OBLIGATION THAT MAY INCREASE OR DECREASE FROM TIME TO
TIME.
WHEN RECORDED OR FILED RETURN TO: THIS DOCUMENT PREPARED BY:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
Attention: Sterling ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
52
MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT,
AND FINANCING STATEMENT
FROM
PETROREAL OF LOUISIANA, L.L.C.
IN FAVOR OF
WHITNEY NATIONAL BANK
(Taxpayer I.D. No. ▇▇-▇▇▇▇▇▇▇)
BE IT KNOWN, that on this 6th day of May , 2004, before the undersigned
notaries public, duly commissioned and qualified and in the presence of the
undersigned competent witnesses, came and appeared the Mortgagor (as hereinafter
defined) and the Lender (as hereinafter defined) who enter into this MORTGAGE,
ASSIGNMENT, SECURITY AGREEMENT, AND FINANCING STATEMENT (this "Mortgage") on the
following terms and conditions.
ARTICLE 1
Granting Clauses: Secured Indebtedness
1.1 Grant and Mortgage. This instrument is executed in connection with,
and pursuant to the terms of the Credit Agreement (the "Credit Agreement") dated
May 6, 2004 between Mortgagor, and Whitney National Bank, a national banking
association (the "Lender"). Petroreal of Louisiana, L.L.C., a Louisiana limited
liability company, whose principal place of business and mailing address is ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (herein called
"Mortgagor"), for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, 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 MORTGAGE, ASSIGN, WARRANTY, PLEDGE and
HYPOTHECATE to WHITNEY NATIONAL BANK, as Lender and grant to Lender a continuing
security interest in (pursuant to this Mortgage and applicable law) with respect
to, all of the following described rights, interests and 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 hereto;
(b) The interest of the Mortgagor in the oil, gas and/or mineral
leases (and other properties, if any) described in Exhibit A hereto;
(c) Without limitation of the foregoing, all other right, title and
interest of Mortgagor of whatever kind of character (including, without
limitation, interests in oil, gas and/or mineral leases, fee mineral
and/or royalty interests, and other interests) in and to the lands which
are described or referred to in Exhibit A hereto as a part of the
descriptions (contained in such Exhibit A) of oil, gas and/or other
mineral leases (and/or other properties) and/or mineral servitudes and/or
mineral rights, or which are otherwise described in any of the leases or
53
other instruments described in Exhibit A hereto, even though the
Mortgagor's interest therein may be incorrectly described in, or omitted
from, Exhibit A hereto;
(d) All of Mortgagor's interest (whether now owned or thereafter
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;
(e) 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, purchase, exchange and/or processing agreements,
gas balancing agreements, transportation 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, c or d 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, any contracts listed in Exhibit
A hereto), as same may be amended or supplemented from time to time; and
(f) All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all improvements,
fixtures, other constructions, component parts, movable or immovable
property and other property (including, without limitation, all ▇▇▇▇▇,
pumping units, wellhead equipment, tanks, pipelines, flow lines, gathering
lines, compressors, dehydration units, separators, meters, buildings,
injection facilities, sale 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, 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
(g) All rights, estates, powers and privileges appurtenant to the
foregoing rights, interests and properties; and
(h) All proceeds and products of all of the foregoing;
all upon the terms, provisions and conditions herein set forth (the
foregoing properties being herein sometimes collectively called the "Mortgaged
Properties").
54
1.2 Mortgage of Security Interest. In order to further 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, Mortgagor hereby grants to Lender a continuing security
interest in the entire interest of Mortgagor (whether now owned or hereafter
acquired by operation of law or otherwise) in and to:
(a) 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);
(b) 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 (b)
being herein called "Payments in Lieu of Production");
(c) 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, or other oil, gas, other hydrocarbons or other minerals), 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, or other oil, gas other
hydrocarbons or other minerals), and all renewals or replacements of the
foregoing or substitutions of the foregoing;
(d) all contract rights, choses in action (i.e., rights to enforce
contracts or to bring claims thereunder) and other general intangibles
(regardless for 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,
55
transporting, or marketing of Production of other oil, gas, other
hydrocarbons or other minerals (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);
(e) 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;
(f) 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, and other forms of recording or obtaining
access to such data;
(g) all money, documents, deposit accounts, instruments, chattel
paper, securities, accounts or general intangibles 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 (all of the
properties, rights and interests described in subsections (a), (b), (c),
(d), (e) and (f) above and this subsection (g) being herein sometimes
collectively called the "Collateral"); and
(h) all proceeds of the Collateral, whether such proceeds or
payments are goods, money, documents, deposit accounts, instruments,
chattel paper, securities, accounts, 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").
1.3 Note, Loan Documents, Other Obligations. This Mortgage is made
to secure and enforce the payment and performance of the following promissory
notes, obligations, indebtedness and liabilities:
(a) All Obligations (as that term is defined in the Credit
Agreement), including all indebtedness evidenced by the Note (as that term
is defined in the Credit Agreement);
(b) All fundings by Lender under Letters of Credit issued to or for
the benefit of Mortgagor;
(c) All other indebtedness, obligations and liabilities of Mortgagor
arising out of the Credit Agreement related to Reimbursement Obligations
56
for any Letters of Credit (as those terms are defined in the Credit
Agreement) or any other Loan Document (as defined below);
(d) All future advances or other value, of whatever class or for
whatever purpose, at any time hereafter made or given by Lender to
Mortgagor in connection with the Credit Agreement or any other Loan
Document, whether or not the advances are given pursuant to a commitment,
whether or not the advances are presently contemplated by the parties
hereto, and whether or not Mortgagor is indebted to the Lender at the time
of such events;
(e) All other indebtedness and obligations owed to Lender now or
hereafter incurred or arising pursuant to or permitted by the provisions
of the Notes, this Mortgage or any other instrument now or hereafter
evidencing, governing, guaranteeing or securing the "secured indebtedness"
(as hereinafter defined) or any part thereof or otherwise executed in
connection with any advance or loan evidenced or governed by the Notes or
Applications and Agreements for Letters of Credit (the Note, the Credit
Agreement, any Applications and Agreements for Letters of Credit, this
Mortgage and such other instruments being herein sometimes collectively
called the "Loan Documents"); and
(f) Without limiting the generality of the foregoing, all
post-petition interest, expenses, and other duties and liabilities with
respect to indebtedness or other obligations described above in this
Section 1.3, which would be owed but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization, or similar proceeding.
1.4 Secured Indebtedness. The indebtedness referred to in Section 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 made to Mortgagor 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.
1.5 MAXIMUM SECURED AMOUNT. NOTWITHSTANDING ANY PROVISION HEREOF TO THE
CONTRARY, THE INDEBTEDNESS SECURED HEREBY SHALL NOT, AT ANY TIME OR FROM TIME TO
TIME, EXCEED AN AGGREGATE MAXIMUM AMOUNT OF $5,000,000.
ARTICLE 2
Representations, Warranties and Covenants
2.1 Mortgagor represents, warrants, and covenants as follows:
(a) Title and Permitted Encumbrances. Mortgagor has, and Mortgagor
covenants to maintain, good and merchantable title to the Mortgaged
Properties, 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 preliminary title opinions
57
delivered by Mortgagor to Lender, and other routine operational agreements
directly related to the Mortgaged Properties which do not provide for
material future commitments, which do not alter the share of revenues
which Mortgagor is entitled to receive (or share of expenses that
Mortgagor is obligated to bear) with respect to the lands covered thereby
and which are of a type normally employed by prudent parties with respect
to oil and gas properties, (ii) the liens and security interests evidenced
by this Mortgage, (iii) statutory liens for taxes which are not yet
delinquent (or which are being contested by Mortgagor in good faith and
for which Mortgagor has established adequate reserves, (iv) liens under
operating agreements, pooling orders and unitization agreements with
respect to obligations which are not yet due (or which are being contested
by Mortgagor in good faith and for which Mortgagor has established
adequate reserves), (v) mechanics' and materialmen's liens, with respect
to obligations which are not yet due (or which are being contested by
Mortgagor in good faith and for which Mortgagor has established adequate
reserves or has secured adequate indemnification from the effects
thereof), (vi) other liens and security interests (if any) in favor of
Lender (the matters described in the foregoing clauses being herein called
the "Permitted Encumbrances"); Mortgagor will warrant and defend title to
the Property, subject as aforesaid, against the claims and demands of all
persons claiming or to claim the same or any part thereof.
(b) Leases and Contracts; Performance of Obligations. The oil, gas
and/or mineral leases, contracts, 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, 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 material 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, 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 materially adversely affect
the ownership or operation of the Property; Mortgagor will fulfill all
such material obligations coming due in the future. Mortgagor is not
currently accounting (and will not hereafter agree to account) for any
royalties, or overriding royalties or other payments out of production, on
a basis (other than delivery in kind) other than proceeds received by
Mortgagor from sale of production, and there are no situations where a
contingent liability to account on another basis may exist.
(c) Sale of Production. No Mortgaged Property is or will become
subject to 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., in the case of oil, not in
excess of 60 days, and in the case of gas, not in excess of 90 days) 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
58
sales contracts, processing agreements or transportation agreements (or
other agreements relating to the marketing of Production) entered into in
the ordinary course of business and consistent with Mortgagor's past
practices (in connection with the Mortgaged Properties to which they
relate), 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.
Mortgagor is presently receiving a price for all Production from (or
attributable to) each Mortgaged Property covered by any applicable
production sales contract in accordance with the terms of such contract,
and, to the best of Mortgagor's knowledge, 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 as to
which there are recoupment rights outstanding, 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) therefore as a result of
payments made, or other actions taken, with respect to other properties.
Except for immaterial overproduction that occurs in the course of routine
operations where no party is affirmatively taking more than its share of
gas, there is no Mortgaged Property with respect to which Mortgagor, or
(to the best of Mortgagor's knowledge) its predecessors in title, has,
prior to the date hereof, 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. Mortgagor will not (except for immaterial
over-production that occurs in the course of routine operations where no
party is affirmatively taking more than its share of gas) become
"overproduced" (as above defined) with respect to any well on the
Mortgaged Properties (or on any unit in which the Mortgaged Properties
participate). No Mortgaged Property is or will become subject to a gas
balancing arrangement under which one or more third parties may take a
portion of the Production attributable to such Mortgaged Property without
payment (or without full payment) therefore 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 Property. The equipment, inventory,
improvements, fixtures, goods and other tangible personal/movable property
forming a part of the Collateral are, and will (subject to repair and/or
replacement in the ordinary course of business and events of casualty and
force majeure) remain, in good repair and condition and are and will be
adequate for the normal operation of the Collateral in accordance with
prudent industry standards; all of such Collateral is, and will remain,
59
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 Collateral. Upon request of Lender, Mortgagor
will deliver to Lender an inventory and/or financing statements describing
and showing the make, model, serial number and location of all equipment,
inventory, fixtures, goods and other tangible personal property forming a
part of the Property.
(e) Operation of Mortgaged Properties. The 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 in
all material respects with all applicable laws and all rules, regulations
and orders of all duly constituted authorities having jurisdiction and in
conformity in all material respects with all oil, gas and/or other mineral
leases (including, without limitation, in conformity with all provisions
where the failure to be in conformity could affect the validity and/or
continuance in force of a lease) 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 materially
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 ▇▇▇▇▇ 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
▇▇▇▇▇ are, and will remain, bottomed under and producing from, with the
well bores wholly within, the Mortgaged Properties (or, in the case of
▇▇▇▇▇ located on properties unitized therewith, such unitized properties).
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 Lender, sell, exchange, lease, transfer, or otherwise dispose
of any part of, or interest in, the Property other than (i) a release,
surrender or abandonment of a lease which does not include a well capable
of producing (or capable of being made capable of producing) in paying
quantities and which is not included in a unit which includes such a well,
(ii) sales, transfers and other dispositions of machinery, equipment and
other personal/movable property and fixtures made in connection with a
release, surrender or abandonment (to which Lender has given its prior
written consent or with respect to which a release has been given under
clause (i)) of a lease, (iii) sales, transfers and other dispositions of
machinery, equipment and other personal/movable property and fixtures in
connection with the abandonment (to which Lender has given its prior
written consent) of a well, (iv) sales, transfers and other dispositions
60
of machinery, equipment and other personal/movable property and fixtures
which are (A) worthless or 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, and (v)
sales of Production that has been produced which are made in compliance
with Section 2.1(c) hereof, in the ordinary course of business, in bona
fide arm's length transactions with third parties and at the best price
(and on the best terms) reasonably available (which shall, in the case of
Production which is subject to price controls and/or is sold, in
accordance with customary industry practice, pursuant to long term
purchase contracts, be determined giving consideration to such matters);
provided that nothing in clause (v) shall be construed as limiting
Lender's rights under Article III of this Mortgage. Mortgagor shall
account fully and faithfully for and, if Lender so elects, shall promptly
pay or turn over to Lender the proceeds in whatever form received from
disposition in any manner of any of the Property.
(g) Ad Valorem and Severance Taxes. Mortgagor has paid and
discharged, and will continue to pay and discharge, all ad valorem taxes
assessed against the Property or any part thereof and all production,
severance and other taxes assessed against, or measured by, the Production
or value, or proceeds, of the Production except to the extent same are
being contested in good faith and Mortgagor has established adequate
reserves therefor.
(h) Suits and Claims. Except as disclosed in writing to the Lender,
there are no suits, actions, claims, investigations, inquiries,
proceedings or demands pending (or, to Mortgagor's knowledge, threatened)
which materially and adversely affect the Property (including, without
limitation, any which challenge or otherwise pertain to Mortgagor's title
to the Property) and no judicial or administrative actions, suits or
proceedings pending (or, to Mortgagor's knowledge, threatened) against
Mortgagor which do or may reasonably be expected to materially and
adversely affect Mortgagor.
(i) Environmental.
(i) Current Status. The Property is being operated in
material compliance with all Environmental Laws (as
hereinafter defined), and to the best knowledge of
Mortgagor after due inquiry, none of such operations
are subject to any federal, state or local
investigation evaluating whether any material
remedial action is needed to respond to a release of
any Hazardous Materials (as hereinafter defined) into
the environment. Neither Mortgagor (nor to the best
knowledge of Mortgagor, any other person) has filed
any notice under any federal, state or local law
indicating the Mortgagor is responsible for a
release, or the improper storage, of any material
amount of Hazardous Materials or any Hazardous
61
Materials have been released, or are improperly
stored, upon any Property. Mortgagor otherwise has
no known material contingent liability in connection
with a release, or the improper storage, of any
Hazardous Materials. Mortgagor has obtained
authorizations or has caused third party operators to
represent that such operators have obtained
authorizations which are required under all
Environmental Laws, except to the extent failure to
have any such permit, license or authorization would
not have a material adverse effect on the financial
condition, operations, business or prospects of
Mortgagor. Mortgagor is in material compliance with
the terms and conditions of all permits, licenses and
authorizations described in the preceding sentence,
and is also in material compliance with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules
and timetables contained in any applicable
Environmental Law or in any notice or demand letter
issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not have
a material adverse effect on the financial condition,
operations, business or prospects of Mortgagor.
Mortgagor has not handled any Hazardous Materials,
other than as a generator, on any Property, or on any
other properties now or previously owned or leased by
Mortgagor, to an extent that such handling, has, or
may reasonably be expected to have, a material
adverse effect on the financial condition,
operations, business or prospects of Mortgagor.
Mortgagor has not transported or arranged for the
transportation of any Hazardous Material to any
location which is listed on the National Priorities
List under CERCLA, listed for possible inclusion on
the National Priorities List by the Environmental
Protection Agency in CERCLIS, or listed on any
similar state list or which is the subject of
federal, state or local enforcement actions or other
investigations which may lead to claims against
Mortgagor for clean-up costs, remedial work, damages
to natural resources or for personal injury claims,
including, but not limited to, claims under CERCLA.
No Hazardous Material generated by Mortgagor has been
recycled, treated, stored, disposed of or released by
Mortgagor at any location other than in full
compliance with Environmental Laws. No oral or
written notification of a release of a Hazardous
Material has been filed by or, to the best of the
Mortgagor's knowledge, on behalf of Mortgagor, and no
property now or previously owned or leased by any
Mortgagor is listed, to the best of the Mortgagor's
knowledge, or proposed for listing on the National
Priority list promulgated pursuant to CERCLA, in
CERCLIS, or on any similar state list of sites
requiring investigation or clean-up. There are no
liens arising under or pursuant to any Environmental
Laws currently existing on any of the Property, or
any other real properties or properties owned or
62
leased by Mortgagor, and no government actions have
been taken or, to the best of the Mortgagor's
knowledge after due inquiry, are in process which
could subject any of such properties to such liens;
nor would Mortgagor be required to place any notice
or restriction relating to the presence of Hazardous
Materials at any properties owned by it in any deed
to such properties. There have been no environmental
investigations, studies, audits, tests, reviews or
other analysis conducted by or which are in the
possession of Mortgagor in relation to any properties
or facility now or previously owned or leased by any
Mortgagor which have not been made available to
Lender.
(ii) Future Performance. Mortgagor will not cause or permit
the Property or Mortgagor to be in violation of
applicable Environmental Laws. Mortgagor shall obtain or
cause third-party operators to represent that they have
obtained, at or prior to the time required by applicable
Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for
its operations and will maintain such authorizations in
full force and effect. Mortgagor will promptly furnish
to Lender all written notices of violation, orders,
claims, demands, notices, citations, complaints, penalty
assessments, suits or other proceedings received by
Mortgagor, or of which it has notice, pending or
threatened against Mortgagor, by any person, firm, or
public or governmental authority with respect to any
alleged violation of or non-compliance with any
Environmental Laws, any alleged personal injury,
property damages, Natural Resources Damages as used in
CERCLA, remediation costs, environmental restoration or
remediation or any other form of legal or equitable
relief whatsoever arising from or in any way connected
with the actual or alleged release or discharge of or
exposure to any substance or material alleged to be
toxic or hazardous or any permits, licenses or
authorizations in connection with its ownership or use
of its properties or the operation of its business,
regardless of where conducted. Mortgagor will promptly
furnish to Lender all requests for information, notices
of claim, demand letters, and other notifications,
received by Mortgagor in connection with its ownership
or use of its properties or the conduct of its business,
relating to potential responsibility with respect to any
investigation or clean-up of Hazardous Material at any
location, or with respect to any alleged personal
injury, property damages, Natural Resources Damages as
used in CERCLA, remediation costs, environmental
restoration or remediation or any other form of legal or
equitable relief whatsoever arising from or in any way
connected with the actual or alleged release or
discharge of or exposure to any substance or material
63
alleged to be toxic or hazardous. Upon Lender's
reasonable written request, at any time and from time to
time during the existence of this Mortgage, but not more
frequently than once per calendar year, Mortgagor will
provide at Mortgagor's sole expense an inspection or
audit of the Property from an engineering or consulting
firm jointly approved by Lender and Mortgagor indicating
the presence or absence of Hazardous Substances or solid
waste on the Property.
(iii) Definitions.
"Environmental Law" means (a) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(as amended by the Superfund Amendments and Reauthorization
Act of 1986, 42 U.S.C. ss. 9601 et seq.), as amended from time
to time, and any and all rules and regulations issued or
promulgated thereunder ("CERCLA"); (b) the Resource
Conservation and Recovery Act (as amended by the Hazardous and
Solid Waste Amendment of 1984, 42 U.S.C. ss. 6901 et seq.) as
amended from time to time, and any and all rules and
regulations issued or promulgated thereunder ("RCRA"); (c) the
Clean Air Act, 42 U.S.C. ss. 7401 et seq., as amended from
time to time, and any and all rules and regulations issued or
promulgated thereunder; (d) the Clean Water Act of 1977, 33
U.S.C. ss. 1251 et seq., as amended from time to time, and any
and all rules and regulations issued or promulgated
thereunder; (e) the Toxic Substances Control Act, 15 U.S.C.
ss. 2601 et seq., as amended from time to time, and any and
all rules and regulations issued or promulgated thereunder; or
(f) any other federal or state law, statute, rule, or
regulation enacted in connection with or relating to the
protection or regulation of the environment (including,
without limitation, relating to the protection or regulation
of the environment (including, without limitation, those laws,
statutes, rules and regulations regulating the disposal,
removal, production, storing, refining, handling,
transferring, processing, or transporting of Hazardous
Materials) and any rules and regulations issued or promulgated
in connection with any of the foregoing by any governmental
authority, and "Environmental Laws" shall mean each of the
foregoing.
"Hazardous Materials" means (a) any "hazardous waste" as
defined by RCRA; (b) any "hazardous substance" as defined by
CERCLA; (c) asbestos; (d) polychlorinated biphenyls; (e) any
flammables, explosives or radioactive materials; (f) any
substance, the presence of which on Mortgagor's properties is
prohibited by any applicable governmental authority; and (g)
any other substance which, pursuant to any Environmental Laws,
requires special handling in its collection, use, storage,
treatment or disposal.
(j) Not Abandon ▇▇▇▇▇; Participate in Operations. Mortgagor will
not, without prior written consent of Lender, 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
64
quantities (as determined without considering the effect of this
Mortgage). Mortgagor will not, without prior written consent of Lender
(which consent, after giving due regard to Mortgagor's business and
technical reasons for electing not to participate, will not be
unreasonably withheld), 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 interest in
the Mortgaged Properties.
(k) 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 to Lender 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 Lender (whether or not named as a
party to legal proceedings with respect thereto), is hereby authorized and
empowered to take such additional reasonable steps as in its 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 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 Lender 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.
(l) Fees and Expenses; Indemnity. Mortgagor will reimburse the
Lender 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 lawful 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 Lender (for purposes of this
paragraph, the term "Lender", shall include the directors, officers,
partners and employees of Lender and any persons or entities owned or
controlled by or affiliated with Lender) from and against all claims,
demands, liabilities, losses, damages (including without limitation
consequential damages), causes of action, judgments, penalties, costs and
65
expenses (including without limitation reasonable attorneys' fees and
expenses) (collectively "Lender Losses") which may be imposed upon,
asserted against or incurred or paid by the Lender on account of, in
connection with, or arising out of (A) any bodily injury or death or
property damage occurring in or upon or 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 lawful exercise of 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 Documents, (E) any violation on or
prior to the Release Date (as hereinafter defined) of any 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
the Property or release from the 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 circumstances constituted a violation
of any Environmental Law at the time of its existence or occurrence, and
(G) any and all claims or proceedings (whether brought by private party or
governmental agencies) for bodily injury, property damage, abatement or
remediation, environmental damage or impairment or any other injury or
damage resulting from or relating to any hazardous or toxic substance,
solid waste or contaminated material located upon or migrating into, from
or through the 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 and whether or not the alleged liability is
attributable to the handling, storage, generation, transportation, removal
or disposal of such substance, waste or material or the mere presence of
such substance, waste or material on the Property), which the Lender may
have liability with respect due to the making of the loan or loans
evidenced by the Note, the granting of this Mortgage, the exercise of any
of their rights under the Loan Documents, or otherwise; provided however,
mortgagor shall not indemnify Lender or hold Lender harmless from any
Lender Losses caused by Lender's gross negligence, or willful or
intentional misconduct. Lender 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 Lender in
compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, attorneys' fees and other expenses of every
character expended by 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 and this Mortgage has been
released of record, 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. However, these 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
66
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 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.
(m) Insurance. Mortgagor will carry insurance on the Property and
the operations thereof in commercially reasonable amounts consistent with
industry standards and Mortgagor's historical practices. In the event of
any loss under any insurance policies so carried by Mortgagor, Lender
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 Lender in its own discretion, of the secured indebtedness,
and any balance remaining shall be subject to the order of Mortgagor.
Lender is hereby authorized but not obligated to enforce in its name or in
the name of Mortgagor payment of any or all said policies or settle or
compromise any claim in respect thereof, and to collect and make receipts
for the proceeds thereof and Lender 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 to the extent permitted by such
policies.
(n) Further Assurances. Mortgagor will, on the reasonable request of
Lender, (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 Documents; (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, reasonably 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) reasonably desired by
Lender 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.
(o) Name and Place of Business. Mortgagor will not cause or permit
any change to be made in its name, identity, or corporate or partnership
structure, or its federal employer identification number unless Mortgagor
shall have notified Lender of such change at least thirty (30) days prior
67
to the effective date of such change, and shall have first taken all
action reasonably required by Lender for the purpose of further perfecting
or protecting the liens and security interests of Lender in the Property.
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, since its creation, been, and will continue to be (unless
Mortgagor notifies Lender 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.
2.2 Compliance by Operator. As to any part of the Mortgaged Properties
which is not a working interest, Mortgagor agrees to use its reasonable efforts
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 use its reasonable efforts
(including, but not limited to, exercising all rights under any operating
agreement) to cause the party who is the operator of such property to comply
with the covenants and agreements contained herein.
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, Lender, 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 Lender and any money so paid
by Lender shall be a demand obligation owing by Mortgagor to Lender (which
obligation Mortgagor hereby expressly promises to pay) and Lender, 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 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
default or late payment interest rate provided in the Note, if any, (provided
that, should applicable law provide for a maximum permissible rate of interest
on such amount, 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 3
Assignment of Production, Accounts, and Proceeds
3.1 Assignment of Production. Mortgagor hereby assigns, pledges and
transfers to Lender and grants to Lender a continuing security interest in all
Production which accrues to Mortgagor's interest in the Mortgaged Properties,
all proceeds of such Production and all payments in lieu of production, and all
rights with respect to proceeds or profits to which Mortgagor is entitled by
virtue of ownership of the Mortgaged Properties described in Section 1.1(h)
(herein referred to as the "Production Proceeds"), together with the immediate
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and continuing right to collect and receive such Production Proceeds. Upon the
occurrence of a default, Mortgagor agrees to direct and instruct any and all
purchasers of any Production, or other parties accounting for Production
Proceeds, to pay to Lender all of the Production Proceeds accruing to
Mortgagor's interest until such time as such parties have been furnished with
evidence that all secured indebtedness has been paid and that this Mortgage has
been released; Mortgagor agrees that no such parties shall have any
responsibility for the application of any funds paid to Lender.
3.2 Effectuating Payment of Production Proceeds to Lender. Upon the
occurrence of a default, Mortgagor agrees to execute and deliver any and all
transfer orders, division orders and other instruments that may be reasonably
requested by Lender or that may be required by any party for the purpose of
effectuating payment of the Production Proceeds to Lender. If under any existing
sales agreements, other than division orders or transfer orders, any Production
Proceeds are required to be paid to Mortgagor so that under such existing
agreements payment cannot be made of such Production Proceeds to Lender,
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 Lender. Without limitation upon any of the
foregoing, Mortgagor hereby constitutes and appoints Lender as Mortgagor's
special attorney-in-fact (with full power of substitution, either generally or
for such periods or purposes as Lender may from time to time 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 Lender 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 party for the purposes of effectuating
payment of the Production Proceeds to Lender or which Lender 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 to
Mortgagor so that under such existing agreements payment cannot be made of
such Production Proceeds to Lender, to make, execute and enter into such
sales agreements or other agreements as are necessary to direct Production
Proceeds to be payable to Lender;
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 Lender may be exercised by Lender through any person who,
at the time of the execution of the particular instrument, is an officer or
Lender. The power of attorney herein conferred is granted for valuable
consideration and hence is coupled with an interest and is irrevocable so long
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as the secured indebtedness, or any part thereof, shall remain unpaid. All
persons dealing with Lender 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 Lender that all the secured indebtedness
is fully and finally paid. Lender 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 Lender 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.
3.3 Release From Liability; Indemnification. Lender and its successors and
assigns are hereby absolved from all liability for failure to enforce collection
of the Production Proceeds and from all other responsibility (except in the case
of Lender's gross negligence or willful misconduct) 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 Lender(for
purposes of this paragraph, the terms "Lender" shall include the directors,
officers, partners, employees of Lender and any persons or entities owned or
controlled by or affiliated with Lender) 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 Lender by reason of the assertion that
Lender 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 Lender 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,
Lender 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 Lender in compromise, satisfaction or discharge of
any such claim, action or judgment, and all court costs, attorneys' fees and
other expenses of every character expended by 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 Lender 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. However, these 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.
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ARTICLE 4
Remedies Upon Default
4.1 Default. The term "default" as used in this Mortgage shall mean
the occurrence of any of the following events:
(a) the occurrence of an Event of Default under the Credit Agreement
or any other Loan Document; or
(b) any material representation contained herein (or in any
certificate delivered by Mortgagor to Lender in connection herewith) shall
prove to have been incorrect in any material respect on or as of the date
made; or
(c) Mortgagor fails to duly observe, perform or comply with any
material covenant, agreement, condition or provision contained herein and
such failure is not remedied within 30 days after written notice of such
failure is given by Lender to Mortgagor; or
(d) (i) Mortgagor shall commence any case, proceeding or other
action (A) under any existing or future law or any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, custodian or other similar
official for it or for all or any substantial part of its assets, or any
Mortgagor shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Mortgagor any
case, proceeding or other action of nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against any Mortgagor any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) any Mortgagor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Mortgagor shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; or
(e) Any of the events referred to above in subsection (d) 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 subsection.
4.2 Acceleration of Secured Indebtedness. Upon the occurrence of a default
described in subsection (d) or (e) 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,
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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 Lender may elect. During the continuance of any other
default, Lender 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
protect, notice of acceleration or of intention to accelerate, putting the
Mortgagor in default, dishonor, notice of acceleration or of 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 Lender
may elect.
(a) Upon the occurrence of a default, Lender may exercise its rights
of enforcement with respect to the Collateral under the Louisiana
Commercial Laws, as amended, or under the Uniform Commercial Code or
similar statute in force in any other state to the extent the same is
applicable law. Cumulative of the foregoing and the other provisions of
this Section 4.2, to the extent permitted by applicable law:
(i) Lender may enter upon Mortgagor's premises to take possession
of, assemble and collect the Collateral or to render it unusable; and
(ii) Lender may require Mortgagor to assemble the Collateral and
make it available at a place Lender designates which is mutually
convenient to allow Lender to take possession or dispose of the
Collateral; and
(iii) written notice mailed to Mortgagor as provided herein at least
ten (10) 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 Lender,
be sold, as a whole or in parts, together or separately (including,
without 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 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 as
if the same were sales proceeds; and
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(vii) as to the Collateral located in or otherwise subject to the
laws of the State of Louisiana, Lender may foreclose this Mortgage as a
security agreement affecting the Collateral by executory 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.
(b) 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 Mortgagor,
for purposes of executory process, hereby confesses judgment for the full
amount of the secured indebtedness in favor of the Lender. Mortgagor
further agrees that the Lender may cause all or any part of the Property
to be seized and sold after due process of law by executory or ordinary
process, 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 or parcels, as the Lender 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 notice of
seizure provided for in articles 2293 and 2721 of the Louisiana Code of
Civil Procedure; (iii) the three (3) days delay provided for in articles
2331 and 2722 of the Louisiana Code of Civil Procedure; and (iv) all other
laws providing rights of notice, demand, appraisement, or delay. Mortgagor
expressly authorizes and agrees that Lender 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 Lender or any 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.
4.3 Receiver. In addition to all other remedies herein provided for,
Mortgagor agrees that, upon the occurrence of a default, Lender shall as a
matter of right be 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 Lender, and agrees that such appointment shall in no manner impair, prejudice
or otherwise affect the rights of Lender under Article III hereof. Nothing
herein is to be construed to deprive 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 Lender in connection with any such receivership
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Lender and shall bear interest, from the
date of making such advancement by Lender until paid, at the rate described in
Section 2.3 hereof.
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4.4 Proceeds of Foreclosure. Unless applicable law requires otherwise, 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 and including
but not limited to a reasonable fee to the Lender if such sale was made by
the Lender acting under the provisions of Section 4.2 (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 reasonable
attorneys' fees due and unpaid on the Note and the amounts due and unpaid
and owed under this Mortgage) in such manner and order as Lender 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.
4.5 Lender as Purchaser. 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 Lender 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 Lender.
4.6 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, 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 may be
utilized, 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.
4.7 Discretion as to Security. Unless applicable law requires otherwise,
Lender 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 Lender 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.
4.8 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, for Mortgagor's heirs, devisees, representatives,
successors and assigns, and for any and all persons ever claiming any interest
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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 Property 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.
ARTICLE 5
Miscellaneous
5.1 Scope of Mortgage. This Mortgage is a mortgage of both real/immovable
and personal/movable property, a security agreement, a financing statement and
an assignment, and also covers proceeds and fixtures.
5.2 Effective as a Financing Statement. This Mortgage covers goods which
are or are to become fixtures on the real property described herein, and this
Mortgage shall be effective as a financing statement filed as a fixture filing
with respect to all fixtures included within the Property. This Mortgage shall
also be effective as a financing statement, filed as a fixture filing, covering
minerals and other substances of value which may be extracted from the earth
(including without limitation oil and gas), and accounts related thereto, which
will be financed at the wellhead or minehead of the ▇▇▇▇▇ or mines located on
the Mortgaged Properties. This Mortgage is to be filed or filed for record in
the real estate/immovable property records of each 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 or state agencies (or any successor agencies). This Mortgage
shall also be effective as a financing statement covering any other Property and
may be filed in any other appropriate filing or recording office. The mailing
address of Mortgagor is the address of Mortgagor set forth at the end of this
Mortgage and the address of Lender from which information concerning the
security interests hereunder may be obtained is the address of Lender set forth
at the end of this Mortgage.
5.3 Reproduction of Mortgage as Financing Statement. A carbon,
photographic, facsimile or other reproduction of this Mortgage or of any
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financing statement relating to this Mortgage shall be sufficient as a financing
statement for any of the purposes referred to in Section 5.2.
5.4 Notice to Account Debtors. In addition to, but without limitation of,
the rights granted in Article III hereof, Lender, upon the occurrence of a
Default, may notify the account debtors or obligors of any accounts, chattel
paper, negotiable instruments or other evidences of indebtedness included in the
Collateral to pay Lender directly.
5.5 Waivers. Lender 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 Lender. Any part 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.
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 may be 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.
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 Lender
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
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.
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
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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.
5.9 Place of Payment. All secured indebtedness which may be owing
hereunder at any time by Mortgagor shall be payable at the place as Lender may
designate in writing.
5.10 Subrogation to Existing Liens. To the extent that proceeds of the
Note 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.
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 shall be
applied on said indebtedness first in discharge of that portion thereof which is
not secured by this Mortgage.
5.12 Compliance with Usury Laws. It is the intent of Mortgagor and Lender
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 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.
5.13 Release of Mortgage. If all of the secured indebtedness be paid as the
same becomes due and payable and all of the covenants, warranties, undertakings
and agreements made in this Mortgage are kept and performed, and if the
Mortgagor is not bound to the other or to any third person to permit any
obligation or secured indebtedness to be incurred then or thereafter, then, upon
two (2) days prior written notice (or such lesser number of days as may be
mandated by applicable law), the Mortgagor may request the Lender to terminate
this Mortgage. Upon such termination the Mortgagor may further request the
Lender to provide a written act of release of this Mortgage in recordable form
(except to the extent expressly provided herein with respect to indemnification
and other rights which are to continue following the release hereof). Lender
agrees to deliver such an act of release (subject to the foregoing limitation),
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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 Lender 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.
5.14 Notices. All notices, requests, 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, or by
delivery service with proof of delivery, by telecopy or telex, 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 provided herein, (b) in the case of telecopy or telex, 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 Lender of its 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.
5.15 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.
5.16 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.
5.17 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 Lender shall reasonably determine
and will pay all such recording, filing, re-recording and refiling taxes, fees
and other charges.
5.18 Reporting Compliance. Mortgagor agrees to comply with any and all
reporting requirements applicable to the transaction evidenced by the Note and
secured by this Mortgage which are set forth in any law, statute, ordinance,
78
rule, regulation, order or determination of any governmental authority, and
further agrees upon request of Lender to furnish Lender with evidence of such
compliance.
5.19 Certain Obligations of Mortgagor. Without limiting Mortgagor's
obligations hereunder, Mortgagor's liability hereunder 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 owned but for
the fact that the same may be unenforceable due to the existence of a
bankruptcy, reorganization or similar proceeding.
5.20 Counterparts. This Mortgage may be executed in several counterparts,
all of which are identical, except that, to facilitate recordation, (a) certain
counterparts hereof may include only those portions of Exhibit A which contain
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. All of such counterparts together shall constitute one and
the same instrument.
5.21 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 Lender and its successors and assigns.
5.22 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.
5.23 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
LAW OF THE STATE OF LOUISIANA APPLICABLE TO CONTRACTS MADE AND TO 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 PROCEDURE AND SUBSTANTIVE MATTERS RELATING TO THE CREATION,
PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS AND
REMEDIES GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF
THE PROPERTY LOCATED IN (OR OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.
5.24 Appearance. Resolutions. For purposes of Louisiana law, including but
not limited to the availability of executory process, Mortgagor and Lender have
appeared on this date before the undersigned Notaries Public and witnesses in
order to execute this Mortgage.
79
5.25 No Paraph. Mortgagor acknowledges that no promissory note or other
instrument has been presented to the undersigned Notary Public(s) to be paraphed
for identification herewith.
[SIGNATURE PAGES FOLLOW]
80
THUS DONE AND PASSED this 6th day of May, 2004, 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: PETROREAL OF LOUISIANA, L.L.C.
By:
-------------------------- --------------------------------
Name:
-------------------------
Title:
-------------------------
NOTARY PUBLIC
THUS DONE AND PASSED this 6th day of May, 2004, in my presence and in the
presence of the undersigned competent witnesses who hereunto sign their names
with Lender and me, Notary, after reading of the whole.
WITNESSES: WHITNEY NATIONAL BANK, Lender
By:
------------------------------------
Name:
Title:
------------------------------------
--------------------------------
NOTARY PUBLIC
The address and Taxpayer ID No. of The address and Taxpayer ID No. of
Mortgagor is: Lender is:
PetroReal of Louisiana, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Whitney National Bank
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Taxpayer ID No. ▇▇-▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Taxpayer ID No. ▇▇-▇▇▇▇▇▇▇
81
Exhibit A
Description of Leases
1. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ et al ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ et COB 160 Folio 141
December 1, 1951 al/Gulf Refining Company
-------------------------------------------------------------------------------
Buras Levee District "K" Board of Commissioners COB 88 Folio 453
June 11, 1938 for the Buras Levee
District/Delta
Development Co. Inc.
-------------------------------------------------------------------------------
Operating Agreement ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇ ▇▇▇ ___ Folio ___
March 16, 1961 Oil Corporation, et al
-------------------------------------------------------------------------------
The above described Lease(s) INSOFAR AND ONLY INSOFAR AS the Lease(s)
cover(s) and bear(s) upon the lands contained within the boundaries of the WB-8
AL ▇▇ ▇▇, created by Louisiana Office of Conservation Order No. 396-HH dated
effective July 1, 1969; and the WB 8B ▇▇ ▇▇ created by Office of Conservation
Order No. 396-JJ, dated effective July 1, 1969, revised by Office of
Conservation Order No. 396-JJ-1, dated effective March 15, 1974, and
supplemented by Supplement to Office of Conservation Order No. 396-JJ-1, dated
effective April 1, 1974, all as shown on the plat attached hereto as Exhibit
A-1.
2. ▇.▇. ▇▇▇▇▇▇▇, et al, No. 1D
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
Louisiana S.L. 451 State of Louisiana/Tide COB 97 Folio 504
November 20, 1939 Water Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 2203 State of Louisiana/Gulf COB 164 Folio 700
October 22, 1952 Refining Company and
Tidewater Associated
Oil Company
-------------------------------------------------------------------------------
82
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
Louisiana S.L. 3263 State of Louisiana/The COB 201 Folio 394
August 16, 1957 British-American Oil
Production Company, et al
-------------------------------------------------------------------------------
BLD `D'/`E'/`K' Board of Commissioners COB 88 Folio 453
June 11, 1938 for the Buras Levee
District/Delta
Development Co. Inc.
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et COB 160 Folio 818
December 18, 1951 al/Gulf Refining Company
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1961 al/Gulf Oil Corporation
COB 243 Folio 717
COB 243 Folio 734
COB 243 Folio 751
COB 243 Folio 767
COB 243 Folio 784
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1964 al/Gulf Oil Company
COB 276 Folio 79
COB 276 Folio 92
COB 276 Folio 107
COB 276 Folio 122
COB 276 Folio 135
COB 276 Folio 151
COB 276 Folio 832
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Dative ▇. ▇. ▇▇▇▇▇▇▇▇, Dative COB 167 Folio 163
Test. Exec Test. Exec/Gulf
February 24, 1953 Refining Company
-------------------------------------------------------------------------------
Operating Agreement ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇ ▇▇▇ ___ Folio ___
March 16, 1961 Oil Corporation, et al
-------------------------------------------------------------------------------
83
The above described Lease(s) INSOFAR AND ONLY INSOFAR AS the Lease(s)
cover(s) and bear(s) upon the lands contained within the boundaries of the H-8
RB SUA, created by Louisiana Office of Conservation Order No. 396-O-2, dated
effective June 26, 2001; and the WB 7 ▇▇ ▇▇, created by Louisiana Office of
Conservation Order No. 396-N-1, dated effective May 8, 1973, all as shown on the
plat attached hereto as B-1.
3. ▇.▇. ▇▇▇▇▇▇▇, et al, No. 2
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
Louisiana S.L. 451 State of Louisiana/Tide COB 97 Folio 504
November 20, 1939 Water Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 2203 State of Louisiana/Gulf COB 164 Folio 700
October 22, 1952 Refining Company and
Tidewater Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 3263 State of Louisiana/The COB 201 Folio 394
August 16, 1957 British-American Oil
Production Company, et al
-------------------------------------------------------------------------------
BLD `D'/`E'/`K' Board of Commissioners COB 88 Folio 453
June 11, 1938 for the Buras Levee
District/Delta
Development Co. Inc.
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et COB 160 Folio 818
December 18, 1951 al/Gulf Refining Company
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1961 al/Gulf Oil Corporation
COB 243 Folio 717
COB 243 Folio 734
COB 243 Folio 751
COB 243 Folio 767
COB 243 Folio 784
-------------------------------------------------------------------------------
84
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1964 al/Gulf Oil Company
COB 276 Folio 79
COB 276 Folio 92
COB 276 Folio 107
COB 276 Folio 122
COB 276 Folio 135
COB 276 Folio 151
COB 276 Folio 832
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Dative ▇. ▇. ▇▇▇▇▇▇▇▇, Dative COB 167 Folio 163
Test. Exec Test. Exec/Gulf Refining
February 24, 1953 Company
-------------------------------------------------------------------------------
Operating Agreement ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇ ▇▇▇ ___ Folio ___
March 16, 1961 Oil Corporation, et al
-------------------------------------------------------------------------------
The above described Lease(s) INSOFAR AND ONLY INSOFAR AS the Lease(s)
cover(s) and bear(s) upon the following described lands, to wit:
TOWNSHIP ▇▇ ▇▇▇▇▇ - ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Section 9: SE/4 of SE/4.
Section 10: SE/4 of NW/4; NE/4; SW/4; N/2 of SE/4; and SW/4 of SE/4.
Section 15: N/2 of NW/4; SW/4 of NW/4; and NW/4 of SW/4.
Section 16: NE/4 of NE/4; S/2 of NE/4; NE/4 of SW/4; and N/2 of SE/4.
Including, but not in limitation of the above described area, the lands
contained within the boundaries of the 6 M RE SUA, created by Louisiana Office
of Conservation Order No. 396-AA-4, dated effective July 18, 2000; and the 5B M
RA SUA, created by Louisiana Office of Conservation Order No. 396-DDD, dated
effective July 18, 2000, all as shown on the plat attached hereto as Exhibit
C-1.
85
4. ▇.▇. ▇▇▇▇▇▇▇, et al, No. 3
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
------------------------------------------------------------------------------
Louisiana S.L. 451 State of Louisiana/Tide COB 97 Folio 504
November 20, 1939 Water Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 2203 State of Louisiana/Gulf COB 164 Folio 700
October 22, 1952 Refining Company and
Tidewater Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 3263 State of Louisiana/The COB 201 Folio 394
August 16, 1957 British-American Oil
Production Company, et al
-------------------------------------------------------------------------------
BLD `D'/`E'/`K' Board of Commissioners COB 88 Folio 453
June 11, 1938 for the Buras Levee
District/Delta
Development Co. Inc.
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et COB 160 Folio 818
December 18, 1951 al/Gulf Refining Company
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et
In January 1, 1961 al/Gulf Oil Corporation In Counterpart
COB 243 Folio 717
COB 243 Folio 734
COB 243 Folio 751
COB 243 Folio 767
COB 243 Folio 784
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1964 al/Gulf Oil Company
COB 276 Folio 79
COB 276 Folio 92
COB 276 Folio 107
COB 276 Folio 122
COB 276 Folio 135
COB 276 Folio 151
COB 276 Folio 832
-------------------------------------------------------------------------------
86
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Dative ▇. ▇. ▇▇▇▇▇▇▇▇, Dative COB 167 Folio 163
Test. Exec Test. Exec/Gulf Refining
February 24, 1953 Company
-------------------------------------------------------------------------------
Operating Agreement ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇ ▇▇▇ ___ Folio ___
March 16, 1961 Oil Corporation, et al
-------------------------------------------------------------------------------
The above described Lease(s) INSOFAR AND ONLY INSOFAR AS the Lease(s)
cover(s) and bear(s) upon the lands contained within the boundaries of the H(8)
RZ SUA (also referred to as the H(8) (FBZ) SUA), created by Louisiana Office of
Conservation Order No. 396-O-1, dated effective July 18, 2000; and the WB 7 ▇▇
▇▇, created by Louisiana Office of Conservation Order No. 396-N-1, dated
effective May 8, 1973, all as shown on the plat attached hereto as Exhibit D-1,
subject to all burdens applicable thereto.
5. ▇.▇. ▇▇▇▇▇▇▇, et al, Nos. 7 & 7D
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
Louisiana S.L. 451 State of Louisiana/Tide COB 97 Folio 504
November 20, 1939 Water Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 2203 State of Louisiana/Gulf COB 164 Folio 700
October 22, 1952 Refining Company and
Tidewater Associated Oil
Company
-------------------------------------------------------------------------------
Louisiana S.L. 3263 State of Louisiana/The COB 201 Folio 394
August 16, 1957 British-American Oil
Production Company, et al
-------------------------------------------------------------------------------
BLD `D'/`E'/`K' Board of Commissioners COB 88 Folio 453
June 11, 1938 for the Buras Levee
District/Delta
Development Co. Inc.
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et COB 160 Folio 818
December 18, 1951 al/Gulf Refining Company
-------------------------------------------------------------------------------
87
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et
In January 1, 1961 al/Gulf Oil Corporation In Counterpart
COB 243 Folio 717
COB 243 Folio 734
COB 243 Folio 751
COB 243 Folio 767
COB 243 Folio 784
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇ et al ▇. ▇. ▇▇▇▇▇▇▇▇▇ et In Counterpart
January 1, 1964 al/Gulf Oil Company
COB 276 Folio 79
COB 276 Folio 92
COB 276 Folio 107
COB 276 Folio 122
COB 276 Folio 135
COB 276 Folio 151
COB 276 Folio 832
-------------------------------------------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇, Dative ▇. ▇. ▇▇▇▇▇▇▇▇, Dative COB 167 Folio 163
Test. Exec Test. Exec/Gulf Refining
February 24, 1953 Company
-------------------------------------------------------------------------------
Operating Agreement ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇/▇▇▇▇ ▇▇▇ ___ Folio ___
March 16, 1961 Oil Corporation, et al
-------------------------------------------------------------------------------
The above described Lease(s) INSOFAR AND ONLY INSOFAR AS the Lease(s)
cover(s) and bear(s) upon the lands contained within the boundaries of the H(8)
RZ SUA (also referred to as the H(8) (FBZ) SUA), created by Louisiana Office of
Conservation Order No. 396-O-1, dated effective July 18, 2000; and the WB 7 ▇▇
▇▇, created by Louisiana Office of Conservation Order No. 396-N-1, dated
effective May 8, 1973, all as shown on the plat attached hereto as Exhibit E-1,
LESS AND EXCEPT an undivided 5.6% of 8/8ths interest in and to the above and
foregoing described Assigned Premises, which is hereby reserved to ASSIGNOR,
subject to all burdens applicable thereto.
88
6. World Assets
All lands covered by the following Lease:
-------------------------------------------------------------------------------
LEASE/DATE LESSOR/LESSEE RECORDED
(Plaquemines Parish)
-------------------------------------------------------------------------------
World Assets, Inc., et al Northcoast Oil COB 994 Folio 521
June 1, 2000 Company/World Assets,
Inc., et al
-------------------------------------------------------------------------------