Exhibit 10.42
DEED OF TRUST,
ASSIGNMENT, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
FROM
PACIFIC ENERGY RESOURCES LTD.
(Organizational I.D. Number 3794132)
TO
CHICAGO TITLE COMPANY, a California corporation, TRUSTEE
FOR THE BENEFIT OF AND TO
▇. ▇▇▇▇ & COMPANY, AGENT
Dated as of November 30, 2006
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF
FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.
THIS INSTRUMENT COVERS, AMONG OTHER THINGS, (A) GOODS WHICH ARE OR ARE TO BECOME
FIXTURES RELATED TO THE REAL PROPERTY DESCRIBED HEREIN, AND (B) AS-EXTRACTED
COLLATERAL RELATED TO THE REAL PROPERTY DESCRIBED HEREIN (INCLUDING WITHOUT
LIMITATION OIL, GAS, OTHER MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH AND ACCOUNTS ARISING OUT OF THE SALE AT THE WELLHEAD OR
MINEHEAD THEREOF). THIS INSTRUMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES REFERENCED IN
EXHIBIT A HERETO AND SUCH FILING SHALL SERVE, AMONG OTHER PURPOSES, AS A FIXTURE
FILING AND AS A FINANCING STATEMENT COVERING AS-EXTRACTED COLLATERAL. THE
MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY
CONCERNED, WHICH INTEREST IS DESCRIBED IN SECTION 1.1 OF THIS INSTRUMENT.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW
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AGENT OR THE TRUSTEE (AS HEREINAFTER DEFINED) TO SELL THE MORTGAGED PROPERTIES
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WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR (AS
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HEREINAFTER DEFINED) UNDER THIS MORTGAGE.
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DEED OF TRUST,
ASSIGNMENT, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
(this "MORTGAGE")
ARTICLE I.
GRANTING CLAUSES; SECURED INDEBTEDNESS
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Section 1.1. GRANT AND MORTGAGE. PACIFIC ENERGY RESOURCES LTD., A
DELAWARE CORPORATION (herein called "MORTGAGOR"), for good and valuable
consideration, the receipt and sufficiency of which are 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 GRANT, BARGAIN,
SELL, CONVEY, TRANSFER, ASSIGN AND SET OVER to CHICAGO TITLE COMPANY, a
California corporation, Trustee (the "TRUSTEE"), IN TRUST for the benefit of ▇.
▇▇▇▇ & Company, as Agent ("AGENT"), WITH POWER OF SALE (pursuant to this
Mortgage and applicable law) the entirety of Mortgagor's interest in and to the
following described properties, rights, and interests (the "MORTGAGED
PROPERTIES"):
A. The oil, gas and/or other mineral properties, mineral
servitudes, and/or mineral rights which are described in EXHIBIT A
attached hereto and made a part hereof;
B. Without limitation of the foregoing, all other right, title
and interest of Mortgagor of whatever kind or character (whether now
owned or hereafter acquired by operation of law or otherwise) in and to
(i) the oil, gas and/or mineral leases or other agreements described in
EXHIBIT A hereto, (ii) the lands described or referred to in EXHIBIT A
(or described in any of the instruments described or referred to in
EXHIBIT A), without regard to any limitations as to specific lands or
depths that may be set forth in EXHIBIT A hereto or in any of the
leases or other agreements described in EXHIBIT A hereto, and (iii) any
other lands (including submerged lands) located anywhere in the United
States of America or located offshore the United States of America but
within the offshore area over which the United States of America or any
State thereof asserts jurisdiction;
C. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all presently
existing and hereafter created oil, gas and/or mineral unitization,
pooling and/or communitization agreements, declarations and/or orders,
and in and to the properties, rights and interests covered and the
units created thereby (including units formed under orders, rules,
regulations or other official acts of any federal, state or other
authority having jurisdiction), which cover, affect or otherwise relate
to the properties, rights and interests described in clause A or B
above;
D. All of Mortgagor's interest in and rights under (whether
now owned or hereafter acquired by operation of law or otherwise) all
presently existing and hereafter created operating agreements,
equipment leases, production sales contracts, processing agreements,
transportation agreements, gas balancing agreements, farmout and/or
farm-in agreements, salt water disposal agreements, area of mutual
interest agreements, and other contracts and/or agreements which cover,
affect, or otherwise relate to the properties, rights and interests
described in clause A, B or C above or to the operation of such
properties, rights and interests or to the treating, handling, storing,
processing, transporting or marketing of oil, gas, other hydrocarbons,
or other minerals produced from (or allocated to) such properties,
rights and interests (including those contracts listed in EXHIBIT A
hereto), as same may be amended or supplemented from time to time;
E. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all improvements,
fixtures, and other real and/or personal property (including all
platforms, ▇▇▇▇▇, pumping units, wellhead equipment, tanks, pipelines,
flow lines, gathering lines, compressors, dehydration units,
separators, meters, buildings, injection facilities, salt water
disposal facilities, and power, telephone and telegraph lines), and all
easements, servitudes, rights-of-way, surface leases, licenses, permits
and other surface rights, which are now or hereafter used, or held for
use, in connection with the properties, rights and interests described
in clause A, B or C above, or in connection with the operation of such
properties, rights and interests, or in connection with the treating,
handling, storing, processing, transporting or marketing of oil, gas,
other hydrocarbons, or other minerals produced from (or allocated to)
such properties, rights and interests; and
F. All rights, estates, powers and privileges of Mortgagor
appurtenant to the foregoing rights, interests and properties.
TO HAVE AND TO HOLD the Mortgaged Properties unto the Trustee, and its
successors or substitutes in this trust, and to its or their successors and
assigns, in trust, however, upon the terms, provisions and conditions herein set
forth. Mortgagor will warrant and defend title to the Property (as hereinafter
defined), free and clear of all liens, security interests, and encumbrances
except for Permitted Liens (as defined in the Credit Agreement, hereinafter
defined) against the claims and demands of all persons claiming or to claim the
same or any part thereof.
Section 1.2. SCOPE OF MORTGAGE. This Mortgage is a deed of trust and
mortgage of both real and personal property, a security agreement, a financing
statement and an assignment, and also covers goods which are or are to become
fixtures, as-extracted collateral, and all proceeds thereof.
Section 1.3. GRANT 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 Agent a security
interest in the entire interest of Mortgagor (whether now owned or hereafter
acquired by operation of law or otherwise) in and to:
(a) 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 when the Production to
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which such proceeds relate occurred), and together with all liens and security
interests securing payment of the proceeds of the Production, including 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
1.3, all payments received in lieu of Production (regardless of when such
payments accrued, and/or the events which gave rise to such payments occurred),
including "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 of whatever nature now or
hereafter located on or used or held for use in connection with the Mortgaged
Properties (or in connection with the operation thereof or the treating,
handling, storing, processing, transporting, or marketing of Production), and
all licenses and permits of whatever nature now or hereafter used or held for
use in connection with the Mortgaged Properties (or in connection with the
operation thereof or the treating, handling, storing, processing, transporting,
or marketing of Production), and all renewals or replacements of the foregoing
or substitutions for the foregoing;
(d) all contracts, contract rights, choses in action (i.e.,
rights to enforce contracts or to bring claims thereunder) and other general
intangibles (regardless of whether the same arose, and/or the events which gave
rise to the same occurred, on or before or after the date hereof) related to the
Mortgaged Properties, the operation thereof (whether Mortgagor is operator or
non-operator), or the treating, handling, separation, stabilization, storing,
processing, transporting, gathering, or marketing of Production (including any
of the same relating to payment of proceeds of Production or to payment of
amounts which could constitute Payments in Lieu of Production); provided,
however, that to the extent the granting of the security interest under this
Mortgage is prohibited by any of such contracts and would cause or result in a
default under any of such contracts, Mortgagor shall not be deemed to have
granted such security interest in such contracts to the extent such prohibition
is enforceable;
(e) without limitation of the generality of the foregoing, any
rights and interests of Mortgagor under any present or future hedge or swap
agreements, cap, floor, collar, exchange, forward or other hedge or protection
agreements or transactions relating to interest rates or 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;
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(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) without limitation of or by any of the foregoing, all
rights, titles and interests now owned or hereafter acquired by Mortgagor in any
and all goods, inventory, equipment, as-extracted collateral, documents, money,
instruments, intellectual property, certificated securities, uncertificated
securities, investment property, letters of credit, rights to proceeds of
written letters of credit and other letter-of-credit rights, commercial tort
claims, deposit accounts, payment intangibles, general intangibles, contract
rights, chattel paper (including electronic chattel paper and tangible chattel
paper), rights to payment evidenced by chattel paper, software, supporting
obligations and accounts, wherever located, and all rights and privileges with
respect thereto (all of the properties, rights and interests described in
subsections (a), (b), (c), (d), (e), and (f) above, subsection (h) below, and
this subsection (g) being herein sometimes collectively called the
"COLLATERAL"); and
(h) all proceeds of the Collateral (the Mortgaged Properties,
the Collateral and the proceeds of the Mortgaged Properties and of the
Collateral being herein sometimes collectively called the "PROPERTY").
Except as otherwise expressly provided in this Mortgage, all terms in this
Mortgage relating to the Collateral and the grant of the foregoing security
interest which are defined in the applicable Uniform Commercial Code (the "UCC")
shall have the meanings assigned to them in Article 9 (or, absent definition in
Article 9, in any other Article) of the UCC, as those meanings may be amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the UCC have, at
all times, the broadest and most inclusive meanings possible. Accordingly, if
the UCC shall in the future be amended or held by a court to define any term
used herein more broadly or inclusively than the UCC in effect on the date of
this Mortgage, then such term, as used herein, shall be given such broadened
meaning. If the UCC shall in the future be amended or held by a court to define
any term used herein more narrowly, or less inclusively, than the UCC in effect
on the date of this Mortgage, such amendment or holding shall be disregarded in
defining terms used in this Mortgage.
Section 1.4. LOAN DOCUMENTS AND OTHER OBLIGATIONS. This Mortgage is
made to secure and enforce the payment and performance of the following
obligations, indebtedness, loans, and liabilities:
(a) All indebtedness and other obligations of Mortgagor, or
any other Credit Party (as defined in the Credit Agreement), now or hereafter
incurred or arising pursuant to the provisions of that certain Credit and
Guaranty Agreement dated as of November 30, 2006 among Mortgagor, certain
Subsidiaries of Mortgagor, ▇. ▇▇▇▇ & Company, individually and in its capacity
as Administrative Agent for the benefit of the Lenders, and the lenders from
time to time parties thereto (such lenders being herein called "LENDERS"), and
all supplements thereto and amendments or modifications thereof, and all
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agreements given in substitution therefor or in restatement, renewal or
extension thereof, in whole or in part (such Credit Agreement as the same may
from time to time be supplemented, amended or modified, and all other agreements
given in substitution therefor or in restatement, renewal or extension thereof,
in whole or in part, being herein called the "CREDIT AGREEMENT");
(b) The Loans (as defined in the Credit Agreement) that may be
made from time to time by Lenders to Mortgagor pursuant to the Credit Agreement,
and all promissory notes evidencing such Loans, bearing interest as provided in
the Credit Agreement;
(c) Payment of and performance of any and all present or
future obligations of Mortgagor or any other Credit Party (defined in the Credit
Agreement) according to the terms of any agreement providing for options, swaps,
floors, caps, collars, forward sales or forward purchases involving interest
rates, commodities or commodity prices, equities, currencies, bonds, or indexes
based on any of the foregoing, or any other derivative agreement or other
similar agreement or arrangement, in each case now existing or hereafter entered
into between Mortgagor or such Credit Party and one or more Lenders (or any one
or more affiliates of any Lenders); provided that if any such counterparty
ceases to be a Lender under the Credit Agreement or an affiliate of a Lender
under the Credit Agreement, such obligations shall be included in the secured
indebtedness only to the extent such obligations arise from transactions entered
into prior to the time such counterparty ceased to be a Lender under the Credit
Agreement or an affiliate of a Lender under the Credit Agreement;
(d) All indebtedness, covenants and other obligations now or
hereafter incurred or arising pursuant to the provisions of the Credit
Agreement, 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 Credit Agreement (the Credit
Agreement, this Mortgage and such other instruments being herein sometimes
collectively called the "LOAN DOCUMENTS"); and
(e) 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 1.4, 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.
Section 1.5. SECURED INDEBTEDNESS. The indebtedness referred to in
Section 1.4, 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."
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ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
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Section 2.1. Mortgagor represents, warrants, and covenants as follows:
(a) TITLE AND PERMITTED ENCUMBRANCES. Mortgagor has, and
Mortgagor covenants to maintain, good and defensible title to the fee interests
in real property and the oil and gas leasehold interests comprising the
Property, in each case free and clear of all liens, security interests, and
encumbrances except for Permitted Liens (as defined in the Credit Agreement).
The ownership by Mortgagor of the Mortgaged Properties does and will, with
respect to each well or unit identified on SCHEDULE I, attached hereto and made
a part hereof, entitle Mortgagor to receive (subject to the terms and provisions
of this Mortgage) a decimal or percentage share of the oil, gas and other
hydrocarbons produced from, or allocated to, such well or unit equal to not less
than the decimal or percentage share set forth, for such well or unit, in the
column headed "Net Revenue Interest" (or comparable reference) on SCHEDULE I,
and cause Mortgagor to be obligated to bear a decimal or percentage share of the
cost of operation of such well or unit equal to not more than the decimal or
percentage share set forth, for such well or unit, in the column headed "Working
Interest" (or comparable reference) on SCHEDULE I without a corresponding and
proportional increase in Mortgagor's "Net Revenue Interest" attributable
thereto. The above-described shares of production which Mortgagor is entitled to
receive and shares of expenses which Mortgagor is obligated to bear are not and
will not be subject to change (other than changes which arise pursuant to
non-consent provisions of operating agreements described in EXHIBIT A in
connection with operations hereafter proposed), except, and only to the extent
that, such changes are reflected in SCHEDULE I. There is not and will not be any
unexpired financing statement covering any part of the Property on file in any
public office naming any party other than Agent as secured party and other than
Permitted Liens (as defined in the Credit Agreement) allowed under Section
6.2(a)(ii) of the Credit Agreement.
(b) [Reserved].
(c) NOT ABANDON ▇▇▇▇▇; PARTICIPATE IN OPERATIONS. Mortgagor
will not, without prior written consent of Agent, abandon, or consent to the
abandonment of, any well producing from the Mortgaged Properties (or properties
unitized therewith) so long as such well is capable (or is subject to being made
capable through drilling, reworking or other operations which it would be
commercially feasible to conduct) of producing oil, gas, or other hydrocarbons
or other minerals in commercial quantities (as determined without considering
the effect of this Mortgage). Mortgagor will not, without prior written consent
of Agent, elect not to participate in a proposed operation on the Mortgaged
Properties where the effect of such election would be the forfeiture either
temporarily (i.e. until a certain sum of money is received out of the forfeited
interest) or permanently of any interest in the Mortgaged Properties.
(d) 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
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notice thereof to Agent and at Mortgagor's own cost and expense will diligently
endeavor to cure any defect that may be developed or claimed, and will take all
reasonably necessary and proper steps for the defense of such legal proceedings,
including the employment of counsel, the prosecution or defense of litigation
and the release or discharge of all adverse claims, and Trustee and Agent, or
either of them (whether or not named as parties to legal proceedings with
respect thereto), are hereby authorized and empowered to take such additional
steps as in their judgment and discretion may be reasonably 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 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
Agent or Trustee (as the case may be) and shall bear interest from the date
expended until paid at the rate described in Section 2.3 hereof, and the party
incurring such expenses shall be subrogated to all rights of the person
receiving such payment.
(e) INSURANCE. Mortgagor will carry insurance as required
under the Credit Agreement. 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.
(f) FURTHER ASSURANCES. Mortgagor will, on request of Agent,
(i) promptly correct any defect, error or omission which may be discovered in
the contents of this Mortgage, or in any other Loan Document, or in the
execution or acknowledgment of this Mortgage or any other Loan Document; and
(ii) execute, acknowledge, deliver and record and/or file such further
instruments (including further deeds of trust, mortgages, security agreements,
financing statements, continuation statements, and assignments of production,
accounts, funds, contract rights, general intangibles, and proceeds) and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and the other Loan Documents and to
more fully identify and subject to the liens and security interests hereof any
property intended to be covered hereby, including any renewals, additions,
substitutions, replacements, or appurtenances to the Property. Mortgagor shall
pay all reasonable costs connected with any of the foregoing.
(g) NOT A FOREIGN PERSON. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended,
(hereinafter called the "CODE"), Sections 1445 and 7701 (i.e. Mortgagor is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 2.2. COMPLIANCE BY OPERATOR. As to any part of the Mortgaged
Properties which is not a working interest, Mortgagor agrees to take all
reasonable action and to exercise all rights and remedies as are reasonably
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available to Mortgagor to cause the owner or owners of the working interest in
such properties to comply with the covenants and agreements contained herein;
and as to any part of the Mortgaged Properties which is a working interest but
which is operated by a party other than Mortgagor, Mortgagor agrees to take all
reasonable action and to exercise all rights and remedies as are reasonably
available to Mortgagor (including 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.
Section 2.3. PERFORMANCE ON MORTGAGOR'S BEHALF. Mortgagor agrees that,
if Mortgagor fails to perform any act or to take any action which hereunder
Mortgagor is required to perform or take, or to pay any money which hereunder
Mortgagor is required to pay, Agent, in Mortgagor's name or its own name, may,
but shall not be obligated to, perform or cause to be performed such act or take
such action or pay such money, and any expenses so incurred by Agent and any
money so paid by Agent shall be a demand obligation owing by Mortgagor to Agent
(which obligation Mortgagor hereby expressly promises to pay) and Agent, upon
making such payment, shall be subrogated to all of the rights of the person,
corporation or body politic receiving such payment. Each amount due and owing by
Mortgagor to Trustee and/or Agent and/or any Lender pursuant to this Section 2.3
or other sections of this Mortgage that specifically refer to this Section 2.3
shall bear interest each day, from the date of such expenditure or payment until
paid, at a rate as provided for past due principal on the Loans as set forth in
Section 2.8 of the Credit Agreement; all such amounts, together with such
interest thereon, shall be a part of the secured indebtedness and shall be
secured by this Mortgage.
Section 2.4. RECORDING. Mortgagor will cause this Mortgage and all
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating thereto to be recorded, filed,
re-recorded and refiled in such manner and in such places as Trustee or Agent
shall reasonably request and will pay all such recording, filing, re-recording
and refiling taxes, fees and other charges.
Section 2.5. REPORTING COMPLIANCE. Mortgagor agrees to comply with any
and all reporting requirements applicable to the transaction evidenced by the
secured indebtedness which are set forth in any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority, and further
agrees upon request of Agent to furnish Agent with evidence of such compliance.
Section 2.6. 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 no
further obligation shall exist to provide credit or advance funds to Mortgagor
or the maker of any promissory note (or other obligor with respect to other
indebtedness) secured hereby, then, at Mortgagor's request and expense, this
Mortgage shall be released as provided in the Credit Agreement; provided,
however, that, notwithstanding such release, the indemnifications, and other
rights, which are provided herein or in the Credit Agreement to continue
following the release hereof shall continue in effect unaffected by such
release; and provided that if any payment to any Lender or Agent is held to
constitute a preference or a voidable transfer under applicable state or federal
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laws or if for any other reason any Lender or Agent is required to refund such
payment to the payor thereof or to pay the amount thereof to any third party,
this Mortgage shall be reinstated to the extent of such payment or payments.
ARTICLE III.
ASSIGNMENT OF PRODUCTION, ACCOUNTS, AND PROCEEDS
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Section 3.1. ASSIGNMENT OF PRODUCTION. Mortgagor does hereby absolutely
and unconditionally assign, transfer and set over to Agent all Production which
accrues to Mortgagor's interest in the Mortgaged Properties, all proceeds of
such Production and all Payments in Lieu of Production (herein collectively
referred to as the "PRODUCTION PROCEEDS"), together with the immediate and
continuing right to collect and receive such Production Proceeds. Mortgagor
directs and instructs any and all purchasers of any Production to pay to Agent
all of the Production Proceeds accruing to Mortgagor's interest until such time
as such purchasers have been furnished with evidence that all secured
indebtedness has been paid and that this Mortgage has been released. Mortgagor
agrees that no purchasers of the Production shall have any responsibility for
the application of any funds paid to Agent.
Section 3.2. EFFECTUATING PAYMENT OF PRODUCTION PROCEEDS TO AGENT.
Independent of the foregoing provisions and authorities herein granted,
Mortgagor agrees to execute and deliver any and all transfer orders, division
orders and other instruments that may be requested by Agent or that may be
required by any purchaser of any Production for the purpose of effectuating
payment of the Production Proceeds to Agent. If under any existing sales
agreements, other than division orders or transfer orders, any Production
Proceeds are required to be paid by the purchaser to Mortgagor so that under
such existing agreements payment cannot be made of such Production Proceeds to
Agent, Mortgagor's interest in all Production Proceeds under such sales
agreements and in all other Production Proceeds which for any reason may be paid
to Mortgagor shall, when received by Mortgagor, constitute trust funds in
Mortgagor's hands and shall be immediately paid over to Agent. Without
limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints
Agent as Mortgagor's special attorney-in-fact (with full power of substitution,
either generally or for such periods or purposes as Agent may from time to time
prescribe) in the name, place and stead of Mortgagor to do any and every act and
exercise any and every power that Mortgagor might or could do or exercise
personally with respect to all Production and Production Proceeds (the same
having been assigned by Mortgagor to Agent pursuant to Section 3.1 hereof),
expressly inclusive, but not limited to, the right, power and authority to:
(a) Execute and deliver in the name of Mortgagor any and all
transfer orders, division orders, letters in lieu of transfer orders,
indemnifications, certificates and other instruments of every nature that may be
requested or required by any purchaser of Production from any of the Mortgaged
Properties for the purposes of effectuating payment of the Production Proceeds
to Agent or which Agent may otherwise deem necessary or appropriate to effect
the intent and purposes of the assignment contained in Section 3.1; and
(b) If under any product sales agreements other than division
orders or transfer orders, any Production Proceeds are required to be paid by
the purchaser to Mortgagor so that under such existing agreements payment cannot
be made of such Production Proceeds to Agent, to make, execute and enter into
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such sales agreements or other agreements as are necessary to direct Production
Proceeds to be payable to Agent;
giving and granting unto said attorney-in-fact full power and authority to do
and perform any and every act and thing whatsoever necessary and requisite to be
done as fully and to all intents and purposes, as Mortgagor might or could do if
personally present; and Mortgagor shall be bound thereby as fully and
effectively as if Mortgagor had personally executed, acknowledged and delivered
any of the foregoing certificates or documents. The powers and authorities
herein conferred upon Agent may be exercised by Agent through any person who, at
the time of the execution of the particular instrument, is an officer of Agent.
The power of attorney herein conferred is granted for valuable consideration and
hence is coupled with an interest and is irrevocable so long as the secured
indebtedness, or any part thereof, shall remain unpaid. All persons dealing with
Agent or any substitute shall be fully protected in treating the powers and
authorities conferred by this paragraph as continuing in full force and effect
until advised by Agent that all the secured indebtedness is fully and finally
paid. Agent may, but shall not be obligated to, take such action as it deems
appropriate in an effort to collect the Production Proceeds and any reasonable
expenses (including reasonable attorney's fees) so incurred by Agent shall be a
demand obligation of Mortgagor and shall be part of the secured indebtedness,
and shall bear interest each day, from the date of such expenditure or payment
until paid, at the rate described in Section 2.3 hereof.
Section 3.3. CHANGE OF PURCHASER. To the extent a default has occurred
hereunder and is continuing, should any person now or hereafter purchasing or
taking Production fail to make payment promptly to Agent of the Production
Proceeds, Agent shall, subject to then existing contractual prohibitions, have
the right to make, or to require Mortgagor to make, a change of purchaser, and
the right to designate or approve the new purchaser, and Agent shall have no
liability or responsibility in connection therewith so long as ordinary care is
used in making such designation.
Section 3.4. APPLICATION OF PRODUCTION PROCEEDS. Any Production
Proceeds received by Agent shall be applied by Agent in accordance with the
provisions of the Credit Agreement.
Section 3.5. RELEASE FROM LIABILITY; INDEMNIFICATION. Agent and its
successors and assigns are hereby released and absolved from all liability for
failure to enforce collection of the Production Proceeds and from all other
responsibility in connection therewith, except the responsibility of each to
account to Mortgagor for funds actually received by each. Mortgagor agrees to
indemnify and hold harmless Agent (for purposes of this paragraph, the term
"AGENT" shall include the directors, officers, partners, employees and agents of
Agent and any persons or entities owned or controlled by or affiliated with
Agent) from and against all claims, demands, liabilities, losses, damages
(including consequential damages), causes of action, judgments, penalties, costs
and expenses (including reasonable attorneys' fees and expenses) imposed upon,
asserted against or incurred or paid by Agent by reason of the assertion that
Agent received, either before or after payment in full of the secured
indebtedness, funds from the Production 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
10
violation of laws, rules, regulations and/or orders governing such sales), and
Agent shall have the right to defend against any such claims or actions,
employing attorneys of its own selection, and if not furnished with indemnity
satisfactory to it, Agent shall have the right to compromise and adjust any such
claims, actions and judgments, and in addition to the rights to be indemnified
as herein provided, all amounts paid by Agent in compromise, satisfaction or
discharge of any such claim, action or judgment, and all court costs, attorneys'
fees and other expenses of every character expended by Agent pursuant to the
provisions of this section shall be a demand obligation (which obligation
Mortgagor hereby expressly promises to pay) owing by Mortgagor to Agent and
shall bear interest, from the date expended until paid, at the rate described in
Section 2.3 hereof. The foregoing indemnities shall not terminate upon the
release, foreclosure or other termination of this Mortgage but will survive such
release, foreclosure of this Mortgage or conveyance in lieu of foreclosure, or
other termination, and the repayment of the secured indebtedness and the
discharge and release of this Mortgage and the other documents evidencing and/or
securing the secured indebtedness. WITHOUT LIMITATION, IT IS THE INTENTION OF
MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES AND INDEMNITIES SHALL
APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS, DEMANDS,
LIABILITIES, LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), CAUSES OF
ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES AND EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE
OUT OF THE NEGLIGENCE, WHETHER ACTIVE OR PASSIVE, OF SUCH (AND/OR ANY OTHER)
INDEMNIFIED PARTY. However, such indemnities shall not apply to any particular
indemnified party (but shall apply to the other indemnified parties) to the
extent the subject of the indemnification is caused by or arises out of the
gross negligence or willful misconduct of such particular indemnified party.
Section 3.6. MORTGAGOR'S ABSOLUTE OBLIGATION TO PAY LOANS. Nothing
herein contained shall detract from or limit the obligations of Mortgagor to
make prompt payment of the Loans, and any and all other secured indebtedness, at
the time and in the manner provided herein and in the Loan Documents, regardless
of whether the Production and Production Proceeds herein assigned are sufficient
to pay same, and the rights under this Article III shall be cumulative of all
other rights under the Loan Documents.
ARTICLE IV.
REMEDIES UPON DEFAULT
---------------------
Section 4.1. DEFAULT. The term "default" as used in this Mortgage shall
mean the occurrence of an "Event of Default" as defined in the Credit Agreement.
Section 4.2. ACCELERATION OF SECURED INDEBTEDNESS. The secured
indebtedness may be (and in certain circumstances shall automatically be)
accelerated as provided in the Credit Agreement
11
Section 4.3. PRE-FORECLOSURE REMEDIES. Upon the occurrence of a
default, Agent is authorized, prior or subsequent to the institution of any
foreclosure proceedings, to enter upon the Property, or any part thereof, and to
take possession of the Property and all books and records relating thereto, and
to exercise without interference from Mortgagor any and all rights which
Mortgagor has with respect to the management, possession, operation, protection
or preservation of the Property. If necessary to obtain the possession provided
for above, Agent may invoke any and all remedies to dispossess Mortgagor.
Mortgagor agrees to peacefully surrender possession of the Property upon default
if requested by Agent. All costs, expenses and liabilities of every character
incurred by Agent in managing, operating, maintaining, protecting or preserving
the Property shall constitute a demand obligation (which obligation Mortgagor
hereby expressly promises to pay) owing by Mortgagor to Agent and shall bear
interest from date of expenditure until paid at the rate described in Section
2.3 hereof, all of which shall constitute a portion of the secured indebtedness
and shall be secured by this Mortgage and by any other instrument securing the
secured indebtedness. In connection with any action taken by Agent pursuant to
this Section 4.3, AGENT SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR
RESULTING FROM ANY ACT OR OMISSION OF AGENT (INCLUDING AGENT'S OWN NEGLIGENCE,
WHETHER ACTIVE OR PASSIVE) IN MANAGING THE PROPERTY UNLESS SUCH LOSS IS CAUSED
BY THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR BAD FAITH OF AGENT, nor shall
Agent be obligated to perform or discharge any obligation, duty or liability of
Mortgagor arising under any agreement forming a part of the Property or arising
under any Permitted Lien (as defined in the Credit Agreement) or otherwise
arising. Mortgagor hereby assents to, ratifies and confirms any and all actions
of Agent with respect to the Property taken under this Section 4.3, other than
gross negligence, willful misconduct, or bad faith of Agent.
Section 4.4. FORECLOSURE.
(a) Upon the occurrence of a default;
(i) Trustee is authorized and empowered and it shall
be Trustee's special duty at the request of Agent to sell the Mortgaged
Properties, or any part thereof, as an entirety or in parcels as Agent
may elect, at such place or places and otherwise in the manner and upon
such notice as may be required by law or, in the absence of any such
requirement, as Trustee may deem appropriate. If Trustee shall have
given notice of sale hereunder, any successor or substitute Trustee
thereafter appointed may complete the sale and the conveyance of the
property pursuant thereto as if such notice had been given by the
successor or substitute Trustee conducting the sale. As to those
Mortgaged Properties located in the State of California (or within the
offshore area over which the United States of America asserts
jurisdiction and to which the laws of such state are applicable with
respect to this Mortgage and/or the liens or security interests created
hereby), Trustee is requested, authorized and empowered to record a
written notice of default and election to sell and, after a lapse of
such time as is required by law, following recordation of such notice,
give a notice of sale as required by law and sell such Mortgaged
Properties at the time and place of sale fixed in such notice to the
highest bidder for cash. Trustee shall deliver to such purchaser or
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purchasers thereof a trustee's deed conveying the property so sold,
which shall not contain any covenant or warranty, express or implied.
The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF
SALE MAY ALLOW AGENT OR TRUSTEE TO SELL THE MORTGAGED
PROPERTIES WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON
DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE.;
(ii) Commence an action to foreclosure this Mortgage;
and/or
(iii) Exercise all other rights and remedies provided
herein, in this Mortgage or any other Loan Document or other document
or agreement now or hereafter securing all or any portion of the
secured indebtedness, or otherwise as provided by applicable law.
(b) Upon the occurrence of a default, Agent may exercise its
rights of enforcement with respect to the Collateral under the applicable
Uniform Commercial Code or any other statute in force in any state to the extent
the same is applicable law. Cumulative of the foregoing and the other provisions
of this Section 4.4:
(i) Agent may enter upon the Mortgaged Properties or
otherwise upon Mortgagor's premises to take possession of, assemble and
collect the Collateral or to render it unusable; and
(ii) Agent may require Mortgagor to assemble the
Collateral and make it available at a place Agent designates which is
mutually convenient to allow Agent to take possession or dispose of the
Collateral; and
(iii) written notice mailed to Mortgagor as provided
herein at least five (5) days prior to the date of public sale of the
Collateral or prior to the date after which private sale of the
Collateral will be made shall constitute reasonable notice; and
(iv) in the event of a foreclosure of the liens
and/or security interests evidenced hereby, the Collateral, or any part
thereof, and the Mortgaged Properties, or any part thereof, may, at the
option of Agent, be sold, as a whole or in parts, together or
separately (including where a portion of the Mortgaged Properties is
sold, the Collateral related thereto may be sold in connection
therewith); and
(v) the expenses of sale provided for in clause FIRST
of Section 4.7 shall include the reasonable expenses of retaking the
Collateral, or any part thereof, holding the same and preparing the
same for sale or other disposition; and
(vi) should, under this subsection, the Collateral be
disposed of other than by sale, any proceeds of such disposition shall
be treated under Section 4.7 as if the same were sales proceeds.
13
(c) To the extent permitted by applicable law, the sale
hereunder of less than the whole of the Property shall not exhaust the powers of
sale herein granted or the right to judicial foreclosure, and successive sale or
sales may be made until the whole of the Property shall be sold, and, if the
proceeds of such sale of less than the whole of the Property shall be less than
the aggregate of the indebtedness secured hereby and the expense of conducting
such sale, this Mortgage and the liens and security interests hereof shall
remain in full force and effect as to the unsold portion of the Property just as
though no sale had been made; provided, however, that Mortgagor shall never have
any right to require the sale of less than the whole of the Property. In the
event any sale hereunder is not completed or is defective in the opinion of
Agent, such sale shall not exhaust the powers of sale hereunder or the right to
judicial foreclosure, and Agent shall have the right to cause a subsequent sale
or sales to be made. Any sale may be adjourned by announcement at the time and
place appointed for such sale without further notice except as may be required
by law. The Trustee or his successor or substitute acting under power of sale
may appoint or delegate any one or more persons as agent to perform any act or
acts necessary or incident to any sale held by it (including the posting of
notices and the conduct of sale), and such appointment need not be in writing or
recorded. Any and all statements of fact or other recitals made in any deed or
deeds, or other instruments of transfer, given in connection with a sale as to
nonpayment of the secured indebtedness or as to the occurrence of any default,
or as to all of the secured indebtedness having been declared to be due and
payable, or as to the request to sell, or as to notice of time, place and terms
of sale and the properties to be sold having been duly given, or, with respect
to any sale by the Trustee, or any successor or substitute trustee, as to the
refusal, failure or inability to act of Trustee or any substitute or successor
trustee or the appointment of any substitute or successor trustee, or as to any
other act or thing having been duly done, shall be taken as prima facie evidence
of the truth of the facts so stated and recited. Notwithstanding any reference
herein to the Credit Agreement or any other Loan Document, all persons dealing
with the Mortgaged Properties shall be entitled to rely on any document, or
certificate, of Agent as to the occurrence of an event, such as an Event of
Default, and shall not be charged with or forced to review any provision of any
other document to determine the accuracy thereof. With respect to any sale held
in foreclosure of the liens and/or security interests covered hereby, it shall
not be necessary for the Trustee, Agent, any public officer acting under
execution or order of the court or any other party to have physically present or
constructively in his/her or its possession, either at the time of or prior to
such sale, the Property or any part thereof.
Section 4.5. EFFECTIVE AS MORTGAGE. This instrument shall be effective
as a mortgage as well as a deed of trust and upon the occurrence of a default
may be foreclosed as to the Mortgaged Properties, or any portion thereof, in any
manner permitted by applicable law, and any foreclosure suit may be brought by
Trustee or by Agent. TO THE EXTENT, IF ANY, REQUIRED TO CAUSE THIS INSTRUMENT TO
BE SO EFFECTIVE AS A MORTGAGE AS WELL AS A DEED OF TRUST, MORTGAGOR HEREBY
MORTGAGES THE MORTGAGED PROPERTIES TO AGENT. In the event a foreclosure
hereunder as to the Mortgaged Properties, or any part thereof, shall be
commenced by Trustee, or his substitute or successor, Agent may at any time
before the sale of such properties direct Trustee to abandon the sale, and may
then institute suit for the foreclosure of this Mortgage as to such properties.
14
It is agreed that if Agent should institute a suit for the foreclosure of this
Mortgage, Agent may at any time before the entry of a final judgment in said
suit dismiss the same, and require Trustee, its substitute or successor, to sell
the Mortgaged Properties, or any part thereof, in accordance with the provisions
of this Mortgage.
Section 4.6. RECEIVER. In addition to all other remedies herein
provided for, Mortgagor agrees that, upon the occurrence of a default, Agent
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 Agent, and agrees that such appointment shall in no manner impair,
prejudice or otherwise affect the rights of Agent under Article III hereof.
Mortgagor expressly waives notice of a hearing for appointment of a receiver and
the necessity for bond or an accounting by the receiver. Nothing herein is to be
construed to deprive Agent or any Lender of any other right, remedy or privilege
it may now or hereafter have under the law to have a receiver appointed. Any
money advanced by Agent in connection with any such receivership shall be a
demand obligation (which obligation Mortgagor hereby expressly promises to pay)
owing by Mortgagor to Agent and shall bear interest, from the date of making
such advancement by Agent until paid, at the rate described in Section 2.3
hereof.
Section 4.7. PROCEEDS OF FORECLOSURE. The proceeds of any sale held in
foreclosure of the liens and/or security interests evidenced hereby shall be
applied:
FIRST, to the payment of all necessary costs and expenses
incident to such foreclosure sale, including all court costs and
charges of every character in the event foreclosed by suit or any
judicial proceeding and including a reasonable fee to the Trustee if
such sale was made by the Trustee acting under the provisions of
Section 4.4.(a);
SECOND, to the payment of the secured indebtedness (including
the principal, interest and attorneys' fees due and unpaid under the
Credit Agreement and the amounts due and unpaid and owed under this
Mortgage) in such manner and order as provided by the Credit Agreement;
and
THIRD, the remainder, if any there shall be, shall be paid to
Mortgagor, or to Mortgagor's heirs, devisees, representatives,
successors or assigns, or such other persons as may be entitled thereto
by law.
Section 4.8. LENDER AS PURCHASER. Any Lender shall have the right to
become the purchaser at any sale held in foreclosure of the liens and/or
security interests evidenced hereby, and any Lender purchasing at any such sale
shall have the right to credit upon the amount of the bid made therefor, to the
extent necessary to satisfy such bid, the secured indebtedness owing to such
Lender, or if such Lender holds less than all of such indebtedness, the pro rata
part thereof owing to such Lender, accounting to all other Lenders not joining
in such bid in cash for the portion of such bid or bids apportionable to such
non-bidding Lender or Lenders.
15
Section 4.9. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence of a
default, Agent shall have the right to proceed with foreclosure of the liens
and/or security interests evidenced hereby without declaring the entire secured
indebtedness due, and in such event, any such foreclosure sale may be made
subject to the unmatured part of the secured indebtedness and shall not in any
manner affect the unmatured part of the secured indebtedness, but as to such
unmatured part, this Mortgage shall remain in full force and effect just as
though no sale had been made. The proceeds of such sale shall be applied as
provided in Section 4.7 except that the amount paid under clause SECOND thereof
shall be only the matured portion of the secured indebtedness and any proceeds
of such sale in excess of those provided for in clauses FIRST and SECOND
(modified as provided above) shall be applied as provided in Section 3.4 hereof.
Several sales may be made hereunder without exhausting the right of sale for any
unmatured part of the secured indebtedness.
Section 4.10. REMEDIES CUMULATIVE. All remedies herein provided for are
cumulative of each other and of all other remedies existing at law or in equity
and are cumulative of any and all other remedies provided for in any other Loan
Document, and, in addition to the remedies herein provided, there shall continue
to be available all such other remedies as may now or hereafter exist at law or
in equity for the collection of the secured indebtedness and the enforcement of
the covenants herein and the foreclosure of the liens and/or security interests
evidenced hereby, and the resort to any remedy provided for hereunder or under
any such other Loan Document or provided for by law shall not prevent the
concurrent or subsequent employment of any other appropriate remedy or remedies.
Section 4.11. DISCRETION AS TO SECURITY. Agent may resort to any
security given by this Mortgage or to any other security now existing or
hereafter given to secure the payment of the secured indebtedness, in whole or
in part, and in such portions and in such order as may seem best to Agent in its
sole and absolute discretion, and any such action shall not in any way be
considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 4.12. MORTGAGOR'S WAIVER OF CERTAIN RIGHTS. To the full extent
Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter
in force providing for any appraisement, valuation, stay, extension or
redemption, and Mortgagor, for Mortgagor, Mortgagor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the extent permitted by applicable
law, hereby waives and releases all rights of appraisement, valuation, stay of
execution, redemption, notice of intention to mature or declare due the whole of
the secured indebtedness, notice of election to mature or declare due the whole
of the secured indebtedness and all rights to a marshaling of assets of
Mortgagor, including the Property, or to a sale in inverse order of alienation
in the event of foreclosure of the liens and/or security interests hereby
created. Mortgagor shall not have or assert any right under any statute or rule
of law pertaining to the marshaling of assets, sale in inverse order of
alienation, the exemption of homestead, the administration of estates of
decedents, or other matters whatever to defeat, reduce or affect the right under
the terms of this Mortgage to a sale of the Property for the collection of the
secured indebtedness without any prior or different resort for collection, or
the right under the terms of this Mortgage to the payment of the secured
16
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.
Section 4.13. MORTGAGOR AS TENANT POST-FORECLOSURE. In the event there
is a foreclosure sale hereunder and at the time of such sale Mortgagor or
Mortgagor's representatives, successors or assigns or any other persons claiming
any interest in the Property by, through or under Mortgagor are occupying or
using the Property, or any part thereof, each and all shall immediately become
the tenant of the purchaser at such sale, which tenancy shall be a tenancy from
day to day, terminable at the will of either landlord or tenant, at a reasonable
rental per day based upon the value of the property occupied, such rental to be
due daily to the purchaser. To the extent permitted by applicable law, the
purchaser at such sale shall, notwithstanding any language herein apparently to
the contrary, have the sole option to demand immediate possession following the
sale or to permit the occupants to remain as tenants at will. In the event the
tenant fails to surrender possession of said property upon demand, the purchaser
shall be entitled to institute and maintain a summary action for possession of
the property (such as an action for forcible entry and detainer) in any court
having jurisdiction.
Section 4.14. REQUEST FOR NOTICE. Notwithstanding the notice provisions
in Section 5.13, Mortgagor hereby requests a copy of any notice of default and
that any notice of sale hereunder be mailed to it at the address set forth below
its signature on this Mortgage.
ARTICLE V.
MISCELLANEOUS
-------------
Section 5.1. 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 as-extracted collateral, minerals and other substances of value which
may be extracted from the earth (including 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 for
record in the real property or other appropriate records of each county 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 boundaries), and
may also be filed in the offices of the Bureau of Land Management or the
Minerals Management Service or any relevant state agency (or any successor
agencies). This Mortgage shall also be effective as a financing statement
17
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 Agent from which
information concerning the security interests hereunder may be obtained is the
address of Agent set forth at the end of this Mortgage.
Section 5.2. REPRODUCTION OF MORTGAGE AS FINANCING STATEMENT. A carbon,
photographic, facsimile or other reproduction of this Mortgage or of any
financing statement relating to this Mortgage shall be sufficient as a financing
statement for any of the purposes referred to in Section 5.1. Without limiting
any other provision herein, Mortgagor hereby authorizes Agent to file one or
more financing statements, or renewal or continuation statements thereof,
describing the Collateral.
Section 5.3. NOTICE TO ACCOUNT DEBTORS. In addition to, but without
limitation of, the rights granted in Article III hereof, Agent may, at any time
after a default has occurred that is continuing, notify the account debtors or
obligors of any accounts, chattel paper, negotiable instruments or other
evidences of indebtedness included in the Collateral to pay Agent directly.
Section 5.4. WAIVERS. Agent may at any time and from time to time in
writing waive compliance by Mortgagor with any covenant herein made by Mortgagor
to the extent and in the manner specified in such writing, or consent to
Mortgagor's doing any act which hereunder Mortgagor is prohibited from doing, or
to Mortgagor's failing to do any act which hereunder Mortgagor is required to
do, to the extent and in the manner specified in such writing, or release any
part of the Property or any interest therein or any Production Proceeds from the
lien and security interest of this Mortgage, without the joinder of Trustee. Any
party liable, either directly or indirectly, for the secured indebtedness or for
any covenant herein or in any other Loan Document may be released from all or
any part of such obligations without impairing or releasing the liability of any
other party. No such act shall in any way impair any rights or powers hereunder
except to the extent specifically agreed to in such writing.
Section 5.5. 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 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 Production Proceeds),
or any part thereof or any interest therein, or any release or indulgence
granted to any endorser, guarantor or surety of any secured indebtedness.
Section 5.6. ACTS NOT CONSTITUTING WAIVER. Any default may be waived
without waiving any other prior or subsequent default. Any default may be
remedied without constituting a waiver by Agent or any Lender of the default
remedied. Neither failure to exercise, nor delay in exercising, any right, power
or remedy upon any default shall be construed as a waiver of such default or as
a waiver of the right to exercise any such right, power or remedy at a later
date. No single or partial exercise of any right, power or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise thereof,
and every such right, power or remedy hereunder may be exercised at any time and
from time to time. No modification or waiver of any provision hereof nor consent
to any departure by Mortgagor therefrom shall in any event be effective unless
the same shall be in writing and signed by Agent and then such waiver or consent
shall be effective only in the specific instances, for the purpose for which
given and to the extent therein specified. No notice to nor demand on Mortgagor
in any case shall of itself entitle Mortgagor to any other or further notice or
demand in similar or other circumstances. Acceptance of any payment in an amount
18
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 (except to the extent waived by Required Lenders (as defined
in the Credit Agreement) in writing in compliance with Section 10.5 of the
Credit Agreement).
Section 5.7. MORTGAGOR'S SUCCESSORS. In the event the ownership of the
Property or any part thereof becomes vested in a person other than Mortgagor,
then, without notice to Mortgagor, such successor or successors in interest may
be dealt with, with reference to this Mortgage and to the indebtedness secured
hereby, in the same manner as with Mortgagor, without in any way vitiating or
discharging Mortgagor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Property, no forbearance, and no extension of the time for the payment of
the indebtedness secured hereby shall operate to release, discharge, modify,
change or affect, in whole or in part, the liability of Mortgagor hereunder or
for the payment of the indebtedness or performance of the obligations secured
hereby or the liability of any other person hereunder or for the payment of the
indebtedness secured hereby.
Section 5.8. SUBROGATION TO EXISTING LIENS. The proceeds of the Loans
have been used to pay indebtedness secured by certain outstanding liens,
security interests, charges or prior encumbrances against the Property
(including those in favor of Laurus Master Fund, Ltd. and Erato Corp.), such
proceeds have been advanced at Mortgagor's request, and the Lenders (and Trustee
and Mortgagee on behalf of the Lenders) shall be subrogated to any and all
rights, security interests and liens owned by any owner or holder of such
outstanding liens, security interests, charges or encumbrances, irrespective of
whether said liens, security interests, charges or encumbrances are released,
and it is expressly understood that, in consideration of the payment of such
indebtedness, Mortgagor hereby waives and releases all demands and causes of
action for offsets and payments to, upon and in connection with the said
indebtedness.
Section 5.9. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If any
part of the secured indebtedness cannot be lawfully secured by this Mortgage or
if any part of the Property cannot be lawfully subject to the lien and security
interest hereof to the full extent of such indebtedness, then all payments made
shall be applied on said indebtedness first in discharge of that portion thereof
which is not secured by this Mortgage.
Section 5.10. COMPLIANCE WITH USURY LAWS. It is the intent of
Mortgagor, Lender and all other parties to the Loan Documents to contract in
strict compliance with applicable usury law from time to time in effect. In
furtherance thereof, it is stipulated and agreed that, as more fully provided in
the Credit Agreement, 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 collected, charged, taken, reserved, or received by applicable
law from time to time in effect.
Section 5.11. SUBSTITUTE TRUSTEE. The Trustee may resign by an
instrument in writing addressed to Agent, or Trustee may be removed at any time
with or without cause by an instrument in writing executed by Agent. In case of
the death, resignation, removal, or disqualification of Trustee, or if for any
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reason Agent shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or
successor trustee, then Agent shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without other
formality than appointment and designation in writing executed by Agent and the
authority hereby conferred shall extend to the appointment of other successor
and substitute trustees successively until the indebtedness secured hereby has
been paid in full, or until the Property is sold hereunder. Such appointment and
designation by Agent shall be full evidence of the right and authority to make
the same and of all facts therein recited. If Agent is a corporation or
association and such appointment is executed in its behalf by an officer of such
corporation or association, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the corporation
or association. Agent may act through an agent or attorney-in-fact in
substituting trustees. Upon the making of any such appointment and designation,
all of the estate and title of Trustee in the Mortgaged Properties shall vest in
the named successor or substitute Trustee and such successor or substitute shall
thereupon succeed to, and shall hold, possess and execute, all the rights,
powers, privileges, immunities and duties herein conferred upon Trustee; but
nevertheless, upon the written request of Agent or of the successor or
substitute Trustee, the Trustee ceasing to act shall execute and deliver an
instrument transferring to such successor or substitute Trustee all of the
estate and title in the Mortgaged Properties of the Trustee so ceasing to act,
together with all the rights, powers, privileges, immunities and duties herein
conferred upon the Trustee, and shall duly assign, transfer and deliver any of
the properties and moneys held by said Trustee hereunder to said successor or
substitute Trustee. All references herein to Trustee shall be deemed to refer to
Trustee (including any successor or substitute appointed and designated as
herein provided) from time to time acting hereunder.
Section 5.12. NO LIABILITY FOR TRUSTEE. THE TRUSTEE SHALL NOT BE LIABLE
FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE
RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING THE
TRUSTEE'S NEGLIGENCE), EXCEPT FOR TRUSTEE'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. The Trustee shall have the right to rely on any instrument, document
or signature authorizing or supporting any action taken or proposed to be taken
by the Trustee hereunder, believed by the Trustee in good faith to be genuine.
All moneys received by Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by
law), and Trustee shall be under no liability for interest on any moneys
received by him hereunder. Mortgagor hereby ratifies and confirms any and all
acts which the herein named Trustee or its successor or successors, substitute
or substitutes, shall do lawfully by virtue hereof. Mortgagor will reimburse
Trustee for, and indemnify and save Trustee harmless against, any and all
liability and expenses (including attorneys fees) which may be incurred by
Trustee in the performance of his duties. The foregoing indemnities shall not
terminate upon the release, foreclosure or other termination of this Mortgage
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but will survive such release, termination and/or foreclosure of this Mortgage,
or conveyance in lieu of foreclosure, and the repayment of the secured
indebtedness and the discharge and release of this Mortgage and the other
documents evidencing and/or securing the secured indebtedness. Any amount to be
paid hereunder by Mortgagor to Trustee shall be a demand obligation owing by
Mortgagor to Trustee and shall be subject to and covered by the provisions of
Section 2.3 hereof.
Section 5.13. NOTICES. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed sufficiently given or furnished if delivered in compliance with
and according to Section 10.1 of the Credit Agreement. Notwithstanding the
foregoing, or anything else in the Loan Documents which may appear to the
contrary, any notice given in connection with a foreclosure of the liens and/or
security interests created hereunder, or otherwise in connection with the
exercise by Agent, any Lender or Trustee of their respective rights hereunder or
under any other Loan Document, which is given in a manner permitted by
applicable law shall constitute proper notice; without limitation of the
foregoing, notice given in a form required or permitted by statute shall (as to
the portion of the Property to which such statute is applicable) constitute
proper notice.
Section 5.14. INVALIDITY OF CERTAIN PROVISIONS. A determination that
any provision of this Mortgage is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Mortgage to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
Section 5.15. INTERPRETATION, ETC. 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. References herein to any Section, Exhibit or Schedule shall
be to a Section, Exhibit or Schedule, as the case may be, hereof unless
otherwise specifically provided. The word "or" is not exclusive. The use herein
of the word "include" or "including", when following any general statement, term
or matter, shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as "without
limitation" or "but not limited to" or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement,
term or matter. This Mortgage has been reviewed and negotiated by sophisticated
parties with access to legal counsel and no rule of construction shall apply
hereto or thereto which would require or allow this Mortgage to be construed
against any party because of its role in drafting this Mortgage.
Section 5.16. CERTAIN CONSENTS. Except where otherwise expressly
provided herein, in any instance hereunder where the approval, consent or the
exercise of judgment of Agent or any Lender is required, the granting or denial
of such approval or consent and the exercise of such judgment shall be within
the sole discretion of such party, and such party shall not, for any reason or
to any extent, be required to grant such approval or consent or exercise such
judgment in any particular manner, regardless of the reasonableness of either
the request or the judgment of such party.
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Section 5.17. 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
owed but for the fact that the same may be unenforceable due to the existence of
a bankruptcy, reorganization or similar proceeding.
Section 5.18. AUTHORITY OF AGENT. The persons constituting Lenders may,
by agreement among themselves, provide for and regulate the exercise of rights
and remedies hereunder, but, unless and until modified to the contrary in
writing signed by all such persons and recorded in the same counties as this
Mortgage is recorded, (i) all persons other than Mortgagor and its affiliates
shall be entitled to rely on the releases, waivers, consents, approvals,
notifications and other acts (including the appointment of substitute or
successor trustee, or trustees, hereunder and the bidding in of all or any part
of the secured indebtedness held by any one or more Lenders, whether the same be
conducted under the provisions hereof or otherwise) of Agent, without inquiry
into any such agreements or the existence of required consent or approval of any
persons constituting Lender and without the joinder of any party other than
Agent in such releases, waivers, consents, approvals, notifications or other
acts and (ii) all notices, requests, consents, demands and other communications
required or permitted to be given hereunder may be given to Agent.
Section 5.19. COUNTERPARTS. This Mortgage may be executed in several
counterparts, all of which are identical, except that, to facilitate
recordation, certain counterparts hereof may include only those portions of
EXHIBIT A or SCHEDULE I 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, and other portions of
EXHIBIT A or SCHEDULE I shall be included in such counterparts by reference
only. All of such counterparts together shall constitute one and the same
instrument. Complete copies of this Mortgage containing the entire EXHIBIT A and
SCHEDULE I have been retained by Mortgagor and Agent.
Section 5.20. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants,
representations, indemnifications and conditions hereof shall be binding upon
Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the
benefit of Agent, Trustee and each person constituting Lender and their
respective successors and assigns, and shall constitute covenants running with
the Mortgaged Properties. Should the agency under which Agent serves be
terminated, or otherwise cease to exist, Lenders (including the respective
successors and assigns of each person constituting Lender named herein) shall be
deemed to be the successors to Agent. All references in this Mortgage to
Mortgagor, Agent, Trustee or Lenders shall be deemed to include all such
successors and assigns.
Section 5.21. 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.
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Section 5.22. CHOICE OF LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA 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 GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS
RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY
INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE TRUSTEE OR THE AGENT GRANTED
HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF THE PROPERTY
LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.
Section 5.23. PLACE OF PAYMENT. All secured indebtedness which may be
owing hereunder at any time by Mortgagor shall be payable at the place
designated in the Credit Agreement (or if no such designation is made, at the
address of Agent indicated at the end of this Mortgage), or at such other place
as Agent may designate in writing.
Section 5.24. WAIVERS. In addition to all the other waivers agreed to
and made by Mortgagor as set forth in this Mortgage, by executing this Mortgage,
Mortgagor freely, irrevocably and unconditionally waives all rights and defenses
that the Mortgagor may have because the Mortgagor's debt is secured by any other
mortgage or interest in real property. This means, among other things:
(a) Agent may collect from the Mortgagor without first
foreclosing on any real or personal property collateral pledged by any
Subsidiary of Mortgagor or any other obligor.
(b) If Agent forecloses on any real property collateral
pledged by any Subsidiary of Mortgagor or any other obligor:
(i) The amount of the debt may be reduced only by the
price for which that collateral is sold at the foreclosure sale, even
if the collateral is worth more than the sale price; and
(ii) The Agent may exercise its rights and remedies
under this Mortgage, even if the Agent, by foreclosing on other real
property collateral, has destroyed any right the Mortgagor may have to
collect from any of its Subsidiaries. This is an unconditional and
irrevocable waiver of any rights and defenses the Mortgagor may have
because Mortgagor's debt is secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based
upon Section 580a, 580b, 580d, or 726 of the California Code of Civil
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Procedure otherwise available as the result of foreclosure on any real
property other than the Mortgaged Properties;
(c) Mortgagor waives all rights and defenses arising out of an
election of remedies by Agent, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed the Mortgagor's rights of subrogation and reimbursement against
the principal by the operation of Section 580d of the California Code of Civil
Procedure or otherwise; and
(d) Mortgagor waives the Mortgagor's or other surety's rights
of subrogation, reimbursement, indemnification and contribution and other
rights, benefits and defenses, if any, otherwise available to Mortgagor pursuant
to California law, including, without limitation, the rights, benefits or
defenses set forth in California Civil Code Sections 2787 to 2855, inclusive,
2899 or 3433.
Section 5.25. PRIORITY. Mortgagor is acquiring certain of the Mortgaged
Properties as part of a series of related transactions in which (a) first,
assignments of those Mortgaged Properties are made to Mortgagor by Aera Energy,
LLC and SWEPI LP, (b) second, certain overriding royalty interests are carved
out of all Mortgaged Properties and are conveyed by Mortgagor to MTGLQ
Investors, L.P., a Delaware limited partnership, SPCP Group, L.L.C., a Delaware
limited liability company, and SPCP Group III LLC, a Delaware limited liability
company, and (c) third, the liens and security interests under this Mortgage are
granted by Mortgagor. Mortgagor and, by their acceptance hereof, all
beneficiaries hereof acknowledge and agree that (x) this Mortgage burdens all
properties and interests assigned to Mortgagor under such assignments, save and
except the overriding royalties carved out of such properties and interests
prior to the delivery hereof in favor of MTGLQ Investors, L.P., SPCP Group,
L.L.C. and SPCP Group III LLC, and (y) none of the overriding royalties granted
by Mortgagor to MTGLQ Investors, L.P., SPCP Group, L.L.C. and SPCP Group III LLC
remain the property of Mortgagor at the time of delivery of this Mortgage and
none of such overriding royalties is subject to the liens and security interests
granted by Mortgagor hereunder.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Mortgagor has executed this Mortgage (dated for
reference purposes as of the date first above written) on the date set forth in
the acknowledgement below.
PACIFIC ENERGY RESOURCES LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
President
The address of Agent is: The address of Mortgagor is:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------
The address of the Trustee is:
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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