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EXHIBIT 4.6
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
DATED AS OF JUNE 13, 1997
BETWEEN
TRANSTEXAS GAS CORPORATION
(MORTGAGOR AND DEBTOR)
TO
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TRUSTEE
FOR THE BENEFIT OF
TRANSAMERICAN ENERGY CORPORATION
(MORTGAGEE AND SECURED PARTY)
The mailing address of the above-named Mortgagee and Secured
Party is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; the mailing address of Mortgagor and Debtor is ▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇; and the mailing address of the Trustee is c/o Baker & ▇▇▇▇▇,
L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
ATTENTION OF RECORDING OFFICERS: This instrument is a
Mortgage of both real and personal property and is, among other things, a
Security Agreement and Financing Statement under the Uniform Commercial Code.
This instrument creates a lien on rights in or relating to lands of Mortgagor
which are described in Exhibit A attached hereto.
Recorded counterparts should be returned to:
Firstar Bank of Minnesota, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
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MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
This Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement, from TRANSTEXAS GAS CORPORATION, a Delaware
corporation ("Mortgagor"), to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee (the "Trustee") for
the benefit of TRANSAMERICAN ENERGY CORPORATION (together with its successors or
assigns, "Mortgagee"), is made and entered into as of this 13th day of June,
1997.
RECITALS
Mortgagor and TransAmerican Energy Corporation, a Delaware corporation
(together with its successors or assigns, "Mortgagee") entering into that
certain Loan Agreement, dated as of June 13, 1997 (as amended or modified and in
effect from time to time, the "Loan Agreement").
Pursuant to and on the terms and conditions set forth in the Loan
Agreement, Mortgagee is making a loan to Mortgagor in the aggregate principal
amount of $450,000,000 (the "Loan").
Mortgagor is entering into this Mortgage pursuant to its obligations
under the Loan Agreement and for the purpose, among other things, of securing
and providing for the repayment of the Loan.
ARTICLE I
Definitions
1.1 Certain Defined Terms. Unless the context otherwise
requires, as used in this Mortgage and all amendments, extensions,
modifications, renewals, supplements or waivers hereof or hereto, the following
terms shall have the following meanings, which meanings shall be equally
applicable to both the singular and plural form of such terms.
"Business Day" shall have the meaning assigned to that term
in the Loan Agreement.
"Collateral" shall have the meaning set out in Article VIII
of this Mortgage.
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"Debtor" shall have the meaning set out in Article VIII of
this Mortgage.
"Equipment" shall mean all of Mortgagor's now owned or
hereafter acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, wellsite compressors, rolling stock and related equipment and other
assets accounted for as equipment by Mortgagor on its financial statements, all
proceeds thereof, and all documents of title, books, records, ledger cards,
files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information relating to
the foregoing; provided, however, that "Equipment" shall not include any assets
constituting a part of a natural gas pipeline or the compression or dehydration
equipment used in the operation of any such pipeline.
"Event of Default" shall have the meaning assigned to that
term in Section 6.1.
"Highest Lawful Rate" shall have the meaning ascribed
thereto in the Loan Agreement.
"Hydrocarbons" shall mean oil, gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products separated, settled and dehydrated therefrom and all products refined
therefrom, including, without limitation, kerosene, liquified petroleum gas,
refined lubricating oils, diesel fuel, drip gasoline and natural gasoline and
all other minerals.
"Indebtedness" shall mean the following indebtedness and
liabilities of Mortgagor (and any extensions, renewals, refundings, increases,
substitutions, replacements, consolidations, modifications or rearrangements of
such indebtedness and liabilities, whether or not Mortgagor executes any
extension agreement or renewal instrument):
(a) all amounts advanced or expended by Mortgagee in its
capacity as lender under the Loan Agreement or under or in connection with this
Mortgage, all reasonable costs and out-of-pocket expenses (excluding expenses
representing administrative overhead) at any time and from time to time incurred
by the Trustee or Mortgagee in connection with the administration and/or
enforcement of this Mortgage, the Note or the Loan Agreement (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel employed
by the Trustee or Mortgagee in connection therewith), and all sums due
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or to become due at any time and from time to time hereunder or under the Loan
Agreement to the Trustee or Mortgagee,
(b) all principal, premiums, accrued interest and any other
sums now or hereafter owing on the Note; and
(c) all other amounts payable by Mortgagor under the Loan
Agreement.
"Inventory" shall mean all of Mortgagor's now owned or hereafter
acquired line pipe, casing, drill pipe and other supplies accounted for as
inventory by Mortgagor on its financial statements (excluding any oil, natural
gas, condensate and natural gas liquids), all proceeds thereof, and all
documents of title, books, records, ledger cards, files, correspondence and
computer files, tapes, disks and related data processing software that at any
time evidence or contain information relating to the foregoing.
"Lands" shall mean that real property in Austin, Chambers,
Colorado, Goliad, Harris, Hidalgo, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇, Lavaca, Live Oak,
▇▇▇▇▇, ▇▇▇ Verde, Victoria, Walker, Webb, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Counties described,
referred to or covered by the Leases described in Exhibit A hereto and the
Pipelines in Exhibit B hereto, or the description of which is incorporated in
Exhibit A by reference to any other instrument or document, together with any
and all other real property, or interests in real property, in the State of
Texas in which Mortgagor has any interest, legal or beneficial, recorded or
unrecorded now owned or hereafter acquired; provided, however, that "Lands"
shall not include the fee interest in that certain real property located in
▇▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇▇ Counties and more particularly described on Exhibit C
attached hereto and made a part hereof.
"Leases" shall mean those Oil and Gas Leases covering Lands in
Austin, Chambers, Colorado, Goliad, Harris, Hidalgo, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇,
Lavaca, Live Oak, ▇▇▇▇▇, ▇▇▇ Verde, Victoria, Walker, Webb, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
Counties described in Exhibit A hereto, or the description of which is
incorporated in Exhibit A by reference to any other instrument or document,
together with any and all other Oil and Gas Leases or leasehold estates covering
Lands in the State of Texas including any lands pooled or unitized therewith, in
which, or in any portion of which, Mortgagor has an interest, now owned or
hereafter acquired as well as any extensions, renewals or replacements of or for
any of the foregoing.
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"Lobo Reserves" shall mean the reserves identified on the Reserve
Report as being located in the Lobo Area Trend Field.
"Material Production Sale Contracts" shall mean Production Sale
Contracts that, individually or in the aggregate, are material to the conduct or
value of Mortgagor's business.
"Mortgage" shall mean this Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement, as same may from time
to time be amended or modified and in effect.
"Mortgaged Property" shall have the meaning set out in Article II
to this Mortgage.
"Mortgagee" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"Mortgagor" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"Note" shall mean that certain Promissory Note, dated as of June
13, 1997, in the original principal amount of $450,000,000 by Mortgagor payable
to Mortgagee, as amended, modified, supplemented, restated, renewed, extended
or increased in amount from time to time.
"Oil and Gas Leases" shall include oil, gas and mineral leases and
shall also include subleases and assignments of operating rights.
"Operating Equipment" shall mean Mortgagor's interest in all
personal property, surface or subsurface machinery, equipment, facilities,
supplies or other property of whatsoever kind or nature (excluding drilling
rigs, drill pipe, mud pumps, trucks, automotive equipment or other property
taken to the premises to drill a well or for other similar temporary uses) now
or hereafter located on or under any of the Lands or Leases or on a unit
including all or part of the Lands or Leases or now or hereafter used, held for
use or useful in connection with the exploration, development, operation,
production, treatment, storage, processing or transportation of Hydrocarbons,
helium and/or other minerals produced or to be produced from or attributable to
the Lands or Leases, including, but not by way of limitation, all oil ▇▇▇▇▇, gas
▇▇▇▇▇, water ▇▇▇▇▇, injection ▇▇▇▇▇, casing, tubing, rods, pumps, pumping units
and engines, christmas
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trees, derricks, separators, gun barrels, flow lines, tanks, tank batteries, gas
systems (for gathering, treating, compression, disposal or injection),
chemicals, solutions, water systems (for treating, disposal and injection),
pipe, pipelines, boilers, meters, apparatus, compressors, liquid extractors,
connectors, valves, fittings, power plants, poles, lines, cables, wires,
transformers, starters and controllers, machine shops, tools, machinery and
parts, storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading docks,
loading racks and shipping facilities, fixtures and other appurtenances,
appliances and property of every kind and character, movable or immovable,
together with all improvements, betterments and additions, accessories and
attachments thereto and replacements thereof.
"Permitted Liens" shall have the meaning assigned to that term in
the Loan Agreement.
"Pipelines" shall mean the Pipeline Assets and all pipelines owned
and/or operating by Mortgagor for the gathering, transmission or distribution
of Hydrocarbons including, without limitation, those pipelines described in
Exhibit B attached hereto, and any interests in real property relating thereto.
"Pipeline Assets" shall mean all parts or aspects of the gas
pipeline system of Mortgagor now or hereafter situated on any of the Lands,
Rights-of-Way and Franchises, including, without limitation, the pipeline system
described in Exhibit B, and all fixtures, improvements, equipment, surface or
subsurface machinery, facilities, supplies, replacement parts, vehicles of every
description, all process control computer systems and equipment or other
property of whatsoever kind or nature, including, without limitation, all
buildings, structures, machinery, gas processing plants, Pipelines, stations,
substations, pumps, pumping stations, meter houses, metering stations, regulator
houses, ponds, tanks, scrapers and scraper traps, fittings, valves, connections,
cathodic or electrical protection by-passes, regulators, drips, meters, pumps,
pumping units, pumping stations, storage or tankage facilities, engines, pipes,
gates, telephone and telegraph lines, electric power lines, poles, wires,
casings, radio towers, fixtures, mechanical equipment, electrical equipment,
machine shops and other equipment, used or useful in connection therewith;
together with all of Mortgagor's liquid hydrocarbons, carbon dioxide, natural
gas liquids, refined petroleum products and other inventory fuels, carbon,
chemicals, electric energy and other consumable materials or products
manufactured, processed, generated, produced, transmitted, stored (whether above
or below ground) or purchased by
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Mortgagor for sale, exchange, distribution, consumption or transmission by
Mortgagor, including, without limitation, all system gas, drip gas and line
fill.
"Production Sale Contracts" shall mean, except to the extent that
the same constitute Receivables, all contracts now or hereafter in effect,
including, without limitation, any gas sales contracts, entered into by
Mortgagor, or Mortgagor's predecessors in interest, for the production, sale,
purchase, exchange or processing of Hydrocarbons, helium and/or other minerals
produced from or attributable to the Subject Interests.
"Receivables" shall mean any and all of Mortgagor's now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York (excluding all intercompany
accounts), all products and proceeds thereof, and all books, records, ledger
cards, files, correspondence and computer files, tapes, disks or software that
at any time evidence or contain information relating to the foregoing.
"Reserve Report" shall have the meaning ascribed thereto in Section
3.1 hereof.
"Rights-of-Way and Franchises" shall mean all leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surfaces leases or rights, amendatory
grants and interests in land for the installation, maintenance and operation of
the Pipelines or the Pipeline Assets or any portion thereof, now owned or held
by Mortgagor, including, without limitation, those leases, leaseholds,
easements, rights-of-way, licenses, franchises, privileges, permits, ordinances,
grants, rights, consents, servitudes, surface leases or rights, amendatory
grants and interests in land applicable to the Pipelines or the Pipeline Assets
owned or held by Mortgaged and located in ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇▇
Counties and those leases, leaseholds, easements, rights-of-way, licenses,
franchises, privileges, permits, ordinances, grants, rights, consents,
servitudes, surfaces leases or rights, amendatory grants and interests in land
owned or held by Mortgagor and described in Exhibit B attached hereto or arising
by virtue of the documents described in Exhibit B attached hereto, which
descriptions of real property set forth in Exhibit B or incorporated by
reference to the documents described on Exhibit B are hereby made a part so that
all of the property rights, other rights and other assets described therein
shall be subject to this Mortgage to the same extent as if they were described
herein.
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"Secured Party" shall have the meaning set out in Article VIII of
this Mortgage.
"Subject Interests" shall mean each kind and character of right,
title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in, under or to the Leases and all right, title, interest or
estate, whether now owned or hereafter acquired, which Mortgagor has in and to
the Lands, together with each kind and character of right, title, interest or
estate now or hereafter vested in Mortgagor in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right, title,
interest or estate be under and by virtue of a Lease, a unitization or pooling
agreement, a unitization or pooling order, a mineral deed, a royalty deed, an
operating agreement, a revenue sharing agreement, a division order, a transfer
order, a farmout agreement, a fee simple conveyance or any other type of
contract, conveyance or instrument or under any other type of claim or title,
legal or equitable, recorded or unrecorded, all as the same shall be enlarged by
the discharge of any payments out of production or by the removal of any charges
or encumbrances to which any of same are subject.
"Subject Minerals" shall mean all Hydrocarbons, helium and/or other
minerals in, under, upon, produced or to be produced or which may be produced,
saved and sold from and which shall accrue and be attributable to the Subject
Interests, including, without limitation, all oil in tanks and all rents,
royalties, issues, profits, proceeds, products, revenues, and other income
arising from or attributable to the Subject Interests and Mortgagor's interest
therein.
"Trustee" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the State of Texas.
"Vehicles" shall mean all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
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ARTICLE II
Mortgage, Deed of Trust
2.1 Grant of Deed of Trust on Real Property and Security
Interest in Personal Property. To secure the payment of the Indebtedness and to
secure the performance of the covenants, agreements and obligations of Mortgagor
contained herein, in the Loan Agreement and in all other security documents
executed in accordance therewith, Mortgagor, for and in consideration of the
premises and of the debts and trusts hereinafter mentioned, except to the extent
that the same constitute Equipment, Inventory or Receivables, has granted,
bargained, sold, warranted, mortgaged, assigned, transferred and conveyed a
security interest, and by these presents does grant, bargain, sell, warrant,
mortgage, assign, transfer and convey and grant a security interest, unto the
Trustee, for the use and benefit of Mortgagee with power of sale, all of
Mortgagor's rights, titles, interests and estates, if any, in, to, under,
derived from or with respect to all of the following described real and personal
property, whether now owned or hereafter acquired, namely:
(a) the Subject Interests;
(b) the Subject Minerals;
(c) the Production Sale Contracts;
(d) the Operating Equipment;
(e) the Leases and the Lands;
(f) the Pipelines;
(g) the Pipeline Assets;
(h) the Rights-of-Way and Franchises;
(i) all unitization, communitization, operating agreements,
pooling agreements and declarations of pooled units and the properties covered
and the units created thereby (including all units formed under orders,
regulations, rules or other official acts of any federal, state or other
governmental agency providing for pooling or unitization, spacing orders or
other well permits
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and other instruments) which relate to or affect all or any portion of the
Subject Interests;
(j) all deposit accounts, contract rights, operating rights,
general intangibles, chattel paper, documents and instruments arising under any
of the foregoing, including without limitation, the Production Sale Contracts
and all transmission contracts or other contracts now or hereafter in effect
with respect to the Pipelines or the Pipeline Assets;
(k) all subleases, farmout agreements, assignments of
interests, assignments of operating rights, contracts, operating agreements,
bidding agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements, tenements,
hereditaments, improvements, appurtenances and benefits now existing or in the
future obtained and incident and appurtenant to any of the foregoing;
(l) all lease records, well records, production records and
accounting and other records and files which relate to any of the foregoing, and
all maps, data bases, manuals, information and data which relate to any of the
foregoing, including without limitation engineering, geological and geophysical
data;
(m) all income, revenues, rents, profits and proceeds
arising out of the gathering, transportation, processing or sale of Hydrocarbons
through the Pipelines and other accounts, contract rights, operating rights,
general intangibles, chattel paper, documents and instruments arising under any
of the foregoing, but expressly excluding therefrom Receivables and the stock of
any "Unrestricted Subsidiary" (as defined in the Loan Agreement);
(n) any liens and security interests in the Subject
Interests in favor of Mortgagor securing payment of proceeds from the sale of
the Subject Minerals including, but not limited to, those liens and security
interests provided for in Tex. Bus. & Com. Code ▇▇▇. Section 9.319 (Tex. UCC)
(▇▇▇▇▇▇ 1968), as amended;
(o) all other rights, titles and interests of Mortgagor in,
to and under or derived from the Lands, the Leases, the Rights-of-Way and
Franchises, the Production Sale Contracts and/or other properties described in
Exhibits A and B hereto;
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(p) any property that may from time to time hereafter, by
delivery or by writing of any kind executed by or on behalf of Mortgagor, be
subjected to the lien and security interest hereof by Mortgagor or by anyone
authorized on Mortgagor's behalf, and Mortgagee and Trustee are hereby
authorized to receive the same as additional security;
(q) all other property of every nature and kind and
wheresoever situated, now owned or hereafter acquired by Mortgagor or to which
Mortgagor is now or may hereafter be entitled at law or in equity, other than
Receivables, Inventory and Equipment; and
(r) any and all proceeds, returns, rents, royalties, issues,
profits, products, revenues and other income arising from or by virtue of the
sale, lease or other disposition of, or from any condemnation, eminent domain or
insurance payable with respect to damage, loss or destruction of, the items
described in subparagraphs (a) through (q) above;
together with any and all proceeds, products, increases, profits, substitutions,
replacements, renewals, additions, amendments and accessions of, to and for all
of the foregoing property. All the aforesaid properties, rights and interests
which are hereby subjected to the lien and/or security interest of this
instrument, together with any additions thereto which may be subjected to the
lien and/or security interest of this instrument by means of supplements hereto
or otherwise, other than Equipment, Inventory and Receivables, shall hereinafter
be referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever.
ARTICLE III
Particular Warranties and Representations of Mortgagor
Mortgagor hereby warrants and represents, as of the date hereof, to
the Trustee and Mortgagee as follows:
3.1 Leases. With respect to Leases covering all ▇▇▇▇▇ and Lands
to which value has been ascribed in that certain reserve report, prepared as of
February 1, 1997 (the "Reserve Report"), by Netherland, ▇▇▇▇▇▇ & Associates,
Inc., other than the Lobo Reserves: (a) the Leases are valid, subsisting leases
as
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to all such ▇▇▇▇▇ and Lands, and are superior and paramount to all other Oil and
Gas Leases respecting the properties to which they pertain and all rentals,
royalties and other amounts due and payable in accordance with the terms of the
Leases have been duly paid or provided for; (b) the Leases are in full force
and effect; and (c) except as disclosed in writing by Mortgagor to Mortgagee,
Mortgagor, and to the best of Mortgagor's knowledge all other parties to the
Leases, have performed in all material respects all obligations required to be
performed by them and are not in material default under nor in receipt of any
claim of material default under any Lease, and no event has occurred which,
with the passage of time or the giving of notice or both, would cause a
material breach of, or default under, any Lease, and Mortgagor has no knowledge
of any material breach or anticipated breach by the other parties to any Lease.
3.2 Documents. Each of the existing Material Production
Sale Contracts is valid, binding and enforceable in accordance with its
respective terms (except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or moratorium or other similar laws
relating to creditor's rights and by general equitable principles which may
limit the right to obtain equitable remedies (regardless of whether such
enforceability is considered in a proceeding at equity or at law), and except as
rights to indemnity thereunder may be limited by applicable law) and is in full
force and effect, and no material default on the part of any party thereto
exists thereunder. To the best knowledge of Mortgagor, all amounts due and
payable in accordance with the terms of each Material Production Sale Contract
have been duly paid or provided for and the obligations to be performed under
each of the Material Production Sale Contracts have been duly performed, in all
material respects in accordance with the terms of such contracts and any related
agreements, and in conformity with all applicable laws, rules, regulations and
orders of all courts and regulatory authorities having jurisdiction.
3.3 Title. Except for Permitted Liens, Mortgagor has (a)
good and indefeasible title to, and is possessed of, the portion of the
Mortgaged Property constituting real property other than the Pipeline Assets,
including, without limitation, those referenced in Exhibit A (it being
understood that indefeasible title as used herein shall mean such title to real
property as is customarily held in the oil and gas business), (b) good and
sufficient title to the portion of the Mortgaged Property constituting Pipeline
Assets or other personal property for the use and operation of such Pipeline
Assets as it has been used in the past and as it is proposed to be used in the
business of storing and transporting Hydrocarbons and other products and any
lack of title to such Pipeline Assets
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or personal property related thereto has not had and will not have any material
adverse effect on Mortgagor's ability to use the Pipeline Assets and related
personal property as it is proposed to be used in Mortgagor's business and will
not materially increase the cost of such use, and (c) good and sufficient title
to the portion of the Mortgaged Property constituting personal property that is
not described in the foregoing clause (b). Mortgagor owns, in the aggregate,
not significantly more than the amount of undivided working interests and not
significantly less than the amount of net revenue interests in the Leases set
forth in the Reserve Report. For purposes of this Paragraph 3.3, "working
interest" shall refer to Mortgagor's share of expense in the applicable Lease,
well or drilling and production unit shown in the Reserve Report, and "net
revenue interest" shall refer to Mortgagor's share of production from the
applicable Lease, well or drilling and production unit after satisfaction of all
royalties, overriding royalties, production payments or similar non-operating
interests. Mortgagor has obtained reconveyances or reassignments of record
title into Mortgagor of all production payments, limited working interests or
similar interests conveyed by Mortgagor's predecessor in title to various
vendors and servicers with respect to any drilling program that has "paid out,"
as that term is defined in the respective drilling agreements, as may be
necessary to vest in Mortgagor record title to the working interests and net
revenue interests as set forth in the Reserve Report. Each of the Material
Production Sale Contracts is free from any material credit, deduction,
allowance, defense, dispute, setoff, or counterclaim (other than current
charges provided for in such instruments but not yet due and payable), and there
is no material extension or indulgence with respect thereto. Mortgagor is not
aware of any defect in or challenge to its ownership of the rights or other
interests in any of the Mortgaged Property that would, individually or in the
aggregate, materially lessen the value of the Mortgaged Property for its use as
part of the Pipeline Assets or materially interfere with the ordinary conduct of
the business of Mortgagor or the use of the Mortgaged Property for the purposes
for which held, except as expressly disclosed to Mortgagee in writing.
3.4 No Liens. Except for Permitted Liens, the Mortgaged
Property is free of any and all claims, liens, charges, encumbrances, mortgages,
security interests, contracts, agreements, options, preferential purchase rights
or other restrictions or limitations of any nature or kind.
3.5 Power and Authority. Mortgagor has full power and
legal right to bargain, grant, sell, mortgage, assign, transfer, convey and
grant a security interest in all of the Mortgaged Property, all in the manner
and form herein provided and without obtaining the waiver, consent or approval
of any
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lessor, sublessor, governmental agency or entity or party whomsoever or
whatsoever, except as already obtained or to be obtained pursuant to the terms
of the Loan Agreement.
3.6 Contracts. Mortgagor is not obligated by virtue of any
prepayment under any Production Sale Contract or other similar contract
providing for the sale by Mortgagor of Hydrocarbons, helium and/or other
minerals, which contains a "take or pay" clause or under any similar prepayment
agreement or arrangement, including, without limitation, "gas balancing
agreements" to deliver Hydrocarbons, helium and/or other minerals (amounting to
a material portion of the Hydrocarbons, helium and/or other minerals covered
hereby) at some future time without then or thereafter receiving full payment
therefor.
3.7 No Governmental Approvals. Mortgagor warrants that no
approval or consent of any regulatory or administrative commission or
authority, or of any other governmental body, is necessary to authorize the
execution and delivery of this Mortgage and that no such approval or consent is
necessary to authorize the observance or performance by Mortgagor of the
covenants herein contained.
3.8 Producing ▇▇▇▇▇. All producing ▇▇▇▇▇ located on the
Lands have been drilled, operated and produced in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and are subject to no material
penalties on account of past production, and such ▇▇▇▇▇ are, in fact, bottomed
under and are producing from, and the well bores are wholly within, the Lands.
3.9 Principal Place of Business. The principal place of
business and chief executive office of Mortgagor is located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
3.10 Pipelines and Pipeline Assets. All Pipelines and
Pipeline Assets have been constructed and operated in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and, except as expressly disclosed in
writing to Mortgagee, are subject to no material penalties on account of past
operations.
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ARTICLE IV
Particular Covenants and Agreements of Mortgagor
Mortgagor hereby covenants to and agrees with Mortgagee as
follows:
4.1 Payment of the Indebtedness. Mortgagor will duly and
punctually pay the principal of and interest on all of the Indebtedness,
including each and every obligation owing under the Note as the same shall
become due and payable under the Note and in accordance with the terms of the
Loan Agreement.
4.2 Performance of Other Obligations. Mortgagor shall
duly and punctually perform and keep all other obligations required of Mortgagor
pursuant to the terms hereof, of the Loan Agreement and of any other documents
executed and delivered by Mortgagor in connection with the Loan Agreement.
4.3 Operation of Mortgaged Property. So long as the
Indebtedness or any part thereof remains unpaid, and whether or not Mortgagor is
the operator of the Mortgaged Property, Mortgagor shall, at Mortgagor's own
expense:
(a) do all things necessary to keep unimpaired
Mortgagor's rights and remedies in or under the Mortgaged Property and, except
as otherwise permitted hereby or in the Loan Agreement, shall (i) not abandon
any well or forfeit, surrender, release or default under (other than any default
that, individually or in the aggregate with all other such defaults, would not
have a material adverse effect on Mortgagor's business) any Lease, or in the
event Mortgagor is not the operator, shall use its best efforts to prevent any
of the above, unless undertaken in the ordinary course of business, (ii) enter
into or otherwise acquire obligations under Production Sale Contracts only on
terms and conditions to which a reasonably prudent producer, seller, purchaser,
or processor, as applicable, of Hydrocarbons, helium and/or other minerals
similar to those produced from or attributable to the Subject Interests, would
agree, and (iii) not abandon, sell, convey, assign, lease or otherwise transfer
any right, title or interest of Mortgagor into or under the Pipelines or the
Pipeline Assets, or consent to any of the foregoing;
(b) except as otherwise permitted in the Loan
Agreement, perform or cause to be performed, each and all covenants, agreements,
terms,
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conditions and limitations imposed upon Mortgagor or its predecessors in,
interest, except where any failure to so perform or cause to be performed,
individually or in the aggregate with all other such failures, would not have a
material adverse effect on Mortgagor's business, and expressly contained in (i)
the Leases and any instrument or document relating thereto, and (ii) any
assignment or other form of conveyance, under or through which the Leases, the
Pipelines, Pipeline Assets, Lands, or Rights-of-Way and Franchises, or an
undivided interest therein are now held, and perform or cause to be performed
all implied covenants and obligations imposed upon Mortgagor in connection
therewith or with any document or instrument relating thereto;
(c) cause, or in the event Mortgagor is not the
operator of the Subject Interests or the Pipeline Assets, use its best efforts
to cause, the Subject Interests and the Pipeline Assets to be maintained,
developed, protected against drainage, and continuously operated for the
production of Hydrocarbons, helium and/or other minerals, and the gathering,
storing, transmission and distribution of Hydrocarbons, as applicable, in a good
and workmanlike manner as would be operated by a prudent operator and in
compliance with all applicable operating agreements and contracts, and all
applicable federal, state and local laws, rules and regulations, excepting those
being contested in good faith in such a manner as not to jeopardize the
Trustee's or Mortgagee's rights in and to the Subject Interests or the Pipeline
Assets, as applicable;
(d) except as otherwise permitted in the Loan
Agreement, cause to be paid, promptly as and when due and payable, except where
the failure to make any such payments would not, individually or in the
aggregate, have a material adverse effect on Mortgagor's business, all rentals,
delay rentals, royalties and indebtedness payable in respect of the Subject
Interests, and all expenses incurred in or arising from the operation or
development of the Subject Interests, or, in the event Mortgagor is not the
operator, shall use its best efforts to cause each of the foregoing to be paid;
(e) cause the Operating Equipment necessary for the
Mortgagor's business operations to be kept in good and effective operating
condition (reasonable wear and tear excepted) and all repairs, renewals,
replacements, additions and improvements thereof or thereto, needful to the
production of Hydrocarbons, helium and/or other minerals, as applicable, from
the Subject Interests, to be promptly made;
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(f) except as otherwise permitted by the Loan
Agreement, cause the the Pipelines to be kept in good and effective operating
condition (reasonable wear and tear excepted), and all repairs, renewals,
replacements, additions and improvements thereof or thereto, needful to the
gathering, storing, transmission and distribution of Hydrocarbons through the
Pipelines, to be promptly made;
(g) except for Permitted Liens or as otherwise
permitted by the Loan Agreement, cause the Mortgaged Property or any part
thereof or the rents, issues, revenues, profits and other income therefrom to be
kept free and clear of all claims, liens, charges, mortgages, security
interests, encumbrances or other restrictions or limitations of any nature or
kind;
(h) maintain insurance for the Mortgaged Property in
accordance with the requirements of the Loan Agreement;
(i) comply with, or cause to be complied with, in all
material respects, or, if Mortgagor is not the operator of the Mortgaged
Property, use its best efforts to cause to be complied with, in all material
respects, all applicable and valid laws, rules and regulations of the United
States, the State of Texas or any other governmental body exercising
jurisdiction, with respect to the operation and development of the Lands and the
production and sale of Hydrocarbons, helium and/or other minerals, as
applicable, therefrom or the operating of the Pipeline Assets; and
(j) deliver, or cause to be delivered, to Mortgagee
a copy of any notice, demand or other communication from any other party to the
Leases or any Production Sale Contract, relating to any alleged, potential or
actual material breach thereunder or material breach of any of the covenants,
agreements, terms, or limitations thereof or purporting to terminate or in any
other way adversely affect the rights of Mortgagor thereunder.
4.4 Taxes. Subject to Mortgagor's right to contest same as
provided in the Loan Agreement, Mortgagor will pay or cause to be paid, before
delinquent, all lawful taxes, assessments and other charges of every kind and
character imposed upon this Mortgage or upon the Mortgaged Property or any part
thereof or upon the interest of the Trustee or Mortgagee therein (excluding
taxes upon the income of the Trustee or Mortgagee), or upon the income, rents,
issues, revenues, profits or other income from the Mortgaged Property, or
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incident to or in connection with the production of Hydrocarbons, helium or
other minerals therefrom, or the operation and development thereof.
4.5 Recording, Etc. Mortgagor will promptly and at
Mortgagor's expense record, register, deposit and file this and every other
instrument in addition or supplemental hereto in such offices and places and at
such times and as often as may be necessary to perfect, preserve, protect and
renew the lien and security interest hereof as a recorded lien on the real
property and fixtures now or hereafter comprising the Mortgaged Property and
perfected security interest on the personal property and fixtures now or
hereafter comprising the Mortgaged Property, as the case may be and the rights
and remedies of the Trustee and of Mortgagee hereunder, and otherwise will do
and perform all matters or things necessary or expedient to be done or observed
by reason of any law or regulation of the State of Texas or of the United States
of America or of any other competent authority, for the purpose of effectively
creating, maintaining and preserving the lien and security interest created by
this Mortgage and the perfection and priority thereof.
4.6 Sale or Mortgage of Mortgaged Property. Except for
Permitted Liens and as otherwise permitted by the Loan Agreement, Mortgagor will
not sell, convey, mortgage, pledge, assign, abandon or otherwise dispose of or
encumber the Mortgaged Property nor any portion thereof, nor any of Mortgagor's
rights, titles, interests or estates therein without first securing the express
written consent of Mortgagee.
4.7 Records, Statements and Reports. Mortgagor will keep
proper books of record and account in which complete and correct entries will be
made of Mortgagor's transactions in accordance with generally accepted
accounting principles.
4.8 Right of Entry and Inspection of Books. Mortgagee and
the agents of Mortgagee are hereby authorized (a) to the extent Mortgagor has
authority to do so, to enter upon the Lands, and all parts thereof, for the
purposes of investigating and inspecting the condition and operation thereof,
(b) to examine the books of account of Mortgagor, and (c) to discuss the
affairs, finances or accounts of Mortgagor and be advised as to the same by any
officer of Mortgagor, all at such reasonable times or intervals as Mortgagee may
desire.
4.9 Qualification to Do Business; Maintenance of Existence.
Mortgagor will (a) continue to be in good standing and duly qualified to
transact
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business in the State of Texas and (b) maintain its corporate existence, except
as otherwise permitted by the Loan Agreement.
4.10 Expenses. Mortgagor will promptly upon demand by
Mortgagee pay all reasonable costs and out- of-pocket expenses heretofore or
hereafter incurred by Mortgagee or the Trustee in connection with the
enforcement of any of the Trustee's and/or Mortgagee's rights hereunder.
4.11 Further Assurances. Mortgagor will execute and deliver
such other and further instruments and will use its best efforts to do such
other and further acts as in the opinion of Mortgagee may be necessary or
desirable to carry out more effectively the purposes of this instrument,
including, without limiting the generality of the foregoing, (a) prompt
correction of any defect which may hereafter be discovered in the title to the
Mortgaged Property or any part thereof other than Permitted Liens or in the
execution and acknowledgment of this instrument, the Note or other document
executed in connection herewith, (b) prompt execution and delivery of all
division or transfer orders that in the opinion of the Mortgagee are needed to
transfer effectively to Mortgagee the assigned proceeds of production from the
Subject Interests and (c) obtaining any necessary governmental approvals,
including, without limitation, those of the State of Texas.
4.12 Adverse Claim. Mortgagor will warrant and forever
defend, subject to the Permitted Liens, the title to the Mortgaged Property unto
the Trustee against every person whomsoever lawfully claiming the same or any
part thereof, and Mortgagor will maintain and preserve the priority of the lien
and security interest created hereby so long as any of the Indebtedness remains
unpaid. Should an adverse claim be made against or a cloud develop upon the
title to any part of the Mortgaged Property, other than Permitted Liens, or upon
the lien and security interest created by this Mortgage, Mortgagor agrees that
it will immediately defend such adverse claim or take appropriate action to
remove such cloud at Mortgagor's expense, and Mortgagor further agrees that
after prior notice to Mortgagor Mortgagee and/or the Trustee may take such other
action as either of them deems advisable to protect and preserve their interests
in the Mortgaged Property, and, in such event, Mortgagor will indemnify
Mortgagee and/or the Trustee against any and all costs, attorneys' fees and
other expenses which it or they may incur in defending against any such adverse
claim or taking action to remove any such cloud.
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4.13 Relocation of Offices. Mortgagor shall not relocate
its principal place of business or chief executive office to a county or state
other than that specified in Section 3.9 of this Mortgage or otherwise relocate
any material portion of the personal property comprising part of the Mortgaged
Property to a county or state other than that where it is presently located or
where, with respect to such property, Mortgagee has a perfected security
interest, unless, prior to such relocation, Mortgagor (a) gives 30 days' prior
written notice to Mortgagee, which notice shall include, without limitation, the
name of the county and state into which such relocation is to be made and (b)
prior to such relocation, executes and delivers all such additional documents
and performs all additional acts (including causing filings of public record and
paying all related fees and costs) as may be necessary or advisable in order to
continue and maintain the existence and priority of Mortgagee's security
interest in the personal property comprising part of the Mortgaged Property so
relocated.
4.14 Notice of Pooling or Unitization. Except as otherwise
provided in Section 9.1 hereof, Mortgagor will promptly notify Mortgagee in
writing upon the first filing of any petition or request with any governmental
or regulatory agency regarding any pooling or unitization arrangement pertaining
to the Mortgaged Property or any part thereof, and any pooling or unitization
arrangement which is imposed or which Mortgagor learns may be imposed on the
Mortgaged Property or any part thereof, which would cause Mortgagor to suffer a
significant reduction in income on a monthly basis from the Mortgaged Property.
4.15 Representations and Covenants Relating to Hazardous
Materials.
(a) Mortgagor is not in violation of any Federal,
state, local or foreign laws or regulations relating to pollution or protection
of human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
("Materials of Environmental Concern"), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively,
"Environmental Laws"), which violation, as defined below would have a material
adverse effect on Mortgagor. "Violation," as used herein, includes, but is not
limited to, noncompliance with any
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permit or other governmental authorization required under applicable
Environmental Laws and noncompliance with the terms and conditions of any such
permit or authorization. In addition, (a) except as previously disclosed in
writing to Mortgagee, Mortgagor has not received any communication (written or
oral), whether from a governmental authority, citizens' group, employee or
otherwise, alleging that Mortgagor is not in full compliance with any
Environmental Laws or permit or authorization required under applicable
Environmental Laws where such failure to comply fully would have a material
adverse effect on Mortgagor and (b) there are no circumstances that may prevent
or interfere with such full compliance in the future where such failure to
comply would have a material adverse effect on Mortgagor.
(b) To the knowledge of Mortgagor, there is no claim
action, cause of action, investigation or notice (written or oral) by any person
or entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location owned or
operated by Mortgagor, or circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law (collectively, "Environmental
Claims") pending or threatened against Mortgagor, except where such an
Environmental Claim would not have a material adverse effect on Mortgagor.
(c) To the knowledge of Mortgagor there are no past
or present actions, activities, circumstances, conditions, events or incidents,
including without limitation, the release, emission, discharge, presence or
disposal or any Material of Environmental Concern, that could form the basis of
any Environmental Claim against Mortgagor, which Environmental Claim would have
a material adverse effect on Mortgagor.
4.16 Mortgagor Holds as Nominee. In the event that the
Trustee or Mortgagee forecloses or attempts to foreclose on the Mortgaged
Property, but such foreclosure will not become effective as to some or all of
the Mortgaged Property unless and until the consent of a third party is
obtained, then Mortgagor agrees to hold title to such portion of the Mortgaged
Property as nominee for Mortgagee or any other party who would have acquired
such Mortgaged Property at foreclosure until such time as the necessary consents
are obtained. In acting as nominee, Mortgagor shall take such acts, and only
such acts, with respect to the Mortgaged Property as Mortgagee or any other
party who would have acquired
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the same may direct and the beneficial interest under such Mortgaged Property
shall run to Mortgagee or such other party. Mortgagor shall enter into a
nominee agreement in form and substance satisfactory to Mortgagee or such other
party and execute any other documents or agreements reasonably necessary to
effectuate the provisions of this section.
ARTICLE V
Assignment of Production
5.1 Assignment. Subject to the rights of the holder of any
Permitted Liens prior to the lien of this Mortgage, as further security for the
payment of the Indebtedness, Mortgagor has transferred, assigned, warranted and
conveyed and does hereby transfer, warrant and convey to Mortgagee, effective as
of the date hereof at 7:00 a.m., local time, all of Mortgagor's rights, titles,
interests and estates in and to the following property, except to the extent
that any of the same constitute Excluded Equipment, Inventory or Receivables:
all Hydrocarbons, helium and/or other minerals which are thereafter produced and
which accrue to the Subject Interests, all products obtained or processed
therefrom and all revenues and proceeds now or hereafter attributable to said
Hydrocarbons, helium and/or other minerals and said products as well as any
liens and security interests securing any sales of said Hydrocarbons, helium
and/or other minerals, including, but not limited to, those liens and security
interests provided for in Tex. Bus. & Com. Code ▇▇▇. Section 9.319 (Tex. UCC)
(▇▇▇▇▇▇ 1968), as amended. All parties producing, purchasing or receiving any
such Hydrocarbons, helium and/or other minerals or products, or having such
Hydrocarbons, helium and/or other minerals, products, or proceeds therefrom, in
their possession for which they or others are accountable to Mortgagee by virtue
of the provisions of this Article, are authorized and directed to treat and
regard Mortgagee as the assignee and transferee of Mortgagor and entitled in
Mortgagor's place and stead to receive such Hydrocarbons, helium and/or other
minerals and all proceeds therefrom, and said parties and each of them shall be
fully protected in so treating and regarding Mortgagee and shall be under no
obligation to see to the application by Mortgagee of any such proceeds or
payments received by it; provided, however; that, until Mortgagee or Mortgagor
shall have instructed such parties to deliver such Hydrocarbons, helium and/or
other minerals and all products, revenues and/or proceeds therefrom directly to
Mortgagee (which such instructions may be given only after the occurrence and
during the continuance of an Event of Default, as herein defined, but the giving
of such instructions shall as to all such parties be conclusive as to the
occurrence of an Event of Default),
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such parties shall be entitled to deliver such Hydrocarbons, helium and/or other
minerals and all products, revenues and/or proceeds therefrom to Mortgagor.
Mortgagor agrees, subject to the rights of the holder of any Permitted Lien
prior to the lien of this Mortgage, to perform all such acts, and to execute all
such further assignments, transfers and division orders and other instruments as
may be required or desired by Mortgagee or any party in order to have said
revenues and proceeds so paid to Mortgagee and/or to have such Hydrocarbons,
helium and/or other minerals delivered to Mortgagee. Mortgagee is fully
authorized to receive and issue a receipt for said revenue and proceeds, to
endorse and cash any and all checks and drafts payable to the order of Mortgagor
or Mortgagee for the account of Mortgagor received from or in connection with
said revenues or proceeds and apply the proceeds thereof in accordance with
Section 5.2 hereof, and to execute transfer and division orders in the name of
Mortgagor, or otherwise, with warranties binding Mortgagor. In the event that
Mortgagee elects to take delivery of any such Hydrocarbons, helium or other
minerals in kind, Mortgagee shall have the right to sell such Hydrocarbons,
helium or minerals upon such terms as Mortgagee may desire, and to apply the
proceeds of such sale as provided in Section 5.2 below.
5.2 Application of Proceeds. Any and all payments and sale
proceeds received by Mortgagee pursuant to Section 5.1 hereof shall be placed
in a cash collateral account with Mortgagee and on the first day of each month
applied as follows:
First: to the payment and satisfaction of all costs and
expenses incurred in connection with the collection
of such proceeds (and in the event Mortgagee shall
have taken delivery in kind, to the costs and
expenses of the sale of such Hydrocarbons, helium or
other minerals); and
Second: then in accordance with the provisions of Section 7.9
below.
5.3 No Liability of Mortgagee in Collecting. Mortgagee is
hereby absolved from all liability for failure to enforce collection of any
proceeds so assigned and from all other responsibility in connection therewith,
except the responsibility to account to Mortgagor for funds actually received.
Mortgagee shall have the right, at its election, to prosecute and defend any
and all actions or legal proceedings deemed advisable by Mortgagee in order to
collect such funds and to protect the interests of Mortgagee and/or Mortgagor,
with all reasonable costs,
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expenses and attorneys' fees incurred in connection therewith being paid by
Mortgagor.
5.4 Assignment Not a Restriction on Mortgagee's Rights.
Nothing herein contained shall detract from or limit the absolute obligation of
Mortgagor to make payment in full of the Indebtedness, regardless of whether
the proceeds assigned by this Article are sufficient to pay the same, and the
rights under this Article V shall be in addition to all other security now or
hereafter existing to secure the payment of the Indebtedness.
5.5 Status of Assignment. Notwithstanding the other
provisions of this Article V, the Trustee or any receiver appointed in judicial
proceedings for the enforcement of this instrument shall have the right to
receive all of the Hydrocarbons, helium, and/or other minerals herein assigned
and the proceeds therefrom after the Note has been declared due and payable in
accordance with the provisions of Section 6.2 hereof and to apply all of said
proceeds as set forth in Section 5.2 hereof. Upon any sale of the Subject
Interests or any part thereof pursuant to Article VII hereof, the Hydrocarbons,
helium, and/or other minerals thereafter produced from the Subject Interests so
sold, and the proceeds therefrom, shall be included in such sale and shall pass
to the purchaser free and clear of the assignment contained in this Article V.
5.6 Indemnity. Mortgagor agrees to indemnify, defend and
hold the Trustee and Mortgagee harmless against all claims, actions,
liabilities, judgments, costs, attorneys' fees or other charges of whatsoever
kind or nature (including without limitation amounts paid in settlement, court
costs and the fees and disbursements of counsel incurred in connection with any
investigation, litigation or other proceeding) (all hereinafter in this Section
5.6 called "claims"), other than claims arising from Mortgagee's own gross
negligence, willful misconduct or bad faith, made against or incurred by them or
any of them as a consequence, either before or after the payment in full of the
Indebtedness, of (i) the breach by Mortgagor of any covenant, representation or
warranty contained in this Mortgage, (ii) any violation of law by Mortgagor, or
(iii) the assertion that Mortgagor and/or Trustee received Hydrocarbons, helium
and/or other minerals herein assigned or the proceeds thereof claimed by third
persons. The Trustee and Mortgagee shall have the right to defend against any
such claims, employing attorneys therefor, and unless furnished with reasonable
indemnity, they or either of them shall have the right to pay or compromise and
adjust all such claims. Mortgagor will indemnify and pay to the Trustee or
Mortgagee any and all such amounts as may be paid in respect of such claims or
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as may be successfully adjudged against Mortgagee and the Trustee or either of
them. The obligations of Mortgagor as hereinabove set forth in this Section 5.6
shall survive the release of this instrument.
ARTICLE VI
Events of Default
6.1 Events of Default. It shall constitute an "Event of
Default" hereunder if an "Event of Default" occurs under the terms and
provisions of the Loan Agreement.
6.2 Effect of Event of Default. If an Event of Default
shall occur and be continuing:
(a) Mortgagee may, subject to and in accordance with
the terms of the Loan Agreement, by notice in writing to Mortgagor declare the
principal of and accrued interest on the Note and all other outstanding
Indebtedness secured hereby to be immediately due and payable whereupon the Note
and all other outstanding Indebtedness shall become and be immediately due and
payable, in each instance without (except for any grace and notice expressly
provided for in the Loan Agreement) grace, demand, presentment for payment,
protest or notice of any kind to Mortgagor or any other person (including, but
not limited to, notice of intent to accelerate and notice of acceleration), all
of which are hereby expressly waived; and
(b) Mortgagee may proceed to enforce its rights
hereunder.
ARTICLE VII
Enforcement of Remedies
7.1 Power of Sale of Real Property Constituting a Part of
the Mortgaged Property. Upon the occurrence and during the continuance of an
Event of Default, the Trustee is hereby authorized and empowered to sell or
offer for sale any part of the Mortgaged Property, with or without having first
taken possession of same, to the highest bidder for cash at public auction.
Such sale shall be made at the courthouse of the county in which the Mortgaged
Property or any part thereof is situated, as herein described, between the
hours of 10:00 a.m. and 4:00 p.m. on the first Tuesday of any month, beginning
within three (3)
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hours of the time provided in the notices described herein, after posting a
written or printed notice or notices of the place, the earliest time at which
the sale will begin and the terms of the sale, and the portion of the Mortgaged
Property to be sold, by posting (or having some person or persons acting for the
Trustee post) for at least twenty-one (21) days preceding the date of the sale,
written or printed notice of the proposed sale at the courthouse door of said
county in which the sale is to be made, and if such portion of the Mortgaged
Property lies in more than one county, one such notice of sale shall be posted
at the courthouse door of each county in which such part of the Mortgaged
Property is situated and such part of the Mortgaged Property may be sold at the
courthouse door of any one of such counties, and the notice so posted shall
designate in which county such property shall be sold. In addition to such
posting of notice, Mortgagee, the Trustee or other holder of the Indebtedness
hereby secured (or some person or persons acting for the Trustee, Mortgagee or
other such holder) shall, at least twenty-one (21) days preceding the date of
sale, file a copy of such notice(s) in the office of the county clerk in each of
such counties and serve or cause to be served written notice of the proposed
sale by certified mail on Mortgagor and on each other debtor, if any, obligated
to pay the Indebtedness hereby secured according to the records of Mortgagee.
Service of such notice shall be completed upon deposit of the notice, enclosed
in a postpaid wrapper properly addressed to Mortgagor and such other debtors at
their most recent address or addresses as shown by the records of Mortgagee in a
post office or official depository under the care and custody of the United
States Postal Service. The affidavit of any person having knowledge of the
facts to the effect that such a service was completed shall be prima facie
evidence of the fact of service. Mortgagor agrees that no notice of any sale,
other than as set out in this paragraph, need be given by the Trustee, Mortgagee
or any other person. Mortgagor hereby designates as its address for the purpose
of such notice, the address set out on the signature page hereof and agrees that
such address shall be changed only by depositing notice of such change enclosed
in a postpaid wrapper in post office or official depository under the care and
custody of the United States Postal Service, certified mail, postage prepaid,
return receipt requested, addressed to Mortgagee or other holder of the
Indebtedness secured hereby at the address for Mortgagee set out herein (or to
such other address as Mortgagee or other holder of the Indebtedness secured
hereby may have designated by notice given as above provided to Mortgagor and
such other debtors). Any such notice of change of address of Mortgagor or other
debtors or of Mortgagee or other holders of the Indebtedness secured hereby
shall be effective three (3) business days after such deposit if such post
office official depository is located in the State of Texas, otherwise to be
effective upon receipt. Mortgagor authorizes and empowers the
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Trustee to sell the Mortgaged Property in lots or parcels or in its entirety as
the Trustee shall deem expedient and to execute and deliver to the purchaser or
purchasers thereof good and sufficient deeds of conveyance thereto by fee simple
title, with evidence of warranty by Mortgagor, subject only to Permitted Liens,
and Mortgagor binds itself to warrant and forever defend the title of such
purchaser or purchasers when so made by the Trustee. Where portions of the
Mortgaged Property lie in different counties, sales in such counties may be
conducted in any order that the Trustee may deem expedient and one or more such
sales may be conducted in the same month or in successive or different months as
the Trustee may deem expedient.
7.2 Rights of the Trustee with Respect to Personal Property
Constituting a Part of the Mortgaged Property. Upon the occurrence and during
the continuance of an Event of Default, the Trustee will have all rights and
remedies granted by law, and particularly by the Uniform Commercial Code as
adopted in the State of Texas, including, but not limited to, (i) the right to
proceed as to both the real and the personal property covered hereby in
accordance with the Trustee's rights and remedies in respect of the real
property covered hereby and (ii) the right to take possession of all personal
property constituting a part of the Mortgaged Property, and for this purpose the
Trustee may enter upon any premises on which any or all of such personal
property is situated and take possession of and operate such personal property
(or any portion thereof) or remove it therefrom. The Trustee may require
Mortgagor to assemble such personal property and make it available to the
Trustee at a place to be designated by the Trustee which is reasonably
convenient to all parties. Unless such personal property is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Trustee will give Mortgagor reasonable notice of the time
and place of any public sale or of the time after which any private sale or
other disposition of such personal property is to be made. This requirement of
sending reasonable notice will be met if the notice is mailed by first class
mail, postage prepaid, to Mortgagor at the address shown below the signatures at
the end of this instrument at least five (5) Business Days before the time of
the sale or disposition.
7.3 Rights of the Trustee with Respect to Fixtures
Constituting a Part of the Mortgaged Property. Upon the occurrence and during
the continuance of an Event of Default, the Trustee may elect to treat the
fixtures constituting a part of the Mortgaged Property as either real property
collateral or personal property collateral and proceed to exercise such rights
as apply to such type of collateral.
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7.4 Judicial Proceedings. Upon the occurrence and during
the continuance of an Event of Default, the Trustee, in lieu of or in addition
to exercising any power of sale hereinabove given, may proceed by a suit or
suits in equity or at law, whether for a foreclosure hereunder, or for the sale
of the Mortgaged Property, or for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for the appointment of a receiver pending any foreclosure hereunder
or the sale of the Mortgaged Property, or for the enforcement of any other
appropriate legal or equitable remedy.
7.5 Possession of the Mortgaged Property. It shall not be
necessary for the Trustee to have physically present or constructively in his
possession at any sale held by the Trustee or by any court, receiver or public
officer any or all of the Mortgaged Property, and Mortgagor shall deliver to the
purchaser at such sale on the date of sale the Mortgaged Property purchased by
such purchasers at such sale, and, if it should be impossible or impracticable
for any of such purchasers to take actual delivery of the Mortgaged Property,
then the title and right of possession to the Mortgaged Property shall pass to
the purchaser at such sale as completely as if the same had been actually
present and delivered.
7.6 Certain Aspects of a Sale. Mortgagee shall have the
right to become the purchaser at any sale held by the Trustee or by any court,
receiver or public officer, and Mortgagee shall have the right to credit upon
the amount of the bid made therefor the amount payable out of the net proceeds
of such sale to it. Recitals contained in any conveyance made to any purchaser
at any sale made hereunder shall conclusively establish the truth and accuracy
of the matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, and the interest accrued
on, the Note after the same have become due and payable, advertisement and
conduct of such sale in the manner provided herein or appointment of any
successor Trustee hereunder.
7.7 Receipt of Purchaser. Upon any sale, whether made under
the Uniform Commercial Code, the power of sale herein granted and conferred or
by virtue of judicial proceedings, the receipt of the Trustee, or of the officer
making sale under judicial proceedings, shall be sufficient discharge to the
purchaser or purchasers at any sale for his or their purchase money, and such
purchaser or purchasers, his or their assigns or personal representatives shall
not, after paying such purchase money and receiving such receipt of the Trustee
or of such officer
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therefore, be obliged to see to the application of such purchase money or be in
anywise answerable for any loss, misapplication or non-application thereof.
7.8 Effect of Sale. Any sale or sales of the Mortgaged
Property or any part thereof, whether under the Uniform Commercial Code, the
power of sale herein granted and conferred or by virtue of judicial proceedings,
shall operate to divest all right, title, interest, claim and demand whatsoever
either at law or in equity, of Mortgagor of, in and to the Mortgaged Property
sold, and shall be a perpetual bar, both at law and in equity, against
Mortgagor, and Mortgagor's successors or assigns, and against any and all
persons claiming or who shall thereafter claim all or any of the property sold
from, through or under Mortgagor, or Mortgagor's successors or assigns.
Nevertheless, Mortgagor, if requested by the Trustee or Mortgagee so to do,
shall join in the execution and delivery of all proper conveyances, assignments
and transfers of the properties so sold.
7.9 Application of Proceeds. The proceeds of any sale of
the Mortgaged Property, or any part thereof, whether under the Uniform
Commercial Code, the power of sale herein granted and conferred or by virtue of
judicial proceedings, whose application has not elsewhere herein been
specifically provided for, shall be applied as follows:
First: to the payment of all expenses incurred by the
Trustee or Mortgagee incident to the enforcement
of this Mortgage, the Notes or any of the
Indebtedness including, without limiting the
generality of the foregoing, all expenses of any
entry or taking of possession, of any sale, of
advertisement thereof, and of conveyances, and as
well, court costs, compensation of agents and
employees and legal fees and expenses and a
reasonable fee to the Trustee;
Second: to the payment of all other costs, charges,
expenses, liabilities and advances incurred or
made by the Trustee or Mortgagee under this
Mortgage or in executing any trust or power
hereunder;
Third: to the payment of the Note and any other
Indebtedness (other than Indebtedness described
in "First" and "Second" above), with interest to
the date of such payment, in such order and manner
as set forth in the Loan Agreement; and
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Fourth: any surplus thereafter remaining shall be paid to
Mortgagor or Mortgagor's successors or assigns, as
their interests shall appear.
7.10 Mortgagor's Waiver of Rights of Marshalling, etc.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any stay, extension or redemption law now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage or the absolute sale of the Mortgaged Property or the possession
thereof by any purchaser at any sale made pursuant to any provision hereof, or
pursuant to the decree of any court of competent jurisdiction; but Mortgagor,
for Mortgagor and all who may claim by, through or under Mortgagor, to the
maximum extent that Mortgagor or those claiming by, through or under Mortgagor
now or hereafter lawfully may, hereby waives the benefit of all such laws.
Mortgagor, for Mortgagor and all who may claim through or under Mortgagor,
waives, to the maximum extent that Mortgagor or those claiming by, through or
under Mortgagor now or hereafter lawfully may do so, any and all right to have
any of the Mortgaged Property marshalled upon any foreclosure of the lien
hereof, or sold in inverse order of alienation, and agrees that the Trustee or
any court having jurisdiction to foreclose such lien may sell the Mortgaged
Property as an entirety. If any law in this Section 7.10 referred to and now in
force, of which Mortgagor or Mortgagor's successor or successors might take
advantage despite the provisions hereof, shall hereafter be repealed or cease to
be in force, such law shall not thereafter be deemed to constitute any part of
the contract herein contained or to preclude the operation or application of the
provisions of this Section 7.10.
7.11 Costs and Expenses. All reasonable costs and out-of-
pocket expenses (excluding expenses representing Mortgagee's administrative
overhead and including, without limitation, reasonable attorneys' fees) incurred
by the Trustee or Mortgagee in protecting and enforcing their rights hereunder
shall constitute a demand obligation owing by Mortgagor to the party incurring
such costs and expenses and shall draw interest at an annual rate equal to the
rate of interest accruing on the Note until paid, all of which shall constitute
a portion of the Indebtedness, provided, however, that in no event shall such
interest rate ever exceed the Highest Lawful Rate.
7.12 Operation of Property by the Trustee. Upon the
occurrence and during the continuance of an Event of Default and in addition to
all other rights herein conferred on the Trustee or Mortgagee, the Trustee (or
any person,
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firm or corporation designated by the Trustee) shall have the right and power,
but shall not be obligated, to enter upon and take possession of any of the
Mortgaged Property, and to exclude Mortgagor, and Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that Mortgagor shall be at the time entitled and in his place
and stead. The Trustee, or any person, firm or corporation designated by the
Trustee, may operate the same without any liability to Mortgagor in connection
with such operations, except for its gross negligence or willful misconduct in
the operation of such properties, and the Trustee or any person, firm or
corporation designated by the Trustee, shall have the right and power, but shall
not be obligated, to collect, receive and issue a receipt for all Hydrocarbons
produced and sold from said properties, to make repairs, purchase machinery and
equipment, conduit and power, to enter work over operations, drill additional
▇▇▇▇▇ and to exercise every power, right and privilege of Mortgagor with respect
to the Mortgaged Property. When and if the expenses of such operation and
development (including costs of unsuccessful work over operations or additional
▇▇▇▇▇) have been paid and the Indebtedness paid, said properties shall, if there
has been no sale or foreclosure, be returned to Mortgagor.
ARTICLE VIII
Security Agreement
Without limiting any of the provisions of this instrument,
to secure the Indebtedness, Mortgagor, as Debtor (referred to in this Article
VIII as "Debtor"), hereby expressly GRANTS, ASSIGNS, TRANSFERS and SETS OVER
unto Mortgagee, as Secured Party (referred to in this Article VIII as "Secured
Party," whether one or more), a lien upon and a security interest in all the
Mortgaged Property, together with any and all proceeds, products, increases,
profits, substitutions, replacements, renewals, additions, amendments and
accessions of, to and for the Mortgaged Property, insofar as such property
consists of equipment, deposit accounts, contract rights, instruments, general
intangibles, inventory, Hydrocarbons, helium and/or other minerals, fixtures and
any and all other personal property of any kind or character (including both
those now and those hereafter existing) to the full extent that such property
may be subject to the Uniform Commercial Code of the state or states where such
property is located, but expressly excluding any and all Equipment, Inventory
and Receivables (said Mortgaged Property, fixtures, contract rights,
instruments, general intangibles, deposit accounts, inventory, Hydrocarbons,
helium and/or other minerals, and equipment, together with any and all proceeds,
products, increases, profits,
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substitutions, replacements, renewals, additions, amendments and accessions of,
to and for the foregoing property, but expressly excluding any and all Excluded
Equipment, Inventory and Receivables, being hereinafter collectively referred
to as the "Collateral" for the purposes of this Article VIII). The lien and
security interest created by this Mortgage attaches upon the delivery hereof.
Debtor covenants and agrees with Secured Party that:
(a) In addition to and cumulative of any other remedies
granted in this instrument to Secured Party or to the Trustee, Secured Party
may, upon the occurrence and during the continuance of an Event of Default,
proceed under said Uniform Commercial Code as to all or any part of the
Collateral and shall have and may exercise with respect to the Collateral all
the rights, remedies and powers of a secured party after default under said
Uniform Commercial Code, including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of, lease or
utilize the Collateral and any part or parts thereof in any manner authorized or
permitted under said Uniform Commercial Code after default by a debtor, and to
apply the proceeds thereof toward payment of any costs and expenses and
attorneys' fees and legal expenses thereby incurred by Secured Party, and toward
payment of the Indebtedness in accordance with Section 7.9 hereof.
(b) Upon the occurrence and during the continuance
of any Event of Default, Secured Party shall have the right (without limitation)
to take possession of the Collateral and to enter upon any premises where same
may be situated for such purpose without being deemed guilty of trespass and
without liability for damages thereby occasioned (other than damages arising
from the gross negligence, willful misconduct or bad faith of Secured Party) and
to take any action deemed necessary or appropriate or desirable by Secured
Party, at its option and in its discretion, to repair, refurbish or otherwise
prepare the Collateral for sale, lease or other use or disposition as herein
authorized. Debtor waives, to the maximum extent permitted by law, any and all
rights that it may have to a judicial hearing in advance of the enforcement of
any of the Secured Party's rights hereunder, including without limitation, its
rights following an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto. To the extent that
any of the Indebtedness is to be paid or performed by a person other than
Debtor, Debtor waives and agrees not to insert any rights or privileges which it
may have under Section 9-112 of the Uniform Commercial Code.
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(c) To the maximum extent permitted by law, Debtor
expressly waives any notice of sale or other disposition of the Collateral and
any other right or remedies of a debtor or formalities prescribed by law
relative to sale or disposition of the Collateral or exercise of any other right
or remedy of Secured Party existing after default hereunder; and to the extent
any such notice is mailed, postage prepaid, to Debtor at the address shown with
Debtor's signature hereinbelow at least five (5) Business Days before the time
of the sale or disposition, such notice shall be deemed reasonable and shall
fully satisfy any requirement for giving of said notice. Such notice, in case of
a public sale or disposition, shall state the time and place fixed for such sale
or disposition and, in case of a private sale or disposition, shall state the
date after which such sale or disposition is to be made.
(d) Any public sale of the Collateral shall be
held at such time or times within ordinary business hours at such places as
Secured Party may fix in the notice of such sale. At any such sale, the
Collateral may be sold in one lot as an entirety or in separate parcels, as
Secured Party may determine.
(e) Secured Party shall not be obligated to make
any sale pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same shall be
so adjourned.
(f) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by Secured Party until the selling price is paid by the purchaser
thereof, but Secured Party shall not incur any liability in case of the failure
of such purchaser to take up and pay for the Collateral so sold and, in case of
any such failure, such Collateral may again be sold upon like notice.
(g) Upon the occurrence and during the continuance
of an Event of Default, Secured Party is expressly granted the right, at its
option, to transfer at any time to itself or to its nominee the Collateral, or
any part thereof and to hold the same as security for the Indebtedness, and to
receive the monies, income, proceeds or benefits attributable or accruing
thereto and to apply the same toward payment of the Indebtedness, whether or not
then due, in accordance with Section 7.9 hereof. All rights to marshalling of
assets of Debtor, including any such right with respect to the Collateral, are
hereby waived to the maximum extent permitted by law.
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(h) All recitals in any instrument of assignment
or any other instrument executed by Secured Party incident to sale, transfer,
assignment, lease or other disposition or utilization of the Collateral or any
part thereof hereunder shall be full proof of the matter stated therein, no
other proof shall be required to establish full legal propriety of the sale or
other action or of any fact, condition or thing incident thereto, and all
prerequisites of such sale or other action and of any fact, condition or thing
incident thereto shall be presumed conclusively to have been performed or to
have occurred.
(i) Upon the occurrence and during the continuance
of an Event of Default, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party that is reasonably convenient to both parties. All expenses of
retaking, holding, preparing for sale, lease or other use or disposition,
selling, leasing or otherwise using or disposing of the Collateral and the like
which are incurred or paid by Secured Party as authorized or permitted
hereunder, including also all attorneys' fees, legal expenses and costs, shall
be added to the Indebtedness.
(j) Should Secured Party elect to exercise its
rights under said Uniform Commercial Code as to part of the personal property
and fixtures described herein, this election shall not preclude Secured Party,
Mortgagee or the Trustee from exercising the rights and remedies granted by the
preceding paragraphs of this instrument as to the remaining personal property
and fixtures.
(k) Secured Party may, at its election, at any
time after delivery of this instrument, sign one or more photocopies hereof in
order that such photocopies may be used as a financing statement under said
Uniform Commercial Code. Such signature by Secured Party may be placed between
the last sentence of this instrument and Debtor's acknowledgement or may follow
Debtor's acknowledgement. Secured Party's signature need not be acknowledged
and is not necessary to the effectiveness hereof as a deed of trust, mortgage,
assignment, pledge or security agreement.
(l) Except for Permitted Liens or as otherwise
permitted by the Loan Agreement, so long as any amount remains unpaid on the
Indebtedness, Debtor will not execute nor file in any public office any
financing statement or statements affecting the Collateral other than financing
statements in favor of Secured Party hereunder, unless the prior written
specific consent and approval of Secured Party shall have first been obtained.
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(m) Secured Party is authorized to file, in any
jurisdiction where Secured Party deems it necessary, a financing statement or
statements, and at the request of Secured Party, Debtor will join Secured Party
in executing one or more financing statements pursuant to said Uniform
Commercial Code in form satisfactory to Secured Party, and will pay the cost of
filing or recording this or any other instrument, as a financing statement, in
all public offices at any time and from time to time whenever filing or
recording of any financing statement or of this instrument is deemed by Secured
Party to be necessary or desirable. The addresses of Debtor and Secured Party
are those addresses set forth for Mortgagor and Mortgagee, respectively, on the
cover page of this Mortgage.
(n) Without in any manner limiting the generality
of any of the other provisions of this Mortgage: (i) some portions of the goods
described or to which reference is made herein are or are to become fixtures on
the Lands; (ii) the security interests created hereby under applicable
provisions of the Uniform Commercial Code of one or more of the jurisdictions in
which the Mortgaged Property is situated will attach to Hydrocarbons or the
accounts (other than Receivables) resulting from the sale thereof at the
wellhead or minehead located on the Lands; and (iii) this instrument is to be
filed of record in the real estate records as a financing statement.
(o) Debtor hereby irrevocably designates and
appoints Secured Party as its attorney-in-fact, with full power of substitution,
for the purposes of carrying out the provisions of this Mortgage and taking any
action and executing any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is effective without further action of Mortgagor or Mortgagee
upon the occurrence and during the continuance of an Event of Default (but the
determination of an Event of Default by Secured Party shall as to all parties
for the purposes hereof be conclusive as to the occurrence of an Event of
Default) and is irrevocable and coupled with an interest.
(p) Without limiting the generality of the
foregoing, Debtor hereby irrevocably authorizes and empowers Secured Party, upon
the occurrence and during the continuance of an Event of Default, at the expense
of Debtor, at any time and from time to time (a) to ask, demand, receive,
receipt, give acquittance for, settle and compromise any and all monies which
may be or become due or payable or remain unpaid at any time or times to Debtor
under or with respect to the Collateral; (b) to endorse any drafts, checks,
orders or other instruments for the payment of money payable to Debtor on
account of the Collateral
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(including any such draft, check, order or instrument issued by an insurance
company payable jointly to Debtor and Secured Party); and (c) in the discretion
of Secured Party, to settle, compromise, prosecute or defend any action, claim
or proceeding, or take any other action, all either in its own name or in the
name of Debtor or otherwise, which Secured Party may deem to be necessary or
advisable for the purpose of exercising and enforcing its powers and rights
under this Mortgage or in furtherance of the purposes hereof, including any
action which by the terms of this Mortgage is to be taken by Debtor. Nothing in
this Mortgage shall be construed as requiring or obligating Secured Party to
make any demand or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim or notice, or to take any
action with respect to any of the Collateral or the amounts due or to become due
under any thereof, or to collect or enforce the payment of any amounts assigned
to it or to which it may otherwise be entitled hereunder at any time or times,
other than to account for amounts or Collateral received.
(q) Secured Party shall incur no liability as a
result of the sale of Collateral, or any part thereof, at any private sale.
Debtor hereby waives, to the extent permitted by applicable law, any claims
against Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Indebtedness, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.
(r) Without precluding any other methods of sale,
Debtor acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party
shall not be liable for any depreciation in the value of the Collateral.
ARTICLE IX
Other Agreements
9.1 Provisions Subject to Intercreditor Agreement.
Notwithstanding anything to the contrary herein, until such time as the "Senior
Obligations" (as defined in the Loan Agreement) are satisfied, discharged and
paid in full, the provisions of this Mortgage (including, without limitation,
Article V, Article VII and Article VIII hereof) are subject to the terms,
covenants, conditions and provisions of the "Intercreditor Agreement" (as
defined in the Loan Agreement). In the event of any inconsistency between the
terms and provisions of this Mortgage and the Intercreditor Agreement, the
terms, covenants, conditions and
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provisions of the Intercreditor Agreement shall prevail until such time as the
Senior Obligations are satisfied and discharged in full.
9.2 Loan Agreement Prevails. In the event of any conflict
or inconsistency between the terms, covenants, conditions and provisions set
forth in this Mortgage and the terms, covenants, conditions and provisions set
forth in the Loan Agreement, the terms, covenants, conditions and provisions of
the Loan Agreement shall prevail.
ARTICLE X
Miscellaneous
10.1 Pooling and Unitization. Mortgagor shall have the
right, and is hereby authorized, to pool or unitize all or any part of the
Leases and Lands, insofar as they are related to the Mortgaged Property, with
adjacent lands, leaseholds and other interests, when, in the reasonable judgment
of Mortgagor, it is necessary or advisable to do so in order to form a drilling
unit to facilitate the orderly development of that part of the Mortgaged
Property affected thereby or to comply with the requirements of any law or
governmental order or regulation relating to the spacing of ▇▇▇▇▇ or proration
of the production therefrom; provided, however, that any unit so formed for the
production of oil shall not substantially exceed 160 acres, and any unit so
formed for the production of gas shall not exceed 640 acres, unless a larger
area is required to conform to any applicable law or governmental order or
regulation relating to the spacing of ▇▇▇▇▇ or to obtain the maximum, allowable
production under any applicable law or governmental order or regulation relating
to the proration of production therefrom; and further provided that the
Hydrocarbons produced from any unit so formed shall be allocated among the
separately owned tracts or interests comprising the unit in proportion to the
respective surface areas thereof or in such proportion as is prescribed by
applicable law. Any unit so formed may relate to one or more zones or horizons,
and a unit formed for a particular zone or horizon need not conform in area to
any other unit relating to a different zone or horizon, and a unit formed for
the production of oil need not conform in area with any unit formed for the
production of gas. Upon the written request of Mortgagee, as to all such units
theretofore formed, and thereafter formed, immediately after formation of any
such unit, Mortgagor shall furnish to Mortgagee
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a true copy of the pooling agreements, declarations of pooling or other
instruments creating such units, in such number of counterparts as Mortgagee may
reasonably request. The interest in any such unit attributable to the Mortgaged
Property (or any part thereof) included therein shall become a part of the
Mortgaged Property and shall be subject to the lien hereof in the same manner
and with the same effect as though such unit and the interest of Mortgagor
therein were specifically described in Exhibit A hereto. Notwithstanding the
foregoing, Mortgagor may enter into pooling or unitization agreements not
hereinabove authorized only with the prior written consent of Mortgagee, which
consent shall not be unreasonably withheld.
10.2 Successor Trustees. The Trustee may resign in
writing addressed to Mortgagee or be removed at any time with or without cause
by an instrument in writing duly executed by Mortgagee. In case of the death,
resignation or removal of a Trustee, a successor Trustee or Trustees may be
appointed by Mortgagee from time to time by instrument of substitution complying
with any applicable requirements of law and, in the absence of any such
requirement, without other formality than appointment and designation in
writing. Such appointment and designation shall be full evidence of the right
and authority to make the same and of all facts therein recited, and, upon the
making of any such appointment and designation, this conveyance shall vest in
the named successor Trustee or Trustees all the estate and title of the prior
Trustee or Trustees in all of the Mortgaged Property, and such successor Trustee
or Trustees shall thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon the Trustee named herein. All
references herein to the Trustee shall be deemed to refer to the Trustees from
time to time acting hereunder.
10.3 Legal Proceedings by and against Trustee. The
Trustee shall not be required to take any action for the enforcement of this
instrument or the exercise of any rights or remedies hereunder or to appear in
or defend any action, suit or other proceeding in connection therewith, where,
in the opinion of the Trustee, such action will be likely to involve him in
expense or liability, unless the Trustee be tendered security and indemnity
satisfactory to him against cost, expense or liability in connection therewith.
10.4 Responsibilities of Trustee. It shall be no part of
the duty of the Trustee to see to any recording, filing or registration of this
instrument or of any instrument supplemental hereto or to see to the payment of
or be under any duty in respect to any tax or assessment or other governmental
charge which may be levied or assessed on the Mortgaged Property or against
Mortgagor or to see
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to the performance or observance by Mortgagor of any of the covenants or
agreements herein contained. The Trustee shall not be responsible for the
execution, acknowledgement or validity of this instrument or of any instrument
supplemental hereto or of the Note or for the sufficiency of the security
purported to be created hereby, and the Trustee makes no representation in
respect thereof or in respect of those rights of the holder of any of the Note.
The Trustee shall have the right to consult with counsel upon any matters
arising hereunder and shall be fully protected in relying as to legal matters on
the advice of such counsel. The Trustee shall not incur any personal liability
hereunder except for his own gross negligence, willful misconduct or bad faith,
and 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
him hereunder which is believed by him in good faith to be genuine.
10.5 Advances by Mortgagee or Trustee. Each and every
covenant herein contained shall be performed and kept by Mortgagor solely at
Mortgagor's expense. If Mortgagor shall fail to perform or keep any of the
covenants of whatsoever kind or nature contained in this instrument, then, if
such failure is not remedied by Mortgagor within 30 days following notice
thereof by Mortgagee, the Trustee or any receiver appointed hereunder may, but
shall not be obligated to, make advances to perform the same in Mortgagor's
behalf, and Mortgagor hereby agrees to repay such sums upon demand plus
interest at an annual rate equal to the highest rate of interest from time to
time accruing on the Notes until paid or, in the event any promissory note
evidences such indebtedness, upon the terms and conditions thereof; provided,
however, that in no event shall such interest rate ever exceed the Highest
Lawful Rate. No such advance shall be deemed to relieve Mortgagor from any
default hereunder.
10.6 Defense of Claims. Mortgagor will notify the Trustee
and Mortgagee, in writing, promptly of the commencement of any legal proceedings
affecting the lien hereof or the Mortgaged Property, or any part thereof, and
will take such action as may be necessary to preserve Mortgagor's, the Trustee's
and Mortgagee's rights affected thereby, and should Mortgagor fail or refuse to
take any such action, the Trustee or Mortgagee may, upon giving prior written
notice thereof to Mortgagor, take such action on behalf of and in the name of
Mortgagor and at Mortgagor's expense. Moreover, Mortgagee, or the Trustee on
behalf of Mortgagee, may take such independent action in connection therewith as
they may in their discretion deem proper, Mortgagor hereby agreeing that all
sums advanced or all expenses incurred in such actions plus interest at an
annual rate equal to the highest rate of interest from time to time accruing on
the Notes will,
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on demand, be reimbursed to Mortgagee, the Trustee or any receiver appointed
hereunder; provided, however, that in no event shall such interest rate ever
exceed the Highest Lawful Rate.
10.7 Survival of Covenants and Liens. All of the covenants
and agreements of Mortgagor set forth herein shall survive the execution and
delivery of this Mortgage and shall continue in force until the Indebtedness is
paid in full. Accordingly, if Mortgagor shall perform faithfully each and all
of the covenants and agreements herein contained, then, and then only, this
conveyance shall become null and void and shall be released in due form, upon
Mortgagor's written request and at Mortgagor's expense; otherwise, it shall
remain in full force and effect. No release of this conveyance or the lien
thereof shall be valid unless executed by Mortgagee.
10.8 Renewals and Other Security. Renewals and extensions
of the Indebtedness may be given at any time, and Mortgagee may take or may now
hold other security for the Indebtedness without notice to or consent of
Mortgagor. The Trustee or Mortgagee may resort first to such other security or
any part thereof or first to the security herein given or any part thereof, or
from time to time to either or both, even to the partial or complete abandonment
of either security, and such action shall not be a waiver of any rights
conferred by this instrument, which shall continue as a perfected lien upon the
Mortgaged Property not expressly released until the Indebtedness secured hereby
is fully paid.
10.9 Instrument an Assignment, Etc. This instrument shall
be deemed to be and may be enforced from time to time as an assignment, chattel
mortgage, hypothecation, contract, deed of trust, mortgage, conveyance,
financing statement, real estate mortgage, pledge or security agreement, and
from time to time as any one or more thereof.
10.10 No Usury Intended. It is the intention of the parties
hereto to comply strictly with applicable usury laws; accordingly,
notwithstanding any provision to the contrary contained herein, in the Note, or
in any of the documents securing or relating to any Indebtedness, in no event
shall this instrument, the Note, or such documents require or permit the
payment, charging, taking, reserving, or receiving of any sums constituting
interest under applicable laws which exceed the maximum amount permitted by such
laws. If any such excess interest is contracted for, charged, taken, reserved,
or received in connection with this instrument or the Note or in any of the
documents securing or relating to any Indebtedness, or in any communication by
Mortgagee or any other person to
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Mortgagor or any other person, or in the event all or part of the Indebtedness
shall be prepaid or accelerated, so that under any of such circumstances or
under any other circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved, or received on the amount of principal actually
outstanding from time to time under this instrument or the Note shall exceed the
maximum amount of interest permitted by applicable usury laws, then in any such
event it is agreed as follows: (i) the provisions of this Section shall govern
and control, (ii) any such excess shall be deemed an accidental and bona fide
error and canceled automatically to the extent of such excess, and shall not be
collected or collectible, (iii) any such excess which is or has been paid or
received notwithstanding this Section shall be credited against the then unpaid
principal balance hereof with the excess, if any, refunded to Mortgagor, and
(iv) the effective rate of interest shall be automatically reduced to the
maximum lawful rate allowed under applicable laws as construed by courts having
jurisdiction hereof or thereof. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved,
or received in connection herewith which are made for the purpose of determining
whether such rate exceeds the maximum lawful rate shall be made to the extent
permitted by applicable laws by amortizing, prorating, allocating and spreading
during the period of the full term of the loan, including all prior and
subsequent renewals and extensions, all interest at any time contracted for,
charged, taken, reserved, or received. The terms of this Section shall be
deemed to be incorporated in every loan document, security instrument, and
communication relating to this instrument and the Notes. The term "applicable
usury laws" shall mean such laws of the State of Texas or the laws of the United
States, whichever laws allow the higher rate of interest, as such laws now
exist; provided, however, that if such laws shall hereafter allow higher rates
of interest, then the applicable usury laws shall be the laws allowing the
higher rates, to be effective as of the effective date of such laws.
10.11 Separability. If any provision hereof or of the Note
is invalid or unenforceable in any jurisdiction, the other provisions hereof or
of the Note shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of the Trustee
and Mortgagee in order to effectuate the provisions hereof, and the invalidity
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
10.12 Rights Cumulative. Each and every right, power and
remedy herein given to the Trustee or Mortgagee shall be cumulative and not
exclusive, and every right, power and remedy whether specifically herein given
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or otherwise existing may be exercised from time to time and so often and in
such order as may be deemed expedient by the Trustee or Mortgagee, as the case
may be, and the exercise, or the beginning of the exercise, of any such right,
power or remedy shall not be deemed a waiver of the right to exercise, at the
same time or thereafter, any other right, power or remedy. No delay or omission
by the Trustee or Mortgagee in the exercise of any right, power or remedy shall
impair any such right, power or remedy or operate as a waiver thereof or of any
other right, power or remedy then or thereafter existing.
10.13 Binding Effect. This instrument is binding upon
Mortgagor, Mortgagor's successors and assigns, and shall inure to the benefit
of the Trustee, his successors and assigns and Mortgagee and its successors and
assigns, and the provisions hereof shall likewise constitute covenants running
with the land.
10.14 Article and Section Headings. The article and
section headings in this instrument are inserted for convenience and shall not
be considered a part of this instrument or used in its interpretation.
10.15 Counterparts. This instrument may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original and all of which are identical except that, to facilitate recordation,
in any particular counterpart portions of Exhibit A which describe properties
situated in counties other than the county in which such counterpart is to be
recorded may have been omitted.
10.16 Notices. Except as otherwise provided in the Loan
Agreement or herein, any notice, request, demand or other instrument which may
be required or permitted to be given or served upon Mortgagor shall be
sufficiently given when made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested and
addressed to Mortgagor at the address shown below the signatures at the end of
this Mortgage or to such different address as Mortgagor shall have designated by
written notice received by Mortgagee or the Trustee.
10.17 Amendments, Modifications and Waivers, Etc. Except
as provided in Section 10.2, this instrument may be amended, modified, revised,
discharged, released or terminated only by a written instrument or instruments
executed by Mortgagor and Mortgagee. Any alleged amendment, revision,
discharge, release or termination which is not so documented shall not be
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effective as to any party. No waiver of any provision of this Mortgage nor
consent to any departure by Mortgagor therefrom shall in any event be effective
unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
10.18 Survival of Agreements. All representations and
warranties of Mortgagor herein and all covenants and agreements herein not fully
and finally performed before the effective date or dates of this Mortgage shall
survive such date or dates. All covenants and obligations in this Mortgage are
intended by the parties to be, and shall be construed as, covenants running with
the Lands.
10.19 Governing Law. This Mortgage shall be governed by
and construed in accordance with the laws of the State of Texas.
10.20 Subrogation. The Indebtedness represents funds
utilized to satisfy certain outstanding indebtedness and obligations secured by
liens, rights and/or claims against the Mortgaged Property or any part thereof,
and therefore Mortgagee shall be subrogated to any and all liens, rights,
superior titles and equities owned or claimed by the holder of any such
outstanding indebtedness or obligation so satisfied, regardless of whether said
liens, rights, superior titles and equities are assigned to the Mortgagee by the
holder(s) thereof or released. Mortgagee shall be subrogated to all covenants
and warranties heretofore given or made with respect to the Mortgaged Property.
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IN WITNESS WHEREOF, Mortgagor has executed or caused to be
executed this Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement on the date and year first set forth above.
The address of the MORTGAGOR:
Mortgagor/Debtor is:
TRANSTEXAS GAS CORPORATION,
1300 North ▇▇▇ Houston a Delaware corporation
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
By:
---------------------------------
Name:
Title:
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[ADD ACKNOWLEDGEMENT FORM]
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EXHIBIT A
LANDS AND LEASES
47
EXHIBIT B
FEE INTERESTS EXCLUDED FROM LANDS
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48
ACT OF MORTGAGE, SECURITY
AGREEMENT AND FINANCING STATEMENT
DATED AS OF JUNE 13, 1997,
BY
TRANSTEXAS GAS CORPORATION
(MORTGAGOR AND DEBTOR)
Taxpayer I.D. No.: ▇▇-▇▇▇▇▇▇▇
TO
TRANSAMERICAN ENERGY CORPORATION
(MORTGAGEE AND SECURED PARTY)
Taxpayer I.D. No.: ▇▇-▇▇▇▇▇▇▇
The mailing address of the above-named Mortgagee and Secured
Party is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; and the mailing address of Mortgagor and Debtor is
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
ATTENTION OF RECORDING OFFICERS: This instrument is a
Mortgage of both immovable and movable property and is, among other things, a
Security Agreement and Financing Statement under the Uniform Commercial Code.
This instrument creates a lien on rights in or relating to lands of Mortgagor
which are described in Exhibit A attached hereto.
Recorded counterparts should be sent to:
Firstar Bank of Minnesota, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Department
49
ACT OF MORTGAGE, SECURITY
AGREEMENT AND FINANCING STATEMENT
BE IT KNOWN that on this ____ day of June, 1997, before me,
the undersigned Notary Public, duly commissioned and qualified in and for the
State of Texas, and in the presence of the undersigned competent witnesses:
PERSONALLY CAME AND APPEARED, TRANSTEXAS GAS CORPORATION, a
Delaware corporation ("Mortgagor"), appearing herein through and represented by
__________________________________, its _____________________________, duly
authorized by virtue of Resolutions of the Board of Directors of Mortgagor, a
certified copy of which is attached hereto and made a part hereof, who, being
duly sworn, did declare and say as follows:
RECITALS
Mortgagor and TransAmerican Energy Corporation, a Delaware
corporation (together with its successors or assigns, "Mortgagee"), are
entering into that certain Loan Agreement, dated as of June 13, 1997 (as
amended or modified and in effect from time to time, the "Loan Agreement").
Pursuant to and on the terms and conditions set forth in the
Loan Agreement, Mortgagee is making a loan to Mortgagor in the aggregate
principal amount of $450,000,000 (the "Loan").
Mortgagor is entering into this Mortgage pursuant to its
obligations under the Loan Agreement and for the purpose, among other things,
of securing and providing for the repayment of the Loan.
ARTICLE I
Definitions
1.1 Certain Defined Terms. Unless the context otherwise
requires, as used in this Mortgage and all amendments, extensions,
modifications, renewals, supplements or waivers hereof or hereto, the following
terms shall have the following meanings, which meanings shall be equally
applicable to both the singular and plural form of such terms:
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"Business Day" shall have the meaning assigned to that term in
the Loan Agreement.
"Collateral" shall have the meaning set out in Article VIII of
this Mortgage.
"Debtor" shall have the meaning set out in Article VIII of
this Mortgage.
"Equipment" shall mean all of Mortgagor's now owned or
hereafter acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, well site compressors, rolling stock and related equipment and other
assets accounted for as equipment by Mortgagor on its financial statements, all
proceeds thereof, and all documents of title, books, records, ledger cards,
files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information relating
to the foregoing; provided, however, that "Equipment" shall not include any
assets constituting a part of a natural gas pipeline or the compression or
dehydration equipment used in the operation of any such pipeline.
"Event of Default" shall have the meaning assigned to that
term in Section 6.1.
"Highest Lawful Rate" shall have the meaning ascribed thereto
in the Loan Agreement.
"Hydrocarbons" shall mean oil, gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products separated, settled and dehydrated therefrom and all products refined
therefrom, including, without limitation, kerosene, liquified petroleum gas,
refined lubricating oils, diesel fuel, drip gasoline and natural gasoline and
all other minerals.
"Indebtedness" shall mean the following indebtedness,
obligations and liabilities of Mortgagor (and any extensions, renewals,
refundings, increases, substitutions, replacements, consolidations,
modifications or rearrangements of such indebtedness, obligations or
liabilities, whether or not Mortgagor executes any extension agreement or
renewal instrument):
(a) all amounts advanced or expended by Mortgagee in
its capacity as lender under the Loan Agreement or under or in connection with
this
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Mortgage, all reasonable costs and out-of-pocket expenses (excluding expenses
representing administrative overhead) at any time and from time to time
incurred by Mortgagee in connection with the administration and/or enforcement
of this Mortgage or the Loan Agreement (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel employed by Mortgagee in
connection therewith), and all sums due or to become due to Mortgagee at any
time and from time to time hereunder or under the Loan Agreement;
(b) all principal, premiums, accrued interest and
any other sums now or hereafter owing on the Loan pursuant to the terms of the
Note; and,
(c) all other amounts payable by Mortgagor under the
Loan Agreement.
"Inventory" shall mean all of Mortgagor's now owned or
hereafter acquired casing, drill pipe and other supplies accounted for as
inventory by Mortgagor on its financial statements (excluding any Subject
Minerals), all proceeds thereof, and all documents of title, books, records,
ledger cards, files, correspondence and computer files, tapes, disks and
related data processing software that at any time evidence or contain
information relating to the foregoing.
"Lands" shall mean that immovable property referred to or
covered by the Leases described in Exhibit A hereto, or the description of
which is incorporated in Exhibit A by reference to any other instrument or
document.
"Leases" shall mean those Oil and Gas Leases described in
Exhibit A hereto, together with any and all other Oil and Gas Leases or
leasehold estates pooled or unitized therewith, in which, or in any portion of
which, Mortgagor has an interest, now owned or hereafter acquired, as well as
any extensions, renewals or replacements of or for any of the foregoing.
"Lobo Reserves" shall mean those reserves identified on the
Reserve Report as being located in the Lobo Trend Area Field.
"Material Production Sale Contracts" shall mean Production
Sale Contracts that, individually or in the aggregate, are material to the
conduct or value of Mortgagor's business.
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"Mortgage" shall mean this Act of Mortgage, Security Agreement
and Financing Statement, as same may from time to time be amended or modified
and in effect.
"Mortgaged Property" shall have the meaning set out in Article
II to this Mortgage.
"Mortgagee" shall have the meaning assigned to that term in
the recitals of this Mortgage.
"Mortgagor" shall have the meaning assigned to that term in
the introduction to this Mortgage.
"Note" shall mean that certain Promissory Note, dated as of
June 13, 1997, in the original principal amount of $450,000,000 by Mortgagor
payable to Mortgagee, as amended, modified, supplemented, restated, renewed,
extended or increased in amount from time to time.
"Oil and Gas Leases" shall include oil and gas leases and oil,
gas and mineral leases and shall also include subleases and assignments of
operating rights.
"Operating Equipment" shall mean Mortgagor's interest in all
movable property, surface or subsurface machinery, equipment, facilities,
supplies or other property of whatsoever kind or nature (excluding drilling
rigs, drill pipe, mud pumps, trucks, automotive equipment or other property
taken to the premises to drill a well or for other similar temporary uses) now
or hereafter located on or under any of the Lands or Leases or on a unit
including all or part of the Lands or Leases or now or hereafter used, held for
use or useful in connection with the exploration, development, operation,
production, treatment, storage, processing or transportation of Hydrocarbons,
helium and/or other minerals produced or to be produced from or attributable to
the Lands or Leases, including, but not by way of limitation, all oil ▇▇▇▇▇,
gas ▇▇▇▇▇, water ▇▇▇▇▇, injection ▇▇▇▇▇, casing, tubing, rods, pumps, pumping
units and engines, christmas trees, derricks, separators, gun barrels, flow
lines, tanks, tank batteries, gas systems (for gathering, treating,
compression, disposal or injection), chemicals, solutions, water systems (for
treating, disposal and injection), pipe, pipelines, boilers, meters, apparatus,
compressors, liquid extractors, connectors, valves, fittings, power plants,
poles, lines, cables, wires, transformers, starters and controllers, machine
shops, tools, machinery and parts, storage yards and
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equipment stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading docks, loading racks and shipping
facilities, fixtures and other appurtenances, appliances and property of every
kind and character, movable or immovable, together with all improvements,
betterments and additions, accessories and attachments thereto and replacements
thereof.
"Permitted Liens" shall have the meaning assigned to that term
in the Loan Agreement.
"Production Sale Contracts" shall mean all contracts now or
hereafter in effect, including, without limitation, any gas sales contracts,
entered into by Mortgagor, or Mortgagor's predecessors in interest, for the
production, sale, purchase, exchange or processing of Hydrocarbons, helium
and/or other minerals produced from or attributable to the Subject Interests.
"Receivables" shall mean any and all of Mortgagor's now owned
or hereafter acquired "accounts" as such term is defined in Article 9 of the
Uniform Commercial Code in the State of New York, all products and proceeds
thereof, and all books, records, ledger cards, files, correspondence and
computer files, tapes, disks or software that at any time evidence or contain
information relating to the foregoing.
"Reserve Report" shall have the meaning ascribed thereto in
Section 3.1 hereof.
"Secured Party" shall have the meaning set out in Article VIII
of this Mortgage.
"Subject Interests" shall mean each kind and character of
right, title, interest or estate, whether now owned or hereafter acquired,
which Mortgagor has in, under or to the Leases and all right, title, interest
or estate, whether now owned or hereafter acquired, which Mortgagor has in and
to the Lands, together with each kind and character of right, title, interest
or estate now or hereafter vested in Mortgagor in and to any and all overriding
royalty interests, mineral interests, leasehold interests, mineral rights,
royalty interests, net profits interests, oil payments, production payments,
carried interests and all other properties or interests of every kind or
character which relate to any of the Lands or Leases, whether such right,
title, interest or estate be under and by virtue of a Lease, a unitization or
pooling agreement, a unitization or pooling order, a mineral deed, a royalty
deed, an operating agreement, a revenue sharing agree-
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54
ment, a division order, a transfer order, a farmout agreement, a fee simple
conveyance or any other type of contract, conveyance or instrument or under any
other type of claim or title, legal or equitable, recorded or unrecorded, all
as the same shall be enlarged by the discharge of any payments out of
production or by the removal of any charges or encumbrances to which any of
same are subject.
"Subject Minerals" shall mean all Hydrocarbons, helium and/or
other minerals in, under, upon, produced or to be produced or which may be
produced, saved and sold from and which shall accrue and be attributable to the
Subject Interests, including, without limitation, all oil in tanks and all
rents, royalties, issues, profits, proceeds, products, revenues, and other
income arising from or attributable to the Subject Interests and Mortgagor's
interest therein.
"Vehicles" shall mean all trucks, automobiles, trailers and
other vehicles covered by a certificate of title.
ARTICLE II
Mortgage
2.1 Mortgage. To secure the full and punctual payment of the
Indebtedness and to secure the performance of the covenants, agreements and
obligations of Mortgagor contained herein, in the Loan Agreement and in all
other security documents executed in accordance therewith (collectively, with
the Indebtedness sometimes referred to herein as the "Obligations"), Mortgagor,
has mortgaged, pledged and hypothecated, and by these presents, except to the
extent that the same constitute Equipment, Inventory or Receivables, does
hereby mortgage, pledge, assign and hypothecate, unto Mortgagee, and further
grants a security interest to Mortgagee in, all of Mortgagor's rights, titles,
interests and estates in, to, under, derived from or with respect to all of the
following described property, whether now owned or hereafter acquired, namely:
(a) the Subject Interests;
(b) the Subject Minerals;
(c) the Production Sale Contracts;
(d) the Operating Equipment;
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(e) the Leases and the Lands;
(f) all unitization, communitization, operating
agreements, pooling agreements and declarations of pooled units and the
properties covered and the units created thereby (including all units formed
under orders, regulations, rules or other official acts of any federal, state
or other governmental agency providing for pooling or unitization, spacing
orders or other well permits and other instruments) which relate to or affect
all or any portion of the Subject Interests;
(g) all accounts receivable and other accounts,
contract rights, operating rights, general intangibles, chattel paper,
documents and instruments arising under any of the foregoing;
(h) all subleases, farmout agreements, assignments
of interests, assignments of operating rights, contracts, operating agreements,
bidding agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements, tenements,
hereditaments, improvements, appurtenances and benefits now existing or in the
future obtained and incident and appurtenant to any of the foregoing;
(i) all lease records, well records, production
records and accounting and other records and files which relate to any of the
foregoing, and all maps, data bases, manuals, information and data which relate
to any of the foregoing, including without limitation engineering, geological
and geophysical data;
(j) any liens and security interests in the Subject
Interests in favor of Mortgagor securing payment of proceeds from the sale of
the Subject Minerals including, but not limited to, those liens and security
interests provided for in the Louisiana Commercial Laws;
(k) all other rights, titles and interests of
Mortgagor in, to and under or derived from the Lands, the Leases, the
Production Sale Contracts and/or other properties described in Exhibit A
hereto;
(l) any property that may from time to time
hereafter, by delivery or by writing of any kind executed by or on behalf of
Mortgagor, be subjected to the lien and security interest hereof by Mortgagor
or by anyone
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authorized on Mortgagor's behalf, and Mortgagee is hereby authorized to receive
the same as additional security;
(m) all other property of every nature and kind and
wheresoever situated, now owned or hereafter acquired by Mortgagor or to which
Mortgagor is now or may hereafter be entitled at law or in equity; and
(n) any and all proceeds, returns, rents, royalties,
issues, profits, products, revenues and other income arising from or by virtue
of the sale, lease or other disposition of, or from any condemnation, eminent
domain or insurance payable with respect to damage, loss or destruction of, the
items described in subparagraphs (a) through (m) above;
together with any and all proceeds, products, increases, profits,
substitutions, replacements, renewals, additions, amendments and accessions of,
to and for all of the foregoing property. All the aforesaid properties, rights
and interests which are hereby subjected to the lien and/or security interest
of this Mortgage, together with any additions thereto which may be subjected to
the lien and/or security interest of this Mortgage by means of supplements
hereto or otherwise, other than Equipment, Inventory and Receivables, shall
hereinafter be referred to as the "Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and to its successors
and assigns forever.
ARTICLE III
Particular Warranties and Representations of Mortgagor
Mortgagor hereby warrants and represents to Mortgagee, as of
the date hereof, as follows:
3.1 Leases. With respect to Leases covering all ▇▇▇▇▇ and
Lands to which value has been ascribed in that certain reserve report, prepared
as of February 1, 1997 (the "Reserve Report"), by Netherland, ▇▇▇▇▇▇ &
Associates, Inc., other than the Lobo Reserves: (a) the Leases are valid,
subsisting leases as to all such ▇▇▇▇▇ and Lands, and are superior and
paramount to all other Oil and Gas Leases respecting the properties to which
they pertain and all rentals, royalties and other amounts due and payable in
accordance with the terms of the Leases have been duly paid or provided for;
(b) the Leases are in full force and
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effect; and (c) except as disclosed in writing by Mortgagor to Mortgagee,
Mortgagor, and to the best of Mortgagor's knowledge all other parties to the
Leases, have performed in all material respects all obligations required to be
performed by them and are not in material default under nor in receipt of any
claim of material default under any Lease, and no event has occurred which,
with the passage of time or the giving of notice or both, would cause a
material breach of, or default under, any Lease, and Mortgagor has no knowledge
of any material breach or anticipated breach by the other parties to any Lease.
The references to Permitted Liens in this Mortgage are made for the purpose of
giving effect to the warranties of Mortgagor contained herein and are not
intended to limit or restrict the description of the Mortgaged Property, nor is
it intended that this Mortgage or the rights of Mortgagee hereunder shall be
subject to, or encumbered by, the Permitted Liens. The warranties made by
Mortgagor hereunder with respect to its title or interest in the Mortgaged
Property shall not in any manner limit the quantum of interest effected by this
Mortgage. It is intended that this Mortgage shall cover and affect Mortgagor's
entire present and future interest in the Mortgaged Property, without regard to
any recited warranted interest.
3.2 Documents. Each of the existing Material Production Sale
Contracts is valid, binding and enforceable in accordance with its respective
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or moratorium or other similar laws relating to
creditor's rights and by general equitable principles which may limit the right
to obtain equitable remedies (regardless of whether such enforceability is
considered in a proceeding at equity or at law), and except as rights to
indemnity thereunder may be limited by applicable law) and is in full force and
effect, and no material default on the part of any party thereto exists
thereunder. To the best knowledge of Mortgagor, all amounts due and payable in
accordance with the terms of each Material Production Sale Contract have been
duly paid or provided for and the obligations to be performed under each of the
Material Production Sale Contracts have been duly performed, in all material
respects in accordance with the terms of such contracts and any related
agreements, and in conformity with all applicable laws, rules, regulations and
orders of all courts and regulatory authorities having jurisdiction.
3.3 Title. Except for Permitted Liens, Mortgagor has (a)
good and marketable title to, and is possessed of, that portion of the
Mortgaged Property constituting real property, including, without limitation,
those referenced in Exhibit A (it being understood that marketable title as
used herein shall mean such title to real property as is customarily held in
the oil and gas business) and
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(b) good and sufficient title to the portion of the Mortgaged Property
constituting personal property. Except as disclosed in writing by Mortgagor to
Mortgagee prior to the date hereof, Mortgagor has obtained reconveyances or
reassignments of record title into Mortgagor of all production payments,
limited working interests or similar interests conveyed by Mortgagor or
Mortgagor's predecessor in title to various vendors and servicers with respect
to any drilling program that has "paid out," as that term is defined in the
respective drilling agreements, as may be necessary to vest in Mortgagor record
title to the working interests and net revenue interests as set forth in the
Reserve Report. Mortgagor owns, in the aggregate, net of Permitted Liens, not
significantly more than the amount of undivided working interests and not
significantly less than the amount of net revenue interests in the Leases set
forth in the Reserve Report. For purposes of this Paragraph 3.3, "working
interest" shall refer to Mortgagor's share of expense in the applicable Lease,
well or drilling and production unit shown on the Reserve Report, and "net
revenue interest" shall refer to Mortgagor's share of production from a Lease,
well or production unit after satisfaction of all royalties, overriding
royalties, production payments or similar non-operating interests. Each of the
Material Production Sale Contracts is free from any material credit, deduction,
allowance, defense, dispute, setoff, or counterclaim (other than current
charges provided for in such instruments but not yet due and payable), and
there is no extension or indulgence with respect thereto.
3.4 No Liens. Except for Permitted Liens, the Mortgaged
Property is free of any and all claims, liens, charges, encumbrances,
mortgages, security interests, contracts, agreements, options, preferential
purchase rights or other restrictions or limitations of any nature or kind.
3.5 Power and Authority. Mortgagor has the full power and
legal right to bargain, grant, sell, mortgage, assign, transfer, convey and
grant a security interest in all of the Mortgaged Property, all in the manner
and form herein provided and without obtaining the waiver, consent or approval
of any lessor, sublessor, governmental agency or entity or party whomsoever or
whatsoever, except as already obtained or to be obtained pursuant to the terms
of the Loan Agreement.
3.6 Contracts. Mortgagor is not obligated by virtue of any
prepayment under any Production Sale Contract or other contract providing for
the sale by Mortgagor of Hydrocarbons, helium and/or other minerals, which
contains a "take or pay" clause or under any similar prepayment agreement or
arrangement, including, without limitation, "gas balancing agreements" to
deliver
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Hydrocarbons, helium and/or other minerals (amounting to a material portion of
the Hydrocarbons, helium and/or other minerals covered hereby) at some future
time without then or thereafter receiving full payment therefor.
3.7 No Governmental Approvals. Mortgagor warrants that no
approval or consent of any regulatory or administrative commission or
authority, or of any other governmental body, is necessary to authorize the
execution and delivery of this Mortgage and that no such approval or consent is
necessary to authorize the observance or performance by Mortgagor of the
covenants herein contained.
3.8 Producing ▇▇▇▇▇. All producing ▇▇▇▇▇ located on the
Leases have been drilled, operated and produced in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and are subject to no material
penalties on account of past production, and such ▇▇▇▇▇ are, in fact, bottomed
under and are producing from, and the well bores are wholly within, the Lands.
3.9 Principal Place of Business; Tax Identification Number.
The principal place of business and chief executive office of Mortgagor is
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇. The federal employer tax identification number of Mortgagor is
▇▇-▇▇▇▇▇▇▇.
ARTICLE IV
Particular Covenants and Agreements of Mortgagor
Mortgagor hereby covenants to and agrees with Mortgagee as
follows:
4.1 Payment of the Indebtedness. Mortgagor will duly and
punctually pay the principal of and interest on all of the Indebtedness,
including each and every obligation owing under the Note as the same shall
become due and payable under the Note and in accordance with the terms of the
Loan Agreement.
4.2 Performance of Other Obligations. Mortgagor shall duly
and punctually perform and keep all other Obligations required of Mortgagor
pursuant to the terms hereof, of the Loan Agreement and of any other documents
executed and delivered by Mortgagor in connection with the Loan Agreement.
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4.3 Operation of Mortgaged Property. So long as the
Indebtedness or any part thereof remains unpaid, and whether or not Mortgagor
is the operator of the Mortgaged Property, Mortgagor shall, at Mortgagor's own
expense:
(a) do all things necessary to keep unimpaired
Mortgagor's rights and remedies in or under the Mortgaged Property and, except
as otherwise permitted hereby or in the Loan Agreement, shall not (i) abandon
any well or forfeit, surrender, release or default under (other than any
default that, individually or in the aggregate with all other such defaults,
would not have a material adverse effect on Mortgagor's business) any Lease or
any Production Sale Contract (except to the extent that any such Production
Sale Contract constitutes a Receivable), or in the event Mortgagor is not the
operator, shall use its best efforts to prevent any of the above, unless
undertaken in the ordinary course of business or (ii) abandon, sell, convey,
assign, lease or otherwise transfer any right, title or interest of Mortgagor
under the Production Sale Contracts (except to the extent that such Production
Sales Contracts constitute Receivables), or consent to any of the foregoing,
directly or indirectly;
(b) except as otherwise permitted in the Loan
Agreement, perform or cause to be performed, except where any failure to so
perform or cause to be performed would not, individually or in the aggregate
with all other such failures, have a material adverse effect or Mortgagor's
business, each and all covenants, agreements, terms, conditions and limitations
imposed upon Mortgagor or its predecessors in interest and expressly contained
in (i) the Leases, any Production Sale Contract, and any instrument or document
relating thereto, and (ii) any assignment or other form of conveyance, under or
through which the Leases or an undivided interest therein are now held, and
perform or cause to be performed all implied covenants and obligations imposed
upon Mortgagor in connection with the Leases, any Production Sale Contract or
any document or instrument relating thereto;
(c) cause, or in the event Mortgagor is not the
operator of the Subject Interests, use its best efforts to cause, the Subject
Interests to be maintained, developed, protected against drainage, and
continuously operated for the production of Hydrocarbons, helium and/or other
minerals, as applicable, in a good and workmanlike manner as would be operated
by a prudent operator and in compliance with all applicable operating
agreements and contracts, and all applicable federal, state and local laws,
rules and regulations, excepting those
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being contested in good faith in such a manner as not to jeopardize Mortgagee's
rights in and to the Subject Interests;
(d) except as otherwise permitted in the Loan
Agreement, cause to be paid, promptly as and when due and payable, except where
the failure to make any such payments would not, individually or in the
aggregate, have a material adverse effect on Mortgagor's business, (i) all
rentals, delay rentals, royalties and indebtedness payable in respect of the
Subject Interests, and all expenses incurred in or arising from the operation
or development of the Subject Interests, or, in the event Mortgagor is not the
operator, shall use its best efforts to cause each of the foregoing to be paid
and (ii) all amounts due and payable in accordance with the terms of each
Production Sale Contract;
(e) cause the Operating Equipment necessary for the
Mortgagor's business operations to be kept in good and effective operating
condition (reasonable wear and tear excepted), and all repairs, renewals,
replacements, additions and improvements thereof or thereto, needful to the
production of Hydrocarbons, helium and/or other minerals, as applicable, from
the Subject Interests, to be promptly made;
(f) except for Permitted Liens or as otherwise
permitted by the Loan Agreement, cause the Mortgaged Property or any part
thereof or the rents, issues, revenues, profits and other income therefrom to
be kept free and clear of all claims, liens, charges, mortgages, security
interests, encumbrances or other restrictions or limitations of any nature or
kind;
(g) maintain insurance for the Mortgaged Property in
accordance with the requirements of the Loan Agreement;
(h) comply with, or cause to be complied with, in
all material respects, or, if Mortgagor is not the operator of the Mortgaged
Property, use its best efforts to cause to be complied with, in all material
respects, all applicable and valid laws, rules and regulations of the United
States, the State of Louisiana or any other governmental body exercising
jurisdiction, with respect to the operation and development of the Lands and
the production and sale of Hydrocarbons, helium and/or other minerals, as
applicable, therefrom; and
(i) deliver, or cause to be delivered, to Mortgagee
a copy of any notice, demand or other communication from any other party to the
Leases or any Production Sale Contract, relating to any alleged, potential or
actual
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material breach thereunder or material breach of any of the covenants,
agreements, terms, or limitations thereof or purporting to terminate or in any
other way adversely affect the rights of Mortgagor thereunder.
4.4 Taxes. Subject to Mortgagor's right to contest same as
provided in the Loan Agreement, Mortgagor will pay or cause to be paid, before
delinquent, all lawful taxes, assessments and other charges of every kind and
character imposed upon this Mortgage or upon the Mortgaged Property or any part
thereof or upon the interest of Mortgagee therein (excluding taxes upon the
income of Mortgagee), or upon the income, rents, issues, revenues, profits or
other income from the Mortgaged Property, or incident to or in connection with
the production of Hydrocarbons, helium or other minerals therefrom, or the
operation and development thereof.
4.5 Recording, Etc. Mortgagor will promptly and at
Mortgagor's expense record, register, deposit and file this Mortgage and every
other instrument in addition or supplemental hereto in such offices and places
and at such times and as often as may be necessary to perfect, preserve,
protect and renew the lien and security interest hereof as a recorded lien on
the immovable property and fixtures now or hereafter comprising the Mortgaged
Property and perfected security interest on movable property and fixtures now
or hereafter comprising the Mortgaged Property as the case may be and the
rights and remedies of Mortgagee hereunder, and otherwise will do and perform
all matters or things necessary or expedient to be done or observed by reason
of any law or regulation of the State of Louisiana or of the United States of
America or of any other competent authority, for the purpose of effectively
creating, maintaining and preserving the lien and security interest created by
this Mortgage and the perfection and priority thereof.
4.6 Sale or Mortgage of Mortgaged Property. Except for
Permitted Liens and as otherwise permitted by the Loan Agreement, Mortgagor
will not sell, convey, mortgage, pledge, assign, abandon or otherwise dispose
of or encumber the Mortgaged Property nor any portion thereof, nor any of
Mortgagor's rights, titles, interests or estates therein without first securing
the express written consent of Mortgagee.
4.7 Records, Statements and Reports. Mortgagor will keep
proper books of record and account in which complete and correct entries will
be made of Mortgagor's transactions in accordance with generally accepted
accounting principles.
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4.8 Right of Entry and Inspection of Books. Mortgagee and
the agents of Mortgagee are hereby authorized (a) to the extent Mortgagor has
authority to do so, to enter upon the Lands, and all parts thereof, for the
purposes of investigating and inspecting the condition and operation thereof,
(b) to examine the books of account of Mortgagor, and (c) to discuss the
affairs, finances or accounts of Mortgagor and be advised as to the same by any
officer of Mortgagor, all at such reasonable times or intervals as Mortgagee
may desire.
4.9 Qualification to Do Business; Maintenance of Existence.
Mortgagor will (a) continue to be in good standing and duly qualified to
transact business in the State of Louisiana and (b) maintain its corporate
existence, except as otherwise permitted by the Loan Agreement.
4.10 Expenses. Mortgagor will promptly upon demand by
Mortgagee pay all reasonable costs and out-of- pocket expenses heretofore or
hereafter incurred by Mortgagee in connection with the enforcement of any of
Mortgagee's rights hereunder.
4.11 Further Assurances. Mortgagor will execute and deliver
such other and further instruments and will use its best efforts to do such
other and further acts as in the opinion of Mortgagee may be necessary or
desirable to carry out more effectively the purposes of this instrument,
including, without limiting the generality of the foregoing, (a) prompt
correction of any defect which may hereafter be discovered in the title to the
Mortgaged Property or any part thereof other than Permitted Liens or in the
execution and acknowledgment of this Mortgage, the Note or other document
executed in connection herewith, (b) prompt execution and delivery of all
division or transfer orders that in the opinion of Mortgagee are needed to
transfer effectively to Mortgagee the assigned proceeds of production from the
Subject Interests and (c) obtaining any necessary governmental approvals,
including, without limitation, those of the State of Louisiana.
4.12 Adverse Claim. Mortgagor will warrant and forever
defend, subject to the Permitted Liens, the title to the Mortgaged Property
unto Mortgagee against every person whomsoever lawfully claiming the same or
any part thereof, and Mortgagor will maintain and preserve as first priority
the lien and security interest created hereby so long as any of the
Indebtedness remains unpaid. Should an adverse claim be made against or a
cloud develop upon the title to any part of the Mortgaged Property, other than
Permitted Liens, or upon the lien and security interest created by this
Mortgage, Mortgagor agrees that it
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will immediately defend such adverse claim or take appropriate action to remove
such cloud at Mortgagor's expense, and Mortgagor further agrees that after
prior notice to Mortgagor, Mortgagee may take such other action as it deems
advisable to protect and preserve its interests in the Mortgaged Property, and,
in such event, Mortgagor will indemnify Mortgagee against any and all costs,
attorneys' fees and other expenses which it or they may incur in defending
against any such adverse claim or taking action to remove any such cloud.
4.13 Change of Taxpayer Identification Number; Relocation of
Offices. Mortgagor shall not change its taxpayer identification number or
relocate its principal place of business or chief executive office to a county
or state other than that specified in Section 3.9 of this Mortgage or otherwise
relocate any material portion of the movable property comprising part of the
Mortgaged Property to a county/parish or state other than that where it is
presently located or where, with respect to such property, Mortgagee has a
perfected security interest, unless, prior to such relocation, Mortgagor (a)
gives 30 days' prior written notice to Mortgagee, which notice shall include,
without limitation, the new taxpayer identification number or the name of the
county/parish and state into which such relocation is to be made and (b) prior
to such change or relocation, executes and delivers all such additional
documents and performs all additional acts (including causing filings of public
record and paying all related fees and costs) as may be necessary or advisable
in order to continue and maintain the existence and priority of Mortgagee's
security interest in the movable property comprising part of the Mortgaged
Property.
4.14 Notice of Pooling or Unitization. Except as otherwise
provided in Section 9.1 hereof, Mortgagor will promptly notify Mortgagee in
writing upon the first filing of any petition or request with any governmental
or regulatory agency regarding any pooling or unitization arrangement
pertaining to the Mortgaged Property or any part thereof, and any pooling or
unitization arrangement which is imposed or which Mortgagor learns may be
imposed on the Mortgaged Property or any part thereof, which would cause
Mortgagor to suffer a significant reduction in income on a monthly basis from
the Mortgaged Property.
4.15 Representations and Covenants Relating to Hazardous
Materials.
(a) Mortgagor is not in violation of any Federal,
state, local or foreign laws or regulations relating to pollution or protection
of human
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health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants wastes toxic
substances, hazardous substances, petroleum or petroleum products ("Materials
of Environmental Concern"), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern (collectively, "Environmental
Laws"), which violation, as defined below would have a material adverse effect
on Mortgagor. "Violation," as used herein, includes, but is not limited to,
noncompliance with any permit or other governmental authorization required
under applicable Environmental Laws and noncompliance with the terms and
conditions of any such permit or authorization. In addition, (a) except as
previously disclosed in writing to Mortgagee, Mortgagor has not received any
communication (written or oral), whether from a governmental authority,
citizens' group, employee or otherwise, alleging that Mortgagor is not in full
compliance with any Environmental Laws or permit or authorization required
under applicable Environmental Laws where such failure to comply fully would
have a material adverse effect on Mortgagor and (b) there are no circumstances
that may prevent or interfere with such full compliance in the future, except
where such failure to comply would not have a material adverse effect on
Mortgagor's business.
(b) To the knowledge of Mortgagor, there is no
claim, action, cause of action, investigation or notice (written or oral) by
any person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern at any location owned or operated by Mortgagor, or circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law (collectively, "Environmental Claims") pending or threatened against
Mortgagor, except where such an Environmental Claim would not have a material
adverse effect on Mortgagor.
(c) To the knowledge of Mortgagor there are no past
or present actions, activities, circumstances, conditions, events or incidents,
including without limitation, the release, emission, discharge, presence or
disposal or any Material of Environmental Concern, that could form the basis of
any Environmental Claim against Mortgagor, which Environmental Claim would have
a material adverse effect on Mortgagor.
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ARTICLE V
Assignment of Production
5.1 Pledge and Assignment. Subject to the rights of the
holders of any Permitted Liens prior to the lien of this Mortgage, as further
security for the payment and performance of the Indebtedness, Mortgagor has
pledged, transferred, assigned, warranted and conveyed and does hereby pledge,
transfer, warrant and convey to Mortgagee, effective as of the date hereof, all
of Mortgagor's rights, titles, interests and estates in, to and under the
following property, except to the extent that any of the same constitute
Equipment, Inventory or Receivables; all Hydrocarbons, helium and/or other
minerals which are thereafter produced and which accrue to the Subject
Interests, all products obtained or processed therefrom and all revenues and
proceeds now or hereafter attributable to said Hydrocarbons, helium and/or
other minerals and said products as well as any liens and security interests
securing any sales of said Hydrocarbons, helium and/or other minerals. All
parties producing, purchasing or receiving any such Hydrocarbons, helium and/or
other minerals or products, or having such Hydrocarbons, helium and/or other
minerals, products, or proceeds therefrom, in their possession for which they
or others are accountable to Mortgagee by virtue of the provisions of this
Article, are authorized and directed to treat and regard Mortgagee as the
assignee and transferee of Mortgagor and entitled in Mortgagor's place and
stead to receive such Hydrocarbons, helium and/or other minerals and all
proceeds therefrom, and said parties and each of them shall be fully protected
in so treating and regarding Mortgagee and shall be under no obligation to see
to the application by Mortgagee of any such proceeds or payments received by
it; provided, however, that, until Mortgagee or Mortgagor shall have instructed
such parties to deliver such Hydrocarbons, helium and/or other minerals and all
products, revenues and/or proceeds therefrom directly to Mortgagee (which such
instructions may be given only after the occurrence and during the continuance
of an Event of Default but the giving of such instructions shall as to all such
parties be conclusive as to the occurrence of an Event of Default), such
parties shall be entitled to deliver such Hydrocarbons, helium and/or other
minerals and all products, revenues and/or proceeds therefrom to Mortgagor.
Mortgagor agrees, subject to the rights of the holder of any Permitted Lien
prior to the lien of the Mortgage, to perform all such acts, and to execute all
such further assignments, transfers and division orders and other instruments
as may be required or desired by Mortgagee or any party in order to have said
revenues and proceeds so paid to Mortgagee and/or to have such Hydrocarbons,
helium and/or other minerals delivered to Mortgagee. Mortgagee is fully
authorized to receive and issue a receipt for said revenue and proceeds, to
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endorse and cash any and all checks and drafts payable to the order of
Mortgagor or Mortgagee for the account of Mortgagor received from or in
connection with said revenues or proceeds and apply the proceeds thereof in
accordance with Section 5.2 hereof, and to execute transfer and division orders
in the name of Mortgagor, or otherwise, with warranties binding Mortgagor. In
the event that Mortgagee elects to take delivery of any such Hydrocarbons,
helium or other minerals in kind, Mortgagee shall have the right to sell such
Hydrocarbons, helium or minerals upon such terms as Mortgagee may desire, and
to apply the proceeds of such sale as provided in Section 5.2 below.
5.2 Application of Proceeds. Any and all payments and sale
proceeds received by Mortgagee pursuant to Section 5.1 hereof shall be placed
in a cash collateral account with Mortgagee and on the first day of each month
applied as follows:
First: to the payment and satisfaction of all costs and
expenses incurred in connection with the collection
of such proceeds (and in the event Mortgagee shall
have taken delivery in kind, to the costs and
expenses of the sale of such Hydrocarbons, helium or
other minerals); and
Second: then in accordance with the provisions of Section
7.9 below.
5.3 No Liability of Mortgagee in Collecting. Mortgagee is
hereby absolved from all liability for failure to enforce collection of any
proceeds so assigned and from all other responsibility in connection therewith,
except the responsibility to account to Mortgagor for funds actually received.
Mortgagee shall have the right, at its election, to prosecute and defend any
and all actions or legal proceedings deemed advisable by Mortgagee in order to
collect such funds and to protect the interests of Mortgagee and/or Mortgagor,
with all reasonable costs, expenses and attorneys' fees incurred in connection
therewith being paid by Mortgagor.
5.4 Assignment Not a Restriction on Mortgagee's Rights.
Nothing herein contained shall detract from or limit the absolute obligation of
Mortgagor to make payment in full of the Indebtedness, regardless of whether
the proceeds assigned by this Article are sufficient to pay the same, and the
rights under this Article V shall be in addition to all other security now or
hereafter existing to secure the payment of the Indebtedness.
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5.5 Status of Assignment. Notwithstanding the other
provisions of this Article V, Mortgagee or any receiver appointed in judicial
proceedings for the enforcement of this Mortgage shall have the right to
receive all of the Hydrocarbons, helium, and/or other minerals herein assigned
and the proceeds therefrom after the Note has been declared due and payable in
accordance with the provisions of Section 6.2 hereof and to apply all of said
proceeds as set forth in Section 5.2 hereof. Upon any sale of the Subject
Interests or any part thereof pursuant to Article VII hereof, the Hydrocarbons,
helium, and/or other minerals thereafter produced from the Subject Interests so
sold, and the proceeds therefrom, shall be included in such sale and shall pass
to the purchaser free and clear of the assignment contained in this Article V.
5.6 Indemnity. Mortgagor agrees to indemnify, defend and
hold Mortgagee harmless against all claims, actions, liabilities, judgments,
costs, attorneys' fees or other charges of whatsoever kind or nature (including
without limitation amounts paid in settlement, court costs and the fees and
disbursements of counsel incurred in connection with any investigation,
litigation or other proceeding) (all hereinafter in this Section 5.6 called
"claims"), other than claims arising from Mortgagee's own gross negligence,
willful misconduct or bad faith, made against or incurred by it as a
consequence, either before or after the payment in full of the Indebtedness, of
(i) the breach by Mortgagor of any covenant, representation or warranty
contained in this Mortgage, (ii) any violation of law by Mortgagor, or (iii)
the assertion that Mortgagee received Hydrocarbons, helium and/or other
minerals herein assigned or the proceeds thereof claimed by third persons.
Mortgagee shall have the right to defend against any such claims, employing
attorneys therefor, and unless furnished with reasonable indemnity, it shall
have the right to pay or compromise and adjust all such claims. Mortgagor will
indemnify and pay to Mortgagee any and all such amounts as may be paid in
respect of such claims or as may be successfully adjudged against Mortgagee.
The obligations of Mortgagor as hereinabove set forth in this Section 5.6 shall
survive the release of this Mortgage.
ARTICLE VI
Events of Default
6.1 Events of Default. It shall constitute an "Event of
Default" hereunder if an "Event of Default" occurs under the terms and
provisions of the Loan Agreement.
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6.2 Effect of Event of Default. If an Event of Default shall
occur and be continuing:
(a) Mortgagee may, subject to and in accordance with
the terms of the Loan Agreement, by notice in writing to Mortgagor, declare the
principal of and accrued interest on the Note and all other outstanding
Indebtedness secured hereby to be immediately due and payable, whereupon the
Note and all other outstanding Indebtedness shall become and be immediately due
and payable, in each instance without (except for any grace and notice
expressly provided for in the Loan Agreement) grace, demand, presentment for
payment, protest or notice of any kind to Mortgagor or any other person
(including, but not limited to, notice of intent to accelerate and notice of
acceleration), all of which are hereby expressly waived; and
(b) Mortgagee may proceed to enforce its rights
hereunder.
ARTICLE VII
Enforcement of Remedies
7.1 Event of Default; Confession of Judgment. Upon the
occurrence and during the continuance of an Event of Default, the Mortgagee may
at its option, without notice, demand, presentment or putting Mortgagor in
default, all of which hereby are waived expressly by Mortgagor, declare the
Indebtedness to be due and payable, without notice to Mortgagor, and may cause
the Mortgaged Property to be seized and sold by executory process, or, at
Mortgagee's option, Mortgagee may file suit in any court of competent
jurisdiction and obtain judgment immediately by virtue of the confession of
judgment herein contained, or, at Mortgagee's option, Mortgagee may proceed
with enforcement of this Mortgage in any other manner provided by law.
Mortgagor waives allotment, citation and all legal notices and delays and
consents that said judgment may be rendered, signed and executed immediately,
either in vacation or term time; in addition, Mortgagor waives the benefit of
any and all laws or parts of laws relative to the advertisement and the
appraisement of property seized and sold under executory or other legal process
and consents that in the case of any sale under any method of foreclosure
authorized by the terms of this Mortgage, the Mortgaged Property or any part
thereof, may be sold in globo or in separate parcels, at the election of
Mortgagee, at public auction or by private sale, to the highest bidder for cash
or on such other terms as Mortgagee may elect. Mortgagor hereby waives (i) the
benefit of appraisement provided for in Articles 2332,
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2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and all other laws
conferring the same; (ii) the demand and three (3) days notice of demand as
provided in Articles 2639 and 2721 of the Louisiana Code of Civil Procedure;
(iii) the notice of seizure provided for in Articles 2293 and 2721 of the
Louisiana Code of Civil Procedure; (iv) the three (3) days delay provided for
in Articles 2331 and 2722 of the Louisiana Code of Civil Procedure; and (v) all
other laws providing rights of notice, demand, appraisement, or delay.
Mortgagor expressly authorizes and agrees that Mortgagee shall have the right
to appoint a keeper of such Mortgaged 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 Mortgagee, any agent or employee thereof, or any other person,
firm or corporation. Compensation for the services of the keeper is hereby
fixed at five percent (5%) of the amount due or sued for or claimed or sought
to be protected, preserved, or enforced in the proceeding for the recognition
or enforcement of this Mortgage and shall be secured by the liens and security
interests of this Mortgage. Mortgagor acknowledges the Indebtedness and the
other Obligations secured hereby, whether now existing or to arise hereafter,
and confesses judgment thereon in favor of Mortgagee, if the Indebtedness or
any other Obligation secured hereby is not paid as and when due, whether by
acceleration or otherwise.
7.2 Rights of Mortgagee with Respect to Immovable Property
Constituting a Part of the Mortgaged Property. Upon the occurrence and during
the continuance of an Event of Default, Mortgagee will have all rights and
remedies granted by law, and particularly by the Louisiana Commercial Laws (La.
R.S. 10:1 - 101 et seq.), including, but not limited to, (i) the right to
proceed as to both the movable and the immovable property covered hereby in
accordance with Mortgagee's rights and remedies in respect of the immovable
property covered hereby and (ii) the right to take possession of all movable
property constituting a part of the Mortgaged Property, and for this purpose
Mortgagee may enter upon any premises on which any or all of such movable
property is situated and take possession of and operate such movable property
(or any portion thereof) or remove it therefrom. Mortgagee may require
Mortgagor to assemble such movable property and make it available to Mortgagee
at a place to be designated by Mortgagee which is reasonably convenient to all
parties. Unless such movable property is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Mortgagee will give Mortgagor reasonable notice of the time and place of any
public sale or of the time after which any private sale or other disposition of
such movable property is to be made. This requirement of sending reasonable
notice will be met if the notice is mailed by first-class mail, postage
prepaid, to Mortgagor at the address shown on
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the cover page of this Mortgage at least five (5) Business Days before the time
of the sale or disposition.
7.3 Rights of Mortgagee with Respect to Fixtures Constituting
a Part of the Mortgaged Property. Upon the occurrence and during the
continuance of an Event of Default, Mortgagee may elect to treat the fixtures
constituting a part of the Mortgaged Property as either immovable property
collateral or movable property collateral and proceed to exercise such rights
as apply to such type of collateral.
7.4 Judicial Proceedings. Upon the occurrence and during the
continuance of an Event of Default, Mortgagee, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits
in equity or at law, whether for a foreclosure hereunder, or for the sale of
the Mortgaged Property, or for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for the appointment of a receiver pending any foreclosure hereunder
or the sale of the Mortgaged Property, or for the enforcement of any other
appropriate legal or equitable remedy.
7.5 Possession of the Mortgaged Property. It shall not be
necessary for Mortgagee to have physically present or constructively in its
possession at any sale held by Mortgagee or by any court, receiver or public
officer any or all of the Mortgaged Property, and Mortgagor shall deliver to
the purchaser at such sale on the date of sale the Mortgaged Property purchased
by such purchasers at such sale, and, if it should be impossible or
impracticable for any of such purchasers to take actual delivery of the
Mortgaged Property, then the title and right of possession to the Mortgaged
Property shall pass to the purchaser at such sale as completely as if the same
had been actually present and delivered.
7.6 Certain Aspects of a Sale. Mortgagee shall have the
right to become the purchaser at any sale held by Mortgagee or by any court,
receiver or public officer, and Mortgagee shall have the right to credit upon
the amount of the bid made therefor the amount payable out of the net proceeds
of such sale to it. Recitals contained in any conveyance made to any purchaser
at any sale made hereunder shall conclusively establish the truth and accuracy
of the matters therein stated, including, without limiting the generality of
the foregoing, nonpayment of the unpaid principal sum of, and the interest
accrued on, the Note after the same have become due and payable, advertisement
and conduct of such sale in the manner provided herein.
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7.7 Receipt of Purchaser. Upon any sale, whether made under
the Louisiana Commercial Laws or by virtue of judicial proceedings, the receipt
of Mortgagee, or of the officer making sale under judicial proceedings, shall
be sufficient discharge to the purchaser or purchasers at any sale for his or
their purchase money, and such purchaser or purchasers, his or their assigns or
personal representatives shall not, after paying such purchase money and
receiving such receipt of Mortgagee or of such officer therefor, be obliged to
see to the application of such purchase money or be in anywise answerable for
any loss, misapplication or non-application thereof.
7.8 Effect of Sale. Any sale or sales of the Mortgaged
Property or any part thereof, whether under the Louisiana Commercial Laws or by
virtue of judicial proceedings, shall operate to divest all right, title,
interest, claim and demand whatsoever either at law or in equity, of Mortgagor
of, in and to the Mortgaged Property sold, and shall be a perpetual bar, both
at law and in equity, against Mortgagor, and Mortgagor's successors or assigns,
and against any and all persons claiming or who shall thereafter claim all or
any of the property sold from, through or under Mortgagor, or Mortgagor's
successors or assigns. Nevertheless, Mortgagor, if requested by Mortgagee so
to do, shall join in the execution and delivery of all proper conveyances,
assignments and transfers of the properties so sold.
7.9 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property, or any part thereof, whether under Louisiana Commercial
Laws or by virtue of judicial proceedings, whose application has not elsewhere
herein been specifically provided for, shall be applied as follows:
First: to the payment of all expenses incurred by Mortgagee
incident to the enforcement of this Mortgage, the
Note or any of the Indebtedness including, without
limiting the generality of the foregoing, all
expenses of any entry or taking of possession, of any
sale, of advertisement thereof, and of conveyances,
and as well, court costs, compensation of agents and
employees and legal fees and expenses;
Second: to the payment of all other costs, charges, expenses,
liabilities and advances incurred or made by
Mortgagee under this Mortgage or in executing any
trust or power hereunder;
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Third: to the payment of the Note and any other Indebtedness
(other than Indebtedness described in "First" and
"Second" above), with interest to the date of such
payment, in such order and manner as set forth in the
Loan Agreement; and
Fourth: any surplus thereafter remaining shall be paid to
Mortgagor or Mortgagor's successors or assigns, as
their interests shall appear.
7.10 Mortgagor's Waiver of Rights of Marshalling, etc.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any stay, extension or redemption law now or hereafter in
force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage or the absolute sale of the Mortgaged Property or the possession
thereof by any purchaser at any sale made pursuant to any provision hereof, or
pursuant to the decree of any court of competent jurisdiction; but Mortgagor,
for Mortgagor and all who may claim by, through or under Mortgagor, to the
maximum extent that Mortgagor or those claiming by, through or under Mortgagor
now or hereafter lawfully may, hereby waives the benefit of all such laws.
Mortgagor, for Mortgagor and all who may claim through or under Mortgagor,
waives, to the maximum extent that Mortgagor or those claiming by, through or
under Mortgagor now or hereafter lawfully may do so, any and all right to have
any of the Mortgaged Property marshalled upon any foreclosure of the lien
hereof, or sold in inverse order of alienation, and agrees that Mortgagee or
any court having jurisdiction to foreclose such lien may sell the Mortgaged
Property as an entirety. If any law in this Section 7.10 referred to and now
in force, of which Mortgagor or Mortgagor's successor or successors might take
advantage despite the provisions hereof, shall hereafter be repealed or cease
to be in force, such law shall not thereafter be deemed to constitute any part
of the contract herein contained or to preclude the operation or application of
the provisions of this Section 7.10.
7.11 Costs and Expenses. All reasonable costs and
out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees and excluding expenses representing Mortgagee's administrative overhead)
incurred by Mortgagee in protecting and enforcing its rights hereunder shall
constitute a demand obligation owing by Mortgagor to the party incurring such
costs and expenses and shall draw interest at an annual rate equal to the rate
of interest then accruing on the Note until paid, all of which shall constitute
a portion of the Indebtedness,
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provided, however, that in no event shall such interest rate ever exceed the
Highest Lawful Rate.
7.12 Operation of Property by Mortgagee. Upon the occurrence
and during the continuance of an Event of Default and in addition to all other
rights herein conferred on Mortgagee, Mortgagee (or any person, firm or
corporation designated by Mortgagee) shall have the right and power, but shall
not be obligated, to enter upon and take possession of any of the Mortgaged
Property, and to exclude Mortgagor, and Mortgagor's agents or servants, wholly
therefrom, and to hold, use, administer, manage and operate the same to the
extent that Mortgagor shall be at the time entitled and in his place and stead.
Mortgagee, or any person, firm or corporation designated by Mortgagee, may
operate the same without any liability to Mortgagor in connection with such
operations, except for its gross negligence or willful misconduct in the
operation of such properties, and Mortgagee, or any person, firm or corporation
designated by Mortgagee, shall have the right and power, but shall not be
obligated, to collect, receive and issue a receipt for all Hydrocarbons, helium
and/or other minerals produced and sold from said properties, to make repairs,
purchase machinery and equipment, conduit and power, to enter work over
operations, drill additional ▇▇▇▇▇ and to exercise every power, right and
privilege of Mortgagor with respect to the Mortgaged Property. When and if the
expenses of such operation and development (including costs of unsuccessful
work over operations or additional ▇▇▇▇▇) have been paid and the Indebtedness
paid, said properties shall, if there has been no sale or foreclosure, be
returned to Mortgagor.
ARTICLE VIII
Security Agreement
Without limiting any of the provisions of this Mortgage, to
secure the Indebtedness and all other Obligations, Mortgagor, as Debtor
(referred to in this Article VIII as "Debtor"), hereby expressly GRANTS,
ASSIGNS, TRANSFERS and SETS OVER unto Mortgagee, as Secured Party (referred to
in this Article VIII as "Secured Party," whether one or more), a lien upon and
a security interest in all the Mortgaged Property, together with any and all
proceeds, products, increases, profits, substitutions, replacements, renewals,
additions, amendments and accessions of, to and for the Mortgaged Property,
insofar as such property consists of equipment, chattel paper accounts,
contract rights, instruments, general intangibles, inventory, Hydrocarbons,
helium and/or other minerals, fixtures and any and all other personal property
of any kind or charac-
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ter (including both those now and those hereafter existing) to the full extent
that such property may be subject to the Louisiana Commercial Laws, but
expressly excluding any and all Equipment, Inventory and Receivables (said
Mortgaged Property, fixtures, contract rights, instruments, general
intangibles, accounts, inventory, Hydrocarbons, helium and/or other minerals,
and equipment, together with any and all proceeds, products, increases,
profits, substitutions, replacements, renewals, additions, amendments and
accessions of, to and for the foregoing property, but expressly excluding any
and all Equipment, Inventory and Receivables being hereinafter collectively
referred to as the "Collateral" for the purposes of this Article VIII). The
lien and security interest created by this Mortgage attaches upon the delivery
hereof. Debtor covenants and agrees with Secured Party that:
(a) In addition to and cumulative of any other
remedies granted in this Mortgage to Secured Party, Secured Party may, upon the
occurrence and during the continuance of an Event of Default, proceed under
said Louisiana Commercial Laws as to all or any part of the Collateral and
shall have and may exercise with respect to the Collateral all the rights,
remedies and powers of a secured party after default under said Louisiana
Commercial Laws, including, without limitation, the right and power to sell, at
public or private sale or sales, or otherwise dispose of, lease or utilize the
Collateral and any part or parts thereof in any manner authorized or permitted
under said Louisiana Commercial Laws after default by a debtor, and to apply
the proceeds thereof toward payment of any costs and expenses and attorneys'
fees and legal expenses thereby incurred by Secured Party, and toward payment
of the Indebtedness in accordance with Section 7.9 hereof.
(b) Upon the occurrence and during the continuance
of any Event of Default, Secured Party shall have the right (without
limitation) to take possession of the Collateral and to enter upon any premises
where same may be situated for such purpose without being deemed guilty of
trespass and without liability for damages thereby occasioned (other than
damages arising from the gross negligence, willful misconduct or bad faith of
Secured Party) and to take any action deemed necessary or appropriate or
desirable by Secured Party, at its option and in its discretion, to repair,
refurbish or otherwise prepare the Collateral for sale, lease or other use or
disposition as herein authorized. Debtor waives any and all rights that it may
have to a judicial hearing in advance of the enforcement of any of the Secured
Party's rights hereunder, including without limitation, its rights following an
Event of Default to take immediate possession of the Collateral and to exercise
its rights with respect thereto. To the extent that any
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of the Indebtedness is to be paid or performed by a person other than Debtor,
Debtor waives and agrees not to insert any rights or privileges which it may
have under Section 9-112 of the Uniform Commercial Code.
(c) To the maximum extent permitted by law, Debtor
expressly waives any notice of sale or other disposition of the Collateral and
any other right or remedies of a debtor or formalities prescribed by law
relative to sale or disposition of the Collateral or exercise of any other
right or remedy of Secured Party existing after default hereunder; and to the
extent any such notice is mailed, postage prepaid, to Debtor at the address
shown with Debtor's signature hereinbelow at least five (5) Business Days
before the time of the sale or disposition, such notice shall be deemed
reasonable and shall fully satisfy any requirement for giving of said notice.
Such notice, in case of a public sale or disposition, shall state the time and
place fixed for such sale or disposition and, in case of a private sale or
disposition, shall state the date after which such sale or disposition is to be
made.
(d) Any public sale of the Collateral shall be held
at such time or times within ordinary business hours at such places as Secured
Party may fix in the notice of such sale. At any such sale, the Collateral may
be sold in one lot as an entirety or in separate parcels, as Secured Party may
determine.
(e) Secured Party shall not be obligated to make any
sale pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same shall be
so adjourned.
(f) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by Secured Party until the selling price is paid by the purchaser
thereof, but Secured Party shall not incur any liability in case of the failure
of such purchaser to take up and pay for the Collateral so sold and, in case of
any such failure, such Collateral may again be sold upon like notice.
(g) Upon the occurrence and during the continuance
of an Event of Default, Secured Party is expressly granted the right, at its
option, to transfer at any time to itself or to its nominee the Collateral, or
any part thereof and to hold the same as security for the Indebtedness, and to
receive the monies, income, proceeds or benefits attributable or accruing
thereto and to apply the
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same toward payment of the Indebtedness, whether or not then due, in accordance
with Section 7.9 hereof. All rights to marshalling of assets of Debtor,
including any such right with respect to the Collateral, are hereby waived to
the maximum extent permitted by law.
(h) All recitals in any instrument of assignment or
any other instrument executed by Secured Party incident to sale, transfer,
assignment, lease or other disposition or utilization of the Collateral or any
part thereof hereunder shall be full proof of the matter stated therein, no
other proof shall be required to establish full legal propriety of the sale or
other action or of any fact, condition or thing incident thereto, and all
prerequisites of such sale or other action and of any fact, condition or thing
incident thereto shall be presumed conclusively to have been performed or to
have occurred.
(i) Upon the occurrence and during the continuance
of an Event of Default, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated
by Secured Party that is reasonably convenient to both parties. All expenses
of retaking, holding, preparing for sale, lease or other use or disposition,
selling, leasing or otherwise using or disposing of the Collateral and the like
which are incurred or paid by Secured Party as authorized or permitted
hereunder, including also all attorneys' fees, legal expenses and costs, shall
be added to the Indebtedness.
(j) Should Secured Party elect to exercise its
rights under said Louisiana Commercial Laws as to part of the movable property
and fixtures described herein, this election shall not preclude Secured Party,
Mortgagee from exercising the rights and remedies granted by the preceding
paragraphs of this Mortgage as to the remaining personal property and fixtures.
(k) Secured Party may, at its election, at any time
after delivery of this Mortgage, sign one or more photocopies hereof in order
that such photocopies may be used as a financing statement under said Louisiana
Commercial Laws. Such signature by Secured Party may be placed between the
last sentence of this instrument and Debtor's acknowledgement or may follow
Debtor's acknowledgement. Secured Party's signature need not be acknowledged
and is not necessary to the effectiveness hereof as a deed of trust, mortgage,
assignment, pledge or security agreement.
(l) Except for Permitted Liens or as otherwise
permitted by the Loan Agreement, so long as any amount remains unpaid on the
Indebtedness,
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Debtor will not execute nor file in any public office any financing statement
or statements affecting the Collateral other than financing statements in favor
of Secured Party hereunder, unless the prior written specific consent and
approval of Secured Party shall have first been obtained.
(m) Secured Party is authorized to file, in any
jurisdiction where Secured Party deems it necessary, a financing statement or
statements, and at the request of Secured Party, Debtor will join Secured Party
in executing one or more financing statements pursuant to said Louisiana
Commercial Laws in form satisfactory to Secured Party, and will pay the cost of
filing or recording this or any other instrument, as a financing statement, in
all public offices at any time and from time to time whenever filing or
recording of any financing statement or of this instrument is deemed by Secured
Party to be necessary or desirable. The addresses of Debtor and Secured Party
are those addresses set forth for Mortgagor and Mortgagee, respectively, on the
cover page of this Mortgage.
(n) Without in any manner limiting the generality of
any of the other provisions of this Mortgage: (i) some portions of the goods
described or to which reference is made herein are or are to become fixtures on
the Lands; (ii) the security interests created hereby under applicable
provisions of the Louisiana Commercial Laws of one or more of the jurisdictions
in which the Mortgaged Property is situated will attach to Hydrocarbons or the
accounts (other than Receivables) resulting from the sale thereof at the
wellhead or minehead located on the Lands; and (iii) this Mortgage may be filed
of record in the real estate records as a financing statement.
(o) Debtor hereby irrevocably designates and
appoints Secured Party as its attorney-in-fact, with full power of
substitution, for the purposes of carrying out the provisions of this Mortgage
and taking any action and executing any instrument that Secured Party may deem
necessary or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is effective without further action of Mortgagor or Mortgagee
upon the occurrence and during the continuance of an Event of Default (but the
determination of an Event of Default by Secured Party shall as to all parties
for the purposes hereof be conclusive as to the occurrence of an Event of
Default) and is irrevocable and coupled with an interest.
(p) Without limiting the generality of the
foregoing, Debtor hereby irrevocably authorizes and empowers Secured Party,
upon the occurrence
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and during the continuance of an Event of Default, at the expense of Debtor, at
any time and from time to time (a) to ask, demand, receive, receipt, give
acquittance for, settle and compromise any and all monies which may be or
become due or payable or remain unpaid at any time or times to Debtor under or
with respect to the Collateral; (b) to endorse any drafts, checks, orders or
other instruments for the payment of money payable to Debtor on account of the
Collateral (including any such draft, check, order or instrument issued by an
insurance company payable jointly to Debtor and Secured Party); and (c) in the
discretion of Secured Party, to settle, compromise, prosecute or defend any
action, claim or proceeding, or take any other action, all either in its own
name or in the name of Debtor or otherwise, which Secured Party may deem to be
necessary or advisable for the purpose of exercising and enforcing its powers
and rights under this Mortgage or in furtherance of the purposes hereof,
including any action which by the terms of this Mortgage is to be taken by
Debtor. Nothing in this Mortgage shall be construed as requiring or obligating
Secured Party to make any demand or to make any inquiry as to the nature or
sufficiency of any payment received by it or to present or file any claim or
notice, or to take any action with respect to any of the Collateral or the
amounts due or to become due under any thereof, or to collect or enforce the
payment of any amounts assigned to it or to which it may otherwise be entitled
hereunder at any time or times, other than to account for amounts or Collateral
received.
(q) Secured Party shall incur no liability as a
result of the sale of Collateral, or any part thereof, at any private sale.
Debtor hereby waives, to the extent permitted by applicable law, any claims
against Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Indebtedness, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.
(r) Without precluding any other methods of sale,
Debtor acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party
shall not be liable for any depreciation in the value of the Collateral.
(s) Debtor acknowledges the Indebtedness and the
other Obligations secured hereby, whether now existing or to arise hereafter,
and confesses judgment thereon in favor of Secured Party, if the Indebtedness
or
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other Obligations secured hereby are not paid as and when due, whether by
acceleration or otherwise.
ARTICLE IX
Other Agreements
9.1 Provisions Subject to Intercreditor Agreement.
Notwithstanding anything to the contrary herein, until such time as Mortgagor's
obligations under the "Senior Loan Documents" (as defined in the Loan
Agreement) are satisfied, discharged and paid in full, the provisions of this
Mortgage (including, without limitation, Article V, Article VII and Article
VIII hereof) are subject to the terms, covenants, conditions and provisions of
the "Intercreditor Agreement" (as defined in the Loan Agreement). In the event
of any inconsistency between the terms and provisions of this Mortgage and the
Intercreditor Agreement, the terms, covenants, conditions and provisions of the
Intercreditor Agreement shall prevail until such time as Mortgagor's
obligations under the Senior Loan Documents are satisfied and discharged in
full.
9.2 Loan Agreement Prevails. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions set forth
in this Mortgage and the terms, covenants, conditions and provisions set forth
in the Loan Agreement, the terms, covenants, conditions and provisions of the
Loan Agreement shall prevail.
ARTICLE X
Miscellaneous
10.1 Pooling and Unitization. Mortgagor shall have the
right, and is hereby authorized, to pool or unitize all or any part of the
Leases and Lands, insofar as they are related to the Mortgaged Property, with
adjacent lands, leaseholds and other interests, when, in the reasonable
judgment of Mortgagor, it is necessary or advisable to do so in order to form a
drilling unit to facilitate the orderly development of that part of the
Mortgaged Property affected thereby or to comply with the requirements of any
law or governmental order or regulation relating to the spacing of ▇▇▇▇▇ or
proration of the production therefrom; provided, however, that any unit so
formed for the production of oil shall not substantially exceed 160 acres, and
any unit so formed for the production of gas shall not exceed 640 acres, unless
a larger area is required to conform to any
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applicable law or governmental order or regulation relating to the spacing of
▇▇▇▇▇ or to obtain the maximum, allowable production under any applicable law
or governmental order or regulation relating to the proration of production
therefrom; and further provided that the Hydrocarbons produced from any unit so
formed shall be allocated among the separately owned tracts or interests
comprising the unit in proportion to the respective surface areas thereof or in
such proportion as is prescribed by applicable law. Any unit so formed may
relate to one or more zones or horizons, and a unit formed for a particular
zone or horizon need not conform in area to any other unit relating to a
different zone or horizon, and a unit formed for the production of oil need not
conform in area with any unit formed for the production of gas. Upon the
written request of Mortgagee, as to all such units theretofore formed, and
thereafter formed, immediately after formation of any such unit, Mortgagor
shall furnish to Mortgagee a true copy of the pooling agreements, declarations
of pooling or other instruments creating such units, in such number of
counterparts as Mortgagee may reasonably request. The interest in any such
unit attributable to the Mortgaged Property (or any part thereof) included
therein shall become a part of the Mortgaged Property and shall be subject to
the lien hereof in the same manner and with the same effect as though such unit
and the interest of Mortgagor therein were specifically described in Exhibit A
hereto. Notwithstanding the foregoing, Mortgagor may enter into pooling or
unitization agreements not hereinabove authorized only with the prior written
consent of Mortgagee, which consent shall not be unreasonably withheld.
10.2 Advances by Mortgagee. Each and every covenant herein
contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this instrument, then, if such failure
is not remedied by Mortgagor within 30 days following notice thereof by
Mortgagee, Mortgagee or any receiver appointed hereunder may, but shall not be
obligated to, make advances to perform the same in Mortgagor's behalf, and
Mortgagor hereby agrees to repay such sums upon demand plus interest at an
annual rate equal to the then rate of interest accruing on the Notes until
paid; provided, however, that in no event shall such interest rate ever exceed
the Highest Lawful Rate. No such advance shall be deemed to relieve Mortgagor
from any default hereunder.
10.3 Defense of Claims. Mortgagor will notify Mortgagee, in
writing, promptly of the commencement of any legal proceedings affecting the
lien hereof or the Mortgaged Property, or any part thereof, and will take such
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action as may be necessary to preserve Mortgagor's and Mortgagee's rights
affected thereby, and should Mortgagor fail or refuse to take any such action,
Mortgagee may, upon giving prior written notice thereof to Mortgagor, take such
action on behalf of and in the name of Mortgagor and at Mortgagor's expense.
Moreover, Mortgagee may take such independent action in connection therewith as
they may in their discretion deem proper, Mortgagor hereby agreeing that all
sums advanced or all expenses incurred in such actions plus interest at an
annual rate equal to the then rate of interest accruing on the Note will, on
demand, be reimbursed to Mortgagee or any receiver appointed hereunder;
provided, however, that in no event shall such interest rate ever exceed the
Highest Lawful Rate.
10.4 Survival of Covenants and Liens. All of the covenants
and agreements of Mortgagor set forth herein shall survive the execution and
delivery of this Mortgage and shall continue in force until the Indebtedness is
paid in full. Accordingly, if Mortgagor shall perform faithfully each and all
of the covenants and agreements herein contained, then, and then only, this
Mortgage shall become null and void and shall be released in due form, upon
Mortgagor's written request and at Mortgagor's expense; otherwise, it shall
remain in full force and effect. No release of this Mortgage or the lien
thereof shall be valid unless executed by Mortgagee.
10.5 Renewals and Other Security. Renewals and extensions of
the Indebtedness may be given at any time, and Mortgagee may take or may now
hold other security for the Indebtedness without notice to or consent of
Mortgagor. Mortgagee may resort first to such other security or any part
thereof or first to the security herein given or any part thereof, or from time
to time to either or both, even to the partial or complete abandonment of
either security, and such action shall not be a waiver of any rights conferred
by this instrument, which shall continue as a perfected lien upon the Mortgaged
Property not expressly released until the Indebtedness secured hereby is fully
paid.
10.6 Instrument an Assignment, Etc. This instrument shall be
deemed to be and may be enforced from time to time as an assignment, chattel
mortgage, hypothecation, contract, deed of trust, mortgage, conveyance,
financing statement, real estate mortgage, pledge or security agreement, and
from time to time as any one or more thereof.
10.7 No Usury Intended. It is the intention of the parties
hereto to comply strictly with applicable usury laws; accordingly,
notwithstanding any provision to the contrary contained herein, in the Note, or
in any of the docu-
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ments securing or relating to any Indebtedness, in no event shall this
Mortgage, the Note, or such documents require or permit the payment, charging,
taking, reserving, or receiving of any sums constituting interest under
applicable laws which exceed the maximum amount permitted by such laws. If any
such excess interest is contracted for, charged, taken, reserved, or received
in connection with this Mortgage or the Note or in any of the documents
securing or relating to any Indebtedness, or in any communication by Mortgagee
or any other person to Mortgagor or any other person, or in the event all or
part of the Indebtedness shall be prepaid or accelerated, so that under any of
such circumstances or under any other circumstance whatsoever the amount of
interest contracted for, charged, taken, reserved, or received on the amount of
principal actually outstanding from time to time under this Mortgage or the
Note shall exceed the maximum amount of interest permitted by applicable usury
laws, then in any such event it is agreed as follows: (i) the provi- sions of
this Section shall govern and control, (ii) any such excess shall be deemed an
accidental and bona fide error and canceled automatically to the extent of such
excess, and shall not be collected or collectible, (iii) any such excess which
is or has been paid or received notwithstanding this Section shall be credited
against the then unpaid principal balance hereof or refunded to Mortgagor, at
Mortgagee's option, and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable laws
as construed by courts having jurisdiction hereof or thereof. Without limiting
the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved, or received in connection herewith which are made for
the purpose of determining whether such rate exceeds the maximum lawful rate
shall be made to the extent permitted by applicable laws by amortizing,
prorating, allocating and spreading during the period of the full term of the
loan, including all prior and subsequent renewals and extensions, all interest
at any time contracted for, charged, taken, reserved, or received. The terms
of this Section shall be deemed to be incorporated in every loan document,
security instrument, and communication relating to this Mortgage and the Note.
The term "applicable usury laws" shall mean such laws of the State of Texas or
the laws of the United States, whichever laws allow the higher rate of
interest, as such laws now exist; provided, however, that if such laws shall
hereafter allow higher rates of interest, then the applicable usury laws shall
be the laws allowing the higher rates, to be effective as of the effective date
of such laws.
10.8 Separability. If any provision hereof or of the Note is
invalid or unenforceable in any jurisdiction, the other provisions hereof or of
the Note shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of Mortgagee
in order to
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effectuate the provisions hereof, and the invalidity of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of any such
provision in any other jurisdiction.
10.9 Rights Cumulative. Each and every right, power and
remedy herein given to Mortgagee shall be cumulative and not exclusive, and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and so often and in such order as
may be deemed expedient by Mortgagee, and the exercise, or the beginning of the
exercise, of any such right, power or remedy shall not be deemed a waiver of
the right to exercise, at the same time or thereafter, any other right, power
or remedy. No delay or omission by Mortgagee in the exercise of any right,
power or remedy shall impair any such right, power or remedy or operate as a
waiver thereof or of any other right, power or remedy then or thereafter
existing.
10.10 Binding Effect. This Mortgage is binding upon
Mortgagor, Mortgagor's successors and assigns, and shall inure to the benefit
of Mortgagee and its successors and assigns, and the provisions hereof shall
likewise constitute covenants running with the land.
10.11 Article and Section Headings. The article and section
headings in this instrument are inserted for convenience and shall not be
considered a part of this instrument or used in its interpretation.
10.12 Notices. Except as otherwise provided herein, any
notice, request, demand or other instrument which may be required or permitted
to be given or served upon Mortgagor shall be sufficiently given when made by
hand delivery, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested and addressed to Mortgagor at the address
shown on the cover page of this Mortgage or to such different address as
Mortgagor shall have designated by written notice received by Mortgagee.
10.13 Amendments, Modifications and Waivers, Etc. Except as
provided in Section 9.2, this Mortgage may be amended, modified, revised,
discharged, released or terminated only by a written instrument or instruments
executed by Mortgagor and Mortgagee. Any alleged amendment, revision,
discharge, release or termination which is not so documented shall not be
effective as to any party. No waiver of any provision of this Mortgage nor
consent to any departure by Mortgagor therefrom shall in any event be effective
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unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
10.14 Survival of Agreements. All representations and
warranties of Mortgagor herein and all covenants and agreements herein not
fully and finally performed before the effective date or dates of this Mortgage
shall survive such date or dates. All covenants and obligations in this
Mortgage are intended by the parties to be, and shall be construed as,
covenants running with the Lands.
10.15 Governing Law. This Mortgage shall be governed by and
construed in accordance with the laws of the State of Louisiana.
10.16 Subrogation. The Indebtedness represents funds
utilized to satisfy certain outstanding indebtedness and obligations secured by
liens, rights and/or claims against the Mortgaged Property or any part thereof,
and therefore Mortgagee shall be subrogated to any and all liens, rights,
superior titles and equities owned or claimed by the holder of any such
outstanding indebtedness or obligation so satisfied, regardless of whether said
liens, rights, superior titles and equities are assigned to the Mortgagee by
the holder(s) thereof or released. Mortgagee shall be subrogated to all
covenants and warranties heretofore given or made with respect to the Mortgaged
Property.
10.17 Limit to Indebtedness and Other Obligations Secured
Hereby. The maximum amount of the Indebtedness or other Obligations that may
be outstanding at any time and from time to time that this Mortgage secures is
fixed at $490,000,000, and the maximum amount which Mortgagee may claim for
damages that Mortgagee may suffer from a breach of any obligation, covenant,
agreement, term or condition secured by this Mortgage (other than for the
payment of money) is fixed at $1,000,000,000.
10.18 No Paraph. The Note and all other evidences of the
Indebtedness or other Obligations have not been paraphed for identification
with this Mortgage.
10.19 Acceptance. The acceptance of this Mortgage by
Mortgagee is presumed, and this Mortgage is not signed by Mortgagee.
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THUS DONE AND PASSED, on the date first written above and in
the presences of the undersigned competent witnesses, who hereunto sign their
names with Mortgagor and me, Notary, after due reading of the whole.
WITNESSES: MORTGAGOR:
TRANSTEXAS GAS CORPORATION,
-------------------------------- a Delaware corporation
--------------------------------
By:
-------------------------------------
Name:
Title:
--------------------------------
NOTARY PUBLIC, in and for the
State of Texas
My Commission
Expires:
----------------
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EXHIBIT "A"
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