WHEN RECORDED RETURN TO:
VINSON & ELKINS L.L.P.
First City Tower, Suite 3562
1001 Fannin Street
Houston, TX 77002-6760
Attn: Linda Daugherty
(Texas Oil & Gas Properties)
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
FROM
TESORO E&P COMPANY, L.P.
as Mortgagor
TO
BRIAN MALONE, AS TRUSTEE
FOR THE BENEFIT OF
BANQUE PARIBAS, AS ADMINISTRATIVE AGENT,
as Mortgagee
TABLE OF CONTENTS
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.01 Grant of Liens. . . . . . . . . . . . . . . .1
Section 1.02 Grant of Security Interest. . . . . . . . . .4
Section 1.03 Indebtedness Secured. . . . . . . . . . . . .4
Section 1.04 Fixture Filing, Etc.. . . . . . . . . . . . .5
Section 1.05 Defined Terms . . . . . . . . . . . . . . . .5
ARTICLE II
Assignment of Production
Section 2.01 Assignment. . . . . . . . . . . . . . . . . .5
Section 2.02 Rights Under Texas Act. . . . . . . . . . . .6
Section 2.03 No Modification of Payment Obligations. . . .6
ARTICLE III
Representations, Warranties and Covenants
Section 3.01 Title . . . . . . . . . . . . . . . . . . . .7
Section 3.02 Defend Title. . . . . . . . . . . . . . . . .7
Section 3.03 Not a Foreign Person. . . . . . . . . . . . .7
Section 3.04 Power to Create Lien and Security . . . . . .7
Section 3.05 Revenue and Cost Bearing Interest . . . . . .8
Section 3.06 Rentals Paid; Leases in Effect. . . . . . . .8
Section 3.07 Operation of Mortgaged Property, Etc. . . . .8
Section 3.08 Operation By Third Parties. . . . . . . . . .9
Section 3.09 Abandon, Sales. . . . . . . . . . . . . . . .9
Section 3.10 Failure to Perform. . . . . . . . . . . . . .9
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. . . . . . . . . . . . . . 10
Section 4.02 Foreclosure and Sale. . . . . . . . . . . . 10
Section 4.03 Substitute Trustees and Agents. . . . . . . 11
Section 4.04 Judicial Foreclosure; Receivership. . . . . 11
Section 4.05 Foreclosure for Installments. . . . . . . . 11
Section 4.06 Separate Sales. . . . . . . . . . . . . . . 12
Section 4.07 Possession of Mortgaged Property. . . . . . 12
Section 4.08 Occupancy After Foreclosure . . . . . . . . 12
Section 4.09 Remedies Cumulative, Concurrent and
Nonexclusive . . . . . . . . . . . . . . . 13
Section 4.10 No Release of Obligations . . . . . . . . . 13
Section 4.11 Release of and Resort to Collateral . . . . 13
Section 4.12 Waiver of Redemption, Notice and
Marshalling of Assets, Etc . . . . . . . . 13
Section 4.13 Discontinuance of Proceedings . . . . . . . 14
Section 4.14 Application of Proceeds . . . . . . . . . . 14
Section 4.15 Resignation of Operator . . . . . . . . . . 14
Section 4.16 Indemnity . . . . . . . . . . . . . . . . . 15
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee . . . 15
Section 5.02 Successor Trustee . . . . . . . . . . . . . 16
Section 5.03 Retention of Moneys . . . . . . . . . . . . 16
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc.. . . 16
Section 6.02 Release of Mortgage . . . . . . . . . . . . 17
Section 6.03 Severability. . . . . . . . . . . . . . . . 17
Section 6.04 Successors and Assigns of Parties . . . . . 17
Section 6.05 Satisfaction of Prior Encumbrance . . . . . 17
Section 6.06 Subrogation of Trustee. . . . . . . . . . . 17
Section 6.07 Nature of Covenants . . . . . . . . . . . . 18
Section 6.08 Notices . . . . . . . . . . . . . . . . . . 18
Section 6.09 Counterparts. . . . . . . . . . . . . . . . 18
Section 6.10 Exculpation Provisions. . . . . . . . . . . 18
Exhibit A - Mortgaged Property
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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 (this "Mortgage") is entered into as of the effective
time and date hereinafter stated (the "Effective Date") by TESORO E&P COMPANY,
L.P., a Delaware limited liability company, whose address for notice hereunder
is 8700 Tesoro Drive, San Antonio, Texas 78217 ("Mortgagor"), for the benefit of
BANQUE PARIBAS, as Administrative Agent for the benefit of the Issuing Banks and
the Lenders, with offices and banking quarters at 1200 Smith Street, Suite 3100,
Houston, Texas 77002 ("Mortgagee"). Any capitalized term used but not defined
in this Mortgage shall have the meaning assigned to such term in the hereinafter
defined Credit Agreement.
R E C I T A L S:
A. On even date herewith, Tesoro Petroleum Corporation (the "Company"),
Mortgagee, The Bank of Nova Scotia, individually and as Documentation Agent, and
the other financial institutions parties thereto are executing a Credit
Agreement (as amended from time to time, the "Credit Agreement").
B. The Lenders and Issuing Banks have conditioned their obligations under
the Credit Agreement upon the execution and delivery by Mortgagor of this
Mortgage, and Mortgagor has agreed to enter into this Mortgage.
C. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with
Mortgagee as follows:
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.01 Grant of Liens. To secure payment of the Indebtedness (as
hereinafter defined) and the performance of the covenants and obligations herein
contained, Mortgagor does by these presents hereby GRANT, BARGAIN, SELL, ASSIGN,
MORTGAGE, TRANSFER and CONVEY unto Brian Malone of Houston, Texas, as Trustee,
whose address for notice hereunder is 1200 Smith Street, Suite 3100, Houston,
Texas 77002 ("Trustee") and Trustee's successors and substitutes in trust
hereunder, for the use and benefit of Mortgagee, the real and personal property,
rights, titles, interests and estates described in the following paragraphs (a)
through (g) (collectively called the "Mortgaged Property"):
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to the oil and gas leases and/or oil, gas and other
mineral leases and other interests and estates and the lands and premises
covered or affected thereby which are described
on Exhibit A hereto (collectively called the "Hydrocarbon Property") or which
Hydrocarbon Property is otherwise referred to herein, and specifically, but
without limitation, the undivided interests of Mortgagor which are more
particularly described on attached Exhibit A.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) the properties now or hereafter pooled or
unitized with the Hydrocarbon Property; (ii) all presently existing or future
unitization, communitization, pooling agreements and declarations of pooled
units and the units created thereby (including, without limitation, all units
created under orders, regulations, rules or other official acts of any Federal,
State or other governmental body or agency having jurisdiction and any units
created solely among working interest owners pursuant to operating agreements or
otherwise) which may affect all or any portion of the Hydrocarbon Property
including, without limitation, those units which may be described or referred to
on attached Exhibit A; (iii) all operating agreements, production sales or other
contracts, farmout agreements, farm-in agreements, area of mutual interest
agreements, equipment leases and other agreements described or referred to in
this Mortgage or which relate to any of the Hydrocarbon Property or interests in
the Hydrocarbon Property described or referred to herein or on attached Exhibit
A or to the production, sale, purchase, exchange, processing, handling, storage,
transporting or marketing of the Hydrocarbons (hereinafter defined) from or
attributable to such Hydrocarbon Property or interests; (iv) all geological,
geophysical, engineering, accounting, title, legal, and other technical or
business data concerning the Mortgaged Property, the Hydrocarbons, and all
books, files, records, magnetic media, computer records, and other forms of
recording or obtaining access to such data; and (v) the Hydrocarbon Property
described on attached Exhibit A and covered by this Mortgage even though
Mortgagor's interests therein be incorrectly described or a description of a
part or all of such Hydrocarbon Property or Mortgagor's interests therein be
omitted; it being intended by Mortgagor and Mortgagee herein to cover and affect
hereby all interests which Mortgagor may now own or may hereafter acquire in and
to the Hydrocarbon Property notwithstanding that the interests as specified on
Exhibit A may be limited to particular lands, specified depths or particular
types of property interests, but specifically excluding other Property outside
of those described on Exhibit A hereto and not intended to be part of the
Hydrocarbon Property.
(c) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the "Hydrocarbons") in and
under and which may be produced and saved from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein, including all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein which are subjected or required to be subjected to the liens
and security interests of this Mortgage and including specifically but without
limitation all liens and security interests in such Hydrocarbons securing
payment of proceeds resulting from the sale of Hydrocarbons.
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(d) All tenements, hereditaments, appurtenances and properties in anywise
appertaining, belonging, affixed or incidental to the Hydrocarbon Property,
rights, titles, interests and estates described or referred to in paragraphs (a)
and (b) above, which are now owned or which may hereafter be acquired by
Mortgagor, including, without limitation, any and all property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use,
or useful in connection with the operating, working or development of any of
such Hydrocarbon Property or the lands pooled or unitized therewith (excluding
drilling rigs, trucks, automotive equipment or other personal property which may
be taken to the premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells, injection wells
or other wells, buildings, structures, field separators, liquid extraction
plants, plant compressors, pumps, pumping units, pipelines, sales and flow
lines, gathering systems, field gathering systems, salt water disposal
facilities, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements, servitudes, licenses and other surface and subsurface
rights together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by delivery or by
writing of any kind, be subjected to the lien and security interest hereof by
Mortgagor; and the Trustee is hereby authorized to receive the same at any time
as additional security hereunder.
(f) All of the rights, titles and interests of every nature whatsoever now
owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property
rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Hydrocarbon Property rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Permitted
Encumbrances (as hereinafter defined in Section 3.01) to which any of the
Hydrocarbon Property rights, titles, interests or estates are subject, or
otherwise; all rights of Mortgagor to liens and security interests securing
payment of proceeds from the sale of production from the Mortgaged Property,
including, but not limited to, those liens and security interests provided in
Tex. Bus. & Com. Code Ann. 9.319 (Tex. UCC) (Vernon Supp. 1989) ("9.319 Tex.
UCC"), as amended from time to time; together with any and all renewals and
extensions of any of the Hydrocarbon Property rights, titles, interests or
estates; all contracts and agreements supplemental to or amendatory of or in
substitution for the contracts and agreements described or mentioned above; and
any and all additional interests of any kind hereafter acquired by Mortgagor in
and to the Hydrocarbon Property rights, titles, interests or estates.
(g) All accounts, contract rights, inventory, general intangibles,
insurance contracts and insurance proceeds constituting a part of, relating to
or arising out of those portions of the Mortgaged Property which are described
in paragraphs (a) through (f) above and all proceeds and products of all such
portions of the Mortgaged Property and payments in lieu of production (such as
"take or pay" payments), whether such proceeds or payments are goods, money,
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documents, instruments, chattel paper, securities, accounts, general
intangibles, fixtures, real property, or other assets.
Any fractions or percentages specified on attached Exhibit A in referring to
Mortgagor's interests are solely for purposes of the warranties made by
Mortgagor pursuant to Section 3.01 hereof and shall in no manner limit the
quantum of interest affected by this Section 1.01 with respect to any
Hydrocarbon Property or with respect to any unit or well identified on said
Exhibit A.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness
(hereinafter defined) and to secure the performance of the covenants,
agreements, and obligations of the Mortgagor herein contained.
Section 1.02 Grant of Security Interest. To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in and to
the Mortgaged Property (whether now or hereafter acquired by operation of law or
otherwise) insofar as the Mortgaged Property consists of equipment, accounts,
contract rights, general intangibles, insurance contracts, insurance proceeds,
inventory, Hydrocarbons, fixtures and any and all other personal property of any
kind or character defined in and subject to the provisions of the Texas Business
and Commerce Code, Chapters 1 through 9, as presently in effect (the "Texas
UCC"), including the proceeds and products from any and all of such personal
property. Upon the happening of any of the Events of Default, Mortgagee is and
shall be entitled to all of the rights, powers and remedies afforded a secured
party by the Texas UCC with reference to the personal property and fixtures in
which Mortgagee has been granted a security interest herein, or the Trustee or
Mortgagee may proceed as to both the real and personal property covered hereby
in accordance with the rights and remedies granted under this Mortgage in
respect of the real property covered hereby. Such rights, powers and remedies
shall be cumulative and in addition to those granted to the Trustee or Mortgagee
under any other provision of this Mortgage or under any other Security
Instrument. Written notice mailed to Mortgagor as provided herein at least
fifteen (15) days prior to the date of public sale of any part of the Mortgaged
Property which is personal property subject to the provisions of the Texas UCC,
or prior to the date after which private sale of any such part of the Mortgaged
Property will be made, shall constitute reasonable notice.
Section 1.03 Indebtedness Secured. This Mortgage is executed and
delivered by Mortgagor to secure and enforce the following (the "Indebtedness"):
(a) The payment of and performance of any and all indebtedness, obligations
and liabilities of Mortgagor pursuant to that certain Amended and Restated
Guaranty Agreement of even date herewith executed by the Mortgagor, among
others, in favor of the Mortgagee (as the same may from time to time be amended,
supplemented or otherwise modified, the "Guaranty Agreement"), guaranteeing the
prompt and complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations (as defined in the Guaranty
Agreement) including, without limitation, the Letter of Credit and the Notes
with final maturity
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on or before April 30, 2000 and any obligations arising under the Hedging
Agreements with any Lender or its Affiliates.
(b) Any sums which may be advanced or paid by Mortgagee or any Lender under
the terms hereof on account of the failure of Mortgagor to comply with the
covenants of the Mortgagor contained herein or in the Credit Agreement; and all
other indebtedness of Mortgagor arising pursuant to the provisions of this
Mortgage.
Section 1.04 Fixture Filing, Etc. 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 land described or to which reference is made herein or on
attached Exhibit A; (ii) the security interests created hereby under applicable
provisions of the Texas UCC will attach to Hydrocarbons (minerals including oil
and gas) or the accounts resulting from the sale thereof at the wellhead or
minehead located on the land described or to which reference is made herein;
(iii) this Mortgage is to be filed of record in the real estate records as a
financing statement, and (iv) Mortgagor is the record owner of the real estate
or interests in the real estate comprised of the Mortgaged Property.
Section 1.05 Defined Terms. Any capitalized term used in this Mortgage
and not defined in this Mortgage shall have the meaning assigned to such term in
the Credit Agreement.
ARTICLE II
Assignment of Production
Section 2.01 Assignment. Mortgagor has absolutely and unconditionally
assigned, transferred, and conveyed, and does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its successors and
assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, and the revenues and proceeds now and hereafter attributable to the
Hydrocarbons and said products and all payments in lieu of the Hydrocarbons such
as "take or pay" payments or settlements. The Hydrocarbons and products are to
be delivered into pipe lines connected with the Mortgaged Property, or to the
purchaser thereof, to the credit of Mortgagee, free and clear of all taxes,
charges, costs, and expenses; and all such revenues and proceeds shall be paid
directly to Mortgagee, at its banking quarters in Houston, Harris County, Texas
with no duty or obligation of any party paying the same to inquire into the
rights of Mortgagee to receive the same, what application is made thereof, or as
to any other matter. Mortgagor agrees 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 proceeds and revenues so paid to Mortgagee. Mortgagee is fully
authorized to receive and receipt for said revenues 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 to hold the proceeds thereof in a bank account as
additional collateral securing the Indebtedness; and to execute transfer and
division orders in the name of Mortgagor, or otherwise, with warranties
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binding Mortgagor. All proceeds received by the Mortgagee pursuant to this
assignment shall be applied as provided in the Credit Agreement, or after the
occurrence and during the continuance of an Event of Default, the Mortgagee may
in its sole discretion apply the proceeds as provided in Section 4.13 hereof.
Mortgagee shall not be liable for any delay, neglect, or failure to effect
collection of any proceeds or to take any other action in connection therewith
or hereunder; but Mortgagee shall have the right, at its election, in the name
of Mortgagor or otherwise, 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 costs, expenses
and attorneys' fees incurred in connection therewith being paid by Mortgagor.
Mortgagor hereby appoints Mortgagee as its attorney-in-fact to pursue any and
all rights of Mortgagor to liens on and security interests in the Hydrocarbons
securing payment of proceeds of runs attributable to the Hydrocarbons. In
addition to the rights granted to Trustee and/or Mortgagee in Section 1.01 (c)
of this Mortgage, Mortgagor hereby further transfers and assigns to Mortgagee
any and all such liens, security interests, financing statements or similar
interests of Mortgagor attributable to its interest in the Hydrocarbons and
proceeds of runs therefrom arising under or created by said statutory provision,
judicial decision or otherwise. The power of attorney granted to Mortgagee in
this paragraph, being coupled with an interest, shall be irrevocable so long as
the Indebtedness or any part thereof remains unpaid.
Section 2.02 Rights Under Texas Act. Mortgagor hereby grants, sells,
assigns, sets over and mortgages unto Mortgagee during the term hereof, all of
Mortgagor's rights and interests pursuant to the provisions of 9.319 Tex. UCC,
hereby vesting in Mortgagee all of Mortgagor's rights as an interest owner to
the continuing security interest in and lien upon the Mortgaged Property.
Section 2.03 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of Mortgagor to make
prompt payment of all principal and interest owing on the Indebtedness when and
as the same become due regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and every character now or hereafter existing to secure payment of the
Indebtedness.
ARTICLE III
Representations, Warranties and Covenants
Mortgagor hereby represents, warrants and covenants as follows:
Section 3.01 Title. To the extent of the undivided interests specified on
attached Exhibit A, Mortgagor has good and indefeasible title to and is
possessed of the Mortgaged Property. The Mortgaged Property is free of any and
all Liens (as defined in the Credit Agreement) except Liens allowed by Section
5.04(b) of the Credit Agreement and Liens described on Exhibit A hereto
(collectively, the "Permitted Encumbrances").
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Section 3.02 Defend Title. This Mortgage is, and always will be kept, a
direct first lien and security interest upon the Mortgaged Property subject only
to the Permitted Encumbrances and Mortgagor will not create or suffer to be
created or permit to exist any lien, security interest or charge prior or junior
to or on a parity with the lien and security interest of this Mortgage upon the
Mortgaged Property or any part thereof or upon the rents, issues, revenues,
profits and other income therefrom. Mortgagor will warrant and defend the title
to the Mortgaged Property against the claims and demands of all other persons
whomsoever and will maintain and preserve the lien created hereby so long as any
of the Indebtedness secured hereby remains unpaid. Should an adverse claim be
made against or a cloud develop upon the title to any part of the Mortgaged
Property, Mortgagor agrees it will immediately defend against such adverse claim
or take appropriate action to remove such cloud at Mortgagor's cost and expense,
and Mortgagor further agrees that the Trustee and/or Mortgagee may take such
other action as they deem advisable to protect and preserve their interests in
the Mortgaged Property, and in such event Mortgagor will indemnify the Trustee
and Mortgagee against any and all cost, attorney's fees and other expenses which
they may incur in defending against any such adverse claim or taking action to
remove any such cloud.
Section 3.03 Not a Foreign Person. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended (hereinafter
called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 3.04 Power to Create Lien and Security. The Mortgagor has full
power and lawful authority to grant, bargain, sell, assign, transfer, mortgage,
and convey a security interest in all of the Mortgaged Property in the manner
and form herein provided and without obtaining the authorization, approval,
consent or waiver of any lessor, sublessor, Governmental Authority or other
party or parties whomsoever.
Section 3.05 Revenue and Cost Bearing Interest. Mortgagor's ownership of
the Hydrocarbon Property and the undivided interests therein as specified on
attached Exhibit A will, after giving full effect to all Permitted Encumbrances,
afford Mortgagor not less than those net interests in the production from or
which is allocated to such Hydrocarbon Property specified as "Net Revenue
Interest" on attached Exhibit A (expressed as a fraction, percentage or decimal)
and will cause Mortgagor to bear not more than that portion, specified as
"Working Interest" on attached Exhibit A (expressed as a fraction, percentage or
decimal), of the costs of drilling, developing and operating the wells
identified on Exhibit A.
Section 3.06 Rentals Paid; Leases in Effect. All rentals and royalties
due and payable in accordance with the terms of any leases or subleases
comprising a part of the Hydrocarbon Property have been duly paid or provided
for and all leases or subleases comprising a part of the Hydrocarbon Property
are in full force and effect.
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Section 3.07 Operation of Mortgaged Property, Etc. Except as provided in
Section 3.08 Mortgagor will promptly pay and discharge all rentals, delay
rentals, royalties and indebtedness accruing under, and perform or cause to be
performed each and every act, matter or thing required by, each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements described or
referred to herein or affecting Mortgagor's interests in the Mortgaged Property,
and will do all other things necessary to keep unimpaired Mortgagor's rights
with respect thereto and prevent any forfeiture thereof or default thereunder.
The Mortgaged Property (and properties unitized therewith) has been maintained,
operated and developed in a good and workmanlike manner and in conformity with
all applicable laws and all rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Property and other contracts and agreements forming a part of the
Mortgaged Property; specifically in this connection, (i) after the Effective
Date no Mortgaged Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Effective Date and (ii) none of the wells
comprising a part of the Mortgaged Property (or properties unitized therewith)
are deviated from the vertical more than the maximum permitted by applicable
laws, regulations, rules and orders, and such wells are, in fact, bottomed under
and are producing from, and the well bores are wholly within, the Mortgaged
Property (or, in the case of wells located on properties unitized therewith,
such unitized properties). Mortgagor will operate the Mortgaged Property in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all applicable proration and conservation laws of the jurisdiction in which
the Mortgaged Property is situated, and all applicable laws, rules and
regulations of every other agency and authority from time to time constituted to
regulate the development and operation of the Mortgaged Property and the
production and sale of Hydrocarbons and other minerals therefrom. Mortgagor
will do or cause to be done such development work as may be reasonably necessary
to the prudent and economical operation of the Mortgaged Property in accordance
with the most approved practices of operators in the industry, including all to
be done that may be appropriate to protect from diminution the productive
capacity of the Mortgaged Property and each producing well thereon including,
without limitation, cleaning out and reconditioning each well from time to time,
plugging and completing at a different level each such well, drilling a
substitute well to conform to changed spacing regulations and to protect the
Mortgaged Property against drainage whenever and as often as is necessary.
Section 3.08 Operation By Third Parties. All or portions of the Mortgaged
Property may be comprised of interests in the Hydrocarbon Property which are
other than working interests or which may be operated by a party or parties
other than Mortgagor and with respect to all or any such interests and
properties as may be comprised of interests other than working interests or
which may be operated by parties other than Mortgagor, Mortgagor's covenants as
expressed in this Article III are modified to require that Mortgagor use its
best efforts to obtain compliance with such covenants by the working interest
owners or the operator or operators of such leases or properties.
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Section 3.09 Abandon, Sales. The Mortgagor will not sell, lease, assign,
transfer or otherwise dispose or abandon any of the Mortgaged Property except as
permitted by the Credit Agreement.
Section 3.10 Failure to Perform. The Mortgagor agrees that if the
Mortgagor fails to perform any act or to take any action which the Mortgagor is
required to perform or take hereunder or pay any money which the Mortgagor is
required to pay hereunder, each of the Mortgagee and the Trustee in the
Mortgagor's name or its or their own name may, but shall not be obligated to,
perform or cause to perform such act or take such action or pay such money, and
any expenses so incurred by either of them and any money so paid by either of
them shall be a demand obligation owing by the Mortgagor to the Mortgagee or the
Trustee, as the case may be, and each of the Mortgagee and the Trustee, upon
making such payment, shall be subrogated to all of the rights of the Person
receiving such payment. Each amount due and owing by Mortgagor to each of the
Mortgagee and the Trustee pursuant to this Mortgage shall bear interest from the
date of such expenditure or payment or other occurrence which gives rise to such
amount being owed to such Person until paid at the rate for overdue principal
and interest set forth in Section 2.06(c) of the Credit Agreement (the
"Post-Default Rate"), and all such amounts together with such interest thereon
shall be a part of the Indebtedness described in Section 1.03 hereof.
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. An "Event of Default" under the Credit
Agreement shall be an Event of Default under this Mortgage.
Section 4.02 Foreclosure and Sale. If an Event of Default shall occur and
be continuing after any applicable notice and cure period provided for in the
Credit Agreement, Mortgagee shall have the right and option to proceed with
foreclosure by directing the Trustee, or his successors or substitutes in trust,
to proceed with foreclosure and to sell, to the extent permitted by law, all or
any portion of the Mortgaged Property at one or more sales, as an entirety or in
parcels, at such place or places in otherwise such manner and upon such notice
as may be required by law, or, in the absence of any such requirement, as the
Mortgagee may deem appropriate, and to make conveyance to the purchaser or
purchasers. Where the Mortgaged Property is situated in more than one county,
notice as above provided shall be posted and filed in all such counties (if such
notices are required by law), and all such Mortgaged Property may be sold in any
such county and any such notice shall designate the county where such Mortgaged
Property is to be sold. Nothing contained in this Section 4.02 shall be
construed so as to limit in any way the Trustee's rights to sell the Mortgaged
Property, or any portion thereof, by private sale if, and to the extent that,
such private sale is permitted under the laws of the applicable jurisdiction or
by public or private sale after entry of a judgment by any court of competent
jurisdiction so ordering. Mortgagor hereby irrevocably appoints the Trustee to
be the attorney
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of Mortgagor and in the name and on behalf of Mortgagor to execute and deliver
any deeds, transfers, conveyances, assignments, assurances and notices which
Mortgagor ought to execute and deliver and do and perform any and all such acts
and things which Mortgagor ought to do and perform under the covenants herein
contained and generally, to use the name of Mortgagor in the exercise of all or
any of the powers hereby conferred on the Trustee. At any such sale: (i)
whether made under the power herein contained or any other legal enactment, or
by virtue of any judicial proceedings or any other legal right, remedy or
recourse, it shall not be necessary for Trustee to have physically present, or
to have constructive possession of, the Mortgaged Property (Mortgagor hereby
covenanting and agreeing to deliver to Trustee any portion of the Mortgaged
Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee) and the title to and right of possession of any such property
shall pass to the purchaser thereof as completely as if the same had been
actually present and delivered to purchaser at such sale, (ii) each instrument
of conveyance executed by Trustee shall contain a general warranty of title,
binding upon Mortgagor and its successors and assigns, (iii) each and every
recital contained in any instrument of convey- ance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited therein,
including, without limitation, nonpayment of the Indebtedness, advertisement and
conduct of such sale in the manner provided herein and otherwise by law and
appointment of any successor Trustee hereunder, (iv) any and all prerequisites
to the validity thereof shall be con- clusively presumed to have been performed,
(v) the receipt of Trustee or of such other party or officer making the sale
shall be a sufficient discharge to the purchaser or purchasers for its purchase
money and no such purchaser or purchasers, or its assigns or personal
representatives, shall thereafter be obligated to see to the application of such
purchase money, or be in any way answerable for any loss, misapplication or
nonapplication thereof, (vi) to the fullest extent permitted by law, Mortgagor
shall be completely and irrevocably divested of all of its right, title,
interest, claim and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar both at law and in equity
against Mortgagor, and against any and all other persons claiming or to claim
the property sold or any part thereof, by, through or under Mortgagor, and (vii)
to the extent and under such circumstances as are permitted by law, Mortgagee
may be a purchaser at any such sale, and shall have the right, after paying or
accounting for all costs of said sale or sales, to credit the amount of the bid
upon the amount of the Indebtedness (in the order of priority set forth in
Section 4.13 hereof) in lieu of cash payment.
Section 4.03 Substitute Trustees and Agents. The Trustee or his successor
or substitute may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by Trustee,
including the posting of notices and the conduct of sale, but in the name and on
behalf of Trustee, his successor or substitute. If Trustee or his successor or
substitute shall have given notice of sale hereunder, any successor or
substitute trustee thereafter appointed may complete the sale and the conveyance
of the property pursuant thereto as if such notice had been given by the
successor or substitute trustee conducting the sale.
Section 4.04 Judicial Foreclosure; Receivership. If any of the
Indebtedness shall become due and payable and shall not be promptly paid, the
Trustee or Mortgagee shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific
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performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction, or for the appointment of a receiver pending
any foreclosure hereunder or the sale of the Mortgaged Property under the order
of a court or courts of competent jurisdiction or under executory or other legal
process, or for the enforcement of any other appropriate legal or equitable
remedy. Any money advanced by the Trustee and/or Mortgagee in connection with
any such receivership shall be a demand obligation (which obligation Mortgagor
hereby expressly promises to pay) owing by Mortgagor to the Trustee and/or
Mortgagee and shall bear interest from the date of making such advance by the
Trustee and/or Mortgagee until paid at the Post Default Rate.
Section 4.05 Foreclosure for Installments. Mortgagee shall also have the
option to proceed with foreclosure in satisfaction of any installments of the
Indebtedness which have not been paid when due either through the courts or by
directing the Trustee or his successors in trust to proceed with foreclosure in
satisfaction of the matured but unpaid portion of the Indebtedness as if under a
full foreclosure, conducting the sale as herein provided and without declaring
the entire principal balance and accrued interest due; such sale may be made
subject to the unmatured portion of the Indebtedness, and any such sale shall
not in any manner affect the unmatured portion of the Indebtedness, but as to
such unmatured portion of the Indebtedness this Mortgage shall remain in full
force and effect just as though no sale had been made hereunder. It is further
agreed that several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the Indebtedness, it being the purpose hereof to
provide for a foreclosure and sale of the security for any matured portion of
the Indebtedness without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion of the Indebtedness.
Section 4.06 Separate Sales The Mortgaged Property may be sold in one or
more parcels and in such manner and order as Mortgagee, in its sole discretion,
may elect, it being expressly understood and agreed that the right of sale
arising out of any Event of Default shall not be exhausted by any one or more
sales.
Section 4.07 Possession of Mortgaged Property. Mortgagor agrees to the
full extent that it lawfully may, that, in case one or more of the Events of
Default shall have occurred and shall not have been remedied, then, and in every
such case, the Trustee or Mortgagee shall have the right and power to enter into
and upon and take possession of all or any part of the Mortgaged Property in the
possession of Mortgagor, its successors or assigns, or its or their agents or
servants, and may exclude Mortgagor, its successors or assigns, and all persons
claiming under Mortgagor, and its or their agents or servants wholly or partly
therefrom; and, holding the same, the Trustee may use, administer, manage,
operate and control the Mortgaged Property and conduct the business thereof to
the same extent as Mortgagor, its successors or assigns, might at the time do
and may exercise all rights and powers of Mortgagor, in the name, place and
stead of Mortgagor, or otherwise as the Trustee shall deem best. All costs,
expenses and liabilities of every character incurred by the Trustee and/or
Mortgagee in administering, managing, operating, and controlling the Mortgaged
Property shall constitute a demand obligation (which obligation
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Mortgagor hereby expressly promises to pay) owing by Mortgagor to the Trustee
and/or Mortgagee and shall bear interest from date of expenditure until paid at
the Post Default Rate, all of which shall constitute a portion of the
Indebtedness and shall be secured by this Mortgage and all other Security
Instruments.
Section 4.08 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor's
heirs, devisees, representatives, successors or assigns or any other person
claiming any interest in the Mortgaged Property by, through or under Mortgagor,
are occupying or using the Mortgaged Property or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either the
landlord or tenant, or at a reasonable rental per day based upon the value of
the property occupied, such rental to be due daily to the purchaser; to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as tenants at will. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall be
entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction.
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power and remedy herein given to the Trustee or Mortgagee shall be
cumulative and in addition to every other right, power and remedy herein
specifically given or now or hereafter existing in equity, at law or by statute
(including specifically those granted by the Texas UCC and applicable to the
Mortgage Property or any portion thereof) each 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 the
Trustee or 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 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.
Section 4.10 No Release of Obligations. Neither Mortgagor, any guarantor
nor any other person hereafter obligated for payment of all or any part of the
Indebtedness shall be relieved of such obligation by reason of (a) the failure
of Trustee to comply with any request of Mortgagor, or any guarantor or any
other person so obligated to foreclose the lien of this Mortgage or to enforce
any provision hereunder or under the Credit Agreement; (b) the release,
regardless of consideration, of the Mortgaged Property or any portion thereof or
interest therein or the addition of any other property to the Mortgaged
Property; (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Mortgagee extending, renewing, rearranging or in any
other way modifying the terms of this Mortgage without first having obtained the
consent of, given notice to or paid any consideration to Mortgagor, any
guarantor or such other person, and in such event Mortgagor, guarantor and all
such other persons shall continue to be liable to make payment according to the
terms of any such extension or
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modification agreement unless expressly released and discharged in writing by
Mortgagee; or (d) by any other act or occurrence save and except the complete
payment of the Indebtedness and the complete fulfillment of all obligations
hereunder or under the Credit Agreement.
Section 4.11 Release of and Resort to Collateral. Mortgagee may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
lien or security interest created in or evidenced by this Mortgage or its
stature as a first and prior lien and security interest in and to the Mortgaged
Property, and without in any way releasing or diminishing the liability of any
person or entity liable for the repayment of the Indebtedness. For payment of
the Indebtedness, Mortgagee may resort to any other security therefor held by
Mortgagee or Trustee in such order and manner as Mortgagee may elect.
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc.
To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment; (b) except as
provided in the Credit Agreement, all notices of any Event of Default or of
Mortgagee's intention to accelerate maturity of the Indebtedness or of Trustee's
election to exercise or his actual exercise of any right, remedy or recourse
provided for hereunder or under the Credit Agreement; and (c) any right to a
marshalling of assets or a sale in inverse order of alienation. If any law
referred to in this Mortgage and now in force, of which Mortgagor or its
successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall thereafter
be deemed not to constitute any part of the contract herein contained or to
preclude the operation or application of the provisions hereof.
Section 4.13 Discontinuance of Proceedings In case Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the Credit Agreement and shall thereafter elect to discontinue or abandon same
for any reason, Mortgagee shall have the unqualified right so to do and, in such
an event, Mortgagor and Mortgagee shall be restored to their former positions
with respect to the Indebtedness this Mortgage, the Credit Agreement, the
Mortgaged Property and otherwise, and the rights, remedies, recourses and powers
of Mortgagee shall continue as if same had never been invoked.
Section 4.14 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by the
Trustee in any proceedings for the enforcement hereof, whose application has not
elsewhere herein been specifically provided for, shall be applied:
(a) first, to the payment of all expenses incurred by the Trustee or
Mortgagee incident to the enforcement of this Mortgage, the Credit Agreement or
any of the Indebtedness (including, without limiting the generality of the
foregoing, expenses of any entry or taking of
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possession, of any sale, of advertisement thereof, and of conveyances, and court
costs, compensation of agents and employees, and legal fees), and to the payment
of all other charges, expenses, liabilities and advances incurred or made by the
Trustee or Mortgagee under this Mortgage or in executing any trust or power
hereunder;
(b) second to payment of the Indebtedness in such order and manner as
Mortgagee may elect; and
(c) third, to Mortgagor; or as otherwise required by any Governmental
Requirement.
Section 4.15 Resignation of Operator. In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or the Mortgagee shall exercise any remedies under this
Mortgage with respect to any portion of the Mortgaged Property (or Mortgagor
shall transfer any Mortgaged Property "in lieu of" foreclosure), the Mortgagee
or the Trustee shall have the right to request that any operator of any
Mortgaged Property, to the extent such operator is either Mortgagor or any
Affiliate of Mortgagor, resign as operator under the joint operating agreement
applicable thereto, and no later than 60 days after receipt by Mortgagor of any
such request, Mortgagor shall resign (or cause such other party to resign) as
operator of such Mortgaged Property.
Section 4.16 Indemnity. In connection with any action taken by the
Trustee and/or Mortgagee pursuant to this Mortgage, the Trustee and/or Mortgagee
and their officers, directors, employees, representatives, agents, attorneys,
accountants and experts ("Indemnified Parties") shall not be liable for any loss
sustained by Mortgagor resulting from an assertion that Mortgagee has received
funds from the production of Hydrocarbons claimed by third persons or any act or
omission of any Indemnified Party in administering, managing, operating or
controlling the Mortgaged Property including such loss which may result from the
ordinary negligence of an Indemnified Party unless such loss is caused by the
willful misconduct or bad faith of an Indemnified Party, nor shall the Trustee
and/or Mortgagee be obligated to perform or discharge any obligation, duty or
liability of Mortgagor. Mortgagor shall and does hereby agree to indemnify each
Indemnified Party for, and to hold each Indemnified Party harmless from, any and
all liability, loss or damage which may or might be incurred by any Indemnified
Party by reason of this Mortgage or the exercise of rights or remedies
hereunder; should the Trustee and/or Mortgagee make any expenditure on account
of any such liability, loss or damage, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be a demand obligation (which
obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to the
Trustee and/or Mortgagee and shall bear interest from the date expended until
paid at the Post-Default Rate, shall be a part of the Indebtedness and shall be
secured by this Mortgage and any other Security Instrument. The liabilities of
the
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Mortgagor as set forth in this Section 4.15 shall survive the termination of
this Mortgage.
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee. It shall be no part
of the duty of the Trustee to see to any recording, filing or registration of
this Mortgage or any other instrument in addition or supplemental thereto, or to
give any notice thereof, or to see to the payment of or be under any duty in
respect of any tax or assessment or other governmental charge which may be
levied or assessed on the Mortgaged Property, or any part thereof, or against
Mortgagor, or to see to the performance or observance by Mortgagor of any of the
covenants and agreements contained herein. The Trustee shall not be responsible
for the execution, acknowledgment or validity of this Mortgage or of any
instrument in addition or supplemental hereto or for the sufficiency of the
security purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights of Mortgagee. The Trustee shall have the
right to advise with counsel upon any matters arising hereunder and shall be
fully protected in relying as to legal matters on the advice of counsel. The
Trustee shall not incur any personal liability hereunder except for Trustee's
own willful misconduct; 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, believed by him in good faith to be
genuine.
Section 5.02 Successor Trustee. The Trustee may resign by written notice
addressed to Mortgagee or be removed at any time with or without cause by an
instrument in writing duly executed on behalf of Mortgagee. In case of the
death, resignation or removal of the Trustee, a successor trustee may be
appointed by Mortgagee by instrument of substitution complying with any
applicable requirements of law, or, in the absence of any such requirement,
without other formality than appointment and designation in writing. Written
notice of such appointment and designation shall be given by Mortgagee to
Mortgagor, but the validity of any such appointment shall not be impaired or
affected by failure to give such notice or by any defect therein. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all the facts therein recited, and, upon the making of any
such appointment and designation, this Mortgage shall vest in the successor
trustee all the estate and title in and to all of the Mortgaged Property, and
the successor trustee shall thereupon succeed to all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Trustee named
herein, and one such appointment and designation shall not exhaust the right to
appoint and designate a successor trustee hereunder but such right may be
exercised repeatedly as long as any Indebtedness remains unpaid hereunder. To
facilitate the administration of the duties hereunder, Mortgagee may appoint
multiple trustees to serve in such capacity or in such jurisdictions as
Mortgagee may designate.
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Section 5.03 Retention of Moneys. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by law), and Trustee shall be under
no liability for interest on any moneys received by him hereunder.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc. With respect to any
portions of the Mortgaged Property located in any state or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of the Trustee as herein provided, the
general language of conveyance hereof to the Trustee is intended and the same
shall be construed as words of mortgage unto and in favor of Mortgagee and the
rights and authority granted to the Trustee herein may be enforced and asserted
by Mortgagee in accordance with the laws of the jurisdiction in which such
portion of the Mortgaged Property is located and the same may be foreclosed at
the option of Mortgagee as to any or all such portions of the Mortgaged Property
in any manner permitted by the laws of the jurisdiction in which such portions
of the Mortgaged Property is situated. This Mortgage may be construed as a
mortgage, deed of trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or contract, or any one or
more of them, in order fully to effectuate the lien hereof and the purposes and
agreements herein set forth.
Section 6.02 Release of Mortgage. If all Indebtedness secured hereby
shall be paid and the Credit Agreement terminated, Mortgagee shall forthwith
cause satisfaction and discharge of this Mortgage to be entered upon the record
at the expense of Mortgagor and shall execute and deliver or cause to be
executed and delivered such instruments of satisfaction and reassignment as may
be appropriate. Otherwise, this Mortgage shall remain and continue in full
force and effect.
Section 6.03 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof 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 or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.04 Successors and Assigns of Parties. The term "Mortgagee" as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of any of the Indebtedness secured hereby. The terms used to designate Trustee,
Mortgagee and Mortgagor shall be deemed to include the respective heirs, legal
representatives, successors and assigns of such parties.
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Section 6.05 Satisfaction of Prior Encumbrance. To the extent that
proceeds of the Credit Agreement are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Mortgagee at Mortgagor's
request, and Mortgagee shall be subrogated to any and all rights, security
interests and liens owned by any owner or holder of such outstanding liens,
security interests, charges or encumbrances, irrespective of whether said liens,
security interests, charges or encumbrances are released, and it is expressly
understood that, in consideration of the payment of such other indebtedness by
Mortgagee, Mortgagor hereby waives and releases all demands and causes of action
for offsets and payments to, upon and in connection with the said indebtedness.
Section 6.06 Subrogation of Trustee. This Mortgage is made with full
substitution and subrogation of the Trustee and his successors in this trust and
his and their assigns in and to all covenants and warranties by others
heretofore given or made in respect of the Mortgaged Property or any part
thereof.
Section 6.07 Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
Section 6.08 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by registered or certified
United States mail, postage prepaid, or by personal service (including express
or courier service) at the addresses specified at the end of this Mortgage
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery at the address and in the manner provided herein, upon receipt;
provided that, service of notice as required by the laws of any state in which
portions of the Mortgaged Property may be situated shall for all purposes be
deemed appropriate and sufficient with the giving of such notice.
Section 6.09 Counterparts. This Mortgage is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one county, only those
portions of the description of the Mortgaged Property attached hereto as Exhibit
A located in the county in which a particular counterpart is recorded shall be
attached hereto. A complete Exhibit A will be attached to that certain
counterpart to be attached to a Financing Statement and filed with the Secretary
of State of Texas in the Uniform Commercial Code Records. Each of such
counterparts shall for all purposes be deemed to be an original and all such
counterparts shall together constitute but one and the same instrument.
Section 6.10 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Mortgage; and agrees that it
is charged with notice and knowledge of the terms of this Mortgage; that it
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has in fact read this Mortgage and is fully informed and has full notice and
knowledge of the terms, conditions and effects of this Mortgage; that it has
been represented by legal counsel of its choice throughout the negotiations
preceding its execution of this Mortgage; and has received the advice of its
attorney in entering into this Mortgage; and that it recognizes that certain of
the terms of this Mortgage result in one party assuming the liability inherent
in some aspects of the transaction and relieving the other party of its
responsibility for such liability. Each party hereto agrees and covenants that
it will not contest the validity or enforceability of any exculpatory provision
of this Mortgage on the basis that the party had no notice or knowledge of such
provision or that the provision is not "conspicuous."
[SIGNATURE BEGINS NEXT PAGE]
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WITNESS THE EXECUTION HEREOF, this 7th day of June, 1996, to be effective as
of the 7th day of June, 1996 (the "Effective Date").
MORTGAGOR:
TESORO E&P COMPANY, L.P.
By: Tesoro Exploration and Production
Company, its general partner
By: /s/ G. A. Wright
Name: G. A. Wright
Title: Vice President and Treasurer
The name and address of the Debtor/Mortgagor is:
TESORO E&P COMPANY, L.P.
8700 Tesoro Drive
San Antonio, Texas 78217
The name and address of the Secured Party/Mortgagee is:
BANQUE PARIBAS, AS ADMINISTRATIVE AGENT
1200 Smith Street, Suite 3100
Houston, Texas 77002
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THE STATE OF TEXAS
COUNTY OF HARRIS
THIS INSTRUMENT was acknowledged before me on June 7th, 1996 by G. A.
Wright, Vice President and Treasurer of Tesoro Exploration and Production
Company, a Delaware corporation, general partner of Tesoro E&P Company, L.P., a
Delaware limited liability company, on behalf of such corporation.
/s/ Linda Daugherty
Notary Public in and for the
State of TEXAS
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