EXHIBIT 10.12
EXHIBIT 10.12
MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT AND FINANCING STATEMENT
BE IT KNOWN, that on this 6th day of September, 1996, 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:
TEXOIL COMPANY, a Tennessee corporation ("MORTGAGOR"), represented
herein by Ruben Medrano, its President, duly authorized by virtue of resolutions
of Mortgagor's Board of Directors, a certified copy of which is attached hereto
as Exhibit B and made a part hereof, who, being sworn, did declare and say as
follows:
RECITALS
WHEREAS, Mortgagor and Texoil, Inc., a Nevada corporation, have
entered into a Note Purchase Agreement, dated as of September 6, 1996 with RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership, and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership
(collectively, "MORTGAGEES") (such Note Purchase Agreement, as same may from
time to time be amended or modified and in effect, being herein called the "NOTE
AGREEMENT"); and
WHEREAS, pursuant to the Note Agreement, Mortgagees have purchased
from Mortgagor and Mortgagor has sold (a) to Mortgagees Mortgagor's 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and (b) to Mortgagees (other than RIMCO Partners, L.P.)
Mortgagor's 10% Senior Secured General Obligation Notes in the maximum aggregate
principal amount of $5,000,000; and
WHEREAS, Mortgagor is granting this Mortgage to Mortgagees pursuant
to its obligations under the Note Agreement and for the purpose of, among other
things, securing and providing for the repayment of all amounts at any time
owing and from time to time owing by Mortgagor to Mortgagees in connection with
or under the Note Agreement or the Notes;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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Exhibit 10.12 - Page 1
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.
"AFFILIATE" shall have the meaning assigned to that term in the Note
Agreement.
"BUSINESS DAY" shall have the meaning assigned to that term in the
Note Agreement.
"COLLATERAL" shall have the meaning assigned to that term in ARTICLE
VIII of this Mortgage.
"DEBTOR" shall have the meaning assigned to that term in ARTICLE
VIII hereof.
"DEBTOR RELIEF LAW(S)" shall mean the Bankruptcy Code of the United
States, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"DEFAULT" shall have the meaning assigned to that term in the Note
Agreement.
"DEFAULT RATE" shall have the meaning assigned to that term in the
Note Agreement.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in
ARTICLE VI hereof.
"EXPLORATION AGREEMENTS" shall mean, collectively, (a) that certain
Raceland 3-D Exploration Agreement dated December 6, 1995 among Mortgagor,
as Operator and Pogo Producing Company, et al., as Participants, (b) that
certain Greens Lake 3-D Exploration Agreement dated October 16, 1995
between Mortgagor and Meridian Oil Inc., as Operator, (c) that certain
Laurel Grove 3-D Exploration Agreement dated May 1, 1996 between Mortgagor
and Phillips Petroleum Company, as Operator, and (d) all operating
agreements, area of mutual interest agreements and other agreements
attached or related to any of the foregoing exploration agreements.
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"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
federal, state, province, city, town, municipality, county, local or other
political subdivision thereof or thereto and any court, tribunal,
department, commission, board, bureau, instrumentality, agency or other
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HIGHEST LAWFUL RATE" shall have the meaning assigned to that term
in the Note Agreement.
"HYDROCARBONS" shall mean oil, natural gas, condensate and all other
liquid or gaseous hydrocarbons and all products produced or separated
therefrom.
"INDEBTEDNESS" shall mean all principal, interest and other amounts
now or hereafter owing by Mortgagor to Mortgagees, and their successors,
transferees and assigns, under the Notes and the other Transaction
Documents and all other obligations, debts, liabilities, covenants and
duties of Mortgagor under the Note Agreement and the other Transaction
Documents, absolute or contingent, due or to become due, now existing or
hereafter arising. The term includes, without limitation, all principal,
interest, reasonable charges, expenses, fees, attorneys' fees and
disbursements chargeable to Mortgagor under the Note Agreement or the
other Transaction Documents, including without limitation, all obligations
of Mortgagor now or hereafter existing under this Mortgage, and all
interest that accrues, to the extent permitted under applicable law, on
all or any part of the obligations after the filing of any petition or
pleading against Mortgagor for a proceeding under any Debtor Relief Laws.
"LANDS" shall mean the lands that are covered by the Leases and the
lands that are pooled or unitized therewith.
"LEASES" shall mean the Oil and Gas Leases described in Exhibit A,
together with extensions, renewals or replacements thereof and new leases
covering all or any portion of the Lands covered thereby.
"LIEN" shall mean any mortgage, lien, pledge, charge, security
interest or other encumbrance.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to that
term in the Note Agreement.
"MORTGAGE" shall mean this Mortgage, Assignment of Production,
Security Agreement and Financing Statement, as same may from time to time
be amended, modified, supplemented or restated.
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"MORTGAGED PROPERTY" shall have the meaning assigned to that term in
ARTICLE II to this Mortgage.
"MORTGAGEES" shall have the meaning assigned to that term in the
introduction of this Mortgage and, after transfer of any of the Notes in
accordance with the Note Agreement, shall include all subsequent holders
of any of the Notes (other than Mortgagor and its Affiliates).
"MORTGAGOR" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"NOTE AGREEMENT" shall have the meaning assigned to that term in the
recitals of this Mortgage.
"NOTES" shall be the collective reference to (i) those four 10%
Senior Secured Exchangeable General Obligation Notes, each dated as of
September 6, 1996 issued by Mortgagor in the aggregate principal sum not
to exceed $3,000,000 and payable to the order of each Mortgagee bearing
interest at the rates provided for in the Notes and providing for the
payment of attorneys' fees and acceleration of maturity as set forth in
the Note Agreement, and with a present maturity date of September 1, 1999
or such earlier date as provided for in the Note Agreement, all as more
particularly described therein or in the Note Agreement, (ii) and those
three 10% Senior Secured General Obligation Notes, each dated as of
September 6, 1996 issued by Mortgagor in the aggregate principal sum not
to exceed $5,000,000 and payable to the order of each Mortgagee (other
than RIMCO Partners, L.P.) bearing interest at the rates provided for in
the Notes and providing for the payment of attorneys' fees and
acceleration of maturity as set forth in the Note Agreement, and with a
present maturity date of September 1, 2002 or such earlier date as
provided for in the Note Agreement, and (iii) any note given in
substitution therefor, or in modification, renewal, extension or
restatement thereof, in whole or in part, as any of the same may be
endorsed, amended, modified or supplemented.
"OIL AND GAS LEASES" shall include oil and gas leases, oil, gas and
mineral leases and shall also include subleases thereof and operating
rights thereto.
"OPERATING EQUIPMENT" shall mean all personal property, surface or
subsurface machinery, equipment, facilities, supplies or other property of
whatsoever kind or nature now or hereafter located on or under or affixed
to any of the Lands or Leases or now or hereafter used, held for use or
useful in connection with the exploration, development and operation of
the Lands or Leases and the production, treatment, storage, processing or
transportation of Hydrocarbons produced or to be produced from or
attributable thereto, including, but not
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by way of limitation, all oil wells, gas wells, water wells, injection
wells, gas processing plants, 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, meters,
apparatus, boilers, 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, accessions and attachments thereto and replacements thereof.
"PERMITTED ENCUMBRANCES" shall mean (i) the Lien hereof, (ii) any
Lien permitted under SECTION 10.02 of the Note Agreement, and (iii) those
restrictions, exceptions, reservations, conditions, limitations, interests
and other matters, if any, set forth or referred to in Exhibit A.
"PRODUCTION SALE CONTRACTS" shall mean contracts now or hereafter in
effect and entered into by Mortgagor, or Mortgagor's predecessors in
interest, for the production, sale, purchase, exchange, processing,
gathering, or transporting of Hydrocarbons produced from or attributable
to the Subject Interests.
"REQUIRED HOLDERS" shall mean, at any time, the holder or holders of
at least 51% of the then outstanding principal amount of the Notes
(exclusive of Notes then owned by Mortgagor or any of its Affiliates).
"REQUIREMENTS OF LAW" shall mean any federal, state or local law,
rule or regulation, permit or other binding determination of any
Governmental Authority.
"SUBJECT INTERESTS" shall mean each kind and character of right,
title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in and to the Leases and each kind and character of 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 all oil and gas leasehold interests, overriding royalty
interests, mineral interests, royalty interests, net profits interests,
oil payments, production payments, carried interests, operating rights,
and all other properties or interests of every kind or character which
relate to any of the Lands and/or the Leases, including, without
limitation, Mortgagor's undivided interests in those certain Leases and
wells located on the Lands, as same may be specified in Exhibit A attached
hereto,
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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,
an assignment, 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, even though the Mortgagor's interest
may be incorrectly or incompletely described in Exhibit A, 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 in, under, upon,
produced or to be produced or which may be produced, saved and sold from
or which shall accrue and be attributable to, the Subject Interests,
including without limitation, all oil in tanks and all rents, issues,
profits, proceeds, products, revenues, and other income arising from or
attributable to the Subject Interests.
"TRANSACTION DOCUMENTS" shall have the meaning assigned to that term
in the Note Agreement.
"UNIFORM COMMERCIAL CODE" shall mean the Louisiana Commercial Laws
(La. R.S. 10:1-101 et seq.) and shall include without limitation Chapter 9
thereof, as amended from time to time and in effect.
"WELL DATA" shall mean all logs, engineering data, formation tests,
drilling reports, division orders, transfer orders, operating agreements,
abstracts, title opinions, files, records, memoranda, data bases,
information systems, wellcores, fluid samples, production data and
reports, well testing data and reports, maps, seismic and geophysical,
geological and chemical data and information, interpretive and analytical
reports of any kind or nature (including, without limitation, reserve
studies and reserve evaluations), computer hardware and software and all
documentation therefor or relating thereto (including, without limitation,
all licenses relating to or covering such computer hardware, software
and/or documentation), and other written information in the possession or
control of Mortgagor relating directly or indirectly to (a) any of the
Leases or the wells located on any of the Lands or (b) the Exploration
Agreements.
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ARTICLE II
MORTGAGE
2.1 GRANT OF MORTGAGE ON REAL PROPERTY AND SECURITY INTEREST IN
PERSONAL PROPERTY. In order to secure the payment and performance of the
Indebtedness, Mortgagor has mortgaged, pledged and hypothecated and conveyed a
security interest in, and by these presents does mortgage, pledge and
hypothecate unto Mortgagees, and grant Mortgagees a continuing security interest
in and to, 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 Exploration Agreements;
(e) the Operating Equipment;
(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 the Production Sale Contracts or pertaining to
the Subject Interests;
(h) all oil and gas produced, and/or general intangibles, accounts
and other rights to payment under any and all contracts under which
Mortgagor is entitled to share in the production from or the proceeds of
production from any oil and/or gas wells located on the Lands and Leases
described in Exhibit A hereto;
(i) all subleases, farmout agreements, assignments of interest,
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;
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(j) all Well Data, subject to confidentiality agreements or
restrictions existing in favor of third parties;
(k) any Liens and security interests in the Subject Interests
securing payment of proceeds from the sale of the Subject Minerals;
(l) any other property not included within subparagraphs (a) through
(k) above that may from time to time hereafter be subjected to the Lien
created hereby and security interest hereof by the express consent of
Mortgagor; and
(m) any and all proceeds, returns, rents, issues, profits, products,
revenues and other income arising from or by virtue of the sale, lease or
other disposition of, or from any condemnation proceeds payable with
respect to loss of Lands, or from any insurance payable with respect to
damage, loss or destruction of, the items described in subparagraphs (a)
through (l) above;
together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, any of the same, or of any instrument relating thereto, all
the aforesaid properties, rights and interests which are hereby subjected to the
Lien of this instrument, together with any additions thereto which may be
subjected to the Lien of this instrument by means of supplements or amendments
hereto, being hereinafter called the "MORTGAGED PROPERTY."
Subject, however, to the condition that Mortgagees shall not be
liable in any respect for the performance of any covenant or obligation of
Mortgagor in respect of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagees and their
respective successors and assigns forever to secure the payment and performance
of the Indebtedness and to secure the performance of the covenants, agreements
and obligations of Mortgagor herein contained.
ARTICLE III
PARTICULAR WARRANTIES AND REPRESENTATIONS OF MORTGAGOR
Mortgagor hereby warrants and represents to Mortgagees as follows:
3.1 LEASES. The Leases are in full force and effect, are valid,
subsisting leases covering the entire estates 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, the
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obligations to be performed under the Leases have been duly performed (and
Mortgagor is not aware of any default by any third party with respect to such
third party's obligations).
3.2 TITLE. With respect to each well or unit described in Exhibit A,
Mortgagor owns good and marketable title to a sufficient interest in the Leases
pertaining to such well or unit described in Exhibit A, free and clear of Liens,
other than Permitted Encumbrances, that will (a) entitle Mortgagor to receive
(subject to the terms of this Mortgage and after deducting all royalties and
other burdens payable out of, or measured by, production) a percentage share of
all of the Hydrocarbons produced from, or to be produced from, such well or unit
equal to not less than the net revenue interest percentage share for such well
or unit set forth in Exhibit A and (b) cause Mortgagor to bear a percentage
share of all costs of exploration, development and operation of such well or
unit not greater than the working interest percentage share for such well or
unit set forth in Exhibit A. All such shares of production which Mortgagor is
entitled to receive, and shares of costs that Mortgagor is obligated to bear are
not subject to change unless and only to the extent such changes are reflected
in Exhibit A. Subject to Permitted Encumbrances, Mortgagor has good and
defensible title to all other Mortgaged Property. The warranty 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 affected 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. The reference to Permitted Encumbrances in this Mortgage is
made for the purpose of giving effect to the warranties of Mortgagor contained
herein, and is not intended to limit or restrict the description of the
Mortgaged Property, nor is it intended that this Mortgage or the rights of
Mortgagees hereunder shall be subject to, or encumbered by, the Permitted
Encumbrances solely by reference thereto. Each of the Production Sale Contracts
and each of the operating agreements governing any Lease described on Exhibit A
attached hereto 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.
3.3 POWER AND AUTHORITY. Mortgagor has the full power and legal
right to grant, bargain, sell, mortgage, assign, transfer and convey a security
interest in all of the Mortgaged Property 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 which has not
been obtained.
3.4 IMBALANCES, ETC. As of the date hereof, (i) neither Mortgagor
nor Mortgagor's predecessors in title have received prepayments (including, but
not limited to, payments for gas not taken pursuant to "take or pay"
arrangements) for any Hydrocarbons produced from the Mortgaged Properties after
the date hereof; (ii) no Mortgaged Property is subject at the present time to
any regulatory refund obligation and, to the best of Mortgagor's knowledge, no
situations exist
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where the same might be imposed; (iii) no Mortgaged Property is subject to a gas
balancing arrangement under which an imbalance exists with respect to which
imbalance Mortgagor is in an overproduced status and is required to (A) permit
one or more third parties to take a portion of the production attributable to
such Mortgaged Property without payment (or without full payment) therefor
and/or (B) make payment in cash, in order to correct such imbalance; or (iv) to
the best of Mortgagor's knowledge, no Mortgaged Property is subject to having
allowable production after the date of this Mortgage reduced below the full and
regular allowable because of any over-production prior to the date of this
Mortgage.
3.5 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, or that such approvals as are required have been
obtained; and that no such approval or consent is necessary to authorize the
observance or performance by Mortgagor of the covenants herein contained, or
that such approvals as are required have been obtained.
3.6 PRODUCING WELLS. All producing wells located on the Lands have
been drilled, operated and produced in all material respects in conformity with
all applicable laws, rules, regulations and orders of all regulatory authorities
having jurisdiction, and are subject to no penalties on account of past
production, and are bottomed under and are producing from, and the well bores
are wholly within, the Lands.
3.7 PRINCIPAL PLACE OF BUSINESS. The principal place of business and
chief executive office of Mortgagor and the place where Mortgagor's books and
records of account are kept is located at 1600 Smith Street, Suite 4000,
Houston, Texas 77002. Mortgagor's taxpayer identification number is 741483196.
ARTICLE IV
PARTICULAR COVENANTS AND AGREEMENTS OF MORTGAGOR
Mortgagor hereby covenants to and agrees with Mortgagees as follows:
4.1 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 in all material
respects Mortgagor's rights and remedies in or under the Mortgaged
Property and shall not, except in the ordinary course of business as a
reasonably prudent operator would do under similar
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circumstances, abandon any well or forfeit, surrender, release or default
under any Lease or any Production Sale Contract, or consent to any of the
foregoing, directly or indirectly;
(b) Perform or cause to be performed, each and all covenants,
agreements, terms, conditions and limitations imposed upon Mortgagor or
its predecessors in interest and expressly contained in (i) the Leases,
the operating agreements governing any of the Leases, any Production Sale
Contract, or 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, except where the failure to
so perform, individually or in the aggregate, will not have a Material
Adverse Effect, and to perform or cause to be performed all implied
covenants and obligations imposed upon Mortgagor in connection with the
Leases, the operating agreements governing any of the Leases, any
Production Sale Contract or any document or instrument relating thereto,
except where the failure to so perform, individually or in the aggregate,
will not have a Material Adverse Effect;
(c) Cause, or in the event Mortgagor is not the operator of the
Subject Interests, use reasonable efforts to cause, the Subject Interests
to be maintained, developed, protected against drainage, and continuously
operated for the production of Hydrocarbons in a good and workmanlike
manner as would a prudent operator and in compliance with all applicable
operating agreements and contracts;
(d) Except to the extent such amounts are being contested in good
faith and by appropriate proceedings, cause to be paid, promptly as and
when due and payable, (i) all rentals, delay rentals and 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 and (ii) all amounts due and payable in accordance with the
terms of each Production Sale Contract, other than such amounts which
Mortgagor is diligently contesting in good faith and by appropriate
proceedings;
(e) Cause, or in the event Mortgagor is not the operator of the
Subject Interests, use reasonable efforts to cause, the Operating
Equipment to be kept in good and effective operating condition, and all
repairs, renewals, replacements, additions and improvements thereof or
thereto, necessary to the production of Hydrocarbons from the Subject
Interests to be promptly made;
(f) 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 liens, charges, security interests and encumbrances of every
character, other than Permitted Encumbrances; and
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(g) Deliver, or cause to be delivered, to Mortgagees a copy of any
notice, demand or other material communication from any other party to the
Leases, the operating agreements governing any of the Leases described in
Exhibit A attached hereto 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 which
would have a Material Adverse Effect on the rights of Mortgagor
thereunder.
4.2 RECORDING, ETC. Upon the request of Mortgagees, Mortgagor, at
its expense, will promptly 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 preserve, protect and
renew the Lien hereof as a first priority perfected Lien on real or personal
property as the case may be and the rights and remedies of Mortgagees, 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 any state or of the
United States of America or of any other competent authority, for the purpose of
effectively creating, maintaining and preserving the Lien of this Mortgage and
the perfection and priority thereof.
4.3 SALE OR MORTGAGE OF MORTGAGED Mortgagor will not sell, convey,
mortgage, pledge, or otherwise dispose of or encumber the Mortgaged Property or
any portion thereof, or any of Mortgagor's rights, titles, interests or estates
therein other than as permitted in the Note Agreement; and Mortgagor will not
enter into any arrangement with any gas pipeline company or other purchaser of
Hydrocarbons regarding the Mortgaged Property outside the ordinary course of
business whereby said gas pipeline company or purchaser may set off any claim
against Mortgagor by withholding payment for any Hydrocarbons actually
delivered.
4.4 FURTHER ASSURANCES. Mortgagor will execute and deliver such
other and further instruments and will use its reasonable best efforts to do
such other and further acts as in the reasonable opinion of Mortgagees may be
necessary or desirable to carry out more effectually 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 or description of the Mortgaged Property or any part thereof or in the
execution and acknowledgment of this instrument, any Note, or other document
executed in connection herewith, (b) prompt execution and delivery of all
division or transfer orders which in the opinion of Mortgagees are needed to
transfer effectively to Mortgagees the assigned proceeds of production from the
Subject Interests, and (c) obtain any necessary governmental approvals,
including, without limitation, those of the United States or the State of
Louisiana.
4.5 ADVERSE CLAIMS. Mortgagor will warrant and forever defend the
title to the Mortgaged Property unto Mortgagees against every Person whomsoever
lawfully claiming the same or any part thereof, and Mortgagor will maintain and
preserve the Lien created hereby so long
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as any of the Indebtedness remains unpaid. Should a material 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 expense if such
claim would, in the reasonable judgment of Mortgagees, materially and adversely
affect the Mortgaged Property, or any material part thereof, and Mortgagor
further agrees that Mortgagees may take such other action they deem advisable to
protect and preserve their interests in the Mortgaged Property, and in such
event Mortgagor will indemnify Mortgagees against any and all costs, reasonable
attorneys' fees and other expenses which they may incur in defending against any
such adverse claim or taking action to remove any such cloud.
4.6 RELOCATION OF OFFICES. Mortgagor shall not change its taxpayer
identification number, name or identity or its corporate structure, or relocate
its principal place of business or chief executive office to a county or state
other than that specified in SECTION 3.7 of this Mortgage or otherwise relocate
any portion of the personal property comprising part of the Mortgaged Property
to a county or state other than that where it is presently located unless prior
to such relocation Mortgagor (a) gives 30 days' prior written notice to
Mortgagees, which notice shall include, without limitation, the nature of the
change and/or the name of the county and state into which such relocation is to
be made and (b) executes and delivers all such additional documents and performs
all additional acts as Mortgagees or their counsel shall reasonably feel is
necessary or advisable in order to continue and maintain the existence and
priority of Mortgagees' security interest in the personal property comprising
part of the Mortgaged Property so relocated.
ARTICLE V
ASSIGNMENT OF PRODUCTION
5.1 ASSIGNMENT OF RENTS. Mortgagor hereby absolutely and
unconditionally assigns and transfers to Mortgagees all the income, rents,
royalties, revenue, issues, profits, and proceeds of the Subject Interests,
whether now due, past due or to become due, and hereby gives to and confers upon
Mortgagees the right, power and authority to collect such income, rents,
royalties, revenue, issues, profits and proceeds. Mortgagor irrevocably appoints
Mortgagees its true and lawful attorney at the option of Mortgagees at any time
to demand, receive, and enforce payment, to give receipts, releases, and
satisfactions and to sue, either in the name of Mortgagor or in the name of
Mortgagees, for all such income, rents, royalties, revenue, issues, profits and
proceeds. Neither the foregoing assignment nor the exercise by Mortgagees of any
of their rights or remedies under this Mortgage shall be deemed to make
Mortgagees a "mortgagee-in-possession" or otherwise responsible or liable in any
manner with respect to the Mortgaged Property or the use, occupancy, enjoyment
or operation of all or any portion thereof, unless Mortgagees, in person or by
agent, assumes actual possession thereof, nor shall appointment of a receiver
for the Subject Interests by any court at the request of Mortgagees or by
agreement with Mortgagor or the entering into possession of the Subject
Interests or any part thereof by such receiver be deemed to make Mortgagees a
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Exhibit 10.12 - Page 13
"mortgagee-in-possession" or otherwise responsible or liable in any manner with
respect to the Subject Interests or the use, occupancy, enjoyment or operation
of all or any portion thereof. Notwithstanding anything to the contrary
contained herein, until such time as Mortgagees or Mortgagor shall have
instructed such parties to deliver such rents, income, royalties, revenues,
issues, profits or proceeds directly to Mortgagees (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 such parties be
conclusive as to the occurrence and continuance of an Event of Default), such
parties shall be entitled to deliver such rents, income, royalties, revenues,
issues, profits and proceeds to Mortgagor, to be applied in accordance with the
Note Agreement.
5.2 ASSIGNMENT OF PRODUCTION. As further security for the payment of
the Indebtedness, Mortgagor has transferred, assigned, warranted and conveyed
and does hereby transfer, assign, warrant and convey to Mortgagees, their
successors and assigns, and grants to Mortgagees a security interest in,
effective as of the date hereof, at 7:00 o'clock a.m., local time, all
Hydrocarbons 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 and said products as
well as any Liens and security interests securing any sales of said
Hydrocarbons. All parties producing, purchasing or receiving any such
Hydrocarbons or products, or having such Hydrocarbons, products, or proceeds
therefrom in their possession for which they or others are accountable to
Mortgagees by virtue of the provisions of this Article, are authorized and
directed to treat and regard Mortgagees as the assignees and transferees of
Mortgagor and entitled in such Mortgagor's place and stead to receive such
Hydrocarbons and all proceeds therefrom; and said parties and each of them shall
be fully protected in so treating and regarding Mortgagees and shall be under no
obligation to see to the application by Mortgagees of any such proceeds or
payments received by them; provided, however, that, until Mortgagees or
Mortgagor shall have instructed such parties to deliver such Hydrocarbons and
all proceeds therefrom directly to Mortgagees (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 such parties be
conclusive as to the occurrence and continuance of an Event of Default),, such
parties shall be entitled to deliver such Hydrocarbons and all proceeds
therefrom to Mortgagor to be applied in accordance with the Note Agreement.
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 Mortgagees or any party in order to have said revenues
and proceeds so paid to Mortgagees. Mortgagees are 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 such Mortgagor or Mortgagees for the
account of Mortgagor received from or in connection with said revenues or
proceeds and apply the proceeds thereof in accordance with SECTION 5.3 hereof,
and to execute transfer and division orders in the name of Mortgagor, or
otherwise, with warranties binding Mortgagor. Mortgagor will execute and deliver
to Mortgagees any instruments Mortgagees may from time to time request for the
purpose of effectuating this assignment and the payment to Mortgagees of the
proceeds assigned. Neither the foregoing assignment nor the exercise by
Mortgagees of any of its rights under this Mortgage shall
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be deemed to make Mortgagees a "mortgagee-in-possession" or otherwise
responsible or liable in any manner with respect to the Subject Interests or the
use, occupancy, enjoyment or operation of all or any portion thereof, unless and
until Mortgagees, in person or by agent, assumes actual possession thereof, nor
shall appointment of a receiver for the Mortgaged Property by any court at the
request of Mortgagees or by agreement with either Mortgagor or the entering into
possession of the Mortgaged Property or any part thereof by such receiver be
deemed to make Mortgagees a "mortgagee-in-possession" or otherwise responsible
or liable in any manner with respect to the Mortgaged Property or the use,
occupancy, enjoyment or operation of all or any portion thereof.
5.3 APPLICATION OF PROCEEDS. All payments received by Mortgagees
pursuant to SECTION 5.1 or 5.2 hereof shall be promptly applied to the
Indebtedness as follows:
First: To the payment and satisfaction of all reasonable costs and
expenses incurred in connection with the collection of such proceeds and
the payment and reimbursement of all amounts of Indebtedness (except that
included in "Second" and "Third" below);
Second: To the payment and satisfaction of the accrued interest
and/or any principal amount then due and owing on the Notes, pro rata in
proportion to the outstanding amount owing on each Note, such application
to be as set forth in the Note Agreement; and
Third: The balance, if any, shall be applied on the then unmatured
principal amounts of the Notes and all other amounts owed under the Note
Agreement, such application to be as set forth in the Note Agreement.
5.4 NO LIABILITY OF MORTGAGEES IN COLLECTING. Mortgagees are 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. Mortgagees
shall have the right, at their election, to prosecute and defend any and all
actions or legal proceedings deemed advisable by Mortgagees in order to collect
such funds and to protect the interests of Mortgagees and/or Mortgagor, with all
reasonable costs, expenses and attorneys' fees incurred in connection therewith
being paid by Mortgagor.
5.5 ASSIGNMENT NOT A RESTRICTION ON MORTGAGEES' 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 shall be in addition to all other security now or hereafter
existing to secure the payment of the Indebtedness.
5.6 STATUS OF ASSIGNMENT. Notwithstanding the other provisions of
this ARTICLE V, Mortgagees or any receiver appointed in judicial proceedings for
the enforcement of this
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Exhibit 10.12 - Page 15
instrument shall have the right to receive all of the Hydrocarbons herein
assigned and the proceeds therefrom after the Notes have been declared due and
payable in accordance with this Mortgage and the Note Agreement and to apply all
of said proceeds as set forth in SECTION 5.3 hereof. Upon any sale of the
Subject Interests or any part thereof pursuant to ARTICLE VII hereof, the
Hydrocarbons 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.
5.7 INDEMNITY. MORTGAGOR SHALL INDEMNIFY MORTGAGEES, THEIR PARTNERS, AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS, REPRESENTATIVES AND EMPLOYEES (THE
"INDEMNITEES") AGAINST ALL CLAIMS, LOSSES, ACTIONS, LIABILITIES, JUDGMENTS,
COSTS, ATTORNEYS' FEES AND OTHER CHARGES OF WHATSOEVER KIND OR NATURE,
(COLLECTIVELY, "CLAIMS") MADE AGAINST OR INCURRED BY THEM OR ANY OF THEM AS A
CONSEQUENCE OF THE ASSERTION, EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE
INDEBTEDNESS, THAT THEY OR ANY OF THEM RECEIVED HYDROCARBONS HEREIN ASSIGNED OR
THE PROCEEDS THEREOF CLAIMED BY THIRD PERSONS. IT IS THE EXPRESS INTENTION OF
MORTGAGOR THAT MORTGAGOR'S INDEMNIFICATION OBLIGATIONS WITH RESPECT TO THE
FOREGOING MATTERS SHALL INCLUDE ANY CLAIMS RESULTING FROM THE SOLE, JOINT OR
CONCURRENT NEGLIGENCE OF ANY INDEMNITEE; PROVIDED, THAT NO INDEMNITEE SHALL BE
ENTITLED TO INDEMNIFICATION FOR ANY CLAIM RESULTING FROM ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. The terms and provisions of this SECTION 5.7
shall specifically survive payment in full of the Indebtedness, release of
liens, assignments and security interests of this Mortgage, the exercise by
Mortgagees of any and all remedies hereunder and/or acceptance of a deed or
other conveyance in lieu of foreclosure with respect to the Mortgaged Property
or any part thereof.
5.8 RIGHTS TO TIMELY PAYMENT. For purposes of more fully effecting the
assignment made under this ARTICLE V and continuing the rights of Mortgagees
hereunder, Mortgagor hereby appoints Mortgagees as its attorney-in-fact to
pursue any and all rights, remedies and payments in respect of the Hydrocarbons
and proceeds therefrom, including, but not limited to, proceeds accruing prior
to the effective date of the assignment contained in this ARTICLE V. The power
of attorney granted to Mortgagees under this SECTION 5.8, being coupled with an
interest, shall be irrevocable so long as the Indebtedness or any part thereof
remains unpaid.
ARTICLE VI
EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any "Event of Default" as
defined under the Credit Agreement shall be and constitute an event of default
under this Mortgage (herein referred to as an "Event of Default").
6.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default of the type
described in Section 11.01(f) or (g) of the Note Agreement shall occur and be
continuing, the Notes and all other
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Exhibit 10.12 - Page 16
outstanding Indebtedness secured hereby shall automatically become and be
immediately due and payable in each instance without grace, demand, presentment
for payment, protest or notice (including, but not limited to, notice of intent
to accelerate and notice of acceleration) of any kind to Mortgagor or any other
Person, all of which are hereby expressly waived, and Mortgagees may proceed to
enforce its rights hereunder. If an Event of Default (other than an Event of
Default of the type described in Section 11.01(f) or (g) of the Note Agreement)
shall occur and be continuing:
(a) the Required Holders may by notice in writing to Mortgagor
declare the principal of and accrued interest on the Notes and all other
outstanding Indebtedness secured hereby to be immediately due and payable
whereupon the outstanding balance on the Notes and all other outstanding
Indebtedness shall become and be immediately due and payable, in each
instance without grace, demand, presentment for payment, protest or notice
(including, but not limited to, notice of intent to accelerate and notice
of acceleration) of any kind to Mortgagor or any other person, all of
which are hereby expressly waived; and
(b) the Required Holders may proceed to enforce the rights of
Mortgagees hereunder.
ARTICLE VII
ENFORCEMENT OF REMEDIES
7.1 RIGHTS OF MORTGAGEES WITH RESPECT TO PERSONAL PROPERTY
CONSTITUTING A PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during
the continuance of an Event of Default, Mortgagees will have all rights and
remedies granted by law, and particularly by the Uniform Commercial Code,
including, but not limited to, the right to take possession of all personal
property constituting a part of the Mortgaged Property, and for this purpose
Mortgagees 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. Mortgagees may require
Mortgagor to assemble such personal property and make it available to Mortgagees
at a place to be designated by Mortgagees 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,
Mortgagees 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 ten (10) days before the time of the sale or disposition.
7.2 RIGHTS OF MORTGAGEES WITH RESPECT TO FIXTURES CONSTITUTING A
PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during the continuance
of an Event of
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Exhibit 10.12 - Page 17
Default, Mortgagees 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.
7.3 JUDICIAL PROCEEDINGS. Upon occurrence and during the continuance
of an Event of Default, the Required Holders 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 or keeper pending any foreclosure hereunder or the
sale of the Mortgaged Property, or for the enforcement of any other appropriate
legal or equitable remedy. Upon occurrence and during the continuance of an
Event of Default, Mortgagor agrees that, to the extent permitted by law, the
appointment of a receiver or keeper shall be as a matter of right and without
proof of insolvency, fraud, insecurity or mismanagement on the part of
Mortgagor. Mortgagor agrees that such receiver or keeper may be appointed to
take possession of, hold, maintain, operate and preserve the Mortgaged Property,
including the production and sale of all Hydrocarbons therefrom, and to apply
the proceeds of the sale thereof in the manner the Mortgagees shall elect; and
said receiver may be authorized to sell and dispose of the Mortgaged Property
under orders of the Court appointing such receiver.
Upon the occurrence and during the continuance of an Event of
Default, the Required Holders may at their option, without notice, demand,
presentment or putting Mortgagor in default, all of which are hereby 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 other legal process, or, at the Required Holders'
option, the Required Holders may file suit in any court of competent
jurisdiction and obtain judgment immediately by virtue of the confession of
judgment herein contained or, at the Required Holders' option, the Required
Holders 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; in addition, Mortgagor waives the benefit of any and all laws or
parts of laws relative to the advertisement and appraisement of property seized
and sold under executory process 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 the Required Holders, at public auction or
at private sale, to the highest bidder for cash or in such other terms as the
Required Holders may elect. Mortgagor hereby waives (i) the benefit of
appraisement provided for in Articles 2332, 2336, 2723 and 2724 of the Louisiana
Code of Civil Procedure and all other laws conferring the same; (ii) the demand
and three (3) days' notice of demand as provided for in Articles 2639 and 2721
of the Louisiana Code of Civil Procedure; (iii) the notice of seizure provided
for in Articles 2393 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 for notice, demand,
appraisement or delay. Mortgagor expressly authorizes and agrees that the
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Exhibit 10.12 - Page 18
Required Holders 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., which
keeper may be the Required Holders, any agent or employee thereof, or any other
person, firm, or corporation appointed by the Required Holders. Mortgagor
acknowledges the Indebtedness secured hereby, whether now existing or to arise
hereafter, and confesses judgment thereon in favor of Mortgagees, if such
Indebtedness is not paid as and when due.
7.4 POSSESSION OF THE MORTGAGED PROPERTY. It shall not be necessary
for Mortgagees to have physically present or constructively in their possession
at any sale held by Mortgagees 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 owned by Mortgagor and
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.
7.5 CERTAIN ASPECTS OF A SALE. Mortgagees shall have the right to
become the purchaser at any sale held by any court, receiver or public officer,
and Mortgagees 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
Notes after the same have become due and payable, advertisement and conduct of
such sale in the manner provided herein.
7.6 RECEIPT TO PURCHASER. Upon any sale, whether made under the
Uniform Commercial Code or by virtue of judicial proceedings, the receipt of
Mortgagees or the officer making sale under judicial proceedings, acknowledging
the payment of purchase money with respect thereto, shall be sufficient
discharge to the purchaser or purchasers at any sale for his or their purchase
money, and such purchaser or purchasers and his or their assigns or personal
represen tatives, shall not, after paying such purchase money and receiving such
receipt of Mortgagees 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.
7.7 EFFECT OF SALE. Any sale or sales of the Mortgaged Property or
any part thereof, whether under the Uniform Commercial Code 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
::ODMA\PCDOCS\DOCS\88117\1
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Mortgagor, or Mortgagor's successors or assigns. Nevertheless, Mortgagor, if
requested by Mortgagees so to do, shall join in the execution and delivery of
all proper conveyances, assignments and transfers of the properties so sold.
7.8 APPLICATION OF PROCEEDS. The proceeds of any sale of the
Mortgaged Property, or any part thereof, whether under the Uniform Commercial
Code or by virtue of judicial proceedings, whose application has not elsewhere
herein been specifically provided for, shall be applied to the Indebtedness as
follows:
First: To the payment of all reasonable expenses incurred by
Mortgagees incident to the enforcement of this Mortgage, the Notes or any
of the Indebtedness including, without limiting the generality of the
foregoing, all such 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;
Second: To the payment of all other costs, charges, expenses,
liabilities and advances incurred or made by Mortgagees under this
Mortgage or in executing any power hereunder;
Third: To the payment of the Notes and any other Indebtedness, with
interest to the date of such payment, pro rata in proportion to the
outstanding amount owing on each Note in such order and manner as set
forth in the Note Agreement;
Fourth: Any surplus thereafter remaining shall be paid to Mortgagor
or Mortgagor's successors or assigns, as their interests shall appear or
as a court of competent jurisdiction may direct.
7.9 MORTGAGOR'S WAIVER OF APPRAISEMENT, MARSHALING, ETC. RIGHTS.
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 appraisement, valuation, stay, extension or redemption
of 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 through or
under Mortgagor, so far as Mortgagor or those claiming 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
(including, without limitation, a holder of a Lien subordinate to the Lien
created hereby, without implying that Mortgagor has, except as expressly
provided herein, a right to grant an interest in, or subordinate a Lien on, the
Mortgaged Property), hereby waives, to the fullest extent permitted by
applicable law, any and all right to have any of the Mortgaged Property
marshaled upon any foreclosure of the Lien
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 20
hereof, or sold in inverse order of alienation, and agrees that any court having
jurisdiction to foreclose such Lien may sell the Mortgaged Property as an
entirety. If any law in this paragraph 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
paragraph.
7.10 COSTS AND EXPENSES. All reasonable costs and expenses
(including reasonable attorneys' fees) incurred by Mortgagees in protecting and
enforcing their rights hereunder, shall, to the extent permitted by applicable
law, constitute a demand obligation owing by Mortgagor to the party incurring
such costs and expenses and shall bear interest until paid at the Default Rate.
7.11 OPERATION OF PROPERTY BY MORTGAGEES. Upon the occurrence and
during the continuation of an Event of Default and in addition to all other
rights herein conferred on Mortgagees, the Required Holders (or any person, firm
or corporation designated by the Required Holders) 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 Required Holders, or any person, firm or corporation designated
by the Required Holders, may operate the same without any liability to Mortgagor
in connection with such operations, except for gross negligence or willful
misconduct in the operation of such Mortgaged Property, and the Required Holders
or any person, firm or corporation designated by the Required Holders, shall
have the right and power, but shall not be obligated, to collect, receive and
receipt for all Hydrocarbons produced and sold from said Mortgaged Property, to
make repairs, purchase machinery and equipment, conduit and power, to enter
work-over operations, drill additional wells 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 wells) have been paid and the Indebtedness
paid, said Mortgaged Property 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, in order
to secure the Indebtedness, Mortgagor, as Debtor (referred to in this ARTICLE
VIII as "Debtor"), hereby expressly GRANTS, ASSIGNS, TRANSFERS and SETS OVER
unto Mortgagees, as Secured Party (Mortgagees being referred to collectively in
this ARTICLE VIII as "Secured Party"), a first Lien upon and a security interest
in all the Mortgaged Property (including, without limitation, all Mortgaged
Property that constitutes equipment, accounts, contract rights, goods,
instruments, general
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intangibles, inventory, Hydrocarbons, fixtures and other personal property of
any kind or character (including both those now and those hereafter existing))
to the full extent that such Mortgaged Property may be subject to the Uniform
Commercial Code including all products and proceeds of such Mortgaged Property
(said Mortgaged Property, products and proceeds 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, 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 such order or
manner as set forth in this Mortgage.
(b) Upon the occurrence and during the continuance of an 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, 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.
(c) To the extent permitted by law, Debtor expressly waives notice
of any right or remedies of a debtor (other than notice of sale or other
disposition of the Collateral) 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 with respect
to any required notice, Debtor agrees that if such notice is mailed,
postage prepaid, to Debtor at the address shown with Debtor's signature
hereinbelow at least ten (10) 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 and at such places as Secured Party
may fix in the notice of
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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 such order or manner as Secured Party may elect. All
rights to marshaling of assets of Debtor, including any such right with
respect to the Collateral, are hereby waived.
(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
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 23
election shall not preclude Secured Party 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 acknowledgment or may follow
Debtor's acknowledgment. Secured Party's signature need not be
acknowledged and is not necessary to the effectiveness hereof as a ,
mortgage, assignment, pledge or security agreement.
(l) So long as any amount remains unpaid on the Indebtedness, Debtor
will not execute or file in any public office any financing statement(s)
affecting the Collateral (other than Liens arising in respect of Permitted
Encumbrances) 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 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.
(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 resulting from the sale thereof at the
wellhead or minehead located on the Lands; (iii) this instrument may be
filed or filed of record in the real estate records as a financing
statement; (iv) Debtor is the record owner of the real estate or interests
in the real estate comprised of the Leases and the Lands described in
Exhibit A and (v) the name and address of each of the Secured Party and
Debtor is set forth on the signature page hereof.
(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
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 24
as attorney-in-fact effective 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,
either in Secured Party's own name or in the name 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 other 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.
(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 if such sale is otherwise commercially reasonable.
(r) Debtor acknowledges the Indebtedness secured hereby, whether now
existing or to arise hereafter, and confesses judgment thereon in favor of
Secured Party, if the Indebtedness is not paid as and when due.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 25
ARTICLE IX
MISCELLANEOUS
9.1 POOLING AND UNITIZATION. Mortgagor shall have the right, and is
hereby authorized, to pool or unitize all or any part of the Leases insofar as
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 wells or proration of the 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 or reservoir volumes 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
Mortgagees, as to all such units theretofore formed, and thereafter immediately
after formation of any such unit, Mortgagor shall furnish to Mortgagees a true
copy of the pooling agreements, declarations of pooling or other instruments
creating such units, in such number of counterparts as Mortgagees 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. Mortgagor may enter into pooling or
unitization agreements not hereinabove authorized only with the prior written
consent of Mortgagees.
9.2 ADVANCES BY MORTGAGEES. 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 and any applicable cure period has
expired, Mortgagees or any receiver or keeper appointed hereunder, may, but
shall not be obligated to, make advances to perform the same in Mortgagor's
behalf. Mortgagees shall notify Mortgagor as soon as practicable of any such
action taken by Mortgagees, PROVIDED that the failure of Mortgagees to so notify
Mortgagor shall not relieve Mortgagor of any of its obligations hereunder.
Mortgagor hereby agree to repay such sums within ten (10) days of demand plus
interest until paid at the Default Rate; 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.
9.3 DEFENSE OF CLAIMS. Mortgagor will notify Mortgagees, 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,
employing attorneys agreeable to
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 26
Mortgagees, as may be necessary to preserve Mortgagor's and Mortgagees's rights
affected thereby; and should the Mortgagor fail or refuse to take any such
action, Mortgagees may, upon giving prior written notice thereof to Mortgagor,
take such action on behalf and in the name of Mortgagor and at Mortgagor's
expense. Moreover, Mortgagees, 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
the Default Rate will, on demand, be reimbursed to Mortgagees or any receiver or
keeper appointed hereunder; provided, however, that in no event shall such
interest rate ever exceed the Highest Lawful Rate.
9.4 RELEASES. If the Indebtedness shall be fully paid and the
covenants herein contained shall be well and truly performed, then Mortgagees in
such case shall, upon the request of Mortgagor and at Mortgagor's cost and
expense, deliver to Mortgagor, proper instruments acknowledging release and
satisfaction of this Mortgage.
9.5 RENEWALS AND OTHER SECURITY. Renewals and extensions of the
Indebtedness may be given at any time and Mortgagees may take or may now hold
other security for the Indebtedness without notice to or consent of Mortgagor.
Mortgagees 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 any 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 is fully paid.
9.6 MORTGAGE AN ASSIGNMENT, ETC. This Mortgage shall be deemed to be
and may be enforced from time to time as an assignment, chattel mortgage,
hypothecation, contract, deed of trust, conveyance, financing statement, real
estate mortgage, pledge or security agreement, and from time to time as any one
or more thereof in order fully to effectuate the lien and security interest
granted hereby and the purposes and agreements herein set forth.
9.7 SUBROGATION. To the extent that any of the Indebtedness
represents funds utilized to satisfy any outstanding indebtedness or obligations
secured by liens, rights or claims against the Mortgaged Property or any part
thereof, Mortgagees 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, however remote, regardless of whether
said liens, rights, superior titles and equities are by the holder(s) thereof
assigned to Mortgagees or released.
9.8 SEPARABILITY. If any provision hereof or of the other
Transaction Documents is invalid or unenforceable in any jurisdiction, the other
provisions hereof or of the other Transaction Documents shall remain in full
force and effect in such jurisdiction, and the remaining provisions hereof shall
be liberally construed in favor of Mortgagees in order to effectuate the
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 27
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. Any reference herein contained to a statute
or law of a state in which no part of the Mortgaged Property is situated shall
be deemed inapplicable to, and not used in, the interpretation hereof.
9.9 RIGHTS CUMULATIVE. Each and every right, power and remedy herein
given to Mortgagees 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 Mortgagees, 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 Mortgagees 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.
9.10 BINDING EFFECT. This Mortgage is binding upon Mortgagor and
Mortgagor's successors and assigns and shall inure to the benefit of Mortgagees,
their respective successors and assigns, and the provisions hereof shall
likewise constitute covenants running with the land.
9.11 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.
9.12 NOTICES. Any notice, request, demand or other instrument which
may be required or permitted to be given or served upon Mortgagor or Mortgagees
shall be given in the manner provided for in the Note Agreement. The taxpayer
identification number of each Mortgagee is as follows: RIMCO PARTNERS, L.P. --
061208375, RIMCO PARTNERS, L.P. II -- 061264592, RIMCO PARTNERS, L.P. III --
061291935, RIMCO PARTNERS, L.P. IV -- 061327489.
9.13 AMENDMENTS, MODIFICATIONS AND WAIVERS, ETC. This Mortgage may
be amended, modified, revised, discharged, released or terminated only by a
written instrument or instruments executed by Mortgagor and Mortgagees. 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 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.
9.14 SURVIVAL OF AGREEMENTS. All representations and warranties of
Mortgagor herein and all covenants and agreements herein not fully and finally
performed before the
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 28
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.
9.15 GOVERNING LAW. THIS MORTGAGE, INCLUDING IN PARTICULAR ANY
PROVISION OF THIS MORTGAGE RELATING TO THE CREATION, EXISTENCE OR VALIDITY OF
THE INDEBTEDNESS AND THE OBLIGATIONS CONTAINED HEREIN, SHALL BE DEEMED CONTRACTS
AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS
OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT
THAT THE CREATION OF THE LIEN ON AND THE PERFECTION, PRIORITY AND ENFORCEABILITY
OF THE LIEN ON ANY MORTGAGED PROPERTY SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS
OF THE STATE OF LOUISIANA.
9.16 NOTE AGREEMENT. To the fullest extent possible, the terms and
provisions of the Note Agreement shall be read together with the terms and
provisions of this Mortgage so that the terms and provisions of this Mortgage do
not conflict with the terms and provisions of the Note Agreement; provided,
however, if any of the terms and provisions of this Mortgage conflict with any
terms or provisions of the Note Agreement, the terms or provisions of the Note
Agreement shall govern and control for all purposes, provided that (i) the
provisions of ARTICLE II, ARTICLE V, ARTICLE VIII and SECTION 9.17 hereof shall
govern and control for all purposes in the event of a conflict with the Note
Agreement, (ii) the provisions of this Mortgage shall govern and control for all
purposes in the event of a conflict with the Note Agreement to the extent that
any provision contained in the Note Agreement would negate or adversely affect
the enforceability, validity, perfection or priority of the Lien and security
interest created by this Mortgage, and (iii) the inclusion of additional terms,
provisions, covenants and warranties, supplemental rights or remedies in favor
of Mortgagees in this Mortgage shall not be deemed to be in conflict with the
Note Agreement.
9.17 LIMIT TO INDEBTEDNESS. The maximum amount of the Indebtedness
that may be outstanding at any time and from time to time that this Mortgage
(including the assignment of rents under Section 5.1 and the assignment of
production under Section 5.2 hereof) secures is fixed at sixteen million
dollars, and the maximum amount which Mortgagees may claim for damages that
Mortgagees may suffer from a breach of any covenant, obligation, agreement, term
or condition secured by this Mortgage (other than for the payment of money) is
fixed at sixteen million dollars.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 29
9.18 NO PARAPH. The Notes and all other evidences of the
Indebtedness have not been paraphed for identification with this Mortgage.
9.19 ACCEPTANCE. The acceptance of this Mortgage by Mortgagees is
presumed, and therefore this Mortgage has not been executed and need not be
executed by Mortgagees.
Thus Done and Passed, on the date first written above, in the presence of
the undersigned competent witnesses, who here unto sign their names with
Mortgagor and me, Notary, after due reading of the whole.
WITNESSES: MORTGAGOR:
TEXOIL COMPANY
/S/ GARY MILAVEC
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
/S/ NICK H. SORENSEN Title:President
The address of the The address of the
Mortgagees/Secured Party is: Mortgagor/Debtor is:
600 Travis Street, Suite 6875 1600 Smith, Suite 4000
Houston, Texas 77002 Houston, Texas 77002
/S/ PAT WAGNER
Notary Public in and for the State of Texas
My Commission Expires: (MARCH 22, 2000)
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 30
MORTGAGE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
DATED SEPTEMBER 6, 1996
FROM
TEXOIL COMPANY
(MORTGAGOR AND DEBTOR)
TO
RIMCO PARTNERS, L.P., RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III AND RIMCO PARTNERS, L.P. IV
(MORTGAGEES AND SECURED PARTY)
The mailing address of the above-named Mortgagees and Secured Party is 600
Travis, Suite 6875, Houston, Texas 77002, the mailing address of Mortgagor and
Debtor is 1600 Smith Street, Suite 4000, Houston, Texas 77002.
This instrument contains after-acquired property provisions.
This instrument secures payment of future advances.
The oil and gas interests included in the Mortgaged Property will be financed at
the wellheads of the wells located on the properties described in Exhibit A
hereto.
Mortgagor has an interest of record in the real estate concerned, which is
described in Exhibit A hereto.
ATTENTION OF RECORDING OFFICERS: This instrument is a mortgage affecting both
real and personal property and is, among other things, a security agreement and
financing statement under the Uniform Commercial Code. Some of the personal
property constituting a portion of the Mortgaged Property is or is to be affixed
to the Lands described in Exhibit A hereto. This instrument creates a lien on
rights in, or relating to, Lands of the Mortgagor which are described in Exhibit
A hereto.
Recorded counterparts should be returned to:
William P. Swenson
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 31
PREAMBLE TO EXHIBIT A
To Mortgage, Assignment of Production, Security Agreement and Financing
Statement from Texoil Company, Mortgagor, to RIMCO Partners, L.P. et al.,
Mortgagees
1. Depth limitations, land descriptions and descriptions of undivided
working interests and net revenue interests contained in Exhibit A and the
listing of any percentages, decimal or fractional interest in this Exhibit A
shall not be deemed to limit or otherwise diminish the interests being subjected
to the lien, security interest and assignment of this Mortgage. It is intended
that this Mortgage shall cover and affect Mortgagor's entire present and future
interest in the Subject Interests and other Mortgaged Property. The listings of
depth limitations, land descriptions, working interests and net revenue
interests in Exhibit A are made for the sole purpose of giving effect to the
title warranties of Mortgagor contained in this Mortgage.
2. Any statement contained in this Mortgage or Exhibit A that any interest
described herein is subject to any Permitted Encumbrance or any other agreement,
instrument, or other matter shall not operate to subject such interest to any
such Permitted Encumbrance or such agreement, instrument or other matter, except
to the extent (i) that such interest described herein is in fact subject to such
Permitted Encumbrance or other agreement, instrument or matter, (ii) that such
Permitted Encumbrance or other agreement, instrument or matter is valid and
presently subsisting, and (iii) that such Permitted Encumbrance or other
agreement, instrument or matter is effective and binding upon third parties.
Nothing contained in this Mortgage or Exhibit A shall be deemed to constitute a
recognition by Mortgagor or Mortgagees that any such Permitted Encumbrance or
other agreement, instrument or other matter is valid and presently subsisting.
3. The term "BPO" in Exhibit A specify the warranted working interest and
net revenue interest of Mortgagor in a particular well or unit before the
occurrence of a particular event such as payout of costs with respect to such
well or unit. The term "APO" in Exhibit A specify the warranted working interest
and net revenue interest of Mortgagor in a particular well or unit after the
occurrence of a particular event such as payout of costs with respect to such
well or unit.
4. References in Exhibit A to instruments on file in the public records
are made for all purposes. Unless provided otherwise, all references to file
numbers, entry numbers and COB/Folio numbers in Exhibit A are references to the
official real property records of the applicable parish in which the Mortgaged
Property is located and in which records such documents are or in the past have
been customarily recorded, whether Official Records, Deed Records, Conveyance
Records, Oil and Gas Records, Oil and Gas Lease Records or other similar
records.
5. Capitalized terms used in Exhibit A shall have the meaning assigned to
them in this Mortgage.
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