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EXHIBIT 4.7
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 "INSTRUMENT"), dated as of June 18, 2001 (the
"EFFECTIVE DATE"), is given by TRI-UNION DEVELOPMENT CORPORATION, (Taxpayer I.D.
Number 76-0503660), a Texas corporation (the "MORTGAGOR"), with an address at
530 Lovett Boulevard, Houston, Texas 77006-4021 to:
1. Wells Fargo Bank Minnesota, National Association (Taxpayer I.D.
Number 41-1592157), with an address at Corporate Trust Services, Sixth and
Marquette Avenue, MAC N9303-120, Minneapolis, MN 55479, as agent for each
Creditor referred to below (in such capacity, the "COLLATERAL AGENT") (the
Collateral Agent, together with its successors in such capacity, is hereinafter
referred to as the "SECURED PARTY"), as to any and all portions of the
Collateral (as hereinafter defined) EXCEPT those portions of the Collateral
which (i) are located in the State of Texas or in offshore waters adjacent to
the State of Texas and subject to the laws of the State of Texas and (ii)
constitute interests in or to real property under the law of the State of Texas
(such Collateral in clauses (i) and (ii) being the "DT COLLATERAL"); and
2. Jane Y. Schweiger, with an address at Wells Fargo Bank Minnesota,
National Association, Corporate Trust Services, Sixth and Marquette Avenue, MAC
N9303-120, Minneapolis, MN 55479, as Lien trustee (in such capacity, together
with her successors and assigns in such capacity, the "LIEN TRUSTEE"), but only
as to the DT Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES (NOT
INCLUDING LOUISIANA), A POWER OF SALE MAY ALLOW THE SECURED PARTY OR THE LIEN
TRUSTEE TO TAKE THE COLLATERAL AND SELL IT WITHOUT GOING TO COURT IN A
FORECLOSURE ACTION UPON DEFAULT UNDER THIS INSTRUMENT.
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THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
TO COMPLY WITH THE REQUIREMENTS OF THE UNIFORM COMMERCIAL CODE IN SEVERAL
STATES, (A) THE NAMES OF THE MORTGAGOR AND THE SECURED PARTY, THE MAILING
ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY
INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE MORTGAGOR AND OTHER
RELEVANT INFORMATION ARE SET FORTH IN THE INTRODUCTORY PARAGRAPHS HEREOF AND
SECTION 8.06 HEREOF AND (B) A STATEMENT INDICATING THE TYPES, OR DESCRIBING THE
ITEMS, OF COLLATERAL IS SET FORTH IN RECITAL 3 HEREOF.
PORTIONS OF THE COLLATERAL ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR
FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN EXHIBIT A HERETO. THIS
FINANCING STATEMENT IS TO BE FILED FOR RECORD OR RECORDED, AMONG OTHER PLACES,
IN THE REAL ESTATE RECORDS OF EACH COUNTY (OR, TO THE EXTENT SIMILAR RECORDS ARE
MAINTAINED AT THE CITY OR TOWN LEVEL INSTEAD OF THE COUNTY OR PARISH LEVEL, EACH
SUCH CITY OR TOWN) IN WHICH SAID LAND OR ANY PORTION THEREOF IS LOCATED. THE
MORTGAGOR IS THE OWNER OF RECORD INTEREST IN THE REAL ESTATE CONCERNED. THIS
INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES, IT BEING CONTEMPLATED THAT
THE MORTGAGOR MAY HEREAFTER BECOME INDEBTED TO THE SECURED PARTY AND/OR THE
CREDITORS IN FURTHER SUM OR SUMS.
PURSUANT TO THE PROVISIONS OF SECTION 8.13 HEREOF, THOSE PORTIONS OF THE
COLLATERAL WHICH ARE HYDROCARBONS OR OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE
ACCOUNTS RELATING THERETO, WILL BE FINANCED AT THE WELLHEADS OF THE WELLS
LOCATED ON THE LAND DESCRIBED OR REFERENCED TO IN EXHIBIT A ATTACHED HERETO
WHICH IS INCORPORATED HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.
RECITALS
1. A. Pursuant to that certain Indenture of even date herewith (the
"INDENTURE") among the Mortgagor, as issuer, Tribo Petroleum Corporation and
Tri-Union Operating Company, as guarantors and Firstar Bank, National
Association, as trustee (the "INDENTURE TRUSTEE"), the Mortgagor may issue up to
$150,000,000 of its 12.50% Senior Secured Notes due 2006 (the "NOTES") having
issued as of June the date hereof not less than $130,000,000 (all Persons
holding such notes or interests therein, the "HOLDERS").
B. On the date of this Instrument and in the future, the Mortgagor will
enter into Approved Hedge Agreements; and from time to time and in the future,
the Mortgagor may enter into Hedge Liquidity Agreements.
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2. The Secured Party, for the benefit of itself, the Approved Hedge
Counterparty or the Hedge Liquidity Providers and the Indenture Trustee for the
benefit of the Holders (collectively, the "CREDITORS"), is intended to have the
benefit of the security provided hereby and of the proceeds hereinafter
assigned. The Secured Party is to act hereunder for the benefit of itself and
the Creditors. The Lien Trustee is to act hereunder for the benefit of the
Secured Party in accordance with the terms of this Instrument.
3. The following are hereinafter collectively referred to as the
"COLLATERAL":
A. all rights, titles and interests of the Mortgagor (but at a
minimum the undivided interests specified in Exhibit A attached hereto and
incorporated herein by this reference) in and to the oil and gas leases, the
oil, gas and mineral leases and other mineral properties or interests described
in Exhibit A hereto (collectively, the "LEASES") and in the lands and premises
covered or affected thereby (the "LANDS"), except the rights, titles and
interests of the Mortgagor expressly excluded in Exhibit A hereto;
B. without limitation of the foregoing, all other right, title
and interest of the Mortgagor of whatever kind or character (whether now owned
or hereafter acquired by operation of law or otherwise) in and to the Leases and
Lands described in Exhibit A hereto, or lands which are otherwise described in
any of the Leases or other instruments described in Exhibit A hereto, even
though such lands may be incorrectly described in, or omitted from, Exhibit A
hereto, except the rights, titles and interests of the Mortgagor expressly
excluded in Exhibit A hereto; it being intended by Mortgagor and Collateral
Agent herein to cover and affect hereby all interests which Mortgagor may now
own or may hereafter acquire in and to the Leases and Lands notwithstanding that
the interests as specified on Exhibit A may be limited to particular lands,
specified depths or particular types of property interests;
C. all rights, titles, interests and estates now owned or
hereafter acquired (by operation of law or otherwise) by the Mortgagor in and to
(i) the properties now or hereafter pooled or unitized with the Leases; (ii) all
presently existing or future unitization, communitization, pooling agreements,
orders and/or 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 so called "working interest units" created under
operating agreements, surface use agreements, support agreements or otherwise)
which may affect all or any portion of the Leases including, without limitation,
those units which may be described or referred to in Exhibit A hereto; (iii) all
operating agreements, farmout agreements, farmin agreements, development
agreements, participation agreements, gas balancing agreements, area of mutual
interest agreements, equipment leases, purchase agreements, sale agreements,
option agreements and other agreements which cover, affect or otherwise relate
to any of the Leases or Lands or interests in the Leases or Lands described or
referred to herein or in Exhibit A hereto or to the production, sale, purchase,
exchange, processing, handling, treating, storing, transporting or marketing of
the Hydrocarbons produced from or attributable to such Leases or Lands or
interests therein; and (iv) all geological, geophysical, engineering,
accounting, title, legal, and other technical or business data concerning the
Collateral, the Leases or Lands, or any other item of property which are in the
possession of Mortgagor or in which Mortgagor can otherwise grant
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a security interest, and all books, files, records, magnetic media, computer
records, and other forms of recording or obtaining access to such data;
D. 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 the Mortgagor or by anyone on the Mortgagor's behalf; and the
Secured Party on behalf of the Creditors is hereby authorized to receive the
same at any time as additional security hereunder;
E. all of the rights, titles and interests of every nature
whatsoever now owned or hereafter acquired by the Mortgagor in and to the Lands,
Leases, rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Lands, Leases, 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 Encumbrances (as defined in
Section 2.1 hereof) to which any of the Lands, Leases, rights, titles, interests
or estates are subject, or otherwise; together with any and all renewals and
extensions of any of the Lands, Leases, 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 the Mortgagor in and to
such Lands, Leases, rights, titles, interests and estates;
F. all tenements, hereditaments, appurtenances and properties
in any way appertaining, belonging, affixed or incidental to the Lands, Leases,
rights, titles, interests and estates described or referred to in paragraphs A,
B, C, D and E above, which are now owned or which may hereafter be acquired (by
operation of law or otherwise) by the Mortgagor, including, without limitation,
any and all property, real or personal, equipment, improvements, fixtures and
other property 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 the Leases or the lands covered thereby or pooled or unitized therewith
including, without limitation, any and all of the Mortgagor's rights, titles and
interests in oil wells, gas wells, injection wells or other wells (including,
without limitation, the wells described in Exhibit A hereto) or well equipment,
buildings, structures, field separators, liquid extraction plants, plant
compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
lines, field gathering systems, injection facilities, 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, power, telephone and
telegraph lines, surface leases, rights-of-way, easements, servitudes, licenses,
permits and other surface rights situated upon, used, held for use or useful in
connection with the operation and development of the Leases and the lands
covered thereby or pooled or unitized therewith, together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing properties (the foregoing rights, interests and properties described
in paragraphs A, B, C, D, E and this paragraph F above, and all rights, estates,
powers and privileges appurtenant thereto are referred to herein collectively as
the "MORTGAGED PROPERTIES" and, individually, as a "MORTGAGED PROPERTY");
G. all rights, titles, interests and estates now owned or
hereafter acquired by the Mortgagor in and to all Hydrocarbons in and under and
which may be produced from or attributable or allocated to the Leases and the
Lands or lands pooled or unitized therewith
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including, without limitation, all natural gas in tanks and all rents, issues,
profits, proceeds (including without limitation, any prepayment for production
not taken or payments in lieu of production), products, revenues and other
income from or attributable to the Leases and the lands covered thereby or
pooled or unitized therewith which are subjected or required to be subjected to
the Liens and security interests of this Instrument; and further including,
without limitation, any and all Liens and security interests in the Hydrocarbons
securing payment of proceeds from the sale of Hydrocarbons; and
H. all accounts, contract rights, inventory, general
intangibles (including all Oil and Gas Hedging Contracts), insurance contracts
and insurance proceeds constituting a part of, relating to or arising out of
those portions of the Lands and Leases which are described in paragraphs A
through G above and all proceeds and products of all such portions of the Lands
and Leases and payments in lieu of production (such as "take or pay" payments),
whether such proceeds or payments are goods, money, documents, instruments,
chattel paper, securities, accounts, general intangibles, fixtures, real
property, or other assets; and
I. all of Mortgagor's right to receive amounts payable from
the Lien Escrow Account and the Escrow Account as established by the Mortgagor's
First Amended Plan of Reorganization that was confirmed by order of the United
States Bankruptcy Court for the Southern District of Texas, Houston Division on
May 23, 2001 in In re Tri-Union Development Corporation (Case No.
00-3249-H4-11).
To secure the performance of the Obligations (as hereinafter defined), the
Mortgagor hereby:
A. GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS, PLEDGES, MORTGAGES,
WARRANTS and CONVEYS, and grants a security interest in, the Collateral other
than the DT Collateral to the Secured Party WITH POWER OF SALE pursuant to this
Instrument and applicable law, for the benefit and security of the Secured
Party, subject to the rights of the Secured Party under the assignment made in
paragraph D below; and
B. GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS and CONVEYS the DT
Collateral to the Lien Trustee, IN TRUST, WITH POWER OF SALE pursuant to this
Instrument and applicable law, for the benefit of the Secured Party.
TO HAVE AND TO HOLD the Collateral other than the DT Collateral unto the Secured
Party, its successors and assigns, forever, and TO HAVE AND TO HOLD the DT
Collateral unto the Lien Trustee, its successors and assigns, forever, in trust,
subject to all of the terms, conditions, covenants and agreements herein set
forth, for the security and benefit of the Secured Party and its successors and
assigns as holders of the Obligations (as hereinafter defined); and
C. UNCONDITIONALLY AND ABSOLUTELY ASSIGNS, CONVEYS, TRANSFERS and SETS
OVER to the Secured Party any and all of the Mortgagor's rights in the
Hydrocarbons, including, without limitation, all severed and extracted
Hydrocarbons and other minerals produced from or attributable to the Mortgaged
Property, including, without limitation, all of the proceeds thereof.
AND, in furtherance thereof, the Mortgagor warrants, represents, covenants and
agrees as follows:
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ARTICLE I
OBLIGATIONS SECURED
Section 1.01 Obligations. This Instrument is executed, acknowledged and
delivered by the Mortgagor to secure and enforce the payment and performance of
any and all of the following indebtedness, obligations and liabilities (herein
collectively called the "OBLIGATIONS"):
A. all indebtedness, obligations and liabilities of Mortgagor under the
terms of the Indenture, whether now existing or hereafter arising, including
without limitation, such indebtedness, obligations and liabilities evidenced by
the $150,000,000 12.50% Senior Secured Notes issued by the Mortgagor, each
having a final maturity date of June 1, 2006;
B. all present and future indebtedness, obligations and liabilities of
the Mortgagor under any Approved Hedge Agreement now existing or hereafter
entered into between the Mortgagor and the Approved Hedge Counterparty;
C. all present and future indebtedness, obligations and liabilities of
the Mortgagor according to the terms of the Hedge Liquidity Agreement now
existing or hereafter entered into among the Mortgagor and the Hedge Liquidity
Providers party thereto;
D. all sums advanced and costs and expenses (including, without
limitation, all legal and engineering fees) as provided for in any Principal
Agreement, this Agreement or any other Security Document incurred by the Secured
Party, the Lien Trustee or any Creditor (whether directly or indirectly on
behalf of itself or any of the Creditors) in connection with the Obligations or
any part thereof, any reborrowing, future advance, readvance, modification,
extension, substitution, exchange and renewal of the Obligations or any part
thereof, or the acquisition or perfection of the security therefor, whether such
advances, costs and expenses were made or incurred at the request of the
Mortgagor or the Secured Party;
E. all other indebtedness, obligations and liabilities and performance
of all other obligations of the Mortgagor to the Secured Party or the Lien
Trustee arising pursuant to this Instrument or in connection herewith, including
without limitation all sums advanced by the Secured Party or the Lien Trustee to
protect the Collateral, each of which Obligations (unless otherwise specified in
the writing creating such Obligation) shall be due and payable five days after
demand for payment is made upon the Mortgagor by the Secured Party and shall
bear interest at the Default Rate, but in no event to exceed the maximum
nonusurial rate allowed by applicable law;
F. all Obligations (as defined in the Intercreditor Agreement) to the
extent not included in clauses (A) to (E); and
G. without limiting the generality of the foregoing, all post-petition
interest, expenses, and other duties and liabilities with respect to
indebtedness, liabilities or other obligations described above in this Section
1.01, which would be owed but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, insolvency, reorganization, or
similar proceeding.
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ARTICLE II
WARRANTIES, REPRESENTATIONS AND COVENANTS
The Mortgagor hereby represents, warrants and covenants as follows:
Section 2.01 Warranty of Title.
(a) The Mortgagor has good and defensible title in and to the
Collateral, including without limitation, the undivided interests specified as
fractional, percentage or decimal interests in Exhibit A hereto in the Lands and
Leases identified in Exhibit A hereto, except to the extent the failure to have
such title or the existence of Liens or Encumbrances would not, individually or
in the aggregate, have a Material Adverse Effect. Any fractional, percentage or
decimal interests specified in Exhibit A in referring to Mortgagor's interests
in the Mortgaged Property are solely for the purposes of the representations and
warranties set forth herein and shall in no manner limit the quantum of the
interests of the Mortgagor in the Mortgaged Property mortgaged and pledged by
the Mortgagor hereunder.
(b) The Collateral is free and clear of (i) all Liens and (ii) any and
all preferential purchase rights or other rights, restrictions or limitations of
any nature or kind (herein collectively called "ENCUMBRANCES") other than (A)
Permitted Liens and (B) the Liens in favor of the Lien Trustee and the Secured
Party created or provided herein, except to the extent that the failure to have
such title or the existence of Liens or Encumbrances would not, individually or
in the aggregate, have a Material Adverse Effect.
(c) Except as described in the Offering Memorandum dated as of June 13,
2001, on the date hereof, (i) all royalties, rentals, deposits and other amounts
due on the oil and gas properties of the Mortgagor have been properly and timely
paid, and no proceeds from the sale or production attributable to the oil and
gas properties of the Mortgagor are currently being held in suspense by any
purchaser thereof, except where such amounts due could not, singly or in the
aggregate, have a Material Adverse Effect, and (ii) there are no claims under
take-or-pay contracts pursuant to which natural gas purchasers have any make-up
rights affecting the interests of the Mortgagor in their respective oil and gas
properties, except where such claims could not, singly or in the aggregate, have
a Material Adverse Effect.
(d) Except to the extent the failure to have such title or the
existence of Liens or Encumbrances would not, individually or in the aggregate,
have a Material Adverse Effect, no Lien or Encumbrance on the Mortgaged
Properties would cause the Mortgagor's (i) share of production from the wells or
Leases and Lands described in Exhibit A to be less than the net revenue interest
(NRI) (expressed as a fraction, percentage or decimal) set forth in Exhibit A in
connection with said wells or Leases and Lands or (ii) share of expenses of
development, production and operation with respect to said well or Leases to be
more than the working interest (WI) (expressed as a fraction, percentage or
decimal) set forth in Exhibit A in connection with said wells or Leases (unless
there is also a proportionate increase in NRI).
Section 2.02 Power to Create Lien and Security Interest. The Mortgagor
has full corporate power and authority to grant, bargain, sell, assign,
transfer, mortgage, and convey a security interest in all of the Collateral in
the manner and form herein provided and without
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obtaining the authorization, approval, consent or waiver of any lessor,
sublessor, governmental or regulatory authority or agency or other party or
parties whomsoever.
Section 2.03 Defense of Title to Collateral. The Mortgagor will warrant
and defend the title to the Collateral 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 Obligations secured hereby remain unpaid. If the title,
interest or Lien, as the case may be, of the Mortgagor or the Secured Party to
the Collateral (or the Lien Trustee to the DT Collateral) or any material part
thereof, or the security of this Instrument, or the rights or powers of the
Secured Party or the Lien Trustee hereunder, shall be challenged, either
directly or indirectly, or if any legal proceedings are commenced involving the
Mortgagor or its properties, the Mortgagor shall promptly give written notice
thereof to the Secured Party (and the Lien Trustee, if the Collateral is DT
Collateral) and at the Mortgagor's own expense shall take all necessary, proper
and reasonable steps to diligently defend against any such challenge or
proceedings.
Section 2.04 First Lien. This Instrument is, and the Mortgagor will
ensure this Instrument is kept as, a direct and first Lien and security interest
upon the Collateral, subject to Permitted Liens, and the Mortgagor will not
create, incur, assume or suffer to be created or permit to exist any other Lien
upon the Collateral or any part thereof or upon the rents, issues, revenues,
profits and other income therefrom except for Permitted Liens.
Section 2.05 Identify; Chief Office; Jurisdiction of Formation. The
Mortgagor will not change its employer identification number, its legal name,
the location of its chief executive office, its principal place of business, its
jurisdiction of formation or the place where it keeps its books and records
concerning the Collateral (including, particularly, the proceeds from the sale
of Hydrocarbons or any interests therein) without notifying the Creditors, the
Secured Party and the Lien Trustee of such change in writing at least 30 days
prior to the effective date of such change.
Section 2.06 Further Assurances; Recordation. The Mortgagor shall
promptly and, insofar as not contrary to applicable law, at Mortgagor's own
expense, file and refile, or cause to be filed or refiled, in such offices, at
such times and as often as may be necessary, this Instrument and every other
instrument in addition or supplemental hereto, including, without limitation,
applicable financing statements, as may be necessary to create, perfect,
maintain and preserve the Lien intended to be created hereby and the rights and
remedies of the Secured Party and of the Lien Trustee hereunder, subject to
Permitted Liens, and shall promptly furnish to the Secured Party evidence
satisfactory to the Secured Party of all such filings and refilings and
otherwise shall do or cause to be done all things necessary or expedient to be
done to effectively create, perfect, maintain and preserve the Lien intended to
be created hereby as a first Lien on the real property and as a first and prior
security interest in the personal property which constitute the Collateral and
to create, perfect, maintain and preserve the assignments made in paragraph D of
the granting clause of this Instrument, in each case subject only to Permitted
Liens. The Mortgagor shall execute, acknowledge and deliver to the Secured Party
such other and further instruments and do such other acts as in the reasonable
opinion of the Secured Party may be necessary or desirable to more fully
identify and subject to the Lien and assignment created hereby, any property
intended by the terms hereof to be covered hereby, to assure the
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first priority thereof, subject only to Permitted Liens and otherwise to effect
the intent of this Instrument, promptly upon request of the Secured Party and at
the Mortgagor's expense.
Section 2.07 Maintenance and Operations. The Mortgagor will promptly
pay and discharge or cause to be paid and discharged 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, subject leases, sub-leases, contracts and agreements
described or referred to herein or affecting the Mortgagor's interests in the
Collateral, and will do or cause to be done all other things necessary to keep
unimpaired the Mortgagor's rights with respect thereto and prevent any
intentional forfeiture thereof or default with respect thereof other than a
default which might occur as a result of cessation of production thereunder,
except where the failure to do so would not have a Material Adverse Effect. The
Mortgaged Property (and properties unitized therewith) have been maintained and
operated in a good and workmanlike manner in accordance with customary industry
standards and in conformity with all applicable laws and all rules, regulations
and orders of all duly constituted authorities having jurisdiction and in
conformity with all oil, gas and/or other mineral leases and other agreements
forming part of the Mortgaged Property and in conformity with all Permitted
Liens, except where the failure to do so would not have a Material Adverse
Effect. The 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 spacings 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 produced therefrom,
except where the failure to do so would not have a Material Adverse Effect. The
Mortgagor will do or cause to be done, or shall participate in, such development
work as may be reasonably necessary to the prudent and economical operation of
the Mortgaged Property in accordance with the approved practices of prudent
operators in the industry, including, without limitation, all to be done that
may be appropriate to protect from diminution the productive capacity of the
Mortgaged Property and each producing well thereon, except where the failure to
do so would not have a Material Adverse Effect. Upon the reasonable request of
either the Secured Party or the Lien Trustee, and at reasonable times and
intervals, the Mortgagor will (a) permit the Secured Party or the Lien Trustee,
as the case may be, and its respective designated representatives to enter upon
any part of the Mortgaged Property under the control of the Mortgagor, and (b)
cause the operator of any part of the Mortgaged Property not under the control
of the Mortgagor to permit the Secured Party or Lien Trustee, as the case may
be, and its designated representatives to enter upon the same (to the extent and
subject to the conditions under which the Mortgagor may so enter), for the
purposes of inspecting the condition and operation thereof.
Section 2.08 Maintenance of Insurance. Mortgagor will keep adequately
insured by insurers of recognized responsibility, all of the Mortgaged Property
of an insurable nature and of a character usually insured by Persons engaged in
the same or similar business, against all risks customarily insured against by
such Persons. Mortgagor will maintain liability insurance against claims for
personal injury or death or property damage suffered by members of the public or
others in or about the Mortgaged Property or occurring by reason of Mortgagor's
ownership, maintenance, use or operation of any plants, shops, machinery,
automobiles, trucks or other
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vehicles, or other facilities on or in connection with the Mortgaged Property
and all such workmen's compensation or similar insurance as may be required
under the laws of any jurisdiction in which any of the Mortgaged Property may be
situated. All such insurance shall be maintained in such amounts, covered risks
and terms, and with such deductibles as is usually carried by Persons engaged in
the same or a similar business and shall be effected under a valid and
enforceable policy or policies issued by insurers of recognized responsibility.
All such insurance shall provide or be endorsed to provide that:
(a) Secured Party or the Lien Trustee shall be included as an
additional insured and named as loss payee, with the understanding that any
obligation imposed upon the insured (including, without limitation, the
liability to pay premiums) under any policy required by this Section shall be
the obligation of Mortgagor and not that of the Secured Party or the Lien
Trustee; and
(b) if such insurance is cancelled for any reason whatsoever
(including, without limitation, nonpayment of premium) or any material change is
made in the coverage that affects the interests of the Secured Party, such
cancellation or change shall not be effective as to the Secured Party for 10
days for nonpayment of premiums and otherwise for 30 days, in both cases after
receipt by both the Secured Party and the Lien Trustee (at the address specified
at the end of this Instrument) of written notice sent by certified mail from
such insurer of such cancellation or change.
Unless an Event of Default shall have occurred and be continuing, the
Secured Party and the Lien Trustee grant to the Mortgagor a power of attorney to
endorse checks representing loss proceeds from any such policies and apply such
proceeds in accordance with the this Instrument, the Intercreditor Agreement and
the Principal Agreements. During the occurrence and continuance of an Event of
Default, the Secured Party or the Lien Trustee shall have the right to collect,
and the Mortgagor hereby assigns to the Secured Party or the Lien Trustee, any
and all monies that may become payable under any such policies of insurance by
reason of damage, loss or destruction of any of the Mortgaged Property, and the
Secured Party or the Lien Trustee may apply all or any part of the sums so
collected, as the Secured Party or the Lien Trustee elects, toward payment of
the Obligations, whether or not such Obligation is then due and payable, in
accordance with the Intercreditor Agreement and the Principal Agreements.
Section 2.09 Expenses; Indemnification. The Mortgagor will promptly
upon demand by the Secured Party pay all reasonable costs and expenses
heretofore or hereafter incurred by the Secured Party for legal, engineering,
geological or accounting services rendered to any Creditor in connection with
the enforcement of any of the rights hereunder. THE MORTGAGOR SHALL INDEMNIFY
AND HOLD HARMLESS EACH INDEMNIFIED PERSON FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT LIMITATION
CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES)
WHICH MAY BE IMPOSED UPON, ASSERTED AGAINST OR INCURRED OR PAID BY ANY OF THEM
ON ACCOUNT OF, IN CONNECTION WITH, OR ARISING OUT OF (A) ANY BODILY INJURY OR
DEATH OR PROPERTY DAMAGE OCCURRING IN OR UPON OR IN THE VICINITY OF THE
MORTGAGED PROPERTY THROUGH ANY CAUSE WHATSOEVER, (B) ANY ACT PERFORMED OR
OMITTED TO BE PERFORMED HEREUNDER OR THE BREACH OF ANY REPRESENTATION OR
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WARRANTY HEREIN, (C) THE EXERCISE OF ANY RIGHTS AND REMEDIES HEREUNDER OR UNDER
ANY OTHER PRINCIPAL AGREEMENT OR SECURITY DOCUMENT, (D) ANY BREACH BY THE
MORTGAGOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED
HEREIN AND (E) ANY TRANSACTION, ACT, OMISSION, EVENT OR CIRCUMSTANCE ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THE MORTGAGED PROPERTY OR WITH THIS MORTGAGE OR
ANY OTHER PRINCIPAL AGREEMENT OR SECURITY DOCUMENT. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, IT IS IN THE INTENTION OF THE MORTGAGOR AND THE
MORTGAGOR AGREES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF
ACTION, JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION
REASONABLE ATTORNEYS' FEES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE SOLE OR PARTIAL NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON.
NOTWITHSTANDING THE FOREGOING, THE FOREGOING INDEMNITIES SHALL NOT APPLY TO ANY
CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGEMENTS,
PENALTIES, COSTS OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
Any amount to be paid hereunder by the Mortgagor shall be a demand
obligation owing by the Mortgagor and shall bear interest from the date such
obligation is due until such obligation is paid, at a per annum rate of interest
equal to the Default Rate, but in no event to exceed the maximum nonusurious
rate allowed by applicable law, and all such amounts together with such interest
thereon shall be a part of the Obligations described in Section 1.01C hereof.
Section 2.10 Non-Operated Interests. All or portions of the Collateral
may be comprised of interests in the Leases or Lands or lands pooled or unitized
therewith which are other than working interests or which may be operated by a
party or parties other than the Mortgagor and with respect to all such portions
of the Collateral, the Mortgagor's covenants and agreements as expressed in this
Article II are modified to require that the Mortgagor use its commercially
reasonable efforts to cause compliance with such covenants and agreements by the
working interest owners or the operator or operators of such Leases, Lands or
properties.
Section 2.11 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, and (unless an Event of Default is then continuing)
such failure continues for more than 30 days after notice thereof by the Secured
Party, each of the Secured Party and the Lien 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 Secured Party or the Lien
Trustee, as the case may be, and each of the Secured Party and the Lien Trustee,
upon making such payment, shall be subrogated to all of the rights of the
Person, corporation or body politic receiving such payment. Each amount due and
owing by Mortgagor to each of the Secured Party and the Lien Trustee pursuant to
this Instrument 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 Default Rate, but in no event to
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exceed the maximum nonusurious rate allowed by applicable law, and all such
amounts together with such interest thereon shall be a part of the Obligations
described in Section 1.01C hereof.
Section 2.12 Compliance with Environmental Laws. The Mortgagor will not
cause or permit the Collateral to be in violation of, or do anything or permit
anything to be done which will subject the Collateral to, any remedial
obligations under any Environmental Law, to the extent the same would reasonably
be expected to have a Material Adverse Effect. The Mortgagor will not, to the
extent the same would reasonably be expected to have a Material Adverse Effect,
use the Collateral in a manner which will result in (i) the disposal or other
release of any solid waste or hazardous substance on or to the Collateral, (ii)
a release of a hazardous substance on or to the Collateral in a quantity equal
to or exceeding that quantity which requires reporting pursuant to Section 103
of CERCLA, or (iii) the release of any hazardous substance on or to the
Collateral so as to pose an imminent and substantial endangerment to public
health or welfare or the environment and covenants and agrees, to the extent the
same would reasonably be expected to have a Material Adverse Effect, to keep or
cause the Collateral to be kept free of any hazardous waste or contaminants and
to remove the same (or if removal is prohibited by law, to take whatever action
is permitted by law), promptly upon discovery and at its sole expense. In the
event the Mortgagor fails to do so, and (unless an Event of Default is then
continuing) such failure continues for more than 30 days and after notice
thereof by the Secured Party, the Secured Party upon the request of any
Creditor, may cause the Collateral to be freed from the hazardous waste or
contaminants (or if removal is prohibited by law, to take whatever action is
permitted by law), and the cost of the removal or such other action shall be a
demand obligation owing by the Mortgagor to the Secured Party (or the Lien
Trustee) pursuant to this Instrument and shall bear interest at the Default
Rate, but in no event to exceed the maximum nonusurious rate allowed by
applicable law. In such event, the Mortgagor grants to the Secured Party and the
Lien Trustee and its agents and employees access to the Collateral and the
license to remove the hazardous waste or contaminants (or if removal is
prohibited by law, to take whatever action is required by law). In accordance
with California Code of Civil Procedure Section 736, as such Section may be
amended from time to time ("CIVIL PROCEDURE CODE 736"), the Secured Party may
bring an action for breach of contract against the Mortgagor to recover all
costs and expenses incurred by the Secured Party in connection with any remedial
work relating to a breach of any Environmental Laws without foreclosing this
Instrument judicially or nonjudicially or accepting a deed or assignment in lieu
of foreclosure. The Secured Party's rights hereunder include its rights under
California Civil Code Section 2929.5, as such Section may be amended from time
to time. The Mortgagor acknowledges that, pursuant to Civil Procedure Code
Section 564(c), as such Section may be amended from time to time, the Secured
Party may be entitled to the appointment of a receiver to enforce its rights
under California Civil Code Section 2929.5.
SECTION 2.13 ENVIRONMENTAL INDEMNITY. THE MORTGAGOR AGREES TO INDEMNIFY
EACH INDEMNIFIED PERSON FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND
ALL LOSSES, LIABILITIES, CLAIMS, DEMANDS, DAMAGES (INCLUDING CONSEQUENTIAL
DAMAGES), CAUSES OF ACTIONS, JUDGMENTS PENALTIES, COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES AND COURT COSTS), ASSERTED AGAINST OR
INCURRED BY ANY OF THE SECURED PARTY AND THE LIEN TRUSTEE AT ANY TIME AND FROM
TIME TO TIME BY REASON OF OR ARISING OUT OF (A) THE BREACH OF ANY REPRESENTATION
OR WARRANTY RELATING TO ENVIRONMENTAL LAWS OF THE MORTGAGOR
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GIVEN TO ANY CREDITOR IN ANY INSTRUMENT FURNISHED TO OR ON BEHALF OF THE
MORTGAGOR IN THE INDENTURE OR IN ANY OTHER SECURITY DOCUMENT, FOR THE RECOVERY
OF DAMAGES AND/OR THE ENFORCEMENT OF ANY SUCH ENVIRONMENTAL LAWS, (B) THE
FAILURE OF THE MORTGAGOR TO PERFORM ANY OBLIGATION HEREIN REQUIRED TO BE
PERFORMED BY THE MORTGAGOR REGARDING ENVIRONMENTAL LAWS, (C) ANY VIOLATION ON OR
BEFORE THE RELEASE DATE (AS HEREINAFTER DEFINED) OF ANY ENVIRONMENTAL LAW IN
EFFECT ON OR BEFORE THE RELEASE DATE, (D) ANY ACT, OMISSION, EVENT OR
CIRCUMSTANCE EXISTING OR OCCURRING ON OR PRIOR TO THE RELEASE DATE (INCLUDING,
WITHOUT LIMITATION, THE PRESENCE ON THE COLLATERAL OR RELEASE FROM THE
COLLATERAL OF HAZARDOUS SUBSTANCES OR SOLID WASTES DISPOSED OF OR OTHERWISE
RELEASED ON OR PRIOR TO THE RELEASE DATE), RESULTING FROM OR IN CONNECTION WITH
THE OWNERSHIP, CONSTRUCTION, OCCUPANCY, OPERATION, USE AND/OR MAINTENANCE OF THE
COLLATERAL, REGARDLESS OF WHETHER THE ACT, OMISSION, EVENT OR CIRCUMSTANCE
CONSTITUTED A VIOLATION OF ANY ENVIRONMENTAL LAW AT THE TIME OF ITS EXISTENCE OR
OCCURRENCE, AND ALL SUCH AMOUNTS TOGETHER WITH SUCH INTEREST THEREON SHALL BE
PART OF THE OBLIGATIONS DESCRIBED IN SECTION 1.01C HEREOF, (E) ANY ACTION TAKEN
BY THE SECURED PARTY, THE LIEN TRUSTEE AND EACH CREDITOR UNDER SECTION 2.12 AND
(F) ANY AND ALL CLAIMS OR PROCEEDINGS (WHETHER BROUGHT BY PRIVATE PARTY OR
GOVERNMENTAL AUTHORITY) FOR BODILY INJURY, PROPERTY DAMAGE, ABATEMENT OR
REMEDIATION, ENVIRONMENTAL DAMAGE OR IMPAIRMENT OR ANY OTHER INJURY OR DAMAGE
RESULTING FROM OR RELATING TO ANY HAZARDOUS OR TOXIC SUBSTANCE, SOLID WASTE OR
CONTAMINATED MATERIAL LOCATED UPON OR MIGRATING INTO, FROM OR THROUGH THE
MORTGAGED PROPERTY (WHETHER OR NOT THE RELEASE OF SUCH MATERIALS WAS CAUSED BY
THE MORTGAGOR, A TENANT OR SUBTENANT OR A PRIOR OWNER OR TENANT OR SUBTENANT ON
THE MORTGAGED PROPERTY AND WHETHER OR NOT THE ALLEGED LIABILITY IS ATTRIBUTABLE
TO THE HANDLING, STORAGE, GENERATION, TRANSPORTATION, REMOVAL OR DISPOSAL OF
SUCH SUBSTANCE, WASTE OR MATERIAL OR THE MERE PRESENCE OF SUCH SUBSTANCE, WASTE
OR MATERIAL ON THE PROPERTY OR IS ASSOCIATED PROPERTY), WHICH THE SECURED PARTY,
ANY CREDITOR AND/OR THE LIEN TRUSTEE MAY HAVE LIABILITY WITH RESPECT TO DUE TO
THE MAKING OF EXTENSIONS OF CREDIT SECURED HEREBY, THE GRANTING OF THIS
MORTGAGE, THE EXERCISE OF ANY OF THEIR RIGHTS UNDER THE PRINCIPAL AGREEMENTS OR
ANY SECURITY DOCUMENTS, OR OTHERWISE. THE FOREGOING INDEMNITY SHALL NOT APPLY
WITH RESPECT TO MATTERS SOLELY CAUSED BY OR ARISING OUT OF THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF ANY OF THE SECURED PARTIES AND THE LIEN TRUSTEE. AS
USED IN THIS PARAGRAPH, THE TERMS "SECURED PARTY" AND "THE LIEN TRUSTEE" SHALL
COLLECTIVELY MEAN AND INCLUDE NOT ONLY THE SECURED PARTY OR THE LIEN TRUSTEE
RESPECTIVELY DESCRIBED HEREIN BUT ALSO ANY CREDITOR, AND ANY RESPECTIVE PERSONS
OR ENTITIES OWNED OR CONTROLLED BY OR AFFILIATED WITH THE SECURED PARTY OR THE
LIEN TRUSTEE. THE "RELEASE DATE" AS USED HEREIN MEANS THE EARLIER OF: (I) THE
DATE ON WHICH THE OBLIGATIONS SECURED HEREBY HAVE BEEN IRREVOCABLY PAID AND
PERFORMED IN FULL AND THIS INSTRUMENT HAS BEEN RELEASED AND (II) THE DATE ON
WHICH THE LIEN OF THIS INSTRUMENT IS FORECLOSED OR A DEED IN LIEU OF SUCH
FORECLOSURE IS FULLY EFFECTIVE. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE
THE RELEASE DATE AND SHALL CONTINUE THEREAFTER IN FULL FORCE AND EFFECT.
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Section 2.14 Action during Event of Default. To the fullest extent that
it lawfully may, the Mortgagor hereby agrees that, during the continuance of an
Event of Default, the Secured Party or the Lien Trustee shall be entitled at any
time or from time to time to exercise all of the rights, remedies, powers and
privileges vested in the Mortgagor under the leases, contracts and interests
comprising the Collateral, and to give or withhold or make all consents,
directions, notices, approvals and waivers required or permitted therein which
the Mortgagor would otherwise be entitled to give or withhold.
Section 2.15 Waiver; Action for Breach of Environmental Provision; Etc.
Without limiting the generality of the foregoing, the Secured Party may, to the
extent permitted under Section 726.5 of California Code of Civil Procedure (as
such Section may be amended from time to time) waive the security of this
Instrument as to any parcel of real property which is "environmentally impaired"
or is an "affected parcel" (as such terms are defined in said Section 726.5) and
as to any personal property attached to such parcel, and thereafter exercise
against the Mortgagor, to the extent permitted under Section 726.5 of California
Code of Civil Procedure, the rights and remedies of an unsecured creditor,
including without limitation, reduction of the Secured Party's claim to
judgment, and any other rights and remedies permitted by law. In addition, in
accordance with Civil Procedure Code Section 736, the Secured Party may bring an
action against the Mortgagor for breach of any "environmental provision" (as
such term in defined in Civil Procedure Code Section 736) made by the Mortgagor
herein, in the Indenture or in any other Security Document, for the recovery of
damages and/or the enforcement of any such "environmental provision".
Section 2.16 Not a Transmitting Utility. The Mortgagor is not a
"transmitting utility" as that term is defined in California Commercial Code
Section 9105(1)(n).
Section 2.17 Compliance with the Law. The Mortgagor has not violated
any Governmental Requirement or failed to obtain any license, permit, franchise
or other governmental authorization necessary for the ownership of any of its
Properties or the conduct of its business, which violation or failure would have
(in the event such violation or failure were asserted by any Person through
appropriate action) a Material Adverse Effect.
Section 2.18 Not a Foreign Person. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended (hereinafter
the "CODE"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in the Code and any regulations promulgated thereunder).
Section 2.19 Wells Situated on Mortgaged Property. Each of the oil
and/or gas wells and/or units listed on Exhibit A hereto are either situated on
the Mortgaged Property or the Mortgagor's share of production therefrom is
attributable to the Mortgaged Property, and the Mortgaged Property is fully and
accurately described such that all rights, titles and interests of the Mortgagor
in and to such wells and/or units is subject to the Liens created and
assignments of production granted hereby.
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ARTICLE III
COLLECTION OF PRODUCTION AND PROCEEDS
Section 3.01 Assignment of Hydrocarbons. Pursuant to the assignment
made by the Mortgagor in paragraph D of the granting clause of this Instrument,
the Secured Party is entitled to receive all of the Hydrocarbons in and under
which may be produced and saved from or attributable to the Mortgaged
Properties, together with all of the proceeds thereof, effective as of the date
of this Instrument at 12:00 a.m., New York City time. The Mortgagor acknowledges
and agrees that said assignment is intended to be an absolute and unconditional
assignment and not merely a pledge of or creation of a security interest therein
or assignment as additional security. The Mortgagor hereby authorizes and
directs any owner, lessor or party to a lease or other contract comprising or
affecting the Collateral and their respective successors and assigns (herein
collectively called "PAYORS") to treat and regard the Secured Party as the party
entitled, in the Mortgagor's place and stead, to receive said Hydrocarbons and
proceeds and to exercise all rights of the Mortgagor with respect thereto; and
said parties shall be fully protected in so treating and regarding the Secured
Party and shall be under no obligation to see to the application by the Secured
Party of any such proceeds received by it. For its convenience, the Secured
Party may, with respect to any or all such Hydrocarbons or proceeds, permit the
Mortgagor to receive such Hydrocarbons or proceeds until the occurrence of and
during the continuance of any Event of Default. The exercise of the rights
granted to the Secured Party hereunder to permit the Mortgagor to receive such
Hydrocarbons prior to the occurrence and continuance of an Event of Default
shall not in any way waive the right of the Secured Party to demand and receive
such Hydrocarbons and proceeds thereafter attributable to the Collateral and
shall not in any way diminish the absolute and unconditional right of the
Secured Party to receive all of the said Hydrocarbons and proceeds and cash
proceeds not theretofore expended or distributed by the Mortgagor.
Notwithstanding the above, Collateral Agent hereby represents to Mortgagor that
it will not make any demand to receive any such Hydrocarbons or proceeds unless
and until an Event of Default has occurred and is continuing. The Mortgagor
hereby agrees that upon (i) written demand from the Secured Party upon the
occurrence and during the continuance of an Event of Default, all cash,
proceeds, instruments and other property, of whatever kind or character,
received by the Mortgagor on account of the Collateral, whether received by the
Mortgagor in the exercise of its collection rights hereunder or otherwise, shall
be deposited to the Collateral Account in the form received (properly assigned
or endorsed to the order of the Secured Party or for collection and in
accordance with the Secured Party's instructions) not later than the first
banking business day following the day of receipt, to be applied as provided in
Section 3.02 hereof and, until so applied, may be held by the Secured Party in a
separate account under the dominion and control of the Secured Party on which
the Mortgagor may not draw. The Mortgagor agrees not to commingle any such
property, following the occurrence of any such Event of Default, with any of its
other funds or property and agrees to hold the same upon an express trust for
the Secured Party until remitted to the Secured Party.
Section 3.02 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by the
Collateral Agent, Lien Trustee or Secured Party in any proceedings for the
enforcement hereof or otherwise, after the occurrence and during the
continuation of an Event of Default, shall be deposited into the Collateral
Account and applied as set forth in Section 2.03 of the Intercreditor Agreement.
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Section 3.03 Status of Hydrocarbons after Sale of Collateral. Upon any
sale of any of the Collateral by the Secured Party for the benefit of the
Creditors pursuant to Article V, the Hydrocarbons thereafter produced from and
attributed to the part of the Collateral so sold, and the proceeds thereof,
shall be included in such sale and shall pass to the purchaser free and clear of
the provisions of this Article.
Section 3.04 No Liability of Collateral Agent and Lien Trustee. The
Secured Party and the Lien Trustee are hereby absolved and released from all
liability for failure to enforce collection of any such proceeds and from all
other responsibility in connection therewith, except the responsibility to
account to the Mortgagor for proceeds actually received.
SECTION 3.05 INDEMNIFICATION. THE MORTGAGOR SHALL INDEMNIFY EACH
INDEMNIFIED PERSON AGAINST ALL CLAIMS, ACTIONS, LIABILITIES, JUDGMENTS, COSTS,
ATTORNEYS' FEES AND OTHER CHARGES OF WHATSOEVER KIND OR NATURE (HEREIN CALLED
"CLAIMS") MADE AGAINST OR INCURRED BY ANY OF THEM AS A CONSEQUENCE OF THE
ASSERTION, EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE OBLIGATIONS, THAT
ANY SUCH INDEMNIFIED PERSON RECEIVED HYDROCARBONS OR PROCEEDS PURSUANT TO THIS
ARTICLE WHICH WERE CLAIMED BY OR DUE TO THIRD PERSONS. EACH INDEMNIFIED PERSON
SHALL HAVE THE RIGHT TO EMPLOY ATTORNEYS AND TO DEFEND AGAINST ANY CLAIMS, AND
UNLESS FURNISHED WITH REASONABLE INDEMNITY, EACH INDEMNIFIED PERSON SHALL HAVE
THE RIGHT TO PAY OR COMPROMISE AND ADJUST ALL CLAIMS. THE MORTGAGOR SHALL
INDEMNIFY AND PAY TO EACH INDEMNIFIED PERSON ALL SUCH AMOUNTS AS MAY BE PAID IN
RESPECT THEREOF OR AS MAY BE SUCCESSFULLY ADJUDICATED AGAINST IT. THE
LIABILITIES OF THE MORTGAGOR AS SET FORTH IN THIS SECTION SHALL SURVIVE THE
TERMINATION OF THIS INSTRUMENT.
Section 3.06 Right to Receive Payments. Secured Party shall have the
immediate and continuing right pursuant to the assignment made in Section 3.01
above, to demand, collect, receive and receipt for all production, proceeds and
payments assigned hereunder, and the Secured Party is hereby irrevocably
appointed agent and attorney-in-fact of the Mortgagor for the purpose of
executing any release, receipt, division order, transfer order, relinquishment
or other instrument that the Secured Party deems necessary in order for the
Secured Party to collect and receive such production, proceeds and payments from
any of the Payors. In addition, the Mortgagor agrees that upon the Secured
Party's request made in accordance with the terms of this Article III, it will
promptly execute and deliver to the Secured Party such transfer orders, payment
orders, division orders and other instruments as the Secured Party may deem
necessary, convenient or appropriate in connection with the payment and delivery
directly to the Secured Party pursuant to the rights of Secured Party granted in
the first sentence of this Section 3.06 of all proceeds, production, and
payments assigned hereunder. The Mortgagor hereby authorizes and directs that,
upon the request of the Secured Party, all of the Payors shall, until the
Secured Party directs otherwise, pay and deliver such proceeds, production or
amounts directly to the Secured Party for the account of the Creditors at the
Secured Party's address set forth in the introduction to this Instrument, or in
such other manner as the Secured Party may direct such parties in writing, and
this authorization shall continue until this Instrument is released. The
Mortgagor agrees that all division orders, transfer orders, receipts and other
instruments that the Secured Party may from time to time execute and deliver for
the purpose of collecting and receipting for such proceeds, production or
payments may be relied upon in all respects, and that
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the same shall be binding upon the Mortgagor and its successors and assigns. No
Payor making payments to the Secured Party at its request under the assignment
contained herein shall have any responsibility to see to the application of any
of such funds, and any party paying or delivering proceeds, production or
amounts to the Secured Party under such assignment shall be released thereby
from any and all liability to the Mortgagor to the full extent and amount of all
payments, production or proceeds so delivered. The Mortgagor agrees to indemnify
and hold harmless any and all parties making payments to the Secured Party, at
the Secured Party's request under the assignment contained herein, against any
and all liabilities, actions, claims, judgments, costs, charges and attorneys'
fees resulting from the delivery of such payments to the Secured Party, and all
such amounts together with such interest thereon shall be part of the
Obligations described in Section 1.01C hereof. The indemnity agreement contained
in the previous sentence is made for the direct benefit of and shall be
enforceable by all such Persons. Should the Secured Party bring suit against any
third party for collection of any amount or sums included within this assignment
(and the Secured Party shall have the right to bring any such suit), it may sue
either in its own name, in the names of the Creditors or in the name of the
Mortgagor, or any of the foregoing.
Section 3.07 No Assumption of Mortgagor's Duties. Nothing in this
Instrument shall be deemed or construed to create a delegation to or assumption
by the Secured Party, any Creditor or the Lien Trustee, of the duties and
obligations of the Mortgagor under any agreement or contract relating to the
Collateral or any portion thereof, and all of the parties to any such contract
shall continue to look to the Mortgagor for performance of all covenants and
other obligations and the satisfaction of all representations and warranties of
the Mortgagor thereunder, notwithstanding the assignment of production and
proceeds herein made or the exercise by the Secured Party or by the Lien
Trustee, prior to foreclosure, of any of its rights hereunder or under
applicable law.
Section 3.08 No Limitation of Remedies. The assignment of production
and proceeds herein made shall not be construed to limit in any way the Secured
Party's other rights hereunder, including, without limitation, its right to
accelerate the indebtedness evidenced by the Obligations upon an Event of
Default. Monies received under the assignments herein made shall not be deemed
to have been applied in payments of Obligations unless and until such monies
actually are applied thereto by the Secured Party, but such monies shall be
applied by the Secured Party as required by and provided for in the
Intercreditor Agreement. The assignment of production made pursuant to this
Instrument is limited to the rights, if any, of the Mortgagor, whether now owned
or hereafter acquired, in and to such production.
ARTICLE IV
TERMINATION
If all of the Obligations of the Mortgagor shall be paid or performed
in full pursuant to the terms and conditions of this Instrument and the
instruments evidencing the Obligations and the Indenture terminated, the Secured
Party shall, upon the request of the Mortgagor, execute, acknowledge and deliver
to the Mortgagor proper instruments evidencing the termination of this
Instrument. The Mortgagor shall pay all reasonable legal fees and other
reasonable expenses incurred by the Secured Party for preparing and reviewing
such instruments of termination and the execution and delivery thereof, and the
Secured Party may require payment of the same prior
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to delivery of such instruments. Otherwise, this Instrument shall remain and
continue in full force and effect.
ARTICLE V
DEFAULT
Section 5.01 Nature of Events. Any of the following events shall
constitute an "EVENT OF DEFAULT" under this Instrument (individually, an "EVENT
OF DEFAULT", and collectively, "EVENTS OF DEFAULT") (whether such event be
voluntary or involuntary or occur or be effected by operation of law or
otherwise):
A. An Event of Default under the Indenture shall occur and be continuing;
or
B. Any Event of Default or Termination Event under an Approved Hedge
Agreement has (i) resulted in designation by an Approved Hedge
Counterparty of an Early Termination Date and (ii) the Approved Hedge
Counterparty is owed a termination payment; or
C. If a Hedge Liquidity Agreement is in place, the obligations of the
Mortgagor thereunder have been accelerated and the commitments of the
Hedge Liquidity Providers thereunder terminated.
Section 5.02 Fixtures. Upon the occurrence and during the continuance
of an Event of Default, the Secured Party or the Lien Trustee may, to the extent
permitted under applicable law, elect to treat the fixtures included in the
Collateral either as real property or as personal property, or both, and proceed
to exercise such rights as apply thereto. With respect to any sale of real
property included in the Collateral made under the powers of sale herein granted
and conferred, the Secured Party or the Lien Trustee may, to the extent
permitted by applicable law, include in such sale any personal property and
fixtures included in the Collateral and relating to such real property.
Section 5.03 Rights and Powers of Lien Trustee and Secured Party
Generally.
(a) Upon the occurrence and during the continuance of an Event of
Default, in addition to all other rights and remedies herein conferred, the
Secured Party shall have all of the rights and remedies of a mortgagee (the
power of sale permitted and provided by applicable statute being hereby
expressly granted by the Mortgagor to the Secured Party) as to all of the
Collateral other than the DT Collateral granted, conferred or permitted by
applicable law, and the Lien Trustee shall have all of the rights and remedies
of a mortgagee and trustee under a deed of trust as to the DT Collateral
granted, conferred or permitted by applicable law, and the Secured Party shall
have all of the rights of a beneficiary thereunder. The Secured Party (and the
Lien Trustee, with respect to the DT Collateral) shall, to the extent permitted
by applicable law, have the right and power, but not the obligation, to enter
upon and take immediate possession of the real property included in the
Collateral or any part thereof, to exclude the Mortgagor therefrom, to hold,
use, operate, manage and control such real property, to make all such repairs,
replacements, alterations, additions and improvements to the same as the Secured
Party may deem proper, and to demand, collect and retain the proceeds of
production of several Hydrocarbons as provided in Article III hereof.
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(b) Upon the occurrence and during the continuance of an Event of
Default, in addition to all other powers, rights and remedies herein granted or
by law or equity conferred, the Secured Party shall have all of the rights and
remedies of an assignee and secured party granted by applicable law, including
the Uniform Commercial Code, and shall, to the extent permitted by applicable
law, have the right and power, but not the obligation, to take possession of the
personal property included in the Collateral, and for that purpose the Secured
Party may enter upon any premises on which any or all of such personal property
is located and take possession of and operate such personal property or remove
the same therefrom. The Secured Party may require the Mortgagor to assemble such
personal property and make it available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to both parties.
The following presumptions shall exist and shall be deemed conclusive with
regard to the exercise by the Secured Party of any of its remedies with respect
to personal property:
(i) If notice is required by applicable law, five days' prior
written notice (unless applicable law otherwise specifies) of
the time and place of any public sale or of the time after
which any private sale or any other intended disposition
thereof is to be made shall be reasonable notice to the
Mortgagor. No such notice is necessary if such property is
perishable, threatens to decline speedily in value or is of a
type customarily sold on a recognized market.
(ii) Without in any way limiting the right and authority of the
Secured Party to sell or otherwise dispose of Collateral in a
commercially reasonable manner, the following, or any of them,
shall be considered commercially reasonable: (A) the Secured
Party may hold a public sale of the Collateral at such place
or places and otherwise in such manner as the Lien Trustee may
elect, after having provided the Mortgagor with five days'
notice of such sale; (B) the Collateral may be sold for cash;
(C) the Secured Party need not have possession of the
Collateral; (D) the Secured Party, any Creditor or any other
Person owning, directly or indirectly, any interest in any of
the Obligations may be a purchaser at such sale; and (E) the
Secured Party shall have no obligation to clean-up or
otherwise prepare the Collateral for sale.
(iii) If the Secured Party in good faith believes that the
Securities Act of 1933 or any other state or Federal law
prohibits or restricts the customary manner of sale or
distribution of any of such property, the Secured Party may
sell such property privately or in any other manner deemed
advisable by the Secured Party at such price or prices as the
Secured Party determines in the reasonable discretion of the
Secured Party. The Mortgagor recognizes that such prohibition
or restriction may cause such property to have less value than
it otherwise would have and that, consequently, such sale or
disposition by the Secured Party may result in a lower sales
price than if the sale were otherwise held.
(c) If any Event of Default shall have occurred and be continuing, the
Secured Party may declare without notice the entire unpaid amount of the
indebtedness secured by this Instrument immediately due and payable, by
commencing an action to foreclose this Instrument as a mortgage, and/or by
delivery to the Lien Trustee of a written declaration of default and demand for
sale and of written notice of default and of election to cause the Mortgaged
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Properties to be sold, which notice the Lien Trustee shall cause to be duly
filed for record in case of foreclosure by exercise of the power of sale herein.
Should the Secured Party elect to foreclose by exercise of the power of sale
herein, the Secured Party shall also deposit with the Lien Trustee this
Instrument and the Notes and such receipts and evidence of expenditures made and
secured hereby as the Lien Trustee may require, and notice of sale having been
given as then required by law and after lapse of such time as may then be
required by law after recordation of such notice of default, the Lien Trustee,
without demand on the Mortgagor, shall sell the Mortgaged Properties at the time
and place of sale fixed by it in such notice of sale as the Secured Party may
direct, either as a whole or in separate parcels, as the Secured Party may
determine, at public auction to the highest bidder for cash in lawful money of
the United States, payable at time of sale. The Secured Party shall have the
right to direct the order in which separate parcels shall be sold and the
Mortgagor shall have no right to direct the order in which separate parcels are
sold. Subject to California Civil Code Section 2924g, the Secured Party may
postpone sale of all or any portion of the Mortgaged Properties by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by public announcement of subsequently noticed sale, and
without further notice make such sale at the time fixed by the last
postponement, or may, in its discretion, give a new notice of sale. The Lien
Trustee shall deliver to such purchaser its deed conveying the Mortgaged
Properties, or any portion thereof, so sold, but without any covenant or
warranty, express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any Person, including the
Mortgagor, the Lien Trustee or the Secured Party, may purchase at such sale. The
Mortgagor hereby covenants to warrant and defend the title of such purchaser or
purchasers. If the Lien on this Instrument is foreclosed, the redemption period
after the judicial sale shall be one month in lieu of nine months.
Section 5.04 Election of Remedies. Upon the occurrence of any of the
Events of Default, or at any time thereafter, the Secured Party (and the Lien
Trustee with respect to the DT Collateral), in lieu of or in addition to
exercising any other power, right or remedy herein granted or by law or equity
conferred (including, without limitation, as provided by law for the foreclosure
of mortgage on real property), may, without notice, demand or declaration of
default, which are hereby waived by the Mortgagor, (A) enter, take possession of
and operate the Mortgaged Property in accordance with Section 5.03(a) hereof or
(B) proceed by an action or actions in equity or at law (i) for the seizure and
sale of the real property included in the Collateral or any part thereof, (ii)
for the specific performance of any covenant or agreement herein contained or in
aid of the execution of any power, right or remedy herein granted or by law or
equity conferred, (iii) for the foreclosure or sale of such real property or any
part thereof under the judgment or decree of any court of competent
jurisdiction, (iv) for the appointment of a receiver pending any foreclosure
hereunder or the sale of such real property or any part thereof or (v) for the
enforcement of any other appropriate equitable or legal remedy.
Section 5.05 Sale of Collateral. Upon the occurrence of any of the
Events of Default, or at any time thereafter, the Secured Party may, with
respect to all or any portion of the Collateral other than the DT Collateral and
the Lien Trustee shall, with respect to all or any part of the DT Collateral, in
response to the Secured Party's or any Creditor's requests (which the Mortgagor
agrees shall be presumed to have been made), subject to any mandatory
requirements of applicable law, sell or have sold the Collateral or any part
thereof at one or more sales, as an entirety or in parcels, at such place or
places and otherwise in such manner and upon such notice
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as may be required by law or by this Instrument, or, in the absence of any such
requirement, as the Secured Party (or the Lien Trustee, as regards the DT
Collateral) may reasonably deem appropriate. The Secured Party (or the Lien
Trustee, as regards the DT Collateral) shall make a conveyance to the purchaser
or purchasers thereof, and the Mortgagor shall warrant title thereto to such
purchaser or purchasers. The Secured Party (or the Lien Trustee, as regards the
DT Collateral) may postpone the sale of such Collateral or any part thereof by
public announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made at the
time of sale fixed by the preceding postponement. Sale of a part of such
Collateral or any defective or irregular sale hereunder will not exhaust the
power of sale, and sales may be made from time to time until all such Collateral
is sold without defect or irregularity or the Obligations are paid in full. The
Secured Party (or the Lien Trustee) shall have the right to appoint one or more
substitute Lien Trustee or attorneys-in-fact to act in conducting the
foreclosure sale and executing a deed to the purchaser. It shall not be
necessary for any of the Collateral at any such sale to be physically present or
constructively in the possession of the Secured Party (or the Lien Trustee, as
regards the DT Collateral) and the Mortgagor shall deliver all of the Collateral
to the purchaser at such sale on the date of sale, and if it should be
impossible or impracticable to take actual delivery of the Collateral, then the
title and right of possession to the Collateral shall pass to the purchaser at
such sale as completely as if the same had been actually present and delivered.
Section 5.06 Secured Party and Creditors as Purchasers. The Secured
Party and any Creditor (or any other Person owning, directly or indirectly, any
interest in any of the Obligations) shall have the right to become the purchaser
at any sale made pursuant to the provisions of this Article V and shall have the
right to credit upon the amount of the bid made therefor the amount payable to
it out of the net proceeds of such sale. Recitals contained in any conveyance to
any purchaser at any sale made hereunder will conclusively establish the truth
and accuracy of the matters therein stated, including, without limitation,
non-payment of the Obligations and advertisement and conduct of such sale in
manner provided herein or provided by law. The Mortgagor does hereby ratify and
confirm all legal acts that the Secured Party and the Lien Trustee may do in
carrying out the provisions of this Instrument.
Section 5.07 Mortgagor's Cooperation Required. Any sale of the
Collateral or any part thereof pursuant to the provisions of this Article V will
operate to divest all right, title, interest, claim and demand of the Mortgagor
in and to the property sold and will be a perpetual bar against the Mortgagor.
Nevertheless, if requested by the Secured Party so to do, the Mortgagor shall
join in the execution, acknowledgment and delivery of all proper conveyances,
assignments and transfers of the property so sold. Any purchaser at a
foreclosure sale will receive immediate possession of the property purchased,
and the Mortgagor agrees that if the Mortgagor or Mortgagor's heirs, devisees,
representatives, successors or assigns or any other Person claiming any interest
in the Mortgaged Property or any part thereof, retains possession of the
property or any part thereof subsequent to such sale, each and all will be
considered a tenant at sufferance of the purchaser. If such tenant at sufferance
remains in possession after demand to remove, the tenant will be guilty of
forcible detainer and will be subject to eviction and removal, forcible or
otherwise, with or without process of law, and all damages to the Mortgagor by
reason of itself becoming a tenant thereof are hereby expressly waived.
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Section 5.08 Mortgagor's Waiver of Rights. The Mortgagor acknowledges
that it is aware of and has had the advice of counsel of its choice with respect
to its rights, under applicable law, with respect to this Instrument, the
Obligations and the Collateral. Nevertheless, the Mortgagor hereby waives and
relinquishes, to the maximum extent permitted by law, and subject to any
mandatory requirements of applicable law, and the Mortgagor hereby agrees that
the Mortgagor shall not at any time hereafter have or assert, any right under
any law pertaining to: marshalling, whether of assets or Liens, the sale of
property in the inverse order of alienation, the exemption of homesteads, the
administration of estates of decedents, appraisement, valuation, stay,
extension, redemption, the maturing or declaring due of the whole or any part of
the Obligations, notice (whether of defaults, advances, the creation, existence,
extension or renewal of Obligations, or otherwise), subrogation, or abatement,
suspension, deferment, diminution or reduction of any of the Obligations
(including, without limitation, setoff), now or hereafter in force. The
Mortgagor hereby waives appraisement, or does not waive appraisement, at the
option of the Secured Party, to be exercised at any time prior to or at entry of
judgment in any action to foreclose this Instrument. The Mortgagor expressly
agrees that the Lien Trustee may offer the Collateral as a whole or in such
parcels or lots as the Secured Party, in its sole discretion elects, regardless
of the manner in which the Collateral may be described. Without limiting the
generality of the foregoing, the Mortgagor also waives and relinquishes all
rights and remedies that the Mortgagor may have or be able to assert by reason
of the laws of the State of California pertaining to the rights and remedies of
sureties, including, without limitation, Sections 2809, 2810, 2819, 2839, 2845,
2849, 2850, 2899 and 3433 of the California Civil Code.
Section 5.09 Additional Remedies. Upon the occurrence of an Event of
Default, the Secured Party may exercise its rights of enforcement with respect
to the Collateral under the Uniform Commercial Code in force in any state (to
the extent the same is applicable law) and in conjunction with, in addition to
or in substitution for those rights and remedies:
A. the Secured Party may enter upon the Mortgagor's premises to take
possession of, assemble and collect the Collateral or to render it unusable;
B. the Secured Party may require the Mortgagor to assemble the
Collateral and make it available at a place the Secured Party designates which
is mutually convenient to allow the Secured Party to take possession or dispose
of the Collateral;
C. any sale made pursuant to the provisions of this section shall be
deemed to have been a public sale conducted in a commercially reasonable manner
if held contemporaneously with and upon the same notice as required for the sale
of the Mortgaged Properties under power of sale as provided for in this
Instrument;
D. in the event of a foreclosure sale, whether made by the Lien Trustee
under the terms hereof, or under judgment of a court, the Collateral and the
Mortgaged Properties may, at the option of the Secured Party, be sold as a
whole;
E. prior to application of proceeds of disposition of the Collateral to
the secured indebtedness, such proceeds shall be applied to the reasonable fees
and expenses of retaking, holding, preparing for sale or lease, selling, leasing
and the like and the reasonable attorneys' fees and legal expenses incurred by
the Secured Party;
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F. any and all statements of fact or other recitals made in any bill of
sale or assignment or other instrument evidencing any foreclosure sale hereunder
as to nonpayment of the secured indebtedness or as to the occurrence of any
default, or as to the Secured Party having declared all of such indebtedness to
be due and payable, or as to notice of time, place and terms of sale and of the
properties to be sold having been duly given, or as to any other act or thing
having been duly done by the Secured Party, shall be taken as prima facie
evidence of the truth of the facts so stated and recited; and
G. the Secured Party 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 the
Lien Trustee, including the sending of notices and the conduct of the sale, but
in the name and on behalf of the Lien Trustee.
Section 5.10 Costs and Expenses. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees, legal expenses,
filing fees, and mortgage, transfer, stamp and other excise taxes) incurred by
the Secured Party, the Lien Trustee or the Creditors in perfecting, protecting
and enforcing its rights hereunder, whether or not an Event of Default shall
have occurred, shall be a part of the Obligations described in Section 1.01C
hereof.
Section 5.11 Proceeds of Sale of Collateral. The proceeds of any sale
of the Collateral or any part thereof made pursuant to this Article V shall be
deposited into the Collateral Account established under the Intercreditor
Agreement and applied as set forth in the Intercreditor Agreement.
As used in this Article 5, "PROCEEDS" of Collateral means cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of any debt of the Mortgagor or any issuer of or
obligor on any of the Collateral.
Section 5.12 Protection of Purchasers. Upon any sale made under the
powers of sale herein granted and conferred, the receipt of the Lien Trustee
will be sufficient discharge to the purchaser or purchasers at any sale for the
purchase money, and such purchaser or purchasers and the heirs, devisees,
personal representatives, successors and assigns thereof will not, after paying
such purchase money and receiving such receipt of the Lien Trustee be obligated
to see to the application thereof or be in any way answerable for any loss,
misapplication or non-application thereof.
Section 5.13 Foreclosure Rights. The Secured Party shall, to the extent
permitted by applicable law, have the option to proceed with foreclosure or the
exercise by the Lien Trustee of the power of sale in satisfaction of any part of
the Obligations without declaring the whole of the Obligations as immediately
mature, and such foreclosure or sale may be made subject to the unmatured part
of the Obligations, and it is agreed that such foreclosure, if so made, shall
not in any manner affect the unmatured part of the Obligations, but as to such
unmatured part of the Notes, the Approved Hedge Agreements or the Hedge
Liquidity Agreement, as applicable, this Instrument and the Indenture shall
remain in full force and effect just as though no foreclosure or sale had been
made. Several foreclosures or sales may be made without exhausting the right of
foreclosure or the power of sale for any unmatured part of the Obligations, it
being the purpose to provide for a foreclosure and sale of the security for any
matured portion of the Obligations
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without exhausting the power of foreclosure and the power to sell the Collateral
for any other part of the Obligations.
Section 5.14 Resignation of Operator. In addition to all rights and
remedies under the Security Documents, at law and in equity, if any Event of
Default shall occur and the Lien Trustee or the Collateral Agent shall exercise
any remedies under the Security Documents with respect to any portion of the
Collateral (or the Mortgagor shall transfer any Collateral "in lieu of"
foreclosure), the Collateral Agent or the Lien Trustee shall have the right to
request that any operator of any Mortgaged Property which is either the
Mortgagor or any Affiliate of the Mortgagor resign as operator under the joint
operating agreement applicable thereto, and no later than 60 days after receipt
by the Mortgagor of any such request, the Mortgagor shall resign (or cause such
other party to resign) as operator of such Mortgaged Property.
Section 5.15 No Release of Obligations. No Obligor shall be relieved of
its obligation hereunder by reason of (a) the failure of Collateral Agent or
Lien Trustee to comply with any request of any Obligor or Creditor to foreclose
the Lien of this Instrument or to enforce any provision hereunder or under the
Indenture; (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 the Collateral Agent, the Lien
Trustee or any Creditor extending, renewing, rearranging or in any other way
modifying the terms of this Instrument without first having obtained the consent
of, given notice to or paid any consideration to any or all of the Obligors, and
in such event each Obligor shall continue to be liable to make payment according
to the terms of any such extension or modification agreement unless expressly
released and discharged in writing by Collateral Agent in accordance with the
terms of the Intercreditor Agreement; or (d) by any other act or occurrence save
and except the complete payment of the Obligations and the complete fulfillment
of all obligations hereunder or under the Indenture.
ARTICLE VI
DEFINITIONS
Section 6.01 Certain Definitions. Terms defined in the Indenture or the
Intercreditor Agreement are used herein as defined therein, unless otherwise
defined herein.
Section 6.02 Additional Definitions. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 6.02
or in other provisions of this Instrument in the singular to have the same
meanings when used in the plural and vice versa):
APPROVED HEDGE AGREEMENT shall have the meaning given to such term in the
Intercreditor Agreement.
APPROVED HEDGE COUNTERPARTY shall have the meaning given to such term in the
Intercreditor Agreement.
CERCLA means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, and as further amended from time to time.
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CIVIL PROCEDURE CODE 736 shall have the meaning given to such term in Section
2.12 hereof.
CLAIMS shall have the meaning given to such terms in Section 3.05 hereof.
COLLATERAL shall have the meaning given to such term in Recital 4 hereof.
COLLATERAL ACCOUNT shall have the meaning given to such term in the
Intercreditor Agreement.
COLLATERAL AGENT shall have the meaning given to such term in the second
paragraph on page 1 hereof.
CREDITOR shall have the meaning given to such term in Recital 2 hereof.
DEFAULT RATE means 13.50%
DT COLLATERAL shall have the meaning given to such term in the second paragraph
on page 1 hereof.
EFFECTIVE DATE shall have the meaning given to such term in the first paragraph
on page 1 hereof.
ENCUMBRANCES shall have the meaning given to such term in Section 2.01 hereof.
ENVIRONMENTAL LAWS means any and all Governmental Requirements pertaining to
health or the environment in effect in any and all jurisdictions in which the
Mortgagor or any of its Subsidiaries is conducting or at any time has conducted
business, or where any property of the Mortgagor or any of its Subsidiaries is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, CERCLA, the Federal Water Pollution Control Act,
as amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, and other environmental
conservation or protection laws. The term "oil" shall have the meaning specified
in OPA, the terms "hazardous substance" and "release" (or "threatened release")
have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") have the meanings specified in RCRA; provided,
however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment, (ii) to the extent the
laws of the state in which any property of the Mortgagor or any of its
Subsidiaries is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply, and (iii) the
terms "hazardous substance" and "solid waste" shall include all oil and gas
exploration and production wastes that may present an endangerment to public
health or welfare or the environment, even if such wastes are specifically
exempt from classification as hazardous substances or solid wastes pursuant to
CERCLA or RCRA or the state analogues to those statutes.
EVENT OF DEFAULT shall have the meaning given to such term in Section 5.01
hereof.
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FEDERAL LEASES shall have the meaning given to such term in Section 8.24 hereof.
GOVERNMENTAL AUTHORITY shall include the country, the state, county, city and
political subdivisions in which any Person or such Person's property is located
or which exercised valid jurisdiction over any such Person or such Person's
property, and any court, agency, department, commission, board, bureau or
instrumentality of any of them including monetary authorities which exercised
valid jurisdiction over any such Person or such Person's property. Unless
otherwise specified, all references to Governmental Authority herein means a
Governmental Authority having jurisdiction over, where applicable, the
Mortgagor, and its property or the Secured Party.
GOVERNMENTAL REQUIREMENT means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
HEDGE AGREEMENTS means any commodity agreements, cap, floor, collar, forward
agreement or other exchange or protection agreements relating to crude oil,
natural gas or other hydrocarbons or any option with respect to any such
transaction.
HEDGE LIQUIDITY AGREEMENT shall have the meaning given to such term in the
Intercreditor Agreement.
HOLDERS shall have the meaning given to such term in Recital 1 hereof.
HYDROCARBONS means oil, natural gas, condensate, natural gas liquids and all
other hydrocarbons.
INDEMNIFIED PERSON means the Secured Party, the Lien Trustee, each Creditor and
their respective affiliates, shareholders, directors, officers, employees and
agents.
INDENTURE shall have the meaning given to such term in Recital 1 hereof.
INDENTURE TRUSTEE shall have the meaning given to such term in Recital 1 hereof.
INSTRUMENT shall have the meaning given to such term in the first paragraph on
page 1 hereof.
INTERCREDITOR AGREEMENT shall have the meaning assigned such term in Section
8.26 hereof.
LANDS shall have the meaning given to such term in Recital 3 hereof.
LEASES shall have the meaning given to such term in Recital 4 hereof.
LIEN TRUSTEE means the party so designated in the second paragraph on page 1
hereof.
LOUISIANA COLLATERAL shall have the meaning given to such term in the first
paragraph of Article IX.
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MATERIAL ADVERSE EFFECT means a material adverse effect on (a) the business,
property, operations, or condition (financial or otherwise) of the Mortgagor and
the Guarantors taken as a whole or (b) the validity or enforceability of this
Instrument or any of the other Security Documents or the rights and remedies of
the Collateral Agent and the Creditors hereunder or thereunder.
MORTGAGE means this Instrument, as amended, supplemented, restated or otherwise
modified from time to time.
MORTGAGED PROPERTY shall have the meaning given to such term in Recital 4
hereof.
MORTGAGOR shall have the meaning given to such term in the first paragraph on
page 1 hereof.
NOTES shall have the meaning given to such term in Recital 1 hereof.
OBLIGATIONS shall have the meaning given to such term in Section 1.01 hereof.
OBLIGOR means the Mortgagor and each Person now or hereafter party to the
Guaranty Agreement or any other Person hereafter obligated for payment of all or
any part of the Obligations.
OIL AND GAS HEDGING CONTRACT means any oil and gas purchase or hedging
agreement, and other agreement or arrangement, in each case, that is designed to
provide protection against oil and gas price fluctuations.
PAYORS shall have the meaning given to such term in Section 3.01 hereof.
PRINCIPAL AGREEMENTS means the Hedge Liquidity Agreement, Approved Hedge
Agreements and the Indenture.
RELEASE DATE shall have the meaning given to such term in Section 2.13 hereof.
SECURED PARTY means the party so designated in the second paragraph on page 1
hereof.
TRIBAL LEASES shall have the meaning given to such term in Section 8.24 hereof.
Section 6.03 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented, renewed, replaced, increased, restated or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, provided such successors and
assigns are permitted by the Principal Agreement to which such Person is a party
and such Person
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complies with Section 6.12 of the Intercreditor Agreement, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Instrument in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Instrument unless otherwise indicated and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts, contract rights and general intangibles.
ARTICLE VII
LIEN TRUSTEE
Section 7.01 Resignation or Removal of the Lien Trustee. The Lien
Trustee may resign in writing addressed to the Secured Party or be removed at
any time with or without cause by an instrument in writing duly executed by the
Secured Party. In case of the death, resignation or removal of the Lien Trustee,
a successor Lien Trustee may be appointed by the Secured Party without formality
other than an appointment and designation in writing, unless otherwise required
by applicable law. Such appointment and designation will be full evidence of the
right and authority to make the same and of all facts therein recited, and upon
the making of any such appointment and designation, this Instrument will vest in
the named successor Lien Trustee all the right, title and interest of the Lien
Trustee in all of the DT Collateral, and said successor will thereupon succeed
to all the rights, powers, privileges, immunities and duties hereby conferred
upon the Lien Trustee; provided that the Secured Party may at its option,
appoint and designate several successor lien trustees, and in such manner;
appoint and designate a different successor lien trustee for each state wherein
a portion of the DT Collateral is located, as described in such written
appointment and designation, and upon the making of any such appointment and
designation, this Instrument will vest in each such named successor lien trustee
all of the right, title and interest of the Lien Trustee in that portion of the
DT Collateral ascribed to such named successor lien trustee, and each such named
successor lien trustee will thereupon succeed to all the rights, powers,
privileges, immunities and duties hereby conferred upon the Lien Trustee in that
portion of the DT Collateral ascribed to such named successor lien trustee. All
references herein to the Lien Trustee will be deemed to refer to the lien
trustee or lien trustees from time to time acting hereunder.
Section 7.02 Lien Trustee's Powers. At any time, or from time to time
without liability therefor and without notice, upon written request of the
Secured Party and presentation of this Instrument and the Notes secured hereby
for endorsement, and without affecting the personal liability of any person for
payment of the Obligations secured hereby or the effect of this Instrument upon
the remainder of the Collateral, the Lien Trustee may (a) reconvey any part of
the DT Collateral, (b) consent in writing to the making of any map or plat
thereof, (c) join in granting any easement thereon, or (d) join in any extension
agreement or any agreement subordinating the Lien or charge hereof.
Section 7.03 Collateral Other than DT Collateral. The signature of the
Lien Trustee shall not be necessary on any instrument affecting Collateral other
than the DT Collateral, including any instrument evidencing the partial or full
release or reconveyance of the Lien of this Instrument on Collateral other than
DT Collateral and the Lien Trustee's signature shall be
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necessary on any instruments releasing the DT Collateral, including any
instrument evidencing the partial or full release or reconveyance of the Lien of
this Instrument on the DT Collateral, only to the extent required by applicable
law, but in no event shall the Lien Trustee's signature be required on a
Principal Agreement.
Section 7.04 Indemnification of the Lien Trustee. The Secured Party
shall indemnify the Lien Trustee and its shareholders, directors, officers,
employees and agents against all claims, actions, liabilities, judgments, costs,
attorneys fees or other charges of whatsoever kind or nature made against or
incurred by any of them, and arising out of the performance by the Lien Trustee
of the duties of the Lien Trustee hereunder other than any of the foregoing
arising out of the gross negligence or willful misconduct of the Person to be
indemnified.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Lien on Remaining Collateral. No failure on the part of
the Secured Party or the Lien Trustee to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power or privilege under
this Instrument shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Instrument preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
Section 8.02 Cumulative Rights; Waivers; Modifications. Each and every
right, power and remedy hereby granted to the Secured Party (or to the Lien
Trustee) shall be cumulative (but not duplicative) and not exclusive, and each
and every right, power and remedy whether specifically hereby granted or
otherwise existing may be exercised from time to time and as often and in such
order as may be deemed expedient by the Secured Party (or by the Lien Trustee,
as the case may be), and the exercise of any such right, power or remedy will
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 Secured Party (or
by the Lien Trustee, as the case may be) in the exercise of any right, power or
remedy will 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. Any
and all covenants of the Mortgagor in this Instrument may from time to time, by
instrument in writing signed by the Secured Party, be waived to such extent and
in such manner as the Secured Party may desire, but no such waiver will ever
affect or impair the rights of the Secured Party (or the Lien Trustee)
hereunder, except to the extent specifically stated in such written instrument.
All changes to and modifications of this Instrument must be in writing and
signed by the Mortgagor and the Secured Party.
Section 8.03 Severability of Provisions. If any provision hereof or of
any of the other documents constituting, evidencing or creating all or any part
of the Obligations is invalid or unenforceable in any jurisdiction, the other
provisions hereof or of said documents shall remain in full force and effect in
such jurisdiction and the remaining provisions hereof will be liberally
construed in favor of the Secured Party and the Lien Trustee in order to carry
out the provisions hereof and of such other documents. The invalidity of any
provision of this Instrument in any jurisdiction will 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
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Collateral is situated will be deemed inapplicable to, and not used in, the
interpretation hereof. If any Lien, encumbrance or security interest evidenced
or created by this Instrument is invalid or unenforceable, in whole or in part,
as to any part of the Obligations or Collateral, such portion, if any, of the
Obligations as is not secured by the Collateral hereunder shall be paid prior to
the payment of the secured portion of the Obligations, and all payments made on
the Obligations (including, without limitation, cash and/or property received in
connection with sales of Collateral pursuant to Article V hereof) shall, unless
prohibited by applicable law or unless the Secured Party, in its sole and
absolute discretion, otherwise elects, be deemed and considered to have been
first paid on and applied to payment in full of the unsecured or partially
secured portion of the Obligations, and the remainder to the secured portion of
the Obligations.
Section 8.04 Substitution and Subrogation. This Instrument is made with
full substitution and subrogation of the Secured Party and of the Lien Trustee
in and to all covenants and warranties by others heretofore given or made in
respect of the Collateral or any part thereof. To the extent that proceeds of
any Note are owed to pay any outstanding Lien, charge or encumbrance against the
Collateral, such proceeds have been or will be advanced by the Secured Party at
the Mortgagor's request and the Secured Party shall be subrogated to any and all
rights and Liens held by any owner or holder of such outstanding Liens, charges
and prior encumbrances, irrespective of whether said Liens, charges or
encumbrances are released.
Section 8.05 Nature of Instrument. This Instrument will be deemed to be
and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof, as is appropriate
under applicable state law. A carbon, photographic or other reproduction of this
Instrument or any financing statement in connection herewith shall be sufficient
as a financing statement for any and all purposes.
Section 8.06 Financing Statement; Fixture Filing. This Instrument shall
be effective as a financing statement filed as a fixture filing with respect to
all fixtures included within the Collateral and is to be filed for record in the
real estate records of each county where any part of the Collateral (including
said fixtures) are situated. This Instrument shall also be effective as a
financing statement covering minerals or the like (including oil and gas and all
other substances of value which may be extracted from the ground) and accounts
financed at the wellhead or minehead of wells or mines located on the properties
or other personal property subject to the Uniform Commercial Code as enacted in
any other state where the Collateral is situated and is to be filed for record
in the real estate records of each county where any part of the Collateral is
situated. In addition, the Mortgagor shall execute and deliver to the Secured
Party, upon the Secured Party's request, any financing statements or amendments
thereof or continuation statements thereto that the Secured Party may require to
perfect a security interest in said items or types of property. The Mortgagor
shall pay all costs of filing such instruments. In that regard, the following
information is provided:
Name of Debtor: Tri-Union Development Corporation, a Texas
corporation
Address of Debtor: See introductory paragraph of this Instrument
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County of Residence/
Principal Place of
Business of Debtor: Harris County, Texas
Tax I.D. Number of
Debtor: 76 - 0503660
Name of Secured
Party: Wells Fargo Bank Minnesota, National Association, as
Collateral Agent
Address of
Secured Party: See introductory paragraph of this Instrument
Tax I.D. Number of
Secured Party: See introductory paragraph of this Instrument.
Owner of Record
of Real Property: Tri-Union Development Corporation, a Texas
corporation
Address of Owner
of Record of
Real Property: See introductory paragraph of this Instrument
Description of
Real Property: See Exhibit A of this Instrument
Section 8.07 Interest. All interest required (a) hereunder and under
the Notes shall be calculated as provided in the Indenture and (b) under the
Approved Hedge Agreements or any Hedge Liquidity Agreement shall be calculated
as provided therein and, in any event, the amount thereof and such calculation
shall be governed by the laws of the State of New York (excluding choice of law
and conflict of law rules). Notwithstanding anything to the contrary contained
herein, no rate of interest required hereunder or under the Obligations shall
exceed the maximum legal rate under applicable law, and, in the event any such
rate is found to exceed such maximum legal rate, the Mortgagor shall be required
to pay only such maximum legal rate and any such excess shall be refunded to the
Mortgagor. All agreements between the Mortgagor and the Secured Party are hereby
expressly limited so that in no contingency or event whatsoever shall the amount
paid, or agreed to be paid, to the Mortgagor for the use, forbearance, or
detention of the money due under the Note secured hereby exceed the maximum
amount permissible under applicable law. If, due to any circumstances
whatsoever, fulfillment of any provision shall be due, shall involve
transcending the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity.
SECTION 8.08 GOVERNING LAW. INSOFAR AS PERMITTED BY OTHERWISE
APPLICABLE LAW, THIS INSTRUMENT AND THE OBLIGATIONS SHALL BE CONSTRUED UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (EXCLUDING CHOICE OF LAW AND
CONFLICT OF LAW RULES); PROVIDED, HOWEVER, THAT, WITH RESPECT TO ANY PORTION OF
THE
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COLLATERAL LOCATED OUTSIDE OF THE STATE OF NEW YORK, THE LAWS OF THE PLACE IN
WHICH SUCH PROPERTY IS LOCATED IN, OR OFFSHORE ADJACENT TO (AND STATE LAW MADE
APPLICABLE AS A MATTER OF FEDERAL LAW), SHALL APPLY TO THE EXTENT OF PROCEDURAL
AND SUBSTANTIVE MATTERS RELATING ONLY TO THE FILING, CREATION, PERFECTION,
FORECLOSURE OF LIENS AND ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE
COLLATERAL. THE MORTGAGOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH
OTHER STATE WHERE THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE
OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS
INSTRUMENT, THE NOTES, ANY APPROVED HEDGE CONTRACT, THE HEDGE LIQUIDITY
AGREEMENT OR THE OBLIGATIONS IN THE CASE OF A PROCEEDING IN ANY OF SUCH STATES,
BY SERVING THE SECRETARY OF STATE OF SUCH STATE IN ACCORDANCE WITH ANY
APPLICABLE PROVISIONS OF SUCH STATE'S LAW GOVERNING SERVICE OF PROCESS UPON
FOREIGN CORPORATIONS OR ENTITIES. IN SUCH CONNECTION, THE PARTIES AGREE THAT (A)
THE SECURED PARTY MAY ENFORCE ITS RIGHTS UNDER THIS INSTRUMENT AND THE OTHER
REQUIRED SECURITY DOCUMENTS, INCLUDING ITS RIGHT TO SUE THE MORTGAGOR, TO
COLLECT ANY OUTSTANDING INDEBTEDNESS, OR TO OBTAIN A JUDGMENT AGAINST THE
MORTGAGOR IN CALIFORNIA, NEW YORK OR OTHER STATES FOR ANY DEFICIENCY PRIOR TO OR
FOLLOWING FORECLOSURE, IN ACCORDANCE WITH NEW YORK LAW, AND IF THE SECURED PARTY
OBTAINS A DEFICIENCY JUDGMENT IN A STATE OTHER THAN IN CALIFORNIA, THEN THE
SECURED PARTY SHALL HAVE THE RIGHT TO ENFORCE SUCH JUDGMENT IN CALIFORNIA, AS
WELL AS IN OTHER STATES, (B) CALIFORNIA'S ANTI-DEFICIENCY, ONE ACTION AND
SECURITY FIRST RULES (INCLUDING, WITHOUT LIMITATION, CALIFORNIA CODE OF CIVIL
PROCEDURE SECTIONS 580A, 580B, 580C AND 580D) ARE INAPPLICABLE TO THE
INDEBTEDNESS SECURED BY THIS INSTRUMENT AND TO THE ENFORCEMENT OR REALIZATION BY
THE SECURED PARTY OF ITS RIGHTS AND REMEDIES RELATING THERETO, AND (C) SECTION
726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE SHALL NOT APPLY TO (i) PREVENT OR
LIMIT EXERCISE OR ENFORCEMENT OF ANY OTHER RIGHTS OR REMEDIES OF THE SECURED
PARTY (INCLUDING, WITHOUT LIMITATION, THE SECURED PARTY'S RIGHT TO OBTAIN A
DEFICIENCY JUDGMENT) EITHER PRIOR TO OR FOLLOWING FORECLOSURE, OR (ii) TO
PREVENT OR LIMIT THE SECURED PARTY'S RIGHT TO FORECLOSE JUDICIALLY OR
NONJUDICIALLY FOLLOWING ANY EXERCISE OR ENFORCEMENT OF ANY OTHER RIGHTS OR
REMEDIES OF THE SECURED PARTY.
Section 8.09 Counterparts. This Instrument may be executed in several
original counterparts. To facilitate filing and recording, there may be omitted
from certain counterparts parts of Exhibit A containing specific descriptions
which relate to land under the jurisdiction of offices or located in counties
other than the office or county in which the particular counterpart is to be
filed or recorded; provided that the description of all lands located in, or
offshore adjacent to, the State of Louisiana shall be filed in the Parish of
East Baton Rouge. As to counterparts to be filed in certain states, the
signatures and acknowledgments by the Collateral Agent, the Secured Party or the
Lien Trustee may be omitted if not required by applicable law. Each
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counterpart shall be deemed to be an original for all purposes, and all
counterparts shall together constitute but one and the same instrument.
Section 8.10 Recording References. Unless otherwise specified in
Exhibit A, all recording references in Exhibit A are to the official real
property records of the county or parish in which the affected land is located
or is adjacent thereto. The reference in Exhibit A to Liens, encumbrances and
other burdens shall not be deemed to recognize or create any rights in third
parties.
Section 8.11 Notices. All notices, demands, consents, requests or other
communications (collectively, "NOTICES") permitted or required to be given by
any party to any other hereunder shall be in writing and given in the manner
specified in Section 6.04 of the Intercreditor Agreement; provided that notices
to the Lien Trustee shall be addressed to the Lien Trustee at its office set
forth on page 1 hereof.
Section 8.12 Successors and Assigns. This Instrument applies to, inures
to the benefit of and binds the parties hereto and their respective successors
and assigns and shall run with the Properties.
Section 8.13 Financing of Extracted Materials. The above described
minerals or other substances of value which may be extracted from the earth
(including, without limitation, oil and gas), and the accounts relating thereto
will be financed at the wellhead of the well or wells located on the Mortgaged
Property or on lands pooled or unitized therewith. This Instrument is to be
filed for record in, among other places, the real estate records of each county
in which the Mortgaged Property is located; to wit, all of those listed in
Exhibit A.
Section 8.14 Enforcement by the Collateral Agent. The Secured Party
shall be entitled to enforce payment of any indebtedness and performance of any
other of the Obligations secured hereby and to exercise all rights and powers
under this Instrument or under any other Security Documents or any laws now or
hereafter in force, notwithstanding the fact that some or all of said
indebtedness and other Obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, Lien, assignment
or otherwise. Neither the acceptance of this Instrument nor its enforcement,
whether by court action or pursuant to the power of sale or other powers herein
contained shall prejudice or in any manner affect the Secured Party's right to
realize upon or enforce any other security now or hereafter held by the Secured
Party, it being agreed that the Secured Party shall be entitled to enforce this
Instrument and any other security now or hereafter held by the Secured Party in
such order and manner as it may in its absolute discretion determine.
Section 8.15 Collateral Agent as Attorney-in-Fact. Upon the occurrence
and during the continuance of an Event of Default hereunder, the Mortgagor
hereby irrevocably designates the Secured Party as its attorney-in-fact and
grants to the Secured Party appropriate powers of attorney to act for and on
behalf of the Mortgagor with the Department of Interior and all other agencies,
departments and subdivisions of the United States of America and of all states,
in all transactions relating to the Collateral or any part thereof. The
Mortgagor hereby authorizes and directs all such agencies, departments and
subdivisions to rely upon any writing from the Secured Party asserting that an
Event of Default hereunder has occurred, without inquiry into
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whether or not such Event of Default actually occurred, and the Mortgagor agrees
that the exercising by the Secured Party of such powers of attorney may be
relied upon in all respects and, as between the Mortgagor and such agency,
department or subdivision, shall be binding upon the Mortgagor.
Section 8.16 Request of Notice of Sale. The Mortgagor hereby requests
that a copy of any notice of sale hereunder be mailed to it at the address of
the Mortgagor set forth in the Intercreditor Agreement.
Section 8.17 Captions. The captions or headings at the beginning of
Articles and Sections hereof are for the convenience of the parties and are not
a part of this Instrument.
Section 8.18 Attorneys' Fees. If any Event of Default occurs and is
continuing, the Mortgagor promises to pay all reasonable costs of enforcement
and collection, including, but not limited to, attorneys' fees, whether or not
such enforcement and collection includes the filing of a lawsuit.
Section 8.19 Interpretation. In this Instrument the singular shall
include the plural and the masculine shall include the feminine and neuter and
vice versa, if the context so requires.
Section 8.20 Purpose. The Obligations secured by this Instrument have
been or will be incurred for business or commercial purposes, and the proceeds
thereof will not be used for personal, family, leasehold or agricultural
purposes.
Section 8.21 Relationship of Parties. The relationship between the
Mortgagor and the Secured Party is that of debtor and creditor only and neither
the Mortgagor nor the Secured Party is, nor shall it hold itself out to be, the
agent, employee, joint venturer or partner of the other.
Section 8.22 Secured Party's Powers. Without affecting the liability of
any other Person liable for the payment of any obligation herein mentioned, and
without affecting the Lien or charge of this Instrument upon any portion of the
Premises not then or theretofore released as secured for the full amount of all
unpaid Obligations, the Secured Party may, from time to time and without notice,
(a) release any Persons liable, (b) extend the maturity or alter any of the
terms of any such obligation, (c) grant other Indulgences, (d) release or
reconvey, or cause to be released or reconveyed at any time at the Secured
Party's option any parcel, portion or all of the Collateral, (e) take or release
any other or additional security for any obligation herein mentioned, or (f)
make compositions or other arrangements with debtors in relation thereto.
Section 8.23 Rule Against Perpetuities. Notwithstanding any other
provision contained herein, if any property interest granted by this Instrument
does not vest on the execution and delivery of this Instrument, it shall vest,
if at all, no later than 20 years and 364 days after the death of the last
surviving descendant of George Herbert Walker Bush (41st President of the United
States) who is alive on the execution and delivery of this Instrument.
Section 8.24 Limitation on Collateral. To the extent any of the
Collateral in which a Lien, pledge, security interest or other encumbrance is
purported to be granted hereby consists of leases from the United States of
America (the "FEDERAL LEASES") or any Indian tribal leases ("TRIBAL LEASES"),
the grant of any such purported Lien, pledge, security interest or other
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encumbrance in such Federal Leases or Tribal Leases pursuant to the terms hereof
shall be effective to the extent permissible under the Mineral Leasing Act of
1920 Section 30 U.S.C. Section 181, et seq., all rules and regulations
promulgated thereunder, 43 C.F.R. Section 3000, et seq., the Outer Continental
Shelf Lands Act, 43 U.S.C., Section 1331 et seq., all rules and regulations
promulgated thereunder, 30 C.F.R. Part 250, et seq., or other applicable law.
SECTION 8.25 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS INSTRUMENT; AND AGREES THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS INSTRUMENT; THAT IT
HAS IN FACT READ THIS INSTRUMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS INSTRUMENT; THAT IT HAS
BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS INSTRUMENT; AND HAS RECEIVED THE
ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS INSTRUMENT; AND THAT IT RECOGNIZES
THAT CERTAIN OF THE TERMS OF THIS INSTRUMENT 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 INSTRUMENT ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS".
Section 8.26 Intercreditor Agreement. All of the rights of any of the
parties hereunder are subject to that certain Intercreditor and Collateral
Agency Agreement (the "INTERCREDITOR AGREEMENT") dated as of June 18, 2001,
among Tri-Union Development Corporation, Tribo Petroleum Corporation, each of
the Subsidiary Guarantors now or hereafter party thereto, each Approved Hedge
Counterparty now or hereafter party thereto, each Hedge Liquidity Provider now
or hereafter party thereto, Wells Fargo Bank Minnesota, National Association, as
Collateral Agent, and Firstar Bank, National Association, as Trustee under the
Indenture.
ARTICLE IX
SPECIAL LOUISIANA PROVISIONS
Anything herein contained in this Instrument to the contrary
notwithstanding, it is understood and agreed that, in the event of any conflict
between the provisions of this Instrument (other than this Article IX) and the
provisions of this Article IX, the following provisions shall specifically
pertain and be applicable to any and all Collateral situated in or offshore the
State of Louisiana, or as to which the laws of the State of Louisiana would be
applicable (the "LOUISIANA COLLATERAL"), to-wit:
Section 9.01 Collateral. Insofar as any and all of the Louisiana
Collateral is concerned, (i) all references in this Instrument to the Trustee
shall be read and understood as references to the Secured Party; (ii) the
general language of conveyance and hypothecation to the Secured Party in this
Instrument is intended and shall be construed as the granting by Mortgagor of a
mortgage and hypothecation and the granting of a security interest by Mortgagor
in favor of the
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Secured Party; and (iii) the maximum amount of the Obligations that may be
outstanding at any time and from time to time that this Instrument secures shall
not exceed $200,000,000.
Section 9.02 Keeper. The Secured Party shall have the right to appoint
a keeper of the Collateral pursuant to the terms and provisions of La. R.S.
9:5131 et seq. and 9:5136 et seq. The keeper shall be entitled to receive as
compensation, in excess of its reasonable costs and expenses incurred in the
administration or preservation of the Collateral, an amount equal to $1,000 per
day, which shall be included as secured Obligations secured by this Instrument.
Section 9.03 Confession of Judgment. For purposes of executory process,
the Mortgagor, in the presence of the undersigned Notary Public and witnesses,
acknowledges the Obligations secured hereby, whether now existing or to arise
hereafter, and confesses judgment thereon if not paid when due. Upon the
occurrence of an Event of Default and any time thereafter so long as the same
shall be continuing, and in addition to all other rights and remedies granted
the Secured Party hereunder, it shall be lawful for and the Mortgagor hereby
authorizes the Secured Party without making a demand or putting the Mortgagor in
default, a putting in default being expressly waived, to cause all and singular
the Collateral to be seized and sold by executory process, the Mortgagor waiving
the benefit of any and all laws or parts of laws relative to appraisement of
Collateral seized and sold under executory process or other legal process and
consenting that the Collateral be sold without appraisement, either in its
entirety or in lots or parcels, as the Secured Party may determine, to the
highest bidder for cash or on such other terms as the plaintiff in such
proceedings may direct. The Secured Party shall be granted all rights and
remedies granted it hereunder as well as all rights and remedies granted a
secured party under Louisiana law including the Uniform Commercial Code then in
effect in Louisiana.
Section 9.04 Waivers. The Mortgagor hereby waives:
(a) 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;
(b) The demand and three (3) days notice of delay as provided in
articles 2629 and 2721 of the Louisiana Code of Civil Procedure;
(c) The notice of seizure provided by articles 2293 and 2721 of the
Louisiana Code of Civil Procedure;
(d) The three (3) days delay provided for in articles 2331 and 2722 of
the Louisiana Code of Civil Procedure; and
(e) The benefit of the other provisions of Louisiana Code of Civil
Procedure Articles 2331, 2722 and 2723, not specifically mentioned above.
Section 9.05 Resolutions. The Mortgagor does declare that attached
hereto as Schedule 1 and made a part hereof is a certified copy of the
resolutions adopted by the Board of Directors of the Mortgagor authorizing the
execution and delivery of this Instrument.
Section 9.06 Insurance. As additional security for the payment of the
Obligations, the Mortgagor hereby collaterally assigns and pledges the right to
receive proceeds attributable to
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the insurance loss of the Collateral or any portion thereof, in accordance with
the provisions of La. R.S. 9:5386.
Section 9.07. Effect of Instrument as Mortgage. It is expressly
declared to be the intention of Mortgagor and Secured Party that (A), insofar as
to that portion of Louisiana Collateral which is susceptible to a mortgage (as
provided in Article 3286 of the Louisiana Revised Civil Code), this Instrument
shall constitute and effect a conventional mortgage as defined and envisioned by
Articles 3278 and 3287 of the Louisiana Revised Civil Code, and Article 203 of
the Louisiana Mineral Code, and that this mortgage shall secure future
obligations as envisioned by, and to the extent provided in, Article 3298 of the
Louisiana Revised Civil Code, and (B), insofar as that portion of the Louisiana
Collateral which constitutes personal property and is susceptible to the
granting of a security interest thereunder, this Instrument shall constitute and
effect a security agreement as envisioned by, and to the extent provided in,
Uniform Commercial Code, Commercial Laws - Secured Transactions (La. R.S.
10:9-101 through 9-605), and Article 204B of the Louisiana Mineral Code.
Section 9.08. Severability of Provisions as to Louisiana Collateral.
Without in any manner modifying or limiting the provisions of Section 8.03 of
this Instrument, but in furtherance thereof, it is understand that, if this
Instrument is being enforced in a Louisiana court, or federal court sitting in
Louisiana, and such court determines that any provision contained in this
Instrument is not enforceable under the laws of the State of Louisiana, then
such provision shall be deemed not written and inapplicable with respect to the
Louisiana Collateral.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE(S) FOLLOW.]
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Thus done and passed, before me, the undersigned Notary Public in and
for the County of Harris, State of Texas, in the presence of the undersigned
competent witnesses, on this ___ day of June, 2001, to be effective as of June
18, 2001.
WITNESSES: MORTGAGOR:
TRI-UNION DEVELOPMENT CORPORATION,
- ------------------------------ a Texas corporation
Name:
-------------------------
By:
- ------------------------------ --------------------------------------
Name: Name:
------------------------- ------------------------------------
Title:
-----------------------------------
------------------------------
Notary Public
My Commission Expires:
------------------------------
[Tri-Union Mortgage --Signature Page]
39
ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF HARRIS
BE IT REMEMBERED that I, the undersigned Notary Public duly qualified,
commissioned, sworn and acting in and for the county and state aforesaid, hereby
certify that, on June ___, 2001 there personally appeared before me, the
following person, being the designated officer of the corporation set opposite
his name, and such corporation being a party to the foregoing Instrument:
Richard Bowman, the President and Chief Executive Officer of Tri-Union
Development Corporation
This instrument was acknowledged before me on June ___, 2001 by Richard Bowman,
President and Chief Executive Officer of Tri-Union Development Corporation, a
Texas corporation, on behalf of said corporation.
- ---------------------------------
Notary Public, State of Texas
Notary's Printed Name:
-----------
- ---------------------------------
My commission Expires:
-----------