EXHIBIT 4.8
EXHIBIT I
WHEN RECORDED RETURN TO:
Katten Muchin Zavis Rosenman
525 W. Monroe Street
Chicago, Illinois 60661
Attn: Mark D. Wood Esq.
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING
STATEMENT
FROM
INFINITY OIL & GAS OF WYOMING, INC.
TO
__________________, AS TRUSTEE
FOR THE BENEFIT OF
PROMETHEAN ASSET MANAGEMENT L.L.C.
A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE TRUSTEE OR THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY
AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
MORTGAGOR UNDER THIS INSTRUMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.
THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS) AND WHICH
WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO. THIS FINANCING STATEMENT IS TO BE FILED OR FILED
FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF
THE COUNTY RECORDERS OF THE COUNTIES LISTED ON EXHIBIT A HERETO. THE MORTGAGOR
HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH INTEREST IS
DESCRIBED IN EXHIBIT A ATTACHED HERETO.
PORTIONS OF THE MORTGAGED PROPERTY 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 OR SIMILAR RECORDS OF EACH COUNTY 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.
TABLE OF CONTENTS
ARTICLE I
Grant of Lien and Indebtedness Secured............................................ 2
Section 1.01 Grant of Liens..................................................... 2
Section 1.02 Grant of Security Interest......................................... 5
Section 1.03 Indebtedness Secured............................................... 5
Section 1.04 Fixture Filing, Etc................................................ 6
Section 1.05 Defined Terms...................................................... 6
ARTICLE II
Assignment of Production, Accounts and Proceeds................................... 6
Section 2.01 Assignment......................................................... 6
Section 2.02 [Reserved]......................................................... 7
Section 2.03 No Modification of Payment Obligations............................. 7
Section 2.04 Effectuating Payment of Production Proceeds to Mortgagee........... 7
Section 2.05 Application of Production Proceeds................................. 8
Section 2.06 Release from Liability; Indemnification............................ 8
ARTICLE III
Representations, Warranties and Covenants......................................... 9
Section 3.01 Title.............................................................. 9
Section 3.02 Defend Title....................................................... 9
Section 3.03 Not a Foreign Person............................................... 9
Section 3.04 Rentals, Taxes, Insurance and Fees Paid; Leases in Effect......... 9
Section 3.05 Operation By Third Parties......................................... 10
Section 3.06 Failure to Perform................................................. 10
Section 3.07 Sale, Encumbrance or Removal....................................... 10
Section 3.08 Sale of Production................................................. 11
Section 3.09 Operation of Mortgaged Property.................................... 11
Section 3.10 Suits and Claims................................................... 12
Section 3.11 Environmental...................................................... 12
Section 3.12 Not Abandon Wells; Participate in Operations....................... 14
Section 3.13 Condemnation Awards................................................ 14
Section 3.14 Insurance.......................................................... 14
Section 3.15 Compliance with Leases............................................. 14
Section 3.16 Further Assurance.................................................. 15
Section 3.17 Name and Place of Business......................................... 15
Section 3.18 Compliance with Laws and Agreements................................ 15
Section 3.19 Inspection; Management............................................. 16
ARTICLE IV
Rights and Remedies............................................................... 16
Section 4.01 Event of Default................................................... 16
Section 4.02 Foreclosure and Sale............................................... 16
Section 4.03 Agents............................................................. 18
Section 4.04 Judicial Foreclosure; Receivership................................. 18
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Section 4.05 Foreclosure for Installments....................................... 18
Section 4.06 Separate Sales..................................................... 19
Section 4.07 Possession of Mortgaged Property................................... 19
Section 4.08 Occupancy After Foreclosure........................................ 19
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive................... 19
Section 4.10 No Release of Obligations.......................................... 19
Section 4.11 Release of and Resort to Collateral................................ 20
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc........ 20
Section 4.13 Discontinuance of Proceedings...................................... 20
Section 4.14 Application of Proceeds............................................ 20
Section 4.15 Resignation of Operator............................................ 21
Section 4.16 Indemnity.......................................................... 21
ARTICLE V
Trustee........................................................................... 22
Section 5.01 Duties, Rights, and Powers of Trustee.............................. 22
Section 5.02 Successor Trustee.................................................. 22
Section 5.03 Retention of Moneys................................................ 22
ARTICLE VI
Miscellaneous..................................................................... 22
Section 6.01 Instrument Construed as Mortgage, Etc.............................. 22
Section 6.02 Release of Mortgage................................................ 23
Section 6.03 Severability....................................................... 23
Section 6.04 Successors and Assigns of Parties.................................. 23
Section 6.05 Satisfaction of Prior Encumbrance.................................. 23
Section 6.06 Subrogation of Trustee............................................. 23
Section 6.07 Nature of Covenants................................................ 23
Section 6.08 Notices............................................................ 23
Section 6.09 Counterparts....................................................... 23
Section 6.10 Effective as a Financing Statement................................. 24
Section 6.11 No Impairment of Security.......................................... 24
Section 6.12 Acts Not Constituting Waiver....................................... 24
Section 6.13 Mortgagor's Successors............................................. 25
Section 6.14 Certain Consents................................................... 25
Section 6.15 Governing Law...................................................... 25
Section 6.16 Exculpation Provisions............................................. 25
Section 6.17 FINAL AGREEMENT.................................................... 26
Section 6.18 Subrogation; Prior Mortgages....................................... 26
Section 6.19 Compliance with Usury Laws......................................... 26
Section 6.20 Certain Obligations of Mortgagor................................... 26
Section 6.21 Authority of Mortgagee............................................. 26
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MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT
This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT (this "Mortgage") is entered
into as of the Effective Date (as hereinafter defined) by INFINITY OIL & GAS OF
WYOMING, INC., a Wyoming corporation, 950 17th Street, Suite 800, Denver,
Colorado 80202 ("Mortgagor"), to _________________, as Trustee, whose address
for notice is _____________________________________ ("Trustee"), for the benefit
of PROMETHEAN ASSET MANAGEMENT L.L.C., a Delaware limited liability company, 750
Lexington, 22nd Floor, New York, New York 10022, on its own behalf and in its
capacity as collateral agent for the benefit of the holders of the Notes (as
defined below) (together with its successors and assigns, the "Mortgagee").
R E C I T A L S:
A. Pursuant to that certain Securities Purchase Agreement dated as of
January 13, 2005 (as amended, restated, supplemented or otherwise modified from
time to time, the "Purchase Agreement"), between Infinity, Inc., a Colorado
corporation ("Infinity") and the investors listed on the Schedule of Buyers
thereto, each of which is a holder of a Note (together with their respective
successors and assigns, and including each holder of an Additional Note (as
defined below), the "Holders"), each initial Holder made loans and certain other
financial accommodations (collectively, the "Initial Loans") to Infinity, as
evidenced by those certain Senior Secured Notes, dated as of January 13, 2005,
made by Infinity payable to each applicable Holder in the original aggregate
principal amount of $30,000,000 (such notes, together with any promissory notes
or other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended, restated, modified or
supplemented and in effect from time to time, being herein referred to as the
"Initial Notes") and each initial Holder (or any subsequent person or entity set
forth on said Schedule of Buyers) may make such additional loans and certain
other financial accommodations (the "Additional Loans" and, together with the
Initial Loans, the "Loans") available to Infinity after the Effective Date under
the Purchase Agreement, as evidenced by certain Senior Secured Notes made by
Infinity payable to each applicable Holder in the original aggregate principal
amount of up to $45,000,000 (such notes, together with any promissory notes or
other securities issued in exchange or substitution therefor or replacement
thereof, and as any of the same may be amended, restated, modified or
supplemented and in effect from time to time, being herein referred to as the
"Additional Notes" and, together with the Initial Notes, the "Notes").
B. Mortgagor has executed and delivered to Mortgagee that certain Guaranty
dated as of the date hereof (as amended, restated, supplemented or otherwise
modified from time to time, the "Guaranty"), pursuant to which Mortgagor has
guaranteed all of the "Obligations" under (and as defined in) the Guaranty.
C. Mortgagor has agreed that all of the Indebtedness (as defined in
Section 1.03 hereof) is intended to be secured in part by this Mortgage and
recorded in those jurisdictions as set forth on, Exhibit A of this Mortgage.
D. Each Holder has conditioned its obligation to make the Loans upon the
execution and delivery by Mortgagor of this Mortgage, and Mortgagor has agreed
to enter into this Mortgage.
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THEREFORE, in order to comply with the terms and conditions of the
Purchase Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with
Trustee and Mortgagee as follows:
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.01 Grant of Liens. To secure payment of the Indebtedness and the
performance of the covenants and obligations herein contained and contained in
the Guaranty and any other Loan Document to which Mortgagor is a party,
Mortgagor does by these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE,
PLEDGE, HYPOTHECATE, TRANSFER and CONVEY unto Trustee and Trustee's successors
and substitutes in trust hereunder, WITH A POWER OF SALE, for the use and
benefit of Mortgagee, the real and personal property, rights, titles, interests
and estates described in the following paragraphs (a) through (g) (collectively
called the "Mortgaged Property"):
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to the oil and gas leases and/or oil, gas and other
mineral leases, other mineral properties, mineral servitudes and/or mineral
rights, "as extracted collateral" as defined in the Applicable UCC (as defined
in Section 1.02) and other interests and estates and the lands and premises
covered or affected thereby which are described on Exhibit A hereto without
regard to any limitations as to specific lands or depths that may be set forth
in Exhibit A (collectively called the "Hydrocarbon Property") or which
Hydrocarbon Property is otherwise referred to herein, and specifically, but
without limitation, the undivided interests of Mortgagor which are more
particularly described on attached Exhibit A.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) the properties now or hereafter pooled or
unitized with any Hydrocarbon Property; (ii) all presently existing or future
unitization, communitization, pooling agreements and designations, orders 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 any units created solely among working interest owners pursuant
to operating agreements or otherwise) which may affect all or any portion of the
Hydrocarbon Property including, without limitation, those units which may be
described or referred to on attached Exhibit A; (iii) all operating agreements,
production sales or other contracts, processing agreements, transportation
agreements, gas balancing agreements, farmout agreements, farm-in agreements,
salt water disposal agreements, area of mutual interest agreements, equipment
leases and other agreements described or referred to in this Mortgage or which
relate to any of the Hydrocarbon Property or interests in the Hydrocarbon
Property described or referred to herein or on attached Exhibit A or to the
production, sale, purchase, exchange, processing, handling, storage,
transporting or marketing of the Hydrocarbons (as defined in Section 1.01(c)
hereof) from or attributable to such Hydrocarbon Property or interests; (iv) all
geological, geophysical, engineering, accounting, title, legal, and other
technical or business data concerning the Hydrocarbon Property, the
Hydrocarbons, or any other item of Hydrocarbon Property which are in the
possession of Mortgagor or in which Mortgagor can otherwise grant a security
interest, and all books, files, records, magnetic media, computer records, and
other forms of recording or obtaining access to such data; and (v) the
Hydrocarbon Property described on attached Exhibit A and covered by this
Mortgage even though Mortgagor's interests therein be incorrectly described or a
description of a part or all of such Hydrocarbon Property or Mortgagor's
interests therein be omitted; it being intended by Mortgagor and Mortgagee
herein to cover and affect hereby all interests which Mortgagor may now own or
may hereafter acquire in and to the Hydrocarbon Property notwithstanding that
the interests as
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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 Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the "Hydrocarbons") in and
under and which may be produced and saved from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein, including all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbons, the Hydrocarbon Property, the lands pooled or unitized therewith
and Mortgagor's interests therein.
(d) All tenements, hereditaments, appurtenances and properties in anywise
appertaining, belonging, affixed or incidental to the Hydrocarbon Property,
rights, titles, interests and estates described or referred to in paragraphs (a)
and (b) above, which are now owned or which may hereafter be acquired by
Mortgagor, including, without limitation, any and all property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use,
or useful in connection with the operating, working, extraction, treatment,
marketing, gathering, transmission or development of any of such Hydrocarbon
Property or the lands pooled or unitized therewith (excluding drilling rigs,
trucks, automotive equipment or other personal property which may be taken to
the premises for the purpose of drilling a well or for other similar temporary
uses) and including any and all oil wells, gas wells, injection wells or other
wells, buildings, structures, field separators, liquid extraction plants, plant
compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
systems, field gathering systems, salt water disposal facilities, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, goods, inventory, equipment, appliances, tools, implements,
cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way,
easements, servitudes, licenses and other surface and subsurface rights together
with all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by delivery or by
writing of any kind, be subjected to the lien and security interest hereof by
Mortgagor or by anyone on Mortgagor's behalf; and Trustee or Mortgagee is hereby
authorized to receive the same at any time as additional security hereunder.
(f) All of the rights, titles and interests of every nature whatsoever now
owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property
rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Hydrocarbon Property rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Permitted Liens
to which any of the Hydrocarbon Property rights, titles, interests or estates
are subject, or otherwise; all rights of Mortgagor to liens and security
interests securing payment of proceeds from the sale of production from the
Mortgaged Property, including, but not limited to, those liens and security
interests provided in Section 9.319 of the Applicable UCC, as amended from time
to time, any other statute enacted in the jurisdiction in which the Hydrocarbon
Property is located or statute made applicable to the Hydrocarbon Property under
federal law (or some combination of federal and state law); together with any
and all renewals and extensions of any of the Hydrocarbon Property rights,
titles, interests or estates; all contracts and agreements supplemental to or
amendatory of or in substitution for the contracts and agreements described or
mentioned above; and any and all additional interests of any kind hereafter
acquired by Mortgagor in and to the Hydrocarbon Property rights, titles,
interests or estates.
(g) All accounts, contract rights, inventory, choses in action (i.e.,
rights to enforce contracts or to bring claims thereunder), commercial tort
claims, general intangibles, insurance contracts and
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insurance proceeds (regardless of whether the same arose, and/or the events
which gave rise to the same occurred, on or before or after the date hereof) and
all proceeds and products of all such portions of the Hydrocarbon Property and
payments in lieu of production, whether such proceeds or payments are goods,
money, documents, instruments, chattel paper, securities, accounts, general
intangibles, fixtures, real property, or other assets and regardless of whether
such payments accrued, and/or the events which gave rise to such payments
occurred, on or before or after the date hereof, including, without limitation,
"take or pay" payments and similar payments, payments received in settlement of
or pursuant to a judgment rendered with respect to take or pay or similar
obligations or other obligations under a production sales contract, payments
received in buyout or buydown or other settlement of a production sales
contract, and payments received under a gas balancing or similar agreement as a
result of (or received otherwise in settlement of or pursuant to judgment
rendered with respect to) rights held by Mortgagor as a result of Mortgagor
(and/or its predecessors in title) taking or having taken less gas from lands
covered by a Hydrocarbon Property (or lands pooled or unitized therewith) than
its ownership of such Hydrocarbon Property would entitle it to receive.
(h) Without limitation of the generality of the foregoing, any rights and
interests of Mortgagor under any present or future hedge or swap agreements,
cap, floor, collar, exchange, forward or other hedge or protection agreements or
transactions relating to crude oil, natural gas or other Hydrocarbons, or any
option with respect to any such agreement or transaction now existing or
hereafter entered into by or on behalf of Mortgagor.
(i) All licenses, permits and other regulatory approvals held by Mortgagor
relating to the Mortgaged Property.
(j) All proceeds of all of the rights, titles and interests of Mortgagor
described in the foregoing paragraphs (a) through (i) whether such proceeds or
payments are goods, money, documents, instruments, chattel paper, securities,
accounts, payment intangibles, general intangibles, fixtures, real/immovable
property, personal/movable property or other assets.
(k) In addition to the rights granted to Trustee and/or Mortgagee in
Section 1.01(f) of this Mortgage, any and all liens, security interests,
financing statements or similar interests of Mortgagor attributable to its
interest in the Hydrocarbons and proceeds of runs therefrom arising under or
created by any statutory provision, judicial decision or otherwise.
(l) All of Mortgagor's rights and interests pursuant to the provisions of
Section 9.319 of the Applicable UCC, of the Oil and Gas Owners Lien Act, 52 O.S.
Section 548.2 and of any similar state or local jurisdiction statute in any
state wherein the Mortgaged Property is located, hereby vesting in Trustee
and/or Mortgagee all of Mortgagor's rights as an interest owner to the
continuing security interest in and liens upon the Mortgaged Property.
Any fractions or percentages specified on attached Exhibit A in referring
to Mortgagor's interests are solely for purposes of the warranties made by
Mortgagor pursuant to Sections 3.01 and 3.05 hereof and shall in no manner limit
the quantum of interest affected by this Section 1.01 with respect to any
Hydrocarbon Property or with respect to any unit or well identified on said
Exhibit A.
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness and to
secure the performance of the covenants, agreements, and obligations of
Mortgagor herein contained.
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Section 1.02 Grant of Security Interest. To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in and to
the Mortgaged Property (whether now or hereafter acquired by operation of law or
otherwise) insofar as the Mortgaged Property consists of equipment, accounts,
contract rights, general intangibles, insurance contracts, insurance proceeds,
inventory, Hydrocarbons, fixtures and any and all other personal property of any
kind or character defined in and subject to the provisions of the Uniform
Commercial Code presently in effect in the jurisdiction in which the Mortgaged
Property is situated ("Applicable UCC"), including the proceeds and products
from any and all of such personal property. Upon the happening of any of the
Events of Default (as defined in Section 4.01), Mortgagee is and shall be
entitled to all of the rights, powers and remedies afforded a secured party by
the Applicable UCC with reference to the personal property and fixtures in which
Mortgagee has been granted a security interest herein, or Trustee or Mortgagee
may proceed as to both the real and personal property covered hereby in
accordance with the rights and remedies granted under this Mortgage in respect
of the real property covered hereby. Such rights, powers and remedies shall be
cumulative and in addition to those granted to Trustee or Mortgagee under any
other provision of this Mortgage or under any other security instrument. Written
notice mailed to Mortgagor as provided herein at least five (5) Business Days
(as defined in the Notes) prior to the date of public sale of any part of the
Mortgaged Property which is personal property subject to the provisions of the
Applicable UCC, or prior to the date after which private sale of any such part
of the Mortgaged Property will be made, shall constitute reasonable notice.
Except as otherwise expressly provided in this Mortgage, all terms in this
Mortgage relating to the Mortgaged Property and the grant of the foregoing
security interest which are defined in the Applicable UCC shall have the
meanings assigned to them in Article 9 (or, absent definition in Article 9, in
any other Article) of the Applicable UCC, as those meanings may be amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Applicable
UCC have, at all times, the broadest and most inclusive meanings possible.
Section 1.03 Indebtedness Secured. This Mortgage is executed and delivered
by Mortgagor to secure and enforce the following (the "Indebtedness"):
(a) Payment of and performance of any and all indebtedness, obligations
and liabilities of Mortgagor pursuant to the Guaranty including the
"Obligations" under and as defined in such Guaranty.
(b) Payment of and performance of any and all other indebtedness,
obligations and liabilities of Mortgagor, Infinity and any direct or indirect
subsidiary of Infinity (collectively, the "Infinity Parties" and each
individually an "Infinity Party") pursuant to the Purchase Agreement, the Notes,
the Warrants, the Registration Rights Agreement, the Guaranty, the other
Security Documents (as defined in the Notes) and all of the other agreements,
documents and instruments contemplated thereby and executed in connection
therewith (collectively, the "Loan Documents"), including, without limitation,
(i) principal and interest (including without limitation, interest accruing
subsequent to the filing of a petition or other action concerning bankruptcy or
other similar proceeding, whether or not an allowed claim) on the Notes, (ii)
reimbursement obligations under any letters of credit, (iii) obligations under
any hedging agreements with any Holder or their respective affiliates, and (iv)
obligations owing under any other Loan Document; and all renewals, extensions,
rearrangements and/or other modifications of any of the foregoing.
(c) Any sums which may be advanced or paid by Mortgagee, Trustee or any
Holder under the terms hereof or under any other Loan Document on account of the
failure of Mortgagor or any other Infinity Party to comply with the covenants
contained herein or in any other Loan Document; and all other indebtedness of
Infinity Parties arising pursuant to the provisions of the Loan Documents, this
Mortgage and any other documents or instruments executed in connection
therewith.
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(d) Without limiting the generality of the foregoing, all post-petition
interest, expenses and other duties and liabilities with respect to indebtedness
or other obligations described above in this Section 1.03, which would be owed
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding.
Section 1.04 Fixture Filing, Etc. Without in any manner limiting the
generality of any of the other provisions of this Mortgage: (i) some portions of
the goods described or to which reference is made herein are or are to become
fixtures on the land described or to which reference is made herein or on
attached Exhibit A; (ii) the security interests created hereby under applicable
provisions of the Applicable UCC will attach to Hydrocarbons (minerals including
oil and gas), as extracted collateral or the accounts resulting from the sale
thereof at the wellhead or minehead located on the land described or to which
reference is made herein; (iii) this Mortgage is to be filed of record in the
real estate records as a financing statement, and (iv) Mortgagor is the record
owner of the real estate or interests in the real estate comprised of the
Mortgaged Property.
Section 1.05 Defined Terms. Any capitalized term used in this Mortgage and
not defined in this Mortgage shall have the meaning assigned to such term in the
Purchase Agreement.
ARTICLE II
Assignment of Production, Accounts and Proceeds
Section 2.01 Assignment. Mortgagor has absolutely and unconditionally
assigned, transferred, and conveyed, and does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its successors and
assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, and the revenues and proceeds now and hereafter attributable to the
Hydrocarbons and said products and all accounts arising therefrom or in
connection therewith and all payments in lieu of the Hydrocarbons such as "take
or pay" payments or settlements (all of the foregoing, the "Production
Proceeds"), together with the immediate and continuing right to collect and
receive such Production Proceeds. The Hydrocarbons and products are to be
delivered into pipe lines connected with the Mortgaged Property, or to the
purchaser thereof, to the credit of Mortgagee (to the extent of the Mortgagor's
interest therein); and all such Production Proceeds shall be paid directly to a
Deposit Account subject to an Account Control Agreement (in each case, as
defined in that certain Security Agreement of even date herewith (as same may be
amended, restated, supplemented or otherwise modified from time to time) entered
into among Mortgagor, the other "Debtors" party thereto and Mortgagee), with no
duty or obligation of any party paying the same to inquire into the rights of
Mortgagee to receive the same, what application is made thereof, or as to any
other matter. Mortgagor directs and instructs any and all purchasers of any
Hydrocarbons to pay to such Deposit Accounts all of the Production Proceeds
accruing to Mortgagor's interest until such time as such purchasers have been
furnished with evidence that all Indebtedness has been paid in full in cash and
that this Mortgage has been released. Mortgagor agrees that no purchasers of the
Hydrocarbons shall have any responsibility for the application of any funds paid
to Mortgagee. Mortgagor agrees to perform all such acts, and to execute all such
further assignments, transfer orders and division orders, and other instruments
as may be required or desired by Mortgagee or any party in order to have the
Production Proceeds paid to Mortgagee. Upon the occurrence of an Event of
Default, Mortgagee is fully authorized to receive and receipt for the Production
Proceeds; to endorse and cash any and all checks and drafts payable to the order
of Mortgagor or Mortgagee for the account of Mortgagor received from or in
connection with the Production Proceeds and to hold the Production Proceeds in a
bank account as additional collateral securing the Indebtedness; and to execute
transfer and division orders in the name of Mortgagor, or otherwise, with
warranties binding Mortgagor. All Production Proceeds received by Mortgagee
pursuant to this assignment shall be applied
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as provided in the other Loan Documents. Mortgagee shall not be liable for any
delay, neglect or failure to effect collection of any Production Proceeds or to
take any other action in connection therewith or hereunder; but Mortgagee shall
have the right, exercisable at its election at any time after an Event of
Default has occurred and is continuing, in the name of Mortgagor or otherwise,
to prosecute and defend any and all actions or legal proceedings deemed
advisable by Mortgagee in order to collect such funds and to protect the
interests of Mortgagee and/or Mortgagor, with all costs, expenses and attorneys'
fees incurred in connection therewith being paid by Mortgagor and until so paid
being a part of the Indebtedness secured by this Mortgage. Mortgagor hereby
appoints Mortgagee as its attorney-in-fact to pursue any and all rights of
Mortgagor to liens on and security interests in the Hydrocarbons securing
payment of proceeds of runs attributable to the Hydrocarbons, provided Mortgagee
shall only be permitted to exercise such power of attorney granted pursuant to
this sentence after the occurrence and during the continuance of an Event of
Default. The power of attorney granted to Mortgagee in this Section 2.01, being
coupled with an interest, shall be irrevocable so long as the Indebtedness or
any part thereof remains unpaid.
Section 2.02 [Reserved].
Section 2.03 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter, limit or modify the absolute
obligation of Mortgagor and the other Infinity Parties to make prompt payment of
all principal, interest and other amounts owing on the Indebtedness when and as
the same become due regardless of whether the Production Proceeds are sufficient
to pay the same and the rights provided in accordance with the foregoing
assignment provision shall be cumulative of all other security of any and every
character now or hereafter existing to secure payment of the Indebtedness.
Section 2.04 Effectuating Payment of Production Proceeds to Mortgagee. If
under any existing sales agreements, other than division orders or transfer
orders, any Production Proceeds are required to be paid by the purchaser to
Mortgagor so that under such existing agreements payment cannot be made of such
Production Proceeds to Mortgagee, Mortgagor's interest in all Production
Proceeds under such sales agreements and in all other Production Proceeds which
for any reason may be paid to Mortgagor shall, when received by Mortgagor,
constitute trust funds in Mortgagor's hands and shall be immediately paid over
to Mortgagee. Without limitation upon any of the foregoing, Mortgagor hereby
constitutes and appoints Mortgagee as Mortgagor's special attorney-in-fact (with
full power of substitution, either generally or for such periods or purposes as
Mortgagee may from time to time prescribe) in the name, place and stead of
Mortgagor to do any and every act and exercise any and every power that
Mortgagor might or could do or exercise personally with respect to all
Hydrocarbons and Production Proceeds expressly inclusive, but not limited to,
giving and granting unto said attorney-in-fact full power and authority to do
and perform any and every act and thing whatsoever necessary and requisite to be
done as fully and to all intents and purposes, as Mortgagor might or could do if
personally present (provided such power of attorney granted pursuant to this
sentence shall only be exercisable by Mortgagee upon the occurrence and during
the continuance of an Event of Default); and Mortgagor shall be bound thereby as
fully and effectively as if Mortgagor had personally executed, acknowledged and
delivered any of the foregoing certificates or documents. The powers and
authorities herein conferred upon Mortgagee may be exercised by Mortgagee
through any person who, at the time of the execution of the particular
instrument, is an officer of Mortgagee. The power of attorney herein conferred
is granted for valuable consideration and hence is coupled with an interest and
is irrevocable so long as the Indebtedness, or any part thereof, shall remain
unpaid or any commitment to lend under the Purchase Agreement remains
outstanding. All persons dealing with Mortgagee or any substitute shall be fully
protected in treating the powers and authorities conferred by this paragraph as
continuing in full force and effect until advised by Mortgagee that all the
Indebtedness is fully and totally paid. Mortgagee may, but shall not be
obligated to, in accordance with the provisions of Section 2.01 above, take such
action as it
7
deems appropriate in an effort to collect the Production Proceeds and any
reasonable expenses (including reasonable attorney's fees) so incurred by
Mortgagee shall be a demand obligation of Mortgagor and shall be part of the
Indebtedness, and shall bear interest each day, from the date of such
expenditure or payment until paid, at a per annum rate equal to the rate of
interest charged under the Notes after an Event of Default plus 2%.
Section 2.05 Application of Production Proceeds. The Production Proceeds
received by Mortgagee during each calendar month shall be paid directly into a
Deposit Account in accordance with Section 2.01 hereof. After an Event of
Default hereunder has occurred, all Production Proceeds from time to time in the
hands of Mortgagee shall be applied to the payment of the Indebtedness at such
times and in such manner and order as Mortgagee determines in Mortgagee's sole
and absolute discretion.
Section 2.06 Release from Liability; Indemnification. Mortgagee and its
successors and assigns are hereby released and absolved from all liability for
failure to enforce collection of the Production Proceeds and from all other
responsibility in connection therewith, except the responsibility to account to
Mortgagor for funds actually received. Mortgagor agrees to indemnify and hold
harmless Mortgagee (for purposes of this paragraph, the term "Mortgagee" shall
include the directors, officers, partners, employees and agents of Mortgagee and
any persons or entities owned or controlled by or affiliated with Mortgagee and
any other Indemnified Party as defined in Section 4.16 hereof) from and against
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)
imposed upon, asserted against or incurred or paid by Mortgagee by reason of the
assertion that Mortgagee received, either before or after payment in full of the
Indebtedness, funds from the production of oil, gas, other hydrocarbons or other
minerals claimed by third persons (and/or funds attributable to sales of
production which were made in violation of laws, rules, regulations and/or
orders governing such sales), and Mortgagee shall have the right to defend
against any such claims or actions, employing attorneys of its own selection,
and if not furnished with indemnity satisfactory to it, Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments, and in
addition to the rights to be indemnified as herein provided, all amounts paid by
Mortgagee in compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, reasonable attorneys' fees and other expenses of
every character expended by Mortgagee pursuant to the provisions of this section
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Mortgagee and shall bear interest, from
the date expended until paid, at a per annum rate equal to the rate of interest
charged under the Notes after an Event of Default plus 2%. The foregoing
indemnities shall not terminate upon the release, foreclosure or other
termination of this Mortgage but will survive the release, foreclosure of this
Mortgage or conveyance in lieu of foreclosure, and the repayment of the
Indebtedness and the discharge and release of this Mortgage and the other
documents evidencing and/or securing the Indebtedness. WITHOUT LIMITATION, IT IS
THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES AND
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS,
DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT LIMITATION
CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES)
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH
(AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not apply
to any particular indemnified party (but shall apply to the other indemnified
parties) to the extent the subject of the indemnification is caused by or arises
out of the gross negligence or willful misconduct of such particular indemnified
party.
8
ARTICLE III
Representations, Warranties and Covenants
Mortgagor hereby represents, warrants and covenants as follows:
Section 3.01 Title. Mortgagor owns an undivided working interest in each
well included in the Mortgaged Property of not more than the working interest
set forth in Exhibit A attached hereto (to the extent the interest of Mortgagor
is a working interest as opposed to a royalty interest) and Mortgagor owns an
undivided net revenue interest or royalty interest in each well included in the
Mortgaged Property of not less than the net revenue or royalty interest set
forth in Exhibit A attached hereto. With respect to the Mortgaged Property,
Mortgagor represents and warrants that (i) Mortgagor has good, marketable and
indefeasible title in fee simple to all Mortgaged Property constituting real
property owned (rather than leased) by it, in each case free and clear of all
Liens other than Permitted Liens, except as set forth in Exhibit A, (ii)
Mortgagor has good and valid title to all Mortgaged Property constituting
personal property owned by it that is material to the business of the Mortgagor,
free and clear of all Liens other than Permitted Liens, (iii) Mortgagor is the
legal and equitable owner of a leasehold interest in all of the leased Mortgaged
Property that is producing oil, gas, minerals and/or other Hydrocarbons, and
possesses good, marketable and defensible title thereto, free and clear of all
Liens (other than Permitted Liens) and other matters affecting title to such
leasehold that could impair the ability of the Mortgagor to realize the benefits
of the rights provided to it under any lease pertaining thereto and (iv)
Mortgagor is the legal and equitable owner of a leasehold interest in all of the
leased Mortgaged Property that is not producing oil, gas, minerals and/or other
Hydrocarbons and, except as could not reasonably be expected, individually or in
the aggregate, to have any of a Material Adverse Effect, a Property Material
Adverse Effect or a Services Business Material Adverse Effect, possesses good,
marketable and defensible title thereto, free and clear of all Liens (other than
Permitted Liens) and other matters affecting title to such leasehold that could
impair the ability of Mortgagor to realize the benefits of the rights provided
to it under any lease pertaining thereto.
Section 3.02 Defend Title. This Mortgage is, and always will be kept, a
direct first lien and security interest upon the Mortgaged Property subject only
to Permitted Liens and Mortgagor will not create or suffer to be created or
permit to exist any lien, security interest or charge prior or junior to or on a
parity with the lien and security interest of this Mortgage upon the Mortgaged
Property or any part thereof or upon the rents, issues, revenues, profits and
other income therefrom. Mortgagor will warrant and defend the title to the
Mortgaged Property against the claims and demands of all other persons
whomsoever and will maintain and preserve the lien created hereby so long as any
of the Indebtedness secured hereby remains unpaid. Should an adverse claim be
made against or a cloud develop upon the title to any part of the Mortgaged
Property, Mortgagor agrees it will immediately defend against such adverse claim
or take appropriate action to remove such cloud at Mortgagor's cost and expense,
and Mortgagor further agrees that Trustee and/or Mortgagee may take such other
action as they deem advisable to protect and preserve their interests in the
Mortgaged Property, and in such event Mortgagor will indemnify Trustee and
Mortgagee against any and all cost, attorney's fees and other expenses which
they may incur in defending against any such adverse claim or taking action to
remove any such cloud.
Section 3.03 Not a Foreign Person. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended (hereinafter
called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign estate
as those terms are defined in the Code and any regulations promulgated
thereunder).
Section 3.04 Rentals, Taxes, Insurance and Fees Paid; Leases in Effect.
All rentals and royalties due and payable in accordance with the terms of any
leases or subleases comprising a part of the
9
Hydrocarbon Property and all severance and production taxes payable with respect
to the production therefrom have been duly paid or provided for and all leases
or subleases comprising a part of the Hydrocarbon Property are in full force and
effect. In addition to the foregoing, Mortgagee shall or shall cause to be paid
when due, all taxes, permits, licenses, insurance premiums and other similar
amounts with respect to the Mortgaged Property, the Hydrocarbon Property and the
Hydrocarbons.
Section 3.05 Operation By Third Parties. As to any part of the Mortgaged
Property which is not a working interest (if any), Mortgagor agrees to take all
such action and to exercise all rights and remedies as are available to
Mortgagor to cause the owner or owners of the working interest in such
properties to comply with the covenants and agreements contained herein; and as
to any part of the Mortgaged Property which is a working interest but which is
operated by a party other than Mortgagor, Mortgagor agrees to take all such
action and to exercise all rights and remedies as are reasonably available to
Mortgagor (including, but not limited to, all rights under any operating
agreement) to cause the party who is the operator of such property to comply
with the covenants and agreements contained herein.
Section 3.06 Failure to Perform. Mortgagor agrees that if Mortgagor fails
to perform any act or to take any action which Mortgagor is required to perform
or take hereunder or pay any money which Mortgagor is required to pay hereunder,
each of Mortgagee and Trustee in Mortgagor's name or its or their own name may,
but shall not be obligated to, perform or cause to be performed such act or take
such action or pay such money, and any expenses so incurred by either of them
and any money so paid by either of them shall be a demand obligation owing by
Mortgagor to Mortgagee or Trustee, as the case may be, and each of Mortgagee and
Trustee, upon making such payment, shall be subrogated to all of the rights of
the Person receiving such payment. Each amount due and owing by Mortgagor to
each of Mortgagee and Trustee pursuant to this Mortgage shall bear interest from
the date of such expenditure or payment or other occurrence which gives rise to
such amount being owed to such Person until paid at a rate per annum equal to
the rate of interest charged under the Notes after an Event of Default plus 2%,
and all such amounts together with such interest thereon shall be a part of the
Indebtedness described in Section 1.03 hereof.
Section 3.07 Sale, Encumbrance or Removal. Mortgagor will not at any time
during the existence hereof, sell, assign, transfer, mortgage, encumber, or
otherwise dispose of any Mortgaged Property, except (i) sales of Hydrocarbons in
the ordinary course of business and only then in compliance with the terms of
this Mortgage, (ii) the sale of obsolete or worn out equipment or personal
property in the ordinary course of business, and Mortgagor shall not remove or
permit to be removed, any personal or other removable property at any time
covered hereby from the premises upon which the same may be situated unless
moved to other portions of the Mortgaged Property or is replaced with property
of equal value and which Lender has a first priority perfected security interest
therein and (iii) the sale of Hydrocarbon Property if and to the extent all of
the following conditions are satisfied: (A) such Hydrocarbon Property to be sold
is not currently producing Hydrocarbons and such Hydrocarbon Property has not
been proven, consistent with prudent customs and practices in the industry in
which Mortgagor operates, to contain Hydrocarbons which may be extracted in the
ordinary course of Mortgagor's business, (B) such sale occurs in the ordinary
course of Mortgagor's business in connection with the disposition of
non-producing and non-proven Hydrocarbon Property, (C) no Event of Default has
occurred and is continuing at the time of such sale and no event has occurred
which, with the passing of time or the giving of notice, would constitute an
Event of Default, (D) such sale is to a third-party not affiliated with the
Mortgagor and on an arms-length basis, (E) if Mortgagor or any other Infinity
Party is the operator with respect to such Hydrocarbon Property, such Infinity
Party remains the operator with respect thereto, and (F) Mortgagee has given its
prior written consent to such sale, such consent not to be unreasonably
withheld.
10
Section 3.08 Sale of Production. No Mortgaged Property is or will become
subject to any contractual or other arrangement (a) whereby payment for
production is or can be deferred for a substantial period after the month in
which such production is delivered (i.e., in the case of oil, not in excess of
sixty (60) days, and in the case of gas, not in excess of ninety (90) days) or
(b) whereby payments are made to Mortgagor other than by checks, drafts, wire
transfer advises or other similar writings, instruments or communications for
the immediate payment of money. Except for transportation, gathering,
processing, compression or dehydration agreements (or other agreements relating
to the marketing of Hydrocarbons) from time to time disclosed to Mortgagee in
writing (in connection with the Mortgaged Property to which they relate), and,
with respect to the immediately succeeding clause (i), except for agreements
entered into by Mortgagor in the ordinary course of business consistent with
prudent customs and practices in the industry in which Mortgagor operates or as
required to comply with Section 4(t) of the Purchase Agreement, (i) no Mortgaged
Property is or will become subject to any contractual or other arrangement for
the sale, processing or transportation of production (or otherwise related to
the marketing of Hydrocarbons) which cannot be cancelled on ninety (90) days'
(or less) notice and (ii) all contractual or other arrangements for the sale,
processing or transportation of Hydrocarbons (or otherwise related to the
marketing of Hydrocarbons) shall be bona fide arm's length transactions and
shall be at generally prevailing market prices. Mortgagor is presently receiving
a price for all production from (or attributable to) each Mortgaged Property
covered by a production sales contract disclosed in writing to Mortgagee as
computed in accordance with the terms of such contract, and is not having
deliveries of production from such Mortgaged Property curtailed substantially
below such property's delivery capacity. Neither Mortgagor, nor any of its
predecessors in title, has received prepayments (including, but not limited to,
payments for gas not taken pursuant to "take or pay" or other similar
arrangements) for any Hydrocarbons produced or to be produced from the Mortgaged
Properties after the date hereof, and Mortgagor hereby covenants not to enter
into any such advance or prepayment arrangements whereby it accepts
consideration for Hydrocarbons not yet produced. No Mortgaged Property is or
will become subject to any "take or pay" or other similar arrangement (y) which
can be satisfied in whole or in part by the production or transportation of gas
from other properties or (z) as a result of which production from the Mortgaged
Properties may be required to be delivered to one or more third parties without
payment (or without full payment) therefor as a result of payments made, or
other actions taken, with respect to other properties. There is no Mortgaged
Property with respect to which Mortgagor, or its predecessors in title, has,
prior to the date hereof, taken more ("overproduced"), or less
("underproduced"), gas from the lands covered thereby (or pooled or unitized
therewith) than its ownership interest in such Mortgaged Property would entitle
it to take. Mortgagor will not after the date hereof become "overproduced" (as
above defined) with respect to any well on the Mortgaged Property (or on any
unit in which the Mortgaged Property participate), in an amount in excess of
Mortgagor's share of gas produced from such well, except in the ordinary course
of business consistent with prudent customs and practices in the industry in
which Mortgagor operates,. No Mortgaged Property is or will become subject to a
gas balancing arrangement under which one or more third parties may take a
portion of the production attributable to such Mortgaged Property without
payment (or without full payment) therefor as a result of production having been
taken from, or as a result of other actions or inactions with respect to, other
properties, except for any such gas balancing arrangement entered into in the
ordinary course of business consistent with prudent customs and practices in the
industry in which Mortgagor operates. No Mortgaged Property is subject at the
present time to any regulatory refund obligation and, to the best of Mortgagor's
knowledge, no facts exist which might cause the same to be imposed.
Section 3.09 Operation of Mortgaged Property. Each Mortgaged Property (and
properties unitized therewith) is being (and, to the extent the same could
adversely affect the ownership or operation of such Mortgaged Property after the
date hereof, have in the past been), and hereafter will be, maintained, operated
and developed in a good and workmanlike manner, in accordance with prudent
industry standards and in conformity with all applicable laws and all rules,
regulations and orders of all
11
duly constituted authorities having jurisdiction and in substantial conformity
with all oil, gas and/or other mineral leases and other contracts and agreements
forming a part of the Mortgaged Property and in conformity with all Permitted
Liens; specifically in this connection, (i) no Mortgaged Property is subject to
having allowable production after the date hereof reduced below the full and
regular allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) prior to
the date hereof and (ii) none of the wells located on the Mortgaged Property (or
properties unitized therewith) are or will be deviated from the vertical more
than the maximum permitted by applicable laws, regulations, rules and orders,
and such wells are, and will remain, bottomed under and producing from, with the
well bores wholly within, the Mortgaged Property (or, in the case of wells
located on properties unitized therewith, such unitized properties). With
respect to any Mortgaged Property in which Mortgagor is the operator in
connection therewith or in which Mortgagor has a majority working interest (and
to the best of Mortgagor's knowledge with respect to any Mortgaged Property in
which Mortgagor has a minority working interest and is not an operator in
connection therewith), there are no dry holes, or otherwise inactive wells,
located on any Mortgaged Property or on lands pooled or unitized therewith,
except for wells that have been properly plugged and abandoned or inactive and
being maintained in accordance with local, state and federal law. Except as
disclosed under the Purchase Agreement, the Mortgagor has, and will in the
future, possess all certificates, authorizations, approvals, licenses and
permits issued by the appropriate federal, state or foreign regulatory
authorities (collectively, "Permits") necessary to produce, extract, transport
and sell the oil, gas, minerals and/or other Hydrocarbons in that portion of the
Mortgaged Property that is producing oil, gas, minerals and/or other
Hydrocarbons. Except as disclosed under the Purchase Agreement or as could not
reasonably be expected to have a Material Adverse Effect or a Property Material
Adverse Effect, Mortgagor has no reason to believe that it will not be able to
obtain Permits as and when necessary to enable the Mortgagor to produce,
extract, transport and sell the oil, gas, minerals and other Hydrocarbons in the
Mortgaged Property. Mortgagor has not received notice of any violations in
respect of any such licenses or permits described in the foregoing provisions of
this Section 3.09 except for notices of violations received prior to the date
hereof that have been remedied by Mortgagor.
Section 3.10 Suits and Claims. Except to the extent disclosed in the
Schedules to the Purchase Agreement, there are no suits, actions, claims,
investigations, inquiries, proceedings or demands pending (or, to Mortgagor's
knowledge, threatened) which affect the Mortgaged Property (including, without
limitation, any which challenge or otherwise pertain to Mortgagor's title to the
Mortgaged Property) and no judicial or administrative actions, suits or
proceedings pending (or, to Mortgagor's knowledge, threatened) against
Mortgagor.
Section 3.11 Environmental.
(a) Current Status. The Mortgaged Property and Mortgagor are not in
violation of Applicable Environmental Laws (as hereinafter defined), or subject
to any existing, pending or, to the best knowledge of Mortgagor, threatened
investigation or inquiry by any governmental authority or any other person under
or with respect to Applicable Environmental Laws, or subject to any remedial
obligations under Applicable Environmental Laws, and are in compliance with all
permits and licenses required under Applicable Environmental Laws, other than
with respect to any such violation, investigation, inquiry or remedial
obligations that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect and, to the best knowledge of
Mortgagor, this representation will continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the Mortgaged Property and
Mortgagor. "Applicable Environmental Laws" shall mean any applicable laws,
orders, rules, or regulations pertaining to safety, health or the environment,
as such laws, orders, rules or regulations now exist or are hereafter enacted
and/or amended (including without limitation the Comprehensive Environmental
Response,
12
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the
Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called
"RCRA") and applicable state and local law). Mortgagor undertook, at the time of
acquisition of the Mortgaged Property, all appropriate inquiry into the previous
ownership and uses of the Mortgaged Property consistent with good commercial or
customary practice. Mortgagor has taken reasonable steps necessary, consistent
with customary practice in the industry in which it operates its business, to
determine and has determined that no hazardous substances or solid wastes have
been disposed of or otherwise released at, into, upon or under the Mortgaged
Property. The use which Mortgagor makes and intends to make of the Mortgaged
Property will not result in the use, treatment, storage or disposal or other
release of any hazardous substance or solid waste at, into, upon or under the
Mortgaged Property, except such usage, and temporary storage in anticipation of
usage, as is in the ordinary course of business and in compliance with
Applicable Environmental Laws. The terms "hazardous substance" and "release" as
used in this Mortgage shall have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") shall have the meanings specified
in RCRA; provided, in the event either 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 and provided further,
to the extent that the laws of the states in which the Mortgaged Properties are
located establish a meaning for "hazardous substance," "release," "solid waste,"
or "disposal" which is broader than that specified in either CERCLA or RCRA,
such broader meaning shall apply. The "Associated Property" (as such term is
hereinafter defined) is not in violation of any Applicable Environmental Laws
for which Mortgagor or its predecessors in title to the Mortgaged Property would
be responsible (to the best of Mortgagor's knowledge with respect to Associated
Property not owned or operated by Mortgagor). The term "Associated Property" as
used in this Mortgage shall mean any and all interests in and to (and/or carved
out of) the lands which are described or referred to in Exhibit A hereto, or
which are otherwise described in any of the oil, gas and/or mineral leases or
other instruments described in or referred to in such Exhibit A, whether or not
such property interests are owned by Mortgagor.
(b) Future Performance. Mortgagor will not cause or permit the Mortgaged
Property or Mortgagor to be in violation of, or do anything or permit anything
to be done which will subject the Mortgaged Property to any remedial obligations
under, or result in noncompliance with applicable permits and licenses under,
any Applicable Environmental Laws, assuming disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to the Mortgaged Property and Mortgagor will promptly notify
Mortgagee in writing of any existing, pending or, to the best knowledge of
Mortgagor, threatened investigation, claim, suit or inquiry by any governmental
authority or any person in connection with any Applicable Environmental Laws.
Mortgagor will take steps necessary to determine that no hazardous substances or
solid wastes have been disposed of or otherwise released on or to the Mortgaged
Property. Mortgagor will not cause or permit the disposal or other release of
any hazardous substance or solid waste at, into, upon or under the Mortgaged
Property and covenants and agrees to keep or cause the Mortgaged Property to be
kept free of any hazardous substance or solid waste (except such use, and
temporary storage in anticipation of use, as is required in the ordinary course
of business, all while in compliance with Applicable Environmental Laws), and to
remove the same (or if removal is prohibited by law, to take whatever action is
required by law), promptly upon discovery at its sole expense. Upon Mortgagee's
reasonable request, at any time and from time to time during the existence of
this Mortgage, but not more often than once every calendar year (so long as no
Event of Default or Triggering Event has occurred), Mortgagor will provide at
Mortgagor's sole expense an inspection or audit of the Mortgaged Property from
an engineering or consulting firm approved by Mortgagee, indicating the presence
or absence of hazardous substances and solid waste on the Mortgaged Property and
compliance with Applicable Environmental Laws.
13
Section 3.12 Not Abandon Wells; Participate in Operations. Mortgagor will
not, without prior written consent of Mortgagee, abandon, or consent to the
abandonment of, any well producing from the Mortgaged Property (or properties
unitized therewith) so long as such well is capable (or is subject to being made
capable through drilling, reworking or other operations which it would be
commercially feasible to conduct) of producing oil, gas, or other Hydrocarbons
or other minerals in commercial quantities (as determined without considering
the effect of this Mortgage).
Section 3.13 Condemnation Awards. If at any time all or any portion of the
Mortgaged Property shall be taken or damaged under the power of eminent domain,
the award received by condemnation proceedings for any property so taken or any
payment received in lieu of such condemnation proceedings shall be paid directly
to Mortgagee as agent for Mortgagor and all or any portion of such award or
payment, at the option of Mortgagee, shall be applied to the Secured
Indebtedness in payment of the last maturing installments of the Secured
Indebtedness or paid over, wholly or in part, to Mortgagor for any purpose or
object satisfactory to Mortgagee; provided that Mortgagee shall not be obligated
to see to the application of any amount paid over to Mortgagor. Mortgagor
immediately upon obtaining knowledge of the institution of any proceedings or
negotiations for the condemnation of the Mortgaged Property, or any portion
thereof, will notify Mortgagee of the pendency of such negotiations or
proceedings. Mortgagee may participate in any such negotiations or proceedings,
and Mortgagor from time to time will execute and deliver to Mortgagee all
instruments requested by Mortgagee to permit such participation.
Section 3.14 Insurance. Mortgagor will maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event general
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business and in any case no less comprehensive
in scope than that maintained by the Mortgager as of the date hereof. In the
event of any loss under any insurance policies so carried by Mortgagor,
Mortgagee shall have the right (but not the obligation) to make proof of loss
and collect the same, and all amounts so received shall be applied toward costs,
charges and expenses (including reasonable attorneys' fees), if any, incurred in
the collection thereof, then to the payment, in the order determined by
Mortgagee in its own discretion, of the Indebtedness, and any balance remaining
shall be subject to the order of Mortgagor. Mortgagee is hereby authorized but
not obligated to enforce in its name or in the name of Mortgagor payment of any
or all of said policies or settle or compromise any claim in respect thereof,
and to collect and make receipts for the proceeds thereof and Mortgagee is
hereby appointed Mortgagor's agent and attorney-in-fact to endorse any check or
draft payable to Mortgagor in order to collect the proceeds of insurance
(provided Mortgagee shall only be entitled to enforce the power of attorney
provided in this sentence after the occurrence and during the continuance of an
Event of Default). In the event of foreclosure of this Mortgage, or other
transfer of title to the Mortgaged Property in extinguishment in whole or in
part of the Indebtedness, all right, title and interest of Mortgagor in and to
such policies then in force concerning the Mortgaged Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or
other transferee in the event of such other transfer of title.
Section 3.15 Compliance with Leases. Mortgagor will observe and comply
with all of the terms and provisions, express or implied, of the oil, gas and
mineral leases covered by this Mortgage, and any other agreements or instruments
applicable thereto; and, except with the prior written consent of Mortgagee,
will not amend (in any manner adverse to Mortgagor, Mortgagee, or Mortgagor's or
Mortgagee's interest in the Mortgaged Property or in any manner that could
reasonably be expected to result in a Material Adverse Effect) or terminate any
of such agreements or surrender, abandon or release any of such leases in whole
or in part so long as any well situated thereon, or located on any unit
containing all or any part of such leases, is capable of producing oil, gas,
casinghead gas or other
14
hydrocarbons in paying quantities. Mortgagor will cause all obligations to the
holders of royalty interests and all other interests in the Mortgaged Properties
to be promptly discharged and all covenants and conditions, express or implied,
imposed upon the original lessee or his assigns by every such lease and every
other agreement relative thereto to be fully and promptly performed and to cause
all acts necessary or proper to accomplish the foregoing and prevent the breach
or forfeiture of any such lease to be fully and promptly performed. Mortgagor
will furnish to Mortgagee ten (10) day advance written notice of any intention
not to pay (or immediately at such time that it anticipates that it will be
unable to pay) any delay rentals on the due date thereof under any such lease;
provided that if such lease is for Mortgaged Property not producing
Hydrocarbons, such advance written notice shall only be required if such lease
covers more than six hundred forty (640) acres.
Section 3.16 Further Assurance. Mortgagor will, on request of Mortgagee,
(i) promptly correct any defect, error or omission which may be discovered in
the contents of this Mortgage, or in any other document or instrument executed
in connection with any of the Loan Documents, or in the execution or
acknowledgment of this Mortgage or any other document; (ii) execute,
acknowledge, deliver and record and/or file such further instruments (including,
without limitation, further deeds of trust, mortgages, security agreements,
financing statements, continuation statements, and assignments of production,
accounts, funds, contract rights, general intangibles, and proceeds) and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby, including specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Mortgaged Property; and
(iii) execute, acknowledge, deliver, and file and/or record any document or
instrument (including specifically any financing statement) desired by Mortgagee
to protect the lien or the security interest hereunder against the rights or
interests of third persons. Mortgagor shall pay all costs connected with any of
the foregoing.
Section 3.17 Name and Place of Business. Except as disclosed in writing to
Mortgagee, Mortgagor has not during the preceding five (5) years been known by
or used any other corporate or partnership, trade or fictitious name. Mortgagor
will not cause or permit any change to be made in its name, identity, state of
formation or corporate or partnership structure, or its federal employer
identification number unless Mortgagor shall have notified Mortgagee of such
change at least thirty (30) days prior to the effective date of such change, and
shall have first taken all action required by Mortgagee for the purpose of
further perfecting or protecting the liens and security interests in the
Mortgaged Property created hereby. Mortgagor's exact name is the name set forth
in this Mortgage. Mortgagor is a registered organization which is organized
under the laws of one of the states comprising the United States (e.g.
corporation, limited partnership, registered limited liability partnership or
limited liability company). Mortgagor is located (as determined pursuant to the
UCC) in the state under which it is organized, which is as set forth in the
preamble to this Mortgage. Mortgagor's principal place of business and chief
executive office, and the place where Mortgagor keeps its books and records
concerning the Mortgaged Property (including, particularly, the records with
respect to Production Proceeds from the Mortgaged Property) has for the
preceding four months, been, and will continue to be (unless Mortgagor notifies
Mortgagee of any change in writing at least thirty (30) days prior to the date
of such change), the address set forth on the signature page of this Mortgage.
Section 3.18 Compliance with Laws and Agreements. Mortgagor is in
compliance with all governmental requirements applicable to it or its property,
including, without limitation, all FERC regulations and the USA Patriot Act, and
all indentures, agreements and other instruments binding upon it or its
property. The execution and performance of the Loan Documents, this Mortgage and
the other documents and instruments contemplated hereby and thereby will not
violate the Trading with the Enemy Act, as amended, any of the foreign assets
control regulations of the United States Treasury Department
15
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto, the Executive Order referred to in the
following sentence or the U.S. Bank Secrecy Act (31 U.S.C. Sections 5311 et
seq.). Mortgagor is not a Person described by section 1 of Executive Order 13224
of September 24, 2001 entitled Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit or Support Terrorism, 66 Fed. Reg.
49,079 (2001), as amended, and Mortgagor does not engage in any transactions or
dealings, or is otherwise associated with any such Persons. Mortgagor is not
bound by any agreement, document, instrument, judgment, decree, order, statute,
law, rule or regulation that limits or could reasonably be expected to limit its
performance under the Loan Documents or this Mortgage.
Section 3.19 Inspection; Management. Mortgagee and any persons authorized
by Mortgagee shall have the right to enter and inspect the Mortgaged Property at
all reasonable times. If, at any time after an Event of Default by Mortgagor,
the management or maintenance of the Mortgaged Property is determined by
Mortgagee to be unsatisfactory and is not corrected within thirty (30) days
after notice to Mortgagor, Mortgagor will, to the extent Mortgagor is entitled
under third party agreements affecting the same, employ, for the duration of
such Event of Default, as managing agent of the Mortgaged Property, any person
from time to time designated or approved by Mortgagee.
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. As used in this Mortgage, an "Event of
Default" means the failure by Mortgagor for ten (10) days from the date
Mortgagor knew or should have known of such failure to comply with any covenant,
agreement, warranty or condition herein required to be observed, kept or
performed or the occurrence of an "Event of Default" or Triggering Event, each
as defined under the Notes.
Section 4.02 Foreclosure and Sale.
(a) If an Event of Default shall occur and be continuing, Mortgagee shall
have the right and option to proceed with foreclosure by directing Trustee, or
his successors or substitutes in trust, to proceed with foreclosure and to sell,
to the extent permitted by law, all or any portion of the Mortgaged Property at
one or more sales, as an entirety or in parcels, at such place or places in
otherwise such manner and upon such notice as may be required by law, or, in the
absence of any such requirement, as Mortgagee may deem appropriate, and to make
conveyance to the purchaser or purchasers. Where the Mortgaged Property is
situated in more than one jurisdiction, notice as above provided shall be posted
and filed in all such jurisdictions (if such notices are required by law), and
all such Mortgaged Property may be sold in any such jurisdiction and any such
notice shall designate the jurisdiction where such Mortgaged Property is to be
sold. Nothing contained in this Section 4.02 shall be construed so as to limit
in any way Trustee's rights to sell the Mortgaged Property, or any portion
thereof, by private sale if, and to the extent that, such private sale is
permitted under the laws of the applicable jurisdiction or by public or private
sale after entry of a judgment by any court of competent jurisdiction so
ordering. Mortgagor hereby irrevocably appoints Trustee to be the attorney of
Mortgagor and in the name and on behalf of Mortgagor to execute and deliver any
deeds, transfers, conveyances, assignments, assurances and notices which
Mortgagor ought to execute and deliver and do and perform any and all such acts
and things which Mortgagor ought to do and perform under the covenants herein
contained and generally, to use the name of Mortgagor in the exercise of all or
any of the powers hereby conferred on Trustee. At any such sale: (i) whether
made under the power herein contained or any other legal enactment, or by virtue
of any judicial proceedings or any other legal right, remedy or recourse, it
shall not be necessary for Trustee to have physically present, or to have
constructive possession of, the Mortgaged Property (Mortgagor hereby
16
covenanting and agreeing to deliver to Trustee any portion of the Mortgaged
Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee) and the title to and right of possession of any such property
shall pass to the purchaser thereof as completely as if the same had been
actually present and delivered to purchaser at such sale, (ii) each instrument
of conveyance executed by Trustee shall contain a general warranty of title,
binding upon Mortgagor and its successors and assigns, (iii) each and every
recital contained in any instrument of conveyance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited therein,
including, without limitation, nonpayment of the Indebtedness, advertisement and
conduct of such sale in the manner provided herein and otherwise by law and
appointment of any successor Trustee hereunder, (iv) any and all prerequisites
to the validity thereof shall be conclusively presumed to have been performed,
(v) the receipt of Trustee or of such other party or officer making the sale
shall be a sufficient discharge to the purchaser or purchasers for its purchase
money and no such purchaser or purchasers, or its assigns or personal
representatives, shall thereafter be obligated to see to the application of such
purchase money, or be in any way answerable for any loss, misapplication or
nonapplication thereof, (vi) to the fullest extent permitted by law, Mortgagor
shall be completely and irrevocably divested of all of its right, title,
interest, claim and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar both at law and in equity
against Mortgagor, and against any and all other persons claiming or to claim
the property sold or any part thereof, by, through or under Mortgagor, and (vii)
to the extent and under such circumstances as are permitted by law, Mortgagee
may be a purchaser at any such sale, and shall have the right, after paying or
accounting for all costs of said sale or sales, to credit the amount of the bid
upon the amount of the Indebtedness (in the order of priority set forth in
Section 4.14 hereof) in lieu of cash payment.
(b) With respect to that portion, if any, of the Mortgaged Property
situated in the State of Wyoming, this instrument may be foreclosed by
advertisement and sale as provided by applicable Wyoming statutes.
(c) Upon the occurrence of an Event of Default, Mortgagee may exercise its
rights of enforcement with respect to the Mortgaged Properties or any part
thereof under the Applicable UCC of any State where any portion of the Mortgaged
Properties are located or under any other statute in force in any state to the
extent the same is applicable law. Cumulative of the foregoing and the other
provisions of this Section 4.02: (i) to the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default Mortgagee may enter
upon the Mortgaged Properties or otherwise upon Mortgagor's premises to take
possession of, assemble and collect the personal property portion of the
Mortgaged Properties or to render it unusable; (ii) upon the occurrence and
during the continuance of an Event of Default Mortgagee may require Mortgagor to
assemble the personal property and make it available at a place Mortgagee
designates which is mutually convenient to allow Mortgagee to take possession or
dispose of the personal property; (iii) written notice mailed to Mortgagor as
provided herein at least five (5) days prior to the date of public sale of the
personal property or prior to the date after which private sale of the personal
property will be made shall constitute reasonable notice; (iv) in the event of a
foreclosure of the liens, privileges and/or security interests evidenced hereby,
the personal property, or any part thereof, and the Mortgaged Properties, or any
part thereof, may, at the option of Mortgagee, be sold, as a whole or in parts,
together or separately (including, without limitation, where a portion of the
Mortgaged Properties is sold, the personal property related thereto may be sold
in connection therewith); (v) upon the occurrence and during the continuance of
an Event of Default, Mortgagee or the Trustee may, to the extent permitted under
applicable law, elect to treat the fixtures included in the Mortgaged Properties
either as real property or as personal property, or both, and proceed to
exercise such rights as apply thereto; and (vi) with respect to any sale of real
property included in the Mortgaged Properties made under the powers of sale
herein granted and conferred, Mortgagee or the Trustee may, to the extent
17
permitted by applicable law, include in such sale any personal property and
fixtures included in the Mortgaged Properties and relating to such real
property.
Section 4.03 Agents. Trustee or his successor or substitute may appoint or
delegate any one or more persons as agent to perform any act or acts necessary
or incident to any sale held by Trustee, including the posting of notices and
the conduct of sale, but in the name and on behalf of Trustee, his successor or
substitute. If Trustee or his successor or substitute shall have given notice of
sale hereunder, any successor or substitute trustee thereafter appointed may
complete the sale and the conveyance of the property pursuant thereto as if such
notice had been given by the successor or substitute trustee conducting the
sale.
Section 4.04 Judicial Foreclosure; Receivership. If any of the
Indebtedness shall become due and payable and shall not be promptly paid,
Trustee or Mortgagee shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction or for the enforcement of any other appropriate legal or equitable
remedy. In addition to all other remedies herein provided for, Mortgagor agrees
that, upon the occurrence of an Event of Default or any event or circumstance
which, with the lapse of time or the giving of notice, or both, would constitute
an Event of Default hereunder, Mortgagee shall as a matter of right be entitled
to the appointment of a receiver or receivers for all or any part of the
Mortgaged Property, whether such receivership be incident to a proposed sale (or
sales) of such property or otherwise, and without regard to the value of the
Mortgaged Property or the solvency of any person or persons liable for the
payment of the Indebtedness secured hereby, and Mortgagor does hereby consent to
the appointment of such receiver or receivers, waives any and all defenses to
such appointment, and agrees not to oppose any application therefor by
Mortgagee, and agrees that such appointment shall in no manner impair, prejudice
or otherwise affect the rights of Mortgagee under Article II hereof. Mortgagor
expressly waives notice of a hearing for appointment of a receiver and the
necessity for bond or an accounting by the receiver. Nothing herein is to be
construed to deprive Mortgagee of any other right, remedy or privilege it may
now or hereafter have under the law to have a receiver appointed. Any money
advanced by Trustee and/or Mortgagee in connection with any such receivership
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) included in the Indebtedness owing by Mortgagor to the Trustee
and/or Mortgagee and shall bear interest from the date of making such advance by
Trustee and/or Mortgagee until paid at the then applicable interest rate under
the Note (the "Applicable Rate").
Section 4.05 Foreclosure for Installments. Mortgagee shall also have the
option to proceed with foreclosure in satisfaction of any installments of the
Indebtedness which have not been paid when due either through the courts or by
directing Trustee or his successors in trust to proceed with foreclosure in
satisfaction of the matured but unpaid portion of the Indebtedness as if under a
full foreclosure, conducting the sale as herein provided and without declaring
the entire principal balance and accrued interest due; such sale may be made
subject to the unmatured portion of the Indebtedness, and any such sale shall
not in any manner affect the unmatured portion of the Indebtedness, but as to
such unmatured portion of the Indebtedness this Mortgage shall remain in full
force and effect just as though no sale had been made hereunder. It is further
agreed that several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the Indebtedness, it being the purpose hereof to
provide for a foreclosure and sale of the security for any matured portion of
the Indebtedness without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion of the Indebtedness.
18
Section 4.06 Separate Sales. The Mortgaged Property may be sold in one or
more parcels and in such manner and order as Mortgagee, in its sole discretion,
may elect, it being expressly understood and agreed that the right of sale
arising out of any Event of Default shall not be exhausted by any one or more
sales.
Section 4.07 Possession of Mortgaged Property. Mortgagor agrees to the
full extent that it lawfully may, that, in case one or more of the Events of
Default shall have occurred and shall not have been remedied, then, and in every
such case, Trustee or Mortgagee shall have the right and power to enter into and
upon and take possession of all or any part of the Mortgaged Property in the
possession of Mortgagor, its successors or assigns, or its or their agents or
servants, and may exclude Mortgagor, its successors or assigns, and all persons
claiming under Mortgagor, and its or their agents or servants wholly or partly
therefrom; and, holding the same, Trustee may use, administer, manage, operate
and control the Mortgaged Property and conduct the business thereof to the same
extent as Mortgagor, its successors or assigns, might at the time do and may
exercise all rights and powers of Mortgagor, in the name, place and stead of
Mortgagor, or otherwise as Trustee shall deem best. All costs, expenses and
liabilities of every character incurred by Trustee and/or Mortgagee in
administering, managing, operating, and controlling the Mortgaged Property shall
constitute a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Trustee and/or Mortgagee and shall bear
interest from date of expenditure until paid at the Applicable Rate, all of
which shall constitute a portion of the Indebtedness and shall be secured by
this Mortgage and all other security instruments.
Section 4.08 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor's
representatives, successors or assigns or any other person claiming any interest
in the Mortgaged Property by, through or under Mortgagor, are occupying or using
the Mortgaged Property or any part thereof, each and all shall immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day to day, terminable at the will of either the landlord or
tenant, or at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser; to the extent permitted
by applicable law, the purchaser at such sale shall, notwithstanding any
language herein apparently to the contrary, have the sole option to demand
immediate possession following the sale or to permit the occupants to remain as
tenants at will. In the event the tenant fails to surrender possession of said
property upon demand, the purchaser shall be entitled to institute and maintain
a summary action for possession of the Mortgaged Property (such as an action for
forcible entry and detainer) in any court having jurisdiction.
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power and remedy herein given to Trustee or Mortgagee shall be cumulative
and in addition to every other right, power and remedy herein specifically given
or now or hereafter existing in equity, at law or by statute (including
specifically those granted by the Applicable UCC in effect and applicable to the
Mortgaged Property or any portion thereof) each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and so often and in such order as may be deemed expedient by
Trustee or Mortgagee, and the exercise, or the beginning of the exercise, of any
such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power or remedy. No
delay or omission by Trustee or Mortgagee in the exercise of any right, power or
remedy shall impair any such right, power or remedy or operate as a waiver
thereof or of any other right, power or remedy then or thereafter existing.
Section 4.10 No Release of Obligations. Neither Mortgagor, any other
Infinity Party, any guarantor nor any other person hereafter obligated for
payment of all or any part of the Indebtedness shall be relieved of such
obligation by reason of (a) the failure of Trustee to comply with any request of
Mortgagor, or any guarantor or any other person so obligated to foreclose the
lien of this Mortgage or to
19
enforce any provision hereunder or under the any of the Loan Documents; (b) the
release, regardless of consideration, of the Mortgaged Property or any portion
thereof or interest therein or the addition of any other property to the
Mortgaged Property; (c) any agreement or stipulation between any subsequent
owner of the Mortgaged Property and Mortgagee extending, renewing, rearranging
or in any other way modifying the terms of this Mortgage without first having
obtained the consent of, given notice to or paid any consideration to Mortgagor,
any other Infinity Party, any guarantor or such other person, and in such event
Mortgagor, the Infinity Parties, guarantor and all such other persons 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 Mortgagee; or (d) by any other act or occurrence save and except the
complete payment of the Indebtedness and the complete fulfillment of all
obligations hereunder or under the Loan Documents.
Section 4.11 Release of and Resort to Collateral. Mortgagee may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
lien or security interest created in or evidenced by this Mortgage or its
stature as a first and prior lien and security interest in and to the Mortgaged
Property, and without in any way releasing or diminishing the liability of any
person or entity liable for the repayment of the Indebtedness. For payment of
the Indebtedness, Mortgagee may resort to any other security therefor held by
Mortgagee or Trustee in such order and manner as Mortgagee may elect.
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc.
To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment; provided, however,
that if the laws of any state do not permit the redemption period to be waived,
the redemption period is specifically reduced to the minimum amount of time
allowable by statute; (b) all notices of any Event of Default or of Mortgagee's
intention to accelerate maturity of the Indebtedness or of Trustee's election to
exercise or his actual exercise of any right, remedy or recourse provided for
hereunder or under the Loan Documents; and (c) any right to a marshalling of
assets or a sale in inverse order of alienation. If any law referred to in this
Mortgage and now in force, of which Mortgagor or its successor or successors
might take advantage despite the provisions hereof, shall hereafter be repealed
or cease to be in force, such law shall thereafter be deemed not to constitute
any part of the contract herein contained or to preclude the operation or
application of the provisions hereof.
Section 4.13 Discontinuance of Proceedings. In case Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the Loan Documents and shall thereafter elect to discontinue or abandon same for
any reason, Mortgagee shall have the unqualified right so to do and, in such an
event, Mortgagor and Mortgagee shall be restored to their former positions with
respect to the Indebtedness, this Mortgage, the Loan Documents, the Mortgaged
Property and otherwise, and the rights, remedies, recourses and powers of
Mortgagee shall continue as if same had never been invoked.
Section 4.14 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by Trustee
or Mortgagee in any proceedings for the enforcement hereof or otherwise, whose
application has not elsewhere herein been specifically provided for, shall be
applied:
(a) first, to the payment of all costs and expenses incurred by Trustee or
Mortgagee incident to the enforcement of this Mortgage, the Loan Documents or
any of the Indebtedness (including, without
20
limiting the generality of the foregoing, expenses of any entry or taking of
possession, of any sale, of advertisement thereof, and of conveyances, and court
costs, compensation of agents and employees, legal fees and a reasonable
commission to Trustee acting in connection herewith or hereunder), and to the
payment of all other charges, expenses, liabilities and advances incurred or
made by Trustee or Mortgagee under this Mortgage or in executing any trust or
power hereunder;
(b) second, to payment of the Indebtedness in such order and manner as
Mortgagee may elect in Mortgagee's sole discretion; and
(c) third, to Mortgagor or such other persons as may be entitled thereto
by law or as otherwise required by any court of competent jurisdiction.
Section 4.15 Resignation of Operator. In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or Mortgagee shall exercise any remedies under this
Mortgage with respect to any portion of the Mortgaged Property (or Mortgagor
shall transfer any Mortgaged Property "in lieu of" foreclosure), Mortgagee or
Trustee shall have the right to request that any operator of any Mortgaged
Property which is either Mortgagor or any affiliate of Mortgagor to resign as
operator under the joint operating agreement applicable thereto, and no later
than 60 days after receipt by Mortgagor of any such request, Mortgagor shall
resign (or cause such other party to resign) as operator of such Mortgaged
Property.
Section 4.16 INDEMNITY. IN CONNECTION WITH ANY ACTION TAKEN BY TRUSTEE
AND/OR MORTGAGEE PURSUANT TO THIS MORTGAGE, TRUSTEE AND/OR MORTGAGEE AND THEIR
OFFICERS, DIRECTORS, PARTNERS, MEMBERS, INVESTORS, EQUITY HOLDERS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ADVISORS, ATTORNEYS, ACCOUNTANTS AND EXPERTS AND ANY
PERSONS OR ENTITIES OWNED OR CONTROLLED BY TRUSTEE, OR MORTGAGEE OR ANY SUCH
OTHER PERSON OR ENTITY ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE FOR ANY LOSS
SUSTAINED BY MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE HAS RECEIVED
FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS OR ANY ACT OR
OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING OR
CONTROLLING THE MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY RESULT FROM THE
ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS CAUSED BY THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY, NOR SHALL
TRUSTEE AND/OR MORTGAGEE BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION,
DUTY OR LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY AGREE TO
INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY
HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE
INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS MORTGAGE OR THE EXERCISE OF
RIGHTS OR REMEDIES HEREUNDER; SHOULD TRUSTEE AND/OR MORTGAGEE MAKE ANY
EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A
DEMAND OBLIGATION (WHICH OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY)
OWING BY MORTGAGOR TO TRUSTEE AND/OR MORTGAGEE AND SHALL BEAR INTEREST FROM THE
DATE EXPENDED UNTIL PAID AT A RATE PER ANNUM EQUAL TO THE RATE OF INTEREST
CHARGED UNDER THE NOTES AFTER AN EVENT OF DEFAULT PLUS 2%, SHALL BE A PART OF
THE INDEBTEDNESS AND SHALL BE SECURED BY THIS MORTGAGE AND ANY OTHER SECURITY
INSTRUMENT. MORTGAGOR HEREBY ASSENTS TO, RATIFIES AND CONFIRMS ANY AND ALL
ACTIONS OF TRUSTEE AND/OR MORTGAGEE WITH RESPECT TO THE MORTGAGED PROPERTY TAKEN
UNDER THIS MORTGAGE. THE LIABILITIES OF MORTGAGOR AS SET FORTH IN THIS SECTION
4.16 SHALL SURVIVE THE TERMINATION OF THIS MORTGAGE.
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ARTICLE V
Trustee
Section 5.01 Duties, Rights, and Powers of Trustee. It shall be no part of
the duty of Trustee to see to any recording, filing or registration of this
Mortgage or any other instrument in addition or supplemental thereto, or to give
any notice thereof, or to see to the payment of or be under any duty in respect
of any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Property, or any part thereof, or against Mortgagor,
or to see to the performance or observance by Mortgagor of any of the covenants
and agreements contained herein. Trustee shall not be responsible for the
execution, acknowledgment or validity of this Mortgage or of any instrument in
addition or supplemental hereto or for the sufficiency of the security purported
to be created hereby, and makes no representation in respect thereof or in
respect of the rights of Mortgagee. Trustee shall have the right to advise with
counsel upon any matters arising hereunder and shall be fully protected in
relying as to legal matters on the advice of counsel. Trustee shall not incur
any personal liability hereunder except for Trustee's own willful misconduct;
and Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by
him hereunder, believed by him in good faith to be genuine.
Section 5.02 Successor Trustee. Trustee may resign by written notice
addressed to Mortgagee or be removed at any time with or without cause by an
instrument in writing duly executed on behalf of Mortgagee. In case of the
death, resignation or removal of Trustee, a successor trustee may be appointed
by Mortgagee by instrument of substitution complying with any applicable
requirements of law, or, in the absence of any such requirement, without other
formality than appointment and designation in writing. Written notice of such
appointment and designation shall be given by Mortgagee to Mortgagor, but the
validity of any such appointment shall not be impaired or affected by failure to
give such notice or by any defect therein. Such appointment and designation
shall be full evidence of the right and authority to make the same and of all
the facts therein recited, and, upon the making of any such appointment and
designation, this Mortgage shall vest in the successor trustee all the estate
and title in and to all of the Mortgaged Property, and the successor trustee
shall thereupon succeed to all of the rights, powers, privileges, immunities and
duties hereby conferred upon Trustee named herein, and one such appointment and
designation shall not exhaust the right to appoint and designate a successor
trustee hereunder but such right may be exercised repeatedly as long as any
Indebtedness remains unpaid hereunder. To facilitate the administration of the
duties hereunder, Mortgagee may appoint multiple trustees to serve in such
capacity or in such jurisdictions as Mortgagee may designate.
Section 5.03 Retention of Moneys. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by law), and Trustee shall be under
no liability for interest on any moneys received by him hereunder.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc. With respect to any
portions of the Mortgaged Property located in any state or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of Trustee as herein provided, the general
language of conveyance hereof to Trustee is intended and the same shall be
construed as words of mortgage unto and in favor of Mortgagee and the rights and
authority granted to Trustee herein may be enforced and asserted by Mortgagee in
accordance with the laws of the jurisdiction in which such portion of the
Mortgaged Property is located and the same may be foreclosed at the option of
Mortgagee as to any
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or all such portions of the Mortgaged Property in any manner permitted by the
laws of the jurisdiction in which such portions of the Mortgaged Property is
situated. This Mortgage may be construed as a mortgage, deed of trust, chattel
mortgage, conveyance, assignment, security agreement, pledge, financing
statement, hypothecation or contract, or any one or more of them, in order fully
to effectuate the lien hereof and the purposes and agreements herein set forth.
Section 6.02 Release of Mortgage. If all Indebtedness secured hereby shall
be paid in full in cash and all Loan Documents terminated, Mortgagee shall
forthwith cause satisfaction and discharge of this Mortgage to be entered upon
the record at the expense of Mortgagor and shall execute and deliver or cause to
be executed and delivered such instruments of satisfaction and reassignment as
may be appropriate. Otherwise, this Mortgage shall remain and continue in full
force and effect.
Section 6.03 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.04 Successors and Assigns of Parties. The term "Mortgagee" as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of any of the Indebtedness secured hereby. The terms used to designate Trustee,
Mortgagee and Mortgagor shall be deemed to include the respective heirs, legal
representatives, successors and assigns of such parties.
Section 6.05 Satisfaction of Prior Encumbrance. To the extent that
proceeds of the Notes are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Mortgagee at Mortgagor's request,
and Mortgagee shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released, and it is expressly understood
that, in consideration of the payment of such other indebtedness by Mortgagee,
Mortgagor hereby waives and releases all demands and causes of action for
offsets and payments to, upon and in connection with the said indebtedness.
Section 6.06 Subrogation of Trustee. This Mortgage is made with full
substitution and subrogation of Trustee and his successors in this trust and his
and their assigns in and to all covenants and warranties by others heretofore
given or made in respect of the Mortgaged Property or any part thereof.
Section 6.07 Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
Section 6.08 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be given or furnished in
accordance with the terms of the Purchase Agreement relating to the giving of
notices (it being agreed to and understood that delivery to Infinity of any such
notice, request, consent, demand or other communication shall be deemed delivery
to Mortgagor).
Section 6.09 Counterparts. This Mortgage is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one jurisdiction,
descriptions of only those portions of the Mortgaged Property located in, and
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descriptions of the Prior Mortgages (as defined herein) for, the jurisdiction in
which a particular counterpart is recorded shall be attached as Exhibit A
thereto. An Exhibit A containing a description of all Mortgaged Property
wheresoever situated will be attached to that certain counterpart to be attached
to a Financing Statement and filed with the Secretary of State of Wyoming in the
Uniform Commercial Code Records. Each of such counterparts shall for all
purposes be deemed to be an original and all such counterparts shall together
constitute but one and the same instrument provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 6.10 Effective as a Financing Statement. This Mortgage, among
other things, covers goods which are or are to become fixtures on the real
property described herein and covers as-extracted collateral related to the
real/immovable property described herein. This Mortgage shall be effective as a
financing statement (i) filed as a fixture filing with respect to all fixtures
included within the Mortgaged Property, (ii) covering as-extracted collateral
with respect to all as-extracted collateral included within the Mortgaged
Property (including, without limitation, all oil, gas, other minerals and other
substances of value which may be extracted from the earth at the wellhead or
minehead) and (iii) covering all other Mortgaged Property. This Mortgage is to
be filed for record in the real/immovable property records of each county or
parish where any part of the Mortgaged Property is situated and may also be
filed in the offices of the Bureau of Land Management or the Minerals Management
Service or any relevant state agency (or any successor agencies). The mailing
address of Mortgagor is the address of Mortgagor set forth at the end of this
Mortgage and the address of Mortgagee from which information concerning the
security interests hereunder may be obtained is the address of Mortgagee set
forth at the end of this Mortgage. Nothing contained in this paragraph shall be
construed to limit the scope of this Mortgage nor its effectiveness as a
financing statement covering any type of property. A carbon, photographic,
facsimile or other reproduction of this Mortgage or of any financing statement
relating to this Mortgage shall be sufficient as a financing statement for any
of the purposes referred to this Section. Without limiting any other provision
herein, Mortgagor hereby authorizes Mortgagee to file, in any filing or
recording office, one or more financing statements and any renewal or
continuation statements thereof.
Section 6.11 No Impairment of Security. To the extent allowed by
applicable law, the lien, privilege, security interest and other security rights
hereunder shall not be impaired by any indulgence, moratorium or release which
may be granted including, but not limited to, any renewal, extension or
modification which may be granted with respect to any secured obligations, or
any surrender, compromise, release, renewal, extension, exchange or substitution
which may be granted in respect of the Mortgaged Property (including without
limitation Production Proceeds), or any part thereof or any interest therein, or
any release or indulgence granted to any borrower, endorser, guarantor or surety
of any Indebtedness.
Section 6.12 Acts Not Constituting Waiver. Any Event of Default may be
waived without waiving any other prior or subsequent Event of Default. Any Event
of Default may be remedied without waiving the Event of Default remedied.
Neither failure to exercise, nor delay in exercising, any right, power or remedy
upon any Event of Default shall be construed as a waiver of such Event of
Default or as a waiver of the right to exercise any such right, power or remedy
at a later date. No single or partial exercise of any right, power or remedy
hereunder shall exhaust the same or shall preclude any other or further exercise
thereof, and every such right, power or remedy hereunder may be exercised at any
time and from time to time. No modification or waiver of any provision hereof
nor consent to any departure by Mortgagor therefrom shall in any event be
effective unless the same shall be in writing and signed by Mortgagee and then
such waiver or consent shall be effective only in the specific instances, for
the purpose for which given and to the extent therein specified. No notice nor
demand on Mortgagor in any case shall of itself entitle Mortgagor to any other
or further notice or demand in similar or other
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circumstances. Acceptance of any payment in an amount less than the amount then
due on any Indebtedness shall be deemed an acceptance on account only and shall
not in any way excuse the existence of an Event of Default hereunder.
Section 6.13 Mortgagor's Successors. In the event the ownership of any
Mortgaged Property or any part thereof becomes vested in a person other than
Mortgagor, then, without notice to Mortgagor, such successor or successors in
interest may be dealt with, with reference to this Mortgage and to the
obligations secured hereby, in the same manner as with Mortgagor, without in any
way vitiating or discharging Mortgagor's liability hereunder or for the payment
of the Indebtedness or performance of the obligations secured hereby. No
transfer of any Mortgaged Property, no forbearance, and no extension of the time
for the payment of any Indebtedness secured hereby, shall operate to release,
discharge, modify, change or affect, in whole or in part, the liability of
Mortgagor hereunder or for the payment of the Indebtedness or performance of the
obligations secured hereby, or the liability of any other person hereunder or
for the payment of the Indebtedness.
Section 6.14 Certain Consents. Except where otherwise expressly provided
herein, in any instance hereunder where the approval, consent or the exercise of
judgment of Mortgagee is required, the granting or denial of such approval or
consent and the exercise of such judgment shall be within the sole discretion of
Mortgagee, and Mortgagee shall not, for any reason or to any extent, be required
to grant such approval or consent or exercise such judgment in any particular
manner, regardless of the reasonableness of either the request or the judgment
of such party.
Section 6.15 GOVERNING LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN WHICH A PORTION OF
THE MORTGAGED PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION
OF THE MORTGAGED PROPERTY) NECESSARILY OR, IN THE SOLE DISCRETION OF THE
MORTGAGEE, APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE
MATTERS RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS,
PRIVILEGES, SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE TRUSTEE OR
MORTGAGEE GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION
OF THE MORTGAGED PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS
OF) SUCH STATE.
Section 6.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT IT
IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT HAS
IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS
BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS MORTGAGE; AND HAS RECEIVED THE
ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS MORTGAGE; AND THAT IT RECOGNIZES
THAT CERTAIN OF THE TERMS OF THIS MORTGAGE RESULT IN ONE PARTY ASSUMING THE
LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER
PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY
EXCULPATORY PROVISION OF THIS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE
OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
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Section 6.17 FINAL AGREEMENT. THE LOAN DOCUMENTS, THIS MORTGAGE AND THE
SECURITY DOCUMENTS AND THE OTHER WRITTEN DOCUMENTS EXECUTED IN CONNECTION
THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 6.18 Subrogation; Prior Mortgages. To the extent that proceeds of
the Indebtedness are used to pay obligations secured by any outstanding lien,
privilege, security interest, charge or prior encumbrance against any Mortgaged
Property ("Prior Mortgages"), such proceeds have been advanced at Mortgagor's
request, and the Trustee for the benefit of the Mortgagee or the Mortgagee as
agent for the party or parties advancing the same shall be subrogated to any and
all rights, security interests and liens owned by any owner or holder of such
Prior Mortgages, privileges, security interests, charges or encumbrances,
irrespective of whether said liens, privileges, security interests, charges or
encumbrances are released, and it is expressly understood that, in consideration
of the payment of such obligations, Mortgagor hereby waives and releases all
demands and causes of action for offsets and payments to, upon and in connection
with the said obligations. Mortgagor and Mortgagee acknowledge that this
Mortgage amends, restates and consolidates the Prior Mortgages, and all liens,
claims, rights, titles, interests and benefits created and granted by the Prior
Mortgages shall continue to exist, remain valid and subsisting, shall not be
impaired or released hereby, shall remain in full force and effect and are
hereby renewed, extended, carried forward and conveyed as security for the
Indebtedness.
Section 6.19 Compliance with Usury Laws. It is the intent of Mortgagor,
Mortgagee and all other parties to the Transaction Documents to contract in
strict compliance with applicable usury law from time to time in effect. In
furtherance thereof, it is stipulated and agreed that none of the terms and
provisions contained herein or in the other Transaction Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
collected, charged, taken or received by applicable law from time to time in
effect.
Section 6.20 Certain Obligations of Mortgagor. Without limiting
Mortgagor's obligations hereunder, Mortgagor's liability hereunder and the
obligations secured hereby shall extend to and include all post petition
interest, expenses and other duties and liabilities with respect to Mortgagor's
obligations hereunder which would be owed but for the fact that the same may be
unenforceable due to the existence of a bankruptcy, reorganization or similar
proceeding.
Section 6.21 Authority of Mortgagee. The holders of the Indebtedness
secured hereby may, by agreement among them, provide for and regulate the
exercise of rights and remedies hereunder, but, unless and until modified to the
contrary in writing signed by all such persons and recorded in the same counties
as this Mortgage is recorded, (i) all persons other than Mortgagor and its
affiliates shall be entitled to rely on the releases, waivers, consents,
approvals, notifications and other acts (including, without limitation, or the
appointment or substitution of trustees hereunder and the bidding in of all or
any part of the Indebtedness held by any one or more persons, whether the same
be conducted under the provisions hereof or otherwise) of Mortgagee, without
inquiry into any such agreements or the existence of required consent or
approval of any holders of Indebtedness and without the joinder of any party
other than Mortgagee in such releases, waivers, consents, approvals,
notifications or other acts and (ii) all notices, requests, consents, demands
and other communications required or permitted to be given hereunder may be
given to Mortgagee.
[rest of page intentionally left blank; signature page follows]
26
WITNESS THE EXECUTION HEREOF, this ___ day of ________, 2005, to be
effective as of said date (the "Effective Date").
MORTGAGOR:
INFINITY OIL & GAS OF WYOMING, INC.
By: __________________________________
Name:
Title:
The name and address of the Debtor/Mortgagor is:
Infinity Oil & Gas of Wyoming, Inc.
950 17th Street, Suite 800
Denver, Colorado 80202
The name and address of the Secured Party/Mortgagee is:
Promethean Asset Management L.L.C.
750 Lexington, 22nd Floor
New York, New York 10022
27
STATE OF COLORADO )
)
CITY AND COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this ____ day of
_________, 2005, by __________________ as _______________________ of
____________________, a [__________] corporation, on behalf of said
corporation.
Witness my hand and official seal.
My Commission Expires: _______________________________
___________________________________
Notary Public
EXHIBIT A
Property Descriptions
[TO INCLUDE PROPERTY DESCRIPTION, COUNTY, DESCRIPTION OF INTEREST IN PROPERTY
AND UNITS, WORKING INTEREST/ROYALTY INTEREST, ETC.]