EXHIBIT 10.23
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement (this "Amendment") is made and
entered into effective as of June 3, 2014 (the "Effective Date"), by and between
Synergy Resources Corporation, a Colorado corporation (the "Borrower"), each of
the Lenders party to the Credit Agreement (as defined below) ("Lenders"), and
Community Banks of Colorado, a division of NBH Bank, N.A., individually, as
Issuing Bank and as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent"), and
is as follows:
Preliminary Statements
A. Lenders, the Administrative Agent and the Borrower are parties to
an Amended and Restated Credit Agreement dated as of November 28, 2012, as
amended by that First Amendment dated as of February 12, 2013 (the "First
Amendment"), that Second Amendment (the "Second Amendment") dated as of June 28,
2013 (as amended, the "Credit Agreement") and that Third Amendment (the "Third
Amendment") dated as of December 20, 2013. Capitalized terms which are used, but
not defined, in this Amendment will have the meanings given to them in the
Credit Agreement.
B. The Borrower has requested that Lenders and the Administrative
Agent make certain amendments to the Credit Agreement, all as more particularly
set forth herein.
C. Lenders and the Administrative Agent are willing to consent to
such requests and so amend the Credit Agreement to reflect such modifications,
all on the terms of this Amendment.
Statement of Amendment
In consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, Lenders, the
Administrative Agent, SunTrust, Key Bank and the Borrower hereby agree as
follows:
1. Amendments to Credit Agreement. Subject to the terms and provisions of
this Amendment, the Credit Agreement is hereby amended as follows:
(a) The following definitions in Section 1.01 of the Credit Agreement are
hereby amended and restated in their entirety as follows:
"Applicable Margin" means, for any day, the rate per annum set forth
in the Utilization Grid below based upon the Type of Loan or Borrowing and
the Borrowing Base Utilization Percentage then in effect, subject to a
minimum interest rate floor of 2.5% per annum:
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BORROWING BASE LIBOR ABR
UTILIZATION MARGIN MARGIN
----------------------------------------------------
= 90% 275 bps 150 bps
----------------------------------------------------
= 75% and < 90% 250 bps 125 bps
----------------------------------------------------
= 50% and < 75% 225 bps 100 bps
----------------------------------------------------
= 25% and < 50% 200 bps 75 bps
----------------------------------------------------
< 25% 175 bps 50 bps
----------------------------------------------------
"Termination Date" means the earlier to occur of (i) May 29, 2019 or
(ii) the date that the Aggregate Maximum Credit Amount is sooner
terminated pursuant to Section 2.06 or Section 10.02."
(b) The first sentence of Section 3.05(e) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"The Borrower agrees to pay to the Administrative Agent for the
account of each Lender an unused commitment fee equal to (i) if the
Borrowing Base Utilization Percentage is less than 50%, 0.375% per annum
and (ii) if the Borrowing Base Utilization Percentage is equal to or
greater than 50%, 0.50% per annum, in each case calculated on the average
daily amount of the unused Commitment of such lender during the period
from and including the date of this Agreement to but excluding the later
of the date of termination of the Commitments."
(c) Clause (ii) of Section 8.01(n) of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"(ii) on a quarterly basis by the 45th day after the end of each
fiscal quarter of the Borrower, an updated report setting forth the
forecasted Capital Expenditure budget for the Borrower and its
Subsidiaries for the remainder of the Borrower's fiscal year; provided,
however, that in the case of the report delivered during the fourth
quarter of each fiscal year, such report shall set forth the forecasted
Capital Expenditure budget for the Borrower and its Subsidiaries for the
following fiscal year; and"
(d) Section 9.01(a) of the Credit Agreement is hereby amended and restated
in its entirety as follows:
"(a) Total Funded Debt to EBITDAX. The Borrower will not, at any
time, permit its ratio of Total Funded Debt as of such time to EBITDAX to
be greater than or equal to 4.0 to 1.0, determined at the fiscal year
ending August 31, 2012, and each fiscal quarter thereafter."
(e) Section 9.01(c) and Section 9.01(d) of the Credit Agreement are hereby
deleted and removed from the Credit Agreement.
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(f) Annex I to the Credit Agreement is hereby amended and restated in its
entirety to conform to Annex I attached hereto. The adjustment to each Lender's
Applicable Percentage as set forth on Annex I attached hereto shall be effective
as of the Increase Date (defined below) and each Lender's Applicable Percentage
prior to the Increase Date shall be as set forth in Annex I to the Credit
Agreement.
2. Adjustments. On the Effective Date, Texas Capital Bank, N.A. will be
paid off and will no longer be a Lender under the Credit Agreement. The Borrower
shall, in coordination with the Administrative Agent, repay the outstanding
Loans of Texas Capital Bank, N.A., and incur additional Loans from the Lenders,
in each case to the extent necessary so that Texas Capital Bank, N.A. is paid in
full with respect to its Loans and all of the Lenders participate in the
Borrowings ratably on the basis of their respective Commitments (after giving
effect to any adjustments contemplated by Section 1(f) hereof).
3. Borrowing Base. In connection with the third Scheduled Redetermination
contemplated by Section 2.07 of the Credit Agreement, the Administrative Agent,
the Lenders and the Borrower have agreed that the Borrowing Base shall be
increased to $110,000,000, which Borrowing Base adjustment shall be effective as
of the later of June 3, 2014, or the satisfaction of the conditions set forth in
Section 7 hereof (the "Increase Date").
4. Reaffirmation of Security. The Borrower, Lenders and the Administrative
Agent hereby expressly intend that this Amendment shall not in any manner (a)
constitute the refinancing, refunding, payment or extinguishment of the
Indebtedness evidenced by the existing Loan Documents; (b) be deemed to evidence
a novation of the outstanding balance of the Indebtedness; or (c) replace,
impair, or extinguish the creation, attachment, perfection or priority of the
Liens on the Borrowing Base Properties. The Borrower ratifies and reaffirms any
and all grants of Liens to Lenders and the Administrative Agent on the Borrowing
Base Properties as security for the Indebtedness, and the Borrower acknowledges
and confirms that the grants of the Liens to Lenders and the Administrative
Agent on the Borrowing Base Properties: (i) represent continuing Liens on all of
the Borrowing Base Properties, (ii) secure all of the Indebtedness, and (iii)
represent valid, first and best Liens on all of the Borrowing Base Properties
except to the extent of any Permitted Liens
5. Conditions Precedent. This Amendment will not become effective until the
date on which each of the following conditions is satisfied:
(a) The Borrower shall have executed and delivered to the Administrative
Agent the Promissory Notes attached hereto as Exhibit A (the "Amendment Notes").
These Amendment Notes are issued in substitution for and replacement of, but not
repayment of (i) those certain Promissory Notes, dated as of December 20, 2013,
issued by the Borrower in favor of the Lenders in connection with the Third
Amendment. The Amendment Notes shall constitute a "Note" as defined and
described in the Credit Agreement. From and after the date hereof, all
references in the Credit Agreement and in all other Loan Documents to the
"Notes" shall be deemed to be references to the Amendment Notes.
(b) The Administrative Agent shall have received counterparts of this
Amendment from the Borrower and each of the Lenders.
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(c) The Administrative Agent shall have received all fees and other amounts
due and payable on or prior to the effective date of this Amendment.
(d) The Administrative Agent shall have received title information
satisfactory to it on at least 80% (by NPV) of the total Proved Reserves
attributable to the Oil and Gas Properties evaluated in such Reserve Report,
with such 80% first being satisfied from Proved Developed Producing Reserves,
next from Proved Developed Nonproducing Reserves and thereafter from Proved
Undeveloped Reserves.
(e) The Administrative Agent shall have received information and evidence
satisfactory to it that the Mortgaged Properties represent at least 80% (by NPV)
of the Oil and Gas Properties evaluated in the most recently completed Reserve
Report, with such 80% first being satisfied from Proved Developed Producing,
next from Proved Developed Nonproducing Reserves and thereafter from Proved
Undeveloped Reserves.
(f) No Default or Event of Default shall have occurred that is continuing.
(g) The Administrative Agent shall have received such other documents as
the Administrative Agent or counsel to the Administrative Agent may reasonably
request.
The Administrative Agent shall notify the Borrower and the Lenders of the
effectiveness of this Amendment, and such notice shall be conclusive and
binding.
6. Representations. To induce Lenders and the Administrative Agent to
accept this Amendment, the Borrower hereby represents and warrants to Lenders
and the Administrative Agent as follows:
(a) Power and Authority. The Borrower has full power and authority to enter
into, and to perform its obligations under, this Amendment, and the execution
and delivery of, and the performance of its obligations under and arising out
of, this Amendment have been duly authorized by all necessary corporate action.
(b) Legal, Valid and Binding Obligation. This Amendment constitutes the
legal, valid and binding obligation of the Borrower enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally.
(c) Continued Representations and Warranties. After giving effect to the
amendments contained in this Amendment, the Borrower's representations and
warranties contained in the Loan Documents are complete and correct as of the
date of this Amendment with the same effect as though these representations and
warranties had been made again on and as of the date of this Amendment, subject
to those changes as are not prohibited by, or do not constitute Events of
Default under, the Credit Agreement.
(d) No Defenses. The Borrower has no defenses to payment, counterclaims, or
right of set-off with respect to any Indebtedness existing as of the Effective
Date.
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(e) No Events of Default. No Event of Default has occurred and is
continuing.
(f) Material Adverse Effect. The Borrower hereby affirms that no Material
Adverse Effect has occurred
7. Fees, Costs and Expenses. As a condition of this Amendment, the Borrower
will (i) in connection with the execution and delivery of this Amendment, pay to
the Administrative Agent for the account of each Lender (A) a fee equal 0.25% of
the such Lender's Commitment as in effect prior to this Amendment, and(B) a fee
equal 0.375% of the increase in such Lender's Commitment as a result of this
Amendment, and (ii) reimburse the Administrative Agent's for all out of pocket
expenses (including reasonable attorneys' fees) incurred in connection with this
Amendment.
8. Release. The Borrower, on its behalf and, as applicable, on behalf of
the Borrower's officers, directors, shareholders, Affiliates, Subsidiaries,
successors and assigns (collectively, the "Releasing Parties"), hereby
represents and warrants that such Releasing Parties have no claims,
counterclaims, setoffs, actions or causes of action, damages or liabilities of
any kind or nature whatsoever, whether in law or in equity, in contract or in
tort, whether now accrued or hereafter maturing (collectively, "Claims") against
Lenders or the Administrative Agent, their direct or indirect Affiliates, or any
of the foregoing's respective directors, officers, employees, attorneys and
legal representatives, or the heirs, administrators, successors or assigns of
any of them (collectively, "Lender Parties") to the extent that any such Claim
directly or indirectly arises out of, is based upon or is in any manner
connected with, any Prior Related Event. The Borrower, on its behalf and, as
applicable, on behalf of the other Releasing Parties, voluntarily releases and
forever discharges all Lender Parties from any and all Claims, whether known or
unknown, to the extent that any such Claim directly or indirectly arises out of,
is based upon or is in any manner connected with any Prior Related Event. "Prior
Related Event" means any transaction, event, circumstance, action, failure to
act, occurrence of any type or sort, whether known or unknown, which occurred,
existed, was taken, was permitted or begun in accordance with, pursuant to or by
virtue of: (a) any of the terms of any Loan Document or this Amendment, (b) any
actions, transactions, matters or circumstances related hereto or to any Loan
Document, (c) the conduct of the relationship between any Lender Party and the
Borrower and its Subsidiaries, or (d) any other actions or inactions by any
Lender Party, in each case on or prior to the Effective Date.
9. Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents.
The provisions of the Credit Agreement (as amended by this Amendment) shall
remain in full force and effect in accordance with its terms following the
effectiveness of this Amendment. Except as expressly amended hereby, all of the
provisions of the Credit Agreement are ratified and confirmed. The existing Loan
Documents, except as amended by this Amendment, shall remain in full force and
effect, and each of them is hereby ratified and confirmed by the Borrower,
Lenders and the Administrative Agent.
10. One Agreement; References; Fax Signature. The Credit Agreement, as
amended by this Amendment, will be construed as one agreement. Each reference in
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the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein", or
words of like import shall mean and be a reference to the Credit Agreement as
amended hereby, and each reference to the Credit Agreement in any Loan Document
or any other document, instrument or agreement executed and/or delivered in
connection with the Credit Agreement shall mean and be a reference to the Credit
Agreement as amended hereby. This Amendment may be signed by facsimile
signatures or other electronic delivery of an image file reflecting the
execution hereof, and if so signed, (a) may be relied on by each party as if the
document were a manually signed original and (b) will be binding on each party
for all purposes.
11. No Implied Consent or Waiver. This Amendment shall not be construed as
consent to the departure from, or a waiver of the terms and conditions of, the
Credit Agreement except as expressly set forth herein.
12. Captions. The headings to the Sections of this Amendment have been
inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions.
13. Counterparts. This Amendment may be executed in multiple counterparts,
each of which shall be an original but all of which together shall constitute
one and the same instrument.
14. Entire Agreement. This Amendment sets forth the entire agreement of the
parties with respect to the subject matter of this Amendment and supersedes all
previous understandings, written or oral, in respect of this Amendment. At no
time shall the prior or subsequent course of conduct by the Borrower, Lenders or
the Administrative Agent directly or indirectly limit, impair or otherwise
adversely affect any of the parties' rights or remedies in connection with this
Amendment or any of the documents, instruments and agreements executed in
connection herewith, as Lenders, the Administrative Agent and the Borrower agree
that this Amendment shall only be amended by written instruments executed by
Lenders, the Administrative Agent and the Borrower. Except to the extent that
the Loan Documents are expressly amended by this Amendment, if there is any
conflict, ambiguity, or inconsistency, in the Administrative Agent's judgment,
between the terms of this Amendment and any of the other Loan Documents, then
the applicable terms and provisions, in the Administrative Agent's judgment,
providing Lenders and the Administrative Agent with greater rights, remedies,
powers, privileges, or benefits will control.
15. Governing Law; Severability. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of Colorado (without
regard to its conflicts of law principles). If any term of this Amendment is
found invalid under Colorado law or laws of mandatory application by a court of
competent jurisdiction, the invalid term will be considered excluded from this
Amendment and will not invalidate the remaining terms of this Amendment.
16. WAIVER OF JURY TRIAL. THE BORROWER, LENDERS AND THE ADMINISTRATIVE
AGENT EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR
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PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[signature page follows]
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The parties have caused this Amendment to be duly executed and delivered as
of the day and year first above written.
THE BORROWER: SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
ADMINISTRATIVE AGENT: COMMUNITY BANKS OF
COLORADO,
as Administrative Agent
By: /s/ Sarah Burchett
------------------------------
Name: Sarah Burchett
Title: Vice President
LENDERS: COMMUNITY BANKS OF
COLORADO,
as a Lender
By: /s/ Sarah Burchett
------------------------------
Name: Sarah Burchett
Title: Vice President
COBIZ BANK, A COLORADO CORPORATION,
DBA COLORADO BUSINESS BANK,
as a Lender
By: /s/ Douglas K. Derks
------------------------------
Name: Douglas K. Derks
Title: Senior Vice President
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AMEGY BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Kevin Donaldson
------------------------------
Name: Kevin Donaldson
Title Senior Vice President
SUNTRUST BANK,
as a Lender
By: /s/ Chulley Bogle
------------------------------
Name: Chulley Bogle
Title: Vice President
KEYBANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ George E. McKean
------------------------------
Name: George E. McKean
Title: Senior Vice President
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ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts
Name of Lender Applicable Maximum Credit Amount of
Percentage Amount Commitment on the
Effective Date
-------------------------------------------------------------------------------------
Community Banks of Colorado 26.36363636% $79,090,909.09 $29,000,000.00
-------------------------------------------------------------------------------------
Amegy Bank National Association 23.63636364% $70,909,090.91 $26,000,000.00
-------------------------------------------------------------------------------------
CoBiz Bank, a Colorado
corporation, dba Colorado
Business 9.09090909% $27,272,727.27 $10,000,000.00
Bank
-------------------------------------------------------------------------------------
SunTrust Bank 20.45454545% $61,363,636.36 $22,500,000.00
-------------------------------------------------------------------------------------
Key Bank National Association 20.45454545% $61,363,636.36 $22,500,000.00
-------------------------------------------------------------------------------------
TOTAL 100.0000000000% $ 300,000,000.00 $ 110,000,000.00
-------------------------------------------------------------------------------------
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PROMISSORY NOTE
$79,090,909.09 Original Note: November 28, 2012
First Amendment and Restatement: June 28, 2013
Second Amendment and Restatement: December 20, 2013
Third Amendment and Restatement: June 3, 2014
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
"Borrower"), hereby promises to pay to Community Banks of Colorado, a division
of NBH Bank, N.A. (the "Lender," and, in its capacity as administrative agent,
the "Administrative Agent"), or its assigns, at 7800 E. Orchard, Greenwood
Village, Colorado 80111, the principal sum of Seventy-Nine Million Ninety
Thousand Nine Hundred Nine and 09/100 dollars ($79,090,909.09) (or such lesser
amount as shall equal the aggregate unpaid principal amount of the Loans made by
the Lender to the Borrower under the Credit Agreement, as hereinafter defined),
in lawful money of the United States of America and in immediately available
funds, on the dates and in the principal amounts provided in the Credit
Agreement, and to pay interest on the unpaid principal amount of each such Loan,
at such office, in like money and funds, for the period commencing on the date
of such Loan until such Loan shall be paid in full, at the rates per annum and
on the dates provided in the Credit Agreement. This Note amends, restates and
supersedes in its entirety Borrower's Promissory Note dated November 28, 2012,
payable to the order of Lender in the original principal amount of $70,212,750,
as amended and restated by that certain Promissory Note dated June 28, 2013 and
by that Promissory Note dated December 20, 2013 (the "Existing Note"). This Note
is given in substitution for, but not in payment of, the Existing Note.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of November 28, 2012, among the Borrower, the
Administrative Agent, and the other lenders signatory thereto, as such agreement
has been amended by that certain First Amendment to Credit Agreement dated as of
February 12, 2013, that certain Second Amendment to Credit Agreement dated as of
June 28, 2013, by that certain Third Amendment to Credit Agreement dated as of
December 20, 2013 and by that certain Fourth Amendment to Credit Agreement dated
as of June 3, 2014 (as the same may be amended, supplemented or restated from
time to time, the "Credit Agreement"). The Lender is a party to the Credit
Agreement and this Note evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and
conditions set forth in, the Credit Agreement and is entitled to the benefits
provided for in the Credit Agreement and the other Loan Documents, and (b) is
1
secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys' fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
In no event shall the interest payable under this Note, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO.
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
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PROMISSORY NOTE
$27,272,727.27 Original Note: November 28, 2012
First Amendment and Restatement: June 28, 2013
Second Amendment and Restatement: December 20, 2013
Third Amendment and Restatement: June 3, 2014
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
"Borrower"), hereby promises to pay to CoBiz Bank, a Colorado corporation, dba
Colorado Business Bank (the "Lender"), or its assigns, at the principal office
of Community Banks of Colorado, a division of NBH Bank, N.A. (, the
"Administrative Agent"), or its assigns, at 7800 E. Orchard, Greenwood Village,
Colorado 80111, the principal sum of Twenty-Seven Million Two Hundred
Seventy-Two Thousand Seven Hundred Twenty-Seven and 27/100 dollars
($27,272,727.27) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
This Note amends, restates and supersedes in its entirety Borrower's Promissory
Note dated November 28, 2012, payable to the order of Lender in the original
principal amount of $31,914,900, as amended and restated by that certain
Promissory Note dated June 28, 2013 and by that Promissory Note dated December
20, 2013 (the "Existing Note"). This Note is given in substitution for, but not
in payment of, the Existing Note.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of November 28, 2012, among the Borrower, the
Administrative Agent, and the other lenders signatory thereto, as such agreement
has been amended by that certain First Amendment to Credit Agreement dated as of
February 12, 2013, that certain Second Amendment to Credit Agreement dated as of
June 28, 2013, by that certain Third Amendment to Credit Agreement dated as of
December 20, 2013 and by that certain Fourth Amendment to Credit Agreement dated
as of June 3, 2014 (as the same may be amended, supplemented or restated from
time to time, the "Credit Agreement"). The Lender is a party to the Credit
Agreement and this Note evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and
conditions set forth in, the Credit Agreement and is entitled to the benefits
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provided for in the Credit Agreement and the other Loan Documents, and (b) is
secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys' fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
In no event shall the interest payable under this Note, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO.
Borrower Certification: The undersigned, as a duly authorized officer of
Borrower, hereby certifies to Lender that no Principal (as defined below) of
Borrower has been convicted of, or pled no contest to, a felony under state or
federal law (excluding crimes related to traffic or motor vehicle offenses) or
to any other crime that requires identification in any registry and/or
notification program maintained by any federal or state jurisdiction. For
purposes of this Note, the term "Principal" means and includes each director of
Borrower, (each of the five most highly compensated executives or officers of
Borrower, and each natural person who is a direct or indirect holder of 20% or
more of the capital stock or stock equivalents of Borrower.
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
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PROMISSORY NOTE
$70,909,090.91 Original Note: November 28, 2012
First Amendment and Restatement: June 28, 2013
Second Amendment and Restatement: December 20, 2013
Third Amendment and Restatement: June 3, 2014
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
"Borrower"), hereby promises to pay to Amegy Bank National Association (the
"Lender"), or its assigns, at the principal office of Community Banks of
Colorado, a division of NBH Bank, N.A. (the "Administrative Agent"), or its
assigns, at 7800 E. Orchard, Greenwood Village, Colorado 80111, the principal
sum of Seventy Million Ninety Hundred Nine Thousand Ninety and 91/100 dollars
($70,909,090.91) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
This Note amends, restates and supersedes in its entirety Borrower's Promissory
Note dated November 28, 2012, payable to the order of Lender in the original
principal amount of $47,872,350, as amended and restated by that certain
Promissory Note dated June 28, 2013 and by that Promissory Note dated December
20, 2013 (the "Existing Note"). This Note is given in substitution for, but not
in payment of, the Existing Note.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of November 28, 2012, among the Borrower, the
Administrative Agent, and the other lenders signatory thereto, as such agreement
has been amended by that certain First Amendment to Credit Agreement dated as of
February 12, 2013, that certain Second Amendment to Credit Agreement dated as of
June 28, 2013, by that certain Third Amendment to Credit Agreement dated as of
December 20, 2013 and by that certain Fourth Amendment to Credit Agreement dated
as of June 3, 2014 (as the same may be amended, supplemented or restated from
time to time, the "Credit Agreement"). The Lender is a party to the Credit
Agreement and this Note evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and
conditions set forth in, the Credit Agreement and is entitled to the benefits
1
provided for in the Credit Agreement and the other Loan Documents, and (b) is
secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys' fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
In no event shall the interest payable under this Note, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO.
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
2
PROMISSORY NOTE
$61,363,636.36 Original Note: December 20, 2013
First Amendment and Restatement: June 3, 2014
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
"Borrower"), hereby promises to pay to SunTrust Bank (the "Lender"), or its
assigns, at the principal office of Community Banks of Colorado, a division of
NBH Bank, N.A. (the "Administrative Agent"), or its assigns, at 7800 E. Orchard,
Greenwood Village, Colorado 80111, the principal sum of Sixty-One Million Three
Hundred Sixty-Three Thousand Six Hundred Thirty-Six and 36/100 dollars
($61,363,636.36) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
This Note amends, restates and supersedes in its entirety Borrower's Promissory
Note dated December 20, 2013, payable to the order of Lender in the original
principal amount of $25,000,000 (the "Existing Note"). This Note is given in
substitution for, but not in payment of, the Existing Note.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of November 28, 2012, among the Borrower, the
Administrative Agent, and the other lenders signatory thereto, as such agreement
has been amended by that certain First Amendment to Credit Agreement dated as of
February 12, 2013, that certain Second Amendment to Credit Agreement dated as of
June 28, 2013, by that certain Third Amendment to Credit Agreement dated as of
December 20, 2013 and by that certain Fourth Amendment to Credit Agreement dated
as of June 3, 2014 (as the same may be amended, supplemented or restated from
time to time, the "Credit Agreement"). The Lender is a party to the Credit
Agreement and this Note evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and
conditions set forth in, the Credit Agreement and is entitled to the benefits
provided for in the Credit Agreement and the other Loan Documents, and (b) is
secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
1
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys' fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
In no event shall the interest payable under this Note, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO.
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
2
PROMISSORY NOTE
$61,363,636.36 Original Note: December 20, 2013
First Amendment and Restatement: June 3, 2014
FOR VALUE RECEIVED, Synergy Resources Corporation, a Colorado corporation (the
"Borrower"), hereby promises to pay to KeyBank National Association (the
"Lender"), or its assigns, at the principal office of Community Banks of
Colorado, a division of NBH Bank, N.A. (the "Administrative Agent"), or its
assigns, at 7800 E. Orchard, Greenwood Village, Colorado 80111, the principal
sum of Sixty-One Million Three Hundred Sixty-Three Thousand Six Hundred
Thirty-Six and 36/100 dollars ($61,363,636.36) (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Lender to
the Borrower under the Credit Agreement, as hereinafter defined), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement. This Note amends, restates and supersedes in
its entirety Borrower's Promissory Note dated December 20, 2013, payable to the
order of Lender in the original principal amount of $25,000,000 (the "Existing
Note"). This Note is given in substitution for, but not in payment of, the
Existing Note.
The date, amount, Type, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrower's rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of November 28, 2012, among the Borrower, the
Administrative Agent, and the other lenders signatory thereto, as such agreement
has been amended by that certain First Amendment to Credit Agreement dated as of
February 12, 2013, that certain Second Amendment to Credit Agreement dated as of
June 28, 2013, by that certain Third Amendment to Credit Agreement dated as of
December 20, 2013 and by that certain Fourth Amendment to Credit Agreement dated
as of June 3, 2014 (as the same may be amended, supplemented or restated from
time to time, the "Credit Agreement"). The Lender is a party to the Credit
Agreement and this Note evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note (a) is issued pursuant to, and is subject to the terms and
conditions set forth in, the Credit Agreement and is entitled to the benefits
provided for in the Credit Agreement and the other Loan Documents, and (b) is
secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
1
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, the Borrower agrees to pay
reasonable attorneys' fees and collection costs to the holder hereof in addition
to the principal and interest payable hereunder.
The Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
In no event shall the interest payable under this Note, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be contracted for, charged, or received on this Note, and this Note is
expressly made subject to the provisions of the Credit Agreement which more
fully set out the limitations on how interest accrues hereon.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF COLORADO.
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
-----------------------------------
Name: Frank L. Jennings
Title: Chief Financial Officer
2
RECORDING REQUESTED BY AND )
WHEN RECORDED RETURN TO: )
)
)
Charles Bybee )
Faegre Baker Daniels LLP )
3200 Wells Fargo Center )
1700 Lincoln Street )
Denver, Colorado, 80203 )
THIRD AMENDED AND RESTATED DEED OF TRUST, MORTGAGE, FIXTURE FILING,
ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT AND FINANCING
STATEMENT
FROM
SYNERGY RESOURCES CORPORATION,
AS BORROWER,
TO
COMMUNITY BANKS OF COLORADO,
AS SECURED PARTY
A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES FUTURE
ADVANCES AND OBLIGATIONS ARISING FROM A REVOLVING CREDIT ARRANGEMENT (UP TO A
MAXIMUM PRINCIPAL AMOUNT OF $325,000,000), AND COVERS PROCEEDS OF COLLATERAL.
THIS INSTRUMENT COVERS OIL AND GAS, AS-EXTRACTED COLLATERAL, AND THE ACCOUNTS
RELATED THERETO, WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS
LOCATED ON THE PROPERTIES DESCRIBED AS THE MORTGAGED PROPERTY HEREIN. THIS
INSTRUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES ON THE
REAL/IMMOVABLE PROPERTY DESCRIBED HEREIN, AND IT IS TO BE FILED FOR RECORD AS A
FIXTURE FILING, AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF
THE RECORDERS OF THE COUNTIES LISTED ON EXHIBIT A HERETO.
BORROWER HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY
CONCERNED, WHICH INTEREST IS DESCRIBED IN SECTION 1.01 OF THIS INSTRUMENT.
TABLE OF CONTENTS
Page
ARTICLE I Grant of Lien and Obligations Secured..............................3
Section 1.01 Grant of Liens..............................................3
Section 1.02 Grant of Security Interest..................................7
Section 1.03 Real Property in Weld County Colorado.......................7
Section 1.04 Real Property in Boulder County Colorado....................7
Section 1.05 Obligations Secured.........................................7
Section 1.06 Fixture Filing, As-extracted Collateral, Etc................9
Section 1.07 Pro Rata Benefit............................................9
Section 1.08 Defined Terms...............................................9
Section 1.09 Certain Definitions........................................10
ARTICLE II Assignment of As-Extracted Collateral............................10
Section 2.01 Assignment.................................................10
Section 2.02 No Modification of Payment Obligations.....................11
Section 2.03 Rights of Producers........................................12
ARTICLE III Representations, Warranties and Covenants.......................12
Section 3.01 Title......................................................12
Section 3.02 Perfected Liens; Defend Title; Further Assurances..........12
Section 3.03 Further Assurances.........................................13
Section 3.04 Not a Foreign Person.......................................14
Section 3.05 Power to Create Lien and Security..........................14
Section 3.06 Revenue and Cost Bearing Interest..........................14
Section 3.07 Rentals Paid; Leases in Effect.............................14
Section 3.08 Operation of Mortgaged Property, Etc.......................15
Section 3.09 Operation By Third Parties.................................15
Section 3.10 Abandon, Sales.............................................15
Section 3.11 Instruments and Chattel Paper..............................16
Section 3.12 Limitations on Modifications, Waivers, Extensions of
Agreements Giving Rise to Accounts.........................16
Section 3.13 Insurance..................................................16
Section 3.14 Further Identification of Collateral.......................16
Section 3.15 Failure to Perform.........................................17
ARTICLE IV Rights and Remedies..............................................17
Section 4.01 Event of Default...........................................17
Section 4.02 Foreclosure by Advertisement and Sale......................17
Section 4.03 Collections on Accounts, Etc...............................20
Section 4.04 Proceeds...................................................21
i
Section 4.05 Agents.....................................................21
Section 4.06 Judicial Foreclosure; Receivership.........................21
Section 4.07 Foreclosure for Installments...............................22
Section 4.08 Separate Sales.............................................22
Section 4.09 Possession of Mortgaged Property and Collateral............23
Section 4.10 Remedies Cumulative, Concurrent and Nonexclusive...........23
Section 4.11 No Release of Obligations..................................23
Section 4.12 No Impairment of Security..................................24
Section 4.13 Release of and Resort to Collateral........................24
Section 4.14 Waiver of Redemption, Notice and Marshalling of Assets,
Etc........................................................24
Section 4.15 Discontinuance of Proceedings..............................25
Section 4.16 Application of Proceeds....................................25
Section 4.17 Resignation of Operator....................................25
Section 4.18 Indemnity..................................................25
Section 4.19 Secured Party Not "Secured Party-In-Possession"............26
ARTICLE V Attorney-in-Fact..................................................26
Section 5.01 Secured Party Attorney-In-Fact.............................26
ARTICLE VI Miscellaneous....................................................27
Section 6.01 Instrument Construed as Mortgage, Etc; Perpetuities........27
Section 6.02 Release of Mortgage........................................27
Section 6.03 Severability...............................................27
Section 6.04 Partial Releases...........................................27
Section 6.05 Successors and Assigns of Parties..........................27
Section 6.06 Satisfaction of Prior Encumbrance..........................27
Section 6.07 Subrogation of Secured Party...............................28
Section 6.08 Nature of Covenants........................................28
Section 6.09 Notices....................................................28
Section 6.10 Counterparts...............................................28
Section 6.11 Governing Law..............................................28
Section 6.12 Exculpation Provisions.....................................29
Section 6.13 Terms Generally; Rules of Construction.....................29
Section 6.14 Recording..................................................30
Section 6.15 Application of Payments to Certain Obligations.............30
Section 6.16 Financing Statement; Fixture Filing........................30
Exhibit A. Hydrocarbon Property
ii
THIRD AMENDED AND RESTATED DEED OF TRUST, MORTGAGE, FIXTURE FILING,
ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT AND FINANCING
STATEMENT
This THIRD AMENDED AND RESTATED DEED OF TRUST, MORTGAGE, FIXTURE FILING,
ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT AND FINANCING
STATEMENT (this "Agreement") dated as of June 3, 2014 (the "Effective Date") is
from SYNERGY RESOURCES CORPORATION, a Colorado corporation ("Borrower"), and to
the Public Trustee of Weld County, Colorado (the "Weld Trustee") and to the
Public Trustee of Boulder County, Colorado (the "Boulder Trustee" and together
with the Weld Trustee, the "Trustees" and each "Trustee") and to and for the
benefit of COMMUNITY BANKS OF COLORADO, a division of NBH Bank, N.A., as
Collateral Agent ("Secured Party"), for the benefit of itself and the Secured
Creditors (as defined below).
R E C I T A L S:
A. Borrower and Community Banks of Colorado formerly known as Bank of
Choice, a division of Bank Midwest, N.A. (in its capacity as lender under the
Existing Credit Agreement, the "Predecessor Lender"), previously entered into
that certain Loan Agreement effective November 30, 2011, as amended by that
Amendment #1 to Loan Agreement, dated as of April 23, 2012 and by that Amendment
#2 to Loan Agreement, dated as of October 18, 2012 (as amended, supplemented and
modified prior to the date of this Agreement, the "Predecessor Credit
Agreement"), pursuant to which the Predecessor Lender made loans and other
extensions of credit to Borrower.
B. The indebtedness, obligations and liabilities of Borrower arising under
the Predecessor Credit Agreement and the other Loan Documents (solely in this
instance, as defined in the Predecessor Credit Agreement) (the "Predecessor
Obligations"), were secured by, among other things, that certain Deed of Trust,
Mortgage, Security Agreement, Financing Statement and Fixture Filing, dated as
of November 30, 2011, as amended by that Amendment of Deed of Trust, Assignment
of Rents, Security Agreement and Fixture Filing, dated as of April 23, 2012 and
by that Amendment of Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated as of October 18, 2012 (as amended before the date of this
Agreement, the "Predecessor Mortgage"), by which Borrower granted liens on and
security interests in certain properties to the Predecessor Lender, including
the Collateral (defined below).
C. Borrower, the Lenders (as defined in the Credit Agreement), and
Community Banks of Colorado, in its capacity as administrative agent (the
"Administrative Agent"), amended and restated the Predecessor Credit Agreement
as of November 28, 2012 (such agreement, the "Existing Credit Agreement") which
amended and restated in its entirety the Predecessor Credit Agreement to
provide, among other things: the appointment of Administrative Agent as
administrative agent, the refinancing of the Predecessor Credit Agreement, and
for the extension of credit for general corporate purposes of Borrower,
including, without limitation, working capital and capital expenditures related
to the acquisition, development and production of oil and gas properties.
1
D. The Existing Credit Agreement has been amended by that First Amendment,
dated as of February 12, 2012, that Second Amendment, dated as of June 28, 2013,
that Third Amendment dated as of December 20, 2013 and that Fourth Amendment,
dated as of June 3, 2014 (the "Fourth Amendment"; and the Existing Credit
Agreement, as modified, amended, supplemented or restated from time to time, the
"Credit Agreement"). The indebtedness, obligations and liabilities of Borrower
arising under the Credit Agreement and the other Loan Documents (as defined in
the Credit Agreement) shall be referred to as the "Existing Obligations".
E. Effective as of November 28, 2012, the parties hereto acknowledge and agree
that (a) the Predecessor Mortgage was amended and restated as set forth in that
Amended and Restated Deed of Trust, Mortgage, Fixture Filing, Assignment of
As-Extracted Collateral, Security Agreement and Financing Statement dated as of
November 28, 2012, and recorded in the office of the clerk and recorder for (i)
Weld County, Colorado, on December 3, 2012, at Reception Number 3892604, and
(ii) Boulder County, Colorado, on December 3, 2012, at Reception Number 03271548
(as amended, supplemented, restated or otherwise modified from time to time, the
"Existing Mortgage"). The Existing Mortgage was amended by (i) that First
Amendment of Amended and Restated Deed of Trust, Mortgage, Fixture Filing,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated June 28, 2013, and recorded in the office of the clerk and
recorder for Weld County, Colorado, on July 3, 2013, at Reception Number
3945393, and (ii) that Second Amendment of Amended and Restated Deed of Trust,
Mortgage, Fixture Filing, Assignment of As-Extracted Collateral, Security
Agreement and Financing Statement dated December 20, 2013, and recorded in the
office of the clerk and recorder for Weld County, Colorado, on January 8, 2014,
at Reception Number 3988852 and in the office of the clerk and recorder for
Boulder County, Colorado, on January 8, 2014 at Reception Number 03361154 (the
"Second Amendment"). In connection with the Existing Mortgage, (i) the
Predecessor Obligations were not satisfied or extinguished but rather were
carried forward as set forth in the Credit Agreement and Notes executed pursuant
thereto, (ii) the liens created and evidenced by the Predecessor Mortgage were
not released, extinguished or otherwise impaired, but continued to secure the
Existing Obligations with the same priority of lien and (iii) Borrower granted
liens on and security interests in certain properties to the Administrative
Agent, including the Collateral.
F. Borrower, the Lenders BP Energy Company, the Administrative Agent, and
Community Banks of Colorado in its capacity as collateral agent (the "Collateral
Agent") for the benefit and on behalf of the Secured Parties (as defined
therein) have entered into that Collateral Agency and Intercreditor Agreement,
dated as of December 20, 2013 (the "Intercreditor Agreement").
G. Borrower and certain Secured Hedging Counterparties have or may enter
into certain Secured Hedging Agreements (collectively, the "Secured Hedging
Agreements"). The Credit Agreement, the Secured Hedging Agreements and the other
Loan Documents are collectively referred to herein as the "Secured Transaction
Documents").
H. Secured Party and the other Secured Creditors have conditioned their
obligations under the Secured Transaction Documents upon the execution and
2
delivery by Borrower of this Agreement, and Borrower has agreed to enter into
this Agreement to secure the Obligations as defined herein.
I. Effective as of the date hereof, the parties hereto acknowledge and
agree that (a) the Existing Mortgage is being amended and restated as set forth
in this Agreement, (b) the Existing Obligations are not being satisfied or
extinguished but rather are being carried forward as set forth in the Credit
Agreement and Notes executed thereto, and (c) the liens created and evidenced by
the Existing Mortgage shall not be released, extinguished or otherwise impaired,
but shall continue to secure such carried forward indebtedness and obligations
with the same priority of lien.
J. In connection with Secured Party's appointment as collateral agent
contemporaneous with the Second Amendment and under the Intercreditor Agreement,
the Administrative Agent agreed to assign all liens and security interests
securing the payment of the Existing Obligations, including, without limitation,
the Existing Mortgage, to Secured Party in its capacity as Collateral Agent for
the ratable benefit of each Lender (as provided in the Credit Agreement) and the
other Secured Creditors.
K. In furtherance of the foregoing, (a) the Lenders, the Administrative
Agent Secured Party and Borrower desire acknowledge and agree to the assignment
of record of all right, title and interest of the Administrative Agent in, to
and under the Existing Mortgage, to Secured Party in its capacity as Collateral
Agent for the ratable benefit of each Lender (as provided in the Credit
Agreement) and the other Secured Creditors, and (b) Secured Party and Borrower
acknowledge and agree that certain of the rights and obligations of the
Administrative Agent under the Existing Mortgage have been assigned to Secured
Party in its capacity as Collateral Agent for the ratable benefit of each Lender
(as provided in the Credit Agreement) and the other Secured Creditors and the
inclusion of certain properties as additional Mortgaged Property to secure the
payment and performance of the Obligations (as defined below), including,
without limitation, the obligations and indebtedness otherwise described in the
Existing Mortgage and the Credit Agreement.
L. Now, therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower hereby agrees with
Secured Party as follows:
ARTICLE I
Grant of Lien and Obligations Secured
Section 1.01 Grant of Liens. To secure the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations (as defined herein) and the performance of the
covenants and obligations herein contained, Borrower does by these presents
hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, TRANSFER and CONVEY unto Secured
Party, WITH POWER OF SALE and right of entry and possession for the use and
benefit of Secured Party and the Secured Creditors, the real and personal
property, rights, titles, interests and estates described in Section 1.01(a)
through (h) (collectively called the "Mortgaged Property"):
3
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Borrower (including all royalty, net revenue and working
interests) in and to (1) the oil and gas leases and/or oil, gas, other
liquid or gaseous hydrocarbon leases, and other mineral leases and other
interests and estates and lands and premises covered or affected thereby
which are described on Exhibit A hereto (the "Subject Leases"), and (2) the
wells (whether oil, gas or otherwise) identified on Exhibit A (the "Subject
Wells") together with all lands that are located within the Spacing Unit
(as defined below) for each Subject Well (all such rights, titles and
estates described in this clause (a) being collectively referred to as the
"Hydrocarbon Property").
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Borrower in and to (1) the properties now or hereafter pooled
or unitized with the Hydrocarbon Property; (2) all presently existing or
future unitization, communitization, spacing, pooling agreements and
declarations of pooled units and the units created thereby (including,
without limitation, all units created under orders, regulations, rules or
other official acts of any federal, state or other governmental body or
agency having jurisdiction and any units created solely among working
interest owners pursuant to operating agreements or otherwise) which
pertain to all or any portion of the Hydrocarbon Property; (3) all
operating agreements, production sales or other contracts, farmout
agreements, farm-in agreements, area of mutual interest agreements, water
use agreements, CO2 purchase agreements, transportation agreements,
equipment leases and other agreements but only to the extent they
specifically relate to any of the Hydrocarbon Property or interests in the
Hydrocarbon Property or to the production, sale, purchase, exchange,
processing, injection, extraction, handling, storage, transporting or
marketing of the Hydrocarbons (as hereinafter defined) from or attributable
to such Hydrocarbon Property or interests; (4) all geological, geophysical,
engineering, accounting, title, legal and other technical or business data
concerning the Hydrocarbon Property, which are in the possession of
Borrower or in which Borrower can 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 (5) the Hydrocarbon
Property even though Borrower's interests therein be incorrectly described
or a description of a part or all of such Hydrocarbon Property or
Borrower's interests therein be omitted; it being intended by Borrower and
Secured Party herein to cover and affect hereby all interests which
Borrower may now own or may hereafter acquire in and to the Hydrocarbon
Property.
(c) All of Borrower's rights, titles and interests in and to all
easements, rights-of-way, or similar property interests or surface rights
related to the Subject Leases or the Spacing Units associated with the
Subject Wells, and all related licenses and permits, together with all
present and future rights, titles, easements and estates now owned or
hereafter acquired by Borrower under or in connection with such interests
(all of which properties described in this Section 1.01(c) are referred to
collectively as the "Surface Rights").
(d) All rights, titles, interests and estates now owned or hereafter
acquired by Borrower in and to all oil, gas, casinghead gas, drip gas,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
4
hydrocarbons and all products refined or separated therefrom (collectively
called the "Hydrocarbons"), in and under and which may be produced and
saved from or attributable to the Hydrocarbon Property, the lands spaced,
pooled or unitized therewith and Borrower's interests therein, including
Borrower's interests in all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Property, the lands spaced, pooled or unitized therewith and
Borrower's interests therein which are subjected to the Liens and security
interests of this Agreement and including specifically all Liens and
security interests in such Hydrocarbons securing payment of proceeds
resulting from the sale of Hydrocarbons.
(e) All tenements, hereditaments, appurtenances and properties in any
way appertaining, belonging, affixed or incidental to the Hydrocarbon
Property and the Surface Rights, rights, titles, interests and estates
described or referred to in Section 1.01(a) through (c), which are now
owned or which may hereafter be acquired by Borrower, including any and all
property, real or personal, immovable or movable, now owned or hereafter
acquired and situated upon, used, held for use, or useful in connection
with the operating, working or development of any of such Hydrocarbon
Property or the lands pooled or unitized therewith and the Surface Rights
(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 Borrower's interest
(if any) in 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, steam generation facilities, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, surface leases, rights-of-way, easements, servitudes,
licenses and other surface and subsurface rights together with all
additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing properties.
(f) 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 Borrower or by anyone on Borrower's behalf; and Secured Party is
hereby authorized to receive the same at any time as additional security
hereunder.
(g) All of the rights, titles and interests of every nature whatsoever
now owned or hereafter acquired by Borrower in and to the Hydrocarbon
Property rights, titles, interests and estates and every part and parcel
thereof, including 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 Liens to which any of the
Hydrocarbon Property rights, titles, interests or estates are subject; all
rights of Borrower to Liens and security interests securing payment of
proceeds from the sale of production from the Mortgaged Property; 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
5
interests of any kind hereafter acquired by Borrower in and to the
Hydrocarbon Property rights, titles, interests or estates.
(h) All property of every kind and character which Borrower has or at
any time hereafter acquires, whether real or personal property, tangible or
intangible, or mixed, all other interests of every kind and character in
and to the types and items of property and interests described in used or
useful in connection with the Hydrocarbon Properties, and the proceeds and
products of all of the foregoing, whether now owned or hereafter acquired,
including, without limitation:
(i) All present and future personal property which is used or
useful in connection with the Hydrocarbon Property;
(ii) All present and future increases, profits, combinations,
reclassifications, improvements and products of, accessions,
attachments and other additions to, tools, parts and equipment used in
connection with, and substitutes and replacements for, all or any part
of the property and interests described above;
(iii) All present and future As-extracted collateral, Accounts,
Goods, Equipment, Inventory, contract rights, General Intangibles
(including, without limitation, rights in and under any hedging
agreements), Chattel Paper, Documents, Instruments, Fixtures,
Letter-of-Credit Rights (whether or not the letter of credit is
evidenced by a writing), all books and records pertaining to the
Hydrocarbon Property, Deposit Accounts (other than payroll,
withholding tax and other fiduciary Deposit Accounts), Commodity
Accounts, Hydrocarbons, cash and noncash Proceeds, and other rights
and other Supporting Obligations arising from or by virtue of, or from
the voluntary or involuntary sale or other disposition of, or
collections with respect to, or insurance proceeds or unearned
insurance premiums payable with respect to, or proceeds payable by
virtue of warranty or other claims against manufacturers of, or claims
against any other person or entity with respect to, all or any part of
the Hydrocarbons or the Hydrocarbon Property;
TO HAVE AND TO HOLD the Mortgaged Property unto Secured Party and its
successors and assigns, for the use and benefit of the Secured Creditors, to
secure the payment of the Obligations and to secure the performance of the
covenants, agreements, and obligations of Borrower herein contained.
Notwithstanding any provision in this Deed of Trust to the contrary, in no
event is any Building (as defined in the applicable Flood Insurance Regulation)
or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance
Regulation) included in the definition of "Mortgaged Property" and no Building
or Manufactured (Mobile) Home is hereby encumbered by this Deed of Trust.
Any fractions or percentages specified on Exhibit A hereto in referring to
Borrower's interests are solely for purposes of the warranties made by Borrower
6
pursuant to ARTICLE III 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 such Schedules.
Section 1.02 Grant of Security Interest. Without limitation of the
foregoing grants, to secure the Obligations, Borrower hereby grants to Secured
Party a security interest in and to all of Borrower's right, title and interest
in and to that portion of the Mortgaged Property consisting of property for
which a security interest may be granted under Article 9 of the Uniform
Commercial Code (including, without limitation, personal property and fixtures),
now owned or at any time hereafter acquired by Borrower or in which Borrower now
has or at any time in the future may acquire any right, title or interest and
whether now existing or hereafter coming into existence (collectively, the
"Collateral") as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
Section 1.03 Real Property in Weld County Colorado. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrower, and the matters hereinafter set forth, Borrower hereby irrevocably
grants bargains, sells assigns, transfers and conveys to the Weld Trustee, with
POWER OF SALE, for the benefit of Secured Party, and to Secured Party, with
POWER OF SALE, that part of the Mortgaged Property that is real property located
in Weld County, Colorado (including any fixtures that are real property under
applicable state law); TO HAVE AND TO HOLD all of the Mortgaged Property that is
real property located in Weld County, Colorado (including any fixtures that are
real property under applicable state law), together with all of the rights,
privileges, benefits, hereditaments and appurtenances in any way belonging,
incidental or pertaining thereto, to the Weld Trustee and its successors and
assigns, forever IN TRUST, NEVERTHELESS, for the security and benefit of Secured
Party and its successors and assigns and to Secured Party and its successors and
assigns, subject to the terms, conditions, covenants, agreements and trusts
herein set forth.
Section 1.04 Real Property in Boulder County Colorado. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, and the matters hereinafter set forth, Borrower hereby
irrevocably grants bargains, sells assigns, transfers and conveys to the Boulder
Trustee, with POWER OF SALE, for the benefit of Secured Party, and to Secured
Party, with POWER OF SALE, that part of the Mortgaged Property that is real
property located in Boulder County, Colorado (including any fixtures that are
real property under applicable state law); TO HAVE AND TO HOLD all of the
Mortgaged Property that is real property located in Boulder County, Colorado
(including any fixtures that are real property under applicable state law),
together with all of the rights, privileges, benefits, hereditaments and
appurtenances in any way belonging, incidental or pertaining thereto, to the
Boulder Trustee and its successors and assigns, forever IN TRUST, NEVERTHELESS,
for the security and benefit of Secured Party and its successors and assigns and
to Secured Party and its successors and assigns, subject to the terms,
conditions, covenants, agreements and trusts herein set forth.
Section 1.05 Obligations Secured. This Agreement is executed and delivered
by Borrower to secure and enforce the following (collectively, the
"Obligations"):
7
(a) All Indebtedness, obligations and liabilities, whether now in
existence or hereafter arising, whether by acceleration or otherwise, of
Borrower, arising out of or under the Credit Agreement and each other Loan
Document to which Borrower is a party, including, without limitation all
Indebtedness evidenced by all promissory notes executed by Borrower
pursuant to the Credit Agreement and all notes given in substitution for
the foregoing promissory notes, or in modification, renewal or extension
thereof, in whole or in part (such promissory notes, as from time to time
supplemented, amended or modified and all other notes given in substitution
therefor or in modification, renewal, rearrangement or extension thereof,
in whole or in part, being hereafter collectively called the "Notes"),
together with interest, collection fees and attorneys' fees, all as
provided in the Credit Agreement and the Loan Documents, whether such Notes
are held by the original payees thereunder or by any assignee or successor
of any of said initial payees.
(b) All Indebtedness, obligations and liabilities, whether now in
existence or hereafter arising, whether by acceleration or otherwise, in
respect of all Letters of Credit issued pursuant to the Credit Agreement
and all reimbursement obligations in respect thereof;
(c) All additional loans or advances made by the Lenders to or for the
benefit of Borrower pursuant to the Credit Agreement or any other Loan
Document (it being contemplated that the Lenders may lend additional sums
to Borrower pursuant to the Credit Agreement from time to time, and
Borrower agrees that any such additional loans shall be secured by this
Agreement).
(d) All Indebtedness, obligations and liabilities of Borrower under
any Secured Hedging Agreement (including, without limitation, any amounts
payable in respect of a liquidation of, an acceleration of obligations
under, or an early termination of, such Secured Hedging Agreement, and any
unpaid amounts owing in respect thereof), but excluding any additional
transactions or confirmations entered into after any Secured Hedging
Counterparty to whom such obligations are owed ceases to be a Secured
Hedging Counterparty.
(e) Any sums which may be advanced or paid by Secured Party or the
Lenders under the terms hereof or of the Credit Agreement or other Loan
Documents on account of the failure of Borrower to comply with the
covenants of Borrower contained herein, or the failure of Borrower to
comply with the covenants of Borrower contained in the Credit Agreement or
any other Loan Documents; and all other indebtedness of Borrower to the
Secured Creditors arising pursuant to the provisions of this Agreement,
including penalties, indemnities, reasonable legal and other fees, charges
and expenses, and amounts advanced and expenses incurred in order to
preserve any collateral or security interest, whether due after
acceleration or otherwise.
(f) All interest (including, without limitation, interest accruing at
any post-default rate and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) in respect of all
8
of the Obligations described in this Section 1.05 and all costs of
collection and reasonable attorneys' fees, all as provided herein and in
the other Loan Documents.
(g) Punctual performance when due of all present and future
obligations, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired, of Borrower under any Security
Instruments or this Agreement to Secured Party or any other Secured
Creditor.
(h) To the extent not otherwise included, payment and performance of
all Indebtedness.
(i) All renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the Obligations
described under paragraphs (a) through (h) in this Section 1.05.
Section 1.06 Fixture Filing, As-extracted Collateral, Etc. Without in any
manner limiting the generality of any of the other provisions of this Agreement:
(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 any Exhibit attached hereto; (ii) the security interests
created hereby under applicable provisions of the Uniform Commercial Code will
attach to the Hydrocarbons as and when they constitute 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
Agreement is to be filed of record in the real estate records of the County in
which the Mortgaged Property is located as a financing statement and a fixture
filing; and (iv) Borrower is the record owner of the real estate or interests in
the real estate comprising the Mortgaged Property. A carbon, photographic,
facsimile or other reproduction of this Agreement or of any financing statement
relating to this Agreement shall be sufficient as a financing statement for any
of the purposes referred to in this Section 1.06.
Section 1.07 Pro Rata Benefit. This Agreement is executed and granted for
the pro rata benefit and security of the Secured Party, the other Secured
Creditors, and any and all future holders of an interest in the Obligations and
the interest thereon for so long as same remain unpaid and thereafter for so
long as any Secured Creditor (or any Affiliate) has any obligations under the
Credit Agreement or any other Loan Documents to lend money or issue Letters of
Credit in favor of Borrower or has any obligations under any Secured Hedging
Agreements (including those described in Section 1.05) or until the Liens hereby
created are released by Secured Party or such other Secured Creditor; it being
understood and agreed that possession of any Notes at any time by Borrower shall
not by itself extinguish the Obligations, such Notes or this Agreement securing
payment thereof, and Borrower shall have the right to issue and reissue any of
the Notes from time to time as convenience may require, without in any manner
extinguishing or affecting the Obligations, the obligations under any of the
Notes, or the security of this Agreement.
Section 1.08 Defined Terms. Each capitalized term used in this Agreement
and not defined in this Agreement shall have the meaning assigned such term in
the Credit Agreement, and if not therein defined, such capitalized term shall
9
have the meaning assigned such term in the Uniform Commercial Code. Terms used
herein that are defined in the Uniform Commercial Code shall have the same
meaning in this Agreement. As used herein, "Uniform Commercial Code" means the
Uniform Commercial Code presently in effect in the State of Colorado, as the
same may be amended from time to time, and any successor statute thereto, except
to the extent that the Uniform Commercial Code of some other jurisdiction
applies mandatorily.
Section 1.09 Certain Definitions. For all purposes of this Agreement, the
following term shall have the meaning set forth below:
"Flood Insurance Regulations" means (a) the National Flood Insurance
Act of 1968 as now or hereafter in effect or any successor statute thereto, (b)
the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any
successor statute thereto, (c) the National Flood Insurance Reform Act of 1994
(amending 42 USC ss. 4001, et seq.), as the same may be amended or recodified
from time to time, and (d) the Flood Insurance Reform Act of 2004 and any
regulations promulgated thereunder.
"Secured Creditors" means the Administrative Agent, the Collateral
Agent, the Lenders and any Secured Hedging Counterparty.
"Spacing Unit" means the drilling unit established for each Subject
Well prior to the commencement of drilling operations, which drilling unit shall
comply with any applicable rules and regulations of the Colorado Oil and Gas
Conservation Commission and the relevant operating agreement.
ARTICLE II
Assignment of As-Extracted Collateral
Section 2.01 Assignment.
(a) As security for payment and performance of the Obligations,
Borrower does hereby absolutely and unconditionally assign, transfer,
convey and grant a security interest unto Secured Party, its successors and
assigns (for the benefit of Secured Party and the other Secured Creditors),
in and to:
(i) all of its As-extracted collateral located in or relating to
any Hydrocarbon Property located in any county where this Agreement is
filed, including all As-extracted collateral relating to the
Hydrocarbon Property, the Hydrocarbons and all products obtained or
processed therefrom;
(ii) the revenues and proceeds now and hereafter attributable to
such Hydrocarbon Property, including the Hydrocarbons, and said
products and all payments in lieu, such as "take or pay" payments or
settlements; and
(iii) all amounts and proceeds hereafter payable to or to become
payable to Borrower or now or hereafter relating to any part of the
subject interests described in (i) and (ii) above, and all amounts,
10
sums, monies, revenues and income which become payable to Borrower
from, or with respect to, any of the Mortgaged Property, present or
future, now or hereafter constituting a part of the Mortgaged
Property.
(b) Following the occurrence and during the continuation of an Event
of Default, Borrower agrees to perform all such acts, and to execute all
such further assignments, transfers and division orders, and other
instruments as may be required or desired by Secured Party in order to have
said proceeds and revenues so paid to Secured Party. In addition to any and
all rights of a secured party under Sections 9-607 and 9-609 of the Uniform
Commercial Code, following the occurrence and during the continuation of an
Event of Default, Secured Party is fully authorized to receive said
revenues and proceeds; to endorse and cash any and all checks and drafts
payable to the order of Borrower or Secured Party for the account of
Borrower received from or in connection with said revenues or proceeds and
to hold the proceeds thereof in a bank account as additional collateral
securing the Obligations; and to execute transfer and division orders in
the name of Borrower, or otherwise, with warranties binding Borrower.
During the continuation of an Event of Default, all proceeds received by
Secured Party pursuant to this grant and assignment shall be at Secured
Party's sole discretion either remitted to Borrower or applied as provided
in the Credit Agreement and the Intercreditor Agreement. Secured Party
shall not be liable for any delay, neglect, or failure to effect collection
of any proceeds or to take any other action in connection therewith or
hereunder; but, following the occurrence and during the continuation of an
Event of Default, Secured Party shall have the right, at its election, in
the name of Borrower or otherwise, to prosecute and defend any and all
actions or legal proceedings deemed advisable by Secured Party in order to
collect such funds and to protect the interests of Secured Party, and/or
Borrower, with all costs, expenses and reasonable attorneys' fees incurred
in connection therewith being paid by Borrower. Borrower hereby appoints
Secured Party as its attorney-in-fact to pursue any and all rights of
Borrower to Liens on and security interests in the Hydrocarbons securing
payment of proceeds of runs attributable to the Hydrocarbons. In addition
to the rights granted to Secured Party in Section 1.01 of this Agreement,
Borrower hereby further transfers and assigns to Secured Party any and all
such Liens, security interests, financing statements or similar interests
of Borrower attributable to its interest in the Hydrocarbons and proceeds
of runs therefrom arising under or created by any statutory provision,
judicial decision or otherwise. The power of attorney granted to Secured
Party in this Section 2.01, being coupled with an interest, shall be
irrevocable so long as the Obligations or any part thereof remains unpaid.
Until such time as an Event of Default has occurred and is continuing,
Secured Party hereby grants to Borrower a license to sell such Hydrocarbons
and receive proceeds from the sale of Hydrocarbons, which license shall
automatically terminate upon such Event of Default and for so long as the
same continues.
Section 2.02 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of Borrower to make
prompt payment of all principal and interest owing on the Obligations when and
as the same become due regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
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and every character now or hereafter existing to secure payment of the
Obligations. Nothing in this ARTICLE II is intended to be an acceptance of
collateral in satisfaction of the Obligations.
Section 2.03 Rights of Producers. As security for payment and performance
of the Obligations, Borrower hereby grants, sells, assigns, sets over and
mortgages unto Secured Party during the term hereof, all of Borrower's rights
and interests (if any) pursuant to any provision of applicable law granting
producers of oil and gas a lien on the oil and gas produced by them and on the
resulting accounts receivable, hereby vesting in Secured Party all of Borrower's
rights as an interest owner to the continuing security interest in and lien upon
the Mortgaged Property.
ARTICLE III
Representations, Warranties and Covenants
Borrower hereby represents, warrants and covenants as follows:
Section 3.01 Title. To the extent of the undivided interests specified on
any Exhibit attached hereto, Borrower has good and defensible title to, or a
valid and enforceable leasehold interest in, all the real property included in
the Mortgaged Property, and good title to, or a valid leasehold interest in, all
personal property included in the Mortgaged Property. The Mortgaged Property is
free of any and all Liens except Liens allowed by the Credit Agreement, if any.
Borrower is the legal and beneficial owner of the Collateral free and clear of
any and all Liens except Liens allowed in the Credit Agreement, if any. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of Secured Party, for its benefit and the ratable benefit of
the Secured Creditors, pursuant to this Agreement, the Security Instruments or
as are filed to secure Liens permitted by the Credit Agreement.
Section 3.02 Perfected Liens; Defend Title; Further Assurances.
(a) This Agreement is, and during the term hereof will be kept, a
direct first priority Lien and security interest upon the real and personal
property presently constituting the Mortgaged Property. The security
interests granted in the Collateral pursuant to this Agreement upon the
filing of financing statements in the appropriate offices in the
appropriate jurisdictions (which filings have been delivered to Secured
Party in completed form) will constitute valid perfected security interests
in all of the Collateral in favor of Secured Party, for the ratable benefit
of the Secured Creditors, as collateral security for the Obligations,
enforceable in accordance with the terms hereof against all creditors of
Borrower and any Persons purporting to purchase any Collateral from
Borrower (to the extent provided in the Uniform Commercial Code) and are
prior to all other Liens on the Collateral in existence on the date hereof
except for Liens that have priority claim on the Collateral by operation of
law.
(b) Borrower will not create or suffer to be created or permit to
exist any Lien, security interest or charge prior to or on a parity with
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the Lien and security interest of this Agreement upon the Mortgaged
Property or the Collateral or any part thereof or upon the rents, issues,
revenues, profits and other income therefrom other than as contemplated by
or permitted under the Credit Agreement to exist, to the extent
contemplated by the terms thereof. Borrower will not create or suffer to be
created or permit to exist any Lien, security interest or charge junior to
the Lien and security interest of this Agreement upon the Mortgaged
Property or the Collateral or any part thereof or upon the rents, issues,
revenues, profits and other income therefrom other than as contemplated by
the Credit Agreement.
(c) Borrower will warrant and defend the title to the Mortgaged
Property and the Collateral against the claims and demands of all other
Persons whomsoever and will maintain and preserve the Lien created hereby
so long as any of the Obligations secured hereby remains unpaid. Should an
adverse claim (other than as contemplated by this Section 3.02) be made
against or a cloud develop upon the title which materially affects part of
the Mortgaged Property or the Collateral, Borrower agrees it will
immediately defend against such adverse claim or take appropriate action to
remove such cloud at Borrower's cost and expense, and Borrower further
agrees that Secured Party may (following notice to Borrower and failure of
Borrower to cure (or diligently contest) such claim or cloud within thirty
(30) days of such notice, unless sooner action is required in order to
preserve the value of the collateral) take such other action as it deems
advisable to protect and preserve the interests of the Secured Creditors in
the Mortgaged Property and the Collateral, and in such event Borrower will
indemnify Secured Party against any and all costs, reasonable attorney's
fees and other expenses which Secured Party may incur in defending against
any such adverse claim or taking action to remove any such cloud.
Section 3.03 Further Assurances.
(a) At any time and from time to time, upon the request of Secured
Party or any Secured Creditor, and at the sole expense of Borrower,
Borrower will promptly and duly give, execute, deliver, indorse, file or
record any and all financing statements, continuation statements,
amendments, notices (including, without limitation, notifications to
financial institutions and any other Person), contracts, agreements,
assignments, certificates, stock powers or other instruments, obtain any
and all governmental approvals and consents and take or cause to be taken
any and all steps or acts that may be necessary or as Secured Party or any
Secured Creditor may reasonably request to create, perfect, establish the
priority of, or to preserve the validity, perfection or priority of, the
Liens granted by this Agreement or to enable Secured Party or any other
Secured Creditor to enforce its rights, remedies, powers and privileges
under this Agreement and any other Loan Document with respect to such Liens
or to otherwise obtain or preserve the full benefits of this Agreement and
the rights, powers and privileges herein granted.
(b) Without limiting the obligations of Borrower under Section 3.03(a)
or under any other provision of this Agreement, upon the request of Secured
Party, Borrower shall take or cause to be taken all actions (other than any
13
actions required to be taken by Secured Party) requested by Secured Party
to cause Secured Party to (i) have "control" (within the meaning of
Sections 9-104, 9-105, 9-106 and 9-107 of the Uniform Commercial Code) over
any Mortgaged Property or Collateral constituting Deposit Accounts,
Electronic Chattel Paper, Investment Property or Letter-of-Credit Rights,
including, without limitation, executing and delivering any agreements, in
form and substance satisfactory to Secured Party, with securities
intermediaries, issuers or other Persons in order to establish "control",
and Borrower shall promptly notify Secured Party of Borrower's acquisition
of any such Collateral, (ii) with respect to Collateral other than Goods
covered by a Document in the possession of a Person other than Borrower or
Secured Party, Borrower shall obtain written acknowledgment that such
Person holds possession subject to Secured Party's rights under this
Agreement; and (iii) with respect to any Collateral constituting Goods that
are in the possession of a bailee, Borrower shall provide prompt notice to
Secured Party of any such Collateral then in the possession of such bailee,
and Borrower shall take or cause to be taken all actions (other than any
actions required to be taken by Secured Party) necessary or requested by
Secured Party to cause Secured Party to have a perfected security interest
in such Mortgaged Property or Collateral under applicable law.
(c) This Section 3.03 and the obligations imposed on Borrower by this
Section 3.03 shall be interpreted as broadly as possible in favor of
Secured Party and the Secured Creditors in order to effectuate the purpose
and intent of this Agreement.
Section 3.04 Not a Foreign Person. Borrower 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., Borrower 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 3.05 Power to Create Lien and Security. Borrower has full power and
lawful authority to grant, bargain, sell, assign, transfer, mortgage, and convey
a security interest in all of the Mortgaged Property and the Collateral in the
manner and form herein provided and without obtaining the authorization,
approval, consent or waiver of any lessor, sublessor, Governmental Authority or
other party or parties whomsoever.
Section 3.06 Revenue and Cost Bearing Interest. Borrower's ownership of the
Hydrocarbon Property and the undivided interests therein as specified on any
Exhibit attached hereto will, after giving full effect to all Liens allowed by
the Credit Agreement, if any, afford Borrower not less than those net interests
(expressed as a fraction, percentage or decimal) in the production from or which
is allocated to such Hydrocarbon Property specified as Net Revenue Interest on
any Exhibit attached hereto and will cause Borrower to bear not more than that
portion (expressed as a fraction, percentage or decimal), specified as Working
Interest on any Exhibit attached hereto, of the costs of drilling, developing
and operating the units identified on any Exhibit attached hereto, except to the
extent of any proportionate corresponding increase in the Net Revenue Interest.
Section 3.07 Rentals Paid; Leases in Effect. All rentals and royalties due
and payable in accordance with the terms of any leases or subleases comprising a
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part of the Hydrocarbon Property have been duly paid or provided for and, to
Borrower's knowledge, all leases or subleases comprising a part of the
Hydrocarbon Property are in full force and effect.
Section 3.08 Operation of Mortgaged Property, Etc. Except with respect to
those which Borrower elects to allow to expire in the ordinary course of
business, Borrower will promptly pay and discharge all rentals, delay rentals,
royalties and indebtedness accruing under, and perform or cause to be performed
each and every act, matter or thing required by, each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements described or
referred to herein or affecting Borrower's interests in the Mortgaged Property,
and will do all other things necessary to keep unimpaired Borrower's rights with
respect thereto and prevent any forfeiture thereof or default thereunder. To
Borrower's knowledge, the Mortgaged Property (and any properties unitized
therewith) has been maintained, operated and developed in a good and workmanlike
manner and in conformity with all applicable laws and all rules, regulations and
orders of all duly constituted authorities having jurisdiction and in conformity
with the provisions of all leases, subleases or other contracts comprising a
part of the Hydrocarbon Property and other contracts and agreements forming a
part of the Mortgaged Property, except where the failure to so maintain, operate
or develop would not have a Material Adverse Effect on Borrower. Borrower will
operate the Mortgaged Property in a careful and efficient manner in accordance
with the practices of the industry and in compliance with all applicable
contracts and agreements and in compliance with all applicable proration and
conservation laws of the jurisdiction in which such Mortgaged Property is
situated, and all applicable laws, rules and regulations of every other agency
and authority from time to time constituted to regulate the development and
operation of such Mortgaged Property and the production and sale of Hydrocarbons
therefrom. In the case of any Mortgaged Property for which Borrower is the
operator, Borrower will or will cause to be done such development work as may be
reasonably necessary to the prudent and economical operation of such Mortgaged
Property in accordance with the most approved practices of operators in the
industry, including all to be done that may be appropriate to protect from
diminution the productive capacity of such Mortgaged Property and each producing
well thereon including, without limitation, cleaning out and reconditioning each
well from time to time, plugging and completing at a different level each such
well, drilling a substitute well to conform to changed spacing regulations and
to protect such Mortgaged Property against drainage whenever and as often as is
necessary.
Section 3.09 Operation By Third Parties. All or portions of the Mortgaged
Property may be comprised of interests in the Hydrocarbon Property which may be
operated by a party or parties other than Borrower or its Affiliates, and with
respect to all or any such interests and properties which may be operated by
parties other than Borrower or its Affiliates, Borrower's covenants as expressed
in this ARTICLE III are modified as follows: to the extent Borrower has
Knowledge of noncompliance, Borrower shall use its commercially reasonable
efforts to obtain compliance with such covenants by the working interest owners
or the operator or operators of such leases or properties (to the extent
required by the operating or other agreements to which they are subject).
Section 3.10 Abandon, Sales. Borrower will not sell, lease, assign,
transfer or otherwise dispose or abandon any of the Mortgaged Property or the
Collateral except as permitted by the Credit Agreement or this Agreement.
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Section 3.11 Instruments and Chattel Paper. Borrower shall notify Secured
Party promptly after the receipt of any Collateral constituting Instruments or
Chattel Paper in which the amount payable thereunder equals or exceeds $100,000.
At the request of Secured Party, Borrower shall deliver to Secured Party all
Collateral constituting Instruments and Tangible Chattel Paper, duly endorsed in
a manner satisfactory to Secured Party, to be held as collateral pursuant to
this Agreement. Borrower will undertake to assure that no Collateral
constituting Chattel Paper or Instruments contains, nor will it hereafter
contain, any statement therein to the effect that such Collateral has been
assigned to an identified party other than Secured Party, and the grant of a
security interest in such Collateral in favor of Secured Party hereunder does
not violate the rights of any other Person as a secured party.
Section 3.12 Limitations on Modifications, Waivers, Extensions of
Agreements Giving Rise to Accounts. Except in the ordinary course of business,
Borrower will not (a) amend, modify, terminate or waive any provision of any
Chattel Paper, Instrument or any agreement giving rise to an Account or Payment
Intangible in any manner which could reasonably be expected to materially
adversely affect the value of such Chattel Paper, Instrument, Payment Intangible
or Account as Collateral, or (b) fail to exercise promptly and diligently each
and every material right which it may have under any Chattel Paper, Instrument
and each agreement giving rise to an Account or Payment Intangible (other than
any right of termination). Borrower shall deliver to Secured Party a copy of
each material demand, notice or document received by it relating in any way to
any Chattel Paper, Instrument or any agreement giving rise to an Account or
Payment Intangible.
Section 3.13 Insurance. In the event of any loss to any Collateral under
any insurance policies required to be carried by Borrower pursuant to the Credit
Agreement, Secured Party 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 Secured Party, in its own discretion, of the Obligations, and any
balance remaining shall be subject to the order of Borrower. As and to the
extent any such insurance policies cover the Collateral, Secured Party is hereby
authorized but not obligated to enforce in its name or in the name of Borrower
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
Secured Party is hereby appointed Borrower's agent and attorney-in-fact to
endorse any check or draft payable to Borrower in order to collect the proceeds
of such insurance. In the event of foreclosure of this Agreement, or other
transfer of title to the Mortgaged Property in extinguishment in whole or in
part of the Obligations, all right, title and interest of Borrower in and to
such policies then in force concerning the Mortgaged Property and all proceeds
payable thereunder with respect to the Mortgaged Property (to the extent
permitted by such policies) shall thereupon vest in the purchaser at such
foreclosure or Secured Party, as the case may be, or other transferee in the
event of such other transfer of title in connection with a foreclosure of the
Mortgage.
Section 3.14 Further Identification of Collateral. Borrower will furnish to
Secured Party and the Secured Creditors from time to time, at Borrower's sole
cost and expense, statements and schedules further identifying and describing
the Mortgaged Property and the Collateral and such other reports in connection
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with the Mortgaged Property and Collateral as Secured Party may reasonably
request, all in reasonable detail.
Section 3.15 Failure to Perform. Borrower agrees that if Borrower fails to
perform any act or to take any action which Borrower is required to perform or
take hereunder or pay any money which Borrower is required to pay hereunder,
each of Secured Party and the Secured Creditors, in Borrower's name or its or
their own name may (upon prior written notice to Borrower), but shall not be
obligated to perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by either of them and any money so paid
by either of them shall be a demand obligation owing by Borrower to Secured
Party or such Secured Creditor, as the case may be, and Secured Party or any
Secured Creditor, upon making such payment, shall be subrogated to all of the
rights of the Person receiving such payment. Each amount due and owing by
Borrower to each of Secured Party and the Secured Creditors pursuant to this
Agreement shall bear interest from the date of such expenditure or payment or
other occurrence which gives rise to such amount being owed to such Person until
paid at the Post Default Rate set forth in the Credit Agreement, and all such
amounts together with such interest thereon shall be a part of the Obligations
described in Section 1.05.
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. An "Event of Default" under the Credit
Agreement shall be an Event of Default under this Agreement.
Section 4.02 Foreclosure by Advertisement and Sale.
(a) If an Event of Default shall occur and be continuing, Secured
Party shall become and be entitled, as of right, without regard to the
adequacy of the Mortgaged Property or the Collateral as security for the
Obligations hereby secured, to employ counsel to enforce payment of the
Obligations secured hereby, to commence and maintain a foreclosure sale by
judicial action or by a public trustee's sale to foreclose this Agreement
and to sell the Mortgaged Property in accordance with the power of sale
granted herein and applicable Colorado law, and exercise such other rights
and remedies granted herein, in any other Loan Document or by law and
equity, which rights and remedies shall be cumulative and not exclusive.
Secured Party may sell the Mortgaged Property either as a whole or in
separate parcels, and in such order as it may determine. The purchase price
shall be payable in lawful money of the United States at the time of the
sale. In exercising the power of sale contained herein, Secured Party may
hold one or more sales of all or any portion of the Mortgaged Property by
public announcement at the time and place of sale set forth in the notice
thereof, and from time to time thereafter may postpone such sale or sales
of all or any portion of the Mortgaged Property to the same or separate
days by public announcement at such time fixed by the preceding
postponement. Any Person, including Secured Party or any Secured Creditor,
may purchase at such sale. Secured Party may credit bid at any such sale,
and if Secured Party is the successful purchaser, it may apply any of the
outstanding Obligations secured hereby in settlement of the purchase price.
Secured Party may resort to and realize upon the security hereunder and any
other real or personal property security now or hereafter held by Secured
Party for the Obligations secured hereby in such order and manner as
Secured Party may, in its sole discretion, determine. Any or all such
security may be taken concurrently or successively and in one or several
consolidated or independent judicial actions or nonjudicial proceedings, or
both. Nothing contained herein shall be construed so as to limit in any way
Secured Party'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. 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 Secured Party to have physically present, or to have
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constructive possession of, the Mortgaged Property (Borrower hereby
covenanting and agreeing to deliver to Secured Party any portion of the
Mortgaged Property not actually or constructively possessed by Secured
Party immediately upon demand by Secured Party) 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
Secured Party shall contain a special warranty of title, binding upon
Borrower and its successors and assigns, (iii) any and all prerequisites to
the validity thereof shall be conclusively presumed to have been performed,
(iv) the receipt of Secured Party 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, (v) to the fullest extent
permitted by law, Borrower 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 Borrower, and against any
and all other persons claiming or to claim the property sold or any part
thereof, by, through or under Borrower, and (vi) to the extent and under
such circumstances as are permitted by law, Secured Party 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 (in lieu of a
cash payment) the amount of the bid against the amount of the Obligations.
(b) Upon the happening and during the continuance of any of the Events
of Default, Secured Party is and shall be entitled to all of the rights,
powers and remedies afforded a secured party by the Uniform Commercial Code
with respect to the Collateral, or Secured Party may proceed as to both the
real and personal property covered hereby in accordance with the rights and
remedies granted under this Agreement in respect of the real property
covered hereby. Without limiting the generality of the foregoing, Secured
Party, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law
18
referred to below) to or upon Borrower or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of Secured Party or any Secured
Creditor or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk, all in
accordance with any requirements of applicable law. Secured Party or any
Secured Creditor shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in Borrower, which right or equity is hereby
waived and released. If an Event of Default shall occur and be continuing,
Borrower further agrees, at Secured Party's request, to assemble the
Collateral and make it available to Secured Party at places which Secured
Party shall reasonably select, whether at Borrower's premises or elsewhere.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. Secured Party shall apply the net
proceeds of any action taken by it pursuant to this Section 4.02, after
deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of
Secured Party and the Secured Creditors hereunder, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Obligations, in accordance with the Credit
Agreement, and only after such application and after the payment by Secured
Party of any other amount required by any provision of law, including,
without limitation, Section 9-615 of the Uniform Commercial Code, need
Secured Party account for the surplus, if any, to Borrower. To the extent
permitted by applicable law, Borrower waives all claims, damages and
demands it may acquire against Secured Party or any Secured Creditor
arising out of the exercise by them of any rights hereunder, other than
claims, damages or demands resulting from the gross negligence or willful
misconduct of Secured Party or any Secured Creditor, as the case may be. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given
at least ten (10) days before such sale or other disposition.
(c) If an Event of Default shall occur and be continuing, in the event
that Secured Party elects not to sell the Collateral, Secured Party retains
its rights to dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in equity, and to
apply the proceeds of the same towards payment of the Obligations. Each and
every method of disposition of the Collateral described in this Agreement
shall constitute disposition in a commercially reasonable manner. Secured
Party may appoint any Person as agent to perform any act or acts necessary
or incident to any sale or transfer of the Collateral.
(d) If an Event of Default shall occur and be continuing, Secured
Party may proceed as to the Mortgaged Property constituting Collateral in
accordance with Secured Party's rights and remedies in respect to the
Mortgaged Property or sell the Mortgaged Property constituting Collateral
19
separately and without regard to the remainder of the Mortgaged Property in
accordance with Secured Party's rights and remedies provided by this
Agreement, the other Loan Documents, the Uniform Commercial Code, as well
as other rights and remedies at law or in equity.
(e) If an Event of Default shall occur and be continuing with respect
to the environmental covenants of the Credit Agreement, if any, then
Secured Party (and, to the extent necessary or appropriate, the
Administrative Agent) may seek a judgment that Borrower has breached its
covenants, representations, or warranties in this Agreement or any other
covenants, representations, or warranties contained in the Credit Agreement
that are deemed to be environmental provisions (each an "Environmental
Provision"), by commencing and maintaining an action or actions in any
court of competent jurisdiction, whether commenced prior to or after
foreclosure of the lien of this Agreement. Secured Party or its agents,
representatives, and employees may also seek an injunction to cause
Borrower to abate any action being taken by Borrower in violation of any
Environmental Provision and may seek the recovery of all costs, damages,
expenses, fees, penalties, fines, judgments, indemnification payments to
third parties, and other out-of-pocket costs or expenses of Secured Party
(collectively, "Environmental Costs") incurred or advanced by Secured Party
relating to the cleanup, remedy, or other response action required by any
environmental law, or any environmental claim, or which Secured Party
believes necessary to protect the Mortgaged Property, in each such case,
which Borrower was required, but failed, to perform under applicable law or
pursuant to the Loan Documents; provided, however, that Secured Party's
recovery hereunder shall be limited to the relevant Environmental Costs
that are attributable to Borrower's interest in the relevant Mortgaged
Property to which the expenditure relates unless Borrower is the operator
of such property. It will be conclusively presumed between Secured Party
and Borrower that all Environmental Costs incurred or advanced by Secured
Party relating to the cleanup, remedy, or other response action of or to
the Mortgaged Property were made by Secured Party in good faith. All
Environmental Costs incurred by Secured Party under this Section 4.02(e)
(including, without limitation, court costs, reasonable consultant fees,
and reasonable attorney fees, whether incurred in litigation and whether
before or after judgment) will bear interest at the rate applicable to the
Notes from the date of expenditure until those sums have been paid in full.
Secured Party will be entitled to bid, at any trustee's or foreclosure sale
of the Mortgaged Property, the amount of the costs, expenses, and interest
in addition to the amount of other Indebtedness. Secured Party may waive
its lien against the Mortgaged Property or any portion of it, including the
improvements and the personal Mortgaged Property, to the extent that any of
the Mortgaged Property is found to be environmentally impaired, and to
exercise all rights and remedies of an unsecured creditor against Borrower
and all of Borrower's assets and property for the recovery of any
deficiency and Environmental Costs, including, but not limited to, seeking
an attachment order.
Section 4.03 Collections on Accounts, Etc. Secured Party hereby authorizes
Borrower to collect upon the Accounts, Instruments, Chattel Paper and Payment
Intangibles, and Secured Party may curtail or terminate said authority at any
time after the occurrence and during the continuance of an Event of Default.
Upon the request of Secured Party at any time after the occurrence and during
20
the continuance of an Event of Default, Borrower shall notify the Account
Debtors that the applicable Accounts, Chattel Paper and Payment Intangibles have
been assigned to Secured Party, for its benefit and the ratable benefit of the
Secured Creditors, and that payments in respect thereof shall be made directly
to Secured Party. Following the occurrence of an Event of Default, Secured Party
may in its own name or in the name of others communicate with the Account
Debtors to verify with them to its satisfaction the existence, amount and terms
of any Accounts, Chattel Paper or Payment Intangibles.
Section 4.04 Proceeds. If required by Secured Party at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Accounts, Instruments, Chattel Paper and Payment Intangibles, when collected or
received by Borrower, and any other cash or non-cash Proceeds received by
Borrower upon the sale or other disposition of any Collateral, shall be
forthwith (and, in any event, within two Business Days) deposited by Borrower in
the exact form received, duly indorsed by Borrower to Secured Party if required,
in a special collateral account maintained by Secured Party, subject to
withdrawal by Secured Party, for its benefit and the ratable benefit of the
Secured Creditors, only, as hereinafter provided, and, until so turned over,
shall be held by Borrower in trust for Secured Party, for its benefit and the
ratable benefit of the Secured Creditors, segregated from other funds of
Borrower. All Proceeds from the disposition of Collateral (including, without
limitation, Proceeds constituting collections of Accounts, Chattel Paper,
Instruments) while held by Secured Party (or by Borrower in trust for Secured
Party, for its benefit and the ratable benefit of the Secured Creditors) shall
continue to be collateral security for all of the Obligations and shall not
constitute payment thereof until applied as hereinafter provided. If an Event of
Default shall have occurred and be continuing, at any time at Secured Party's
election, Secured Party shall apply all or any part of the funds on deposit in
said special collateral account on account of the Obligations in such order as
Secured Party may elect, and any part of such funds which Secured Party elects
not so to apply and deems not required as collateral security for the
Obligations shall be paid over from time to time by Secured Party to Borrower or
to whomsoever may be lawfully entitled to receive the same.
Section 4.05 Agents. Secured Party or its successor or assigns 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 Secured Party, including, without
limitation, the posting of notices and the conduct of sale, but in the name and
on behalf of Secured Party or its successor or substitute, as applicable. If
Secured Party or its successors or assigns shall have given notice of sale
hereunder, any successor or substitute to such Person 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 conducting the sale.
Section 4.06 Judicial Foreclosure; Receivership. If an Event of Default
shall occur and be continuing, Secured Party 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 by any foreclosure hereunder or for
the sale of the Mortgaged Property or the Collateral under the judgment or
decree of any court or courts of competent jurisdiction, or by the ex parte
appointment of a receiver pending any foreclosure hereunder or the sale of the
Mortgaged Property or the Collateral under the order of a court or courts of
competent jurisdiction or under executory or other legal process, or by the
enforcement of any other appropriate legal or equitable remedy. Any money
21
advanced by Secured Party in connection with any such receivership shall be a
demand obligation (which obligation Borrower hereby expressly promises to pay)
owing by Borrower to Secured Party and shall bear interest from the date of
making such advance by Secured Party until paid at the post default rate set
forth in the Credit Agreement. In addition, Borrower agrees that, upon the
occurrence and during the continuance of an Event of Default, Secured Party
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 Obligations, and
Borrower 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 Secured Party and agrees that such appointment shall in
no manner impair, prejudice or otherwise affect the rights of Secured Party
under ARTICLE II hereof. Borrower 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 Secured Party or any
other Secured Creditor 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
Secured Party or any other Secured Creditor in connection with any such
receivership shall be a demand obligation (which obligation Borrower hereby
expressly promises to pay) owing by Borrower to Secured Party or such Secured
Creditor and shall bear interest from the date of making such advancement by
Secured Party or such Secured Creditor until paid, at the Post Default Rate set
forth in the Credit Agreement.
Section 4.07 Foreclosure for Installments. If an Event of Default shall
occur and be continuing, Secured Party shall also have the option to proceed
with foreclosure in satisfaction of any installments of the Obligations which
have not been paid when due either through the courts or by proceeding with
foreclosure in satisfaction of the matured but unpaid portion of the Obligations
as if under a full foreclosure, conducting the sale as herein provided as to a
portion of the Mortgaged Property and without declaring the entire principal
balance and accrued interest due; such sale may be made subject to the unmatured
portion of the Obligations, and any such sale shall not in any manner affect the
unmatured portion of the Obligations, but as to such unmatured portion of the
Obligations this Agreement shall remain in full force and effect as to any
Mortgaged Property that was not sold just as though no sale had been made
hereunder. It is further agreed that several sales of a portion of the Mortgaged
Property may be made hereunder without exhausting the right of sale for any
unmatured part of the Obligations, it being the purpose hereof to provide for a
foreclosure and sale of the security for any matured portion of the Obligations
without exhausting the power to foreclose and sell the remainder of the
Mortgaged Property for any subsequently maturing portion of the Obligations.
Section 4.08 Separate Sales. The Mortgaged Property may be sold in one or
more parcels and to the extent permitted by applicable law in such manner and
order as Secured Party, 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.
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Section 4.09 Possession of Mortgaged Property and Collateral. Borrower
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, Secured Party shall have the right and power to enter
into and upon and take possession of all or any part of the Mortgaged Property
or the Collateral in the possession of Borrower, its successors or assigns, or
its agents or servants, and may exclude Borrower, its successors or assigns, and
all Persons claiming under Borrower, and its agents or servants wholly or partly
therefrom; and, holding the same, Secured Party may use, administer, manage,
operate and control the Mortgaged Property or the Collateral and conduct the
business thereof to the same extent as Borrower, its successors or assigns,
might at the time do and may exercise all rights and powers of Borrower, in the
name, place and stead of Borrower, or otherwise as Secured Party shall deem
best. All reasonable and customary costs, expenses and liabilities incurred by
Secured Party in administering, managing, operating, and controlling the
Mortgaged Property or the Collateral shall constitute a demand obligation (which
obligation Borrower hereby expressly promises to pay) owing by Borrower to
Secured Party and shall bear interest from date of expenditure until paid at the
Post Default Rate set forth in the Credit Agreement, all of which shall
constitute a portion of the Obligations and shall be secured by this Agreement
and all other Security Instruments.
Section 4.10 Remedies Cumulative, Concurrent and Nonexclusive. Each and
every right, power, privilege and remedy shall be cumulative and in addition to
(i) those granted to Secured Party or any Secured Creditor under this Agreement,
any other Loan Document and in any other instrument or agreement securing,
evidencing or relating to the Obligations, (ii) all rights, remedies, powers and
privileges of a secured party under the applicable Uniform Commercial Code
(whether the Uniform Commercial Code is in effect in the jurisdiction where such
rights, remedies, powers or privileges are asserted) or (iii) any other
applicable law or otherwise available at law or equity; each and every right,
power, privilege 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 Secured Party or any Secured Creditor and the
exercise, or the beginning of the exercise, or the abandonment, of any such
right, power, privilege or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power, privilege or
remedy. No delay or omission by Secured Party or any Secured Creditor in the
exercise of any right, power, privilege or remedy shall impair any such right,
power, privilege or remedy or operate as a waiver thereof or of any other right,
power, privilege or remedy then or thereafter existing.
Section 4.11 No Release of Obligations. Neither Borrower nor any other
Person hereafter obligated for payment of all or any part of the Obligations
shall be relieved of such obligation by reason of (a) the failure of Secured
Party to comply with any request of Borrower or any other Person so obligated to
foreclose the Lien of this Agreement or to enforce any provision hereunder or
under the Credit Agreement; (b) the release, regardless of consideration, of the
Mortgaged Property or the Collateral or any portion thereof or interest therein
or the addition of any other property to the Mortgaged Property or the
Collateral; or (c) by any other act or occurrence save and except the complete
payment of the Obligations and the complete fulfillment of all obligations
hereunder or under the Credit Agreement or any other Loan Document of the
Obligations in accordance with their terms.
23
Section 4.12 No Impairment of Security. The Lien, security interest and
other security rights of Secured Party hereunder shall not be impaired by any
indulgence, moratorium or partial release granted by Secured Party including,
but not limited to, any renewal, extension or modification which Secured Party
or the Secured Creditors may grant with respect to any of the Obligations, or
any surrender, compromise, partial release, renewal, extension, exchange or
substitution which Secured Party or the Secured Creditors may grant in respect
of the Mortgaged Property or any part thereof or any interest therein, or any
release or indulgence granted to any endorser, guarantor or surety of any of the
Obligations.
Section 4.13 Release of and Resort to Collateral. Secured Party may
release, regardless of consideration, any part of the Mortgaged Property or the
Collateral without, as to the remainder, in any way impairing, affecting,
subordinating or releasing the Lien or security interest created in or evidenced
by this Agreement or its stature as a first and prior Lien and security interest
in and to the Mortgaged Property and the Collateral, and without in any way
releasing or diminishing the liability of any Person or entity liable for the
repayment of the Obligations. For payment of the Obligations, Secured Party may
resort to any other security therefor held by Secured Party in such order and
manner as Secured Party may elect.
Section 4.14 Waiver of Redemption, Notice and Marshalling of Assets, Etc.
To the fullest extent permitted by law, Borrower hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Borrower by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property or the Collateral from attachment, levy or sale
on execution or providing for any appraisement, valuation, stay of execution,
exemption from civil process, or extension of time for payment; (b) all notices
of Secured Party's intention to accelerate maturity of the Obligations or of
Secured Party's election to exercise or its actual exercise of any right, remedy
or recourse provided for hereunder or under the Credit Agreement; and (c) any
rights, legal and equitable, to a marshalling of assets or a sale in inverse
order of alienation. Each successor and assign of Borrower, including without
limitation, a holder of a Lien subordinate to the Lien created hereby (without
implying that Borrower has, except as expressly provided herein, a right to
grant an interest in, or a subordinate Lien on, the Mortgaged Property or the
Collateral), by acceptance of its interest or Lien agrees that it shall be bound
by the above waiver, as if it gave the waiver itself. The right to plead any and
all statutes of limitation as a defense to any demand secured by or made
pursuant to this Agreement is hereby waived to the full extent permitted by law.
If any law referred to in this Agreement and now in force, of which Borrower 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. Secured Party
may enforce its rights hereunder without prior judicial process or judicial
hearing to the extent permitted by applicable law, and to the extent permitted
by law, Borrower expressly waives any and all legal rights which might otherwise
require Secured Party to enforce its rights by judicial process. To the fullest
extent permitted by law, Borrower waives and agrees not to assert any rights or
privileges which it may acquire under the Uniform Commercial Code or any other
applicable law. Borrower shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Mortgaged Property or the Collateral
24
conducted in accordance with applicable law are insufficient to pay its
Obligations and the reasonable fees and disbursements of any attorneys employed
by Secured Party and any Secured Creditor to collect such deficiency. Payments
to be made by Borrower under any Loan Document are to be made without defense,
deduction, recoupment, set-off, or counterclaim.
Section 4.15 Discontinuance of Proceedings. In case Secured Party (and, to
the extent necessary or appropriate, the Administrative Agent) shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the Credit Agreement and shall thereafter elect to discontinue or abandon same
for any reason, Secured Party (and the Administrative Agent at the direction of
the Secured Party) shall have the unqualified right so to do and, in such an
event, Borrower and Secured Party shall be restored to their former positions
with respect to the Obligations, this Agreement, the Credit Agreement, the
Mortgaged Property and the Collateral and otherwise, and the rights, remedies,
recourses and powers of Secured Party shall continue as if same had never been
invoked.
Section 4.16 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or the Collateral or any part thereof and all other monies
received by Secured Party in any proceedings for the enforcement hereof, whose
application has not elsewhere herein been specifically provided for, shall be
applied first to the payment of all reasonable expenses incurred by Secured
Party incident to the enforcement of this Agreement, the Credit Agreement or any
of the Obligations (including, without 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, reasonable compensation of agents,
and reasonable legal fees), and to the payment of all other reasonable charges,
expenses, liabilities and advances incurred or made by Secured Party under this
Agreement or in executing any trust or power hereunder; and then as set forth in
the Credit Agreement.
Section 4.17 Resignation of Operator. In addition to all rights and
remedies under this Agreement, at law and in equity, if any Event of Default
shall occur and be continuing and Secured Party shall exercise any remedies
under this Agreement with respect to any portion of the Mortgaged Property or
the Collateral (or Borrower shall transfer any Mortgaged Property or the
Collateral "in lieu of" foreclosure), Secured Party shall have the right to
request that any operator of any Mortgaged Property which is either Borrower or
any Affiliate of Borrower resign as operator under the joint operating agreement
applicable thereto, and no later than 60 days after receipt by Borrower of any
such request, Borrower shall resign (or cause such other party to resign) as
operator of such Mortgaged Property.
Section 4.18 Indemnity. IN CONNECTION WITH ANY ACTION TAKEN BY SECURED
PARTY PURSUANT TO THIS AGREEMENT, SECURED PARTY, EACH ISSUING BANK, THE SECURED
CREDITORS AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE
FOR ANY LOSS SUSTAINED BY BORROWER RESULTING FROM AN ASSERTION THAT SECURED
PARTY 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 OR THE COLLATERAL
25
INCLUDING SUCH LOSS WHICH MAY RESULT FROM THE ORDINARY NEGLIGENCE OF AN
INDEMNIFIED PARTY UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF AN INDEMNIFIED PARTY, NOR SHALL SECURED PARTY AND ANY OTHER
INDEMNIFIED PARTY BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR
LIABILITY OF BORROWER. BORROWER SHALL AND DOES HEREBY AGREE TO INDEMNIFY EACH
INDEMNIFIED PARTY FOR, TO DEFEND 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 AGREEMENT OR THE EXERCISE OF RIGHTS OR
REMEDIES HEREUNDER, INCLUDING WITHOUT LIMITATION SUCH LIABILITY, LOSS OR DAMAGE
AS MAY OR MIGHT ARISE OUT OF OR BE CAUSED BY THE ORDINARY NEGLIGENCE OF ANY OF
THE INDEMNIFIED PARTIES, UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE OF AN INDEMNIFIED PARTY. SHOULD SECURED PARTY MAKE ANY
EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE OUT OF POCKET ATTORNEYS' FEES,
SHALL BE A DEMAND OBLIGATION (WHICH OBLIGATION BORROWER HEREBY EXPRESSLY
PROMISES TO PAY) OWING BY BORROWER TO SECURED PARTY AND SHALL BEAR INTEREST FROM
THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE AS SET FORTH IN THE CREDIT
AGREEMENT, SHALL BE A PART OF THE OBLIGATIONS AND SHALL BE SECURED BY THIS
AGREEMENT AND ANY OTHER SECURITY INSTRUMENT. THE LIABILITIES OF BORROWER AS SET
FORTH IN THIS SECTION 4.18 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
Section 4.19 Secured Party Not "Secured Party-In-Possession". It is understood
and agreed that neither the assignment of Hydrocarbons, products therefrom,
revenues and proceeds to Secured Party pursuant to Section 2.01 nor the exercise
by Secured Party of any of its rights or remedies hereunder shall be deemed to
make Secured Party a "Secured Party-in-possession" or otherwise responsible or
liable in any manner with respect to the Mortgaged Property or the use,
occupancy, enjoyment or operation of all or any portion thereof, nor shall
appointment of a receiver for the Mortgaged Property by any court at the request
of Secured Party or by agreement with Borrower or the entering into possession
of the Mortgaged Property or any part thereof by such receiver be deemed to make
Secured Party a "Secured Party-in-possession" or otherwise responsible or liable
in any manner with respect to the Mortgaged Property or the use, occupancy,
enjoyment or operation of all or any portion thereof.
ARTICLE V
Attorney-in-Fact
Section 5.01 Secured Party Attorney-In-Fact. Borrower hereby irrevocably
constitutes and appoints Secured Party the attorney-in-fact of Borrower, and in
such capacity, Secured Party, its counsel or its representative, may from time
to time, execute, deliver and file with the appropriate filing officer or office
such security agreements, financing statements, continuation statements,
amendments, other filing or recording documents or instruments as Secured Party
26
may request or require, in such form as Secured Party reasonably determines
appropriate, in order to impose, perfect, protect, preserve the priority of, or
enforce, the Liens on the Collateral.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc; Perpetuities. This
Agreement may be construed as a deed of trust, mortgage, chattel mortgage,
conveyance, assignment, security agreement, pledge, financing statement,
hypothecation or contract, or any one or more of them, as necessary fully to
effectuate the Lien hereof and the purposes and agreements herein set forth.
Notwithstanding anything to the contrary contained herein, if any interest in
real property granted pursuant to this Agreement does not vest upon the
execution and delivery of this Agreement, it shall vest, if at all, not later
than 20 years after the execution and delivery of this Agreement.
Section 6.02 Release of Mortgage. If all Obligations secured hereby shall
be paid in full in accordance with the Credit Agreement and all of the
Commitments of the Lenders and all Letters of Credit under the Credit Agreement
are terminated, Secured Party shall forthwith cause reconveyance, satisfaction
and discharge of this Agreement to be entered upon the record and shall execute
and deliver or cause to be executed and delivered such instruments of
reconveyance, satisfaction and reassignment as may be appropriate. Otherwise,
this Agreement 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 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 Partial Releases. If any of the Mortgaged Property shall be
sold, transferred or otherwise disposed of by Borrower in a transaction
permitted by the Credit Agreement, then Secured Party, at the request and sole
expense of Borrower, shall promptly execute and deliver to Borrower all releases
or other documents reasonably necessary or desirable for the release of the
Liens created hereby on the Mortgaged Property.
Section 6.05 Successors and Assigns of Parties. The term "Secured Party" as
used herein shall mean and include Community Banks of Colorado, a division of
NBH Bank, N.A., and its successors and assigns acting as Administrative Agent
for the benefit of any legal owner, holder, assignee or pledgee of any of the
Obligations secured hereby. The terms used to designate Secured Party and
Borrower shall be deemed to include the respective heirs, legal representatives,
successors and assigns of such parties.
Section 6.06 Satisfaction of Prior Encumbrance. To the extent that proceeds
of the Credit Agreement are used to pay indebtedness secured by any outstanding
Lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Secured Party at Borrower's
27
request, and Secured Party 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
Secured Party, Borrower hereby waives and releases all demands and causes of
action for offsets and payments to, upon and in connection with the said
indebtedness.
Section 6.07 Subrogation of Secured Party. This Agreement is made with full
substitution and subrogation of Secured Party and its successors and 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 6.08 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 6.09 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by registered or certified
United States mail, postage prepaid, or by personal service (including express
or courier service) at the addresses specified at the end of this Agreement
(unless changed by similar notice in writing given by the particular party whose
address is to be changed). Any such notice or communication shall be deemed to
have been given either at the time of personal delivery or, in the case of
delivery at the address and in the manner provided herein, upon receipt;
provided that, service of notice as required by the laws of any state in which
portions of the Mortgaged Property may be situated shall for all purposes be
deemed appropriate and sufficient with the giving of such notice. Borrower
requests that a copy of any notice of sale or combined notice hereunder be sent
to it by express or courier service at the address of Borrower set forth below.
Section 6.10 Counterparts. This Agreement is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one county, descriptions of
only those portions of the Mortgaged Property located in the county in which a
particular counterpart is recorded shall be attached as a Schedule thereto. A
Schedule 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 Colorado in the Uniform
Commercial Code Records. Each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
Section 6.11 Governing Law. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE
LAW, THIS AGREEMENT AND THE OBLIGATIONS SHALL BE CONSTRUED UNDER AND GOVERNED BY
THE LAWS OF THE STATE OF COLORADO (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW
RULES); PROVIDED, HOWEVER, THAT, WITH RESPECT TO ANY PORTION OF THE MORTGAGED
28
PROPERTY OR COLLATERAL LOCATED OUTSIDE OF THE STATE OF COLORADO, THE LAWS OF THE
PLACE IN WHICH SUCH PROPERTY IS OR IS DEEMED TO BE LOCATED IN, OR OFFSHORE
ADJACENT TO (AND STATE LAW MADE APPLICABLE AS A MATTER OF FEDERAL LAW), SHALL
APPLY TO THE EXTENT OF PROCEDURAL AND SUBSTANTIVE MATTERS RELATING ONLY TO THE
CREATION, PERFECTION, FORECLOSURE OF LIENS AND ENFORCEMENT OF RIGHTS AND
REMEDIES AGAINST THE MORTGAGED PROPERTY OR COLLATERAL.
Section 6.12 Exculpation Provisions. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT; AND AGREES THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT; THAT IT
HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS
BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT; AND HAS RECEIVED THE
ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT; AND THAT IT RECOGNIZES
THAT CERTAIN OF THE TERMS OF THIS AGREEMENT 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 AGREEMENT ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 6.13 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. . The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person's successors and assigns (subject to the restrictions
contained herein), (d) the words "herein", "hereof" and "hereunder", and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word "from" means "from and including" and
the word "to" means "to and including" and (f) any reference herein to Articles,
Sections and Schedules shall be construed to refer to Articles and Sections of,
and Schedules to, this Agreement. No provision of this Agreement or any other
29
Loan Document shall be interpreted or construed against any Person solely
because such Person or its legal representative drafted such provision.
Section 6.14 Recording. Borrower will cause this Agreement and all
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating thereto to be recorded, filed,
re-recorded and refiled in such a manner and in such places as Secured Party
shall reasonably request and will pay all such recording, filing, re-recording
and refiling taxes, fees and other charges.
Section 6.15 Application of Payments to Certain Obligations. If any part of
the Obligations cannot be lawfully secured by this Agreement or if any part of
the Mortgaged Property cannot be lawfully subject to the lien and security
interest hereof to the full extent of the Obligations, then all payments made
shall be applied on said Obligations first in discharge of that portion thereof
which is not secured by this Agreement.
Section 6.16 Financing Statement; Fixture Filing. This Agreement shall be
effective as a financing statement filed as a fixture filing with respect to all
fixtures included within the Mortgaged Property and is to be filed or filed for
record in the real estate records, Agreement records or other appropriate
records of each jurisdiction where any part of the Mortgaged Property (including
said fixtures) are situated. This Agreement shall also be effective as a
financing statement covering As-extracted collateral, including oil and gas or
the like and accounts financed at the wellhead or minehead of wells or mines
located on the properties subject to the Uniform Commercial Code and is to be
filed for record in the real estate records, Mortgage records or other
appropriate records of each jurisdiction where any part of the Mortgaged
Property is situated. Borrower hereby authorizes Secured Party to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Mortgaged Property without the signature of Borrower at
any time after the execution of this Agreement, and hereby ratifies any thereof
filed prior to the execution of this Agreement. In addition, Borrower shall
execute and deliver to Secured Party, upon Secured Party's request, any
financing statements or amendments thereof or continuation statements thereto
that Secured Party may require to perfect a security interest in said items or
types of property. Borrower shall pay all costs associated with filing such
instruments. In that regard, the following information is provided:
Name of Borrower: Synergy Resources Corporation
Mailing Address of Borrower
& County of Residence
(chief executive office): 20203 Highway 60
Platteville, CO 80651
Attention: Edward Holloway, CEO and Director
Facsimile: 970-737-1045
30
Jurisdiction of incorporation
Organizational ID #: Colorado/ID No. 20051109690
Name of Secured Party: Community Banks of Colorado, as Administrative
Agent
Mailing Address of
Secured Party: 7800 E. Orchard
Greenwood Village, Colorado 80111
Attention: Sarah Burchett
Facsimile: 855-621-4007
Telephone: 303-892-8700
Owner of Record of
Mortgaged Property: Borrower
31
WITNESS THE EXECUTION HEREOF, as of the Effective Date.
BORROWER:
SYNERGY RESOURCES CORPORATION
By: /s/ Frank L. Jennings
---------------------------
Frank L. Jennings,
Chief Financial Officer
32
The name and address of Borrower is:
Synergy Resources Corporation
20203 Highway 60
Platteville, CO 80651
Phone: 970-737-1073
Fax: 970-737-1045
Attn: Edward Holloway
The name and address of Secured Party is:
Community Banks of Colorado
as Administrative Agent
7800 E. Orchard
Greenwood Village, Colorado 80111
Phone: 303-892-8702
Fax: 855-621-4007
Attn: Sarah Burchett
33
Exhibit A
1. Capitalized terms used herein without definition shall have the meaning
ascribed thereto in the Mortgage.
2. The terms "Working Interest" and "WI" as used herein with respect to a
lease, shall mean the interest in and to the full and entire leasehold estate
created under and by virtue of the lease described as to the described lands and
formations (or as to all formations if no formation is described) and arising
therefrom, insofar as said interest in said leasehold estate is burdened with
the obligation to bear and pay costs of operations, without regard of any valid
lessor's royalties, overriding royalties or similar burdens, and without regard
to the percent of the mineral estate underlying the lands covered by the lease
owned by the lessor(s) of the referenced lease.
3. The terms "Net Revenue Interest" and "NRI" as used herein with respect
to a lease shall mean the interest in and to applicable production of all
Hydrocarbons produced, saved and sold from, under or by virtue of the lease
described herein as to the described lands and formations (or as to all
formations if no formation is described).
4. The terms "Working Interest" and "WI" as used herein with respect to a
well, unit, pool or communitized area, shall mean the interest in and to the
well or the full and entire unitized, pooled or communitized area created under
and by virtue of each of the described unitization, pooling, communitization or
similar agreements, and all rights of every kind and character appurtenant
thereto, arising therefrom insofar as the said interest in said well or
unitized, pooled, communitized or other interest is burdened with the obligation
to bear and pay costs of operations, without regard to any valid lessor's
royalties, overriding royalties or similar burdens.
5. The terms "Net Revenue Interest" and "NRI" as used herein with respect
to a well, unit, pool or communitized area, shall mean the interest in and to
applicable production of all Hydrocarbons produced, saved and sold from, under
or by virtue of such well or such unitized, pooled or communitized area.
7. The Mortgage covers all right, title and interest of Debtor (whether now
owned or hereafter acquired by operation of law or otherwise) in and to the land
specifically described in this Exhibit A and the land described in or covered by
the leases, licenses, subleases, sublicenses, easements, rights-of-way,
agreements and other documents and instruments described in this Exhibit A
whether or not such land is specifically described in this Exhibit A; and any
references to specific lands, depth limitations, horizons, formations, zones,
unit designations, unit tract descriptions and descriptions of undivided
leasehold interests, "Working Interest" or "WI" and "Net Revenue Interest" or
"NRI" contained in this Exhibit A are for the purposes of defining the nature
and extent of Debtor's warranties and shall not be deemed to limit or restrict
the interests covered by the Mortgage or the liens and security interests
created thereby.
8. This Exhibit A consists of this Preamble and the following subparts:
Exhibit A-1 (55 pages), Exhibit A-2 (79 pages), Exhibit A-3 (1 page), Exhibit
A-4 (9 pages) and Exhibit A-5 (1 page).
9. To facilitate recording, only the relevant subparts of this Exhibit A
may be filed for recording as follows:
County: Relevant subparts for filing:
WELD Exhibits A-1, A-2, and A-4
BOULDER Exhibits A-3 and A-5