<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>6
<FILENAME>d19028exv4w5.txt
<DESCRIPTION>AMENDMENT AND RESTATED MORTGAGE
<TEXT>
<PAGE>
EXHIBIT 4.5
After recording return to:
Vinson & Elkins L.L.P.
2001 Ross Avenue, Suite 3700
Dallas, Texas 75201
Attn: Mark C. Anderson
AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT AND
ASSIGNMENT OF PRODUCTION
FROM
QUEST CHEROKEE, LLC, AS MORTGAGOR,
TO UBS AG, STAMFORD BRANCH, AS COLLATERAL AGENT
FOR SECURED PARTIES, AS MORTGAGEE,
DATED JULY __, 2004
THIS MORTGAGE IS, AMONG OTHER THINGS, A FINANCING STATEMENT UNDER THE UNIFORM
COMMERCIAL CODE COVERING MINERALS, AS-EXTRACTED COLLATERAL AND THE LIKE
(INCLUDING OIL AND GAS), ACCOUNTS RESULTING FROM THE SALE OF MINERALS,
AS-EXTRACTED COLLATERAL AND THE LIKE (INCLUDING OIL AND GAS), AND GOODS WHICH
ARE, OR ARE TO BECOME, FIXTURES ON THE REAL/IMMOVABLE PROPERTY HEREIN DESCRIBED.
THE OIL AND GAS INTERESTS OR ACCOUNTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE
FINANCED AT THE WELLHEADS LOCATED ON THE REAL/IMMOVABLE PROPERTY DESCRIBED IN
EXHIBIT A ATTACHED HERETO. THIS MORTGAGE IS TO BE RECORDED IN THE REAL ESTATE OR
COMPARABLE RECORDS OF THE COUNTY OR PARISH RECORDER OF EACH COUNTY OR PARISH IN
EACH STATE IN WHICH IS SITUATED ANY OF THE COLLATERAL COVERED HEREBY. THE
REAL/IMMOVABLE PROPERTY SUBJECT HERETO IS DESCRIBED IN EXHIBIT A ATTACHED
HERETO.
THIS MORTGAGE CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
MORTGAGOR OWNS A RECORD INTEREST IN THE MORTGAGED PROPERTY.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE, WHERE
PERMITTED BY LAW, MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER
THIS MORTGAGE.
<TABLE>
<S> <C>
EMPLOYER IDENTIFICATION NUMBER OF MORTGAGOR: 200470965
ORGANIZATIONAL IDENTIFICATION NUMBER OF MORTGAGOR: 3739332
EMPLOYER IDENTIFICATION NUMBER OF MORTGAGEE: 980186363
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page No.
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<S> <C>
ARTICLE 1 DEFINITIONS.............................................................. 2
Section 1.1 Certain Defined Terms........................................... 2
Section 1.2 Other Terms..................................................... 10
ARTICLE 2 GRANTING CLAUSE; MORTGAGED PROPERTY...................................... 10
ARTICLE 3 SECURED INDEBTEDNESS..................................................... 12
ARTICLE 4 COVENANTS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF MORTGAGOR....... 12
Section 4.1 Payment of Indebtedness......................................... 12
Section 4.2 Warranties...................................................... 13
Section 4.3 Further Assurances.............................................. 13
Section 4.4 Taxes........................................................... 13
Section 4.5 Operation of the Mortgaged Property............................. 13
Section 4.6 Recording....................................................... 14
Section 4.7 Records, Statements and Reports................................. 14
Section 4.8 No Government Approvals......................................... 15
Section 4.9 Right of Entry.................................................. 15
Section 4.10 Reaffirmation................................................... 15
ARTICLE 5 ADDITIONS TO MORTGAGED PROPERTY.......................................... 15
ARTICLE 6 ENFORCEMENT OF THE SECURITY.............................................. 15
Section 6.1 General Remedies................................................ 15
Section 6.2 Foreclosure by Judicial Proceedings............................. 20
Section 6.3 Receipt to Purchaser............................................ 20
Section 6.4 Effect of Sale.................................................. 20
Section 6.5 Application of Proceeds......................................... 21
Section 6.6 Mortgagor's Waiver of Appraisement, Marshaling, etc. Rights..... 21
Section 6.7 Mineral Leasing Act............................................. 21
Section 6.8 Costs and Expenses.............................................. 21
Section 6.9 Operation of the Mortgaged Property by Mortgagee................ 22
Section 6.10 Additional Waivers.............................................. 22
ARTICLE 7 MISCELLANEOUS............................................................ 23
Section 7.1 Advances by Mortgagee........................................... 23
Section 7.2 Defense of Claims............................................... 23
Section 7.3 Defeasance...................................................... 23
Section 7.4 Renewals, Amendments and Other Security......................... 23
Section 7.5 Instrument and Assignment, etc.................................. 24
Section 7.6 Limitation on Interest.......................................... 24
Section 7.7 Unenforceable or Inapplicable Provisions........................ 24
Section 7.8 Rights Cumulative............................................... 25
Section 7.9 Waiver by Mortgagee............................................. 25
Section 7.10 Successors and Assigns.......................................... 25
</TABLE>
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<TABLE>
<S> <C>
Section 7.11 Article and Section Headings.................................... 25
Section 7.12 Counterparts.................................................... 25
Section 7.13 Special Filing as Financing Statements.......................... 25
Section 7.14 Notices......................................................... 26
Section 7.15 GOVERNING LAW................................................... 26
Section 7.16 Future Advances; Maximum Secured Amount......................... 26
Section 7.17 Recording....................................................... 27
Section 7.18 No Paraphed Notes............................................... 27
Section 7.19 Renewal and Extension........................................... 27
ARTICLE 8 ASSIGNMENT OF PRODUCTION................................................. 27
Section 8.1 Assignment...................................................... 27
Section 8.2 Power of Attorney............................................... 28
</TABLE>
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<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Accounts and Contract Rights....................................................... 2
Act................................................................................ 19
Article............................................................................ 3
Assignment......................................................................... 2
Bank One........................................................................... 1
Bluestem........................................................................... 3
Cherokee Partners.................................................................. 3
Code............................................................................... 3
Collateral Agent................................................................... 3
Commitments........................................................................ 3
Contested Collateral Lien Conditions............................................... 3
Credit Agreement................................................................... 2, 3
Effective Date..................................................................... 3
Equity Interest.................................................................... 3
Event of Default................................................................... 4
Exhibit A.......................................................................... 4
Existing Credit Agreements......................................................... 1
Existing Lender.................................................................... 1
Existing Lenders................................................................... 1
Existing Loan Papers............................................................... 1
Existing Loans..................................................................... 1
Existing Mortgage.................................................................. 1
Existing Mortgagee................................................................. 1
Existing Obligations............................................................... 1
Future Advances.................................................................... 27
GAAP............................................................................... 4
Gas Balancing Agreement............................................................ 4
Guarantees......................................................................... 4
Guarantors......................................................................... 4
Hydrocarbons....................................................................... 4
Lands.............................................................................. 4
LC Facility Commitment............................................................. 4
Lenders............................................................................ 5
Lien............................................................................... 5
Loan Documents..................................................................... 5
Loans.............................................................................. 5
Material Adverse Effect............................................................ 5
Mortgage........................................................................... 1
Mortgaged Property................................................................. 1, 12
Mortgagee.......................................................................... 1
Mortgagor.......................................................................... 1
Net Revenue Interest............................................................... 5
Notes.............................................................................. 5
</TABLE>
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<TABLE>
<S> <C>
Obligations........................................................................ 5
Oil and Gas Leases................................................................. 6
Operating Equipment................................................................ 6
parent............................................................................. 9
Permitted Encumbrances............................................................. 6
person............................................................................. 8
Personal Property.................................................................. 8
Proved Mineral Interests........................................................... 8
Proved Nonproducing Mineral Interests.............................................. 8
Proved Producing Mineral Interests................................................. 8
Proved Undeveloped Mineral Interests............................................... 8
Reimbursement Obligations.......................................................... 9
Revolving Commitment............................................................... 9
Revolving Lender................................................................... 9
Revolving Loan..................................................................... 9
Section............................................................................ 9
Secured Indebtedness............................................................... 13
Secured Parties.................................................................... 9
Subject Interests.................................................................. 11
Subsidiary......................................................................... 9
Subsidiary Guarantor............................................................... 10
Swingline Commitment............................................................... 10
Swingline Lender................................................................... 10
Term B Commitment.................................................................. 10
Term B Lender...................................................................... 10
Term B Loan........................................................................ 10
Well Data.......................................................................... 10
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT
AND ASSIGNMENT OF PRODUCTION
THIS AMENDED AND RESTATED MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION (this "MORTGAGE") is from QUEST
CHEROKEE, LLC, a Delaware limited liability company, as Mortgagor ("MORTGAGOR"),
to UBS AG, STAMFORD BRANCH, as Collateral Agent ("COLLATERAL AGENT") for Secured
Parties (as hereinafter defined). In its capacity as Collateral Agent for
Secured Parties, UBS AG, STAMFORD BRANCH is hereinafter referred to as
"MORTGAGEE." The addresses of Mortgagor and Mortgagee are set forth in Section
7.14 hereof.
R E C I T A L S:
WHEREAS, Mortgagor, Bank One, NA, a national banking association having
its principal office in Chicago, Illinois ("BANK ONE"), as Administrative Agent,
and the financial institutions party thereto (collectively, the "EXISTING
LENDERS", and each individually, an "EXISTING LENDER") entered into to (a) that
certain Revolving Credit Agreement dated as of December 22, 2003, and (b) that
certain Senior Term Second Lien Secured Credit Agreement dated as of December
22, 2003 (collectively, as each may have been amended, modified or restated from
time to time, the "EXISTING CREDIT AGREEMENTS"), pursuant to which the Existing
Lenders made the Revolving Loan and the Term Loan (as each such term is defined
in the Existing Credit Agreements, respectively, and such Revolving Loan and
Term Loan are collectively referred to herein as the "EXISTING LOANS") to
Mortgagor, as borrower; and
WHEREAS, as security for the payment and the performance of the
obligations and indebtedness (collectively, the "EXISTING OBLIGATIONS") of
Mortgagor under the Existing Credit Agreements and the other Loan Papers (as
respectively defined in each Existing Credit Agreement, and as referred to
herein, the "EXISTING LOAN PAPERS"), Mortgagor executed and delivered to
Existing Mortgagee (defined below), that certain Mortgage, Deed of Trust,
Security Agreement, Financing Statement and Assignment of Production,
counterparts of which were filed and/or recorded in the various counties in
Kansas and Oklahoma as more particularly described in Schedule 1 hereto (the
"EXISTING MORTGAGE") in favor of Bank One (in its capacity as Collateral Agent
under the Existing Credit Agreements; hereinafter referred to in such capacity
as "EXISTING MORTGAGEE"); and
WHEREAS, to the extent provided in the Existing Mortgage, the Existing
Mortgage attaches to and creates first and prior liens in and to the Mortgaged
Property therein defined and described (and referred to herein as the "MORTGAGED
PROPERTY"); and
WHEREAS, Mortgagor, Existing Mortgagee and Mortgagee entered into that
certain Assignment of and Amendment to Mortgage dated as of the date hereof (the
"ASSIGNMENT"), counterparts of which shall be filed and/or recorded in the
various counties listed on Schedule 1 hereto, pursuant to which (a) Existing
Mortgagee assigned of record to Mortgagee all of Existing Mortgagee's right,
title and interest in, to and under the mortgages, deeds of trust, security
agreements, financing statements and assignments of production executed in
connection with the
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<PAGE>
Existing Credit Agreements, including, without limitation, the Existing
Mortgage, and (b) Bank One, in its individual capacity as an Existing Lender,
and all of the Existing Lenders assigned all of their respective rights and
obligations under the Existing Credit Agreements and Existing Loan Papers to
Mortgagee, in its individual capacity as a Lender and Secured Party under the
Credit Agreement (defined below), and certain of the other Secured Parties under
the Credit Agreement.
WHEREAS, as a result of giving effect to the Assignment, Mortgagee will
succeed to all right, title and interest of Existing Mortgagee under the
Existing Mortgage as described in the Assignment; and
WHEREAS, contemporaneously with the execution and delivery hereof,
Mortgagor, as borrower, the Guarantors, the Lenders (each as defined herein),
UBS Securities LLC, as lead arranger, documentation agent and syndication agent,
UBS Loan Finance LLC, as swingline lender, and UBS AG, Stamford Branch, as
issuing bank, LC Facility issuing bank, administrative agent for the Lenders,
collateral agent for the Secured Parties and Mortgagee, will each enter into
that certain Credit Agreement (the "CREDIT AGREEMENT") dated as of the date
hereof; and
NOW, THEREFORE, in consideration of the sum of $10.00 and other good and
valuable consideration, in hand paid by Mortgagee, the receipt and adequacy of
which are hereby acknowledged and confessed by Mortgagor, Mortgagor hereby
agrees as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. For all purposes of this Mortgage,
unless the context otherwise requires:
"ACCOUNTS AND CONTRACT RIGHTS" means all accounts (including accounts in
the form of joint interest billings under applicable operating agreements),
contract rights and general intangibles of Mortgagor now or hereafter existing,
or hereafter acquired by, or on behalf of, Mortgagor, or Mortgagor's successors
in interest, relating to or arising from the ownership, operation and
development of the Mortgaged Property and to the production, processing,
treating, sale, purchase, exchange or transportation of Hydrocarbons (defined
below) produced or to be produced from or attributable to the Mortgaged Property
or any units or pooled interest units in which all or a portion of the Mortgaged
Property forms a part, together with all accounts and proceeds accruing to
Mortgagor attributable to the sale of Hydrocarbons produced from the Mortgaged
Property or any units or pooled interest units in which all or a portion of the
Mortgaged Property forms a part.
"ARTICLE" means and refer to an Article of this Mortgage, unless
specifically indicated otherwise.
"BLUESTEM" means Bluestem Pipeline, LLC, a Delaware limited liability
company.
"CHEROKEE PARTNERS" means Cherokee Energy Partners LLC, a Delaware limited
liability company.
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<PAGE>
"CODE" means the Uniform Commercial Code in effect in each of the
jurisdictions where the Mortgaged Property or a portion thereof is situated.
"COLLATERAL AGENT" means Mortgagee in its capacity as Collateral Agent
under the Credit Agreement.
"COMMITMENTS" has the meaning ascribed to such term in the Credit
Agreement.
"CONTESTED COLLATERAL LIEN CONDITIONS" means, with respect to any
Permitted Encumbrance of the type described in clauses (a), (b), (d) and (h) of
the definition of Permitted Encumbrances, the following conditions:
(a) Mortgagor shall cause any proceeding instituted contesting
such Lien to stay the sale or forfeiture of any portion of the Collateral on
account of such Lien;
(b) at the option and at the request of the Administrative Agent,
to the extent such Lien is in an amount in excess of $100,000, the appropriate
Loan Party shall maintain cash reserves in an amount sufficient to pay and
discharge such Lien and the Administrative Agent's reasonable estimate of all
interest and penalties related thereto; and
(c) such Lien shall in all respects be subject and subordinate in
priority to the Lien and security interest created and evidenced by the Security
Documents (as defined in the Credit Agreement), except if and to the extent that
the law or regulation creating, permitting or authorizing such Lien provides
that such Lien is or must be superior to the Lien and security interest created
and evidenced by the Security Documents.
"CREDIT AGREEMENT" has the meaning ascribed to such term in the Recitals,
as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time.
"EFFECTIVE DATE" means July __, 2004.
"EQUITY INTEREST" means, with respect to any person, any and all shares,
interests, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such person,
including, if such person is a partnership, partnership interests (whether
general or limited) and any other interest or participation that confers on a
person the right to receive a share of the profits and losses of, or
distributions of property of, such partnership, whether outstanding on the date
hereof or issued after the Effective Date, but excluding debt securities
convertible or exchangeable into such equity.
"EVENT OF DEFAULT" means any Event of Default under and as defined in the
Credit Agreement.
"EXHIBIT A" means, unless specifically indicated otherwise, Exhibit A
attached hereto and incorporated herein by reference for all purposes.
"GAAP" means generally accepted accounting principles in the United States
applied on a consistent basis.
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"GAS BALANCING AGREEMENT" means any agreement or arrangement whereby any
Loan Party, or any other party having an interest in any Hydrocarbons to be
produced from Mineral Interests in which any Loan Party owns an interest, has a
right to take more than its proportionate share of production therefrom.
"GUARANTEES" means the guarantees issued pursuant to Article VII of the
Credit Agreement by the Subsidiary Guarantors.
"GUARANTORS" shall mean the Subsidiary Guarantors.
"HYDROCARBONS" means oil, gas, coalbed methane gas, casinghead gas, drip
gasolines, natural gasoline, condensate, distillate, as-extracted collateral and
all other liquid or gaseous hydrocarbons produced or to be produced in
conjunction therewith, and all products, by-products and all other substances
derived therefrom or the processing thereof, and all other minerals and
substances, including, but not limited to, sulphur, lignite, coal, uranium,
thorium, iron, geothermal steam, water, carbon dioxide, helium and any and all
other minerals, ores, or substances of value and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ
combustion of coal or lignite.
"LANDS" means the lands described in Exhibit A and shall include any
lands, the description of which is contained in Exhibit A or incorporated in
Exhibit A by reference to another instrument or document, including, without
limitation, all lands described in the Oil and Gas Leases listed on Exhibit A
hereto, and shall also include any lands now or hereafter unitized, pooled,
spaced or otherwise combined, whether by statute, order, agreement, declaration
or otherwise, with lands the description of which is contained in Exhibit A or
is incorporated in Exhibit A by reference.
"LC FACILITY COMMITMENT" means, with respect to each LC Facility Lender,
the commitment, if any, of such LC Facility Lender to make LC Facility Deposits
under the Credit Agreement up to the amount set forth on Schedule 2.01 attached
to the Credit Agreement or in the Assignment and Assumption pursuant to which
such LC Facility Lender assumed its LC Facility Commitment, as applicable, as
the same may be (a) reduced from time to time pursuant to Section 2.07 of the
Credit Agreement and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04 the Credit Agreement.
The aggregate amount of the Lenders' LC Facility Commitments on the Closing Date
is $15.0 million.
"LENDERS" means (a) the financial institutions that have become a party to
the Credit Agreement pursuant to a Lender Addendum and (b) any financial
institution that has become a party to the Credit Agreement pursuant to an
Assignment and Assumption, other than, in each case, any such financial
institution that has ceased to be a party to the Credit Agreement pursuant to an
Assignment and Assumption. Unless the context clearly indicates otherwise, the
term "Lenders" shall include the Swingline Lenders and the LC Facility Lenders.
"LIEN" means any mortgage, deed of trust, collateral assignment, lien,
pledge, charge, security interest or other encumbrance.
4
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"LOANS" means, as the context may require, a Revolving Loan, a Term B Loan
or a Swingline Loan.
"LOAN DOCUMENTS" means, this Mortgage, the Credit Agreement, the Letters
of Credit, the Notes (if any), the Security Documents, each Hedging Obligation
relating to the Loans entered into with any counterparty that was a Lender or an
Affiliate of a Lender at the time such Hedging Obligation was entered into and,
solely for purposes of Section 8.01(a), the Fee Letter.
"LOAN PARTIES" means Mortgagor and the Subsidiary Guarantors.
"MATERIAL ADVERSE EFFECT" means an event that has or causes, or could
reasonably be expected to have or cause, (a) a material adverse effect on the
business, property, results of operations, prospects or condition, financial or
otherwise, or material agreements of Mortgagor and its Subsidiaries, taken as a
whole; (b) a material impairment of the ability of the Loan Parties to fully and
timely perform any of their obligations under any Loan Document; (c) a material
impairment of the rights of or benefits or remedies available to the Lenders or
the Collateral Agent under any Loan Document; or (d) a material adverse effect
on the Collateral or the Liens in favor of the Collateral Agent (for its benefit
and for the benefit of the other Secured Parties) on the Collateral or the
priority of such Liens.
"MORTGAGED PROPERTY" shall have the meaning stated in Article 2 of this
Mortgage.
"NET REVENUE INTEREST" means Mortgagor's share of all Hydrocarbons
produced from the Lands, after deducting the appropriate proportionate part of
all lessors' royalties, overriding royalties, production payments and other
payments out of or measured by production which burden Mortgagor's share of all
such production, subject to non-consent provisions contained in joint operating
agreements.
"NOTES" means any notes evidencing the Term B Loans, Revolving Loans or
Swingline Loans issued pursuant to the Credit Agreement.
"OBLIGATIONS" means (a) obligations of Mortgagor and the other Loan
Parties from time to time arising under or in respect of the due and punctual
payment of (i) the principal of and premium, if any, and interest (including
interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by Mortgagor and the other Loan
Parties under the Credit Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of Reimbursement Obligations, interest
thereon and obligations to provide cash collateral and (iii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of Mortgagor and the other Loan Parties under the
Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of
Mortgagor and the other Loan Parties under or pursuant to the Credit Agreement
and the other Loan Documents, (c) the due and punctual
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payment and performance of all obligations of Mortgagor and the other Loan
Parties under each Hedging Agreement relating to the Loans entered into with any
counterparty that was a Lender or an Affiliate of a Lender at the time such
Hedging Agreement was entered into and (d) the due and punctual payment and
performance of all obligations in respect of overdrafts and related liabilities
owed to any Lender, any Affiliate of a Lender, the Administrative Agent or the
Collateral Agent arising from treasury, depositary and cash management services
or in connection with any automated clearinghouse transfer of funds.
"OIL AND GAS LEASES" means oil, gas and mineral leases, oil and gas
leases, oil leases, gas leases, other mineral leases, subleases, top leases, any
rights resulting in an ownership interest in Hydrocarbons and all operating
rights relating to any of the foregoing (whether operated by virtue of such
leases, or assignments or applicable operating agreements), and all other
interests pertaining to any of the foregoing, including, without limitation, all
royalty and overriding royalty interests, production payments and net profit
interests, mineral fee interests, and all reversionary, remainder, carried and
contingent interests relating to any of the foregoing and all other rights
therein which are described and/or to which reference may be made on Exhibit A.
"OPERATING EQUIPMENT" means all Personal Property and fixtures affixed or
situated upon all or any part of the Mortgaged Property, including, without
limitation, all surface or subsurface machinery, equipment, facilities or other
property of whatsoever kind or nature now or hereafter located on any of the
Lands which are useful for the production, treatment, storage or transportation
of oil or gas, including, but not by way of limitation, all oil wells, gas
wells, water wells, injection wells, casing, tubing, rods, pumping units and
engines, Christmas trees, derricks, separators, gun barrels, flow lines, tanks,
gas systems (for gathering, treating and compression), water systems (for
treating, disposal and injection), power plants, poles, lines, transformers,
starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks and shipping facilities.
"PERMITTED ENCUMBRANCES" means, with respect to the Mortgaged Property:
(a) inchoate Liens for taxes, assessments or governmental charges
or levies not yet due and payable or delinquent and Liens for taxes, assessments
or governmental charges or levies, which (i) are being contested in good faith
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which proceedings (or orders entered in connection with
such proceedings) have the effect of preventing the forfeiture or sale of the
property subject to any such Lien, or (ii) in the case of any such charge or
claim which has or may become a Lien against any of the Collateral, such Lien
and the contest thereof shall satisfy the Contested Collateral Lien Conditions;
(b) Liens in respect of property of any Company imposed by law,
which were incurred in the ordinary course of business and do not secure
Indebtedness for borrowed money, such as carriers', warehousemen's,
materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics'
Liens and other similar Liens arising in the ordinary course of business, and
(i) which do not in the aggregate materially detract from the value of the
property of the Companies, taken as a whole, and do not materially impair the
use thereof in the operation
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of the business of the Companies, taken as a whole, (ii) which, if they secure
obligations that are then due and unpaid, are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which proceedings (or orders entered in connection with
such proceedings) have the effect of preventing the forfeiture or sale of the
property subject to any such Lien, and (iii) in the case of any such Lien which
has or may become a Lien against any of the Collateral, such Lien and the
contest thereof shall satisfy the Contested Collateral Lien Conditions;
(c) easements, rights-of-way, restrictions (including zoning
restrictions), covenants, licenses, encroachments, protrusions and other similar
charges or encumbrances, and minor title deficiencies on or with respect to any
Real Property, Mineral Interest, or Pipeline in each case whether now or
hereafter in existence, not (i) securing Indebtedness, (ii) individually or in
the aggregate materially impairing the value or marketability of such Real
Property, Mineral Interest or Pipeline or (iii) individually or in the aggregate
materially interfering with the ordinary conduct of the business of the
Companies at such Real Property and for the purposes of this Agreement, a minor
defect in title shall include, but not be limited to, easements, rights-of-way,
servitudes, permits, surface leases and other similar rights in respect of
surface operations, and easements for pipelines, streets, alleys, highways,
telephone lines, power lines, railways and other easements and rights-of-way,
on, over or in respect of any of the properties of any Loan Party that are
customarily granted in the oil and gas industry; provided, however, that such
defects shall not have, individually or in the aggregate, a Material Adverse
Effect;
(d) Liens arising out of judgments, attachments or awards not
resulting in a Default and in respect of which such Company shall in good faith
be prosecuting an appeal or proceedings for review in respect of which there
shall be secured a subsisting stay of execution pending such appeal or
proceedings and, in the case of any such Lien which has or may become a Lien
against any of the Collateral, such Lien and the contest thereof shall satisfy
the Contested Collateral Lien Conditions;
(e) Leases of the properties of any Company, in each case entered
into in the ordinary course of such Company's business so long as such Leases
are subordinate in all respects to the Liens granted and evidenced by the
Security Documents and do not, individually or in the aggregate, (i) interfere
in any material respect with the ordinary conduct of the business of any Company
or (ii) materially impair the use (for its intended purposes) or the value of
the property subject thereto;
(f) Liens on property of a person existing at the time such person
is acquired or merged with or into or consolidated with any Company to the
extent permitted hereunder (and not created in anticipation or contemplation
thereof); provided that such Liens do not extend to property not subject to such
Liens at the time of acquisition (other than improvements thereon) and are no
more favorable to the lienholders than such existing Lien;
(g) Liens granted pursuant to the Security Documents to secure the
Obligations; and
(h) inchoate statutory or operators' Liens securing obligations
for labor, services, materials and supplies furnished to Mineral Interests, (i)
which, if they secure
7
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obligations that are then due and unpaid, are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which proceedings (or orders entered in connection with
such proceedings) have the effect of preventing the forfeiture or sale of the
property subject to any such Lien, and (ii) in the case of any such Lien which
has or may become a Lien against any of the Collateral, such Lien and the
contest thereof shall satisfy the Contested Collateral Lien Conditions; and
(i) lease burdens payable to third parties which are deducted in
the calculation of discounted present value in the Reserve Report (as defined in
the Credit Agreement) including, without limitation, any royalty, overriding
royalty, net profits interest, production payment, carried interest or
reversionary working interest.
"PERSON" means any individual, corporation, partnership, limited liability
company, association, trust, other entity or organization, or any court or
governmental department, commission, board, bureau, agency, or instrumentality
of any nation or of any province, state, commonwealth, nation, territory,
possession, county, parish, or municipality, whether now or hereafter
constituted or existing.
"PERSONAL PROPERTY" means that portion of the Mortgaged Property that is
personal property.
"PROVED MINERAL INTERESTS" means, collectively, Proved Producing Mineral
Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped Mineral
Interests.
"PROVED NONPRODUCING MINERAL INTERESTS" means all Subject Interests which
constitute proved developed nonproducing reserves.
"PROVED PRODUCING MINERAL INTERESTS" means all Subject Interests which
constitute proved developed producing reserves.
"PROVED UNDEVELOPED MINERAL INTERESTS" means all Subject Interests which
constitute proved undeveloped reserves.
"REIMBURSEMENT OBLIGATIONS" means Mortgagor's obligations under Section
2.18(e) of the Credit Agreement to reimburse LC Disbursements (as defined in the
Credit Agreement).
"REVOLVING COMMITMENT" means , with respect to each Lender, the
commitment, if any, of such Lender to make Revolving Loans under the Credit
Agreement up to the amount set forth on Schedule I to the Lender Addendum
executed and delivered by such Lender or in the Assignment and Assumption
pursuant to which such Lender assumed its Revolving Commitment, as applicable,
as the same may be (a) reduced from time to time pursuant to Section 2.07 of the
Credit Agreement and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04 of the Credit
Agreement. The aggregate amount of the Lenders' Revolving Commitments on the
Effective Date is $20.0 million.
"REVOLVING LENDER" means a Lender with a Revolving Commitment.
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"REVOLVING LOAN" means a Loan made by the Lenders to Mortgagor pursuant to
Section 2.01(b) of the Credit Agreement.
"SECTION" means and refer to a section of this Mortgage, unless
specifically indicated otherwise.
"SECURED INDEBTEDNESS" shall have the meaning stated in Article 3 of this
Mortgage.
"SECURED PARTIES" means, collectively, the Administrative Agent, the
Collateral Agent, each other Agent, the Lenders and each party to a Hedging
Agreement relating to the Loans if at the date of entering into such Hedging
Agreement such person was a Lender or an Affiliate of a Lender and such person
executes and delivers to the Administrative Agent a letter agreement in form and
substance acceptable to the Administrative Agent pursuant to which such person
(i) appoints the Collateral Agent as its agent under the applicable Loan
Documents and (ii) agrees to be bound by the provisions of Sections 11.03 and
11.09 of the Credit Agreement.
"SUBJECT INTERESTS" shall have the meaning stated in Article 2 of this
Mortgage.
"SUBSIDIARY" means, with respect to any person (the "PARENT") at any date,
(i) any person the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, (ii) any other
corporation, limited liability company, association or other business entity of
which securities or other ownership interests representing more than 50% of the
voting power of all Equity Interests entitled (without regard to the occurrence
of any contingency) to vote in the election of the Board of Directors thereof
are, as of such date, owned, controlled or held by the parent and/or one or more
subsidiaries of the parent, (iii) any partnership (a) the sole general partner
or the managing general partner of which is the parent and/or one or more
subsidiaries of the parent or (b) the only general partners of which are the
parent and/or one or more subsidiaries of the parent and (iv) any other person
that is otherwise Controlled by the parent and/or one or more subsidiaries of
the parent. Unless the context requires otherwise, "Subsidiary" refers to a
Subsidiary of Mortgagor.
"SUBSIDIARY GUARANTOR" means the Subsidiary listed on Schedule 1.01(c) of
the Credit Agreement, and each other Subsidiary that becomes a party to the
Credit Agreement pursuant to Section 5.11 thereof.
"SWINGLINE COMMITMENT" shall mean the commitment of the Swingline Lender
to make loans pursuant to Section 2.17 of the Credit Agreement, as the same may
be reduced from time to time pursuant to Section 2.07 or Section 2.17 thereof.
The amount of the Swingline Commitment shall initially be $5.0 million, but in
no event exceed the Revolving Commitment.
"SWINGLINE LENDER" means UBS Loan Finance LLC, together with its
successors and assigns.
"TERM B COMMITMENT" means, with respect to each Lender, the commitment, if
any, of such Lender to make a Term B Loan under the Credit Agreement on the
Effective Date in the amount set forth on Schedule I to the Lender Addendum
executed and delivered by such Lender, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its
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Term B Commitment, as applicable, as the same may be (a) reduced from time to
time pursuant to Section 2.07 of the Credit Agreement and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 11.04 of the Credit Agreement. The aggregate amount of the
Lenders' Term B Commitments is $120.0 million.
"TERM B LENDER" means a Lender with a Term B Commitment or an outstanding
Term B Loan.
"TERM B LOAN" means a loan made by the Lenders to Mortgagor pursuant to
Section 2.01(a) of the Credit Agreement.
"WELL DATA" means all logs, drilling reports, division orders, transfer
orders, operating agreements, contracts and other agreements, abstracts, title
opinions, files, records, seismic data, memoranda and other information in the
possession or control of Mortgagor or to which Mortgagor has access relating to
the Lands and/or any wells located thereon.
SECTION 1.2 OTHER TERMS. Unless otherwise defined or indicated herein, all
terms with their initial letter capitalized shall have the meaning given such
terms in the Credit Agreement.
ARTICLE 2
GRANTING CLAUSE; MORTGAGED PROPERTY
Mortgagor, for and in consideration of the sum of $10.00 and other good
and valuable consideration, in hand paid by Mortgagee, the receipt and adequacy
of which are hereby acknowledged and confessed by Mortgagor, and for and in
consideration of the debt and purposes hereinafter set forth, to secure the full
and complete payment and performance of the Secured Indebtedness and to secure
the performance of the covenants, obligations, agreements and undertakings of
Mortgagor hereinafter described, has GRANTED, BARGAINED, WARRANTED, MORTGAGED,
ASSIGNED, TRANSFERRED and CONVEYED, and by these presents does GRANT, BARGAIN,
WARRANT, MORTGAGE, ASSIGN, TRANSFER and CONVEY, unto Mortgagee and Mortgagee's
successors in title and assigns, with power of sale (to the extent permitted by
applicable law), as herein provided, for the uses and purposes herein set forth,
with warranties and covenants of title only to the extent provided herein and in
the Credit Agreement, all of Mortgagor's right, title and interest, whether now
owned or hereafter acquired, in all of the hereinafter described properties,
rights and interests; and, insofar as such properties, rights and interests
consist of equipment, general intangibles, accounts, contract rights, inventory,
goods, chattel paper, instruments, documents, money, fixtures, as-extracted
collateral, proceeds and products of collateral or any other Personal Property
of a kind or character defined in or subject to the applicable provisions of the
Code, Mortgagor hereby grants to Mortgagee a security interest therein, whether
now owned or hereafter acquired, namely:
(1) all of those certain Oil and Gas Leases and Lands (all
such Oil and Gas Leases and Lands being herein called the "SUBJECT
INTERESTS," as hereinafter further defined) which are described in Exhibit
A and/or to which reference may be made in Exhibit A and/or which are
covered by any of the leases described on Exhibit A, which
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Exhibit A is made a part of this Mortgage for all purposes, and is
incorporated herein by reference as fully as if copied at length in the
body of this Mortgage at this point;
(2) all rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to (A) any and all properties now
or hereafter pooled or unitized with any of the Subject Interests, and (B)
all presently existing or future operating agreements and unitization,
communitization and pooling agreements and the units operated thereby to
the extent the same relate to all or any part of the Subject Interests,
including, without limitation, all units formed under or pursuant to any
applicable laws (the rights, titles, interests and estates described in
this clause (B) also being included within the term "Subject Interests" as
used herein);
(3) all presently existing and future agreements entered
into between Mortgagor and any third party that provide for the
acquisition by Mortgagor of any interest in any of the properties or
interests specifically described in Exhibit A or which relate to any of
the properties and interests specifically described in Exhibit A;
(4) the Hydrocarbons (including inventory) which are in,
under, upon, produced or to be produced from or attributable to the Lands
from and after the Effective Date;
(5) the Accounts and Contract Rights;
(6) the Operating Equipment;
(7) the Well Data;
(8) the rights and security interests of Mortgagor held by
Mortgagor to secure the obligation of the first purchaser to pay the
purchase price of the Hydrocarbons;
(9) all surface leases, rights-of-way, franchises,
easements, servitudes, licenses, privileges, tenements, hereditaments and
appurtenances now existing or in the future obtained in connection with
any of the aforesaid, and all other items of value and incident thereto
which Mortgagor may, at any time, have or be entitled; and
(10) all and any different and additional rights of any
nature, of value or convenience in the enjoyment, development, operation
or production, in any wise, of any property or interest included in any of
the foregoing clauses, and in all revenues, income, rents, issues, profits
and other benefits arising therefrom or from any contract now in existence
or hereafter entered into pertaining thereto, and in all rights and claims
accrued or to accrue for the removal by anyone of Hydrocarbons from, or
other act causing damage to, any of such properties or interests.
All the aforesaid properties, rights and interests, together with any and
all substitutions, replacements, corrections or amendments thereto, or renewals,
extensions or ratifications thereof, or of any instrument relating thereto, and
together with any additions thereto which may be subjected to the Lien of this
Mortgage by means of supplements hereto, being hereinafter called the "MORTGAGED
PROPERTY".
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Subject, however, to (i) Permitted Encumbrances, and (ii) the condition
that Mortgagee shall not be liable in any respect for the performance of any
covenant or obligation of Mortgagor with respect to the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and its
successors, legal representatives and assigns, forever, subject to Section 7.3
hereof, to secure, in each such instance, the payment and performance of the
Secured Indebtedness and the Obligations.
ARTICLE 3
SECURED INDEBTEDNESS
This Mortgage is given to secure the Loans and all of the Obligations
under and as described in the Credit Agreement, including, without limitation:
(a) interest on all credit outstanding under the Credit Agreement
at the rates provided therein;
(b) the Obligations, including, without limitation, the
indebtedness evidenced by the Notes;
(c) payment and performance of any and all present and future
obligations of Mortgagor according to the terms of any present or future Hedging
Agreements, including, without limitation, any present or future swap
agreements, cap, floor, collar, exchange transaction, forward agreement or other
exchange or protection agreements relating to any such transaction now existing
or hereafter entered into between Mortgagor, on the one hand, and Mortgagee or
any other Secured Party on the other hand;
(d) any sums advanced as expenses or costs incurred by, or on
behalf of, Mortgagee or any Secured Party (or any receiver appointed hereunder)
which are made or incurred pursuant to the terms of this Mortgage or any other
Loan Document, plus interest thereon at the rate set forth in Section 2.06 of
the Credit Agreement from the date of advance or expenditure until reimbursed;
and
(e) all other and additional debts, obligations and liabilities of
every kind and character of Mortgagor now existing or hereafter arising in
connection with any of the Loan Documents (all of the obligations and
indebtedness referred to in this Article 3, and all renewals, refinancings,
extensions and modifications thereof, and all substitutions therefor, in whole
or in part, are herein sometimes referred to as the "SECURED INDEBTEDNESS").
ARTICLE 4
COVENANTS, REPRESENTATIONS,
WARRANTIES AND AGREEMENTS OF MORTGAGOR
Mortgagor hereby covenants, represents, warrants and agrees that:
SECTION 4.1 PAYMENT OF INDEBTEDNESS. Mortgagor will duly and punctually
pay or cause to be paid when due all of the Secured Indebtedness.
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SECTION 4.2 WARRANTIES.
(a) Mortgagor, to the extent of the interests specified in Exhibit
A, has good and defensible title, subject to Permitted Encumbrances and
Immaterial Title Deficiencies (as defined in the Credit Agreement), to each
property right or interest constituting the Mortgaged Property, and has a good
and legal right to make the grant and conveyance made in this Mortgage;
(b) with the exception of Immaterial Title Deficiencies,
Mortgagor's present Net Revenue Interest in the Mortgaged Property is not less
than that specified in Exhibit A and if no interest is specified, includes all
its interests however specified in and to the Oil and Gas Leases and Lands
described on Exhibit A; and
(c) the Mortgaged Property is free from all Liens other than
Permitted Encumbrances and Immaterial Title Deficiencies. Mortgagor will warrant
and forever defend (subject to Immaterial Title Deficiencies and, to the extent
the same are of record as of the Effective Date, those Permitted Encumbrances
described in clauses (c) and (i) of the definition of "Permitted Encumbrances"
set forth above) the Mortgaged Property unto Mortgagee and Mortgagee's
successors, legal representatives and assigns against every person whomsoever
lawfully claiming the same or any part thereof, and Mortgagor will maintain and
preserve the Lien hereby created so long as any of the Secured Indebtedness
remains unpaid, except where such failure to comply would not have a Material
Adverse Effect.
SECTION 4.3 FURTHER ASSURANCES. Mortgagor will execute and deliver such
other and further instruments and will do such other and further acts as in the
reasonable discretion of Mortgagee may be necessary or desirable to carry out
more effectively the purposes of this Mortgage, including, without limiting the
generality of the foregoing, (a) prompt correction of any material defect which
may hereafter be discovered in the title to the Mortgaged Property or in the
execution and acknowledgment of this Mortgage, any Notes, or any other document
used in connection herewith or at any time delivered to Mortgagee in connection
with any Obligations, and (b) if required by Section 8.1 hereof, prompt
execution and delivery of all division or transfer orders that in the reasonable
discretion of Mortgagee are needed to transfer effectively the assigned proceeds
of production from the Mortgaged Property to Mortgagee.
SECTION 4.4 TAXES. To the extent and in the manner required by the Credit
Agreement, and to the extent not prohibited by applicable law, Mortgagor will
promptly pay, or cause to be paid, all taxes legally imposed upon this Mortgage
or upon the Mortgaged Property or upon the interest of Mortgagee therein, or
upon the income, profits, proceeds and other revenues thereof.
SECTION 4.5 OPERATION OF THE MORTGAGED PROPERTY. So long as the Secured
Indebtedness or any part thereof remains unpaid:
(a) Mortgagor shall maintain and operate the Subject Interests in
a good and workmanlike manner and will observe and comply with all of the terms
and provisions, express or implied, of all Oil and Gas Leases relating to the
Subject Interests so long as such Oil and Gas Leases are capable of producing
Hydrocarbons in paying quantities, except where such failure to comply would not
have a Material Adverse Effect;
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(b) Mortgagor shall comply with all contracts and agreements
applicable to or relating to the Mortgaged Property or the production and sale
of Hydrocarbons therefrom, except to the extent a failure to so comply would not
have a Material Adverse Effect;
(c) Mortgagor shall, at all times, maintain, preserve and keep all
Operating Equipment used with respect to the Mortgaged Property in proper
repair, working order and condition, and make all necessary or appropriate
repairs, renewals, replacements, additions and improvements thereto so that the
efficiency of such Operating Equipment shall at all times be properly preserved
and maintained, except where such failure to comply would not have a Material
Adverse Effect; provided that no item of Operating Equipment need be so
repaired, renewed, replaced, added to or improved, if Mortgagor shall in good
faith determine that such action is not necessary or desirable for the continued
efficient and profitable operation of the Subject Interests;
(d) Mortgagor shall cause the Mortgaged Property to be kept free
and clear of all Liens other than Permitted Encumbrances and Immaterial Title
Deficiencies;
(e) Mortgagor shall comply with Section 5.04 of the Credit
Agreement with respect to maintenance of insurance. All loss payable clauses or
provisions in said policy or policies shall be endorsed in favor of and made
payable to Mortgagee, as Collateral Agent for the benefit of the Secured
Parties. Mortgagee, for the benefit of the Secured Parties, shall have the right
to collect, and Mortgagor hereby assigns to Mortgagee for the benefit of the
Secured Parties, any and all monies that may become payable under any such
policies of insurance by reason of damage, loss or destruction of any of the
Mortgaged Property, and Mortgagee may, at its election, either apply for the
benefit of the Secured Parties all or any part of the sums so collected toward
payment of the Secured Indebtedness, whether or not such Secured Indebtedness,
or any portion thereof, is then due and payable, in such manner as Mortgagee may
elect, or release same to Mortgagor; and
(f) Mortgagor shall not sell, lease, transfer, abandon or
otherwise dispose of any portion of the Mortgaged Property or any of Mortgagor's
rights, titles or interests therein or thereto, except as specifically permitted
in the Credit Agreement.
SECTION 4.6 RECORDING. Mortgagor will promptly and at Mortgagor's sole
cost and expense, record, register, deposit and file this Mortgage and every
other instrument in addition or supplemental hereto in such offices and places
and at such times and as often as may be necessary to preserve, protect and
renew the Lien hereof as a perfected Lien on real or personal property, as the
case may be, subject only to Permitted Encumbrances and Immaterial Title
Deficiencies, and the rights and remedies of Mortgagee, and otherwise will do
and perform all matters or things necessary or expedient to be done or observed
by reason of any law or regulation of any state or of the United States or of
any other competent authority, for the purpose of effectively operating,
maintaining and preserving the Lien hereof on the Mortgaged Property.
SECTION 4.7 RECORDS, STATEMENTS AND REPORTS. Mortgagor will keep proper
books of record and account in which complete and correct entries will be made
of Mortgagor's transactions in accordance with sound accounting principles
consistently applied and will, to the
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extent required by the Credit Agreement, furnish or cause to be furnished to
Mortgagee (a) all reports required under the Loan Documents, and (b) such other
information concerning the business and affairs and financial condition of
Mortgagor as Mortgagee may from time to time reasonably request.
SECTION 4.8 NO GOVERNMENT APPROVALS. Mortgagor warrants that no approval
or consent of any person is necessary to authorize the execution and delivery of
this Mortgage, or any of the other Loan Documents or the Notes, or to authorize
the observance or performance by Mortgagor of the covenants herein or therein
contained.
SECTION 4.9 RIGHT OF ENTRY. To the extent required by the Credit
Agreement, Mortgagor will permit Mortgagee, or the agents or designated
representatives of Mortgagee, to enter upon the Mortgaged Property, and all
parts thereof, for the purposes of investigating and inspecting the condition
and operation thereof.
SECTION 4.10 REAFFIRMATION. Mortgagor hereby ratifies, readopts and
reaffirms all of Mortgagor's agreements and covenants contained in the Existing
Mortgage, including, without limitation, all of its grants, warrants,
assignments, mortgages, pledges, transfers and conveyances of the Mortgaged
Property contained in the granting clauses of the Existing Mortgage to secure
all of the indebtedness described in the Existing Mortgage (as amended hereby),
including, without limitation, all of the Obligations.
The representations and warranties set forth in Article III of the Credit
Agreement are incorporated herein by reference as if set forth herein, and each
such representation and warranty is true and correct.
ARTICLE 5
ADDITIONS TO MORTGAGED PROPERTY
It is understood and agreed that Mortgagor may periodically subject
additional properties to the Lien of this Mortgage. In the event that additional
properties are to be subjected to the Lien hereof, the parties hereto agree to
execute a supplemental mortgage, satisfactory in form and substance to
Mortgagee, together with any security agreement, financing statement or other
security instrument required by Mortgagee, all in form and substance
satisfactory to Mortgagee and in a sufficient number of executed (and, where
necessary or appropriate, acknowledged) counterparts for recording purposes.
Upon execution of such supplemental mortgage, all additional properties thereby
subjected to the Lien of this Mortgage shall become part of the Mortgaged
Property for all purposes.
ARTICLE 6
ENFORCEMENT OF THE SECURITY
SECTION 6.1 GENERAL REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Mortgagee may do any one or more of the
following, subject to and in accordance with any applicable provision of the
Credit Agreement and to any mandatory requirements or limitations of applicable
law then in force:
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(a) exercise all of the rights, remedies, powers and privileges of
Mortgagor with respect to the Mortgaged Property or any part thereof, give or
withhold all consents required therein which, with respect to the Mortgaged
Property or any part thereof, Mortgagor would otherwise be entitled to give or
withhold, and perform or attempt to perform any covenants in this Mortgage which
Mortgagor is obligated to perform; provided that, no payment or performance by
Mortgagee shall constitute a waiver of any Event of Default, and Mortgagee shall
be subrogated to all rights and Liens securing the payment of any debt, claim,
tax or assessment for the payment of which Mortgagee may make an advance, or
which Mortgagee may pay.
(b) execute and deliver to such person or persons as may be
designated by Mortgagee appropriate powers of attorney to act for and on behalf
of Mortgagor in all transactions with any federal, state or local agency with
respect to any of the Mortgaged Property.
(c) exercise any and all other rights or remedies granted to
Mortgagee pursuant to the provisions of any of the Loan Documents.
(d) if Mortgagor has failed to keep or perform any covenant
whatsoever contained in any Loan Document, Mortgagee may, at its option, perform
or attempt to perform such covenant. Any payment made or expense incurred in the
performance or attempted performance of any such covenant shall be a part of the
Secured Indebtedness, and Mortgagor promises, upon demand, to pay to Mortgagee,
at the place where the Notes are payable, or at such other place as Mortgagee
may direct by written notice, all sums so advanced or paid by Mortgagee, with
interest at the rate set forth in Section 2.06(c) of the Credit Agreement from
the date when paid or incurred by Mortgagee or any such Secured Party. No such
payment by Mortgagee shall constitute a waiver of any Event of Default.
(e) Mortgagee shall, if requested by the Secured Parties as
provided in the Credit Agreement, without notice, demand, presentment, notice of
intent to accelerate or of acceleration, or notice of protest, all of which are
hereby expressly waived by Mortgagor, declare the entire unpaid balance of the
Secured Indebtedness, or any part thereof, immediately due and payable, and upon
such declaration, it shall be immediately due and payable, and the Liens hereof
shall then be subject to foreclosure in accordance with applicable law.
(f) Upon the occurrence of an Event of Default, this Mortgage may
be foreclosed as to the Mortgaged Property, or any part thereof, in any manner
permitted by applicable law.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. WHERE PERMITTED BY LAW,
A POWER OF SALE MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER
THIS MORTGAGE.
Mortgagee may proceed with foreclosure and sell all or any part of the
Mortgaged Property at one or more sales, as an entirety or in parcels, at such
place or places and otherwise
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in such manner and upon such notice as may be required by applicable law, or, in
the absence of any such requirement, as Mortgagee may deem appropriate, and to
make conveyance to the purchaser or purchasers thereof. Any such sale shall be
made to the highest bidder or bidders for cash, at the courthouse door of the
county wherein the Mortgaged Property is situated; provided that, if the
Mortgaged Property is situated in more than one county, such sale of the
Mortgaged Property, or part thereof, may be made in any county wherein any part
of the Mortgaged Property is situated. Such sale shall be made at public outcry,
on the day of any month, during the hours of such day, and after written notices
thereof have been publicly posted in such places and for such time periods and
all persons entitled to notice thereof have been sent such notice, all as
required by applicable law. If the applicable law in force as of the Effective
Date hereof should hereafter be amended to require a different notice of sale
applicable to sales of property of the nature of the Mortgaged Property under
powers of sale conferred by mortgages or deeds of trust, Mortgagee may, in his
or her sole discretion, to the extent permitted by applicable law, give either
the notice of sale required by applicable law in effect on the Effective Date or
the notice of sale prescribed by the amended law; and nothing herein shall be
deemed to require Mortgagee to do, and Mortgagee shall not be required to do,
any act other than as required by applicable law in effect at the time of any
such sale. After such sale, Mortgagee shall make to the purchaser or purchasers
thereunder good and sufficient deeds, assignments or bills of sale in the name
of Mortgagor, conveying or transferring the Mortgaged Property, or any part
thereof, so sold to the purchaser or purchasers containing such warranties of
title as are customarily given, which warranties shall be binding upon
Mortgagor.
Sale of a part of the Mortgaged Property shall not exhaust the power of
sale granted hereby, but sales may be made from time to time until the Secured
Indebtedness is paid and performed in full. It shall not be necessary to have
present or to exhibit at any such sale any of the Personal Property. In addition
to the rights and other powers of sale granted under the preceding provisions of
this Section 6.1(f), if default is made in the payment of any installment of the
Obligations, Mortgagee may, subject to, and in accordance with, the applicable
provisions of the Credit Agreement, at its option, at once or at any time
thereafter while any matured installment remains unpaid, without declaring the
entire Secured Indebtedness to be due and payable, orally or in writing, enforce
the Liens created by this Mortgage and sell the Mortgaged Property subject to
such matured indebtedness and the Liens securing its payment, in the same
manner, on the same terms, at the same place and time and after having given
notice in the same manner, all as provided in the preceding provisions of this
Section 6.1(f). After such sale, Mortgagee shall make due conveyance to the
purchaser or purchasers. Sales made without maturing the Secured Indebtedness
may be made hereunder whenever there is a default in the payment of any
installment of the Secured Indebtedness without exhausting the power of sale
granted hereby and without affecting in any way the power of sale granted under
this Section 6.1(f), the unmatured balance of the Secured Indebtedness (except
as to any proceeds of any sale which Mortgagee may apply as prepayment of the
Secured Indebtedness), or the Liens securing payment of the Secured
Indebtedness. The sale or sales of less than the whole of the Mortgaged Property
shall not exhaust the power of sale herein granted, and Mortgagee is
specifically empowered to make successive sale or sales under such power until
the whole of the Mortgaged Property shall be sold. It is intended by each of the
foregoing provisions of this Section 6.1(f) that Mortgagee may sell not only the
Subject Interests but also all other items constituting a part of the Mortgaged
Property along with the Subject Interests, or any part thereof, all as a unit
and as a part of a single sale, or may sell any part of the Mortgaged Property
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separately from the remainder of the Mortgaged Property. If the proceeds of such
sale or sales of less than the whole of such Mortgaged Property shall be less
than the aggregate of the Secured Indebtedness and the expense of enforcing the
trust created by this Mortgage, the Liens of this Mortgage shall remain in full
force and effect as to the unsold portion of the Mortgaged Property just as
though no sale or sale of less than the whole of the Mortgaged Property had
occurred, but Mortgagee shall have the right, at its sole election, to sell less
than the whole of the Mortgaged Property. In the event any questions should be
raised as to the regularity or validity of any sale hereunder, Mortgagee shall
have the right and is hereby authorized to make resale of said property so as to
remove any questions or doubt as to the regularity or validity of the previous
sale, and as many resales may be made as may be appropriate. It is agreed that,
in any deed or deeds given by Mortgagee, any and all statements of fact or other
recitals therein made as to the identity of Mortgagee, or as to the occurrence
or existence of any Event of Default, or as to the request to sell, notice of
sale, time, place, terms, and manner of sale, and receipt, distribution, and
application of the money realized therefrom, or as to the due and proper
appointment of a substitute trustee, and, without being limited by the
foregoing, as to any other act or thing having been duly done by Mortgagee,
shall be taken by any Governmental Authority as prima facie evidence that the
said statements or recitals are true and correct and are without further
question to be so accepted, and Mortgagor does hereby ratify and confirm any and
all acts that Mortgagee may lawfully do in the premises by virtue hereof.
To the extent any of the Mortgaged Property is located within the State of
Oklahoma, upon the occurrence of an Event of Default, Mortgagee may, at its
option, and Mortgagor hereby confers on Mortagee for the benefit of the Secured
Parties the power to, sell the Mortgaged Property and the interests therein in
the manner provided for in the Oklahoma Power of Sale Mortgage Foreclosure Act,
OKLA. STAT., tit. 46, ss.ss. 40 et seq., as the same may amended from time to
time (the "ACT"), or other applicable law. Such power of sale shall be exercised
by giving Mortgagor a notice of intent to foreclose by power of sale and setting
forth, among other things, the nature of the breach(es) or default(s) and the
action required to effect a cure thereof and the time period within which such
cure may be effected all in compliance with and as may be required by the Act or
other applicable law. If no cure is effected within the statutory time limits,
Mortgagee may accelerate the Secured Indebtedness without further notice (the
aforementioned statutory cure period shall run concurrently with any contractual
provision for notice and cure period before acceleration of the Secured
Indebtedness) and may then proceed in the manner and subject to and as required
by the conditions of the Act or other applicable law to serve upon Mortgagor and
other necessary parties and publish a notice of sale and to then sell and convey
the Mortgaged Property all in accordance with the Act or other applicable law.
The sale shall be made as an entirety or in lots, parcels or divisions, upon
such notice, at such time and place, in such manner and under such conditions
all as provided for in the Act or other applicable law. The proceeds of the sale
shall be applied in the manner provided for in the Act or other applicable law
and in accordance with the terms of the Credit Agreement. No action of Mortgagee
based upon the provisions contained herein or contained in the Act, including,
without limitation, the giving of the notice of intent to foreclose by power of
sale or service of the notice of sale, shall constitute an election of remedies
which would preclude Mortgagee from pursuing judicial foreclosure before or at
any time after commencement of the power of sale foreclosure procedure.
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(g) Mortgagee may, in lieu of or in addition to exercising the
power of sale provided for in Section 6.1(f) hereof, proceed by suit or suits,
at law or in equity, to enforce the payment and performance of the Secured
Indebtedness in accordance with the terms hereof, and of the other Loan
Documents evidencing it, to foreclose the Liens of this Mortgage as against all
or any part of the Mortgaged Property, and to have all or any part of the
Mortgaged Property sold under the judgment or decree of a court of competent
jurisdiction.
(h) To the extent permitted by law, upon the acceleration of the
Secured Indebtedness under the Credit Agreement, Mortgagee, as a matter of right
and without regard to the sufficiency of the Mortgaged Property, and without any
showing of insolvency, fraud or mismanagement on the part of Mortgagor, and
without the necessity of filing any judicial or other proceeding other than the
proceeding for appointment of a receiver, shall be entitled to the appointment
of a receiver or receivers of the Mortgaged Property, or any part thereof, and
of the income, royalties, revenues, bonuses, production payments, delay rentals,
benefits, rents, issues and profits thereof. Mortgagor hereby consents to the
appointment of such receiver or receivers and agrees not to oppose any
application therefor by Mortgagee.
(i) Upon the acceleration of the Secured Indebtedness under the
Credit Agreement, Mortgagee may (without notification, if permitted by
applicable law) enter upon the Mortgaged Property, take possession of the
Mortgaged Property, and remove the Personal Property, or any part thereof, with
or without judicial process, and, in connection therewith, without any
responsibility or liability on the part of Mortgagee, take possession of any
property located on or in the Mortgaged Property which is not a part of the
Mortgaged Property and hold or store such property at Mortgagor's expense. If
necessary to obtain the possession provided for in this Section 6.1(i),
Mortgagee may undertake any and all remedies to dispossess Mortgagor, including,
specifically, one or more actions for forcible entry and detainer, trespass to
try title and restitution.
(j) Mortgagee may require Mortgagor to assemble any Personal
Property and any other items of the Mortgaged Property, or any part thereof, and
make it available to Mortgagee at a place to be designated by Mortgagee which is
reasonably convenient to Mortgagor and Mortgagee.
(k) Mortgagee may surrender the insurance policies maintained
pursuant to the Credit Agreement, or any part thereof, and receive and apply the
unearned premiums as a credit on the Secured Indebtedness, and, in connection
therewith, Mortgagor hereby appoints Mortgagee as the agent and attorney-in-fact
for Mortgagor (with full powers of substitution) to collect such premiums, which
power of attorney shall be deemed to be a power coupled with an interest and
therefore irrevocable until the release of the Liens evidenced by this Mortgage.
(l) Mortgagee may retain the Personal Property and any other items
of the Mortgaged Property, or any part thereof, in satisfaction or partial
satisfaction of the Secured Indebtedness whenever the circumstances are such
that Mortgagee is entitled to do so under the Code.
(m) Any Secured Party shall have the right to become the purchaser
at any sale of the Mortgaged Property held by Mortgagee or by any court,
receiver or public officer, and
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Mortgagee shall have the right to credit upon the amount of the bid made
therefor, the amount payable out of the net proceeds of such sale to any such
Secured Party. Recitals contained in any conveyance made to any purchaser at any
sale made hereunder shall conclusively establish the truth and accuracy of the
matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, interest accrued on, and
fees payable in respect of, the Secured Indebtedness after the same have become
due and payable, and advertisement and conduct of such sale in the manner
provided herein.
(n) Mortgagee and any Secured Party may buy any Personal Property
and any other items of the Mortgaged Property, or any part thereof, at any
private disposition if the Mortgaged Property or the part thereof being disposed
of, is a type customarily sold in a recognized market or a type which is the
subject of widely distributed standard price quotations.
(o) Mortgagee shall have and may exercise any and all other rights
which Mortgagee may have under the Code, by virtue of the Loan Documents, at
law, in equity or otherwise.
Mortgagee shall have no obligation to do, or refrain from doing, any of
the acts, or to make or refrain from making any payment, referred to in this
Section 6.1.
SECTION 6.2 FORECLOSURE BY JUDICIAL PROCEEDINGS. Upon the occurrence of an
Event of Default, Mortgagee may proceed, where permitted by law, by a suit or
suits in equity or at law, whether for a foreclosure hereunder, or for the sale
of the Mortgaged Property, or for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power herein
granted, or for the appointment of a receiver pending any foreclosure hereunder
or the sale of the Mortgaged Property, or for the enforcement of any other
appropriate legal or equitable remedy.
SECTION 6.3 RECEIPT TO PURCHASER. Upon any sale by virtue of judicial
proceedings, the receipt of the officer making such sale under judicial
proceedings shall be sufficient discharge to the purchaser or purchasers at any
sale for his or their purchase money, and such purchaser or purchasers, or his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of such officer therefor, be obligated
to see to the application of such purchase money, or be in any way answerable
for any loss, misapplication or non-application thereof.
SECTION 6.4 EFFECT OF SALE. Any sale or sales of the Mortgaged Property or
portions thereof where permitted by law shall operate to divest all right,
title, interest, claim and demand whatsoever either at law or in equity, of
Mortgagor of, in and to the premises and the property sold, and shall be a
perpetual bar, both at law and in equity, against Mortgagor, and Mortgagor's
successors, legal representatives or assigns, and against any and all persons
claiming or who shall thereafter claim all or any of the property sold by,
through or under Mortgagor, or Mortgagor's successors, legal representatives and
assigns. Nevertheless, Mortgagor, if requested by Mortgagee to do so, shall join
in the execution and delivery of all proper conveyances, assignments and
transfers of the properties so sold.
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SECTION 6.5 APPLICATION OF PROCEEDS. The proceeds of any sale of or other
realization on the Mortgaged Property, or any part thereof, shall be applied in
the manner required by Section 2.10 of the Credit Agreement.
SECTION 6.6 MORTGAGOR'S WAIVER OF APPRAISEMENT, MARSHALING, ETC. RIGHTS.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time, insist upon or plead or, in any manner
whatsoever, claim the benefit of any stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Mortgage or the absolute sale of the Mortgaged Property or any portion
thereof or the possession thereof by any purchaser at any sale made pursuant to
any provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, and all who may claim through or under Mortgagor,
so far as Mortgagor or those claiming through or under Mortgagor now or
hereafter lawfully may, hereby waives the benefit of all such laws. Mortgagor
and all who may claim through or under Mortgagor, waives, to the extent that
Mortgagor or those claiming through or under Mortgagor may lawfully do so, any
and all rights of appraisement and any and all right to have the Mortgaged
Property marshaled upon any foreclosure of the Lien hereof, or sold in inverse
order of alienation, and agrees that any court having jurisdiction to foreclose
such Lien may sell the Mortgaged Property as an entirety. If any law in this
Section 6.6 referred to and now in force, of which Mortgagor or Mortgagor's
successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to constitute any part of the contract herein contained or
to preclude the operation or application of the provisions of this Section 6.6.
Notwithstanding the provisions of Section 6.1(f) or any other contrary or
inconsistent provision of this Mortgage, in any judicial foreclosure action in
Oklahoma, appraisement of the Mortgaged Property located in Oklahoma is waived
or not waived, at the Mortgagee's election, which election shall be exercised at
the time any written judgment is entered by the applicable court or at any time
prior thereto.
SECTION 6.7 MINERAL LEASING ACT. Notwithstanding any other provisions of
this Mortgage, any Oil and Gas Leases covered by this Mortgage which are subject
to the Mineral Leasing Act of 1920, as amended, and the regulations promulgated
thereunder, shall not be sold or otherwise disposed of to any party other than
citizens of the United States, or to associations of such citizens or to any
corporation organized under the laws of the United States, or any state or
territory thereof that are qualified to own or control interests in such Oil and
Gas Leases under the provisions of such Mineral Leasing Act and regulations, or
to persons who may acquire ownership or interest in such Oil and Gas Leases
under the provisions of 30 U.S.C. ss. 184(g), if applicable, as such Mineral
Leasing Act or regulations are now or may be from time to time in effect.
SECTION 6.8 COSTS AND EXPENSES. All reasonable costs, expenses (including
attorneys' fees) and payments incurred or made by Mortgagee in protecting and
enforcing its rights hereunder, shall constitute a demand obligation owing by
Mortgagor to the party incurring such or making such costs, expenses or payments
and shall bear interest at a rate per annum equal to the rate set forth in
Section 2.06(c) of the Credit Agreement, all of which shall constitute a portion
of the Secured Indebtedness.
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SECTION 6.9 OPERATION OF THE MORTGAGED PROPERTY BY MORTGAGEE. Upon the
occurrence of an Event of Default that is continuing and the acceleration of the
Secured Indebtedness under the Credit Agreement, and in addition to all other
rights herein conferred on Mortgagee, Mortgagee (or any person designated by
Mortgagee) shall, to the extent permitted by applicable law, have the right and
power, but not the obligation, to enter upon and take possession of any of the
Mortgaged Property, and to exclude Mortgagor, and Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that Mortgagor shall be at the time entitled to do any of
such things and in Mortgagor's place and stead. Mortgagee (or any person
designated by Mortgagee) may operate the same without any liability or duty to
Mortgagor in connection with such operations, except to use ordinary care in the
operation of such Mortgaged Property, and Mortgagee or any person designated by
Mortgagee shall have the right to collect and receive all Hydrocarbons produced
and sold from the Mortgaged Property, the proceeds of which shall be applied to
the Obligations in the manner required under the Credit Agreement, to make
repairs, purchase machinery and equipment, conduct workover operations, drill
additional wells and to exercise every power, right and privilege of Mortgagor
with respect to the Mortgaged Property. When and if such expenses of such
operation and development (including costs of unsuccessful workover operations
or additional wells) have been paid and the Secured Indebtedness paid and
performed in full, such Mortgaged Property shall, if there has been no sale or
foreclosure thereof, be returned to Mortgagor.
SECTION 6.10 ADDITIONAL WAIVERS. In order to enforce this Mortgage,
Mortgagee shall not be obligated (a) to foreclose any other mortgage or deed of
trust covering Mortgaged Property located in another State, seek a deficiency
after any such foreclosure, or otherwise enforce Mortgagee's rights in any of
the other Mortgaged Property; or (b) to seek an injunction (prohibitive or
mandatory), the appointment of a receiver, an order modifying any stay in any
federal or state bankruptcy, reorganization or other insolvency proceedings
relating to any of the Mortgaged Property or any portion thereof, or any other
extraordinary relief. Mortgagor waives, to the fullest extent permitted by law,
any defense Mortgagor may have to any liability hereunder based on Mortgagee's
failure or refusal to prosecute, or any lack of diligence or delay in
prosecuting, any action or proceeding to enforce any other mortgage or deed of
trust. If Mortgagee elects to enforce this Mortgage before, or without,
enforcing its rights with respect to any Mortgaged Property covered by any other
Mortgage, Mortgagor waives, to the fullest extent permitted by law, any right
Mortgagor may have, whether statutory or otherwise, to set off the value of any
other Mortgaged Property, or any portion thereof, against the Secured
Indebtedness. If Mortgagee elects to enforce its mortgages or deeds of trust
covering all or any portion of the Mortgaged Property located in other States,
or in conjunction with the enforcement of this Mortgage, Mortgagee is authorized
to purchase all or any part of such other Mortgaged Property at public or
private sale or as otherwise provided by applicable law, and to credit the
purchase price against the Secured Indebtedness in such order or manner as
Mortgagee determines in its sole discretion and to preserve Mortgagee's rights
and Liens under this Mortgage for any portion of the Secured Indebtedness that
remains unpaid. Mortgagor waives to the fullest extent permitted by applicable
law any right to claim or seek any credit against the Secured Indebtedness in
excess of the actual amount bid or received by Mortgagee in connection with the
foreclosure of Mortgagee's Liens on any of the Mortgaged Property located in
such other States. Mortgagor further agrees that Mortgagee shall not be required
(1) to seek or obtain a deficiency judgment in or pursuant to any action or
proceeding to foreclose this Mortgage as a condition of
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later enforcing any mortgage or deed of trust covering Mortgaged Property
located in another State, or (2) to seek or obtain a deficiency judgment in or
pursuant to any action or proceeding to foreclose any such other mortgage or
deed of trust as a condition of later enforcing this Mortgage. Notwithstanding
the foregoing, if Mortgagee in good faith believes that it may be required
either to obtain a deficiency judgment to enforce this Mortgage after
enforcement of a mortgage or deed of trust covering Mortgaged Property located
in another State, or to enforce another mortgage or deed of trust after
enforcement of this Mortgage, then Mortgagor agrees that Mortgagee shall be
entitled to seek and obtain such a deficiency judgment notwithstanding any
contrary or inconsistent provision contained in any Loan Documents.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 ADVANCES BY MORTGAGEE. Each and every covenant herein
contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Mortgage, Mortgagee or any receiver
appointed hereunder, may, but shall not be obligated to, make advances to
perform the same on Mortgagor's behalf, and Mortgagor hereby agrees to repay
such sums upon demand plus interest at a rate per annum equal to the rate of
interest set forth in Section 2.06(c) of the Credit Agreement. No such advance
shall be deemed to relieve Mortgagor from any Event of Default hereunder.
SECTION 7.2 DEFENSE OF CLAIMS. Mortgagor will notify Mortgagee, in
writing, promptly of the commencement of any legal proceedings of which
Mortgagor has notice affecting or which could adversely effect the Lien hereof
or the status of or title to the Mortgaged Property, or any material part
thereof, and will take such action, employing attorneys agreeable to Mortgagee,
as may be necessary to preserve Mortgagor's or Mortgagee's rights affected
thereby; and should Mortgagor fail or refuse to take any such action, Mortgagee
may take such action on behalf and in the name of Mortgagor and at Mortgagor's
sole cost and expense. Moreover, Mortgagee may take such independent action in
connection therewith as it may, in its sole discretion, deem proper without any
liability or duty to Mortgagor except to use ordinary care, Mortgagor hereby
agreeing that all sums advanced or all expenses incurred in such actions plus
interest at a rate per annum equal to the rate of interest set forth in Section
2.06(c) of the Credit Agreement, will, on demand, be reimbursed to Mortgagee or
any receiver appointed hereunder.
SECTION 7.3 DEFEASANCE. If the Secured Indebtedness shall be paid and
discharged in full and the Commitments shall have terminated, then, and in that
case only, this Mortgage shall be null and void and the interests of Mortgagor
in the Mortgaged Property shall become wholly clear of the Lien created hereby,
and such Lien shall be released in due course at the cost of Mortgagor.
Mortgagee will, at Mortgagor's sole expense, execute and deliver to Mortgagor
all releases and other instruments reasonably requested of the Lien created
hereunder. Otherwise, this Mortgage shall remain and continue in full force and
effect.
SECTION 7.4 0RENEWALS, AMENDMENTS AND OTHER SECURITY. Renewals,
refinancings and extensions of the Secured Indebtedness may be given at any time
and amendments may be made to this Mortgage, the Loan Documents and any other
agreements relating to any part of the
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Secured Indebtedness, and Mortgagee may take or may hold other security for the
Secured Indebtedness. Any amendment of this Mortgage shall be by written
instrument and need be executed only by the party against whom enforcement of
such amendment is asserted. Mortgagee may resort first to such other security or
any part thereof or first to the security herein given or any part thereof, or
from time to time to either or both, even to the partial or complete abandonment
of either security, and such action shall not be a waiver of any rights
conferred by this Mortgage, which shall continue as a first Lien upon the
Mortgaged Property not expressly released until all Secured Indebtedness secured
hereby is fully paid and discharged.
SECTION 7.5 INSTRUMENT AND ASSIGNMENT, ETC. This Mortgage shall be deemed
to be and may be, enforced from time to time as an assignment, chattel mortgage,
contract, financing statement, real estate mortgage, pledge or security
agreement, and from time to time as any one or more thereof; and to the extent
that any particular jurisdiction wherein a portion of the Mortgaged Property is
situated does not recognize or permit Mortgagor to grant, bargain, sell,
warrant, mortgage, assign, transfer or convey Mortgagor's rights, titles and
interests to Mortgagee in the manner herein adopted, then, with respect to the
Mortgaged Property located in such jurisdiction, Mortgagor does hereby grant,
bargain, sell, warrant, mortgage, assign, transfer and convey unto Mortgagee,
the Mortgaged Property to secure the Secured Indebtedness and the Obligations of
Mortgagor contained herein.
SECTION 7.6 LIMITATION ON INTEREST. Regardless of any provision contained
in this Mortgage or any of the other Loan Documents, Secured Parties shall never
be entitled to receive, collect, or apply, as interest on the Loans, any amount
in excess of the Maximum Lawful Rate, and in the event any Secured Party ever
receives, collects or applies as interest any such excess, such amount which
would be deemed excessive interest shall be deemed a partial prepayment of
principal and treated hereunder as such; and if the Loans are paid in full, any
remaining excess shall promptly be paid to Mortgagor. In determining whether or
not the interest paid or payable under any specific contingency exceeds the
Maximum Lawful Rate, Mortgagor and Secured Parties shall, to the extent
permitted under applicable law, (a) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) amortize, prorate, allocate and
spread, in equal parts, the total amount of the interest throughout the entire
contemplated term of the Notes, so that the interest rate is the Maximum Lawful
Rate throughout the entire term of the Notes; provided, however, that if the
unpaid principal balance thereof is paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Lawful Rate, Secured
Parties shall refund to Mortgagor the amount of such excess and, in such event,
Secured Parties shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Lawful Rate.
SECTION 7.7 UNENFORCEABLE OR INAPPLICABLE PROVISIONS. If any provision of
this Mortgage or in any of the other Loan Documents is invalid or unenforceable
in any jurisdiction, the other provisions hereof or of any of the other Loan
Documents shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of Mortgagee
in order to effectuate the provisions hereof, and the invalidity of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction. Any reference
herein contained to statutes or laws of a state
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in which no part of the Mortgaged Property is situated shall be deemed
inapplicable to, and not used in, the interpretation hereof.
SECTION 7.8 RIGHTS CUMULATIVE. Each and every right, power and remedy
herein given to Mortgagee shall be cumulative and not exclusive; and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and so often and in such order as
may be deemed expedient by Mortgagee and the exercise, or the beginning of the
exercise, of any such right, power or remedy shall not be deemed a waiver of the
right to exercise, at the same time and thereafter, any other right, power or
remedy. No delay or omission by Mortgagee in the exercise of any right, power or
remedy shall impair any such right, power or remedy or operate as a waiver
thereof or of any other right, power or remedy then or thereafter existing.
SECTION 7.9 WAIVER BY MORTGAGEE. Any and all covenants in this Mortgage
may, from time to time, by instrument in writing signed by Mortgagee and, to the
extent required under the Credit Agreement, the Secured Parties be waived to
such extent and in such manner as Mortgagee may desire, but no such waiver shall
ever affect or impair Mortgagee's or any Secured Party rights and remedies or
Liens hereunder, except to the extent specifically stated in such written
instrument.
SECTION 7.10 SUCCESSORS AND ASSIGNS. This Mortgage is binding upon
Mortgagor, and Mortgagor's heirs, devisees, successors, personal and legal
representatives and assigns, and shall inure to the benefit of Mortgagee and its
successors, legal representatives and assigns, and the provisions hereof shall
likewise be covenants running with the Lands.
SECTION 7.11 ARTICLE AND SECTION HEADINGS. The article and section
headings in this Mortgage are inserted for convenience and shall not be
considered a part of this Mortgage or used in its interpretation.
SECTION 7.12 COUNTERPARTS. This Mortgage may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original,
and all of which are identical except that, to facilitate recordation in any
particular county or parish, counterpart portions of Exhibit A which describe
properties situated in counties or parishes other than the county or parish in
which such counterpart is to be recorded may be omitted.
SECTION 7.13 SPECIAL FILING AS FINANCING STATEMENTS. This Mortgage shall
likewise be a security agreement and a financing statement by virtue of
Mortgagor, as debtor, granting to Mortgagee, its successors, legal
representatives and assigns, as secured party, a security interest in all
personal property, as-extracted collateral, fixtures, accounts, contract rights,
general intangibles, inventory, goods, chattel paper, instruments, documents and
money described or referred to in granting clauses (1) through (10) of Article 2
hereof and all proceeds and products from the sale, lease or other disposition
of the Mortgaged Property or any part thereof. The addresses shown in Section
7.14 hereof are the addresses of Mortgagor and Mortgagee and information
concerning the security interest may be obtained from Mortgagee at its address.
Without in any manner limiting the generality of any of the foregoing provisions
hereof: (a) some portion of the goods described or to which reference is made
herein are or are to become fixtures on the Lands described or to which
reference is made herein; (b) the minerals
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and the like (including oil and gas) included in the Mortgaged Property and the
accounts resulting from the sale thereof will be financed at the wellhead(s) or
minehead(s) of the well(s) or mine(s) located on the Lands described or to which
reference is made herein; and (c) this Mortgage is to be filed of record, among
other places, in the real estate records of each county or parish in which the
Lands, or any part thereof, are situated, as a financing statement, but the
failure to do so will not otherwise affect the validity or enforceability of
this Mortgage. Mortgagor authorizes Mortgagee to file such amendments to this
Mortgage, financing statements and amendments thereto, and continuation
statements, as Mortgagee deems reasonable or necessary to perfect and maintain
the perfection of the Liens granted herein, including such Liens with respect to
any additions to the Mortgaged Property as provided in Article 5.
SECTION 7.14 NOTICES. Whenever this Mortgage requires or permits any
consent, approval, notice, request or demand from one party to another, such
consent, approval, notice or demand shall, unless otherwise required under
applicable law, be given in accordance with the provisions of the Credit
Agreement, addressed to the party to be notified at the address stated below (or
such other address as may have been designated in accordance with the provisions
of the Credit Agreement):
MORTGAGOR - DEBTOR MORTGAGEE-SECURED PARTY
Quest Cherokee, LLC UBS AG, Stamford Branch
5901 N. Western, Suite 200 677 Washington Boulevard
Oklahoma City, Oklahoma 73118 Stamford, Connecticut 06901
Attn: Jerry D. Cash Attn: Sailoz Sikka
SECTION 7.15 GOVERNING LAW. THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT
THE LAWS OF ANY STATE IN WHICH THE MORTGAGED PROPERTY IS LOCATED NECESSARILY
GOVERNS THE VALIDITY, PERFECTION, PRIORITY AND ENFORCEABILITY OF, AND THE
EXERCISE OF ANY REMEDIES WITH RESPECT TO, ANY LIEN INTENDED TO BE CREATED HEREBY
ON THE MORTGAGED PROPERTY LOCATED IN SUCH STATE.
SECTION 7.16 FUTURE ADVANCES; MAXIMUM SECURED AMOUNT. This Mortgage covers
not only the proceeds of the Loan, but all advances hereafter made by Lenders to
or for the benefit of Mortgagor (the "FUTURE ADVANCES"), including, without
limitation, any amounts advanced by Lenders in satisfying, on Mortgagor's
behalf, any of Mortgagor's Obligations, and any advances made in accordance
herewith by Mortgagee or any Secured Party to protect its security, and any
other advances by Mortgagee or any Secured Party which shall not, in the
aggregate exceed $235,000,000. The maximum amount secured hereby may be advanced
and repaid, and again advanced and repaid from time to time, in Secured Parties'
sole and absolute discretion, and this Mortgage shall become enforceable upon
recording and shall have priority over all other parties whose rights arose
after the recording hereof, with respect to all funds advanced by any Secured
Party to Mortgagor, regardless of whether such funds were advanced before or
after the arising of such other party's rights. Nothing herein shall be
interpreted as requiring any Secured Party to make any Future Advances
hereunder. THE MAXIMUM AMOUNT SECURED BY THIS MORTGAGE AT ANY ONE TIME SHALL BE
$235,000,000.
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SECTION 7.17 RECORDING. Executed original counterparts of this Mortgage
are to be filed for record in the records of the jurisdictions wherein the
Mortgaged Property is situated, and shall have annexed thereto as Exhibit A,
only the portions or divisions containing specific descriptions of the Mortgaged
Property relating to the Lands located in such jurisdictions. Whenever a
recorded counterpart of this Mortgage contains specific descriptions which are
less than all of the descriptions contained in any full counterpart lodged with
Mortgagee, the omitted descriptions are hereby included by reference in such
recorded counterpart as if each recorded counterpart conformed to any full
counterpart lodged with Mortgagee.
SECTION 7.18 NO PARAPHED NOTES. Mortgagor acknowledges that no promissory
note or other instrument has been presented to the undersigned notary public(s)
to be paraphed for identification herewith.
SECTION 7.19 RENEWAL AND EXTENSION. By this Mortgage, the Existing
Mortgage is hereby amended and restated in its entirety, and the liens, security
interests and assignments created and granted by the Existing Mortgage are
hereby renewed, continued, amended, restated and supplemented to the fullest
extent legally permitted, and nothing contained herein is intended to impair or
extinguish the liens, security interests, assignments, privileges and priorities
of the Existing Mortgage, as hereby amended and restated, and such liens,
security interests, assignments and privileges are and will remain in full force
and effect. The parties hereto expressly recognize and confirm their intent to
continue the effectiveness and priority of the liens, security interests,
assignments and privileges granted under the Existing Mortgage, as hereby
amended and restated, as to all sums now or hereafter owing under the Loan
Documents
ARTICLE 8
ASSIGNMENT OF PRODUCTION
SECTION 8.1 ASSIGNMENT. For the purpose of further securing the Secured
Indebtedness and the performance of Mortgagor's covenants hereunder, Mortgagor
does hereby TRANSFER, ASSIGN, AND CONVEY unto Mortgagee any and all of the
interests of Mortgagor in and to the Hydrocarbons that may be produced from, or
attributable to, the Mortgaged Property on and after the Effective Date,
together with the proceeds of the sale thereof and attributable thereto. This
assignment is made upon the following terms and conditions: (a) pipeline
companies and others purchasing the oil, gas, minerals and other substances
listed above produced and to be produced from said property are hereby
authorized and directed to pay directly to Mortgagee the interests of Mortgagor
in and to the proceeds of the sale of the oil, gas, minerals and other
substances listed above produced, to be produced and attributable to said
property, and to continue such payments until they have been furnished with a
release hereof executed in writing by Mortgagee, and the receipt of Mortgagee
for monies so paid to it shall be a full and complete release, discharge and
acquittance to any such pipeline company or other purchaser, to the extent of
all amounts so paid, (b) Mortgagee is hereby authorized to receive and collect
the proceeds of the sale of the oil, gas, minerals and other substances listed
above assigned to it hereunder, and to apply the funds so received first toward
the payment of the expenses, if any, incurred in the collection thereof, then in
such order as provided in the Credit Agreement toward the payment of the Secured
Indebtedness, any balance remaining after the full and final payment of the
Secured Indebtedness to be held subject to the order of Mortgagor, (c) Mortgagee
shall have the right, at its sole option, at any time, and from
27
<PAGE>
time to time, to release to, or on the order of, Mortgagor all or any portion of
the funds assigned to Mortgagee hereunder, and no such releases shall affect or
impair the Lien of this Mortgage or the validity and effect of the assignment
contained in this Article 8, (d) Mortgagee shall never be under any obligation
to enforce the collection of the funds assigned to it hereunder, nor shall it
ever be liable for failure to exercise diligence in the collection of such
funds, but it shall only be accountable for the sums that it shall actually
receive, (e) Mortgagor covenants to cause all pipeline companies or other
purchasers of the oil, gas, minerals and other substances listed above produced
from and attributable to said property, to pay promptly to Mortgagee, at the
office of Mortgagee at the address of Mortgagee stated above, the interests of
Mortgagor in and to the proceeds of the sale thereof, and (f) upon the full and
final payment of the Secured Indebtedness, Mortgagee, at the request of
Mortgagor, and at Mortgagor's sole cost and expense, shall execute and deliver
to Mortgagor a reassignment hereof, without recourse, representations or
warranties. Notwithstanding the foregoing provisions of this Section 8.1, so
long as no Event of Default has occurred and shall be continuing, Mortgagor may
continue to receive from the purchasers of production, all such Hydrocarbons and
proceeds of the sale thereof, subject, however, to the Liens created under this
Mortgage. If an Event of Default has occurred and is continuing, Mortgagee may
exercise all rights and remedies granted hereunder, including, without
limitation, the right to obtain possession of all Hydrocarbons and proceeds of
the sale thereof then held by Mortgagor or to receive directly from the
purchasers all other Hydrocarbons and proceeds of the sale thereof.
SECTION 8.2 POWER OF ATTORNEY. In consideration of the Loans evidenced by
the Notes, Mortgagor hereby designates and appoints Mortgagee as Mortgagor's
true and lawful agent and attorney-in-fact (with full power of substitution,
either generally or for such limited periods or purposes as Mortgagee may, from
time to time, prescribe), with full power and authority, for and on behalf and
in the name of Mortgagor, upon the occurrence of an Event of Default that is
continuing, to execute, acknowledge and deliver all such division orders,
transfer orders, certificates and any and all other documents of every nature as
may, from time to time, be necessary or proper to effectuate the intent and
purpose of the assignment contained in Section 8.1 hereof. Mortgagor shall be
bound thereby as fully and effectively as if Mortgagor had personally executed,
acknowledged and delivered any such division order, transfer order, certificate
or other documents. The powers and authorities herein conferred on Mortgagee may
be exercised by Mortgagee through any person who, at the time of the execution
of a particular instrument, is the president, a senior vice-president or a
vice-president of Mortgagee. The power of attorney conferred by this Section 8.2
is granted for a valuable consideration and hence is coupled with an interest
and is irrevocable so long as the Secured Indebtedness, or any part thereof,
shall remain unpaid. All persons dealing with Mortgagee, any officer thereof
above designated or any substitute thereof, shall be fully protected in treating
the powers and authorizations conferred by this Section 8.2 as continuing in
full force and effect until advised by Mortgagee that all of the Secured
Indebtedness is fully and finally paid.
[Signature Page to Follow]
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<PAGE>
IN WITNESS WHEREOF, Mortgagor and Mortgagee, acting by and through
their respective duly authorized officers, have each executed this Mortgage on
the date of their respective acknowledgments, to be effective as of the
Effective Date.
QUEST CHEROKEE, LLC, a Delaware
limited liability company
By: /s/ JERRY D. CASH
----------------------------------
Jerry D. Cash, Manager
The address of Mortgagor is:
Quest Cherokee, LLC
5901 N. Western, Suite 200
Oklahoma City, Oklahoma 73118
Attn: Jerry D. Cash
This Mortgage was prepared by, and
recorded counterparts should be
returned to:
Mark C. Anderson
Vinson & Elkins L.L.P.
2001 Ross Avenue, Suite 3700
Dallas, Texas 75201
Signature Page
Amended and Restated Mortgage
<PAGE>
SCHEDULE 1
Mortgage Documents
Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment
of Production by Quest Cherokee, LLC in favor of Bank One, NA, as Collateral
Agent, or alternatively, J. Scott Fowler, Trustee, for the benefit of Bank One,
NA, as Collateral Agent, counterparts of which were filed as follows:
KANSAS
CHATAUQUA COUNTY, KANSAS
1. Counterpart filed with the County Clerk of Chatauqua County, Kansas on
January 7, 2004, in Volume 117, Page 336.
ELK COUNTY, KANSAS
2. Counterpart filed with the County Clerk of Elk County, Kansas on December
30, 2003, in Volume 112, Page 513.
LABETTE COUNTY, KANSAS
3. Counterpart filed with the County Clerk of Labette County, Kansas on
December 31, 2003, in Volume 33, Page 70.
MONTGOMERY COUNTY, KANSAS
4. Counterpart filed with the County Clerk of Montgomery County, Kansas on
December 30, 2003, in Volume 536, Page 519.
NEOSHO COUNTY, KANSAS
5. Counterpart filed with the County Clerk of Neosho County, Kansas on
December 30, 2003, in Volume 326, Page 245.
WILSON COUNTY, KANSAS
6. Counterpart filed with the County Clerk of Wilson County, Kansas on
December 30, 2003, in Volume 267, Page 88.
WOODSON COUNTY, KANSAS
7. Counterpart filed with the County Clerk of Woodson County, Kansas on
December 30, 2003, in Volume 95, Page 72.
OKLAHOMA
CRAIG COUNTY, OKLAHOMA
Schedule 1-1
<PAGE>
8. Counterpart filed with the County Clerk of Craig County, Oklahoma on
December 29, 2003, in Volume 521, Page 158.
NOWATA COUNTY, OKLAHOMA
9. Counterpart filed with the County Clerk of Nowata County, Oklahoma on
January 2, 2004, in Volume 709, Page 1.
Schedule 1-2
<PAGE>
EXHIBIT A
(TO BE ATTACHED)
A-1
</TEXT>
</DOCUMENT>