MORTGAGE, ASSIGNMENT OF PROCEEDS,
SECURITY AGREEMENT AND FINANCING STATEMENT
(Oil and Gas)
FROM
XXXXX OIL AND GAS COMPANY
TO
HOLDERS OF 1996 10% COLLATERALIZED SUBORDINATED
CONVERTIBLE DEBENTURES
DATED AS OF NOVEMBER 15, 1996
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THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THE OIL AND GAS INTERESTS INCLUDED IN THE MORTGAGED PROPERTY WILL BE FINANCED AT
THE WELLHEADS OF THE XXXXX LOCATED ON THE PROPERTY DESCRIBED IN EXHIBIT A
HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS OF THE COUNTY RECORDER.
THE SECURED PARTY IS NOT A SELLER OR PURCHASE MONEY LENDER OF THE COLLATERAL
COVERED BY THIS INSTRUMENT.
THIS DOCUMENT WAS PREPARED BY AND WHEN RECORDED AND/OR FILED SHOULD BE RETURNED
TO:
Xxxx X. Xxxxxx, Esq.
Xxxxxx and Xxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
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SUBORDINATED MORTGAGE, ASSIGNMENT OF PROCEEDS,
SECURITY AGREEMENT AND FINANCING STATEMENT
This SUBORDINATED Mortgage, Assignment of Proceeds, Security Agreement and
Financing Statement (the "Mortgage") is entered into as of the Effective Date
(as defined below) by and between the undersigned Xxxxx Oil and Gas Company, a
Nevada corporation (formerly Xxxxxxx Xxxxx Oil and Gas Company and successor by
merger to Skaer Enterprises, Inc., a Colorado corporation, herein called
"Mortgagor"), whose address is 000 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxxxxx,
Xxxxxxxx 00000-0000, and those persons who are the registered holders of the
1996 10% Collateralized Subordinated Convertible Debentures of Xxxxx Oil and Gas
Company, the total principal amount of which is Five Million Dollars
($5,000,000) (hereafter the "Debentures") and the names, addresses and principal
amount of Debentures held is set forth on Exhibit B, incorporated herein by this
reference (hereafter the "Debenture Mortgagees"), is subject and subordinate to
the Mortgage, Assignment, Proceeds, Security Agreement and Financing Statement
pertaining to the collateral, dated August 23, 1996, recorded in Larimer County,
Colorado as Reception No. 93062241 and No. 93062242 and in Weld County, Colorado
in Book 1399 at File 1122 as Reception No. 02348218 and Book 0189 at File 1186
as Reception No. U0253060.
The parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
Section 1.1 Defined Terms. For the purposes of this instrument:
"Collateral" includes Fixture Collateral, Personalty Collateral and Realty
Collateral as hereinafter defined.
"Dollars" and "US$" mean lawful money of the United States of America.
"Effective Date" means as of November 15, 1996.
"Environmental Laws" shall mean any and all laws,, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Authority
pertaining to health or the environment in effect in any and all jurisdictions
in which Mortgagor is conducting or at any time has conducted business, or where
any Property of Mortgagor is located, or where any hazardous substances
generated by or disposed of by Mortgagor are located, including, without
limitation, the Clean Air Act, as amended; the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended; the
Federal Water Pollution Control Act, as amended; the Occupational Safety and
Health Act of 1970, as amended; the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended; the Safe Drinking Water Act, as amended; the Toxic
Substances Control Act, as amended; the Superfund Amendments and Reauthorization
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Act of 1986, as amended; and other environmental conservation or protection
laws. The terms "hazardous substance," "release" and "threatened release" have
the meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment with respect to all provisions of this Agreement, and
provided further that, to the extent the laws of the state in which any Property
of Mortgagor is located establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply.
"Fixture Collateral" means all of Mortgagor's interest in and to all
Operating Equipment which is or becomes so related to the Oil and Gas Property
or any part thereof that an interest in the Operating Equipment arises under the
real property law of the State in which it is situated, including all oil or
natural gas delivery pipelines.
"Hazardous Materials" means (a) petroleum or petroleum products, natural or
synthetic gas other than crude oil, natural gas and natural gas liquids prior to
capture and production thereof; (b) asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and radon gas; and (c) any other
substances defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants" under any applicable Environmental Law.
"Hydrocarbons" means oil, gas and other liquid or gaseous hydrocarbons,
whether or not treated or processed.
"Obligations" means the aggregate of:
(a) all amounts payable pursuant to any of the Debentures at any time
outstanding in the aggregate principal amount not to exceed Five Million
Dollars ($5,000,000) issued by Mortgagor to the Debenture Mortgagees with a
stated maturity date of April 15. 2001, bearing interest at the rates
specified in and otherwise subject to the terms of the Debentures dated on
or about November 15, 1996 among the Mortgagor and the Debenture
Mortgagees, with such Debentures, and all modifications, extensions and
renewals thereof referred to as the "Debentures," and with the holders of
the Debentures and all subsequent holders of all or any part thereof
referred to as the "Secured Parties";
(b) claims, as defined in Section 3.5 which are identified (whether or
not the specific amount thereof has been determined) prior to payment of
all principal and interest due under the Debentures;
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(c) any and all other or additional indebtedness or liabilities for
which Mortgagor is now or may become liable to any Secured Party or
Debenture Mortgagees in any manner pursuant to the Debentures;
(d) all sums advanced and costs and expenses incurred by or on behalf
of the Debenture Mortgagees, including without limitation all legal,
accounting, engineering, management, consulting or like fees, made and
incurred in connection with the Obligations described in paragraphs (i) and
(ii) above or any part thereof, any renewal, extension or modification of,
or substitution for, the foregoing Obligations or any part thereof, or the
acquisition, perfection or maintenance and preservation of the security
therefor, whether such advances, costs or expenses shall have been made and
incurred at the request of Mortgagor or the Debenture Mortgagees; and
(e) any and all extensions and renewals of, substitutions for, or
modifications or amendments of any of the foregoing Obligations or any part
thereof.
"Oil and Gas Property" means all of the oil and gas leasehold interests and
estates and other interests of Mortgagor in the lands, leases and agreements
described in Exhibit A attached hereto and made a part hereof, (it being
expressly understood and agreed that the undivided interests in such properties
set forth in Exhibit A are for information purposes and do not establish a limit
on Mortgagor's interests therein which are subject to this Mortgage) whether now
owned or hereafter acquired, by operation of law or otherwise, together with all
of Mortgagor's interests of any nature whatsoever now or hereafter incident or
appurtenant thereto, including, but not limited to, fee mineral and surface
interests in said lands, royalty interests therein, all unsevered and
unextracted Hydrocarbons in, under or attributable to Mortgagor's interests in
said lands, oil and gas (or oil, gas and mineral) leases, subleases, mineral
agreements, farmin agreements, farmout agreements, bottom hole agreements, other
participation agreements of any kind, royalties, overriding royalties, net
profits interests, production payments, licenses, servitudes, orders, acreage
contribution agreements, processing agreements, options and similar interests,
and all rights-of-way, surface leases, and easements affecting the foregoing
interests of Mortgagor or useful or appropriate in exploring and/or drilling
for, producing, processing, treating, handling, storing, transporting or
marketing Hydrocarbons therefrom or the disposal of water, Hydrocarbons or
associated substances from said lands.
"Operating Equipment" means all surface or subsurface machinery, equipment,
facilities, supplies or other property of whatsoever kind or nature and any
replacements thereof, substitutions therefor or accessions thereto (including
leases of equipment), now or hereafter located in, on or under, affixed or
attributable to or obtained or used in connection with any of the Oil and Gas
Property or any portion thereof or interest therein, including, without limiting
the generality of the foregoing, goods which are or are to become fixtures on
the Oil and Gas Property, oil xxxxx, gas xxxxx, water xxxxx, injection xxxxx,
casing, tubing, rods, pumps, pumping units and engines, Christmas trees,
derricks, separators, gun barrels, flow lines, tanks, gas systems (for
gathering, treatment, compression and transmission), chemicals, solutions, water
systems (for treating, disposal and injection), power plants, boilers, poles,
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lines, transformers, starters and controllers, valves, meters, measuring
devices, machine shops, tools, storage yards and equipment stored therein,
buildings and camps, secondary and other recovery equipment, systems and
processes, plans, drawings, specifications, surveys, engineering, geological and
geophysical studies and reports, well logs, reports and related data,
seismographic studies, reports and information, office and personnel books,
files, records and correspondence, computer output and data files, maps, plats,
abstracts of title, lease files, unit files, production marketing files, title
curative opinions, title files and title records, division orders and division
order records, ownership maps, warranties and guarantees of manufacturers and
others, telegraph, telephone and other communication systems, roads, loading
docks, shipping facilities and building and construction materials.
"Personalty Collateral" means all of Mortgagor's interest now owned or
hereafter acquired in and to: (i) all Operating Equipment; (ii) all
Hydrocarbons, whether or not extracted from or attributable to the Oil and Gas
Property; (iii) all Production Sales Contracts; and (iv) all other personal
property, movable and immovable, tangible or intangible, of whatsoever nature
and kind, wherever located, including, without limitation, all accounts,
contract rights, general intangibles, equipment, inventory, goods, chattel
paper, permits, authorizations, seismic or other data, title information, title
abstracts and maps, now owned or existing or hereafter acquired by Mortgagor or
arising in connection with the conduct by Mortgagor of any activity on or
relating to the Collateral, except that organizational, tax and other internal
records, agreements or documents of the Mortgagor or any partner therein which
are not related to or necessary for the ownership and operation of the
Collateral and sale of Hydrocarbons are excluded from Personalty Collateral.
"Proceeds" includes whatever is received upon the sale, exchange,
collection or other disposition of the Collateral and insurance payable or
damages or other payments by reason of loss or damage to the Collateral, and all
additions thereto, substitutions and replacements thereof or accessions thereto.
"Production Sales Contract" means each contract now in effect or hereafter
entered into by Mortgagor or Xxxxxxxxx's predecessors in title for the sale,
purchase, exchange or processing of Hydrocarbons extracted from or attributable
to the Oil and Gas Property.
"Realty Collateral" means all of Xxxxxxxxx's interest in and to the Oil and
Gas Property, including, but not limited to, the interests of Mortgagor
described or specified in Exhibit A hereto.
ARTICLE 2 - CREATION OF SECURITY
Section 2.1 Grant. In consideration of the Debenture Mortgagees'
acquisition of the Debentures constituting the Obligations, and in consideration
of the mutual covenants contained herein, and for the purpose of securing
payment of the Obligations, Mortgagor hereby grants, bargains, sells, warrants,
mortgages, assigns, transfers and conveys the Realty Collateral and Fixture
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Collateral to the Debenture Mortgagees, pari passu among all the Debenture
Mortgagees with power of sale to have and to hold the Realty Collateral and
Fixture Collateral, together with all and singular the rights, privileges,
contracts, and appurtenances now or hereafter at any time before the foreclosure
or release hereof, in any way appertaining or belonging thereto, unto the
Debenture Mortgagees and to their substitutes or successors, forever, upon the
terms and conditions herein set forth; and Xxxxxxxxx hereby binds and obligates
Mortgagor and Xxxxxxxxx's successors and assigns, to warrant and to defend, all
and singular, title to the Collateral unto the Debenture Mortgagees and its
substitutes or successors, forever, against the claims of any and all persons
whomsoever claiming any part thereof.
Section 2.2 Creation of Security Interest. In addition to the grant
contained in Section 2.1, and for the same consideration and purpose, Mortgagor
hereby grants to the Debenture Mortgagees, pari passu among all the Debenture
Mortgagees, security interest in all Personalty Collateral, now owned or
hereafter acquired by the Mortgagor, and in all Proceeds. Without limiting the
foregoing provisions of this Section 2.2, Mortgagor stipulates that the grant
made by this Section 2.2 includes a grant of a security interest in Hydrocarbons
extracted from or attributable to the Oil and Gas Property and in the Proceeds
resulting from sale of such Hydrocarbons (including, but not limited to, sales
at the wellhead), such security interest to attach to such Hydrocarbons as
extracted and to the accounts resulting from such sales.
Section 2.3 Proceeds. The security interest of Debenture Mortgagees
hereunder in the Proceeds shall not be construed to mean that any Debenture
Mortgagees consent to the sale or other disposition of any part of the
Collateral other than Hydrocarbons extracted from or attributable to the Oil and
Gas Property and sold in the ordinary course of business.
ARTICLE 3 - ASSIGNMENT OF PRODUCTION PROCEEDS
Section 3.1 Assignment. As further security for the payment of the
Obligations, upon default by the Company under the terms of the Debentures, the
Mortgagor shall transfer, assign, warrant and convey to Debenture Mortgagees,
pari passu among all the Debenture Mortgagees, all Hydrocarbons (and the
Proceeds therefrom) which are extracted from or attributable to the Oil and Gas
Property. All parties producing, purchasing and receiving such Hydrocarbons or
the Proceeds therefrom are authorized and directed to treat Debenture
Mortgagees, pari passu among all the Debenture Mortgagees, as the person
entitled in Mortgagor's place and stead to receive the same; and further, those
parties will be fully protected in so treating Debenture Mortgagees and will be
under no obligation to see to the application by Debenture Mortgagees of any
Proceeds received by it.
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Section 3.2 Application of Proceeds.
(a) All payments received by Debenture Mortgagees pursuant to Section 3.1
above shall be placed in a collateral collection account at the financial
institution designated by the Debenture Mortgagees and on the last day of each
month shall be applied as follows:
(i) first, toward satisfaction of all costs and expenses incurred in
connection with the collection of Proceeds and the payment of any part of
the Obligations not represented by a written instrument;
(ii) second, to the payment of all accrued interest on the Debentures
and of all other fees or payments required in the Debentures;
(iii) third, to the payment of any then due and owing principal on the
Debentures; and
(iv) the balance, if any, shall be released to Mortgagor.
(b) If any date of application specified above (herein called a "regular
application date") shall be a Saturday, Sunday or legal banking holiday under
the laws of the jurisdiction in which such proceeds shall be applied, the
proceeds to be applied by Debenture Mortgagees pursuant to this Section 3.2
shall be applied on the last business day next preceding such regular
application date that is not a Saturday, Sunday or legal banking holiday, but
the amount to be applied pursuant to paragraph (a)(ii) of this Section 3.2 shall
nevertheless be the amount accrued up to, but not including, such regular
application date.
Section 3.3 Mortgagor's Payment Duties. Nothing contained herein will limit
Xxxxxxxxx's duty to make payment on the Obligations when the Proceeds received
by Debenture Mortgagees pursuant to this Article 3 are insufficient to pay the
costs, interest, principal and any other portion of the Obligations then owing,
and the receipt of Proceeds by Debenture Mortgagees will be in addition to all
other security now or hereafter existing to secure payment of the Obliga tions.
Section 3.4 Debenture Mortgagees Collection Duties. Debenture Mortgagees
have no obligation to enforce collection of any Proceeds and are hereby released
from all responsibility in connection therewith, except the responsibility to
account to Mortgagor for Proceeds actually received.
Section 3.5 Indemnification. Xxxxxxxxx agrees to indemnify Debenture
Mortgagees and each other Secured Party against and hold Debenture Mortgagees
and each other Secured Party harmless from all claims, actions, liabilities,
losses, judgments, attorneys' fees, costs and expenses and other charges of any
description whatsoever (all of which are hereafter referred to in this Section
3.5 as "Claims") made against or sustained or incurred by Debenture Mortgagees
or any other Secured Party as a consequence of the assertion, either before or
after the payment in full of the Obligations, that Debenture Mortgagees or any
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other Secured Party received Hydrocarbons or Proceeds pursuant to this
instrument. Debenture Mortgagees and each other Secured Party will have the
right to employ attorneys and to defend against any Claims and unless furnished
with satisfactory indemnity, after notice to Mortgagor, Debenture Mortgagees or
any other Secured Party will have the right to pay or compromise and adjust all
Claims in its sole reasonable discretion. Mortgagor shall indemnify and pay to
Debenture Mortgagees or any other Secured Party all amounts paid by Debenture
Mortgagees or any other Secured Party in compromise or adjustment of any of the
Claims or amounts adjudged against Debenture Mortgagees or any other Secured
Party in respect of any of the Claims. The liabilities of Mortgagor as set forth
in this Section 3.5 will constitute Obligations and will survive the termination
of this instrument for a period of six months.
Section 3.6 Limitation of Liability. The Mortgagor is liable for the full
amount of the Obligations, including, without limitation, the Obligations
evidenced by the Debentures. If, in connection with this Mortgage and the
transactions contemplated hereby, there is a foreclosure of Liens by private
power of sale or otherwise, and attachment, execution or other writ against the
assets of the Mortgagor, no judgment for any deficiency upon the Obligations
shall be sought or obtained by the Debenture Mortgagees or any other Secured
Party against any general partner (other than as may be required to enforce
rights and remedies against the Mortgagor).
ARTICLE 4 - XXXXXXXXX'S WARRANTIES AND COVENANTS
Section 4.1 Warranties and Covenants.
(a) Mortgagor warrants and covenants that:
(i) Mortgagor, to the extent of the interests of Mortgagor in Exhibit
A, has good and defensible title (as defined in the Credit Agreement) to
each property right or interest constituting the Collateral free of any
adverse claim, burden, mortgage, lien, security interest, pledge, charge,
encumbrance or interest of or in favor of any third party other than as
stated in Exhibit A, except as previously disclosed to Debenture Mortgagees
in writing, or as previously disclosed to Debenture Mortgagees, no
financing statement covering any of the Collateral in favor of any third
party is on file in any public office; Xxxxxxxxx holds the working
interests in the Oil and Gas Property described in Exhibit A; and Xxxxxxxxx
has a good and legal right and full authority to grant and convey same to
Debenture Mortgagees pursuant to this instrument;
(ii) the oil and gas (or oil, gas and mineral) leases and mineral
agreements included in the Oil and Gas Property are valid and subsisting
and all payments, rentals and royalties due under each of them have been
properly and timely paid, and all conditions and obligations necessary to
keep them in force have been fully satisfied and performed; and all
producing xxxxx located on the Oil and Gas Property or properties unitized
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therewith have been drilled, operated and produced in conformity with all
applicable laws and rules, regulations and orders of all governmental
authorities having jurisdiction and are subject to no penalties on account
of past production;
(iii) no approval or consent of any regulatory or administrative
commission or authority or of any other governmental body or any other
party is necessary to authorize the execution and delivery of this
instrument or of any other written instrument constituting or evidencing
the Obligations, or to authorize the observance or performance by Xxxxxxxxx
of the covenants contained in this instrument or in the other written
instruments constitut ing or evidencing the Obligations or to enable the
Debenture Mortgagees to exercise its rights hereunder; and
(iv) Xxxxxxxxx has taken all proper corporate action to authorize the
execution and delivery of the Debentures secured hereby and of this
instrument and to make the Debentures and this instrument the legal, valid
and binding obligations of Mortgagor.
(b) Mortgagor warrants and shall forever defend the Collateral against
every person whomsoever lawfully claiming the same or any part thereof, and
Mortgagor shall maintain and preserve the lien and security interest herein
created until this instrument has been terminated as provided herein.
Section 4.2 Operation of Mortgaged Property. As long as this instrument has
not been released in accordance with Section 9.5, and whether or not Mortgagor
is the operator of all or any part of the Oil and Gas Property, Mortgagor shall,
at Xxxxxxxxx's own expense:
(a) comply, or cause the operator to comply, fully with all of the
terms and conditions of all leases, mineral agreements and other
instruments of title described in Exhibit A and all rights-of-way,
easements and privileges necessary for the proper operation of such leases
and instruments, and otherwise do all things necessary to keep Mortgagor's
rights and Debenture Mortgagees' interest in the Collateral unimpaired;
(b) except to the extent a prudent operator would do so, not abandon
any well which is producing or capable of production or forfeit, surrender
or release any lease, sublease, mineral agreement or farmout or any
operating agreement or other agreement or instrument comprising or
affecting the Oil and Gas Property without Debenture Mortgagees's prior
written consent, which consent shall not be withheld unreasonably;
(c) cause the Oil and Gas Property to be maintained, developed and
protected against drainage and continuously operated for the production of
Hydrocarbons in a good and workmanlike manner as a prudent operator would
in accordance with generally accepted practices, applicable operating
agreements and all applicable federal, state, tribal and local laws, rules,
regulations and orders;
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(d) promptly pay or cause to be paid when due and owing all rentals,
other payments and royalties payable in respect of the Oil and Gas
Property, if any; all expenses incurred in or arising from the operation or
development of the Collateral; and all taxes, assessments and governmental
charges imposed upon the Collateral or Mortgagor;
(e) cause the Operating Equipment to be kept in good and effective
operating condition and cause to be made all repairs, renewals,
replacements, additions and improvements thereof or thereto necessary or
appropriate for the production Hydrocarbons from the Oil and Gas Property
and permit the Debenture Mortgagees (through its agents and employees),
upon reasonable prior notice and during normal business hours, to enter
upon the Oil and Gas Property for the purpose of investigating and
inspecting the condition and operation of the Collateral;
(f) cause the Collateral to be kept free and clear of liens, charges,
security interests, encumbrances, adverse claims and title defects of every
character other than (i) the lien and security interest created by this
instrument, (ii) taxes constituting a lien but not due and payable, (iii)
defects or irregularities in title which are not such as interfere
materially with the development, operation or value of the Collateral and
not such as to materially affect title thereto, (iv) those set forth or
referred to in Exhibit A hereto, (v) those being contested in good faith by
Xxxxxxxxx and which do not, in the judgment of Debenture Mortgagees,
jeopardize the Debenture Mortgagees's rights in and to the Collateral, and
(vi) those consented to in writing by Debenture Mortgagees; provided,
however, that Debenture Mortgagees may take such reasonable independent
action in connection with any such matters affecting the Collateral as it
deems advisable, and all costs and expenses thereof, including, without
limitation, attorneys' fees incurred by Debenture Mortgagees in taking such
action, shall be part of the Obligations hereunder;
(g) defend, indemnify and hold harmless the Debenture Mortgagees and
other Secured Parties, and their respective employees, agents, officers and
directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any
way relating to the violation of or noncompliance with any Environmental
Laws applicable to the properties owned or operated by the Mortgagor, or
any orders, requirements or demands of governmental authorities related
thereto, including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, environmental response and cleanup
costs, court costs and litigation expenses, except to the extent that any
of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor; and
(h) execute, acknowledge and deliver to Debenture Mortgagees such
other and further instruments and do such other acts as in the opinion of
Debenture Mortgagees are necessary or desirable to effect the intent of
this instrument or otherwise protect and preserve the interests of
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Debenture Mortgagees hereunder, promptly upon request of Debenture
Mortgagees.
Section 4.3 Recording and Filing. Mortgagor shall pay all costs of filing,
registering and recording this and every other instrument in addition or
supplemental hereto and all financing state ments Debenture Mortgagees may
require, in such offices and places and at such times and as often as may be, in
the judgment of Debenture Mortgagees, necessary to preserve, protect and renew
the lien and security interest herein created as a second lien and
second-in-priority security interest on and in the Collateral and otherwise 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 creating,
maintaining and preserving the lien and security interest created herein and on
the Collateral and the priority thereof. Mortgagor shall also pay the costs of
obtaining reports from appropriate filing officers concerning financing
statement filings in respect of any of the Collateral in which a security
interest is granted herein.
Section 4.4 Debenture Mortgagees' Right to Perform Mortgagor's Obligations.
Mortgagor agrees that, if Xxxxxxxxx fails to perform any act which Mortgagor is
required to perform under this instrument, any Debenture Mortgagees or any
receiver appointed hereunder may, but shall not be obligated to, perform or
cause to be performed such act, and any expense incurred by Debenture Mortgagees
in so doing shall be a demand obligation owing by Mortgagor to Debenture
Mortgagees, shall bear interest at an annual rate equal to the maximum interest
rate provided in the Note until paid and shall be a part of the Obligations, and
Debenture Mortgagees, or any receiver shall be subrogated to all of the rights
of the party receiving the benefit of such performance. The undertaking of such
performance by Debenture Mortgagees or any receiver as aforesaid shall not
obligate such person to continue such performance or to engage in such
performance or performance of any other act in the future, shall not relieve
Mortgagor from the observance or performance of any covenant, warranty or
agreement contained in this instrument or constitute a waiver of default
hereunder and shall not affect the right of Debenture Mortgagees to accelerate
the payment of all indebtedness and other sums secured hereby or to resort to
any other of its rights or remedies hereunder or under applicable law. In the
event the Debenture Mortgagees or any receiver appointed hereunder undertakes
any such action, no such party shall have any liability to the Mortgagor in the
absence of a showing of gross negligence or willful misconduct of such party,
and in all events no party other than the acting party shall be liable to
Mortgagor.
ARTICLE 5 - DEFAULT
Section 5.1 Events of Default. The term "Event of Default" means the
occurrence of any of the following events or the existence of any of the
following conditions:
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(a) failure by Mortgagor to make any payment when due of any of the
Obligations provided for herein or other failure to keep, punctually
perform or observe any of the covenants, obligations or prohibitions
contained herein or in any other agreement with Debenture Mortgagees
(whether now existing or entered into hereafter) or the occurrence of any
other event which is, or is deemed to be, an Event of Default under and as
that term is defined in any such other written instrument or agreement; or
(b) any warranty, information, representation or statement by
Xxxxxxxxx made or furnished to Debenture Mortgagees by or on behalf of
Mortgagor in connection with the Obligations is determined by Debenture
Mortgagees to be untrue or misleading in any material respect.
Section 5.2 Acceleration Upon Default. Upon the occurrence of any Event of
Default, or at any time thereafter, the holders of at least 25% of the
outstanding principal amount of the Debentures may, at their option, on behalf
of all Debenture Mortgagees pari passu, by notice to Xxxxxxxxx, declare the
entire unpaid principal of and the interest accrued on the Obligations to be due
and payable forthwith without any further notice, presentment or demand of any
kind, all of which are hereby expressly waived.
Section 5.3 Possession and Operation of Property. Upon the occurrence of
any Event of Default, or at any time thereafter, and in addition to all other
rights therein conferred on the Debenture Mortgagees, the Debenture Mortgagees
or any person, firm or corporation designated by Debenture Mortgagees, will have
the right and power, but will not be obligated, to have an audit performed, at
Mortgagor's expense, of the books and records of Xxxxxxxxx, and to enter upon
and take possession of all or any part of the Collateral, to exclude Mortgagor
therefrom, and to hold, use, administer, manage and operate the same (in
compliance with the terms of contracts binding on the Oil and Gas Property known
to the Debenture Mortgagees and all applicable laws) to the extent that
Mortgagor could do so. The Debenture Mortgagees or any person, firm or
corporation designated by the Debenture Mortgagees, may operate and develop the
Collateral, or any portion thereof, without any liability to Mortgagor in
connection with the operations except with respect to gross negligence and
willful misconduct; and the Debenture Mortgagees or any person, firm or
corporation designated by Debenture Mortgagees will have the right to collect,
receive and receipt for all Hydrocarbons produced and sold from the Oil and Gas
Property, to make repairs, to purchase machinery and equipment, to conduct
workover operations, to drill additional xxxxx as necessary in Debenture
Mortgagees's good faith judgment for the protection of the Collateral, and to
exercise every power, right and privilege of Mortgagor with respect to the
Collateral. Providing there has been no foreclosure sale, when and if the
expenses of the operation and development (including costs of unsuccessful
workover operations or additional xxxxx) have been paid and the Obligations paid
in full, the remaining Collateral shall be returned to the Mortgagor.
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Section 5.4 Ancillary Rights. Upon the occurrence of an Event of Default,
or at any time thereafter, and in addition to all other rights of Debenture
Mortgagees hereunder, Debenture Mortgagees may, without notice, demand or
declaration of default, all of which are hereby expressly waived by Mortgagor,
proceed by a suit or suits in equity or at law, (i) for the seizure and sale of
the Collateral or any part thereof, (ii) for the specific performance of any
covenant or agreement herein contained or in aid of the execution of any power
herein granted, (iii) for the foreclosure or sale of the Collateral or any part
thereof under the judgment or decree of any court of competent jurisdiction,
(iv) without regard to the solvency or insolvency of any person, and without
regard to the value of the Collateral, and without notice to Mortgagor (notice
being hereby expressly waived), for the ex parte appointment of a receiver to
serve without bond pending any foreclosure or sale hereunder, or (v) for the
enforcement of any other appropriate legal or equitable remedy. Notwithstanding
the foregoing, the Debenture Mortgagees agrees to give reasonable efforts to
give Xxxxxxxxx prior notice of any of the foregoing actions, provided that the
failure of Debenture Mortgagees to use such reasonable efforts to give prior
notice shall not invalidate any action so taken by Debenture Mortgagees. It is
hereby expressly agreed that Xxxxxxxxx's sole remedy for any such failure by
Debenture Mortgagees shall be an action for damages suffered by Mortgagor as a
direct and proximate result of such failure.
ARTICLE 6 - DEBENTURE MORTGAGEES'S RIGHTS AS TO
REALTY COLLATERAL UPON DEFAULT
Section 6.1 Foreclosure. Upon the occurrence of an Event of Default, or at
any time thereafter, Debenture Mortgagees may, subject to any mandatory
requirements of applicable law, proceed by suit to foreclose its lien hereunder
and to sell or have sold the Realty Collateral or any part thereof at one or
more sales, as an entirety or in parcels, at such place or places and otherwise,
in such manner and upon such notice as may be required by law, or, in the
absence of any such requirement, as Debenture Mortgagees may deem appropriate,
and Debenture Mortgagees shall thereafter make or cause to be made a conveyance
to the purchaser or purchasers thereof. Debenture Mortgagees may postpone the
sale of the real property included in the Collateral or any part thereof by
public announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made at the
time of sale fixed by the preceding postponement. Sale of a part of the Realty
Collateral will not exhaust the power of sale, and sales may be made from time
to time until all such property is sold or the Obligations are paid in full.
ARTICLE 7 - DEBENTURE MORTGAGEES'S RIGHTS AS TO PERSONALTY AND
FIXTURE COLLATERAL UPON DEFAULT
Section 7.1 Personalty Collateral. Upon the occurrence of an Event of
Default, or at any time thereafter, Debenture Mortgagees may, without notice to
Mortgagor, exercise their rights to declare all of the Obligations to be
immediately due and payable, in which case Debenture Mortgagees will have all
rights and remedies granted by law, and particularly by the Uniform Commercial
Code, including, but not limited to, the right to take possession of the
Personalty Collateral, and for this purpose Debenture Mortgagees may enter upon
any premises on which any or all of the Personalty Collateral is situated and
take possession of and operate the Personalty Collateral or remove it therefrom.
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Debenture Mortgagees may require Mortgagor to assemble the Personalty Collateral
and make it available to Debenture Mortgagees or a representative of the
Debenture Mortgagees at a place to be designated by Debenture Mortgagees which
is reasonably convenient to all parties. Unless the Personalty Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Debenture Mortgagees will give Mortgagor reasonable
notice of the time and place of any public sale or of the time after which any
private sale or other disposition of the Personalty Collateral is to be made.
This requirement of sending reasonable notice will be met if the notice is
mailed, postage prepaid, to Mortgagor at the address designated above at least
five days before the time of the sale or disposition.
Section 7.2 Sale with Realty Collateral. In the event of foreclosure,
whether judicial or nonjudicial, at Debenture Mortgagees's option it may proceed
under the Uniform Commercial Code as to the Personalty Collateral or Debenture
Mortgagees may proceed as to both Realty Collateral and Personalty Collateral in
accordance with their rights and remedies in respect of the Realty Collateral.
Section 7.3 Fixture Collateral. Upon the occurrence of an Event of Default,
or at any time thereafter, Debenture Mortgagees may elect to treat the Fixture
Collateral as either Realty Collateral or as Personalty Collateral and proceed
to exercise such rights as apply to the type of Collateral selected.
ARTICLE 8 - OTHER PROVISIONS CONCERNING FORECLOSURE
Section 8.1 Possession and Delivery of Collateral. It shall not be
necessary for Debenture Mortgagees to have physically present or constructively
in their possession any of the Collateral at any foreclosure sale, and Mortgagor
shall deliver to the purchasers at such sale on the date of sale the Collateral
purchased by such purchasers at such sale, and if it should be impossible or
impracticable for any of such purchasers to take actual delivery of the
Collateral, then the title and right of possession to the Collateral shall pass
to the purchaser at such sale as completely as if the same had been actually
present and delivered.
Section 8.2 Debenture Mortgagees as Purchaser. Debenture Mortgagees will
have the right to become the purchaser at any foreclosure sale, and it will have
the right to credit upon the amount of the bid the amount payable to it out of
the net proceeds of sale.
Section 8.3 Recitals Conclusive: Ratification. Recitals contained in any
conveyance to any purchaser at any sale made hereunder will conclusively
establish the truth and accuracy of the matters therein stated, including,
without limiting the generality of the foregoing, nonpayment of the unpaid
principal sum of, and the interest accrued on, the written instruments
constituting part or all of the Obligations after the same have become due and
payable, nonpayment of any other of the Obligations or advertisement and conduct
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of the sale in the manner provided herein. Mortgagor ratifies and confirms all
legal acts that Debenture Mortgagees may do in carrying out the provisions of
this instrument.
Section 8.4 Effect of Sale. Any sale or sales of the Collateral or any part
thereof will operate to divest all right, title, interest, claim and demand
whatsoever, either at law or in equity, of Mortgagor in and to the premises and
the property sold, and will be a perpetual bar, both at law and in equity,
against Mortgagor, Xxxxxxxxx's successors or assigns and against any and all
persons claiming or who shall thereafter claim all or any of the property sold
from, through or under Mortgagor, or Mortgagor's successors or assigns. The
purchaser or purchasers at the foreclosure sale will receive immediate
possession of the property purchased; and if Mortgagor retains possession of the
Realty Collateral, or any part thereof, subsequent to sale, Mortgagor will be
considered a tenant at sufferance of the purchaser or purchasers, and if
Mortgagor remains in such possession after demand of the purchaser or purchasers
to remove, Mortgagor will be guilty of forcible detainer and will be subject to
eviction and removal, forcible or otherwise, with or without process of law, and
without any right to damages arising out of such removal.
Section 8.5 Application of Proceeds. The proceeds of any sale of the
Collateral or any part thereof will be applied as follows:
(a) first, to the payment of all expenses incurred by the Debenture
Mortgagees in connection therewith, including, without limiting the
generality of the foregoing, court costs, legal fees and expenses, fees of
accountants, engineers, consultants, agents or managers and expenses of any
entry or taking of possession, holding, valuing, preparing for sale,
advertising, selling and conveying;
(b) second, to the payment of the Obligations; and
(c) third, any surplus thereafter remaining to Mortgagor or
Xxxxxxxxx's successors or assigns, as their interests may be established to
Debenture Mortgagees' reasonable satisfaction.
Section 8.6 Deficiency. Mortgagor will remain liable for any deficiency
owing to Debenture Mortgagees or any other Secured Party after application of
the net proceeds of any foreclosure sale.
Section 8.7 Mortgagor's Waiver of Appraisement, Marshalling, etc. Xxxxxxxxx
agrees that Xxxxxxxxx will not at any time insist upon or plead or in any manner
whatsoever claim the benefit of any appraisement, valuation, stay, extension or
redemption law now or hereafter in force, in order to prevent or hinder the
enforcement or foreclosure of this instrument, the absolute sale of the
Collateral or the possession thereof by any purchaser at any sale made pursuant
to this instrument or pursuant to the decree of any court of competent
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jurisdiction. Xxxxxxxxx, for Xxxxxxxxx and all who may claim through or under
Xxxxxxxxx, hereby waives the benefit of all such laws and to the extent that
Mortgagor may lawfully do so under applicable state law, waives any and all
right to have the Realty Collateral marshalled upon any foreclosure of the lien
hereof or sold in inverse order of alienation.
ARTICLE 9 - MISCELLANEOUS
Section 9.1 Pooling and Unitization. The interest of Mortgagor in any unit,
pooling agreement or other similar arrangement, whether voluntary or
involuntary, to which the Oil and Gas Property (or any part thereof) is or may
be subject will become a part of the Realty Collateral and the Personalty
Collateral, as the case may be, and will be subject to the lien and security
interest hereof in the same manner and with the same effect as though the unit,
pooling agreement or other arrangement and the interest of Mortgagor therein
were specifically described in Exhibit A.
Section 9.2 Discharge of Purchaser. Upon any sale made under the powers of
sale herein granted and conferred, the receipt of Debenture Mortgagees will be
sufficient discharge to the purchaser or purchasers at any sale for the purchase
money, and such purchaser or purchasers and the heirs, devisees, personal
representatives, successors and assigns thereof will not, after paying such
purchase money and receiving such receipt of Debenture Mortgagees, be obliged to
see to the application thereof or be in anyways answerable for any loss,
misapplication or nonapplication thereof.
Section 9.3 Indebtedness of Obligations Absolute. Nothing herein contained
shall be construed as limiting Debenture Mortgagees to the collection of any
indebtedness of Mortgagor to Debenture Mortgagees only out of the income,
revenue, rents, issues and profits from the Collateral or as obligating
Debenture Mortgagees to delay or withhold action upon any default which may be
occasioned by failure of such income or revenue to be sufficient to retire the
principal or interest when due on the indebtedness secured hereby. It is
expressly understood between Debenture Mortgagees and Mortgagor that any
indebtedness of Mortgagor to Debenture Mortgagees secured hereby shall
constitute an absolute, unconditional obligation of Mortgagor to pay as provided
herein or therein in accordance with the terms of the instrument evidencing such
indebtedness in the amount therein specified at the maturity date or at the
respective maturity dates of the installments thereof, whether by acceleration
or otherwise.
Section 9.4 Defense of Claims. Mortgagor will promptly notify Debenture
Mortgagees in writing of the commencement of any material proceedings or any
litigation affecting Debenture Mortgagees' interest in the Collateral, or any
part thereof, and shall take such action, employing attorneys (which must be
reasonably acceptable to Debenture Mortgagees), as may be necessary to preserve
Mortgagor's and Debenture Mortgagees's rights affected thereby; and should
Mortgagor fail or refuse to take any such action, Debenture Mortgagees may take
the action on behalf of and in the name of Xxxxxxxxx and at Xxxxxxxxx's expense.
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Moreover, Debenture Mortgagees may take independent action in connection
therewith as it may in its discretion deem proper, and Xxxxxxxxx hereby agrees
to make reimbursement for all sums advanced and all expenses incurred in such
actions plus interest at a rate equal to the maximum interest rate provided in
the Debentures.
Section 9.5 Termination. If (i) all amounts of principal and interest due
under all the Debentures, (ii) all other fees and expenses payable by Mortgagor
under the Debentures and hereunder, and (iii) all other Obligations which are in
sum certain amounts have been paid in full and no Claims have been identified,
then Debenture Mortgagees shall, upon the request of Mortgagor and at
Xxxxxxxxx's cost and expense, deliver to Mortgagor proper instruments executed
by or on behalf of the holders of at least eighty percent (80%) of the principal
amount of the Debentures evidencing the release of this instrument. Mortgagor
shall be authorized to file and record such instruments and upon delivery
thereof to Mortgagor, this instrument shall be terminated. Until such delivery,
this instrument shall remain and continue in full force and effect.
Section 9.6 Renewals, Amendments and Other Security. Renewals and
extensions of the Obligations may be given at any time, amendments may be made
to the agreements relating to any part of the Obligations or the Collateral in
accordance with the terms of the Debentures.
Section 9.7 Effect of Instrument. This instrument shall be deemed and
construed to be, and may be enforced as, an assignment, chattel mortgage or
security agreement, contract, deed of trust, financing statement, financing
statement filed as a fixture filing, and real estate mortgage, and as any one or
more of them if appropriate under applicable state law. This instrument shall be
effective as a financing statement filed as a fixture filing with respect to all
Fixture Collateral and is to be filed for record in the Office of the County
Clerk or other appropriate office of each county where any part of the
Collateral, including Fixture Collateral, is situated. This instrument shall
also be effective as a financing statement covering minerals or the like
(including oil and gas) and accounts subject to Section 9-103(5) (or
corresponding provision) of the Uniform Commercial Code as enacted in the
appropriate jurisdiction and is to be filed for record in the Office of the
County Clerk or other appropriate office of each county where any part of the
collateral is situated. A carbon, photographic, or other reproduction of this
Mortgage or of any financing statement relating to this Mortgage shall be
sufficient as a financing statement.
Section 9.8 Unenforceable or Inapplicable Provisions. If any provision
hereof or of any of the written instruments constituting part or all of the
Obligations is invalid or unenforceable in any jurisdiction, whether with
respect to all parties hereto or with respect to less than all of such parties,
the other provisions hereof and of the written instruments will remain in full
force and effect in that jurisdiction with respect to the parties as to which
such provision is valid and enforce able, and the remaining provisions hereof
will be liberally construed in favor of Debenture Mortgagees in order to carry
out the provisions hereof. The invalidity of any provision of this instrument in
any jurisdiction will not affect the validity or enforceability of any provision
in any other jurisdiction.
- 17 -
Section 9.9 Rights Cumulative. Each and every right, power and remedy given
to Debenture Mortgagees herein or in any other written instrument relating to
the Obligations will be cumulative and not exclusive; and each and every right,
power and remedy whether specifically given herein or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by Debenture Mortgagees, and the exercise, or the beginning of the
exercise, of any such right, power or remedy will not be deemed a waiver of the
right to exercise, at the same time or thereafter, any other right, power or
remedy. A waiver by Debenture Mortgagees of any right or remedy hereunder or
under applicable law on any occasion will not be a bar to the exercise of any
right or remedy on any subsequent occasion.
Section 9.10 Non-Waiver. No act, delay, omission or course of dealing
between Debenture Mortgagees and Mortgagor will be a waiver of any of Debenture
Mortgagees' rights or remedies hereunder or under applicable law. No waiver,
change or modification in whole or in part of this instrument or any other
written instrument will be effective unless in a writing signed by Debenture
Mortgagees.
Section 9.11 Debenture Mortgagees's Expenses. Xxxxxxxxx agrees to pay in
full all expenses and reasonable attorneys' fees of Debenture Mortgagees which
may have been or may be incurred by Debenture Mortgagees in connection with the
collection of the Obligations and the enforcement of any of Xxxxxxxxx's
obligations hereunder and under any documents executed in connection with the
Obligations.
Section 9.12 Partial Releases. In the event Mortgagor sells for monetary
consideration or otherwise any portion of the Oil and Gas Property, Debenture
Mortgagees shall release the lien of this instrument with respect to the portion
sold, at the request of Mortgagor. No release from the lien of this instrument
of any part of the Collateral by Debenture Mortgagees shall in anyways alter,
vary or diminish the force, effect or lien of this instrument on the balance or
remainder of the Collateral.
Section 9.13 Notice. All notices and deliveries of information hereunder
shall be deemed to have been duly given if to the Debenture Mortgagees at the
addresses of the holders of the Debentures set forth on Exhibit B or at such
subsequent addresses as may be furnished to Mortgagor in writing by any holder
of a Debenture. Notwithstanding the provisions of Section 5.4 and Articles 6 and
7 wherein Debenture Mortgagees is authorized to exercise certain rights or take
certain actions without notice to Mortgagor, Debenture Mortgagees agrees to use
reasonable efforts to give Mortgagor prior notice of any such exercise of rights
or action. It is expressly agreed, however, that any failure by Debenture
Mortgagees to use reasonable efforts to give Mortgagor prior notice of an
exercise of rights or action shall not invalidate or preclude such exercise of
rights or action, but shall merely entitle the Mortgagor to recover from
Debenture Mortgagees any actual damages suffered by Mortgagor as the proximate
and direct result of such failure by Debenture Mortgagees.
- 18 -
Section 9.14 Successors. This instrument shall bind and inure to the
benefit of the respective successors and assigns of the parties.
Section 9.15 Interpretation.
(a) Article and section headings used in this instrument are intended
for convenience only and shall be given no significance whatever in
interpreting and construing the provisions of this instrument.
(b) As used in this instrument, "Debenture Mortgagees" and "Mortgagor"
include their respective successors and assigns. Unless context otherwise
requires, words in the singular number include the plural and in the plural
number include the singular. Words of the masculine gender include the
feminine and neuter gender and words of the neuter gender may refer to any
gender.
Section 9.16 Inconsistencies with Related Documents. To the extent, if any,
the provisions hereof are inconsistent with the provisions of the Debentures,
such inconsistencies shall be resolved by giving controlling effect to the
Debentures.
Section 9.17 Counterparts. This instrument may be executed in any number of
counterparts, each of which will for all purposes be deemed to be an original,
and all of which are identical except that to facilitate recordation, in
particular counterparts hereof used for recordation, portions of Exhibit A
hereto which describe properties situated in counties other than the county in
which the counterpart is to be recorded have been omitted.
Executed as of the Effective Date.
MORTGAGOR:
ATTEST XXXXX OIL AND GAS COMPANY
By
------------------------------------- ---------------------------------
Secretary Xxxxxxx X. Xxxxx, Xx., President
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DEBENTURE MORTGAGES:
By: XXXXX OIL AND GAS COMPANY
By
---------------------------------
Xxxxxxx X. Xxxxx, Xx.,
as attorney-in-fact on behalf of
all holders of Debentures as
identified on Exhibit B.
STATE OF COLORADO )
) ss.
COUNTY OF MESA )
The foregoing instrument was acknowledged before me this ____ day of
___________, 1996, by Xxxxxxx X. Xxxxx, Xx. as President of Xxxxx Oil and Gas
Company, a Nevada corporation.
Witness my hand and official seal.
My commission expires:
S E A L
--------------------------------------
Notary Public
- 20 -
EXHIBIT B
Holders of 1996 10% Collateralized Subordinated Convertible Debentures of
Xxxxx Oil and Gas Company (herein referred to as "Debenture Mortgagees"):
Name and Address of Holders Principal Amount of Debenture
--------------------------- -----------------------------
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