EXHIBIT 10.182
PARTICIPATION AGREEMENT
GREEN CANYON AREA, OUTER CONTINENTAL SHELF
THIS PARTICIPATION AGREEMENT (the "Agreement ) is executed and
effective this 28th day of August, 1997 by and between Reading & Xxxxx
Development Co., a Delaware corporation ("R&B") and British-Borneo
Petroleum Inc., a Texas corporation ("BBPI") and to the extent of its
obligations hereunder, British-Borneo Exploration, Inc. a Texas
corporation. as operator ("Operator" or "BBEI").
RECITALS
WHEREAS, BBPI is simultaneously with the execution of this Agreement,
acquiring an undivided sixty, percent (60%) interest in and to those Oil
and Gas Leases of Submerged Lands under the Outer Continental Shelf Lands
Act set forth and more fully described in Exhibit "A", attached hereto and
made a part hereof for all purposes (the "Leases"); and
WHEREAS, R&B is simultaneously with the execution of this Agreement,
acquiring an undivided twenty percent (20%) interest in and to the Leases,
resulting in R&B owning the remaining undivided forty percent (40% interest
in the Leases") and
WHEREAS, the Leases are burdened by and operated in accordance with
that certain Operating Agreement dated effective May 1, 1995, executed by
and between Enserch Exploration, Inc., Mobil Oil Corporation, Mobil Oil
Exploration & Producing Southeast Inc. and Reading & Xxxxx Development Co.,
et al., as amended by letters dated October 16, 1995, October 31, 1995 and
May 17, 1996 (the "Allegheny JOA") and that certain Unit Agreement for
Outer Continental Shelf Exploration, Development, and Production Operations
on the Green Canyon Block 254 Unit executed by and between Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1, 1995
and bearing MMS Contract No. 754395015, as amended (the "UA") and that
certain Unit Operating Agreement, executed by and between Enserch
Exploration, Inc. and Enserch Offshore, Inc., dated effective June 1, 1995
(the "UOA") and
WHEREAS, BBPI and R&B have entered into a letter of intent dated
August 19, 1997, covering and pertaining to the Leases, the Allegheny JOA
and the further development of the Leases (the "LOI"); and
WHEREAS, BBPI and R&B desire to set forth in detail, the preliminary
agreements reached between then in the LOI and to provide a mechanism for
the effectuation of such agreements.
NOW, THEREFORE, BBPI and R&B, for and in consideration of the mutual
covenants herein contained and of the mutual benefits to be derived
herefrom, the sufficiency of such consideration is hereby acknowledged and
confessed and for which due acquittance is hereby granted, hereby covenant,
stipulate and agree as follows (capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Alleghenv JOA):
1. PARTICIPATION.
1.1 Participation. Notwithstanding anything to the contrary contained
within or derivable from the Allegheny JOA, the UA and/or the UOA, BBPI,
BBEI and R&B do hereby covenant, stipulate and agree with respect to the
Leases that:
(a) BBEI is hereby established, named and designated as operator of
the Leases and any unit encompassing all or any portion of the
Leases in accordance with the terms and provisions of the
Allegheny JOA, the UA and the UOA, as to certain depths, all as
identified in those certain Designation of Operator and
Designation of Successor Unit Operator Forms filed with the
Minerals Management Service on August 20, 1997. BBPI and R&B do
hereby stipulate and agree that for purposes of the default and
security provisions of the Allegheny JOA, the UA and the UOA, a
default by BBEI, as operator, shall be deemed a default by BBPI.
BBPI and R&B shall execute and deliver, each unto the other, an
amendment to the Allegheny JOA, the UA and the UOA, as may be
required to implement this stipulation and agreement.
(b) The development plan attached hereto and made a part hereof for
all purposes as Exhibit "B" (the "Development Plan"), is hereby
approved by both R&B and BBPI with respect to the development of
the Leases and both BBPI and R&B shall be deemed to have obtained
any necessary execution, approval and consent necessary to
implement the Development Plan, to construct any and all
facilities contemplated by the Development Plan and to conduct
any and all operations contemplated by the Development Plan.
Although not necessary to evidence the execution of, the approval
of or their consent to the Development Plan hereunder, it is
anticipated that information AFEs shall be forwarded to R&B and
BBPI by the Operator. By way of illustration and not limitation,
BBPI and R&B do hereby acknowledge the consent, approval and/or
execution of any and all Design AFEs, Fabrication AFEs, waivers
of the formation of an integrated project team, joint evaluation
of development options, any approval processes for the
Development Plan, the right to make counter proposals for
development plans, any minor modifications to the Development
Plan and/or any other applicable provisions of the Allegheny JOA,
the UA and/or the UOA which may be necessary to implement the
intent of the BBPI and R&B hereunder or which may impede, delay
or affect the timely implementation of the Development Plan in
accordance with the terms and provisions of the LOI and the terms
and provisions of this Agreement.
(c) BBPI and R&B agree to cooperate in good faith in the acquisition
of appropriate Minerals Management Service ("MMS") acceptance and
approval of the Development Plan and any associated matter with
the Development Plan.
(d) BBPI and R&B do hereby approve the immediate commencement and
implementation of the Development Plan by the Operator, and the
Operator hereby undertakes to do so.
(e) Subject to the further terms hereof, including, but not limited
to, providing for the bearing by BBPI of R&B's share of costs
relating to the implementation of the Development Plan, R&B does
hereby agree to bear and absorb its forty percent (40%) share of
all costs, risks and expenses associated with the Development
Plan and its implementation and execution, as if such Development
Plan had been approved by R&B under the terms and provision of
the Allegheny JOA.
(f) With respect to the acquisition of interests in the Leases by R&B
and BBPI described above, both R&B and BBPI do hereby waive and
relinquish any and all pre-emtive, preferential rights of
purchase, rights to object due to the failure to maintain a
uniform interest or any other such similar or dissimilar right
which either R&B or BBPI may have or maintain with respect to the
other on account of or arising from the above describer
acquisition of interests, whether such right is derived from the
Allegheny JOA, the UA or the UOA or any other contract or
agreement. Additionally, R&B does hereby grant unto BBPI a
similar waiver of rights with respect to any future acquisition
by BBPI of the interest of Mobil Oil Corporation and/or Mobil Oil
Exploration & Producing Southeast Inc or any other affiliated
entity of either which may hold title (hereinafter collectively
"Mobil") or its successors or assigns, in Green Canyon Block 252
and/or Green Canyon Block 296. In the event BBPI does acquire an
interest from Mobil, BBPI and R&B agree to examine and discuss,
in good faith, the equalization of interests between them in
Xxxxx Xxxxxx Xxxxx 000 xxx/xx Xxxxx Xxxxxx Xxxxx 296.
g) With respect to the acquisition of interests in the Leases by R&B
and BBPI described above, for the purposes of properly reflecting
the interests to be acquired in the records of the Minerals
Management Service ("MMS"), R&B and BBPI do hereby agree that the
conveyance documents evidencing the conveyance of interest from
Mobil to BBPI shall be filed with the MMS prior to the conveyance
documents evidencing the conveyance of interest from Enserch to
R&B and that R&B agrees that in its letter to the MMS requesting
approval of the conveyance documents evidencing the conveyance of
interest from Enserch to R&B, R&B shall specifically provide that
the documents evidencing the conveyance of interest from Mobil to
BBPI shall be approved first.
2. DEVELOPMENT CARRY.
2.1 Obligation to Carry. Notwithstanding anything to the contrary
which may be contained in or derived from the Allegheny JOA, the UA or the
UOA, and as a portion of the consideration due R&B hereunder, BBPI shall
bear (by paying for the following costs on R&B's behalf), R&B's undivided
forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
contemplated under the Development Plan ("Development Costs"), through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by R&B, whichever is the first to occur. BBPl's obligation hereunder is
only as to costs actually incurred during said time period and R&B shall
continue to bear and pay directly, its proportionate share of all
liability, risks, exposures, lawsuits, demands, claims and other similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey or other fixing of costs or liabilities with respect to the
implementation of the Development Plan.
2.2 Election of R&B. On or before August 28, 1998 (the period from
August 28, 1997 to the earlier of August 28, 1998 or the date upon which
payment is made pursuant to R&B's election under 2.2 shall be referred to
at the "Option Period"), R&B shall elect by written notice to BBPI, either
to:
(a) convey to BBPI, effective as of August 28, 1997 (the "Effective
Closing Date"), free and clear of all burdens, liens, overriding
royalties, production payments and any other burden or
encumbrance created by, through or under R&B, all of R&B's
interest in the Leases, and all of R&B's interest in any and all
associated facilities and equipment for the sum of Twenty-five
Million and No/100 Dollars ($25,000,000.00) plus interest from
August 28, 1997 at LIBOR (London Interbank Rate) + 2%: or
(b) retain its interest in the Leases and pay to BBPI, forty percent
(40%) of all of the above described costs incurred by BBPI in
connection with the implementation of the Development Plan during
the Option Period, plus interest to be calculated at LIBOR + 2%
from the date such funds were paid by BBPI. R&B would then be
assigned an undivided forty percent (40%) interest in and to the
Seastar facility and all associated equipment and facilities,
free and clear of all liens and encumbrances, save and except
those liens and encumbrances contemplated under the terms and
provisions of the Allegheny JOA, the UA or the UOA and R&B would
also then assume an undivided forty percent (40%) of the future
costs of the development pursuant to the terms and provisions of
the Allegheny JOA and the LOI.
Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a above
In the event R&B makes an election under option 2.2 (a) above or if R&B
fails to make an election during the Option Period, upon the closing of the
transaction contemplated in 2.2(a) above, BBPI shall agree to protect,
indemnify, defend and hold R&B harmless from and against any and all
claims, demands, liabilities, suits, damages and injuries arising from the
implementation of the Development Plan from and after August 28, 1997.
2.3 Option Agreement. The rights and obligations of the parties with
respect to the option of R&B hereunder, shall be confirmed in a separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option Agreement shall be executed in recordable form and which may be
filed in the records of the Minerals Management Service and the appropriate
parish records.
2.4 Voting/Elections during the Option Period. During the Option
Period, BBPI shall, under the terms of the Allegheny JOA, be entitled to
vote and make Elections with respect to R&B's interest with respect to the
implementation of and all matters associated with the Development Plan,
provided that such vote and/or Election is the same as BBPI's vote with
respect to its own interest. During the Option Period, BBPI shall not be
entitled to vote or make Elections with respect to R&B's interest with
respect to drilling operations, but may vote and make Elections with
respect to R&B's interest with respect to completion operations of existing
xxxxx. BBPI agrees to keep R&B fully informed with respect to such votes
and Elections.
2.5 Transfers of Interest by R&B during the Option Period. Prior to
its payment or assignment under Article 2.2 above, R&B shall not sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor enter into any agreement to sell, convey, mortgage, pledge, assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.
2.6 Information to R&B during the Option Period. During the Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, at an
observer, periodic review meetings with contractors in which the
Development Plan is discussed. In addition to the other information to be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days after the end of each calendar month during the Option Period, BBEI
and BBPI shall provide a statement to R&B describing the costs and expenses
accruing to R&B's forty percent (40%) share during the preceeding month.
3. SECURITIZATION OF OBLIGATIONS.
3.1 Mortgage, Pledge and Assignment. To secure its obligation to pay
BBPI for the amounts paid by BBPI and attributable to R&B's forty percent
(40%) share of the costs for the development contemplated by the
Development Plan hereunder and/or its obligation to convey its interest in
the Leases under Article 2.2(a) hereof if R&B so elects, if R&B fails to
make an election or if R&B experiences a change in control of the Company,
R&B shall grant to BBPI a mortgage and UCC financing statement
(collectively the "Mortgage") burdening its interest in the Leases and
equipment associated with the Leases (now or hereinafter in existence), in
an amount sufficient to secure its undivided forty percent (40%) share of
all anticipated expenditures to be made by BBPI in connection with the
development contemplated by the Development Plan. The Mortgage shall be in
the form and contain the terms and provisions as set forth in Exhibit "D",
attached hereto and made a part hereof for all purposes.
3.2 Release and Subordination of Mortgage, Pledge and Assignment. The
Mortgage shall be released when both first commercial production of
hydrocarbons, contemplated under the Development Plan has occurred and R&B
has repaid in full its share of development costs, plus accrued interest,
accruing prior to such first commercial production and payment. If prior to
final payment by R&B and release of the Mortgage by BBPI, R&B desires to
acquire alternate project financing of its proportionate share of such
development, BBPI shall subordinate such Mortgage to the extent of any
funds advanced pursuant to such financing and to the extent that any
interest may be due on such advanced funds, provided that such funds
advanced are paid directly to BBPI, to the extent of R&B;'s unpaid
obligations to BBPI only, pursuant to Article 2.2(b) above in repayment of
its loan to R&B.
4. CHANGE IN CONTROL OF R&B.
4.1 Effect of Change in Control. In the event that, at any time
during the term of the Option Period R&B experiences a "change in control
of the Company", as hereinafter defined in Article 4.2, R&B shall give
written notice to BBPI of such occurrence and BBPI shall have the right and
option, but not the obligation, for a period of ten (10) business days
after receipt of such notice, to acquire the Property from R&B as provided
herein. Such option shall expire if BBPI fails to exercise such option
within the time frame established hereunder.
Any such acquisition by BBPI pursuant to the terms and provisions hereof
shall be made free and clear of any and all liens, mortgages, claims,
overriding royalty interests, production payments or any other burdens
which may have been created by, through or under R&B.
4.2 Change in Control Defined. For the purposes of this provision,
"Company" shall be deemed to mean R&B and the parent of R&B and/or any
other entity controlling a majority of the voting stock of R&B. For the
purposes of this provision, a "change in control of the Company" shall mean
a change in control of a nature that would be required to be reported in
response to Item l(a) of the Current Report on Form 8-K, as in effect on
the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act") or would have been required to be
so reported but for the fact that such event had been "previously reported"
as that term is defined in Rule 12b-2 of Regulation 12B of the Exchange
Act; provided that, without limitation, such a change it control shall be
deemed to have occurred if (a) any Person is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company's then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of directors ("Voting
Securities"), or (b) individuals who constitute the Board on the Effective
Date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least three
quarters of the directors comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (b), considered as though
such person were a member of the Incumbent Board, or (c) a recapitalization
of the Company occurs which results in either a decrease by 33% or more in
the aggregate percentage ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock option and warrants) or an increase in the
aggregate percentage ownership of Voting Securities held by non-Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants) to greater than 50%.
For purposes of this provision the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person,"
as such term is used in Section 14(d) of the Exchange Act, other than the
Company, a subsidiary of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or an subsidiary thereof, and the
term "Independent Shareholder" shall mean any shareholder of the Company
except any employee(s) or director(s) of the Company or any employee
benefit plan(s) sponsored or maintained by the Company or any subsidiary
thereof. For purposes of this Article 4., a "change in control of the
Company" shall not be deemed to occur solely as the result of a spin-off,
split-off or other distribution of the outstanding stock of R&B to the
stockholders of the ultimate parent corporation controlling a majority of
the voting stock of R&B, or the merger of R&B's parent with Falcon Drilling
Company, Inc., or the merger of R&B where R&B's parent ultimately retains
controlling interest of the surviving entity, or any merger where the
parent of R&B is the surviving entity.
5. TITLE WARRANTY.
5.1 Title Warranty. R&B warrants that:
(a) Neither R&B nor any parent, subsidiary or affiliate of R&B
during their respective periods of ownership has (A)
executed any deed, conveyance, assignment or other
instrument as an assignor, grantor, sublessor or in another
capacity or (B) has breached any obligation under any Lease
that would (i) result, now or in the future, in R&B's
interest for any Lease being less than that set forth in
Exhibit "F", attached hereto and made a part hereof for all
purposes or (ii) obligate R&B, now or in the future, to bear
the costs and expense relating to the maintenance,
development and operation of such Lease, in an amount
greater than the working interest for such Lease, well or
unit set forth in Exhibit "F", unless the net revenue
interest attributable to said working interest is increased
by proportionate or greater amount; and
(b) Except as specifically provided in the Allegheny JOA, the UA
or the UOA, the interests of R&B, as set forth in Exhibit
"F" hereto are free of all liens, mortgages, charges
privileges, security interests and encumbrances created by
or through R&B as of the Effective Closing Date;
(the limited warranty set forth in subparagraphs (a) and (h) above shall
hereinafter be referred to as the "Special Limited Warranty"). The Mortgage
and the assignment of leasehold interest, in the event the option set forth
in 2.2(a) is selected or deemed to be selected, executed by R&B in favor of
BBPI shall be with no warranty whatsoever other than the Special Limited
Warranty, but with full substitution and subrogation to BBPI in and to all
covenants, agreements, representations and warranties made by others
heretofore given or made in connection with the Leases or any part thereof.
6. REPRESENTAT10NS OF R&B.
As a principal cause and material inducement to BBPI's execution of
this Agreement and to BBPI's consummation of the transactions contemplated
hereby, and with the acknowledgment by R&B of BBPI's reliance hereon, R&B,
to the extent set forth below and with respect to its undivided forty
percent (40%) interest in the Leases covered hereby, represents to BBPI
that as of the date hereof:
6.1 Existence of R&B. R&B is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.2 Power of R&B. R&B has the requisite corporate power to enter
into and perform this Agreement and the transactions contemplated hereby.
Subject to rights to consent by, required notices to, and filings with of
other actions by governmental entities where the same are customarily
obtained subsequent to the assignment of oil and gas interests and leases,
the execution, delivery and performance of this Agreement by R&B, and the
transactions contemplated hereby, will not violate (i) any provision of the
articles of incorporation or bylaws of R&B, (ii) an, material agreement or
instrument to which R&B is a party or by which R&B is or the Assets owned
by R&B art bound, (iii) any judgment, order, ruling, or decree applicable
to the Assets or to R&B as a party in interest, or (iv) any law, rule or
regulation applicable to R&B or to the ownership or operation of the
Assets.
6.3 Authorization of R&B. The execution, delivery and performance of
this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of R&B.
This Agreement has been duly executed and delivered on behalf of R&B, and
at the Closing all documents and instruments required hereunder to be
executed and delivered by R&B shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall, constitute
legal, valid and binding obligations of R&B enforceable in accordance with
their terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
relating to the rights and remedies of creditors, as well as to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
6.4 Brokers. R&B has incurred no obligation or liability, contingent
or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement and any such obligation or liability that
might exist and which was incurred by R&B, shall be the sole obligation or
liability of R&B.
6.5 Foreign Person. R&B is not a "foreign person" within the meaning
of the Sections 1445 and 7701 of Internal Revenue Code of 1986, as amended
(the "Code")(i.e. R&B is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate as those terms are
defined in the Code and any regulations promulgated thereunder).
6.6 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of R&B threatened, against or affecting the Leases or
any portion or portions thereof, or the operations of R&B relating to the
Leases or any portion or portions thereof, and to the best of R&B's
knowledge after reasonable inquiry, no violation of any laws, statutes,
regulations or orders applicable to any Lease or the operation thereof
exists.
6.7 Consents and Preferential Purchase Rights. Other than the
consents and waivers contained in this Agreement and the existing
agreements with Manta Ray Gathering Company, L.L.C., there are no consents
(except governmental consents which are customarily obtained after the
assignment of an oil and gas lease), agreements or waivers of preferential
rights necessary to the valid mortgage of the Leases to BBPI at Closing
that have not been affirmatively waived or deemed to have been waived by
expiration of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production from
the Leasehold Interests, which limit the purchase price for oil or pas, or
which are not subject to termination upon 60 days' notice.
6.8 MMS Approval. R&B is not aware of the existence of any fact or
condition with respect to R&B or the Leases that may cause the MMS to
withhold unconditional approval, to the extent MMS approval is required
under applicable law, of the Mortgage of the Leases from R&B to BBPI or any
acquisition of R&B's interest in the Leases under Articles 2., 3. or 4.
hereof.
7. REPRESENTATIONS OF BBPI AND BBEI.
As a principal cause and material inducement to R&B's execution of
this Agreement and to R&B's consummation of the transactions contemplated
hereby, and with the acknowledgment by BBPI of R&B's reliance hereon, BBPI,
to the extent set forth below and with respect to its undivided sixty
percent (60%) interest in the Leases covered hereby, represents to R&B that
as of the date hereof:
7.1 Existence of BBPI. BBPI and BBEI are corporations duly organized,
validly existing and in good standing under the laws of the State of Texas.
7.2 Power of BBPI & BBEI. BBPI and BBEI have the requisite corporate
power to enter into and perform this Agreement and the transactions
contemplated hereby. Subject to rights to consent by, required notices to,
and filings with or other actions by governmental entities where the same
are customarily obtained subsequent to the assignment of oil and gas
interests and leases, the execution, delivery and performance of this
Agreement by BBPI and BBEI, and the transactions contemplated hereby, will
not violate (i) any provision of the articles of incorporation or bylaws of
BBPI or BBEI, (ii) any material agreement or instrument to which BBPI or
BBEI is a party or by which BBPI or BBEI is or the Leases owned by BBPI are
bound, (iii) any judgment, order, ruling, or decree applicable to the
Leases or to BBPI or BBEI as a party in interest, or (iv) any law, rule or
regulation applicable to BBPI or BBEI or to the ownership or operation of
the Leases.
7.3 Authorization of BBPI & BBEI. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the
part of BBPI and BBEI. This Agreement has been duly executed and delivered
on behalf of BBPI and BBEI, and at the Closing all documents and
instruments required hereunder to be executed and delivered by BBPI and
BBEI shall have been duly executed and delivered. This Agreement does, and
such documents and instruments shall, constitute legal, valid and binding
obligations of BBPI and BBEI, enforceable in accordance with their terms,
subject, however, to the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to the
rights and remedies of creditors, as well as to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
7.4 Brokers. Neither BBEI or BBPI have incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees in
respect of the matters provided for in this Agreement and any such
obligation or liability that might exist and which was incurred by BBPI or
BBEI, shall be the sole obligation or liability of BBPI and BBEI.
7.5 Foreign Person. Neither BBPI or BBEI are a "foreign person"
within the meaning of the Sections 1445 and 7701 of Internal Revenue Code
of 1986, as amended (the Code) (i.e., BBPI and BBEI are not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign
estate as those terms are defined in the Code and any regulations
promulgated thereunder).
7.6 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of BBPI or BBEI threatened, against or affecting the
Leases or any portion or portions thereof, or the operations of BBPI or
BBEI relating to the Leases or any portion or portions thereof, and to the
best of BBPI's and BBEI's knowledge after reasonable inquiry, no violation
of any laws statutes. regulations or orders applicable to any Lease or the
operation thereof exists.
7.7 Consents and Preferential Purchase Rights. Other than the
consents and waivers contained in this Agreement and the existing
agreements with Manta Ray Gathering Company, L.L.C., there are no consents
(except governmental consents which are customarily obtained after the
assignment of an oil and gas lease), agreements of waivers of preferential
rights necessary to the valid mortgage of the Leases to BBPI at Closing
that have not been affirmatively waived or deemed to have been waived by
expiration of the appropriate notice period, and there are no preferential
purchase rights or calls on production with respect to the production from
the Leasehold Interests, which limit the purchase vice for oil or gas, or
which are not subject to termination upon 60 days' notice.
7.8 MMS Approval. Neither BBEI nor BBPI is aware of the existence of
any fact or condition with respect to BBPI or BBEI or the Leases that may
cause the MMS to withhold unconditional approval, to the extent MMS
approval is required under applicable law, of the Mortgage of the Leases
from R&B to BBPI or any acquisition of R&B's interest in the Leases under
Articles 2., 3., or 4. hereof.
8. CLOSING.
8.1 Time and Place of Closing. The consummation of the transactions
contemplated hereby (the "Closing") is to be held at the offices of BBPI on
the later to occur of August 28, 1997, or such other date as may be
mutually agreed in writing between BBPI and R&B.
8.2 Closing Obligations. At the Closing:
(a) R&B shall execute, acknowledge and deliver to BBPI and BBPI
shall execute, acknowledge and deliver to R&B, this
Agreement, the Option Agreement attached hereto as Exhibit
"C", the mortgage and UCC statements attached hereto as
Exhibit "D" together with any and all requisite forms
required to accompany such documents for filing with the MMS
and the appropriate parishes, including, but not limited to,
Designation of Operator forms in favor of BBEI.
(h) BBPI and R&B shall execute such other instruments and take
such other action as may be necessary to carry out their
respective obligations under this Agreement.
(c) BBEI, BBPI and R&B shall execute and deliver, each unto the
other, appropriate ratifications of the Allegheny JOA and
which agreement shall govern the operation of the Leases on
and after the Effective Date, together with any and all
Declarations of Operating Agreement, UCC Financing
Statements and any other documents which may be required
under the terms and provisions of the Allegheny JOA.
9. POST-CLOSING OBLIGATIONS.
9.1 Further Assurances. After Closing, BBPI and R&B agree to take
such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purpose
of this Agreement or of any document delivered pursuant hereto.
9.2 Governmental Approvals. After Closing, BBPI and R&B agree to
take all actions and to execute all documents reasonably requested by the
other party to obtain all necessary permissions, approvals or consent
required by federal, state or local governmental authorities to consummate
the transactions contemplated by this Agreement.
9.3 Cooperation. Each party to this Agreement shall provide the
other party with reasonable access to all relevant documents, data and
other information which may be required by the other parties for the
purpose of preparing tax returns and responding to any audit by any taxing
jurisdiction. Each party to this Agreement shall cooperate with all
reasonable requests of the other parties made in connection with contesting
the imposition of taxes. Notwithstanding anything to the contrary in this
Agreement, no party to this Agreement shall be required at any time to
disclose to the other parties any tax return or other confidential tax
information.
9.4 Sharing of Information regarding the Leases. If requested by
Mobil and/or Enserch Exploration Inc. ("Enserch"), BBPI may provide Mobil
and/or Enserch reasonable access to data concerning the development
contemplated by the Development Plan, by means of project reports and
invitations to attend periodic review meetings
10. MISCELLANEOUS.
10.1 Governing law. THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED IN
ACCORDANCE WITH IT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO
CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
10.2 Entire Agreement. This Agreement, including all exhibits
attached hereto and made a part hereof, together with the LOI, including
all exhibits attached thereto and made a part thereof, constitute the
entire agreement between the parties and together supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. In the event of any conflict between this
Agreement and the LOI, the provisions of this Agreement shall take
precedence. In the event of any conflict between this Agreement and the
terms and provisions of the Allegheny JOA, this Agreement shall take
precedence. No supplement, amendment, alteration, modification, waiver or
termination of this Agreement or the LOI shall be binding unless executed
in writing by the parties hereto. The Allegheny JOA shall govern the
operation of the Leases on and after the Effective Date.
10.3 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing
waive' unless otherwise expressly provided.
10.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered part of or affect the construction or
interpretation of any provision of this Agreement.
10.5 Notices. Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by personal
delivery, by depositing same in the mail, addressed to the party to be
notified, postage prepaid, and registered or certified with a return
receipt requested or by facsimile transmission. Notice deposited in the
mail in the manner herein above described shall be deemed to have been
given and received on the date of the delivery as shown on the return
receipt. Notice served in any other manner shall be deemed to have been
given and received only in and when actually received by the addressee. For
purposes of notice, the addresses of the parties shall be as follows:
BBPI's Mailing Address: British-Borneo Petroleum, Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Xx
General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
BBEI's Mailing Address: British-Borneo Exploration. Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention Xxxxx X. Xxxxxxx, Xx.
General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
R&B's Mailing Address: Reading & Xxxxx Development Co
000 Xxxxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
Chief Operating Office
Telephone: (000) 000-0000
Fax: (000) 000-0000
Each party shall have the right, upon giving ten (10) days prior notice to
the other in the manner hereinabove provided, to change its address for
purposes of notice.
10.6 Expenses. Except as otherwise provided herein, each party shall
be solely responsible for all expenses incurred by it in connection with
this transaction (including, without limitation, fees and expenses of its
own counsel and accountants).
10.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any rule of law,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is no affected in a
materially adverse manner with respect to either party
10.8 Survival. The warranties, representations, covenants,
agreements and obligations of the parties under this Agreement shall
survive the Closing of the transaction contemplated hereby.
10.9 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Attorneys' Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred in investigation or related matters and
it preparation for and prosecution or defense of such suit or action as
fixed by the trial court, and, if any appeal is takes from the decision
of the trial court, reasonable attorneys' fees as fixed by the appellate
court or, if appropriate, by the trial court.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
BRITISH-BORNEO PETROLEUM, INC.
WITNESSES: By: _____________________
Name: _____________________
Title:_____________________
READING & XXXXX DEVELOPMENT CO.
WITNESSES:
_______________________________ By: ______________________
Name: _________________________ Name: ______________________
Title:______________________
_______________________________
Name: _________________________
TO THE EXTENT AND ONLY TO THE EXTENT
OF ITS OBLIGATIONS HEREUNDER:
BRITISH-BORNEO EXPLORATION, INC.
WITNESSES:
_______________________________ By: ______________________
Name: ______________________
_______________________________ Title:______________________
STATE OF TEXAS
COUNTY OF XXXXXX
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that he
executed the above and foregoing instrument in his capacity as
_______________ of British-Borneo Petroleum, Inc., a Texas corporation, on
behalf of said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ___________________ and ___________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF XXXXXX
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
______________ , to me personally known to be the person whose name
is subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the present of the undersigned competent witnesses, that he
executed the above and foregoing instrument in his capacity as
______________ of Reading & Xxxxx Development Co., a Delaware corporation,
on behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ______________________ and ___________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
STATE OF TEXAS
COUNTY OF XXXXXX
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
_____________________, to me personally known to be the person whose
name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, the he executed the above and foregoing instrument in his
capacity as _______________ of British-Borneo Exploration, Inc., a Texas
corporation, on behalf of said corporation with full authority, and that
the said instrument is the free act ant deed of the said corporation, and
was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _______________ and _________________, competent witnesses, on
the 28th day of August, 1997.
WITNESSES:
_________________________ _________________________
_________________________
_________________________
Notary Public in and for the
State of Texas
My Commission expires:
________________________
EXHIBIT "A"
THE LEASES
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
to Amerada Xxxx et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
to Xxxx Petroleum Corporation et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Xxxxx 000, Xxxxx Xxxxxx. OCS Official Protraction
Diagram, NG 15-3.
EXHIBIT, "B"
THE DEVELOPMENT PLAN
ALLEGHENY FIELD
DEVELOPMENT PLAN (SUMMARY)
I DEVELOPMENT OVERVIEW
1.1 The purpose of this note is to demonstrate how British-Borneo intends
to develop the Allegheny field, achieving first oil in Q3 1999 at a
development cost in the region of US $213 million.
1.2 This proposal for the Allegheny field development is founded on the
following assumptions:
- four existing (suspended) xxxxx completed at two sea floor
locations (at xxxxx XX 254 #3, 4STI, 5 and at GC 297 #1);
- one new well located near GC 297 # 1;
- recompletions as needed dependent on reservoir performance;
- additional xxxxx as needed, also dependent upon reservoir
performance;
- dual gravel pack completions using HES/PES for all equipment and
installation;
- production via flowlines to a SeaStar TLP situated between the two
sea floor well
locations (see Attachments la and lb);
- duplication of the Morpeth SeaStar system;
- project management undertaken by the existing British-Borneo
project team;
1.3 Export-quality crude will be shipped via a 30 mile, 8" pipeline to the
Poseidon trunk line system a EW 953, gas via a 25 mile, 6" pipeline to
the Texaco Discovery system at EW 873 (see Attachment 1c). An
alternative route for both pipelines could be to the Morpeth SeaStar
at EW 921.
1.4 The SeaStar TLP will provide full processing facilities for:
- 25M bpd oil average: 27 M peak;
- 35MMscfd gas average: 45mm peak;
- 8M bpd water average: 9M peak
(See Attachment 2)
2 CONTRACTING PHILOSOPHY
2.1 It is proposed to use British-Borneo's current Morpeth field
development as a model for Allegheny substantially duplicating the
Morpeth SeaStar components (e.g. hull, mooring system) utilizing the
services of the same contractors and subcontractors This is considered
an essential prerequisite for the optimum development of the Allegheny
field. Discussions have been held with the major contractors and
subcontractors. Negotiations are sufficiently far advanced to enable
British-Borneo to express its confidence in the viability of this
proposal.
2.2 Current contractual areas of responsibility on Morpeth are:
2.2.1 Atlantia Corporation - the design and procurement and fabrication of
the SeaStar System including hull, deck
topsides and mooring system:
subcontracting to: Gulf Island Fabrication - hull fabrication
- deck
- piles
Xxxx Gulf Marine - tendons
ABB Vetco Xxxx - tendon connectors
2.2.2 J. Xxx XxXxxxxxx - transportation and installation of the SeaStar
TLP including mooring system, hull and
topsides;
- design, engineering, fabrication, supply and
installation of the subsea system including
xmas trees, flowline risers, control system
and umbilicals;
- design, engineering, fabrication, supply and
installation of the subsea gas and oil export
pipelines.
3 PROJECT MANAGEMENT PHILOSOPHY
3.1 This proposal is predicated on capitalizing on the existing
relationships that British-Borneo has developed with Atlantia and J.
Xxx XxXxxxxxx on the Morpeth project. With a small augmentation in the
current Morpeth project team (in the subsea area), existing synergies
can be exploited to the fullest, thus ensuring the most effective and
efficient management of the Allegheny project.
4 SCHEDULE
4.1 Taking into account the existing skills and resources being offered by
British-Borneo, the aggressive schedule contained in Attachment 3 is
achievable. The following key dates should be noted:
August 29, 1997 - Obtain SOP extension from MMS
August 29, 1997 - Deal closure
October 1. 1997 - Order tendon connectors
- Order steel for hull
- Commit to DB50 slot
November 1, 1998 - Order subsea trees
Q1 1999 - Complete 3 xxxxx
Xx/Q2 1999 - Install SeaStar and subsea systems (using DB50 prior
to its commitment to Shell on 7/1/99)
Q3 1999 - FIRST OIL
- Drill and complete one additional well, complete
fourth existing well
5 ESTIMATED COSTS
5.1 Total field facility costs, pre-production costs (including 3
completions) are estimated at US$ 213MM. A breakdown of this figure
can be found in Attachment 4.
EXHIBIT "C"
THE OPTION AND ELECTION AGREEMENT
STATE OF TEXAS
COUNTY OF XXXXXX
OPTION AND ELECTION AGREEMENT
THIS OPTION AGREEMENT is entered into and shall be effective as
of 12:01 a.m., August 28, 1997 (hereinafter referred to as the "Effective
Date"), by and between READING & XXXXX DEVELOPMENT CO., a Delaware
corporation, federal taxpayer identification no._____, whose mailing
address is 000 Xxxxxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 ("R&B") and
BRITISH-BORNEO PETROLEUM, INC., a Texas corporation, federal taxpayer
identification no._____, whose mailing address is 0000 Xxxxxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx 00000 ("BBPI").
In consideration of the payment of the sum of One Thousand
($1,000.00) Dollars and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged and confessed and for which
due acquitance is hereby granted, (x) R&B does hereby grant in favor of
BBPI the right and option, but not the obligation, to purchase, upon the
occurrence of a change in control of the Company, as hereinbelow defined,
during the Option Period (as defined in Article 2.2 of the Participation
Agreement dated August 28, 1997, executed by and between R&B and BBPI (the
"Participation Agreement")), on the terms and conditions described
hereinbelow; and (y) BBPI shall purchase, upon the election of R&B to sell
on or before August 28, 1998, pursuant to the terms and provisions of
Article 2.2(a) of the Participation Agreement, or upon the failure of R&B
to make an election, pursuant to the terms and provisions of Article 2.2 of
the Participation Agreement; on the terms described below, all of R&B's
right, title and interest, together with any and all right, title and
interest which may be hereinafter acquired by R&B pursuant to the terms of
the Operating Agreement, dated effective May 1, 1995, ratified by R&B and
BBPI, as amended (the "Operating Agreement" or the "Allegheny JOA"), in and
to the following described properties (the "Property"):
(a) The oil, gas and mineral leases described on Exhibit 1,
Part (a) (the "Leases"), together with a like interest with
respect to the Leases in and to any and all (i) mineral
interests, (ii) overriding or landowners' royalty interests,
(iii) surface and subsurface interests and rights, (iv)
beneficial, convertible or reversionary interests, (v) interest
owned, claimed or acquired, or to be owned, claimed or acquired,
by agreement, (vi) production payments, (vii) contractual
interests owned pursuant to participation agreements, operating
agreements or similar agreements, and (viii) any and all like or
unlike interests, including without limitation those specific
items identified on Exhibit 1, Part (a). This shall include any
contractual rights providing for the acquisition or earning of
any of the foregoing, and R&B's rights in respect of any pooled,
communitized or unitized acreage of which any of the foregoing
is a part. (All of the foregoing shall be called collectively
the "Leasehold Interests.")
(b) Any and all xxxxx, wellbores, pipe, gathering lines,
compressors, facilities, equipment, platforms, pipelines,
templates and any and all other personal, real, movable and
immovable property, fixtures or equipment which are located on
or used directly in connection with the production, treatment or
transportation of oil and gas from the Leasehold Interests,
including, without limitation, those items specifically
identified on Exhibit 1, Part (b) (the "Equipment").
(c) Any and all easements, rights-of-way, and subsurface and
surface rights associated or used in connection with any such
easements or rights-of-way, which easements, rights-of-way and
subsurface and surface rights have been obtained for use in
connection with the Leasehold Interests (the "Gathering
Facilities").
(d) To the extent the same are assignable or transferable by
R&B and to the extent and only to the extent that the same
relate to the ownership or operation of the Leasehold Interests,
the Gathering Facilities or the Equipment on or after the
Effective Date, a like interest in and to all orders, contracts,
agreements (including without limitation all operating
agreements, transportation agreements, unit agreements,
participation agreements and processing agreements),
instruments, licenses, authorizations, permits, audits, claims,
liens, suits, settlements and demands, and other rights,
privileges, benefits and powers conferred upon R&B.
(e) Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interest on or after the Effective
Closing Date (as hereinafter defined).
R&B and BBPI have heretofore entered into the Participation Agreement
and have ratified the Operating Agreement covering the Leases. In
connection with the obligations set forth in the Participation Agreement
and Operating Agreement, R&B and BBPI do hereby agree that this Option
Agreement shall be irrevocable until the occurrence of (i) the election by
R&B to retain its interest and the payment by R&B to BBPI of costs and
expenses paid on behalf of R&B, with accrued interest, as provided in
Article 2 of the Participation Agreement or (ii) the conveyance by R&B to
BBPI of all of its right, title and interest in and to the Property,
whichever occurs first.
Additionally, the Participation Agreement provides and for purposes of this
Option Agreement, Change in Control of the Company shall be defined in
accordance with the Participation Agreement:
The Participation Agreement provides, inter alia:
2. DEVELOPMENT CARRY.
2.1 Obligation to Carry. Notwithstanding anything to the contrary
which may be contained in or derived from the Allegheny JOA, the UA or the
UOA, and as a portion of the consideration due R&B hereunder, BBPI shall
bear (by paying for the following costs on R&B's behalf), R&B's undivided
forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
contemplated under the Development Plan ("Development Costs"), through
August 28, 1998, or the date of the election set out in Article 2.2 is made
by R&B, whichever is the first to occur. BBPI's obligation hereunder is
only as to costs actually incurred during said time period and R&B shall
continue to bear and pay directly, its proportionate share of all
liability, risks, exposures, lawsuits, demands, claims and other similar
and dissimilar liabilities. Nothing herein shall be deemed to provide R&B a
turnkey or other fixing of costs or liabilities with respect to the
implementation of the Development Plan.
2.2 Election of R&B. On or before August 28, 1998 (the period from
August 28,1997 to the earlier of August 28, 1998 or the date upon which
payment is made pursuant to R&B's election under 2.2 shall be referred to
as the "Option Period"), R&B shall elect by written notice to BBPI either
to:
(a) convey to BBPI, effective as of August 28, 1997 (the
"Effective Closing Date"), free and clear of all burdens,
liens, overriding royalties, production payments and any
other burden or encumbrance created by, through or under
R&B, all of R&B's interest in the Leases, and all of R&B's
interest in any and all associated facilities and equipment
for the sum of Twenty-five Million and No/100 Dollars
($25,000,000.00) plus interest front August 28. 1997 at
LIBOR (London Interbank Rate) + 2%: or
(b) retain its interest in the Leases and pay to BBPI, forty
percent (40%) of all of the above described costs incurred
by BBPI in connection with the implementation of the
Development Plan during the Option Period, plus interest to
be calculated at LIBOR + 2% from the date such funds were
paid by BBPI. R&B would then be assigned al undivided forty
percent (40%) interest in and to the Seastar facility and
all associate equipment and facilities, free and clear of
all liens and encumbrances, save and except those liens and
encumbrances contemplated under the terms and provisions of
the Allegheny JOA, the UA or the UOA and R&B would also then
assume an undivided forty percent (40%) of the future costs
of the development pursuant to the terms and provisions of
the Allegheny JOA and the LOI.
Failure of R&B to make an election within the Option Period shall be deemed
to be an election under Article 2.2 (a) above.
In the event R&B makes an election under option 2.2 (a) above or if R&B
fails to make an election during the Option Period, upon the closing of the
transaction contemplated in 2.2(a) above, BBPI shall agree to protect,
indemnify, defend and hold R&B harmless from and against any and all
claims, demands, liabilities, suits, damages and injuries arising from the
implementation of the Development Plan from and after August 28, 1997.
2.3 Option Agreement. The rights and obligations of the parties with
respect to the option of R&B hereunder, shall be confirmed in a separate
agreement to be executed by R&B and BBPI (the "Option Agreement") which is
attached hereto and made a part hereof for all purposes as Exhibit "D." The
Option Agreement shall be executed in recordable form and which may be
filed in the records of the Minerals Management Service and the appropriate
parish records.
2.4 Voting/Elections during the Option Period. During the Option
Period, BBPI shall, under the terms of the Allegheny JOA, be entitled to
vote and make Elections with respect to R&B's interest with respect to the
implementation of and all matters associated with the Development Plan,
provided that such vote and/or Election is the same as BBPl's vote with
respect to its own interest. During the Option Period, BBPI shall not be
entitled to vote or make Elections with respect to R&B's interest with
respect to drilling operations, but may vote and make Elections with
respect to R&B's interest with respect to completion operations of existing
xxxxx. BBPI agrees to keep R&B fully informed with respect to such votes
and Elections.
2.5 Transfers of Interest by R&B during the Option Period. Prior to
its payment or assignment under Article 2.2 above, R&B shall not sell,
convey, mortgage, pledge, assign, encumber, alienate or otherwise transfer,
nor enter into any agreement to sell, convey, mortgage, pledge, assign,
encumber, alienate or otherwise transfer all or any portion of its interest
in the Leases to any party other than BBPI.
2.6 Information to R&B during the Option Period. During the Option
Period, R&B shall be entitled to review all information, data and contracts
affecting the Development Plan and R&B shall be permitted to attend, as an
observer, periodic review meetings with contractors in which the
Development Plan is discussed. In addition to the other information to be
provided to R&B under the Allegheny JOA as a Participating Party, within 30
days after the end of each calendar month during the Option Period, BBEI
and BBPI shall provide a statement to R&B describing the costs ant expenses
accruing to R&B's forty Percent (40%) share during the preceeding month.
Additionally, the Participation Agreement provides and for the purposes of
this Option Agreement, change in control of the Company shall be defined as
follows:
4 CHANGE IN CONTROL OF R&B.
4.1 Effect of Change in Control. In the event that, at any time
during the term of the Option Period, R&B experiences a
"change in control of the Company", as hereinafter defined
in Article 4.2, R&B shall give written notice to BBPI of
such occurrence and BBPI shall have the right and option,
but not the obligation, for a period of ten (10) business
days after receipt of such notice, to acquire the Property
from R&B as provided herein. Such option shall expire if
BBPI fails to exercise such option within the time frame
established hereunder.
4.2 Change in Control Defined. For the purposes of this
provision, "Company" shall be deemed to mean R&B and the
parent of R&B and/or any other entity controlling a majority
of the voting stock of R&B. For the purposes of this
provision, a "change in control of the Company" shall mean a
change in control of a nature that would be required to be
reported in response to Item l(a) of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act") or would have been required to
be so reported but for the fact that such event had been
"previously reported" as that term is defined in Rule 12b-2
of Regulation 12B of the Exchange Act; provided that,
without limitation, such a change in control shall be deemed
to have occurred if (a) any Person is or becomes the
beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the
combined voting power of the Company's then outstanding
securities ordinarily (apart from rights accruing under
special circumstances) having the right to vote at election
of directors ("Voting Securities"), or (b) individuals who
constitute the Board on the Effective Date hereof (the
"Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming
a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (either by specific
vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes
of this clause (b), considered as though such person were a
member of the Incumbent Board, or (c) a recapitalization of
the Company occurs which results in either a decrease by 33%
or more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a primary
basis or on a fully diluted basis after giving effect to the
exercise of stock option and warrants) or an increase in the
aggregate percentage ownership of Voting Securities held by
non-Independent Shareholders (on a primary basis or on a
fully diluted basis after giving effect to the exercise of
stock options and warrants) to greater than 50%. For
purposes of this provision, the term "Person" shall mean and
include any individual, corporation, partnership, group,
association or other "person," as such term is used in
Section 14(d) of the Exchange Act, other than the Company, a
subsidiary of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or an subsidiary
thereof, and the term "Independent Shareholder" shall mean
any shareholder of the Company except any employee(s) or
director(s) of the Company or any employee benefit plans
sponsored or maintained by the Company or any subsidiary
thereof. For purposes of this Article 4., a "change in
control of the Company" shall not be deemed to occur solely
as the result of a spin-off, split-off or other distribution
of the outstanding stock of R&B to the stockholders of the
ultimate parent corporation controlling a majority of the
voting stock of R&B, or the merger of R&B's parent with
Falcon Drilling Company, Inc., or the merger of R&B where
R&B's parent ultimately retains controlling interest of the
surviving entity, or any merger where the parent of R&B is
the surviving entity.
Upon the occurrence of a change in control of the Company, R&B
shall give written notice to BBPI of such occurrence and BBPI shall have
the right and option, but not the obligation, for a period of ten (10)
business day after receipt of such notice, to acquire the Property from R&B
as provided in the Participation Agreement. BBPI shall provide R&B written
notice of its election hereunder and the failure of BBPI to make an
election within the time frame established hereunder shall be deemed an
election not to acquire the interest.
The consideration for this conveyance shall be as set forth in
the Participation Agreement ("Purchase Price"). The Purchase Price shall be
paid in cash at the time of the passing of the act of sale, which shall
occur at the offices of the BBPI within ten (101 business days of R&B's
receipt of notification of BBPI's election to purchase.
R&B shall convey the Property to BBPI, free and clear of any and
all liens, mortgages, claims, security interests and encumbrances,
overriding royalty interests, production payments or other burdens which
may have been created by, through or under R&B and R&B shall further
warrant that neither R&B nor any parent, subsidiary or affiliate of R&B
during their respective periods of ownership has (A) executed any deed,
conveyance, assignment or other instrument as an assignor, grantor,
sublessor or in another capacity or (B) has breached any obligation under
any Lease that would (i) result, now or in the future, in R&B's interest
for any Lease being less than that set forth in Exhibit "A", attached
hereto and made a part hereof for all purposes or (ii) obligate R&B, now or
in the future, to bear the costs and expenses relating to the maintenance,
development and operation of such Lease, in an amount greater than the
working interest for such Lease, well or unit set forth in Exhibit "A",
unless the net revenue interest attributable to said working interest is
increased by a proportionate or greater amount.
The assignment shall also be made with full substitution and
subrogation to BBPI in and to all covenants, agreements, representations
and warranties made by others heretofore given or made in connection with
the Leases or any part or portion thereof.
Any notice provided or permitted to be given under this Option
Agreement shall be in writing, and may be served by personal delivery, by
depositing same in the mail, addressed to the party to be notified, postage
prepaid, and registered or certified with a return receipt requested or by
facsimile transmission. Notice deposited in the mail in the manner
hereinabove described shall be deemed to have been given and received on
the date of the delivery as shown of the return receipt. Notice served in
any other manner shall be deemed to have been given and received only in
and when actually received by the addressee. For purposes of notice, the
addresses of the parties shall be as follows:
R&B's Mailing Address:
Reading & Xxxxx Development Co.
000 Xxxxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
Chief Operating Office
Telephone: (000) 000-0000
Fax: (000) 000-0000
BBPI's Mailing Address:
British-Borneo Petroleum, Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Xx
General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
Each party shall have the right, upon giving ten (10) days prior
notice to the other in the manner hereinabove provided, to change its
address for purposes of notice.
IN WITNESS WHEREOF, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 28th day
of August, 1997, but to be effective as of the Effective Date.
WITNESSES: READING & XXXXX DEVELOPMENT CO.
___________________________________By:___________________________________
Name:______________________________Title:__________________________________
(Please Print)
___________________________________
Name:______________________________
(Please Print)
BRITISH-BORNEO PETROLEUM, INC.
___________________________________By:___________________________________
Name:______________________________Title:__________________________________
(Please Print)
___________________________________
Name:______________________________
(Please Print)
STATE OF TEXAS
COUNTY OF XXXXXX
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
_____________________________, to me personally known to be the
person whose name is subscribed to the foregoing instrument, who declared
and acknowledged to me, notary, in the presence of the undersigned
competent witnesses, that he executed the above and foregoing instrument in
his capacity as __________________of British-Borneo Petroleum, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
______________________________ ______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
_______________________
STATE OF TEXAS
COUNTY OF XXXXXX
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
____________________, to me personally known to be the person whose
name is subscribed to the foregoing instrument, who declared and
acknowledged to me, notary, in the presence of the undersigned competent
witnesses, that he executed the above and foregoing instrument in his
capacity as _________________ of Reading & Xxxxx Development Co., a
Delaware corporation, on behalf of the said corporation with full
authority, and that the said instrument is the free act and deed of the
said corporation, and was executed for the uses, purposes and benefits
therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of ________________________ and _______________________, competent
witnesses, on the 28th day of August, 1997.
WITNESSES:
______________________________ ______________________________
______________________________
______________________________
Notary Public in and for the
State of Texas
My Commission expires:
_______________________
EXHIBIT I TO OPTION AGREEMENT
PART (a)
LEASEHOLD INTERESTS
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Amerada Xxxx, et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shell Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
and Xxxx Petroleum Corporation, et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.66666%
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
PART (b)
EOUIPMENT
1. XXXXX:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 40.00000% 34.70133%
B. OCS-G 7049 #4 40.00000% 34.70133%
C. OCS-G 7049 #4STI 40.00000% 34.70133%
D. OCS-G 7049 #5 40.00000% 34.70133%
E OCS-G 8876 #1 40.00000% 33.66666%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
EXHIBIT "D"
MORTGAGE AND UCC FINANCING STATEMENTS
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage") dated as of this
28th day of August, 1997 is by and between READING & XXXXX DEVELOPMENT CO.,
a Delaware corporation whose mailing address is 000 Xxxxxxxxxxxx, Xxxxx
000, Xxxxxxx, Xxxxx 00000, and whose federal taxpayer identification
number is 00-0000000 (hereinafter referred to as "Mortgagor"), and BRITISH-
BORNEO PETROLEUM, INC., a Texas corporation whose mailing address is 0000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, and whose federal taxpayer
identification number is 00-0000000 (the "Mortgagee" or "BBPI"), here
present who accepts this Mortgage.
Recitals
WHEREAS, pursuant to that certain Participation Agreement (the
"Participation Agreement") dated ____________, 1997 by and between
Mortgagor, Mortgagee and to the extent of its obligations thereunder,
British-Borneo Exploration, Inc., Mortgagee has agreed to bear Mortgagor's
undivided forty percent (40%) share of the cost and expense of the design,
engineering, fabrication, construction and installation of the facilities
(the "Development Costs") contemplated under the development plan attached
hereto and made a part hereof for all purposes at Exhibit "B" (the
"Development Plan") through August 28, 1998, or the date the election under
Section 2.2 of the Participation Agreement is made by Mortgagor, whichever
is the first to occur;
WHEREAS, pursuant to Section 2.2 of the Participation Agreement,
Mortgagor must, on or before August 28, 1998, elect to either (the period
from August 28, 1997 to the earlier of August 28, 1998 or the date upon
which payment is made pursuant to Mortgagor's election under Section 2.2 of
the Participation Agreement shall be defined to as the "Option Period")
(a) convey to Mortgagee free and clear of all burdens, liens, overriding
royalties, production payments and any other burdens or encumbrances
created by, through or under Mortgagor, all of Mortgagor's interest in the
leases described on Exhibit "A" hereto and all associated facilities and
equipment for the sum of Twenty-Five Million and No/100 Dollars
($25,000,000.00) plus interest from August 28, 1997 at LIBOR (London
Interbank Rate) plus 2% ("Mortgagor's Conveyance Obligation") or (b) retain
its interest in the leases described in Exhibit "A" hereto and pay to
Mortgagee forty percent (40%) of all of the Development Costs advanced by
Mortgagee on Mortgagor's behalf in connection with the implementation of
the Development Plan during the Option Period plus interest at LIBOR plus
2% from the date such funds were paid by Mortgagee ("Mortgagor's Repayment
Obligation");
WHEREAS, in order to secure the full and punctual payment and
performance of either Mortgagor's Conveyance Obligation or Mortgagor's
Repayment Obligation and the other Indebtedness (as hereafter defined), the
Mortgagor has agreed to execute and deliver this Mortgage and to grant a
mortgage lien and continuing security interest in and to the Collateral (as
hereafter defined);
NOW, THEREFORE, in consideration of the premises, the Mortgagor and
Mortgagee agree as follows:
ARTICLE 1.
General Terms
Section 1.1 Definitions. As used in this Mortgage, the terms
"Mortgagor," "Mortgagor's Conveyance Obligation," "Mortgagor's Repayment
Obligation," "Development Costs," "Development Plan," "Mortgagee,"
"Mortgage" and "Participation Agreement" shall have the meanings indicated
above. As used in this Mortgage, the following additional terms shall have
the meanings indicated:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Mortgagor (including without limitation accounts
resulting from the sale of Hydrocarbons at the well head) now or hereafter
arising in connection with the sale or other disposition of any
Hydrocarbons, and further means all rights accrued, accruing or to accrue
to receive payments of any and every kind under all Contracts, including
without limitation bonuses, rents and royalties which are payable out of or
measured by production of any Hydrocarbons or
are otherwise attributable to the Mineral Properties and all other revenues
owing to the Mortgagor in connection with the Mineral Properties, including
revenues from the treatment, transportation or storage of Hydrocarbons for
third parties.
"Collateral" has the meaning set forth in Section 2.2 ("The Security
Interest") of this Mortgage".
"Collateral Documents" means collectively all mortgages, pledges,
security agreements and other documents by which the Mortgagor grants Liens
and security interests in immovable or movable property to the Mortgagee.
"Contracts" means all contracts (including, but not limited to, those
contracts described on Exhibit "C" attached hereto), agreements, operating
agreements, farm-out or farm-in agreements, sharing agreements, limited or
general partnership agreements, area of mutual interest agreements, mineral
purchase agreements, contracts for the sale, exchange, transportation or
processing of Hydrocarbons, rights-of-way, easements, surface leases, salt
water disposal agreements, service contracts, permits, franchises,
licenses, pooling or unitization agreements, unit designations and pooling
orders now in effect or hereafter entered into by the Mortgagor affecting
any of the Mineral Properties, Equipment or Hydrocarbons now or hereafter
covered hereby, or which are useful or appropriate in drilling for,
producing, treating, handling, storing, transporting or marketing oil, gas
or other minerals produced from any lands affected by the Mineral
Properties.
"Default" means the occurrence of any of the events specified as an
Event of Default, whether or not any requirement for notice or lapse of
time or other condition precedent has been satisfied.
"Equipment" means all equipment now owned or hereafter acquired by the
Mortgagor and now or hereafter located on or used or held for use in
connection with the Mineral Properties (including, but limited to, the
equipment described on Exhibit "D" attached hereto) or in connection with
the operation thereof or the treating, handling, storing, transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons, including
without limitation all xxxxx, wellbores, rigs, templates platforms,
constructions, extraction plants, facilities, gas systems (for gathering,
treating, injection and compression), water systems (for treating, disposal
and injection), compressors, casing, tubing, rods, flow lines, pipelines,
derricks, tanks, separators, pumps, machinery, tools and all other movable
property and fixtures, now or hereafter located upon and dedicated to be
used (or held for use) in connection with any of the Mineral Properties,
together with all additions, accessories, parts, attachments, special tools
and accessions now and hereafter affixed thereto or used in connection
therewith, and all replacements thereof and substitutions therefor.
"Event of Default" has the meaning set forth in Section 5.1 ("Events
of Default") of this Mortgage.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by the Mortgagor related to the
Mineral Properties, the Equipment or the Hydrocarbons, the operation of the
Mineral Properties or the Equipment (whether the Mortgagor is operator or
non-operator), or the treating, handling, storing, transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons, or under
which the proceeds of Hydrocarbons arise or are evidenced or governed,
including, without limitation, (i) all contractual rights and obligations
or indebtedness owing to the Mortgagor (other than Accounts) from whatever
source arising in connection with the sale or other disposition of any
Hydrocarbons, including all rights to payment owed or received by the
Mortgagor pursuant to a "take-or-pay" provision or gas balancing
arrangement, (ii) all Contracts and other general intangibles now or
hereafter arising in connection with or resulting from Contracts, (iii) all
insurance proceeds and unearned insurance premiums affecting all or any
part of the Collateral, and (iv) all things in action, rights represented
by judgments, claims arising out of tort and other claims relating to the
Collateral, including the right to assert and otherwise to be the plaintiff
and proper party of interest to commence and prosecute such action (whether
as claims, counterclaims or otherwise, and whether involving matters
arising from casualty, condemnation, indemnification, negligence, strict
liability, other tort, contract or in any other manner).
"Hydrocarbons" mean all oil, gas, casinghead gas, condensate,
distillate, other liquid and gaseous hydrocarbons, sulfur, and all other
minerals, whether similar to the foregoing or not, produced, obtained or
secured from or allocable to the Mineral Properties, and any products
refined, processed, recovered or obtained therefrom, including oil in
tanks.
"Indebtedness" means all Development Costs paid by Mortgagee on behalf
of Mortgagor and all other present and future amounts, liabilities and
obligations to perform and/or pay and covenants of the Mortgagor to the
Mortgagee or to any successor or transferee thereof under or pursuant to
the Participation Agreement, that certain Option Agreement effective as of
12:01 a.m., August 28, 1997 by and between Mortgagor and Mortgagee with
respect to the Mineral Properties (the "Option Agreement"), this Mortgage,
the other Collateral Documents or otherwise, whether said amounts,
liabilities or obligations are liquidated or unliquidated, now existing or
hereafter arising, direct or indirect, primary to secondary, fixed or
contingent, and irrespective of the manner in which same may be incurred,
including without limitation all costs and attorneys' fees, as therein
stipulated, and under and pursuant to all amendments, supplements and
restatements to any of said documents, together with any and all renewals
and extensions of such debts, obligations to perform and/or pay, covenants
and liabilities or any part thereof. The Indebtedness includes without
limitation all Payments and other amounts for which the Mortgagor is
obligated under the terms of this Mortgage.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on jurisprudence, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
servitudes, usufructs, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions an encumbrances affecting property.
"Mineral Properties" means all right, title and interest of Mortgagor
in the oil, gas and mineral leases described in Exhibit "A" hereto,
together with all interests of the Mortgagor with respect to all
unitization and pooling agreements and orders now or hereafter existing or
which relate to those certain interests described in Exhibit "A", and all
interests of the Mortgagor in agreements and rights pertaining to the use
or occupation of the subsurface depths that relate to those certain
interests described in Exhibit "A".
"Mortgage" means this Mortgage and Security Agreement, as amended or
supplemented from time to time.
"Mortgaged Property" has the meaning set forth in Section 2.1
("Hypothecation") of this Mortgage.
"Payments" has the meaning set forth in Section 4.23 ("Payments by
Mortgagee") of this Mortgage.
"Permitted Liens" means the Security Interest, any other Liens in
favor of the Mortgagee; any validly perfected mechanic's and materialman's
lien filed as of the date of this Mortgage; the Lien created by the
Financing Statement executed by Mortgagor, as debtor, in favor of Mortgagee
and other parties, as Secured Party, securing certain obligations of
Mortgagor under the Operating Agreement dated effective May 1, 1995
executed by and between Enserch Exploration, Inc., Mortgagor, et al., as
amended by letters dated October 16, 1995, October 31, 1995 and May 17,
1996 and assumed by Mortgagee and British-Borneo Exploration, Inc.
effective August 28, 1997 (the "Operating Agreement"); Liens permitted by
the Mortgagee in writing to be created or assumed or to otherwise exist on
the Collateral (including without limitation the Liens permitted by the
provisions of Section 4.3 ("Liens") hereof).
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or
any other form of entity.
"Proceeds" means all cash and non-cash proceeds of, and all other
profits, rentals, or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including without
limitation all claims of the Mortgagor against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to
any Collateral, and including proceeds of all such proceeds, in each case
whether now existing or hereafter arising.
"Proceeds of Runs" has the meaning set forth in Section 2.3
("Assignment") of this Mortgage.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Indebtedness.
"UCC" means the Uniform Commercial Code, Commercial Laws-Secured
Transactions (Louisiana Revised Statutes 10:9-101 through 9-605) in the
State of Louisiana, as amended from time to time; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction
other than Louisiana, "UCC" means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
ARTICLE 2.
Liens and Security Interests
Section 2.1 Hypothecation. (a) In order to secure the full and
punctual payment and performance of all present and future Indebtedness,
the Mortgagor does by these presents specially mortgage, affect,
hypothecate, pledge and assign unto and in favor of the Mortgagee, to inure
to the use and benefit of the Mortgagee, the following described property,
to-wit:
(1) The Mineral Properties, together with all profits, products and
proceeds, whether now or hereafter existing or arising, from the Mineral
Properties.
(2) The Mortgagor's rights in the improvements and other
constructions now or hereafter located on the Mineral Properties, including
without limitation the Equipment, to the extent (i) any such property
should constitute or be deemed to constitute immovable property for the
purposes of Louisiana law, including without limitation any buildings,
platforms, templates, structures, towers, rigs or other immovable property
or component parts thereof, or (ii) any such property that is otherwise
susceptible of mortgage pursuant to Louisiana Civil Code Article 3286 or
Louisiana Mineral Code Article 203.
The descriptions of the Mineral Properties contained in Exhibit "A"
are qualified by the explanations contained in Exhibit 1 attached hereto
and made a part hereof.
All of the foregoing property and rights covered by and subject to
this Mortgage are herein collectively referred to as the "Mortgaged
Property."
SUBJECT, however, to (i) the restrictions, exceptions, reservations,
conditions, limitations and other matters, if any, set forth or specified
in the specific descriptions of such properties and interests in Exhibit
"A" (including all presently existing royalties, overriding royalties,
payments out of production and other burdens which are specified in Exhibit
"A" and which are taken into consideration in computing any percentage,
decimal or fractional interests set forth in Exhibit "A"), and (ii) the
condition that the Mortgagee shall not be liable in any respect hereunder
for the performance of any covenant or obligation of the Mortgagor in
respect of the Mortgaged Property.
The Mortgaged Property is to remain so specially mortgaged, affected
and hypothecated unto and in favor of Mortgagee until the full and final
payment or discharge of the Indebtedness, and Mortgagor is herein and
hereby bound and obligated not to sell or alienate the Mortgaged Property
to the prejudice of this act.
(b) In the event that the Mortgagor acquires additional undivided
interests in some or all of the Mineral Properties, this Mortgage shall
automatically encumber such additions or increases to the Mortgagor's
interest in the Mineral Properties without need of further act or document.
Further, in the event the Mortgagor becomes the owner of an interest in any
part of the land described either in Exhibit "A" or in the documents
described in Exhibit "A" or otherwise subject to or covered by the Mineral
Properties, this Mortgage shall automatically encumber such ownership
interest of the Mortgagor without need of further act or document.
Section 2.2 The Security Interests. In order to secure the full
and punctual payment and performance of all present and future
Indebtedness, the Mortgagor hereby grants to the Mortgagee a continuing
security interest in and to all right, title and interest of the Mortgagor
in, to and under the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
(1) the Mineral Properties;
(2) the Accounts;
(3) the Hydrocarbons;
(4) the Equipment;
(5) the General Intangibles (including the Contracts);
(6) all engineering, seismic, reserve, production,
accounting, title and legal data, reports and books
and records in any form (including, without limitation,
customer lists, credit files, computer programs, tapes,
disks, punch cards, data processing software,
transaction files, master files, printouts and other
computer materials and records) of the Mortgagor
pertaining to any of the Mineral Properties or
Collateral; and
(7) all Proceeds and products of all or any of the
Collateral described in clauses 1 through 6 hereof.
The term "Collateral" means each and all of the items and property
rights described in clauses 1-7 above, together with the Mortgaged
Property.
Section 2.3 Assignment. To further secure the full and punctual
payment and performance of all present and future Indebtedness, up to the
maximum amount outstanding at any time and from time to time set forth in
Section 2.5 ("Maximum Amount") below, the Mortgagor does hereby absolutely,
irrevocably and unconditionally pledge, pawn, transfer and assign to the
Mortgagee all monies which accrue after 8:00 a.m. Central Time, U.S.A., on
the date of this Mortgage, attributable to the Mortgagor's interest in the
Mineral Properties and all present and future rents therefrom (which rents
include without limitation all royalties, delay rentals, shut-in payments
and other payments which are rentals under Title 31 of the Louisiana
Revised Statutes) and all proceeds of the Hydrocarbons (which proceeds
include without limitation all payments for Hydrocarbons not yet delivered,
such as those received pursuant to "take or pay" arrangements) and of the
products obtained, produced or processed from or attributable to the
Mineral Properties now or hereafter (which monies, rents and proceeds are
referred to herein as the "Proceeds of Runs"). The Mortgagor hereby
authorizes and directs all obligors or payors of any Proceeds of Runs to
pay and deliver to Mortgagee, upon request therefor by Mortgagee, all of
the Proceeds of Runs accruing to the Mortgagor's interest without further
inquiry as the rights of the Mortgagee to receive the same and without any
further action or consent on the part of Mortgagor; provided, however, that
Mortgagee hereby agrees that it shall not request that the Proceeds of Runs
be paid directly to Mortgagee unless and until there has occurred an Event
of Default. The Mortgagor agrees that such obligors shall have no
responsibility to see to the application of any funds so paid to Mortgagee.
Section 2.4 Condemnation. The Mortgagor hereby assigns to the
Mortgagee any and all awards that may be given or made in any proceedings
by any legally constituted authority to condemn or expropriate the
Collateral, or any part thereof, under power of eminent domain, and if
there is such a condemnation or expropriation, the Mortgagee may, at its
election, either pay the net proceeds thereof toward the payment of the
Indebtedness or pay the net proceeds thereof to the Mortgagor.
Section 2.5 Maximum Amount. (a) The maximum amount of the
Indebtedness that may be outstanding at any time and from time to time that
this Mortgage secures, including without limitation as a mortgage and as a
collateral assignment, and including any Payments made and included within
the Indebtedness, is Forty Million and No/100 ($40,000,000.00) Dollars.
(b) The Mortgagor acknowledges that this Mortgage secures all
Indebtedness under or pursuant to the Participation Agreement, the Option
Agreement, this Mortgage or the other Collateral Documents, whether such
loans or advances made or incurred by the Mortgagee are optional or
obligatory by the Mortgagee. This Mortgage is and shall remain effective
until all of the amounts, liabilities and obligations, present and future,
comprising the Indebtedness have been incurred and are extinguished. When
no Indebtedness secured by this Mortgage exists, this Mortgage shall
terminate, Mortgagor shall have no further obligation hereunder and
Mortgagee shall promptly cause this Mortgage to be released of record.
Section 2.6 Delivery of Transfer Orders. Independent of the other
provisions and authorities herein granted, the Mortgagor agrees to execute
and deliver any and all transfer orders, letters in lieu thereof, division
orders and other instruments that may be requested by Mortgagee or that may
be required by any purchaser of any Hydrocarbons for the purpose of
effectuating payment of the Proceeds of Runs to Mortgagee. If under any
existing sales agreements, other than division orders or transfer orders,
any Proceeds of Runs are required to be paid by the purchaser or any other
payor to the Mortgagor so that under such existing agreements payment
cannot be made of such Proceeds of Runs to Mortgagee, upon the occurrence
of an Event of Default, the Mortgagor's interest in all Proceeds of Runs
under such sales agreements and in all other Proceeds of Runs which for any
reason may be paid to the Mortgagor shall, when received by the Mortgagor,
constitute trust funds in the Mortgagor's hands and shall be immediately
paid over to Mortgagee.
Section 2.7 Change of Purchaser. Should any Person now or
hereafter purchasing or taking Hydrocarbons fail to make payment promptly
to Mortgagee of the Proceeds of Runs, Mortgagee shall have the right to
make, or to require Mortgagor to make, an change of connection and the
right to designate or approve the purchase with those facilities a new
connection shall be made, and Mortgagee shall have no liability or
responsibility in connection therewith so long as ordinary care is used in
making such designation.
Section 2.8 Application. All proceeds of Runs from time to time in
the hands of Mortgagee shall be applied by it toward the payment and
prepayment of all Indebtedness at such time, and in such manner as
Mortgagee deems advisable, may be held by Mortgagee pending a resolution of
any dispute as to Mortgagee's right to collect such Proceeds of Runs, or
may be delivered by Mortgagee to the Mortgagor without in any way reducing
or paying the Indebtedness.
Section 2.9 Payment of Proceeds. In the event that, for any
reason, the Mortgagee, upon the occurrence of an Event of Default, should
elect with respect to all or particular Mineral Properties or Contracts not
to exercise immediately its right to receive Proceeds of Runs, then the
purchasers or other Persons obligated to make such payment shall continue
to make payment to the Mortgagor until such time as written demand has been
made upon them by the Mortgagee that payment be made direct to the
Mortgagee. Such failure to notify such purchasers or other Persons shall
not in any way waive, remit or release the right of the Mortgagee to
receive any payments not theretofore paid over to the Mortgagor before the
giving of written notice. In this regard, in the event payments are made
direct to the Mortgagee, and then, at the request of the Mortgagee payments
are, for a period or periods of time, paid to the Mortgagor, the Mortgagee
shall nevertheless have the right, effective upon written notice, to
require future payments be again made to it.
Section 2.10 Limitation of Liability. The Mortgagee and its
successors and assigns are hereby absolved from all liability for failure
to enforce collection of the Proceeds of Runs and from all other
responsibility in connection therewith, except the responsibility of each
to account (by application upon the Indebtedness or otherwise) to the
Mortgagor for funds actually received. The Mortgagor agrees to indemnify
and hold harmless Mortgagee against any and all liabilities, actions,
claims, judgments, costs, charges and attorneys' fees by reason of the
assertion that such parties received, either before or after payment and
performance in full of the Indebtedness, funds from the production of
Hydrocarbons or the Proceeds of Runs claimed by third persons (and/or funds
attributable to sales of production which (i) were made at prices in excess
of the maximum price permitted by or (ii) were otherwise made in violation
of laws, rules, regulations and/or orders governing such sales), and the
Mortgagee shall have the right to defend against any such claims or
actions, employing attorneys of Mortgagee's own selection and if not
furnished with indemnify satisfactory to them, the Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments, and
in addition to the rights to be indemnified as herein provided, all amounts
paid by the Mortgagee in compromise, satisfaction or discharge of any such
claim, actions or judgments, and all court costs, attorneys' fees and other
expenses of every character expended by the Mortgagee pursuant to the
provisions of this Section shall be a demand obligation (which obligation
the Mortgagor hereby expressly promises to pay) owing by the Mortgagor to
such parties and shall bear interest, from the date expended until paid, at
the rate described in Section 4.23 ("Payments by Mortgagee") hereof.
Section 2.11 Duty to Perform. Nothing herein contained shall
detract from or limit the obligation of the Mortgagor to make prompt
payment of the Indebtedness at the time and in the manner provided herein.
The Mortgagor will do and perform every act required of it by this Mortgage
at the time or times in the manner specified.
Section 2.12 No Liability. The foregoing mortgage Liens and
Security Interest are granted as security only and shall not subject the
Mortgagee to, or transfer or in any way affect or modify, any obligation or
liability of the Mortgagor with respect to any of the Collateral or any
transaction in connection therewith.
Section 2.13 Priority. Notwithstanding any other provision in this
Mortgage, Mortgagee hereby agrees that this Mortgage shall in all respects
be subordinate to that Permitted Lien granted by Mortgagor in favor of
Mortgagee and other parties under and pursuant to Article 6.3 of the
Operating Agreement.
ARTICLE 3.
Representations and Warranties
The Mortgagor represents and warrants to the Mortgagee (such
representations and warranties are limited to the best of Mortgagor's
knowledge with respect to Sections 3.1, 3.2, 3.3, 3.7, 3.8 and 3.9) that:
Section 3.1 Title. The Collateral (including without limitation
the Mineral Properties) is accurately, completely, adequately and
sufficiently described herein and in Exhibit "A" as required by all
applicable laws for this Mortgage to create a Lien on all of the
Collateral. The execution, delivery and performance of this Mortgage and
the creation of the liens hereunder do not violate any provision of or
constitute a default under any operating agreement or other instrument
affecting or comprising any of the Collateral or to which the Mortgagor is
a party. The Mortgagor represents and warrants to the Mortgagee that (a)
the Mineral Properties described in Exhibit "A" hereto are valid,
subsisting leases and contracts, in full force and effect, (b) all
producing xxxxx located on the lands described in Exhibit "A" have been
drilled, operated and produced in conformity with all applicable laws,
rules and regulations of all regulatory authorities having jurisdiction,
and are subject to no penalties on account of past production, and that
such xxxxx are in fact bottomed under and are producing from, and the well
bores are wholly within, lands described in Exhibit "A" (or in the case of
xxxxx located on properties unitized therewith, such unitized properties),
(c) upon approval of the assignment by Enserch Exploration, Inc. of a
twenty percent (20%) undivided interest in the Mineral Properties to
Mortgagor by the United States of America Department of Interior, Minerals
Management Service, the Mortgagor, to the extent of the interest specified
in Exhibit "A", shall have legal, valid and defensible title to each
property right or interest constituting the Mineral Properties and the
respective gross working interest and net revenue interests of the
Mortgagor in and to the Hydrocarbons as set forth on Exhibit "A" hereto,
and the Mortgagor's percentage interests in the Mineral Properties, cash
flow, net income and other distributions and in the cost of exploration,
development and production, all as set forth in Exhibit "A" hereto, are
true and correct in all material respects and accurately reflect the
respective interests to which the Mortgagor is legally entitled, (d) the
Mortgagor is not obligated, by virtue of any prepayment under any contract
providing for the sale by the Mortgagor of Hydrocarbons which contains a
"take or pay" clause or under any similar arrangement, to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor and (e) no agreement, contract or instrument set forth in
Exhibit "A" contains any provision which would prevent the practical
realization of the benefits of this Mortgage as to the Collateral. With
respect to all xxxxx existing on the date hereof, such shares of production
and expenses are not subject to change (pursuant to non-consent provisions
operating agreements described in Exhibit "A" or otherwise) except, and
only to the extent that, such changes are expressly described in Exhibit
"A".
Section 3.2 No Liens Except for Permitted Liens. Other than
financing statements or other similar or equivalent documents or
instruments with respect to the Security Interest and the other Permitted
Liens, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the
Collateral has been executed by the Mortgagor. No Collateral is in the
possession of any Person (other than the Mortgagor) asserting any claim
thereto or security interest therein, except that the Mortgagee or its
designee may have possession of Collateral as contemplated hereby.
Section 3.3 Rents; Royalties. All rents, royalties and other
payments (except for those which are being contested in good faith and by
appropriate proceedings and for which the Mortgagor has established
adequate reserves and so long as the payment of same is not a condition to
be met in order to maintain an oil, gas and/or other mineral lease or other
agreement in force) due and payable under the Mineral Properties which are
productive of oil and/or gas (or are included in units productive of oil
and /or gas) and all other oil, gas and/or mineral leases, contracts and
other agreements forming a part of the Mortgaged Property, have been and
are being properly and timely paid, and the Mortgagor is not in default
with respect to any obligations (and the Mortgagor is not aware of any
default by any third party with respect to such third party's obligations)
under such leases, contracts and other agreements, or otherwise attendant
to the ownership or operation of the Collateral, where such fault could
adversely affect the ownership or operation of the Collateral to which such
obligations relate. The Mortgagor is not currently accounting (and does
not anticipate accounting) for any royalties, or overriding royalties or
other payments out of production, on a basis (other than delivery in kind)
where such payments are based other than on proceeds received by Mortgagor
from sale; the Mortgagor has advised the Mortgagee in writing of
situations, if any, where a contingent liability to account in such manner
may exist.
Section 3.4 No Limitations on Payments for Production. Except as
otherwise specifically disclosed to the Mortgagee in writing with respect
to any particular part of the Mineral Properties, (i) neither Mortgagor,
nor its predecessors in title, have received prepayments (including, but no
limited to, payments for gas not taken pursuant to "take or pay"
arrangements) for any Hydrocarbons produced or to be produced from the
Mineral Properties after the date hereof; (ii) none of the Mineral
Properties is subject to any contractual or other arrangement whereby
payment for production is to be deferred for a substantial period after the
month in which such production is delivered (i.e., in the case of oil not
in excess of sixty (60) days, and in the case of gas not in excess of
ninety (90) days); (iii) none of the Mineral Properties is subject to a gas
sales contract which contains terms which are not customary in the
industry; (iv) none of the Mineral Properties is subject at the present
time to any regulatory refund obligation and, to the best of Mortgagor's
knowledge, no facts exist which might cause the same to be imposed; (v)
none of the Mineral Properties is subject to an arrangement or agreement
under which any purchaser or other Person is entitled to "make-up" or
otherwise receive deliveries of Hydrocarbons at any time after the date
hereof without paying at such time the full contract price therefor; and
(vi) no Person is entitled to receive any portion of the interest of the
Mortgagor in any Hydrocarbons or to receive cash or other payments from the
Mortgagor to "balance" any disproportionate allocation of Hydrocarbons
under any operating agreement, gas balancing and storage agreement, gas
processing or dehydration agreement, or other similar agreements.
Mortgagee acknowledges that Mortgagor may be obligated to escrow a portion
of the proceeds of the Hydrocarbons for certain plugging and abandonment
obligations.
Section 3.5 Consents and Preferential Rights. There are no
unwaived preferential purchase rights held by third parties affecting any
part of the Collateral or rights of third parties to prohibit the pledge or
mortgage of any part of the Collateral without the consent of such third
parties.
Section 3.6 No Inconsistent Agreements. The Mortgagor has not
performed any acts or signed any agreements which might prevent the
Mortgagee from enforcing any of the terms of this Mortgage or which would
limit the Mortgagee in any such enforcement.
Section 3.7 Status of Contracts. All of the Contracts and
obligations of the Mortgagor that relate to the Mineral Properties (i) are
in full force and effect and constitute legal, valid and binding
obligations of the Mortgagor, and (ii) neither the Mortgagor nor, to the
knowledge of the Mortgagor, any other party to the Contracts (a) is in
breach of or default, or with the lapse of time or the giving of notice, or
both, would be in breach or default, with respect to any of its obligations
thereunder or (b) has given or threatened to give notice of any default
under or inquiry into any possible default under, or action to alter,
terminate, rescind or procure a judicial reformation of any Contract.
Section 3.8 Accounts. The Accounts represent bona fide obligations
of the respective account debtors, which obligations are free and clear of
any set off, compensation, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, and arose in
the ordinary course of the Mortgagor's business.
Section 3.9 Status of Equipment. The Equipment, fixtures and other
tangible personal property forming a part of the Collateral are in good
repair and condition and are adequate for the normal operation of the
Collateral in accordance with prudent industry standards; all of such
Collateral is located on the Mineral Properties, except for that portion
thereof which is located elsewhere (including that usually located ion the
Mineral Properties but now temporarily located elsewhere) in the course of
the normal operation of the Mineral Properties.
Section 3.10. Name. The legal name of the Mortgagor as it appears in
its Articles of Incorporation is as it appears on page 1 of this Mortgage.
Section 3.11 Taxpayer Identification Number. The federal taxpayer
identification number of the Mortgagor is as follows: 00-0000000.
Section 3.12 Chief Executive Office. The chief executive office of
the Mortgagor is located at 000 Xxxxxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000.
Section 3.13 Filing Location. When UCC financing statement(s) have
been filed in the offices of a Louisiana Clerk of Court (or, the case of
Orleans Parish, the Recorder of Mortgages), the Security Interests shall
constitute perfected security interests in the Collateral to the extent
that a security interest therein may be perfected by filing in the Uniform
Commercial Code records of Louisiana, prior to all other Liens and rights
of others therein except for the Permitted Liens to the extent that such
priority is afforded by the UCC or otherwise.
ARTICLE 4.
Covenants
The Mortgagor covenants and agrees as follow:
Section 4.1 Taxes. The Mortgagor will pay and discharge promptly
when due all taxes, license fees, assessments and governmental charges or
levies imposed upon it or upon its income or upon the Collateral or any
part thereof (including production, severance, windfall profit, excise and
other taxes assessed against or measured by the production of, or the value
or proceeds of production of, Hydrocarbons; provided, however, the
Mortgagor shall not be required to pay any such tax, assessment, charge or
levy if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted and
if the contesting party shall have set up reserves therefor adequate under
generally accepted accounting principles (provided that such reserves may
be set up under generally accepted accounting principles).
Section 4.2 Insurance. The Mortgagor will procure and maintain for
the benefit of the Mortgagee and Mortgagor original paid-up insurance
policies against such liabilities, casualties, risks and contingencies, in
such amounts and form and substance, with such financially sound and
reputable companies, and with such expiration dates, as are reasonably
acceptable to the Mortgagee, and containing a noncontributory standard
mortgage clause or its equivalent in favor of the Mortgagee. The Mortgagor
will at all times maintain costs of regaining control of well insurance or
similar insurance to the extent customary in the industry in the pertinent
area of operations. Each policy shall contain an agreement by the insurer
not to cancel or amend the policy without giving the Mortgagee at least
thirty (30) days' prior written notice of its intention to do so. Upon
request of the Mortgagee, the Mortgagor will furnish or cause to be
furnished to the Mortgagee from time to time a summary of the insurance
coverage of the Mortgagor in form and substance reasonably satisfactory to
the Mortgagee and if requested will furnish the Mortgagee original
certificates of insurance and/or copies of the applicable policies and all
renewals thereof. In the event the Mortgagor should, for any reason
whatsoever, fail to keep the corporeal (tangible) Collateral or any part
thereof so insured, or to keep said policies so payable, or fail to deliver
to the Mortgagee the original or certified policies of insurance and the
renewals therefor upon demand, then Mortgagee, if it so elects, may itself
have such insurance effected in such amounts and with such companies as it
may deem proper and may pay the premiums therefor (as an Advance as defined
hereinbelow). The Mortgagor will notify the Mortgagee immediately in
writing of any material blowout, fire or other casualty to or accident
involving the Mortgaged Property, the Equipment or the Hydrocarbons,
whether or not such blowout, fire or other casualty to or accident
involving the Mortgaged Property, the Equipment or the Hydrocarbons,
whether or not such blowout, fire, casualty or accident is covered by
insurance. Further, the Mortgagor will notify promptly the Mortgagor's
insurance company and submit an appropriate claim and proof of claim to the
insurance company if such a casualty or accident occurs. In the event of
any loss on any of such policies, the Mortgagee may at its election, either
apply the net proceeds thereof toward the payment of the Indebtedness or
pay the net proceeds thereof to the Mortgagor, either wholly or in part,
and under such conditions as the Mortgagee may determine to enable the
Mortgagor to repair or restore the Collateral.
Section 4.3 Liens. The Mortgagor will not create, incur, assume or
permit to exist any Lien on any portion of the Collateral, except for (i)
the Lien and Security Interests hereof and the Permitted Liens, (ii) taxes,
assessments or governmental charges or levies if the same shall not at the
time be delinquent or thereafter can be paid without penalty, or are being
contested in compliance with the preceding Section 4.1 ("Taxes"), (iii)
defects or irregularities of title and Liens which are not such as to
interfere materially with the development, operation or value of the
Mortgaged Property or the title thereto, (iv) those imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens
arising in the ordinary course of business which would secure obligations
not more than ninety (90) days past due or which are being contested in
good faith by appropriate proceedings diligently conducted and for which
adequate reserves shall have been set aside on its books, (v) those arising
out of pledges or deposits under workmen's compensation laws, unemployment
insurance, old age pensions, or other social security or retirement
benefits, or similar legislation, (vi) utility easements, building
restrictions and such other encumbrances or charges against real property
as are of a nature generally existing with respect to properties of a
similar character as the Mortgaged Property and which do not in any
material way affect the merchantability of the same or interfere with the
use thereof and the business of the Mortgagor, and (vii) those consented to
in writing by the Mortgagee.
Section 4.4 Sale. Except for (i) sales of severed Hydrocarbons in
the ordinary course of the Mortgagor's business on the best terms which
would be available in bona fide and arms length transactions with third
parties not affiliated with the Mortgagor (which in the case of production
which is subject to price controls or is sold in accordance with customary
industry practice pursuant to long term purchase contracts, shall be
determined giving consideration to such matters), (ii) dispositions made in
connection with a permitted (as provided below) release, surrender or
abandonment of a lease, or (iii) in the absence of an Event of Default,
collection of Accounts and General Intangibles, the Mortgagor will not
sell, convey, lease or otherwise transfer or dispose of all or any portion
of the Collateral without the written consent of Mortgagee (which consent
shall not be unreasonably withheld).
Section 4.5 Compliance with Laws and Covenants. The Mortgagor will
observe and comply with all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, certificates,
franchises, permits, licenses, authorizations, directions and requirements
of all federal, state, county, municipal an other governments, departments,
commissions, boards, courts, authorities, officials and officers domestic
or foreign, applicable to the Mortgagor or to the Collateral, except those
being contested in good faith.
Section 4.6 Payment of Debts. The Mortgagor will cause all debts
and liabilities of any character (including, without limitation, all debts
and liabilities for labor, material and equipment used or furnished for use
on the Mortgaged Property) incurred in the operation, maintenance and
development of the Collateral to be paid within ninety (90) days after same
becomes due. The Mortgagor may, however, delay paying or discharging any
such debts and liabilities so long as the validity thereof is contested in
good faith and by appropriate proceedings diligently conducted and the
Mortgagor has established adequate reserves therefor in accordance with
generally accepted accounting principles and so long as the payment of same
is not a condition to be met in order to maintain an oil, gas and/or
mineral lease in force.
Section 4.7 Operation of the Mortgaged Property. Whether or not
the Mortgagor is the operator of the Mortgaged Property, the Mortgagor
will, at the Mortgagor's own expense, (a) do all things necessary to keep
unimpaired the Mortgagor's rights in the Mortgaged Property (subject to any
permitted abandonment provisions hereinbelow), (b) use its best efforts to
cause the lands described in Exhibit "A" to be maintained, developed,
protected against drainage, and continuously operated for the production of
hydrocarbons in a good and workmanlike manner as would a prudent operator,
and in accordance with generally accepted practices and applicable
operating agreements, and (c) cause to be paid, promptly as and when due
and payable, all rentals and royalties payable in respect of the Mortgaged
Property, and all expenses incurred in or arising from the operation or
development of the Mortgaged Property. The Mortgagor will observe and
comply with all terms and provisions, express or implied, of the Mineral
Properties, and all agreements and contracts of any type relating to the
Mortgaged Property, in order to keep the same in full force and effect,
including, without limitation, maintenance of productive capacity of each
well or unit comprising the Mortgaged Property, and will not, without the
prior written consent, which consent shall not be unreasonably withheld, of
the Mortgagee, surrender, abandon or release (or otherwise reduce its
rights under) any such lease, in whole or in part, so long as any well
situated thereon (whether or not such well is located in the Mineral
Properties), or located on any unit containing all or any part of such
leases, is capable (or is subject to being made capable through drilling,
reworking or other operations which it would be economically feasible to
conduct) of producing hydrocarbons in commercial quantities (as determined
without considering the effect of this Mortgage); provided, however that
the Mortgagor may, to the extent expressly required by the terms of any
such lease under a "Xxxx clause" or similar provision, or to the extent
otherwise required by law, confirm to the lessor thereof that the lease has
by its terms terminated as to any specified portion thereof on which no
such well exists. Without the express prior written consent of the
Mortgagee, which consent shall not be unreasonably withheld, Mortgagor will
not abandon or consent to the abandonment of any well producing from the
Mortgaged Property (or properties unitized therewith) so long as such well
is capable (or is subject to being made capable through drilling, reworking
or other operations which it would be commercially feasible to conduct) of
producing hydrocarbons in commercial quantities (as determined without
considering the effect of this Mortgage but considering the cost of such
drilling, reworking and other operations). The Mortgagor will not without
the express prior written consent of the Mortgagee, which consent shall not
be unreasonably withheld, elect not to participate in a proposed operation
on the Mortgaged Property where the effects of such election would be the
forfeiture either temporarily (i.e., until a certain sum of money is
received out of the forfeited interest) or permanently of any interest in
the Mortgaged Property.
Section 4.8 Pooling and Unitization. The Mortgagor has the right,
and is hereby authorized, to pool or unitize all or any part of the tract
of land described in Exhibit "A", insofar as relates to the Mortgaged
Property, with adjacent lands, leaseholds and other interests, when, in the
reasonable judgment of the Mortgagor, it is necessary or advisable to do so
in order to form a drilling unit to facilitate the orderly development of
that part of the Mortgaged Property affected thereby, or to comply with the
requirements of any law or governmental order or regulation relating to the
spacing of xxxxx or proration of the production therefrom; provided,
however, that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the
unit in proportion to the respective surface areas thereof; and provided
further that the Mortgagor shall not be entitled to form any such unit
without the written consent of the Mortgagee (which consent shall not be
unreasonably withheld) if the effect of such formation would be to decrease
the amount of Hydrocarbons which would be subject to this Mortgage. Any
unit so formed may relate to one or more zones or horizons, and a unit
formed for a particular zone or horizon need not conform in area to any
other unit relating to a different zone or horizon, and a unit formed for
the production of oil need not conform in area with any unit formed for the
production of gas. Immediately after formation of any such unit, the
Mortgagor shall furnish to the Mortgagee a true copy of the pooling
agreement, declaration of pooling or other instrument creating such unit,
in such number of counterparts as the Mortgagee may reasonably request.
The interest in any such unit attributable to the Mortgaged Property (or
any part thereof) included therein shall become a part of the Mortgaged
Property and shall be subject to the Lien hereof in the same manner and
with the same effect as though such unit and the interest of the Mortgagor
therein were specifically described in Exhibit "A". The Mortgagor may
enter into pooling or unitization agreements not hereinabove authorized
only with the prior written consent of the Mortgagee.
Section 4.9 Contracts. The Mortgagor will not enter into any
operating agreement, other than the Operating Agreement or other Contract
which materially adversely affects the Collateral or the Mineral
Properties, or which is not in the ordinary course of business. The
Mortgagor will promptly take all action necessary to enforce or secure the
observance or performance of any term, covenant, agreement or condition to
be observed or performed by third parties under any Contract, or any part
thereof, or to exercise any of is rights, remedies, powers and privileges
under any Contract, all in accordance with the respective terms thereof.
The Mortgagor will not do or permit anything to be done to the Collateral
that may violate the terms of any insurance covering the Collateral or any
part thereof.
Section 4.10 Condition of Equipment. The Mortgagor will maintain,
preserve and keep the Equipment at all times in thorough repair and good
working order and condition, and from time to time make all needful
repairs, renewals and additions so that its value and the Security
Interests shall at no time become impaired.
Section 4.11 Accounts Collection. The Mortgagor shall use its best
efforts to cause to be collected from its account debtors, as and when due,
any and all amounts owing under or on account of each Account (including,
without limitation, Accounts which are delinquent, such Accounts to be
collected in accordance with lawful collection procedures) and shall apply
forthwith upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. Subject to the rights of the
Mortgagee hereunder if an Event of Default shall have occurred and be
continuing, the Mortgagor may allow in the ordinary course of business as
adjustments to amounts owing under its Accounts an extension of renewal of
the time or times of payment, or settlement for less than the total unpaid
balance, which the Mortgagor finds appropriate in accordance with sound
business judgment in accordance with the Mortgagor's ordinary course of
business consistent with its historical collection practices. The costs
and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by the Mortgagor or the Mortgagee, shall be
borne by the Mortgagor.
Section 4.12 Governmental Accounts. If the Collateral is or becomes
subject to the Federal Assignment of Claims Act, the Mortgagor will
immediately notify the Mortgagee thereof in writing and execute all
instruments and take all steps required by the Mortgagee to comply with
that act.
Section 4.13 Accounts Aging. The Mortgagor will from time to time
at the request of the Mortgagee furnish the Mortgagee with a schedule of
the Accounts which shall include the names and addresses of each account
debtor. The Mortgagee shall also have the right to make test verification
of the Accounts or any portion thereof. The Mortgagor at its expense shall
furnish to the Mortgagee from time to time upon request by the Mortgagee a
listing and aging of all Accounts.
Section 4.14 Right of Inspection an Information. The Mortgagor will
permit any officer, employee or agent of the Mortgagee to visit and inspect
the Collateral, examine the books of record and accounts of the Mortgagor,
take copies and extracts therefrom, and discuss the affairs, finances and
accounts of the Mortgagor with the Mortgagor's officers, accountants and
auditors, and the Mortgagor will furnish information concerning the
Collateral, including schedules of all internal and third party information
identifying the Collateral (such as, for example, lease and well names and
numbers assigned by the Mortgagor or the operator of any Mineral
Properties, division orders and payment names and numbers assigned by
purchasers of the Hydrocarbons, and internal identification names and
numbers used by the Mortgagor in accounting for revenues, costs and joint
interest transactions attributable to the Mineral Properties), all on
reasonable notice, at such reasonable times without hindrance or delay and
as often as the Mortgages may reasonably desire. The Mortgagor will
furnish to the Mortgagee promptly upon request and in the form and content
specified by the Mortgagee lists of purchasers of Hydrocarbons and other
account debtors, Schedules of Equipment and other data concerning the
Collateral as the Mortgagee may from time to time specify.
Section 4.15 Financial Statements and Reports. The Mortgagor will
furnish to the Mortgagee promptly upon the request of the Mortgagee, all
regular financial statements, reports, budgets and such other information
regarding the business and affairs and financial condition of the Mortgagor
as the Mortgagee may reasonably request. All financial statements shall be
in such detail as the mortgagee may reasonably request and shall conform to
generally accepted accounting principles applied on a consistent basis,
except only for such changes in accounting principles or practice with
which the independent certified public accountants concur.
Section 4.16 Further Assurances. The Mortgagor will keep the Lien
of this Mortgage valid and unimpaired except for the Permitted Liens. The
Mortgagor will promptly (and in no event later than thirty (30) days after
written notice from the Mortgagee is received) (i) correct any defect,
error or omission which may be discovered in the contents of this Mortgage
or any financing statement relating thereto or in the execution or
acknowledgment of this Mortgage or any financing statement; (ii) execute,
acknowledge, deliver and record such further instruments (including,
without limitation, further security agreements, financing statements,
continuation statements and assignments of accounts, contract rights,
general intangibles and proceeds) and do such further acts as may be
necessary, desirable or proper to carry out more effectively the purposes
of this Mortgage and to more fully identify and subject to the Liens hereof
any property intended to be covered hereby, including without limitation
any renewals, additions, substitution, replacements or accessions to the
Collateral; and (iii) execute, acknowledge, deliver and record any document
or instrument (including specifically any financing statement) and obtain
any consents necessary, desirable or proper to perfect, protect or preserve
the Lien and Security Interests hereunder against the rights or interests
of third persons.
Section 4.17 Notice of Changes. The Mortgagor will not change its
name, identify, federal tax identification number or corporate structure in
any manner unless it shall have given the Mortgagee at last thirty (30)
days' prior written notice thereof.
Section 4.18 Filing. The Mortgagor agrees that a carbon,
photographic, facsimile, photostatic or other reproduction of this Mortgage
or of a financing statement is sufficient as a financing statement. This
Mortgage may be effective as a financing statement filed as a fixture
filing with respect to all fixtures included within the Collateral, and
shall also be effective as the financing statement covering minerals or the
like (including oil and gas) and accounts subject to subsection (5) of
Section 9-103 of the UCC, as amended, and similar provisions (if any) of
the UCC as enacted in any other state where filing may be appropriate. The
mailing address of the Mortgagor and the address of the Mortgagee from
which information concerning the Security Interests evidenced hereunder may
be obtained are the respective addresses of the Mortgagor and the Mortgagee
set forth in Article 6. The Mortgagee shall pay all costs of or incidental
to the recording or filing of this Mortgage and of any financing,
amendment, continuation, termination or other statements concerning the
Collateral.
Section 4.19 Collateral Indemnity. If the validity or priority of
this Mortgage (except with respect to the Permitted Liens) or any rights,
security interests or other interests created or evidenced hereby shall be
attacked, endangered or questioned or if any legal proceedings are
instituted with respect thereto, the Mortgagor will give prompt written
notice thereof to the Mortgagee and at the Mortgagor's own cost and expense
will diligently endeavor to cure any defect that may be developed or
claimed, and will take all necessary and proper steps for the defense of
such legal proceedings, and the Mortgagee (whether or not named as a party
to legal proceedings with respect thereto) is hereby authorized an
empowered to take such additional steps as in its judgment and discretion
may be necessary or proper for the defense of any such legal proceedings or
the protection of the validity or priority of this Mortgage and the rights,
security interests and other interests created or evidenced hereby, and all
expenses so incurred of any kind and character shall be considered Payments
as provided in Section 4.23 ("Payments by Mortgagee") hereof, and shall be
a part of the Indebtedness.
Section 4.20 Environmental Indemnity. To the extent of its
interests in the Mineral Properties, the Mortgagor will defend, indemnify
and hold Mortgagee and its directors, officers, agents and employees
harmless from and against all claims, demands, causes of action,
liabilities, losses, costs and expenses (including, without limitation,
costs of suit, reasonable attorneys' fees and fees of expert witnesses)
arising from or in connection with (i) the presence in, on or under or the
removal from the Collateral of any hazardous substances or solid wastes (as
hereafter defined), or any releases or discharges of any hazardous
substances or solid wastes on, under or from such property, (ii) any
activity carried on or undertaken on or off the Collateral, whether prior
to or during the term of this Mortgage, and whether by the Mortgagor or any
predecessor in title or any officers, employees, agents, contractors or
subcontractors of Mortgagor or any predecessor in title, or any third
persons at any time operating the Collateral or occupying or present on the
Collateral, in connection with the handling, use, generation, manufacture,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any hazardous substances or solid wastes at any time located or
present on or under the Collateral or involving the use or operation of the
Collateral, or (iii) any breach of any representation, warranty or covenant
under the terms of this Mortgage. The foregoing indemnity shall further
apply to any residual contamination on or under the Collateral, or
affecting any natural resources, and to any contamination of the Collateral
or natural resources arising in connection with the generation, use,
handling, storage, transport or disposal of any such hazardous substances
or solid wastes, and irrespective of whether any of such activities were or
will be undertaken in accordance with applicable laws, regulations, codes
and ordinances. The terms "hazardous substance" and "release" as used in
this Mortgage shall have the meanings specified in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 (as amended,
"CERCLA"), and the terms "solid waste" and "disposal" (or "disposed") shall
have the meanings specified in the Resource Conservation and Recovery Act
of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, "RCRA"); provided, in the event that the
laws of the State of Louisiana 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.
Without prejudice to the survival of any other agreements of the Mortgagor
hereunder, the provisions of this Section shall survive the final payment
of all Indebtedness and the termination of this Mortgage and shall continue
thereafter in full force and effect.
Section 4.21 Release of Collateral. The Mortgagee may at any time
and without notice to the Mortgagor, release any part of the Collateral
from the effect of this Mortgage, or grant an extension or deferment of
time for the discharge of any obligation hereunder (or other Indebtedness),
without affecting the liability of the Mortgagor hereunder.
Section 4.22 Taxation of Mortgage. In the event that any
governmental authority shall impose any taxation of mortgages or the
indebtedness they secure, the Mortgagor agrees to pay such governmental
taxes, assessments or charges either to the governmental authority or to
the Mortgagee, as provided by law.
Section 4.23 Payments by Mortgagee. The Mortgagor authorizes the
Mortgagee in the Mortgagee's discretion to advance any sums necessary for
the purpose of paying (i) insurance premiums, (ii) taxes, forced
contributions, service charges, local assessments and governmental charges,
(iii) any Liens or encumbrances affecting the Collateral (whether superior
or subordinate to the Lien of this Mortgage) other than Permitted Liens,
(iv) necessary repairs and maintenance expenses or (v) any other amounts
which are covered by Section 4.16 ("Further Assurances") or which the
Mortgagee deems necessary and appropriate to preserve the validity and
ranking of this Mortgage, to cure any Defaults or to prevent the occurrence
of any Default, or otherwise authorized by this Mortgage (collectively, the
"Payments") of whatever kind; provided, however, that nothing herein
contained shall be construed as making such Payments obligatory upon
Mortgagee, or as making Mortgagee liable for any loss, damage, or injury
resulting from the nonpayment thereof. The Mortgagor covenants and agrees
that within five (5) days after demand therefor by the Mortgagee, the
Mortgagor will repay the Payments to the Mortgagee, together with interest
thereon at the rate of twelve (12%) percent per annum from the date
incurred. All such Payments (and interest) shall be included in the
Indebtedness secured hereby, subject to the maximum amount of the
Indebtedness set forth above in Section 2.5 ("Maximum Amount").
ARTICLE 5.
Default and Remedies
Section 5.1 Events of Default. Any of the following events shall
be considered an "Event of Default" as that term is used herein:
(a) Payment and Performance of the Indebtedness. The Mortgagor fails
to timely pay or perform any of the Indebtedness.
(b) Representations and Warranties. Any representation or warranty
made by the Mortgagor proves to have been incorrect in any material respect
as of the date thereof; or any representation, statement (including
financial statements), certificate or data furnished or made by the
Mortgagor (or any officer, accountant or attorney of the Mortgagor) under
this Mortgage, proves to have been untrue in any material adverse respect,
as of the date as of which the facts therein set forth were stated or
certified.
(c) Insurance. The Mortgagor fails to maintain at any time the
insurance required by this Mortgage.
(d) Alienation or Encumbrance of Collateral. The Mortgagor sells,
conveys or otherwise transfers or disposes of all or any portion of the
Collateral or grants any mortgage, security interest or other Lien (other
than Permitted Liens) affecting all or any portion of the Collateral, or
permits any judgment, Lien (other than Permitted Liens) or other
encumbrance against all or any portion of the Collateral.
(e) Covenants. The Mortgagor defaults in the observance or
performance of any of the covenants or agreements contained in this
Mortgage to be kept or performed by the Mortgagor (other than a default
under Subsections (a) through (d) hereof) and such default continues
unremedied for a period of 30 days after the notice thereof being given by
the Mortgagee to the Mortgagor.
(f) Involuntary Bankruptcy or Receivership Proceedings. A receiver,
conservator, liquidator or trustee of the Mortgagor, or of any of its
property (including the Collateral), is appointed by order or decree of any
court or agency or supervisory authority having jurisdiction; or an order
for relief is entered against the Mortgagor under the Federal Bankruptcy
Code; or the Mortgagor is adjudicated bankrupt or insolvent; or any
material portion of the property (including the Collateral) of the
Mortgagor is sequestered by court order and such order remains in effect
for more than 60 days; or a petition is filed against the Mortgagor under
any state, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and such petition is not dismissed within 60
days.
(g) Voluntary Petitions. The Mortgagor files a case under the
Federal Bankruptcy Code or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any case or petition
against it under any such law.
(h) Assignments for Benefit of Creditors. The Mortgagor makes an
assignment for the benefit of its creditors', or admits in writing its
inability to pay its debts generally a they become due, or consents to the
appointment of a receiver, trustee or liquidator of the Mortgagor or of all
or any part of its property (including the Collateral).
(i) Undischarged Judgments. Judgment for the payment of money in
excess of $1,000,000 (which is not covered by insurance) is rendered by any
court or other governmental body against the Mortgagor, and the Mortgagor
does not discharge the same or provide for its discharge in accordance with
its terms, or procure a stay of execution thereof within 30 days from the
date of entry thereof, and within said 30-day period or such longer period
during which execution of such judgement shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal
while providing such reserves therefor as may be required under generally
accepted accounting principles.
(j) Attachment. A writ or warrant of executory process, fieri
facias, attachment or any similar process shall be issued by any court
against the Collateral and such writ or warrant is not released or bonded
within 10 days after its entry.
(k) Condemnation. The Collateral, or any portion thereof, is
condemned or expropriated under power of eminent domain by any legally
constituted governmental authority.
Section 5.2 Remedies. (a) Upon the happening of any Event of
Default specified in the preceding Section (other than Subsections (f) or
(g) thereof), the Mortgagee may by written notice to the Mortgagor declare
the entire principal amount of all Indebtedness then outstanding including
interest accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice
of default of any kind, all of which are hereby expressly waived by the
Mortgagor.
(b) Upon the happening of any Event of Default specified in
Subsections (f) or (g) of the preceding Section, the entire principal
amount of all obligations then outstanding, including interest accrued
thereon shall, without notice or action by the Mortgagee, be immediately
due and payable without presentment, demand, protest, notice of protest or
dishonor or other notice of default of any kind, all of which are hereby
expressly waived by the Mortgagor.
(c) Upon the occurrence of any Event of Default, the Mortgagee may
take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against the Mortgagor and in and to the
Collateral, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as the Mortgagee may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of the
Mortgagee: (i) institute proceedings for the complete foreclosure of this
mortgage in which case the Collateral or any part thereof may be sold for
cash or upon credit in one or more portions; or (ii) to the extent
permitted and pursuant to the procedures provided by applicable law,
institute proceedings for the partial foreclosure of this Mortgage for the
portion of the Indebtedness then due and payable, subject to the continuing
Lien of this Mortgage for the balance of the Indebtedness not then due; or
(iii) institute an action, suit or proceeding in equity for the specific
performance of the Indebtedness or any covenant, condition or agreement
contained in this Mortgage; or (iv) apply for the appointment of a trustee,
receiver, liquidator or conservator of the Collateral, without regard for
the adequacy of the security for the Indebtedness and without regard for
the solvency of the Mortgagor or of any person, firm or other entity liable
for the payment of the Indebtedness; (v) exercise its rights under Section
2.3 ("Assignment") hereof; or (vi) pursue such other remedies as the
Mortgagee may have under applicable law.
(d) The proceeds or avails of any sale made under or by virtue of
this Section, together with any other sums which then may be held by the
Mortgagee under this Mortgage, whether under the provisions of this Section
or otherwise, shall be applied in such manner as the Mortgagee, in its sole
discretion, shall determine.
(e) Upon any sale made under or by virtue of this Section, the
Mortgagee may bid for and acquire the Collateral or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Indebtedness the net sales price after deducting
therefrom the expenses of the sale and the costs of the action and any
other sums which the Mortgagee is authorized to deduct under this Mortgage.
Section 5.3 General authority and Power of Attorney. The Mortgagor
hereby irrevocably appoints the Mortgagee its agent and attorney in fact,
with full power of substitution, in the name of the Mortgagor or the
Mortgagee, for the sole use and benefit of the Mortgagee, but at the
Mortgagor's expense, to exercise, at any time and from time to time while
an Event of Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(i) to endorse the name of the Mortgagor upon any check, draft or
other instrument payable to the Mortgagor evidencing payment upon any
Accounts or General Intangible.
(ii) to demand, xxx for, collect, receive and give acquittance for any
and all Accounts and other monies due or to become due for or as Collateral
or by virtue thereof,
(iii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect to any of the Collateral, and
(iv) to extend the time of payment of any or all of the Collateral and
to make any allowance and other adjustments with reference thereto.
The aforesaid mandate and power of attorney, being coupled with an
interest, is irrevocable so long as any of the Indebtedness remains
outstanding.
Section 5.4 Accounts and Contracts. While an Event of Default has
occurred and is continuing (i) the Mortgagor will make no material change
to the terms of any Account or Contract without the prior written
permission of the Mortgagee, and (ii) the Mortgagor upon request of the
Mortgagee will promptly notify (and the Mortgagor hereby authorizes the
Mortgagee so to notify) each account debtor in respect of any Account or
General Intangible that such Collateral has been assigned to the Mortgagee
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Mortgagee or its designee.
Section 5.5 Sale. Upon the occurrence of an Event of Default, the
Mortgagee may exercise all rights of a secured party under the UCC and
other applicable law (including the Uniform Commercial Code as in effect in
another applicable jurisdiction) and, in addition, the Mortgagee may,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, sell the Collateral or any
part thereof at public sale, for cash, upon credit or for future delivery,
and at such price or prices as the Mortgagee may deem satisfactory. The
Mortgagee may be the purchaser of any or all of the Collateral so sold at
any public sale. The Mortgagor will execute and deliver such documents and
take such other action as the Mortgagee deems necessary or advisable in
order that any such sale may be made in compliance with law. Upon any such
sale the Mortgagee shall have the right to deliver, assign and transfer to
the purchaser thereof the Collateral so sold. Each purchaser at any such
sale shall hold the Collateral so sold to it absolutely and free from any
claim or right of whatsoever kind and the Mortgagor, to the extent
permitted by law, hereby specifically waives all rights of appraisal which
it has or may have under any law now existing or hereafter adopted. The
Mortgagor agrees that ten (10) days' prior written notice of the time and
place of any sale or other intended disposition of any of the Collateral
constitutes "reasonable notification" within the meaning of Section 9-
504(3) of the UCC. The notice (if any) of any such sale shall state the
time and place fixed for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or
places as the Mortgagee may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Mortgagee may determine. The Mortgagee shall not be
obligated to make any such sale pursuant to any such notice. The Mortgagee
may, without notice or publication, adjourn any public sale or cause the
same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part
of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by the Mortgagee until the selling price is paid by the
purchaser thereof, but the Mortgagee shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of such failure, such Collateral may again be sold upon
like notice.
Section 5.6 Set-Off. Upon the occurrence of any Event of Default,
the Mortgagee shall have the right to set-off any funds of the Mortgagor in
the possession of the Mortgagee against any amounts then due by the
Mortgagor to the Mortgagee pursuant to the Mortgage.
Section 5.7 Confession of Judgment. For purposes of foreclosure
under Louisiana executory process procedures, the Mortgagor hereby
acknowledges the Indebtedness and confesses judgment in favor of Mortgagee
for the full amount of the indebtedness.
Section 5.8 Expenses. The Mortgagor will pay all reasonable
expenses, including but not limited to reasonable attorneys' fees, incurred
in connection with the full protection and preservation of, and
foreclosure, collection or other realization of or on, the Collateral or
this Mortgage, or in connection with the enforcement of any of the
Mortgagor's obligations or the Mortgagee's rights and remedies set forth
herein, whether or not suit or any foreclosure proceedings are filed. All
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, preparing for sale, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by
any federal, state or local authority on any of the Collateral, all
expenses in respect of periodic appraisals and inspections of the
Collateral to the extent the same may be requested from time to time, and
all expenses in respect of the sale or other disposition thereof shall be
borne and paid by the Mortgagor. All such expenses shall be treated as
Payments as provided in Section 4.23 ("Payments by Mortgagee") hereof and
thus included in the Indebtedness secured hereby.
Section 5.9 Keeper. In the event the Collateral, or any part
thereof, is seized as an incident to an action for the recognition or
enforcement of this Mortgage by executory process, ordinary process,
sequestration, writ of fieri facias or otherwise, the Mortgagor and the
Mortgagee agree that the court issuing any such order shall, if petitioned
for by Mortgagee, direct the applicable sheriff to appoint as a keeper of
the Collateral, the Mortgagee or any agent designated by Mortgagee or any
person named by the Mortgagee at the time such seizure is effected This
designation is pursuant to Louisiana Revised Statutes 9:5131 through 5135
and 9:5136 through 5140.3, as the same may be amended, and Mortgagee shall
be entitled to all the rights and benefits afforded thereunder. It is
hereby agreed that the keeper shall be entitled to receive as compensation,
in excess of its reasonable costs and expenses incurred in the
administration or preservation of the Collateral, an amount equal to 3% of
the gross revenues of the Collateral, which shall be included as
Indebtedness secured by this Mortgage. The designation of keeper made
herein shall not be deemed to require Mortgagee to provoke the appointment
of such a keeper.
Section 5.10 Waivers. The Mortgagor waives in favor of the
Mortgagee any and all homestead exemptions and other exemptions of seizure
or otherwise to which Mortgagor is or may be entitled under the
constitution and statutes of the State of Louisiana insofar as the
Collateral is concerned. The Mortgagor further waives: (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles
2332, 2336, 2723 and 2724, and all other laws conferring the same; (b) the
demand and three days' delay accorded by Louisiana Code of Civil Procedure
Articles 2639 and 2721; (c) the notice of seizure required by Louisiana
Code of Civil Procedure Articles 2293 and 2721; (d) the three days' delay
provided by Louisiana Code of Civil Procedure Articles 2331 and 2722; and
(e) the benefit of the other provisions of Louisiana Code of Civil
Procedure Articles 2331, 2722 and 2723, not specifically mentioned above.
Section 5.11 Authentic Evidence. Any and all declarations of facts
made by authentic act before a notary public in the presence of two
witnesses by a person declaring that such facts lie within his knowledge,
shall constitute authentic evidence of such facts for the purpose of
executory process. The Mortgagor specifically agrees that such an
affidavit by a representative of the Mortgagee as to the existence, amount,
terms and maturity of the Indebtedness and of a default thereunder shall
constitute authentic evidence of such facts for the purpose of executory
process.
Section 5.12 Assemble Collateral. For the purpose of enforcing any
and all rights and remedies under this Mortgage the Mortgagee may (i)
require the Mortgagor to, and the Mortgagor agrees that it will, at its
expense and upon the request of the Mortgagee, forthwith assemble all or
any part of the Collateral as directed by the Mortgagee and make it
available at a place designated by the Mortgagee which is, in its opinion,
reasonably convenient to the Mortgagee and the Mortgagor, whether at the
premises of the Mortgagor or otherwise, and Mortgagee shall be entitled to
specific performance of this obligation, (ii) to the extent permitted by
applicable law of this or any other state, enter, with or without process
of law and without breach of the peace, any premise where any of the
Collateral is or may be located, and without charge or liability to it
seize and remove such Collateral from such premises, (iii) have access to
and use the Mortgagor's books and records relating to the Collateral, and
(iv) prior to the disposition of the Collateral, store or transfer it
without charge in or by means of any storage or transportation facility
owned or leased by the Mortgagor, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the
Mortgagee deems appropriate and, in connection with such preparation and
disposition, use without charge any trademark, trade name, copyright,
patent or technical process used by the Mortgagor.
Section 5.13 Limitation on Duty of Mortgagee. Beyond the exercise
of reasonable care in the custody thereof, the Mortgagee shall have no duty
a to any Collateral in its possession or control or in the possession or
control of any agent or bailee or any income thereon. The Mortgagee shall
be deemed to have exercised reasonable care in the custody of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall
not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by the Mortgagee in good faith.
Section 5.14 Appointment of Agent. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Mortgagee may
appoint a bank or trust company or one or more other Persons with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment.
ARTICLE 6.
Miscellaneous
Section 6.1 Notices. Any notice or demand which, by provision of
this Mortgage, is required or permitted to be given or served to the
Mortgagor or the Mortgagee shall be deemed to have been sufficiently given
and served for all purposes (if mailed) three calendar days after being
deposited, postage prepaid, in the United States Mail, or (if delivered by
express courier) one business day after being delivered to such courier, or
(if delivered in person) the same day as delivery, in each case if made
addressed to (i) the address of such party shown on page 1 hereof or (ii)
Mortgagor or Mortgagee at such different address(es) as shall have been
designated by written notice actually received by Mortgagor or Mortgagee,
as applicable at least ten (10) days in advance of the date upon which such
change of address shall be effective under this Section 6.1.
Section 6.2 Amendment. Neither this Mortgage nor any provisions
hereof may be changed, waived, discharged or terminated orally or in any
manner other than by an authentic instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
Section 6.3 Invalidity. In the event that any one or more of the
provisions contained in this Mortgage shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Mortgage.
Section 6.4 Waivers. No course of dealing on the part of the
Mortgagee, its officers, employees, consultants or agents, nor any failure
or delay by the Mortgagee with respect to exercising any of its rights,
powers or privileges under this Mortgage shall operate a waiver thereof.
Section 6.5 Cumulative Rights. The rights and remedies of the
Mortgagee under this Mortgage and the Collateral Documents shall be
cumulative, and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy.
Section 6.6 Titles of Articles. Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions of
this Mortgage or the exhibits hereto are only for the convenience of the
parties and shall not be construed to have any effect or meaning with
respect to the other content of such articles, sections, subsections or
other divisions, such other content being controlling as to the agreement
between the parties hereto.
Section 6.7 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the
plural and vice versa. The definitions of words in the singular herein
shall apply to such words when used in the plural where the context so
permits and vice versa.
Section 6.8 Termination. Upon full and final payment and
performance of the Indebtedness and the payment or redemption of the Note,
or upon Mortgagee's acquisition of the Mineral Properties (other than by
reason of an Event of Default hereunder), this Mortgage shall terminate,
and the Mortgagee shall pay to the Mortgagor all amounts then remaining in
the possession of the Mortgagee from collections on or proceeds of the
Collateral. Upon request of the Mortgagor, the Mortgagee shall execute and
deliver to the Mortgagor at the Mortgagor's expense such termination
statements as the Mortgagor may reasonably request to evidence such
termination.
Section 6.9 Successors and Assigns. (a) All covenants and
agreements contained by or on behalf of the Mortgagor in this Mortgagee
shall bind its successors and assigns and shall inure to the benefit of the
Mortgagee and its successors and assigns.
(b) This Mortgage is for the benefit of the Mortgagee and for such
other Person or Persons as may from time to time become or be the holder of
the Note and the other Indebtedness, and this Mortgage shall be
transferrable and negotiable, with the same force and effect and to the
same extent as the Note may be transferrable, it being understood that,
upon the transfer or assignment by the Mortgagee of the Note (to the extent
transfer is permitted thereby), the legal holder of such Note shall have
all of the rights granted to the Mortgagee under this Mortgage.
(c) The Mortgagor hereby recognizes and agrees that the Mortgagee
may, from time to time, one or more times, transfer all or any portion of
the Indebtedness to one or more third parties. Such transfers may
include, but not be limited to, sales of participation interests in such
Indebtedness in favor of one or more third party lenders. Upon any
transfer of all or any portion of the Indebtedness, the Mortgagee may
transfer and deliver any or all of the Collateral to the transferree of the
Indebtedness in favor of such a transferee then existing and thereafter
arising, and after any such transfer has taken place, the Mortgagee shall
be fully discharged from any and all future liability and responsibility to
the Mortgagor with respect to such Collateral, and the transferee
thereafter shall be vested with all the powers, rights and duties with
respect to such Collateral.
Section 6.10 Governing Law. This Mortgage is made under and shall
be construed in accordance with and governed by the laws of the United
States of America and the State of Louisiana.
Section 6.11 Certificates. The production of mortgage, conveyance,
tax research or other certificates is waived by consent, and the Mortgagor
and the Mortgagee agree to hold me, Notary, harmless for failure to procure
and attach same.
Section 6.12 No Paraph. The notes and other written obligations
that comprise a part of the Indebtedness have not been presented to me,
Notary, for purposes of being paraphed herewith.
THUS DONE AND PASSED as of the day and in the month and year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto sign their names with the Mortgagor and Mortgagee and me, Notary,
after due reading of the whole.
WITNESSES: READING & XXXXX DEVELOPMENT CO.
______________________________ By:______________________________
Name:_________________________ Name:______________________
(Please Print) Title:_______________________
______________________________
Name:_________________________
(Please Print)
______________________________
Notary Public
My Commission Expires:_______________
______________________________, Notary Public
My Commission Expires:________________
THUS DONE AND PASSED as of the day and in the month and year
hereinabove first written, in the presence of the undersigned witnesses who
hereunto sign their names with the Mortgagee and me, Notary, after due
reading of the whole.
WITNESSES: BRITISH-BORNEO PETROLEUM, INC.
______________________________ By:______________________________
Name:_________________________ Name:______________________
(Please Print) Title:_______________________
______________________________
Name:_________________________
(Please Print)
__________________________________________
______________________________, Notary Public
My Commission Expires:________________
EXHIBIT "A"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & XXXXX DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
The Mortgagor and the Mortgagee hereby agree and affirm that the
following is an explanation of the terminology, format and information
contained in this Exhibit "A" and that this instrument shall be construed a
a whole with reference to the entirety of its provisions (including all
Exhibits).
1. This instrument covers the Mortgagor's entire interest in each of
the mineral servitudes, mineral leases, mineral royalties and
other mineral rights described in Exhibit "A", as now owned or as
hereafter acquired. The inclusion of the Mortgagor's "Net
Revenue Interest," "Working Interest" and undivided leasehold
interests, by the listing of percentage, decimal or fractional
numbers or otherwise, as well as the inclusion of depth
limitations, spacing unit designations and agreements, well names
and well arabic numbers, are in some instances for purposes of
certain representations of the Mortgagor contained in this
instrument and are generally for descriptive purposes. The
inclusion (or the inaccuracy thereof) of this information is not
in any way a limitation or restriction on the interest of the
Mortgagor being subjected to the lien and encumbrance of this
instrument. In the event that the Mortgagor acquires additional
undivided interests in some or all of such mineral or leasehold
rights, this instrument shall automatically encumber such
additions or increases to the Mortgagor's interest in such
mineral or leasehold rights without need of further act or
document.
2. References in Exhibit "A" to instruments on file in the public
records are made for all purposes. Unless provided otherwise,
all recording references in Exhibit "A" are to the official real
property records of the parish or parishes in which the mortgaged
property is located and in which records of such documents are or
in the past have been customarily recorded, whether Conveyance
Records, Oil and Gas Records, Mineral Lease Records, Oil and Gas
Lease Records or other records.
3. A statement herein that a certain interest described herein is
subject to the terms of certain described or referred to
agreements, instruments or other matters shall not operate to
subject such interest to any such agreement, instrument or other
matter except to the extent that such agreement, instrument or
matter is otherwise valid and presently subsisting nor shall such
statement be deemed to constitute a recognition by the parties
hereto that any such agreement, instrument or other matter is
valid and presently subsisting or binding against the Mortgagee.
PROPERTY DESCRIPTION
1. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of June 1, 1984, by and between the United States of
America, as Lessor, and Placid Oil Company, et al., as Lessees,
bearing Serial No. OCS-G 7049 covering all of Block 254, Green
Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
2. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of July 1, 1985, by and between the United States of
America, as Lessor, and Placid Oil Company, et al., as Lessees,
bearing Serial No. OCS-G 8010 covering all of Block 298, Green
Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of June 1, 1987, by and between the United Stated of
America, as Lessor, and Xxxx Petroleum Corporation, et al., as
Lessees, bearing Serial No. OCS-G 8876 covering all of Block 297,
Green Canyon, OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.66666%
4. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and
effective as of July 1, 1985, by and between the United Stated of
America, as Lessor, and Amerada Xxxx, et al., as Lessees, bearing
Serial No. OCS-G 8005 covering all of Block 253, Green Canyon,
OCS Official Protraction Diagram, NA 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
EXHIBIT "B"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & XXXXX DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
DEVELOPMENT PLAN
EXHIBIT "C"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & XXXXX DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
1. Letter of Intent dated August 19, 1997, executed by and between
British-Borneo Petroleum, Inc. and Reading & Xxxxx Development
Co., as such may have been amended.
2. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta
Ray Gathering Systems Inc., as Gatherer.
3. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta
Ray Gathering Systems, Inc., as Gatherer.
4. That certain Exploration, Drilling and Production Unit Agreement
dated June 22, 2995, executed by and between Enserch Offshore,
Inc. and Enserch Exploration, Inc., covering and pertaining to
Green Canyon Blocks 253, 254, 297 and 298.
5. That certain Operating Agreement dated May 1, 1995, executed by
and between Enserch Exploration, Inc., Reading & Xxxxx
Development Co., et al., as amended by letters dated October 16,
1995, October 31, 1995 and May 17, 1996.
EXHIBIT "D"
TO
MORTGAGE AND SECURITY AGREEMENT
BY READING & XXXXX DEVELOPMENT CO.
IN FAVOR OF BRITISH-BORNEO PETROLEUM, INC.
1. XXXXX:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 40.00000% 33.70133%
B. OCS-G 7049 #4 40.00000% 33.70133%
C. OCS-G 7049 #4ST1 40.00000% 33.70133%
D. OCS-G 7049 #5 40.00000% 33.70133%
E. OCS-G 8876 #1 40.00000% 33.66666%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Mortgagor for use in connection with the drilling of the OCS-G 7049 #5
Well.
NOTE: All references in the Exhibit "D" made to "Working Interest" and
"Revenue Interest," and to the numbers set forth in connection
therewith, are for title warranty purposes only.
EXHIBIT "E"
R&B INTEREST IN THE LEASES
1. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Amerada Xxxx, et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.00000%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
3. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shell Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
and Xxxx Petroleum Corporation, et al., as Lessees, bearing Serial No.
OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 33.66666%
4. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 40.00000%
Net Revenue Interest 34.70133%
NOTE: All references in this Exhibit "E" made to "Working Interest"
and "Revenue Interest," and to the numbers set forth in connection
therewith, are for title warranty purposes only.
FACT SHEET
Allegheny Development Plan
Location Green Canyon, Blocks 253, 254, 298, 297
Water Depth Range 2,900 - 3,250 ft
Processing Pipeline spec. oil and gas
Annualized average throughput - Oil 25,000 BOPD (27,500 Peak)
Annualized average throughput - Gas 35 MMSCFD (45 MM Peak)
Annualized average throughput - Produced water 8,000 BWPD
Number of Production Xxxxx (subsea) 5 to 7
Production Risers 4 in. insulated steel catenary risers
Control Umbilicals 2
Well/riser Maintenance Chemical injection, Coiled tubing for riser cleanout
Export - Oil SCR and - 30 miles of 8" Pipeline to EW 953 (Poseidon)
or Xxxxx Bank 921 (Morpeth)
Export - Gas SCR and 25 miles of 6" Pipeline to EW 873 (Discovery)
or Xxxxx Bank 921 (Morpeth)
SeaStar TLP
Payload (Deck/Facilities/Risers) 3,500 tons
Hull weight 2,500 tons
Displacement 11,000 tons
Tendons 6 x 26 inch
Foundation Independent piles for each tendon
Hull Dimensions (as Morpeth)
Column Diameter 58 ft
Draft 91 ft
Pontoon Radius 115 ft
Pontoon Height 25 ft
Main Column Height 112 ft
Topsides
Dry Equipment Weight 1,500 tons
Deck Dimensions (two decks) 110 x 110 ft
Quarters 18 man
Helideck Xxxx 412
Allegheny Development Cost Estimate
SeaStar
Key Data Allegheny Comments
Data source In house Derived from Morpeth data
Water depth (ft) 2950 to 3250 Dependent upon field layout
Number of xxxxx 5 to 7 Flowline access from two sectors
First oil date: Q3 1999 Same execution plan & contractors
as Morpeth
Field life (years) 7 to 10
Hull weight (t) 2,500 Same hull assumed as Morpeth
Topside payload (t) 3,500 Payload reduced due to increased
tendon lengths & riser load
Oil capacity gross (bbl/d) 27,500 Sized for 5 to 7 xxxxx dependent
on field performance
Gas capacity gross (mmsc/d) 45 GOR 1300
WI capacity gross (bbl/d) None No WI required
Production flowlines 4" SCR (Ins) Move to SCR's for wt & cost
saving
Oil export line diameter 8" SCR Sized for 27,000 bopd
Gas export line diameter 6" SCR Sized for 45 MMscfd
$MM
Drilling and Completion Costs
Pre-Production 23.3 Complete 3 existing xxxxx plus
1.1 mob/demob
Post-Production Startup
Drill new well 17.0 Assumed Xxxxxx Xxxxxx day rate
of 105.000 $/d
Complete new well (SCRAMS) 7.4
Complete 4th existing well 6.0
Drilling sub total: 53.7 (1 new well, ! completion)
Facilities Costs
Engineering & PMgmt. 11.0 Broadly similar to Morpeth
Mooring system 25.5 Increased to account for
deeper water
Hull 19.0 Same hull (no design saving)
Topsides 30.0 Smaller topsides (no WI)
Installation 21.0 Increased water depth
Risers (production) 19.0 4" SCR's - priced on 5500 ft
between well clusters (2750
ft standoff)
Trees 28.0 Increase to 5 xxxxx & water
depth increase over Morpeth
Hookup & commissioning 5.0 Topsides HUC costs in yard
Facilities sub total: 158.5
Oil export risers 6.5 SCR - 8" diameter
Oil export lines 21.0 8" diameter - 30 miles (all of
which J layed) to EW953
Gas export risers 0.0 SCR 6" diameter - paid for in
tariff to Discovery system
Gas export lines 0.0 25 miles of 6" (all of which J
layed) - paid in tariff to
Discovery system
Export lines sub total: 27.5
Contingency: 4.0
Facilities & export
sub total 190.0
Drilling, Facilities &
export total: 243.7
Future well costs:
Recompletions as needed 6.0 Costs per well, as needed
New Xxxxx 14.0 Costs per well, as needed
