WYOMING
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION AND
REVENUES
FROM
RANCHER ENERGY CORP.
a
Nevada corporation d/b/a
RANCHER ENERGY OIL & GAS CORPORATION
(Mortgagor
and Debtor)
TO
GASROCK CAPITAL LLC
(Mortgagee
and Secured Party)
FOR
PURPOSES OF FILING THIS INSTRUMENT AS A FINANCING STATEMENT,
THE MAILING ADDRESS OF MORTGAGOR/DEBTOR IS 999 EIGHTEENTH
STREET, SUITE 3400, DENVER, COLORADO 80202; THE MAILING
ADDRESS OF MORTGAGEE/SECURED PARTY IS 1301 MCKINNEY STREET,
SUITE 2800, HOUSTON, TEXAS 77010.
THIS
INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, AND
COVERS FUTURE ADVANCES AND PROCEEDS. INTERESTS IN OIL, GAS,
MINERALS AND OTHER AS-EXTRACTED COLLATERAL OR IN ACCOUNTS
RESULTING FROM THE SALE THEREOF, WHICH ARE INCLUDED IN THE
MORTGAGED PROPERTY, WILL BE FINANCED AT WELLHEADS LOCATED ON
THE LANDS ASSOCIATED WITH THE PIPELINE DESCRIBED IN
EXHIBIT A HERETO.
PERSONAL
PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY MAY
BE OR MAY IN THE FUTURE BE AFFIXED TO THE LANDS DESCRIBED
IN
EXHIBIT A HERETO.
A
POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF
SALE MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND
SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON
DEFAULT BY MORTGAGOR UNDER THIS INSTRUMENT.
THIS
FINANCING STATEMENT IS TO BE FILED, AMONG OTHER PLACES, IN THE
REAL ESTATE RECORDS.
*********************************
This
instrument was prepared by Ephraim del Pozo, PORTER &
HEDGES, L.L.P., 1000 Main Street, 36
th Floor,
Houston, Texas 77002.
ATTENTION OF RECORDING OFFICER :
This instrument is a mortgage of both real and personal property
and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument
creates a lien on rights in or relating to lands of Mortgagor which
are described in
Exhibit A hereto.
RECORDED
DOCUMENT SHOULD BE RETURNED TO:
PORTER
& HEDGES, L.L.P.
1000
Main Street, 36
th Floor
Houston,
Texas 77002
Attn:
Ephraim del Pozo
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION and
revenues
(
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY
PROVISIONS )
ARTICLE I
GRANT OF LIENS AND SECURITY INTERESTS
KNOW
ALL MEN BY THESE PRESENTS: That as of October 16, 2007 the
undersigned
RANCHER ENERGY CORP., a
Nevada corporation doing business in the State of Wyoming as
RANCHER ENERGY OIL & GAS CORP. (“
Mortgagor ”),
with its principal office in Colorado, and whose mailing address is
999 Eighteenth Street, Suite 3400, Denver, Colorado 80202, for
valuable consideration, the receipt of which is hereby
acknowledged, and in consideration of the premises and debt
hereinafter mentioned, has granted, bargained, sold, conveyed,
transferred and assigned, and by these presents does GRANT,
BARGAIN, SELL, WARRANT, CONVEY, MORTGAGE, PLEDGE, TRANSFER, ASSIGN
AND SET OVER to
GASROCK CAPITAL LLC, a
Delaware limited liability company, whose address is 1301 McKinney
Street, Suite 2800, Houston, Texas 77010, and its successors and
assigns (“
Mortgagee ”),
with a power of sale, for itself and as agent for
BP CORPORATION NORTH AMERICA, INC. ,
an Indiana corporation (together with its successors and assigns,
“
Swap Counterparty ”),
parties under that certain Intercreditor Agreement dated as of
October 16, 2007 (as ratified, amended, extended, restated or
otherwise modified from time to time, the “
Intercreditor Agreement ”),
the following property,
whether real, personal or mixed, whether now owned or hereafter
acquired under law or in equity (collectively, the “
Mortgaged Property ”);
the inclusion of certain specific types and items of property and
interests in one or more of the following Paragraphs are not
intended in any way to limit the effect of the more general
descriptions:
A.
All
of Mortgagor’s present and future rights, titles,
interests and estates, now owned or hereafter acquired by
Mortgagor, in and to those certain oil, gas and mineral
leases, mineral interests, mineral servitudes, royalty
interests, overriding royalty interests, production payments,
net profits interests, fee interests, carried interests,
reversionary interests and all other rights, titles, interests
or estates described on
Exhibit A attached
hereto and made a part hereof or in, on or under any lands
described in
Exhibit A ,
whether such rights, titles, interests or estates or such lands are
correctly described therein or not (all of which rights, titles,
interests and estates described in this Paragraph A are hereinafter
included within the term “
Subject Interests ”).
The term “oil, gas and mineral leases,” as used in this
instrument and in
Exhibit A includes,
in addition to oil, gas and mineral leases, oil and gas leases,
oil, gas and sulphur leases, other mineral leases,
co-lessor’s agreements and extensions, amendments,
ratifications and subleases of all or any of the foregoing, all as
may be appropriate.
B.
All
of Mortgagor’s present and future rights, titles,
interests and estates, now owned or hereafter acquired by
Mortgagor, in and to present and future drilling, spacing,
proration or production units, as created by the terms of any
unitization, communitization and pooling agreements and
orders, and all properties, property rights and estates
created thereby which include, belong or appertain to the
Subject Interests, including, without limitation, all such
units formed voluntarily or under or pursuant to any Law
relating to any of the Subject Interests. As used herein, the
term “Law” means all applicable statutes, laws,
ordinances, regulations, orders, writs, injunctions, or
decrees of any state, commonwealth, nation, territory,
possession, county, township, parish, municipality, or
Tribunal, and the term “Tribunal” means any court
or governmental department, commission, board, bureau, agency,
or instrumentality of the United States or of any state,
commonwealth, nation, territory, possession, county, parish,
or municipality, whether now or hereafter constituted or
existing.
C.
All
present and future oil, gas, casinghead gas, drip gasoline,
natural gasoline, distillate, all other liquid or gaseous
hydrocarbons produced or to be produced in conjunction
therewith, all products, by-products and all other substances
derived therefrom or the processing thereof, and all other
similar minerals, now owned or hereafter acquired by
Mortgagor, now or hereafter accruing to, attributable to or
produced from the Subject Interests or to which Mortgagor now
or hereafter may be entitled as a result or by virtue of
Mortgagor’s ownership of the Subject Interests
(collectively, “
Hydrocarbons ”).
D.
All
present and future sulphur, lignite, coal, uranium, thorium,
iron, geothermal steam, water, carbon dioxide, helium and all
other minerals, ores or substances of value (whether similar
to the foregoing or not), and the products and proceeds
therefrom now owned or hereafter acquired by Mortgagor,
including, without limitation, all gas resulting from the
in-situ combustion of coal or lignite now or hereafter
accruing to, attributable to or produced from the Subject
Interests or to which Mortgagor now or hereafter may be
entitled as a result of or by virtue of Mortgagor’s
ownership of the Subject Interests (collectively,
“
Other Minerals ”).
E.
All
present and future oil and gas wells, disposal and injection
wells, rigs, improvements, fixtures, machinery and other
equipment, inventory and articles of personal property or
movables, wherever located, now owned or hereafter acquired by
Mortgagor, including, without limitation, connection apparatus
and flow lines from wells to tanks, wells, pipelines,
gathering lines, trunk lines, lateral lines, flow lines,
compressor, dehydration and pumping equipment, pumping plants,
gas plants, processing plants, pumps, dehydration units,
separators, heater treaters, valves, gauges, meters, derricks,
rig substructures, buildings, tanks, reservoirs, tubing, rods,
liquid extractors, engines, boilers, tools, appliances,
cables, wires, tubular goods, machinery, supplies and any and
all other equipment, inventory and articles of personal
property of any kind or character whatsoever appurtenant to,
or used or held for use in connection with the production of
Hydrocarbons or Other Minerals from the Subject Interests, or
now or hereafter located on any of the lands encumbered by any
of the Subject Interests (the “
Lands ”),
or used on or about the Lands in connection with the operations
thereon, together with all present and future improvements or
products of, accessions, attachments and other additions to, tools,
parts and equipment used in connection with, and substitutes and
replacements for, all or any part of the foregoing (all of the
types or items of property and interests described in this
Paragraph E are hereinafter collectively referred to as the
“
Personal Property ”).
F.
All
present and future rights, titles, interests and estates now
owned or hereafter acquired by Mortgagor (including, without
limitation, all rights to receive payments) under or by virtue
of all easements, permits, licenses, rights-of-way, surface
leases, franchises, servitudes, division orders, transfer
orders and other agreements relating or pertaining to
purchasing, exchanging, exploring for, developing, operating,
treating, processing, storing, marketing or transporting
Hydrocarbons now or hereafter found in, on or under, or
produced from, any of the Subject Interests, or under or by
virtue of any contract relating in any way to all or any part
of the Mortgaged Property otherwise described herein,
including, without limitation, farmout contracts, farmin
contracts, operating or joint operating agreements, trade
letter agreements and all agreements creating rights-of-way
for ingress and egress to and from the Subject Interests (all
of such rights, titles, interests and estates referred to or
described in this Paragraph F are hereinafter collectively
referred to as the “
Subject Contracts ”).
G.
All
present and future accounts (including, but not limited to,
all open accounts receivable and accounts receivable arising
under or pursuant to any joint operating agreements, division
orders or other agreements, documents or instruments relating
to any of the Subject Interests), general intangibles
(including right to proceeds under Swap Agreements, as defined
in the Credit Agreement), chattel paper, documents,
instruments, cash and noncash proceeds and other rights, now
owned or hereafter acquired by Mortgagor, arising from or by
virtue of, or from the voluntary or involuntary sale or other
disposition of, or collections with respect to, or insurance
proceeds payable with respect to, or proceeds payable by
virtue of warranty or other claims against manufacturers of,
or claims against any other person or entity with respect to,
all or any part of the Mortgaged Property described in this
Paragraph G or otherwise (all of which types and items of
property and interests described in this Paragraph G are
hereinafter collectively referred to as the “
Accounts ”).
H.
All
present and future tenements, hereditaments, appurtenances,
profits and properties in anyway appertaining, belonging,
affixed or incidental to, or used or useful in connection
with, all or any part of the Mortgaged Property otherwise
described herein, now owned or hereafter acquired by
Mortgagor, including, without limitation, all reversions,
remainders, carried interests, tolls, rents, revenues, issues,
proceeds, earnings, income, products, profits, deposits,
easements, permits, licenses, servitudes, surface leases,
rights-of-way and franchises relating to all or any part of
the Mortgaged Property.
I.
All pipelines owned and/or operated by Mortgagor for the gathering,
transmission, or distribution of Hydrocarbons including, without
limitation, those pipelines described on
Exhibit A
which is attached hereto,
and any interests in real property relating thereto
(collectively called the “
Pipelines
”).
J.
All tracts and parcels of real property described or referred to
in
Exhibit A
attached hereto, or the description of which is incorporated
in
Exhibit A
by reference to any other instrument or document associated with
the Pipelines (collectively, the “
Lands Associated with Pipelines
”).
K
.
All leases, leaseholds, easements, rights-of-way, licenses,
franchises, privileges, permits, ordinances, grants, rights,
consents, servitudes, surface leases or rights, amendatory grants
and interests in land for the installation, maintenance and
operation of the Pipelines or the assets associated with the
Pipelines or any portion thereof, now owned or held by Mortgagor
including, without limitation, those leases, leaseholds, easements,
rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or
rights, amendatory grants and interests in land applicable to the
Pipelines or the Pipeline Assets (as defined below) owned or held
by Mortgagor and those leases, leaseholds, easements,
rights-of-way, licenses, franchises, privileges, permits,
ordinances, grants, rights, consents, servitudes, surface leases or
rights, amendatory grants and interests in land owned or held by
Mortgagor and described in
Exhibit A
attached hereto or arising by virtue of the documents described
in
Exhibit A
(collectively, the “
Rights-of-Way and Franchises
”).
L.
All
other assets of Mortgagor now or hereafter situated on any of
the Lands Associated with Pipelines or the Rights-of-Way and
all Franchises, fixtures, improvements, equipment, surface or
subsurface machinery, facilities, supplies, replacement parts,
vehicles of every description, all process control computer
systems and equipment or other property of whatsoever kind or
nature, including, without limitation, all buildings,
structures, machinery, gas processing plants, stations,
substations, pumps, pumping stations, meter houses, metering
stations, regulator houses, ponds, tanks, scrapers and scraper
traps, fittings, valves, connections, cathodic or electrical
protection by-passes, regulators, drips, meters, pumps,
pumping units, pumping stations, storage or tankage
facilities, engines, pipes, gates, telephone and telegraph
lines, electric power lines, poles, wires, casings, radio
towers, fixtures, mechanical equipment, electrical equipment,
machine shops and other equipment, used or useful in
connection therewith; together with all of Mortgagor’s
liquid hydrocarbons, carbon dioxide, natural gas liquids,
refined petroleum products and other inventory fuels, carbon,
chemicals, electric energy, and other consumable materials or
products manufactured, processed, generated, produced,
transmitted, stored (whether above or below ground) or
purchased by Mortgagor for sale, exchange, distribution,
consumption or transmission by Mortgagor, including, without
limitation, off system gas, drip gas and line fill
(collectively, the “
Pipeline Assets ”).
M.
All
other interests of every kind and character which Mortgagor
now has or at any time hereafter acquires in and to the types
and items of property and interests described in Paragraphs A,
B, C, D, E, F, G, H, I, J, K and L preceding and all property
which is used or useful in connection with the Mortgaged
Property and the proceeds and products of all of the
foregoing, whether now owned or hereafter
acquired.
N.
To
further secure the full and complete payment and performance
of the Indebtedness, Mortgagor, as debtor, hereby grants to
Mortgagee and Mortgagee’s successors in title and
assigns, as secured party, a first and prior security interest
in and to the following types and items of property and
interests now owned or hereafter acquired by Mortgagor (all of
which are included within the term “Mortgaged
Property”): (a) all present and future Personal
Property, Subject Contracts and Accounts; (b) all present and
future Subject Interests, Hydrocarbons and Other Minerals
insofar as the same consist of as-extracted collateral
(including Accounts), as defined in and subject to the Uniform
Commercial Code as enacted, amended and in effect in each
jurisdiction in which any of the Mortgaged Property is
situated (the “
UCC ”),
and for which the creation and perfection of a security interest or
lien therein is governed by the provisions of the UCC; (c) all
present and future other Mortgaged Property described in Paragraphs
“A” through “L” above consisting of
Accounts, contract rights, general intangibles, chattel paper,
documents, instruments, inventory, equipment, fixtures and other
goods and articles of personal property of any kind or character
defined in and subject to the UCC; (d) all present and future
increases, profits, combinations, reclassifications, improvements
and products of, accessions, attachments and other additions to,
tools, parts and equipment used in connection with, and substitutes
and replacements for, all or any part of the Mortgaged Property
described in this or any other clause of this paragraph; (e) all
present and future Accounts, contract rights, general intangibles,
chattel paper, documents, instruments, cash and noncash proceeds
and other rights arising from or by virtue of, or from the
voluntary or involuntary sale or other disposition of, or
collections with respect to, or insurance proceeds payable with
respect to, or proceeds payable by virtue of warranty or other
claims against manufacturers of, or claims against any other person
or entity with respect to, all or any part of the Hydrocarbons, the
Other Minerals or the Mortgaged Property described in this or any
other clause of this paragraph; and (f) all present and future
security for the payment to Mortgagor of any of the Mortgaged
Property described in this or any other clause of this paragraph
and goods which gave or will give rise to any of such Mortgaged
Property or are evidenced, identified, or represented therein or
thereby; provided that nothing in this paragraph shall be deemed to
permit any action prohibited by this instrument or by terms
incorporated in this instrument.
In
the event that Mortgagor acquires additional undivided
interests in some or all of the Mortgaged Properties, this
Mortgage shall automatically encumber such additions or
increases to Mortgagor's interest in the Mortgaged Properties
without need of further act or document. Further, in the event
Mortgagor becomes the owner of an interest in any part of the
lands described in
Exhibit A or
the documents described on
Exhibit A or
otherwise subject to or covered by the Mortgaged Properties, this
Mortgage shall automatically encumber such ownership interest of
Mortgagor without need of further act or document.
For
the same consideration, Mortgagor hereby grants to Mortgagee
any and all rights of Mortgagor to liens and security
interests in the Mortgaged Property securing payment of
proceeds from the sale of production from the Mortgaged
Property, including, but not limited to, those liens and
security interests provided for in the Uniform Commercial Code
as adopted by the State of Wyoming (and any successor statute
thereto or any similar statute in any state where the
Mortgaged Property is located).
TO
HAVE AND TO HOLD all and singular the Mortgaged Property and
all other property which, by the terms hereof, has or may
hereafter become subject to the lien and/or security interest
of this Mortgage, Security Agreement, Financing Statement and
Assignment of Production and Revenues (the “
Mortgage” ),
together with all rights, hereditaments and appurtenances in
anywise belonging to Mortgagee or assigns forever. Any additional
right, title or interest which Mortgagor may hereafter acquire or
become entitled to in the interests, properties, Lands, and
premises aforesaid, or in the oil, gas or other minerals in and
under or produced from the Lands and leases shall inure to the
benefit of and be covered by this Mortgage and constitute
“
Mortgaged Property ,”
the same as if expressly described and conveyed herein. Mortgagor
hereby binds itself, its successors and assigns, to warrant and
forever defend all and singular the above described property,
rights, and interests constituting the Mortgaged Property to
Mortgagee and to his assigns forever, against every person
whomsoever lawfully claiming or to claim the same or any part
thereof.
ARTICLE II
INDEBTEDNESS SECURED
This
Mortgage is made to secure and enforce the payment of the
following indebtedness, obligations and
liabilities:
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(a)
|
All
sums advanced under the terms of that certain Term Note dated as of
even date herewith, in the face amount of $12,240,000 executed by
Mortgagor and made payable to Mortgagee bearing interest and
payable as therein provided, and containing the usual provisions in
notes of this character, and all renewals, rearrangements,
amendments, modifications and extensions thereof (whether one or
more, the “
Note ”).
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(b)
|
All
Obligations of Mortgagor
owed
to Mortgagee defined in or arising pursuant to the terms of that
certain Term Credit Agreement dated as of even date herewith, and
all modifications, amendments, and restatements thereto (the
“
Credit Agreement ”).
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(c)
|
Payment
of any sums which may be advanced or paid by Mortgagee under the
terms hereof on account of the failure of Mortgagor to comply with
the covenants of Mortgagor contained herein; and all other
indebtedness of Mortgagor arising pursuant to the provisions of
this Mortgage.
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(d)
|
All
obligations of Mortgagor owed to Swap Counterparty, as counterparty
under those certain Permitted Swap Agreements defined in or arising
pursuant to the terms of that certain Credit Agreement, including
without limitation, that certain ISDA Master Agreement dated as of
October 16, 2007 between Mortgagor and Swap Counterparty, as
referenced in the Intercreditor Agreement (together with all
schedules and confirmations in respect thereof, as amended,
supplemented, restated, extended or replaced from time to
time).
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(e)
|
All
obligations of
RANCHER ENERGY WYOMING, LLC ,
a Wyoming limited liability company, owed to Mortgagee arising
pursuant to the terms of that certain Guaranty dated as of even
date herewith, and all modifications, amendments, and restatements
thereto.
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(f)
|
All
renewals, extensions, replacements and modifications of
indebtedness described, referred to or mentioned in paragraphs (a)
through (e) above, and all substitutions therefor, in whole or in
part.
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(g)
|
The
word “
Indebtedness ”
wherever used in this Mortgage shall refer to all present and
future debts, obligations and liabilities described or referred to
in this Article II or otherwise in this Mortgage; provided however,
this Mortgage does not secure any obligation of Mortgagor to
Mortgagee arising under the ORRI (as referenced and described in
the Credit Agreement).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
By
execution of this Mortgage, Mortgagor does hereby adopt and
ratify all of Mortgagor’s warranties and representations
set forth in the Credit Agreement; and all the warranties and
representations set forth in the Credit Agreement as they
relate to the properties described on
Exhibit A attached
thereto are hereby made and adopted with respect to the properties
listed on
Exhibit A attached
hereto. In addition, Mortgagor hereby represents and warrants as
follows:
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(a)
|
Organization and Good Standing .
Mortgagor is a corporation duly organized, validly existing and in
good standing under the laws of Nevada, having all powers necessary
to carry on its businesses and to enter into and consummate the
transactions contemplated by the Credit Agreement and hereunder.
Mortgagor is authorized to do business in all other jurisdictions
wherein the character of the properties owned or held by them or
the nature of the business transacted by them makes such
qualification necessary or desirable.
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(b)
|
No Conflicts or Consents .
The execution and delivery by Mortgagor of this Mortgage, the
performance of its obligations under this Mortgage, and the
consummation of the transaction contemplated by this Mortgage does
not and will not (i) conflict with any provision of (A) any
domestic or foreign law, statute, rule or regulation, (B) the
Bylaws of Mortgagor, or (C) any agreement, judgment, license, order
or permit applicable to or binding upon Mortgagor, (ii) result in
the acceleration of any Indebtedness (as defined in the Credit
Agreement) owed by Mortgagor, or (iii) result in or require the
creation of any Lien (as defined in the Credit Agreement) upon any
assets or properties of Mortgagor, except as expressly contemplated
in the Credit Agreement. Except as expressly contemplated in this
Mortgage, no consent, approval, authorization or order of, and no
notice to or filing with, any court or governmental authority or
third party is required in connection with the execution, delivery
or performance by Mortgagor of this Mortgage or to consummate any
transactions contemplated by this Mortgage.
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(c)
|
Enforceable Obligations .
This Mortgage, when executed and delivered by Mortgagor, will be
legal, valid and binding obligations of Mortgagor enforceable in
accordance with its terms except as such enforcement may be limited
by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors’ rights or by
principles of equity applicable to the enforcement of
creditors’ rights generally.
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(d)
|
Title .
Mortgagor is the lawful owner of the Mortgaged Property and has
good right and authority to convey, pledge, mortgage and assign the
Mortgaged Property. Mortgagor has good and defensible title to and
is possessed of the Mortgaged Property; the Mortgaged Property is
free of any and all liens and encumbrances, except Permitted
Encumbrances as defined in the Credit Agreement.
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(e)
|
Leases .
All of the oil, gas and/or mineral leases constituting all or part
of the Mortgaged Property (the “
Leases ”)
are in full force and effect. All covenants, express or implied, in
respect thereof of any Leases, or of any assignment thereof, which
may affect the validity of any of the Leases, have been
performed.
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(f)
|
Revenue and Cost Bearing Interest .
That Mortgagor’s ownership of the Subject Interest and the
undivided interests therein as specified on attached
Exhibit A will,
after giving full effect to all Permitted Encumbrances (as defined
in the Credit Agreement), afford Mortgagor not less than those net
interests in the production from or allocated to such Subject
Interest as is specified on attached
Exhibit A and
will cause Mortgagor to bear not more than that portion of the
costs of drilling, developing and operating the wells or units
identified on
Exhibit A ,
unless there is a proportionate increase in Mortgagor’s net
revenue interest in such property.
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(g)
|
Power to Create Lien .
Mortgagor has full power and lawful authority to bargain, grant,
sell, mortgage, assign, transfer, convey, pledge and hypothecate
and grant a security interest in all of the Mortgaged Property all
in the manner and form herein provided and without obtaining the
waiver, consent or approval of any lessor, sublessor, governmental
agency or entity or other party whomsoever or whatsoever, except to
the extent the approval or consent of the State of Wyoming or the
Department of the Interior, United States of America, as the case
may be, is required by applicable law or regulation to the
transfer, deed or assignment of an interest in any of the Mortgaged
Property.
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(h)
|
Taxes .
Except for taxes accrued but not yet due and payable, all (a)
p roperty
taxes, (b) Severance Taxes, (c) Ad Valorem Taxes, (d) conservation
taxes, and (e) any other taxes of any kind, excluding only income
taxes and franchise taxes, imposed on Mortgagor or any producer in
connection with or as a result of its ownership of interests in the
Mortgaged Properties have been paid. For purposes of this
Paragraph, “Ad
Valorem Taxes” means taxes imposed annually on Mortgagor
which are based on or measured by the estimated value (at the time
such taxes are assessed) of any Hydrocarbons situated within the
Mortgaged Property as calculated by the governing authority where
located and “Severance
Taxes” means taxes imposed at the time Hydrocarbons are
produced from a well which are based on or measured by the amount
or value of such production.
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(i)
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Rentals Paid; Leases in Effect .
All rentals and royalties due and payable in accordance with the
terms of the Leases comprising a part of the Subject Interest have
been duly paid or provided for and all Leases or subleases
comprising a part of the Subject Interest are in full force and
effect.
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(j)
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Operation of Mortgaged Property .
The Mortgaged Property (and properties unitized therewith) is being
maintained, operated and developed in a good and workmanlike manner
according to practices and procedures that are standard in the
petroleum industry and in conformity with all applicable laws and
all rules, regulations and orders of all duly constituted
authorities having jurisdiction and in conformity with the
provisions of all Leases, subleases or other contracts comprising a
part of the Subject Interests and other contracts and agreements
forming a part of the Mortgaged Property; specifically in this
connection, (i) no Mortgaged Property is subject to having
allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the
time) and (ii) none of the wells comprising a part of the Mortgaged
Property (or properties unitized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are, in fact,
bottomed under and are producing from, and the well bores are
wholly within, the Mortgaged Property (or, in the case of wells
located on properties unitized therewith, such unitized
properties).
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(k)
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Environmental Laws .
Mortgagor (a) is and has in the past been in compliance with all
Environmental Laws (as defined in the Credit Agreement) and all
permits, requests and notifications relating to health, safety or
the environment applicable to Mortgagor or any of its properties,
assets, operations and businesses; (b) where applicable, has
obtained or caused to be obtained and adhered to and currently
possesses all necessary permits and other approvals necessary to
store, dispose of and otherwise handle Hazardous Materials (as
defined in the Credit Agreement) and to operate, where applicable,
its properties, assets and businesses; (c) where applicable, will
report or cause to be reported, to the extent required by all
federal, state and local statutes, laws, ordinances, regulations,
rules, permits, judgments, orders and decrees, all sites owned
and/or operated by Mortgagor where any Hazardous Materials are
released, treated, stored or disposed of and (d) has not used,
stored, or released any Hazardous Materials in excess of amounts
allowed by Environmental Law. Except as set forth in any
environmental reports provided by Mortgagor to Mortgagee, there is
(x) no location on any property currently or previously owned or
operated by Mortgagor where Hazardous Materials have entered or are
likely to enter into the soil or groundwater or such property, none
of which releases (i) either individually, or in the aggregate, has
had or may be expected to have a material adverse effect on
Mortgagor’s business or (ii) has violated or reasonably may
be expected to violate any Environmental Laws, and (y) no on-site
or off-site location to which Mortgagor has released or transported
Hazardous Materials or arranged for the transportation or disposal
of Hazardous Materials, which is or is likely to be the subject of
any federal, state, local or foreign enforcement action or any
investigation which could lead to any claims against any such
entity for any clean-up cost, remedial work, damage to natural
resources, common law or legal liability, including, but not
limited to, claims under CERCLA.
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(l)
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Pipelines and Pipeline Assets .
To Mortgagor’s knowledge, all Pipelines and Pipeline Assets
have been constructed and operated in conformity with all
applicable laws, rules, regulations and orders of all regulatory
authorities having jurisdiction.
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Any
fractions or percentages specified on attached
Exhibit A in
referring to Mortgagor’s interests are solely for the
purposes of the warranties made by Mortgagor above and shall in no
manner limit the quantum of interest with respect to any Subject
Interests or with respect to any Unit or Well identified on
Exhibit A .
If any of the Lands covered by the Subject Interests or Lands
Associated with Pipeline or other instrument mentioned on
Exhibit A are
incorrectly described, then nevertheless this Mortgage shall cover
all Mortgagor’s interest in such Subject Interests, the Lands
Associated with Pipeline and other instrument as to all of the
lands covered thereby, unless limited by express words to the
contrary on
Exhibit A .
ARTICLE IV
COVENANTS OF MORTGAGOR
In
consideration of the Indebtedness hereinabove described,
Mortgagor, for itself and its successors and assigns,
covenants and agrees as follows:
A.
Defend Title .
Mortgagor will not create or suffer to be created or permit to
exist any lien, or security interest senior to, junior to, or on a
parity with, the lien and security interest of this Mortgage upon
the Mortgaged Property or any part thereof or upon the rents,
issues, revenues, profits and other income therefrom, except
Permitted Encumbrances (as defined in the Credit Agreement). Except
for the Permitted Encumbrances (as defined in the Credit
Agreement), Mortgagor will warrant and defend the title to the
Mortgaged Property against the claims and demands of all other
persons whomsoever and will maintain and preserve the lien and
security interests created hereby so long as any of the
Indebtedness secured hereby remains unpaid. Except for the
Permitted Encumbrances (as defined in the Credit Agreement), should
an adverse claim be made against or a cloud develop upon the title
to any part of the Mortgaged Property, Mortgagor agrees it will
immediately defend against such adverse claim or take appropriate
action to remove such cloud at Mortgagor’s cost and expense,
and Mortgagor further agrees that Mortgagee may take such other
action as Mortgagee reasonably deems advisable to protect and
preserve its interests in the Mortgaged Property, and in such event
Mortgagor will indemnify Mortgagee against any and all costs,
attorneys’ fees and other expenses which it may reasonably
incur in defending against any such adverse claim or taking action
to remove any such cloud.
B.
Correct Defects .
Upon request of Mortgagee, Mortgagor will promptly correct any
defect which may be discovered after the execution and delivery of
this Mortgage, in the Note above described or other documents
executed in connection herewith, in the execution or acknowledgment
hereof or thereof or in the description of the Mortgaged Property,
and will execute, acknowledge, and deliver such division orders,
transfer orders and other assurances and instruments as shall, in
the opinion of Mortgagee, be necessary or proper to convey and
assign to Mortgagee all of the Mortgaged Property herein conveyed
or assigned, or intended to be so.
C.
Notifications .
Mortgagor will notify Mortgagee of the destruction, loss,
termination or acquisition of any Mortgaged Property within two (2)
Business Days (as defined in the Credit Agreement)
thereof.
D.
Pooling .
Except as required by law, rule or regulation, Mortgagor will not,
without the prior written consent of Mortgagee, which consent shall
not be unreasonably withheld, voluntarily pool or unitize all or
any part of the Mortgaged Property where the pooling or unitization
would result in the diminution of Mortgagor’s net revenue
interest in production from the pooled or unitized lands.
Immediately after the formation of any pool or unit in accordance
herewith, Mortgagor will furnish to Mortgagee a conformed copy of
the pooling agreement, declaration of pooling, or other instrument
creating the pool or unit. The interest of Mortgagor included in
any pool or unit attributable to the Mortgaged Property or any part
thereof shall become a part of the Mortgaged Property and shall be
subject to liens and security interests hereof in the same manner
and with the same effect as though the pool or unit and the
interest of Mortgagor therein were specifically described in
Exhibit A hereto.
In the event any proceedings of any governmental body which could
result in pooling or unitizing all or any part of the Mortgaged
Property are commenced, Mortgagor shall give immediate written
notice thereof to Mortgagee.
E.
Maintenance and Operation of Mortgaged Property
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(a)
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Mortgagor
will, from time to time, pay or cause to be paid before they become
delinquent and payable all taxes, assessments and governmental
charges lawfully levied or assessed upon the Mortgaged Property or
any part thereof, or upon or arising from any of the rents, issues,
revenues, profits and other income from the Mortgaged Property, or
incident to or in connection with the production of Hydrocarbons or
other minerals therefrom, or the operation and development thereof;
provided, that the foregoing covenant shall be suspended so long as
the amount, applicability or validity of any such charges is being
diligently contested in good faith by appropriate proceedings and
if Mortgagor shall have set up reserves therefor which are adequate
under generally accepted accounting principles.
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(b)
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Mortgagor
will at its own expense do or cause to be done all things
reasonably necessary to preserve and keep in full repair, working
order and efficiency (subject to reasonable wear and tear) all of
the Mortgaged Property, including, without limitation, all
equipment, machinery and other tangible or movable personal
property, and from time to time will make or cause to be made all
the needful and proper repairs, renewals and replacements so that
at all times the state and condition of the Mortgaged Property will
be fully preserved and maintained in accordance with the standards
of a prudent operator.
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(c)
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Mortgagor
will promptly pay and discharge before delinquent, or cause to be
promptly paid or discharged before delinquent, all rentals, delay
rentals, royalties and indebtedness accruing under, and perform or
cause to be performed each and every act, matter or thing required
by, each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements described or referred to herein or
affecting Mortgagor’s interests in the Mortgaged Property,
and will do or cause to be done all other things necessary to keep
unimpaired Mortgagor’s rights with respect thereto and
prevent any forfeiture thereof or default thereunder; provided that
Mortgagor may contest such obligations under such assignments,
deeds, leases, sub-leases and contracts and agreements in good
faith and by appropriate proceedings after giving Mortgagee
appropriate indemnity against any loss resulting from such contest.
Mortgagor will operate or cause to be operated the Mortgaged
Property in a good and workmanlike manner consistent with prudent
operator practices and in material compliance with all applicable
contracts an
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