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- -~TGAGE ASSIGNMENT OF PROD~r~¢,~-r¢ "" ,-,v,['( ~LR
DEED OF TRUST, MOK _ 7 ...... *~'~G STATE~Er~E''', ~:'~ "(.';::;',.~l~;:q
SECU~TY AG~EMENT AND pllNAl~ll~ · , -
' from
SEQUOYAH RESOURCE PARTNERS, L.P.
(Grantor and Debtor)
to
ROBERT H. GUINN, II, TRUSTEE
for the benefit of
ROCK CREEK RANCH I, LTD:
(Lender/Mortgagee and Secured Party)
A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT. FOR PURPOSES OF FILING THIS
INSTRUMENT AS A FINANCING STATEMENT THE ADDRESS OF THE GRANTOR AND '
DEBTOR IS 2311 CEDAR SPRINGS ROAD, SUITE 405, DALLAS, TEXAS 75201 AND THE
ADDRESS OF THE LENDER AND SECURED PARTY IS 1331 LAMAR, SUITE 501,
HOUSTON, TEXAS 77010.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTUt/TE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF COLLATERAL-
THIS INSTRUMENT COVERS PRODUCTS OF COLLATERAL.
THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES oF VALUE WHICH
MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND
GAS). THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS OF THE cOUNTY RECORDERS OF THE
COUNTIES LISTED ON EXHIBIT A HERETO. TIKE GRANTOR HAS AN INTEREST OF
RECORD 1N THE REAL ESTATE CONCERNED, WHICH INTEREST IS DESCRIBED IN
EXHIBIT_A ATTACHED HERETO.
THIS INSTRUMENT WAS pREPARED BY AND WIIEN RECORDED OR FILED SHOULD BE
RETURNED TO:
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LAWRENCE E. GLENN
Crady, Jewett & McCulley, L.L.P.
2727 Allen Parkway, Suite 1700
Houston, Texas 77019-2125
DEED OF TRUST, MORTGAGE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
SEQUOYAH RESOURCE PARTNERS, L.P., a Texas limited partnership (hereinafter referred to
as "Grantor"), for and in cOnsideration of the sum of TEN DOLLARS ($10.00) to Grantor in hand
paid by Robert H. Guinn, II, whose address is 1331 Lamar, Suite 501, Houston, Texas 77010
(hereinafter called the ,Trustee"), and ROCK CREEK RANCH I, LTD,, a Texas limited partnership
("Lender") of Houston, Harris County, Texas, and of the agreement of the Lender to extend credit
to Grantor as evidenced by that certain promissory note hereinafter described, and in order to secure
the payment of the indebtedness hereinafter referred to and the performance of the obligations,
covenants, agreements and undertakings of Grantor hereinafter described, does hereby GRANT,
BARGAIN, SELL, CONVEY, MORTGAGE, PLEDGE, TRANSFER, ASSIGN and SET OVER
to the Trustee for the benefit of Lender with power of sale, the following property:
(a) All of Grantor's rights, titles, interests and estates whether now owned or hereafter
acquired in and to the oil, gas, oil and gas, and/or oil, gas and other mineral leases which are
described on attached Exhibit A hereto (all references herein to such Exhibit A shall include the
introductory and explanatory comments thereto contained in the preamble to Exhibit A), including,
without limitation, overriding royalty interests, production payments, net profits interests or other
interests irrespective of whether such interests are cost bearing and of whatsoever nature or kind and
however characterized, together with any and all mineral interests, royalty interests, fee interests or
other interests derived from a landowner or landowners of the lands described on attached Exhibit
A, all of which such rights, titles, interests and estates 0f Grantor and howsoever characterized being
hereinafter collectively called the "Leases";
(b) All rights, titles, interests and estates now owned or hereafter acquired by Grantor
in and to:' (1) the properties now or hereafter pooled or unitized with any of the Leases; (ii) all
presently existing or future unitization, communitization, pooling agreements and declarations of
pooled units and the units created thereby (including, without limitation, all units created under
orders, regulationS, rules or other official acts of any Federal, State or other governmental body or
agency having Jurisdiction and so called "working interest units" created under operating agreements
or otherwise) which may affect all or any portion of the Leases including, without limitation, those
units which may be described on Exhibit A; (iii)all operating agreements, contracts, farm out
agreements, farm in agreements, area of mutual interest agreements, equipment leases and other
agreements which relate to any of the Leases or interests in the Leases described or referred to herein
on Exhibit A or to the production, sale, purchase, exchange, processing, transporting or marketing
of the Hydrocarbons (hereinafter defined) from or attributable to such Leases or interests; and (iv)
the Leases described on Exhibit A and covered by this Mortgage (hereinafter defined) even though
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Grantor's interest therein be incorrectly described or a description of a part or all of such Leases or
Grantor's interest therein be omitted; it being intended by Grantor, the Lender and the Noteholder
(hereinafter defined) herein to cover and affect hereby all interests which Grantor may now own or
may hereafter acquire in and to the Leases and lands described on Exhibit A notwithstanding that the
interests as specified on Exhibit A be limited to particular lands, specified depths or particular types
of property interests;
(c) All rights, titles, interests and estates now owned or hereafter acquired by Grantor in
and to all oil, ga.s, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons
and all products refined therefrom and all other minerals (collectively called the "Hydrocarbons") in
and under which may be produced and saved from or attributable to the Leases, the lands covered
· thereby and GrantOr's interests therein, including all oil in tanks and all rents, issues, profits, proceeds,
products, revenues and other income from or attributable to the Leases, the lands covered thereby,
and Grantor's interests therein which are subjected or required to be subjected to the liens and
security interests of this Mortgage; and further including any and all liens and security interests in the
HYdrocarbons and the proceeds therefrom securing payment of proceeds from the sale of
Hydrocarbons, including but not limited to those liens and security interests provided for in Section
9.343 of the Texas Business and Commerce Code or any equivalent statute in the State of Wyoming;
(d) All tenements, hereditaments, appurtenances and properties in anywise appertaining,
belonging, affixed or incidental to the Leases, properties, rights, titles, interests and estates described
or referred to in subparagraphs (a) and (b) above, which are now owned or Which may hereafter be
acquired by Grantor, including, without limitation, any and all property, real or personal, now owned
or hereafter acquired and situated upon, used, held for use, or useful in connection with the operating,
working or development of any of such Leases or properties (excluding drilling rigs, trucks,
automotive equipment or other personal property which may be taken to the premises for the purpose
of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells,
injection wells or other wells, buildings, structures, field separators~ liquid extraction plants, plant
compressors, pumps, pumping units, wellhead valves, field gathering kystems, pipelines, salt water
disposal facilities, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, power, telephone and telegraph lines, surface leases, rights-of-way, easements,
servitudes, licenses and other surface rights together with ali additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing properties;
(e) Any prOperty that may from time to time hereafter, by writing of any kind, be
subjected to the lien and security interest hereof by Grantor or by anyone on Grantor's behalf; and the
Trustee is hereby authorized to receive the same at any time as additional security hereunder;
(f) All of the rights, titles and interests of every nature whatsoever now owned or
hereafter acquired by Grantor, whether such relate to the Leases, lands and properties described on
Exhibit A or whether they relate to other lands, properties (realty or personalty) or oil, gas and
mineral leases, royalties, or rights, wherever such lands, properties and rights may be located;
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151
(g) All accounts, as - extracted collateral, equipment, contract rights, inventory and
general intangibles as such terms are defined in Article 9 of the Uniform Commercial Code from time
to time in effect in the State of Texas (including without limitation, seismic geological and
geophysical data and interpretations) constituting a part of, relating to, or arising out of the property
and collateral described or mentioned in paragraphs (a) through (f) above, and all proceeds and
products of the property and collateral described or mentioned in this and said preceding paragraphs;
and
(h) All of Grantor's rights, now owned or hereafter acquired, in and to all lease recordsl
well records and production records which relate to any of the foregoing property; provided, however
the ibregoing is made subject to the overriding royalties, unit declarations, operating agreements,
contracts, encumbrances, agreements, exceptions, limitations and other matters, if any, described or
referred to in Exhibit A (all of the properties, interests and rights, subject as aforesaid, being
hereinafter sometimes referred to as the "Mortgaged Properties".
Any fractions or percentages specified on Exhibit A referring to Grantor's interest (whether working
interest, net revenue interest or otherwise) are contained thereon solely for the purpose of the
warranties made by Grantor under Article 11 hereof and shall not limit the quantum of interest
granted under Article I with respect to any unit or well. If any Lease or unit described on Exhibit A
respecting any well mentioned hereon is incorrectly described, nevertheless this Mortgage shall cover
all Grantor's interest in the Leases allocable to and the unit for such well. If any of the lands covered
by the Lease or other instrument mentioned on Exhibit A are incorrectly described, then nevertheless
this Mortgage shall cover all Grantor's interest in such Lease or other instrument as to all of the lands
covered thereby, unless limited by express words to the contrary on Exhibit A.
TO HAVE AND TO HOLD the Mortgaged Properties, together with all and singular the rights,
estates, hereditarrients, powers and privileges appurtenant or incident thereto, unto the Trustee and
his successors or substitutes in this trust and to his or their successors and assigns, forever.
BUT IN TRUST, NEVERTHELESS, for'the benefit and security of the holders of the indebtedness
secured hereby and upon the trusts and subject to the terms and provisions herein set forth.
ARTICLE L
Secured Indebtedness
1.1 This instrument (hereinafter called the "Mortgage") is made irrevocably in trust, with power
of sale to secure and enforce the payment of the following note, obligations, indebtedness and
liabilities:
(a) All amounts owing or to become owing on that certain Secured Note dated
AuguSt 28, 2001 in the original face amount of $745,000.00, made by Grantor and payable to the
order of Lender, bearing interest at the rate therein provided and containing provisions for the
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4
payment of a reasonable additional amount as collection and attorneys' fees, and all other notes given
in substitution therefor or in renewal, extension or modification thereof, in whole or in part, all such
note being hereinafter collectively called the "Note", and Lender and subsequent holders of the Note
or any part thereof or any interest therein being hereinafter called the "Noteholder". Reference is
hereby made to said Note for all of their terms and provisions;
(b) All obligations incurred or arising pursuant to or pemfitted by the provisions of this
Mortgage, and any other security instrument or other loan agreement which Grantor has, either alone
or with others, executed, or in the future may execute, to secure the Note including, without
limitation, all principal, interest, fees, expenses, costs and indemnities; and
(c) All other loans and future advances made by the Noteholder to Grantor and all other
debts, obligations and liabilities of every kind and character now or hereafter owing by Grantor to the
Noteholder, whether direct or indirect, primary or secondary, fixed or contingent, and whether
originally payable to the Noteholder or to a third party and subsequently acquired by the Noteholder
and including, without limitation, any fees, expense or costs (including attorneys' fees) advanced by
any Noteholder to enforce its rights hereunder. Nothing herein shall be construed to impose any
obligation upon Lender or any Noteholder to make any such loans or advances.
1.2 ' The indebtedness referred to in clauses (a), (b) and (c) of Section 1.1 and all renewals,
extensions and rearrangements thereof are hereinafter sometimes referred to as the "Secured
Indebtedness".
ARTICLE II.
Representations, Warranties and Covenants
2.d Grantor represents, warrants and covenants to and with the Trustee, Lender and the
Noteholder that Grantor is the lawful owner of the Mortgaged Properties and has good right and
authority to grant, bargain, sell, transfer, assign and mortgage the same; that Grantor's interests in the
Mortgaged Properties is no less than that Net Revenue Interest and no greater than the Working
Interest set forth on Exhibit A; that all oil, gas and/or mineral lease and leasehold estates, gas
purchase and sales contracts, pipeline easements and rights-of-way, procesSing contracts, franchises,
licenses and other agreements comprising or relating to the Mortgaged Properties or any portion
thereof to the best of Grantor's knowledge after due inquiry are valid and subsisting and are in full
force and effect; that such leases are subject to no overriding royalties or other burdens or charges,
except as reflected herein or in the Exhibit annexed hereto and to the best of Grantor's knowledge
after due inquiry that all rents, royalties and other payments due and payable by Grantor under each
of the Mortgaged Properties have been properly and timely paid and all ad valorem, property, oil and
gas production, 'excise and severance taxes payable by Grantor have been duly paid; that the
Mortgaged Properties are free and clear from all liens and encumbrances except for the record lien
evidenced by this Mortgage and except as shown in Exhibit A; that all producing wells located on the
Mortgaged Properties or properties unitized therewith have been legally drilled and are not deviated
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!53
from the vertical more than the maximum permitted by applicable laws, rules and regulations, and that
such wells are in fact bottomed under and are producing from lands described in said Exhibit A or
lands unitized therewith; and Grantor does hereby bind itself, its heirs, legal representatives,
successors and assigns to forever warrant and defend the title to the Mortgaged Properties unto the
said Trustee, his successors and assigns, against the claims of all persons whomsoever claiming or
to claim the same or any part thereof by, through or Under Grantor, but not otherwise. Any additional
rights, title, or interest which Grantor may hereafter acquire or become entitled to in the properties
aforesaid or in the oil, gas or other minerals in and under or produced therefrom shall inure to the
benefit of this trust, the same as if expressly described and conveyed herein.
2.2 So long as the Secured Indebtedness or any part thereof remains unpaid, Grantor covenants
and agrees with the Noteholder as follows:
(a) That Grantor will make prompt payment of the Notes and of all installments of
principal and interest thereon as the same become due, and also of all other Secured Indebtedness.
(b) That Grantor will continuously maintain Grantor's existence as a limited partnership
with full power to own and operate the Mortgaged Properties and, if reqUired by law, Grantor's right
to do business in each State where any part of the Mortgaged Properties is situated, and that Grantor
wilt promptly pay, if applicable, all income, franchise and other taxes owing by Grantor and any
stamp, documentary or recording taxes which may be required to be paid with respect to this
Mortgage or any other instrument evidencing or securing any of the Secured Indebtedness.
(c) That Grantor will cause the oil and gas (or oil, gas and mineral) leases included in or
relating to the Mortgaged PrOperties (herein called "Subject Leases") to be maintained and operated
for the production of oil or gas in a good and workmanlike manner and in accordance with sound
field practices and all applicable federal, state and local laws, rules and regulations and will not allow
any of Subject Leases to be surrendered, abandoned, or terminated or impaired in any manner unless
such is consistent with good oil and gas field practices.
(d) That Grantor will cause all debts and liabilities of any character incurred in the
operation, maintenance or development of the Mortgaged Properties (including, without limitation,
all costs of the administration and development of each Subject Lease, and all leasehold costs
attributable thereto, including, but not by way of limitation, all costs of completing, processing,
storing, transporting and marketing oil or gas which are allocated as leasehold expenses by customary
industry account) to be paid punctually when due.
(e) That Grantor will cause the Mortgaged Properties and all related machinery, pipelines,
equipment, improvements and personal property of any kind now or hereafter used or obtained in
connection with the'oPeration thereof to be kept in safe, good and effective operating condition and
all necessary repairs, replacements, additions and improvements thereto to be made.
(f) That Grantor will observe and comply with all of the terms and provisions, express
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or implied, of the Subject Leases and assignments constituting a part of the Mortgaged Properties in
order to keep the same in full force and effect. Grantor will also protect all oil and gas properties
included in the Mortgaged Properties against drainage of oil, gas and hydrocarbons thereunder by
reason Of production on other properties in a manner consistent with prudent operator practices to
maximize production from or allocable over the productive life of the Mortgaged Properties.
(g) That if the validity or priority of this Mortgage or of any right, titles, liens or interests
created or evidenced hereby with respect to the Mortgaged Properties or any part thereof shall be
endangered or questioned or shall be attacked directly or indirectly or if any legal proceedings are
instituted against Grantor with respect thereto, Grantor will give written notice thereof to the
Noteholder promptly and, at Grantor's own cost and expense, Grantor 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, including, but not limited to, the employment of counsel agreeable
to the Noteholder, the prosecution or defense of litigation and the release or discharge of all adverse
claims. If Grantor fails or refuses to take such action, the Trustee and the Noteholder, or any of them
(whether or not named as parties to legal proceedings with respect thereto), are hereby authorized
and empowered to take such additional steps as in their judgment and discretion may be necessary
or prOper for the defense of any such legal proceedings, including, but not limited to, the employment
of independent counsel, the prosecution or defense of litigation, and the compromise or discharge of
any adverse claims made with respect to the Mortgaged Properties, and all expense so incurred of
every kind and character shall be a demand obligation Owing by Grantor and shall bear interest at the
rate set forth in the Note from the date of expenditure until paid and shall be secured by the lien
evidenced by this Mortgage and the party incurring such expenses shall be subrogated to all rights
of the person receiving such payment.
(h) That Grantor will not, without the prior written consent of the Noteholder, suffer or
permit any lien other than Permitted Encumbrances (as defined in Exhibit A hereto) to be hereafter
claimed or created on any of the Mortgaged Properties, and should a lien other than Permitted
Encumbrances become attached hereafter in any manner to any part of the Mortgaged Properties
without the prior written consent of the Noteholder, Grantor will cause such lien to be promptly
discharged.
(i) That Grantor will pay all taxes and assessments of every kind and character charged,
levied or assessed against the Mortgaged Properties, or any part thereof, and all franchise taxes,
production, severance or other similar taxes orcharges, before any such taxes and assessments shall
become delinquent; but Grantor shall have the right to contest any such tax in good faith, and while
any such contest is pending shall not be in default hereunder; and, in the event Grantor should fail or
refuse to pay or discharge the same, the holder of said indebtedness hereunder shall have the right,
but shall not be obligated, to pay off said charges against said property and shall be subrogated to the
rights, liens and equities thereof, and the amount so paid, together with interest at the same rate as
is provided in the Note for interest on past due principal from the date of payment, shall be added to
said indebtedness and shall be part of the Secured Indebtedness.
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(j) That Grantor will, on request of the Noteholder, promptly correct any defect, error
or omission which may be discovered in the contents of this Mortgage, the Note, or other documents
executed in connection herewith or in the execution or acknowledgment of any thereof, and will
execute and deliver any and all additional instruments as may be requested by the Noteholder to
correct such defect, error or omission or to identify any additional properties which are or beCome
subject to this Mortgage and will execute, acknowledge and deliver such further assurances and
instruments as shall be, in the opinion of the Noteholder, necessary or proper to convey and assign
to the Trustee all of the Mortgaged ProPerties herein conveyed or assigned, or intended so to be.
(k) That Grantor will indemnify and hold harmless the Trustee and the Noteholder from
and against all claims, demands, liabilities and causes of action on account of any act performed or
omitted to be performed hereunder or on account of any transaction arising out of or in any way
connected with the Mortgaged Properties or with this Mortgage or any of the Secured Indebtedness,
save and except for the gross negligence, willful misconduct or breach by Lender or Noteholder of
any document or instruments executed in connection with the Note and this Mortgage.
(1) That Grantor will keep such part of the Mortgaged Properties as is of an insurable
nature and of a character usually insured by persons operating similar properties insured with
companies of recognized responsibility satisfactory to the Noteholder against loss or damage by fire
and against other hazards customarily insured against and in such amounts as may be reasonably
required by Lender.
(m) That Grantor will promptly pay its share of all costs and expenses incurred under any
joint operating agreement affecting the Mortgaged Properties or any portion thereof and will furnish
the Noteholder as and when requested full information as to the status ofanyj oint account maintained
with others under any such operating agreement.
(n) That, promptly upon receipt of any reasonably based written request from the
Noteholder, Grantor will furnish and deliver, pursuant to such request, all title materials in the
possession of Grantor or to which Grantor has access~ including all title opinions and abstracts of title
prepared by competent abstractors and covering title to the real property hereby mortgaged. Should
Grantor fail to furnish such title opinions and abstracts upon such request, the Noteholder may
proceed to obtain such title materials, and any and all costs so incurred shall be added to and included
in the indebtedness secured hereby and shall be payable by Grantor upon demand, the obligation for
such payment being secured by all liens and remedies granted in this Mortgage. Any abstracts
furnished by Grantor or so acquired by the Noteholder shall be and constitute a part of the Mortgaged
Properties, as above defined.
(o) That Grantor shall make available to the Noteholder, or its engineers, attorneys or
representatives, at any time reasonably requested, its complete files and contracts on the properties
included in this instrument and the wells, pipelines and other proPerty located thereon, or regarding
the operations of(or the production from) the Mortgaged Properties, and in the event the Noteholder
or the Trustee should take possession of the Mortgaged Properties under this Mortgage, the
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Noteholder shall be entitled to possession of all such files and contracts including seismic data and
interpretation. Should this Mortgage be foreclosed (howsoever such foreclosure may be effected),
the purchaser at the foreclosure sale shall be entitled to all such files.
(p) That Grantor acting as a reasonable and prudent operator will continuously maintain
in good condition and operate, or cause to be maintained and operated, in a good and workmanlike
manner any pipelines and pipeline systems included in the Mortgaged Properties in accordance with
the valid rules and regulations of duly constituted authorities.
2.3 Grantor agrees to take all such reasonable action and to exercise all rights and remedies as
are reasonably available to Grantor to cause the owner or owners of the working interest in the
Mortgaged Properties to comply with the covenants and agreements contained herein. With respect
to those Leases which are being operated by operators other than Grantor, Grantor shall not be
obligated itself to perform any undertakings contemplated by the covenants and agreements contained
herein which are performable only by such operators and are beyond the control of Grantor; however,
Grantor agrees to promptly take all reasonable actions available to Grantor under any operating
agreement or otherwise to bring about the performance of any such undertakings required to be
performed by such operators.
2.4 Grantor agrees that, if Grantor fails to perform any act or to take any action which hereunder
Grantor is required to perform or take or to pay any money which hereunder Grantor is required to
pay, the Noteholder, in Grantor's name or its own name, may (but shall not be obligated to) perform
or cause to be performed such act or take such action or pay such money, and any expenses so
incurred bythe Noteholder and any money so paid by the Noteholder shall be apart of the obligations
owing by Grantor and shall bear interest from the date of making such payment until paid at the rate
set forth in the Note and shall be a part of the Secured indebtedness and shall be secured by the lien
evidenced by this Mortgage and by any Other instrument securing the Secured Indebtedness, and the
Noteholder, upon making such payment, shall be subrogated to all of the rights of the person,
Corporation or body politic receiving such payment.
ARTICLE III.
Assignment of Production, Accounts
Contract Rights and Proceeds
3.1 To facilitate the discharge of all such indebtedness and as cumulative of any and all rights and
remedies herein provided for, Grantor hereby BARGAINS, SELLS, TRANSFERS, AS SIGNS, SETS
OVER and DELIVERS to the Noteholder, and assigns all of the following and which shall be applied
by Noteholder as provided herein:
(a) All oil, gas, casinghead gas, distillate and other minerals, and the proceeds therefrom,
produced and to be produced from the interests of Grantor in the oil, gas and mineral leases,
properties, processing plants and interests now or hereafter constituting a part of the Mortgaged
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157
ProPerties from and after the Effective Date (as hereafter defined), Grantor hereby authorizes and
empowers said Noteholder to demand, collect and receive said oil, gas, casinghead gas, distillate and
other minerals, and the proceeds therefrom, produced and to be produced from the interests of
Grantor in said Mortgaged Properties, and to execute any release, receipt, division order, transfer
order and relinquishment or other instrument that may be required or necessary to collect and receive
such production or the proceeds therefrom and Grantor hereby authorizes and directs all pipeline
companies, gathering companies and others purchasing oil, gas or other mineral production from said
properties or having in their possession any production from said properties or the Proceeds
therefrom, to pay and deliver to the Noteholder all such production or proceeds therefrom accruing
Grantor agrees that all division orders, transfer orders, receipts and other instruments which the
Noteholder may from time to time execute and deliver for the purpose of collecting or receipting for
such production or the proceeds therefrom may be relied upon in all respects, and that the same shall
be binding upon Grantor, and Grantor's successors and assigns. Grantor agrees to execute and deliver
all necessary and appropriate instruments, including transfer and division orders, which may be
required by the Noteholder in connection with the receipt by the Noteholder of such production or
the proceeds therefrom and to indemnify and keep and hold the Noteholder free and harmless from
all parties whomsoever having or claiming an adverse interest in said leases, properties and interests
and the production and proceeds therefrom, and in this respect agrees to pay all expenses, costs,
charges and feasonable attorneys' fees that may be incurred by the Noteholder as to any of said
matters.
(b) All amounts or proceeds hereafter payable to or to become payable to Grantor or to
which Grantor is entitled under all gas sales contracts, all oil, distillate or condensate sales contracts,
all gas transportation contracts, and all gas processing contracts relating to or now or hereafter to
become a part of the Mortgaged Properties.
(c) All amounts, sums, revenues and income which become payable to Grantor from any
of the Mortgaged Properties (including after-acquired properties) or under any contract, present or
future, relating to any gas pipeline system and processing plant or unit now or hereafter constituting
a part of the Mortgaged Properties.
The foregoing assignment of production, accounts, contract rights and proceeds relating to the
Mortgaged Properties shall be upon the following terms: (a) until receipt from Noteholder 0fa notice
of the occurrence of an event of default hereunder, Grantor shall have the right under a retained or
issued license (but limited as provided hereunder) to collect the production and proceeds from the
Mortgaged Properties, but after an event of default, Grantor's license shall automatically terminate
and be revoked and to the extent Grantor collects such production or proceeds relating to the
Mortgaged Properties, Grantor covenants to hold all such production and proceeds in trust for the
use and benefit of Lender. After a receipt of notice of an event of default, Grantor hereby authorizes
and directs that all such pipeline companies, purchasers, transPorters and other parties owing moneys
to Grantor under contracts herein assigned, pay such amounts direct to the Noteholder as follows:
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Rock Creek Ranch I, Ltd.
Attn: Russell Gordy
1331 Lamar, Suite 501
Houston, Texas 77010
and such authorization shall continue until this Mortgage is released. The Noteholder is authorized
to collect, receive and receipt for all such amounts and no party making payment shall have any
responsibility to see to the application of any funds paid to the Noteholder, but shall be fully protected
in making such payment to the Noteholder under the assignments herein contained. Should the
Noteholder bring suit against any third party for collection of any amounts or sums included within
this assignment (and the Noteholder shall have the right to bring any such suit) it may sue either in
its own name or in the name of Grantor.
The office where the records of Grantor with respect to the accounts and contracts rights concerning
the Mortgaged Properties are kept is located at the address shown opposite the signature of Grantor
to this Mortgage, and Grantor agrees that the place at which such records are kept will not be
changed without the prior written notice to the Noteholder. :
3.2 Independent of the foregoing provisions and authorities herein granted, Grantor agrees to
execute and deliver any and all transfer orders, payment orders, division orders and other instruments
that may be requested by the Noteholder or that may be required by any purchaser of the production
from any of the Mortgaged Properties for the purpose of effectuating payment to the Noteholder of
the proceeds of Hydrocarbon sales to the Noteholder. If under any existing sales agreements, other
than division orders or transfer orders, any proceeds of Hydrocarbon sales are required to be paid by
the purchaser to Grantor so that Under such existing agreement payment of such proceeds of
Hydrocarbon sales cannot be made to the Noteholder, Grantor's interest in all proceeds of
Hydrocarbon sales under such sales agreements and in all other proceeds of Hydrocarbon sales which
for any reason may be paid to Grantor shall, when received by Grantor, constitute trust funds in
Grantor's hands and shall be immediately paid over to the Noteholder.
3.3 Grantor authorizes and empowers the Noteholder t° receive, hold and collect all sums of
money paid to the Noteholder in accordance with this assignment and to apply the same as is
hereinafter provided, all without any liability or responsibility on the part of the Noteholder, save as
to good faith in so receiving and applying said sums. All payments provided for in this assignment
shall be paid promptly to the Noteholder, and applied pursuant to the terms of the Credit Agreement.
It is understood and agreed that should said payments provided for by this assignment be less than
the sum or sums then due on said indebtedness, such sum or sums then due shall nevertheless be
payable by Grantor in accordance with the provisions of the note or notes or other instrument or
instruments evidencing said indebtedness and neither this assignment nor any provision herein
contained shall in any manner be construed to affect the terms and provisions of said note or notes
or other instrument or instruments. Likewise, neither this assignment nor any provision herein
contained shall in any manner be construed to affect the lien, rights and remedies herein granted
securing said indebtedness, nor Grantor's liability therefor. The rights under this assignment are
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cumulative of the other rights, remedies and powers granted under this Mortgage and are cumulative
of any other security which the Noteholder now holds or may hereafter hold to secure the payment
of said indebtedness.
3.4 If a default has Occurred and is continuing, should any person now or hereafter purchasing
or taking oil, gas, other hydrocarbons or other minerals attributed to the Mortgaged Properties fail
to make payment promptly to the Noteholder of the hereby assigned proceeds of Hydrocarbon sales,
the Noteholder shall have the right to make, or to require Grantor to make, a change of connection
and the right to designate or approve the purchaser with whose facilities a new connection shall be
made, without liability or responsibility in connection therewith, so long as ordinary care is used in
making such designation, and Grantor agrees to pay to the Noteholder the amount of any proceeds
of Hydrocarbon sales not promptly paid to the Noteholder by any person having responsibility for
payment thereof, provided, however, Noteholder shall only require the change of purchaser if such
change would not cause a breach of Grantor's obligation to an existing purchaser under an existing
contract as of the date hereof.
3.5 The Lender and Noteholder and their successors and assigns are hereby absolved from all
liability for failure to enforce collection of the proceeds of hydrocarbon sales and from all other
responsibility in connection therewith, except the responsibility to account to Grantor for funds
actually received pursuant to the Credit Agreement. Grantor agrees to indemnify and hold harmless
the Lender, Noteholder and the Trustee against any and all liabilities, actions, claims, judgments,
costs, charges and attorneys' fees by reason of the assertion that Trustee, Lender or Noteholder
received with respect to the Mortgaged Properties or for Grantor's account either before or after
payment in full of the Secured Indebtedness funds from the production ofoil, gas, other hydrocarbons
or other minerals claimed by third persons, and if Grantor fails to do so within 20 days after written
· notice from the Noteholder, the Lender, Noteholder and the Trustee shall each have the right to
defend against any such claims or,actions, employing attorneys of their own selection, and if not
furnished with indenmity satisfactory to them, they 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 Lender, Noteholder or the Trustee in compromise; satisfaction or discharge
of any such claim, action or judgment, and all court costs, attorneys' fees and other expenses of every
character incurred by the Trustee, Lender or the Noteholder pursuant to the provisions of this section
shall be part of the Obligations under the Credit Agreement owing by Grantor, shall bear interest from
date of expenditure until paid at the Interest Rate (as defined in the Credit Agreement), and shall be
a part of the Secured Indebtedness. Notwithstanding the foregoing, nothing contained herein shall
be deemed to require Grantor to indemnify Lender or Noteholder for its willful misconduct or gross
negligence or breach by Lender or Noteholder of the provisions of the Security Documents or any
documents or instruments executed in connection with the Security Documents.
3.6 Nothing herein contained shall detract from or limit the absolute obligation of Grantor to
make prompt payment of the Notes, of all amounts owing thereon, and of all amounts owing
hereunder at the time and in the manner provided in the Notes, the Credit Agreement or provided
herein, regardless of whether the proceeds herein assigned are sufficient to pay the same, and the
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rights under this assignment shall be cumulative of all other security of any and every character now
or hereafter existing to secure the payment of the Notes and all other Secured Indebtedness.
ARTICLE IV.'
Waiver and Partial Release
4.1 The Noteholder may at any time and from time to time in writing:
(a) Waive compliance by Grantor with any covenant herein made by Grantor to the extent
and in ~the manner specified in such writing;
(b) Consent to Grantor's doing any act which hereunder Grantor is prohibited from doing,
or to Grantor's failing to do any act which hereunder Grantor is required to do, to the extent and in
the manner specified in writing; or
(c) Release any part of the Mortgaged Properties, or any interest therein, or any proceeds
of Hydrocarbon sales from the lien of this Mortgage, without the joinder of the Trustee.
No such act by Noteholder shall in any way impair the rights of the Noteholder hereunder except to
the extent specifically agreed to by the Noteholder in such writing.
4.2 The lien and other security rights of the Noteholder hereunder shall not be impaired by any
indulgence, including but not limited to:
(a) . Any forbearance, renewal, extension or modification (whether one or more) which the
Noteholder may grant with respect to any Secured Indebtedness; or
(b) Any surrender, compromise, release, renewal, extension, exchange or substitution
which the Noteholder may grant in respect of any item of the Mortgaged Properties or any part
thereof or any interest therein, or any of the prOceeds of Hydrocarbon sales, or
(c) Any release or indulgence granted to any endorser, guarantor or surety of any Secured
Indebtedness.
ARTICLE V.
Possession Until Default, Defeasance
5.1 Unless a default specified in Section 6.1 hereof shall occur and be continuing, Grantor shall
retain full right to the Mortgaged Properties subject, however, to all of the terms and provisions of
this Mortgage.
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.!.61
5.2 If all of the Secured Indebtedness be paid as the same become due and payable and if the
covenants, warranties, undertakings and agreements made in this Mortgage are kept and performed,
then and in that event only all rights under this Mortgage shall terminate and the properties hereby
conveyed shall become wholly clear of the liens, conveyances and assignments evidenced hereby, and
such liens shall be released by the Noteholder in due form at Grantor's cost.
ARTICLE VI.
Remedies in Event of Default
6.1 The term "default" as used in this Mortgage shall mean the occurrence of any of the following
events:
(a) Grantor fails to pay the Secured Indebtedness when the same is due and payable,
Whether at a date for the payment ora fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise;
(b)
hereof;
Grantor fails to observe, perform or comply with any covenant set forth in Article II
(c) Any representation or warranty made by Grantor in Article II herein shall prove to be
false or incorrect in any material respect on any date on or as of which made;
(d) Subject to the Permitted Encumbrances, Lender shall at any time not have a perfected
first lien security interest on the Mortgaged Properties;
(e) Grantor:
(i) has entered against it a judgment, decree or order for relief by a court of
competent jurisdiction in an involuntary proceeding commenced under any applicable
bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time amended, or has
any such proceeding commenced against it which remains undismissed for a period
of sixty days (60); or
(ii) commences a voluntary case under any applicable bankruptcy, insolvency or
similar law now or hereafter in effect, including the federal Bankruptcy Code, as from
time to time amended; or applies for or consents to the entry of an order for relief in
an involuntary case under any such law; or makes a general assignment for the benefit
of creditors; or fails generally to pay (or admits in writing its inability to pay) debts
as such debts become due; or takes any action to authorize any of the foregoing; or
(iii) Suffers the appointment of or taking possession by a receiver, liquidator,
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assignee, custodian, trustee, sequestrator or similar official of all or a substantial part
of its assets or of any part of the Mortgaged Properties in a proceeding brought
against or initiated by it, and such appointment or taking possession is neither made
ineffective nor discharged within sixty (60) days after the making thereof, or such
appointment or taking possession is at any time consented to, requested by or
acquiesced to by it.
6.2 (a) If an event of default shall occur and be continuing, the Mortgagee shall have the right
and option to proceed with foreclosure and to sell, to the extent permitted by law, all or any portion
of the Mortgaged Property at one or more sales, as an entirety or in parcels, at such place or places
and otherwise in such manner and upon such notice as may be required by applicable law or, in the
absence of any such requirements, as the Mortgagee may deem appropriate, and to make conveyance
to the purchaser or purchasers.
(b) With regard to any part of the Mortgaged Property located in the State of Wyoming,
it is agreed that the appraisement of any such properties is expressly waived at the option of the
Mortgagee, and any such option may be exercised prior to the time judgment is rendered in any
foreclosure hereon. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A
POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED'
PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE. It is the
intent of the parties that the provisions herein relating to the power of sale granted herein are to be
subject to the applicable provisions of the laws of the State of Wyoming. Additionally, it is the intent
of the parties that the power of sale granted herein may be exercised by Mortgagee pursuant to the
terms and provisions of the applicable laws of the State of Wyoming.
(c) Notwithstanding any other provision of this Section 6.2, if any of the Secured
Indebtedness shall become due and payable and shall not be promptly paid, Mortgagee shall have the
right and power to proceed by a suit or suits in equity or at law, whether for the specific performance
of any covenant or agreement herein contained or in aid of the execution of any power herein granted,
or for any foreclosure hereunder or for the sale of the Mortgaged Property under the judgment or
decree of any court or courts of competent jurisdiction, or for the appointment of a receiver pending
any foreclosure hereunder or the sale of the Mortgaged Property under the order of a court or courts
of competent jurisdiction or under executory or other legal process, or for the enforcement of any
other appropriate legal or equitable remedy. Any money advanced by Mortgagee in connection with
any such receivership shall be a demand obligation (which obligation Grantor hereby expressly
promises to pay) owing by Grantor to Mortgagee and shall bear interest from the date of making
such advance by Mortgagee until paid at the Default Rate.
(d) Notwithstanding any other provision, Mortgagee shall also have the option to proceed
with foreclosure in satisfaction of any installments of the Secured Indebtedness Which have not been
paid when due either through the courts or by proceeding with foreclosure in satisfaction of the
matured but unpaid portion of the Secured Indebtedness as if under a full foreclosure, conducting the
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163
sale as herein provided and without declaring the entire principal balance and accrued interest due;
such sale may be made subject to the unmatured portion of the Secured Indebtedness, and any such
sale shall not in any manner affect the unmatured portion of the Secured Indebtedness, but, as to sUch
unmatured portion of the Secured Indebtedness, this Mortgage shall remain in full force and effect
just as though no sale had been made hereunder. It is further agreed that several sales may be made
hereunder without exhausting the right of sale for any unmatured part of the Secured Indebtedness,
it being the purpose hereof to provide for a foreclosure and sale of the security for any matured
portion of the Secured Indebtedness without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion'ofthe Secured Indebtedness.
(e) The Mortgaged Property may be sold in one or more parcels and in such manner and
order as Mortgagee, in his sole discretion, may elect, it being exPressly understood and agreed that
the right of sale arising out of any Event of Default shatl not be exhausted by any one or more sales.
(f) Grantor agrees to the full extent that it lawfully may, that, in case one or more of the
events of default shall have occurred and shall not have been remedied, then, and in every such case,
Mortgagee shall have the right and power to enter into and upon and take possession of all or any
part of the Mortgaged Property in the Possession of Grantor, its successors or assigns, or its or their
agents or servants, and may exclude Grantor, its successors or assigns, and all persons claiming under
Grantor, and its or their agents or servants wholly or partly therefrom. All costs, expenses and
liabilities of every character incurred by Mortgagee in adn~inistering, managing, operating, and
controlling the Mortgaged Property shall constitute a demand obligation (which obligation Grantor
hereby expressly promises to pay) owing by Grantor to Mortgagee and shall bear interest from date
of expenditure until paid at the interest rate set forth in the Note, all of Which shall constitute a
portion of the Secured Indebtedness and shall be secured by this Mortgage and all other Security
Instruments.
(g) Every right, power and remedy herein given to Mortgagee shall be cumulative and in
addition to every other night, power and remedy herein specifically given or now or hereafter existing
in equity, at law or by statute (including specifically those granted by the UCC in effect and applicable
to the Mortgaged Property for any portion thereof) each and every right, power and remedy whether
specifically herein given or otherwise existing may be exercised from time to time and so often and
in such order as may be deemed expedient by Mortgagee, and the exercise, or the beginning of the
exercise, of any Such right, power or remedy shall not be deemed a waiver of the night to exercise,
at the same time or thereafter any other right, power or remedy. No delay or omission by Mortgagee
in the exercise of any right, power or remedy shall impair any such right, power or remedy or operate
as a waiver thereof or of any other right, power or remedy then or thereafter existing.
(h) Neither Grantor, nor any guarantor or any other person hereafter obligated for
payment of all or any part of the Secured Indebtedness shall be relieved of such obligation by reason
of (a) the failure of Mortgagee to comply with any request of Grantor, or any guarantor or any other
person so obligated, to foreclose the lien of this Mortgage or to enforce any Provision hereunder;
(b) the release, regardless of consideration, of the Mortgaged Property or any portion thereof or
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interest therein or the addition of any other property to the Mortgaged Property; (c) any agreement
or stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending,
renewing, rearranging or in any other way modifying the terms of this Mortgage without first having
obtained the consent of, given notice to or paid any consideration to Mortgagor, any guarantor or
such other person, and in such event Grantor, guarantor and all such other persons shall continue to
be liable to make payment according to the terms of any such extension or modification agreement
unless expressly released and discharged in writing by Mortgagee; or (d) by any other act or
occurrence save and except the complete payment of the Secured Indebtedness and the complete
fulfillment of all obligations hereunder.
(i) Mortgagee may release, regardless of consideration, any part of the Mortgaged
Property without, as to the remainder, in any way impairing, affecting, subordinating or releasing .the
lien or security interest created in or evidenced by this Mortgage or its stature as a first and prior lien
and security interest in and to the Mortgaged Property, and without in any way releasing or
diminishing the liability of any person or entity liable for the repayment of the Secured Indebtedness.
For payment of the Secured Indebtedness, Mortgagee may resort to any other security therefor held
by Mortgagee in such order and manner as Mortgagee may elect.
(j) To the fullest extent permitted by law, Grantor hereby irrevocably and unconditionally
waives and releases: (a) all benefits that might accrue to Grantor by virtue of any present or future
moratorium law or other law exempting the Mortgaged Property from attachment, levy or sale on
execution or providing for any appraisement, valuation, stay of execution, exemption from civil
process, redemption or extension of time for payment; (b) all notices of any Event of Default or of
Mortgagee's intention to accelerate maturity of the Secured Indebtedness or of his election to exercise
(or his actual exercise of) any right, remedy or recourse provided for hereunder; and (c) any right to
a marshaling of assets or a sale in inverse order of alienation. If any law referred to in this Mortgage
and now in force, (of which Grantor or its successor or successors might take advantage despite the
provisions hereof), shall hereafter be repealed or cease to be in force, such law shall thereafter be
deemed not to constitute any part of the contract herein contained or to preclude the operation or
application of the provisions hereof.
(k) In case Mortgagee shall have proceeded to invoke any right, remedy or recourse
permitted hereunder and shall thereafter elect to discontinue or abandon same for any reason,
Mortgagee shall have the unqualified right so to do and, in such an event, Grantor and Mortgagee
shall be restored to their former positions with respect to the Secured Indebtedness, this Mortgage,
the Mortgaged Property and otherwise, and the rights, remedies, recourses and powers of Mortgagee
shall continue as if same had never been invoked.
(1) The proceeds of any sale of the Mortgaged Property or any part thereof and all other
monies received by Mortgagee through any proceedings for the enforcement hereof or otherwise,
whose application has not elsewhere herein been specifically provided for, shall be applied:
FIRST, to the payment of all expenses incurred by Mortgagee incident to the enforcement of
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this Mortgage or any of the Secured Indebtedness (including, without limiting the generality
of the foregoing, expenses of any entry or taking of possession, of any sale, of advertisement
thereof and of conveyances, and court costs, compensation of agents and employees, legal
fees and a reasonable commission to the Trustee acting), and to the payment of all other
'charges, expenses, liabilities and advances incurred or made by Mortgagee under this
Mortgage or in executing any power hereunder; '
SECOND, to payment of the Secured Indebtedness in such order and manner as Mortgagee
may elect; and
THIRD, to Mortgagor or as otherwise required by any Governmental Requirement.
(m) In connection with any action taken by .Mortgagee pursuant to this mortgage,
Mortgagee and employees, representatives, agents, attorneys, accountants and experts ("Indemnified
Parties") shall not be liable for any loss sustained by GrantOr resulting from an assertion that
Mortgagee has received funds from the production of Hydrocarbons claimed by third persons or any
act or omission of any Indemnified Party in administering, managing, operating or controlling the
Mortgaged Property including any such loss which may result from the ordinary negligence of an
Indemnified Party unless such loss is caused by the willful misconduct and bad faith of an Indemnified
Party, nor shall Mortgagee be obligated to perform or discharge any obligation, duty or liability of
Grantor. Grantor shall and does hereby agree to indemnify each Indemnified Party for, and to hold
each Indemnified Party harmless from, any and all liability, loss or damage which may or might be
incurred by any Indemnified Party by reason of this Mortgage or the exercise of rights or remedies
hereunder; should Mortgagee make any expenditure on account of any such liability, loss or damage,
the amount thereof, including costs, expenses and reasonable attorneys' fees, shall be a demand
obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Grantor to
Mortgagee and shall bear interest from the date expended until paid at the Interest Rate, shall be a
part of the indebtedness and shall be secured by this Mortgage and any other security instrument.
Mortgagor hereby assents to, ratifies and confirms any and all actions of Mortgagee with respect to
the Mortgaged Property taken under this Mortgage. The liabilities of the Grantor as set forth in this '
subsection 6.2(m) shall survive the termination of this Mortgage.
ARTICLE VII.
Security Agreement
7.1 Without limiting any of the provisions of this instrument, Grantor (referred to in this Article
as "Debtor", whether one or more), expressly GRANTS unto the Noteholder (referred to in this
Article as "Secured Party",_whether one or more), a security interest in all the Mortgaged Properties
hereinabove described (including both those now and those hereafter existing) to the full extent that
such properties may be subject to the Uniform Commercial Code of the state or states where such
properties are situated (the "Uniform Commercial Code"). The security interest granted hereby also
covers and includes all contract rights, equipment, inventory, general intangibles and accounts with
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respect to said properties and all products and proceeds of said properties (said properties, contract
rights, equiPment, inventory, general intangibles, accounts, products and proceeds thereof being
hereinafter collectively referred to as the "Collateral" for the purposes of this paragraph). Debtor
covenants and with Secured Party that:
(a) In addition to and cumulative of any other remedies granted in this instrument to
Secured Party or the Trustee, Secured Party may, in event of default, proceed under said Uniform
Commercial Code as to all or any part of the Collateral and shall have and may exercise with respect
to the Collateral all the rights, remedies and powers of a secured party after default under said
Uniform Commercial Code, including, without limitation, the right and power to sell, at public or
private sale or sales, or otherwise dispose of, lease or utilize the Collateral and any part or parts
thereof in any manner authorized or permitted under said Uniform Commercial Code after default by
a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorneys'
fees and legal expenses thereby incurred by Secured Party, and toward payment of the Secured
Indebtedness in such order or manner as Secured Party may elect.
(b) Upon a default, Secured Party shall have the right (without limitation, subject to said
Uniform Commercial Code) to take possession of the Collateral and to enter upon any premises
where same may be situated for such purpose without being deemed guilty of trespass and without
liability for damages thereby occasioned, and to take any action deemed necessary or appropriate or
desirable by Secured Party, at its option and in its discretion, to repair, refurbish or otherwise prepare
the Collateral for Sale, lease or other use or disposition as herein authorized.
(c) To the extent permitted by law, Debtor expressly waives any notice of sale or other
disposition of the Collateral and any other right or remedies ora debtor or formalities prescribed by
law relative to sale or disposition of the Collateral or exercise of any other right or remedy of Secured
Party existing after default hereunder; and to the extent any such notice is required and cannot be
waived, Debtor agrees that if such notice is mailed, postage prepaid, to Debtor at the address shown
with debtor's signature hereinbelow at least ten days before the time of the sale or dispositionl such
notice shall be deemed reasonable and shall fully satisfy any requirement for giving of said notice.
(d) Secured Party is expressly granted the right to receive the monies, income, proceeds
or benefits attributable or accruing to the Collateral and to hold the same as security for the Secured
Indebtedness or to apply it on the principal and interest or other amounts owing on any of the
Secured Indebtedness, whether or not then due, in such order or manner as Secured Party may elect.
All rights to marshaling of assets of Debtor, including any such right with respect to the Collateral,
are hereby waived.
(e) All recitals in any instrument of assignment or any other instrument executed by
Secured Party incident to sate, transfer, assignment, lease or other disposition or utilization of the
Collateral or any part thereof hereunder shall be prima facie evidence of the matter stated therein, no
other proof shall be required to establish full legal propriety of the sale or other action or of any fact,
condition or thing incident thereto, and all prerequisites of such sale or other action and of any fact,
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condition or thing incident thereto shall be presumed to have been performed Or to have occurred.
(f) Upon acceleration of the Secured Indebtedness, Secured Party may require Debtor
to assemble the Collateral that is not located on the lands covered by the Leases and make it available
to Secured Party at a place to be designated by Secured Party that is reasonably convenient to both
partiesl All expenses of retaking, holding, preparing for sale, lease or other use or disposition, selling,
leasing or otherwise using or disposing of the Collateral and the like which are incurred or paid by
Secured Party as authorized or permitted hereunder, including also all attorneys' fees, legal expenses
and costs, shall be added to the indebtedness secured by this instrument, and Debtor shall be liable
therefor.
(g) Should Secured Party elect to exercise its right under said Uniform Commercial Code
as to part of the persona} property and fixtures described herein, this election shall not preclude
Secured Party or the Trustee from exercising the rights and remedies granted by the preceding
Paragraphs of this instrument as to the remaining personal property and fixtures.
(h) Secured Party may, at its election, at any time after delivery of this instrument, sign
one or more copies hereof in order that such copies may be used as a fmancing statement under said
Uniform Commercial Code. Such signature by Secured Party may be placed between the last sentence
of this instrument and the Debtor's acknowledgment or may follow the Debtor's acknowledgment.
Secured Party's signature need not be acknowledged and is not necessary to the effectiveness hereof
as a deed of trust, mortgage, assignment, pledge or security agreement.
7.2 (a) Any copy of this instrument which is signed by Secured Party may also serve as a
financing statement under said Uniform Commercial Code between the Debtor, whose address is
designated with its signature, and the SECURED PARTY, WHOSE ADDRESS IS TWO
HOUSTON CENTER, 1331 LAMAR, SUITE 501, HOUSTON, TEXAS 77010.
(b) So long as any amount remains unpaid on the Secured Indebtedness and except as
allowed as a Permitted Encumbrance, Debtor will not execute and there will not be filed in any public
office any financing statement or statements affecting the Collateral other than financing statements
in favor of Secured Party hereunder, unless the prior written specific consent and approval of Secured
Party shall have first been obtained.
(c) Secured Party is authorized to file, in any jurisdiction where Secured Party deems it
necessary, a financing statement or statements, and at the request of Secured Party, Debtor will join
Secured Party in executing one or more financing statements pursuant to said Uniform Commercial
Code in form satisfactory to Secured Party, and will pay the cost of filing or recording this
instrument, as a financing statement, in all public offices at any time and from time to time whenever
filing or recording of any financing statement or of this instrument is deemed by Secured Party to be
necessary or desirable.'
(d) The office where the records of Debtor with respect to the Collateral and the
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168
MOrtgaged Properties are kept is located at the address shown opposite the signature of Debtor to
this Mortgage, and Debtor agrees that the place at which such records are kept will not be changed
without the prior written consent of the Noteholder.
Debtor further warrants and represents to Secured Party that, except for the security interest
granted hereby in the Collateral and other claims previously disclosed in writing to Secured Party,
Debtor is the owner and holder of the Collateral, free of any adverse claim, security interest or
encumbrance, and Debtor agrees to defend the Collateral against all claims and demands of any
person at any time claiming the same or any interest therein. Debtor further warrants and represents
that it has not heretofore signed any financing statement and no financing statement signed by Debtor
is now on file in any public office except those statements true and correct copies of which have been
delivered to Secured Party.
ARTICLE VIII.
Concerning the Trustee
8.1 The Trustee may resign by an instrument in writing addressed to the Noteholder. The Trustee
or any successor or substitute Trustee may be removed at any time with or without cause by an
instrument in writing executed by the Noteholder and such power of removal may be exercised as
frequently and at such times as the Noteholder may elect. In case of the absence, death, resignation
or removal of the Trustee, or the inability, failure, or refusal of the Trustee to act, a successor or
substitute Trustee may be appointed by the Noteholder by instrument complying with any applicable
requirements of law, and in the absence of any such requirement, without other formality than
appointment and designation in writing executed by the Noteholder. Such right to appoint a substitute
Trustee shall exist and may be exercised as often and whenever the Noteholder may elect. Such
· appointment and designation shall be full evidence of the right and authority to make the same and
of all facts therein required, and upon the making of any such appointment and designation, all of the
estate and title of the Trustee in the Mortgaged Properties shall vest in the named successor Trustee
and he Shall thereupon succeed to, hold, possess and exercise all the rights, powers, privileges,
immunities and duties herein conferred upon the Trustee. All references herein to the Trustee shall
be deemed to refer to the Trustee (including any successor appointed and designated as herein
provided) from time to time acting hereunder.
If no successor Trustee shall have been appointed as contemplated by the foregoing provisions
in this Section, or if appointed shall not have accepted the appointment, within thirty (30) days after
the occurrence of a vacancy in the office of the Trustee, the Noteholder or such retiring Trustee may
apply to any court of competent jurisdiction to appoint a successor Trustee or Trustees.
8.2 Any Trustee from time to time serving hereunder shall have the absolute right, acting
independently, to take any action and to exercise any right, remedy, power or privilege conferred
upon the Trustee, and any action taken by any Trustee from time to time serving hereunder shall be
binding upon all other Trustees and no person dealing with any Trustee from time to time serving
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169
hereunder shall be obligated to confirm the power and authority of such Trustee to act without the
concurrence of the other Trustees.
8.3 The Trustee shall not be required to take any action for the enforcement of this instrument
or the exercise of any rights or remedies hereunder or to appear in or defend any action, suit or other
proceeding in connection therewith, where, in the opinion of the Trustee, such action will be likely
to involve him in expense or liability, unless the Trustee be tendered security and indemnity
satisfactory to him, against cost, expense or liability in connection therewith.
8.4 It shall be no part of the duty of the Trustee to see to any recording, filing or registration of
this instrument or any other instrument supplemental hereto, or to see to the payment of or be under
any duty in respect of any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Properties or against Grantor or to see to the performance or observance
by Grantor of any of the covenants or agreements herein contained. The Trustee shall not be
responsible for the execution, acknowledgment or validity of this instrument or of any instrument
supplemental hereto or of the Notes, or for the sufficiency of the security purported to be created
hereby, and makes no representation in respect thereof or in respect of the rights of the holder of the
Notes. The Trustee shall have the right to consult with counsel upon any matters arising hereunder,
and shall be fully protected in relying as to legal matters on the advice of the counsel. The Trustee
shall not incur any personal liability hereunder except for his own gross negligence or willful
misconduct; and the Trustee shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by him .hereunder, believed by him
in good faith to be genuine.
ARTICLE IX.
Miscellaneous
9.1 This instrument is a deed of trust and mortgage of both real and personal property, a security
agreement, a financing statement and an assignment, and also covers proceeds and fixtures.
9.2 All options and rights of election herein provided for the benefit of the Noteholder are
continuing, and the failure to exercise any such option or right of election upon a particular default
or breach or upon any subsequent default or breach shall not be construed as waiving the right to
exercise such option or election at any later date. By the acceptance of payment of any indebtedness
secured hereby after its due date, the Noteholder does not waive the right either to require prompt
payment when due of all other sums so secured or to regard as a default failure to pay any other sums
due which are secured hereby. No exercise of the rights and powers herein granted and no delay or
omission in the exercise of such rights and powers shall be held to exhaust the same or be construed
as a waiver thereof, and every such right and power may be exercised at time and from time to time.
9.3 No release of any part of the Mortgaged Properties shall in anywise alter, vary or diminish
the force, effect or lien of this instrument on the balance of Mortgaged Properties.
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9.4 Any provision contained herein or in the Notes or in any other instrument evidencing or
relating to any Secured Indebtedness to the contrary notwithstanding, neither Lender nor any
Noteholder nor the holder of any other Secured Indebtedness shall be entitled to receive or collect,
nor shall Grantor be obligated to pay, interest on any of the Secured Indebtedness in excess of the
maximum rate of interest permitted by applicable law, and if any provision of the Notes or of any
other such instrument shall ever be construed or held to permit the collection or to require the
payment of any amount of interest in excess of that permitted by applicable law, the provisions of this
section shall control and shall override any contrary or inconsistent provision of the Notes or other
instrument.
9.5 Any notice, request, demand or other instrument which may be required or permitted to be
given or furnished to or served upon Grantor shall be addressed to it at its address set forth below,
or such other address as Grantor may furnish to the Trustee or the Noteholder in writing. Notices to
the Trustee and the Noteholder shall be deemed to have been properly given if delivered in like
fashion to them at ROCK CREEK RANCH I, LTD., 1331 LAMAR, SUITE 501, HOUSTON,
TEXAS 77010, ATTENTION: RUSSELL GORDY, or at such other address as the Trustee or the
Noteholder may furnish to Grantor in writing.
9.6 Renewals and extensions of the Secured Indebtedness maybe given at any time and
amendments may be made to this Mortgage and other agreements relating to any of the Secured
Indebtedness or the Mortgaged Properties and/or such properties may at any time be released or
partially released and/or the Noteholder may take or hold other security for the Secured Indebtedness
without notice to or joinder or consent of any persons hereafter acquiring any interest in the
Mortgaged Properties. The Trustee or the Noteholder may resort first to such other security or any
part thereof or first to the security herein given or any part thereof, or from time to time: to either or
both, even to the partial or complete abandonment of either security, and such action shall not be a
waiver of any nights conferred by this instrument, which shall continue as a first lien upon all of the
Mortgaged Properties not expressly released until the Secured Indebtedness is fully paid.
9.7 If any provision hereof or the Notes. is invalid or unenforceable in anyjurisdiction, the other
provisions hereof or of the Notes shall remain in full force and effect in such jurisdiction, and the
remaining provisions hereof shall be liberally construed in favor of the Trustee, Lender and the
Noteh°lder in order to effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in anyj urisdiction shall not affect the validity or enforceability of any such provision
in any other jurisdiction; provided that if the term determined to be illegal or unenforceable naturally
changes the economic rights or position of either party, the parties shall negotiate an amendment
necessary to render this Agreement consistent with the original intent of the parties.
9.8 Lender and Trustee shall at all times have the right to assign and/or transfer any and all of
their rights and privileged under this Mortgage provided no assignment shall be binding upon Grantor
until Grantor receives written notice of such assignment. All of the terms, provisions, covenants and
conditions hereof shall be binding upon Grantor, and the successors and assigns of Grantor and the
.Noteholder and successors and assigns of Noteholder, and shall inure to the benefit of the Trustee
WSR659\00\deed of trust WY001.wPd
23
and the Noteholder and their respective successors and assigns and Grantor's covenants shall
constitute covenants running with the lands covered by the Mortgaged Properties, but this provision
shall not be construed to authorize any sale or other disposition of the Mortgaged Properties contrary
to any other provisions hereof.
9.9 The Mortgage may be executed in multiple counterparts, each of which is deemed to be an
original for all purposes although all such executed copies shall evidence and constitute one and the
same Mortgage; provided that it shall never be necessary for Noteholder or Trustee to produce more
than one fully executed counterpart with all divisions to prove the existence of all such counterparts.
The counterpart recorded in a particular jurisdiction may have attached to it only the division or
subdivisions of the exhibit that contain descriptions of Mortgaged Properties located in such
Jurisdiction. Whenever a recorded counterpart of the Mortgage contains less than all of the divisions,
the descriptions contained in the omitted divisions are hereby incorporated into said recorded
counterpart by reference.
9.10 The term "Grantor" herein used shall mean and include the limited partnership executing this
instrument, and its successor in interest in the Mortgaged Properties. The number and gender of
pronouns used in referring to Grantor shall be construed to mean and correspond with the number
and gender of the individuals and/or corporations executing this instrument as Grantor, and, further,
the term "Grantor" herein used shall mean and include both all of the parties executing this instrument
as Grantor as well as any single one or more of them.
9.11 This MOrtgage shall be governed by and construed and interpreted under the laws of the State
of Texas (without giving effect to conflicts of laws principles), except to the extent that the laws of
the State Where the Mortgaged ProPerties are located shall be mandatorily applicable.
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24
]72
IN WITNESS WHEREOF, the undersignedhave caused this instrument to be executed by their duly
authorized undersigned officers effective as of August 28, 2001 (the "Effective Date").
"GRANTOR" and "DEBTOR"
SEQUOYAH RESOURCE PARTNERS, L.P.
By: Loco Resources, L.L.C.
Its: General Partner
Name: J.M. K
Title: Manager
This Deed of Trust, Mortgage, Assignment of production, Security Agreement and Financing
Statement is executed by the undersigned solely for the purpose of acknowledging and accepting the
benefits conferred on Lender mhd to evidence its agreement with the covenants of Lender set forth
herein.
"LENDER" and "MORTGAGEE" and "SECURED PARTY"
ROCK CREEK RANCH I, LTD.
By: Gordy Gas Corporation
Its: General Partner
BNYa:m e .., ~R~u s~/'rr~d/~
Title: President //
/
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25
173
ACKNOWLEDGMENT
STATE OF TEXAS §
COUNTY OF~l(~ §
Sworn and subscribed before me this /Sr~day of(_~A~ , 2002 by J.M. Kerr,
Manager of Loco Resources, LLC, a Texas hm~ted hablhty company, and general partner to
Sequoyah Resource Partners, L.P., a Texas limited partnership, on behalf of said partnership.
STATE OF TEXAS
·
COUNTY OF
Swo'rn and subscribed before me this~ dayof d~\q -,g00~byRussellGordy,
President of Gordy Gas Corporation, a Texas corporation, and general partner to Rock Creek Ranch
I, L.P., a Texas limited partnership, on behalf of said partnership.
Notary Public, State of Texas
?'~,*..~2: ?!;?.. MELISSA POTI
"'*:';~'-'*'i Notary Public, S',,e of Texas
!...2¢..~ My Commission Expires
May 23, 2007
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26
774
EXHIBIT A
ATTACHED TO AND FORMING A PART OF THE DEED OF TRUST, MORTGAGE,
ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT AND FINANCING
STATEMENT DATED AUGUST 28, 2001
PREAMBLE
This Exhibit A contains this Preamble and the specific description of the "Leases" comprising a
portion of the "Mortgaged Properties", as those terms are defined in the Deed of Trust, Mortgage,
Assignment of Production, Security Agreement and Financing Statement (the "Mortgage") to which
this Exhibit A is attached.
Divisions. This Exhibit A may be composed of several divisions and subdivisions--at least one
for each state and county or parish in each state in which any part of the Mortgaged
Properties is located in more than one county, the division hereof containing the description
of such oil, gas and mineral lease will generally include the relevant portion of each of the
counties in which any part of such oil, gas and mineral lease is located. Counties containing
portions of such multi-county leases ma'y therefore be covered by more than one division
of this Exhibit A. Each subdiTdsion is in turn composed of further subdivisionS--each one
covering one or more of the oil, gas and mineral leases included among the Mortgaged
Properties.
Counterparts. The Mortgage may be executed in multiple counterparts, each of which is
deemed to be an original for all purposes although all such executed copies shall evidence and
constitute one and the same Mortgage; provided that it shall never be necessary for
Noteholder or Trustee to produce more than one fully executed counterpart with all divisions
to prove the existence of all such counterparts. The counterpart recorded in a particular
county or parish may have attached to it only the division or subdivisions of this exhibit that
contain descriptions of Mortgaged Properties located in such county or parish. Whenever a
recorded counterpart of the Mortgage contains less than all of the divisions, the descriptions
contained in the omitted divisions are hereby incorporated into said recorded counterpart by
reference.
Definitions. For all purposes of this Exhibit A unless the context otherwise requires, the
hereinafter-identified terms have the following meanings:
"Net Revenue Interest" or "NRI" means (1) with respect to a Unit for which a Net Revenue Interest
is stated, that interest inthe applicable Hydrocarbons (as defined in the Mortgage) produced, saved
and sold from such unitized area which is afforded to Grantor by virtue of its ownership of the Leases
included in whole or in part in being the Township number, and the third number being the Range
number. The Township and Range numbers are followed by an N, S, E, or W to indicate whether the
Township or Range is North, South, East, or West, respectively; eg., T-2S, R-3W. Certain
W:kR659\00\deed of trust WY001 .wpd
27
descriptions merely .refer to the subdivision or survey in which the property is located in whole or in
part. In such cases, the recorded Leases and any amendments thereof and any other recorded
instruments affecting Grantor's title more particularly describe the land within such subdivision or
survey in which Grantor owns an interest, and the descriptions contained in such instruments are
incorporated herein by this reference. In the case of certain federal and state leases, the interests set
forth may be in the nature of either record, title or operating rights. The land description does not
necessarily signify that Grantor owns the entire interest in such Lease as to all of such Land or as to
all depth intervals. The statement of an Working Interest and a Net Revenue Interest for a Well or
Unit does not necessarily signify that Grantor owns the same applicable Lease or leases as to the areas
or depth intervals not attributable to the Well or Unit.
The statement of a Working Interest and a Net Revenue Interest with respect to a Well or Wells
signifies that Grantor owns that Working Interest and Net Revenue Interest in the Well or Wells with
respect to the intervals in which the Well or Wells are currently completed, and excludes a unitized
area or formation, if any, included within a Unit which is also described in this Exhibit A.
Each Well or Unit with respect to which the Working Interest and Net Revenue Interest of Grantor
is stated is described as follows: (i) each well is described by reference to the Well name given to the
Well in Grantor's records, which may or may not be the name stated in the records of the applicable
state or federal regulatory authority, and (ii) each Unit is described by the name by which such Unit
is referred to in Grantor's records, which may or may not be the name used (ifa name is used) in the
instrument creating such Unit.
The matters to which any Lease, well or Unit described in this Exhibit A are stated to be subject
within a given Prospect may burden any Lease, Well, or Unit described in this Exhibit within the same
Prospect.
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