Exhibit 10.8
MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
THIS MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND
ASSIGNMENT OF PRODUCTION (this "Mortgage") is from New Century Energy Corp., a
Colorado corporation, and Century Resources, Inc., a Delaware corporation,
together as Mortgagors (individually and together, "Mortgagors"), to ▇▇▇▇▇▇
Grin, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as Trustee ("Trustee") for the
benefit of LAURUS MASTER FUND, LTD., a Cayman Islands company ("Mortgagee"),
dated as of September 19, 2005 between Mortgagors and Mortgagee.
RECITALS
WHEREAS, pursuant to the terms of a Securities Purchase Agreement dated
September 19, 2005 between Mortgagors and Mortgagee as amended, modified, and
supplemented from time to time (the "Securities Purchase Agreement") and the
Related Agreements defined therein, Mortgagors are required to execute and
deliver this Mortgage pursuant to which, among other things, the Mortgaged
Property (defined below) is granted and assigned by Mortgagors to Mortgagee to
further secure the Secured Indebtedness (defined below).
NOW, THEREFORE, in consideration of the sum of $10.00 and other good and
valuable consideration, in hand paid by Mortgagee, the receipt and adequacy of
which are hereby acknowledged and confessed by Mortgagors, Mortgagors hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. For all purposes of this Mortgage, unless
the context otherwise requires:
"Accounts and Contract Rights" shall mean all accounts (including accounts
in the form of joint interest ▇▇▇▇▇▇▇▇ under applicable operating agreements),
contract rights and general intangibles of Mortgagors now or hereafter existing,
or hereafter acquired by, or on behalf of, Mortgagors, or Mortgagors' successors
in interest, relating to or arising from the ownership, operation and
development of the Mortgaged Property and to the production, processing,
treating, sale, purchase, exchange or transportation of Hydrocarbons (defined
below) produced or to be produced from or attributable to the Mortgaged Property
or any units or pooled interest units in which all or a portion of the Mortgaged
Property forms a part, together with all accounts and proceeds accruing to
Mortgagors attributable to the sale of Hydrocarbons produced from the Mortgaged
Property or any units or pooled interest units in which all or a portion of the
Mortgaged Property forms a part.
"Article" shall mean and refer to an Article of this Mortgage, unless
specifically indicated otherwise.
"Code" shall mean the Uniform Commercial Code in effect in each of the
jurisdictions where the Mortgaged Property or a portion thereof is situated.
"Credit Agreements" shall mean, collectively, the Securities Purchase
Agreement and the Related Agreements as defined therein and "Credit Agreement"
shall mean any one of the foregoing.
"Effective Date" shall mean September 19, 2005.
"Event of Default" shall mean the occurrence of any breach by Mortgagors of
any term or provision of this Mortgage or the occurrence of any Event of Default
under and as defined in the applicable Credit Agreement.
"Exhibit A" shall mean, unless specifically indicated otherwise, Exhibit A
attached hereto and incorporated herein by reference for all purposes.
"Gas Balancing Agreement" means any agreement or arrangement whereby
Mortgagors, or any other party having an interest in any Hydrocarbons to be
produced from mineral interests in which Mortgagors own an interest, have a
right or an obligation to take more or less than its proportionate share of
production therefrom.
"Hydrocarbons" shall mean oil, gas, coalbed methane gas, casinghead gas,
drip gasolines, natural gasoline, condensate, distillate, as-extracted
collateral and all other liquid or gaseous hydrocarbons produced or to be
produced in conjunction therewith, and all products, byproducts and all other
substances derived therefrom or the processing thereof, and all other minerals
and substances, including, but not limited to, sulphur, lignite, coal, uranium,
thorium, iron, geothermal steam, water, carbon dioxide, helium and any and all
other minerals, ores, or substances of value and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ
combustion of coal or lignite.
"June 2005 Credit Agreements" shall mean, collectively, the Securities
Purchase Agreement dated as of June 30, 2005 between Mortgagors and Mortgagee
(as amended, modified and supplemented from time to time) and the Related
Agreements as defined therein, and "June 2005 Credit Agreement" shall mean any
one or more of the foregoing.
"June 2005 Note" means the Secured Convertible Term Note dated June 30,
2005 made by Mortgagors in favor of Mortgagee, as amended, modified and
supplemented from time to time.
"Lands" shall mean the lands described in Exhibit A, shall include any
lands the description of which is incorporated in Exhibit A by reference to
another instrument or document, including, without limitation, all lands
described in the Oil and Gas Leases listed on Exhibit A hereto, and shall also
include any lands now or hereafter unitized, pooled, spaced or otherwise
combined, whether by statute, order, agreement, declaration or otherwise, with
lands the description of which is contained in Exhibit A or is incorporated in
Exhibit A by reference.
"Lien" shall mean any mortgage, deed of trust, collateral assignment, lien,
pledge, charge, security interest or other encumbrance.
"Loans" shall mean collectively, all amounts advanced by the Mortgagee to
Mortgagors under the Note and the Credit Agreements.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
assets, liabilities, financial condition, results of operations or prospects of
Mortgagors, (b) the right or ability of Mortgagors to fully, completely and
timely perform their obligations under the Credit Agreements, or (c) the
validity or enforceability of any Credit Agreement against Mortgagors, or the
rights or remedies of Mortgagee thereunder.
"Mortgaged Property" shall have the meaning stated in Article 2 of this
Mortgage.
"Net Revenue Interest" shall mean Mortgagors' share of all Hydrocarbons
produced from the Lands, after deducting the appropriate proportionate part of
all lessors' royalties, overriding royalties, production payments and other
payments out of or measured by production which burden Mortgagors' share of all
such production, subject to non-consent provisions contained in joint operating
agreements.
"Note" shall have the meaning set forth in the Credit Agreements.
"Obligations" shall mean all present and future indebtedness, obligations
and liabilities, and all renewals, refinancings and extensions thereof, or any
part thereof, of Mortgagors to Mortgagee arising pursuant to any of the Credit
Agreements, or arising pursuant to any commodity, interest rate, currency or
other swap, option, collar, futures contract or other contract pursuant to which
a Person ▇▇▇▇▇▇ risks related to commodity prices, interest rates, currency
exchange rates, securities prices or financial market conditions and any other
commodity price hedging agreements by and between Mortgagors and Mortgagee and
all interest accrued on any of the foregoing, and reasonable costs, expenses,
and attorneys' fees incurred in the enforcement or collection thereof,
regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several.
"Oil and Gas Leases" shall mean oil, gas and mineral leases, oil and gas
leases, oil leases, gas leases, other mineral leases, subleases, top leases, any
rights resulting in an ownership interest in Hydrocarbons and all operating
rights relating to any of the foregoing (whether operated by virtue of such
leases, or assignments or applicable operating agreements) and all other
interests pertaining to any of the foregoing, including, without limitation, all
royalty and overriding royalty interests, production payments and net profit
interests, production payments and net profit interests, mineral fee interests,
and all reversionary, remainder, carried and contingent interests relating to
any of the foregoing and all other rights therein which are described and/or to
which reference may be made on Exhibit A.
"Operation Equipment" shall mean all Personal Property and fixtures affixed
or situated upon all or any part of the Mortgaged Property, including, without
limitation, all surface or subsurface machinery, equipment, facilities or other
property of whatsoever kind or nature now or hereafter located on any of the
Lands which are useful for the production, treatment, storage or transportation
of oil or gas, including, but not by way of limitation, all oil ▇▇▇▇▇, gas
▇▇▇▇▇, water ▇▇▇▇▇, injection ▇▇▇▇▇, casing, tubing, rods, pumping units and
engines, Christmas trees, derricks, separators, gun barrels, flow lines, tanks,
gas systems (for gathering, treating and compression), water systems (for
treating, disposal and injection), power plants, poles, lines, transformers,
starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks and shipping facilities.
"Permitted Encumbrances" shall mean with respect to the Mortgaged
Property:
(a) Liens securing the obligations;
(b) minor defects in title which do not secure the payment of money
and otherwise have no material adverse effect on the value or operation of
the subject property, including, without limitation, easements,
rights-of-way, servitudes, permits, surface leases, and other similar
rights in respect of surface operations, and easements for pipelines,
streets, alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
properties of Mortgagors that are customarily granted in the oil and gas
industry;
(c) inchoate statutory or operators' Liens securing obligations for
labor, services, materials and supplies furnished for operations on the
Lands, which are not more than 60 days delinquent;
(d) mechanic's, materialman's, warehouseman's, journeyman's and
carrier's Liens, and other similar Liens arising by operation of law in the
ordinary course of business, securing obligations which are not more than
60 days delinquent;
(e) Liens for taxes or assessments not yet due or not yet delinquent,
or, if delinquent, that are being contested in good faith in the normal
course of business by appropriate action;
(f) lease burdens payable to third parties which are deducted in the
calculation of discounted present value in any reserve report delivered by
Mortgagors pursuant to the Credit Agreements, including, without
limitation, any royalty, overriding royalty, net profits interest,
production payment, carried interest or reversionary working interest; and
(g) Liens, charges and encumbrances upon Mortgagors' assets, other
than Proved Mineral Interests, which in the aggregate do not have a value
in excess of $50,000.
"Person" shall mean any individual, corporation, partnership, limited
liability company, association, trust, other entity or organization, or any
court or governmental department, commission, board, bureau, agency, or
instrumentality of any nation or of any province, state, commonwealth, nation,
territory, possession, county, parish, or municipality, whether now or hereafter
constituted or existing.
"Personal Property" shall mean that portion of the Mortgaged Property that
is personal property.
"Proved Mineral Interests" shall mean, collectively, Proved Producing
Mineral Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped
Mineral Interests.
"Proved Nonproducing Mineral Interests" shall mean all Subject Interests
which constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" shall mean all Subject Interests which
constitute proved developed producing reserves.
"Proved Undeveloped Mineral Interests" shall mean all Subject Interests
which constitute proved undeveloped reserves.
"Section" shall mean and refer to a section of this Mortgage, unless
specifically indicated otherwise.
"Secured Indebtedness" shall have the meaning stated in Article 3 of this
Mortgage.
"Subject Interests" shall have the meaning stated in Article 2 of this
Mortgage.
"Subsidiary" shall mean, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. "Subsidiary" shall include Subsidiaries of Subsidiaries (and so on).
"Well Data" shall mean all logs, drilling reports, division orders,
transfer orders, operating agreements, contracts and other agreements,
abstracts, title opinions, files, records, seismic data, memoranda and other
information in the possession or control of Mortgagors or to which Mortgagors
have access relating to the Lands and/or any ▇▇▇▇▇ located thereon.
1.2 Other Terms. Unless otherwise defined or indicated herein, all terms
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with their initial letter capitalized shall have the meaning given such terms in
the Revolving Credit Agreement.
ARTICLE II
GRANTING CLAUSE: MORTGAGED PROPERTY
Mortgagors, for and in consideration of the sum of $10.00 and other good
and valuable consideration, in hand paid by Mortgagee, the receipt and adequacy
of which are hereby acknowledged and confessed by Mortgagors, and for and in
consideration of the debt and purposes hereinafter set forth, to secure the full
and complete payment and performance of the Secured Indebtedness and to secure
the performance of the covenants, obligations, agreements and undertakings of
Mortgagors hereinafter described, have GRANTED, BARGAINED, WARRANTED, MORTGAGED,
ASSIGNED, TRANSFERRED and CONVEYED, and by these presents do GRANT, BARGAIN,
WARRANT, MORTGAGE, ASSIGN, TRANSFER and CONVEY unto Trustee and Trustee's
substitutes or successors, and his and their assigns, for the uses and purposes
herein set forth, with warranties and covenants of title only to the extent
provided herein and in the Credit Agreements, all of Mortgagors' right, title
and interest, whether now owned or hereafter acquired, in all of the hereinafter
described properties, rights and interests; and, insofar as such properties,
rights and interests consist of equipment, general intangibles, accounts,
contract rights, inventory, goods, chattel paper, instruments, documents, money,
fixtures, as extracted collateral, proceeds and products of collateral or any
other Personal Property of a kind or character defined in or subject to the
applicable provisions of the Code, Mortgagors hereby grant to Mortgagee a
security interest therein, whether now owned or hereafter acquired, namely:
(a) all of those certain Oil and Gas Leases and Lands (all such Oil
and Gas Leases and Lands being herein called the "Subject Interests," as
hereinafter further defined) which are described in Exhibit A and/or to
which reference may be made in Exhibit A and/or which are covered by any of
the leases described on Exhibit A, which Exhibit A is made a part of this
Mortgage for all purposes, and is incorporated herein by reference as fully
as if copied at length in the body of this Mortgage at this point;
(b) all rights, titles, interests and estates now owned or hereafter
acquired by Mortgagors in and to (i) any and all properties now or
hereafter pooled or unitized with any of the Subject Interests, and (ii)
all presently existing or future operating agreements and unitization,
communitization and pooling agreements and the units operated thereby to
the extent the same relate to all or any part of the Subject Interests,
including, without limitation, all units formed under or pursuant to any
applicable laws (the rights, titles, interests and estates described in
this clause (b) also being included within the term "Subject Interests" as
used herein);
(c) all presently existing and future agreements entered into between
Mortgagors and any third party that provide for the acquisition by
Mortgagors of any interest in any of the properties or interests
specifically described in Exhibit A or which relate to any of the
properties and interests specifically described in Exhibit A;
(d) the Hydrocarbons (including inventory) which are in, under, upon,
produced or to be produced from or attributable to the Lands from and after
the Effective Date;
(e) the Accounts and Contract Rights;
(f) the Operating Equipment;
(g) the Well Data;
(h) the rights and security interests of Mortgagors held by Mortgagors
to secure the obligation of the first purchaser to pay the purchase price
of the Hydrocarbons;
(i) all surface leases, rights-of-way, franchises, easements,
servitudes, licenses, privileges, tenements, hereditaments and
appurtenances now existing or in the future obtained in connection with any
of the aforesaid, and all other items of value and incident thereto which
Mortgagors may, at any time, have or be entitled; and
(j) all and any different and additional rights of any nature, of
value or convenience in the enjoyment, development, operation or
production, in any way, of any property or interest included in any of the
foregoing clauses, and in all revenues, income, rents, issues, profits and
other benefits arising therefrom or from any contract now in existence or
hereafter entered into pertaining thereto, and in all rights and claims
accrued or to accrue for the removal by anyone of Hydrocarbons from, or
other act causing damage to, any of such properties or interests.
All the aforesaid properties, rights and interests, together with any and
all substitutions, replacements, corrections or amendments thereto, or renewals,
extensions or ratifications thereof, or of any instrument relating thereto, and
together with any additions thereto which may be subjected to the Lien of this
Mortgage by means of supplements hereto, being hereinafter called the "Mortgaged
Property".
Subject, however, to (i) Permitted Encumbrances, and (ii) the condition
that Mortgagee shall not be liable in any respect for the performance of any
covenant or obligation of Mortgagors with respect to the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee and its
successors, legal representatives and assigns, forever, subject to Section 7.3
hereof, to secure, in each such instance, the payment and performance of the
Secured Indebtedness and the Obligations.
ARTICLE III
SECURED INDEBTEDNESS
This Mortgage is given to secure the Loans and all of the Obligations under
and as described in the Credit Agreements and the June 2005 Credit Agreements,
including, without limitation:
(a) interest on all credit outstanding under the Credit Agreements and
the June 2005 Credit Agreements, as applicable, at the rates provided in
the Credit Agreements;
(b) the Obligations, including, without limitation, the indebtedness
evidenced by the Note and the June 2005 Note;
(c) payment and performance of any and all present and future
obligations of Mortgagors according to the terms of any present or future
hedge transaction, including, without limitation, any present or future
swap agreements, cap, floor, collar, exchange transaction, forward
agreement or other exchange or protection agreements relating to any such
transaction now existing or hereafter entered into between Mortgagors and
Mortgagee;
(d) any sums advanced as expenses or costs incurred by, or on behalf
of, Mortgagee which are made or incurred pursuant to the terms of this
Mortgage or any Credit Agreement pr any June 2005 Credit Agreement, plus
interest thereon at the rate set forth in Section 1.1(a) of the Note and
Section 1.1(a) of the June 2005 Note, as applicable, from the date of
advance or expenditure until reimbursed; and
(e) all other and additional debts, obligations and liabilities of
every kind and character of Mortgagors now existing or hereafter arising in
connection with any of the Credit Agreements and the June 2005 Credit
Agreements (all of the obligations and indebtedness referred to in this
Article 3, and all renewals, refinancings, extensions and modifications
thereof, and all substitutions therefor, in whole or in part, are herein
sometimes referred to as the "Secured Indebtedness").
NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN OR IN ANY OTHER
AGREEMENT BETWEEN MORTGAGORS AND MORTGAGEE, the lien granted hereunder shall
only serve to encumber the properties described in Exhibit A until payment in
full by Mortgagors to Mortgagee of the Secured Indebtedness arising under the
Credit Agreements.
ARTICLE IV
COVENANTS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF MORTGAGOR
Mortgagors hereby covenant, represent, warrant and agree that:
4.1 Payment of Indebtedness. Mortgagors will duly and punctually pay or
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cause to be paid when due all of the Secured Indebtedness.
4.2 Warranties. (a) Mortgagors, to the extent of the interests specified in
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Exhibit A, have good and defensible title, subject to Permitted Encumbrances, to
each property right or interest constituting the Mortgaged Property, and has a
good and legal right to make the grant and conveyance made in this Mortgage; (b)
Mortgagors' present Net Revenue Interest in the Mortgaged Property is not less
than that specified in Exhibit A and if no interest is specified, includes all
their interests however specified in and to the Oil and Gas Leases and Lands
described on Exhibit A; and (c) the Mortgaged Property is free from all Liens
other than Permitted Encumbrances. Mortgagors will warrant and forever defend
(subject to those Permitted Encumbrances described in clauses (b) and (f) of the
definition of "Permitted Encumbrances" set forth above) the Mortgaged Property
unto Mortgagee and Mortgagee's successors, legal representatives and assigns,
and Trustee and Trustee's successors, legal representatives and assigns, against
every Person whomsoever lawfully claiming the same or any part thereof, and
Mortgagors will maintain and preserve the Lien hereby created so long as any of
the Secured Indebtedness remains unpaid, except where such failure to comply
would not have a Material Adverse Effect.
4.3 Further Assurances. Mortgagors will execute and deliver such other and
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further instruments and will do such other and further acts as in the reasonable
discretion of Mortgagee may be necessary or desirable to carry out more
effectively the purposes of this Mortgage, including, without limiting the
generality of the foregoing, (a) prompt correction of any material defect which
may hereafter be discovered in the title to the Mortgaged Property or in the
execution and acknowledgment of this Mortgage, any Notes, or any other document
used in connection herewith or at any time delivered to Mortgagee in connection
with any Obligations, and (b) if required by Section 8.1 hereof, prompt
execution and delivery of all division or transfer orders that in the reasonable
discretion of Mortgagee are needed to transfer effectively the assigned proceeds
of production from the Mortgaged Property to Mortgagee.
4.4 Taxes. To the extent and in the manner required by the Credit
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Agreements, and to the extent not prohibited by applicable law, Mortgagors will
promptly pay, or cause to be paid, all taxes legally imposed upon this Mortgage
or upon the Mortgaged Property or upon the interest of Mortgagee therein, or
upon the income, profits, proceeds and other revenues thereof.
4.5 Operation of the Mortgaged Property. So long as the Secured
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Indebtedness or any part thereof remains unpaid:
(a) Mortgagors shall observe and comply with all of the terms and
provisions, express or implied, of all Oil and Gas Leases relating to the
Subject Interests so long as such Oil and Gas Leases are capable of
producing Hydrocarbons in paying quantities, except where such failure to
comply would not have a Material Adverse Effect;
(b) Mortgagors shall comply with all contracts and agreements
applicable to or relating to the Mortgaged Property or the production and
sale of Hydrocarbons therefrom, except to the extent a failure to so comply
would not have a Material Adverse Effect;
(c) Mortgagors shall, at all times, take reasonable steps to maintain,
preserve and keep all Operating Equipment used with respect to the
Mortgaged Property in proper repair, working order and condition, and make
all necessary or appropriate repairs, renewals, replacements, additions and
improvements thereto so that the efficiency of such Operating Equipment
shall at all times be properly preserved and maintained, except where such
failure to comply would not have a Material Adverse Effect; provided that
no item of Operating Equipment need be so repaired, renewed, replaced,
added to or improved, if Mortgagor shall in good faith determine that such
action is not necessary or desirable for the continued efficient and
profitable operation of the Subject Interests;
(d) Mortgagors shall cause the Mortgaged Property to be kept free and
clear of all Liens other than Permitted Encumbrances;
(e) Mortgagors shall comply with the terms of the Credit Agreements
with respect to maintenance of insurance. All loss payable clauses or
provisions in said policy or policies shall be endorsed in favor of and
made payable to Mortgagee, as its interest may appear. Mortgagee shall have
the right to collect, and Mortgagors hereby assign to Mortgagee, any and
all monies that may become payable under any such policies of insurance by
reason of damage, loss or destruction of any of the Mortgaged Property, and
Mortgagee may, at its election, either apply all or any part of the sums so
collected toward payment of the Secured Indebtedness, whether or not such
Secured Indebtedness, or any portion thereof, is then due and payable, in
such manner as Mortgagee may elect, or release same to Mortgagors; and
(f) Mortgagors shall not sell, lease, transfer, abandon or otherwise
dispose of any portion of the Mortgaged Property or any of Mortgagors'
rights, titles or interests therein or thereto, except as specifically
permitted in the Credit Agreements.
4.6 Recording. Mortgagors will promptly and at Mortgagors' sole cost and
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expense, record, register, deposit and file this Mortgage and every other
instrument in addition or supplemental hereto in such offices and places and at
such times and as often as may be necessary to preserve, protect and renew the
Lien hereof as a perfected Lien on real or personal property, as the case may
be, subject only to Permitted Encumbrances, and the rights and remedies of
Mortgagee, and otherwise will do and perform all matters or things necessary or
expedient to be done or observed by reason of any law or regulation of any state
or of the United States or of any other competent authority, for the purpose of
effectively operating, maintaining and preserving the Lien hereof on the
Mortgaged Property.
4.7 Records, Statements and Reports. Mortgagors will keep proper books of
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record and account in which complete and correct entries will be made of
Mortgagors' transactions in accordance with sound accounting principles,
consistently applied and will, to the extent required by the Credit Agreements,
furnish or cause to be furnished to Mortgagee (a) all reports required under the
Credit Agreements, and (b) such other information concerning the business and
affairs and financial condition of Mortgagors as Mortgagee may, from time to
time reasonably request.
4.8 No Government Approvals. Mortgagors warrant that no approval or consent
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of any Person is necessary to authorize the execution and delivery of this
Mortgage, or any of the other Credit Agreements or the Note, or to authorize the
observance or performance by Mortgagor of the covenants herein or therein
contained.
4.9 Right of Entry. Mortgagors will permit Mortgagee, or the agents or
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designated representatives of Mortgagee, to enter upon the Mortgaged Property,
and all parts thereof, for the purposes of investigating and inspecting the
condition and operation thereof.
The representations and warranties set forth in the Credit Agreement are
incorporated herein by reference as if set forth herein, and each such
representation and warranty is true and correct.
ARTICLE V
ADDITIONS TO MORTGAGED PROPERTY
It is understood and agreed that Mortgagors may periodically subject
additional properties to the Lien of this Mortgage. In the event that additional
properties are to be subjected to the Lien hereof, the parties hereto agree to
execute a supplemental mortgage, satisfactory in form and substance to
Mortgagee, together with any security agreement, financing statement or other
security instrument required by Mortgagee, all in form and substance
satisfactory to Mortgagee and in a sufficient number of executed (and, where
necessary or appropriate, acknowledged) counterparts for recording purposes.
Upon execution of such supplemental mortgage, all additional properties thereby
subjected to the Lien of this Mortgage shall become part of the Mortgaged
Property for all purposes.
ARTICLE VI
ENFORCEMENT OF THE SECURITY
6.1 General Remedies. Upon the occurrence and during the continuance of an
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Event of Default, Mortgagee may peform or direct Trustee to perform any one or
more of the following acts, subject to and in accordance with any applicable
provision of the Credit Agreements and to any mandatory requirements or
limitations of applicable law then in force:
(a) exercise all of the rights, remedies, powers and privileges of
Mortgagors with respect to the Mortgaged Property or any part thereof, give
or withhold all consents required therein which, with respect to the
Mortgaged Property or any part thereof, Mortgagors would otherwise be
entitled to give or withhold and perform or attempt to perform any
covenants in this Mortgage which Mortgagors are obligated to perform;
provided that no payment or performance by Mortgagee shall constitute a
waiver of any Event of Default and Mortgagee shall be subrogated to all
rights and Liens securing the payment of any debt, claim, tax or assessment
for the payment of which Mortgagee may make an advance or which Mortgagee
may pay.
(b) execute and deliver to such Person or Persons as may be designated
by Mortgagee appropriate powers of attorney to act for and on behalf of
Mortgagors in all transactions with any federal, state or local agency with
respect to any of the Mortgaged Property.
(c) exercise any and all other rights or remedies granted to Mortgagee
pursuant to the provisions of any of the Credit Agreements and applicable
law.
(d) if Mortgagors have failed to keep or perform any covenant
whatsoever contained in any Credit Agreement or this Mortgage, Mortgagee
may, at its option, perform or attempt to perform such covenant. Any
payment made or expense incurred in the performance or attempted
performance of any such covenant shall be a part of the Secured
Indebtedness, and Mortgagors promise, upon demand, to pay to Mortgagee, at
the place where the Note is payable, or at such other place as Mortgagee
may direct by written notice, all sums so advanced or paid by Mortgagee,
with interest at the rate set forth in Section 4.11 of the Note from the
date when paid or incurred by Mortgagee. No such payment by Mortgagee shall
constitute a waiver of any Event of Default.
(e) Mortgagee may, at its option, without notice, demand, presentment,
notice of intent to accelerate or of acceleration, or notice of protest,
all of which are hereby expressly waived by Mortgagors, declare the entire
unpaid balance of the Secured Indebtedness, or any part thereof,
immediately due and payable, and upon such declaration it shall be
immediately due and payable, and the Liens hereof shall then be subject to
foreclosure in accordance with applicable law.
(f) Upon the occurrence of an Event of Default, this Mortgage may be
foreclosed as to the Mortgaged Properties, or any part thereof, in any
manner permitted by applicable law.
Mortgagee may request Trustee to, and in such event Trustee is hereby
authorized and empowered and it shall be his or her special duty upon such
request of Mortgagee and to the extent permitted by applicable law, proceed with
foreclosure and sell all or any part of the Mortgaged Property at one or more
sales, as an entirety or in parcels, at such place or places and otherwise in
such manner and upon such notice as may be required by applicable law or, in the
absence of any such requirement, as Trustee or Mortgagee may deem appropriate,
and to make conveyance to the purchaser or purchasers thereof. Any such sale
shall be made to the highest bidder or bidders for cash, at the courthouse door
of the county wherein the Mortgaged Property is situated; provided that, if the
Mortgaged Property is situated in more than one county, such sale of the
Mortgaged Property, or part thereof, may be made in any county wherein any part
of the Mortgaged Property is situated. Such sale shall be made at public outcry,
on the day of any month, during the hours of such day, and after written notices
thereof have been publicly posted in such places and for such time periods and
all Persons entitled to notice thereof have been sent such notice, all as
required by applicable law. If the applicable law in force as of the Effective
Date hereof should hereafter be amended to require a different notice of sale
applicable to sales of property of the nature of the Mortgaged Property under
powers of sale conferred by mortgages or deeds of trust, Trustee may, in his or
her sole discretion, to the extent permitted by applicable law, give either the
notice of sale required by applicable law in effect on the Effective Date or the
notice of sale prescribed by the amended law; and nothing herein shall be deemed
to require Mortgagee or Trustee to do, and Mortgagee and Trustee shall not be
required to do, any act other than as required by applicable law in effect at
the time of any such sale. After such sale, Trustee shall make to the purchaser
or purchasers thereunder good and sufficient deeds, assignments or bills of sale
in the name of Mortgagors, conveying or transferring the Mortgaged Property, or
any part thereof, so sold to the purchaser or purchasers containing such
warranties of title as are customarily given, which warranties shall be binding
upon Mortgagors.
Sale of a part of the Mortgaged Property shall not exhaust the power of
sale granted hereby, but sales may be made from time to time until the Secured
Indebtedness is paid and performed in full. It shall not be necessary to have
present or to exhibit at any such sale any of the Personal Property. In addition
to the rights and other powers of sale granted under the preceding provisions of
this Section 6.1(f), if default is made in the payment of any installment of the
Obligations, Mortgagee may, at its option, at once or at any time thereafter
while any matured installment remains unpaid, without declaring the entire
Secured Indebtedness to be due and payable, orally or in writing, enforce or
direct Trustee to enforce (as provided by applicable law) the Liens created by
this Mortgage and sell the Mortgaged Property subject to such matured
indebtedness and the Liens securing its payment, in the same manner, on the same
terms, at the same place and time and after having given notice in the same
manner, all as provided in the preceding provisions of this Section 6.1(f).
After such sale, Mortgagee or Trustee (as provided by applicable law) shall make
due conveyance to the purchaser or purchasers. Sales made without maturing the
Secured Indebtedness may be made hereunder whenever there is a default in the
payment of any installment of the Secured Indebtedness without exhausting the
power of sale granted hereby and without affecting in any way the power of sale
granted under this Section 6.1(f), the unmatured balance of the Secured
Indebtedness (except as to any proceeds of any sale which Mortgagee may apply as
prepayment of the Secured Indebtedness), or the Liens securing payment of the
Secured Indebtedness. The sale or sales of less than the whole of the Mortgaged
Property shall not exhaust the power of sale herein granted, and Mortgagee or
Trustee (as provided by applicable law) is specifically empowered to make
successive sale or sales under such power until the whole of the Mortgaged
Property shall be sold. It is intended by each of the foregoing provisions of
this Section 6.1(f) that Trustee may, after any request or direction by
Mortgagee, sell not only the Subject Interests but also all other items
constituting a part of the Mortgaged Property along with the Subject Interests,
or any part thereof, all as a unit and as a part of a single sale, or may sell
any part of the Mortgaged Property separately from the remainder of the
Mortgaged Property. If the proceeds of such sale or sales of less than the whole
of such Mortgaged Property shall be less than the aggregate of the Secured
Indebtedness and the expense of enforcing the trust created by this Mortgage,
the Liens of this Mortgage shall remain in full force and effect as to the
unsold portion of the Mortgaged Property just as though no sale or sale of less
than the whole of the Mortgaged Property had occurred, but Mortgagee shall have
the right, at its sole election, to request Trustee to sell less than the whole
of the Mortgaged Property. In the event any questions should be raised as to the
regularity or validity of any sale hereunder, Mortgagee or Trustee (as provided
by applicable law) shall have the right and is hereby authorized to make resale
of said property so as to remove any questions or doubt as to the regularity or
validity of the previous sale, and as many resales may be made as may be
appropriate. It is agreed that, in any deed or deeds given by Mortgagee or
Trustee (as provided by applicable law), any and all statements of fact or other
recitals therein made as to the identity of Mortgagee, or as to the occurrence
or existence of any Event of Default, or as to the request to sell, notice of
sale, time, place, terms, and manner of sale, and receipt, distribution, and
application of the money realized therefrom, or as to the due and proper
appointment of a substitute trustee, and, without being limited by the
foregoing, as to any other act or thing having been duly done by Mortgagee or by
Trustee shall be taken by any Governmental Authority as prima facie evidence
that the said statements or recitals are true and correct and are without
further question to be so accepted, and Mortgagors do hereby ratify and confirm
any and all acts that Trustee or Mortgagee may lawfully do in the premises by
virtue hereof. In the event of the resignation or death of Trustee, or his or
her failure, refusal, or inability, for any reason, to make any such sale or to
perform any of the trusts herein declared, or, at the option of Mortgagee,
without cause, Mortgagee may appoint at its sole discretion, in writing, a
substitute trustee, who shall thereupon succeed to all the estates, titles,
rights, powers, and trusts herein granted to and vested in Trustee. If Mortgagee
is a national banking association or a corporation, such appointment may be made
on behalf of such Mortgagee by any Person who is then the president, or any
vice-president, or the cashier or secretary, or any other authorized officer or
agent of Mortgagee. In the event of the resignation or death of any such
substitute trustee, or his or her failure, refusal, or inability to make such
sale or perform such trusts, or, at the option of Mortgagee, without cause,
Mortgagee may appoint successive substitute trustees from time to time in the
same manner. Wherever herein the word "Trustee" is used, the same shall mean the
Person who is the duly appointed Trustee or substitute trustee hereunder at the
time in question.
(g) Mortgagee may, or Trustee may upon written request of Mortgagee,
in lieu of or in addition to exercising the power of sale provided for in
Section 6.1(f) hereof, proceed by suit or suits, at law or in equity, to
enforce the payment and performance of the Secured Indebtedness in
accordance with the terms hereof and of the Credit Agreements evidencing
it, to foreclose the Liens of this Mortgage as against all or any part of
the Mortgaged Property, and to have all or any part of the Mortgaged
Property sold under the judgment or decree of a court of competent
jurisdiction.
(h) To the extent permitted by law, upon the acceleration of the
Secured Indebtedness, Mortgagee, as a matter of right and without regard to
the sufficiency of the Mortgaged Property, and without any showing of
insolvency, fraud or mismanagement on the part of Mortgagors, and without
the necessity of filing any judicial or other proceeding other than the
proceeding for appointment of a receiver, shall be entitled to the
appointment of a receiver or receivers of the Mortgaged Property, or any
part thereof, and of the income, royalties, revenues, bonuses, production
payments, delay rentals, benefits, rents, issues and profits thereof.
Mortgagors hereby consent to the appointment of such receiver or receivers
and agrees not to oppose any application therefor by Trustee or Mortgagee.
(i) Upon the acceleration of the Secured Indebtedness, Mortgagee may
(without notification, if permitted by applicable law) enter upon the
Mortgaged Property, take possession of the Mortgaged Property and remove
the Personal Property or any part thereof, with or without judicial process
and, in connection therewith, without any responsibility or liability on
the part of Mortgagee, take possession of any property located on or in the
Mortgaged Property which is not a part of the Mortgaged Property and hold
or store such property at Mortgagors' expense. If necessary to obtain the
possession provided for in this Section 6.1 (i), Mortgagee or Trustee may
undertake any and all remedies to dispossess Mortgagors, including,
specifically, one or more actions for forcible entry and detainer, trespass
to try title and restitution.
(j) Mortgagee may require Mortgagors to assemble any Personal Property
and any other items of the Mortgaged Property, or any part thereof, and
make it available to Mortgagee at a place reasonably convenient to
Mortgagors and Mortgagee to be designated by Mortgagee.
(k) Mortgagee may surrender the insurance policies maintained pursuant
to the Credit Agreements, or any part thereof, and receive and apply the
unearned premiums as a credit on the Secured Indebtedness, and, in
connection therewith, Mortgagors hereby appoint Mortgagee as the agent and
attorney-in-fact for Mortgagors (with full powers of substitution) to
collect such premiums, which power of attorney shall be deemed to be a
power coupled with an interest and therefore irrevocable until the release
of the Liens evidenced by this Mortgage.
(l) Mortgagee may retain the Personal Property and any other items of
the Mortgaged Property, or any part thereof, in satisfaction or partial
satisfaction of the Secured Indebtedness whenever the circumstances are
such that Mortgagee is entitled to do so under the Code.
(m) Mortgagee shall have the right to become the purchaser at any sale
of the Mortgaged Property held by Mortgagee, Trustee or by any court,
receiver or public officer, and Mortgagee shall have the right to credit
upon the amount of the bid made therefor, the amount payable out of the net
proceeds of such sale to Mortgagee. Recitals contained in any conveyance
made to any purchaser at any sale made hereunder shall conclusively
establish the truth and accuracy of the matters therein stated, including,
without limiting the generality of the foregoing, nonpayment of the unpaid
principal sum of, interest accrued on, and fees payable in respect of the
Secured Indebtedness after the same have become due and payable, and
advertisement and conduct of such sale in the manner provided herein or
appointment of any successor Trustee hereunder.
(n) Mortgagee may buy any Personal Property and any other items of the
Mortgaged Property or any part thereof at any private disposition if the
Mortgaged Property or the part thereof being disposed of is a type
customarily sold in a recognized market or a type which is the subject of
widely distributed standard price quotations.
(o) Mortgagee shall have and may exercise any and all other rights
which Mortgagee may have under the Code, by virtue of the Credit
Agreements, this Mortgage, at law, in equity or otherwise.
Mortgagee shall have no obligation to do, or refrain from doing, any
of the acts, or to make or refrain from making any payment, referred to in
this Section 6.1.
6.2 Foreclosure by Judicial Proceedings. Upon the occurrence of an Event of
----------------------------------
Default, Mortgagee may proceed, where permitted by law, by a suit or suits in
equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property, or for the enforcement of any other appropriate legal or
equitable remedy.
6.3 Receipt to Purchaser. Upon any sale by virtue of judicial proceedings,
-------------------
the receipt of the officer making such sale under judicial proceedings shall be
sufficient discharge to the purchaser or purchasers at any sale for his or their
purchase money, and such purchaser or purchasers, or his or their assigns or
personal representatives, shall not, after paying such purchase money and
receiving such receipt of such officer therefor, be obligated to see to the
application of such purchase money or be in any way answerable for any loss,
misapplication or non-application thereof.
6.4 Effect of Sale. Any sale or sales of the Mortgaged Property or portions
--------------
thereof where permitted by law shall operate to divest all right, title,
interest, claim and demand whatsoever either at law or in equity of Mortgagors
of, in and to the premises and the property sold and shall be a perpetual bar,
both at law and in equity, against Mortgagors, and Mortgagors' successors, legal
representatives or assigns, and against any and all Persons claiming or who
shall thereafter claim all or any of the property sold by, through or under
Mortgagors, or Mortgagors' successors, legal representatives and assigns.
Nevertheless, Mortgagors, if requested by Mortgagee to do so, shall join in the
execution and delivery of all proper conveyances, assignments and transfers of
the properties so sold.
6.5 Application of Proceeds. The proceeds of any sale of or other
-------------------------
realization on the Mortgaged Property, or any part thereof, shall be applied by
Mortgagee to the Secured Indebtedness in such order as Mortgagee shall elect.
6.6 Mortgagors' Waiver ofRight toAppraisement, Marshaling, etc. Mortgagors
----------------------------------------------------------
agree, to the full extent that Mortgagors may lawfully so agree, that Mortgagors
will not at any time insist upon or plead or, in any manner whatsoever, claim
the benefit of any stay, extension or redemption law now or hereafter in force
in order to prevent or hinder the enforcement or foreclosure of this Mortgage or
the absolute sale of the Mortgaged Property or any portion thereof or the
possession thereof by any purchaser at any sale made pursuant to any provision
hereof or pursuant to the decree of any court of competent jurisdiction; but
Mortgagors, and all who may claim through or under Mortgagors, so far as
Mortgagors or those claiming through or under Mortgagors now or hereafter
lawfully may, hereby waive the benefit of all such laws. Mortgagors and all who
may claim through or under Mortgagors waive, to the extent that Mortgagors or
those claiming through or under Mortgagors may lawfully do so, any and all
rights of appraisement and any and all right to have the Mortgaged Property
marshaled upon any foreclosure of the Lien hereof or sold in inverse order of
alienation and agree that any court having jurisdiction to foreclose such Lien
may sell the Mortgaged Property as an entirety. If any law in this Section 6.6
referred to and now in force, of which Mortgagors or Mortgagors' successor or
successors might take advantage despite the provisions hereof, shall hereafter
be repealed or cease to be in force, such law shall not thereafter be deemed to
constitute any part of the contract herein contained or to preclude the
operation or application of the provisions of this Section 6.6.
6.7 Costs and Expenses. All reasonable costs, expenses (including
--------------------
attorneys' fees) and payments incurred or made by Mortgagee in protecting and
enforcing its rights hereunder shall constitute a demand obligation owing by
Mortgagors to the party incurring such or making such costs, expenses or
payments and shall bear interest at a rate per annum equal to the rate set forth
in Section 4.11 of the Note, all of which shall constitute a portion of the
Secured Indebtedness.
6.8 Operation of the Mortgaged Property by Mortgagee. Upon the occurrence
-------------------------------------------------
of an Event of Default that is continuing and the acceleration of the Secured
Indebtedness under any Credit Agreement, and in addition to all other rights
herein conferred on Mortgagee, Mortgagee (or any Person designated by Mortgagee)
shall, to the extent permitted by applicable law, have the right and power, but
not the obligation, to enter upon and take possession of any of the Mortgaged
Property and to exclude Mortgagors, and Mortgagors' agents or servants, wholly
therefrom and to hold, use, administer, manage and operate the same to the
extent that Mortgagors shall be at the time entitled to do any of such things
and in Mortgagors' place and stead. Mortgagee (or any Person designated by
Mortgagee) may operate the same without any liability or duty to Mortgagors in
connection with such operations, except to use ordinary care in the operation of
such Mortgaged Property, and Mortgagee or any Person designated by Mortgagee
shall have the right to collect and receive all Hydrocarbons produced and sold
from the Mortgaged Property, the proceeds of which shall be applied to the
Secured Indebtedness in such order as Mortgagee shall elect, to make repairs,
purchase machinery and equipment, conduct workover operations, drill additional
▇▇▇▇▇ and to exercise every power, right and privilege of Mortgagors with
respect to the Mortgaged Property. When and if such expenses of such operation
and development (including costs of unsuccessful workover operations or
additional ▇▇▇▇▇) have been paid and the Secured Indebtedness paid and performed
in full, such Mortgaged Property shall, if there has been no sale or foreclosure
thereof, be returned to Mortgagors.
6.9 Additional Waivers. In order to enforce this Mortgage, Mortgagee or
-------------------
Trustee shall not be obligated (a) to foreclose any other mortgage or deed of
trust covering Mortgaged Property located in another State, seek a deficiency
after any such foreclosure or otherwise enforce Mortgagee's rights in any of the
other Mortgaged Property; or (b) to seek an injunction (prohibitive or
mandatory), the appointment of a receiver, an order modifying any stay in any
federal or state bankruptcy, reorganization or other insolvency proceedings
relating to any of the Mortgaged Property or any portion thereof, or any other
extraordinary relief. Mortgagors waive, to the fullest extent permitted by law,
any defense Mortgagors may have to any liability hereunder based on Mortgagee's
failure or refusal to prosecute, or any lack of diligence or delay in
prosecuting, any action or proceeding to enforce any other mortgage or deed of
trust. If Mortgagee elects to enforce this Mortgage before, or without,
enforcing its rights with respect to any Mortgaged Property covered by any other
Mortgage, Mortgagors waive, to the fullest extent permitted by law, any right
Mortgagors may have, whether statutory or otherwise, to set off the value of any
other Mortgaged Property, or any portion thereof, against the Secured
Indebtedness. If Mortgagee elects to enforce its mortgages or deeds of trust
covering all or any portion of the Mortgaged Property located in other States,
or in conjunction with the enforcement of this Mortgage, Mortgagee is authorized
to purchase all or any part of such other Mortgaged Property at public or
private sale or as otherwise provided by applicable law, and to credit the
purchase price against the Secured Indebtedness in such order or manner as
Mortgagee determines in its sole discretion and to preserve Mortgagee's rights
and Liens under this Mortgage for any portion of the Secured Indebtedness that
remains unpaid. Mortgagors waive to the fullest extent permitted by applicable
law any right to claim or seek any credit against the Secured Indebtedness in
excess of the actual amount bid or received by Mortgagee in connection with the
foreclosure of Mortgagee's Liens on any of the Mortgaged Property located in
such other States. Mortgagors further agree that Mortgagee shall not be required
(a) to seek or obtain a deficiency judgment in or pursuant to any action or
proceeding to foreclose this Mortgage as a condition of later enforcing any
mortgage or deed of trust covering Mortgaged Property located in another State,
or (b) to seek or obtain a deficiency judgment in or pursuant to any action or
proceeding to foreclose any such other mortgage or deed of trust as a condition
of later enforcing this Mortgage. Notwithstanding the foregoing, if Mortgagee in
good faith believes that it may be required either to obtain a deficiency
judgment to enforce this Mortgage after enforcement of a mortgage or deed of
trust covering Mortgaged Property located in another State or to enforce another
mortgage or deed of trust after enforcement of this Mortgage then Mortgagors
agree that Mortgagee shall be entitled to seek and obtain such a deficiency
judgment notwithstanding any contrary or inconsistent provision contained in any
Credit Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Advances by Mortgagee. Each and every covenant herein contained shall
----------------------
be performed and kept by Mortgagors solely at Mortgagors' expense. If Mortgagors
shall fail to perform or keep any of the covenants of whatsoever kind or nature
contained in this Mortgage, Mortgagee or any receiver appointed hereunder may,
but shall not be obligated to, make advances to perform the same on Mortgagors'
behalf, and Mortgagors hereby agree to repay such sums upon demand plus interest
at a rate per annum equal to the rate of interest set forth in Section 4.11 of
the Note. No such advance shall be deemed to relieve Mortgagors from any Event
of Default hereunder.
7.2 Defense of Claims. Mortgagors will notify Mortgagee, in writing,
-------------------
promptly of the commencement of any legal proceedings of which Mortgagors have
notice affecting or which could adversely effect the Lien hereof or the status
of or title to the Mortgaged Property or any material part thereof and will take
such action, employing attorneys agreeable to Mortgagee, as may be necessary to
preserve Mortgagors' or Mortgagee's rights affected thereby; and should
Mortgagor fail or refuse to take any such action, Mortgagee may take such action
on behalf and in the name of Mortgagors and at Mortgagors' sole cost and
expense. Moreover, Mortgagee may take such independent action in connection
therewith as it may, in its sole discretion, deem proper without any liability
or duty to Mortgagors except to use ordinary care, Mortgagors hereby agreeing
that all sums advanced or all expenses incurred in such actions plus interest at
a rate per annum equal to the rate of interest set forth in Section 4.11 of the
Note will, on demand, be reimbursed to Mortgagee or any receiver appointed
hereunder.
7.3 Defeasance. If the Secured Indebtedness shall be paid and discharged in
----------
full then, and in that case only, this Mortgage shall be null and void and the
interests of Mortgagors in the Mortgaged Property shall become wholly clear of
the Lien created hereby, and such Lien shall be released in due course at the
cost of Mortgagors. Mortgagee will, at Mortgagors' sole expense, execute and
deliver to Mortgagors all releases and other instruments reasonably requested of
the Lien created hereunder. Otherwise, this Mortgage shall remain and continue
in full force and effect.
7.4 Renewals, Amendments and Other Security. Renewals, refinancings and
------------------------------------------
extensions of the Secured Indebtedness may be given at any time, and amendments
may be made to this Mortgage, the Credit Agreements and any other agreements
relating to any part of the Secured Indebtedness, and Mortgagee may take or may
hold other security for the Secured Indebtedness. Any amendment of this Mortgage
shall be by written instrument and need be executed only by the party against
whom enforcement of such amendment is asserted. Mortgagee may resort first to
such other security or any part thereof or first to the security herein given or
any part thereof, or from time to time to either or both, even to the partial or
complete abandonment of either security, and such action shall not be a waiver
of any rights conferred by this Mortgage, which shall continue as a first Lien
upon the Mortgaged Property not expressly released until all Secured
Indebtedness secured hereby is fully paid and discharged.
7.5 Instrument and Assignment, etc. This Mortgage shall be deemed to be and
------------------------------
may be enforced from time to time as an assignment, chattel mortgage, contract,
financing statement, real estate mortgage, pledge, security agreement, or any
combination thereof, and to the extent that any particular jurisdiction wherein
a portion of the Mortgaged Property is situated does not recognize or permit
Mortgagors to grant, bargain, sell, warrant, mortgage, assign, transfer or
convey Mortgagors' rights, titles and interests to Mortgagee in the manner
herein adopted, with respect to the Mortgaged Property located in such
jurisdiction, Mortgagors do hereby grant, bargain, sell, warrant, mortgage,
assign, transfer and convey unto Mortgagee the Mortgaged Property to secure the
Secured Indebtedness and the Obligations of Mortgagors contained herein.
7.6 Limitation on Interest. Regardless of any provision contained in this
-----------------------
Mortgage or any of the Credit Agreements, Mortgagee shall never be entitled to
receive, collect, or apply, as interest on the Loans, any amount in excess of
the Maximum Lawful Rate, and in the event Mortgagee ever receives, collects or
applies as interest any such excess, such amount which would be deemed excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and if the Loans are paid in full, any remaining excess shall promptly
be paid to Mortgagors. In determining whether or not the interest paid or
payable under any specific contingency exceeds the Maximum Lawful Rate,
Mortgagors shall, to the extent permitted under applicable law, (a) characterize
any non-principal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread, in equal parts, the total amount of the interest
throughout the entire contemplated term of the Note, so that the interest rate
is the Maximum Lawful Rate throughout the entire term of the Note; provided,
however, that if the unpaid principal balance thereof is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Lawful
Rate, Mortgagee shall refund to Mortgagors the amount of such excess, and, in
such event, Mortgagee shall not be subject to any penalties provided by any laws
for contracting for, charging, taking, reserving or receiving interest in excess
of the Maximum Lawful Rate.
7.7 Unenforceable or Inapplicable Provisions. If any provision of this
-------------------------------------------
Mortgage or in any of the Credit Agreements is invalid or unenforceable in any
jurisdiction, the other provisions hereof or of any of the Credit Agreements
shall remain in full force and effect in such jurisdiction, and the remaining
provisions hereof shall be liberally construed in favor of Mortgagee in order to
effectuate the provisions hereof, and the invalidity of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of any such
provision in any other jurisdiction. Any reference herein contained to statutes
or laws of a state in which no part of the Mortgaged Property is situated shall
be deemed inapplicable to, and not used in, the interpretation hereof.
7.8 Rights Cumulative. Each and every right, power and remedy herein given
-----------------
to Mortgagee shall be cumulative and not exclusive; and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and so often and in such order as may be deemed
expedient by Mortgagee, and the exercise, or the beginning of the exercise, of
any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time and thereafter, any other right, power or remedy. No
delay or omission by Mortgagee in the exercise of any right, power or remedy
shall impair any such right, power or remedy or operate as a waiver thereof or
of any other right, power or remedy then or thereafter existing.
7.9 Waiver by Mortgagee. Any and all covenants in this Mortgage may, from
--------------------
time to time, by instrument in writing signed by Mortgagee be waived to such
extent and in such manner as Mortgagee may desire, but no such waiver shall ever
affect or impair Mortgagee's rights and remedies or Liens hereunder, except to
the extent specifically stated in such written instrument.
7.10 Successors and Assigns. This Mortgage is binding upon Mortgagors, and
----------------------
Mortgagors' heirs, devisees, successors, personal and legal representatives and
assigns, and shall inure to the benefit of Mortgagee and Trustee and their
successors, legal representatives and assigns, and the provisions hereof shall
likewise be covenants running with the Lands.
7.11 Article and Section Headings. The article and section headings in this
----------------------------
Mortgage are inserted for convenience and shall not be considered a part of this
Mortgage or used in its interpretation.
7.12 Counterparts. This Mortgage may be executed in any number of
------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which are identical, except that, to facilitate recordation in any
particular county or parish, counterpart portions of Exhibit A which describe
properties situated in counties or parishes other than the county or parish in
which such counterpart is to be recorded may be omitted.
7.13 Special Filing as Financing Statements. This Mortgage shall likewise
---------------------------------------
be a security agreement and a financing statement by virtue of Mortgagors, as
debtors, granting to Mortgagee, its successors, legal representatives and
assigns, as secured party, a security interest in all personal property,
as-extracted collateral, fixtures, accounts, contract rights, general
intangibles, inventory, goods, chattel paper, instruments, documents and money
described or referred to in granting clauses (a) through (j) of Article 2 hereof
and all proceeds and products from the sale, lease or other disposition of the
Mortgaged Property or any part thereof. The addresses shown in Section 7.14
hereof are the addresses of Mortgagors and Mortgagee and information concerning
the security interest may be obtained from Mortgagee at its address. Without in
any manner limiting the generality of any of the foregoing provisions hereof:
(a) some portion of the goods described or to which reference is made herein are
or are to become fixtures on the Lands described or to which reference is made
herein; (b) the minerals and the like (including oil and gas) included in the
Mortgaged Property and the accounts resulting from the sale thereof will be
financed at the wellhead(s) or minehead(s) of the well(s) or mine(s) located on
the Lands described or to which reference is made herein; and (c) this Mortgage
is to be filed of record, among other places, in the real estate records of each
county or parish in which the Lands, or any part thereof, are situated, as a
financing statement, but the failure to do so will not otherwise affect the
validity or enforceability of this Mortgage. Mortgagors authorize Mortgagee to
file such amendments to this Mortgage, financing statements and amendments
thereto, and continuation statements as Mortgagee deems reasonable or necessary
to perfect and maintain the perfection of the Liens granted herein, including
such Liens with respect to any additions to the Mortgaged Property as provided
in Article 5.
7.14 Notices. Whenever this Mortgage requires or permits any consent,
------
approval, notice, request or demand from one party to another, such consent,
approval, notice or demand shall, unless otherwise required under applicable
law, be given in accordance with the provisions of the Credit Agreements,
addressed to the party to be notified at the address stated below (or such other
address as may have been designated in accordance with the provisions of the
Credit Agreements):
MORTGAGORS-DEBTORS MORTGAGEE-SECURED PARTY
New Century Energy Corp. Laurus Master Fund, Ltd.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ c/o M&C Corporate Services Limited
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ PO Box 309 G.T.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Grand Cayman, Cayman Islands
Century Resources, Inc. Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
with copies to: with copies to:
J. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ Loeb & Loeb, LLP
1616 ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile ▇▇▇-▇▇▇-▇▇▇▇
7.15 GOVERNING LAW. THIS MORTGAGE, THE NOTE AND THE CREDIT AGREEMENTS SHALL
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BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
AND THE LAWS OF THE UNITED STATES OF AMERICA.
7.16 Future Advances: Maximum Secured Amount. This Mortgage covers not only
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the proceeds of the Loan, but all advances hereafter made by Mortgagee to or for
the benefit of Mortgagors (the "Future Advances"), including, without
limitation, any amounts advanced by Mortgagee in satisfying, on Mortgagors'
behalf, any of Mortgagors' Obligations, and any advances made in accordance
herewith by Mortgagee to protect its security, and any other advances by
Mortgagee. The maximum amount secured hereby may be advanced and repaid, and
again advanced and repaid from time to time, in Mortgagee' sole and absolute
discretion, and this Mortgage shall become enforceable upon recording and shall
have priority over all other parties whose rights arose after the recording
hereof, with respect to all funds advanced by Mortgagee to Mortgagors,
regardless of whether such funds were advanced before or after the arising of
such other party's rights. Nothing herein shall be interpreted as requiring
Mortgagee to make any Future Advances hereunder. The maximum principal amount
secured by this Mortgage at any one time shall be $50,000,000.
7.17 Recording. Executed original counterparts of this Mortgage are to be
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filed for record in the records of the Counties wherein the Mortgaged Property
is situated, and shall have annexed thereto as Exhibit A, only the portions or
divisions containing specific descriptions of the Mortgaged Property relating to
the Lands located in such Counties. Whenever a recorded counterpart of this
Mortgage contains specific descriptions which are less than all of the
descriptions contained in any full counterpart lodged with Mortgagee, the
omitted descriptions are hereby included by reference in such recorded
counterpart as if each recorded counterpart conformed to any full counterpart
lodged with Mortgagee.
ARTICLE VIII
ASSIGNMENT OF PRODUCTION
8.1 Assignment. For the purpose of further securing the Secured
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Indebtedness and the performance of Mortgagors' covenants hereunder, Mortgagors
do hereby TRANSFER, ASSIGN, AND CONVEY unto Mortgagee any and all of the
interests of Mortgagors in and to the Hydrocarbons that may be produced from, or
attributable to, the Mortgaged Property on and after the Effective Date,
together with the proceeds of the sale thereof and attributable thereto. This
assignment is made upon the following terms and conditions: (a) pipeline
companies and others purchasing the oil, gas, minerals and other substances
listed above produced and to be produced from said property are hereby
authorized and directed to pay directly to Mortgagee the interests of Mortgagors
in and to the proceeds of the sale of the oil, gas, minerals and other
substances listed above produced, to be produced and attributable to said
property and to continue such payments until they have been furnished with a
release hereof executed in writing by Mortgagee, and the receipt of Mortgagee
for monies so paid to it shall be a full and complete release, discharge and
acquittance to any such pipeline company or other purchaser, to the extent of
all amounts so paid; (b) Mortgagee is hereby authorized to receive and collect
the proceeds of the sale of the oil, gas, minerals and other substances listed
above assigned to it hereunder and to apply the funds so received first toward
the payment of the expenses, if any, incurred in the collection thereof then
toward the payment of the Secured Indebtedness, any balance remaining after the
full and final payment of the Secured Indebtedness to be held subject to the
order of Mortgagors; (c) Mortgagee shall have the right, at its sole option, at
any time, and from time to time, to release to, or on the order of, Mortgagors
all or any portion of the funds assigned to Mortgagee hereunder, and no such
releases shall affect or impair the Lien of this Mortgage or the validity and
effect of the assignment contained in this Article 8; (d) Mortgagee shall never
be under any obligation to enforce the collection of the funds assigned to it
hereunder, nor shall it ever be liable for failure to exercise diligence in the
collection of such funds, but it shall only be accountable for the sums that it
shall actually receive; (e) Mortgagors covenant to cause all pipeline companies
or other purchasers of the oil, gas, minerals and other substances listed above
produced from and attributable to said property to pay promptly to Mortgagee, at
the office of Mortgagee at the address of Mortgagee stated above, the interests
of Mortgagors in and to the proceeds of the sale thereof; and (f) upon the full
and final payment of the Secured Indebtedness, Mortgagee, at the request of
Mortgagors, at Mortgagors' sole cost and expense, shall execute and deliver to
Mortgagors a reassignment hereof, without recourse, representations or
warranties. Notwithstanding the foregoing provisions of this Section 8.1, so
long as no Event of Default has occurred and shall be continuing, Mortgagors may
continue to receive from the purchasers of production all such Hydrocarbons and
proceeds of the sale thereof, subject, however, to the Liens created under this
Mortgage. If an Event of Default has occurred and is continuing, Mortgagee may
exercise all rights and remedies granted hereunder, including, without
limitation, the right to obtain possession of all Hydrocarbons and proceeds of
the sale thereof then held by Mortgagors or to receive directly from the
purchasers all other Hydrocarbons and proceeds of the sale thereof.
8.2 Power of Attorney. In consideration of the Loans evidenced by the Note,
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Mortgagors hereby designate and appoint Mortgagee as Mortgagors' true and lawful
agent and attorney-in-fact (with full power of substitution, either generally or
for such limited periods or purposes as Mortgagee may, from time to time,
prescribe) with full power and authority for and on behalf and in the name of
Mortgagors upon the occurrence of an Event of Default that is continuing, to
execute, acknowledge and deliver all such division orders, transfer orders,
certificates and any and all other documents of every nature as may, from time
to time, be necessary or proper to effectuate the intent and purpose of the
assignment contained in Section 8.1 hereof. Mortgagors shall be bound thereby as
fully and effectively as if Mortgagors had duly executed, acknowledged and
delivered any such division order, transfer order, certificate or other
documents. The powers and authorities herein conferred on Mortgagee may be
exercised by any authorized officer or director of Mortgagee. The power of
attorney conferred by this Section 8.2 is granted for a valuable consideration
and hence is coupled with an interest and is irrevocable so long as the Secured
Indebtedness, or any part thereof, shall remain unpaid. All Persons dealing with
Mortgagee, any officer or director thereof above designated or any substitute
thereof shall be fully protected in treating the powers and authorizations
conferred by this Section 8.2 as continuing in full force and effect until
advised by Mortgagee that all of the Secured Indebtedness is fully and finally
paid.
[Signature Page to Follow]
IN WITNESS WHEREOF, Mortgagors, acting by and through their duly authorized
officers have executed this Mortgage on the date of its acknowledgment.
NEW CENTURY ENERGY CORP.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President & CEO
CENTURY RESOURCES, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President & CEO
The address of Mortgagors are:
New Century Energy Corp.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Century Resources, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
This Mortgage was prepared by,
and recorded counterparts should be
returned to:
J. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
THE STATE OF TEXAS Sec.
Sec.
COUNTY OF ▇▇▇▇▇▇ Sec.
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President and CEO of NEW CENTURY ENERGY CORP., a Colorado
corporation, and known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed, as the act and deed of such
corporation and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 19 day of September, 2005.
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Notary Public, State of Texas
THE STATE OF TEXAS Sec.
Sec.
COUNTY OF ▇▇▇▇▇▇ Sec.
BEFORE ME, the undersigned authority, on this day personally appeared
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President and CEO of CENTURY RESOURCES, INC., a Delaware
corporation, and known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed, as the act and deed of such
corporation and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 19 day of September, 2005.
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/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Notary Public, State of Texas
EXHIBIT A
Matagorda County, Texas
Attached to and made a part of that certain MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION from New
Century Energy Corp. and Century Resources, Inc. to Laurus Master Fund, Ltd.
dated September 19, 2005.
1. Century Resources, Inc.'s 80% working interest in existing ▇▇▇▇▇ and
new ▇▇▇▇▇ above 7,000' and its 40% working interest in new ▇▇▇▇▇ below
7,000' arising out of the Oil, Gas and Mineral Lease dated April 16, 1951,
between ▇▇▇▇▇▇ & ▇▇▇▇▇▇, a partnership, et al., as Lessors, and ▇▇▇▇▇
▇▇▇▇▇▇▇, as Lessee, as evidenced of record in Volume 225, Page 290, of the
Deed Records of Matagorda County, Texas, and amended of record in Volume
543, Page 7 of the Deed Records of Matagorda County, Texas.
2. Century Resources, Inc.'s interest in that certain subsurface easement
dated August 17, 2001, between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Grantor, and Calpine
Natural Gas Company, as Grantee, as evidenced of record in Volume 629, Page
754, of the Deed Records of Matagorda County, Texas.
3. Century Resources, Inc.'s interest in that certain subsurface easement
dated August 14, 2001, between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, et ux., as Grantors, and
Calpine Natural Gas Company, as Grantee, as evidenced of record in Volume
629, Page 756, of the Deed Records of Matagorda County, Texas.
4. Century Resources, Inc.'s interest in that certain subsurface easement
dated May 29, 2001, between ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, as Grantor, and Calpine
Natural Gas Company, as Grantee, as evidenced of record in Volume 628, Page
417, of the Deed Records of Matagorda County, Texas.
5. Century Resources, Inc.'s interest in that certain subsurface easement
dated July 16, 2001, between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as Grantor, and Calpine
Natural Gas Company, as Grantee, as evidenced of record in Volume 628, Page
439, of the Deed Records of Matagorda County, Texas.
6. Century Resources, Inc.'s interest in that certain unrecorded
subsurface easement dated August 8, 2001, between the U.S. Dept. of the
Army, as Grantor, and Calpine Natural Gas Company, as Grantee.