EXHIBIT 10.32
MORTGAGE,
ASSIGNMENT, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
FROM
CHENIERE ENERGY, INC.
(Taxpayer I.D. No. 95-45352386)
TO
ENCAP ENERGY CAPITAL FUND III, L.P.
(Taxpayer I.D. No.▇▇-▇▇▇▇▇▇▇)
Dated September 1, 1999
A CARBON, PHOTOGRAPHIC, FACSIMILE, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF
FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.
THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS), AND THE
ACCOUNTS RELATED THERETO, WHICH WILL BE FINANCED AT THE WELLHEADS OR MINEHEADS
OF THE ▇▇▇▇▇ OR MINES LOCATED ON THE PROPERTIES DESCRIBED IN SECTION 1.1 OF THIS
INSTRUMENT. THIS INSTRUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES ON
THE REAL PROPERTY DESCRIBED HEREIN. THIS INSTRUMENT IS TO BE FILED FOR RECORD,
AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES
AND/OR PARISHES REFERENCED IN EXHIBIT A HERETO AND SUCH FILING SHALL SERVE,
AMONG OTHER PURPOSES, AS A FIXTURE FILING. THE MORTGAGOR HAS AN INTEREST OF
RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS
DESCRIBED IN SECTION 1.1 OF THIS INSTRUMENT.
WHEN RECORDED OR FILED RETURN TO: THIS DOCUMENT PREPARED BY:
▇▇▇▇▇▇▇▇ & Knight L.L.P. ▇▇▇▇ ▇. Rain
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Knight L.L.P.
Suite 3300 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Suite 3300
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
BE IT KNOWN that on the 1st day of September, 1999, BEFORE ME, the
undersigned Notary Public duly commissioned and qualified in and for the State
set forth below, PERSONALLY APPEARED CAME AND APPEARED
Cheniere Energy, Inc., a Delaware corporation represented herein by ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, its President and Chief Executive Officer, duly authorized by
resolution of its Board of Directors, a certified copy of which is annexed
hereto as Annex I, whose mailing address is Two ▇▇▇▇▇ Center, Suite 1740, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and whose federal tax identification number
95-45352386 ("Mortgagor"), and
EnCap Energy Capital Fund III, L.P., a Texas limited partnership,
represented herein by the undersigned duly authorized officer of EnCap
Investments L.L.C., a Delaware limited liability company, its general partner,
whose mailing address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and whose federal tax identification number is ▇▇-▇▇▇▇▇▇▇ ("Mortgagee"),
who being duly sworn, executed this Mortgage, Assignment, Security Agreement,
Fixture Filing and Financing Statement (this "Mortgage") on the terms and
conditions set forth herein.
ARTICLE I.
Granting Clauses; Secured Indebtedness
Section 1.1. Grant and Mortgage. Mortgagor, for and in consideration of
the sum of Ten Dollars ($10.00) to Mortgagor in hand paid, in order to secure
the payment of the secured indebtedness hereinafter referred to and the
performance of the obligations, covenants, agreements, warranties and
undertakings of Mortgagor hereinafter described, does hereby MORTGAGE ASSIGN,
WARRANT, PLEDGE AND HYPOTHECATE to Mortgagee the following described properties,
rights and interests (the "Mortgaged Properties"):
A. The oil, gas and/or mineral properties, mineral servitudes and/or
mineral rights which are described in Exhibit "A" attached hereto and made
a part hereof;
B. Without limitation of the foregoing, all other right, title and
interest of Mortgagor of whatever kind or character (whether now owned or
hereafter acquired by operation of law or otherwise) in and to (i) the oil,
gas and/or mineral leases or other agreements described in Exhibit "A"
hereto, or (ii) the lands (including submerged lands) described or referred
to in Exhibit "A" (or described in any of the instruments described or
referred to in Exhibit "A"), without regard to any limitations as to
specific lands or depths that may be set forth in Exhibit "A" hereto or in
any of the leases or other agreements described in Exhibit "A" hereto;
C. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all presently existing
and hereafter created oil, gas and/or mineral unitization, pooling and/or
communitization agreements, declarations and/or orders, and in and to the
properties, rights and interests covered and the units created thereby
(including, without limitation, units formed under orders, rules,
regulations or other official acts of any federal, state or other authority
having jurisdiction), which cover, affect or otherwise relate to the
properties, rights and interests described in clause A or B above;
D. All of Mortgagor's interest in and rights under (whether now owned
or hereafter acquired by operation of law or otherwise) all presently
existing and hereafter created operating agreements, equipment leases,
production sales contracts, processing agreements, transportation
agreements, gas balancing agreements, farmout and/or farm-in agreements,
salt water disposal agreements, area of mutual interest agreements, and
other contracts and/or agreements which cover, affect, or otherwise relate
to the properties, rights and interests described in clause A, B or C above
or to the operation of such properties, rights and interests or to the
treating, handling, storing, processing, transporting or marketing of oil,
gas, other hydrocarbons, or other minerals produced from (or allocated to)
such properties, rights and interests including, but not limited to, those
contracts listed in Exhibit "A" hereto, as same may be amended or
supplemented from time to time;
E. All of Mortgagor's interest (whether now owned or hereafter
acquired by operation of law or otherwise) in and to all improvements,
fixtures, movable or immovable property and other real and/or personal
property (including, without limitation, all ▇▇▇▇▇, pumping units, wellhead
equipment, tanks, pipelines, flow lines, gathering lines, compressors,
dehydration units, separators, meters, buildings, injection facilities,
salt water disposal facilities, and power, telephone and telegraph lines)
and all easements, servitudes, rights-of-way, surface leases, licenses,
permits and other surface rights, which are now or hereafter used, or held
for use, in connection with the properties, rights and interests described
in clause A, B or C above, or in connection with the operation of such
properties, rights and interests, or in connection with the treating,
handling, storing, processing, transporting or marketing of oil, gas, other
hydrocarbons, or other minerals produced from (or allocated to) such
properties, rights and interests; and
F. All rights, estates, powers and privileges appurtenant to the
foregoing rights, interests and properties.
TO HAVE AND TO HOLD the Mortgaged Properties unto Mortgagee, and
Mortgagee's heirs, devisees, representatives, successors and assigns, upon the
terms, provisions and conditions herein set forth.
Section 1.2. Grant of Security Interest. In order to further secure the
payment of the secured indebtedness hereinafter referred to and the performance
of the obligations, covenants, agreements, warranties, and undertakings of
Mortgagor hereinafter described, Mortgagor hereby
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grants to Mortgagee a security interest in the entire interest of Mortgagor
(whether now owned or hereafter acquired by operation of law or otherwise) in
and to the Mortgaged Properties and in and to:
(a) all oil, gas, other hydrocarbons, and other minerals produced from
or allocated to the Mortgaged Properties, and any products processed or
obtained therefrom (herein collectively called the "Production"), together
with all proceeds of Production (regardless of whether Production to which
such proceeds relate occurred on or before or after the date hereof), and
together with all liens and security interests securing payment of the
proceeds of the Production, including, but not limited to, those liens and
security interests provided for under (i) statutes enacted in the
jurisdictions in which the Mortgaged Properties are located, or (ii)
statutes made applicable to the Mortgaged Properties under federal law (or
some combination of federal and state law);
(b) without limitation of any other provisions of this Section 1.2,
all payments received in lieu of production from the Mortgaged Properties
(regardless of whether such payments accrued, and/or the events which gave
rise to such payments occurred, on or before or after the date hereof),
including, without limitation, "take or pay" payments and similar payments,
payments received in settlement of or pursuant to a judgment rendered with
respect to take or pay or similar obligations or other obligations under a
production sales contract, payments received in buyout or buydown or other
settlement of a production sales contract, and payments received under a
gas balancing or similar agreement as a result of (or received otherwise in
settlement of or pursuant to judgment rendered with respect to) rights held
by Mortgagor as a result of Mortgagor (and/or its predecessors in title)
taking or having taken less gas from lands covered by a Mortgaged Property
(or lands pooled or unitized therewith) than their ownership of such
Mortgaged Property would entitle them to receive (the payments described in
this subsection (b) being herein called "Payments in Lieu of Production");
(c) all equipment, inventory, improvements, fixtures, accessions,
goods and other personal property or movable property of whatever nature
now or hereafter located on or used or held for use in connection with the
Mortgaged Properties (or in connection with the operation thereof or the
treating, handling, storing, processing, transporting, or marketing of
Production), and all licenses and permits of whatever nature now or
hereafter used or held for use in connection with the Mortgaged Properties
(or in connection with the operation thereof, or the treating, handling,
storing, processing, transporting or marketing of Production), and all
renewals or replacements of the foregoing or substitutions for the
foregoing;
(d) all contract rights, choses in action (i.e., rights to enforce
contracts or to bring claims thereunder) and other general intangibles
(regardless of whether the same arose, and/or the events which gave rise to
the same occurred, on or before or after the date hereof) related to the
Mortgaged Properties, the operation thereof (whether Mortgagor is operator
or non-operator), or the treating, handling, storing, processing,
transporting, or marketing of Production (including, without limitation,
any of the same
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relating to payment of proceeds of Production or to payment of amounts
which could constitute Payments in Lieu of Production);
(e) without limitation of the generality of the foregoing, any rights
and interests of the Mortgagor under any present or future hedge or swap
agreements, cap, floor, collar, exchange, forward or other hedge or
protection agreements or transactions relating to crude oil, natural gas or
other hydrocarbons, or any option with respect to any such agreement or
transaction now existing or hereafter entered into by or on behalf of
Mortgagor;
(f) to the extent permitted under applicable confidentiality and
license agreements, all geological, geophysical, engineering, accounting,
title, legal, and other technical or business data concerning the Mortgaged
Properties, the Production, or any other item of Property (as hereinafter
defined) which are now or hereafter in the possession of Mortgagor or in
which Mortgagor can otherwise grant a security interest, and all books,
files, records, magnetic media, and other forms of recording or obtaining
access to such data;
(g) all money, documents, instruments, chattel paper, securities,
accounts or general intangibles arising from or by virtue of any
transaction (regardless of whether such transaction occurred on or before
or after the date hereof) related to the Mortgaged Properties, the
Production or any other item of Property (all of the properties, rights and
interests described in subsections (a), (b), (c), (d), (e) and (f) above
and this subsection (g) being herein sometimes collectively called the
"Collateral"); and
(h) all proceeds of the Collateral or of the Mortgaged Properties,
whether such proceeds or payments are goods, money, documents, instruments,
chattel paper, securities, accounts, general intangibles, fixtures,
real/immovable property, personal/movable property or other assets (the
Mortgaged Properties, the Collateral and the proceeds of the Mortgaged
Properties and of the Collateral being herein sometimes collectively called
the "Property").
Section 1.3. Note, Loan Documents, Other Obligations. This Mortgage is
made to secure and enforce the payment and performance of the following
promissory notes, obligations, indebtedness and liabilities:
(a) All indebtedness and other obligations now or hereafter incurred
or arising pursuant to the provisions of that certain Credit Agreement
dated of even date herewith between Mortgagor and Mortgagee and all
supplements thereto and amendments or modifications thereof, and all
agreements given in substitution therefor or in restatement, renewal or
extension thereof, in whole or in part (such Credit Agreement as the same
may from time to time be supplemented, amended or modified, and all other
agreements given in substitution therefor or in restatement, renewal or
extension thereof, in whole or in part, being herein called the "Credit
Agreement");
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(b) One certain promissory note dated of even date herewith, in the
principal amount of Three Million One Hundred Thousand Dollars ($3,100,000)
made by Mortgagor and payable to the order of Mortgagee, on or before
August 31, 2001, bearing interest as therein provided, and containing a
provision for the payment of a reasonable additional amount as attorneys'
fees, as the same may from time to time be supplemented, amended or
modified, and all other notes given in substitution therefor or in
modification, renewal or extension thereof, in whole or in part (such note,
as from time to time supplemented, amended, or modified and all other notes
given in substitution therefor, or in modification, renewal or extension
thereof, in whole or in part, being herein called the "Note");
(c) All indebtedness and other obligations now or hereafter incurred
or arising pursuant to or permitted by the provisions of the Note, the
Credit Agreement, this Mortgage or any other instrument now or hereafter
evidencing, governing, guaranteeing or securing the "secured indebtedness"
(as hereinafter defined) or any part thereof or otherwise executed in
connection with any advance or loan evidenced or governed by the Note or
the Credit Agreement (the Note, the Credit Agreement, this Mortgage and
such other instruments being herein sometimes collectively called the "Loan
Documents");
(d) Payment of and performance of any and all present or future
obligations of Mortgagor under the terms of any present or future swap
agreements, cap, floor, collar, exchange transaction, forward agreement or
other derivative, exchange or protection agreements relating to interest
rates or to crude oil, natural gas, natural gas liquids, refined products
or other hydrocarbons or the prices thereof, or any option with respect to
any such transaction, now existing or hereafter entered into between
Mortgagor and Mortgagee or any affiliate of Mortgagee (including without
limitation El Paso Energy Marketing Company);
(e) All other loans and future advances made by Mortgagee to Mortgagor
and all other debts, obligations and liabilities of Mortgagor of every kind
and character now or hereafter existing in favor of Mortgagee (including
without limitation all debts, obligations and liabilities owing under that
certain Conveyance of Net Profits Overriding Royalty Interest of even date
herewith from Mortgagor to Mortgagee), whether direct or indirect, primary
or secondary, joint or several, fixed or contingent, and whether originally
payable to Mortgagee or to a third party and subsequently acquired by
Mortgagee, it being contemplated that Mortgagor may hereafter become
indebted to Mortgagee for such further debts, obligations and liabilities;
and
(f) Without limiting the generality of the foregoing, all post-
petition interest, expenses, and other duties and liabilities with respect
to indebtedness or other obligations described above in this Section 1.3,
which would be owed but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization, or similar
proceeding.
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Section 1.4. Secured Indebtedness. The indebtedness referred to in
Section 1.3, and all renewals, extensions and modifications thereof, and all
substitutions therefor, in whole or in part, are herein sometimes referred to as
the "secured indebtedness" or the "indebtedness secured hereby". It is
contemplated and acknowledged that the secured indebtedness may include
revolving credit loans and advances from time to time, and that this Mortgage
shall have effect, as of the date hereof, to secure all secured indebtedness,
regardless of whether any amounts are advanced on the date hereof or on a later
date or, whether having been advanced, are later repaid in part or in whole and
further advances made at a later date.
Section 1.5. Maximum Secured Amount. Notwithstanding any provision hereof
to the contrary, the outstanding indebtedness secured by hereby shall not, at
any time or from time to time, exceed an aggregate maximum amount of
$50,000,000.
Section 1.7 Maturity of Indebtedness. The maturity of the indebtedness
secured hereby, subject to rights of acceleration, is August 31, 2001.
ARTICLE II.
Representations, Warranties and Covenants
Section 2.1. Mortgagor represents, warrants, and covenants as follows:
(a) Title and Permitted Encumbrances. Mortgagor has, and Mortgagor
covenants to maintain, good and marketable title to the Property, free and
clear of all liens, security interests, and encumbrances except for (i) the
contracts, agreements, burdens, encumbrances and other matters set forth in
the descriptions of certain of the Mortgaged Properties on Exhibit "A"
hereto, (ii) the liens and security interests evidenced by this Mortgage,
(iii) statutory liens for taxes which are not yet delinquent, or which are
being contested in good faith by appropriate proceedings and for which
Mortgagor has established reserves as required by generally accepted
accounting principles, (iv) liens securing lessors' royalties arising by
statute or under the terms of a lease, liens under operating agreements,
pooling orders and unitization agreements, and mechanics' and materialmen's
liens, with respect to obligations which are not yet due or the
enforceability of which is being contested in good faith by appropriate
proceedings, (v) other liens and security interests (if any) in favor of
Mortgagee, (vi) minor defects and irregularities in title to any Property,
so long as such defects and irregularities neither (A) are liens which
secure other indebtedness or obligations nor (B) materially impair the
value of such Property or the use thereof for the purposes for which such
Property is held (the matters described in the foregoing clauses (i), (ii),
(iii), (iv), (v) and (vi) being herein called the "Permitted
Encumbrances"); Mortgagor will warrant and defend title to the Property,
subject as aforesaid, against the claims and demands (including claims
which would be a Permitted Encumbrance under item (vi) above) of all
persons claiming or to claim the same or any part thereof. With respect to
each Mortgaged Property, the ownership of Mortgagor in such Mortgaged
Property does and will (after giving effect to all Permitted
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Encumbrances, but prior to giving effect to the Conveyance of Net Profits
Overriding Royalty Interest given by Mortgagor to Mortgagee immediately
prior to the grant of this Mortgage): (i) with respect to each tract of
land described in Exhibit "A" hereto (whether described directly in such
Exhibit "A" or described by reference to another instrument) in connection
with such Mortgaged Property, (A) entitle Mortgagor to receive (subject to
the terms and provisions of this Mortgage) a decimal or percentage share of
the oil, gas and other hydrocarbons produced from, or allocated to, such
tract equal to not less than the decimal or percentage share set forth in
Exhibit "A" in connection with such tract opposite the words "Net Revenue
Interest" (or words of similar import), (B) cause Mortgagor to be obligated
to bear a decimal or percentage share of the cost of exploration,
development and operation of such tract of land not greater than the
decimal or percentage share set forth in Exhibit "A" in connection with
such tract opposite the words "Working Interest" (or words of similar
import) and (ii) if such Mortgaged Property is shown on Exhibit "A" to be
subject to a unit or units, with respect to each such unit, (A) entitle
Mortgagor to receive (subject to the terms and provisions of this Mortgage)
a decimal or percentage share of all substances covered by such unit which
are produced from, or allocated to, such unit equal to not less than the
decimal or percentage share set forth in Exhibit "A" in connection with
such Mortgaged Property opposite the words "Unit Net Revenue Interest" or
words of similar import (and if such Mortgaged Property is subject to more
than one unit, words identifying such interest with such unit), and (B)
obligate Mortgagor to bear a decimal or percentage share of the cost of
exploration, development and operation of such unit not greater than the
decimal or percentage share set forth in Exhibit "A" in connection with
such Mortgaged Property opposite the words "Unit Working Interest" or words
of similar import (and if such Mortgaged Property is subject to more than
one unit, words identifying such interest with such unit). With respect to
each Property described in Exhibit "A" hereto which is subject to a
voluntary or involuntary pooling, unitization or communitization agreement
and/or order, the term "tract of land" as used in this Section 2.1(a) shall
mean the pooled, unitized or communitized area as an entirety and shall not
be deemed to refer to any individual tract committed to said pooled,
unitized or communitized area. The above-described shares of production
which Mortgagor is entitled to receive, and shares of expenses which
Mortgagor is obligated to bear, are not and will not be subject to change
(other than changes which arise pursuant to non-consent provisions of
operating agreements described in Exhibit "A" in connection with operations
hereafter proposed), except, and only to the extent that, such changes are
expressly set out in Exhibit "A". There is not and will not be any
unexpired financing statement covering any part of the Property on file in
any public office naming any party other than Mortgagee as secured party.
Upon request by Mortgagee, Mortgagor will deliver to Mortgagee schedules of
all internal and third party information identifying the Mortgaged
Properties (such as, for example, lease names and numbers assigned by
Mortgagor or the operator of any Mortgaged Property, well and/or unit
and/or property names and numbers assigned by purchasers of Production, and
internal identification names and numbers used by Mortgagor in accounting
for revenues, costs, and joint interest transactions attributable to the
Mortgaged Properties). The listing of Permitted Encumbrances above is made
for the purpose of limiting certain warranties and covenants made by
Mortgagor herein; such
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listing is not intended to affect the description herein of the Mortgaged
Properties nor to subordinate the liens and security interests hereunder to
any Permitted Encumbrances.
(b) Leases and Contracts; Performance of Obligations. The oil, gas
and/or mineral leases, contracts, servitudes and other agreements forming a
part of the Property, to the extent the same cover or otherwise relate to
the Property, are in full force and effect, and Mortgagor agrees to so
maintain them in full force and effect. All rents, royalties and other
payments due and payable under such leases, contracts, servitudes and other
agreements, or under the Permitted Encumbrances, or otherwise attendant to
the ownership or operation of the Property, have been, and will continue to
be, properly and timely paid. Mortgagor is not in default with respect to
Mortgagor's obligations (and Mortgagor is not aware of any default by any
third party with respect to such third party's obligations) under such
leases, contracts, servitudes and other agreements, or under the Permitted
Encumbrances, or otherwise attendant to the ownership or operation of any
part of the Property, where such default could adversely affect the
ownership or operation of the Property; Mortgagor will fulfill all such
obligations coming due in the future. Mortgagor is not currently
accounting (and will not hereafter agree to account) for any royalties, or
overriding royalties or other payments out of production, on a basis (other
than delivery in kind) less favorable to Mortgagor than proceeds received
by Mortgagor (calculated at the well) from sale of production.
(c) Sale of Production. No Mortgaged Property is or will become
subject to any contractual or other arrangement (i) whereby payment for
production is or can be deferred for a substantial period after the month
in which such production is delivered (i.e., in the case of oil, not in
excess of 60 days, and in the case of gas, not in excess of 90 days) or
(ii) whereby payments are made to Mortgagor other than by checks, drafts,
wire transfer advises or other similar writings, instruments or
communications for the immediate payment of money. Except for production
sales contracts, processing agreements or transportation agreements (or
other agreements relating to the marketing of Production) listed on Exhibit
"A" (in connection with the Mortgaged Properties to where they relate), (i)
no Mortgaged Property is or will become subject to any contractual or other
arrangement for the sale, processing or transportation of Production (or
otherwise related to the marketing of Production) which cannot be canceled
on 120 days' (or less) notice and (ii) all contractual or other
arrangements for the sale, processing or transportation of Production (or
otherwise related to the marketing of Production) shall be bona fide arm's
length transactions with third parties not affiliated with Mortgagor and
shall be at the best price (and on the best terms) available (such price
shall, in the case of Production sales which are subject to price controls,
be determined giving consideration to such fact). Mortgagor is presently
receiving a price for all production from (or attributable to) each
Mortgaged Property covered by a production sales contract listed on Exhibit
"A" as computed in accordance with the terms of such contract, and is not
having deliveries of production from such Mortgaged Property curtailed
substantially below such property's delivery capacity. Neither Mortgagor,
nor any of its predecessors in title, has received prepayments (including,
but not limited to, payments for gas not taken pursuant to "take or pay" or
other similar arrangements) for any oil, gas or other hydrocarbons
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produced or to be produced from the Mortgaged Properties after the date
hereof, and Mortgagor hereby covenants not to enter into any such advance
or prepayment arrangements whereby it accepts consideration for oil, gas or
other hydrocarbons not yet produced. No Mortgaged Property is or will
become subject to any "take or pay" or other similar arrangement (i) which
can be satisfied in whole or in part by the production or transportation of
gas from other properties or (ii) as a result of which production from the
Mortgaged Properties may be required to be delivered to one or more third
parties without payment (or without full payment) therefor as a result of
payments made, or other actions taken, with respect to other properties.
There is no Mortgaged Property with respect to which Mortgagor, or its
predecessors in title, has, prior to the date hereof, taken more
("overproduced"), or less ("underproduced"), gas from the lands covered
thereby (or pooled or unitized therewith) than its ownership interest in
such Mortgaged Property would entitle it to take. Mortgagor will not after
the date hereof become "overproduced" (as above defined) with respect to
any well on the Mortgaged Properties (or on any unit in which the Mortgaged
Properties participate), in an amount in excess of Mortgagor's share of gas
produced from such well during the preceding four calendar months. No
Mortgaged Property is or will become subject to a gas balancing arrangement
under which one or more third parties may take a portion of the production
attributable to such Mortgaged Property without payment (or without full
payment) therefor as a result of production having been taken from, or as a
result of other actions or inactions with respect to, other properties. No
Mortgaged Property is subject at the present time to any regulatory refund
obligation and, to the best of Mortgagor's knowledge, no facts exist which
might cause the same to be imposed.
(d) Condition of Personal or Movable Property. The equipment,
inventory, improvements, fixtures, goods and other tangible
personal/movable property forming a part of the Property are and will
remain in good repair and condition and are and will be adequate for the
normal operation of the Property in accordance with prudent industry
standards; all of such Property is, and will remain, located on the
Mortgaged Properties, except for that portion thereof which is or shall be
located elsewhere (including that usually located on the Mortgaged
Properties but temporarily located elsewhere) in the course of the normal
operation of the Property or which is hereafter sold or disposed of as
allowed under the Credit Agreement.
(e) Operation of Mortgaged Properties. The Mortgaged Properties (and
properties unitized therewith) are being (and, to the extent the same could
adversely affect the ownership or operation of the Mortgaged Properties
after the date hereof, have in the past been), and hereafter will be,
maintained, operated and developed in a good and workmanlike manner, in
accordance with prudent industry standards and in conformity with all
applicable laws and all rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with all oil,
gas and/or other mineral leases and other contracts and agreements forming
a part of the Property and in conformity with the Permitted Encumbrances;
specifically in this connection, (i) no Mortgaged Property is subject to
having allowable production after the date hereof, reduced below the full
and regular allowable (including the maximum permissible
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tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the date hereof, and (ii) none of the
▇▇▇▇▇ located on the Mortgaged Properties (or properties unitized
therewith) are or will be deviated from the vertical more than the maximum
permitted by applicable laws, regulations, rules and orders, and such ▇▇▇▇▇
are, and will remain, bottomed under and producing from, with the well
bores wholly within, the Mortgaged Properties (or, in the case of ▇▇▇▇▇
located on properties unitized therewith, such unitized properties). There
are no ▇▇▇▇▇ being drilled, deepened, plugged back or reworked, and no
other operations are being conducted for which consent is required under
the applicable operating agreement (or which are other than normal
operation of existing ▇▇▇▇▇ on the Mortgaged Properties); there are no
proposals currently outstanding (whether made by Mortgagor or by any other
party) to drill, deepen, plug back, or rework ▇▇▇▇▇, or to conduct any such
other operations, or to abandon any ▇▇▇▇▇ on the Mortgaged Properties (nor
are there any such proposals which have been approved, either by Mortgagor
or any other party, with respect to which the operations covered thereby
have not been commenced other than those disclosed by Mortgagor to
Mortgagee in writing prior to the execution hereof). There are no dry
holes, or otherwise inactive ▇▇▇▇▇, located on the Mortgaged Properties or
on lands pooled or unitized therewith except for ▇▇▇▇▇ that have been
properly plugged and abandoned. Mortgagor has, and will have in the future,
all governmental licenses and permits necessary or appropriate to own and
operate the Property; and Mortgagor has not received notice of any
violations in respect of any such licenses or permits.
(f) Sale or Disposal. Mortgagor will not, without the prior written
consent of Mortgagee, sell, exchange, lease, transfer, or otherwise dispose
of any part of, or interest in, the Property other than (i) sales,
transfers and other dispositions of machinery, equipment and other
personal/movable property and fixtures made in connection with a release,
surrender or abandonment (to which Mortgagee has given its prior written
consent) of a lease, (ii) sales, transfers and other dispositions of
machinery, equipment and other personal/movable property and fixtures in
connection with the abandonment (to which Mortgagee has given its prior
written consent) of a well, (iii) sales, transfers and other dispositions
of machinery, equipment and other personal/movable property and fixtures
which are (A) obsolete for their intended purpose and disposed of in the
ordinary course of business or (B) replaced by articles of at least equal
suitability and value owned by Mortgagor free and clear of all liens except
this Mortgage and the Permitted Encumbrances, (iv) sales of Production
which are made in the ordinary course of business and in compliance with
Section 2.1(c) hereof, and (v) sales permitted under Section 7.5 of the
Credit Agreement; provided that nothing in clause (iv) shall be construed
as limiting Mortgagee's rights under Article III of this Mortgage.
Mortgagor shall account fully and faithfully for and, if Mortgagee so
elects, shall promptly pay or turn over to Mortgagee the proceeds in
whatever form received from disposition in any manner of any of the
Property.
(g) Ad Valorem and Severance Taxes. Mortgagor has paid and
discharged, and will continue to pay and discharge, all ad valorem taxes
assessed against the Property
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or any part thereof and all production, severance and other taxes assessed
against, or measured by, the Production or the value, or proceeds, of the
Production.
(h) Suits and Claims. There are no suits, actions, claims,
investigations, inquiries, proceedings or demands pending (or, to
Mortgagor's knowledge, threatened) which affect the Property (including,
without limitation, any which challenge or otherwise pertain to Mortgagor's
title to the Property) and no judicial or administrative actions, suits or
proceedings pending (or, to Mortgagor's knowledge, threatened) against
Mortgagor.
(i) Environmental.
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(A) Current Status. The Property and Mortgagor are not in
violation of Applicable Environmental Laws (below defined), or subject
to any existing, pending or, to the best knowledge of Mortgagor,
threatened investigation or inquiry by any governmental authority or
any other person under or with respect to Applicable Environmental
Laws, or subject to any remedial obligations under Applicable
Environmental Laws, and are in compliance with all permits and
licenses required under Applicable Environmental Laws, and this
representation will continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the
Property and Mortgagor. "Applicable Environmental Laws" shall mean
any applicable laws, orders, rules, or regulations pertaining to
safety, health or the environment, as such laws, orders, rules or
regulations now exist or are hereafter enacted and/or amended
(including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986 (as amended,
hereinafter called "CERCLA"), the Resource Conservation and Recovery
Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA")
and applicable state and local law). Mortgagor undertook, at the time
of acquisition of the Property, all appropriate inquiry into the
previous ownership and uses of the Property consistent with good
commercial or customary practice. Mortgagor has taken all steps
necessary to determine and has determined that no hazardous substances
or solid wastes have been disposed of or otherwise released at, into,
upon or under the Property. The use which Mortgagor makes and intends
to make of the Property will not result in the use, treatment, storage
or disposal or other release of any hazardous substance or solid waste
at, into, upon or under the Property, except such usage, and temporary
storage in anticipation of usage, as is in the ordinary course of
business and in compliance with Applicable Environmental Laws. The
terms "hazardous substance" and "release" as used in this Mortgage
shall have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") shall have the meanings
specified in RCRA; provided, in the event either CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of such
amendment and provided further, to the extent that the laws of the
states in which the Mortgaged Properties are located establish a
meaning for "hazardous substance," "release," "solid waste," or
"disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply. The "Associated Property" (as
such term is hereinafter defined) is not in violation of any
Applicable Environmental Laws for which Mortgagor or its predecessors
in the Property would be responsible. The term "Associated Property"
as used in this Mortgage shall mean any and all interests in and to
(and or carved out of) the lands which are described or referred to in
Exhibit "A" hereto, or which are otherwise described in any of the
oil, gas
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and/or mineral leases or other instruments described in or referred to
in such Exhibit "A", whether or not such property interests are owned
by Mortgagor.
(B) Future Performance. Mortgagor will not cause or permit
the Property or the Associated Property or Mortgagor to be in
violation of, or do anything or permit anything to be done which will
subject the Property or the Associated Property to any remedial
obligations under, or result in noncompliance with applicable permits
and licenses under, any Applicable Environmental Laws, assuming
disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the
Property or the Associated Property and Mortgagor will promptly notify
Mortgagee in writing of any existing, pending or, to the best
knowledge of Mortgagor, threatened investigation, claim, suit or
inquiry by any governmental authority or any person in connection with
any Applicable Environmental Laws. Mortgagor will take all steps
necessary to determine that no hazardous substances or solid wastes
have been disposed of or otherwise released on or to the Property or
the Associated Property. Mortgagor will not cause or permit the
disposal or other release of any hazardous substance or solid waste
at, into, upon or under the Property or the Associated Property and
covenants and agrees to keep or cause the Property and/or the
Associated Property to be kept free of any hazardous substance or
solid waste (except such use, and temporary storage in anticipation of
use, as is required in the ordinary course of business, all while in
compliance with Applicable Environmental Laws), and to remove the same
(or if removal is prohibited by law, to take whatever action is
required by law) promptly upon discovery at its sole expense. Upon
Mortgagee's reasonable request, at any time and from time to time
during the existence of this Mortgage, Mortgagor will provide at
Mortgagor's sole expense an inspection or audit of the Property and
the Associated Property from an engineering or consulting firm
approved by Mortgagee, indicating the presence or absence of hazardous
substances and solid waste on the Property and/or the Associated
Property and compliance with Applicable Environmental Laws.
(j) Not Abandon ▇▇▇▇▇; Participate in Operations. Mortgagor will not,
without prior written consent of Mortgagee, abandon, or consent to the
abandonment of, any well producing from the Mortgaged Properties (or
properties unitized therewith) so long as such well is capable (or is
subject to being made capable through drilling, reworking or other
operations which it would be commercially feasible to conduct) of producing
oil, gas, or other hydrocarbons or other minerals in commercial quantities
(as determined without considering the effect of this Mortgage). Mortgagor
will not, without prior written consent of Mortgagee, elect not to
participate in a proposed operation on the Mortgaged Properties where the
effect of such election would be the forfeiture either temporarily (i.e.
until a certain sum of money is received out of the forfeited interest) or
permanently of any interest in the Mortgaged Properties.
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(k) Defense of Mortgage. If the validity or priority of this Mortgage
or of any rights, titles, liens or security interests created or evidenced
hereby with respect to the Property or any part thereof or the title of
Mortgagor to the Property shall be endangered or questioned or shall be
attacked directly or indirectly or if any legal proceedings are instituted
against Mortgagor with respect thereto, Mortgagor will give prompt written
notice thereof to Mortgagee and at Mortgagor's own cost and expense will
diligently endeavor to cure any defect that may be developed or claimed,
and will take all necessary and proper steps for the defense of such legal
proceedings, including, but not limited to, the employment of counsel, the
prosecution or defense of litigation and the release or discharge of all
adverse claims, and Mortgagee is 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 or the protection
of the validity or priority of this Mortgage and the rights, titles, liens
and security interests created or evidenced hereby, including but not
limited to the employment of independent counsel, the prosecution or
defense of litigation, the compromise or discharge of any adverse claims
made with respect to the Property, the purchase of any tax title and the
removal of prior liens or security interests, and all expenditures so made
of every kind and character shall be a demand obligation (which obligation
Mortgagor hereby expressly promises to pay) owing by Mortgagor to Mortgagee
and shall bear interest from the date expended until paid at the rate
described in Section 2.3 hereof, and the party incurring such expenses
shall be subrogated to all rights of the person receiving such payment.
(l) Indemnity. Mortgagor will reimburse Mortgagee (for purposes of
this paragraph, the term "Mortgagee" shall include the directors, officers,
partners, employees and agents of Mortgagee and any persons or entities
owned or controlled by or affiliated with Mortgagee) for all expenditures,
including reasonable attorneys' fees and expenses, incurred or expended in
connection with (i) the breach by Mortgagor of any covenant, agreement or
condition contained herein or in any other Loan Document, (ii) the exercise
by Mortgagee of any rights and remedies hereunder or under any other Loan
Document, and (iii) the protection of the Property and/or liens and
security interests therein. Mortgagor will indemnify and hold harmless
Mortgagee from and against (and will reimburse Mortgagee for) all claims,
demands, liabilities, losses, damages (including without limitation
consequential damages), causes of action, judgments, penalties, costs and
expenses (including without limitation reasonable attorneys' fees and
expenses) which may be imposed upon, asserted against or incurred or paid
by Mortgagee on account of, in connection with, or arising out of (A) any
bodily injury or death or natural resource, human health or property damage
occurring in, at, into, under or upon or in the vicinity of the Property
through any cause whatsoever, (B) any act performed or omitted to be
performed hereunder or the breach of any representation or warranty herein,
(C) the exercise of any rights and remedies hereunder or under any other
Loan Document, (D) any transaction, act, omission, event or circumstance
arising out of or in any way connected with the Property or with this
Mortgage or any other Loan Document, (E) any violation on or prior to the
Release Date (as hereinafter defined) of any Applicable Environmental Law,
(F) any act, omission, event or circumstance existing or occurring on or
prior to the Release Date (including without limitation the presence on or
under the
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Property or the Associated Property or release at, into, upon, under or
from the Property or the Associated Property of hazardous substances or
solid wastes disposed of or otherwise released) resulting from or in
connection with the ownership, construction, occupancy, operation, use
and/or maintenance of the Property or the Associated Property, regardless
of whether the act, omission, event or circumstance constituted a violation
of any Applicable Environmental Law at the time of its existence or
occurrence, and (G) any and all claims or proceedings (whether brought by
private party or governmental agencies) for human health, bodily injury,
property damage, abatement or remediation, environmental damage, cleanup,
mitigation, removal, natural resource damage or impairment or any other
injury or damage resulting from or relating to any hazardous or toxic
substance, solid waste or contaminated material located upon or migrating
into, from or through the Property or the Associated Property (whether or
not the release of such materials was caused by Mortgagor, a tenant or
subtenant or a prior owner or tenant or subtenant on the Property or the
Associated Property and whether or not the alleged liability is
attributable to the use, treatment, handling, storage, generation,
transportation, removal or disposal of such substance, waste or material or
the mere presence of such substance, waste or material on or under the
Property or the Associated Property), which the Mortgagee may have
liability with respect to due to the making of the loan or loans evidenced
by the Note, the granting of this Mortgage, the exercise of any rights
under the Loan Documents, or otherwise. Mortgagee shall have the right to
compromise and adjust any such claims, actions and judgments, and in
addition to the rights to be indemnified as herein provided, all amounts
paid in compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, attorneys' fees and other expenses of every
character expended by Mortgagee pursuant to the provisions of this section
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Mortgagee. The "Release Date" as
used herein shall mean the earlier of the following two dates: (i) the date
on which the indebtedness and obligations secured hereby have been paid and
performed in full and this Mortgage has been released of record, or (ii)
the date on which the lien of this Mortgage is foreclosed or a deed in lieu
of such foreclosure is fully effective and recorded. WITHOUT LIMITATION, IT
IS THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO CLAIMS,
DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS,
PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE
ATTORNEYS' FEES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF
THE NEGLIGENCE OR STRICT LIABILITY OF SUCH (AND/OR ANY OTHER) INDEMNIFIED
PARTY. However, such indemnities shall not apply to any particular
indemnified party (but shall apply to the other indemnified parties) to the
extent the subject of the indemnification is caused by or arises out of the
gross negligence or willful misconduct of such particular indemnified
party. The foregoing indemnities shall not terminate upon the Release Date
or upon the release, foreclosure or other termination of this Mortgage but
will survive the Release Date, foreclosure of this Mortgage or conveyance
in lieu of foreclosure, and the repayment of the secured indebtedness and
the discharge and release of this Mortgage and the other
-15-
documents evidencing and/or securing the secured indebtedness. Any amount
to be paid hereunder by Mortgagor to Mortgagee shall be a demand obligation
owing by Mortgagor to Mortgagee and shall be subject to and covered by the
provisions of Section 2.3 hereof.
(m) Insurance. Mortgagor will carry insurance as provided in the
Credit Agreement. All policies evidencing such insurance shall contain
clauses providing that the proceeds thereof shall be payable to Mortgagee
as its interest may appear and providing that such policies may not be
canceled, reduced or otherwise affected without at least thirty (30) days
prior written notice to Mortgagee. Upon request by Mortgagee, Mortgagor
shall deliver to Mortgagee the original policies, evidence of payment of
premiums, certificates evidencing renewals, and such other information
regarding such insurance as Mortgagee may request. In the event of any
loss under any insurance policies so carried by Mortgagor, Mortgagee shall
have the right (but not the obligation) to make proof of loss and collect
the same, and all amounts so received shall be applied toward costs,
charges and expenses (including reasonable attorneys' fees), if any,
incurred in the collection thereof, then to the payment, in the order
determined by Mortgagee in its own discretion, of the secured indebtedness,
and any balance remaining shall be subject to the order of Mortgagor.
Mortgagee is hereby authorized but not obligated to enforce in its name or
in the name of Mortgagor payment of any or all of said policies or settle
or compromise any claim in respect thereof, and to collect and make
receipts for the proceeds thereof and Mortgagee is hereby appointed
Mortgagor's agent and attorney-in-fact to endorse any check or draft
payable to Mortgagor in order to collect the proceeds of insurance. In the
event of foreclosure of this Mortgage, or other transfer of title to the
Property in extinguishment in whole or in part of the secured indebtedness,
all right, title and interest of Mortgagor in and to such policies then in
force concerning the Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure or other transferee in
the event of such other transfer of title.
(n) Further Assurances. Mortgagor will, on request of Mortgagee, (i)
promptly correct any defect, error or omission which may be discovered in
the contents of this Mortgage, or in any other Loan Document, or in the
execution or acknowledgment of this Mortgage or any other Loan Document;
(ii) execute, acknowledge, deliver and record and/or file such further
instruments (including, without limitation, further mortgages, deeds of
trust, security agreements, financing statements, continuation statements,
and assignments of production, accounts, funds, contract rights, general
intangibles, and proceeds) and do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this
Mortgage and the other Loan Documents and to more fully identify and
subject to the liens and security interests hereof any property intended to
be covered hereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements, or appurtenances to the
Property; and (iii) execute, acknowledge, deliver, and file and/or record
any document or instrument (including specifically any financing statement)
desired by Mortgagee to protect the lien or the security interest hereunder
against the rights or interests of third persons. Mortgagor shall pay all
costs connected with any of the foregoing.
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(p) Not a Foreign Person. Mortgagor is not a "foreign person" within
the meaning of the Internal Revenue Code of 1986, as amended, (hereinafter
called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-
resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 2.2. Compliance by Operator. As to any part of the Mortgaged
Properties which is not a working interest, Mortgagor agrees to take all such
action and to exercise all rights and remedies as are available to Mortgagor to
cause the owner or owners of the working interest in such properties to comply
with the covenants and agreements contained herein; and as to any part of the
Mortgaged Properties which is a working interest but which is operated by a
party other than Mortgagor, Mortgagor agrees to take all such action and to
exercise all rights and remedies as are available to Mortgagor (including, but
not limited to, all rights under any operating agreement) to cause the party who
is the operator of such property to comply with the covenants and agreements
contained herein.
Section 2.3. Performance on Mortgagor's Behalf. Mortgagor agrees that, if
Mortgagor fails to perform any act or to take any action which hereunder
Mortgagor is required to perform or take, or to pay any money which hereunder
Mortgagor is required to pay, Mortgagee, in Mortgagor'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 by Mortgagee
and any money so paid by Mortgagee shall be a demand obligation owing by
Mortgagor to Mortgagee (which obligation Mortgagor hereby expressly promises to
pay) and Mortgagee, upon making such payment, shall be subrogated to all of the
rights of the person, corporation or body politic receiving such payment. Each
amount due and owing by Mortgagor to Mortgagee pursuant to this Mortgage shall
bear interest each day, from the date of such expenditure or payment until paid,
at the rate of fifteen percent per annum; all such amounts, together with such
interest thereon, shall be a part of the secured indebtedness and shall be
secured by this Mortgage.
ARTICLE III.
Assignment of Production, Accounts, and Proceeds
Section 3.1. Assignment of Production. Mortgagor does hereby absolutely
and unconditionally assign, transfer and set over to Mortgagee all Production
which accrues to Mortgagor's interest in the Mortgaged Properties, all proceeds
of such Production and all Payments in Lieu of Production (herein collectively
referred to as the "Production Proceeds"), together with the immediate and
continuing right to collect and receive such Production Proceeds. Mortgagor
directs and instructs any and all purchasers of any Production to pay to
Mortgagee all of the Production Proceeds accruing to Mortgagor's interest until
such time as such purchasers have been furnished with evidence that all secured
indebtedness has been paid and that this Mortgage has been released. Mortgagor
agrees that no purchasers of the Production shall have any responsibility for
the application of any funds paid to Mortgagee.
-17-
Section 3.2. Effectuating Payment of Production Proceeds to Mortgagee.
Independent of the foregoing provisions and authorities herein granted,
Mortgagor agrees to execute and deliver any and all transfer orders, division
orders and other instruments that may be requested by Mortgagee or that may be
required by any purchaser of any Production for the purpose of effectuating
payment of the Production Proceeds to Mortgagee. If under any existing sales
agreements, other than division orders or transfer orders, any Production
Proceeds are required to be paid by the purchaser to Mortgagor so that under
such existing agreements payment cannot be made of such Production Proceeds to
Mortgagee, Mortgagor's interest in all Production Proceeds under such sales
agreements and in all other Production Proceeds which for any reason may be paid
to Mortgagor shall, when received by Mortgagor, constitute trust funds in
Mortgagor's hands and shall be immediately paid over to Mortgagee. Without
limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints
Mortgagee as Mortgagor's special attorney-in-fact (with full power of
substitution, either generally or for such periods or purposes as Mortgagee may
from time to time prescribe) in the name, place and stead of Mortgagor to do any
and every act and exercise any and every power that Mortgagor might or could do
or exercise personally with respect to all Production and Production Proceeds
(the same having been assigned by Mortgagor to Mortgagee pursuant to Section 3.1
hereof), expressly inclusive, but not limited to, the right, power and authority
to:
(a) Execute and deliver in the name of Mortgagor any and all transfer
orders, division orders, letters in lieu of transfer orders,
indemnifications, certificates and other instruments of every nature that
may be requested or required by any purchaser of Production from any of the
Mortgaged Properties for the purposes of effectuating payment of the
Production Proceeds to Mortgagee or which Mortgagee may otherwise deem
necessary or appropriate to effect the intent and purposes of the
assignment contained in Section 3.1; and
(b) If under any product sales agreements other than division orders
or transfer orders, any Production Proceeds are required to be paid by the
purchaser to Mortgagor so that under such existing agreements payment
cannot be made of such Production Proceeds to Mortgagee, to make, execute
and enter into such sales agreements or other agreements as are necessary
to direct Production Proceeds to be payable to Mortgagee;
giving and granting unto said attorney-in-fact full power and authority to do
and perform any and every act and thing whatsoever necessary and requisite to be
done as fully and to all intents and purposes, as Mortgagor might or could do if
personally present; and Mortgagor shall be bound thereby as fully and
effectively as if Mortgagor had personally executed, acknowledged and delivered
any of the foregoing certificates or documents. The powers and authorities
herein conferred upon Mortgagee may be exercised by Mortgagee through any person
who, at the time of the execution of the particular instrument, is an officer of
Mortgagee. The power of attorney herein conferred is granted for 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 or any substitute shall be fully protected in
treating the powers and authorities conferred by this paragraph as continuing in
full force and effect until advised by
-18-
Mortgagee that all the secured indebtedness is fully and finally paid. Mortgagee
may, but shall not be obligated to, take such action as it deems appropriate in
an effort to collect the Production Proceeds and any reasonable expenses
(including reasonable attorney's fees) so incurred by Mortgagee shall be a
demand obligation of Mortgagor and shall be part of the secured indebtedness,
and shall bear interest each day, from the date of such expenditure or payment
until paid, at the rate described in Section 2.3 hereof.
Section 3.3. Change of Purchaser. To the extent a default has occurred
hereunder and is continuing, should any person now or hereafter purchasing or
taking Production fail to make payment promptly to Mortgagee of the Production
Proceeds, Mortgagee shall, subject to then-existing contractual prohibitions,
have the right to make, or to require Mortgagor to make, a change of purchaser,
and the right to designate or approve the new purchaser, and Mortgagee shall
have no liability or responsibility in connection therewith so long as ordinary
care is used in making such designation.
Section 3.4. Application of Production Proceeds. So long as no default
has occurred hereunder, the Production Proceeds received by Mortgagee during
each calendar month shall on the first business day of the next succeeding
calendar month (or, at the option of Mortgagee, on any earlier date) be applied
by Mortgagee as follows:
FIRST, to the payment of all secured indebtedness then due and
payable, in such manner and order as Mortgagee deems advisable;
SECOND, to the prepayment of the remainder of the secured indebtedness
in such manner and order and to such extent as Mortgagee deems advisable;
and
THIRD, the remainder, if any, of the Production Proceeds shall be paid
over to Mortgagor or to Mortgagor's order or to such other parties as may
be entitled thereto by law.
After a default hereunder has occurred, all Production Proceeds from time to
time in the hands of Mortgagee shall be applied by it toward the payment of all
secured indebtedness (principal, interest, attorneys' fees and other fees and
expenses) at such times and in such manner and order and to such extent as
Mortgagee deems advisable.
Section 3.5. Release From Liability; Indemnification. Mortgagee and its
successors and assigns are hereby released and absolved from all liability for
failure to enforce collection of the Production Proceeds and from all other
responsibility in connection therewith, except the responsibility of each to
account to Mortgagor for funds actually received by each. Mortgagor agrees to
indemnify and hold harmless Mortgagee (for purposes of this paragraph, the term
"Mortgagee" shall include the directors, officers, partners, employees and
agents of Mortgagee and any persons or entities owned or controlled by or
affiliated with Mortgagee) from and against any and all claims, demands,
liabilities, losses, damages (including without limitation consequential
damages), causes of action, judgments, penalties, costs and expenses (including
without limitation reasonable attorneys' fees and expenses) imposed upon,
asserted against or
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incurred or paid by Mortgagee by reason of the assertion that Mortgagee
received, either before or after payment in full of the secured indebtedness,
funds from the production of oil, gas, other hydrocarbons or other minerals
claimed by third persons (and/or funds attributable to sales of production which
(i) were made at prices in excess of the maximum price permitted by applicable
law or (ii) were otherwise made in violation of laws, rules, regulations and/or
orders governing such sales), and Mortgagee shall have the right to defend
against any such claims or actions, employing attorneys of its own selection,
and if not furnished with indemnity satisfactory to it, Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments, and in
addition to the rights to be indemnified as herein provided, all amounts paid by
Mortgagee in compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, attorneys' fees and other expenses of every
character expended by Mortgagee pursuant to the provisions of this section shall
be a demand obligation (which obligation Mortgagor hereby expressly promises to
pay) owing by Mortgagor to Mortgagee and shall bear interest, from the date
expended until paid, at the rate described in Section 2.3 hereof. The foregoing
indemnities shall not terminate upon the Release Date or upon the release,
foreclosure or other termination of this Mortgage but will survive the Release
Date, foreclosure of this Mortgage or conveyance in lieu of foreclosure, and the
repayment of the secured indebtedness and the discharge and release of this
Mortgage and the other documents evidencing and/or securing the secured
indebtedness. WITHOUT LIMITATION, IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR
AGREES THAT THE FOREGOING RELEASES AND INDEMNITIES SHALL APPLY TO EACH
INDEMNIFIED PARTY WITH RESPECT TO ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES,
DAMAGES (INCLUDING WITHOUT LIMITATION CONSEQUENTIAL DAMAGES), CAUSES OF ACTION,
JUDGMENTS, PENALTIES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION
REASONABLE ATTORNEYS' FEES AND EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY
OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY.
However, such indemnities shall not apply to any particular indemnified party
(but shall apply to the other indemnified parties) to the extent the subject of
the indemnification is caused by or arises out of the gross negligence or
willful misconduct of such particular indemnified party.
Section 3.6. Mortgagor's Absolute Obligation to Pay Note. Nothing herein
contained shall detract from or limit the obligations of Mortgagor to make
prompt payment of the Note, and any and all other secured indebtedness, at the
time and in the manner provided herein and in the Loan Documents, regardless of
whether the Production and Production Proceeds herein assigned are sufficient to
pay same, and the rights under this Article III shall be cumulative of all other
rights under the Loan Documents.
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ARTICLE IV.
Remedies Upon Default
Section 4.1. Default. The term "default" as used in this Mortgage shall
mean the occurrence of an "Event of Default" as defined in the Credit Agreement.
Section 4.2. Acceleration of Secured Indebtedness. Upon the occurrence of
a default, Mortgagee at any time and from time to time may, as provided in the
Credit Agreement, without notice to Mortgagor or any other person declare any or
all of the secured indebtedness immediately due and payable and all such secured
indebtedness shall thereupon be immediately due and payable, without
presentment, demand, protest, notice of protest, declaration or notice of
acceleration or intention to accelerate, putting the Mortgagor in default,
dishonor, notice of dishonor or any other notice or declaration of any kind, all
of which are hereby expressly waived by Mortgagor, and the liens evidenced
hereby shall be subject to foreclosure in any manner provided for herein or
provided for by law as Mortgagee may elect.
Section 4.3. Pre-Foreclosure Remedies. Upon the occurrence of a default,
or any event or circumstance which, with the lapse of time or the giving of
notice, or both, would constitute a default hereunder, Mortgagee is authorized,
prior or subsequent to the institution of any foreclosure proceedings, to enter
upon the Property, or any part thereof, and to take possession of the Property
and all books and records relating thereto, and to exercise without interference
from Mortgagor any and all rights which Mortgagor has with respect to the
management, possession, operation, protection or preservation of the Property.
If necessary to obtain the possession provided for above, Mortgagee may invoke
any and all remedies to dispossess Mortgagor. All costs, expenses and
liabilities of every character incurred by Mortgagee in managing, operating,
maintaining, protecting or preserving the Property shall constitute a demand
obligation (which obligation Mortgagor hereby expressly promises to pay) owing
by Mortgagor to Mortgagee and shall bear interest from date of expenditure until
paid at the rate described in Section 2.3 hereof, all of which shall constitute
a portion of the secured indebtedness and shall be secured by this Mortgage and
by any other instrument securing the secured indebtedness. In connection with
any action taken by Mortgagee pursuant to this Section 4.3, MORTGAGEE SHALL NOT
BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY ACT OR OMISSION
OF MORTGAGEE (INCLUDING MORTGAGEE'S OWN NEGLIGENCE) IN MANAGING THE PROPERTY
UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OR BAD FAITH OF MORTGAGEE,
nor shall Mortgagee be obligated to perform or discharge any obligation, duty or
liability of Mortgagor arising under any agreement forming a part of the
Property or arising under any Permitted Encumbrance or otherwise arising.
Mortgagor hereby assents to, ratifies and confirms any and all actions of
Mortgagee with respect to the Property taken under this Section 4.3.
Section 4.4. Foreclosure.
(a) Upon the occurrence of a default, this Mortgage may be foreclosed as to
the Mortgaged Properties, or any part thereof, in any manner permitted by
applicable law. Cumulative of the foregoing and the other provisions of this
Section 4.4, Mortgagee may foreclose this Mortgage by executory process subject
to, and on the terms and conditions required or permitted by, applicable law,
and shall have the right to appoint a keeper of such Mortgaged Properties.
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(b) Upon the occurrence of a default, Mortgagee may exercise its rights of
enforcement with respect to the Collateral under the Louisiana Commercial Laws
or under, the Uniform Commercial Code or any other statute in force in any state
to the extent the same is applicable law. Cumulative of the foregoing and the
other provisions of this Section 4.4:
(i) Mortgagee may enter upon the Mortgaged Properties or otherwise
upon Mortgagor's premises to take possession of, assemble and collect the
Collateral or to render it unusable; and
(ii) Mortgagee may require Mortgagor to assemble the Collateral and
make it available at a place Mortgagee designates which is mutually
convenient to allow Mortgagee to take possession or dispose of the
Collateral; and
(iii) written notice mailed to Mortgagor as provided herein at least
five (5) days prior to the date of public sale of the Collateral or prior
to the date after which private sale of the Collateral will be made shall
constitute reasonable notice; and
(iv) in the event of a foreclosure of the liens and/or security
interests evidenced hereby, the Collateral, or any part thereof, and the
Mortgaged Properties, or any part thereof, may, at the option of Mortgagee,
be sold, as a whole or in parts, together or separately (including, without
limitation, where a portion of the Mortgaged Properties is sold, the
Collateral related thereto may be sold in connection therewith); and
(v) the expenses of sale provided for in clause FIRST of Section 4.6
shall include the reasonable expenses of retaking the Collateral, or any
part thereof, holding the same and preparing the same for sale or other
disposition; and
(vi) should, under this subsection, the Collateral be disposed of
other than by sale, any proceeds of such disposition shall be treated under
Section 4.6 as if the same were sales proceeds; and
(vii) as to the Collateral located in or otherwise subject to the
laws of the State of Louisiana, Mortgagee may foreclose this Mortgage as a
security agreement affecting the Collateral by executory process subject
to, and on the terms and conditions required or permitted by, applicable
law, and shall have the right to appoint a keeper of such Collateral.
(c) To the extent permitted by applicable law, the sale hereunder of less
than the whole of the Property shall not exhaust the powers of sale under the
Uniform Commercial Code herein granted or the right to judicial foreclosure, and
successive sale or sales may be made until the whole of the Property shall be
sold and, if the proceeds of such sale of less than the whole of the Property
shall be less than the aggregate of the indebtedness secured hereby and the
expense of conducting such sale, this Mortgage and the liens and security
interests hereof shall remain in full force and effect as to the unsold portion
of the Property just as though no sale had been
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made. In the event any sale hereunder is not completed or is defective in the
opinion of Mortgagee, such sale shall not exhaust the powers of sale under the
Uniform Commercial Code herein granted or the right to judicial foreclosure, and
Mortgagee shall have the right to cause a subsequent sale or sales to be made.
Any sale may be adjourned by announcement at the time and place appointed for
such sale without further notice except as may be required by law. Mortgagee
acting under such Uniform Commercial Code power of sale may appoint or delegate
any one or more persons as agent to perform any act or acts necessary or
incident to any sale held by it (including, without limitation, the posting of
notices and the conduct of sale), and such appointment need not be in writing or
recorded. Any and all statements of fact or other recitals made in any deed or
deeds, or other instruments of transfer, given in connection with a sale as to
nonpayment of the secured indebtedness or as to the occurrence of any default,
or as to all of the secured indebtedness having been declared to be due and
payable, or as to the request to sell, or as to notice of time, place and terms
of sale and the properties to be sold having been duly given, or as to any other
act or thing having been duly done, shall be taken as prima facie evidence of
the truth of the facts so stated and recited. Notwithstanding any reference
herein to the Note or the Credit Agreement or any other Loan Document, all
persons dealing with the Mortgaged Properties shall be entitled to rely on any
document, or certificate, of the Mortgagee as to the occurrence of an event,
such as an Event of Default, and shall not be charged with or forced to review
any provision of any other document to determine the accuracy thereof. With
respect to any sale held in foreclosure of the liens and/or security interests
covered hereby, it shall not be necessary for the Mortgagee, any public officer
acting under execution or order of the court or any other party to have
physically present or constructively in his/her or its possession, either at the
time of or prior to such sale, the Property or any part thereof.
(d) As to Property now or hereafter located in, or otherwise subject to the
laws of, the State of Louisiana, Mortgagor acknowledges the secured
indebtedness, whether now existing or to arise hereafter, and for Mortgagor,
Mortgagor's heirs, devisees, personal representatives, successors and assigns,
hereby confesses judgment for the full amount of the secured indebtedness in
favor of the Mortgagee. Mortgagor further agrees that the Mortgagee may cause
all or any part of the Property to be seized and sold after due process of law,
the Mortgagor waiving the benefit of all laws or parts of laws relative to the
appraisement of property seized and sold under executory process or other legal
process, and consenting that all or any part of the Property may be sold without
appraisement, either in its entirety or in lots and parcels, as the Mortgagee
may determine, to the highest bidder for cash or on such terms as the plaintiff
in such proceedings may direct. Mortgagor hereby waives (i) the benefit of
appraisement provided for in articles 2332, 2336, 2723, and 2724 of the
Louisiana Code of Civil Procedure and all other laws conferring the same; (ii)
the demand and three (3) days notice of demand as provided in articles 2639 and
2721 of the Louisiana Code of Civil Procedure; (iii) the notice of seizure
provided for in articles 2293 and 2721 of the Louisiana Code of Civil Procedure;
(iv) the three (3) days delay provided for in articles 2331 and 2722 of the
Louisiana Code of Civil Procedure; and (v) all other laws providing rights of
notice, demand, appraisement, or delay. Mortgagor expressly authorizes and
agrees that Mortgagee shall have the right to appoint a keeper of such Property
pursuant to the terms and provisions of La. R.S. 9:5131 et seq. and La. R.S.
9:5136 et seq., which keeper may be the Mortgagee, any agent or employee
thereof, or any other person, firm, or corporation. Compensation for the
services of the keeper is hereby fixed at five percent (5%) of the amount
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due or sued for or claimed or sought to be protected, preserved, or enforced in
the proceeding for the recognition or enforcement of this Mortgage and shall be
secured by the liens and security interests of this Mortgage.
Section 4.5. Receiver. In addition to all other remedies herein provided
for, Mortgagor agrees that, upon the occurrence of a default or any event or
circumstance which, with the lapse of time or the giving of notice, or both,
would constitute a default hereunder, Mortgagee shall as a matter of right be
entitled to the appointment of a receiver or receivers for all or any part of
the Property, whether such receivership be incident to a proposed sale (or
sales) of such property or otherwise, and without regard to the value of the
Property or the solvency of any person or persons liable for the payment of the
indebtedness secured hereby, and Mortgagor does hereby consent to the
appointment of such receiver or receivers, waives any and all defenses to such
appointment, and agrees not to oppose any application therefor by Mortgagee, and
agrees that such appointment shall in no manner impair, prejudice or otherwise
affect the rights of Mortgagee under Article III hereof. Mortgagor expressly
waives notice of a hearing for appointment of a receiver and the necessity for
bond or an accounting by the receiver. Nothing herein is to be construed to
deprive Mortgagee of any other right, remedy or privilege it may now or
hereafter have under the law to have a receiver appointed. Any money advanced
by Mortgagee in connection with any such receivership shall be a demand
obligation (which obligation Mortgagor hereby expressly promises to pay) owing
by Mortgagor to Mortgagee and shall bear interest, from the date of making such
advancement by Mortgagee until paid, at the rate described in Section 2.3
hereof.
Section 4.6. Proceeds of Foreclosure. The proceeds of any sale held in
foreclosure of the liens and/or security interests evidenced hereby shall be
applied:
FIRST, to the payment of all necessary costs and expenses incident to
such foreclosure sale, including but not limited to all court costs and
charges of every character in the event foreclosed by suit and including
but not limited to the compensation of the keeper, if any;
SECOND, to the payment of the secured indebtedness (including
specifically without limitation the principal, interest and attorneys' fees
due and unpaid on the Note and the amounts due and unpaid and owed under
this Mortgage) in such manner and order as Mortgagee may elect; and
THIRD, the remainder, if any there shall be, shall be paid to
Mortgagor, or to Mortgagor's heirs, devisees, representatives, successors
or assigns, or such other persons as may be entitled thereto by law.
Section 4.7. Mortgagee as Purchaser. Any party constituting Mortgagee
shall have the right to become the purchaser at any sale held in foreclosure of
the liens and/or security interests evidenced hereby, and any party constituting
Mortgagee which is purchasing at any such sale shall have the right to credit
upon the amount of the bid made therefor, to the extent necessary to satisfy
such bid, the secured indebtedness owing to such party, or if such party holds
less than all
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of such indebtedness, the pro rata part thereof owing to such party, accounting
to all other parties constituting Mortgagee who are not joining in such bid in
cash for the portion of such bid or bids apportionable to such non-bidding
parties.
Section 4.8. Foreclosure as to Matured Debt. Upon the occurrence of a
default, Mortgagee shall have the right to proceed with foreclosure of the liens
and/or security interests evidenced hereby without declaring the entire secured
indebtedness due, and in such event, any such foreclosure sale may be made
subject to the unmatured part of the secured indebtedness and shall not in any
manner affect the unmatured part of the secured indebtedness, but as to such
unmatured part, this Mortgage shall remain in full force and effect just as
though no sale had been made. The proceeds of such sale shall be applied as
provided in Section 4.6 except that the amount paid under clause SECOND thereof
shall be only the matured portion of the secured indebtedness and any proceeds
of such sale in excess of those provided for in clauses FIRST and SECOND
(modified as provided above) shall be applied as provided in clause SECOND AND
THIRD of Section 3.4 hereof. Several sales may be made hereunder without
exhausting the right of sale for any unmatured part of the secured indebtedness.
Section 4.9. Remedies Cumulative. All remedies herein provided for are
cumulative of each other and of all other remedies existing at law or in equity
and are cumulative of any and all other remedies provided for in any other Loan
Document, and, in addition to the remedies herein provided, there shall continue
to be available all such other remedies as may now or hereafter exist at law or
in equity for the collection of the secured indebtedness and the enforcement of
the covenants herein and the foreclosure of the liens and/or security interests
evidenced hereby, and the resort to any remedy provided for hereunder or under
any such other Loan Document or provided for by law shall not prevent the
concurrent or subsequent employment of any other appropriate remedy or remedies.
Section 4.10. Discretion as to Security. Mortgagee may resort to any
security given by this Mortgage or to any other security now existing or
hereafter given to secure the payment of the secured indebtedness, in whole or
in part, and in such portions and in such order as may seem best to Mortgagee in
its sole and uncontrolled discretion, and any such action shall not in any way
be considered as a waiver of any of the rights, benefits, liens or security
interests evidenced by this Mortgage.
Section 4.11. Mortgagor's Waiver of Certain Rights. To the full extent
Mortgagor may do so, Mortgagor agrees that Mortgagor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law now or hereafter
in force providing for any appraisement, valuation, stay, extension or
redemption, and Mortgagor, for Mortgagor, Mortgagor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Property, to the extent permitted by applicable
law, hereby waives and releases all rights of appraisement, valuation, stay of
execution, redemption, notice of intention to mature or declare due the whole of
the secured indebtedness, notice of election to mature or declare due the whole
of the secured indebtedness and all rights to a marshaling of assets of
Mortgagor, including the Property, or to a sale in inverse order of alienation
in the event of foreclosure of the liens and/or security interests hereby
created. Mortgagor shall not have or assert any right under
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any statute or rule of law pertaining to the marshaling of assets, sale in
inverse order of alienation, the exemption of homestead, the administration of
estates of decedents, or other matters whatever to defeat, reduce or affect the
right under the terms of this Mortgage to a sale of the Property for the
collection of the secured indebtedness without any prior or different resort for
collection, or the right under the terms of this Mortgage to the payment of the
secured indebtedness out of the proceeds of sale of the Property in preference
to every other claimant whatever. If any law referred to in this section and now
in force, of which Mortgagor or Mortgagor's heirs, devisees, representatives,
successors or assigns or any other persons claiming any interest in the
Mortgaged Properties or the Collateral might take advantage despite this
section, shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to preclude the application of this section.
Section 4.12. Mortgagor as Tenant Post-Foreclosure. In the event there is
a foreclosure sale hereunder and at the time of such sale Mortgagor or
Mortgagor's heirs, devisees, representatives, successors or assigns or any other
persons claiming any interest in the Property by, through or under Mortgagor are
occupying or using the Property, or any part thereof, each and all shall
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day to day, terminable at the will of either landlord or
tenant, at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser. To the extent permitted
by applicable law, the purchaser at such sale shall, notwithstanding any
language herein apparently to the contrary, have the sole option to demand
immediate possession following the sale or to permit the occupants to remain as
tenants at will. In the event the tenant fails to surrender possession of said
property upon demand, the purchaser shall be entitled to institute and maintain
a summary action for possession of the property (such as an action for forcible
entry and detainer) in any court having jurisdiction.
ARTICLE V.
Miscellaneous
Section 5.1. Scope of Mortgage. This Mortgage is a mortgage of both
real/immovable and personal/movable property, a security agreement, a financing
statement and an assignment, and also covers proceeds and fixtures.
Section 5.2. Effective as a Financing Statement. This Mortgage covers
goods which are or are to become fixtures on the real property described herein,
and this Mortgage shall be effective as a financing statement filed as a fixture
filing with respect to all such fixtures included within the Property. This
Mortgage shall also be effective as a financing statement covering minerals and
other substances of value which may be extracted from the earth (including
without limitation oil and gas), and accounts related thereto, which will be
financed at the wellhead or minehead of the ▇▇▇▇▇ or mines located on the
Mortgaged Properties. This Mortgage is to be filed for record in the
real/immovable property records of each county or parish where any part of the
Mortgaged Properties is situated or which lies shoreward of any Mortgaged
Property (i.e., to the extent a Mortgaged Property lies offshore within the
actual or projected seaward extension of
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the relevant county or parish boundaries), and may also be filed in the Uniform
Commercial Code records of any such parish, in the offices of the Bureau of Land
Management or the Minerals Management Service, and in the offices of the
Louisiana Mineral Board or any other relevant state agency (or any successor
agencies). This Mortgage shall also be effective as a financing statement
covering any other Property and may be filed in any other appropriate filing or
recording office. The mailing address of Mortgagor is the address of Mortgagor
set forth at the end of this Mortgage and the address of Mortgagee from which
information concerning the security interests hereunder may be obtained is the
address of Mortgagee set forth at the end of this Mortgage.
Section 5.3. Reproduction of Mortgage as Financing Statement. A carbon,
photographic, facsimile or other reproduction of this Mortgage or of any
financing statement relating to this Mortgage shall be sufficient as a financing
statement for any of the purposes referred to in Section 5.2.
Section 5.4. Notice to Account Debtors. In addition to, but without
limitation of, the rights granted in Article III hereof, Mortgagee may, at any
time after a default has occurred that is continuing, notify the account debtors
or obligors of any accounts, chattel paper, negotiable instruments or other
evidences of indebtedness included in the Collateral to pay Mortgagee directly.
Section 5.5. Waivers. Mortgagee may at any time and from time to time in
writing waive compliance by Mortgagor with any covenant herein made by Mortgagor
to the extent and in the manner specified in such writing, or consent to
Mortgagor's doing any act which hereunder Mortgagor is prohibited from doing, or
to Mortgagor's failing to do any act which hereunder Mortgagor is required to
do, to the extent and in the manner specified in such writing, or release any
part of the Property or any interest therein or any Production Proceeds from the
lien and security interest of this Mortgage. Any party liable, either directly
or indirectly, for the secured indebtedness or for any covenant herein or in any
other Loan Document may be released from all or any part of such obligations
without impairing or releasing the liability of any other party. No such act
shall in any way impair any rights or powers hereunder except to the extent
specifically agreed to in such writing.
Section 5.6. No Impairment of Security. The lien, security interest and
other security rights hereunder shall not be impaired by any indulgence,
moratorium or release which may be granted including, but not limited to, any
renewal, extension or modification which may be granted with respect to any
secured indebtedness, or any surrender, compromise, release, renewal, extension,
exchange or substitution which may be granted in respect of the Property
(including without limitation Production Proceeds), or any part thereof or any
interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any secured indebtedness.
Section 5.7. Acts Not Constituting Waiver. Any default may be waived
without waiving any other prior or subsequent default. Any default may be
remedied without waiving the default remedied. Neither failure to exercise, nor
delay in exercising, any right, power or remedy upon any default shall be
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construed as a waiver of such default or as a waiver of the right to exercise
any such right, power or remedy at a later date. No single or partial exercise
of any right, power or remedy hereunder shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification
or waiver of any provision hereof nor consent to any departure by Mortgagor
therefrom shall in any event be effective unless the same shall be in writing
and signed by Mortgagee and then such waiver or consent shall be effective only
in the specific instances, for the purpose for which given and to the extent
therein specified. No notice to nor demand on Mortgagor in any case shall of
itself entitle Mortgagor to any other or further notice or demand in similar or
other circumstances. Acceptance of any payment in an amount less than the
amount then due on any secured indebtedness shall be deemed an acceptance on
account only and shall not in any way excuse the existence of a default
hereunder.
Section 5.8. Mortgagor's Successors. In the event the ownership of the
Property or any part thereof becomes vested in a person other than Mortgagor,
then, without notice to Mortgagor, such successor or successors in interest may
be dealt with, with reference to this Mortgage and to the indebtedness secured
hereby, in the same manner as with Mortgagor, without in any way vitiating or
discharging Mortgagor's liability hereunder or for the payment of the
indebtedness or performance of the obligations secured hereby. No transfer of
the Property, no forbearance, and no extension of the time for the payment of
the indebtedness secured hereby, shall operate to release, discharge, modify,
change or affect, in whole or in part, the liability of Mortgagor hereunder or
for the payment of the indebtedness or performance of the obligations secured
hereby or the liability of any other person hereunder or for the payment of the
indebtedness secured hereby.
Section 5.9. Place of Payment. All secured indebtedness which may be
owing hereunder at any time by Mortgagor shall be payable at the place
designated in the Note (or if no such designation is made, at the address of
Mortgagee indicated at the end of this Mortgage), or at such other place as
Mortgagee may designate in writing.
Section 5.10. Subrogation to Existing Liens. To the extent that proceeds
of the Note are used to pay indebtedness secured by any outstanding lien,
security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced at Mortgagor's request, and the party or parties
advancing the same shall be subrogated to any and all rights, security interests
and liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released, and it is expressly understood
that, in consideration of the payment of such indebtedness, Mortgagor hereby
waives and releases all demands and causes of action for offsets and payments
to, upon and in connection with the said indebtedness.
Section 5.11. Application of Payments to Certain Indebtedness. If any
part of the secured indebtedness cannot be lawfully secured by this Mortgage or
if any part of the Property cannot be lawfully subject to the lien and security
interest hereof to the full extent of such indebtedness, then all payments made
shall be applied on said indebtedness first in discharge of that portion thereof
which is not secured by this Mortgage.
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Section 5.12. Compliance With Usury Laws. It is the intent of Mortgagor,
Mortgagee and all other parties to the Loan Documents to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof, it is stipulated and agreed that none of the terms and
provisions contained herein shall ever be construed to create a contract to pay,
for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from time
to time in effect, and any interest purportedly in excess of such maximum shall
be limited to such maximum. The provisions of Section 9.8 of the Credit
Agreement (limiting the interest under the Loan Documents) apply to this
Mortgage.
Section 5.13. Release of Mortgage. If all of the secured indebtedness be
paid as the same becomes due and payable, all other requirements of the Credit
Agreement are satisfied and all of the covenants, warranties, undertakings and
agreements made in this Mortgage are kept and performed, and if neither the
Mortgagor nor the Mortgagee is bound to the other or to any third person to
permit any obligation or secured indebtedness to be incurred then or thereafter,
then, upon twenty (20) days prior written notice (or such lesser number of days
as may be mandated by applicable law), the Mortgagor may request that this
Mortgage be terminated. Upon such termination the Mortgagor may further request
that a written act of release of this Mortgage be provided (except this Mortgage
shall be reinstated to the extent expressly provided herein, and will continue
with respect to indemnification and other rights which are to continue following
the release hereof). Mortgagee agrees to deliver such an act of release
(subject to the foregoing limitation), all at the cost and expense of the
Mortgagor, within twenty (20) days (or such lesser number of days as may be
mandated by applicable law) of receiving such request unless Mortgagee in good
faith, has cause to believe that Mortgagor is not entitled to a termination of
this Mortgage. Notwithstanding the foregoing, it is understood and agreed that
certain indemnifications, and other rights, which are provided herein to
continue following the release hereof, shall continue in effect notwithstanding
such release; provided that if any payment to Mortgagee is held to constitute a
preference or a voidable transfer under applicable state or federal laws or if
for any other reason Mortgagee is required to refund such payment to the payor
thereof or to pay the amount thereof to any third party, this Mortgage shall be
reinstated to the extent of any such payment or payments.
Section 5.14. Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy, by delivery service with proof of delivery, or by registered or
certified United States mail, postage prepaid, at the addresses specified at the
end of this Mortgage (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery at the
address and in the manner provided herein, (b) in the case of telecopy, upon
receipt, and (c) in the case of registered or certified United States mail,
three days after deposit in the mail. Notwithstanding the foregoing, or
anything else in the Loan Documents which may appear to the contrary, any notice
given in connection with a foreclosure of the liens and/or security interests
created hereunder, or otherwise in connection with the
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exercise by Mortgagee of its rights hereunder or under any other Loan Document,
which is given in a manner permitted by applicable law shall constitute proper
notice; without limitation of the foregoing, notice given in a form required or
permitted by statute shall (as to the portion of the Property to which such
statute is applicable) constitute proper notice.
Section 5.15. Invalidity of Certain Provisions. A determination that any
provision of this Mortgage is unenforceable or invalid shall not affect the
enforceability or validity of any other provision and the determination that the
application of any provision of this Mortgage to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
Section 5.16. Gender; Titles. Within this Mortgage, words of any gender
shall be held and construed to include any other gender, and words in the
singular number shall be held and construed to include the plural, unless the
context otherwise requires. Titles appearing at the beginning of any
subdivisions hereof are for convenience only, do not constitute any part of such
subdivisions, and shall be disregarded in construing the language contained in
such subdivisions.
Section 5.17. Recording. Mortgagor will cause this Mortgage and all
amendments and supplements thereto and substitutions therefor and all financing
statements and continuation statements relating thereto to be recorded, filed,
re-recorded and refiled in such manner and in such places as Mortgagee shall
reasonably request and will pay all such recording, filing, re-recording and
refiling taxes, fees and other charges.
Section 5.18. Reporting Compliance. Mortgagor agrees to comply with any
and all reporting requirements applicable to the transaction evidenced by the
Note and secured by this Mortgage which are set forth in any law, statute,
ordinance, rule, regulation, order or determination of any governmental
authority, and further agrees upon request of Mortgagee to furnish Mortgagee
with evidence of such compliance.
Section 5.19. Certain Consents. Except where otherwise expressly provided
herein, in any instance hereunder where the approval, consent or the exercise of
judgment of Mortgagee is required, the granting or denial of such approval or
consent and the exercise of such judgment shall be within the sole discretion of
Mortgagee, and Mortgagee shall not, for any reason or to any extent, be required
to grant such approval or consent or exercise such judgment in any particular
manner, regardless of the reasonableness of either the request or Mortgagee's
judgment.
Section 5.20. Certain Obligations of Mortgagor. Without limiting
Mortgagor's obligations hereunder, Mortgagor's liability hereunder shall extend
to and include all post petition interest, expenses, and other duties and
liabilities with respect to Mortgagor's obligations hereunder which would be
owed but for the fact that the same may be unenforceable due to the existence of
a bankruptcy, reorganization or similar proceeding.
Section 5.21. Counterparts. This Mortgage may be executed in several
counterparts, all of which are identical, except that, to facilitate
recordation, certain counterparts hereof may
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include only that portion of Exhibit "A" which contains descriptions of the
properties located in (or otherwise subject to the recording or filing
requirements and/or protections of the recording or filing acts or regulations
of) the recording jurisdiction in which the particular counterpart is to be
recorded, and other portions of Exhibit "A" shall be included in such
counterparts by reference only. All of such counterparts together shall
constitute one and the same instrument. Complete copies of this Mortgage
containing the entire Exhibit "A", and being fully executed by Mortgagee,
attested and sealed by a representative of Mortgagor, and witnessed by two
individuals, have been retained by Mortgagor and Mortgagee and one such copy has
been recorded in Cameron Parish, Louisiana.
Section 5.22. Successors and Assigns. The terms, provisions, covenants,
representations, indemnifications and conditions hereof shall be binding upon
Mortgagor, and the successors and assigns of Mortgagor, and shall inure to the
benefit of Mortgagee and the successors and assigns of Mortgagee, and shall
constitute covenants running with the Mortgaged Properties. All references in
this Mortgage to Mortgagor or Mortgagee shall be deemed to include all such
successors and assigns.
SECTION 5.23. FINAL AGREEMENT OF THE PARTIES. THE WRITTEN LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 5.24. CHOICE OF LAW. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF LOUISIANA APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF
AMERICA.
SECTION 5.25 . APPEARANCE, RESOLUTIONS. For purposes of Louisiana law,
including but not limited to the availability of executory process, Mortgagor
and Mortgagee have appeared on this date before the undersigned Notaries Public
and witnesses in order to execute this Mortgage. Mortgagor attaches to
counterparts hereof being recorded in Louisiana, certified resolutions of its
Board of Directors authorizing the execution and delivery of this Mortgage.
Section 5.26. Paraph. Mortgagor acknowledges that no promissory note or
other instrument has been presented to the undersigned Notary Public(s) to be
paraphed for identification herewith.
Section 5.27 Reliance as to Facts. Notwithstanding any reference herein
to the Credit Agreement, the Note, or any other document, no third party shall
be obligated to inquire as to whether any term or condition set forth therein
has occurred but shall be entitled to rely upon
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the certificate of the Mortgagee as to all events, including but not limited to
the occurrence of a default hereunder.
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THUS DONE AND PASSED this 1st day of September, 1999 in my presence and in
the presence of the undersigned competent witnesses who hereunto sign their
names with Mortgagor and me, Notary, after reading of the whole.
WITNESSES: MORTGAGOR
CHENIERE ENERGY, INC.
Name:
By:____________________________
Name:
Title:
Name:
------------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
The address of Mortgagor is:
Two ▇▇▇▇▇ Center, Suite 1740
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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THUS DONE AND PASSED this 1st day of September, 1999 in my presence and in
the presence of the undersigned competent witnesses who hereunto sign their
names with Mortgagee and me, Notary, after reading of the whole.
WITNESSES: MORTGAGEE
ENCAP ENERGY CAPITAL FUND III, L.P.
By: ENCAP INVESTMENTS L.L.C.,
General Partner
Name: By:__________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Managing Director
Name:
----------------------------------------------
NOTARY PUBLIC, STATE OF TEXAS
The address of Mortgagee is: This instrument prepared by:
▇▇▇▇ ▇. Rain
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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