Exhibit 10.3
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
MADE BY
TEXAURUS ENERGY, INC., a Delaware corporation
as "Mortgagor"
and
LAURUS MASTER FUND, LTD.
a Cayman Islands company
as "Mortgagee"
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
BE IT KNOWN, that on this 20th day of April, 2006,
BEFORE ME, the undersigned Notary Public, duly commissioned as set forth
below, and in the presence of the undersigned competent witnesses,
PERSONALLY CAME AND APPEARED:
TEXAURUS ENERGY, INC., a Delaware corporation ("Mortgagor"),
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represented herein by Xxx Xxxxxxx, its President, duly authorized
by Resolution, a copy of which is annexed hereto as Schedule 1,
whose mailing address is 0000 Xxxxxxxxxxxx, #000, Xxxxxxx, Xxxxx
00000 whose tax id number is applied for, and whose
organizational number is 4118617,
who, being duly sworn, declared and said that it does hereby execute this
MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
(this "Mortgage") to LAURUS MASTER FUND, LTD., a Cayman Islands company
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("Mortgagee").
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RECITALS.:
WHEREAS, in order to secure the Secured Indebtedness (defined below),
Mortgagor has agreed to execute and deliver this Mortgage pursuant to which,
among other things, the Mortgaged Property (defined below) is mortgaged and
hypothecated by Mortgagor to Mortgagee.
NOW, THEREFORE, Mortgagor hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. For all purposes of this Mortgage, unless the
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context otherwise requires:
"Accounts and Contract Rights" shall mean all accounts (including accounts
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in the form of joint interest xxxxxxxx under applicable operating agreements),
contract rights and general intangibles of Mortgagor now or hereafter existing,
or hereafter acquired by, or on behalf of, Mortgagor, or Mortgagor's successors
in interest, relating to or arising from the ownership, operation and
development of the Mortgaged Property and to the production, processing,
treating, sale, purchase, exchange or transportation of Hydrocarbons (defined
below) produced or to be produced from or attributable to the Mortgaged Property
or any units or pooled interest units in which all or a portion of the Mortgaged
Property forms a part, together with all accounts and proceeds accruing to
Mortgagor attributable to the sale of Hydrocarbons produced from the Mortgaged
Property or any units or pooled interest units in which all or a portion of the
Mortgaged Property forms a part.
"Article" shall mean and refer to an Article of this Mortgage, unless
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specifically indicated otherwise.
"Code" shall mean the Uniform Commercial Code in effect in each of the
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jurisdictions where the Mortgaged Property or a portion thereof is situated.
"Credit Agreements" shall mean, collectively, the Securities Purchase
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Agreement and the other Related Agreements as defined therein, and "Credit
Agreement" shall mean any one of the foregoing.
"Effective Date" shall mean April 21, 2006.
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"Event of Default" shall mean the occurrence of any breach by Mortgagor of
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any term or provision of this Mortgage or the occurrence of any Event of Default
under and as defined in the applicable Credit Agreement.
"Exhibit A" shall mean, unless specifically indicated otherwise, Exhibit A
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attached hereto and incorporated herein by reference for all purposes.
"Gas Balancing Agreement" shall mean any agreement or arrangement whereby
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Mortgagor, or any other party having an interest in any Hydrocarbons to be
produced from Mineral Interests in which Mortgagor owns an interest, has a right
or an obligation to take more or less than its proportionate share of production
therefrom.
"Hydrocarbons" shall mean oil, gas, coalbed methane gas, casinghead gas,
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drip gasolines, natural gasoline, condensate, distillate, as-extracted
collateral and all other liquid or gaseous hydrocarbons produced or to be
produced in conjunction therewith, and all products, byproducts and all other
substances derived therefrom or the processing thereof, and all other minerals
and substances, including, but not limited to, sulphur, lignite, coal, uranium,
thorium, iron, geothermal steam, water, carbon dioxide, helium and any and all
other minerals, ores, or substances of value and the products and proceeds
therefrom, including, without limitation, all gas resulting from the in-situ
combustion of coal or lignite.
"Lands" shall mean the lands described in Exhibit A and shall include any
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lands, the description of which is contained in Exhibit A or incorporated in
Exhibit A by reference to another instrument or document, including, without
limitation, all lands described in the Oil and Gas Leases listed on Exhibit A
hereto, and shall also include any lands now or hereafter unitized, pooled,
spaced or otherwise combined, whether by statute, order, agreement, declaration
or otherwise, with lands the description of which is contained in Exhibit A or
is incorporated in Exhibit A by reference.
"Lien" shall mean any mortgage, deed of trust, collateral assignment, lien,
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pledge, charge, security interest or other encumbrance.
"Loans" shall mean collectively, all amounts now or hereafter advanced by
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the Mortgagee to Mortgagor under the Notes and the Credit Agreements.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
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assets, liabilities, financial condition, results of operations or prospects of
Mortgagor, (b) the right or ability of Mortgagor to fully, completely and timely
perform its obligations under the Credit Agreements, or (c) the validity or
enforceability of any Credit Agreement against Mortgagor, or the rights or
remedies of Mortgagee thereunder.
"Mortgaged Property" shall have the meaning stated in Article II of this
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Mortgage.
"Net Revenue Interest" shall mean Mortgagor's share of all Hydrocarbons
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produced from the Lands, after deducting the appropriate proportionate part of
all lessors' royalties, overriding royalties, production payments and other
payments out of or measured by production which burden Mortgagor's share of all
such production, subject to non-consent provisions contained in joint operating
agreements.
"Notes" shall have the meaning set forth in the Credit Agreements.
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"Obligations" shall mean all present and future indebtedness, obligations
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and liabilities and all renewals, refinancings and extensions thereof, or any
part thereof, of Mortgagor, to Mortgagee arising pursuant to any of the Credit
Agreements, or arising pursuant to any commodity, interest rate, currency or
other swap, option, collar, futures contract or other contract pursuant to which
a Person xxxxxx risks related to commodity prices, interest rates, currency
exchange rates, securities prices or financial market conditions and any other
commodity price hedging agreements by and between Mortgagor and Mortgagee and
all interest accrued on any of the foregoing, and reasonable costs, expenses,
and attorneys' fees incurred in the enforcement or collection thereof,
regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several.
"Oil and Gas Leases" shall mean oil, gas and mineral leases, oil and gas
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leases, oil leases, gas leases, other mineral leases, subleases, top leases, any
rights resulting in an ownership interest in Hydrocarbons and all operating
rights relating to any of the foregoing (whether operated by virtue of such
leases, or assignments or applicable operating agreements), and all other
interests pertaining to any of the foregoing, including, without limitation, all
royalty and overriding royalty interests, production payments and net profit
interests, production payments and net profit interests, mineral fee interests,
and all reversionary, remainder, carried and contingent interests relating to
any of the foregoing and all other rights therein which are described and/or to
which reference may be made on Exhibit A.
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"Operating Equipment" shall mean all Personal Property and fixtures affixed
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or situated upon all or any part of the Mortgaged Property, including, without
limitation, all surface or subsurface machinery, equipment, facilities or other
property of whatsoever kind or nature now or hereafter located on any of the
Lands which are useful for the production, treatment, storage or transportation
of oil or gas, including, but not by way of limitation, all oil xxxxx, gas
xxxxx, water xxxxx, injection xxxxx, casing, tubing, rods, pumping units and
engines, Christmas trees, derricks, separators, gun barrels, flow lines, tanks,
gas systems (for gathering, treating and compression), water systems (for
treating, disposal and injection), power plants, poles, lines, transformers,
starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks and shipping facilities.
"Permitted Encumbrances" shall mean with respect to the Mortgaged Property:
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(a) Liens securing the Obligations;
(b) minor defects in title which do not secure the payment of money
and otherwise have no material adverse effect on the value or operation of
the subject property, including, without limitation, easements,
rights-of-way, servitudes, permits, surface leases, and other similar
rights in respect of surface operations, and easements for pipelines,
streets, alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the
properties of Mortgagor that are customarily granted in the oil and gas
industry;
(c) inchoate statutory or operators' Liens securing obligations for
labor, services, materials and supplies furnished to Mineral Interests,
which are not more than 60 days delinquent;
(d) mechanic's, materialman's, warehouseman's, journeyman's and
carrier's Liens, and other similar Liens arising by operation of law in the
ordinary course of business, securing obligations which are not more than
60 days delinquent;
(e) Liens for taxes or assessments not yet due or not yet delinquent,
or, if delinquent, that are being contested in good faith in the normal
course of business by appropriate action;
(f) lease burdens payable to third parties which are deducted in the
calculation of discounted present value in any reserve report delivered by
Mortgagor pursuant to the Credit Agreements including, without limitation,
any royalty, overriding royalty, net profits interest, production payment,
carried interest or reversionary working interest;
(g) Liens, charges and encumbrances upon Mortgagor's assets, other
than Proved Mineral Interests, which in the aggregate do not have a value
in excess of $100,000; and
(h) Liens described in Section 4(e) of the Master Security Agreement
dated as of March 28, 2006, made by Mortgagor in favor of Mortgagee (as the
same may be amended, modified and supplemented from time to time).
"Person" shall mean any individual, corporation, partnership, limited
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liability company, association, trust, other entity or organization, or any
court or governmental department, commission, board, bureau, agency, or
instrumentality of any nation or of any province, state, commonwealth, nation,
territory, possession, county, parish, or municipality, whether now or hereafter
constituted or existing.
"Personal Property" shall mean that portion of the Mortgaged Property that
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is personal property.
"Proved Mineral Interests" shall mean, collectively, Proved Producing
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Mineral Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped
Mineral Interests.
"Proved Nonproducing Mineral Interests" shall mean all Subject Interests
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which constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" shall mean all Subject Interests which
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constitute proved developed producing reserves.
"Proved Undeveloped Mineral Interests" shall mean all Subject Interests
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which constitute proved undeveloped reserves.
"Section" shall mean and refer to a section of this Mortgage, unless
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specifically indicated otherwise.
"Secured Indebtedness" shall have the meaning stated in Article III of this
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Mortgage.
"Securities Purchase Agreements" means the Securities Purchase Agreement
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dated as of March 28, 2006 between Mortgagor and Mortgagee, as may be amended,
modified and supplemented from time to time.
"Subject Interests" shall have the meaning stated in Article II of this
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Mortgage.
"Subsidiary" shall mean, for any Person, any corporation or other entity of
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which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. "Subsidiary" shall include Subsidiaries of Subsidiaries (and so on).
"Well Data" shall mean all logs, drilling reports, division orders,
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transfer orders, operating agreements, contracts and other agreements,
abstracts, title opinions, files, records, seismic data, memoranda and other
information in the possession or control of Mortgagor or to which Mortgagor has
access relating to the Lands and/or any xxxxx located thereon.
1.2 Other Terms. Unless otherwise defined or indicated herein, all terms
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with their initial letter capitalized shall have the meaning given such terms in
the Revolving Credit Agreement.
ARTICLE II
GRANTING CLAUSE: MORTGAGED PROPERTY
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In order to secure the Secured Indebtedness, up to a maximum amount outstanding
at any time or from time to time of FIFTY MILLION DOLLARS ($50,000,000.00),
Mortgagor does hereby mortgage, pledge, assign, hypothecate, and grant a
security interest unto Mortgagee and Mortgagee's successors in title and
assigns, as herein provided, for the uses and purposes herein set forth, with
warranties and covenants of title only to the extent provided herein and in the
Credit Agreements, all of Mortgagor's right, title and interest, whether now
owned or hereafter acquired, including whether the same is acquired before or
after the Effective Date, in all of the hereinafter described properties, rights
and interests to the full extent that such property is susceptible of mortgage
under the Louisiana Civil Code, Louisiana Revised Statutes, and other provisions
of Louisiana law; and, insofar as such properties, rights and interests consist
of equipment, general intangibles, accounts, contract rights, inventory, goods,
chattel paper, instruments, documents, money, fixtures, asextracted collateral,
proceeds and products of collateral or any other Personal Property of a kind or
character defined in or subject to the applicable provisions of the Code or any
provision of Louisiana law, Mortgagor hereby grants to Mortgagee a continuing
security interest therein and does further affect, hypothecate, collaterally
assign, and pledge unto and in favor of Mortgagee and its successors and
assigns, as collateral assignee, all the present and future rents, as well as
all other property and rights described below that are susceptible of collateral
assignment under La. R.S. Sec. 9:4401, Sec. 9:5386, or any other provision of
Louisiana law, whether now owned or hereafter acquired, including whether the
same are acquired on or after the Effective Date, namely:
(a) all of those certain Oil and Gas Leases and Lands (all such Oil
and Gas Leases and Lands being herein called the "Subject Interests," as
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hereinafter further defined) which are described in Exhibit A and/or to
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which reference may be made in Exhibit A and/or which are covered by any of
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the leases described on Exhibit A, which Exhibit A is made a part of this
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Mortgage for all purposes, and is incorporated herein by reference as fully
as if copied at length in the body of this Mortgage at this point;
(b) all rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) any and all properties now or hereafter
pooled or unitized with any of the Subject Interests, and (ii) all
presently existing or future operating agreements and unitization,
communitization and pooling agreements and the units operated thereby to
the extent the same relate to all or any part of the Subject Interests,
including, without limitation, all units formed under or pursuant to any
applicable laws (the rights, titles, interests and estates described in
this clause (b) also being included within the term "Subject Interests" as
used herein);
(c) all presently existing and future agreements entered into between
Mortgagor and any third party that provide for the acquisition by Mortgagor
of any interest in any of the properties or interests specifically
described in Exhibit A or which relate to any of the properties and
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interests specifically described in Exhibit A;
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(d) the Hydrocarbons (including inventory) which are in, under, upon,
produced or to be produced from or attributable to the Lands from and after
the Effective Date;
(e) the Accounts and Contract Rights;
(f) the Operating Equipment;
(g) the Well Data;
(h) the rights and security interests of Mortgagor held by Mortgagor
to secure the obligation of the first purchaser to pay the purchase price
of the Hydrocarbons;
(i) all surface leases, rights-of-way, franchises, easements,
servitudes, licenses, .privileges, tenements, hereditaments and
appurtenances now existing or in the future obtained in connection with any
of the aforesaid, and all other items of value and incident thereto which
Mortgagor may, at any time, have or be entitled; and
(j) all and any different and additional rights of any nature, of
value or convenience in the enjoyment, development, operation or
production, in any way, of any property or interest included in any of the
foregoing clauses, and in all revenues, income, rents, issues, profits and
other benefits arising therefrom or from any contract now in existence or
hereafter entered into pertaining thereto, and in all rights and claims
accrued or to accrue for the removal by anyone of Hydrocarbons from, or
other act causing damage to, any of such properties or interests.
All the aforesaid properties, rights and interests, together with any and
all substitutions, replacements, corrections or amendments thereto, or renewals,
extensions or ratifications thereof, or of any instrument relating thereto, and
together with any additions thereto which may be subjected to the Lien of this
Mortgage by means of supplements hereto, being hereinafter called the "Mortgaged
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Property".
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Subject, however, to (i) Permitted Encumbrances, and (ii) the condition
that Mortgagee shall not be liable in any respect for the performance of any
covenant or obligation of Mortgagor with respect to the Mortgaged Property.
Mortgagor covenants and agrees with Mortgagee that it will not mortgage,
pledge, or assign the Mortgaged Property to the detriment of this Mortgage.
This Mortgage has been executed by Mortgagor pursuant to Article 3298 of
the Louisiana Civil Code and other applicable law for the purpose of securing
the Secured Indebtedness that may now be existing and/or that may arise in the
future as provided herein, with the preferences and priorities provided under
applicable Louisiana law. However, nothing under this Mortgage shall be
construed as limiting the duration of this Mortgage or the purpose or purposes
for which the Secured Indebtedness may be requested or extended.
ARTICLE III
SECURED INDEBTEDNESS
This Mortgage is given to secure the Loans and all of the Obligations under
and as described in the Credit Agreements, including, without limitation:
(a) interest on all credit outstanding under the Credit Agreements at
the rates provided in the Credit Agreements;
(b) the Obligations, including, without limitation, the indebtedness
evidenced by the Notes;
(c) payment and performance of any and all present and future
obligations of Mortgagor according to the terms of any present or future
hedge transaction, including, without limitation, any present or future
swap agreements, cap, floor, collar, exchange transaction, forward
agreement or other exchange or protection agreements relating to any such
transaction now existing or hereafter entered into between Mortgagor, on
the one hand and Mortgagee on the other hand;
(d) any sums advanced as expenses or costs incurred by, or on behalf
of, Mortgagee which are made or incurred pursuant to the terms of this
Mortgage or any Credit Agreement, plus interest thereon at the rate set
forth in the applicable Note from the date of advance or expenditure until
reimbursed; and
(e) all other and additional debts, obligations and liabilities of
every kind and character of Mortgagor now existing or hereafter arising in
connection with any of the Credit Agreements or otherwise (all of the
obligations and indebtedness referred to in this Article III, and all
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renewals, refinancings, extensions and modifications thereof, and all
substitutions therefor, in whole or in part, are herein sometimes referred
to as the "Secured Indebtedness").
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ARTICLE IV
COVENANTS, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF MORTGAGORS
Mortgagor hereby covenants, represents, warrants and agrees that:
4.1 Payment of Indebtedness. Mortgagor will duly and punctually pay or
cause to be paid when due all of the Secured Indebtedness.
4.2 Warranties. (a) Mortgagor, to the extent of the interests specified in
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Exhibit A, has, or on the Effective Date, will have, good and defensible title,
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subject to Permitted Encumbrances, to each property right or interest
constituting the Mortgaged Property, and has, or on the Effective Date will
have, a good and legal right to make the grant and conveyance made in this
Mortgage; (b) Mortgagor's present Net Revenue Interest in the Mortgaged Property
is not less (or on the Effective Date will not be less) than that specified in
Exhibit A and if no interest is specified, includes all its interests however
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specified in and to the Oil and Gas Leases and Lands described on Exhibit A; and
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(c) the Mortgaged Property is free from all Liens other than Permitted
Encumbrances. Mortgagor will warrant and forever defend (subject to those
Permitted Encumbrances described in clauses (b) and (f) of the definition of
"Permitted Encumbrances" set forth above) the Mortgaged Property unto Mortgagee
and Mortgagee's successors, legal representatives and assigns, and Mortgagee and
Mortgagee's successors, legal representatives and assigns, against every Person
whomsoever lawfully claiming the same or any part thereof, and Mortgagor will
maintain and preserve the Lien hereby created so long as any of the Secured
Indebtedness remains unpaid, except where such failure to comply would not have
a Material Adverse Effect.
4.3 Further Assurances. Mortgagor will execute and deliver such other and
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further instruments and will do such other and further acts as in the reasonable
discretion of Mortgagee may be necessary or desirable to carry out more
effectively the purposes of this Mortgage, including, without limiting the
generality of the foregoing, (a) prompt correction of any material defect which
may hereafter be discovered in the title to the Mortgaged Property or in the
execution and acknowledgment of this Mortgage, any Notes, or any other document
used in connection herewith or at any time delivered to Mortgagee in connection
with any Obligations, and (b) if required by Section 8.1 hereof, prompt
execution and delivery of all division or transfer orders that in the reasonable
discretion of Mortgagee are needed to transfer effectively the assigned proceeds
of production from the Mortgaged Property to Mortgagee.
4.4 Taxes. To the extent and in the manner required by the Credit
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Agreements, and to the extent not prohibited by applicable law, Mortgagor will
promptly pay, or cause to be paid, all taxes legally imposed upon this Mortgage
or upon the Mortgaged Property or upon the interest of Mortgagee therein, or
upon the income, profits, proceeds and other revenues thereof.
4.5 Operation of the Mortgaged Property. So long as the Secured
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Indebtedness or any part thereof remains unpaid:
(a) To the extent that Mortgagor is the Operator of the Subject
Interests, Mortgagor shall maintain and operate the Subject Interests in a
good and workmanlike manner and will observe and comply with all of the
terms and provisions, express or implied, of all Oil and Gas Leases
relating to the Subject Interests so long as such Oil and Gas Leases are
capable of producing Hydrocarbons in paying quantities, except where such
failure to comply would not have a Material Adverse Effect;
(b) To the extent that Mortgagor is the Operator of the Subject
Interests, Mortgagor shall comply with all contracts and agreements
applicable to or relating to the Mortgaged Property or the production and
sale of Hydrocarbons therefrom, except to the extent a failure to so comply
would not have a Material Adverse Effect;
(c) To the extent that Mortgagor is the Operator of the Subject
Interests, Mortgagor shall, at all times, maintain, preserve and keep all
Operating Equipment used with respect to the Mortgaged Property in proper
repair, working order and condition, and make all necessary or appropriate
repairs, renewals, replacements, additions and improvements thereto so that
the efficiency of such Operating Equipment shall at all times be properly
preserved and maintained, except where such failure to comply would not
have a Material Adverse Effect; provided that no item of Operating
Equipment need be so repaired, renewed, replaced, added to or improved, if
Mortgagor shall in good faith determine that such action is not necessary
or desirable for the continued efficient and profitable operation of the
Subject Interests;
(d) Mortgagor shall cause the Mortgaged Property to be kept free and
clear of all Liens other than Permitted Encumbrances;
(e) Mortgagor shall comply with the terms of the Credit Agreements
with respect to maintenance of insurance. All loss payable clauses or
provisions in said policy or policies shall be endorsed in favor of and
made payable to Mortgagee, as its interest may appear. Mortgagee shall have
the right to collect, and Mortgagor hereby assigns to Mortgagee, any and
all monies that may become payable under any such policies of insurance by
reason of damage, loss or destruction of any of the Mortgaged Property, and
Mortgagee may, at its election, either apply all or any part of the sums so
collected toward payment of the Secured Indebtedness, whether or not such
Secured Indebtedness, or any portion thereof, is then due and payable, in
such manner as Mortgagee may elect, or release same to Mortgagors; and
(f) Mortgagor shall not sell, lease, transfer, abandon or otherwise
dispose of any portion of the Mortgaged Property or any of Mortgagor's
rights, titles or interests therein or thereto, except as specifically
permitted in the Credit Agreements.
4.6 Recording. Mortgagor will promptly and at Mortgagors' sole cost and
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expense, record, register, deposit and file this Mortgage and every other
instrument in addition or supplemental hereto in such offices and places and at
such times and as often as may be necessary to preserve, protect and renew the
Lien hereof as a perfected Lien on real or personal property, as the case may
be, subject only to Permitted Encumbrances, and the rights and remedies of
Mortgagee, and otherwise will do and perform all matters or things necessary or
expedient to be done or observed by reason of any law or regulation of any state
or of the United States or of any other competent authority, for the purpose of
effectively operating, maintaining and preserving the Lien hereof on the
Mortgaged Property.
4.7 Records. Statements and Reports. Mortgagor will keep proper books of
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record and account in which complete and correct entries will be made of
Mortgagor's transactions in accordance with sound accounting principles
consistently applied and will, to the extent required by the Credit Agreements,
furnish or cause to be furnished to Mortgagee (a) all reports required under the
Credit Agreements, and (b) such other information concerning the business and
affairs and financial condition of Mortgagor as Mortgagee may, from time to time
reasonably request.
4.8 No Government Approvals. Mortgagor warrants that no approval or consent
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of any Person is necessary to authorize the execution and delivery of this
Mortgage, or any of the other Credit Agreements or the Notes, or to authorize
the observance or performance by Mortgagor of the covenants herein or therein
contained.
4.9 Right of Entry. Mortgagor will permit Mortgagee, or the agents or
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designated representatives of Mortgagee, to enter upon the Mortgaged Property,
and all parts thereof at reasonable times during normal business hours and with
advance notice to Mortgagor's President, for the purposes of investigating and
inspecting the condition and operation thereof, provided that no such notice
shall be required to be given in the event Mortgagee believes such access is
necessary to preserve or protect the Mortgaged Property or following the
occurrence and during the continuance of an Event of Default.
The representations and warranties set forth in the Credit Agreements are
incorporated herein by reference as if set forth herein, and each such
representation and warranty is true and correct.
ARTICLE V
ADDITIONS TO MORTGAGED PROPERTY
It is understood and agreed that Mortgagor may periodically subject additional
properties to the Lien of this Mortgage. In the event that additional properties
are to be subjected to the Lien hereof, the parties hereto agree to execute a
supplemental mortgage, satisfactory in form and substance to Mortgagee, together
with any security agreement, financing statement or other security instrument
required by Mortgagee, all in form and substance satisfactory to Mortgagee and
in a sufficient number of executed (and, where necessary or appropriate,
acknowledged) counterparts for recording purposes. Upon execution of such
supplemental mortgage, all additional properties thereby subjected to the Lien
of this mortgage shall become part of the Mortgaged Property for all purposes.
ARTICLE VI
ENFORCEMENT OF THE SECURITY
6.1 General Remedies. Upon the occurrence and during the continuance of an
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Event of Default, Mortgagee may do any one or more of the following, subject to
and in accordance with any applicable provision of the Credit Agreements, and to
any mandatory requirements or limitations of applicable law then in force:
(a) exercise all of the rights, remedies, powers and privileges of
Mortgagor with respect to the Mortgaged Property or any part thereof, give
or withhold all consents required therein which, with respect to the
Mortgaged Property or any part thereof, Mortgagor would otherwise be
entitled to give or withhold, and perform or attempt to perform any
covenants in this Mortgage which Mortgagor is obligated to perform;
provided that, no payment or performance by Mortgagee shall constitute a
waiver of any Event of Default, and Mortgagee shall be subrogated to all
rights and Liens securing the payment of any debt, claim, tax or assessment
for the payment of which Mortgagee may make an advance, or which Mortgagee
may pay.
(b) execute and deliver to such Person or Persons as may be designated
by Mortgagee appropriate powers of attorney to act for and on behalf of
Mortgagor in all transactions with any federal, state or local agency with
respect to any of the Mortgaged Property.
(c) exercise any and all other rights or remedies granted to Mortgagee
pursuant to the provisions of any of the Credit Agreements and applicable
law.
(d) if Mortgagor has failed to keep or perform any covenant whatsoever
contained in any Credit Agreement or this Mortgage, Mortgagee may, at its
option, perform or attempt to perform such covenant. Any payment made or
expense incurred in the performance or attempted performance of any such
covenant shall be a part of the Secured Indebtedness, and Mortgagor
promises, upon demand, to pay to Mortgagee, at the place where the Notes
are payable, or at such other place as Mortgagee may direct by written
notice, all sums so advanced or paid by Mortgagee, with interest at the
default rates set forth in the Notes from the date when paid or incurred by
Mortgagee. No such payment by Mortgagee shall constitute a waiver of any
Event of Default.
(e) Mortgagee may, at its option, without notice, demand, presentment,
notice of intent to accelerate or of acceleration, or notice of protest,
all of which are hereby expressly waived by Mortgagor, declare the entire
unpaid balance of the Secured Indebtedness, or any part thereof,
immediately due and payable, and upon such declaration, it shall be
immediately due and payable, and the Liens hereof shall then be subject to
foreclosure in accordance with applicable law.
(f) Upon the occurrence of an Event of Default, this Mortgage may be
foreclosed as to the Mortgaged Properties, or any part thereof, in any
manner permitted by applicable law, by ordinary or executory process. For
purposes of Louisiana executory process only, Mortgagor hereby acknowledges
the Secured Indebtedness and confesses judgment up to the full amount
thereof if the same is not paid at maturity. Mortgagor further agrees that
the Mortgagee may cause all or any part of the Mortgaged Properties to be
seized and sold after due process of law, Mortgagor waiving the benefit of
all laws or parts of law relative to the appraisement or property seized
and sold under executory process or other legal process, and consenting
that all or any part of the Mortgaged Properties may be sold without
appraisement, either in its entirety or in lots or parcels, as the
Mortgagee may determine, to the highest bidder for cash. 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 Article 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. Pursuant to Louisiana Revised Statutes 9:5131-5135 and
9:5136-5140.2, in the event the Mortgaged Properties or any part thereof is
seized as an incident to an action for the recognition or enforcement of
this Mortgage by executory process, ordinary process, sequestration, writ
of fieri facias, or otherwise, Mortgagor agrees that the court issuing any
such order, shall, if petitioned for by Mortgagee direct the applicable
sheriff to appoint as a keeper of the Mortgaged Properties the holder or
any agent or other Person designated by holder at the time such seizure is
effected. Mortgagor agrees that such keeper shall be entitled to receive
its compensation, in excess of its reasonable costs and expenses incurred
in the administration or preservation of the Mortgaged Properties, an
amount equal to one (1%) percent of the gross revenues of the Mortgaged
Properties and other amounts received by the keeper, payable on a monthly
basis. The designation of a keeper made herein shall not be deemed to
require the holder to provoke the appointment of such a keeper.
(g) Mortgagee may proceed by suit or suits, at law or in equity, to
enforce the payment and performance of the Secured Indebtedness in
accordance with the terms hereof, and of the Credit Agreements evidencing
it, to foreclose the Liens of this Mortgage as against all or any part of
the Mortgaged Property, and to have all or any part of the Mortgaged
Property sold under the judgment or decree of a court of competent
jurisdiction.
(h) To the extent permitted by law, upon the acceleration of the
Secured Indebtedness, Mortgagee, as a matter of right and without regard to
the sufficiency of the Mortgaged Property, and without any showing of
insolvency, fraud or mismanagement on the part of Mortgagor, and without
the necessity of filing any judicial or other proceeding other than the
proceeding for appointment of a receiver, shall be entitled to the
appointment of a receiver or receivers of the Mortgaged Property, or any
part thereof, and of the income, royalties, revenues, bonuses, production
payments, delay rentals, benefits, rents, issues and profits thereof.
Mortgagor hereby consents to the appointment of such receiver or receivers
and agrees not to oppose any application therefor by Mortgagee.
(i) Upon the acceleration of the Secured Indebtedness, Mortgagee may
(without notification, if permitted by applicable law) enter upon the
Mortgaged Property, take possession of the Mortgaged Property, and remove
the Personal Property, or any part thereof, with or without judicial
process, and, in connection therewith, without any responsibility or
liability on the part of Mortgagee, take possession of any property located
on or in the Mortgaged Property which is not a part of the Mortgaged
Property and hold or store such property at Mortgagors' expense. If
necessary to obtain the possession provided for in this Section 6.1 (i),
--------------
Mortgagee may undertake any and all remedies to dispossess Mortgagor,
including, specifically, one or more actions for forcible entry and
detainer, trespass to try title and restitution.
(j) Mortgagee may require Mortgagor to assemble any Personal Property
and any other items of the Mortgaged Property, or any part thereof, and
make it available to Mortgagee at a place to be designated by Mortgagee
which is reasonably convenient to such Mortgagor and Mortgagee.
(k) Mortgagee may surrender the insurance policies maintained pursuant
to the Credit Agreements, or any part thereof, and receive and apply the
unearned premiums as a credit on the Secured Indebtedness, and, in
connection therewith, Mortgagor hereby appoints Mortgagee as the agent and
attorney-in-fact for such Mortgagor (with full powers of substitution) to
collect such premiums, which power of attorney shall be deemed to be a
power coupled with an interest and therefore irrevocable until the release
of the Liens evidenced by this Mortgage.
(l) Mortgagee may retain the Personal Property and any other items of
the Mortgaged Property, or any part thereof, in satisfaction or partial
satisfaction of the Secured Indebtedness whenever the circumstances are
such that Mortgagee is entitled to do so under the Code.
(m) Mortgagee shall have the right to become the purchaser at any sale
of the Mortgaged Property held by Mortgagee or by any court, receiver or
public officer, and Mortgagee shall have the right to credit upon the
amount of the bid made therefor, the amount payable out of the net proceeds
of such sale to Mortgagee. Recitals contained in any conveyance made to any
purchaser at any sale made hereunder shall conclusively establish the truth
and accuracy of the matters therein stated, including, without limiting the
generality of the foregoing, nonpayment of the unpaid principal sum of,
interest accrued on, and fees payable in respect of, the Secured
Indebtedness after the same have become due and payable, and advertisement
and conduct of such sale in the manner provided herein.
(n) Mortgagee may buy any Personal Property and any other items of the
Mortgaged Property, or any part thereof, at any private disposition if the
Mortgaged Property or the part thereof being disposed of, is a type
customarily sold in a recognized market or a type which is the subject of
widely distributed standard price quotations.
(o) Mortgagee shall have and may exercise any and all other rights
which Mortgagee may have under the Code, by virtue of the Credit
Agreements, this Mortgage, at law, in equity or otherwise.
(p) In the event that the Mortgagee elects to commence appropriate
Louisiana foreclosure proceedings under this Mortgage, Mortgagee may cause
the Mortgaged Property, or any part or parts thereof, to be immediately
seized and sold, whether in term of court or in vacation, under ordinary or
executory process, in accordance with applicable Louisiana law, to the
highest bidder for cash, with or without appraisement, and without the
necessity of making additional demand upon or notifying Mortgagor or
placing Mortgagor in default, all of which are expressly waived.
(q) Should any or all of the Mortgaged Property be seized as an
incident to an action for the recognition or enforcement of this Mortgage,
by executory process, sequestration, attachment, writ of fieri facias or
otherwise, Mortgagor hereby agrees that the court issuing any such order
shall, if requested by Mortgagee, appoint Mortgagee, or any agent
designated by Mortgagee, or any person or entity named by Mortgagee at the
time such seizure is requested, or any time thereafter, as Keeper of the
Mortgaged Property as provided under La. R.S. 9:5136 et seq. Such a Keeper
------
shall be entitled to reasonable compensation. Mortgagor agrees to pay the
reasonable fees of such Keeper, which are hereby fixed at the greater of
market rate or $50.00 per hour, which compensation to the Keeper shall also
be secured by this Mortgage.
(r) Should it become necessary for Mortgagee to foreclose under this
Mortgage, all declarations of fact, which are made under an authentic act
before a Notary Public in the presence of two witnesses, by a person
declaring such facts to lie within his or her knowledge, shall constitute
authentic evidence for purposes of executory process and also for purposes
of La. R.S. 9:3509.1, La. R.S. 9:3504(D)(6) and La. R.S. 10:9-508, where
applicable.
(s) Mortgagee may, in addition to the foregoing remedies, or in lieu
thereof, in Mortgagee's sole discretion, pursuant to Louisiana Civil Code
Article 1986, commence an appropriate action against Mortgagor seeking
specific performance of any covenant contained herein, or in aid of the
execution or enforcement of any power herein granted.
Mortgagee shall have no obligation to do, or refrain from doing, any
of the acts, or to make or refrain from making any payment, referred to in
this Section 6.1.
6.2 Foreclosure by Judicial Proceedings. Upon the occurrence of an Event of
-----------------------------------
Default, Mortgagee may proceed, where permitted by law, by a suit or suits in
equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property, or for the enforcement of any other appropriate legal or
equitable remedy.
6.3 Receipt to Purchaser. Upon any sale by virtue of judicial proceedings,
--------------------
the receipt of the officer making such sale under judicial proceedings shall be
sufficient discharge to the purchaser or purchasers at any sale for his or their
purchase money, and such purchaser or purchasers, or his or their assigns or
personal representatives, shall not, after paying such purchase money and
receiving such receipt of such officer therefor, be obligated to see to the
application of such purchase money, or be in any way answerable for any loss,
misapplication or non-application thereof.
6.4 Effect of Sale. Any sale or sales of the Mortgaged Property or portions
--------------
thereof where permitted by law shall operate to divest all right, title,
interest, claim and demand whatsoever either at law or in equity, of Mortgagor
of, in and to the premises and the property sold, and shall be a perpetual bar,
both at law and in equity, against Mortgagor, and Mortgagor's successors, legal
representatives or assigns, and against any and all Persons claiming or who
shall thereafter claim all or any of the property sold by, through or under
Mortgagor, or Mortgagor's successors, legal representatives and assigns.
Nevertheless, Mortgagor, if requested by Mortgagee to do so, shall join in the
execution and delivery of all proper conveyances, assignments and transfers of
the properties so sold.
6.5 Application of Proceeds. The proceeds of any sale of or other
-------------------------
realization on the Mortgaged Property, or any part thereof, shall be applied by
Mortgagee to the Secured Indebtedness in such order as Mortgagee shall elect.
6.6 Mortgagors' Waiver of Appraisement, Marshaling, etc.; Rights. Mortgagor
agrees, to the full extent that such Mortgagor may lawfully so agree, that such
Mortgagor will not at any time, insist upon or plead or, in any manner
whatsoever, claim the benefit of any stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure
of this Mortgage or the absolute sale of the Mortgaged Property or any portion
thereof or the possession thereof by any purchaser at any sale made pursuant to
any provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, and all who may claim through or under such
Mortgagor, so far as such Mortgagor or those claiming through or under such
Mortgagor now or hereafter lawfully may, hereby waives the benefit of all such
laws. Mortgagor and all who may claim through or under such Mortgagor, waives,
to the extent that such Mortgagor or those claiming through or under such
Mortgagor may lawfully do so, any and all rights of appraisement and any and all
right to have the Mortgaged Property marshaled upon any foreclosure of the Lien
hereof, or sold in inverse order of alienation, and agrees that any court having
jurisdiction to foreclose such Lien may sell the Mortgaged Property as an
entirety. If any law in this Section 6.6 referred to and now in force, of which
-----------
Mortgagor or Mortgagor's successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in force, such
law shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the provisions of this
Section 6.6.
------------
6.7 Mineral Leasing Act. Notwithstanding any other provisions of this
---------------------
Mortgage , any Oil and Gas Leases covered by this Mortgage which are subject to
the Mineral Leasing Act of 1920, as amended, and the regulations promulgated
thereunder, shall not be sold or otherwise disposed of to any party other than
citizens of the United States, or to associations of such citizens or to any
corporation organized under the laws of the United States, or any state or
territory thereof that are qualified to own or control interests in such Oil and
Gas Leases under the provisions of such Mineral Leasing Act and regulations, or
to Persons who may acquire ownership or interest in such Oil and Gas Leases
under the provisions of 30 U.S.C. Sec. 184(g), if applicable, as such Mineral
Leasing Act or regulations are now or may be from time to time in effect.
6.8 Costs and Expenses. All reasonable costs, expenses (including
--------------------
attorneys' fees) and payments incurred or made by Mortgagee in protecting and
enforcing its rights hereunder, shall constitute a demand obligation owing by
Mortgagor to the party incurring such or making such costs, expenses or payments
and shall bear interest at a rate per annum equal to the default rates set forth
in the Notes, all of which shall constitute a portion of the Secured
Indebtedness.
6.9 Operation of the Mortgaged Property by Mortgagee. Upon the occurrence
-------------------------------------------------
of an Event of Default that is continuing and the acceleration of the Secured
Indebtedness under any Credit Agreement, and in addition to all other rights
herein conferred on Mortgagee, Mortgagee (or any Person designated by Mortgagee)
shall, to the extent permitted by applicable law, have the right and power, but
not the obligation, to enter upon and take possession of any of the Mortgaged
Property, and to exclude Mortgagor, and Mortgagor's agents or servants, wholly
therefrom, and to hold, use, administer, manage and operate the same to the
extent that Mortgagor shall be at the time entitled to do any of such things and
in such Mortgagor's place and stead. Mortgagee (or any Person designated by
Mortgagee) may operate the same without any liability or duty to Mortgagor in
connection with such operations, except to use ordinary care in the operation of
such Mortgaged Property, and Mortgagee or any Person designated by Mortgagee
shall have the right to collect and receive all Hydrocarbons produced and sold
from the Mortgaged Property, the proceeds of which shall be applied to the
Secured Indebtedness in such order as Mortgagee shall elect, to make repairs,
purchase machinery and equipment, conduct workover operations, drill additional
xxxxx and to exercise every power, right and privilege of Mortgagor with respect
to the Mortgaged Property. When and if such expenses of such operation and
development (including costs of unsuccessful workover operations or additional
xxxxx) have been paid and the Secured Indebtedness paid and performed in full,
such Mortgaged Property shall, if there has been no sale or foreclosure thereof,
be returned to Mortgagors.
6.10 Additional Waivers. In order to enforce this Mortgage , Mortgagee
-------------------
shall not be obligated (a) to foreclose any other mortgage or deed of trust
covering Mortgaged Property located in another State, seek a deficiency after
any such foreclosure, or otherwise enforce Mortgagee's rights in any of the
other Mortgaged Property; or (b) to seek an injunction (prohibitive or
mandatory), the appointment of a receiver, an order modifying any stay in any
federal or state bankruptcy, reorganization or other insolvency proceedings
relating to any of the Mortgaged Property or any portion thereof, or any other
extraordinary relief. Mortgagor waives, to the fullest extent permitted by law,
any defense such Mortgagor may have to any liability hereunder based on
Mortgagee's failure or refusal to prosecute, or any lack of diligence or delay
in prosecuting, any action or proceeding to enforce any other mortgage or deed
of trust. If Mortgagee elects to enforce this Mortgage before, or without,
enforcing its rights with respect to any Mortgaged Property covered by any other
Mortgage , Mortgagor waives, to the fullest extent permitted by law, any right
such Mortgagor may have, whether statutory or otherwise, to set off the value of
any other Mortgaged Property, or any portion thereof, against the Secured
Indebtedness. If Mortgagee elects to enforce its mortgages or deeds of trust
covering all or any portion of the Mortgaged Property located in other States,
or in conjunction with the enforcement of this Mortgage, Mortgagee is authorized
to purchase all or any part of such other Mortgaged Property at public or
private sale or as otherwise provided by applicable law, and to credit the
purchase price against the Secured Indebtedness in such order or manner as
Mortgagee determines in its sole discretion and to preserve Mortgagee's rights
and Liens under this Mortgage for any portion of the Secured Indebtedness that
remains unpaid. Mortgagor waives to the fullest extent permitted by applicable
law any right to claim or seek any credit against the Secured Indebtedness in
excess of the actual amount bid or received by Mortgagee in connection with the
foreclosure of Mortgagee's Liens on any of the Mortgaged Property located in
such other States. Mortgagor further agrees that Mortgagee shall not be required
(a) to seek or obtain a deficiency judgment in or pursuant to any action or
proceeding to foreclose this Mortgage as a condition of later enforcing any
mortgage or deed of trust covering Mortgaged Property located in another State,
or (b) to seek or obtain a deficiency judgment in or pursuant to any action or
proceeding to foreclose any such other mortgage or deed of trust as a condition
of later enforcing this Mortgage. Notwithstanding the foregoing, if Mortgagee in
good faith believes that it may be required either to obtain a deficiency
judgment to enforce this Mortgage after enforcement of a mortgage or deed of
trust covering Mortgaged Property located in another State, or to enforce
another mortgage or deed of trust after enforcement of this Mortgage, then
Mortgagor agrees that Mortgagee shall be entitled to seek and obtain such a
deficiency judgment notwithstanding any contrary or inconsistent provision
contained in any Credit Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Advances by Mortgagee. Each and every covenant herein contained shall
----------------------
be performed and kept by Mortgagor solely at Mortgagors' expense. If Mortgagor
shall fail to perform or keep any of the covenants of whatsoever kind or nature
contained in this Mortgage, Mortgagee or any receiver appointed hereunder, may,
but shall not be obligated to, make advances to perform the same on Mortgagor's
behalf, and Mortgagor hereby agrees to repay such sums upon demand plus interest
at a rate per annum equal to the default rate of interest set forth in the
applicable Note. No such advance shall be deemed to relieve Mortgagor from any
Event of Default hereunder.
7.2 Defense of Claims. Mortgagors will notify Mortgagee, in writing,
-------------------
promptly of the commencement of any legal proceedings of which Mortgagor has
notice affecting or which could adversely effect the Lien hereof or the status
of or title to the Mortgaged Property, or any material part thereof, and will
take such action, employing attorneys agreeable to Mortgagee, as may be
necessary to preserve Mortgagor's or Mortgagee's rights affected thereby; and
should Mortgagor fail or refuse to take any such action, Mortgagee may take such
action on behalf and in the name of Mortgagor and at Mortgagors' sole cost and
expense. Moreover, Mortgagee may take such independent action in connection
therewith as it may, in its sole discretion, deem proper without any liability
or duty to Mortgagor except to use ordinary care, Mortgagor hereby agreeing that
all sums advanced or all expenses incurred in such actions plus interest at a
rate per annum equal to the default rate of interest set forth in the applicable
Note, will, on demand, be reimbursed to Mortgagee or any receiver appointed
hereunder.
7.3 Release. If the Secured Indebtedness shall be paid and discharged in
-------
full, then, and in that case only, this Mortgage shall terminate and the
interests of Mortgagor in the Mortgaged Property shall become wholly clear of
the Lien created hereby, and such Lien shall be released in due course at the
cost of Mortgagor. Mortgagee will, at Mortgagors' sole expense, execute and
deliver to Mortgagor all releases and other instruments reasonably requested of
the Lien created hereunder. Otherwise, this Mortgage shall remain and continue
in full force and effect.
7.4 Renewals, Amendments and Other Security. Renewals, refinancings and
------------------------------------------
extensions of the Secured Indebtedness may be given at any time and amendments
may be made to this Mortgage, the Credit Agreements and any other agreements
relating to any part of the Secured Indebtedness, and Mortgagee may take or may
hold other security for the Secured Indebtedness. Any amendment of this Mortgage
shall be by written instrument and need be executed only by the party against
whom enforcement of such amendment is asserted. Mortgagee may resort first to
such other security or any part thereof or first to the security herein given or
any part thereof, or from time to time to either or both, even to the partial or
complete abandonment of either security, and such action shall not be a waiver
of any rights conferred by this Mortgage, which shall continue as a first Lien
upon the Mortgaged Property not expressly released until all Secured
Indebtedness secured hereby is fully paid and discharged.
7.5 Instrument and Assignment, etc. This Mortgage shall be deemed to be and
------------------------------
may be, enforced from time to time as an assignment, chattel mortgage, contract,
financing statement, real estate mortgage, pledge or security agreement, and
from time to time as anyone or more thereof; and to the extent that any
particular jurisdiction wherein a portion of the Mortgaged Property is situated
does not recognize or permit Mortgagor to grant, bargain, sell, warrant,
mortgage, assign, transfer or convey Mortgagor's rights, titles and interests to
Mortgagee in the manner herein adopted, then, with respect to the Mortgaged
Property located in such jurisdiction, Mortgagor does hereby grant, bargain,
sell, warrant, mortgage, assign, transfer and convey unto Mortgagee, the
Mortgaged Property to secure the Secured Indebtedness and the Obligations.
7.6 Limitation on Interest. Regardless of any provision contained in this
-----------------------
Mortgage or any of the Credit Agreements, Mortgagee shall never be entitled to
receive, collect, or apply, as interest on the Loans, any amount in excess of
the Maximum Lawful Rate, and in the event Mortgagee ever receives, collects or
applies as interest any such excess, such amount which would be deemed excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and if the Loans are paid in full, any remaining excess shall promptly
be paid to Mortgagors. In determining whether or not the interest paid or
payable under any specific contingency exceeds the Maximum Lawful Rate,
Mortgagor shall, to the extent permitted under applicable law, (a) characterize
any non-principal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread, in equal parts, the total amount of the interest
throughout the entire contemplated term of the Note, so that the interest rate
is the Maximum Lawful Rate throughout the entire term of the Note; provided,
however, that if the unpaid principal balance thereof is paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence thereof exceeds the Maximum Lawful
Rate, Mortgagee shall refund to Mortgagors the amount of such excess and, in
such event, Mortgagee shall not be subject to any penalties provided by any laws
for contracting for, charging, taking, reserving or receiving interest in excess
of the Maximum Lawful Rate.
7.7 Unenforceable or Inapplicable Provisions. If any provision of this
-------------------------------------------
Mortgage or in any of the Credit Agreements is invalid or unenforceable in any
jurisdiction, the other provisions hereof or of any of the Credit Agreements
shall remain in full force and effect in such jurisdiction, and the remaining
provisions hereof shall be liberally construed in favor of Mortgagee in order to
effectuate the provisions hereof, and the invalidity of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of any such
provision in any other jurisdiction. Any reference herein contained to statutes
or laws of a state in which no part of the Mortgaged Property is situated shall
be deemed inapplicable to, and not used in, the interpretation hereof.
7.8 Rights Cumulative. Each and every right, power and remedy herein given
-----------------
to Mortgagee shall be cumulative and not exclusive; and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and so often and in such order as may be deemed
expedient by Mortgagee and the exercise, or the beginning of the exercise, of
any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time and thereafter, any other right, power or remedy. No
delay or omission by Mortgagee in the exercise of any right, power or remedy
shall impair any such right, power or remedy or operate as a waiver thereof or
of any other right, power or remedy then or thereafter existing.
7.9 Waiver by Mortgagee. Any and all covenants in this Mortgage may, from
--------------------
time to time, by instrument in writing signed by Mortgagee be waived to such
extent and in such manner as Mortgagee may desire, but no such waiver shall ever
affect or impair Mortgagee's rights and remedies or Liens hereunder, except to
the extent specifically stated in such written instrument.
7.10 Successors and Assigns. This Mortgage is binding upon Mortgagor, and
-----------------------
Mortgagor's heirs, devisees, successors, personal and legal representatives and
assigns, and shall inure to the benefit of Mortgagee and its successors, legal
representatives and assigns, and the provisions hereof shall likewise be
covenants running with the Lands.
7.11 Article and Section Headings. The article and section headings in this
----------------------------
Mortgage are inserted for convenience and shall not be considered a part of this
Mortgage or used in its interpretation.
7.12 Counterparts. This Mortgage may be executed in any number of
------------
counterparts, each of which shall for all purposes be deemed to be an original,
and all of which are identical except that, to facilitate recordation in any
particular county or parish, counterpart portions of Exhibit A which describe
---------
properties situated in counties or parishes other than the county or parish in
which such counterpart is to be recorded may be omitted.
7.13 Special Filing as Financing Statements. This Mortgage shall likewise
---------------------------------------
be a security agreement and a financing statement by virtue of Mortgagor, as
debtor, granting to Mortgagee, its successors, legal representatives and
assigns, as secured party, a security interest in all personal property,
as-extracted collateral, fixtures, accounts, contract rights, general
intangibles, inventory, goods, chattel paper, instruments, documents and money
described or referred to in granting clauses (a) through (j) of Article II
----------
hereof and all proceeds and products from the sale, lease or other disposition
of the Mortgaged Property or any part thereof. The addresses shown in Section
-------
7.14 hereof are the addresses of Mortgagors and Mortgagee and information
----
concerning the security interest may be obtained from Mortgagee at its address.
Without in any manner limiting the generality of any of the foregoing provisions
hereof: (a) some portion of the goods described or to which reference is made
herein are or are to become fixtures on the Lands described or to which
reference is made herein; (b) the minerals and the like (including oil and gas)
included in the Mortgaged Property and the accounts resulting from the sale
thereof will be financed at the wellhead(s) or minehead(s) of the well(s) or
mine(s) located on the Lands described or to which reference is made herein; and
(c) this Mortgage is to be filed of record, among other places, in the real
estate records of each county or parish in which the Lands, or any part thereof,
are situated, as a financing statement, but the failure to do so will not
otherwise affect the validity or enforceability of this Mortgage. Mortgagor
authorizes Mortgagee to file such amendments to this Mortgage, financing
statements and amendments thereto, and continuation statements, as Mortgagee
deems reasonable or necessary to perfect and maintain the perfection of the
Liens granted herein, including such Liens with respect to any additions to the
Mortgaged Property as provided in Article V.
7.14 Notices. Whenever this Mortgage requires or permits any consent,
-------
approval, notice, request or demand from one party to another, such consent,
approval, notice or demand shall, unless otherwise required under applicable
law, be given in accordance with the provisions of the Credit Agreements,
addressed to the party to be notified at the address stated below (or such other
address as may have been designated in accordance with the provisions of the
Credit Agreements):
MORTGAGOR-DEBTOR MORTGAGEE-SECURED PARTY
Laurus Master Fund, Ltd.
c/o M&C Corporate Services Limited
XX Xxx 000 X.X.
Xxxxxx House, South Church Street, Xxxxxx Town
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with copies to:
Xxxx X. Xxxxxx, Esq.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Loeb & Loeb, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile 000-000-0000
7.15 GOVERNING LAW. THIS MORTGAGE, THE NOTE AND THE CREDIT AGREEMENTS SHALL
-------------
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
LOUISIANA AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT
THAT THE LAWS OF ANY STATE IN WHICH THE MORTGAGED PROPERTY IS LOCATED
NECESSARILY GOVERNS THE VALIDITY, PERFECTION, PRIORITY AND ENFORCEABILITY OF,
AND THE EXERCISE OF ANY REMEDIES WITH RESPECT TO, ANY LIEN INTENDED TO BE
CREATED HEREBY ON THE MORTGAGED PROPERTY LOCATED IN SUCH STATE.
7.16 Future Advances. This Mortgage covers not only the proceeds of the
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Loan, but all advances hereafter made by any Mortgagee to or for the benefit of
Mortgagor (the "Future Advances"), including, without limitation, any amounts
advanced by Mortgagee in satisfying, on Mortgagor's behalf, any of Mortgagor's
Obligations, and any advances made in accordance herewith by Mortgagee to
protect its security, and any other advances by Mortgagee. The maximum amount
secured hereby may be advanced and repaid, and again advanced and repaid from
time to time, in Mortgagee' sole and absolute discretion, and this Mortgage
shall become enforceable upon recording and shall have priority over all other
parties whose rights arose after the recording hereof, with respect to all funds
advanced by Mortgagee to Mortgagor, regardless of whether such funds were
advanced before or after the arising of such other party's rights.
7.17 Recording. Executed original counterparts of this Mortgage are to be
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filed for record in the records of the jurisdictions wherein the Mortgaged
Property is situated, and shall have annexed thereto as Exhibit A, only the
portions or divisions containing specific descriptions of the Mortgaged Property
relating to the Lands located in such jurisdictions. Whenever a recorded
counterpart of this Mortgage contains specific descriptions which are less than
all of the descriptions contained in any full counterpart lodged with Mortgagee,
the omitted descriptions are hereby included by reference in such recorded
counterpart as if each recorded counterpart conformed to any full counterpart
lodged with Mortgagee.
7.18 No Paraphed Notes. Mortgagor acknowledges that no promissory note or
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other instrument has been presented to the undersigned notary public(s) to be
paraphed for identification herewith.
7.19 Acceptance. The acceptance of this Mortgage by Mortgagee and the
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consent by Mortgagee to the terms and conditions of this Mortgage is presumed
and, under the provisions of Louisiana Civil Code article 3289, Mortgagee has
not been required to sign this Mortgage .
7.20 Certificates. The production of mortgage, conveyance, and tax
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certificates is waived by Mortgagor and Mortgagee and the undersigned notary
public is released from all liability in connection therewith.
7.21 Louisiana Defined Terms. The term "real estate" will mean "immovable
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property" as that term is used in the Louisiana Civil Code. The term "personal
property" will mean "movable property" as that term is used in the Louisiana
Civil Code. The term "easement" will mean "servitude" as that term is used in
the Louisiana Civil Code. The term "intangible" will mean "incorporeal" as that
term is used in Louisiana law. The term "receiver" will include "keeper" as that
term is used in Louisiana law. The term "joint and several" will mean "solidary"
as that term is used in Louisiana law.
ARTICLE VIII
ASSIGNMENT OF PRODUCTION
8.1 Assignment. For the purpose of further securing the Secured
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Indebtedness and the performance of Mortgagor's covenants hereunder, Mortgagor
does hereby TRANSFER, ASSIGN, AND CONVEY unto Mortgagee any and all of the
interests of Mortgagor in and to the Hydrocarbons that may be produced from, or
attributable to, the Mortgaged Property on and after the Effective Date,
together with the proceeds of the sale thereof and attributable thereto. This
assignment is made upon the following terms and conditions: (a) pipeline
companies and others purchasing the oil, gas, minerals and other substances
listed above produced and to be produced from said property are hereby
authorized and directed to pay directly to Mortgagee the interests of Mortgagor
in and to the proceeds of the sale of the oil, gas, minerals and other
substances listed above produced, to be produced and attributable to said
property, and to continue such payments until they have been furnished with a
release hereof executed in writing by Mortgagee, and the receipt of Mortgagee
for monies so paid to it shall be a full and complete release, discharge and
acquittance to any such pipeline company or other purchaser, to the extent of
all amounts so paid, (b) Mortgagee is hereby authorized to receive and collect
the proceeds of the sale of the oil, gas, minerals and other substances listed
above assigned to it hereunder, and to apply the funds so received first toward
the payment of the expenses, if any, incurred in the collection thereof, then in
such order as Mortgagee shall determine toward the payment of the Secured
Indebtedness, any balance remaining after the full and final payment of the
Secured Indebtedness to be held subject to the order of Mortgagors, (c)
Mortgagee shall have the right, at its sole option, at any time, and from time
to time, to release to, or on the order of, Mortgagor all or any portion of the
funds assigned to Mortgagee hereunder, and no such releases shall affect or
impair the Lien of this Mortgage or the validity and effect of the assignment
contained in this Article VIII, (d) Mortgagee shall never be under any
obligation to enforce the collection of the funds assigned to it hereunder, nor
shall it ever be liable for failure to exercise diligence in the collection of
such funds, but it shall only be accountable for the sums that it shall actually
receive, (e) Mortgagor covenants to cause all pipeline companies or other
purchasers of the oil, gas, minerals and other substances listed above produced
from and attributable to said property, to pay promptly to Mortgagee, at the
office of Mortgagee at the address of Mortgagee stated above, the interests of
Mortgagor in and to the proceeds of the sale thereof, and (f) upon the full and
final payment of the Secured Indebtedness, Mortgagee, at the request of
Mortgagors, and at Mortgagors' sole cost and expense, shall execute and deliver
to Mortgagors a reassignment hereof, without recourse, representations or
warranties.
8.2 Power of Attorney. In consideration of the Loans evidenced by the
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Notes, Mortgagor hereby designates and appoints Mortgagee as Mortgagor's true
and lawful agent and attorney-in-fact (with full power of substitution, either
generally or for such limited periods or purposes as Mortgagee may, from time to
time, prescribe), with full power and authority, for and on behalf and in the
name of Mortgagor, upon the occurrence of an Event of Default that is
continuing, to execute, acknowledge and deliver all such division orders,
transfer orders, certificates and any and all other documents of every nature as
may, from time to time, be necessary or proper to effectuate the intent and
purpose of the assignment contained in Section 8.1 hereof. Mortgagor shall be
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bound thereby as fully and effectively as if Mortgagor had personally executed,
acknowledged and delivered any such division order, transfer order, certificate
or other documents. The powers and authorities herein conferred on Mortgagee may
be exercised by any authorized officer or director of Mortgagee. The power of
attorney conferred by this Section 8.2 is granted for a valuable consideration
and hence is coupled with an interest and is irrevocable so long as the Secured.
Indebtedness, or any part thereof, shall remain unpaid. All Persons dealing with
Mortgagee, any officer or director thereof above designated or any substitute
thereof, shall be fully protected in treating the powers and authorizations
conferred by this Section 8.2 as continuing in full force and effect until
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advised by Mortgagee that all of the Secured Indebtedness is fully and finally
paid.
[Signature Page to Follow]
THUS DONE AND PASSED, on the date first above mentioned, 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.
The address of Mortgagor is:
0000 Xxxxxxxxxxxx Xx. Xxxxx 000
Xxxxxxx, Xxxxx 00000
WITNESSES: TEXAURUS ENERGY, INC.
/s/ Xxxx Xxxxx
---------------------------- By: /s/ Xxx Xxxxxxx
Print Name: Xxxx Xxxxx --------------------------
Xxx Xxxxxxx
Its: President
/s/ Xxxxxxx X. Xxxxxxx
---------------------------
Print Name: Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Notary Public
Printed Name: Xxxxxxx X Xxxxxx
State of Texas, County of Xxxxxx
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My commission expires: 7-22-2009
Notary #/Bar# 00105121-1
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EXHIBIT A
Being an undivided Eight (8%) Percent of 8/8ths working interest in the "Leases"
listed and described on Exhibit "A" and an undivided Eight (8%) Percent of
8/8ths working interest in and to: (a) the wellbores of the Key Operating and
Production Company, Inc. - S.L. 16995 No. 1 Well, bearing Office of Conservation
Serial No. 228882, and the Key Operating and Production Company, Inc. - S.L.
16995 No. 1-D Well, bearing Office of Conservation Serial No. 229486
(collectively ("S.L. 16995 Well"), and the Key Operating and Production
Company, Inc. - S.L. 16995 No.2 Well, bearing Office of Conservation Serial
No.230531, and the Key Operating and Production Company, Inc. - S.L. 16995 No. 3
Well, bearing Office of Conservation Serial No. 3-231777 and 3D-232537
(collectively "Xxxxx"), (b) all physical facilities situated at the wellsite
location of the Xxxxx, including, but not limited to, any tanks, tank
batteries, gas plants, disposal facilities, buildings, structures, field
separators and liquid extractors, compressors, pumps, pumping units, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, implements,
tools, appliances, cables, wires, towers, casing, tubing and rods, gathering
lines, and any and all other fixtures and equipment of every type and
description (collectively, "Equipment"); and (c) the right of ingress and egress
to and from the Xxxxx on, over and across the leased premises covered by the
Leases.
