Exhibit 10.4
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A
POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED
PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE
ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE
FROM
CEP-M PURCHASE, LLC
Organizational Identification
Number: 4848558
(Mortgagor and Debtor)
TO
AMEGY BANK NATIONAL ASSOCIATION,
AS COLLATERAL AGENT
(Mortgagee and Secured Party)
EFFECTIVE
NOVEMBER 19, 2010
For purposes of filing this Mortgage as a financing statement, the mailing
address of Mortgagor is 00000 Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxx, Xxxx 00000,
Attn: Xxxxx X. Xxxx, and the mailing address of Mortgagee is 0000 Xxxx Xxx
Xxxxxxx, 0xx Xxxxx, Xxxxxxx, Xxxxx 00000, Attn: Energy Lending Dept.
This instrument, prepared by Xxxxx X. Xxxxxx, XXXXXXX XXXXXX L.L.P., 0000
XxXxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, 713-752-4200, contains
after-acquired property provisions and covers future advances and proceeds to
the fullest extent allowed by applicable law.
ATTENTION OF RECORDING OFFICER: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument creates a lien on
rights in or relating to lands of Mortgagor which are described in such Exhibit
A hereto or in documents described in Exhibit A.
RECORDED DOCUMENT SHOULD BE RETURNED TO:
XXXXXXX XXXXXX L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn.: Xxxxx Xxxxxxx
MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION
(THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)
A POWER OF SALE HAS BEEN GRANTED IN THIS
MORTGAGE. A POWER OF SALE MAY ALLOW THE MORTGAGEE
TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE MORTGAGOR UNDER THIS MORTGAGE
This Mortgage, Security Agreement, Financing Statement, and Assignment of
Production (this "Mortgage") is executed pursuant to the Credit Agreement dated
effective November 19, 2010, by and among CEP-M PURCHASE, LLC, a Delaware
limited liability company (herein, "Mortgagor"), Amegy Bank National
Association, a national banking association, in its capacity as Agent for the
lenders party thereto and certain other parties under certain circumstances, and
the lenders party thereto (as amended, restated, or supplemented from time to
time, the "Credit Agreement"). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
Mortgagor, acting herein by and through its proper officer who has heretofore
been duly authorized, and with its principal office in Highland, Utah, and the
mailing address for which, for purposes hereof, is 00000 Xxxxxxxx Xxxx., Xxxxx
000, Xxxxxxxx, Xxxx 00000, Attn: Xxxxx X. Xxxx, hereby agrees as follows:
ARTICLE 1
GRANT
1.1 Lien. Mortgagor, for valuable consideration, the receipt of which is
hereby acknowledged, and in consideration of the debt hereinafter mentioned, has
granted, bargained, sold, conveyed, transferred and assigned, and by these
presents does grant, bargain, sell, convey, transfer and assign, to AMEGY BANK
NATIONAL ASSOCIATION, the banking quarters for which are in Houston, Xxxxxx
County, Texas, and the mailing address for which, for purposes hereof, is 0000
Xxxx Xxx Xxxxxxx, 0xx Xxxxx, Xxxxxxx, Xxxxx 00000, in its capacity as collateral
agent for the lenders party to the Credit Agreement and any additional Secured
Creditors (in such capacity, "Mortgagee"), the following described Property
located in the State of Wyoming (the "State") with Power of Sale:
(a) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the leases, rights of way,
easements, or other documents described in Exhibit A attached hereto and
incorporated herein for all purposes, without regard to any surface acreage
and/or depth limitations set forth in Exhibit A, and all renewals and extensions
thereof and all new leases, rights of way, easements or other documents (i) in
which an interest is acquired by Mortgagor after the termination or expiration
of any lease, right of way, easement or other document described in Exhibit A
and (ii) that
covers all or any part of the Property described in and covered by such
terminated or expired lease, right of way, easement or other document, to the
extent, and only to the extent, such new leases, rights of way, easements or
other documents may cover such Property (all of the foregoing in this paragraph
(a) being the "Leases");
(b) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the lands subject to the
Leases or otherwise described in Exhibit A (the "Lands"), including, without
limitation, the oil, gas, mineral and leasehold estates in and to the Lands,
without regard to any surface acreage and/or depth limitations set forth in
Exhibit A;
(c) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to any of the oil, gas, and
minerals in, on, or under the Lands, including, without limitation, all
contractual rights, fee interests, leasehold interests, overriding royalty
interests, non-participating royalty interests, mineral interests, production
payments, net profits interests, or any other interest measured by or payable
out of production of oil, gas, or other minerals from the Leases and/or Lands;
(d) all of the foregoing interests of Mortgagor as such interests may be
enlarged by the discharge of any payments out of production or by the removal of
any charges or encumbrances;
(e) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
any present or future operating, farmout, bidding, pooling, unitization, and
communitization agreements, assignments, and subleases, whether or not described
in Exhibit A, to the extent, and only to the extent, that such agreements,
assignments, and subleases cover or include any right, title, and interest,
whether now owned and existing or hereafter acquired or arising, of Mortgagor in
and to all or any portion of the Leases and/or the Lands, and all units created
by any such pooling, unitization, and communitization agreements and all units
formed under orders, regulations, rules, or other official acts of any
Governmental Authority having jurisdiction, to the extent and only to the extent
that such units cover or include all or any portion of the Leases and/or the
Lands;
(f) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
all presently existing and future advance payment agreements, oil, casinghead
gas, and gas sales, exchange, and processing contracts and agreements,
including, without limitation, those contracts and agreements that are described
on Exhibit A, if any, to the extent, and only to the extent, those contracts and
agreements cover or include all or any portion of the Leases and/or the Lands;
and
(g) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
all
existing and future permits, licenses, easements, and similar rights and
privileges that relate to or are appurtenant to any of the Leases and/or the
Lands.
1.2 Security Interest. Mortgagor, for the same consideration, hereby grants
to Mortgagee a continuing security interest in all improvements and all personal
Property of any kind or character defined in and subject to the provisions of
the Uniform Commercial Code in effect in the State as of the date hereof (the
"UCC"), including, without limitation, the proceeds and products from any and
all of such improvements and personal Property, as well as any and all
"as-extracted collateral" as such term is defined in the UCC, whether now owned
and existing or hereafter acquired or arising, and situated on any of the Lands,
including, but not limited to, pipe, casing, tubing, rods, storage tanks,
boilers, loading racks, pumps, foundations, warehouses, and all other personal
Property and equipment of every kind and character upon, incident, appurtenant,
or belonging to and used in connection with the interest of Mortgagor, whether
now owned and existing or hereafter acquired or arising, in the Lands and/or the
Leases, including all oil, gas, and other minerals produced or to be produced to
the account of Mortgagor from the Lands and all accounts receivable, general
intangibles, and contract rights of Mortgagor in connection with the Lands
and/or the Leases and all proceeds, products, substitutions, and exchanges
thereof (the Lands, the Leases, and the real and personal Property interests
described above in this Article 1 being the "Mortgaged Property").
1.3 Assignment of Security. Mortgagor, for the same consideration, hereby
grants to Mortgagee any and all rights of Mortgagor to Liens securing payment of
proceeds from the sale of production from the Mortgaged Property.
1.4 After-Acquired Property. Mortgagor, for the same consideration, hereby
grants, bargains, sells, conveys, transfers, and assigns to Mortgagee a
continuing security interest in, as the case may be, all additional right,
title, or interest which Mortgagor may hereafter acquire or become entitled to
in the interests, Properties, Lands, Leases, and premises aforesaid, and in the
oil, gas, or other minerals in and under or produced from or attributable to any
of the Lands or Leases, which additional right, title, and interest, when
acquired, shall constitute "Mortgaged Property," the same as if expressly
described and conveyed herein.
1.5 Habendum. TO HAVE AND TO HOLD all and singular the Mortgaged Property
and all other Property which, by the terms hereof, has or may hereafter become
subject to the Liens of this Mortgage, together with all rights, hereditaments,
and appurtenances in anywise belonging to Mortgagee, its successors and assigns
forever.
ARTICLE 2
INDEBTEDNESS SECURED
This conveyance is made to secure and enforce the payment of the following
indebtedness, obligations, and liabilities:
2.1 Specific Obligations. The Obligations, including, without limitation,
the indebtedness evidenced by the Credit Agreement and the Notes executed by
Mortgagor in the face amount of up to SEVENTY-FIVE MILLION DOLLARS
($75,000,000), bearing interest at
a variable rate and payable as therein provided and as provided in the Credit
Agreement, with the last of the Obligations under the Credit Agreement and the
other Loan Documents to mature on the Commitment Termination Date (which is
currently November 19, 2013), and all obligations of Mortgagor under Commodity
Hedge Agreements or Interest Rate Hedge Agreements with Secured Third Party
Hedge Counterparties.
2.2 Revolving Line of Credit. This Mortgage is intended to secure, in part,
a revolving credit line as set forth in the Credit Agreement. If intermediate
paydowns by Mortgagor on such revolving line of credit reduce the outstanding
Indebtedness to zero, it is intended that the Liens created under this Mortgage
shall remain in full force and effect as long as any Commitment exists.
2.3 Indebtedness. The word "Indebtedness" whenever used in this Mortgage
shall refer to all present and future debts, obligations, and disabilities
described or referred to in this Article 2.
ARTICLE 3
WARRANTIES
3.1 Warranty of Title. Mortgagor hereby binds itself, its legal
representatives, successors, and assigns, to warrant and forever defend all and
singular the Mortgaged Property to the Mortgagee and the successors and assigns
of the Mortgagee forever against every Person whomsoever lawfully claiming or to
claim the same or any part thereof. Notwithstanding that this Mortgage covers
all of the right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the Mortgaged Property,
Mortgagor, for itself, its legal representatives, successors, and assigns,
further covenants, represents, and warrants that Mortgagor has good and
marketable title to the Mortgaged Property and that the interests of Mortgagor
in and to the Leases and/or Lands described in Exhibit A are not greater than
the working interest nor less than the net revenue interest, overriding royalty
interest, net profit interest, production payment interest, royalty interest, or
other interest payable out of or measured by production set forth in connection
with each oil and gas well described in Exhibit A. In the event Mortgagor owns
any other or greater interest, such additional interest is nonetheless included
in, covered by, and subject to the liens and security interests created by this
Mortgage.
3.2 Additional Warranties. For the same consideration, Mortgagor, for
itself, its legal representatives, successors, and assigns, covenants,
represents, and warrants that:
(a) Leases in Effect. All of the Leases specifically described in Exhibit A
are in full force and effect. To Mortgagor's knowledge, all covenants, express
or implied, in respect of the Leases specifically described in Exhibit A, or of
any assignment of any of such Leases, which may affect the validity of any of
such Leases, have been performed.
(b) Interests Free of Liens. The interests of Mortgagor in the Mortgaged
Property are free and clear of all Liens except Permitted Liens. All
gross production taxes and all taxes as to which nonpayment could result in a
Lien against any of the Mortgaged Property have been paid.
ARTICLE 4
COVENANTS OF MORTGAGOR
In consideration of the Indebtedness, Mortgagor, for itself, its legal
representatives, successors, and assigns, covenants and agrees as follows:
4.1 Maintenance of Leases. Mortgagor will, in accordance with Mortgagor's
normal course of business and to the extent that a reasonably prudent operator
would do so, keep and continue all Leases, estates, and interests herein
described and all contracts and agreements relating thereto in full force and
effect in accordance with the terms thereof and will not permit the same to
lapse or otherwise become impaired for failure to comply with the obligations
thereof, whether express or implied. In this connection, Mortgagor shall not
release any of the Leases without the prior written consent of Mortgagee, which
consent shall not be unreasonably withheld, conditioned or delayed, except as
provided otherwise in the Credit Agreement or in accordance with the reasonably
prudent operator standard.
4.2 Maintenance of Property. Mortgagor will keep and maintain all
improvements, personal Property, and equipment now or hereafter situated on the
Lands and constituting a portion of the Mortgaged Property and used or obtained
in connection therewith in good repair and condition, ordinary wear and tear
excepted, and will not tear down or remove the same or permit the same to be
torn down or removed without the prior consent of Mortgagee, which consent shall
not be unreasonably withheld, conditioned or delayed, except in the usual course
of operations as may be required for replacement when otherwise in compliance
with the provisions of this Mortgage and the Credit Agreement.
4.3 Pooling or Unitization. Except as required by law, rule or regulation,
Mortgagor will not, without the prior written consent of Mortgagee, which
consent shall not be unreasonably withheld or delayed, pool or unitize all or
any part of the Mortgaged Property where the pooling or unitization would result
in the diminution of the net revenue interest of Mortgagor in production from
the pooled or unitized lands attributable to the Mortgaged Property constituting
a portion of such pooled or unitized lands. As soon as reasonably practical
after the formation of any pool or unit in accordance herewith, Mortgagor will
furnish to Mortgagee a conformed copy of the pooling agreement, declaration of
pooling, or other instrument creating the pool or unit. The interest of
Mortgagor included in any pool or unit attributable to the Mortgaged Property or
any part thereof shall become a part of the Mortgaged Property and shall be
subject to the Liens hereof in the same manner and with the same effect as
though the pool or unit and the interest of Mortgagor therein were specifically
described in Exhibits A. In the event any proceedings of any Governmental
Authority which could result in pooling or unitizing all or any part of the
Mortgaged Property are commenced, Mortgagor shall give prompt written notice
thereof to Mortgagee. Any pooling or unitization of all or any part of the
Mortgaged Property in violation of this Section shall be of no force or effect
against the Mortgagee.
4.4 Operation of Mortgaged Property. Mortgagor will operate or, to the
extent that the right of operation is vested in others, will exercise its best
efforts to cause the operator to operate the Mortgaged Property and all xxxxx
now or hereafter located thereon continuously and in a prudent and workmanlike
manner in accordance with the customary industry standards of the field and in
accordance with all applicable Requirements of Law. Mortgagor will comply with
all material terms and conditions of the Leases and each assignment or contract
obligating Mortgagor in any way with respect to the Mortgaged Property; but
nothing herein shall be construed to empower Mortgagor to bind the Mortgagee to
any contract or obligation or render the Mortgagee in any way responsible or
liable for bills or obligations incurred by Mortgagor.
4.5 Compliance with Operating Agreements. Mortgagor agrees to promptly pay
all bills for labor and materials incurred in the operation of the Mortgaged
Property and will promptly pay its share of all costs and expenses incurred
under any joint operating agreement affecting the Mortgaged Property or any
portion thereof; except to the extent contested in good faith and as to which an
adequate reserve in accordance with GAAP has been established or unless failure
to pay would not reasonably be expected to result in a Material Adverse Effect;
will furnish Mortgagee, as and when reasonably requested by Mortgagee, full
information as to the status of any joint account maintained with others under
any such operating agreement; will not take any action to incur any liability or
Lien thereunder (other than Permitted Liens), except to the extent contested in
good faith and as to which an adequate reserve in accordance with GAAP has been
established.
4.6 Access to Mortgaged Property. Mortgagor will permit Mortgagee and its
accredited agents, representatives, attorneys and employees, at the expense of
Mortgagor, during reasonable business hours upon five (5) Business Days prior
written notice to Mortgagor, to go upon, examine, inspect, conduct environmental
audits and other testing of, and remain on, the Mortgaged Property, and to go
upon the xxxxxxx floor of any well at any time drilled or being drilled thereon,
and will furnish Mortgagee, upon Mortgagee's reasonable request, all pertinent
information regarding the development and operation of the Mortgaged Property.
Notwithstanding the foregoing, such inspection by Mortgagee and its accredited
agents, representatives, attorneys and employees shall be at their sole risk and
expense.
4.7 Waivers. Mortgagor hereby expressly waives, to the full extent
permitted by applicable law, any and all rights or privileges of marshaling of
assets, sale in inverse order of alienation, notices, appraisements, redemption,
and any prerequisite in the event of foreclosure of the Liens created herein.
Mortgagee at all times shall have the right to release any part of the Mortgaged
Property now or hereafter subject to the Liens of this Mortgage, any part of the
proceeds of production or other income herein or hereafter assigned or pledged,
or any other security it now has or may hereafter have securing the
Indebtedness, without releasing any other part of the Mortgaged Property,
proceeds, or income, and without affecting the Liens hereof as to the part or
parts of the Mortgaged Property, proceeds, or income not so released or the
right to receive future proceeds and income.
4.8 Compliance with Laws. Mortgagor will comply, in all material respects,
with all Requirements of Law applicable to the Mortgaged Property and the
operations conducted thereon, including, without limitation, the Natural Gas
Policy Act of 1978, as amended, and Environmental Laws; and cause all employees,
crew members, agents, contractors,
sub-contractors, and future lessees (pursuant to appropriate lease provisions)
of Mortgagor, while such Persons are acting within the scope of their
relationship with Mortgagor, to comply, in all material respects, with all such
Requirements of Law as may be necessary or appropriate to enable Mortgagor to so
comply.
4.9 Hazardous Substances Indemnification. MORTGAGOR HEREBY INDEMNIFIES AND
HOLDS MORTGAGEE, ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND
JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY MORTGAGED PROPERTY,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR
UNDERTAKEN ON OR OFF ANY MORTGAGED PROPERTY, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, AND WHETHER BY MORTGAGOR OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR OR ANY OTHER PERSON AT ANY TIME
OCCUPYING OR PRESENT ON ANY MORTGAGED PROPERTY, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY MORTGAGED
PROPERTY, (D) ANY CONTAMINATION OF ANY MORTGAGED PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE BY MORTGAGOR OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH MORTGAGOR, IRRESPECTIVE
OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF THIS
MORTGAGE OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO THIS
MORTGAGE OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATION,
ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE (BUT EXCLUDING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER SOLE OR CONCURRENT, ON THE PART
OF MORTGAGEE OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES; WITH THE FOREGOING INDEMNITY SURVIVING
SATISFACTION OF THE INDEBTEDNESS, THE TERMINATION OF THE CREDIT AGREEMENT, AND
THE RELEASE OF THE LIENS CREATED HEREBY.
4.10 Site Assessments. Mortgagee (by its officers, employees and agents) at
any time and from time to time, either prior to or after the occurrence of an
Event of Default, may contract, at the expense of Mortgagor, for the services of
Persons (the "Site Reviewers") to perform environmental site assessments and
other tests ("Site Assessments") on all or any portion of the Mortgaged Property
for the purpose of determining whether any environmental condition exists on any
Mortgaged Property which could reasonably be expected to result in any
liability, cost, or expense to Mortgagee or any owner, occupier, or operator of
such Mortgaged Property. The Site Assessments may be performed at any time or
times, upon reasonable notice,
and under reasonable conditions established by Mortgagor which do not impede the
performance of the Site Assessments. The Site Reviewers are hereby authorized
to enter upon all or any portion of the Mortgaged Property for such purposes.
The Site Reviewers are further authorized to perform both above and below the
ground testing for environmental damage or the presence of Hazardous Substances
on the Mortgaged Property and such other tests on the Mortgaged Property as may
be reasonably necessary to conduct the Site Assessments in the reasonable
opinion of the Site Reviewers. Mortgagor will supply to the Site Reviewers such
historical and operational information regarding the Mortgaged Property as may
be reasonably requested by the Site Reviewers to facilitate the Site Assessments
and will make available for meetings with the Site Reviewers appropriate
personnel having knowledge of such matters. On request, Mortgagee shall make
the results of such Site Assessments available to Mortgagor, which, prior to an
Event of Default, may at its election participate under reasonable procedures in
the direction of such Site Assessments and the description of tasks of the Site
Reviewers. The cost of performing all Site Assessments shall be paid by
Mortgagor upon demand of Mortgagee and any such obligations shall be
Indebtedness secured by this Mortgage.
4.11 Performance of Gas Contracts. Mortgagor will perform and observe in
all material respects all of its obligations under each contract relating to the
sale of gas produced from or attributable to the Mortgaged Property and will
not, except in good faith and as the result of arm's length negotiations and
with prior written notice to Mortgagee, change, modify, amend or waive any of
the material terms or provisions of any such contract or take any other action
which would release any other party from its obligations or liabilities under
any such contract.
4.12 Covenants Running with the Land. All covenants and agreements herein
contained shall constitute covenants running with the Land.
ARTICLE 5
DEFEASANCE, FORECLOSURE
AND OTHER REMEDIES
5.1 Defeasance. Should the Commitment terminate and the Indebtedness be
paid, as the same becomes due and payable, and should Mortgagor duly observe and
perform all of the covenants, conditions, and agreements herein and in all other
Loan Documents provided to be observed and performed by Mortgagor, then the
conveyance of the Mortgaged Property shall become of no further force and
effect, and, at the expense of Mortgagor, the Lien granted hereunder shall be
released, without recourse or warranty. The Mortgagee will, at Mortgagor's
expense, execute and deliver to Mortgagor all releases and other instruments
reasonably requested by Mortgagor for the purpose of evidencing the release and
discharge of the Lien and security interest granted hereunder. Otherwise, it
shall remain in full force and effect.
5.2 Events of Default. The occurrence and continuance of any Event of
Default under the Credit Agreement, any default by Mortgagor under any relevant
Commodity Hedge Agreement or Interest Rate Hedge Agreement, or the sale of any
Mortgaged Property (other than the sale of hydrocarbons permitted by the Credit
Agreement and other sales permitted by the Credit Agreement) without the prior
written consent of the Mortgagee shall constitute an Event of Default under this
Mortgage.
5.3 Acceleration and Exercise of Power of Sale.
(a) Upon the occurrence and continuance of an Event of Default specified in
Sections 7.1(f) or 7.1(g) of the Credit Agreement, the aggregate principal
amount of all Indebtedness then outstanding and all interest accrued thereon
shall automatically become immediately due and payable, without presentment,
demand, protest, notice of protest, default or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, or other notice of any
kind, all of which are hereby expressly waived by Mortgagor to the full extent
permitted by applicable law. Upon the occurrence and continuance of any other
Event of Default, Mortgagee may declare the aggregate principal amount of all
Indebtedness then outstanding and all interest accrued thereon immediately due
and payable, whereupon the same shall become immediately due and payable without
presentment, demand, protest, notice of protest, default or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, all of which are hereby expressly waived by Mortgagor to the
full extent permitted by applicable law.
(b) Upon the occurrence and continuance of any Event of Default or at any
time thereafter while the Indebtedness or any part thereof remains unpaid,
Mortgagee may proceed to enforce this Mortgage in accordance with applicable
laws of the State.
5.4 Rights as Secured Party. Upon the occurrence and continuance of any
Event of Default, Mortgagee shall be entitled to all of the rights, powers, and
remedies afforded a secured party by the UCC with respect to the personal
Property, fixtures, and as-extracted collateral in which Mortgagee has been
granted a security interest hereby, or Mortgagee may proceed in accordance with
the provisions hereof as to both the real and personal Property covered hereby.
5.5 Application of Proceeds of Sale. Except as otherwise provided in the
Credit Agreement, the Mortgagee is authorized to receive the proceeds of each
sale of Mortgaged Property and apply the same as follows:
FIRST: to the payment of all necessary costs and expenses incident to the
enforcement of this Mortgage;
SECOND: to any and all Indebtedness then hereby secured, application to be made
in such order and in such manner as Mortgagee may, in its discretion, elect;
THIRD: the balance, if any, to Mortgagor or its successors or assigns.
5.6 Statements by Mortgagee. It is agreed that in any deed or deeds given
by the Mortgagee any and all statements of fact or other recitals therein made
as to the identity of the holder or holders of the Indebtedness, or as to
default in the payments thereof or any part thereof, or as to the breach of any
covenants herein contained, or as to the request to sell, notice
of sale, time, place, terms and manner of sale, and receipt, application, and
distribution of the money realized therefrom, or as to the due and proper
appointment of a substitute Mortgagee, and, without being limited by the
foregoing, as to any other or additional act or thing having been done by
Mortgagee, shall be taken by all courts of law and equity as prima facie
evidence that the statements or recitals state facts and are without further
question to be so accepted. Mortgagor does hereby ratify and confirm any and
all acts that the Mortgagee may lawfully do in the premises by virtue of the
terms and conditions of this Mortgage.
5.7 Suit to Collect and Foreclose. Mortgagee, at its election, may proceed
by suit or suits, at law or in equity, to enforce the payment of the
Indebtedness in accordance with the terms hereof and of the notes, guaranties,
or other documents evidencing it, and to foreclose the Lien of this Mortgage as
against all or any portion of the Mortgaged Property and to have such Property
sold under the judgment or decree of a court of competent jurisdiction.
5.8 Mortgagee as Purchaser. Mortgagee may be a purchaser of all or any
portion of the Mortgaged Property at any sale thereof, whether such sale be
under the power of sale hereinabove vested in the Mortgagee, upon any other
foreclosure of the Lien hereof, or otherwise. Mortgagee so purchasing shall,
upon any such purchase, acquire title to the Mortgaged Property so purchased,
free of the Lien of this Mortgage and free of all rights of redemption in
Mortgagor.
5.9 Entry and Operation. Upon the occurrence and continuance of any Event
of Default, then in each and every such case and in addition to the other rights
and remedies hereunder, the Mortgagee, whether or not the Indebtedness shall
have become due and payable, may, but shall not be obligated to, enter into and
upon and take possession of all or any portion of the Mortgaged Property and may
exclude Mortgagor, its agents and servants wholly therefrom and have, hold, use,
operate, manage, and control all or any portion of the Mortgaged Property and
produce the oil, gas, and other minerals therefrom and market the same, all at
the sole risk and expense of Mortgagor and at the expense of the Mortgaged
Property, applying the net proceeds so derived, first, to the cost of
maintenance and operation of such Mortgaged Property; second, to the payment of
the Indebtedness, application to be made first to interest and then to
principal; and the balance thereof, if any, shall be paid to Mortgagor. Upon
such payment of all such costs and Indebtedness, the Mortgaged Property shall be
returned to Mortgagor in its then condition, and the Mortgagee shall not be
liable to Mortgagor for any damage or injury to the Mortgaged Property except
such as may be caused through the fraud, willful misconduct or gross negligence
of the Mortgagee.
5.10 Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as the agent of Mortgagor to act in the name, place, and stead of
Mortgagor in the exercise of each and every remedy set forth herein and in
conducting any and all operations and taking any and all action reasonably
necessary to do so, recognizing such agency in favor of Mortgagee to be coupled
with the interests of Mortgagee under this Mortgage and, thus, irrevocable so
long as this Mortgage is in force and effect.
5.11 Remedies Cumulative and Non-Exclusive. The rights of entry, sale, or
suit, as hereinabove or hereinafter conferred, are cumulative of all other
rights and remedies herein or by law or in equity provided, and shall not be
deemed to deprive Mortgagee of any
such other legal or equitable rights or remedies, by judicial proceedings or
otherwise, appropriate to enforce the conditions, covenants, and terms of this
Mortgage and the other Loan Documents. The employment of any remedy hereunder
or otherwise shall not prevent the concurrent or subsequent employment of any
other appropriate remedy or remedies.
5.12 Special Provisions Applicable to Mortgaged Property in Wyoming. As to
that portion of the Mortgaged Property located in the State of Wyoming,
Mortgagee shall have the right to proceed pursuant to law to foreclose and sell
the Mortgaged Property either by advertisement and sale as provided in the laws
of the State of Wyoming or by court action, and out of the proceeds of such
sale, Mortgagee shall pay all sums due hereunder, together with all costs of
sale and foreclosure, including, without limitation, reasonable attorneys' fees.
Notwithstanding any other provisions of this Mortgage, the manner of such
foreclosure by advertisement and sale shall be as provided for by Wyoming law.
ARTICLE 6
ASSIGNMENT OF PRODUCTION
6.1 Assignment. In addition to the conveyance to the Mortgagee herein made,
Mortgagor does hereby transfer, assign, deliver and convey unto Mortgagee, its
successors and assigns, all of the oil, gas, and other minerals produced, saved,
or sold from the Mortgaged Property and attributable to the interests of
Mortgagor therein subsequent to 7:00 a.m. on the first day of the month in which
this Mortgage is executed, together with the proceeds of any sale thereof.
Mortgagor hereby directs any purchaser now or hereafter taking any production
from the Mortgaged Property to pay to Mortgagee such proceeds derived from the
sale thereof and to continue to make payments directly to Mortgagee until
notified in writing by Mortgagee to discontinue the same. The purchaser of any
such production shall not be required to see to the application of the proceeds
thereof by Mortgagee, and payment made to Mortgagee shall be binding and
conclusive as between such purchaser and Mortgagor. Mortgagor further agrees to
perform all such acts and to execute all such further assignments, transfer and
division orders, and other instruments as may be required or desired by
Mortgagee or any other party to have such proceeds and revenues so paid to
Mortgagee.
6.2 Postponement of Payment. For its convenience, Mortgagee has elected not
to exercise immediately its right to receive payment to it directly of the
proceeds of any sale of the oil, gas and other minerals produced or sold from
the Mortgaged Property and the purchasers may continue to make such payment or
delivery of the proceeds to Mortgagor until such time as Mortgagor and the
purchasers have received notice that an Event of Default has occurred and is
continuing, and that the purchasers are directed to make payment or delivery of
the proceeds directly to Mortgagee. Such failure by Mortgagee to exercise its
rights immediately shall not in any way waive the right of Mortgagee to receive
any of the proceeds, or to make any such demand, or to affect any such
assignment as to any proceeds not theretofore paid or delivered to Mortgagor.
In this regard, if any of the proceeds are paid or delivered directly to
Mortgagee and then, at the request of Mortgagee, the proceeds are, for a period
or periods of time, paid or delivered to Mortgagor, Mortgagee shall nevertheless
have the right, effective upon written notice, to require that future proceeds
be again paid or delivered directly to it. Mortgagee shall never be required to
send any such notice to all purchasers, and may direct such notice only
to those purchasers as it may, in its discretion, desire. It shall never be
necessary for Mortgagee to institute legal proceedings to enforce the assignment
of hydrocarbons, proceeds, or other rents, profits, or income contained in this
instrument. It shall not be necessary for Mortgagee to obtain possession of the
Mortgaged Property as a prerequisite to Mortgagee's right to collect or receive
any hydrocarbons, other minerals, proceeds, or other rents, profits, or income
assigned to Mortgagee under this instrument. Mortgagor and Mortgagee expressly
agree and it is the express intention of Mortgagor and Mortgagee that in no
event will any reduction in the obligations be measured by the fair market value
of the hydrocarbons, other minerals, proceeds, or other rents, profits, or
income assigned to Mortgagee under this instrument.
6.3 Change of Purchaser. Should any purchaser taking the production from
the Mortgaged Property fail to make prompt payment to Mortgagee in accordance
with the provisions of Section 6.1, Mortgagee shall have the right, at the
expense of Mortgagor, to demand a change of connection and to designate another
purchaser with whom a new connection may be made, without any liability on the
part of Mortgagee in making such selection, so long as ordinary care is used in
the making thereof. Promptly upon such demand, Mortgagor shall take all
necessary and appropriate action to effect such change of connection.
6.4 Application of Proceeds. Mortgagor authorizes and empowers Mortgagee to
receive, hold, and collect all sums of money paid to Mortgagee in accordance
with the provisions of Section 6.1, and to apply the same as hereinafter
provided, all without any liability or responsibility on the part of Mortgagee,
save and except as to good faith in so receiving and applying such sums.
Mortgagee may apply all sums received by Mortgagee pursuant to Section 6.1 to
the payment of the Indebtedness, application to be made in such manner as
Mortgagee may elect, regardless of whether the application so made shall exceed
the payments of principal and interest then due as provided in the Loan
Documents. After such application has been so made by Mortgagee, the balance of
any such sums shall be paid to Mortgagor.
6.5 No Postponement of Installments on Indebtedness. It is understood and
agreed that should such payments provided for by Section 6.1 be less than the
sum or sums then due on the Indebtedness, such sum or sums then due shall
nevertheless be paid by Mortgagor in accordance with the provisions of the Loan
Documents, and neither the assignment made pursuant to Section 6.1 nor any other
provisions hereof shall in any manner be construed to affect the terms and
provisions of the Loan Documents. Likewise, neither the assignment made
pursuant to Section 6.1 nor any other provisions hereof shall in any manner be
construed to affect the Liens, rights, title, and remedies herein granted
securing the Indebtedness or the liability of Mortgagor therefor. The rights
under this Article 6 are cumulative of all other rights, remedies, and powers
granted under this Mortgage and are cumulative of any other security which
Mortgagee now holds or may hereafter hold to secure the payment of the
Indebtedness.
6.6 Turnover to Mortgagee. Should Mortgagor receive any of the proceeds of
any sale of oil, gas, or other minerals produced, saved, or sold from the
Mortgaged Property, which under the terms hereof should have been remitted to
Mortgagee, Mortgagor will immediately remit same in full to Mortgagee.
6.7 Release of Proceeds Upon Payment of Indebtedness. Upon payment in full
of all Indebtedness and the termination of the Commitment, the remainder of such
proceeds
held by Mortgagee, if any, shall be paid over to Mortgagor upon demand, and a
release of the interest hereby assigned will be made, without recourse or
warranty, by Mortgagee to Mortgagor at its request and its expense.
6.8 Duty of Mortgagee. Mortgagee shall not be liable for any failure to
collect, or for any failure to exercise diligence in collecting, any funds
assigned hereunder. Mortgagee shall be accountable only for funds actually
received.
6.9 Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as the agent of Mortgagor to act in the name, place, and stead of
Mortgagor for the purpose of taking any and all actions deemed by Mortgagee
necessary for the realization by Mortgagee of the benefits of the assignment of
production provided herein, recognizing such agency in favor of Mortgagee to be
coupled with the interests of Mortgagee under this Mortgage and, thus,
irrevocable so long as this Mortgage is in force and effect.
ARTICLE 7
MISCELLANEOUS
7.1 Further Assurances. Upon request of Mortgagee, Mortgagor will promptly
correct any defects, errors, or omissions in the execution or acknowledgment of
this Mortgage or any other Loan Document, and execute, acknowledge, and deliver
such other assurances and instruments as shall, in the opinion of Mortgagee, be
reasonably necessary to fulfill the terms of this Mortgage.
7.2 Interest. Any provision in any document that may be executed in
connection herewith to the contrary notwithstanding, Mortgagee shall in no event
be entitled to receive or collect, nor shall any amounts received hereunder be
credited so that Mortgagee shall be paid, as interest a sum greater than that
authorized by law. If any possible construction of this Mortgage or any Loan
Document seems to indicate any possibility of a different power given to
Mortgagee or any authority to ask for, demand, or receive any larger rate of
interest, this clause shall override and control, and proper adjustments shall
be made accordingly.
7.3 Agreement as Entirety. This Mortgage, for convenience only, has been
divided into Articles, Sections, and subsections. The rights, powers,
privileges, duties, and other legal relations of Mortgagor and Mortgagee shall
be determined from this Mortgage as an entirety and without regard to the
aforesaid division into Articles, Sections, and subsections and without regard
to headings affixed to such Articles, Sections, or subsections.
7.4 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural, and the plural
shall likewise be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter when such
construction is appropriate; and specific enumeration shall not exclude the
general, but shall be construed as cumulative.
7.5 Rights and Remedies Cumulative. All rights, powers, immunities,
remedies, and Liens of Mortgagee existing and to exist hereunder or under any
other instruments or at law or in equity and all other or additional security
shall be cumulative and not exclusive,
each of the other. Mortgagee shall, in addition to the rights and remedies
herein expressly provided, be entitled to such other remedies as may now or
hereafter exist at law or in equity for securing and collecting the
Indebtedness, for enforcing the covenants herein, and for foreclosing the Liens
hereof. Resort by Mortgagee to any right or remedy provided for hereunder or at
law or in equity shall not prevent concurrent or subsequent resort to the same
or any other right or remedy. No security heretofore, herewith, or subsequently
taken by Mortgagee shall in any manner impair or affect the security given by
this Mortgage or any security by endorsement or otherwise presently or
previously given; and all security shall be taken, considered, and held as
cumulative.
7.6 Parties in Interest. This Mortgage shall be binding upon the parties
and their respective heirs, administrators, legal representatives, successors,
and assigns and shall inure to the benefit of the Mortgagee and its legal
representatives, successors, and assigns. The terms used to designate any of
the parties herein shall be deemed to include the heirs, administrators, legal
representatives, successors, and assigns of such parties.
7.7 Supplements. Without in any manner limiting the effect of Section 1.4
or any other provisions of this Mortgage as to the binding effect of this
Mortgage on after-acquired rights of Mortgagor, it is contemplated by the
parties hereto that from time to time additional interests and properties may or
will be added to the interests and properties subject to the Liens, rights,
titles, and interests created by this Mortgage by means of supplemental
indentures identifying this Mortgage and describing such interests and
properties to be so added and included. Upon the execution of any such
supplemental indenture, the Liens, rights, titles, and interests created herein
shall immediately attach to and be effective with respect to any such interests
and properties so described, the same as if such interests and properties had
been specifically described herein, and such interests and properties being
included in the term "Mortgaged Property," as used herein.
7.8 Invalidity. In the event that any one or more of the provisions
contained in this Mortgage shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Mortgage or any other Loan
Document.
7.9 Construction. All titles or headings to Articles, Sections,
subsections, or other divisions of this Mortgage or the exhibits hereto are only
for the convenience of the parties and shall not be construed to have any effect
or meaning with respect to the other content of such Articles, Sections,
subsections, or other divisions, such other content being controlling as to the
agreement among the parties hereto. Article, Section, subsection, and Exhibit
references herein are to such Articles, Sections, subsections, and Exhibits of
this Mortgage unless otherwise specified. The words "hereby," "herein,"
"hereinabove," "hereinafter," "herein- below," "hereof," and "hereunder" when
used in this Mortgage shall refer to this Mortgage as a whole and not to any
particular Article, Section, subsection, or provision of this Mortgage.
7.10 Fixtures, Minerals and Accounts. Without in any manner limiting the
generality of any of the foregoing hereof, some portions of the personal
Property described hereinabove are or are to become fixtures on the Lands. In
addition, the security interest created
hereby under applicable provisions of the UCC attaches to minerals, including
oil and gas, and accounts resulting from the sale thereof, at the wellhead or
minehead located on the Lands.
7.11 Financing Statement Filings. This Mortgage may be filed as provided in
Article 9 of the UCC to assure that the security interests granted by this
Mortgage are perfected. In this connection, this Mortgage will be presented to
a filing officer under the UCC to be filed in the real estate records of each
jurisdiction where any part of the Mortgaged Property is situated as a Financing
Statement covering as-extracted collateral (including, without limitation,
minerals and the like extracted and to be extracted, as well as all accounts and
general intangibles resulting from the sale thereof at the wellhead or minehead)
and goods that are or are to become fixtures. Mortgagor, as lessee or fee
owner, has an interest of record in the real property described in Exhibit A.
Further, Mortgagor authorizes Mortgagee to execute and file at any time and from
time to time any initial Financing Statements and amendments thereto in any UCC
jurisdiction, pursuant to Article 9 of the UCC, as Mortgagee deems necessary in
its sole discretion, in conjunction with this Mortgage, and Mortgagor expressly
authorizes execution and filing of such Financing Statements by Mortgagee
without need of signature or execution by Mortgagor.
7.12 Addresses. For purposes of filing this Mortgage as a financing
statement, the addresses for Mortgagor, as the debtor, and Mortgagee, as the
secured party, are as set forth hereinabove.
7.13 Counterparts. For the convenience of the parties, this Mortgage may be
executed in multiple counterparts, each of which for all purposes shall be
deemed, and may be enforced from time to time as, a chattel mortgage, real
estate mortgage, security agreement, assignment or contract, or as one or more
thereof. For recording purposes, various counterparts have been executed, and
there may be attached to each such counterpart an Exhibit A containing only the
description of the Mortgaged Property, or portions thereof, which relates to the
county or state in which the particular counterpart is to be recorded. A
complete, original counterpart of this Mortgage with a complete Exhibit A may be
obtained from Mortgagee. Each of the counterparts hereof so executed shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
7.14 No Waiver by Mortgagee. No course of dealing on the part of Mortgagee,
its officers or employees, nor any failure or delay by Mortgagee with respect to
exercising any of its rights or remedies hereunder shall operate as a waiver
thereof nor shall the exercise or partial exercise of any such right or remedy
shall preclude the exercise of any other right or remedy.
7.15 Governing Agreement. This Mortgage is made pursuant and subject to the
terms and provisions of the Credit Agreement. In the event of a conflict
between the terms and provisions of this Mortgage and those of the Credit
Agreement, the terms and provisions of the Credit Agreement shall govern and
control. The inclusion in this Mortgage of provisions not addressed in the
Credit Agreement shall not be deemed a conflict, and all such additional
provisions contained herein shall be given full force and effect.
IN WITNESS WHEREOF, this Mortgage is executed on November 18, 2010, but to be
effective as of November 19, 2010 immediately following the acquisition by
Mortgagor of the Mortgaged Property.
MORTGAGOR/DEBTOR:
CEP-M PURCHASE, LLC
By: Current Energy Partners Corporation,
its Manager
By: \s\ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Chief Executive Officer
THE STATE OF TEXAS S
S
COUNTY OF XXXXXX S
The foregoing instrument was acknowledged before me on this 18th day of
November, 2010, by Xxxxx X. Xxxx, as Chief Executive Officer of Current Energy
Partners Corporation, the Manager of CEP-M PURCHASE, LLC, a Delaware limited
liability company, on behalf of such corporation, as the Manager of such limited
liability company.
Witness my hand and official seal.
__________________________________________
Notary Public in and for the State of Texas
My commission expires:_____________________