Exhibit 10.28
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AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
FROM
CALPINE CORPORATION,
a Delaware corporation
(Taxpayer I.D. No. 77-0212977),
Trustor and Mortgagor
TO
DENIS O'MEARA, Trustee
AND
JAMES TRIMBLE, Trustee
AND
THE BANK OF NEW YORK,
not in its individual capacity but solely as Collateral Trustee,
(Taxpayer I.D. No. 13-5160382)
as Beneficiary
Dated as of July 16, 2003
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"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."
"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
"THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE AS-EXTRACTED COLLATERAL
(INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE ACCOUNTS RELATING THERETO,
WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS."
"MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH IS
DESCRIBED IN EXHIBIT A HERETO."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO AND THIS
FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS."
"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 MORTGAGOR UNDER THIS MORTGAGE."
THIS INSTRUMENT WAS PREPARED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:
Kevin L. Shaw, Esq.
Mayer, Brown, Rowe & Maw LLP
700 Louisiana Street
Suite 3600
Houston, Texas 77002
AMENDED AND RESTATED
MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
THIS AMENDED AND RESTATED MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (this "MORTGAGE"), dated as of
July 16, 2003, is made by CALPINE CORPORATION, a Delaware corporation
("MORTGAGOR"), whose address is 50 West San Fernando Street, San Jose, CA 95113,
to DENIS O'MEARA and JAMES TRIMBLE (whether one or more, collectively called
"TRUSTEE"), and THE BANK OF NEW YORK, a New York banking corporation, not in its
individual capacity but solely as Collateral Trustee under the Collateral Trust
Agreement dated July 16, 2003 (the "COLLATERAL TRUST AGREEMENT") among
Mortgagor, Beneficiary, the 2007 Trustee, the 2010 Trustee, the 2013 Trustee,
Credit Agreement Agent and Term Loan Administrative Agent ("BENEFICIARY"), whose
address is 101 Barclay Street, New York, New York 10286. References to this
"Mortgage" shall mean this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations, substitutions, spreaders,
restatements and replacements of this instrument.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed thereto in the Collateral Trust Agreement.
ARTICLE I. RECITALS AND DEFINITIONS
1.1 Mortgagor has heretofore executed and delivered to The Bank of Nova
Scotia, for itself and as agent for the Lender Parties (together with its
successors in such capacity, the "CREDIT AGREEMENT AGENT") and John Quick (as
predecessor-in-interest to Denis O'Meara) and Kemp Leonard (as
predecessor-in-interest to James Trimble), as Trustees, that certain mortgage or
deed of trust, dated as of May 1, 2002, as supplemented and amended prior to the
date hereof (as so supplemented and amended, herein called the "EXISTING
MORTGAGE"), to secure (i) payment of indebtedness owed or to be owing to certain
institutional lenders (the "EXISTING 2002 LENDERS") pursuant to the terms of
that certain Credit Agreement, dated as of March 8, 2002 (herein, as the same
may be amended, modified or supplemented from time to time, called the "EXISTING
2002 CREDIT AGREEMENT") pursuant to which the Existing 2002 Lenders made loans
to Mortgagor and issued letters of credit for the benefit of Mortgagor (the
"EXISTING 2002 LETTERS OF CREDIT") in amounts not to exceed at any one time
outstanding $1,600,000,000, and Mortgagor, to evidence its indebtedness to the
Existing 2002 Lenders under the Existing 2002 Credit Agreement, has executed and
delivered to the Existing 2002 Lenders its secured promissory notes to mature
not later than May 24, 2003 (the "EXISTING 2002 LOAN NOTES"), the Existing 2002
Loan Notes being payable to the order of the Existing 2002 Lenders, bearing
interest as provided for therein, and containing provisions for payment of
attorneys' fees and acceleration of maturity in the event of default, as therein
set forth; and (ii) payment of indebtedness owed or to be owing to certain
institutional lenders (the "EXISTING 2000 LENDERS", and together with the
Existing 2002 Lenders, the "EXISTING LENDERS") pursuant to the terms of that
certain Second Amended and Restated Credit Agreement dated as of May 23, 2000
(herein, as the same may be amended, modified, or supplemented from time to
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time, called the "EXISTING 2000 CREDIT AGREEMENT" and together with the Existing
2002 Credit Agreement, collectively, the "EXISTING CREDIT AGREEMENTS") pursuant
to which the Existing 2000 Lenders made loans to Mortgagor and issued letters of
credit for the benefit of Mortgagor (the "EXISTING 2000 LETTERS OF CREDIT") in
amounts not to exceed at any one time outstanding $400,000,000, and Mortgagor,
to evidence its indebtedness to the Existing 2000 Lenders under the Existing
2000 Credit Agreement, has executed and delivered to the Existing 2000 Lenders
its secured promissory notes to mature not later than May 24, 2003 (the
"EXISTING 2000 LOAN NOTES") (the Existing 2000 Loan Notes, together with the
Existing 2002 Loan Notes, collectively, the "EXISTING LOAN NOTES"), the Existing
2000 Loan Notes being payable to the order of the Existing 2000 Lenders, bearing
interest as provided for therein, and containing provisions for payment of
attorney's fees and acceleration of maturity in the event of default, as therein
set forth.
1.2 The Existing Mortgage, together with other mortgages and deeds of
trust (a) have been filed and recorded, among other places, as set forth in
Schedule I hereto; (b) have been supplemented and amended by various instruments
that have been filed and recorded, among other places, as set forth in Schedule
II hereto; and (c) have been amended and certain items of property mortgaged
thereby have been released by various instruments that have been filed and
recorded, among other places, as set forth in Schedule III hereto.
1.3 Mortgagor, the Existing Lenders and the Credit Agreement Agent are (i)
terminating the commitments under the Existing 2000 Credit Agreement, and (ii)
amending and restating the Existing 2002 Credit Agreement (as so amended and
restated, and as the same may, from time to time hereafter, be amended,
supplemented, modified or amended and restated, the "AMENDED AND RESTATED CREDIT
AGREEMENT".
1.4 Mortgagor is also (a) issuing $500,000,000 in aggregate principal
amount of Second Priority Senior Floating Rate Secured Notes due 2007 (the "2007
NOTES") pursuant to the Indenture dated as of July 16, 2003 (the "2007
INDENTURE") between Mortgagor and Wilmington Trust Company, as Trustee (together
with its successors in such capacity, the "2007 TRUSTEE"), (b) issuing
$1,150,000,000 in aggregate principal amount of 8.5% Second Priority Senior
Secured Fixed Rate Notes due 2010 (the "2010 NOTES") pursuant to the Indenture
dated as of July 16, 2003 (the "2010 INDENTURE") between Mortgagor and
Wilmington Trust Company, as Trustee (together with its successors in such
capacity, the "2010 TRUSTEE"), (c) issuing $900,000,000 in aggregate principal
amount of 8.75% Second Priority Senior Secured Fixed Rate Notes due 2013 (the
"2013 NOTES") pursuant to the Indenture dated as of July 16, 2003 (the "2013
INDENTURE") between Mortgagor and Wilmington Trust Company, as Trustee (together
with its successors in such capacity, the "2013 TRUSTEE"), and (d) borrowing
$750,000,000 in Term Loans (the "TERM LOANS") pursuant to a Term Loan Agreement
dated as of July 16, 2003 (the "TERM LOAN AGREEMENT") between Mortgagor and
Goldman Sachs Credit Partners L.P., as Administrative Agent (together with its
successors in such capacity, the "TERM LOAN ADMINISTRATIVE AGENT"). The proceeds
from the issuance of the 2007 Notes, the 2010 Notes and the 2013 Notes and the
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borrowing of the Term Loans will be used to refinance a portion of the loans and
other indebtedness outstanding under the Existing Credit Agreements.
1.5 As permitted pursuant to the Secured Debt Documents, Mortgagor may
incur future debt which could, together with the obligations under the Amended
and Restated Credit Agreement, constitute Priority Lien Debt and Mortgagor may
incur future debt which could, together with the 2007 Notes, 2010 Notes, the
2013 Notes and the Term Loans, constitute Parity Lien Debt, provided that the
aggregate amount of the Secured Debt to be secured hereby shall not exceed
$4,200,000,000. Mortgagor intends to secure the Indebtedness, including its
obligations (a) under the Amended and Restated Credit Agreement and any future
Priority Lien Debt, equally and ratably, on a priority basis, and, (b) subject
to such priority, under the 2007 Notes, 2010 Notes, 2013 Notes and Term Loans
and any future Parity Lien Debt, equally and ratably, with liens and security
interests in, among other collateral, the Mortgaged Property under the Existing
Mortgage, as contemplated in the Collateral Trust Agreement.
1.6 Pursuant to the Collateral Trust Agreement and that certain Assignment
of Liens of even date herewith, the Credit Agreement Agent has assigned to
Beneficiary, all of the Credit Agreement Agent's right, title and interest in
and to, and its interest as beneficiary under, the Existing Mortgage. This
Mortgage amends and restates the Existing Mortgage. The Collateral Trust
Agreement sets forth the terms on which the Collateral Trustee, as trustee for
the present and future holders of the Indebtedness, will receive, hold,
maintain, administer, maintain, enforce and distribute this Mortgage and all
interests, rights, powers and remedies of the Collateral Trustee thereunder and
the proceeds thereof.
1.7 For all purposes of this Mortgage, unless the context otherwise
requires:
A. "Actionable Default" is defined in the Collateral Trust
Agreement.
B. "Affiliate" of any Person means any other Person which,
directly or indirectly, controls, is controlled by or is under common
control with such Person (excluding any trustee under, or any committee
with responsibility for administering, any Plan (as defined under ERISA)).
A Person shall be deemed to be "controlled by" any other Person if such
other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
C. "Applicable Law" means with respect to any Person or
matter, any federal, state, regional, tribal or local statute, law, code,
rule, treaty, convention, application, order, decree, consent decree,
injunction, directive,
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determination or other requirement (whether or not having the force of
law) relating to such Person or matter and, where applicable, any
interpretation thereof by a Governmental Authority having jurisdiction
with respect thereto or charged with the administration or interpretation
thereof.
D. "Default Interest Rate" means the lesser of (a) ten percent
(10%), and (b) the Maximum Lawful Rate.
E. "Event of Default" means an Actionable Default.
F. "Environmental Laws" means any and all present and future
Applicable Laws issued, promulgated or entered thereunder relating to
pollution or protection of the environment, including laws relating to
reclamation of land and waterways and laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
G. "Governmental Authority" means any and all courts, boards,
agencies, commissions, offices or authorities of any nature whatsoever for
any governmental unit (federal, state, county, district, municipal, city,
tribe or otherwise) whether now or hereafter in existence charged with the
administration, interpretation or enforcement of any Applicable Law.
H. "Hedging Agreements" means: (a) interest rate swap
agreements, basis swap agreements, interest rate cap agreements, forward
rate agreements, interest rate floor agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or currency exchange
rates, and (b) forward contracts, options, futures contracts, futures
options, commodity swaps, commodity options, commodity collars, commodity
caps, commodity floors and all other agreements or arrangements designed
to protect such Person against fluctuations in the price of commodities.
I. "Hedging Obligations" means with respect to any Person, all
liabilities (including without limitation obligations and liabilities
arising in connection with or as a result of early or premature
termination of a Hedging Agreement, whether or not occurring as a result
of a default thereunder) of such Person under a Hedging Agreement.
J. "Hydrocarbons" means collectively, oil, gas, casinghead
gas, drip gasoline, natural gasoline, condensate, distillate and all other
liquid or gaseous hydrocarbons and related minerals and all products
therefrom, in each case whether in a natural or a processed state.
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K. "Indebtedness" shall have the meaning set forth in Section
2.2 of this Mortgage.
L. "Indemnification Claim" is defined in Section 4.6(a) of
this Mortgage.
M. "Indemnified Person" is defined in Section 3.10(c) of this
Mortgage.
N. "Joint Operating Agreements" shall mean, with respect to
the lands described in Exhibit A, the respective operating agreement
burdening the lands described in Exhibit A.
O. "lands described in Exhibit A" shall include the real
property or other interest in any lands which are either described in
Exhibit A attached hereto or the description of which is incorporated in
Exhibit A by reference to an instrument or document containing in, or
referring to, such a description, and shall also include any lands now or
hereafter unitized or pooled with lands which are either described in
Exhibit A or the description of which is incorporated in Exhibit A by
reference and Fixtures and all rights, titles and interests appurtenant
thereto. References to Exhibit A shall include, where applicable, Exhibit
A-1 as well.
P. "Leases" means any and all leases (including without
limitation oil and gas leases and oil, gas and other minerals leases),
surface leases or easements, subleases, licenses, concessions, operating
rights or other agreements (written or verbal, now or hereafter in effect)
which grant a possessory interest in and to, or the right to explore, use,
lease, license, possess, produce, process, store and transport
Hydrocarbons from, operate from, or otherwise enjoy, the Mortgaged
Property, together with all amendments, modifications, extensions and
renewals thereof.
Q. "Legal Requirements" means (i) any and all present and
future judicial decisions, statutes, rulings, rules, regulations,
licenses, decisions, orders, injunctions, decrees, permits, certificates
or ordinances of any Governmental Authority in any way applicable to
Mortgagor, or the Mortgaged Property, including the ownership, use,
occupancy, operation, maintenance, repair or reconstruction thereof, and
any other Applicable Law enacted by any Governmental Authority relating to
health or the environment, (ii) Mortgagor's presently or subsequently
effective Organic Documents, (iii) any and all Leases, (iv) any and all
leases and other contracts (written or oral) of any nature to which
Mortgagor, or the Mortgaged Property may be bound and (v) any and all
restrictions, restrictive covenants or zoning, present and future, as the
same may apply to the Mortgaged Property.
R. "Losses" is defined in Section 3.10(c) of this Mortgage.
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S. "Maximum Lawful Rate" means the maximum nonusurious rate of
interest that may be received, charged or contracted for under Applicable
Law from time to time in effect.
T. "Mortgaged Property" means the properties, rights and
interests hereinafter described in Section 1.8 and defined as the
Mortgaged Property.
U. "Obligations" means any and all of the covenants,
warranties, representations and other obligations (other than to repay the
Indebtedness) made or undertaken by Mortgagor or others under any of the
Secured Debt Documents.
V. "oil and gas leases" shall include oil, gas and mineral
leases, subleases and assignments thereof, operating rights, and shall
also include subleases and assignments of operating rights.
W. "Operating Equipment" means all surface or subsurface
machinery, goods, equipment, fixtures, inventory, facilities, supplies or
other property of whatsoever kind or nature (excluding drilling rigs,
trucks, automotive equipment or other property taken to the premises to
drill a well or for other similar temporary uses) now or hereafter located
on or under any of the lands described in Exhibit A which are useful for
the production, gathering, treatment, processing, storage or
transportation of Hydrocarbons (together with all accessions, additions
and attachments to any thereof), including, but not by way of limitation,
all oil wells, gas wells, water wells, injection wells, casing, tubing,
tubular goods, rods, pumping units and engines, christmas trees,
platforms, derricks, separators, compressors, gun barrels, flow lines,
tanks, gas systems (for gathering, treating and compression), pipelines
(including gathering lines, laterals and trunklines), chemicals,
solutions, water systems (for treating, disposal and injection), steam
generation and injection equipment and systems, power plants, poles,
lines, transformers, starters and controllers, supervisory control and
data acquisition systems, machine shops, tools, storage yards and
equipment stored therein, buildings and camps, telegraph, telephone and
other communication systems, roads, loading docks, loading racks and
shipping facilities.
X. "Organic Documents" means the Articles of Incorporation,
Certificate of Incorporation, limited liability company certificate of
formation and regulations or operating agreement, partnership agreement,
limited partnership agreement, joint venture agreement, trust agreement or
other similar documents governing the organization and operation of a
business association.
Y. "Parity Lien Debt" is defined in the Collateral Trust
Agreement.
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Z. "Parity Lien Documents" is defined in the Collateral Trust
Agreement.
AA. "Parity Lien Obligations" means any and all of the
covenants, warranties, representations and other obligations (other than
to repay the Indebtedness) made or undertaken by Mortgagor or others under
any of the Parity Lien Documents.
BB. "Permits" means all authorizations, approvals, permits,
variances, land use entitlements, consents, licenses, franchises and
agreements issued by or entered into with any Governmental Authority now
or hereafter required for all stages of exploration, developing,
operating, and plugging and abandoning oil and gas wells (including,
without limitation, those shown on Exhibit A) on all or any part of the
lands described in Exhibit A (or any other lands any production from
which, or profits or proceeds from such production, is attributed to any
interest in the lands described in Exhibit A).
CC. "Permitted Encumbrances" means the outstanding liens,
easements, restrictions, exceptions, reservations, conditions,
limitations, security interests and other matters as permitted by and
defined in the Secured Debt Documents.
DD. "Person" means any natural person, corporation,
partnership, limited liability company, firm, association, trust,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
EE. "Personalty" means all of the right, title and interest of
Mortgagor now owned or hereafter acquired in and to all furniture,
furnishings, Equipment, machinery, Goods, General Intangibles, money,
Accounts, receivables, Contract Rights, Inventory, all refundable,
returnable or reimbursable fees, deposits or other funds or evidences of
credit or indebtedness deposited by or on behalf of Mortgagor with any
Governmental Authority, agencies, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits, commitment fees and development costs, and all other personal
property (other than the Fixtures) of any kind or character as defined in
and subject to the provisions of Article 9 of the Uniform Commercial Code,
now or hereafter located upon, within or about, or used in connection
with, the lands described in Exhibit A together with all accessories,
replacements and substitutions thereto or therefor and the Proceeds
thereof.
FF. "Priority Lien Debt" is defined in the Collateral Trust
Agreement.
GG. "Priority Lien Documents" is defined in the Collateral
Trust Agreement.
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HH. "Priority Lien Obligations" means any and all of the
covenants, warranties, representations and other obligations (other than
to repay the Indebtedness) made or undertaken by Mortgagor or others under
any of the Priority Lien Documents.
II. "Production Sale Contracts" means contracts now in effect,
or hereafter entered into by Mortgagor, or entered into by Mortgagor's
predecessors in interest, for the sale, purchase, exchange, gathering,
transportation, treating or processing of Hydrocarbons produced from the
lands described in Exhibit A.
JJ. "Rents and Revenues" means all of the rents, revenues,
income, proceeds, profits and other benefits paid or payable by parties to
the Leases other than Mortgagor for using, leasing, licensing, possessing,
operating, selling or otherwise enjoying the Mortgaged Property, including
the proceeds from the sale of Hydrocarbons.
KK. "Secured Debt" is defined in the Collateral Trust
Agreement.
LL. "Secured Debtholder" is defined in the Collateral Trust
Agreement.
MM. "Secured Debt Documents" is defined in the Collateral
Trust Agreement.
NN. "Secured Debt Representative" is defined in the Collateral
Trust Agreement.
OO. "Taxes" means all real property and personal property
taxes, production taxes, assessments, permit fees, water, gas, sewer,
electricity and other utility rates and charges, charges for any easement,
license or agreement maintained for the benefit of the Mortgaged Property,
and all other taxes, charges and assessments and any interest, costs or
penalties with respect thereto, of any kind and nature whatsoever which at
any time prior to or after the execution hereof may be charged, assessed,
levied or imposed upon the Mortgaged Property or the Rents and Revenues or
the ownership, use, occupancy or enjoyment thereof.
PP. "Transportation Agreements" shall mean any contracts or
agreements entered into from time to time by Mortgagor, or entered into by
Mortgagor's predecessors in interest, relating to the transportation of
Hydrocarbons, as any such agreement or contract may be amended,
supplemented, restated or otherwise modified from time to time.
QQ. "Uniform Commercial Code" means the Uniform Commercial
Code as in effect from time to time in the State of New York or any other
applicable state, and the terms "Accounts," "Account Debtor, "As Extracted
Collateral," "Chattel Paper," "Contract Rights," "Deposit Accounts,"
"Documents,"
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"Electronic Chattel Paper," "General Intangibles," "Goods," "Equipment,"
"Fixtures," "Inventory," "Instruments," and "Proceeds" shall have the
respective meanings assigned to such terms in the Uniform Commercial Code.
RR. "Water Rights" means (including without limitation those
described in Exhibit A hereto) all now or hereafter existing or acquired
water and water rights, reservoirs and reservoir rights, ditches and ditch
rights, wells and well rights, whether evidenced or initiated by permit,
decree, well registration, appropriation not decreed, water court
application, shares of stock or other interests in mutual ditch or
reservoir companies or carrier ditch or reservoir companies or otherwise,
appertaining or appurtenant to or beneficially used or useful in
connection with the lands described in Exhibit A, together with all pumps,
well casings, wellheads, electrical installations, pumphouses, meters,
monitoring wells and systems, measuring devices, pipes, pipelines, and
other structures or personal property which are or may be used to produce,
regulate, measure, distribute, store, or use water from the said water and
water rights, reservoirs and reservoir rights, ditches and ditch rights,
wells and well rights.
1.8 Grant.
Grant of Priority Lien
NOW, THEREFORE, Mortgagor, to secure the full and timely payment of the Priority
Lien Indebtedness and the full and timely performance and discharge of the
Priority Lien Obligations, has granted, bargained, sold, warranted, mortgaged,
assigned, transferred and conveyed, and by these presents does grant, bargain,
sell, warrant, mortgage, assign, pledge and hypothecate, transfer and convey
unto Trustee, IN TRUST, WITH POWER OF SALE, for the use and benefit of
Beneficiary, all Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in and to all of the hereinafter described properties,
rights and interests; and, insofar as such properties, rights and interests
consist of Equipment, General Intangibles, Accounts, As Extracted Collateral,
Contract Rights, Inventory, Fixtures, Proceeds of collateral or any other
personal property of a kind or character defined in, or subject to the
applicable provisions of, the Uniform Commercial Code (as in effect from time to
time in the appropriate jurisdiction with respect to each of said properties,
rights and interests), Mortgagor hereby grants to said Beneficiary, a security
interest therein to the full extent of Mortgagor's legal and beneficial interest
therein, now owned or hereafter acquired, namely:
(a) the lands described in Exhibit A, and Leases, the fee, mineral,
overriding royalty, royalty and other interests which are described in
Exhibit A,
(b) the presently existing and (subject to the terms of Section 6.1
hereof) hereafter arising unitization, unit operating, communitization and
pooling agreements and the properties covered and the units created
thereby (including, without limitation, all units formed under orders,
regulations, rules, approvals, decisions or other official acts of any
Governmental Authority) which are
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specifically described in Exhibit A or which relate to any of the
properties and interests specifically described in Exhibit A,
(c) the Hydrocarbons which are in, under, upon, produced or to be
produced from or which are attributed or allocated to the lands described
in Exhibit A,
(d) the Production Sale Contracts,
(e) the Joint Operating Agreements,
(f) the Transportation Agreements,
(g) the Operating Equipment,
(h) the Permits,
(i) the Water Rights,
(j) the Hedging Agreements,
(k) the Leases,
(l) the Personalty,
(m) the Rents and Revenues,
(n) without duplication of any other provision of this granting
clause, Equipment, Fixtures and other Goods necessary or used in
connection with, and Inventory, Accounts, As Extracted Collateral, General
Intangibles, Contract Rights, Chattel Paper, Deposit Accounts, Documents,
Electronic Chattel Paper, Instruments and Proceeds arising from, or
relating to, the properties and other interests described in Exhibit A
(including Exhibit A-1),
(o) any and all liens and security interests in Hydrocarbons
securing the payment of proceeds from the sale of Hydrocarbons, including
but not limited to those liens and security interests provided for in
Section 9.343 of the Texas Business and Commerce Code or similar statutes
of other jurisdictions or any successor statutes,
together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, or replacements or substitutions for, any of the same, or
any instrument relating thereto, and all accounts, contracts, contract rights,
options, nominee agreements, unitization or pooling agreements, operating
agreements and unit operating agreements, processing agreements, farmin
agreements, farmout agreements, joint venture agreements, partnership agreements
(including mining partnerships), exploration agreements, bottom hole agreements,
dry hole agreements, support agreements, acreage contribution agreements,
surface use and surface
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damage agreements, net profits agreements, production payment agreements,
Hedging Agreements, insurance policies, title opinions, title abstracts, title
materials and information, files, records, writings, data bases, information,
systems, logs, well cores, fluid samples, production data and reports, well
testing data and reports, maps, seismic and geophysical, geological and chemical
data and information, interpretative and analytical reports of any kind or
nature (including, without limitation, reserve studies and reserve evaluations),
computer hardware and software and all documentation therefor or relating
thereto (including, without limitation, all licenses relating to or covering
such computer hardware, software and/or documentation), trade secrets,
trademarks, service marks and business names and the goodwill of the business
relating thereto, copyrights, copyright registrations, unpatented inventions,
patent applications and patents, rights-of-way, franchises, bonds, easements,
servitudes, surface leases, permits, licenses, tenements, hereditaments,
appurtenances, concessions, occupancy agreements, privileges, development
rights, condemnation awards, claims against third parties, general intangibles,
rents, royalties, issues, profits, products and proceeds, whether now or
hereafter existing or arising, used or useful in connection with, covering,
relating to, or arising from or in connection with, any of the aforesaid items
(a) through o), inclusive, in this granting clause mentioned, and all other
things of value and incident thereto (including, without limitation, any and all
liens, lien rights, security interests and other properties, rights and
interests) which Mortgagor might at any time have or be entitled to, but
excluding any data or contracts with respect to which mortgaging or granting of
a lien or a security interest is prohibited by existing third party agreements,
all the aforesaid properties, rights and interests, together with any additions
thereto which may be subjected to the lien and security interest of this
Mortgage by means of supplements hereto, being hereinafter, collectively, called
the "Mortgaged Property."
Grant of Parity Lien
NOW, THEREFORE, Mortgagor, to secure the full and timely payment of the
Parity Lien Indebtedness and the full and timely performance and discharge of
the Parity Lien Obligations, has granted, bargained, sold, warranted, mortgaged,
assigned, transferred and conveyed, and by these presents does grant, bargain,
sell, warrant, mortgage, assign, pledge and hypothecate, transfer and convey
unto Trustee, IN TRUST, WITH POWER OF SALE, for the use and benefit of
Beneficiary, all Mortgagor's right, title and interest, whether now owned or
hereafter acquired, in and to all of the Mortgaged Property.
Subject, however, in each case to (i) Permitted Encumbrances (including
without limitation all presently existing royalties, overriding royalties,
payments out of production and other burdens which are referred to in Exhibit A
and which are taken into consideration in computing any percentage, decimal or
fractional interest as set forth in Exhibit A), (ii) the assignment of
production contained in Article IV hereof, but only insofar and so long as said
assignment of production is not inoperative under the provisions of Section 4.5
hereof, and (iii) the condition that none of Trustee, Beneficiary nor any
Secured Debtholder shall be liable in any respect for the performance of any
covenant or obligation (including, without limitation, measures required to
comply with Environmental Laws) of Mortgagor in respect of the Mortgaged
Property.
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TO HAVE AND TO HOLD the Mortgaged Property for the benefit of Beneficiary,
and forever to secure the payment of the Indebtedness and to secure the
performance and discharge of the Obligations of Mortgagor herein and therein
contained.
As set forth in the separate granting clauses above, it is the intent of
Mortgagor that such grants shall create two separate and distinct security
interests in all right, title and interest of Mortgagor in the Mortgaged
Property in favor of (a) the Trustee for the benefit of the Beneficiary, for the
benefit of the holders of the Priority Lien Debt, and (b) the Trustee for the
benefit of the Beneficiary, for the benefit of the holders of the Parity Lien
Debt.
Notwithstanding (i) anything to the contrary contained in this Mortgage or
any other document, filing or agreement related to the creation, attachment,
perfection or existence of the liens and security interests granted herein, (ii)
the time, place, order or method of attachment or perfection of such liens or
security interests, (iii) the time or order of filing or recording of financing
statements or other documents filed or recorded to perfect such security
interests, and (iv) the rules for determining priority under any law governing
the relative priorities of secured creditors, the lien securing the Parity Lien
Indebtedness is subordinated and junior in priority to the lien securing the
Priority Lien Indebtedness.
Mortgagor, in consideration of the Secured Debt as set forth above, hereby
covenants and agrees with each of Trustee and Beneficiary:
ARTICLE II. INDEBTEDNESS SECURED
2.1 Items of Indebtedness Secured. The following items of indebtedness are
secured hereby:
(a) The Priority Lien Debt (including future advances to be made
with respect thereto), and all other Obligations of Mortgagor under the
Priority Lien Documents;
(b) The Parity Lien Debt (including future advances to be made with
respect thereto), and all other Obligations of Mortgagor under the Parity
Lien Documents;
(c) All Obligations under any other Priority Lien Debt or Parity
Lien Debt;
(d) Any sums advanced or expenses or costs incurred by Trustee,
Beneficiary or any Secured Debtholder, or by any receiver appointed
hereunder, which are made or incurred pursuant to, or permitted by, the
terms hereof, plus interest thereon at the rate herein specified or
otherwise agreed upon, from the date of the advances or the incurring of
such expenses or costs until reimbursed;
(e) Any and all other indebtedness of Mortgagor or any Affiliate of
Mortgagor to Beneficiary now or hereafter owing, whether direct or
indirect, primary or secondary, fixed or contingent, joint or several,
regardless of how
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evidenced or arising, where the indebtedness provides that it is secured
hereby; and
(f) Any extensions, refinancings, modifications or renewals of all
such indebtedness described in subparagraphs (a) through (e) above,
whether or not Mortgagor executes any extension agreement or renewal
instrument.
2.2 Indebtedness Defined. All the above items of indebtedness described in
subparagraphs (a) of Section 2.1 and subparagraphs (c) through (f) of Section
2.1 hereof in respect of the Priority Lien Debt, are hereinafter collectively
referred to as the "Priority Lien Indebtedness." And all the above items of
indebtedness described in subparagraphs (b) of Section 2.1 and subparagraphs (c)
through (f) of Section 2.1 hereof in respect of the Parity Lien Debt, are
hereinafter collectively referred to as the "Parity Lien Indebtedness"; the
Priority Lien Indebtedness and the Parity Lien Indebtedness are collectively
referred to as the "Indebtedness".
2.3 Valid and Subsisting First Lien. Mortgagor hereby acknowledges and
agrees that, except as otherwise provided by the Secured Debt Documents, the
Existing Mortgage constitutes a valid and subsisting first lien on the portion
of the Mortgaged Property encumbered thereby, and that none of the rights and
liens existing thereunder shall be impaired or released hereby, and that the
same as amended and restated hereby shall remain in full force and effect, and
all rights and liens existing and to exist thereunder are renewed, extended,
carried forward, and conveyed to secure all of the Indebtedness hereinabove
mentioned.
2.4 Amended and Restated Mortgage. The Existing Mortgage is amended and
restated in full hereby in order to, among other things, secure all of the
Indebtedness herein described or referred to as if reference to such
Indebtedness were fully described in the Existing Mortgage. None of the rights,
titles, and interests, existing or to exist under the Existing Mortgage are
hereby released, diminished or impaired.
2.5 No Impairment or Discharge of Liens. It is the express intention of
all parties hereto that the Secured Debtholders are subrogated to all of the
rights, powers, and equities of the original lenders and beneficiary under the
Existing Mortgage, that the liens created hereby shall relate back to and be
effective as of the effective date of the Existing Mortgage and that nothing
contained herein shall be construed to impair or discharge the liens and
security interests created thereby.
ARTICLE III. PARTICULAR COVENANTS, REPRESENTATIONS
AND WARRANTIES OF MORTGAGOR
3.1 Payment of the Indebtedness and Performance of Obligations. Mortgagor
will duly and punctually pay the Indebtedness, as and when called for in the
Secured Debt Documents and on or before the due dates thereof, and will timely
perform and discharge all of the Obligations in full and on or before the dates
same are to be performed and discharged.
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3.2 Certain Representations and Warranties. Mortgagor represents and
warrants (and with respect to those matters set forth in the following
subsections (b) and (f), as to those portions of the Mortgaged Property that are
operated by persons other than Mortgagor or a Subsidiary of Mortgagor, Mortgagor
makes such representation and warranty to the best of its knowledge) that
(a) the oil and gas leases described in Exhibit A hereto are valid,
subsisting leases, superior and paramount to all other oil and gas leases
respecting the properties to which they pertain,
(b) all producing wells located on the lands described in Exhibit A
(including Exhibit A-1) have been drilled, operated and produced in
conformity with all Applicable Laws of all Governmental Authorities having
jurisdiction, and are subject to no penalties on account of past
production, and such wells are in fact bottomed under and are producing
from, and the well bores are wholly within, the lands described in Exhibit
A or lands pooled or unitized therewith,
(c) Mortgagor, to the extent of the interest specified in Exhibit A
(including Exhibit A-1), has valid and indefeasible title to each property
right or interest constituting the Mortgaged Property described in Exhibit
A (including Exhibit A-1) and has a good and legal right to grant and
convey the same to Trustee; such interest entitles Mortgagor to receive
not less than the share of Hydrocarbons from such property indicated as
its net revenue interest or "NRI" share of such Hydrocarbons, and
obligates Mortgagor to pay for not more than the share of operating and
other costs, liabilities and expenses associated with such property
indicated as its working interest or "Wl" share of such costs, liabilities
and expenses,
(d) Excepting the Permitted Encumbrances, the Mortgaged Property is
free from all encumbrances or liens whatsoever,
(e) Mortgagor is not obligated, by virtue of any prepayment under
any contract providing for the sale by Mortgagor of Hydrocarbons which
contains a "take or pay" clause or under any similar arrangement, to
deliver Hydrocarbons at some future time without then or thereafter
receiving full payment therefor,
(f) the Mortgaged Property is currently being operated, maintained
and developed, in all material respects, in accordance with all applicable
currently existing Permits, Legal Requirements and all Applicable Laws
(including, without limitation, Environmental Laws),
(g) the cover page to this Mortgage lists the correct legal name of
Mortgagor and Mortgagor has not been known by any legal name different
from the one set forth on the cover page of this Mortgage,
(h) the execution, delivery, and performance by Mortgagor of this
Mortgage (i) are within Mortgagor's corporate powers and have been duly
authorized by Mortgagor's Board of Directors, shareholders and all other
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requisite corporate action, (ii) have received all (if any) requisite
prior governmental approval and consent in order to be legally binding and
enforceable in accordance with the terms thereof, and (iii) will not
violate, be in conflict with, result in a breach or constitute (with due
notice or lapse of time, or both) a default under, any Legal Requirement
or result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of Mortgagor's property or assets,
except as contemplated by the provisions of the Secured Debt Documents,
and
(i) except as permitted by the Secured Debt Documents, there are no
actions, suits or proceedings pending, or to the knowledge of Mortgagor
threatened, against or affecting Mortgagor or the Mortgaged Property that
could materially adversely affect Mortgagor or the Mortgaged Property, or
involving the validity or enforceability of this Mortgage or the priority
of the liens and security interests created by the Secured Debt Documents,
and no event has occurred (including specifically Mortgagor's execution of
this Mortgage which will violate, be in conflict with, result in the
breach of, or constitute (with due notice or lapse of time, or both) a
material default under, any Legal Requirement or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of Mortgagor's property other than the liens and security
interests created by the Secured Debt Documents.
3.3 Further Assurances. Mortgagor will warrant and forever defend the
Mortgaged Property unto Trustee and Beneficiary as the case may be, against
every person whomsoever lawfully claiming the same or any part thereof, subject
to Permitted Encumbrances, and Mortgagor will maintain and preserve the lien and
security interest hereby created so long as any of the Indebtedness remains
unpaid. Mortgagor will execute and deliver such other and further instruments
and will do such other and further acts as may be required pursuant to the
Collateral Trust Agreement and/or any Secured Debt Documents to carry out more
effectually the purposes of this Mortgage, including, without limiting the
generality of the foregoing, (i) prompt correction of any defect which may
hereafter be discovered in the title to the Mortgaged Property or in the
execution and acknowledgment of this Mortgage, the Secured Debt Documents, or,
immediately upon the occurrence of an Event of Default, any other document
executed in connection herewith, and (ii) at any time a Secured Debt
Representative may request and upon such request, promptly execute all notices
to parties operating, purchasing or receiving proceeds of production of
Hydrocarbons from the Mortgaged Property, and all division orders or transfer
orders needed in order to transfer effectually or to assist in transferring
effectually to the Beneficiary the assigned proceeds of production from the
Mortgaged Property, which notices, division orders and transfer orders shall be
held by such Secured Debt Representative and delivered upon an Event of Default.
3.4 Operation of the Mortgaged Property. So long as the Indebtedness or
any part thereof remains unpaid, and whether or not Mortgagor is the operator of
any particular part of the Mortgaged Property, Mortgagor shall, at Mortgagor's
own expense:
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(a) Do all things necessary to keep unimpaired Mortgagor's rights in
the Mortgaged Property and not abandon any well or forfeit, surrender or
release any Lease, except that Mortgagor may, in the ordinary course of
business, (i) plug and abandon any well no longer capable of producing
Hydrocarbons in paying quantities, (ii) surrender or release any Lease or
a portion thereof so long as no well capable of producing Hydrocarbons in
paying quantities is located on such Lease or a portion thereof or
production from any such well is attributed to such Lease or a portion
thereof, (iii) surrender or release any Lease or a portion thereof on
which no producing well has ever been drilled or which has never been held
by production from another well unless Proven Reserves (as defined in any
Secured Debt Document) are attributed to such Lease or a portion thereof
and (iv) abandon, forfeit, surrender or release any other portion of the
Mortgaged Property to the extent permitted under the then existing Secured
Debt Documents;
(b) Obtain and maintain all required Permits and cause the lands
described in Exhibit A to be maintained, developed, protected against
drainage, and operated for the production of Hydrocarbons in a good and
workmanlike manner as would a prudent operator, and consistent with
industry practices, Joint Operating Agreements, and all Applicable Laws,
excepting those being contested in good faith; and plug and abandon wells
no longer capable of producing Hydrocarbons in paying quantities in
accordance with all Applicable Laws, Legal Requirements and the terms and
conditions of applicable Leases; and remediate the lands described in
Exhibit A and facilities located thereon in accordance with all Applicable
Laws, Legal Requirements and the terms and conditions of applicable
Leases;
(c) Duly pay and discharge, or cause to be paid and discharged,
promptly as and when due and payable, all rentals and royalties (including
shut-in royalties) payable in respect of the Mortgaged Property (other
than rentals under Leases that are surrendered pursuant to the foregoing
Section 3.4(a)), and all expenses incurred in or arising from the
operation or development of the Mortgaged Property not later than the due
date thereof, or the day any fine, penalty, interest or cost may be added
thereto or imposed, or the day any lien may be filed, for the non-payment
thereof (if such day is used to determine the due date of the respective
item) except as to such matters which are being contested by Mortgagor in
good faith;
(d) Cause the Operating Equipment to be kept in good and effective
operating condition, ordinary wear and tear excepted, and all repairs,
renewals, replacements, additions and improvements thereof or thereto,
needful to the production of Hydrocarbons from the lands described in
Exhibit A, to be promptly made;
(e) Not, except as permitted under the Secured Debt Documents,
create, place or permit to be created or placed, or through any act or
failure to act, acquiesce in the placing of, or allow to remain, any
mortgage, pledge, lien
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(statutory, constitutional or contractual), security interest, encumbrance
or charge, or conditional sale or other title retention agreement,
regardless of whether same are expressly subordinate to the liens of the
Secured Debt Documents, with, respect to all or any portion of the
Mortgaged Property, the Leases or the Rents and Revenues other than (1)
the Permitted Encumbrances, (2) Taxes constituting a lien but not due and
payable, (3) defects or irregularities in title, and liens, charges or
encumbrances, which are customarily viewed in the industry as not
interfering materially with the development, operation or value of the
Mortgaged Property and not such as to affect materially title thereto, and
(4) those being contested by Mortgagor in good faith in such manner as not
to jeopardize Beneficiary's rights in and to the Mortgaged Property;
(f) Carry with financially sound and reputable insurance companies
and in amounts as is customary in the industry or as otherwise required
pursuant to the Secured Debt Documents, the following insurance: (1)
workmen's compensation insurance and public liability and property damage
insurance in respect of all activities in which Mortgagor might incur
personal liability for the death of or injury to an employee or third
person, or damage to or destruction of another's property; and (2) to the
extent such insurance is carried by similar companies engaged in similar
undertakings in, the same general areas in which the Mortgaged Property,
is located, insurance in respect of the Operating Equipment, against loss
or damage by fire, lightning, hail, tornado, explosion and other similar
risks, hazards, casualties and contingencies (including business
interruption insurance covering loss of Rents and Revenues); provided,
that any such insurance may be -------- provided by way of self insurance
to the extent that similar companies engaged in similar undertakings in
the same general areas also self-insure. Each insurance policy issued in
connection therewith shall provide by way of endorsements, riders or
otherwise that (i) name Beneficiary as a loss payee on all property
insurance policies and an additional insured on all liability insurance
policies, and provide that proceeds from property insurance policies will
be payable to Beneficiary as its interest may appear, which proceeds are
hereby assigned to Beneficiary, it being agreed by Mortgagor that such
payments shall be applied A) if there be no Event of Default existing or
which would exist but for due notice or lapse of time, or both, to the
restoration, repair or replacement of the Mortgaged Property, or B) if
there be an Event of Default existing, or which would exist but for due
notice or lapse of time, or both, in accordance with the provisions of the
Collateral Trust Agreement, either for the above stated purpose or toward
the payment of the Indebtedness; (ii) the coverage of Beneficiary shall
not be terminated, reduced or affected in any manner regardless of any
breach or violation by Mortgagor of any warranties, declarations or
conditions in such policy; (iii) no such insurance policy shall be
canceled, endorsed, altered or reissued to effect a change in coverage for
any reason and to any extent whatsoever unless such insurer shall have
first given Beneficiary and each Secured Debt Representative thirty (30)
days prior written notice thereof; and (iv) Beneficiary may, but shall not
be obligated to, make premium payments to prevent any cancellation,
endorsement, alteration or re-issuance and such payments shall be accepted
by the insurer to prevent the
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same. Beneficiary shall be furnished with a certificate evidencing such
coverage in form and content comparable to coverage typically provided in
the industry. All policies to be maintained under this Mortgage are to be
issued on forms and by companies and with endorsements as are customary in
the industry. Mortgagor shall maintain insurance in an amount sufficient
to prevent Mortgagor from becoming a co-insurer under any policy required
hereunder. If Mortgagor fails to maintain the level of insurance required
under this Mortgage, then Mortgagor shall and hereby agrees to indemnify
Beneficiary to the extent that a casualty occurs and insurance proceeds
would have been available had such insurance been maintained;
(g) Furnish to Beneficiary and each Secured Debt Representative, as
soon as possible and in any event within five (5) days after the
occurrence from time to time of any change in the address of Mortgagor's
location (as described on the signature page hereto) or in the name of
Mortgagor, notice in writing of such change;
(h) Not initiate or acquiesce in any change in any material zoning
or other land use or Water Rights classification now or hereafter in
effect and affecting the Mortgaged Property or any part thereof;
(i) Notify Beneficiary and each Secured Debt Representative in
writing, as soon as possible and in any event within five (5) days after
it shall become aware of the occurrence of any Event of Default or any
event which, with notice, the passage of time or both would be such an
Event of Default;
(j) Appear and defend, and hold Beneficiary and any Secured
Debtholder harmless from, any action, proceeding or claim affecting the
Mortgaged Property or the rights and powers of Beneficiary or Secured
Debtholders under the Secured Debt Documents, and all costs and expenses
incurred by Beneficiary or any Secured Debtholder in protecting its
interests hereunder in such an event (including all court costs and
attorneys' fees) shall be borne by Mortgagor;
(k) Subject to Mortgagor's right to contest the same, promptly pay
all Taxes legally imposed upon this instrument or upon the Mortgaged
Property or upon the income and profits thereof, or upon the interest of
Beneficiary therein; provided that Mortgagor shall not be liable for taxes
accruing after a transfer of the Mortgaged Property following a
foreclosure;
(l) Comply with, conform to and obey, in all material respects, all
present and future Legal Requirements and not use, maintain, operate,
occupy, or allow the use, maintenance, operation or occupancy of, the
Mortgaged Property in any manner which (a) violates any present and future
Legal Requirement, (b) may be dangerous unless safeguarded as required by
Applicable Law, (c) constitutes a public or private nuisance or (d) makes
void,
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voidable or cancelable, or increases the premium of, any insurance then in
force with respect thereto; and
(m) Not, except as authorized under the Secured Debt Documents,
permit any of the Fixtures or Personalty to be removed at any time from
the lands described in Exhibit A unless (i) the removed item is removed
temporarily for maintenance and repair, (ii) if removed permanently, is
replaced by an article of equal suitability and value, owned by Mortgagor,
free and clear of any lien or security interest or (iii) such Fixtures or
Personalty are removed in connection with the plugging and abandoning of
wells, or abandonment of other facilities, in each case as permitted by
this Mortgage.
3.5 Performance of Leases. Mortgagor will: (a) duly and punctually perform
and comply with any and all representations, warranties, covenants and
agreements expressed as binding upon it under each of the Leases; (b) subject to
the exceptions provided for in Section 3.4(a), not voluntarily terminate, cancel
or waive its rights or the obligations of any other party under any of the
Leases; (c) subject to the exceptions provided for in Section 3.4(a), use all
reasonable efforts to maintain each of the Leases in force and effect during the
full term thereof, and (d) appear in and defend (or cause its operator to appear
in and defend) any action or proceeding arising under or in any manner connected
with any of the Leases or the representations, warranties, covenants and
agreements of it or the other party or parties thereto.
3.6 Recording, etc. Mortgagor will promptly, and at Mortgagor's expense,
record, register, deposit and file this 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 and security
interest hereof as a first lien on and prior perfected security interest in real
or personal property, as the case may be, and the rights and remedies of
Beneficiary and Secured Debt Representatives, and otherwise will do and observe
all things or matters necessary or expedient to be done or observed by reason of
any Applicable Law, for the purpose of effectively creating, maintaining and
preserving the lien and security interest hereof on and in the Mortgaged
Property.
3.7 Sale or Mortgage of the Mortgaged Property. Except (a) as set forth in
Section 6.1 of this Mortgage; (b) for sales of severed Hydrocarbons in the
ordinary course of Mortgagor's business; (c) for sales of or dispositions of
surplus, obsolete or worn inventory or equipment; (d) for the lien and security
interest created by this Mortgage, (e) for Permitted Encumbrances, and (f) for
sales, exchanges or other dispositions of Mortgaged Property permitted under the
Secured Debt Documents governing Priority Lien Debt and permitted under the
Secured Debt Documents governing Parity Lien Debt, Mortgagor will not sell,
convey, mortgage, pledge, hypothecate, pool, unitize or otherwise dispose of or
encumber the Mortgaged Property nor any portion thereof, nor any of Mortgagor's
right, title or interest therein, and Mortgagor will not enter into any
arrangement with any gas pipeline company or other consumer of Hydrocarbons
regarding the Mortgaged Property whereby said gas
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pipeline company or consumer may set off any claim against Mortgagor by
withholding payment for any Hydrocarbons actually delivered.
3.8 Records, Statements and Reports. Mortgagor will keep proper books of
record and account in which complete and correct entries will be made of
Mortgagor's transactions in accordance with generally accepted accounting
principles and will furnish or cause to be furnished to each Secured Debt
Representative such information concerning the business, affairs and financial
condition of Mortgagor as required under the Secured Debt Documents. Without
limiting the generality of the foregoing, Mortgagor shall furnish to Beneficiary
and each Secured Debt Representative, but not more than every six (6) months:
(a) reports prepared by a reputable national independent petroleum engineer
regularly engaged by Mortgagor for such purposes or other engineering firm
acceptable to the Credit Agreement Agent concerning (1) the quantity of
Hydrocarbons recoverable from the Mortgaged Property, (2) the projected income
and expense attributable to the Mortgaged Property, and (3) the expediency of
any change in methods of treatment or operation of all or any wells productive
of Hydrocarbons, any new drilling or development, any method of secondary
recovery by repressuring or otherwise, or any other action with respect to the
Mortgaged Property, the decision as to which may increase or reduce the quantity
of Hydrocarbons ultimately recoverable or the rate of production thereof, and
(b) reports for the prior period showing the gross proceeds from the sale of
Hydrocarbons produced from the lands described in Exhibit A (including any
thereof taken by Mortgagor for Mortgagor's own use), the quantity of such
Hydrocarbons sold, the severance, gross production, occupation, or gathering
taxes deducted from or paid out of such proceeds and the number of wells
operated, drilled or abandoned.
3.9 Right of Entry.
(a) Upon at least twenty-four (24) hours notice to Mortgagor,
Mortgagor will permit Beneficiary, each Secured Debt Representative and/or
the agents of either of them, at the cost and expense of Mortgagor, to
enter upon the Mortgaged Property and all parts thereof, for the purpose
of investigating and inspecting the condition and operation thereof, and
shall permit reasonable access to the field offices and other offices (to
the fullest extent that Mortgagor may do so under the terms of the
applicable Joint Operating Agreements and other applicable agreements
affecting the Mortgaged Property), including the principal place of
business, of Mortgagor to inspect and examine the Mortgaged Property and
to inspect, review and reproduce as necessary any books, records,
accounts, contracts or other documents of Mortgagor.
(b) Without limiting the generality of the foregoing, Beneficiary
shall have the right (but shall not be obligated to), and each Secured
Debt Representative and its agents shall have the right (to the fullest
extent that Mortgagor may do so under the terms of the applicable Joint
Operating Agreements and other applicable agreements affecting the
Mortgaged Property), on twenty-four (24) hours prior notice to Mortgagor
to enter the Mortgaged Property to conduct (at the cost and expense of
Mortgagor), or to cause
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Mortgagor to conduct (at the cost and expense of Mortgagor), such tests
and investigations as may be necessary to determine whether any hazardous
materials or solid waste is being generated, transported, stored, or
disposed of in accordance with applicable Environmental Laws. Such tests
and investigations may include, without limitation, underground borings,
ground water analyses and borings from the floors, ceilings and walls of
any improvements located on the Mortgaged Property. This Section 3.9 shall
not be construed to affect or limit the obligations of Mortgagor pursuant
to Section 3.4 hereof.
(c) Neither Beneficiary nor any Secured Debt Representative shall
have any duty to visit or observe the Mortgaged Property, or to conduct
tests, and no site visit, observation or testing by any such person (or
its agents and independent contractors) shall impose any liability on any
such person nor shall Mortgagor or any other obligor be entitled to rely
on any such visit, observation or testing in any respect. Beneficiary or a
Secured Debt Representative may, but shall not be obligated to, disclose
to Mortgagor or, subject to the relevant confidentiality provisions of the
Secured Debt Documents then in effect, any other Person, including any
Governmental Authority, any report or finding made as a result of, or in
connection with, any site visit, observation or testing. Mortgagor agrees
that neither Beneficiary nor any Secured Debt Representative makes any
warranty or representation to Mortgagor or any other obligor regarding the
truth, accuracy or completeness of any such report or findings that may be
so disclosed. Mortgagor also acknowledges that, depending upon the results
of any site visit, observation or testing disclosed to Mortgagor,
Mortgagor may have a legal obligation to notify one or more Governmental
Authorities of such results, that such reporting requirements are
site-specific, and are to be evaluated by Mortgagor without advice or
assistance from Beneficiary or any Secured Debt Representative.
3.10 Environmental Laws.
(a) Mortgagor represents and warrants, to the best of its knowledge
after due inquiry that:
(i) except as permitted by the Secured Debt Documents, the
Mortgaged Property is in compliance in all material respects with
all applicable Environmental Laws and there are no conditions
existing currently which would be likely to subject Mortgagor to
damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws or assertions thereof, or which require or are
likely to require cleanup, removal, remedial action or other
response pursuant to Environmental Laws by Mortgagor; and all use,
generation, manufacturing, release, discharge, storage, deposit,
treatment, recycling or disposal of any materials on, under or at
the Mortgaged Property or transported to or from the Mortgaged
Property (or tanks or other facilities thereon containing such
materials) are being and will be conducted in accordance in all
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material respects with applicable Environmental Laws including
without limitation those requiring cleanup, removal or any other
remedial action,
(ii) Mortgagor is not a party to any litigation or
administrative proceedings, nor so far as is known by Mortgagor is
any litigation or administrative proceeding threatened against it,
which asserts or alleges that Mortgagor has violated or is violating
Environmental Laws or that Mortgagor is required to clean up, remove
or take remedial or other responsive action due to the disposal,
depositing, discharge, leaking or other release of any hazardous
substances or materials; neither the Mortgaged Property nor
Mortgagor is subject to any judgment, decree, order or citation
related to or arising out of Environmental Laws and neither has been
named or listed as a potentially responsible party by any
Governmental Authority in a matter arising under any Environmental
Laws; and
(iii) Mortgagor has also obtained all Permits required under
applicable Environmental Laws which are necessary for its current
exploration, production, transportation, storage, use, and
development activities at the Mortgaged Property.
(b) Mortgagor shall not use or permit the Mortgaged Property or any
part thereof to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, transfer, produce or process any hazardous
materials, except in material compliance with all applicable Environmental
Laws, nor shall Mortgagor cause or permit, as a result of any intentional
or unintentional act or omission on the part of Mortgagor or any tenant or
subtenant, any material release of any hazardous materials onto the
Mortgaged Property or onto any other property in material violation of any
applicable Environmental Laws. Mortgagor shall comply, in all material
respects, with all applicable Environmental Laws and shall obtain and
comply, in all material respects, with any and all registrations or
Permits required thereunder. To the extent any hazardous materials are
released or discharged onto the Mortgaged Property on or after the date of
this Mortgage, Mortgagor shall conduct and complete all investigations,
studies, sampling, and testing, and all remedial, removal, and other
actions necessary to clean up and remove all such hazardous materials on,
from, or affecting the Mortgaged Property or any part thereof (i) in
accordance, in all material respects, with all applicable Environmental
Laws; and (ii) in accordance, in all material respects, with the orders
and directives of all Governmental Authorities having jurisdiction over
the Mortgaged Property. Mortgagor shall promptly notify Beneficiary and
each Secured Debt Representative of its receipt of any notice of a
violation of any Environmental Laws.
(c) Regardless of whether any site assessments are conducted
pursuant to this Mortgage, and without limiting the liability of Mortgagor
for the breach of any warranty, representation or covenant contained
herein or in any Secured Debt Document, and notwithstanding any limitation
of liability contained
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in the Secured Debt Documents, Mortgagor hereby agrees to unconditionally
and absolutely defend, indemnify and hold harmless Beneficiary, Secured
Debtholders, Trustee and their respective employees, affiliates, agents
and attorneys, under the Mortgage and any successors or substitute trustee
under the Mortgage (any person to be indemnified being herein called the
"Indemnified Person"), from and against, and be responsible for, any and
all liabilities (including strict liability), actions, demands, penalties,
fines, taxes, assessments, losses (including, without limitation,
diminution in the value of the Mortgaged Property), costs and expenses
(including, without limitation, attorneys', paralegals', accountants' and
other experts' and consultants' fees and expenses, and remedial costs,
including, without limitation, costs of monitoring), suits, damages,
including, without limitation, punitive damages and foreseeable and
unforeseeable consequential damages, costs of any settlement or judgment
and claims (including, without limitation, third-party claims for personal
injury or real or personal property damage) of any and every kind
whatsoever (hereinafter, collectively, called the "Losses"), which may now
or in the future (whether before or after the release, or other
termination of the Mortgage and the other Secured Debt Documents) be paid,
imposed upon, incurred or suffered by or asserted or awarded against any
of the Indemnified Persons or the Mortgaged Property by any person or
entity or Governmental Authority for, with respect to, arising out of, or
as a direct or indirect result of, any one or more of the following: (i)
the presence or suspected presence, release or suspected release of any
hazardous materials at, upon, under, within, above, from, by or in
connection with the Mortgaged Property or any portion thereof, or
elsewhere in connection with the transportation of hazardous materials to
or from the Mortgaged Property (including, without limitation, in the air,
soil, groundwater or surface water), or the escape, seepage, leakage,
spillage, discharge, emission or release from the Mortgaged Property of
any hazardous materials; (ii) any violations of any Environmental Laws at,
upon, under, within, from, by or in connection with the Mortgaged
Property; (iii) the environmental condition of the Mortgaged Property;
(iv) the imposition by any Governmental Authority of any lien or so-called
"super priority lien" upon the Mortgaged Property as a result of the
presence or release of hazardous materials, or any violation of any
Environmental Laws, at, upon, under, within, from, by or connection with
the Mortgaged Property; (v) obligations to remediate hazardous materials
contamination, or to remediate any condition which constitutes a violation
of any Environmental Laws; (vi) any site assessments of the Mortgaged
Property; (vii) liability for personal injury or property damage or damage
to the environment or fines, penalties and punitive damages, resulting
from the presence or release of hazardous materials or any violations of
any Environmental Laws, at, upon, under, within, from, by or in connection
with the Mortgaged Property; and (viii) any environmental matter described
in this Mortgage, including, without limitation, matters arising out of
any breach of the covenants, representations and warranties set forth
herein in each instance described in (i) through (viii) hereof regardless
of whether any such Losses arise out of or result from any breach of the
covenants, representations and warranties pertaining to environmental
matters set forth in this Mortgage or
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the other Secured Debt Documents, and regardless of whether or not caused
by or within the control of Mortgagor or any Indemnified Person; or
whether any such matters arise before, during or after any foreclosure of
the Mortgage or other taking of title to all or any portion of the
Mortgaged Property or the enforcement of any other remedies under the
Secured Debt Documents (if any such event occurs). WITHOUT LIMITATION, THE
FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
LOSSES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE OR THE STRICT LIABILITY OF ANY SUCH
INDEMNIFIED PERSON, BUT NOT THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ANY SUCH INDEMNIFIED PERSON.
(d) Notwithstanding the foregoing or any contrary provision hereof,
Mortgagor's indemnification obligations set forth in this Section 3.10
shall not extend to any such Losses which are attributable solely to
contamination by hazardous materials first introduced to the Mortgaged
Property after a foreclosure of this Mortgage or other taking of title to
the Mortgaged Property by any of Indemnified Persons.
(e) The indemnification provided in this Section 3.10 shall
specifically apply to and include claims or actions brought by or on
behalf of tenants or employees of Mortgagor. Mortgagor hereby expressly
waives (with respect to any claims of any Indemnified Person arising under
this Section 3.10) any immunity to which Mortgagor may otherwise be
entitled under any industrial or worker's compensation laws.
(f) In the event any of the Indemnified Persons shall suffer or
incur any such Losses, Mortgagor shall pay to such Indemnified Persons the
total of all such Losses suffered or incurred within ten (10) days after
demand therefore.
(g) Mortgagor agrees that the representations, covenants, warranties
and indemnifications contained in this Mortgage shall survive the release
of the Mortgage, the foreclosure or the taking of a deed in lieu of
foreclosure, other termination of the lien of the Mortgage, or the
exercise by Beneficiary of any other remedies under the Secured Debt
Documents, the discharge of Mortgagor's Obligations under any of the other
Secured Debt Documents, or any transfer of the Mortgaged Property, even if
as a part of such foreclosure, deed in lieu of foreclosure or other
enforcement action, the Indebtedness is satisfied in full.
3.11 Corporate Mortgagor. Mortgagor will continue to be duly qualified to
transact business in each state where the conduct of its business requires it to
be qualified, and will not, unless permitted pursuant to the Secured Debt
Documents, consolidate or merge with any other partnership, company, corporation
or other Person.
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3.12 Taxpayer I.D. Number. The taxpayer identification number of Mortgagor
is 77-0212977. The taxpayer identification number of Beneficiary is 13-5160382.
ARTICLE IV. ASSIGNMENT OF PRODUCTION
4.1 Assignment.
(a) Mortgagor hereby absolutely and irrevocably (a) transfers,
assigns, warrants and conveys, to Beneficiary, effective as of July 1,
2003, at 7:00 A.M., local time, all Hydrocarbons which are thereafter
produced from and which accrue to the Mortgaged Property, and all proceeds
therefrom, and (b) gives to and confers upon Beneficiary the right, power
and authority to collect such Hydrocarbons and proceeds. Subject to the
terms of Section 4.1 (b), all parties producing, purchasing or receiving
any such Hydrocarbons, or having such, or proceeds therefrom, in their
possession for which they or others are accountable to Beneficiary by
virtue of the provisions of this Article IV, are authorized and directed
to treat and regard Beneficiary as the assignee and transferee of
Mortgagor and entitled in Mortgagor's place and stead to receive such
Hydrocarbons and all proceeds therefrom; and said parties and each of them
shall be fully protected in so treating and regarding Beneficiary and
shall be under no obligation to see to the application by Beneficiary of
any such proceeds or payments received by it; provided, however, that,
until Beneficiary or any Secured Debt Representative shall have instructed
such parties that an Event of Default has occurred and to deliver such
Hydrocarbons and all proceeds therefrom directly to Beneficiary, such
parties shall be entitled to deliver such Hydrocarbons and all proceeds
therefrom directly to Mortgagor. So long as no Event of Default shall have
occurred, Mortgagor shall be entitled to receive directly from such
parties, and keep and retain, all such proceeds from the sale of such
Hydrocarbons.
(b) Upon the occurrence of an Event of Default (provided that the
Secured Debt Representative shall not give such instruction and notice
under this Article IV unless such Event of Default shall then be
continuing), any Secured Debt Representative may at any time (and from
time to time) thereafter give notice thereof to any party producing,
purchasing or receiving any such Hydrocarbons, or having such, or proceeds
therefrom, in their possession for which they or others are accountable to
Beneficiary, directing that said Hydrocarbons and products are to be
delivered into pipelines connected with the oil and gas leases, or to the
purchaser thereof, free and clear of all Taxes, and the proceeds from the
sale of such Hydrocarbons paid directly to Beneficiary in accordance with
Section 4.5 of this Mortgage. Said parties producing, purchasing or
receiving any such Hydrocarbons, or having such, or proceeds therefrom, in
their possession for which they or others are accountable to Beneficiary
by virtue of the provisions of this Article IV, shall be fully protected
in relying on any such Secured Debt Representative's determination and
notice of the occurrence of an Event of Default. Mortgagor agrees to
perform all such acts, and to execute all such further assignments,
transfers and division orders,
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and other instruments as may be required pursuant to the Collateral Trust
Agreement or any of the Secured Debt Documents in order to have said
revenues and proceeds so paid to Beneficiary, as and when provided in this
Article IV. With respect to any funds received by Beneficiary, Beneficiary
is fully authorized to (but shall not be obligated to) receive and give
receipt for any such revenues and proceeds that are received by
Beneficiary; to endorse and cash any and all checks and drafts payable to
the order of Mortgagor or Beneficiary for the account of Mortgagor
received from or in connection with said revenues or proceeds and apply
the proceeds thereof in accordance with Section 4.2 hereof, and to execute
transfer and division orders in the name of Mortgagor, or otherwise, with
warranties binding Mortgagor. The assignment of the Hydrocarbons and
proceeds in this Section 4.1 is intended to be an absolute assignment from
Mortgagor to Beneficiary and not merely the passing of a security
interest. Such Hydrocarbons and proceeds are hereby assigned absolutely by
Mortgagor to Beneficiary.
4.2 Application of Proceeds. All payments received by Beneficiary pursuant
to Section 4.1 hereof shall be placed in a cash collateral account to be applied
in accordance with the provisions of the Collateral Trust Agreement.
4.3 No Liability of Beneficiary in Collecting. Beneficiary is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned (and no such failure shall be deemed to be a waiver of any right of
Beneficiary under this Article IV) and from all other responsibility in
connection therewith, except the responsibility to account to Mortgagor for
funds actually received.
4.4 Assignment Not a Restriction on Beneficiary's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of Mortgagor to
make payment of the Indebtedness regardless of whether the proceeds assigned by
this Article IV are sufficient to pay the same, and the rights under this
Article IV shall be in addition to all other security now or hereafter existing
to secure the payment of the Indebtedness.
4.5 Status of Assignment. Notwithstanding the other provisions of this
Article IV and in addition to the other rights hereunder, Beneficiary or any
receiver appointed in judicial proceedings for the enforcement of this Mortgage
shall have the right to receive all of the Hydrocarbons herein assigned and the
proceeds therefrom after the occurrence and during the continuance of any Event
of Default and to apply all of said proceeds as provided in Section 4.2 hereof.
Upon any sale of the Mortgaged Property or any part thereof pursuant to Article
V, the Hydrocarbons thereafter produced from the property so sold, and the
proceeds therefrom, shall be included in such sale and shall pass to the
purchaser free and clear of the assignment contained in this Article IV.
4.6 Indemnification Obligation. The following provisions shall apply to,
and be deemed in each case to modify, each of the provisions of this Mortgage
(except those set forth in Section 3.10 hereof) and the other Secured Debt
Documents (except to the
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extent otherwise expressly provided therein) wherein Mortgagor is obligated to
indemnify each of the Indemnified Persons:
(a) Mortgagor agrees to indemnify Beneficiary, the Secured
Debtholders, Trustee and their respective employees, affiliates, agents
and attorneys, under the Mortgage and any successors or substitute trustee
under the Mortgage, against all legal and administrative proceedings for
which a claim for indemnification may be made by the Indemnified Person
(herein, collectively, called "Indemnification Claims") made against or
incurred by them or any of them as a consequence of the assertion, either
before or after the payment in full of the Indebtedness, that they or any
of them received Hydrocarbons herein assigned or the proceeds thereof
claimed by third persons and Beneficiary, Secured Debtholders, and Trustee
shall have the right to defend against any such Indemnification Claims,
employing attorneys therefor, and unless furnished with reasonable
indemnity, they or any of them shall have the right to pay or compromise
and adjust all such Indemnification Claims. Mortgagor will indemnify and
pay to Beneficiary, Secured Debtholders and Trustee any and all such
amounts as may be paid in respect thereof or as may be successfully
adjudged against such persons. The obligations of Mortgagor as hereinabove
set forth in this Section 4.6 shall survive the release termination,
foreclosure or assignment of this Mortgage or any sale hereunder.
(b) Mortgagor shall pay when due any judgments with respect to an
Indemnification Claim against any of the Indemnified Persons and which are
rendered by a final order or decree of a court of competent jurisdiction
from which no further appeal may be taken or has been taken within the
applicable appeal period. In the event that such payment is not made, any
of the Indemnified Persons at its sole discretion may pay any such
judgments, in whole or in part, and look to Mortgagor for reimbursement
pursuant to this Mortgage, or may proceed to file suit against Mortgagor
to compel such payment.
(c) Any amount which Mortgagor is obligated to pay to or for the
benefit of an Indemnified Person with respect to an Indemnification Claim,
but which is not paid when due, shall bear interest at the applicable rate
set forth under the Secured Debt Documents from the date such amount is
due until such amount is paid.
ARTICLE V. ENFORCEMENT OF THE SECURITY
5.1 Title Examination. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, Beneficiary shall have the right and
power to (but shall not be obligated to) cause to be brought down to date a
title examination and tax histories of the Mortgaged Property, procure title
opinions or title reports or, if necessary, procure new abstracts and tax
histories.
5.2 Environmental Audit. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, Beneficiary shall have the right and
power to
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(but shall not be obligated to) procure an updated or entirely new environmental
audit of the Mortgaged Property including the lands described in Exhibit A,
buildings, soil, ground water and subsurface investigations; have the buildings
inspected by an engineer or other qualified inspector; enter upon the Mortgaged
Property at any time and from time to time to show the Mortgaged Property to
potential purchasers and potential bidders at foreclosure sale; make available
to potential purchasers and potential bidders all information obtained pursuant
to the foregoing and any other information in the possession of Beneficiary
regarding the Mortgaged Property.
5.3 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, Trustee shall have the right and power to sell, to
the extent permitted by Applicable Law, at one or more sales, as an entirety or
in parcels, as they may elect, the real property constituting a part of the
Mortgaged Property, at such place or places and otherwise in such manner and
upon such notice as may be required by Applicable Law, or, in the absence of any
such requirement, as Trustee may deem appropriate, and to make conveyance to the
purchaser or purchasers; and Mortgagor shall warrant title to such real property
to such purchaser or purchasers. Trustee may postpone the sale of all or any
portion of such real property by public announcement at the time and place of
such sale, and from time to time thereafter may further postpone such sale by
public announcement made at the time of sale fixed by the preceding
postponement. The right of sale hereunder shall not be exhausted by one or any
sale, and Trustee may make other and successive sales until all of the trust
estate be legally sold. With respect to that portion, if any, of the Mortgaged
Property situated in the State of Wyoming, this Mortgage may be foreclosed by
advertisement and sale as provided by applicable Wyoming statutes. With respect
to that portion, if any, of the Mortgaged Property situated in the State of
Oklahoma, the Beneficiary shall have the right and power to (but shall not be
obligated to) declare the Indebtedness secured hereby due and payable and to
sell, or direct Trustee to sell, the "real estate," as such term is defined
under the provisions of 46 O.S. Supp. 1986, Section 42, constituting a part of
the Mortgaged Property, all under the terms of 46 O.S. Supp. 1986, Section 40 et
seq., and shall, to the extent permitted by Applicable Law, have the other
rights conferred on Trustee under the provisions of this Mortgage.
5.4 Rights of Beneficiary with Respect to Personal Property Constituting a
Part of the Mortgaged Property. Upon the occurrence of an Event of Default and
if such Event of Default shall be continuing, Beneficiary will have all rights
and remedies granted by Applicable Law, and particularly by the Uniform
Commercial Code, including, but not limited to, the right to take possession of
all personal property constituting a part of the Mortgaged Property, and for
this purpose Beneficiary may enter upon any premises on which any or all of such
personal property is situated and take possession of and operate such personal
property (or any portion thereof) or remove it therefrom. Beneficiary may
require Mortgagor to assemble such personal property and make it available to
Beneficiary at a place to be designated by Beneficiary which is reasonably
convenient to all parties. Unless such personal property is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Beneficiary will give Mortgagor reasonable notice of the time
and place of any public
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sale or of the time after which any private sale or other disposition of such
personal property is to be made. This requirement of sending reasonable notice
will be met if the notice is mailed by first-class mail, postage prepaid, to
Mortgagor at the address shown below the signatures at the end of this Mortgage
at least five (5) days before the time of the sale or disposition.
5.5 Rights with Respect to Fixtures Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, Beneficiary may elect to treat the fixtures
constituting a part of the Mortgaged Property as either real property collateral
or personal property collateral and then proceed to exercise such rights as
apply to such type of collateral.
5.6 Judicial Proceedings. Upon the occurrence of an Event of Default and
if such Event of Default shall be continuing, Trustee, in lieu of or in addition
to exercising any power of sale hereinabove given, may proceed by a suit or
suits in equity or at law, whether for a foreclosure hereunder for each or upon
credit in one or more parcels or portions under executory or ordinary process,
at Beneficiary's sole option, without appraisement (appraisement being expressly
waived), 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. Mortgagor
hereby acknowledges the Indebtedness secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon in the full amount of the
Indebtedness in favor of Beneficiary and any future holder or holders of Secured
Debt if such obligations are not paid at maturity.
5.7 Possession of the Mortgaged Property. It shall not be necessary for
Trustee or Beneficiary to have physically present or constructively in their
possession at any sale held by Trustee or Beneficiary or by any court, receiver
or public officer any or all of the Mortgaged Property; and Mortgagor shall
deliver to the purchasers at such sale on the date of sale the Mortgaged
Property purchased by such purchasers at such sale, and if it should be
impossible or impracticable for any of such purchasers to take actual delivery
of the Mortgaged Property, then the title and right of possession to the
Mortgaged Property shall pass to such purchaser at such sale as completely as if
the same had been actually present and delivered.
5.8 Certain Aspects of a Sale. Beneficiary shall have the right to (but
shall not be obligated to) become the purchaser at any sale held by Trustee,
Beneficiary or by any court, receiver or public officer, and Beneficiary shall
have the right to (but shall not be obligated to) credit upon the amount of the
bid made therefor the amount payable out of the net proceeds of such sale to it
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, and the interest accrued on, Secured
Debt after the same have become due and payable, advertisement and
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conduct of such sale in the manner provided herein or appointment of any
successor Trustee hereunder.
5.9 Receipt to Purchaser. Upon any sale, whether made under the power of
sale herein granted and conferred or by virtue of judicial proceedings, the
receipt of Trustee, Beneficiary or of the officer making 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 Trustee, Beneficiary, or of such
officer therefor, be obliged to see to the application of such purchase money,
or be in anywise answerable for any loss, misapplication or nonapplication
thereof.
5.10 Effect of Sale. Any sale or sales of the Mortgaged Property, whether
under the power of sale herein granted and conferred or by virtue of judicial
proceedings, 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 or assigns, and against
any and all persons claiming or who shall thereafter claim all or any of the
property sold from, through or under Mortgagor or Mortgagor's successors or
assigns. Nevertheless, Mortgagor, shall join in the execution and delivery of
all proper conveyances, assignments and transfers of the properties so sold.
5.11 Application of Proceeds. The proceeds of any sale of, and the Rents
and Revenues and other amounts generated by the holding, leasing, operation or
other use of, the Mortgaged Property shall be applied in accordance with the
provisions of the Collateral Trust Agreement.
5.12 Mortgagor's Waiver of Appraisement, Marshalling and Other Rights.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any appraisement, valuation, 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
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, for Mortgagor and all who may claim through or
under Mortgagor, so far as Mortgagor or those claiming through or under
Mortgagor now or hereafter lawfully may, hereby waives the benefit of all such
laws; provided, however, that appraisement of any of the Mortgaged Property
located in the State of Oklahoma is hereby expressly waived or not, at the
option of Beneficiary, such option to be exercised prior to or at the time the
judgment is rendered in any foreclosure hereof. Mortgagor, for Mortgagor and all
who may claim through or under Mortgagor, waives, to the extent that Mortgagor
may lawfully do so, any and all right to have the Mortgaged Property marshalled
upon any foreclosure of the lien hereof, or sold in inverse order of alienation,
and agrees that Trustee, Beneficiary or any court having jurisdiction to
foreclose such lien may sell the Mortgaged Property as an entirety.
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Mortgagor, for Mortgagor and all who may claim through or under Mortgagor,
further waives, to the full extent that Mortgagor may lawfully do so, any
requirement for posting a receiver's bond or replevin bond or other similar type
of bond if Trustee or Beneficiary commence an action for appointment of a
receiver or an action for replevin to recover possession of any of the Mortgaged
Property. If any law in this paragraph 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 paragraph. Pursuant to Section 39-5-19, New Mexico Statutes, Annotated,
1978 Comp., as amended, Mortgagor agrees that as to the Mortgaged Property
situated in the State of New Mexico, the redemption period shall be shortened to
one (1) month. Mortgagor hereby waives all rights of appraisement, sale,
homestead or redemption allowed under any law or laws of the State of Arkansas,
and especially redemption under the Act of the General Assembly of the State of
Arkansas approved May 8, 1899, and acts amendatory thereto. If Mortgagor is an
individual, Mortgagor waives and releases all rights of dower, courtesy and
homestead in the Mortgaged Property insofar as such rights may in any way affect
the purposes of this Mortgage.
5.13 Costs and Expenses. All costs and expenses (including attorneys'
fees) incurred by Trustee or Beneficiary in protecting and enforcing their
rights hereunder shall constitute a demand obligation owing by Mortgagor to the
party incurring such costs and expenses and shall draw interest at Default
Interest Rate, all of which shall constitute a portion of the Indebtedness.
5.14 Sale of the Mortgaged Property in Texas. If Secured Debt is not paid
when due, whether by acceleration or otherwise, Trustee is hereby authorized and
empowered to (but shall not be obligated to) sell any part of the Mortgaged
Property located in the State of Texas at public sale to the highest bidder for
cash in the area at the county courthouse of the county in Texas in which the
Texas portion of the Mortgaged Property or any part thereof is situated, as
herein described, designated by such county's commissioner's court for such
proceedings, or if no area is so designated, at the door of the county
courthouse of said county, at a time between the hours of 10:00 A.M. and 4:00
P.M. which is no later than three (3) hours after the time stated in the notice
described immediately below as the earliest time at which such sale would occur
on the first Tuesday of any month, after advertising the earliest time at which
said sale would occur, the place, and terms of said sale, and the portion of the
Mortgaged Property to be sold, by (a) posting (or by having some person or
persons acting for Trustee post) for at least twenty-one (21) days preceding the
date of the sale, written or printed notice of the proposed sale at the
courthouse door of said county in which the sale is to be made; and if such
portion of the Mortgaged Property lies in more than one county, one such notice
of sale shall be posted at the courthouse door of each county in which such part
of the Mortgaged Property is situated and such part of the Mortgaged Property
may be sold in the area at the county courthouse of any one of such counties
designated by such county's commissioner's court for such proceedings, or if no
area is so designated, at the courthouse door of such county, and the notice so
posted shall designate in which county such property shall be sold, and (b)
filing in the office of the
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county clerk of each county in which any part of the Texas portion of the
Mortgaged Property which is to be sold at such sale is situated a copy of the
notice posted in accordance with the preceding clause (a). In addition to such
posting and filing of notice, Beneficiary may or other holder of the
Indebtedness shall, at least twenty-one (21) days preceding the date of sale,
serve or cause to be served written notice of the proposed sale by certified
mail on Mortgagor and on each other debtor, if any, obligated to pay the
Indebtedness according to the records of Beneficiary or other holder of the
Indebtedness. Service of such notice shall be completed upon deposit of the
notice, enclosed in a postpaid wrapper properly addressed to Mortgagor and such
other debtors at their most recent address or addresses as shown by the records
of Beneficiary or other holder of the Indebtedness in a post office or official
depository under the care and custody of the United States Postal Service. The
affidavit of any person having knowledge of the facts to the effect that such a
service was completed shall be prima facie evidence of the fact of service.
Mortgagor agrees that no notice of any sale, other than as set out in this
Section, need be given by Trustee, Beneficiary or any other person, except as
may otherwise be required by Applicable Law. Mortgagor hereby designates as its
address for the purpose of such notice the address set out on the signature page
hereof; and agrees that such address shall be changed only by depositing notice
of such change enclosed in a postpaid wrapper in a post office or official
depository under the care and custody of the United States Postal Service,
certified mail, postage prepaid, return receipt requested, addressed to
Beneficiary or other holder of the Indebtedness at the address for Beneficiary
set out herein (or to such other address as Beneficiary or other holder of the
Indebtedness may have designated by notice given as above provided to Mortgagor
and such other debtors). Any such notice of change of address of Mortgagor or
other debtors or of Beneficiary or of other holder of the Indebtedness shall be
effective three (3) business days after such deposit if such post office or
official depository is located in the State of Texas, otherwise to be effective
upon receipt. Mortgagor authorizes and empowers Trustee to sell the Texas
portion of the Mortgaged Property in lots or parcels or in its entirety as is
customary in the industry or Trustee may elect; and to execute and deliver to
the purchaser or purchasers thereof good and sufficient deeds of conveyance
thereto by fee simple title, with evidence of general warranty by Mortgagor, and
the title of such purchaser or purchasers when so made by Trustee, Mortgagor
binds itself to warrant and forever defend. Where portions of the Mortgaged
Property lie in different counties, sales in such counties may be conducted in
any order that Trustee may deem expedient; and one or more such sales may be
conducted in the same month, or in successive or different months.
Notwithstanding anything to the contrary contained herein, Trustee may postpone
the sale provided for in this Section 5.14 at any time without the necessity of
a public announcement. The provisions hereof with respect to the posting and
giving of notices of sale are intended to comply with the provisions of Section
51.002 of the Property Code of the State of Texas, effective January 1, 1984,
and in the event the requirements, or any notice, under such Section 51.002 of
the Property Code of the State of Texas shall be eliminated or the prescribed
manner of giving such notices modified by future amendment to, or adoption of
any statute superseding, Section 51.002 of the Property Code of the State of
Texas, the requirement for such particular notices shall be deemed stricken from
or modified in this
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Mortgage in conformity with such amendment or superseding statute, effective as
of the effective date thereof.
5.15 Fair Market Value. It is expressly agreed by Mortgagor that to the
extent Section 51.003 of the Texas Property Code, or any amendment thereto,
requires that the "fair market value" of the Mortgaged Property shall be
determined as of the foreclosure date in order to enforce a deficiency against
Mortgagor or any other party liable for repayment of the Indebtedness, the term
"fair market value" shall include those matters required by Applicable Law and
shall also include the additional factors set forth below:
(a) The Mortgaged Property is to be valued "AS IS" and "WITH ALL
FAULTS" and there shall be no assumption of restoration of or
refurbishment of improvements, if any, after the date of the foreclosure;
(b) An offset to the fair market value of the Mortgaged Property, as
determined hereunder, shall be made by deducting from such value the
reasonable estimated closing costs relating to the sale of the Mortgaged
Property, including but not limited to brokerage commissions, title
examination and curative expenses, tax prorations, escrow fees, and other
common charges which are incurred by a seller of property; and
(c) After consideration of the factors required by Applicable Law
and those required above, an additional discount factor shall be
calculated based upon the estimated time it will take to effectuate a sale
of the Mortgaged Property so that the "fair market value" as so determined
is discounted to be as of the date of the foreclosure sale of the
Mortgaged Property.
5.16 Operation of the Mortgaged Property by Beneficiary. Upon the
occurrence of an Event of Default and during the continuance of such Event of
Default and in addition to all other rights herein conferred on Beneficiary,
Beneficiary (or any person, firm or corporation designated by Beneficiary) shall
have the right and power, but shall not be obligated, 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 and in its place and stead. Beneficiary, or any person, firm or
corporation designated by Beneficiary, may operate the same without any
liability to Mortgagor in connection with such operations, except to use
ordinary care in the operation of such properties, and Beneficiary or any
person, firm or corporation designated by Beneficiary, shall have the right to
(but shall not be obligated to) collect, receive and receipt for all
Hydrocarbons produced and sold from said properties, to make repairs, purchase
machinery and equipment, conduct work-over operations, drill additional wells
and to exercise every power, right and privilege of Mortgagor with respect to
the Mortgaged Property. When and if the expenses of such operation and
development (including costs of unsuccessful work-over operations or additional
wells) paid by Beneficiary or attributable to Mortgagor's undivided interest
therein and withheld, or offset against, by an operator or other party have been
paid or reimbursed
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in full by Mortgagor and the Indebtedness paid, said properties shall, if there
has been no sale or foreclosure, be returned to Mortgagor.
5.17 Separate Sales. The Mortgaged Property may be sold in one or more
parcels and it being expressly understood and agreed that the right of sale
arising out of any Event of Default shall not be exhausted by any one or more
sales but other and successive sales may be made until all of the Mortgaged
Property has been sold or until the Indebtedness has been fully satisfied.
5.18 Remedies Cumulative, Concurrent and Non-Exclusive. Beneficiary shall
have all rights, remedies and recourses granted in the Secured Debt Documents
and available at law or equity (including specifically those granted by the
Uniform Commercial Code in effect and applicable to the Mortgaged Property, or
any portion thereof), and the same (a) shall be cumulative and concurrent, (b)
may be pursued separately, successively or concurrently against any one or more
of Mortgagor, any Guarantor, or others obligated under the Secured Debt
Documents, or against the Mortgaged Property, pursuant to the Collateral Trust
Agreement and any Secured Debt Documents, (c) may be exercised as often as
occasion therefor shall arise, it being agreed by Mortgagor that the exercise or
failure to exercise any of same shall in no event be construed as a waiver or
release thereof or of any other right, remedy or recourse, and (d) are intended
to be, and shall be, non-exclusive.
5.19 Release of and Resort to Collateral. Beneficiary may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
lien or security interests created in or evidenced by the Secured Debt Documents
or their stature as a first and prior lien and security interest in and to the
Mortgaged Property. For payment of the Indebtedness, Beneficiary may resort to
any other security therefor held in such order and manner as Beneficiary may
elect.
5.20 Discontinuance of Proceedings. In case Beneficiary shall have
proceeded to invoke any right, remedy or recourse permitted under the Secured
Debt Documents and shall thereafter elect to discontinue or abandon same for any
reason, Beneficiary shall have the unqualified right so to do and, in such an
event, Mortgagor and Beneficiary shall be restored to their former positions
with respect to the Indebtedness, the Obligations, the Secured Debt Documents,
the Mortgaged Property and otherwise, and the rights, remedies, recourses and
powers of Beneficiary shall continue as if same had never been invoked.
5.21 Uniform Commercial Code Remedies. Beneficiary shall have all the
rights, remedies and recourses with respect to the Personalty, Fixtures, Leases
and Rents and Revenues afforded a Secured Party by the aforesaid Uniform
Commercial Code (being Chapter 9 of the Texas Business and Commerce Code, as to
property within the scope thereof and situated in the State of Texas) in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded Beneficiary by the Secured Debt Documents.
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5.22 No Obligation of Trustee or Beneficiary. The assignment and security
interest herein granted shall not be deemed or construed (a) to constitute
Trustee or Beneficiary as a trustee in possession of the Mortgaged Property or,
(b) to obligate Trustee or Beneficiary to (i) lease the Mortgaged Property or
attempt to do same, (ii) take any action, (iii) incur any expenses or perform or
discharge any obligation, duty or liability whatsoever under any of the Leases
or otherwise.
ARTICLE VI. MISCELLANEOUS PROVISIONS
6.1 Pooling and Unitization. Mortgagor shall have the right, and is hereby
authorized, to pool or unitize all or any part of the lands described in Exhibit
A, insofar as relates to the Mortgaged Property, with adjacent lands, leaseholds
and other interests, when, in the reasonable judgment of Mortgagor, it is
necessary or advisable to do so in order to form a drilling and/or production
unit to facilitate the orderly development of that part of the Mortgaged
Property affected thereby, or to comply with the requirements of any Applicable
Law or governmental order or regulation relating to the spacing of wells or
proration of the production therefrom; provided, however, that any unit so
formed for the production of oil shall not substantially exceed 160 acres, and
any unit so formed for the production of gas shall not substantially exceed 640
acres, unless a larger area is required to conform to an Applicable Law or
governmental order or regulation relating to the spacing of wells or to obtain
the maximum allowable production under any Applicable Law or governmental order
or regulation relating to the proration of production therefrom; and further
provided that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the unit in
a uniform manner consistently applied; and further provided that all interests
owned by Mortgagor in such unit shall be included within the Mortgaged Property.
Any unit so formed may relate to one or more zones or horizons, and a unit
formed for a particular zone or horizon need not conform in area to any other
unit relating to a different zone or horizon, and a unit formed for the
production of oil need not conform in area with any unit formed for the
production of gas. Promptly after formation of any such unit, Mortgagor shall
furnish to Beneficiary and each Secured Debt Representative a true copy of the
pooling agreement, declaration of pooling or other instrument creating such
unit. The interest in any such unit attributable to the Mortgaged Property (or
any part thereof) included therein shall become a part of the Mortgaged Property
and shall be subject to the lien hereof in the same manner and with the same
effect as though such unit and the interest of Mortgagor therein were
specifically described in Exhibit A. Mortgagor is further authorized to amend,
modify or terminate any pooling or unitization agreement or order to which
Mortgagor is a party or the Mortgaged Property is subject, provided that such
action does not conflict with the provisions of this Mortgage, including this
Section 6.1. Mortgagor may enter into, or amend, modify or terminate, pooling or
unitization agreements not hereinabove authorized only as permitted under the
Secured Debt Documents.
6.2 No Liability. None of Beneficiary, Trustee, any Secured Debt
Representative or any of their agents shall be liable for any error of judgment
or act done in good faith, or be otherwise responsible or accountable under any
circumstances whatsoever, except for their gross negligence or willful
misconduct. None of
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Beneficiary, Trustee, any Secured Debt Representative or any of their agents
shall be personally liable in case of entry by them, or anyone entering by
virtue of the powers herein granted them, upon the Mortgaged Property for debts
contracted or liability or damages incurred in the management or operation of
the Mortgaged Property. Such persons shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by them hereunder, believed by them in good faith to be
genuine. Beneficiary, Trustee, any Secured Debt Representative or any of their
agents shall be entitled to reimbursement for expenses incurred by them in the
performance of their duties hereunder and to reasonable compensation for such of
their services hereunder as shall be rendered. Mortgagor will, from time to
time, pay the compensation due hereunder and reimburse such parties for, and
save them harmless against, any and all liability and expenses which may be
incurred by them in the performance of their duties.
6.3 Successor Trustee. Any Trustee may resign in writing addressed to
Beneficiary or may be removed at any time with or without cause by an instrument
in writing duly executed by Beneficiary. In case of the death, resignation or
removal of a Trustee, one or more successor Trustee may be appointed by
Beneficiary by instrument of substitution complying with any applicable
requirements of Applicable Law, and in the absence of any such requirement
without formality other than appointment and designation in writing. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all facts therein recited, and upon the making of any such
appointment and designation this conveyance shall vest in the named successor
Trustee or Trustee, all the estate and title of the prior Trustee in all of the
Mortgaged Property, and he or they shall thereupon succeed to all the rights,
powers, privileges, immunities and duties hereby conferred upon the prior
Trustee. All references herein to Trustee shall be deemed to refer to Trustee
from time to time acting hereunder.
6.4 Actions or Advances by Beneficiary or Trustee. Each and every covenant
herein contained shall be performed and kept by Mortgagor solely at Mortgagor's
expense. If Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Mortgage, Beneficiary, or Trustee or
any receiver appointed hereunder or under Applicable Law, may, but shall not be
obligated to, take action and/or make advances to perform the same in
Mortgagor's behalf; provided, however, that concurrently with the taking of such
action or making such advances, Beneficiary, Trustee or any Secured Debt
Representative shall deliver notice to Mortgagor. Mortgagor hereby agrees to
repay the expense of such action and such advances upon demand plus interest as
set forth in the Collateral Trust Agreement. No such advance or action by
Beneficiary, Trustee or any receiver appointed hereunder shall be deemed to
relieve Mortgagor from any default hereunder.
6.5 No Waiver. Any failure by Trustee or Beneficiary to insist, or any
election by Trustee or Beneficiary not to insist, upon strict performance by
Mortgagor of any of the terms, provisions or conditions of the Collateral Trust
Agreement or any Secured Debt Documents shall not be deemed to be a waiver of
same or of any other term, provision or condition thereof, and Trustee and
Beneficiary shall have the right at any
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time or times thereafter to insist upon strict performance by Mortgagor of any
and all of such terms, provisions and conditions.
6.6 Defense of Claims. Mortgagor will notify Beneficiary and each Secured
Debt Representative, in writing, promptly of the commencement of any legal
proceedings affecting the lien or security interest hereof or the Mortgaged
Property, or any part thereof, and will take such action, employing attorneys as
set forth in Section 3.4(j), as may be necessary or appropriate to preserve
Mortgagor's or Beneficiary's rights affected thereby and/or to hold harmless
Beneficiary in respect of such proceedings; and should Mortgagor fail or refuse
to take any such action, Beneficiary may, upon giving prior written notice
thereof to Mortgagor, take such action in behalf and in the name of Mortgagor
and at Mortgagor's expense. Moreover, Beneficiary may take such independent
action in connection therewith as it may in its discretion deem proper,
Mortgagor hereby agreeing that all sums advanced or all expenses incurred in
such actions plus interest thereon at the Default Interest Rate, will, on
demand, be reimbursed, as appropriate, to Beneficiary or any receiver appointed
hereunder or under Applicable Law. The obligations of Mortgagor as hereinabove
set forth in this Section 6.6 shall survive the release, termination,
foreclosure or assignment of this Mortgage or any sale hereunder.
6.7 The Mortgaged Property to Revert; Release. If the Indebtedness shall
be fully paid and the covenants herein contained shall be well and truly
performed, then all of the Mortgaged Property shall revert to Mortgagor and the
entire estate, right, title and interest of Trustee and Beneficiary shall
thereupon cease; and Trustee and Beneficiary in such case shall, upon the
request of Mortgagor and at Mortgagor's cost and expense, deliver to Mortgagor
proper instruments acknowledging satisfaction of this Mortgage and the release
or reconveyance of the lien hereof in accordance with Applicable Law.
Notwithstanding anything contained herein to the contrary, the Mortgaged
Property, or any part thereof, shall, upon the written request of Mortgagor, be
released from the lien of this Mortgage, in accordance with the provisions of
the Collateral Trust Agreement, when such a release is permitted by the
Collateral Trust Agreement and the other Secured Debt Documents.
6.8 Covenants Running with the Land. All Obligations contained in this
Mortgage are intended by the parties to be, and shall be construed as, covenants
running with the Mortgaged Property.
6.9 Renewals, Amendments and Other Security. Renewals and extensions of
the Indebtedness and modifications of any kind of the Obligations may be given
at any time and amendments may be made to agreements with third parties relating
to any part of such Indebtedness or the Mortgaged Property and Trustee and
Beneficiary may take or may now hold other security from others for the
Indebtedness, all without notice to or consent of Mortgagor. Beneficiary 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 and prior perfected security interest in the Mortgaged
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Property not expressly released until the Secured Debt and all other
Indebtedness secured hereby are fully paid.
6.10 Mortgage, Assignment, etc. This Mortgage shall be deemed to be and
may be enforced from time to time as an assignment, chattel mortgage, contract,
deed of trust, financing statement, real estate mortgage, or security agreement,
and from time to time as any one or more thereof.
6.11 Limitation on Interest. No provision of this Mortgage or the Secured
Debt Documents shall require the payment or permit the collection of interest in
excess of the Maximum Lawful Rate or which is otherwise contrary to Applicable
Law. If any excess of interest in such respect is in the Secured Debt Documents
or otherwise herein provided for, or shall be adjudicated to be so provided for
herein or in the Secured Debt Documents, Mortgagor shall not be obligated to pay
such excess.
6.12 Severability. The Secured Debt Documents are intended to be performed
in accordance with, and only to the extent permitted by, all applicable Legal
Requirements. If any provision of any of the Secured Debt Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of the instrument
in which such provision is contained nor the application of such provision to
other persons or circumstances nor the other instruments referred to hereinabove
shall be affected thereby, but rather shall be enforced to the greatest extent
permitted by Applicable Law. It is hereby expressly stipulated and agreed to be
the intent of Mortgagor and Beneficiary at all times to comply with the usury,
and all other, laws relating to the Secured Debt Documents. If, at any time, the
applicable Legal Requirements render usurious any amount called for in any
Security Document, then it is Mortgagor's, Trustee's and Secured Debtholders'
express intent that such document be immediately deemed reformed and the amounts
collectible reduced, without the necessity of the execution of any new document,
so as to comply with the then Applicable Law but so as to permit the recovery of
the fullest amount otherwise called for in such Secured Debt Documents.
6.13 Waiver by Trustee and Beneficiary. Any and all covenants in this
Mortgage may from time to time by instrument in writing signed by Trustee and
Beneficiary be waived to such extent and in such manner as Trustee and
Beneficiary may desire, but no such waiver shall ever affect or impair either
Trustee's or Beneficiary's rights or liens or security interests hereunder,
except to the extent specifically stated in such written instrument.
6.14 No Partnership. Nothing contained in this Mortgage is intended to, or
shall be construed as, creating to any extent and in any manner whatsoever, any
partnership, joint venture, or association among Mortgagor, Trustee, Beneficiary
and their respective Affiliates, or in any way as to make Beneficiary or
Trustee's co-principals with Mortgagor with reference to the Mortgaged Property,
and any inferences to the contrary are hereby expressly negated.
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6.15 Successors and Assigns. This Mortgage is binding upon Mortgagor,
Mortgagor's successors and assigns, and shall inure to the benefit of
Beneficiary, its successors and assigns, and the provisions hereof shall
likewise be covenants running with the land.
6.16 Article and Section Headings. The article and section headings in
this Mortgage are inserted for convenience of reference and shall not be
considered a part of this Mortgage or used in its interpretation.
6.17 Execution in 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
or filing, in any particular counterpart portions of Exhibit A hereto which
describe properties situated in parishes or counties other than the parish or
county in which such counterpart is to be recorded or filed may have been
omitted.
6.18 Special Filing as Financing Statement. This Mortgage shall likewise
be a Security Agreement and a Financing Statement. This Mortgage shall be filed
for record, among other places, in the real estate records of each county or
parish in which any portion of the real property covered by the oil and gas
leases described in Exhibit A hereto is situated, and, when filed in such
counties or parishes shall be effective as a financing statement covering
Fixtures located on oil and gas properties, which oil and gas properties (and
accounts arising therefrom) are to be financed at the wellheads of the wells
located on the lands described in Exhibit A. A carbon, photographic or other
reproduction of this Mortgage or of any financing statement covering the
Mortgaged Property or any portion thereof shall be sufficient as a financing
statement and may be filed as such. Mortgagor agrees that any Secured Debt
Representative may, in such manner, on such terms and at such times as may be
elected by such Secured Debt Representative, and without demand or notice to, or
the consent or signature of, Mortgagor, file and/or record such UCC financing
statements, fixture filings, and/or amendments to or continuations of any
financing statements or fixture filings to evidence, perfect and/or continue the
perfection of, any security interests created or to be created pursuant to this
Mortgage or any of the other Secured Debt Documents.
6.19 Notices. Except as otherwise required by Sections 5.4 and 5.14
hereof, any notice, request or demand which may be required or permitted to be
given or served upon Mortgagor shall be sufficiently given when given or made
pursuant to (a) the terms of the Collateral Trust Agreement, or (b) such other
means and manner of giving of notice as may be required by Applicable Law.
6.20 Reliance. Notwithstanding any reference herein to the Secured Debt
Documents, no party shall have any obligation to inquire into the terms or
conditions of any such documents and all parties shall be fully authorized to
rely upon any statement, certificate, or affidavit of Beneficiary or any future
holder of any portion of the Indebtedness as to the occurrence of any event such
as the occurrence of any event of default.
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6.21 Beneficiary as Agent for the Secured Debtholders. As described above,
certain Affiliates of Beneficiary and the Secured Debt Representatives are or
may become parties to certain Hedging Agreements with Mortgagor and/or
Affiliates of Mortgagor. This Mortgage secures the obligations of Mortgagor and
such Affiliates, as the case may be, under such Hedging Agreements, and the
parties acknowledge for all purposes that Beneficiary acts for itself and as
agent on behalf of such Affiliates of Beneficiary and the Secured Debtholders
which are so entitled to share in the rights and benefits accruing to
Beneficiary under this Mortgage in respect of the Mortgaged Property.
6.22 Applicable Law. As to any tract or parcel of land comprising a
portion of the Mortgaged Property, this Mortgage shall be governed by and
construed according to the Applicable Laws of the State where such tract or
parcel of land is situated.
6.23 Subrogation. If any or all of the proceeds of Secured Debt have been
used to extinguish, extend or renew any indebtedness heretofore existing against
the Mortgaged Property, then, to the extent of such funds so used, the
Indebtedness and this Mortgage shall be subrogated to all of the rights, claims,
liens, titles and interests heretofore existing against the Mortgaged Property
to secure the indebtedness so extinguished, extended or renewed and the former
rights, claims, liens, titles and interests, if any, are not waived but rather
are continued in full force and effect in favor of Beneficiary and are merged
with the lien and security interest created herein as cumulative security for
the repayment of the Indebtedness and the satisfaction of the Obligations.
6.24 Fixture Filing. Portions of the Mortgaged Property are or are to
become fixtures relating to the above described real estate, and Mortgagor
herein expressly covenants and agrees that the filing of this Mortgage in the
Real Estate Records in the county where the Mortgaged Property is located shall
also operate from the time of filing therein as a financing statement filed as a
fixture filing in accordance with Section 9.502(c) of the Uniform Commercial
Code - Secured Transactions of the State of Texas.
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IN WITNESS WHEREOF, Mortgagor has executed or caused to be executed this
Amended and Restated Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement and Fixture Filing in the presence of the undersigned Notary
Public on this 14th day of July, 2003.
MORTGAGOR AND DEBTOR
CALPINE CORPORATION, a Delaware
corporation
By:
------------------------
Title: Executive Vice President
Printed Name: B.A. Berilgen
ATTEST:
- -------------------------------
Printed Name:
The name and mailing address of Mortgagor is:
Calpine Corporation
1000 Louisiana Street, Suite 800
Houston, TX 77002
S-1
STATE OF TEXAS )
) SS.
COUNTY OF HARRIS )
BE IT REMEMBERED that I, Suzanne B. Snow, a Notary Public duly qualified,
commissioned, sworn and acting in and for the County and State aforesaid, hereby
certify that, on this 14th day of July, 2003, there appeared before me severally
each of the following persons, each being either a Trustee or else the
designated officer of the corporation or association set opposite his name, and
each such Trustee, corporation and association being a party to the foregoing
instrument:
B.A. Berilgen, the Executive Vice President, and Michael H. Hickey, the
Vice President-Managing Counsel, of Calpine Corporation, a Delaware corporation,
which has no corporate seal whose address is 1000 Louisiana Street, Suite 800,
Houston, TX 77002.
ARKANSAS Before me on this day appeared in person the aforementioned
persons, to me personally well known, who stated that they
held the offices in the corporation or association set forth
opposite their names above (or, in the case of the Trustees,
were validly appointed Trustees) and were duly authorized in
their respective capacities to execute the foregoing
instrument for and in the name and on behalf of said
corporation or association (or as Trustees, as the case may
be), and further stated and acknowledged that they had so
signed, executed and delivered said foregoing instrument for
the consideration, uses and purposes therein mentioned and set
forth.
COLORADO The foregoing instrument was acknowledged before me this day
by each such person on behalf of said corporation or
association, or himself, as a Trustee, as the case may be.
KANSAS On this day before me personally appeared the aforementioned
persons, who acknowledged themselves to hold the offices in
the corporation set forth opposite their names above (or, in
the case of the Trustees, were validly appointed Trustees) and
as such officers or Trustees, hereby authorized to do so,
executed the foregoing instrument for the purposes therein
contained.
MISSISSIPPI Personally appeared before me, the undersigned authority in
and for the said county and state, on this 14th day of July,
2003, within my jurisdiction the within named B.A. Berilgen
who acknowledged that he is the Executive Vice President of
CALPINE CORPORATION, a Delaware corporation, and that for and
on behalf of said corporation and as its act and deed
(he)(she) executed the above and foregoing instrument after
first having been duly authorized by said
corporation so to do.
MONTANA On this day before me personally appeared each such person,
each of whom is known to me to be the officer of the
corporation that executed the within instrument (or a Trustee,
as the case may be), and acknowledged to me that such
corporation (or Trustee, as the case may be) executed the
same.
NEBRASKA The foregoing instrument was acknowledged before me this day
and by each such person as the designated officers of the
NEW MEXICO corporation or association set opposite their names (or as
Trustees, as the case may be) on behalf of said corporation or
association, or himself as a Trustee, as the case may be.
OKLAHOMA Before me on this day personally appeared the aforementioned
persons, to me known to be the identical persons who
subscribed the names of the respective makers thereof to the
foregoing instrument in the capacities set forth opposite the
names of such persons above, and each such person acknowledged
to me that he executed the same as his free and voluntary act
and deed and as the free and voluntary act and deed of the
corporation or association set opposite his name (or of
himself as Trustee, as the case may be) for the uses and
purposes therein set forth.
TEXAS This instrument was acknowledged before me on this day by each
such person as the designated officer of the corporation or
association set opposite his name (or a Trustee, as the case
may be), on behalf of said corporation or association set
opposite his name (or of himself as Trustee, as the case may
be).
WYOMING The foregoing instrument was acknowledged before me by the
above individuals on this day.
Witness my hand and official seal.
-----------------------------------------
Notary Public
Residing at Houston, Harris County, Texas
My commission expires: 12/21/2006
EXHIBIT A To Amended and Restated Mortgage, Deed of Trust, Assignment,
Security Agreement, Financing Statement and Fixture Filing, dated
July 16, 2003, from CALPINE CORPORATION
to Denis O'Meara and James Trimble
and THE BANK OF NEW YORK
List of Properties
1. Depth limitations, unit designations, unit tract descriptions and
descriptions (including percentages, decimals or fractions) of undivided
leasehold interests, well names, "Operating Interests," "Working Interests" and
"Net Revenue Interests" contained in this Exhibit A and the listing of any
percentage, decimal or fractional interest in this Exhibit A shall not be deemed
to limit or otherwise diminish the interests being subjected to the lien,
security interest and encumbrance of this Mortgage.
2. Some of the land descriptions in this Exhibit A may refer only to a portion
of the land covered by a particular lease. This Mortgage is not limited to the
land described in Exhibit A but is intended to cover the entire interest of
Mortgagor in any lease described in Exhibit A even if such interest relates to
land not described in Exhibit A. Reference is made to the land descriptions
contained in the documents of title recorded as described in this Exhibit A. To
the extent that the land descriptions in this Exhibit A are incomplete,
incorrect or not legally sufficient, the land descriptions contained in the
documents so recorded are incorporated herein by this reference.
3. References in Exhibit A to instruments on file in the public records are made
for all purposes. Unless provided otherwise, all recording references in Exhibit
A are to the official real property records of the county or counties (or parish
or parishes) in which the mortgaged property is located and in which records
such documents are or in the past have been customarily recorded, whether Deed
Records, Oil and Gas Records, Oil and Gas Lease Records or other records.
4. A statement herein that a certain interest described herein is subject to the
terms of certain described or referred to agreements, instruments or other
matters shall not operate to subject such interest to any such agreement,
instrument or other matter except to the extent that such agreement, instrument
or matter is otherwise valid and presently subsisting nor shall such statement
be deemed to constitute a recognition by the parties hereto that any such
agreement, instrument or other matter is valid and presently subsisting.
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A-1
SCHEDULE I
Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and
Fixture Filing (Colorado) from Calpine Corporation, a Delaware corporation,
Trustor and Mortgagor to Kemp Leonard, Trustee, John Quick, Trustee and The Bank
of Nova Scotia, for itself and as Agent, Beneficiary, filed as follows:
JURISDICTION FILE NO. FILE DATE
------------ -------- ---------
Garfield County, Colorado Reception #602924 5/7/2002
Book 1353, Page 8
UCC-1 Financing Statement regarding Multi-State Mortgage, naming Calpine
Corporation as debtor and The Bank of Nova Scotia, as Agent, as secured party,
filed as follows:
JURISDICTION FILE NO. FILE DATE
------------ -------- ---------
Garfield County, Colorado Reception #603031 5/8/2002
Book 1353, Page 410
Schedule I-1
SCHEDULE II
First Supplemental Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement and Fixture Filing (Colorado) from Calpine Corporation, a
Delaware corporation, Trustor and Mortgagor to Dennis O'Meara, Trustee, James
Trimble, Trustee and The Bank of Nova Scotia, for itself and as Agent,
Beneficiary, filed as follows:
JURISDICTION FILE NO. FILE DATE
------------ -------- ---------
Garfield County, CO Book 1405, Page 45 11/08/2002
Second Supplemental Mortgage, Deed of Trust, Assignment, Security Agreement,
Financing Statement, and Fixture Filing (Colorado) from Calpine Corporation to
Trustees and The Bank of Nova Scotia, filed as follows:
ORIGINAL ORIGINAL SUPPLEMENT SUPPLEMENT
JURISDICTION FILE NO. FILE DATE FILE NO. FILE DATE
------------ -------- --------- -------- ---------
Garfield County, Colorado 602924; 5/7/02 624212; 4/2/03
Book 1353, Book 1453,
Pg. 8 Pg. 812
Schedule II-1
SCHEDULE III
N/A
Schedule III-1