EXHIBIT 10.31
RECORDING REQUESTED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:
MAYER, BROWN, ROWE & MAW LLP
700 Louisiana Street
Suite 3600
Houston, Texas 77002
Attn: Kevin L. Shaw, Esq.
Instructions to County Recorder:
Index this document as:
(1) A deed of trust
(2) A fixture filing
AMENDED AND RESTATED
DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
FROM
CALPINE CORPORATION,
a Delaware corporation, Trustor
(Taxpayer I.D. No. 77-0212977),
TO
CHICAGO TITLE INSURANCE COMPANY
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
"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."
"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
"OIL AND GAS INTERESTS AND AS-EXTRACTED COLLATERAL INCLUDED IN THE ENCUMBERED
PROPERTY 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."
"TRUSTOR 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 ENCUMBERED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO AND THIS
FINANCING STATEMENT AND FIXTURE FILING IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS."
"THE SECURED PARTIES ARE NOT SELLERS OR PURCHASE MONEY LENDERS OF COLLATERAL."
"A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER OF SALE MAY
ALLOW THE TRUSTEE TO TAKE THE ENCUMBERED PROPERTY AND SELL IT WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON DEFAULT BY TRUSTOR UNDER THIS DEED OF TRUST."
"NOTICE TO JUNIOR LIENHOLDERS: THE OBLIGATIONS SECURED HEREBY PROVIDE FOR THE
ACCRUAL OF INTEREST WHICH MAY RESULT IN INCREASES IN THE PRINCIPAL BALANCE ABOVE
THE FACE PRINCIPAL AMOUNT OF THE APPLICABLE NOTES."
AMENDED AND RESTATED
DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
THIS AMENDED AND RESTATED DEED OF TRUST WITH POWER OF SALE, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING (this
"DEED OF TRUST"), dated as of July 16, 2003, is made by CALPINE CORPORATION, a
Delaware corporation ("TRUSTOR"), whose address is 50 West San Fernando Street,
San Jose, CA 95113, to CHICAGO TITLE INSURANCE COMPANY (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 Trustor, 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 "DEED OF TRUST" 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 Trustor 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 Chicago Title
Insurance Company, as Trustee, 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 Trustor
and issued letters of credit for the benefit of Trustor (the "EXISTING 2002
LETTERS OF CREDIT") in amounts not to exceed at any one time outstanding
$1,600,000,000, and Trustor, 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
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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 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 Trustor and issued letters of credit for the benefit of Trustor
(the "EXISTING 2000 LETTERS OF CREDIT") in amounts not to exceed at any one time
outstanding $400,000,000, and Trustor, 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 encumbered
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 Trustor, 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 Trustor 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 Trustor 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 Trustor 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 Trustor 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 Trustor and Goldman
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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
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, Trustor may incur
future debt which could, together with the obligations under the Amended and
Restated Credit Agreement, constitute Priority Lien Debt and Trustor may incur
future debt which could, together with the 2007 Notes, the 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. Trustor 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 Encumbered 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 Deed
of Trust amends and restates the Existing Mortgage. The Collateral Trust
Agreement sets forth the terms on which the Beneficiary, as collateral trustee
for the present and future holders of the Indebtedness, will receive, hold,
maintain, administer, maintain, enforce and distribute this Deed of Trust and
all interests, rights, powers and remedies of the Collateral Trustee thereunder
and the proceeds thereof.
1.7 For all purposes of this Deed of Trust, 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.
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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, 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%), or (b) the Maximum Lawful Rate.
E. "Encumbered Property" means the properties, rights and interests
hereinafter described in Section 1.8 and defined as the Encumbered
Property.
F. "Environmental Laws" shall mean any and all present and future
United States federal, tribal, state and local laws or regulations, codes,
plans, orders, decrees, directives, judgments, injunctions and lawfully
imposed requirements 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. "Event of Default" means an Actionable Default as defined under
the Collateral Trust Agreement.
H. "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.
I. "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.
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J. "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.
K. "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.
L. "Indebtedness" shall have the meaning set forth in Section 2.2 of
this Deed of Trust.
M. "Indemnification Claim" is defined in Section 4.6(a) of this Deed
of Trust.
N. "Indemnified Person" means Trustee, Beneficiary and each of the
Secured Debtholders, their respective employees, affiliates, agents and
attorneys, and any other Person to be indemnified under this Deed of
Trust.
O. "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.
P. "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.
Q. "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 Encumbered Property, together with
all amendments, modifications, extensions and renewals thereof.
R. "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 Trustor,
or the Encumbered Property, including
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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)
Trustor'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 Trustor, or the Encumbered Property may be
bound and (v) any and all restrictions, restrictive covenants or zoning,
present and future, as the same may apply to the Encumbered Property.
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. "Obligations" means any and all of the covenants, warranties,
representations and other obligations (other than to repay the
Indebtedness) made or undertaken by Trustor or others under any of the
Secured Debt Documents.
U. "oil and gas leases" shall include oil, gas and mineral leases,
subleases and assignments thereof, operating rights, servitudes and shall
also include subleases and assignments of operating rights.
V. "Operating Equipment" means all surface or subsurface machinery,
goods, equipment, fixtures, movable property attached to immovable
property and other movable property, 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.
W. "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.
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X. "Parity Lien Debt" is defined in the Collateral Trust Agreement.
Y. "Parity Lien Documents" is defined in the Collateral Trust
Agreement.
Z. "Parity Lien Indebtedness" is defined in Section 2.2 of this Deed
of Trust.
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 Trustor 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
Trustor 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 Trustor 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.
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GG. "Priority Lien Documents" is defined in the Collateral Trust
Agreement.
HH. "Priority Lien Indebtedness" is defined in Section 2.2 of this
Deed of Trust.
II. "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 Trustor or others under any of the
Priority Lien Documents.
JJ. "Production Sale Contracts" means contracts now in effect, or
hereafter entered into by Trustor, or entered into by Trustor's
predecessors in interest, for the sale, purchase, exchange, gathering,
transportation, treating or processing of Hydrocarbons produced from the
lands described in Exhibit A.
KK. "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 Trustor for using, leasing, licensing, possessing,
operating, selling or otherwise enjoying the Encumbered Property,
including the proceeds from the sale of Hydrocarbons.
LL. "Secured Debt" is defined in the Collateral Trust Agreement.
MM. "Secured Debtholder" is defined in the Collateral Trust
Agreement.
NN. "Secured Debt Documents" is defined in the Collateral Trust
Agreement.
OO. "Secured Debt Representative" is defined in the Collateral Trust
Agreement.
PP. "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 Encumbered 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 Encumbered Property or the Rents and Revenues or the
ownership, use, occupancy or enjoyment thereof.
QQ. "Transportation Agreements" shall mean any contracts or
agreements entered into from time to time by Trustor, or entered into by
Trustor'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.
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RR. "Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of California or any other
applicable state, and the terms "Accounts," "Account Debtor, "As Extracted
Collateral," "Chattel Paper," "Contract Rights," "Deposit Accounts,"
"Documents," "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.
SS. "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, Trustor, for and in consideration of the premises and of
the Priority Lien Indebtedness and trusts hereinafter mentioned, has granted,
bargained, sold, warranted, encumbered, assigned, transferred and conveyed, and
by these presents does grant, bargain, sell, warrant, encumber, assign, pledge
and hypothecate, transfer and convey unto Trustee, IN TRUST, WITH POWER OF SALE,
for the use and benefit of Beneficiary, all Trustor'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, chattel paper, contract rights, deposit accounts,
documents, goods, instruments, 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 California Uniform Commercial Code, Trustor hereby
grants to said Beneficiary, a security interest therein to the full extent of
Trustor's legal and beneficial interest therein, now owned or hereafter
acquired, namely:
(a) the lands described in Exhibit A, and Leases, profit a prendre,
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
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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 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),
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 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,
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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 n), 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 Trustor 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 Deed of
Trust by means of supplements hereto, being hereinafter, collectively, called
the "Encumbered Property."
Grant of Parity Lien
NOW, THEREFORE, Trustor, for and in consideration of the premises and the
Parity Lien Obligations and trusts hereafter mentioned, has granted, bargained,
sold, warranted, encumbered, assigned, transferred and conveyed, and by these
presents does grant, bargain, sell, warrant, encumber, assign, pledge and
hypothecate, transfer and convey unto Trustee, IN TRUST, WITH POWER OF SALE, for
the use and benefit of Beneficiary, all Trustor's right, title and interest,
whether now owned or hereafter acquired, in and to all of the Encumbered
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 Trustor in respect of the Encumbered
Property.
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TO HAVE AND TO HOLD the Encumbered 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 Trustor herein and therein
contained.
As set forth in the separate granting clauses above, it is the intent of
Trustor that such grants shall create two separate and distinct security
interests in all right, title and interest of Trustor in the Encumbered 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 instrument
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.
Trustor, 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 Trustor under the
Priority Lien Documents;
(b) The Parity Lien Debt (including future advances to be made with
respect thereto), and all other Obligations of Trustor 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;
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(e) Any and all other indebtedness of Trustor or any Affiliate of
Trustor to Beneficiary now or hereafter owing, whether direct or indirect,
primary or secondary, fixed or contingent, joint or several, regardless of
how 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 Trustor 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. Trustor 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 Encumbered 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 Deed of Trust. 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 TRUSTOR
3.1 Payment of the Indebtedness and Performance of Obligations. Trustor
will duly and punctually pay the Indebtedness, as and when called for in the
Secured
13
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.
3.2 Certain Representations and Warranties. Trustor represents and
warrants (and with respect to those matters set forth in the following
subsections (b) and (f), as to those portions of the Encumbered Property that
are operated by persons other than Trustor or a Subsidiary of Trustor, Trustor
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) Trustor, 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 Encumbered 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 Trustor 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 Trustor 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 Encumbered Property is
free from all encumbrances or liens whatsoever,
(e) Trustor is not obligated, by virtue of any prepayment under any
contract providing for the sale by Trustor 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 Encumbered 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 Deed of Trust lists the correct legal
name of Trustor and Trustor has not been known by any legal name different
from the one set forth on the cover page of this Deed of Trust,
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(h) the execution, delivery, and performance by Trustor of this Deed
of Trust (i) are within Trustor's corporate powers and have been duly
authorized by Trustor's Board of Directors, shareholders and all other
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 Trustor'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 Trustor
threatened, against or affecting Trustor or the Encumbered Property that
could materially adversely affect Trustor or the Encumbered Property, or
involving the validity or enforceability of this Deed of Trust or the
priority of the liens and security interests created by the Secured Debt
Documents, and no event has occurred (including specifically Trustor's
execution of this Deed of Trust 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 Trustor's property other than the liens and
security interests created by the Secured Debt Documents.
3.3 Further Assurances. Trustor will warrant and forever defend the
Encumbered 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 Trustor will maintain and preserve the lien and
security interest hereby created so long as any of the Indebtedness remains
unpaid. Trustor 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 Deed of Trust, including, without limiting the
generality of the foregoing, (i) prompt correction of any defect which may
hereafter be discovered in the title to the Encumbered Property or in the
execution and acknowledgment of this Deed of Trust, the Secured Debt Documents,
or 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 Encumbered 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 Encumbered 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 Encumbered Property. So long as the Indebtedness or
any part thereof remains unpaid, and whether or not Trustor is the operator of
any particular part of the Encumbered Property, Trustor shall, at Trustor's own
expense:
15
(a) Do all things necessary to keep unimpaired Trustor's rights in
the Encumbered Property and not abandon any well or forfeit, surrender or
release any Lease, except that Trustor 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
Encumbered 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 Encumbered 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 Encumbered 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 Trustor 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
16
(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
Encumbered 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
Encumbered Property and not such as to affect materially title thereto,
and (4) those being contested by Trustor in good faith in such manner as
not to jeopardize Beneficiary's rights in and to the Encumbered 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 Trustor 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 Encumbered 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 Trustor 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 Encumbered 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 Trustor 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
17
same. Beneficiary and each Secured Debt Representative 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 Deed of Trust are to be issued on forms and by
companies and with endorsements as are customary in the industry. Trustor
shall maintain insurance in an amount sufficient to prevent Trustor from
becoming a co-insurer under any policy required hereunder. If Trustor
fails to maintain the level of insurance required under this Deed of
Trust, then Trustor 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 Trustor's
location (as described on the signature page hereto) or in the name of
Trustor, 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 Encumbered 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
Encumbered 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 Trustor;
(k) Subject to Trustor's right to contest the same, promptly pay all
Taxes legally imposed upon this instrument or upon the Encumbered Property
or upon the income and profits thereof, or upon the interest of
Beneficiary therein; provided that Trustor shall not be liable for taxes
accruing after a transfer of the Encumbered 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
Encumbered 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,
18
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 Trustor,
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 Deed of Trust.
3.5 Performance of Leases. Trustor 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. Trustor will promptly, and at Trustor'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 Debtholders, 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 Encumbered
Property.
3.7 Sale or Deed of Trust of the Encumbered Property. Except (a) as set
forth in Section 6.1 of this Deed of Trust; (b) for sales of severed
Hydrocarbons in the ordinary course of Trustor'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 Deed of Trust; (e) for Permitted
Encumbrances; and (f) for sales, exchanges or other dispositions of Encumbered
Property permitted under the Secured Debt Documents governing Priority Lien Debt
and permitted under the Secured Debt Documents governing Parity Lien Debt,
Trustor will not sell, convey, mortgage, pledge, hypothecate, pool, unitize or
otherwise dispose of or encumber the Encumbered Property nor any portion
thereof, nor any of Trustor's right, title or interest therein, and Trustor will
not enter into any arrangement with any gas pipeline company or other consumer
of Hydrocarbons regarding the Encumbered Property whereby said gas pipeline
company or consumer may set off any claim against Trustor by withholding payment
for any Hydrocarbons actually delivered.
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3.8 Records, Statements and Reports. Trustor will keep proper books of
record and account in which complete and correct entries will be made of
Trustor'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 Trustor as required under the Secured Debt Documents. Without
limiting the generality of the foregoing, Trustor 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 Trustor or other engineering firm acceptable to the Credit
Agreement Agent concerning (1) the quantity of Hydrocarbons recoverable from the
Encumbered Property, (2) the projected income and expense attributable to the
Encumbered 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 Encumbered 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
Trustor for Trustor'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 Trustor, Trustor
will permit Beneficiary, each Secured Debt Representative and/or the
agents of either of them, at the cost and expense of Trustor, to enter
upon the Encumbered 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 Trustor may do so under the terms of the
applicable Joint Operating Agreements and other applicable agreements
affecting the Encumbered Property), including the principal place of
business, of Trustor to inspect and examine the Encumbered Property and to
inspect, review and reproduce as necessary any books, records, accounts,
contracts or other documents of Trustor, it being understood that any
non-public information obtained in connection therewith shall be subject
to the relevant confidentiality provisions of the Secured Debt Documents
then in effect.
(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 Trustor may do so under the terms of the applicable Joint
Operating Agreements and other applicable agreements affecting the
Encumbered Property), on twenty-four (24) hours prior notice to Trustor to
enter the Encumbered Property to conduct (at the cost and expense of
Trustor), or to cause Trustor to conduct (at the cost and expense of
Trustor), such tests and investigations as may be necessary to determine
whether any hazardous materials or solid waste is being
20
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
Encumbered Property. This Section 3.9 shall not be construed to affect or
limit the obligations of Trustor pursuant to Section 3.4 hereof.
(c) Neither Beneficiary nor any Secured Debt Representative shall
have any duty to visit or observe the Encumbered 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 Trustor 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 Trustor 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. Trustor agrees
that neither Beneficiary nor any Secured Debt Representative makes any
warranty or representation to Trustor or any other obligor regarding the
truth, accuracy or completeness of any such report or findings that may be
so disclosed. Trustor also acknowledges that, depending upon the results
of any site visit, observation or testing disclosed to Trustor, Trustor
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 Trustor without advice or assistance from
Beneficiary or any Secured Debt Representative.
3.10 Taxes. Subject to Trustor's right to contest the same, Trustor will
promptly pay all taxes, assessments and governmental charges legally imposed
upon this instrument or upon the Encumbered Property, or upon the interest of
Beneficiary therein, or upon the income and profits thereof.
3.11 No Governmental Approvals. Trustor represents and warrants that (a)
no approval or consent of any regulatory or administrative commission or
authority, or of any other governmental body, is necessary to authorize the
execution and delivery of this Deed of Trust, or to authorize the observance or
performance by Trustor of the covenants herein, or that such approvals as are
required have been obtained or will be obtained promptly and (b) Trustor has
obtained all Permits which are necessary for the operation of the Encumbered
Property.
3.12 Environmental Laws. Trustor represents and warrants, to the best of
its knowledge after due inquiry that, except as permitted by the Secured Debt
Documents, the Encumbered Property is in material compliance with all applicable
Environmental Laws; there are no conditions existing currently which would be
likely to subject Trustor 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 Trustor; Trustor is not a
21
party to any litigation or administrative proceedings, nor so far as is known by
Trustor is any litigation or administrative proceeding threatened against it,
which asserts or alleges that Trustor has violated or is violating Environmental
Laws or that Trustor 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 Encumbered
Property nor Trustor 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 body or agency in
a matter arising under any Environmental Laws. Trustor has also obtained all
permits, licenses or approvals required under applicable Environmental Laws
which are necessary for its current exploration, use, and development activities
at the Encumbered Property; and to Trustor's knowledge after reasonable
investigation all use, generation, manufacturing, release, discharge, storage,
deposit, treatment, recycling or disposal of any materials on, under or at the
Encumbered Property or transported to or from the Encumbered Property (or tanks
or other facilities thereon containing such materials) are being and will be
conducted in accordance, in all material respects, with applicable Environmental
Laws including without limitation those requiring cleanup, removal or any other
remedial action.
3.13 Corporate Status. Trustor will continue to be duly qualified to
transact business in California and 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.
3.14 Taxpayer I.D. Number. The taxpayer identification number of Trustor
is 77-0212977. The taxpayer identification number of Beneficiary is 13-5160382.
ARTICLE IV.
ASSIGNMENT OF PRODUCTION
4.1 Assignment.
(a) Trustor 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 Encumbered 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 Trustor and entitled in Trustor'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;
22
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 Trustor. So long as no
Event of Default has occurred, Trustor 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 instructions 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, 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 Deed of Trust. 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. Trustor agrees to perform all
such acts, and to execute all such further assignments, transfers and
division orders, 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 Trustor or Beneficiary for the account
of Trustor 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 Trustor, or
otherwise, with warranties binding Trustor. The assignment of the
Hydrocarbons and proceeds in this Section 4.1 is intended to be an
absolute assignment from Trustor to Beneficiary and not merely the passing
of a security interest. Such Hydrocarbons and proceeds are hereby assigned
absolutely by Trustor 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
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IV) and from all other responsibility in connection therewith, except the
responsibility to account to Trustor 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 Trustor 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 Deed of
Trust 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 Encumbered Property or any part thereof
pursuant to Article V, the rents, issues, profits and 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 Deed of
Trust (except those set forth in Section 3.10 hereof) and the other Secured Debt
Documents (except to the extent otherwise expressly provided therein) wherein
Trustor is obligated to indemnify each of the Indemnified Persons:
(a) Trustor agrees to indemnify Beneficiary, the Secured
Debtholders, Trustee and their respective employees, affiliates, agents
and attorneys, under the Deed of Trust and any successors or substitute
trustee under the Deed of Trust, 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. Trustor 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 Trustor as
hereinabove set forth in this Section 4.6 shall survive the release
termination, foreclosure or assignment of this Deed of Trust or any sale
hereunder.
(b) Trustor shall pay when due any judgments with respect to an
Indemnification Claim against any of the Indemnified Persons and which are
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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 Trustor for reimbursement
pursuant to this Deed of Trust, or may proceed to file suit against
Trustor to compel such payment.
(c) Any amount which Trustor 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 REMEDIES. Upon the occurrence of an Event of Default, the Beneficiary
may:
(a) Commence an action to foreclose this instrument as a mortgage,
appoint a receiver, or specifically enforce any of the covenants hereof.
(b) Exercise any or all of the remedies available to a secured party
under the Uniform Commercial Code of the State of California, including,
but not limited to:
(i) Either personally or by means of a court appointed
receiver, take possession of all or any of the personal property
constituting a part of the Encumbered Property and exclude therefrom
the Trustor and all others claiming under the Trustor, and
thereafter hold, store, use, operate, manage, maintain and control,
make repairs, replacements, alterations, additions and improvements
to and exercise all rights and powers of the Trustor in respect of
such personal property or any part thereof. In the event the Secured
Debt Representative demands or attempts to take possession of such
personal property in the exercise of any rights under the Secured
Debt Documents or any document executed in connection therewith, the
Trustor promises and agrees promptly to turn over and deliver
complete possession thereof to the Secured Debt Representative;
(ii) Without notice to or demand upon the Trustor, make such
payments and do such acts as the Secured Debt Representative may
deem necessary to protect its security interest in such personal
property, including without limitation, paying, purchasing,
contesting or compromising any encumbrance, charge or lien which is
prior to or superior to the security interest granted hereunder, and
in exercising any
25
such powers or authority to pay all expenses incurred in connection
therewith;
(iii) Require the Trustor to assemble such personal property
or any portion thereof, at a place designated by the Secured Debt
Representative and reasonably convenient to both parties, and
promptly to deliver such personal property to the Secured Debt
Representative, or an agent or representative designated by it. The
Secured Debt Representative, and its agents and representatives
shall have the right to enter upon any or all of the Trustor's
premises and property to exercise the Secured Debt Representative's
rights hereunder;
(iv) Elect to treat the fixtures constituting a part of the
Encumbered Property as either real property collateral or personal
property collateral and then proceed to exercise such rights as
apply to such type of collateral; and
(v) Sell, lease or otherwise dispose of such personal property
at public sale, with or without having such personal property at the
place of sale, and upon such terms and in such manner as the Secured
Debt Representative may determine, and the Secured Debt
Representative may be a purchaser at any such sale.
Unless such personal property is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Secured Debt Representative shall give the Trustor at least ten (10) days prior
written notice of the time and place of any public sale of such personal
property or other intended disposition thereof. Such notice may be mailed to the
Trustor at the address set forth on the signature page(s) of this instrument.
(c) Deliver to the Trustee a written declaration of default and
demand for sale, and a written notice of default and election to cause the
Trustor's interest in the Encumbered Property to be sold, which notice the
Trustee or the Secured Debt Representative shall cause to be duly filed
for record in the Official Records of the county or counties in which the
Encumbered Property is located.
(d) Any other remedy permitted to be exercised by the beneficiary of
a deed of trust or a secured party or both under the laws of the State of
California.
5.2 Foreclosure By Power of Sale. Should Beneficiary elect to foreclose by
exercise of the power of sale herein contained, Beneficiary shall notify Trustee
and shall deposit with Trustee this instrument and such receipts and evidence of
expenditures made and secured hereby as Trustee may require.
(a) Upon receipt of such notice from Beneficiary, Trustee shall
cause to be recorded, published and delivered to Trustor such Notice of
Default and Election to Sell as then required by law and by this
instrument. Trustee shall, without demand on Trustor, after lapse of such
time as may then be required by
26
law and after recordation of such Notice of Default and after Notice of
Sale having been given as required by law, sell the Encumbered Property at
the time and place of sale fixed by it in said Notice of Sale, either as a
whole, or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the
highest bidder for cash in lawful money of the United States payable at
the time of sale. Trustee shall deliver to such purchaser or purchasers
thereof its good and sufficient deed or deeds conveying the property so
sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of
the truthfulness thereof. Any person, including, without limitation,
Trustor, Trustee or Beneficiary, may purchase at such sale and Trustor
hereby covenants to warrant and defend the title of such purchaser or
purchasers.
(b) After deducting all costs, fees and expenses of Trustee and of
this Trust, including costs of evidence of title in connection with sale,
Trustee shall apply the proceeds of sale to payment of: all sums expended
under the terms hereof, not then repaid, with accrued interest at the
highest rate of interest from time-to-time accruing under and as provided
in the Secured Debt Documents; all other sums then secured hereby and the
remainder, if any, to the person or persons legally entitled thereto.
(c) Trustee may postpone sale of all or any portion of the
Encumbered Property by public announcement at such time and place of sale,
and from time to time thereafter may postpone such sale by public
announcement at the time fixed by the preceding postponement or
subsequently noticed sale, and without further notice make such sale at
the time fixed by the last postponement, or may, in its discretion, give a
new notice of sale.
5.3 Appointment of Receiver. If an Event of Default shall have occurred
and be continuing, Beneficiary, as a matter of right and without notice to
Trustor or anyone claiming under Trustor, and without regard to the then value
of the Encumbered Property or the interest of Trustor therein, shall have the
right to (but shall not be obligated to) apply to any court having jurisdiction
to appoint a receiver or receivers of the Encumbered Property, and Trustor
hereby irrevocably consents to such appointment and waives notice of any
application therefor. Any such receiver or receivers shall have all the usual
powers and duties of receivers in like or similar cases and all the powers and
duties of Beneficiary in case of entry as provided in Section 5.4 of this
instrument and shall continue as such and exercise all such powers until the
date of confirmation of sale of the Encumbered Property unless such receivership
is sooner terminated.
5.4 Operation of the Encumbered Property by Beneficiary. If an Event of
Default shall have occurred and be continuing, 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 Encumbered
Property, and to exclude Trustor, and
27
Trustor's agents or servants, wholly therefrom, and to hold, use, administer,
manage and operate the same to the extent that Trustor 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 Trustor 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 rents, issues, profits and
Hydrocarbons 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 Trustor with respect to the Encumbered
Property. When and if the expenses of such operation and development (including
costs of unsuccessful work-over operations or additional wells) have been paid
and the Indebtedness paid, said properties shall, if there has been no sale or
foreclosure, be returned to Trustor.
5.5 Trustor's Waiver of Rights. Trustor waives the benefit of all laws now
existing or that hereafter may be enacted providing for (i) any appraisement
before sale of any portion of the Encumbered Property, and (ii) the benefit of
all laws that may be hereafter enacted in any way extending the time for the
enforcement of the collection of the Secured Debt or creating or extending a
period of redemption from any sale made in collecting said debt. To the full
extent Trustor may do so, Trustor agrees that Trustor will not at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension or
redemption, and Trustor, for Trustor, Trustor's heirs, devisees,
representatives, successors and assigns, and for any and all persons ever
claiming any interest in the Encumbered Property, to the extent permitted by
law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of election to mature or declare due the
whole of the secured indebtedness and marshalling in the event of foreclosure of
the liens hereby created. If any law referred to in this Section and now in
force, of which Trustor, Trustor's heirs, devisees, representatives, successors
and assigns or other person might take advantage despite this Section, shall
hereafter be repealed or cease to be in force, such law shall not thereafter be
deemed to preclude the application of this Section. Trustor expressly waives and
relinquishes any and all rights and remedies which Trustor may have or be able
to assert by reason of the laws of the State of California pertaining to the
rights and remedies of sureties.
5.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them,
shall be entitled to enforce payment and performance of any Indebtedness or
obligations secured hereby and to exercise all rights and powers under this Deed
of Trust or under the Collateral Trust Agreement or any other Secured Debt
Document or any laws now or hereafter in force, notwithstanding some or all of
the Indebtedness and obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment
or otherwise. Neither the acceptance of this instrument nor its enforcement
whether by court action or pursuant to the power of sale or other powers herein
contained, shall prejudice or in any manner affect Trustee's or Beneficiary's
right to realize upon or enforce any other security now or
28
hereafter held by Trustee or Beneficiary, it being agreed that Trustee and
Beneficiary, and each of them, shall be entitled to enforce this instrument and
any other security now or hereafter held by Beneficiary or Trustee in such order
and manner as they or either of them may in their absolute discretion determine.
No remedy herein conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by the Collateral Trust Agreement or any
other Secured Debt Document to Trustee or Beneficiary or to which either of them
may be otherwise entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Trustee or Beneficiary
and either of them may pursue inconsistent remedies.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
6.1 Pooling and Unitization. Trustor 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 Encumbered Property, with adjacent lands,
leaseholds and other interests, when, in the reasonable judgment of Trustor, 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 Encumbered
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 Trustor in such unit shall be included within the Encumbered 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, Trustor 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 Encumbered Property (or
any part thereof) included therein shall become a part of the Encumbered
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 Trustor therein were
specifically described in Exhibit A. Trustor is further authorized to amend,
modify or terminate any pooling or unitization agreement or order to which
Trustor is a party or the Encumbered Property is subject, provided that such
action does not conflict with the
29
provisions of this Deed of Trust, including this Section 6.1. Trustor 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 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 Encumbered
Property for debts contracted or liability or damages incurred in the management
or operation of the Encumbered 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. Trustor 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
Encumbered 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 Trustor solely at Trustor's
expense. If Trustor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Deed of Trust, 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 Trustor'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 Trustor. Trustor hereby agrees to repay
the expense of such action and such advances upon demand plus interest at the
Default Interest Rate. No such advance or action by Beneficiary,
30
Trustee or any receiver appointed hereunder shall be deemed to relieve Trustor
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
Trustor 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 time or times thereafter to insist upon
strict performance by Trustor of any and all of such terms, provisions and
conditions.
6.6 Defense of Claims. Trustor 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 Encumbered
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
Trustor's, the Trustee's or Beneficiary's rights affected thereby and/or to hold
harmless the Trustee and Beneficiary in respect of such proceedings; and should
Trustor fail or refuse to take any such action, Beneficiary may, upon giving
prior written notice thereof to Trustor, take such action in behalf and in the
name of Trustor and at Trustor's expense. Moreover, Beneficiary may take such
independent action in connection therewith as it may in its discretion deem
proper, Trustor 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 Trustor as hereinabove set
forth in this Section 6.6 shall survive the release, termination, foreclosure or
assignment of this Deed of Trust or any sale hereunder.
6.7 Trustee's Powers. At any time, or from time to time, without liability
therefor and without notice, upon written request of Beneficiary and
presentation of this instrument and the Secured Debt secured hereby for
endorsement, and without affecting Trustor's personal liability or the effect of
this instrument upon the remainder of the Encumbered Property, Trustee may (a)
reconvey any part of the Encumbered Property, (b) consent in writing to the
making of any map or plat thereof, (c) join in granting any easement thereon, or
(d) join in any extension agreement or any agreement subordinating the lien or
security interest hereof.
6.8 Beneficiary's Powers. Without affecting the liability of any other
person liable for the payment of the Indebtedness herein mentioned, and without
affecting perfection or priority of the lien or security interest of this
instrument against or in any portion of the Encumbered Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Beneficiary may, from time to time and without notice (a) release any person so
liable, (b) extend the maturity or alter any of the terms of any such
obligation, (c) grant other indulgences, (d) release or reconvey, or cause to be
released or reconveyed at any time at Beneficiary's option, any parcel, portion
or all of the Encumbered Property, (e) take or release any other or additional
security for any
31
obligation herein mentioned, or (f) make compositions or other arrangements with
debtors in relation thereto.
6.9 Reconveyance by Trustee. Upon written request of Beneficiary stating
that all sums secured hereby have been paid, and upon surrender of this
instrument and the Secured Debt to Trustee for cancellation and retention and
upon payment by Trustor of Trustee's fees, Trustee shall reconvey to Trustor, or
the person or persons legally entitled thereto, without representation or
warranty, any portion of the Encumbered Property then held hereunder. The
recitals in such reconveyance of any matters or facts shall be conclusive proof
of the truthfulness thereof. The grantee in any reconveyance may be described as
"the person or persons legally entitled thereto".
6.10 Effect of Partial Release or Reconveyance. If there is a partial
release or reconveyance by Trustee of any portion of the Encumbered Property,
Trustee and Beneficiary may look to the remainder of the Encumbered Property as
security for the full payment of the Secured Debt and all other Indebtedness
secured by this instrument.
6.11 Subrogation. To the extent that proceeds of the Indebtedness are owed
to pay any outstanding lien, charge or prior encumbrance against the Encumbered
Property, such proceeds may be advanced by Beneficiary at Trustor's request and
Beneficiary may be subrogated to any and all rights and liens owed by any owner
or holder of such outstanding liens, charges and prior encumbrances,
irrespective of whether said liens, charges or encumbrances are released.
6.12 No Merger. If both the lessor's and lessee's estates under any lease
or any portion thereof which constitutes a part of the Encumbered Property shall
at any time become vested in one owner, this instrument and the lien and
security interest created hereby shall not be destroyed or terminated by
application of the doctrine of merger and, in such event, Beneficiary shall
continue to have and enjoy all of the rights and privileges of Beneficiary as to
the separate estates. In addition, upon the foreclosure of the lien and security
interest created by this instrument on the Encumbered Property pursuant to the
provisions hereof, any leases or subleases then existing and created by Trustor
shall not be destroyed or terminated by application of the law of merger or as a
matter of law or as a result of such foreclosure unless Beneficiary or any
purchaser at any such foreclosure sale shall so elect. No act by or on behalf of
Beneficiary or any such purchaser shall constitute a termination of any lease or
sublease unless Beneficiary or such purchaser shall give written notice thereof
to such tenant or subtenant.
6.13 The Encumbered 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 Encumbered Property shall revert to Trustor 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 Trustor and at Trustor's cost and expense, deliver to Trustor proper
instruments acknowledging satisfaction of this Deed of Trust and the release or
reconveyance of the lien hereof in accordance with Applicable Law.
Notwithstanding any provision herein to the contrary, the Encumbered
32
Property, or any part thereof, shall, upon the written request of Trustor, be
released from the lien of this Deed of Trust 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.
6.14 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 Encumbered 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 Trustor. 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 Deed of Trust, which shall
continue as a first lien upon and prior perfected security interest in the
Encumbered Property not expressly released until the Secured Debt and all other
Indebtedness secured hereby are fully paid.
6.15 Deed of Trust, Assignment, etc. This Deed of Trust 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.
6.16 Limitation on Interest. It is the intent of Trustor and Secured
Debtholders in the execution of this instrument and the Secured Debt Documents
to contract in strict compliance with the usury laws of the State of California
and any other jurisdiction whose laws may govern the Secured Debt. In
furtherance thereof, it is agreed that none of the terms and provisions
contained in the Collateral Trust Agreement or any other Secured Debt Document
shall ever be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate in excess of the
Maximum Lawful Rate. Trustor or any guarantor, endorser or other party now or
hereafter becoming liable for the payment of the Secured Debt shall never be
liable for unearned interest on the Secured Debt and shall never be required to
pay interest on the Secured Debt at a rate in excess of the Maximum Lawful Rate,
and the provisions of this Section shall control over all other provisions of
the Secured Debt and any other instrument executed in connection herewith which
may be in apparent conflict herewith. In the event any Secured Debtholder shall
collect monies which are deemed to constitute interest which would otherwise
increase the effective interest rate on the Secured Debt to a rate in excess of
Maximum Lawful Rate, all such sums deemed to constitute interest in excess of
the legal rate shall be immediately returned to Trustor upon such determination.
6.17 Unenforceable Provisions. If any provision hereof or of the Secured
Debt Documents is invalid or unenforceable in the State of California or
otherwise, the other provisions hereof or of the Secured Debt Documents shall
remain in full force and effect, and the remaining provisions hereof shall be
liberally construed in favor of Trustee and Beneficiary in order to effectuate
the provisions hereof.
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6.18 Waiver by Trustee and Beneficiary. Any and all covenants in this Deed
of Trust 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.
6.19 Successors and Assigns. This Deed of Trust is binding upon Trustor,
Trustor'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.
6.20 Article and Section Headings. The article and section headings in
this Deed of Trust are inserted for convenience of reference and shall not be
considered a part of this Deed of Trust or used in its interpretation.
6.21 Execution in Counterparts. This Deed of Trust 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 counties other than the county in which such
counterpart is to be recorded or filed may have been omitted.
6.22 Special Filing as Financing Statement. This Deed of Trust shall
likewise be a security agreement and a financing statement. This Deed of Trust
shall be filed for record, among other places, in the real estate records of
each county in which any part of the real property covered by the oil and gas
leases described in Exhibit A hereto is situated, and, when filed in such
counties 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 real
property described in Exhibit A, hereto. A portion of the goods encumbered
hereby are, or are to become, fixtures as that term is defined in Section 9313
of the Uniform Commercial Code of the State of California. A carbon,
photographic or other reproduction of this Deed of Trust or of any financing
statement covering the Encumbered Property or any portion thereof shall be
sufficient as a financing statement and may be filed as such. Trustor 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, Trustor, 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 Deed of Trust or any of the other Secured Debt
Documents.
6.23 Notices. Except as otherwise required by Section 5.1 hereof, any
notice, request or demand which may be required or permitted to be given or
served upon Trustor shall be sufficiently given when given or made pursuant to
(a) the terms of the
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Collateral Trust Agreement, or (b) such other means and manner of giving of
notice as may be required by Applicable Law.
6.24 Request for Notice. Trustor hereby requests a copy of any notice of
default and that any notice of sale hereunder be mailed to it at the address set
forth on the signature page(s) of this instrument.
6.25 Acceptance by the Trustee. The Trustee accepts this trust when this
instrument, duly executed and acknowledged, is made a public record as provided
by law.
6.26 Release and Waiver. Trustor hereby waives and releases any and all
rights of contribution, reimbursement or indemnity it has or may hereafter have
against Trustee and/or Beneficiary arising from or relating to this instrument
and/or the Encumbered Property, including without limitation claims or
liabilities relating to Environmental Laws. Notwithstanding anything to the
contrary set forth in this instrument or any other Secured Debt Document, the
obligations and liabilities of Trustor under and pursuant to the Hazardous
Materials Undertaking and Unsecured Indemnity are not secured by this
instrument.
6.27 No Partnership. Nothing contained in this instrument is intended to,
or shall be construed as, creating to any extent and in any manner whatsoever,
any partnership, mining partnership, joint venture, or association among
Trustor, Trustee and Beneficiary, or in any way as to make Beneficiary or
Trustee co-principals with Trustor with reference to the Encumbered Property,
and any inferences to the contrary are hereby expressly negated.
6.28 Beneficiary as Agent for the Secured Debtholders. As described above,
certain Affiliates of Credit Agreement Agent and the Secured Debtholders are or
may become parties to certain Hedging Agreements with Trustor and/or Affiliates
of Trustor. This Deed of Trust secures the obligations of Trustor 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 Credit Agreement Agent and the Secured Debtholders
which are so entitled to share in the rights and benefits accruing to
Beneficiary under this Deed of Trust in respect of the Encumbered Property.
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IN WITNESS WHEREOF, Trustor has executed or caused to be executed this
Amended and Restated Deed of Trust with Power of Sale, Assignment of Production,
Security Agreement, Financing Statement and Fixture Filing in the presence of
the undersigned Notary Public on this 14th day of July, 2003.
TRUSTOR AND DEBTOR
CALPINE CORPORATION, a Delaware
corporation
By: ____________________________________
Title: Executive Vice President
Printed Name: B.A. Berilgen
CALIFORNIA
ACKNOWLEDGMENT
STATE OF TEXAS )
COUNTY OF HARRIS )
On July 14, 2003, before me, Suzanne B. Snow, a Notary Public in and for said
County and State, personally appeared B.A. Berilgen, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and office seal.
(SEAL)
Signature: ______________________________
Suzanne B. Snow, Notary Public
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Schedule I
Existing Mortgage
Deed of Trust with Power of Sale, Assignment of Production, Security Agreement,
Financing Statement and Fixture Filing (California) from Calpine Corporation, a
Delaware corporation, Trustor to Chicago Title Insurance Company, Trustee and
The Bank of Nova Scotia, for itself and as Agent, Beneficiary, filed as follows:
JURISDICTION FILE NO. FILE DATE
------------ -------- ---------
Colusa County, CA 02-2145 5/17/2002
Contra Costa County, CA 2002-0170008-00 5/13/2002
Fresno County, CA 2002-0085593 5/23/2002
Kern County, CA 0202084536 5/24/2002
Kings County, CA 0210874 5/20/2002
Sacramento County, CA Book 20020507, Page 5/7/2002
0611
Solano County, CA 2002-00058871 5/9/2002
Sutter County, CA 2002-0009817 5/17/2002
Tulare County, CA 2002-0045392 6/14/2002
Yolo County, CA 2002-0019210-00 5/7/2002
UCC-1 Financing Statement regarding California Deed of Trust, naming Calpine
Corporation as debtor and The Bank of Nova Scotia, as Agent, as secured party,
filed as follows:
JURISDICTION FILE NO. FILE DATE
------------ -------- ---------
Colusa County, CA 02-2146 5/17/2002
Contra Costa County, CA 2002-0170009-00 5/13/2002
Fresno County, CA 2002-0085594 5/23/2002
Kern County, CA 0202084537 5/24/2002
Kings County, CA 0210875 5/20/2002
Sacramento County, CA Book 20020507, Page 5/7/2002
0614
Solano County, CA 2002-00058870 5/9/2002
Sutter County, CA 2002-0009818 5/17/2002
Tulare County, CA 2002-0045393 6/14/2002
Yolo County, CA 2002-0019211-00 5/7/2002
I-2
Schedule II
Supplements and Amendments
N/A
II-1
Schedule III
Partial Releases
Substitution of Trustee and Partial Reconveyance by The Bank of Nova Scotia, as
Agent, in favor of Calpine Corporation (California-Deed of Trust) filed as
follows:
JURISDICTION ORIGINAL ORIGINAL PARTIAL PARTIAL
------------ FILE NO. FILE DATE RELEASE FILE RELEASE FILE
-------- --------- NO. DATE
--- ----
Solano County, 2002- 5/9/02 2002-00127329 10/7/02
CA (Church 1-11) 00058871
UCC-3 Financing Statement Amendment relating to the Partial Release-California
Deed of Trust naming Calpine Corporation as Debtor and The Bank of Nova Scotia,
as Agent, as Secured Party, filed as follows:
JURISDICTION ORIGINAL ORIGINAL PARTIAL PARTIAL
------------ FILE NO. FILE DATE RELEASE FILE RELEASE FILE
-------- --------- NO. DATE
--- ----
Solano County, 2002- 5/9/02 2002-00132521 10/17/02
CA (Church 1-11) 00058870
III-1
EXHIBIT A To
Amended and Restated Deed of Trust with Power of Sale,
Assignment of Production,
Security Agreement, Financing Statement and Fixture Filing,
dated July 16, 2003, from
Calpine Corporation, As Trustor,
to
Chicago Title Insurance Company, As Trustee
and The Bank of New York, As Beneficiary
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
instrument.
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 instrument is not
limited to the land described in Exhibit A but is intended to cover the
entire interest of Trustor 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 in which the encumbered 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, Official
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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