EXHIBIT 10.20
MORTGAGE, ASSIGNMENT, SECURITY
AGREEMENT AND FINANCING STATEMENT
FROM
CALPINE CORPORATION, as Mortgagor
(Taxpayer I.D. No.77-0212977)
TO
THE BANK OF NOVA SCOTIA,
for itself and as Agent,
as Mortgagee
(Taxpayer I.D. No. 13-494-1099)
Dated as of May 1, 2002
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"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
"THIS FINANCING STATEMENT COVERS AS-EXTRACTED COLLATERAL WHICH WILL BE FINANCED
AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN EXHIBIT A
HERETO."
"THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE IMMOVABLE PROPERTY CONCERNED,
WHICH IS DESCRIBED IN EXHIBIT A HERETO."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO AND THIS
FINANCING STATEMENT IS TO BE FILED AS A FIXTURE FILING AS DEFINED IN LA. REV.
STAT. SECTION 10:9-102(a)(40)."
THIS INSTRUMENT WAS PREPARED BY:
Kevin L. Shaw, Esq.
Mayer, Brown, Rowe & Maw
700 Louisiana Street, 36th Floor
Houston, TX 77002
MORTGAGE, ASSIGNMENT, * UNITED STATES OF AMERICA
SECURITY AGREEMENT
AND FINANCING STATEMENT * STATE OF CALIFORNIA
BY * COUNTY OF SANTA CLARA
CALPINE CORPORATION, *
a Delaware corporation STATE OF CALIFORNIA
in Favor of *
THE BANK OF NOVA SCOTIA, COUNTY OF SAN FRANCISCO
a Canadian chartered bank *
* * * * * * * * * * * * * *
BE IT KNOWN, that on this 2nd day of May, 2002, before me, the
undersigned Notary Public duly commissioned and qualified in and for the State
and County first written above, and in the presence of the undersigned witnesses
personally came and appeared:
CALPINE CORPORATION, a Delaware corporation having a mailing address of 1000
Louisiana Street, Suite 800, Houston TX 77002, and a federal taxpayer
identification number of 77-0212977, appearing herein through Robert D. Kelly,
its Executive Vice President, duly authorized by resolutions of the Board of
Directors of said corporation, a certified copy of which is attached hereto as
Exhibit B (herein called the "Mortgagor" or the "Borrower"), who declared that
Mortgagor does by these presents declare and acknowledge an indebtedness unto
Scotiabank (as hereinafter defined)
BE IT KNOWN, that on this 1ST day of May, 2002, before me, the
undersigned Notary Public duly commissioned and qualified in and for the State
and County second written above, and in the presence of the undersigned
witnesses personally came and appeared:
THE BANK OF NOVA SCOTIA, a Canadian chartered bank ("Scotiabank"), having a
mailing address of 580 California Street, Suite 2100, San Francisco, CA
94119, and a federal taxpayer identification number of 13-494-1099,
appearing herein through its undersigned representative, duly authorized
hereunto
(herein called the "Agent"), here present who accepts this instrument.
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Borrower and Agent declare as follows:
RECITALS
Borrower, certain institutional lenders (individually, a "2002 Lender" and
collectively, the "2002 Lenders") and Scotiabank have entered into a Credit
Agreement, dated as of March 8, 2002 (herein, as the same may be amended,
modified or supplemented from time to time, called the "2002 Loan Agreement"),
pursuant to which the 2002 Lenders have agreed to make loans to Borrower and
issue or cause to be issued letters of credit for the benefit of Borrower
(individually, a "2002 Letter of Credit" and collectively, the "2002 Letters of
Credit") in amounts not to exceed at any one time outstanding $1,600,000,000,
and Borrower, to evidence its indebtedness to the 2002 Lenders under the 2002
Loan Agreement, has executed and delivered (or will execute and deliver) to the
2002 Lenders its secured promissory notes in the aggregate, original principal
amount of $1,600,000,000, to mature not later than May 24, 2003 (individually, a
"2002 Loan Note" and collectively, the "2002 Loan Notes"), the 2002 Loan Notes
being payable to the order of the 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.
Borrower, certain institutional lenders (individually, an "Existing Lender" and
collectively, the "Existing Lenders"; and together with the 2002 Lenders, the
"Lenders") and Scotiabank have entered into a 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 Credit
Agreement") pursuant to which the Existing Lenders have agreed to make loans to
Borrower and issue or cause to be issued any letters of credit for the benefit
of Borrower (individually, an "Existing Letter of Credit" and collectively, the
"Existing Letters of Credit") in amounts not to exceed at any one time
$400,000,000, and Borrower, to evidence its indebtedness to the Existing Lenders
under the Existing Credit Agreement, has executed and delivered to the Existing
Lenders its secured promissory notes to mature not later than May 24, 2003
(individually, an "Existing Loan Note" and collectively, the "Existing Loan
Notes"), the Existing Loan Notes being payable to the order of the Existing
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. The 2002 Loan Agreement and the Existing Credit Agreement
are herein collectively called the "Credit Agreements." The 2002 Loan Notes and
the Existing Loan Notes are herein individually called a "Loan Note" and
collectively called the "Loan Notes". The 2002 Letters of Credit and the
Existing Letters of Credit are herein individually called a "Letter of Credit"
and collectively called the "Letters of Credit".
It is a condition precedent to the obligation of the Lenders to make Loans under
the Credit Agreements, to issue or cause to be issued Letters of Credit under
the Credit Agreements and to the obligations of the Agent, the Lenders or the
Lender Parties (as the case may be), that the Mortgagor executes and delivers
this instrument.
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For all purposes of this instrument, unless the context otherwise requires:
A. "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 in the Credit Agreements)). 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.
B. "Agent" is defined in the Preamble of this instrument.
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. "Borrower" is defined in the Preamble of this instrument.
E. "Credit Agreements" is defined in Recital 2 to this instrument.
F. "Deed of Trust" means each mortgage, deed of trust, or other real
property collateral security instrument in a form reasonably satisfactory
to the Agent, executed and delivered pursuant to Section 8.1.8 of the 2002
Credit Agreement, as amended, supplemented, restated or otherwise modified
from time to time, including, without limitation, this instrument.
G. "Environmental Laws" shall mean any and all present and future
United States federal, state and local laws or regulations, codes, plans,
orders, decrees, 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.
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H. "Existing Assignment Agreement" means that certain Assignment and
Security Agreement executed and delivered by Calpine Gilroy Cogen, L.P., a
California limited partnership, pursuant to Section 6.1.3 of the Existing
Credit Agreement, substantially in the form of Exhibit F to the Existing
Credit Agreement, as amended, supplemented, amended and restated or
otherwise modified from time to time.
I. "Existing Credit Agreement" is defined in Recital 2 to this
instrument.
J. "Existing Lenders" is defined in Recital 2 to this instrument.
K. "Existing Letters of Credit" is defined in Recital 2 to this
instrument.
L. "Existing Loan Documents" means the Existing Credit Agreement, the
Existing Loan Notes, the Existing Assignment Agreement, and each other
relevant agreement, document or instrument (including the fee letter
described in Section 3.3.2 of the Existing Credit Agreement) delivered in
connection therewith.
M. "Existing Loan Notes" is defined in Recital 2 to this instrument.
N. "Fee Letter" means the fee letter agreement described in Section
3.3.2 of the 2002 Credit Agreement.
O. "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.
P. "Guaranty" means the guaranty executed and delivered by the
Guarantors pursuant to Section 6.1.3 of the 2002 Credit Agreement,
substantially in the form of Exhibit H thereto, as amended, supplemented or
otherwise modified from time to time.
Q. "Hazardous Materials Indemnity" means that certain hazardous
materials indemnity executed and delivered by the Borrower pursuant to
Section 8.1.8 of the 2002 Credit Agreement, as amended, supplemented,
restated or otherwise modified from time to time.
R. "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
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all other agreements or arrangements designed to protect such Person
against fluctuations in the price of commodities.
S. "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.
T. "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.
U. "Indebtedness", "Note" and "Notes" shall have the respective
meanings set forth in Section 1.2 hereof.
V. "Indemnification Claim" is defined in Section 3.6 of this
instrument.
W. "Indemnified Person" means Agent and each of the Lender Parties,
and their respective employees, affiliates, agents and attorneys, and any
other Person to be indemnified under this instrument.
X. "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.
Y. "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.
Z. "Leases" means any and all leases (including without limitation oil
and gas leases and oil, gas and other minerals leases), surface leases or
easements, subleases, licenses, concessions, operating rights or other
agreements (written or verbal, now or hereafter in effect) which grant a
possessory interest in and to, or the right to explore, use, lease,
license, possess, produce, process, store and transport Hydrocarbons from,
operate from, or otherwise enjoy, the Mortgaged Property, together with all
amendments, modifications, extensions and renewals thereof.
AA. "Legal Requirements" means (i) any and all present and future
judicial decisions, statutes, rulings, rules, regulations, licenses,
decisions, orders,
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injunctions, decrees, permits, certificates or ordinances of any
Governmental Authority in any way applicable to the Mortgagor, or the
Mortgaged Property, including the ownership, use, occupancy, operation,
maintenance, repair or reconstruction thereof, and any other Applicable Law
enacted by any Governmental Authority relating to health or the
environment, (ii) the Mortgagor's presently or subsequently effective
Organic Documents, (iii) any and all Leases, (iv) any and all leases and
other contracts (written or oral) of any nature to which the Mortgagor, or
the Mortgaged Property may be bound and (v) any and all restrictions,
restrictive covenants or zoning, present and future, as the same may apply
to the Mortgaged Property.
BB. "Lender Party" or "Lender Parties" means, as the context may
require, the Agent, any Lender and any Affiliate of any Lender that is an
issuer under a letter of credit, and each of their respective successors,
transferees and assigns.
CC. "Loan Documents" means the Existing Loan Documents and the 2002
Loan Documents.
DD. "Loan Note" is defined in Recital 2 to this instrument.
EE. "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.
FF. "Mortgaged Property" shall mean the properties, rights and
interests hereinafter described and defined as the Mortgaged Property.
GG. "Obligations" means any and all of the covenants, warranties,
representations and other obligations (other than to repay the
Indebtedness) made or undertaken by the Mortgagor or others to the Agent,
the Lender Parties or others as set forth in the Credit Agreements or other
Loan Documents.
HH. "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.
II. "Operating Equipment" shall mean 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,
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derricks, separators, steam generators, 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), 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, boats, loading docks, loading racks and
shipping facilities.
JJ. "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.
KK. "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).
LL. "Permitted Encumbrances" means the outstanding liens, easements,
building lines, restrictions, exceptions, reservations, conditions,
limitations, security interests and other matters (if any) as reflected on
Exhibit C attached hereto and the lien and security interests created by
the Security Documents.
MM. "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.
NN. "Personalty" means all of the right, title and interest of the
Mortgagor now owned or hereafter acquired in and to all furniture,
furnishings, Equipment, machinery, Goods, General Intangibles, money,
Accounts, receivables, Contract Rights, Inventory, all refundable,
returnable or reimbursable fees, deposits or other funds or evidences of
credit or indebtedness deposited by or on behalf of the Mortgagor with any
Governmental Authority, agencies, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits, commitment fees and development costs, and all other personal
property (other than the Fixtures) of any kind or character as defined in
and subject to the provisions of Article 9 of the Uniform Commercial Code,
now or hereafter located upon, within or about, or used in connection with,
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the lands described in Exhibit A, together with all accessories,
replacements and substitutions thereto or therefor and the Proceeds
thereof.
OO. "Pledge Agreements" means the pledge agreements executed and
delivered pursuant to Section 6.1.4 of the 2002 Credit Agreement, as such
agreements may be amended, supplemented, restated or otherwise modified
from time to time, which will be in substantially the form of Exhibit I
thereto.
PP. "Production Sale Contracts" shall mean contracts now in effect, or
hereafter entered into by the Mortgagor, or entered into by the Mortgagor's
predecessors in interest, for the sale, purchase, exchange, gathering,
transportation, treating or processing of Hydrocarbons produced from the
lands described in Exhibit A attached hereto and made a part hereof.
QQ. "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 the Mortgagor for using, leasing, licensing, possessing,
operating, selling or otherwise enjoying the Mortgaged Property, including
the proceeds from the sale of Hydrocarbons.
RR. "Security Documents" means the Notes, this instrument, the
financing statements and any and all other instruments now or hereafter
executed by the Mortgagor or any other person or party to evidence or
secure the payment of the Indebtedness or the performance and discharge of
the Obligations, as any of the foregoing may be amended, renewed or
extended. Notwithstanding that the definition of Security Documents and
various of the components thereof include documents that may be amended,
renewed or extended, such definition shall in no way be construed to
suggest that any party has agreed (or is obligated) to amend, renew or
extend them.
SS. "2002 Assignment Agreement" means that certain Assignment and
Security Agreement executed and delivered by Calpine Gilroy Cogen, L.P., a
California limited partnership, pursuant to Section 6.1.8 of the 2002
Credit Agreement, substantially in the form of Exhibit K hereto, as
amended, supplemented, amended and restated or otherwise modified from time
to time.
TT. "2002 Loan Agreement" is defined in Recital 1 to this instrument.
UU. "2002 Lenders" is defined in Recital 1 to this instrument.
VV. "2002 Letters of Credit" is defined in Recital 1 to this
instrument.
WW. "2002 Loan Documents" means the 2002 Credit Agreement, the 2002
Loan Notes, the Pledge Agreements, the Guaranty, the Deeds of Trust, the
2002 Assignment Agreement, the Hazardous Materials Indemnity, the Fee
Letter, and each other relevant agreement, document or instrument delivered
in connection therewith.
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XX. "2002 Loan Notes" is defined in Recital 1 to this instrument.
YY. "Taxes" means all real property and personal property taxes,
production taxes, assessments, permit fees, water, gas, sewer, electricity
and other utility rates and charges, charges for any easement, license or
agreement maintained for the benefit of the Mortgaged Property, and all
other taxes, charges and assessments and any interest, costs or penalties
with respect thereto, of any kind and nature whatsoever which at any time
prior to or after the execution hereof may be charged, assessed, levied or
imposed upon the Mortgaged Property or the Rents and Revenues or the
ownership, use, occupancy or enjoyment thereof.
ZZ. "Transportation Agreements" shall mean any contracts or agreements
entered into from time to time by the Mortgagor, or entered into by the
Mortgagor's predecessors in interest, relating to the transportation of
Hydrocarbons, as any such agreement or contract may be amended,
supplemented, restated or otherwise modified from time to time.
AAA. "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect from time to time in the State of Louisiana (Louisiana
Commercial Laws - Louisiana Revised Statutes Title 10) or any other
applicable state, and the terms "Accounts", "Account Debtor", "As Extracted
Collateral", "Deposit Account", "Chattel Paper", "Documents", "General
Intangibles", "Goods", "Equipment", "Fixtures", "Inventory", "Instruments",
and "Proceeds" shall have the respective meanings assigned to such terms in
the Uniform Commercial Code.
BBB. "Water Rights" shall mean (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.
GRANT
NOW, THEREFORE, the Mortgagor, for and in consideration of the premises and
as security for the Indebtedness as described below, by these presents does
specially mortgage, collaterally assign, pledge, affect and hypothecate, unto
and in favor of the Agent, individually and as agent for the Lender Parties, all
the Mortgagor's right, title and interest, whether now owned or hereafter
acquired, in and to all of the hereinafter
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described properties, rights and interests; and, insofar as such properties,
rights and interests consist of Equipment, General Intangibles, Accounts,
Deposit Accounts, As Extracted Collateral, Contract Rights, Inventory, Fixtures,
Proceeds of collateral or any other personal property of a kind or character
defined in or subject to the applicable provisions of the Uniform Commercial
Code (as in effect from time to time in the appropriate jurisdiction with
respect to each of said properties, rights and interests), the Mortgagor hereby
grants to the Agent, individually and as agent for the Lender Parties, a
continuing security interest therein; namely:
(a) the lands described in Exhibit A, and Leases, fee, mineral,
overriding royalty, royalty and other interests which are described in
Exhibit A,
(b) the presently existing and (subject to the terms of Section 6.1
hereof) hereafter arising unitization, unit operating, communitization and
pooling agreements and the properties covered and the units created thereby
(including, without limitation, all units formed under orders, regulations,
rules, approvals, decisions or other official acts of any Governmental
Authority having jurisdiction) 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 Permits,
(e) the Production Sale Contracts,
(f) the Joint Operating Agreements,
(g) the Transportation Agreements,
(h) the Hedging Agreements,
(i) the Leases,
(j) the Personalty,
(k) the Rents and Revenues,
(l) the Operating Equipment,
(m) the Water Rights, and
(n) without duplication of any other provision of this granting
clause, all of the Mortgagor's now owned or hereafter arising or acquired
Equipment, Fixtures and other Goods necessary or used in connection with,
and Inventory, Accounts, As Extracted Collateral, Deposit Accounts, General
Intangibles,
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Contract Rights, Chattel Paper, Electronic Chattel Paper, Documents,
Instruments, and Proceeds arising from, or relating to, the properties and
lands 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, "take-or-pay" settlements, buy-outs or
buy-downs, gas balancing claims, options, nominee agreements, unitization
and pooling agreements, operating agreements and unit operating agreements,
processing agreements, salt water disposal 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, 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, accounting records,
rights-of-way, franchises, bonds, easements, servitudes, surface leases,
permits, licenses, tenements, hereditaments, appurtenances, concessions,
occupancy leases, 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 the Mortgagor might at any time have or be entitled to,
but excluding any data or contracts with respect to which mortgaging or
granting of a lien or a security interest is prohibited by existing third
party agreements,
all the aforesaid properties, rights and interests, together with any additions
thereto which may be subjected to the lien and security interest of this
instrument by means of supplements hereto, being hereinafter called the
"Mortgaged Property."
Subject, however, to (i) Permitted Encumbrances (including 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
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production contained in Article III hereof, but only insofar and so long as said
assignment of production is not inoperative under the provisions of Section 3.5
hereof, and (iii) the condition that neither the Agent nor any of the other
Lender Parties 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 the Mortgagor in respect of the Mortgaged Property.
The Mortgaged Property is to remain so specially mortgaged, affected and
hypothecated unto and in favor of the Agent for itself and as agent for the
Lender Parties to secure the payment of the Indebtedness (including the
performance of the obligations of the Mortgagor herein contained) until the full
and final payment or discharge of the Indebtedness, and the Mortgagor is herein
and hereby bound and obligated not to sell or alienate the Mortgaged Property to
the prejudice of this act.
The Mortgagor, in consideration of the premises and to induce the Agent and
the Lender Parties, as the case may be, to make the Loans and issue the Letters
of Credit, hereby covenants and agrees with the Agent, for itself and as agent
for the Lender Parties, as follows:
ARTICLE I
Indebtedness Secured
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1.1 Items of Indebtedness Secured. The following items of indebtedness are
secured hereby:
(a) The Loan Notes (including future advances to be made thereunder by
the Agent or the Lenders), the Letter of Credit Outstandings (as defined in
the Credit Agreements) and all other obligations and liabilities of the
Mortgagor under the Credit Agreements;
(b) All indebtedness and future advances evidenced by any promissory
notes evidencing any additional loans which the Agent or the Lenders may
from time to time make to the Mortgagor, if any, the Agent and the Lenders
not being obligated, however, to make such additional loans;
(c) Any sums advanced or expenses or costs incurred by the Agent or
the Lender Parties, or by any keeper or 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;
(d) Any and all other indebtedness of the Mortgagor or any Affiliate
of the Mortgagor to the Agent or any Lender Party now or hereafter owing,
whether direct or indirect, primary or secondary, fixed or contingent,
joint or several, regardless of how evidenced or arising, including without
limitation, all Letters of Credit; and
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(e) Any extensions, refinancings, modifications or renewals of all
such indebtedness described in subparagraphs (a) through (d) above, whether
or not the Mortgagor executes any extension agreement or renewal
instruments. The indebtedness secured hereby further continues with respect
to any new obligation arising from any novation (subjective or objective)
of the foregoing indebtedness as permitted by Louisiana Civil Code Article
1884. Pursuant to Louisiana Revised Statutes 9:5390, this instrument shall
automatically secure payment of any renewal or refinancing note or notes
delivered in substitution for or exchange of the note or notes then secured
by this instrument evidencing any part of the Indebtedness.
1.2 Indebtedness and the Notes Defined. All the above items of indebtedness
are hereinafter collectively referred to as the "Indebtedness." Any promissory
note evidencing any part of the Indebtedness, including, without limitation, any
of the Loan Notes, is hereinafter referred to as a "Note," and all such
promissory notes are hereinafter referred to collectively as the "Notes."
1.3 Maximum Amount. The maximum amount of the Indebtedness that may be
outstanding at any time and from time to time that this instrument secures,
including without limitation as a mortgage and as a collateral assignment, and
including without limitation any expenses, advances or costs incurred by the
Agent and all other amounts included within the Indebtedness, is Three Billion
($3,000,000,000.00) dollars.
1.4 No Paraph. The Mortgagor and the Agent acknowledge that no Note or
other evidence of Indebtedness has been paraphed for identification with this
instrument.
ARTICLE II
Particular Covenants and Warranties
-----------------------------------
of the Mortgagor
----------------
2.1 Payment of the Indebtedness and Performance of Obligations. The
Mortgagor will duly and punctually pay the Indebtedness, as and when called for
in the Credit Agreements and the Security Documents and on or before the due
dates thereof, and will timely perform and discharge all of the Obligations
(including each and every obligation owing on account of the Notes), in full and
on or before the dates same are to be performed and discharged.
2.2 Certain Representations and Warranties. The Mortgagor represents and
warrants (and with respect to those matters set forth in the following
subsections (b) and (f), as to those portions of the Mortgaged Property that are
operated by persons other than Mortgagor, Mortgagor makes such representation
and warranty to the best of its knowledge) that
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(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) the Mortgagor, to the extent of the interest specified in Exhibit
A (including Exhibit A-1), has valid and indefeasible title to each
property right or interest constituting the Mortgaged Property described in
Exhibit A (including Exhibit A-1) and has a good and legal right to grant
and convey the same to the Agent; such interest entitles Mortgagor to
receive not less than the share of Hydrocarbons from such property
indicated as its net revenue interest or "NRI" share of such Hydrocarbons,
and obligates Mortgagor to pay for not more than the share of operating and
other costs, liabilities and expenses associated with such property
indicated as its working interest or "WI" share of such costs, liabilities
and expenses,
(d) the Mortgaged Property is free from all encumbrances or liens
whatsoever, except for the Permitted Encumbrances or as permitted by the
provisions of Section 2.4(e) hereof,
(e) the Mortgagor is not obligated, by virtue of any prepayment under
any contract providing for the sale by the Mortgagor of Hydrocarbons which
contains a "take or pay" clause or under any similar arrangement, to
deliver Hydrocarbons at some future time without then or thereafter
receiving full payment therefor,
(f) the Mortgaged Property is currently being operated, maintained and
developed, in all material respects, in accordance with all applicable
currently existing Permits, Legal Requirements and all Applicable Laws
(including, without limitation, Environmental Laws),
(g) the cover page to this instrument lists the correct legal name of
the Mortgagor and the Mortgagor has not been known by any legal name
different from the one set forth on the cover page of this instrument,
except as set forth on Schedule I to this instrument; the Mortgagor is not
now and has not been known by any trade name, nor has the Mortgagor been
the subject of any merger or other corporate reorganization,
(h) the execution, delivery and performance by the Mortgagor of the
Security Documents and the borrowing evidenced by the Notes, (i) are within
the Mortgagor's corporate powers and have been duly authorized by the
Mortgagor's
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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 the Mortgagor's property or assets, except as contemplated by the
provisions of the Security Documents. The Security Documents constitute the
legal, valid and binding obligations of the Mortgagor and others obligated
under the terms of the Security Documents, in accordance with their
respective terms, and
(i) there are no actions, suits or proceedings pending, or to the
knowledge of the Mortgagor threatened, against or affecting the Mortgagor
or the Mortgaged Property that could materially adversely affect the
Mortgagor or the Mortgaged Property, or involving the validity or
enforceability of this instrument or the priority of the liens and security
interests created by the Security Documents, and no event has occurred
(including specifically the Mortgagor's execution of the Security Documents
and its consummation of the Loans described therein) 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 the Mortgagor's property other than
the liens and security interests created by the Security Documents.
2.3 Further Assurances. The Mortgagor will warrant and forever defend the
Mortgaged Property unto the Agent against every person whomsoever lawfully
claiming the same or any part thereof, subject to Permitted Encumbrances, and
Mortgagor will maintain and preserve the lien and security interest hereby
created so long as any of the Indebtedness remains unpaid. The Mortgagor will
execute and deliver such other and further instruments and will do such other
and further acts as, in the opinion of the Agent, may be necessary or desirable
to carry out more effectually the purposes of this instrument, including,
without limiting the generality of the foregoing, (i) prompt correction of any
defect which may hereafter be discovered in the title to the Mortgaged Property
or in the execution and acknowledgment of this instrument, any Note, or any
other document executed in connection herewith, and (ii) prompt execution and
delivery of all notices to parties operating, purchasing or receiving proceeds
of production of Hydrocarbons from the Mortgaged Property, and all division
orders or transfer orders, any of which, in the opinion of the Agent, is needed
in order to transfer effectually or to assist in transferring effectually to the
Agent the assigned proceeds of production from the Mortgaged Property.
2.4 Operation of the Mortgaged Property. So long as the Indebtedness or any
part thereof remains unpaid, and whether or not the Mortgagor is the operator of
any particular part of the Mortgaged Property, the Mortgagor shall, at the
Mortgagor's own expense:
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(a) Do all things necessary to keep unimpaired the Mortgagor's rights
in the Mortgaged Property and not, except in the ordinary course of
business, abandon any well or forfeit, surrender or release any Lease
capable of producing Hydrocarbons in paying quantities, without the prior
written consent of the Agent;
(b) Obtain and maintain all required Permits and cause the lands
described in Exhibit A to be maintained, developed, protected against
drainage, and continuously operated for the production of Hydrocarbons in a
good and workmanlike manner as would a prudent operator, and in accordance
with generally accepted industry practices, Joint Operating Agreements, and
all Applicable Laws, excepting those being contested in good faith;
(c) Duly pay and discharge, or cause to be paid and discharged,
promptly as and when due and payable, all rentals and royalties (including
shut-in royalties) payable in respect of the Mortgaged Property, and all
expenses incurred in or arising from the operation or development of the
Mortgaged Property not later than the due date thereof, or the day any
fine, penalty, interest or cost may be added thereto or imposed, or the day
any lien may be filed, for the non-payment thereof (if such day is used to
determine the due date of the respective item);
(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, without the prior written consent of the Agent, 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
(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
Security Documents, with respect to all or any portion of the Mortgaged
Property, the Leases or the Rents and Revenues other than (1) the Permitted
Encumbrances, (2) Taxes constituting a lien but not due and payable, (3)
defects or irregularities in title, and liens, charges or encumbrances,
which, in the Agent's reasonable opinion, are not such as to interfere
materially with the development, operation or value of the Mortgaged
Property and not such as to affect materially title thereto, (4) those
being contested by the Mortgagor in good faith in such manner as not to
jeopardize the Agent's rights in and to the Mortgaged Property, (5) those
liens permitted by each Section 8.2.3 of each of the Credit Agreements, and
(6) those consented to in writing by the Agent;
(f) Carry with financially sound and reputable insurance companies and
in amounts satisfactory to the Agent the following insurance: (1) workmen's
compensation insurance and public liability and property damage insurance
in
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respect of all activities in which the Mortgagor might incur personal
liability for the death of or injury to an employee or third person, or
damage to or destruction of another's property; and (2) to the extent such
insurance is carried by similar companies engaged in similar undertakings
in the same general areas in which the Mortgaged Property is located,
insurance in respect of the Operating Equipment, against loss or damage by
fire, lightning, hail, tornado, explosion and other similar risks, hazards,
casualties and contingencies (including business interruption insurance
covering loss of Rents and Revenues); provided, that any such insurance may
be provided by way of self insurance to the extent that similar companies
engaged in similar undertakings in the same general areas also self-insure.
Each insurance policy issued in connection therewith shall provide by way
of endorsements, riders or otherwise that (i) name the Agent as a loss
payee on all property insurance policies and an additional insured on all
liability insurance policies, and provide that proceeds will be payable to
the Agent as its interest may appear, which proceeds are hereby assigned to
the Agent, it being agreed by the Mortgagor that such payments shall be
applied A) if there be no event of default existing or which would exist
but for due notice or lapse of time, or both, to the restoration, repair or
replacement of the Mortgaged Property, or B) if there be an event of
default existing, or which would exist but for due notice or lapse of time,
or both, at the option of the Agent, either for the above stated purpose or
toward the payment of the Indebtedness; (ii) the coverage of the Agent
shall not be terminated, reduced or affected in any manner regardless of
any breach or violation by the Mortgagor of any warranties, declarations or
conditions in such policy; (iii) no such insurance policy shall be
canceled, endorsed, altered or reissued to effect a change in coverage for
any reason and to any extent whatsoever unless such insurer shall have
first given the Agent thirty (30) days prior written notice thereof; and
(iv) the Agent may, but shall not be obligated to, make premium payments to
prevent any cancellation, endorsement, alteration or reissuance and such
payments shall be accepted by the insurer to prevent same. The Agent shall
be furnished with a certificate evidencing such coverage in form and
content acceptable to the Agent. All policies to be maintained under this
instrument are to be issued on forms and by companies and with endorsements
acceptable to the Agent. The Mortgagor shall maintain insurance in an
amount sufficient to prevent the Mortgagor from becoming a co-insurer under
any policy required hereunder. If the Mortgagor fails to maintain the level
of insurance required under this instrument, then the Mortgagor shall and
hereby agrees to indemnify the Agent to the extent that a casualty occurs
and insurance proceeds would have been available had such insurance been
maintained;
(g) Furnish to the Agent 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 the Mortgagor's location (as described on the signature page
hereto) or in the name of the Mortgagor, notice in writing of such change;
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(h) Not initiate or acquiesce in any change in any material zoning or
other land use or Water Rights classification now or hereafter in effect
and affecting the Mortgaged Property or any part thereof;
(i) Notify the Agent 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 under Section 4.1 or any event which, with notice, the
passage of time or both would be such an event of default;
(j) Appear and defend, with counsel acceptable to the Agent in its
reasonable discretion, and hold the Agent harmless from, any action,
proceeding or claim affecting the Mortgaged Property or the rights and
powers of the Agent under the Security Documents, and all costs and
expenses incurred by the Agent in protecting its interests hereunder in
such an event (including all court costs and attorneys' fees) shall be
borne by the Mortgagor; provided, that such defense: (1) shall be provided
by a lawyer or law firm listed on a schedule delivered to and approved in
writing by the Agent, from time to time (the "Approved Counsel List"), and
(2) if the amount in controversy in such action, proceeding or claim is in
excess of $2,500,000 in actual or compensatory damages and/or liquidated
damages (or is reasonably believed to exceed such amount if the demand
involves unliquidated damages), such law firm shall be approved by the
Agent, in its reasonable discretion, for that particular action, proceeding
or claim. As to actions, proceedings or claims involving a portion of the
Mortgaged Property in which Mortgagor or a Subsidiary of Mortgagor is not
the operator and with respect to which Mortgagor does not have a majority
net revenue interest and/or working interest, Mortgagor may elect, in its
reasonable judgment, to allow counsel for the operator to appear for, and
defend Mortgagor in such matter, in which case, selection of counsel by the
operator shall not be governed by this Section 2.4 (j); and further
provided, that nothing herein shall restrict or limit the right of the
Agent or the Lenders to select its or their own counsel to defend, at
Mortgagor's cost and expense, any action proceeding or claim in which any
of them are named as parties;
(k) Subject to the Mortgagor's right to contest the same, promptly pay
all Taxes legally imposed upon this instrument or upon the Mortgaged
Property or upon the income and profits thereof, or upon the interest of
the Agent or the other Lender Parties therein; provided that the Mortgagor
shall not be liable for taxes accruing after a transfer of the Mortgaged
Property following a foreclosure;
(l) Comply with, conform to and obey, in all material respects, all
present and future Legal Requirements and not use, maintain, operate,
occupy, or allow the use, maintenance, operation or occupancy of, the
Mortgaged Property in any manner which (a) violates any present and future
Legal Requirement, (b) may be dangerous unless safeguarded as required by
Applicable Law, (c) constitutes a public or private nuisance or (d) makes
void, voidable or cancelable, or increases the premium of, any insurance
then in force with respect thereto; and
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(m) Not, without the prior written consent of the Agent, 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 the Mortgagor, free and
clear of any lien or security interest except such as may be first approved
in writing by the Agent or (iii) such Fixtures or Personalty are removed in
connection with the plugging and abandoning of wells, or abandonment of
other facilities, in each case as permitted by this Mortgage.
2.5 Performance of Leases. The Mortgagor will: (a) duly and punctually
perform and comply with any and all representations, warranties, covenants and
agreements expressed as binding upon it under each of the Leases; (b) not
voluntarily terminate, cancel or waive its rights or the obligations of any
other party under any of the Leases; (c) 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.
2.6 Recording, etc. The Mortgagor will promptly, and at the Mortgagor's
expense, record, register, deposit and file this and every other instrument in
addition or supplemental hereto in such offices and places and at such times and
as often as may be necessary to preserve, protect and renew the lien and
security interest hereof as a first lien on and prior perfected security
interest in real or personal property, as the case may be, and the rights and
remedies of the Agent and of the other Lender Parties, and otherwise will do and
observe all things or matters necessary or expedient to be done or observed by
reason of any Applicable Law, for the purpose of effectively creating,
maintaining and preserving the lien and security interest hereof on and in the
Mortgaged Property.
2.7 Sale or Mortgage of the Mortgaged Property. Except (a) as set forth in
Section 6.1 of this instrument; (b) as permitted by each Section 8.2.10 of each
of the Credit Agreements; (c) for sales of severed Hydrocarbons in the ordinary
course of the Mortgagor's business; (d) sales of or dispositions of surplus,
obsolete or worn inventory or equipment; and (e) the lien and security interest
created by this instrument, the Mortgagor will not sell, convey, mortgage,
pledge, hypothecate, pool, unitize or otherwise dispose of or encumber the
Mortgaged Property nor any portion thereof, nor any of the Mortgagor's right,
title or interest therein, without first securing the written consent of the
Agent; and the Mortgagor will not enter into any arrangement with any gas
pipeline company or other consumer of Hydrocarbons regarding the Mortgaged
Property whereby said gas pipeline company or consumer may set off any claim
against the Mortgagor by withholding payment for any Hydrocarbons actually
delivered.
2.8 Records, Statements and Reports. The Mortgagor will keep proper books
of record and account in which complete and correct entries will be made of the
Mortgagor's transactions in accordance with generally accepted accounting
principles
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and will furnish or cause to be furnished to the Agent such information
concerning the business, affairs and financial condition of the Mortgagor as the
Agent may from time to time reasonably request. Without limiting the generality
of the foregoing, the Mortgagor shall furnish to the Agent, upon its request,
but not more than every six (6) months, (a) reports prepared by an independent
petroleum engineer acceptable to the Agent concerning (1) the quantity of
Hydrocarbons recoverable from the Mortgaged Property, (2) the projected income
and expense attributable to the Mortgaged Property, and (3) the expediency of
any change in methods of treatment or operation of all or any wells productive
of Hydrocarbons, any new drilling or development, any method of secondary
recovery by repressuring or otherwise, or any other action with respect to the
Mortgaged Property, the decision as to which may increase or reduce the quantity
of Hydrocarbons ultimately recoverable or the rate of production thereof, and
(b) reports for the prior period showing the gross proceeds from the sale of
Hydrocarbons produced from the lands described in Exhibit A (including any
thereof taken by the Mortgagor for the Mortgagor's own use), the quantity of
such Hydrocarbons sold, the severance, gross production, occupation, or
gathering taxes deducted from or paid out of such proceeds, the number of wells
operated, drilled or abandoned, and such other information as the Agent may
reasonably request (upon request of the Agent, such reports referred to in
clauses (a) and (b) above shall set forth such information on a lease or unit
basis, and after the occurrence of an Event of Default, and upon the Agent's
request, Mortgagor shall deliver the reports described in clause (b) on a
monthly basis).
2.9 Right of Entry.
(a) Upon at least twenty-four (24) hours notice to the Mortgagor, the
Mortgagor will permit the Agent, or its agents, at the cost and expense of
the Mortgagor, to enter upon the Mortgaged Property and all parts thereof,
for the purpose of investigating and inspecting the condition and operation
thereof, and shall permit reasonable access to the field offices and other
offices (to the fullest extent that Mortgagor may do so under the terms of
the applicable Joint Operating Agreements and other applicable agreements
affecting the Mortgaged Property), including the principal place of
business, of the Mortgagor to inspect and examine the Mortgaged Property
and to inspect, review and reproduce as necessary any books, records,
accounts, contracts or other documents of the Mortgagor.
(b) Without limiting the generality of the foregoing, the Agent shall
have the right (to the fullest extent that Mortgagor may do so under the
terms of the applicable Joint Operating Agreements and other applicable
agreements affecting the Mortgaged Property), on twenty-four (24) hours
prior notice to the Mortgagor, to cause such persons and entities as the
Agent may designate to enter the Mortgaged Property to conduct (at the cost
and expense of the Mortgagor), or to cause the Mortgagor to conduct (at the
cost and expense of the Mortgagor), such tests and investigations as the
Agent deems necessary to determine whether any hazardous materials or solid
waste is being generated, transported, stored, or disposed of in accordance
with applicable Environmental
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Laws. Such tests and investigations may include, without limitation,
underground borings, ground water analyses and borings from the floors,
ceilings and walls of any improvements located on the Mortgaged Property.
This Section 2.9 shall not be construed to affect or limit the obligations
of the Mortgagor pursuant to Section 2.4 hereof.
(c) The Agent shall have no duty to visit or observe the Mortgaged
Property, or to conduct tests, and no site visit, observation or testing by
the Agent (or its agents and independent contractors) shall impose any
liability on the Agent or any other Lender Party, nor shall the Mortgagor
or any other obligor be entitled to rely on any visit, observation or
testing by the Agent in any respect. The Agent may, in its discretion,
disclose to the Mortgagor or 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 by the Agent. the Mortgagor
agrees that the Agent makes no warranty or representation to the Mortgagor
or any other obligor regarding the truth, accuracy or completeness of any
such report or findings that may be so disclosed. The Mortgagor also
acknowledges that, depending upon the results of any site visit,
observation or testing by the Agent and disclosed to the Mortgagor, the
Mortgagor may have a legal obligation to notify one or more Governmental
Authorities of such results, that such reporting requirements are
site-specific, and are to be evaluated by the Mortgagor without advice or
assistance from the Agent.
2.10 Taxes. Subject to the Mortgagor's right to contest the same, the
Mortgagor will promptly pay all taxes, assessments and governmental charges
legally imposed upon this instrument or upon the Mortgaged Property, or upon the
interest of the Agent therein, or upon the income and profits thereof.
2.11 No Governmental Approvals. The Mortgagor 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 instrument or of the Notes, or to authorize the
observance or performance by the Mortgagor of the covenants herein or in the
Notes contained, or that such approvals as are required have been obtained or
will be obtained promptly and (b) the Mortgagor has obtained all Permits which
are necessary for the operation of the Mortgaged Property.
2.12 Environmental Laws. The Mortgagor represents and warrants, to the best
of its knowledge after due inquiry, and except as set forth in each Item 7.12 of
the Disclosure Schedule (including Part B thereof) attached to each of the
Credit Agreements, that: the Mortgaged Property is in compliance with all
applicable Environmental Laws; there are no conditions existing currently which
would be likely to subject the Mortgagor to damages, penalties, injunctive
relief or cleanup costs under any Environmental Laws or assertions thereof, or
which require or are likely to require cleanup, removal, remedial action or
other response pursuant to Environmental Laws by the Mortgagor; the Mortgagor is
not a party to any litigation or administrative proceedings, nor so far as is
known by the Mortgagor is any litigation or administrative proceeding threatened
against it, which asserts or alleges that the Mortgagor has
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violated or is violating Environmental Laws or that the Mortgagor is required to
clean up, remove or take remedial or other responsive action due to the
disposal, depositing, discharge, leaking or other release of any hazardous
substances or materials; neither the Mortgaged Property nor the Mortgagor is
subject to any judgment, decree, order or citation related to or arising out of
Environmental Laws and neither has been named or listed as a potentially
responsible party by any governmental body or agency in a matter arising under
any Environmental Laws. The Mortgagor 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 Mortgaged
Property; and to the Mortgagor'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 Mortgaged Property or
transported to or from the Mortgaged Property (or tanks or other facilities
thereon containing such materials) are being and will be conducted in accordance
with applicable Environmental Laws including without limitation those requiring
cleanup, removal or any other remedial action.
2.13 Corporate Mortgagor. The Mortgagor will continue to be duly qualified
to transact business in each state where the conduct of its business requires it
to be qualified, and will not, without the prior written consent of the Agent,
consolidate or merge with any other partnership, company, corporation or other
Person.
2.14 Taxpayer I.D. Number. The taxpayer identification number of the
Mortgagor is 77-0212977. The taxpayer identification number of the Agent is
13-494-1099.
ARTICLE III
Assignment of Production
------------------------
3.1 Assignment.
(a) The Mortgagor hereby transfers, assigns, warrants and conveys to
the Agent, effective as of May 1, 2002, at 7:00 A.M., local time, all
Hydrocarbons which are thereafter produced from and which accrue to the
Mortgaged Property, and all proceeds therefrom. Subject to the terms of
Section 3.1(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 the Agent by virtue of the
provisions of this Article III, are authorized and directed to treat and
regard the Agent as the assignee and transferee of the Mortgagor and
entitled in the Mortgagor's place and stead to receive such Hydrocarbons
and all proceeds therefrom; and said parties and each of them shall be
fully protected in so treating and regarding the Agent and shall be under
no obligation to see to the application by the Agent of any such proceeds
or payments received by it; provided, however, that, until the Agent shall
have instructed such parties that an Event of Default has occurred and to
deliver such Hydrocarbons and all proceeds therefrom directly to the Agent,
such parties shall
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be entitled to deliver such Hydrocarbons and all proceeds therefrom
directly to the Mortgagor. So long as no Event of Default shall have
occurred, the Agent agrees that Mortgagor shall be entitled to receive
directly from such parties, and keep and retain, all such proceeds from the
sale of such Hydrocarbons.
(b) Upon the occurrence of an Event of Default (it being understood
that the determination of the occurrence of an Event of Default by the
Agent shall be conclusive and binding as to all such parties for all
purposes hereof and that, at the time the Agent gives the initial
instruction and notice under this Article III, such Event of Default shall
be then continuing) 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 in accordance with Section 3.5 of this instrument.
The Mortgagor agrees to perform all such acts, and to execute all such
further assignments, transfers and division orders, and other instruments
as may be required or desired by the Agent or any party in order to have
said revenues and proceeds so paid to the Agent, as and when provided in
this Article III. With respect to any funds received by the Agent after
notice of an Event of Default shall have been given under this Article III,
the Agent is fully authorized to receive and give receipt for any such
revenues and proceeds that are received by the Agent; to endorse and cash
any and all checks and drafts payable to the order of the Mortgagor or the
Agent for the account of the Mortgagor received from or in connection with
said revenues or proceeds and apply the proceeds thereof in accordance with
Section 3.2 hereof, and to execute transfer and division orders in the name
of the Mortgagor, or otherwise, with warranties binding the Mortgagor.
3.2 Application of Proceeds. All payments received by the Agent pursuant to
Section 3.1 hereof shall be placed in a cash collateral account at the Agent and
on the last business day of each calendar month applied as follows:
First: To the payment and satisfaction of all costs and expenses
incurred in connection with the collection of such proceeds, and to the
payment of all items of the Indebtedness and the Obligations not evidenced
by any Note.
Second: To the payment of the interest on the Notes accrued to the
date of such payment.
Third: To the payment of the amounts of principal then due and owing
on the Notes.
Fourth: The balance, if any, shall either be applied on the then
unmatured principal amounts of the Notes, such application to be on such of
the Notes and installments thereof as the Agent may select, or, at the
option of the Agent, released to the Mortgagor.
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3.3 No Liability of the Agent in Collecting. The Agent 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 the Agent
under this Article) and from all other responsibility in connection therewith,
except the responsibility to account to the Mortgagor for funds actually
received.
3.4 Assignment Not a Restriction on the Agent's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of the Mortgagor
to make payment of the Indebtedness regardless of whether the proceeds assigned
by this Article are sufficient to pay the same, and the rights under this
Article shall be in addition to all other security now or hereafter existing to
secure the payment of the Indebtedness.
3.5 Status of Assignment. Notwithstanding the other provisions of this
Article and in addition to the other rights hereunder, the Agent or any receiver
or keeper appointed in judicial proceedings for the enforcement of this
instrument 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, in any event, after any Note or other
item of Indebtedness has been declared due and payable in accordance with the
provisions of Section 4.1 hereof and to apply all of said proceeds as provided
in Section 3.2 hereof. Upon any sale of the Mortgaged Property or any part
thereof pursuant to Article V, the Hydrocarbons thereafter produced from the
property so sold, and the proceeds therefrom, shall be included in such sale and
shall pass to the purchaser free and clear of the assignment contained in this
Article.
3.6 Indemnification Obligations. The following provisions shall apply to,
and be deemed in each case to modify, each of the provisions of this instrument
(except those set forth in Sections 2.12 and 6.11 hereof) and the other Security
Documents (except to the extent otherwise expressly provided therein) wherein
the Mortgagor is obligated to indemnify each of the Indemnified Persons:
(a) Mortgagor agrees to indemnify the Agent 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 the
Agent 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. The Mortgagor will indemnify
and pay to the Agent any and all such amounts as may be paid in respect
thereof or as may be successfully adjudged against the Agent. The
obligations of the Mortgagor as hereinabove set forth in this Section 3.6
shall survive the release termination, foreclosure or assignment of this
instrument or any sale hereunder.
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(b) The Mortgagor shall pay when due any judgments with respect to an
Indemnification Claim against any of the Indemnified Persons and which are
rendered by a final order or decree of a court of competent jurisdiction
from which no further appeal may be taken or has been taken within the
applicable appeal period. In the event that such payment is not made, any
of the Indemnified Persons at its sole discretion may pay any such
judgments, in whole or in part, and look to the Mortgagor for reimbursement
pursuant to this instrument, or may proceed to file suit against the
Mortgagor to compel such payment.
(c) Any amount which the Mortgagor is obligated to pay to or for the
benefit of an Indemnified Person with respect to an Indemnification Claim,
but which is not paid when due, shall bear interest at the default or post
maturity rate of interest provided for in the Note from the date such
amount is due until such amount is paid.
ARTICLE IV
Events of Default
-----------------
4.1 Events of Default Hereunder. In case any one or more of the following
"events of default" shall occur and shall not have been remedied:
(a) default in the payment of principal of or interest on any Note, or
in the payment of any other Indebtedness or in the performance and
discharge of the Obligations secured hereby, when due;
(b) the occurrence of an event of default (other than any relating to
non-payment of principal of or interest on any Note) under the terms and
provisions of either Credit Agreement and the continuance of such event of
default for the applicable period of grace, if any;
(c) any warranty or representation made by Mortgagor herein shall
prove to be untrue in any material respect as of the date made or deemed
made; or
(d) failure by Mortgagor, within the applicable period of grace, if
any, to cure a default in the due performance or observance of any covenant
or agreement contained in this instrument and not constituting a default in
the payment of principal of or interest upon any Note or in the payment of
any other Indebtedness;
then and in any such event the Agent, at its option, may declare the entire
unpaid principal of and the interest accrued on the Notes and all other
Indebtedness secured hereby to be forthwith due and payable, without any notice
or demand of any kind, both of which are hereby expressly waived.
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ARTICLE V
Enforcement of the Security
---------------------------
5.1 Rights of the Agent with Respect to Personal Property Constituting a
Part of the Mortgaged Property. Upon the occurrence of an event of default and
if such event shall be continuing, the Agent will have all rights and remedies
granted by law, and particularly by the Uniform Commercial Code, including, but
not limited to, the right to take possession of all personal property
constituting a part of the Mortgaged Property, and for this purpose the Agent
may enter upon any premises on which any or all of such personal property is
situated and take possession of and operate such personal property (or any
portion thereof) or remove it therefrom. The Agent may require the Mortgagor to
assemble such personal property and make it available to the Agent at a place to
be designated by the Agent which is reasonably convenient to all parties. Unless
such personal property is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent will give the
Mortgagor reasonable notice of the time and place of any public sale or of the
time after which any private sale or other disposition of such personal property
is to be made. This requirement of sending reasonable notice will be met if the
notice is mailed by first-class mail, postage prepaid, to the Mortgagor at the
address shown below the signatures at the end of this instrument at least five
(5) days before the time of the sale or disposition. Further, Agent shall have
the right to utilize executory process, as more fully set forth in Section 5.4
hereof and the right to appointment of a keeper, as set forth in Section 5.3
hereof.
5.2 Rights of the Agent with Respect to Fixtures Constituting a Part of the
Mortgaged Property. Upon the occurrence of an event of default and if such event
shall be continuing, the Agent may elect to treat the fixtures constituting a
part of the Mortgaged Property as either real property collateral or personal
property collateral and then proceed to exercise such rights as apply to such
type of collateral.
5.3 Judicial Proceedings. Upon the occurrence of an event of default and if
such event shall be continuing, the Agent may proceed by a suit or suits for a
foreclosure hereunder for cash or upon credit in one or more parcels or portions
under executory or ordinary process, at the Agent's sole option, without
appraisement, appraisement being expressly waived, or for the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, or for the appointment of a keeper or
receiver pending any foreclosure hereunder or the sale of the Mortgaged
Property, or for the enforcement of any other appropriate legal or equitable
remedy.
5.4 Other Remedies. The Mortgagor hereby acknowledges the Indebtedness
secured hereby, whether now existing or to arise hereafter, and, for the purpose
of foreclosure under Louisiana's executory process procedures, confesses
judgment thereon in the full amount of the Indebtedness in favor of the Agent
and any future holder or holders of the Indebtedness if such obligations are not
paid at maturity. The Mortgagor in accordance with the terms hereof and the
Credit Agreements does by
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these presents consent, agree and stipulate that, upon the occurrence of an
event of default hereunder or under either Credit Agreement, the Agent or any
future holder or holders of any of the Indebtedness, at its (or their) option,
without making demand and without notice or putting in default, the same being
hereby expressly waived, cause all and singular the property of the Mortgagor
herein mortgaged to be seized and sold by executory process issued by any
competent court, or to proceed with the enforcement of this instrument and
pledge of production in any manner prescribed by law, the Mortgagor hereby
waiving notice of demand or delay stipulated in Article 2639 of the Code of
Civil Procedure of Louisiana and the benefit of any laws, or parts of laws,
relating to the appraisement of the property seized and sold under executory
process or other legal process, and consenting that the Mortgaged Property
situated in the State of Louisiana be sold without appraisement to the highest
bidder for cash.
5.5 Certain Aspects of a Sale. The Agent shall have the right to become the
purchaser at any sale held by any court, receiver or public officer, and the
Agent shall have the right to credit upon the amount of the bid made therefor
the amount payable out of the net proceeds of such sale to it. Recitals
contained in any conveyance made to any purchaser at any sale made hereunder
shall conclusively establish the truth and accuracy of the matters therein
stated, including, without limiting the generality of the foregoing, nonpayment
of the unpaid principal sum of, and the interest accrued on, the Notes, after
the same have become due and payable, advertisement and conduct of such sale in
the manner provided herein.
5.6 Receipt to Purchaser. Upon any sale, the receipt of the officer making
sale under judicial proceedings, shall be sufficient discharge to the purchaser
or purchasers at any sale for his or their purchase money, and such purchaser or
purchasers, or his or their assigns or personal representatives, shall not,
after paying such purchase money and receiving such receipt of such officer
therefor, be obliged to see to the application of such purchase money, or be in
anywise answerable for any loss, misapplication or nonapplication thereof.
5.7 Effect of Sale. Any sale or sales of the Mortgaged Property shall
operate to divest all right, title, interest, claim and demand whatsoever either
at law or in equity, of the Mortgagor of, in and to the premises and the
property sold, and shall be a perpetual bar, both at law and in equity, against
the Mortgagor, and the Mortgagor's successors or assigns, and against any and
all persons claiming or who shall thereafter claim all or any of the property
sold from, through or under the Mortgagor or the Mortgagor's successors or
assigns. Nevertheless, the Mortgagor, if requested by the Agent so to do, shall
join in the execution and delivery of all proper conveyances, assignments and
transfers of the properties so sold.
5.8 Application of Proceeds. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the power of sale herein granted
and conferred or by virtue of judicial proceedings, shall be applied as follows:
First: To the payment and satisfaction of all costs and expenses
incurred by the Agent in such proceedings including, without limiting the
generality of the
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foregoing, a commission of five percent (5%) to the keeper and costs and
expenses of any entry, or taking of possession, of any sale, or
advertisement thereof, and of conveyances, and as well, court costs,
compensation of agents and employees and legal fees.
Second: To the payment of the interest on the Notes accrued to the
date of such payment.
Third: To the payment of the amounts of principal of the Notes and of
the other items of Indebtedness due and owing at the time of such payment.
Fourth: Any surplus thereafter remaining shall be paid to the
Mortgagor or the Mortgagor's successors or assigns, as their interests
shall appear.
5.9 The Mortgagor's Waiver of Appraisement, Marshalling and Other Rights.
The Mortgagor agrees, to the full extent that the Mortgagor may lawfully so
agree, that the Mortgagor will not at any time insist upon or plead or in any
manner whatever claim the benefit of any appraisement, valuation, stay,
extension or redemption law now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this instrument or the absolute sale of
the Mortgaged Property or the possession thereof by any purchaser at any sale
made pursuant to any provision hereof, or pursuant to the decree of any court of
competent jurisdiction; but the Mortgagor, for the Mortgagor and all who may
claim through or under the Mortgagor, so far as the Mortgagor or those claiming
through or under the Mortgagor now or hereafter lawfully may, hereby waives the
benefit of all such laws. The Mortgagor, for the Mortgagor and all who may claim
through or under the Mortgagor, waives, to the extent that the Mortgagor may
lawfully do so, any and all right to have the Mortgaged Property marshalled upon
any foreclosure of the lien hereof, or sold in inverse order of alienation, and
agrees that the Agent or any court having jurisdiction to foreclose such lien
may sell the Mortgaged Property as an entirety. The Mortgagor, for the Mortgagor
and all who may claim through or under the Mortgagor, further waives, to the
full extent that the Mortgagor may lawfully do so, any requirement for posting a
receiver's bond or replevin bond or other similar type of bond if the Agent
commence an action for appointment of a receiver or an action for replevin to
recover possession of any of the Mortgaged Property. If any law in this
paragraph referred to and now in force, of which the Mortgagor or the
Mortgagor's successor or successors might take advantage despite the provisions
hereof, shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to constitute any part of the contract herein contained or
to preclude the operation or application of the provisions of this paragraph. If
the Mortgagor is an individual, the Mortgagor waives and releases all rights of
dower, courtesy and homestead in the Mortgaged Property insofar as such rights
may in any way affect the purposes of this instrument.
5.10 Costs and Expenses. All costs and expenses (including attorneys' fees)
incurred by the Agent in protecting and enforcing its rights hereunder shall
constitute a demand obligation owing by the Mortgagor to the party incurring
such costs and expenses and shall draw interest at an annual rate equal to the
highest rate of interest
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from time to time accruing on the Loan Note plus three percent (3%) until paid,
all of which shall constitute a portion of the Indebtedness.
5.11 Operation of the Mortgaged Property by the Agent. Upon the occurrence
of an event of default and in addition to all other rights herein conferred on
the Agent, the Agent (or any person, firm or corporation designated by the
Agent) shall have the right and power, but shall not be obligated, to enter upon
and take possession of any of the Mortgaged Property, and to exclude the
Mortgagor, and the Mortgagor's agents or servants, wholly therefrom, and to
hold, use, administer, manage and operate the same to the extent that the
Mortgagor shall be at the time entitled and in its place and stead. The Agent,
or any person, firm or corporation designated by the Agent, may operate the same
without any liability to the Mortgagor in connection with such operations,
except to use ordinary care in the operation of such properties, and the Agent
or any person, firm or corporation designated by the Agent, shall have the right
to collect, receive and receipt for all Hydrocarbons produced and sold from said
properties, to make repairs, purchase machinery and equipment, conduct work-over
operations, drill additional wells and to exercise every power, right and
privilege of the Mortgagor with respect to the Mortgaged Property. When and if
the expenses of such operation and development (including costs of unsuccessful
work-over operations or additional wells) have been paid and the Indebtedness
paid, said properties shall, if there has been no sale or foreclosure, be
returned to the Mortgagor. Further, in the event that any of the Mortgaged
Property is seized as an incident to an action for the recognition or the
enforcement of this instrument, whether by executory process, ordinary process,
writ of fieri facias, sequestration, or otherwise, the court issuing the order
under which the seizure is to be effected shall, if such order is petitioned for
by the holder or holders of the Notes or other Indebtedness, direct the sheriff
or other officer making the seizure to appoint as keeper of the Mortgaged
Property, in accordance with Louisiana Revised Statutes 9:5131 through 5135
and/or 9:5136 through 5140.2, as the same may be amended, such person as may be
named by the Agent at the time the seizure is effected.
ARTICLE VI
Miscellaneous Provisions
------------------------
6.1 Pooling and Unitization. The Mortgagor shall have the right, and is
hereby authorized, to pool or unitize all or any part of any of the lands
described in Exhibit A, insofar as relates to the Mortgaged Property, with
adjacent lands, leaseholds and other interests, when, in the reasonable judgment
of the Mortgagor, it is necessary or advisable to do so in order to form a
drilling and/or production unit to facilitate the orderly development of that
part of the Mortgaged Property affected thereby, or to comply with the
requirements of any Applicable Law or governmental order or regulation relating
to the spacing of wells or proration of the production therefrom; provided,
however, that any unit so formed for the production of oil shall not
substantially exceed 160 acres, and any unit so formed for the production of gas
shall not substantially exceed 640 acres, unless a larger area is required to
conform to an Applicable Law or governmental order or regulation relating to the
spacing of wells or to obtain the
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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. 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. Immediately after formation of any such
unit, the Mortgagor shall furnish to the Agent a true copy of the pooling
agreement, declaration of pooling or other instrument creating such unit, in
such number of counterparts as the Agent may reasonably request. The interest in
any such unit attributable to the Mortgaged Property (or any part thereof)
included therein shall become a part of the Mortgaged Property and shall be
subject to the lien hereof in the same manner and with the same effect as though
such unit and the interest of the Mortgagor therein were specifically described
in Exhibit A. The Mortgagor may enter into pooling or unitization agreements not
hereinabove authorized only with the prior written consent of the Agent, which
consent will not be unreasonably withheld.
6.2 Actions or Advances by the Agent. Each and every covenant herein
contained shall be performed and kept by the Mortgagor solely at the Mortgagor's
expense. If the Mortgagor shall fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this instrument, the Agent, or any keeper
or receiver appointed hereunder, may, but shall not be obligated to, take action
and/or make advances to perform the same in the Mortgagor's behalf, and the
Mortgagor hereby agrees to repay the expense of such action and such advances
upon demand plus interest at an annual rate equal to the Alternate Base Rate (as
defined in the Credit Agreements) of interest from time to time accruing on the
Loan Note plus the Applicable Margin (as defined in the Credit Agreements) plus
two percent (2%) until paid or, in the event any promissory note evidences such
indebtedness, upon the terms and conditions thereof. No such advance or action
by the Agent or any keeper or receiver appointed hereunder shall be deemed to
relieve the Mortgagor from any default hereunder.
6.3 Defense of Claims. The Mortgagor will notify the Agent, in writing,
promptly of the commencement of any legal proceedings affecting the lien or
security interest hereof or the Mortgaged Property, or any part thereof, and
will take such action, employing attorneys as set forth in Section 2.4(j), as
may be necessary or appropriate to preserve the Mortgagor's and the Agent's
rights affected thereby and/or to hold harmless the Agent and the Lender Parties
in respect of such proceedings; and should the Mortgagor fail or refuse to take
any such action, the Agent may, upon giving prior written notice thereof to the
Mortgagor, take such action in behalf and in the name of the Mortgagor and at
the Mortgagor's expense. Moreover, the Agent may take such independent action in
connection therewith as it may in its discretion deem proper, the Mortgagor
hereby agreeing that all sums advanced or all expenses incurred in such actions
plus interest at an annual rate equal to the Alternate Base Rate (as defined in
the Credit Agreements) of interest from time to time accruing on the Loan Note
plus the Applicable Margin (as defined in the Credit Agreements) plus two
percent (2%) until
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paid, will, on demand, be reimbursed, as appropriate, to the Agent, or any
keeper or receiver appointed hereunder. The obligations of the Mortgagor as
hereinabove set forth in this Section 6.3 shall survive the release,
termination, foreclosure or assignment of this instrument or any sale hereunder.
6.4 The Mortgaged Property to Revert. If the Indebtedness shall be fully
paid and the covenants herein contained shall be well and truly performed, then
all of the Mortgaged Property shall revert to the Mortgagor and the entire
estate, right, title and interest of the Agent shall thereupon cease; and the
Agent in such case shall, upon the request of the Mortgagor and at the
Mortgagor's cost and expense, deliver to the Mortgagor proper instruments
acknowledging release and satisfaction of this instrument.
6.5 Renewals, Amendments and Other Security. Renewals and extensions of the
Indebtedness and modifications of any kind of the Obligations may be given at
any time and amendments may be made to agreements with third parties relating to
any part of such Indebtedness or the Mortgaged Property and the Agent may take
or may now hold other security from others for the Indebtedness, all without
notice to or consent of the Mortgagor. The Agent 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 instrument, which shall continue as a first lien upon
and prior perfected security interest in the Mortgaged Property not expressly
released until the Notes and all other Indebtedness secured hereby are fully
paid.
6.6 Instrument an Assignment, etc. This instrument shall be deemed to be
and may be enforced from time to time as an assignment, chattel mortgage,
contract, financing statement, real estate (immovable property) mortgage, or
security agreement, and from time to time as any one or more thereof.
6.7 Limitation on Interest. No provision of this instrument or of the
Notes, the Credit Agreements or any other Loan Document shall require the
payment or permit the collection of interest in excess of the Maximum Lawful
Rate or which is otherwise contrary to Applicable Law. If any excess of interest
in such respect is herein or in the Notes, the Credit Agreements or any other
Loan Document provided for, or shall be adjudicated to be so provided for herein
or in the Notes, the Credit Agreements or any other Loan Document, the Mortgagor
shall not be obligated to pay such excess.
6.8 Unenforceable or Inapplicable Provisions. If any provision hereof or of
the Notes is invalid or unenforceable in any jurisdiction, the other provisions
hereof or of the Notes shall remain in full force and effect in such
jurisdiction, and the remaining provisions hereof shall be liberally construed
in favor of the Agent in order to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the
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Mortgaged Property is situated shall be deemed inapplicable to, and not used in,
the interpretation hereof.
6.9 Rights Cumulative. Each and every right, power and remedy herein given
to the Agent shall be cumulative and not exclusive; and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and so often and in such order as may be deemed
expedient by the Agent, as the case may be, and the exercise, or the beginning
of the exercise, of any such right, power or remedy shall not be deemed a waiver
of the right to exercise, at the same time or thereafter, any other right, power
or remedy. No delay or omission by the Agent in the exercise of any right, power
or remedy shall impair any such right, power or remedy or operate as a waiver
thereof or of any other right, power or remedy then or thereafter existing.
6.10 Waiver by the Agent. Any and all covenants in this instrument may from
time to time by instrument in writing signed by the Agent be waived to such
extent and in such manner as the Agent may desire, but no such waiver shall ever
affect or impair the Agent's rights or liens or security interests hereunder,
except to the extent specifically stated in such written instrument.
6.11 Environmental Indemnification. The Mortgagor will indemnify and hold
the Agent harmless from and against and reimburse the Agent with respect to, any
and all claims, demands, causes of action, losses, damages, liabilities, costs
and expenses (including reasonable attorney's fees and court costs) of any and
every kind or character, known or unknown, fixed or contingent, out-of-pocket or
consequential, asserted against or by the Agent at any time and from time to
time by reason of or arising out of any violation of any Environmental Laws
applicable to the Mortgagor and/or the Mortgaged Property and any and all
matters arising out of any act, omission, event or circumstance existing or
occurring (including, without limitation, the presence on the Mortgaged Property
or release from the Mortgaged Property of hazardous substances or solid waste
disposed of or otherwise released), regardless of whether the act, omission,
event or circumstance constituted a violation of any Environmental Law at the
time of its existence or occurrence. The terms "hazardous substance" and
"release" shall have the meanings specified in the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as subsequently
modified, supplemented or amended (herein called "CERCLA"), and for purposes of
RCRA (as defined below) compliance the terms "solid waste" and "disposed" shall
have the meanings specified in the Federal Resource Conservation and Recovery
Act of 1976, as subsequently modified, supplemented or amended (herein called
"RCRA"); provided, in the event that either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and provided further,
to the extent the laws of any jurisdiction where the Mortgaged Property is
located on the date hereof or on any subsequent date establish a meaning for
"hazardous substance," "release," "solid waste," or "disposal" which is broader
than that specified in either CERCLA or RCRA, such broader meaning shall apply.
If and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Mortgagor hereby agrees to make the maximum contribution to the
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payment and satisfaction of the indemnified claims, demands, causes of action,
losses, damages, liabilities, costs, expenses and fees which is permissible
under applicable law. The obligations of the Mortgagor as hereinabove set forth
in this Section 6.11 shall survive the release, termination, foreclosure or
assignment of this instrument or any sale hereunder.
6.12 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, joint venture, or association among the Mortgagor and the
Agent, or in any way as to make the Agent a co-principal with the Mortgagor with
reference to the Mortgaged Property, and any inferences to the contrary are
hereby expressly negated.
6.13 Successors and Assigns. This instrument is binding upon the Mortgagor,
the Mortgagor's successors and assigns, and shall inure to the benefit of the
Agent, its successors and assigns, and the provisions hereof shall likewise be
covenants running with the land.
6.14 Article and Section Headings. The article and section headings in this
instrument are inserted for convenience of reference and shall not be considered
a part of this instrument or used in its interpretation.
6.15 Execution in Counterparts. This instrument may be executed in any
number of counterparts, each of which shall for all purposes be deemed to be an
original and all of which are identical, except that, to facilitate recordation
or filing, in any particular counterpart portions of Exhibit A hereto which
describe properties situated in parishes other than the parish in which such
counterpart is to be recorded or filed may have been omitted.
6.16 Special Filing as Financing Statement. This instrument shall likewise
be a Security Agreement and a Financing Statement. This instrument shall be
filed for record, among other places, in the real estate records and in the
Uniform Commercial Code records of each parish in which any portion of the
immovable property covered by the oil and gas leases described in Exhibit A
hereto is situated, and, when filed in such parishes shall be effective as a
financing statement covering Fixtures located on oil and gas properties and
as-extracted collateral, which as-extracted collateral are to be financed at the
wellheads of the wells located on the lands described in Exhibit A. At the
option of the Agent, a carbon, photographic or other reproduction of this
instrument or of any financing statement covering the Mortgaged Property or any
portion thereof shall be sufficient as a financing statement and may be filed as
such.
6.17 Notices. Any notice, request, demand or other instrument which may be
required or permitted to be given or served upon the Mortgagor shall be
sufficiently given when mailed by first-class mail, addressed to the Mortgagor
at the address shown below the signatures at the end of this instrument or to
such different address as the Mortgagor shall have designated by written notice
received by the Agent.
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6.18 Waivers. The parties hereto expressly waive the production of
mortgage, conveyance, tax research or other certificates and hereby release and
hold the Notary Public whose name is hereunder signed harmless for and by reason
of the nonproduction and nonannexation thereof to this instrument. The Mortgagor
waives in favor of the Agent any and all homestead exemptions and other
exemptions of seizure or otherwise to which Mortgagor is or may be entitled
under the constitution and statutes of the State of Louisiana insofar as the
Mortgaged Property is concerned. Mortgagor further waives: (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles 2332,
2336, 2723 and 2724, and all other laws conferring the same; (b) the demand and
three days delay accorded by Louisiana Code of Civil Procedure Articles 2639 and
2721; (c) the notice of seizure required by Louisiana Code of Civil Procedure
2293 and 2721; (d) the three days delay provided by Louisiana Code of Civil
Procedure Articles 2331 and 2722; and (e) the benefit of the other provisions of
Louisiana Code of Civil Procedure Articles 2331, 2722 and 2723, not specifically
mentioned above.
6.19 Transfer of the Notes without Notarial Act. The parties hereto agree
that the Notes may be transferred without the necessity for a notarial act of
transfer thereof, and that any such transfer without notarial act shall carry
with it into the hands of any future holder or holders of the Notes full and
entire subrogation of title in and to the Notes to any and all rights and
privileges under this instrument herein granted to the Agent, as holder of the
Notes. This instrument is for the benefit of the Agent, the Lenders, the Lender
Parties and for such other person or persons as may from time to time become or
be the holders of any of the Indebtedness, and this instrument shall be
transferable and negotiable, with the same force and effect and to the same
extent as the Indebtedness may be transferable, it being understood that, upon
the transfer or assignment by the Agent, the Lenders or any of the Lender
Parties of any of the Indebtedness, the legal holder of such Indebtedness shall
have all of the rights granted to the Agent under this instrument. The Mortgagor
specifically agrees that upon any transfer of all or any portion of the
Indebtedness, this instrument shall secure with retroactive rank the then
existing Indebtedness of the Mortgagor to the transferee and any and all
Indebtedness to such transferee thereafter arising.
6.20 Authentic Evidence. Any and all declarations of facts made by
authentic act before a notary public in the presence of two witnesses by a
person declaring that such facts lie within his knowledge, shall constitute
authentic evidence of such facts for the purpose of executory process. The
Mortgagor specifically agrees that such an affidavit by a representative of the
Agent as to the existence, amount, terms and maturity of the Indebtedness and of
a default thereunder shall constitute authentic evidence of such facts for the
purpose of executory process.
6.21 Reliance. Notwithstanding any reference herein to the Credit
Agreements, the Notes or the Letters of Credit, no party shall have any
obligation to inquire into the terms or conditions of any such documents and all
parties shall be fully authorized to rely upon any statement, certificate, or
affidavit of Agent or any future holder of any portion of the Indebtedness as to
the occurrence of any event such as the occurrence of any Event of Default.
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6.22 Governing Law. THIS INSTRUMENT IS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF
LOUISIANA.
6.23 Acceptance. Pursuant to Louisiana Civil Code Article 3289, the
Mortgagor acknowledges that this instrument need not be signed by the Agent,
whose consent is presumed and is hereby acknowledged by the Mortgagor.
6.24 No Liability. The Agent shall not be liable for any error of judgment
or act done by the Agent in good faith, or be otherwise responsible or
accountable under any circumstances whatsoever, except for their negligence or
bad faith. The Agent shall not be personally liable in case of entry by it, or
anyone entering by virtue of the powers herein granted them, upon the Mortgaged
Property for debts contracted or liability or damages incurred in the management
or operation of the Mortgaged Property. The Agent 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 it in good faith to
be genuine. The Mortgagor will, from time to time, pay the compensation due to
the Agent hereunder and reimburse the Agent for, and save it harmless against,
any and all liability and expenses which may be incurred by it in the
performance of its duties.
6.25 Covenants Running with the Land. All Obligations contained in this
instrument are intended by the parties to be, and shall be construed as, real
rights and covenants running with the Mortgaged Property.
6.26 The Agent as Agent for the Lender Parties. As described above, certain
Affiliates of the Agent and the Lenders are or may become parties to certain
Hedging Agreements with the Mortgagor and/or Affiliates of the Mortgagor. This
instrument secures the obligations of the Mortgagor and such Affiliates, as the
case may be, under such Hedging Agreements, and the parties acknowledge for all
purposes that the Agent acts for itself and as agent on behalf of such
Affiliates of the Agent and such Lenders which are so entitled to share in the
rights and benefits accruing to the Agent under this instrument in respect of
the Mortgaged Property.
6.27 Subrogation. If any or all of the proceeds of the Note have been used
to extinguish, extend or renew any indebtedness heretofore existing against the
Mortgaged Property, then, to the extent of such funds so used, the Indebtedness
and this instrument shall be subrogated to all of the rights, claims, liens,
titles and interests heretofore existing against the Mortgaged Property to
secure the indebtedness so extinguished, extended or renewed and the former
rights, claims, liens, titles and interests, if any, are not waived but rather
are continued in full force and effect in favor of the Agent and are merged with
the lien and security interest created herein as cumulative security for the
repayment of the Indebtedness and the satisfaction of the Obligations.
6.28 Subordination by The Agent. From time to time at the Agent's option,
by instrument executed by the Agent and recorded in the real property records
where this
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instrument has been recorded, the Agent may subordinate the lien created by this
instrument to any interest in the Mortgaged Property. Any such subordination
shall be solely at the Agent's option, and in no event shall the Agent be
obligated to subordinate the lien or security interest created by this
instrument.
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THUS DONE AND PASSED IN MULTIPLE ORIGINALS on the _______ date of
_____________, 2002 in the presence of the undersigned competent witnesses, who
hereunto sign their names, together with Mortgagor and me, Notary, after due
reading of the whole.
CALPINE CORPORATION,
a Delaware corporation
By:______________________________________
Title:___________________________________
Printed Name:____________________________
The name and address of the Mortgagor and Debtor is:
Calpine Corporation
1000 Louisiana Street, Suite 800
Houston, TX 77002
WITNESSES TO SIGNATURE:
_______________________________________
_______________________________________
_________________________________________
NOTARY PUBLIC
Residing at______________________________
My Commission Expires____________________
[LA Mortgage]
THUS DONE AND PASSED IN MULTIPLE ORIGINALS on the ________date of
_____________, 2002 in the presence of the undersigned competent witnesses, who
hereunto sign their names, together with Agent and me, Notary, after due reading
of the whole.
THE BANK OF NOVA SCOTIA, as Agent
By:_____________________________________
Title: Director
Printed Name: Kemp Leonard
The name and mailing address of the Secured Party and Agent is:
The Bank of Nova Scotia, as Agent
580 California Street
Suite 2100
San Francisco, CA 94119
WITNESSES TO SIGNATURE:
__________________________________
John Quick
__________________________________
_________________________________________
NOTARY PUBLIC
Residing at______________________________
My Commission Expires____________________
[LA Mortgage]
This Instrument Was Prepared By:
Kevin L. Shaw, Esq.
Mayer, Brown, Rowe & Maw
700 Louisiana Street, 36th Floor
Houston, TX 77002
SCHEDULE I To Mortgage, Assignment,
Security Agreement and Financing Statement,
dated May 1, 2002,
from CALPINE CORPORATION to THE BANK OF NOVA SCOTIA
Prior Names of the Mortgagor
----------------------------
Calpine Natural Gas Company L.P.
TGX Corporation
Sheridan Energy, Inc.
Sheridan California Energy, Inc.
Calpine Natural Gas California, Inc.
Calpine Natural Gas Company
Michael Petroleum Corporation
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EXHIBIT A To Mortgage, Assignment,
Security Agreement and Financing Statement,
dated May 1, 2002,
from CALPINE CORPORATION to THE BANK OF NOVA SCOTIA
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 the Mortgagor in any lease described in Exhibit A even if such
interest relates to land not described in Exhibit A. Reference is made to the
land descriptions contained in the documents of title recorded as described in
this Exhibit A. To the extent that the land descriptions in this Exhibit A are
incomplete, incorrect or not legally sufficient, the land descriptions contained
in the documents so recorded are incorporated herein by this reference.
3. References in Exhibit A to instruments on file in the public records are
made for all purposes. Unless provided otherwise, all recording references in
Exhibit A are to the official real property records of the parish or parishes in
which the mortgaged property is located and in which records such documents are
or in the past have been customarily recorded, whether Conveyance Records, Oil
and Gas Records, Oil and Gas Lease Records or other records.
4. A statement herein that a certain interest described herein is subject
to the terms of certain described or referred to agreements, instruments or
other matters shall not operate to subject such interest to any such agreement,
instrument or other matter except to the extent that such agreement, instrument
or matter is otherwise valid and presently subsisting nor shall such statement
be deemed to constitute a recognition by the parties hereto that any such
agreement, instrument or other matter is valid and presently subsisting.
A-1
EXHIBIT B To Mortgage, Assignment,
Security Agreement and Financing Statement,
dated May 1, 2002,
from CALPINE CORPORATION to THE BANK OF NOVA SCOTIA
Certified Copies of Resolutions
-------------------------------
B-1
EXHIBIT C To Mortgage, Assignment,
Security Agreement and Financing Statement,
dated May 1, 2002,
from CALPINE CORPORATION to THE BANK OF NOVA SCOTIA
Permitted Encumbrances
----------------------
All initially-capitalized terms used in this Exhibit C, whether or not
defined in this instrument, shall have the meanings given such terms in the
Credit Agreements.
(a) Liens securing payment of the Obligations granted pursuant to any Loan
Document and Liens securing payment of the obligations granted pursuant to the
loan documents relating to the Existing Credit Agreement;
(b) Liens granted prior to the Effective Date to secure payment of
Indebtedness of the type permitted and described in clause (a) of Section 8.2.2
of the Credit Agreements;
(c) Liens granted to secure payment of Indebtedness of the type permitted
and described in clause (b) of Section 8.2.2 of the Credit Agreements where
recourse is limited as described in clause (b) of Section 8.2.2 of the Credit
Agreements;
(d) Liens for taxes, assessments or other governmental charges or levies not at
the time delinquent or thereafter payable without penalty or being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen and landlords
incurred in the ordinary course of business for sums not overdue or being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
(f) Liens incurred in the ordinary course of business in connection with
workmen's compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed money) entered into
in the ordinary course of business or to secure obligations on surety or appeal
bonds;
(g) judgment Liens in existence less than 15 days after the entry thereof
or with respect to which execution has been stayed or the payment of which is
covered in full (subject to a customary deductible) by insurance maintained with
responsible insurance companies;
(h) Liens granted to secure payment of Indebtedness of the type permitted
and described in clauses (e) and (g) of Section 8.2.2 of the Credit Agreements
where recourse is limited as described in clauses (e) or (g), as applicable, of
Section 8.2.2 of the Credit Agreements;
C-1
(i) Zoning restrictions, easements, rights of way, title irregularities and
other similar encumbrances which alone or in the aggregate do not materially
detract from the value of the property subject thereto;
(j) Liens on the property or assets of any Subsidiary of the Borrower in
favor of the Borrower;
(k) Banker's Liens and similar Liens (including set-off rights) in respect
of bank deposits;
(l) Landlord's Liens and similar Liens in respect of leased property;
(m) Liens securing Attributable Debt with respect to outstanding leases
entered into pursuant to Sale/Leaseback Transactions so long as, with respect to
Sale/Leaseback Transactions closing after January 1, 2002, the amount thereof
does not exceed 10% of the consolidated tangible assets of the Borrower and its
Subsidiaries; and
(n) Liens incurred in connection with the extension, renewal or refinancing
of Indebtedness secured by Liens permitted and described in clauses (b), (c) and
(h) of Section 8.2.3 of the Credit Agreements; provided, however, that (x) such
new Lien shall be limited to all or part of the same property that secured the
original Lien and (y) the Indebtedness secured by such Lien at such time is not
increased (other than by an amount necessary to pay fees and expenses, including
premiums, related to the refinancing, refunding, extension, renewal or
replacement of such Indebtedness); provided, further, that the limitations set
forth in this clause (n) shall not apply to Liens which are otherwise permitted
under Section 8.2.3 of the Credit Agreements, even if such Liens secure
Indebtedness issued to repay or refinance existing Indebtedness permitted and
described in clauses (b), (c) and (h) of Section 8.2.3 of the Credit Agreements.
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