EXHIBIT 10.21
--------------------------------------------------------------------------------
MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
FROM
CALPINE CORPORATION,
a Delaware corporation
(Taxpayer I.D. No. 00-0000000),
Trustor and Mortgagor
TO
XXXX XXXXXXX, Trustee
AND
XXXX XXXXX, Trustee
AND
THE BANK OF NOVA SCOTIA,
(Taxpayer I.D. No. 13-494-1099),
for itself and as Agent,
Beneficiary
Dated as of May 1, 2002
--------------------------------------------------------------------------------
"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."
"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
"THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE AS-EXTRACTED COLLATERAL
(INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE ACCOUNTS RELATING THERETO,
WILL BE FINANCED AT THE WELLHEADS OF THE XXXXX LOCATED ON THE PROPERTIES
DESCRIBED IN EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS."
"MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH IS
DESCRIBED IN EXHIBIT A HERETO."
"SOME OF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY
IS OR IS TO BE AFFIXED TO THE PROPERTIES DESCRIBED IN EXHIBIT A HERETO AND THIS
FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS."
"A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW
THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT
IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE."
"MORTGAGOR AGREES BY EXPRESS LANGUAGE IN THIS MORTGAGE TO SUBJECT THE TRUST REAL
ESTATE TO THE TERMS OF THE DEED OF TRUST ACT (SECTIONS 48-10-1 THROUGH 21 NMSA
(1978))."
THIS INSTRUMENT WAS PREPARED BY AND
WHEN RECORDED AND/OR FILED
RETURN TO:
Xxxxx X. Xxxx, Esq.
Mayer, Brown, Xxxx & Maw
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY
AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING
THIS MORTGAGE, DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT, FINANCING
STATEMENT AND FIXTURE FILING (this "Mortgage"), dated as of May 1, 2002, is from
CALPINE CORPORATION, a Delaware corporation (hereinafter called the "Mortgagor"
or "Borrower"), to XXXX XXXXXXX and XXXX XXXXX, as Trustees (hereinafter,
collectively, called the "Trustees"), and THE BANK OF NOVA SCOTIA
("Scotiabank"), a Canadian chartered bank having offices at 000 Xxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, for itself and as agent
(hereinafter called the "Agent") for the Lender Parties (as defined below).
ARTICLE I
Recitals and Definitions
------------------------
1.1 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
0000 Xxxxxxx 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.
1.2 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
-1-
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".
1.3 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.
1.4 For all purposes of this Mortgage, 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 Mortgage.
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 Mortgage.
E. "Credit Agreements" is defined in Section 1.2 of this Mortgage.
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 Mortgage.
-2-
G. "Event of Default" means any happening or occurrence described in
Article V hereinbelow, and any other happening or occurrence specifically
designated herein or in any of the other Security Documents (as defined
herein) as constituting an event of default thereunder.
H. "Environmental Laws" means any and all present and future
Applicable Laws issued, promulgated or entered thereunder relating to
pollution or protection of the environment, including laws relating to
reclamation of land and waterways and laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
I. "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.
J. "Existing Credit Agreement" is defined in Section 1.2 of this
Mortgage.
K. "Existing Lenders" is defined in Section 1.2 of this Mortgage.
L. "Existing Letters of Credit" is defined in Section 1.2 of this
Mortgage.
M. "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.
N. "Existing Loan Notes" is defined in Section 1.2 of this Mortgage.
O. "Fee Letter" means the fee letter agreement described in Section
3.3.2 of the 2002 Credit Agreement.
P. "Governmental Authority" means any and all courts, boards,
agencies, commissions, offices or authorities of any nature whatsoever for
any governmental xxxx (xxxxxxx, xxxxx, xxxxxx, xxxxxxxx, xxxxxxxxx, xxxx,
tribe or otherwise) whether now or hereafter in existence charged with the
administration, interpretation or enforcement of any Applicable Law.
-3-
Q. "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.
R. "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.
S. "Hedging Agreements" means: (a) interest rate swap agreements,
basis swap agreements, interest rate cap agreements, forward rate
agreements, interest rate floor agreements and interest rate collar
agreements, and all other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or currency exchange
rates, and (b) forward contracts, options, futures contracts, futures
options, commodity swaps, commodity options, commodity collars, commodity
caps, commodity floors and all other agreements or arrangements designed to
protect such Person against fluctuations in the price of commodities.
T. "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.
U. "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.
V. "Indebtedness", "Note" and "Notes" shall have the respective
meanings set forth in Section 2.2 of this Mortgage.
W. "Indemnification Claim" is defined in Section 4.6 of this Mortgage.
X. "Indemnified Person" is defined in Section 3.10 of this Mortgage.
Y. "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.
Z. "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
-4-
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.
AA. "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.
BB. "Legal Requirements" means (i) any and all present and future
judicial decisions, statutes, rulings, rules, regulations, licenses,
decisions, orders, injunctions, decrees, permits, certificates or
ordinances of any Governmental Authority in any way applicable to
Mortgagor, or the Mortgaged Property, including the ownership, use,
occupancy, operation, maintenance, repair or reconstruction thereof, and
any other Applicable Law enacted by any Governmental Authority relating to
health or the environment, (ii) Mortgagor's presently or subsequently
effective Organic Documents, (iii) any and all Leases, (iv) any and all
leases and other contracts (written or oral) of any nature to which
Mortgagor, or the Mortgaged Property may be bound and (v) any and all
restrictions, restrictive covenants or zoning, present and future, as the
same may apply to the Mortgaged Property.
CC. "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.
DD. "Loan Documents" means the Existing Loan Documents and the 2002
Loan Documents.
EE. "Loan Note" is defined in Section 1.2 of this Mortgage.
FF. "Losses" is defined in Section 3.10 of this Mortgage.
GG. "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.
HH. "Mortgaged Property" means the properties, rights and interests
hereinafter described in Section 1.5 and defined as the Mortgaged Property.
II. "Mortgagor" is defined in the Preamble of this Mortgage.
-5-
JJ. "Obligations" means any and all of the covenants, warranties,
representations and other obligations (other than to repay the
Indebtedness) made or undertaken by Mortgagor or others to the Agent, the
Lender Parties, the Trustees or others as set forth in the Credit
Agreements or other Loan Documents.
KK. "oil and gas leases" shall include oil, gas and mineral leases,
subleases and assignments thereof, operating rights, and shall also include
subleases and assignments of operating rights.
LL. "Operating Equipment" means all surface or subsurface machinery,
goods, equipment, fixtures, inventory, facilities, supplies or other
property of whatsoever kind or nature (excluding drilling rigs, trucks,
automotive equipment or other property taken to the premises to drill a
well or for other similar temporary uses) now or hereafter located on or
under any of the lands described in Exhibit A which are useful for the
production, gathering, treatment, processing, storage or transportation of
Hydrocarbons (together with all accessions, additions and attachments to
any thereof), including, but not by way of limitation, all oil xxxxx, gas
xxxxx, water xxxxx, injection xxxxx, casing, tubing, tubular goods, rods,
pumping units and engines, christmas trees, platforms, derricks,
separators, compressors, gun barrels, flow lines, tanks, gas systems (for
gathering, treating and compression), pipelines (including gathering lines,
laterals and trunklines), chemicals, solutions, water systems (for
treating, disposal and injection), steam generation and injection equipment
and systems, power plants, poles, lines, transformers, starters and
controllers, machine shops, tools, storage yards and equipment stored
therein, buildings and camps, telegraph, telephone and other communication
systems, roads, loading docks, loading racks and shipping facilities.
MM. "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.
NN. "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 xxxxx (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).
OO. "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 "B"
-6-
attached hereto and the lien and security interests created by the Security
Documents.
PP. "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.
QQ. "Personalty" means all of the right, title and interest of
Mortgagor now owned or hereafter acquired in and to all furniture,
furnishings, Equipment, machinery, Goods, General Intangibles, money,
Accounts, receivables, Contract Rights, Inventory, all refundable,
returnable or reimbursable fees, deposits or other funds or evidences of
credit or indebtedness deposited by or on behalf of Mortgagor with any
Governmental Authority, agencies, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits, commitment fees and development costs, and all other personal
property (other than the Fixtures) of any kind or character as defined in
and subject to the provisions of Article 9 of the Uniform Commercial Code,
now or hereafter located upon, within or about, or used in connection with,
the lands described in Exhibit A, together with all accessories,
replacements and substitutions thereto or therefor and the Proceeds
thereof.
RR. "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.
SS. "Production Sale Contracts" means contracts now in effect, or
hereafter entered into by Mortgagor, or entered into by Mortgagor's
predecessors in interest, for the sale, purchase, exchange, gathering,
transportation, treating or processing of Hydrocarbons produced from the
lands described in Exhibit A.
TT. "Rents and Revenues" means all of the rents, revenues, income,
proceeds, profits and other benefits paid or payable by parties to the
Leases other than Mortgagor for using, leasing, licensing, possessing,
operating, selling or otherwise enjoying the Mortgaged Property, including
the proceeds from the sale of Hydrocarbons.
UU. "Security Documents" means the Notes, this Mortgage, the financing
statements and any and all other instruments now or hereafter executed by
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
-7-
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.
VV. "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.
WW. "2002 Loan Agreement" is defined in Section 1.1 of this Mortgage.
XX. "2002 Lenders" is defined in Section 1.1 of this Mortgage.
YY. "2002 Letters of Credit" is defined in Section 1.1 of this
Mortgage.
ZZ. "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.
AAA. "2002 Loan Notes" is defined in Section 1.1 of this Mortgage.
BBB. "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.
CCC. "Transportation Agreements" shall mean any contracts or
agreements entered into from time to time by Mortgagor, or entered into by
Mortgagor's predecessors in interest, relating to the transportation of
Hydrocarbons, as any such agreement or contract may be amended,
supplemented, restated or otherwise modified from time to time.
DDD. "Trustees" means the Trustees defined in the Preamble of this
Mortgage and any successor or substitute trustee appointed in accordance
with the terms hereof.
EEE. "Water Rights" means (including without limitation those
described in Exhibit A hereto) all now or hereafter existing or acquired
water and water rights, reservoirs and reservoir rights, ditches and ditch
rights, xxxxx and well rights, whether evidenced or initiated by permit,
decree, well registration, appropriation not decreed, water court
application, shares of stock or other
-8-
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 xxxxx 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, xxxxx and well rights.
FFF. "Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of New York or any other applicable
state, and the terms "Accounts", "Account Debtor", "As Extracted
Collateral", "Chattel Paper", "Contract Rights", "Deposit Accounts",
"Documents", "Electronic Chattel Paper", "General Intangibles", "Goods",
"Equipment", "Fixtures", "Inventory", "Instruments", and "Proceeds" shall
have the respective meanings assigned to such terms in the Uniform
Commercial Code.
1.5 Grant. NOW, THEREFORE, Mortgagor, to secure the full and timely payment
of the Indebtedness and the full and timely performance and discharge of the
Obligations, has granted, bargained, sold, warranted, mortgaged, assigned,
transferred and conveyed, and by these presents does grant, bargain, sell,
warrant, mortgage, assign, pledge and hypothecate, transfer and convey unto the
Trustees, IN TRUST, WITH POWER OF SALE, for the use and benefit of the Agent,
for itself and as agent for the Lender Parties, all Mortgagor's right, title and
interest, whether now owned or hereafter acquired, in and to all of the
hereinafter described properties, rights and interests; and, insofar as such
properties, rights and interests consist of Equipment, General Intangibles,
Accounts, As Extracted Collateral, Contract Rights, Inventory, Fixtures,
Proceeds of collateral or any other personal property of a kind or character
defined in, or subject to the applicable provisions of, the Uniform Commercial
Code (as in effect from time to time in the appropriate jurisdiction with
respect to each of said properties, rights and interests), Mortgagor hereby
grants to said Trustees, for the use and benefit of the Agent, for itself and as
agent for the Lender Parties, a security interest therein to the full extent of
Mortgagor's legal and beneficial interest therein, now owned or hereafter
acquired, namely:
(a) the lands described in Exhibit A, and Leases, the fee, mineral,
overriding royalty, royalty and other interests which are described in
Exhibit A,
(b) the presently existing and (subject to the terms of Section 3.7
hereof) hereafter arising unitization, unit operating, communitization and
pooling agreements and the properties covered and the units created thereby
(including, without limitation, all units formed under orders, regulations,
rules, approvals, decisions or other official acts of any Governmental
Authority) which are specifically described in Exhibit A or which relate to
any of the properties and interests specifically described in Exhibit A,
-9-
(c) the Hydrocarbons which are in, under, upon, produced or to be
produced from or which are attributed or allocated to the lands described
in Exhibit A,
(d) the Production Sale Contracts,
(e) the Joint Operating Agreements,
(f) the Transportation Agreements,
(g) the Operating Equipment,
(h) the Permits,
(i) the Water Rights,
(j) the Hedging Agreements,
(k) the Leases,
(l) the Personalty,
(m) the Rents and Revenues,
(n) without duplication of any other provision of this granting
clause, Equipment, Fixtures and other Goods necessary or used in connection
with, and Inventory, Accounts, As Extracted Collateral, General
Intangibles, Contract Rights, Chattel Paper, Deposit Accounts, Documents,
Electronic Chattel Paper, Instruments and Proceeds arising from, or
relating to, the properties and other interests described in Exhibit A
(including Exhibit A-1),
(o) any and all liens and security interests in Hydrocarbons securing
the payment of proceeds from the sale of Hydrocarbons, including but not
limited to those liens and security interests provided for in Section 9.343
of the Texas Business and Commerce Code or similar statutes of other
jurisdictions or any successor statutes,
together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, or replacements or substitutions for, any of the same, or
any instrument relating thereto, and all accounts, contracts, contract rights,
options, nominee agreements, unitization or pooling agreements, operating
agreements and unit operating agreements, processing agreements, farmin
agreements, farmout agreements, joint venture agreements, partnership agreements
(including mining partnerships), exploration agreements, bottom hole agreements,
dry hole agreements, support agreements, acreage contribution agreements,
surface use and surface 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,
-10-
fluid samples, production data and reports, well testing data and reports, maps,
seismic and geophysical, geological and chemical data and information,
interpretative and analytical reports of any kind or nature (including, without
limitation, reserve studies and reserve evaluations), computer hardware and
software and all documentation therefor or relating thereto (including, without
limitation, all licenses relating to or covering such computer hardware,
software and/or documentation), trade secrets, trademarks, service marks and
business names and the goodwill of the business relating thereto, copyrights,
copyright registrations, unpatented inventions, patent applications and patents,
rights-of-way, franchises, bonds, easements, servitudes, surface leases,
permits, licenses, tenements, hereditaments, appurtenances, concessions,
occupancy agreements, privileges, development rights, condemnation awards,
claims against third parties, general intangibles, rents, royalties, issues,
profits, products and proceeds, whether now or hereafter existing or arising,
used or useful in connection with, covering, relating to, or arising from or in
connection with, any of the aforesaid items (a) through (o), inclusive, in this
granting clause mentioned, and all other things of value and incident thereto
(including, without limitation, any and all liens, lien rights, security
interests and other properties, rights and interests) which Mortgagor might at
any time have or be entitled to, but excluding any data or contracts with
respect to which mortgaging or granting of a lien or a security interest is
prohibited by existing third party agreements,
all the aforesaid properties, rights and interests, together with any additions
thereto which may be subjected to the lien and security interest of this
Mortgage by means of supplements hereto, being hereinafter, collectively, called
the "Mortgaged Property".
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 production contained in Article IV
hereof, but only insofar and so long as said assignment of production is not
inoperative under the provisions of Section 4.5 hereof, and (iii) the condition
that none of the Trustees, 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 Mortgagor in respect of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustees for the
benefit of the Agent, for itself and as agent for the Lender Parties, forever to
secure the payment of the Indebtedness and to secure the performance and
discharge of the Obligations of Mortgagor herein and therein contained.
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 each of the Trustees and the Agent, for
itself and as agent for the Lender Parties, as follows:
-11-
ARTICLE II
Indebtedness Secured
--------------------
2.1 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
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 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 Trustees,
the Agent or the Lender Parties, or by any receiver appointed hereunder,
which are made or incurred pursuant to, or permitted by, the terms hereof,
plus interest thereon at the rate herein specified or otherwise agreed
upon, from the date of the advances or the incurring of such expenses or
costs until reimbursed;
(d) Any and all other indebtedness of Mortgagor or any Affiliate of
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
(e) Any extensions, refinancings, modifications or renewals of all
such indebtedness described in subparagraphs (a) through (d) above, whether
or not Mortgagor executes any extension agreement or renewal instrument.
2.2 Indebtedness and the Notes Defined. All the above items of indebtedness
described in subparagraphs (a) through (e) of Section 2.1 hereof 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".
2.3 Maximum Amount. The maximum amount of the Indebtedness that may be
outstanding at any time, and from time to time, and secured by this Mortgage is
Three Billion Dollars ($3,000,000,000).
-12-
ARTICLE III
Particular Covenants, Representations
-------------------------------------
and Warranties of Mortgagor
---------------------------
3.1 Payment of the Indebtedness and Performance of Obligations. Mortgagor
will duly and punctually pay the Indebtedness, as and when called for in the
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.
3.2 Certain Representations and Warranties. Mortgagor represents and
warrants (and with respect to those matters set forth in the following
subsections (b) and (f), as to those portions of the Mortgaged Property that are
operated by persons other than Mortgagor or a Subsidiary of Mortgagor, Mortgagor
makes such representation and warranty to the best of its knowledge) that
(a) the oil and gas leases described in Exhibit A hereto are valid,
subsisting leases, superior and paramount to all other oil and gas leases
respecting the properties to which they pertain,
(b) all producing xxxxx 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 xxxxx are in fact bottomed under and are producing
from, and the well bores are wholly within, the lands described in Exhibit
A or lands pooled or unitized therewith,
(c) Mortgagor, to the extent of the interest specified in Exhibit A
(including Exhibit A-1), has valid and indefeasible title to each property
right or interest constituting the Mortgaged Property described in Exhibit
A (including Exhibit A-1) and has a good and legal right to grant and
convey the same to the Trustees; 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 3.4(e) hereof,
(e) Mortgagor is not obligated, by virtue of any prepayment under any
contract providing for the sale by Mortgagor of Hydrocarbons which contains
a
-13-
"take or pay" clause or under any similar arrangement, to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor,
(f) the Mortgaged Property is currently being operated, maintained and
developed, in all material respects, in accordance with all applicable
currently existing Permits, Legal Requirements and all Applicable Laws
(including, without limitation, Environmental Laws),
(g) the cover page to this Mortgage lists the correct legal name of
Mortgagor and Mortgagor has not been known by any legal name different from
the one set forth on the cover page of this Mortgage, except as set forth
on Schedule I to this Mortgage; Mortgagor is not now and has not been known
by any trade name, nor has Mortgagor been the subject of any merger or
other corporate reorganization,
(h) the execution, delivery and performance by Mortgagor of the
Security Documents and the borrowing evidenced by the Loan Notes, (i) are
within Mortgagor's corporate powers and have been duly authorized by
Mortgagor's Board of Directors, shareholders and all other requisite
corporate action, (ii) have received all (if any) requisite prior
governmental approval and consent in order to be legally binding and
enforceable in accordance with the terms thereof, and (iii) will not
violate, be in conflict with, result in a breach or constitute (with due
notice or lapse of time, or both) a default under, any Legal Requirement or
result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of 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 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 Mortgagor threatened, against or affecting Mortgagor or the
Mortgaged Property that could materially adversely affect Mortgagor or the
Mortgaged Property, or involving the validity or enforceability of this
Mortgage or the priority of the liens and security interests created by the
Security Documents, and no event has occurred (including specifically
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 Mortgagor's property other than the liens and security interests
created by the Security Documents.
3.3 Further Assurances. Mortgagor will warrant and forever defend the
Mortgaged Property unto the Trustees 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
-14-
long as any of the Indebtedness remains unpaid. Mortgagor will execute and
deliver such other and further instruments and will do such other and further
acts as, in the opinion of the Trustees or the Agent, may be necessary or
desirable to carry out more effectually the purposes of this Mortgage,
including, without limiting the generality of the foregoing, (i) prompt
correction of any defect which may hereafter be discovered in the title to the
Mortgaged Property or in the execution and acknowledgment of this Mortgage, 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.
3.4 Operation of the Mortgaged Property. So long as the Indebtedness or any
part thereof remains unpaid, and whether or not Mortgagor is the operator of any
particular part of the Mortgaged Property, Mortgagor shall, at Mortgagor's own
expense:
(a) Do all things necessary to keep unimpaired 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 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,
-15-
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 Mortgagor in good faith in such manner as not to
jeopardize the Trustees' and 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 respect of all activities in which Mortgagor might incur personal
liability for the death of or injury to an employee or third person, or
damage to or destruction of another's property; and (2) to the extent such
insurance is carried by similar companies engaged in similar undertakings
in the same general areas in which the Mortgaged Property is located,
insurance in respect of the Operating Equipment, against loss or damage by
fire, lightning, hail, tornado, explosion and other similar risks, hazards,
casualties and contingencies (including business interruption insurance
covering loss of Rents and Revenues); provided, that any such insurance may
be provided by way of self insurance to the extent that similar companies
engaged in similar undertakings in the same general areas also self-insure.
Each insurance policy issued in connection therewith shall provide by way
of endorsements, riders or otherwise that (i) name the Agent as a loss
payee on all property insurance policies and an additional insured on all
liability insurance policies, and provide that proceeds from property
insurance policies will be payable to the Agent as its interest may appear,
which proceeds are hereby assigned to the Agent, it being agreed by
Mortgagor that such payments shall be applied A) if there be no Event of
Default existing or which would exist but for due notice or lapse of time,
or both, to the restoration, repair or replacement of the Mortgaged
Property, or B) if there be an Event of Default existing, or which would
exist but for due notice or lapse of time, or both, 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
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
-16-
certificate evidencing such coverage in form and content acceptable to the
Agent. All policies to be maintained under this Mortgage are to be issued
on forms and by companies and with endorsements acceptable to the Agent.
Mortgagor shall maintain insurance in an amount sufficient to prevent
Mortgagor from becoming a co-insurer under any policy required hereunder.
If Mortgagor fails to maintain the level of insurance required under this
Mortgage, then Mortgagor shall and hereby agrees to indemnify 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 Mortgagor's location (as described on the signature page hereto)
or in the name of Mortgagor, notice in writing of such change;
(h) Not initiate or acquiesce in any change in any material zoning or
other land use or Water Rights classification now or hereafter in effect
and affecting the Mortgaged Property or any part thereof;
(i) Notify 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 5.1 or any event which, with notice, the
passage of time or both would be such an Event of Default;
(j) Appear and defend, and hold the Agent harmless from, any action,
proceeding or claim affecting the Mortgaged Property or the rights and
powers of the Agent or any of the Trustees 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 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 3.4 (j); and further provided, that nothing herein shall
restrict or limit the right of the Agent, the Trustees 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;
-17-
(k) Subject to Mortgagor's right to contest the same, promptly pay all
Taxes legally imposed upon this instrument or upon the Mortgaged Property
or upon the income and profits thereof, or upon the interest of the
Trustees, 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
(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
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 xxxxx, or abandonment of other facilities, in each case
as permitted by this Mortgage.
3.5 Performance of Leases. Mortgagor will: (a) duly and punctually perform
and comply with any and all representations, warranties, covenants and
agreements expressed as binding upon it under each of the Leases; (b) 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.
3.6 Recording, etc. Mortgagor will promptly, and at Mortgagor's expense,
record, register, deposit and file this and every other instrument in addition
or supplemental hereto in such offices and places and at such times and as often
as may be necessary to preserve, protect and renew the lien and security
interest hereof as a first lien on and prior perfected security interest in real
or personal property, as the case may be, and the rights and remedies of the
Trustees, 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.
-18-
3.7 Sale or Mortgage of the Mortgaged Property. Except (a) as set forth in
Section 7.1 of this Mortgage; (b) as permitted by Section 8.2.10 of each of the
Credit Agreements; (c) for sales of severed Hydrocarbons in the ordinary course
of 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 Mortgage, Mortgagor will not sell, convey, mortgage, pledge, hypothecate,
pool, unitize or otherwise dispose of or encumber the Mortgaged Property nor any
portion thereof, nor any of Mortgagor's right, title or interest therein,
without first securing the written consent of the Agent; and Mortgagor will not
enter into any arrangement with any gas pipeline company or other consumer of
Hydrocarbons regarding the Mortgaged Property whereby said gas pipeline company
or consumer may set off any claim against Mortgagor by withholding payment for
any Hydrocarbons actually delivered.
3.8 Records, Statements and Reports. Mortgagor will keep proper books of
record and account in which complete and correct entries will be made of
Mortgagor's transactions in accordance with generally accepted accounting
principles and will furnish or cause to be furnished to the Agent such
information concerning the business, affairs and financial condition of
Mortgagor as the Trustees or the Agent may from time to time reasonably request.
Without limiting the generality of the foregoing, 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
xxxxx productive of Hydrocarbons, any new drilling or development, any method of
secondary recovery by repressuring or otherwise, or any other action with
respect to the Mortgaged Property, the decision as to which may increase or
reduce the quantity of Hydrocarbons ultimately recoverable or the rate of
production thereof, and (b) reports for the prior period showing the gross
proceeds from the sale of Hydrocarbons produced from the lands described in
Exhibit A (including any thereof taken by Mortgagor for Mortgagor's own use),
the quantity of such Hydrocarbons sold, the severance, gross production,
occupation, or gathering taxes deducted from or paid out of such proceeds, the
number of xxxxx 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).
3.9 Right of Entry.
(a) Upon at least twenty-four (24) hours notice to Mortgagor,
Mortgagor will permit the Trustees or the Agent, or the agents of either of
them, at the cost and expense of Mortgagor, to enter upon the Mortgaged
Property and all parts thereof, for the purpose of investigating and
inspecting the condition and operation thereof, and shall permit reasonable
access to the field offices and other offices (to the fullest extent that
Mortgagor may do so under the terms of
-19-
the applicable Joint Operating Agreements and other applicable agreements
affecting the Mortgaged Property), including the principal place of
business, of Mortgagor to inspect and examine the Mortgaged Property and to
inspect, review and reproduce as necessary any books, records, accounts,
contracts or other documents of Mortgagor.
(b) Without limiting the generality of the foregoing, 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 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 Mortgagor), or to cause Mortgagor to conduct (at the cost and
expense of 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 Laws. Such tests and investigations may include,
without limitation, underground borings, ground water analyses and borings
from the floors, ceilings and walls of any improvements located on the
Mortgaged Property. This Section 3.9 shall not be construed to affect or
limit the obligations of Mortgagor pursuant to Section 3.4 hereof.
(c) 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 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
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. Mortgagor agrees that the Agent
makes no warranty or representation to Mortgagor or any other obligor
regarding the truth, accuracy or completeness of any such report or
findings that may be so disclosed. Mortgagor also acknowledges that,
depending upon the results of any site visit, observation or testing by the
Agent and disclosed to Mortgagor, Mortgagor may have a legal obligation to
notify one or more Governmental Authorities of such results, that such
reporting requirements are site-specific, and are to be evaluated by
Mortgagor without advice or assistance from the Agent.
3.10 Environmental Laws.
(a) 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:
(i) the Mortgaged Property is in compliance in all material
respects with all applicable Environmental Laws and there are no
-20-
conditions existing currently which would be likely to subject
Mortgagor to damages, penalties, injunctive relief or cleanup costs
under any Environmental Laws or assertions thereof, or which require
or are likely to require cleanup, removal, remedial action or other
response pursuant to Environmental Laws by Mortgagor; and all use,
generation, manufacturing, release, discharge, storage, deposit,
treatment, recycling or disposal of any materials on, under or at the
Mortgaged Property or transported to or from the Mortgaged Property
(or tanks or other facilities thereon containing such materials) are
being and will be conducted in accordance in all material respects
with applicable Environmental Laws including without limitation those
requiring cleanup, removal or any other remedial action;
(ii) Mortgagor is not a party to any litigation or administrative
proceedings, nor so far as is known by Mortgagor is any litigation or
administrative proceeding threatened against it, which asserts or
alleges that Mortgagor has violated or is violating Environmental Laws
or that Mortgagor is required to clean up, remove or take remedial or
other responsive action due to the disposal, depositing, discharge,
leaking or other release of any hazardous substances or materials;
neither the Mortgaged Property nor Mortgagor is subject to any
judgment, decree, order or citation related to or arising out of
Environmental Laws and neither has been named or listed as a
potentially responsible party by any Governmental Authority in a
matter arising under any Environmental Laws; and
(iii) Mortgagor has also obtained all Permits required under
applicable Environmental Laws which are necessary for its current
exploration, production, transportation, storage, use, and development
activities at the Mortgaged Property.
(b) Mortgagor shall not use or permit the Mortgaged Property or any
part thereof to be used to generate, manufacture, refine, transport, treat,
store, handle, dispose, transfer, produce or process any hazardous
materials, except in strict compliance with all applicable Environmental
Laws, nor shall Mortgagor cause or permit, as a result of any intentional
or unintentional act or omission on the part of Mortgagor or any tenant or
subtenant, a release of any hazardous materials onto the Mortgaged Property
or onto any other property. Mortgagor shall comply, in all material
respects, with all applicable Environmental Laws and shall obtain and
comply with any and all registrations or Permits required thereunder. To
the extent any hazardous materials are released or discharged onto the
Mortgaged Property on or after the date of this Mortgage, Mortgagor shall
conduct and complete all investigations, studies, sampling, and testing,
and all remedial, removal, and other actions necessary to clean up and
remove all such hazardous materials on, from, or affecting the Mortgaged
Property or any part thereof (i) in accordance with all applicable
Environmental Laws; (ii) to the satisfaction of the Agent; and (iii) in
accordance with the orders and directives of
-21-
all Governmental Authorities having jurisdiction over the Mortgaged
Property. Mortgagor shall promptly notify the Agent of its receipt of any
notice of a violation of any Environmental Laws.
(c) Regardless of whether any site assessments are conducted pursuant
to this Mortgage, and without limiting the liability of Mortgagor for the
breach of any warranty, representation or covenant contained herein or in
any other Security Document, and notwithstanding any limitation of
liability contained in the Note or other Security Documents, Mortgagor
hereby agrees to unconditionally and absolutely defend, indemnify and hold
harmless the Agent and each of the Lender Parties, and their respective
employees, affiliates, agents and attorneys, and the Trustees under the
Mortgage and any successors or substitute trustee under the Mortgage (any
person to be indemnified being herein called the "Indemnified Person"),
from and against, and be responsible for, any and all liabilities
(including strict liability), actions, demands, penalties, fines, taxes,
assessments, losses (including, without limitation, diminution in the value
of the Mortgaged Property), costs and expenses (including, without
limitation, attorneys', paralegals', accountants' and other experts' and
consultants' fees and expenses, and remedial costs, including, without
limitation, costs of monitoring), suits, damages, including, without
limitation, punitive damages and foreseeable and unforeseeable
consequential damages, costs of any settlement or judgment and claims
(including, without limitation, third-party claims for personal injury or
real or personal property damage) of any and every kind whatsoever
(hereinafter, collectively, called the "Losses"), which may now or in the
future (whether before or after the release, or other termination of the
Mortgage and the other Security Documents) be paid, imposed upon, incurred
or suffered by or asserted or awarded against any of the Indemnified
Persons or the Mortgaged Property by any person or entity or Governmental
Authority for, with respect to, arising out of, or as a direct or indirect
result of, any one or more of the following: (i) the presence or suspected
presence, release or suspected release of any hazardous materials at, upon,
under, within, above, from, by or in connection with the Mortgaged Property
or any portion thereof, or elsewhere in connection with the transportation
of hazardous materials to or from the Mortgaged Property (including,
without limitation, in the air, soil, groundwater or surface water), or the
escape, seepage, leakage, spillage, discharge, emission or release from the
Mortgaged Property of any hazardous materials; (ii) any violations of any
Environmental Laws at, upon, under, within, from, by or in connection with
the Mortgaged Property; (iii) the environmental condition of the Mortgaged
Property; (iv) the imposition by any Governmental Authority of any lien or
so-called "super priority lien" upon the Mortgaged Property as a result of
the presence or release of hazardous materials, or any violation of any
Environmental Laws, at, upon, under, within, from, by or connection with
the Mortgaged Property; (v) obligations to remediate hazardous materials
contamination, or to remediate any condition which constitutes a violation
of any Environmental Laws; (vi) any site assessments of the Mortgaged
Property; (vii) liability for personal injury or property damage or damage
to the environment or fines, penalties and punitive damages, resulting from
the presence or release of hazardous materials or any
-22-
violations of any Environmental Laws, at, upon, under, within, from, by or
in connection with the Mortgaged Property; and (viii) any environmental
matter described in this Mortgage, including, without limitation, matters
arising out of any breach of the covenants, representations and warranties
set forth herein in each instance described in (i) through (viii) hereof
regardless of whether any such Losses arise out of or result from any
breach of the covenants, representations and warranties pertaining to
environmental matters set forth in this Mortgage or the other Security
Documents, and regardless of whether or not caused by or within the control
of Mortgagor or any Indemnified Person; or whether any such matters arise
before, during or after any foreclosure of the Mortgage or other taking of
title to all or any portion of the Mortgaged Property or the enforcement of
any other remedies under the Security Documents (if any such event occurs).
WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED
PERSON WITH RESPECT TO LOSSES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR
ARISE OUT OF THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OR THE STRICT
LIABILITY OF ANY SUCH INDEMNIFIED PERSON, BUT NOT THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ANY SUCH INDEMNIFIED PERSON. The following shall
apply to that portion of the Mortgaged Property located in the State of New
Mexico: To the extent the foregoing indemnity is governed by Section 00-0-0
XXXX (1978), said indemnity shall not extend to liability, claims, damages,
losses or expenses, including attorneys fees, arising out of (a) the
preparation or approval of maps, drawings, opinions, reports, surveys,
change orders, designs or specifications by an Indemnified Person, or (b)
the giving of or the failure to give directions or instructions by an
Indemnified Person where such giving or failure to give directions or
instructions is the primary cause of bodily injury to persons or damage to
property. To the extent the foregoing indemnity is governed by Section
00-0-0 XXXX (1978), said indemnity shall not extend to (a) the sole or
concurrent negligence of an Indemnified Person, (b) the sole or concurrent
negligence of an independent contractor who is directly responsible to an
Indemnified Person, or (c) an accident that occurs in operations carried
on, at the direction, or under the supervision of an Indemnified Person or
in accordance with methods and means specified by an Indemnified Person.
(d) Notwithstanding the foregoing or any contrary provision hereof,
Mortgagor's indemnification obligations set forth in this Section 3.10
shall not extend to any such Losses which are attributable solely to
contamination by hazardous materials first introduced to the Mortgaged
Property after a foreclosure of this Mortgage or other taking of title to
the Mortgaged Property by any of Indemnified Persons.
(e) The indemnification provided in this Section 3.10 shall
specifically apply to and include claims or actions brought by or on behalf
of tenants or employees of Mortgagor. Mortgagor hereby expressly waives
(with respect to any claims of any Indemnified Person arising under this
Section 3.10) any
-23-
immunity to which Mortgagor may otherwise be entitled under any industrial
or worker's compensation laws.
(f) In the event any of the Indemnified Persons shall suffer or incur
any such Losses, Mortgagor shall pay to such Indemnified Persons the total
of all such Losses suffered or incurred within ten (10) days after demand
therefore.
(g) Mortgagor agrees that the representations, covenants, warranties
and indemnifications contained in this Mortgage shall survive the release
of the Mortgage, the foreclosure or the taking of a deed in lieu of
foreclosure, other termination of the lien of the Mortgage, or the exercise
by the Agent of any other remedies under the Security Documents, the
discharge of Mortgagor's Obligations under any of the other Security
Documents, or any transfer of the Mortgaged Property, even if as a part of
such foreclosure, deed in lieu of foreclosure or other enforcement action,
the Indebtedness is satisfied in full.
3.11 Corporate Mortgagor. Mortgagor will continue to be duly qualified to
transact business in each state where the conduct of its business requires it to
be qualified, and will not, without the prior written consent of the Agent,
consolidate or merge with any other partnership, company, corporation or other
Person.
3.12 Taxpayer I.D. Number. The taxpayer identification number of Mortgagor
is 00-0000000. The taxpayer identification number of the Agent is 00-000-0000.
ARTICLE IV
Assignment of Production
------------------------
4.1 Assignment.
(a) 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 4.1(b), all parties producing, purchasing or receiving any such
Hydrocarbons, or having such, or proceeds therefrom, in their possession
for which they or others are accountable to the Agent by virtue of the
provisions of this Article IV, are authorized and directed to treat and
regard the Agent as the assignee and transferee of Mortgagor and entitled
in Mortgagor's place and stead to receive such Hydrocarbons and all
proceeds therefrom; and said parties and each of them shall be fully
protected in so treating and regarding 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 be entitled to deliver such Hydrocarbons and all
proceeds therefrom directly to Mortgagor. So long as no Event of Default
shall have occurred and the Agent
-24-
has not yet given such instruction and notice thereof, 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
and agreed 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 IV, such Event of Default shall
then be continuing) the Agent may at any time (and from time to time)
thereafter give notice thereof to any party producing, purchasing or
receiving any such Hydrocarbons, or having such, or proceeds therefrom, in
their possession for which they or others are accountable to the Agent,
directing that said Hydrocarbons and products are to be delivered into
pipelines connected with the oil and gas leases, or to the purchaser
thereof, free and clear of all Taxes, and the proceeds from the sale of
such Hydrocarbons paid directly to the Agent in accordance with Section 4.5
of this Mortgage. 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 IV. With respect to any funds received by the
Agent after notice of an Event of Default shall have been given under this
Article IV, 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 Mortgagor or
the Agent for the account of Mortgagor received from or in connection with
said revenues or proceeds and apply the proceeds thereof in accordance with
Section 4.2 hereof, and to execute transfer and division orders in the name
of Mortgagor, or otherwise, with warranties binding Mortgagor.
4.2 Application of Proceeds. All payments received by the Agent pursuant to
Section 4.1 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 Mortgagor.
-25-
4.3 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 IV) and from all other responsibility in connection
therewith, except the responsibility to account to Mortgagor for funds actually
received.
4.4 Assignment Not a Restriction on the Agent's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of Mortgagor to
make payment of the Indebtedness regardless of whether the proceeds assigned by
this Article IV are sufficient to pay the same, and the rights under this
Article IV shall be in addition to all other security now or hereafter existing
to secure the payment of the Indebtedness.
4.5 Status of Assignment. Notwithstanding the other provisions of this
Article IV and in addition to the other rights hereunder, the Trustees, the
Agent or any receiver appointed in judicial proceedings for the enforcement of
this Mortgage shall have the right to receive all of the Hydrocarbons herein
assigned and the proceeds therefrom after the occurrence and during the
continuance of any 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 5.1 hereof and to apply all of said proceeds as provided in Section
4.2 hereof. Upon any sale of the Mortgaged Property or any part thereof pursuant
to Article VI, the Hydrocarbons thereafter produced from the property so sold,
and the proceeds therefrom, shall be included in such sale and shall pass to the
purchaser free and clear of the assignment contained in this Article IV.
4.6 Indemnification Obligations. The following provisions shall apply to,
and be deemed in each case to modify, each of the provisions of this Mortgage
(except those set forth in Section 3.10 hereof) and the other Security Documents
(except to the extent otherwise expressly provided therein) wherein Mortgagor is
obligated to indemnify each of the Indemnified Persons:
(a) Mortgagor agrees to indemnify the Trustees and 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 Trustees 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.
Mortgagor will indemnify and pay to the Trustees or the Agent any and all
such amounts as may be paid in respect thereof or as may be successfully
adjudged against the Trustees and the Agent or any of them. The obligations
of Mortgagor as hereinabove set forth in this Section 4.6 shall survive the
release termination, foreclosure or assignment of this Mortgage or any sale
hereunder.
-26-
(b) Mortgagor shall pay when due any judgments with respect to an
Indemnification Claim against any of the Indemnified Persons and which are
rendered by a final order or decree of a court of competent jurisdiction
from which no further appeal may be taken or has been taken within the
applicable appeal period. In the event that such payment is not made, any
of the Indemnified Persons at its sole discretion may pay any such
judgments, in whole or in part, and look to Mortgagor for reimbursement
pursuant to this Mortgage, or may proceed to file suit against Mortgagor to
compel such payment.
(c) Any amount which Mortgagor is obligated to pay to or for the
benefit of an Indemnified Person with respect to an Indemnification Claim,
but which is not paid when due, shall bear interest at the 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 V
Events of Default
-----------------
5.1 Events of Default Hereunder. In case any one or more of the following
events of default (each, an "Event 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 Mortgage 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 enforce any of the
provisions of Article VI hereof, without any notice or demand of any kind, both
of which are hereby expressly waived.
-27-
ARTICLE VI
Enforcement of the Security
---------------------------
6.1 Acceleration. Upon the occurrence of an Event of Default and if such
Event of Default shall be continuing, the Trustees shall have the right and
power to declare the then unpaid principal balance on the Note, the accrued
interest and any other accrued but unpaid portion of the Indebtedness to be
immediately due and payable, without further notice, presentment, protest,
demand or action of any nature whatsoever (each of which hereby is expressly
waived by Mortgagor), whereupon the same shall become immediately due and
payable.
6.2 Title Examination. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, the Trustees shall have the right and
power to cause to be brought down to date a title examination and tax histories
of the Mortgaged Property, procure title opinions or title reports or, if
necessary, procure new abstracts and tax histories.
6.3 Environmental Audit. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, the Trustees shall have the right and
power to procure an updated or entirely new environmental audit of the Mortgaged
Property including the lands described in Exhibit A, buildings, soil, ground
water and subsurface investigations; have the buildings inspected by an engineer
or other qualified inspector; enter upon the Mortgaged Property at any time and
from time to time to show the Mortgaged Property to potential purchasers and
potential bidders at foreclosure sale; make available to potential purchasers
and potential bidders all information obtained pursuant to the foregoing and any
other information in the possession of the Agent regarding the Mortgaged
Property.
6.4 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, the Trustees shall have the right and power to
sell, to the extent permitted by Applicable Law, at one or more sales, as an
entirety or in parcels, as they may elect, the real property constituting a part
of the Mortgaged Property, at such place or places and otherwise in such manner
and upon such notice as may be required by Applicable Law, or, in the absence of
any such requirement, as the Trustees may deem appropriate, and to make
conveyance to the purchaser or purchasers; and Mortgagor shall warrant title to
such real property to such purchaser or purchasers. The Trustees may postpone
the sale of all or any portion of such real property by public announcement at
the time and place of such sale, and from time to time thereafter may further
postpone such sale by public announcement made at the time of sale fixed by the
preceding postponement. The right of sale hereunder shall not be exhausted by
one or any sale, and the Trustees may make other and successive sales until all
of the trust estate be legally sold. With respect to that portion, if any, of
the Mortgaged Property situated in the State of Wyoming, this Mortgage may be
foreclosed by advertisement and sale as provided by applicable Wyoming statutes.
With respect to that portion, if any, of the Mortgaged Property situated in the
State of Oklahoma, the
-28-
Agent shall have the right and power at its option to declare the Indebtedness
secured hereby due and payable and to sell, or direct the Trustees to sell, the
"real estate," as such term is defined under the provisions of 46 O.S. Supp.
1986, ss.42, constituting a part of the Mortgaged Property, all under the terms
of 46 O.S. Supp. 1986, ss.40 et seq., and shall, to the extent permitted by
Applicable Law, have the other rights conferred on the Trustees under the
provisions of this Mortgage.
6.5 Rights of the Trustees with Respect to Personal Property Constituting a
Part of the Mortgaged Property. Upon the occurrence of an Event of Default and
if such Event of Default shall be continuing, the Trustees will have all rights
and remedies granted by Applicable Law, and particularly by the Uniform
Commercial Code, including, but not limited to, the right to take possession of
all personal property constituting a part of the Mortgaged Property, and for
this purpose the Trustees or 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
Trustees or the Agent may require Mortgagor to assemble such personal property
and make it available to the Trustees or the Agent at a place to be designated
by the Trustees or 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 Trustees or
the Agent will give 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 Mortgagor at the address shown below the signatures at the end of this
Mortgage at least five (5) days before the time of the sale or disposition.
6.6 Rights with Respect to Fixtures Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default and if such Event of
Default shall be continuing, the Trustees 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.
6.7 Judicial Proceedings. Upon the occurrence of an Event of Default and if
such Event of Default shall be continuing, the Trustees, in lieu of or in
addition to exercising any power of sale hereinabove given, may proceed by a
suit or suits in equity or at law, whether for a foreclosure hereunder for each
or upon credit in one or more parcels or portions under executory or ordinary
process, at the Agent's sole option, without appraisement (appraisement being
expressly waived), or for the sale of the Mortgaged Property, or for the
specific performance of any covenant or agreement herein contained or in aid of
the execution of any power herein granted, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged Property, or for
the enforcement of any other appropriate legal or equitable remedy. Mortgagor
hereby acknowledges the Indebtedness secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon in the full amount of the
Indebtedness in favor of the Agent and any future holder or holders of the Notes
if such obligations are not paid at maturity.
-29-
6.8 Possession of the Mortgaged Property. It shall not be necessary for the
Trustees or the Agent to have physically present or constructively in their
possession at any sale held by the Trustees or the Agent or by any court,
receiver or public officer any or all of the Mortgaged Property; and Mortgagor
shall deliver to the purchasers at such sale on the date of sale the Mortgaged
Property purchased by such purchasers at such sale, and if it should be
impossible or impracticable for any of such purchasers to take actual delivery
of the Mortgaged Property, then the title and right of possession to the
Mortgaged Property shall pass to such purchaser at such sale as completely as if
the same had been actually present and delivered.
6.9 Certain Aspects of a Sale. The Agent shall have the right to become the
purchaser at any sale held by the Trustees or 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 or appointment of any successor Trustee
hereunder.
6.10 Receipt to Purchaser. Upon any sale, whether made under the power of
sale herein granted and conferred or by virtue of judicial proceedings, the
receipt of the Trustees, or of the officer making sale under judicial
proceedings, shall be sufficient discharge to the purchaser or purchasers at any
sale for his or their purchase money, and such purchaser or purchasers, or his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Trustees or of such officer
therefor, be obliged to see to the application of such purchase money, or be in
anywise answerable for any loss, misapplication or nonapplication thereof.
6.11 Effect of Sale. Any sale or sales of the Mortgaged Property, whether
under the power of sale herein granted and conferred or by virtue of judicial
proceedings, shall operate to divest all right, title, interest, claim and
demand whatsoever either at law or in equity, of Mortgagor of, in and to the
premises and the property sold, and shall be a perpetual bar, both at law and in
equity, against Mortgagor, and Mortgagor's successors or assigns, and against
any and all persons claiming or who shall thereafter claim all or any of the
property sold from, through or under Mortgagor or Mortgagor's successors or
assigns. Nevertheless, Mortgagor, 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.
6.12 Application of Proceeds. The proceeds of any sale of, and the Rents
and Revenues and other amounts generated by the holding, leasing, operation or
other use of, the Mortgaged Property shall be applied by the Agent (or the
receiver, if one is appointed) to the extent that funds are so available
therefrom in the following orders of priority:
-30-
(a) first, to the payment of the costs and expenses of taking
possession of the Mortgaged Property and of holding, using, leasing,
repairing, improving and selling the same, including, without limitation,
(i) trustees' and receivers' fees, (ii) court costs, (iii) attorneys' and
accountants' fees, (iv) costs of advertisement, and (v) the payment of any
and all Taxes, liens, security interests or other rights, title or
interests equal or superior to the lien and security interest of this
Mortgage (except those to which the Mortgaged Property has been sold
subject to and without in any way implying the Agent's prior consent to the
creation thereof);
(b) second, to the payment of all amounts, other than the unpaid
principal balance and accrued but unpaid interest due on the Note, which
may be due to the Agent or the Lenders under the Security Documents,
together with interest thereon as provided therein;
(c) third, to the payment of all accrued but unpaid interest due on
the Note;
(d) fourth, to the payment of the unpaid principal balance due on the
Note in the inverse order of maturity, and interest shall cease as to the
amount so paid;
(e) fifth, to the extent funds are available therefor out of the sale
proceeds or the Rents and Revenues and to the extent known by the Agent, to
the payment of any indebtedness or obligation secured by a subordinate
Mortgage on or security interest in the Mortgaged Property; and
(f) sixth, to Mortgagor or Mortgagor's successors or assigns, as their
interests shall appear.
6.13 Mortgagor's Waiver of Appraisement, Marshalling and Other Rights.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any appraisement, valuation, stay, extension or redemption
law now or hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the absolute sale of the Mortgaged Property or
the possession thereof by any purchaser at any sale made pursuant to any
provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, for Mortgagor and all who may claim through or
under Mortgagor, so far as Mortgagor or those claiming through or under
Mortgagor now or hereafter lawfully may, hereby waives the benefit of all such
laws; provided, however, that appraisement of any of the Mortgaged Property
located in the State of Oklahoma is hereby expressly waived or not, at the
option of the Trustees, such option to be exercised prior to or at the time the
judgment is rendered in any foreclosure hereof. Mortgagor, for Mortgagor and all
who may claim through or under Mortgagor, waives, to the extent that Mortgagor
may lawfully do so, any and all right to have the Mortgaged Property marshalled
upon any foreclosure of the lien hereof, or sold in inverse order of alienation,
and agrees that the Trustees, the Agent or any court
-31-
having jurisdiction to foreclose such lien may sell the Mortgaged Property as an
entirety. Mortgagor, for Mortgagor and all who may claim through or under
Mortgagor, further waives, to the full extent that Mortgagor may lawfully do so,
any requirement for posting a receiver's bond or replevin bond or other similar
type of bond if the Trustees or 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 Mortgagor or Mortgagor's successor or successors might take advantage
despite the provisions hereof, shall hereafter be repealed or cease to be in
force, such law shall not thereafter be deemed to constitute any part of the
contract herein contained or to preclude the operation or application of the
provisions of this paragraph. Pursuant to Section 39-5-19, New Mexico Statutes,
Annotated, 1978 Comp., as amended, Mortgagor agrees that as to the Mortgaged
Property situated in the State of New Mexico, the redemption period shall be
shortened to one (1) month. Mortgagor hereby waives all rights of appraisement,
sale, homestead or redemption allowed under any law or laws of the State of
Arkansas, and especially redemption under the Act of the General Assembly of the
State of Arkansas approved May 8, 1899, and acts amendatory thereto. If
Mortgagor is an individual, Mortgagor waives and releases all rights of dower,
courtesy and homestead in the Mortgaged Property insofar as such rights may in
any way affect the purposes of this Mortgage.
6.14 Costs and Expenses. All costs and expenses (including attorneys' fees)
incurred by the Trustees or the Agent in protecting and enforcing their rights
hereunder shall constitute a demand obligation owing by Mortgagor to the party
incurring such costs and expenses and shall draw interest at an annual rate
equal to the highest rate of interest from time to time accruing on the Loan
Note plus one percent (1%) until paid, all of which shall constitute a portion
of the Indebtedness.
6.15 Sale of the Mortgaged Property in Texas. If any Note is not paid when
due, whether by acceleration or otherwise, the Trustees are hereby authorized
and empowered to sell any part of the Mortgaged Property located in the State of
Texas at public sale to the highest bidder for cash in the area at the county
courthouse of the county in Texas in which the Texas portion of the Mortgaged
Property or any part thereof is situated, as herein described, designated by
such county's commissioner's court for such proceedings, or if no area is so
designated, at the door of the county courthouse of said county, at a time
between the hours of 10:00 A.M. and 4:00 P.M. which is no later than three (3)
hours after the time stated in the notice described immediately below as the
earliest time at which such sale would occur on the first Tuesday of any month,
after advertising the earliest time at which said sale would occur, the place,
and terms of said sale, and the portion of the Mortgaged Property to be sold, by
(a) posting (or by having some person or persons acting for the Trustees post)
for at least twenty-one (21) days preceding the date of the sale, written or
printed notice of the proposed sale at the courthouse door of said county in
which the sale is to be made; and if such portion of the Mortgaged Property lies
in more than one county, one such notice of sale shall be posted at the
courthouse door of each county in which such part of the Mortgaged Property is
situated and such part of the Mortgaged Property may be sold in the area at the
county courthouse of any one of such counties designated by such county's
commissioner's court for such proceedings, or if no area is so designated,
-32-
at the courthouse door of such county, and the notice so posted shall designate
in which county such property shall be sold, and (b) filing in the office of the
county clerk of each county in which any part of the Texas portion of the
Mortgaged Property which is to be sold at such sale is situated a copy of the
notice posted in accordance with the preceding clause (a). In addition to such
posting and filing of notice, the Agent or other holder of the Indebtedness
shall, at least twenty-one (21) days preceding the date of sale, serve or cause
to be served written notice of the proposed sale by certified mail on Mortgagor
and on each other debtor, if any, obligated to pay the Indebtedness according to
the records of the Agent or other holder of the Indebtedness. Service of such
notice shall be completed upon deposit of the notice, enclosed in a postpaid
wrapper properly addressed to Mortgagor and such other debtors at their most
recent address or addresses as shown by the records of the Agent or other holder
of the Indebtedness in a post office or official depository under the care and
custody of the United States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such a service was completed shall be
prima facie evidence of the fact of service. Mortgagor agrees that no notice of
any sale, other than as set out in this Section, need be given by the Trustees,
the Agent or any other person, except as may otherwise be required by Applicable
Law. Mortgagor hereby designates as its address for the purpose of such notice
the address set out on the signature page hereof; and agrees that such address
shall be changed only by depositing notice of such change enclosed in a postpaid
wrapper in a post office or official depository under the care and custody of
the United States Postal Service, certified mail, postage prepaid, return
receipt requested, addressed to the Agent or other holder of the Indebtedness at
the address for the Agent set out herein (or to such other address as the Agent
or other holder of the Indebtedness may have designated by notice given as above
provided to Mortgagor and such other debtors). Any such notice of change of
address of Mortgagor or other debtors or of the Agent or of other holder of the
Indebtedness shall be effective three (3) business days after such deposit if
such post office or official depository is located in the State of Texas,
otherwise to be effective upon receipt. Mortgagor authorizes and empowers the
Trustees to sell the Texas portion of the Mortgaged Property in lots or parcels
or in its entirety as the Trustees shall deem expedient; and to execute and
deliver to the purchaser or purchasers thereof good and sufficient deeds of
conveyance thereto by fee simple title, with evidence of general warranty by
Mortgagor, and the title of such purchaser or purchasers when so made by the
Trustees, Mortgagor binds itself to warrant and forever defend. Where portions
of the Mortgaged Property lie in different counties, sales in such counties may
be conducted in any order that the Trustees may deem expedient; and one or more
such sales may be conducted in the same month, or in successive or different
months as the Trustees may deem expedient. Notwithstanding anything to the
contrary contained herein, the Trustees may postpone the sale provided for in
this Section 6.15 at any time without the necessity of a public announcement.
The provisions hereof with respect to the posting and giving of notices of sale
are intended to comply with the provisions of Section 51.002 of the Property
Code of the State of Texas, effective January 1, 1984, and in the event the
requirements, or any notice, under such Section 51.002 of the Property Code of
the State of Texas shall be eliminated or the prescribed manner of giving such
notices modified by future amendment to, or adoption of any statute superseding,
-33-
Section 51.002 of the Property Code of the State of Texas, the requirement for
such particular notices shall be deemed stricken from or modified in this
Mortgage in conformity with such amendment or superseding statute, effective as
of the effective date thereof.
6.16 Fair Market Value. It is expressly agreed by Mortgagor that to the
extent Section 51.003 of the Texas Property Code, or any amendment thereto,
requires that the "fair market value" of the Mortgaged Property shall be
determined as of the foreclosure date in order to enforce a deficiency against
Mortgagor or any other party liable for repayment of the Indebtedness, the term
"fair market value" shall include those matters required by Applicable Law and
shall also include the additional factors set forth below:
(a) The Mortgaged Property is to be valued "AS IS" and "WITH ALL
FAULTS" and there shall be no assumption of restoration of or refurbishment
of improvements, if any, after the date of the foreclosure;
(b) An offset to the fair market value of the Mortgaged Property, as
determined hereunder, shall be made by deducting from such value the
reasonable estimated closing costs relating to the sale of the Mortgaged
Property, including but not limited to brokerage commissions, title
examination and curative expenses, tax prorations, escrow fees, and other
common charges which are incurred by a seller of property; and
(c) After consideration of the factors required by Applicable Law and
those required above, an additional discount factor shall be calculated
based upon the estimated time it will take to effectuate a sale of the
Mortgaged Property so that the "fair market value" as so determined is
discounted to be as of the date of the foreclosure sale of the Mortgaged
Property.
6.17 Operation of the Mortgaged Property by the Trustees or the Agent. Upon
the occurrence of an Event of Default and during the continuance of such Event
of Default and in addition to all other rights herein conferred on the Trustees,
the Trustees or the Agent (or any person, firm or corporation designated by the
Trustees or 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 Mortgagor, and Mortgagor's agents or servants, wholly therefrom,
and to hold, use, administer, manage and operate the same to the extent that
Mortgagor shall be at the time entitled and in its place and stead. The
Trustees, the Agent, or any person, firm or corporation designated by the
Trustees or the Agent, may operate the same without any liability to Mortgagor
in connection with such operations, except to use ordinary care in the operation
of such properties, and the Trustees, the Agent or any person, firm or
corporation designated by the Trustees or 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 xxxxx and to exercise every power, right and
privilege of Mortgagor with respect to the Mortgaged Property. When and if the
expenses of such operation and
-34-
development (including costs of unsuccessful work-over operations or additional
xxxxx) paid by the Trustees or the Agent or attributable to Mortgagor's
undivided interest therein and withheld, or offset against, by an operator or
other party have been paid or reimbursed in full by Mortgagor and the
Indebtedness paid, said properties shall, if there has been no sale or
foreclosure, be returned to Mortgagor.
6.18 Separate Sales. The Mortgaged Property may be sold in one or more
parcels and in such manner and order as the Agent, in its sole discretion, may
elect, it being expressly understood and agreed that the right of sale arising
out of any Event of Default shall not be exhausted by any one or more sales but
other and successive sales may be made until all of the Mortgaged Property has
been sold or until the Indebtedness has been fully satisfied.
6.19 Remedies Cumulative, Concurrent and Non-Exclusive. The Agent shall
have all rights, remedies and recourses granted in the Security Documents and
available at law or equity (including specifically those granted by the Uniform
Commercial Code in effect and applicable to the Mortgaged Property, or any
portion thereof), and same (a) shall be cumulative and concurrent, (b) may be
pursued separately, successively or concurrently against any one or more of
Mortgagor, any Guarantor, or others obligated under the Note, or against the
Mortgaged Property, at the sole discretion of the Agent, (c) may be exercised as
often as occasion therefor shall arise, it being agreed by Mortgagor that the
exercise or failure to exercise any of same shall in no event be construed as a
waiver or release thereof or of any other right, remedy or recourse, and (d) are
intended to be, and shall be, non-exclusive.
6.20 Release of and Resort to Collateral. The Agent may release, regardless
of consideration, any part of the Mortgaged Property without, as to the
remainder, in any way impairing, affecting, subordinating or releasing the lien
or security interests created in or evidenced by the Security Documents or their
stature as a first and prior lien and security interest in and to the Mortgaged
Property. For payment of the Indebtedness, the Agent may resort to any other
security therefor held by Trustees in such order and manner as the Agent may
elect.
6.21 Discontinuance of Proceedings. In case the Agent shall have proceeded
to invoke any right, remedy or recourse permitted under the Security Documents
and shall thereafter elect to discontinue or abandon same for any reason, the
Agent shall have the unqualified right so to do and, in such an event, Mortgagor
and the Agent shall be restored to their former positions with respect to the
Indebtedness, the Obligations, the Security Documents, the Mortgaged Property
and otherwise, and the rights, remedies, recourses and powers of the Agent shall
continue as if same had never been invoked.
6.22 Uniform Commercial Code Remedies. The Agent (or Trustees in the
Agent's behalf) shall have all the rights, remedies and recourses with respect
to the Personalty, Fixtures, Leases and Rents and Revenues afforded a Secured
Party by the aforesaid Uniform Commercial Code (being Chapter 9 of the Texas
Business and Commerce Code, as to property within the scope thereof and situated
in the State of
-35-
Texas) in addition to, and not in limitation of, the other rights, remedies and
recourses afforded the Agent and/or Trustees by the Security Documents.
6.23 No Obligation of Trustees or the Agent. The assignment and security
interest herein granted shall not be deemed or construed (a) to constitute
Trustees or the Agent as a trustee in possession of the Mortgaged Property or
(b) to obligate Trustees or the Agent to (i) lease the Mortgaged Property or
attempt to do same, (ii) take any action, (iii) incur any expenses or perform or
discharge any obligation, duty or liability whatsoever under any of the Leases
or otherwise.
ARTICLE VII
Miscellaneous Provisions
------------------------
7.1 Pooling and Unitization. Mortgagor shall have the right, and is hereby
authorized, to pool or unitize all or any part of the lands described in Exhibit
A, insofar as relates to the Mortgaged Property, with adjacent lands, leaseholds
and other interests, when, in the reasonable judgment of Mortgagor, it is
necessary or advisable to do so in order to form a drilling and/or production
unit to facilitate the orderly development of that part of the Mortgaged
Property affected thereby, or to comply with the requirements of any Applicable
Law or governmental order or regulation relating to the spacing of xxxxx 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 xxxxx or to obtain
the maximum allowable production under any Applicable Law or governmental order
or regulation relating to the proration of production therefrom; and further
provided that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the unit in
a uniform manner consistently applied. 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, Mortgagor shall furnish to the Trustees and 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 Trustees 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 Mortgagor therein were specifically
described in Exhibit A. Mortgagor may enter into pooling or unitization
agreements not hereinabove authorized only with the prior written consent of the
Agent, which consent shall not be unreasonably withheld.
7.2 No Liability. Trustees and the Agent shall not be liable for any error
of judgment or act done by Trustees and the Agent in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for their
-36-
negligence or bad faith. Trustees and the Agent shall not be personally liable
in case of entry by them, or anyone entering by virtue of the powers herein
granted them, upon the Mortgaged Property for debts contracted or liability or
damages incurred in the management or operation of the Mortgaged Property.
Trustees and 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 them in good faith to be genuine. Trustees shall
be entitled to reimbursement for expenses incurred by them in the performance of
their duties hereunder and to reasonable compensation for such of their services
hereunder as shall be rendered. Mortgagor will, from time to time, pay the
compensation due to Trustees and the Agent hereunder and reimburse Trustees and
the Agent for, and save them harmless against, any and all liability and
expenses which may be incurred by them in the performance of their duties.
7.3 Successor Trustees. Any Trustee may resign in writing addressed to the
Agent or may be removed at any time with or without cause by an instrument in
writing duly executed by the Agent. In case of the death, resignation or removal
of a Trustee, one or more successor Trustees may be appointed by the Agent by
instrument of substitution complying with any applicable requirements of
Applicable Law, and in the absence of any such requirement without formality
other than appointment and designation in writing. Such appointment and
designation shall be full evidence of the right and authority to make the same
and of all facts therein recited, and upon the making of any such appointment
and designation this conveyance shall vest in the named successor Trustee or
Trustees, all the estate and title of the prior Trustee in all of the Mortgaged
Property, and he or they shall thereupon succeed to all the rights, powers,
privileges, immunities and duties hereby conferred upon the prior Trustee. All
references herein to the Trustees shall be deemed to refer to the Trustees from
time to time acting hereunder.
7.4 Actions or Advances by the Agent or the Trustees. Each and every
covenant herein contained shall be performed and kept by Mortgagor solely at
Mortgagor's expense. If Mortgagor shall fail to perform or keep any of the
covenants of whatsoever kind or nature contained in this Mortgage, the Agent, or
the Trustees or any receiver appointed hereunder or under Applicable Law, may,
but shall not be obligated to, take action and/or make advances to perform the
same in Mortgagor's behalf, and 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, the Trustees or any
receiver appointed hereunder shall be deemed to relieve Mortgagor from any
default hereunder.
7.5 No Waiver. Any failure by Trustees or the Agent to insist, or any
election by Trustees or the Agent not to insist, upon strict performance by
Mortgagor of any of the terms, provisions or conditions of the Security
Documents shall not be deemed to be
-37-
a waiver of same or of any other term, provision or condition thereof, and
Trustees or the Agent shall have the right at any time or times thereafter to
insist upon strict performance by Mortgagor of any and all of such terms,
provisions and conditions.
7.6 Defense of Claims. Mortgagor will notify the Trustees and 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 3.4(j),
as may be necessary or appropriate to preserve Mortgagor's, the Trustees' and
the Agent's rights affected thereby and/or to hold harmless the Trustees, the
Agent and the Lender Parties in respect of such proceedings; and should
Mortgagor fail or refuse to take any such action, the Trustees or the Agent may,
upon giving prior written notice thereof to Mortgagor, take such action in
behalf and in the name of Mortgagor and at Mortgagor's expense. Moreover, the
Agent or the Trustees on behalf of the Agent, may take such independent action
in connection therewith as it or they may in its or their discretion deem
proper, 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 paid, will, on demand, be reimbursed, as
appropriate, to the Agent, the Trustees or any receiver appointed hereunder or
under Applicable Law. The obligations of Mortgagor as hereinabove set forth in
this Section 7.6 shall survive the release, termination, foreclosure or
assignment of this Mortgage or any sale hereunder.
7.7 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 Mortgagor and the entire estate,
right, title and interest of the Trustees and the Agent shall thereupon cease;
and the Trustees and the Agent in such case shall, upon the request of Mortgagor
and at Mortgagor's cost and expense, deliver to Mortgagor proper instruments
acknowledging satisfaction of this Mortgage.
7.8 Covenants Running with the Land. All Obligations contained in this
Mortgage are intended by the parties to be, and shall be construed as, covenants
running with the Mortgaged Property.
7.9 Renewals, Amendments and Other Security. Renewals and extensions of the
Indebtedness and modifications of any kind of the Obligations may be given at
any time and amendments may be made to agreements with third parties relating to
any part of such Indebtedness or the Mortgaged Property and the Trustees and the
Agent may take or may now hold other security from others for the Indebtedness,
all without notice to or consent of Mortgagor. The Trustees or 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 Mortgage, which shall continue
as a first lien upon and prior perfected security interest
-38-
in the Mortgaged Property not expressly released until the Notes and all other
Indebtedness secured hereby are fully paid.
7.10 Mortgage, Assignment, etc. This Mortgage shall be deemed to be and may
be enforced from time to time as an assignment, chattel mortgage, contract, deed
of trust, financing statement, real estate mortgage, or security agreement, and
from time to time as any one or more thereof.
7.11 Limitation on Interest. No provision of this Mortgage 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, Mortgagor shall
not be obligated to pay such excess.
7.12 Severability. The Security Documents are intended to be performed in
accordance with, and only to the extent permitted by, all applicable Legal
Requirements. If any provision of any of the Security Documents or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of the instrument
in which such provision is contained nor the application of such provision to
other persons or circumstances nor the other instruments referred to hereinabove
shall be affected thereby, but rather shall be enforced to the greatest extent
permitted by Applicable Law. It is hereby expressly stipulated and agreed to be
the intent of Mortgagor and the Agent at all times to comply with the usury, and
all other, laws relating to the Security Documents. If, at any time, the
applicable Legal Requirements render usurious any amount called for in any
Security Document, then it is Mortgagor's, Trustees' and the Agent's express
intent that such document be immediately deemed reformed and the amounts
collectible reduced, without the necessity of the execution of any new document,
so as to comply with the then Applicable Law but so as to permit the recovery of
the fullest amount otherwise called for in such Security Documents.
7.13 Waiver by the Trustees. Any and all covenants in this Mortgage may
from time to time by instrument in writing signed by the Trustees and the Agent
be waived to such extent and in such manner as the Trustees and the Agent may
desire, but no such waiver shall ever affect or impair either the Trustees' or
the Agent's rights or liens or security interests hereunder, except to the
extent specifically stated in such written instrument.
7.14 Action by Individual Trustee. Any Trustee from time to time serving
hereunder shall have the absolute right, acting individually, to take any action
and to give any consent and to exercise any right, remedy, power, privilege or
authority conferred upon the Trustees, and any action taken by either Trustee
from time to time serving hereunder shall be binding upon the other Trustee and
no person dealing with either Trustee from time to time serving hereunder shall
be obligated to confirm the power and authority of such Trustee to act without
the concurrence of the other Trustee.
-39-
In this Mortgage, the term "Trustee" means the Trustees hereinabove named, or
either of them, as the context requires, and any successor Trustee.
7.15 No Partnership. Nothing contained in this Mortgage is intended to, or
shall be construed as, creating to any extent and in any manner whatsoever, any
partnership, joint venture, or association among Mortgagor, the Trustees, the
Agent and their respective Affiliates, or in any way as to make the Agent or the
Trustee's co-principals with Mortgagor with reference to the Mortgaged Property,
and any inferences to the contrary are hereby expressly negated.
7.16 Successors and Assigns. This Mortgage is binding upon Mortgagor,
Mortgagor's successors and assigns, and shall inure to the benefit of the
Trustees, their successors, and the Agent, its successors and assigns, and the
provisions hereof shall likewise be covenants running with the land.
7.17 Article and Section Headings. The article and section headings in this
Mortgage are inserted for convenience of reference and shall not be considered a
part of this Mortgage or used in its interpretation.
7.18 Execution in Counterparts. This Mortgage may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original and all of which are identical, except that, to facilitate recordation
or filing, in any particular counterpart portions of Exhibit A hereto which
describe properties situated in parishes or counties other than the parish or
county in which such counterpart is to be recorded or filed may have been
omitted.
7.19 Special Filing as Financing Statement. This Mortgage shall likewise be
a Security Agreement and a Financing Statement. This Mortgage shall be filed for
record, among other places, in the real estate records of each county or parish
in which any portion of the real property covered by the oil and gas leases
described in Exhibit A hereto is situated, and, when filed in such counties or
parishes shall be effective as a financing statement covering Fixtures located
on oil and gas properties, which oil and gas properties (and accounts arising
therefrom) are to be financed at the wellheads of the xxxxx located on the lands
described in Exhibit A. At the option of the Agent, a carbon, photographic or
other reproduction of this Mortgage or of any financing statement covering the
Mortgaged Property or any portion thereof shall be sufficient as a financing
statement and may be filed as such.
7.20 Notices. Except as otherwise required by Sections 6.5 and 6.15 hereof,
any notice, request, demand or other Mortgage which may be required or permitted
to be given or served upon Mortgagor shall be sufficiently given when mailed by
first-class mail, addressed to Mortgagor at the address shown below the
signatures at the end of this Mortgage or to such different address as Mortgagor
shall have designated by written notice received by the Agent or the Trustees.
7.21 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
-40-
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.
7.22 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 Mortgagor and/or Affiliates of Mortgagor. This Mortgage
secures the obligations of Mortgagor and such Affiliates, as the case may be,
under such Hedging Agreements, and the parties acknowledge for all purposes that
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 Mortgage in respect of the Mortgaged Property.
7.23 Applicable Law. As to any tract or parcel of land comprising a portion
of the Mortgaged Property, this Mortgage shall be governed by and construed
according to the Applicable Laws of the State where such tract or parcel of land
is situated.
7.24 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 Mortgage shall be subrogated to all of the rights, claims, liens,
titles and interests heretofore existing against the Mortgaged Property to
secure the indebtedness so extinguished, extended or renewed and the former
rights, claims, liens, titles and interests, if any, are not waived but rather
are continued in full force and effect in favor of 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.
7.25 Fixture Filing. Portions of the Mortgaged Property are or are to
become fixtures relating to the above described real estate, and Mortgagor
herein expressly covenants and agrees that the filing of this Mortgage in the
Real Estate Records in the county where the Mortgaged Property is located shall
also operate from the time of filing therein as a financing statement filed as a
fixture filing in accordance with Section 9.502(c) of the Uniform Commercial
Code - Secured Transactions of the State of Texas.
7.26 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 Mortgage has been recorded, the Agent may subordinate the lien
created by this Mortgage 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
Mortgage.
-41-
IN WITNESS WHEREOF, Mortgagor has executed or caused to be executed this
Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and
Fixture Filing in the presence of the undersigned Notary Public on this _____
day of ______________, 2002.
MORTGAGOR AND DEBTOR
--------------------
CALPINE CORPORATION, a Delaware
corporation
By:______________________________________
Title:___________________________________
Printed Name:____________________________
ATTEST:
_______________________________________
Secretary
Printed Name:__________________________
The name and mailing address of Mortgagor is:
Calpine Corporation
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
[Multistate Mortgage]
SECURED PARTY
-------------
THE BANK OF NOVA SCOTIA, as Agent
By:______________________________________
Title: Director
Printed Name: Xxxx Xxxxxxx
ATTEST:
_______________________________________
Banking Officer/Clerk
Printed Name: Xxxx Xxxxx
ADDITIONAL SECURED PARTIES
--------------------------
_________________________________________
Xxxx Xxxxxxx, Trustee
_________________________________________
Xxxx Xxxxx, Trustee
The name and mailing address of the Secured Party is:
The Bank of Nova Scotia, as Agent
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
The mailing address of the additional Secured Parties, Xxxx Xxxxxxx, as Trustee,
and Xxxx Xxxxx, as Trustee, is:
The Bank of Nova Scotia
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Xxxx Xxxxx
[Multistate Mortgage]
STATE OF _______________________)
) SS.
COUNTY OF ______________________)
BE IT REMEMBERED that I, _______________________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the County and State
aforesaid, hereby certify that, on this _____ day of ____________, 2002, there
appeared before me severally each of the following persons, each being either a
Trustee or else the designated officer of the corporation or association set
opposite his name, and each such Trustee, corporation and association being a
party to the foregoing instrument:
___________________________, the ______________________, and
___________________________, the ______________________ Secretary, of Calpine
Corporation, a Delaware corporation, whose address is 0000 Xxxxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxx, XX 00000.
ARKANSAS Before me on this day appeared in person the aforementioned
persons, to me personally well known, who stated that they held
the offices in the corporation or association set forth opposite
their names above (or, in the case of the Trustees, were validly
appointed Trustees) and were duly authorized in their respective
capacities to execute the foregoing instrument for and in the
name and on behalf of said corporation or association (or as
Trustees, as the case may be), and further stated and
acknowledged that they had so signed, executed and delivered said
foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
COLORADO The foregoing instrument was acknowledged before me this day by
each such person on behalf of said corporation or association, or
himself, as a Trustee, as the case may be.
KANSAS On this day before me personally appeared the aforementioned
persons, who acknowledged themselves to hold the offices in the
corporation set forth opposite their names above (or, in the case
of the Trustees, were validly appointed Trustees) and as such
officers or Trustees, hereby authorized to do so, executed the
foregoing instrument for the purposes therein contained.
MISSISSIPPI Personally appeared before me, the undersigned authority in and
for the said county and state, on this day, within my
jurisdiction the within named persons, who acknowledged
themselves to hold the offices in the corporation set forth
opposite their name above (or, in the case of the Trustees, were
validly appointed Trustees), and that for and on behalf of said
corporation (or as Trustees, as the case may be), executed the
above and foregoing instrument after
[Multistate Mortgage]
first having been duly authorized by said corporation so to do.
MONTANA On this day before me personally appeared each such person, each
of whom is known to me to be the officer of the corporation that
executed the within instrument (or a Trustee, as the case may
be), and acknowledged to me that such corporation (or Trustee, as
the case may be) executed the same.
NEBRASKA The foregoing instrument was acknowledged before me this day by
and each such person as the designated officers of the corporation or
NEW MEXICO association set opposite their names (or as Trustees, as the case
may be) on behalf of said corporation or association, or himself
as a Trustee, as the case may be.
OKLAHOMA Before me on this day personally appeared the aforementioned
persons, to me known to be the identical persons who subscribed
the names of the respective makers thereof to the foregoing
instrument in the capacities set forth opposite the names of such
persons above, and each such person acknowledged to me that he
executed the same as his free and voluntary act and deed and as
the free and voluntary act and deed of the corporation or
association set opposite his name (or of himself as Trustee, as
the case may be) for the uses and purposes therein set forth.
TEXAS This instrument was acknowledged before me on this day by each
such person as the designated officer of the corporation or
association set opposite his name (or a Trustee, as the case may
be), on behalf of said corporation or association set opposite
his name (or of himself as Trustee, as the case may be).
WYOMING The foregoing instrument was acknowledged before me by the above
individuals on this day.
Witness my hand and official seal.
_________________________________________
Notary Public
Residing at______________________________
My commission expires:
[Multistate Mortgage]
STATE OF _______________________)
) SS.
COUNTY OF ______________________)
BE IT REMEMBERED that I, _______________________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the County and State
aforesaid, hereby certify that, on this _____ day of ____________, 2002, there
appeared before me severally each of the following persons, each being either a
Trustee or else the designated officer of the corporation or association set
opposite his name, and each such Trustee, corporation and association being a
party to the foregoing instrument:
Xxxx Xxxxxxx, Director, and Xxxx Xxxxx, Banking Officer/Clerk, of THE BANK
OF NOVA SCOTIA, a Canadian chartered bank, whose address is 000 Xxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000.
ARKANSAS Before me on this day appeared in person the aforementioned
persons, to me personally well known, who stated that they held
the offices in the corporation or association set forth opposite
their names above (or, in the case of the Trustees, were validly
appointed Trustees) and were duly authorized in their respective
capacities to execute the foregoing instrument for and in the
name and on behalf of said corporation or association (or as
Trustees, as the case may be), and further stated and
acknowledged that they had so signed, executed and delivered said
foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
COLORADO The foregoing instrument was acknowledged before me this day by
each such person on behalf of said corporation or association, or
himself, as a Trustee, as the case may be.
KANSAS On this day before me personally appeared the aforementioned
persons, who acknowledged themselves to hold the offices in the
corporation set forth opposite their names above (or, in the case
of the Trustees, were validly appointed Trustees) and as such
officers or Trustees, hereby authorized to do so, executed the
foregoing instrument for the purposes therein contained.
MISSISSIPPI Personally appeared before me, the undersigned authority in and
for the said county and state, on this day, within my
jurisdiction the within named persons, who acknowledged
themselves to hold the offices in the corporation set forth
opposite their name above (or, in the case of the Trustees, were
validly appointed Trustees), and that for and on behalf of said
corporation (or as Trustees, as the case may be), executed the
above and foregoing instrument after first having been duly
authorized by said corporation so to do.
[Multistate Mortgage]
MONTANA On this day before me personally appeared each such person, each
of whom is known to me to be the officer of the corporation that
executed the within instrument (or a Trustee, as the case may
be), and acknowledged to me that such corporation (or Trustee, as
the case may be) executed the same.
NEBRASKA The foregoing instrument was acknowledged before me this day by
and each such person as the designated officers of the corporation or
NEW MEXICO association set opposite their names (or as Trustees, as the case
may be) on behalf of said corporation or association, or himself
as a Trustee, as the case may be.
OKLAHOMA Before me on this day personally appeared the aforementioned
persons, to me known to be the identical persons who subscribed
the names of the respective makers thereof to the foregoing
instrument in the capacities set forth opposite the names of such
persons above, and each such person acknowledged to me that he
executed the same as his free and voluntary act and deed and as
the free and voluntary act and deed of the corporation or
association set opposite his name (or of himself as Trustee, as
the case may be) for the uses and purposes therein set forth.
TEXAS This instrument was acknowledged before me on this day by each
such person as the designated officer of the corporation or
association set opposite his name (or a Trustee, as the case may
be), on behalf of said corporation or association set opposite
his name (or of himself as Trustee, as the case may be).
WYOMING The foregoing instrument was acknowledged before me by the above
individuals on this day.
Witness my hand and official seal.
_________________________________________
Notary Public
Residing at______________________________
My commission expires:
[Multistate Mortgage]
STATE OF _______________________)
) SS.
COUNTY OF ______________________)
BE IT REMEMBERED that I, _______________________________, a Notary Public
duly qualified, commissioned, sworn and acting in and for the County and State
aforesaid, hereby certify that, on this _____ day of ____________, 2002, there
appeared before me severally each of the following persons, each being either a
Trustee or else the designated officer of the corporation or association set
opposite his name, and each such Trustee, corporation and association being a
party to the foregoing instrument:
Xxxx Xxxxxxx and Xxxx Xxxxx whose addresses are 000 Xxxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxxxxxxx, XX 00000, as Trustees.
ARKANSAS Before me on this day appeared in person the aforementioned
persons, to me personally well known, who stated that they held
the offices in the corporation or association set forth opposite
their names above (or, in the case of the Trustees, were validly
appointed Trustees) and were duly authorized in their respective
capacities to execute the foregoing instrument for and in the
name and on behalf of said corporation or association (or as
Trustees, as the case may be), and further stated and
acknowledged that they had so signed, executed and delivered said
foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
COLORADO The foregoing instrument was acknowledged before me this day by
each such person on behalf of said corporation or association, or
himself, as a Trustee, as the case may be.
KANSAS On this day before me personally appeared the aforementioned
persons, who acknowledged themselves to hold the offices in the
corporation set forth opposite their names above (or, in the case
of the Trustees, were validly appointed Trustees) and as such
officers or Trustees, hereby authorized to do so, executed the
foregoing instrument for the purposes therein contained.
MISSISSIPPI Personally appeared before me, the undersigned authority in and
for the said county and state, on this day, within my
jurisdiction the within named persons, who acknowledged
themselves to hold the offices in the corporation set forth
opposite their name above (or, in the case of the Trustees, were
validly appointed Trustees), and that for and on behalf of said
corporation (or as Trustees, as the case may be), executed the
above and foregoing instrument after first having been duly
authorized by said corporation so to do.
[Multistate Mortgage]
MONTANA On this day before me personally appeared each such person, each
of whom is known to me to be the officer of the corporation that
executed the within instrument (or a Trustee, as the case may
be), and acknowledged to me that such corporation (or Trustee, as
the case may be) executed the same.
NEBRASKA The foregoing instrument was acknowledged before me this day by
and each such person as the designated officers of the corporation or
NEW MEXICO association set opposite their names (or as Trustees, as the case
may be) on behalf of said corporation or association, or himself
as a Trustee, as the case may be.
OKLAHOMA Before me on this day personally appeared the aforementioned
persons, to me known to be the identical persons who subscribed
the names of the respective makers thereof to the foregoing
instrument in the capacities set forth opposite the names of such
persons above, and each such person acknowledged to me that he
executed the same as his free and voluntary act and deed and as
the free and voluntary act and deed of the corporation or
association set opposite his name (or of himself as Trustee, as
the case may be) for the uses and purposes therein set forth.
TEXAS This instrument was acknowledged before me on this day by each
such person as the designated officer of the corporation or
association set opposite his name (or a Trustee, as the case may
be), on behalf of said corporation or association set opposite
his name (or of himself as Trustee, as the case may be).
WYOMING The foregoing instrument was acknowledged before me by the above
individuals on this day.
Witness my hand and official seal.
_________________________________________
Notary Public
Residing at______________________________
My commission expires:
[Multistate Mortgage]
SCHEDULE I To Mortgage, Deed of Trust, Assignment,
-------------------------------------------------
Security Agreement, Financing Statement and Fixture Filing, dated
May 1, 2002, from CALPINE CORPORATION
to XXXX XXXXXXX and XXXX XXXXX
and 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
Xxxxxxx Petroleum Corporation
-1-
EXHIBIT A To Mortgage, Deed of Trust, Assignment,
------------------------------------------------
Security Agreement, Financing Statement and Fixture Filing, dated
May 1, 2002, from CALPINE CORPORATION
to XXXX XXXXXXX AND XXXX XXXXX
and 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 Mortgage.
2. Some of the land descriptions in this Exhibit A may refer only to a
portion of the land covered by a particular lease. This Mortgage is not limited
to the land described in Exhibit A but is intended to cover the entire interest
of Mortgagor in any lease described in Exhibit A even if such interest relates
to land not described in Exhibit A. Reference is made to the land descriptions
contained in the documents of title recorded as described in this Exhibit A. To
the extent that the land descriptions in this Exhibit A are incomplete,
incorrect or not legally sufficient, the land descriptions contained in the
documents so recorded are incorporated herein by this reference.
3. References in Exhibit A to instruments on file in the public records are
made for all purposes. Unless provided otherwise, all recording references in
Exhibit A are to the official real property records of the county or counties
(or parish or parishes) in which the mortgaged property is located and in which
records such documents are or in the past have been customarily recorded,
whether Deed Records, Oil and Gas Records, Oil and Gas Lease Records or other
records.
4. A statement herein that a certain interest described herein is subject
to the terms of certain described or referred to agreements, instruments or
other matters shall not operate to subject such interest to any such agreement,
instrument or other matter except to the extent that such agreement, instrument
or matter is otherwise valid and presently subsisting nor shall such statement
be deemed to constitute a recognition by the parties hereto that any such
agreement, instrument or other matter is valid and presently subsisting.
[Do not detach this page]
A-1
EXHIBIT B To Mortgage, Deed of Trust, Assignment,
------------------------------------------------
Security Agreement, Financing Statement and Fixture Filing, dated
May 1, 2002, from CALPINE CORPORATION
to XXXX XXXXXXX AND XXXX XXXXX
and THE BANK OF NOVA SCOTIA
Permitted Encumbrances
----------------------
All initially-capitalized terms used in this Exhibit B, whether or not
defined in this instrument, shall have the respective 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;
B-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.
B-2
