WHEN RECORDED RETURN TO:
William W. Kelly, Jr.
Classic Oil & Gas Resources, Inc.
416 W. Brannon Road
Nicholasville, KY  40356

MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

FROM

VELOCITY ENERGY PARTNERS LP, a Delaware limited partnership

TO
R. FORD FRANCIS, AS TRUSTEE

FOR THE BENEFIT OF

CLASSIC OIL & GAS RESOURCES, INC.

NOTICE OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE
OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS
FILED FOR RECORD IN THE PUBLIC RECORDS:  YOUR SOCIAL SECURITY NUMBER OR YOUR
DRIVER’S LICENSE NUMBER.
 
A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
 
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT.  IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE TRUSTEE OR THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY
AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
MORTGAGOR UNDER THIS INSTRUMENT.
 
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
 
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
 
THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.
 
THIS INSTRUMENT COVERS AS-EXTRACTED COLLATERAL, MINERALS AND OTHER SUBSTANCES OF
VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL
AND GAS), AND ACCOUNTS RESULTING FROM THE SALE OF AS-EXTRACTED COLLATERAL, AND
WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE
PROPERTIES DESCRIBED IN EXHIBIT A HERETO.  IN ADDITION, PORTIONS OF THE
MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR FIXTURES
ON THE LAND DESCRIBED IN OR REFERRED TO IN EXHIBIT A HERETO. THIS FINANCING
STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS OR SIMILAR RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED
ON EXHIBIT A HERETO.  THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE
CONCERNED, WHICH INTEREST IS DESCRIBED IN EXHIBIT A ATTACHED HERETO.  THIS
INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS.

 
 

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TABLE OF CONTENTS
 
ARTICLE I
         
Grant of Lien and Indebtedness Secured
1
Section 1.01
Grant of Liens
1
Section 1.02
Grant of Security Interest
4
Section 1.03
Indebtedness Secured
5
Section 1.04
Fixture Filing, Etc
5
Section 1.05
Defined Terms
6
     
ARTICLE II
         
Assignment of Production, Accounts and Proceeds
6
Section 2.01
Assignment
6
Section 2.02
[Reserved].
7
Section 2.03
No Modification of Payment Obligations
7
Section 2.04
Effectuating Payment of Production Proceeds to Mortgagee
7
Section 2.05
Application of Production Proceeds
8
Section 2.06
Release from Liability; Indemnification
8
     
ARTICLE III
         
Representations, Warranties and Covenants
9
Section 3.01
Title
9
Section 3.02
Defend Title
10
Section 3.03
Not a Foreign Person
10
Section 3.04
Rentals, Taxes, Insurance and Fees Paid;  Leases in Effect
10
Section 3.05
Operation By Third Parties
10
Section 3.06
Failure to Perform
10
Section 3.07
Sale
11
Section 3.08
Sale of Production
11
Section 3.09
Operation of Mortgaged Property
12
Section 3.10
Suits and Claims
13
Section 3.11
Environmental.
13
Section 3.12
Not Abandon Wells; Participate in Operations
15
Section 3.13
Condemnation Awards
15
Section 3.14
Insurance
15
Section 3.15
Compliance with Leases
16
Section 3.16
Further Assurance
16
Section 3.17
Name and Place of Business
16
Section 3.18
Compliance with Laws and Agreements
17
Section 3.19
Inspection; Management
17
Section 3.20
Priority over Contemporaneous Mortgage
17
     
ARTICLE IV
         
Rights and Remedies
18
Section 4.01
Event of Default
18
Section 4.02
Foreclosure and Sale.
18

 
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Section 4.03
Agents
20
Section 4.04
Judicial Foreclosure; Receivership
20
Section 4.05
Foreclosure for Installments
20
Section 4.06
Separate Sales
21
Section 4.07
Possession of Mortgaged Property
21
Section 4.08
Occupancy After Foreclosure
21
Section 4.09
Remedies Cumulative, Concurrent and Nonexclusive
22
Section 4.10
No Release of Obligations
22
Section 4.11
Release of and Resort to Collateral
22
Section 4.12
Waiver of Redemption, Notice and Marshalling of Assets, Etc
22
Section 4.13
Discontinuance of Proceedings
22
Section 4.14
Application of Proceeds
23
Section 4.15
Resignation of Operator
23
Section 4.16
Indemnity
23
     
ARTICLE V
         
Trustee
24
Section 5.01
Duties, Rights, and Powers of Trustee
24
Section 5.02
Successor Trustee
24
Section 5.03
Retention of Monies
25
     
ARTICLE VI
         
Miscellaneous
25
Section 6.01
Instrument Construed as Mortgage, Etc
25
Section 6.02
Release of Mortgage
25
Section 6.03
Severability
25
Section 6.04
Successors and Assigns of Parties
25
Section 6.05
Satisfaction of Prior Encumbrance
26
Section 6.06
Subrogation of Trustee
26
Section 6.07
Nature of Covenants
26
Section 6.08
Notices
26
Section 6.09
Counterparts
26
Section 6.10
Effective as a Financing Statement
26
Section 6.11
No Impairment of Security
27
Section 6.12
Acts Not Constituting Waiver
27
Section 6.13
Mortgagor’s Successors
27
Section 6.14
Certain Consents
27
Section 6.15
Governing Law
28
Section 6.16
Exculpation Provisions
28
Section 6.17
FINAL AGREEMENT
28
Section 6.18
Subrogation; Prior Mortgages
28
Section 6.19
Compliance with Usury Laws
29
Section 6.20
Certain Obligations of Mortgagor
29
Section 6.21
Authority of Mortgagee
29

 
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MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT
 
This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT (this “Mortgage”) is entered into as of
the Effective Date (as hereinafter defined) by VELOCITY ENERGY PARTNERS LP, a
Delaware limited partnership, whose address for notice is 523 North Sam Houston
Parkway East, Suite 175, Houston, Texas 77060 (“Mortgagor”), to R. Ford Francis,
as Trustee, whose address for notice is Francis, Nelson & Brison, 1560 Kanawha
Boulevard East, Charleston, WV  25311 (“Trustee”), for the benefit of CLASSIC
OIL & GAS RESOURCES, INC., a Kentucky corporation, whose address for notice is
416 W. Brannon Road, Nicholasville, KY  40356, and in its capacity as collateral
agent for the benefit of the holders of the Note (as defined below) (together
with its successors and assigns, the “Mortgagee”).
 
RECITALS:
 
A.           This Mortgage is made pursuant to that certain Promissory Note
dated as of September 1_, 2009 (as amended, restated, supplemented or otherwise
modified from time to time, the “Promissory Note” or the “Note”), between
Mortgagor and the holder of the Note (together with their respective successors
and assigns, the “Mortgagee”), to secure the payment of the Note ( as well as
the other items constituting “Indebtedness” pursuant to Section 1.03 hereof) as
provided in that certain definitive, legally Letter of Intent between the
Parties hereto dated September 4, 2009, effective July 1, 2009 (“LOI” or
“Purchase Agreement”).
 
B.           Mortgagor has agreed that all of the Indebtedness (as defined in
Section 1.03 hereof) is intended to be secured in part by this Mortgage and this
Mortgage is to be recorded in those jurisdictions as set forth on Exhibit A of
this Mortgage.
 
THEREFORE, in order to comply with the terms and conditions of the Note and the
Purchase Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with
Trustee and Mortgagee as follows:
 
ARTICLE I
Grant of Lien and Indebtedness Secured
 
Section 1.01     Grant of Liens.  To secure payment of the Indebtedness and the
performance of the covenants and obligations herein contained and contained in
the Note and any other Loan Document to which Mortgagor is a party, Mortgagor
does by these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, PLEDGE,
HYPOTHECATE, TRANSFER and CONVEY unto Trustee and Trustee’s successors and
substitutes in trust hereunder, WITH A POWER OF SALE, for the use and benefit of
Mortgagee, the real and personal property, rights, titles, interests and estates
described in the following paragraphs (a) through (l) (collectively called the
“Mortgaged Property”):

 
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(a)           All estates now owned or hereafter acquired by Mortgagor in and to
the oil and gas leases and/or oil, gas and other mineral leases, other mineral
properties, mineral servitudes and/or mineral rights, “as extracted collateral”
as defined in the Applicable UCC (as defined in Section 1.02) and other
interests and estates and the lands and premises covered or affected thereby
which are described on Exhibit A hereto without regard to any limitations as to
specific lands or depths that may be set forth in Exhibit A (collectively called
the “Hydrocarbon Property”) or which Hydrocarbon Property is otherwise referred
to herein, and specifically, but without limitation, the undivided interests of
Mortgagor which are more particularly described on attached Exhibit A.
 
(b)           All estates now owned or hereafter acquired by Mortgagor in and to
(i) the properties now or hereafter pooled or unitized with any Hydrocarbon
Property; (ii) all presently existing or future unitization, communitization,
pooling agreements and designations, orders or declarations of pooled units and
the units created thereby (including, without limitation, all units created
under orders, regulations, rules or other official acts of any Federal, State or
other governmental body or agency having jurisdiction and any units created
solely among working interest owners pursuant to operating agreements or
otherwise) which may affect all or any portion of the Hydrocarbon Property
including, without limitation, those units which may be described or referred to
on attached Exhibit A; (iii) all operating agreements, production sales or other
contracts, processing agreements, transportation agreements, gas balancing
agreements, farmout agreements, farm-in agreements, salt water disposal
agreements, area of mutual interest agreements, equipment leases and other
agreements described or referred to in this Mortgage or which relate to any of
the Hydrocarbon Property or interests in the Hydrocarbon Property described or
referred to herein or on attached Exhibit A or to the production, sale,
purchase, exchange, processing, handling, storage, transporting or marketing of
the Hydrocarbons (as defined in Section 1.01(c) hereof) from or attributable to
such Hydrocarbon Property or interests; (iv) all geological, geophysical,
engineering, accounting, title, legal, and other technical or business data
concerning the Hydrocarbon Property, the Hydrocarbons, or any other item of
Hydrocarbon Property which are in the possession of Mortgagor or in which
Mortgagor can otherwise grant a security interest, and all books, files,
records, magnetic media, computer records, and other forms of recording or
obtaining access to such data; and (v) the Hydrocarbon Property described on
attached Exhibit A and covered by this Mortgage even though Mortgagor’s
interests therein be incorrectly described or a description of a part or all of
such Hydrocarbon Property or Mortgagor’s interests therein be omitted; it being
intended by Mortgagor and Mortgagee herein to cover and affect hereby all
interests which Mortgagor may now own or may hereafter acquire in and to the
Hydrocarbon Property notwithstanding that the interests as specified on
Exhibit A may be limited to particular lands, specified depths or particular
types of property interests.
 
(c)           All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the “Hydrocarbons”) in and
under and which may be produced and saved from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor’s
interests therein, including all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbons, the Hydrocarbon Property, the lands pooled or unitized therewith
and Mortgagor’s interests therein.

 
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(d)           All tenements, hereditaments, appurtenances and properties in
anywise appertaining, belonging, affixed or incidental to the Hydrocarbon
Property, and estates described or referred to in paragraphs (a) and (b) above,
which are now owned or which may hereafter be acquired by Mortgagor, including,
without limitation, any and all property, real or personal, now owned or
hereafter acquired and situated upon, used, held for use, or useful in
connection with the operating, working, extraction, treatment, marketing,
gathering, transmission or development of any of such Hydrocarbon Property or
the lands pooled or unitized therewith (excluding drilling rigs, trucks,
automotive equipment or other personal property which may be taken to the
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, field separators, liquid extraction plants, plant
compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
systems, field gathering systems, salt water disposal facilities, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, goods, inventory, equipment, appliances, tools, implements,
cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way,
easements, servitudes, licenses and other surface and subsurface rights together
with all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing properties.
 
(e)           Any property that may from time to time hereafter, by delivery or
by writing of any kind, be subjected to the lien and security interest hereof by
Mortgagor or by anyone on Mortgagor’s behalf and Trustee or Mortgagee is hereby
authorized to receive the same at any time as additional security hereunder.
 
(f)           All of the rights, titles and interests of every nature whatsoever
now owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property
rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Hydrocarbon Property rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Permitted Liens
to which any of the Hydrocarbon Property rights, titles, interests or estates
are subject, or otherwise; all rights of Mortgagor to liens and security
interests securing payment of proceeds from the sale of production from the
Mortgaged Property, including, but not limited to, those liens and security
interests provided in §9.343 of the Applicable UCC, as amended from time to
time, any other statute enacted in the jurisdiction in which the Hydrocarbon
Property is located or statute made applicable to the Hydrocarbon Property under
federal law (or some combination of federal and state law); together with any
and all renewals and extensions of any of the Hydrocarbon Property rights,
titles, interests or estates; all contracts and agreements supplemental to or
amendatory of or in substitution for the contracts and agreements described or
mentioned above; and any and all additional interests of any kind hereafter
acquired by Mortgagor in and to the Hydrocarbon Property rights, titles,
interests or estates.
 
(g)           All accounts, contract rights, inventory, choses in action (i.e.,
rights to enforce contracts or to bring claims thereunder), commercial tort
claims, general intangibles, insurance contracts and insurance proceeds
(regardless of whether the same arose, and/or the events which gave rise to the
same occurred, on or before or after the date hereof) and all proceeds and
products of all such portions of the Hydrocarbon Property and payments in lieu
of production, whether such proceeds or payments are goods, money, documents,
instruments, chattel paper, securities, accounts, general intangibles, fixtures,
real property, or other assets and regardless of whether such payments accrued,
and/or the events which gave rise to such payments occurred, on or before or
after the date hereof, including, without limitation, “take or pay” payments and
similar payments, payments received in settlement of or pursuant to a judgment
rendered with respect to take or pay or similar obligations or other obligations
under a production sales contract, payments received in buyout or buydown or
other settlement of a production sales contract, and payments received under a
gas balancing or similar agreement as a result of (or received otherwise in
settlement of or pursuant to judgment rendered with respect to) rights held by
Mortgagor as a result of Mortgagor (and/or its predecessors in title) taking or
having taken less gas from lands covered by a Hydrocarbon Property (or lands
pooled or unitized therewith) than its ownership of such Hydrocarbon Property
would entitle it to receive.

 
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(h)           Without limitation of the generality of the foregoing, any rights
and interests of Mortgagor under any present or future hedge or swap agreements,
cap, floor, collar, exchange, forward or other hedge or protection agreements or
transactions relating to crude oil, natural gas or other Hydrocarbons, or any
option with respect to any such agreement or transaction now existing or
hereafter entered into by or on behalf of Mortgagor.
 
(i)           All licenses, permits and other regulatory approvals held by
Mortgagor relating to the Mortgaged Property.
 
(j)           All proceeds of all of the rights, titles and interests of
Mortgagor described in the foregoing paragraphs (a) through (i) whether such
proceeds or payments are goods, money, documents, instruments, chattel paper,
securities, accounts, payment intangibles, general intangibles, fixtures,
real/immovable property, personal/movable property or other assets.
 
(k)           In addition to the rights granted to Trustee and/or Mortgagee in
Section 1.01(f) of this Mortgage, any and all liens, security interests,
financing statements or similar interests of Mortgagor attributable to its
interest in the Hydrocarbons and proceeds of runs therefrom arising under or
created by any statutory provision, judicial decision or otherwise.
 
(l)           All of Mortgagor’s rights and interests pursuant to the provisions
of §9.343 of the Applicable UCC and of any similar state or local jurisdiction
statute in any state wherein the Mortgaged Property is located, hereby vesting
in Trustee and/or Mortgagee all of Mortgagor’s rights as an interest owner to
the continuing security interest in and liens upon the Mortgaged Property.
 
Any fractions or percentages specified on attached Exhibit A in referring to
Mortgagor’s interests are solely for purposes of the warranties made by
Mortgagor pursuant to Sections 3.01 and 3.05 hereof and shall in no manner limit
the quantum of interest affected by this Section 1.01 with respect to any
Hydrocarbon Property or with respect to any unit or well identified on said
Exhibit A.
 
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee and to its successors
and assigns forever to secure the payment of the Indebtedness and to secure the
performance of the covenants, agreements, and obligations of Mortgagor herein
contained.
 
Section 1.02       Grant of Security Interest.  To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in and to
the Mortgaged Property (whether now or hereafter acquired by operation of law or
otherwise) insofar as the Mortgaged Property consists of equipment, accounts,
contract rights, general intangibles, insurance contracts, insurance proceeds,
inventory, Hydrocarbons, fixtures and any and all other personal property of any
kind or character defined in and subject to the provisions of the Uniform
Commercial Code presently in effect in the jurisdiction in which the Mortgaged
Property is situated (“Applicable UCC”), including the proceeds and products
from any and all of such personal property.  Upon the happening of any of the
Events of Default (as defined in Section 4.01), Mortgagee is and shall be
entitled to all of the rights, powers and remedies afforded a secured party by
the Applicable UCC with reference to the personal property and fixtures in which
Mortgagee has been granted a security interest herein, or Trustee or Mortgagee
may proceed as to both the real and personal property covered hereby in
accordance with the rights and remedies granted under this Mortgage in respect
of the real property covered hereby.  Such rights, powers and remedies shall be
cumulative and in addition to those granted to Trustee or Mortgagee under any
other provision of this Mortgage or under any other security
instrument.  Written notice mailed to Mortgagor as provided herein at least five
(5) Business Days prior to the date of public sale of any part of the Mortgaged
Property which is personal property subject to the provisions of the Applicable
UCC, or prior to the date after which private sale of any such part of the
Mortgaged Property will be made, shall constitute reasonable notice. Except as
otherwise expressly provided in this Mortgage, all terms in this Mortgage
relating to the Mortgaged Property and the grant of the foregoing security
interest which are defined in the Applicable UCC shall have the meanings
assigned to them in Article 9 (or, absent definition in Article 9, in any other
Article) of the Applicable UCC, as those meanings may be amended, revised or
replaced from time to time.  Notwithstanding the foregoing, the parties intend
that the terms used herein which are defined in the Applicable UCC have, at all
times, the broadest and most inclusive meanings possible.

 
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Section 1.03       Indebtedness Secured.  This Mortgage is executed and
delivered by Mortgagor to secure and enforce the following (the “Indebtedness”):
 
(a)          Payment of and performance of any and all indebtedness, obligations
and liabilities of Mortgagor pursuant to the Note.
 
(b)          Payment of and performance of any and all other indebtedness,
obligations and liabilities of Mortgagor and any direct or indirect subsidiary
of Mortgagor (collectively, the “Mortgagor Parties” and each, individually, a
“Mortgagor Party”) pursuant to the Note, this Mortgage and all of the other
agreements, documents and instruments contemplated thereby and executed in
connection therewith (collectively, the “Loan Documents”), including, without
limitation, (i) principal and interest (including without limitation interest
accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceeding, whether or not an allowed claim) on the
Note, (ii) reimbursement obligations under any letters of credit, (iii)
obligations under any hedging agreements with any Buyer or its affiliates, and
(iv) obligations owing under any other Loan Documents; and all renewals,
extensions, rearrangements and/or other modifications of any of the foregoing.
 
(c)          Any sums which may be advanced or paid by Mortgagee, Trustee or any
Buyer under the terms hereof or under any other Loan Documents on account of the
failure of Mortgagor or any other Mortgagor Party to comply with the covenants
contained herein or in any other Loan Document and all other indebtedness of the
Mortgagor Parties arising pursuant to the provisions of the Loan Documents, this
Mortgage and any other documents or instruments executed in connection
therewith.
 
(d)          Without limiting the generality of the foregoing, all post-petition
interest, expenses and other duties and liabilities with respect to indebtedness
or other obligations described above in this Section 1.03, which would be owed
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding.
 
Section 1.04       Fixture Filing, Etc.  Without in any manner limiting the
generality of any of the other provisions of this Mortgage: (i) some portions of
the goods described or to which reference is made herein are or are to become
fixtures on the land described or to which reference is made herein or on
attached Exhibit A; (ii) the security interests created hereby under applicable
provisions of the Applicable UCC will attach to Hydrocarbons (minerals including
oil and gas), as extracted collateral or the accounts resulting from the sale
thereof at the wellhead located on the land described or to which reference is
made herein; (iii) this Mortgage is to be filed of record in the real estate
records as a financing statement, and (iv) Mortgagor is the record owner of the
real estate or interests in the real estate comprised of the Mortgaged Property.

 
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Section 1.05       Defined Terms.  Any capitalized term used in this Mortgage
and not defined in this Mortgage shall have the meaning assigned to such term in
the Note.
 
ARTICLE II
Assignment of Production, Accounts and Proceeds
 
Section 2.01      Assignment.  Mortgagor does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its successors and
assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, which accrue to Mortgagor’s interest in the Mortgaged Properties, and
the revenues and proceeds now and hereafter attributable to the Hydrocarbons and
said products and all accounts arising therefrom or in connection therewith and
all payments in lieu of the Hydrocarbons such as “take or pay” payments or
settlements (all of the foregoing, the “Production Proceeds”), together with the
immediate and continuing right after the occurrence of and during the
continuation of an Event of Default, subject to the remaining provisions of this
Section 2.01, to collect and receive such Production Proceeds. The Hydrocarbons
and products are to be delivered into pipelines connected with the Mortgaged
Property, or to the purchaser thereof, to the credit of Mortgagee (to the extent
of the Mortgagor’s interest therein); and all Production Proceeds shall
initially be deposited into a separate account (the “Deposit Account”).  No
party paying any Production Proceeds shall have any duty or obligation to
inquire into any of the rights of Mortgagee under this Section 2.01, what
application is made of the Production Proceeds, or as to any other
matter.  Mortgagor directs and instructs any and all purchasers of any
Hydrocarbons to pay to such Deposit Account all of the Production Proceeds
accruing to Mortgagor’s interest until such time as such purchasers have been
furnished with evidence that all Indebtedness has been paid in full in cash and
that this Mortgage has been released.  Mortgagor agrees that no purchasers of
the Hydrocarbons shall have any responsibility for the application of any funds
paid to Mortgagee.  Mortgagor agrees to perform all such acts, and to execute
all such further assignments, transfer orders and division orders, and other
instruments as may be required or desired by Mortgagee or any party in order to
have the Production Proceeds paid to Mortgagee after the occurrence of and
during the continuation of an Event of Default. Upon the occurrence and during
the continuation of an Event of Default, Mortgagee is fully authorized to
receive and receipt for the Production Proceeds; to endorse and cash any and all
checks and drafts payable to the order of Mortgagor or Mortgagee for the account
of Mortgagor received from or in connection with the Production Proceeds and to
hold the Production Proceeds in a bank account as additional collateral securing
the Indebtedness; and to execute transfer and division orders in the name of
Mortgagor, or otherwise, with warranties binding Mortgagor.  All Production
Proceeds received by Mortgagee pursuant to this Section 2.01 after an Event of
Default has occurred shall be applied as provided herein or, to the extent not
inconsistent with this Mortgage, in the other Loan Documents.  Mortgagee shall
not be liable for any delay, neglect or failure to effect collection of any
Production Proceeds or to take any other action in connection therewith or
hereunder; but Mortgagee shall have the right, exercisable at its election at
any time after an Event of Default has occurred and is continuing, in the name
of Mortgagor or otherwise, to prosecute and defend any and all actions or legal
proceedings deemed advisable by Mortgagee in order to collect such funds and to
protect the interests of Mortgagee and/or Mortgagor, with all reasonable costs,
expenses and attorneys’ fees incurred in connection therewith being paid by
Mortgagor and until so paid being a part of the Indebtedness secured by this
Mortgage.  Mortgagor agrees to perform all such acts, and to execute all such
further assignments, transfer orders and division orders, and other instruments
as may be required or desired by Mortgagee or any party in order to effectuate
the provisions contained in this Section 2.01.  Mortgagor hereby appoints
Mortgagee as its attorney-in-fact to pursue any and all rights of Mortgagor to
liens on and security interests in the Hydrocarbons securing payment to
Mortgagee of proceeds of runs attributable to the Hydrocarbons, provided
Mortgagee shall only be permitted to exercise such power of attorney granted
pursuant to this sentence after the occurrence and during the continuation of an
Event of Default.  The power of attorney granted to Mortgagee in this Section
2.01, being coupled with an interest, shall be irrevocable so long as the
Indebtedness or any part thereof remains unpaid.

 
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Section 2.02       [Reserved].
 
Section 2.03      No Modification of Payment Obligations.  Nothing herein
contained shall modify or otherwise alter, limit or modify the absolute
obligation of Mortgagor and the other Mortgagor Parties to make prompt payment
of all principal, interest and other amounts owing on the Indebtedness when and
as the same become due, regardless of whether the Production Proceeds are
sufficient to pay the same, and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and every character now or hereafter existing to secure payment of the
Indebtedness.
 
Section 2.04      Effectuating Payment of Production Proceeds to Mortgagee.   If
under any existing sales agreements, other than division orders or transfer
orders, any Production Proceeds are required to be paid by the purchaser to
Mortgagor so that under such existing agreements payment cannot be made of such
Production Proceeds to Mortgagee, Mortgagor’s interest in all Production
Proceeds under such sales agreements and in all other Production Proceeds which
for any reason may be paid to Mortgagor shall, when received by Mortgagor,
constitute trust funds in Mortgagor’s hands and shall be immediately paid over
to Mortgagee after the occurrence of and during the continuation of an Event of
Default as provided in Section 2.01 above.  Without limitation upon any of the
foregoing, Mortgagor hereby constitutes and appoints Mortgagee as Mortgagor’s
special attorney-in-fact (with full power of substitution, either generally or
for such periods or purposes as Mortgagee may from time to time prescribe) in
the name, place and stead of Mortgagor to do any and every act and exercise any
and every power that Mortgagor might or could do or exercise personally with
respect to all Hydrocarbons and Production Proceeds expressly inclusive, but not
limited to, giving and granting unto said attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever necessary and
requisite to be done as fully and to all intents and purposes, as Mortgagor
might or could do if personally present (provided such power of attorney granted
pursuant to this sentence shall only be exercisable by Mortgagee upon the
occurrence and during the continuation of an Event of Default) and Mortgagor
shall be bound thereby as fully and effectively as if Mortgagor had personally
executed, acknowledged and delivered any of the foregoing certificates or
documents. The powers and authorities herein conferred upon Mortgagee may be
exercised by Mortgagee through any person who, at the time of the execution of
the particular instrument, is an officer of Mortgagee.  The power of attorney
herein conferred is granted for valuable consideration and hence is coupled with
an interest and is irrevocable so long as the Indebtedness, or any part thereof,
shall remain unpaid or any commitment to lend under the Note remains
outstanding.  All persons dealing with Mortgagee or any substitute shall be
fully protected in treating the powers and authorities conferred by this
paragraph as continuing in full force and effect until advised by Mortgagee that
all the Indebtedness is fully and totally paid.  Mortgagee may, but shall not be
obligated to, in accordance with the provisions of Section 2.01 above, take such
action as it deems reasonably appropriate in an effort to collect the Production
Proceeds and any reasonable expenses (including reasonable attorney’s fees) so
incurred by Mortgagee shall be a demand obligation of Mortgagor and shall be
part of the Indebtedness, and shall bear interest each day, from the date of
such expenditure or payment until paid, at the  interest rate prescribed in the
Note.

 
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Section 2.05       Application of Production Proceeds.  So long as no Event of
Default has occurred, the Production Proceeds received by Mortgagee shall be
paid directly into a Deposit Account in accordance with Section 2.01
hereof.  After an Event of Default hereunder has occurred and during the
continuation of an Event of Default, all Production Proceeds from time to time
in the hands of Mortgagee shall be applied to the payment of the Indebtedness at
such times and in such manner and order as Mortgagee determines in Mortgagee’s
sole and absolute discretion.
 
Section 2.06       Release from Liability; Indemnification.  Mortgagee and its
successors and assigns are hereby released and absolved from all liability for
failure to enforce collection of the Production Proceeds and from all other
responsibility in connection therewith, except the responsibility to account to
Mortgagor for funds actually received.  Mortgagor agrees to indemnify and hold
harmless Mortgagee (for purposes of this paragraph, the term “Mortgagee” shall
include the directors, officers, partners, employees and agents of Mortgagee and
any persons or entities owned or controlled by or affiliated with Mortgagee and
any other Indemnified Party as defined in Section 4.16 hereof) from and against
all claims, demands, liabilities, losses, damages (including without limitation
consequential damages), causes of action, judgments, penalties, costs and
expenses (including without limitation reasonable attorneys’ fees and expenses)
imposed upon, asserted against or incurred or paid by Mortgagee by reason of the
assertion that Mortgagee received, either before or after payment in full of the
Indebtedness, funds from the production of oil, gas, other hydrocarbons or other
minerals claimed by third persons (and/or funds attributable to sales of
production which were made in violation of laws, rules, regulations and/or
orders governing such sales), and Mortgagee shall have the right to defend
against any such claims or actions, employing attorneys of its own selection,
and if not furnished with indemnity satisfactory to it, Mortgagee shall have the
right to compromise and adjust any such claims, actions and judgments, and in
addition to the rights to be indemnified as herein provided, all amounts paid by
Mortgagee in compromise, satisfaction or discharge of any such claim, action or
judgment, and all court costs, reasonable attorneys’ fees and other expenses of
every character expended by Mortgagee pursuant to the provisions of this section
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Mortgagee and shall bear interest, from
the date expended until paid at the interest rate prescribed in the Note.  The
foregoing indemnities shall not terminate upon the release, foreclosure or other
termination of this Mortgage, but will survive the release, foreclosure of this
Mortgage or conveyance in lieu of foreclosure, and the repayment of the
Indebtedness and the discharge and release of this Mortgage and the other
documents evidencing and/or securing the Indebtedness.  WITHOUT LIMITATION, IT
IS THE INTENTION OF MORTGAGOR, AND MORTGAGOR AGREES THAT THE FOREGOING RELEASES
AND INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL
CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING, WITHOUT LIMITATION,
CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES AND
EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE
OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY, EXCLUDING THE GROSS NEGLIGENCE AND
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY.  However, such indemnities shall
not apply to any particular indemnified party (but shall apply to the other
indemnified parties) to the extent the subject of the indemnification is caused
by or arises out of the gross negligence or willful misconduct of such
particular indemnified party.

 
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ARTICLE III
Representations, Warranties and Covenants
 
Mortgagor hereby covenants with the Mortgagee, and represents and warrants to
the Mortgagee that:
 
Section 3.01       Title.  Mortgagor has good and defensible title to the
Mortgaged Property. With respect to each Mortgaged Property, the ownership of
Mortgagor in such Mortgaged Property does and will, (i) with respect to each
tract of land described in Exhibit A hereto, (whether described directly in such
Exhibit A or described by reference to another instrument) in connection with
such Mortgaged Property, (A) entitle Mortgagor to receive (subject to the terms
and provisions of this Mortgage) a decimal or percentage share of the oil, gas
and other hydrocarbons produced from, or allocated to, such tract equal to not
less than the percentage share set forth in Exhibit A in connection with such
tract in the column headed “NRI”, (B) cause Mortgagor to be obligated to bear a
percentage share of the cost of exploration, development and operation of such
tract of land not greater than the percentage share set forth in Exhibit A in
connection with such tract in the column headed “WI”, and (ii) if such Mortgaged
Property is shown on Exhibit A to be subject to a unit or units, with respect to
each such unit, (A) entitle Mortgagor to receive (subject to the terms and
provisions of this Mortgage) a percentage share of all substances covered by
such unit which are produced from, or allocated to, such unit equal to not less
than the percentage share set forth in Exhibit A in connection with such
Mortgaged Property in connection with such tract in the column headed “NRI” (and
if such Mortgaged Property is subject to more than one unit, words identifying
such interest with such unit), and (B) obligate Mortgagor to bear a percentage
share of the cost of exploration, development and operation of such unit not
greater than the percentage share set forth in Exhibit A in connection with such
tract in the column headed “WI” (and if such Mortgaged Property is subject to
more than one unit, words identifying such interest with such unit).  With
respect to each Mortgaged Property described in Exhibit A hereto (or in any of
the instruments described or referred to in Exhibit A) which is subject to a
voluntary or involuntary pooling, unitization or communitization agreement
and/or order, the term "tract of land" as used in this Section 3.01 shall mean
the pooled, unitized or communitized area as an entirety and shall not be deemed
to refer to any individual tract committed to said pooled, unitized or
communitized area.  Without limitation of the foregoing, the ownership by
Mortgagor of the Mortgaged Properties does and will, with respect to each well
or unit identified on Exhibit A attached hereto and made a part hereof, entitle
Mortgagor to receive (subject to the terms and provisions of this Mortgage) a
percentage share of the oil, gas and other hydrocarbons produced from, or
allocated to, such well or unit equal to not less than the percentage share set
forth, for such well or unit, in the column headed "NRI" on Exhibit A, and cause
Mortgagor to be obligated to bear a percentage share of the cost of operation of
such well or unit equal to not more than the decimal or percentage share set
forth, for such well or unit, in the column headed "WI" on Exhibit A.  The
above-described shares of production which Mortgagor is entitled to receive and
shares of expenses which Mortgagor is obligated to bear are not and will not be
subject to change (other than changes which arise pursuant to non-consent
provisions of operating agreements described in Exhibit A in connection with
operations hereafter proposed), except, and only to the extent that, such
changes are reflected in Exhibit A.  Any fractional, percentage or decimal
interests specified in Exhibit A in referring to Mortgagor’s interest in the
Mortgaged Property are solely for the purposes of the representations and
warranties set forth herein and shall in no manner limit the quantum of the
interests of the Mortgagor or the Mortgagee in the Mortgaged Property mortgaged
and pledged by the Mortgagor hereunder.  The Mortgaged Property is free and
clear of all Liens other than the encumbrances set forth in Exhibit A (the
“Permitted Liens”).

 
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Section 3.02       Defend Title.  This Mortgage is and will be a direct first
Lien and security interest upon the Mortgaged Property, subject only to
Permitted Liens, so long as the Indebtedness under the Note remains
unpaid.  This Mortgage will always be kept as a direct first Lien and security
interest upon the Mortgaged Property, and Mortgagor will not grant, incur or
create or suffer to be created or permit to exist any Lien, security interest or
charge prior or junior to or on a parity with the Lien and security interest of
this Mortgage upon the Mortgaged Property or any part thereof or upon the rents,
issues, revenues, profits and other income therefrom, other than Permitted
Liens.  Mortgagor will warrant and defend the title to the Mortgaged Property
against the claims and demands of all other persons whomsoever and will maintain
and preserve the Lien created hereby so long as any of the Indebtedness secured
hereby remains unpaid.  Should an adverse claim be made against or a cloud
develop upon the title to any part of the Mortgaged Property, other than
Permitted Liens, Mortgagor agrees it will timely defend against such adverse
claim or take appropriate action to remove such cloud at Mortgagor’s cost and
expense, and Mortgagor further agrees that Trustee and/or Mortgagee may take
such other action as they deem reasonably advisable to protect and preserve
their interests in the Mortgaged Property, and in such event Mortgagor will
indemnify Trustee and Mortgagee against any and all cost, attorney’s fees and
other expenses which they may incur in defending against any such adverse claim
or taking action to remove any such cloud.
 
Section 3.03       Not a Foreign Person.  Mortgagor is not a “foreign person”
within the meaning of the Internal Revenue Code of 1986, as amended (i.e.
Mortgagor is not a non-resident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate as those terms are defined in the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder).
 
Section 3.04       Rentals, Taxes, Insurance and Fees Paid;  Leases in
Effect.  All rentals and royalties due and payable in accordance with the terms
of any leases or subleases comprising a part of the Hydrocarbon Property and all
severance and production taxes payable with respect to the production therefrom
have been duly paid or provided for and all leases or subleases comprising a
part of the Hydrocarbon Property are in full force and effect.  In addition to
the foregoing, Mortgagor shall or shall cause to be paid when due, all taxes,
permits, licenses, insurance premiums and other similar amounts with respect to
the Mortgaged Property, the Hydrocarbon Property and the Hydrocarbons.
 
Section 3.05      Operation By Third Parties.   As to any part of the Mortgaged
Property which is not a working interest (if any), Mortgagor agrees to take all
such action and to exercise all rights and remedies as are reasonably available
to Mortgagor to cause the owner or owners of the working interest in such
properties to comply with the covenants and agreements contained herein; and as
to any part of the Mortgaged Property which is a working interest but which is
operated by a party other than Mortgagor, Mortgagor agrees to take all such
action and to exercise all rights and remedies as are reasonably available to
Mortgagor (including, but not limited to, all rights under any operating
agreement) to cause the party who is the operator of such property to comply
with the covenants and agreements contained herein.
 
Section 3.06      Failure to Perform.  Mortgagor agrees that if Mortgagor fails
to perform any act or to take any action which Mortgagor is required to perform
or take hereunder or pay any money which Mortgagor is required to pay hereunder,
each of Mortgagee and Trustee in Mortgagor’s name or its or their own name may,
but shall not be obligated to, perform or cause to be performed such act or take
such action or pay such money, and any expenses so incurred by either of them
and any money so paid by either of them shall be a demand obligation owing by
Mortgagor to Mortgagee or Trustee, as the case may be, and each of Mortgagee and
Trustee, upon making such payment, shall be subrogated to all of the rights of
the Person receiving such payment.  Each amount due and owing by Mortgagor to
each of Mortgagee and Trustee pursuant to this Mortgage shall bear interest from
the date of such expenditure or payment or other occurrence which gives rise to
such amount being owed to such Person until paid at the Applicable Interest
Rate, and all such amounts together with such interest thereon shall be a part
of the Indebtedness described in Section 1.03 hereof.

 
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Section 3.07       Sale of Mortgaged Property.  Mortgagor shall, except after
the occurrence and during the continuation of an Event of Default, be permitted
to (i) sell Hydrocarbons in the ordinary course of business in compliance with
the terms of this Mortgage and (ii) sell or otherwise dispose of obsolete or
worn out equipment or personal property which is replaced with property of equal
or greater value in the ordinary course of business; otherwise, any proposed
sale, transfer, farm-out, assignment or other disposition of the Mortgaged
Property by the Mortgagor during such time as any Indebtedness under the Note
remains unpaid shall be subject to the advance written consent of the Mortgagee.
 
Section 3.08       Sale of Production.  No Mortgaged Property is or will become
subject to any contractual or other arrangement (a) whereby payment for
production is or can be deferred for a substantial period after the month in
which such production is delivered (i.e., in the case of oil, not in excess of
sixty (60) days, and in the case of gas, not in excess of ninety (90) days) or
(b) whereby payments are made to Mortgagor other than by checks, drafts, wire
transfer advises or other similar writings, instruments or communications for
the immediate payment of money.  Except for transportation, gathering,
processing, compression or dehydration agreements (or other agreements relating
to the marketing of Hydrocarbons), and, with respect to the immediately
succeeding clause (i), except for agreements entered into by Mortgagor in the
ordinary course of business consistent with prudent customs and practices in the
industry in which Mortgagor operates, (i) no Mortgaged Property is or will
become subject to any contractual or other arrangement for the sale, processing
or transportation of production (or otherwise related to the marketing of
Hydrocarbons) which cannot be cancelled on 120 days (or less) notice and (ii)
all contractual or other arrangements for the sale, processing or transportation
of Hydrocarbons (or otherwise related to the marketing of Hydrocarbons) shall be
bona fide arm’s length transactions and shall be at generally prevailing market
prices.  Mortgagor is presently receiving a price for all production from (or
attributable to) each Mortgaged Property covered by a production sales contract
disclosed in writing to Mortgagee as computed in accordance with the terms of
such contract, and is not having deliveries of production from such Mortgaged
Property curtailed substantially below such property’s delivery
capacity.  Neither Mortgagor nor, to the best of Mortgagor’s knowledge, any of
its predecessors in title, has received prepayments (including, but not limited
to, payments for gas not taken pursuant to “take or pay” or other similar
arrangements) for any Hydrocarbons produced or to be produced from the Mortgaged
Properties after the date hereof, and Mortgagor hereby covenants not to enter
into any such advance or prepayment arrangements whereby it accepts
consideration for Hydrocarbons not yet produced.  No Mortgaged Property is or
will become subject to any “take or pay” or other similar arrangement (y) which
can be satisfied in whole or in part by the production or transportation of gas
from other properties or (z) as a result of which production from the Mortgaged
Properties may be required to be delivered to one or more third parties without
payment (or without full payment) therefor as a result of payments made, or
other actions taken, with respect to other properties.  There is no Mortgaged
Property with respect to which Mortgagor, or, to the best of Mortgagor’s
knowledge, its predecessors in title, has, prior to the date hereof, taken more
(“overproduced”), or less (“underproduced”), gas from the lands covered thereby
(or pooled or unitized therewith) than its ownership interest in such Mortgaged
Property would entitle it to take, except in the ordinary course of business
consistent with prudent customs and practices in the industry in which Mortgagor
operates.  Mortgagor will not after the date hereof become “overproduced” (as
above defined) with respect to any well on the Mortgaged Property (or on any
unit in which the Mortgaged Property participate), in an amount in excess of
Mortgagor’s share of gas produced from such well, except in the ordinary course
of business consistent with prudent customs and practices in the industry in
which Mortgagor operates.  No Mortgaged Property is or will become subject to a
gas balancing arrangement under which one or more third parties may take a
portion of the production attributable to such Mortgaged Property without
payment (or without full payment) therefor as a result of production having been
taken from, or as a result of other actions or inactions with respect to, other
properties, except for any such gas balancing arrangement entered into in the
ordinary course of business consistent with prudent customs and practices in the
industry in which Mortgagor operates.  No Mortgaged Property is subject at the
present time to any regulatory refund obligation and, to the best of Mortgagor’s
knowledge, no facts exist which might cause the same to be imposed.

 
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Section 3.09       Operation of Mortgaged Property.  The Mortgagor will promptly
pay and discharge or cause to be paid and discharged all rentals, delay rentals,
royalties and indebtedness accruing under, and perform or cause to be performed
each and every act, matter or thing required by, each and all of the
assignments, deeds, subject leases, sub-leases, contracts and agreements
described or referred to herein or affecting the Mortgagor’s interests in the
Mortgaged Property and will do or cause to be done all other things reasonably
necessary to keep unimpaired the Mortgagor’s rights with respect thereto and
prevent any intentional forfeiture thereof or default with respect thereto,
other than a default which might occur as a result of cessation of production
thereunder.  Except as could not reasonably be expected, either individually or
in the aggregate, to have a Material Adverse Effect, the Mortgaged Property (and
properties unitized therewith) is being (and, to the extent the same could
adversely affect the ownership or operation of such Mortgaged Property after the
date hereof, have in the past been), and hereafter will be maintained,
operated and developed in a good and workmanlike manner in accordance with
customary industry standards and in conformity with all applicable laws and all
rules, regulations and orders of all duly constituted authorities having
jurisdiction and in conformity with all oil, gas and/or other mineral leases and
other agreements forming part of the Mortgaged Property and in conformity with
all Permitted Liens; specifically in this connection, (i) no Mortgaged Property
is subject to having allowable production after the date hereof reduced below
the full and regular allowable (including the maximum permissible tolerance)
because of any overproduction (whether or not the same was permissible at the
time) prior to the date hereof and (ii) none of the wells located on the
Mortgaged Property (or properties unitized therewith) are or will be deviated
from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are, and will remain, bottomed
under and producing from, with the well bores wholly within, the Mortgaged
Property (or, in the case of wells located on properties unitized therewith,
such unitized properties).  With respect to any Mortgaged Property in which
Mortgagor is the operator in connection therewith or in which Mortgagor has a
majority working interest (and to the best of Mortgagor’s knowledge with respect
to any Mortgaged Property in which Mortgagor has a minority working interest and
is not an operator in connection therewith), there are no dry holes, or
otherwise inactive wells, located on any Mortgaged Property or on lands pooled
or unitized therewith (including, without limitation, any wells which would, if
located in West Virginia, require compliance with Railroad Commission Rule
14(b)(2)), except for wells that have been properly plugged and abandoned or
inactive and being maintained in accordance with local, state and federal
law.  The Mortgagor has, and will in the future, possess all certificates,
authorizations, approvals, licenses and permits issued by the appropriate
federal, state or foreign regulatory authorities (collectively, “Permits”)
necessary to produce, extract, transport and sell the oil, gas, minerals and/or
other Hydrocarbons in that portion of the Mortgaged Property that is producing
oil, gas, minerals and/or other Hydrocarbons.  Except Mortgagor has no reason to
believe that it will not be able to obtain Permits as and when necessary to
enable the Mortgagor to produce, extract, transport and sell the oil, gas,
minerals and other Hydrocarbons in the Mortgaged Property.  Mortgagor has not
received notice of any violations in respect of any such licenses or permits
described in the foregoing provisions of this Section 3.09, except for notices
of violations received prior to the date hereof that have been remedied by
Mortgagor.  The Mortgagor will operate the Mortgaged Property in a careful and
efficient manner in accordance with the practices of the industry and in
compliance with all applicable contracts and agreements and in compliance with
all applicable spacing, proration and conservation laws of the jurisdiction in
which the Mortgaged Property is situated, and all applicable laws, rules and
regulations of every other agency and authority from time to time constituted to
regulate the development and operation of the Mortgaged Property and the
production and sale of Hydrocarbons and other minerals produced therefrom,
except as could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.  The Mortgagor will do or cause to be done, or
shall participate in, such development work as may be reasonably necessary to
the prudent and economical operation of the Mortgaged Property in accordance
with the approved practices of prudent operators in the industry, including,
without limitation, all to be done that may be appropriate to protect from
diminution the productive capacity of the Mortgaged Property and each producing
well thereon.  Upon the reasonable request of the Mortgagee, and at reasonable
times and intervals, the Mortgagor will (a) permit the Mortgagee and its
respective designated representatives to enter upon any part of the Mortgaged
Property under the control of the Mortgagor, and (b) cause the operator of any
part of the Mortgaged Property not under the control of the Mortgagor to permit
the Mortgagee and its designated representatives to enter upon the same (to the
extent and subject to the conditions under which the Mortgagor may so enter),
for the purposes of inspecting the condition and operation thereof.

 
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Section 3.10      Suits and Claims.  There are no suits, actions, claims,
investigations, inquiries, proceedings or demands pending (or, to Mortgagor’s
knowledge, threatened) which affect the Mortgaged Property (including, without
limitation, any which challenge or otherwise pertain to Mortgagor’s title to the
Mortgaged Property) and no judicial or administrative actions, suits or
proceedings pending (or, to Mortgagor’s knowledge, threatened) against
Mortgagor.
 
Section 3.11       Environmental.

(a)          Current Status.  Neither Mortgagor nor Mortgagee knows, nor does
Mortgagor or Mortgagee have reason to know, of any violations of Applicable
Environmental Laws relating to the Mortgaged Property or operations involving
the Mortgaged Property. “Applicable Environmental Laws” shall mean
any applicable laws, orders, rules, or regulations pertaining to safety, health
or the environment, as such laws, orders, rules or regulations now exist or are
hereafter enacted and/or amended (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended, hereinafter called “CERCLA”), the Resource Conservation and Recovery
Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of
1984 (as amended, hereinafter called “RCRA”) and applicable state and local
law).  Mortgagor undertook, at the time of acquisition of the Mortgaged
Property, all appropriate inquiry into the previous ownership and uses of the
Mortgaged Property consistent with good commercial or customary
practice.  Mortgagor has taken reasonable steps necessary, consistent with
customary practice in the industry in which it operates its business, to
determine and has determined that no hazardous substances or solid wastes have
been disposed of or otherwise released at, into, upon or under the Mortgaged
Property except in accordance with Applicable Environmental Laws.  The use which
Mortgagor makes and intends to make of the Mortgaged Property will not result in
the use, treatment, storage or disposal or other release of any hazardous
substance or solid waste at, into, upon or under the Mortgaged Property, except
such usage, and temporary storage in anticipation of usage, as is in the
ordinary course of business and in compliance with Applicable Environmental
Laws.  The terms “hazardous substance” and “release” as used in this Mortgage
shall have the meanings specified in CERCLA, and the terms “solid waste” and
“disposal” (or “disposed”) shall have the meanings specified in RCRA; provided,
in the event either CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and provided further, to the extent that the
laws of the states in which the Mortgaged Properties are located establish a
meaning for “hazardous substance,” “release,” “solid waste,” or “disposal” which
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply.  The “Associated Property” (as such term is hereinafter defined) is
not in violation of any Applicable Environmental Laws for which Mortgagor or its
predecessors in title to the Mortgaged Property would be responsible (to the
best of Mortgagor’s knowledge with respect to Associated Property not owned or
operated by Mortgagor).  The term “Associated Property” as used in this Mortgage
shall mean any and all interests in and to (and/or carved out of) the lands
which are described or referred to in Exhibit A hereto, or which are otherwise
described in any of the oil, gas and/or mineral leases or other instruments
described in or referred to in such Exhibit A, whether or not such property
interests are owned by Mortgagor.
 
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(b)          Future Performance.  Except as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, Mortgagor
will operate each Mortgaged  Property in a careful and efficient manner in
accordance with the practices of the industry so as not to cause or permit such
Mortgaged Property or Mortgagor to be in violation of, and Mortgagor shall not
do anything or permit anything to be done which will subject such
Mortgaged  Property or any Associated Property to any remedial obligations
under, or result in noncompliance with applicable permits and licenses under,
any Applicable Environmental Laws, assuming disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances, if
any, pertaining to the Mortgaged Property or any Associated Property and
Mortgagor will promptly notify Mortgagee in writing of any existing, pending or,
to the best knowledge of Mortgagor, threatened investigation, claim, suit or
inquiry by any governmental authority or any person in connection with any
Applicable Environmental Laws.  Except as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, Mortgagor
will take steps necessary to determine that no hazardous substances or solid
wastes have been disposed of or otherwise released on or to the Mortgaged
Property or any Associated Property.  Except as could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect, Mortgagor will not cause or permit the disposal or other release of any
hazardous substance or solid waste at, into, upon or under the Mortgaged
Property or any Associated Property.  Mortgagor covenants and agrees to keep or
cause the Mortgaged Property to be kept free of any hazardous substance or solid
waste (except such use, and temporary storage in anticipation of use, as is
required in the ordinary course of business, all while in compliance with
Applicable Environmental Laws), and to remove the same (or if removal is
prohibited by law, to take whatever action is required by law), promptly upon
discovery at its sole expense.  Upon Mortgagee’s reasonable request, at any time
and from time to time during the existence of this Mortgage, but not more often
than once every calendar year (so long as no Event of Default has occurred),
Mortgagor will provide at Mortgagor’s sole expense an inspection or audit of
each Mortgaged Property from an engineering or consulting firm approved by
Mortgagee, indicating the presence or absence of hazardous substances and solid
waste on such Mortgaged Property and compliance with Applicable Environmental
Laws.

 
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Section 3.12       Not Abandon Wells; Participate in Operations; Non-Operated
Interests.  Mortgagor will not, without prior written consent of Mortgagee,
which consent shall not be unreasonably conditioned, withheld, or delayed,
abandon, or consent to the abandonment of, any well producing from the Mortgaged
Property (or properties unitized therewith) so long as such well is capable (or
is subject to being made capable through drilling, reworking or other operations
which it would be commercially feasible to conduct) of producing oil, gas, or
other Hydrocarbons or other minerals in commercial quantities (as determined
without considering the effect of this Mortgage), except in the ordinary course
of business consistent with prudent customs and practices in the industry in
which Mortgagor operates.  Mortgagor will not, without prior written consent of
Mortgagee, which consent shall not be unreasonably conditioned, withheld, or
delayed, elect not to participate in a proposed operation on the Mortgaged
Properties where the effect of such election would be the forfeiture either
temporarily (i.e., until a certain sum of money is received out of the forfeited
interest) or permanently of any interest in the Mortgaged Properties.  All or
portions of the Mortgaged Property may be comprised of interests in the
Hydrocarbon Property or lands pooled or unitized therewith which are other than
working interests or which may be operated by a party or parties other than the
Mortgagor and with respect to all such portions of the Mortgaged Property, the
Mortgagor’s covenants and agreements as expressed in this Article III are
modified to require that the Mortgagor use its commercially reasonable efforts
to cause compliance with such covenants and agreements by the working interest
owners or the operator or operators of such Hydrocarbon Properties.
 
Section 3.13      Condemnation Awards.  If at any time all or any portion of the
Mortgaged Property shall be taken or damaged under the power of eminent domain,
the award received by condemnation proceedings for any property so taken or any
payment received in lieu of such condemnation proceedings shall be paid directly
to Mortgagee as agent for Mortgagor and all or any portion of such award or
payment, at the option of Mortgagee, shall be applied to the Indebtedness in
payment of the last maturing installments of the Indebtedness or paid over,
wholly or in part, to Mortgagor for any purpose or object satisfactory to
Mortgagee; provided that Mortgagee shall not be obligated to see to the
application of any amount paid over to Mortgagor.  Mortgagor immediately upon
obtaining knowledge of the institution of any proceedings or negotiations for
the condemnation of the Mortgaged Property, or any portion thereof, will notify
Mortgagee of the pendency of such negotiations or proceedings.  Mortgagee may
participate in any such negotiations or proceedings, and Mortgagor from time to
time will execute and deliver to Mortgagee all instruments requested by
Mortgagee to permit such participation.
 
Section 3.14       Insurance.  Mortgagor will maintain with financially sound
and reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event general
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business and in any case no less comprehensive
in scope than that maintained by the Mortgager as of the date hereof.  In the
event of any loss under any insurance policies so carried by Mortgagor,
Mortgagee shall have the right (but not the obligation) to make proof of loss
and collect the same, and all amounts so received shall be applied toward costs,
charges and expenses (including reasonable attorneys’ fees), if any, incurred in
the collection thereof, then to the payment, in the order determined by
Mortgagee in its own discretion, of the Indebtedness, and any balance remaining
shall be subject to the order of Mortgagor.  Mortgagee is hereby authorized but
not obligated to enforce in its name or in the name of Mortgagor payment of any
or all of said policies or settle or compromise any claim in respect thereof,
and to collect and make receipts for the proceeds thereof and Mortgagee is
hereby appointed Mortgagor’s agent and attorney-in-fact to endorse any check or
draft payable to Mortgagor in order to collect the proceeds of insurance
(provided Mortgagee shall only be entitled to enforce the power of attorney
provided in this sentence after the occurrence and during the continuation of an
Event of Default).  In the event of foreclosure of this Mortgage, or other
transfer of title to the Mortgaged Property in extinguishment in whole or in
part of the Indebtedness, all right, title and interest of Mortgagor in and to
such policies then in force concerning the Mortgaged Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or
other transferee in the event of such other transfer of title.

 
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Section 3.15       Compliance with Leases.  Mortgagor (i) will observe and
comply with all of the terms and provisions, express or implied, of the oil, gas
and mineral leases covered by this Mortgage, and any other agreements or
instruments applicable thereto; and, (ii) except with the prior written consent
of Mortgagee, which consent shall not be unreasonably conditioned, withheld, or
delayed, will not amend or terminate (in any manner adverse to Mortgagor,
Mortgagee, or Mortgagor’s or Mortgagee’s interest in the Mortgaged Property or
in any manner that could reasonably be expected to result in a Material Adverse
Effect) any of such agreements or surrender, abandon or release any of such
leases in whole or in part so long as any well situated thereon, or located on
any unit containing all or any part of such leases, is capable of producing oil,
gas, casinghead gas or other hydrocarbons in paying quantities.  Mortgagor will
cause all obligations to the holders of royalty interests and all other
interests in the Mortgaged Properties to be promptly discharged and all
covenants and conditions, express or implied, imposed upon the original lessee
or his assigns by every such lease and every other agreement relative thereto to
be fully and promptly performed and to cause all acts necessary or proper to
accomplish the foregoing and prevent the breach or forfeiture of any such lease
to be fully and promptly performed.  Mortgagor will furnish to Mortgagee a ten
(10) day advance written notice of any intention not to pay (or immediately at
such time that it anticipates that it will be unable to pay) any delay rentals
on the due date thereof under any such lease.
 
Section 3.16      Further Assurance.  Mortgagor will, on request of Mortgagee,
(i) promptly correct any defect, error or omission which may be discovered in
the contents of this Mortgage, or in any other document or instrument executed
in connection with any of the Loan Documents, or in the execution or
acknowledgment of this Mortgage or any other document; (ii) execute,
acknowledge, deliver and record and/or file such further instruments (including,
without limitation, further deeds of trust, mortgages, security agreements,
financing statements, continuation statements, and assignments of production,
accounts, funds, contract rights, general intangibles, and proceeds) and do such
further acts as may be necessary, desirable or proper to carry out more
effectively the purposes of this Mortgage and to more fully identify and subject
to the liens and security interests hereof any property intended to be covered
hereby, including specifically, but without limitation, any renewals, additions,
substitutions, replacements, or appurtenances to the Mortgaged Property; and
(iii) execute, acknowledge, deliver, and file and/or record any document or
instrument (including specifically any financing statement) desired by Mortgagee
to protect the lien or the security interest hereunder against the rights or
interests of third persons.  Mortgagor shall pay all reasonable costs connected
with any of the foregoing.
 
Section 3.17       Name and Place of Business.  Except as disclosed in writing
to Mortgagee, Mortgagor has not during the preceding five (5) years been known
by or used any other corporate or partnership, trade or fictitious
name.  Mortgagor will not cause or permit any change to be made in its name,
identity, state of formation or corporate or partnership structure, or its
federal employer identification number unless Mortgagor shall have notified
Mortgagee of such change at least thirty (30) days prior to the effective date
of such change, and shall have first taken all action required by Mortgagee for
the purpose of further perfecting or protecting the liens and security interests
in the Mortgaged Property created hereby.  Mortgagor’s exact name is the name
set forth in this Mortgage.  Mortgagor is organized under the laws of one of the
states comprising the United States (e.g. corporation, limited partnership,
registered limited liability partnership or limited liability
company).  Mortgagor is located (as determined pursuant to the UCC) in the state
under which it is organized, which is as set forth in the preamble to this
Mortgage.  Mortgagor’s principal place of business and chief executive office,
and the place where Mortgagor keeps its books and records concerning the
Mortgaged Property (including, particularly, the records with respect to
Production Proceeds from the Mortgaged Property) has for the preceding four
months, been, and will continue to be (unless Mortgagor notifies Mortgagee of
any change in writing at least thirty (30) days prior to the date of such
change), the address set forth on the signature page of this Mortgage.

 
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Section 3.18       Compliance with Laws and Agreements.  Mortgagor is in
compliance with all governmental requirements applicable to it or its property,
including, without limitation, all FERC regulations and the USA Patriot Act, and
all indentures, agreements and other instruments binding upon it or its property
the failure with which to comply would have a Material Adverse Effect on
Mortgagor or the Mortgaged Property.  The execution and performance of the Loan
Documents, this Mortgage and the other documents and instruments contemplated
hereby and thereby will not violate the Trading with the Enemy Act, as amended,
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto, the Executive Order referred to
in the following sentence or the U.S. Bank Secrecy Act (31 U.S.C. §§ 5311 et
seq.).  Mortgagor is not a Person described by section 1 of Executive Order
13224 of September 24, 2001 entitled Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism,
66 Fed. Reg. 49,079 (2001), as amended, and Mortgagor does not engage in any
transactions or dealings, or is otherwise associated with any such
Persons.  Mortgagor is not bound by any agreement, document, instrument,
judgment, decree, order, statute, law, rule or regulation that limits or could
reasonably be expected to limit its performance under the Loan Documents or this
Mortgage.
 
Section 3.19       Inspection; Management.  Mortgagee and any persons authorized
by Mortgagee shall have the right to enter and inspect the Mortgaged Property at
all reasonable times.  If, at any time after an Event of Default by Mortgagor,
the management or maintenance of the Mortgaged Property is determined by
Mortgagee to be unsatisfactory and is not corrected within thirty (30) days
after notice to Mortgagor, Mortgagor will, to the extent Mortgagor is entitled
under third party agreements affecting the same, employ, for the duration of
such Event of Default, as managing agent of the Mortgaged Property, any person
from time to time designated or approved by Mortgagee.
 
Section 3.20       Priority over Contemporaneous Mortgage.   Mortgagor
acknowledges and warrants that while it is entering into a Mortgage, Deed of
Trust, Assignment of Production, Security Agreement, Fixture Filing and
Financing Statement for the benefit of Summerline Asset Management Services,
LLC, a Delaware limited liability company (the “Summerline Mortgage”)
contemporaneous with this Mortgage,  also covering the Mortgaged Property, (i)
the intent is that this Mortgage and the liens and encumbrances created
hereunder be senior and prior to the Summerline Mortgage and the liens and
encumbrances created thereunder for so long as any Indebtedness shall remain
outstanding, (ii) the Summerline Mortgage will contain language acknowledging
this, and (iii) Mortgagor shall not take any action, as long as Indebtedness
shall remaining outstanding hereunder, to amend the Summerline Mortgage to
remove such acknowledgment or so as to otherwise remove or diminish the
seniority and priority of this Mortgage to the Summerline Mortgage.   In
addition, Mortgagor agrees to take any steps reasonably requested by Mortgagee
as shall be deemed reasonably necessary by Mortgagee to affirm, perfect or
preserve such seniority and priority of this Mortgage.

 
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ARTICLE IV
Rights and Remedies
 
Section 4.01       Event of Default.  As used in this Mortgage, an “Event of
Default” means (i) the earlier to occur of (A) the failure by Mortgagor for ten
(10) days from the date of receipt by Mortgagor of notice from Mortagee of such
failure to comply with any covenant, agreement, warranty or condition herein
required to be observed, kept or performed or (B) ten (10) days after any
executive officer of Mortgagor obtains actual knowledge of such failure, or (ii)
the occurrence of an “Event of Default” as defined under the Note.
 
Section 4.02       Foreclosure and Sale.
 
(a)          If an Event of Default shall occur and be continuing, Mortgagee
shall have the right and option to proceed with foreclosure by directing
Trustee, or his successors or substitutes in trust, to proceed with foreclosure
and to sell, to the extent permitted by law, all or any portion of the Mortgaged
Property at one or more sales, as an entirety or in parcels, at such place or
places in otherwise such manner and upon such notice as may be required by law,
or, in the absence of any such requirement, as Trustee may deem appropriate, and
to make conveyance to the purchaser or purchasers.  Where the Mortgaged Property
is situated in more than one jurisdiction, notice as above provided shall be
posted and filed in all such jurisdictions (if such notices are required by
law), and all such Mortgaged Property may be sold in any such jurisdiction and
any such notice shall designate the jurisdiction where such Mortgaged Property
is to be sold.  Cumulative of the foregoing and the other provisions of this
Section 4.02 as to any portion of the Mortgaged Properties located in the State
of West Virginia, such sales of all or any part of such Mortgaged Properties
shall be conducted at the courthouse of any county (whether or not the counties
in which such Mortgaged Properties are located are contiguous) in the State of
West Virginia in which any part of such Mortgaged Properties is situated as
provided by the statutes of the State of West Virginia then in force governing
sales of real estate under powers conferred by deed of trust, after having given
notice of such sale in accordance with such statutes. Nothing contained in this
Section 4.02 shall be construed so as to limit in any way Trustee’s rights to
sell the Mortgaged Property, or any portion thereof, by private sale if, and to
the extent that, such private sale is permitted under the laws of the applicable
jurisdiction or by public or private sale after entry of a judgment by any court
of competent jurisdiction so ordering.  Mortgagor hereby irrevocably appoints
Trustee to be the attorney of Mortgagor and in the name and on behalf of
Mortgagor to execute and deliver any deeds, transfers, conveyances, assignments,
assurances and notices which Mortgagor ought to execute and deliver and do and
perform any and all such acts and things which Mortgagor ought to do and perform
under the covenants herein contained and generally, to use the name of Mortgagor
in the exercise of all or any of the powers hereby conferred on Trustee.  At any
such sale: (i) whether made under the power herein contained or any other legal
enactment, or by virtue of any judicial proceedings or any other legal right,
remedy or recourse, it shall not be necessary for Trustee to have physically
present, or to have constructive possession of, the Mortgaged Property
(Mortgagor hereby covenanting and agreeing to deliver to Trustee any portion of
the Mortgaged Property not actually or constructively possessed by Trustee
immediately upon demand by Trustee) and the title to and right of possession of
any such property shall pass to the purchaser thereof as completely as if the
same had been actually present and delivered to purchaser at such sale,
(ii) each instrument of conveyance executed by Trustee shall contain a general
warranty of title, binding upon Mortgagor and its successors and assigns,
(iii) each and every recital contained in any instrument of conveyance made by
Trustee shall conclusively establish the truth and accuracy of the matters
recited therein, including, without limitation, nonpayment of the Indebtedness,
advertisement and conduct of such sale in the manner provided herein and
otherwise by law and appointment of any successor Trustee hereunder, (iv) any
and all prerequisites to the validity thereof shall be conclusively presumed to
have been performed, (v) the receipt of Trustee or of such other party or
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers for its purchase money and no such purchaser or purchasers, or its
assigns or personal representatives, shall thereafter be obligated to see to the
application of such purchase money, or be in any way answerable for any loss,
misapplication or nonapplication thereof, (vi) to the fullest extent permitted
by law, Mortgagor shall be completely and irrevocably divested of all of its
right, title, interest, claim and demand whatsoever, either at law or in equity,
in and to the property sold and such sale shall be a perpetual bar both at law
and in equity against Mortgagor, and against any and all other persons claiming
or to claim the property sold or any part thereof, by, through or under
Mortgagor, and (vii) to the extent and under such circumstances as are permitted
by law, Mortgagee may be a purchaser at any such sale, and shall have the right,
after paying or accounting for all costs of said sale or sales, to credit the
amount of the bid upon the amount of the Indebtedness (in the order of priority
set forth in Section 4.14 hereof) in lieu of cash payment.

 
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(b)         With respect to that portion, if any, of the Mortgaged Property
situated in the State of West Virginia, this instrument may be foreclosed by
advertisement and sale as provided by applicable West Virginia statutes, and
after such sale to execute and deliver to the purchaser or purchasers good and
sufficient deeds and assignments, conveying such property so sold to the
purchaser or purchasers with general warranty of title made on behalf of
Mortgagor.  The Trustee, or his successor or substitute, is hereby authorized
and empowered to appoint any one or more persons or entities as his
attorneys-in-fact or agents to act as Trustee under him and in his name, place
and stead, such appointment to be evidenced by a written instrument executed by
the Trustee, or his successor or substitute, to perform any one or more act or
acts necessary or incident to any sale under the power of sale hereunder,
including, without limitation, the posting and filing of any notices, the
conduct of the sale and the execution and delivery of any instruments conveying
the Mortgaged Property as a result of the sale, but in the name and on behalf of
the Trustee, or his successor or substitute; and all acts done or performed by
such attorneys-in-fact or agents shall be valid, lawful and binding as if done
or performed by the Trustee, or his successor substitute.
 
(c)         Upon the occurrence of an Event of Default, Mortgagee may exercise
its rights of enforcement with respect to the Mortgaged Properties or any part
thereof under the Applicable UCC of any State where any portion of the Mortgaged
Properties are located or under any other statute in force in any state to the
extent the same is applicable law.  Cumulative of the foregoing and the other
provisions of this Section 4.02: (i) to the extent permitted by law, upon the
occurrence and during the continuation of an Event of Default Mortgagee may
enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to
take possession of, assemble and collect the personal property portion of the
Mortgaged Properties or to render it unusable; (ii) upon the occurrence and
during the continuation of an Event of Default Mortgagee may require Mortgagor
to assemble the personal property and make it available at a place Mortgagee
designates which is mutually convenient to allow Mortgagee to take possession or
dispose of the personal property; (iii)  written notice mailed to Mortgagor as
provided herein at least five (5) business days prior to the date of public sale
of the personal property or prior to the date after which private sale of the
personal property will be made shall constitute reasonable notice; (iv) in the
event of a foreclosure of the liens, privileges and/or security interests
evidenced hereby, the personal property, or any part thereof, and the Mortgaged
Properties, or any part thereof, may, at the option of Mortgagee, be sold, as a
whole or in parts, together or separately (including, without limitation, where
a portion of the Mortgaged Properties is sold, the personal property related
thereto may be sold in connection therewith); (v) upon the occurrence and during
the continuation of an Event of Default, Mortgagee or the Trustee may, to the
extent permitted under applicable law, elect to treat the fixtures included in
the Mortgaged Properties either as real property or as personal property, or
both, and proceed to exercise such rights as apply thereto; and (vi) with
respect to any sale of real property included in the Mortgaged Properties made
under the powers of sale herein granted and conferred, Mortgagee or the Trustee
may, to the extent permitted by applicable law, include in such sale any
personal property and fixtures included in the Mortgaged Properties and relating
to such real property.

 
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Section 4.03       Agents.  Trustee or his successor or substitute may appoint
or delegate any one or more persons as agent to perform any act or acts
necessary or incident to any sale held by Trustee, including the posting of
notices and the conduct of sale, but in the name and on behalf of Trustee, his
successor or substitute.  If Trustee or his successor or substitute shall have
given notice of sale hereunder, any successor or substitute trustee thereafter
appointed may complete the sale and the conveyance of the property pursuant
thereto as if such notice had been given by the successor or substitute trustee
conducting the sale.
 
Section 4.04       Judicial Foreclosure; Receivership.  If any of the
Indebtedness shall become due and payable and shall not be promptly paid,
Trustee or Mortgagee shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction or for the enforcement of any other appropriate legal or equitable
remedy.  In addition to all other remedies herein provided for, Mortgagor agrees
that, upon the occurrence of an Event of Default or any event or circumstance
which, with the lapse of time or the giving of notice, or both, would constitute
an Event of Default hereunder, Mortgagee shall as a matter of right be entitled
to the appointment of a receiver or receivers for all or any part of the
Mortgaged Property, whether such receivership be incident to a proposed sale (or
sales) of such property or otherwise, and without regard to the value of the
Mortgaged Property or the solvency of any person or persons liable for the
payment of the Indebtedness secured hereby, and Mortgagor does hereby consent to
the appointment of such receiver or receivers, waives any and all defenses to
such appointment, and agrees not to oppose any application therefor by
Mortgagee, and agrees that such appointment shall in no manner impair, prejudice
or otherwise affect the rights of Mortgagee under Article II hereof.  Mortgagor
expressly waives notice of a hearing for appointment of a receiver and the
necessity for bond or an accounting by the receiver.  Nothing herein is to be
construed to deprive Mortgagee of any other right, remedy or privilege it may
now or hereafter have under the law to have a receiver appointed.  Any money
advanced by Trustee and/or Mortgagee in connection with any such receivership
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) included in the Indebtedness owing by Mortgagor to the Trustee
and/or Mortgagee and shall bear interest from the date of making such advance by
Trustee and/or Mortgagee until paid at the then applicable interest rate under
the Note (the “Applicable Rate”).
 
Section 4.05       Foreclosure for Installments.  Mortgagee shall also have the
option to proceed with foreclosure in satisfaction of any installments of the
Indebtedness which have not been paid when due either through the courts or by
directing Trustee or his successors in trust to proceed with foreclosure in
satisfaction of the matured but unpaid portion of the Indebtedness as if under a
full foreclosure, conducting the sale as herein provided and without declaring
the entire principal balance and accrued interest due; such sale may be made
subject to the unmatured portion of the Indebtedness, and any such sale shall
not in any manner affect the unmatured portion of the Indebtedness, but as to
such unmatured portion of the Indebtedness, this Mortgage shall remain in full
force and effect just as though no sale had been made hereunder.  It is further
agreed that several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the Indebtedness, it being the purpose hereof to
provide for a foreclosure and sale of the security for any matured portion of
the Indebtedness without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion of the Indebtedness.

 
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Section 4.06       Separate Sales.  The Mortgaged Property may be sold in one or
more parcels and in such manner and order as Mortgagee, 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.
 
Section 4.07      Possession of Mortgaged Property.  Mortgagor agrees to the
full extent that it lawfully may, that, in case one or more of the Events of
Default shall have occurred and shall not have been remedied, then, and in every
such case, Trustee or Mortgagee shall have the right and power to enter into and
upon and take possession of all or any part of the Mortgaged Property in the
possession of Mortgagor, its successors or assigns, or its or their agents or
servants, and may exclude Mortgagor, its successors or assigns, and all persons
claiming under Mortgagor, and its or their agents or servants wholly or partly
therefrom; and, holding the same, Trustee may use, administer, manage, operate
and control the Mortgaged Property and conduct the business thereof to the same
extent as Mortgagor, its successors or assigns, might at the time do and may
exercise all rights and powers of Mortgagor, in the name, place and stead of
Mortgagor, or otherwise as Trustee shall deem best.  All reasonable costs,
expenses and liabilities of every character incurred by Trustee and/or Mortgagee
in administering, managing, operating, and controlling the Mortgaged Property
shall constitute a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to Trustee and/or Mortgagee and
shall bear interest from date of expenditure until paid at the Applicable Rate,
all of which shall constitute a portion of the Indebtedness and shall be secured
by this Mortgage and all other security instruments.
 
Section 4.08       Occupancy After Foreclosure.  In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor’s
representatives, successors or assigns or any other person claiming any interest
in the Mortgaged Property by, through or under Mortgagor, are occupying or using
the Mortgaged Property or any part thereof, each and all shall immediately
become the tenant of the purchaser at such sale, which tenancy shall be a
tenancy from day to day, terminable at the will of either the landlord or
tenant, or at a reasonable rental per day based upon the value of the property
occupied, such rental to be due daily to the purchaser; to the extent permitted
by applicable law, the purchaser at such sale shall, notwithstanding any
language herein apparently to the contrary, have the sole option to demand
immediate possession following the sale or to permit the occupants to remain as
tenants at will.  In the event the tenant fails to surrender possession of said
property upon demand, the purchaser shall be entitled to institute and maintain
a summary action for possession of the Mortgaged Property (such as an action for
forcible entry and detainer) in any court having jurisdiction.
 
Section 4.09       Remedies Cumulative, Concurrent and Nonexclusive.  Every
right, power and remedy herein given to Trustee or Mortgagee shall be cumulative
and in addition to every other right, power and remedy herein specifically given
or now or hereafter existing in equity, at law or by statute (including
specifically those granted by the Applicable UCC in effect and applicable to the
Mortgaged Property or any portion thereof) each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and so often and in such order as may be deemed expedient by
Trustee or Mortgagee, and the exercise, or the beginning of the exercise, of any
such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power or remedy.  No
delay or omission by Trustee or Mortgagee in the exercise of any right, power or
remedy shall impair any such right, power or remedy or operate as a waiver
thereof or of any other right, power or remedy then or thereafter existing.

 
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Section 4.10       No Release of Obligations.  Neither Mortgagor, any other
Mortgagor Party, any guarantor nor any other person hereafter obligated for
payment of all or any part of the Indebtedness shall be relieved of such
obligation by reason of (a) the failure of Trustee to comply with any request of
Mortgagor, or any guarantor or any other person so obligated to foreclose the
lien of this Mortgage or to enforce any provision hereunder or under the any of
the Loan Documents; (b) the release, regardless of consideration, of the
Mortgaged Property or any portion thereof or interest therein or the addition of
any other property to the Mortgaged Property; (c) any agreement or stipulation
between any subsequent owner of the Mortgaged Property and Mortgagee extending,
renewing, rearranging or in any other way modifying the terms of this Mortgage
without first having obtained the consent of, given notice to or paid any
consideration to Mortgagor, any other Mortgagor Party, any guarantor or such
other person, and in such event Mortgagor, the Mortgagor Parties, guarantor and
all such other persons shall continue to be liable to make payment according to
the terms of any such extension or modification agreement unless expressly
released and discharged in writing by Mortgagee; or (d) by any other act or
occurrence, save and except the complete payment of the Indebtedness and the
complete fulfillment of all obligations hereunder or under the Loan Documents.
 
Section 4.11      Release of and Resort to Collateral.  Mortgagee 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 interest created in or evidenced by this Mortgage or its
stature as a first and prior lien and security interest in and to the Mortgaged
Property, and without in any way releasing or diminishing the liability of any
person or entity liable for the repayment of the Indebtedness.  For payment of
the Indebtedness, Mortgagee may resort to any other security therefor held by
Mortgagee or Trustee in such order and manner as Mortgagee may elect.
 
Section 4.12       Waiver of Redemption, Notice and Marshalling of Assets,
Etc.  To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases: (a) all benefits that might accrue to
Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment; provided, however,
that if the laws of any state do not permit the redemption period to be waived,
the redemption period is specifically reduced to the minimum amount of time
allowable by statute; (b) all notices of any Event of Default or of Mortgagee’s
intention to accelerate maturity of the Indebtedness or of Trustee’s election to
exercise or his actual exercise of any right, remedy or recourse provided for
hereunder or under the Loan Documents; and (c) any right to a marshalling of
assets or a sale in inverse order of alienation.  If any law referred to in this
Mortgage and now in force, of which Mortgagor or its successor or successors
might take advantage despite the provisions hereof, shall hereafter be repealed
or cease to be in force, such law shall thereafter be deemed not to constitute
any part of the contract herein contained or to preclude the operation or
application of the provisions hereof.
 
Section 4.13       Discontinuance of Proceedings.  In case Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the Loan Documents and shall thereafter elect to discontinue or abandon same for
any reason, Mortgagee shall have the unqualified right to do so and, in such an
event, Mortgagor and Mortgagee shall be restored to their former positions with
respect to the Indebtedness, this Mortgage, the Loan Documents, the Mortgaged
Property and otherwise, and the rights, remedies, recourses and powers of
Mortgagee shall continue as if same had never been invoked.

 
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Section 4.14       Application of Proceeds.  The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by Trustee
or Mortgagee in any proceedings for the enforcement hereof or otherwise, whose
application has not elsewhere herein been specifically provided for, shall be
applied:
 
(a)         first, to the payment of all costs and expenses incurred by Trustee
or Mortgagee incident to the enforcement of this Mortgage, the Loan Documents or
any of the Indebtedness (including, without limiting the generality of the
foregoing, expenses of any entry or taking of possession, of any sale, of
advertisement thereof, and of conveyances, and court costs, compensation of
agents and employees, legal fees and a reasonable commission to Trustee acting
in connection herewith or hereunder), and to the payment of all other charges,
expenses, liabilities and advances incurred or made by Trustee or Mortgagee
under this Mortgage or in executing any trust or power hereunder;
 
(b)         second, to payment of the Indebtedness in such order and manner as
Mortgagee may elect in Mortgagee’s sole discretion; and
 
(c)         third, to Mortgagor or such other persons as may be entitled thereto
by law or as otherwise required by any court of competent jurisdiction.
 
Section 4.15       Resignation of Operator.  In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or Mortgagee shall exercise any remedies under this
Mortgage with respect to any portion of the Mortgaged Property (or Mortgagor
shall transfer any Mortgaged Property “in lieu of” foreclosure), Mortgagee or
Trustee shall have the right to request that any operator of any Mortgaged
Property which is either Mortgagor or any affiliate of Mortgagor to resign as
operator under the joint operating agreement applicable thereto, and no later
than 60 days after receipt by Mortgagor of any such request, Mortgagor shall
resign (or cause such other party to resign) as operator of such Mortgaged
Property.
 
Section 4.16       Indemnity.  In connection with any action taken by Trustee
and/or Mortgagee pursuant to this Mortgage, Trustee and/or Mortgagee and their
officers, directors, Partners, Members, Investors, Equity Holders, employees,
representatives, agents, advisors, attorneys, accountants and experts and any
persons or entities owned or controlled by Trustee, or Mortgagee or any such
other person or entity (“Indemnified Parties”) shall not be liable for any loss
sustained by Mortgagor resulting from an assertion that Mortgagee has received
funds from the production of Hydrocarbons claimed by third persons or any act or
omission of any Indemnified Party in administering, managing, operating or
controlling the Mortgaged Property, including such loss which may result from
the ordinary negligence of an Indemnified Party, unless such loss is caused by
the gross negligence or willful misconduct of an Indemnified Party, nor shall
Trustee and/or Mortgagee be obligated to perform or discharge any obligation,
duty or liability of Mortgagor. Mortgagor shall and does hereby agree to
indemnify each Indemnified Party for, and to hold each Indemnified Party
harmless from, any and all liability, loss or damage which may or might be
incurred by any Indemnified Party by reason of this Mortgage or the exercise of
rights or remedies hereunder; should Trustee and/or Mortgagee make any
expenditure on account of any such liability, loss or damage, the amount
thereof, including reasonable costs and expenses and reasonable attorneys’ fees,
shall be a demand obligation (which obligation Mortgagor hereby expressly
promises to pay) owing by Mortgagor to Trustee and/or Mortgagee and shall bear
interest from the date expended until paid at the applicable interest rate,
shall be a part of the Indebtedness and shall be secured by this Mortgage and
any other Security Instrument.  Mortgagor hereby assents to, ratifies and
confirms any and all actions of Trustee and/or Mortgagee with respect to the
Mortgaged Property taken under this Mortgage.  The liabilities of Mortgagor as
set forth in this Section 4.16 shall survive the termination of this Mortgage.

 
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ARTICLE V
Trustee
 
Section 5.01      Duties, Rights, and Powers of Trustee.  It shall be no part of
the duty of Trustee to see to any recording, filing or registration of this
Mortgage or any other instrument in addition or supplemental thereto, or to give
any notice thereof, or to see to the payment of or be under any duty in respect
of any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Property, or any part thereof, or against Mortgagor,
or to see to the performance or observance by Mortgagor of any of the covenants
and agreements contained herein.  Trustee shall not be responsible for the
execution, acknowledgment or validity of this Mortgage or of any instrument in
addition or supplemental hereto or for the sufficiency of the security purported
to be created hereby, and makes no representation in respect thereof or in
respect of the rights of Mortgagee.  Trustee shall have the right to seek advice
of counsel of his choice upon any matters arising hereunder and shall be fully
protected in relying as to legal matters on the advice of counsel.  Trustee
shall not incur any personal liability hereunder, except for Trustee’s own
willful misconduct; and Trustee shall have the right to rely on any instrument,
document or signature authorizing or supporting any action taken or proposed to
be taken by him hereunder, believed by him in good faith to be genuine.
 
Section 5.02      Successor Trustee.  Trustee may resign by written notice
addressed to Mortgagee or be removed at any time with or without cause by an
instrument in writing duly executed on behalf of Mortgagee.  In case of the
death, resignation or removal of Trustee, a successor trustee may be appointed
by Mortgagee by instrument of substitution complying with any applicable
requirements of law, or, in the absence of any such requirement, without other
formality than appointment and designation in writing (“Successor
Trustee”).  Written notice of such appointment and designation shall be given by
Mortgagee to Mortgagor, but the validity of any such appointment shall not be
impaired or affected by failure to give such notice or by any defect
therein.  Such appointment and designation shall be full evidence of the right
and authority to make the same and of all the facts therein recited, and, upon
the making of any such appointment and designation, this Mortgage shall vest in
the Successor Trustee all the estate and title in and to all of the Mortgaged
Property, and the Successor Trustee shall thereupon succeed to all of the
rights, powers, privileges, immunities and duties hereby conferred upon Trustee
named herein, and one such appointment and designation shall not exhaust the
right to appoint and designate a Successor Trustee hereunder but such right may
be exercised repeatedly as long as any Indebtedness remains unpaid
hereunder.  To facilitate the administration of the duties hereunder, Mortgagee
may appoint multiple Successor Trustees to serve in such capacity or in such
jurisdictions as Mortgagee may designate.

 
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Section 5.03       Retention of Monies.  All monies received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other monies (except to the extent required by law), and Trustee shall be under
no liability for interest on any monies received by him hereunder.
 
ARTICLE VI
Miscellaneous
 
Section 6.01       Instrument Construed as Mortgage, Etc.  With respect to any
portions of the Mortgaged Property located in any state or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of Trustee as herein provided, the general
language of conveyance hereof to Trustee is intended and the same shall be
construed as words of mortgage unto and in favor of Mortgagee and the rights and
authority granted to Trustee herein may be enforced and asserted by Mortgagee in
accordance with the laws of the jurisdiction in which such portion of the
Mortgaged Property is located and the same may be foreclosed at the option of
Mortgagee as to any or all such portions of the Mortgaged Property in any manner
permitted by the laws of the jurisdiction in which such portions of the
Mortgaged Property is situated.  This Mortgage may be construed as a mortgage,
deed of trust, chattel mortgage, conveyance, assignment, security agreement,
pledge, financing statement, hypothecation or contract, or any one or more of
them, in order fully to effectuate the lien hereof and the purposes and
agreements herein set forth.
 
Section 6.02       Release of Mortgage.  At such time, if any, as (i) all
Indebtedness under the Note secured hereby shall be finally and irrevocably paid
in full in cash, (ii) the Note no longer remains outstanding, (iii) all
commitments to lend under the Note shall have terminated and (iv) there shall
exist no other outstanding payment or reimbursement obligations (other than
contingent indemnification obligations for which no claims shall have been
asserted) of the Mortgagor to the Mortgagee under any of the documents
underlying the transactions of which the Loan Documents are an integral part
(the “Transaction Documents”), Mortgagee shall forthwith cause satisfaction and
discharge of this Mortgage to be entered upon the record at the expense of
Mortgagor and shall execute and deliver or cause to be executed and delivered
such instruments of satisfaction and reassignment as may be
appropriate.  Otherwise, this Mortgage shall remain and continue in full force
and effect.
 
Section 6.03       Severability.  If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
 
Section 6.04       Successors and Assigns of Parties.  The term “Mortgagee” as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of any of the Indebtedness secured hereby.  The terms used to designate Trustee,
Mortgagee and Mortgagor shall be deemed to include the respective successors and
assigns of such parties.

 
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Section 6.05       Satisfaction of Prior Encumbrance.  To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Mortgagee at Mortgagor’s request,
and Mortgagee shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released, and it is expressly understood
that, in consideration of the payment of such other indebtedness by Mortgagee,
Mortgagor hereby waives and releases all demands and causes of action for
offsets and payments to, upon and in connection with the said indebtedness.
 
Section 6.06       Subrogation of Trustee.  This Mortgage is made with full
substitution and subrogation of Trustee and his successors in this trust and his
and their assigns in and to all covenants and warranties by others heretofore
given or made in respect of the Mortgaged Property or any part thereof.
 
Section 6.07       Nature of Covenants.  The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
 
Section 6.08       Notices.  Whenever this Mortgage requires or permits any
consent, approval, notice, request, or demand from one party to another, the
consent, approval, notice, request, or demand must be in writing to be effective
and shall be deemed to have been given on the day personally delivered or, if
mailed, on the day it is enclosed in an envelope, properly stamped, sealed and
deposited in a post office or official depository maintained by the United
States Postal Service, certified mail, return receipt requested, addressed to
the party to be notified at the address set forth on the signature page of this
Mortgage (or if none, to the address set forth in the introductory paragraph of
this Mortgage or at such other address as may have been designated by written
notice).
 
Section 6.09       Counterparts.  This Mortgage is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one jurisdiction,
descriptions of only those portions of the Mortgaged Property located in, and
descriptions of the Prior Mortgages (as defined herein) for, the jurisdiction in
which a particular counterpart is recorded shall be attached as Exhibit A
thereto. An Exhibit A containing a description of all Mortgaged Property
wheresoever situated will be attached to that certain counterpart to be attached
to a Financing Statement and filed with the Secretary of State of each of
Delaware, Texas, and West Virginia in their respective Uniform Commercial Code
Records.  Each of such counterparts shall for all purposes be deemed to be an
original and all such counterparts shall together constitute but one and the
same instrument, provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original signature, not a facsimile
signature.
 
Section 6.10       Effective as a Financing Statement.  This Mortgage, among
other things, covers goods which are or are to become fixtures on the real
property described herein and covers as-extracted collateral related to the
real/immovable property described herein.  This Mortgage shall be effective as a
financing statement (i) filed as a fixture filing with respect to all fixtures
included within the Mortgaged Property, (ii) covering as-extracted collateral
with respect to all as-extracted collateral included within the Mortgaged
Property (including, without limitation, all oil, gas, other minerals and other
substances of value which may be extracted from the earth at the wellhead or
minehead) and (iii) covering all other Mortgaged Property.  This Mortgage is to
be filed for record in the real/immovable property records of each county where
any part of the Mortgaged Property is situated and may also be filed in the
offices of any relevant state agency (or any successor agencies).  The mailing
address of Mortgagor is the address of Mortgagor set forth at the end of this
Mortgage and the address of Mortgagee from which information concerning the
security interests hereunder may be obtained is the address of Mortgagee set
forth at the end of this Mortgage.  Nothing contained in this paragraph shall be
construed to limit the scope of this Mortgage nor its effectiveness as a
financing statement covering any type of property.  A carbon, photographic,
facsimile or other reproduction of this Mortgage or of any financing statement
relating to this Mortgage shall be sufficient as a financing statement for any
of the purposes referred to this Section.  Without limiting any other provision
herein, Mortgagor hereby authorizes Mortgagee to file, in any filing or
recording office, one or more financing statements and any renewal or
continuation statements thereof.

 
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Section 6.11       No Impairment of Security.  To the extent allowed by
applicable law, the lien, privilege, security interest and other security rights
hereunder shall not be impaired by any indulgence, moratorium or release which
may be granted including, but not limited to, any renewal, extension or
modification which may be granted with respect to any secured obligations, or
any surrender, compromise, release, renewal, extension, exchange or substitution
which may be granted in respect of the Mortgaged Property (including, without
limitation, Production Proceeds), or any part thereof or any interest therein,
or any release or indulgence granted to any borrower, endorser, guarantor or
surety of any Indebtedness.
 
Section 6.12       Acts Not Constituting Waiver.  Any default may be waived
without waiving any other prior or subsequent default.  Any default may be
remedied without waiving any other default.  Neither the failure to exercise,
nor any delay in exercising, any right, power or remedy upon any default shall
be construed as a waiver of such default or as a waiver of the right to exercise
any such right, power or remedy at a later date.  No single or partial exercise
of any right, power or remedy hereunder shall exhaust the same or shall preclude
any other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time.  No modification
or waiver of any provision hereof nor consent to any departure by Mortgagor
therefrom shall in any event be effective unless the same shall be in writing
and signed by Mortgagee and then such waiver or consent shall be effective only
in the specific instances, for the purpose for which given, and to the extent
therein specified.  No notice or demand on Mortgagor in any case shall in and of
itself entitle Mortgagor to any other or further notice or demand in similar or
other circumstances.  Acceptance of any payment in an amount less than the
amount then due on any Indebtedness shall be deemed an acceptance on account
only and shall not in any way excuse the existence of default hereunder.
 
Section 6.13      Mortgagor’s Successors.  In the event the ownership of any
Mortgaged Property or any part thereof becomes vested in a person other than
Mortgagor, then, without further notice to Mortgagor, such successor or
successors in interest may be dealt with, in reference to this Mortgage and to
the obligations secured hereby, in the same manner as with Mortgagor, without in
any way vitiating or discharging Mortgagor’s liability hereunder or for the
payment of the Indebtedness or performance of the obligations secured
hereby.  No transfer of any Mortgaged Property, no forbearance, and no extension
of the time for the payment of any Indebtedness secured hereby shall operate to
release, discharge, modify, change or affect, in whole or in part, the liability
of Mortgagor hereunder or for the payment of the Indebtedness or performance of
the obligations secured hereby, or the liability of any other person hereunder
or for the payment of the Indebtedness.
 
Section 6.14       Certain Consents.  Except where otherwise expressly provided
herein, in any instance hereunder where the approval, consent or the exercise of
judgment of Mortgagee is required, the grant or denial of such approval or
consent and the exercise of such judgment shall be within the sole discretion of
Mortgagee, and Mortgagee shall not, for any reason or to any extent, be required
to grant such approval or consent or to exercise such judgment in any particular
manner, regardless of the reasonableness of either the request or the judgment
of such party.

 
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Section 6.15      Governing Law.  WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF WEST VIRGINIA APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN
WHICH A PORTION OF THE MORTGAGED PROPERTY IS LOCATED (OR WHICH IS OTHERWISE
APPLICABLE TO A PORTION OF THE MORTGAGED PROPERTY) NECESSARILY OR, IN THE SOLE
DISCRETION OF THE MORTGAGEE, APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL
AND SUBSTANTIVE MATTERS RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF
THE LIENS, PRIVILEGES, SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE
TRUSTEE OR MORTGAGEE GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO
THAT PORTION OF THE MORTGAGED PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT
TO THE LAWS OF) SUCH STATE.
 
Section 6.16       Exculpation Provisions.  Each of the parties hereto
specifically agrees that it has a duty to read this Mortgage; and agrees that it
is charged with notice and knowledge of the terms of this Mortgage; that it has
in fact read this Mortgage and is fully informed and has full notice and
knowledge of the terms, conditions and effects of this Mortgage; that it has
been represent­ed by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Mortgage; and has received the
advice of its attorney in entering into this Mortgage; and that it recognizes
that certain of the terms of this Mortgage MAY result in one party assuming the
liability inherent in some aspects of the transaction and relieving the other
party of its responsibility for such liability.  Each party hereto agrees and
covenants that it will not contest the validity or enforceability of any
exculpatory provision of this Mortgage on the basis that the party had no notice
or knowledge of such provision or that the provision is not “conspicuous.”
 
Section 6.17       FINAL AGREEMENT.    THE TRANSACTION DOCUMENTS, THIS MORTGAGE
AND THE LOAN DOCUMENTS AND THE OTHER WRITTEN DOCUMENTS EXECUTED IN CONNECTION
THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
Section 6.18       Subrogation; Prior Mortgages.  To the extent that proceeds of
the Indebtedness are used to pay obligations secured by any outstanding lien,
privilege, security interest, charge or prior encumbrance against any Mortgaged
Property (“Prior Mortgages”), such proceeds have been advanced at Mortgagor's
request, and the Trustee for the benefit of the Mortgagee or the Mortgagee as
agent for the party or parties advancing the same shall be subrogated to any and
all rights, security interests and liens owned by any owner or holder of such
Prior Mortgages, privileges, security interests, charges or encumbrances,
irrespective of whether said liens, privileges, security interests, charges or
encumbrances are released, and it is expressly understood that, in consideration
of the payment of such obligations, Mortgagor hereby waives and releases all
demands and causes of action for offsets and payments to, upon and in connection
with the said obligations.  Mortgagor and Mortgagee acknowledge that this
Mortgage amends, restates and consolidates the Prior Mortgages, and all liens,
claims, rights, titles, interests and benefits created and granted by the Prior
Mortgages shall continue to exist, remain valid and subsisting, shall not be
impaired or released hereby, shall remain in full force and effect and are
hereby renewed, extended, carried forward and conveyed as security for the
Indebtedness.

 
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Section 6.19       Compliance with Usury Laws.  It is the intent of Mortgagor,
Mortgagee and all other parties to the Transaction Documents to contract in
strict compliance with applicable usury law from time to time in effect.  In
furtherance thereof, it is stipulated and agreed that none of the terms and
provisions contained herein or in the other Transaction Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
collected, charged, taken or received by applicable law from time to time in
effect.
 
Section 6.20       Certain Obligations of Mortgagor.  Without limiting
Mortgagor's obligations hereunder, Mortgagor's liability hereunder and the
obligations secured hereby shall extend to and include all post-petition
interest, expenses and other duties and liabilities with respect to Mortgagor's
obligations hereunder which would be owed, but for the fact that the same may be
unenforceable due to the existence of a bankruptcy, reorganization or similar
proceeding.
 
Section 6.21       Authority of Mortgagee.  The holders of the Indebtedness
secured hereby may, by agreement among them, provide for and regulate the
exercise of rights and remedies hereunder, but, unless and until modified to the
contrary in writing signed by all such persons and recorded in the same counties
as this Mortgage is recorded, (i) all persons other than Mortgagor and its
affiliates shall be entitled to rely on the releases, waivers, consents,
approvals, notifications and other acts (including, without limitation, or the
appointment or substitution of trustees hereunder and the bidding in of all or
any part of the Indebtedness held by any one or more persons, whether the same
be conducted under the provisions hereof or otherwise) of Mortgagee, without
inquiry into any such agreements or the existence of required consent or
approval of any holders of Indebtedness and without the joinder of any party
other than Mortgagee in such releases, waivers, consents, approvals,
notifications or other acts and (ii) all notices, requests, consents, demands
and other communications required or permitted to be given hereunder may be
given to Mortgagee.
 
[rest of page intentionally left blank; signature page follows]

 
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WITNESS THE EXECUTION HEREOF, this 2nd day of October, 2009, to be effective as
of said date (the “Effective Date”).
 
MORTGAGOR:
 
VELOCITY ENERGY PARTNERS LP, a Delaware limited partnership, By It’s General
Partner, VELOCITY ENERGY LIMITED LLC, a Texas limited liability company
 
By:
/s/ D. E. Vandenberg
 
Name:     D.E. Vandenberg
 
Title:       President

The name and address of the Debtor/Mortgagor is:

 
523 N. Sam Houston Parkway. East, Suite 175

Houston, TX 77060
 
The name and address of the Secured Party/Mortgagee is:

 
Classic Oil & Gas Resources, Inc.

 
416 W. Brannon Road

Nicholasville, KY  40356
Attention:  William W. Kelly, Jr.
Fax:  (859) 201-1159

 
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EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 
ADKINS #1 PDP
 
Adkins, Artimus & Glenna E.
 
INDIAN CREEK
 
WYOMING
 
02/01/99
 
7.71
 
399
 
733
 
15.000
 
12.825
 
15.000
 
12.825
 
AUREDNICK #1 PDP
 
Aurednick, Robert
 
CLEAR FORK
 
WYOMING
 
04/07/05
 
8.00
 
433
 
906
 
2.500
 
2.450
 
2.500
 
2.450
 
BOBO #1 PDP
 
Bobo, Mildred Vance & Charles R.
 
GILBERT CREEK
 
MINGO
 
02/15/62
 
60.00
 
BCL 43
 
294
 
75.000
 
66.250
 
75.000
 
66.250
 
BOLEN#1 PDP
 
Bolen, Norvel & Darlene
 
OCEANA EAST
 
WYOMING
 
10/12/05
 
15.00
 
437
 
721
 
1.039
 
1.119
 
1.039
 
1.119
 
BROWNING #1 PDP
 
Browning, Emmett & Deborah
 
CLEAR FORK
 
WYOMING
 
04/23/05
 
15.00
 
433
 
903
 
2.500
 
2.470
 
2.500
 
2.470
 
BRYANT #1 PDP
 
Bryant, Johnny, Jr.
 
OCEANA
 
WYOMING
 
05/12/07
 
6.00
 
437
 
691
 
4.000
 
3.300
 
4.000
 
3.300
 
CHAMBERS #1 PDP
 
Chambers, Watson; Post, Mary Jo & Jack
 
CLEAR FORK
 
WYOMING
 
09/23/03
 
186.00
 
417
 
971
 
1.500
 
1.670
 
1.500
 
1.670
 
CNB 748 PDP
 
Charleston National Bank (assignment)
 
BOONE COUNTY
 
BOONE
 
10/01/77
 
WELLBORE
 
O&G 23
 
775
 
100.000
 
80.280
 
100.000
 
80.280
 
CLINE, B.  #1 PDNP
 
Cline, Bobby & Yvonne
 
CLEAR FORK
 
WYOMING
 
04/09/05
 
31.94
 
433
 
922
 
2.500
 
2.550
 
2.500
 
2.550
 
CLINE, ELMER #1 PDP
 
Cline, Elmer et al.
 
GILBERT CREEK
 
MINGO
 
10/09/61
 
113.00
 
BCL 42
 
331
 
100.000
 
87.500
 
100.000
 
87.500
 
CLINE, ELMER #2 PDP
 
Cline, Elmer et al.
 
GILBERT CREEK
 
MINGO
 
10/09/61
 
113.00
 
BCL 42
 
331
 
15.500
 
15.250
 
15.500
 
15.250
 
CLINE, R. S. #1 PDP
 
Cline, R. S. & Sadie
 
ELK LICK
 
WYOMING
 
02/01/98
 
88.00
 
393
 
920
 
30.000
 
27.650
 
30.000
 
27.650
 
COOK #1 PDP
 
Cook, George R.
 
OCEANA EAST
 
WYOMING
 
03/27/06
 
30.00
 
433
 
950
 
5.526
 
4.560
 
5.526
 
4.560
 
COOK #1 PDP
 
Cook, Larry W.
 
OCEANA EAST
 
WYOMING
 
03/27/06
 
30.00
 
433
 
948
 
5.526
 
4.560
 
5.526
 
4.560
 
COOK #2 PDP
 
Cook, George R.
 
OCEANA EAST
 
WYOMING
 
03/27/06
 
30.00
 
433
 
950
 
1.039
 
0.857
 
1.039
 
0.857
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

COOK #2 PDP
 
Cook, Larry W.
 
OCEANA EAST
 
WYOMING
 
03/27/06
 
30.00
 
433
 
948
 
1.039
 
0.857
 
1.039
 
0.857
 
COOKE, H. #1 PDP
 
Cooke, Harry G. Jr. & Lillian et al.
 
OCEANA EAST
 
WYOMING
 
12/06/05
 
68.90
 
433
 
958
 
5.000
 
4.300
 
5.000
 
4.300
 
CRAIG #1 PDP
 
Craig, Carol
 
CLEAR FORK
 
WYOMING
 
04/22/05
 
8.53
 
433
 
899
 
2.500
 
2.450
 
2.500
 
2.450
 
DAVIS #1 PDP
 
Davis, Leonard
 
CLEAR FORK
 
WYOMING
 
04/08/05
 
84.00
 
433
 
928
 
2.000
 
2.225
 
2.000
 
2.225
 
ELLIS #1 PDP
 
Goad, Conley
 
GILBERT CREEK
 
MINGO
 
02/15/62
 
94.90
 
47
 
331
 
100.000
 
87.500
 
100.000
 
87.500
 
ELLIS #2 PDP
 
Goad, Conley
 
GILBERT CREEK
 
MINGO
 
02/15/62
 
94.90
 
47
 
331
 
19.500
 
18.670
 
19.500
 
18.670
 
FIELDS, BOB #1 PDNP
 
Fields, Bobby (Fields Furn. & Appliance)
 
OCEANA
 
WYOMING
 
05/03/06
 
16.348
 
433
 
946
 
4.000
 
3.280
 
4.000
 
3.280
 
FOX #1 PDP
 
Fox, William L.
 
OCEANA
 
WYOMING
 
12/02/06
 
23.33
 
437
 
712
 
5.000
 
4.850
 
5.000
 
4.850
 
FOX #1 PDNP (BP)
 
Fox, William L.
 
OCEANA
 
WYOMING
 
12/02/06
 
23.33
 
437
 
712
 
5.000
 
4.850
 
5.000
 
4.850
 
FOX #2 PDP
 
Fox, William L.
 
OCEANA
 
WYOMING
 
12/02/06
 
18.50
 
437
 
714
 
4.000
 
3.300
 
4.000
 
3.300
 
HATFIELD #1 PDP
 
Hatfield, Wayne, Jr. (C. R. Rentals)
 
OCEANA
 
WYOMING
 
03/21/06
 
5.50
 
433
 
916
 
1.039
 
1.119
 
1.039
 
1.119
 
HUGHES #1 PDP
 
Hughes, Bobby et al
 
CLEAR FORK
 
WYOMING
 
04/26/05
 
39.00
 
433
 
924
 
2.500
 
2.450
 
2.500
 
2.450
 
JACKSON #1 PDP
 
Jackson, Gerald R. & Geraldine et al.
 
OCEANA EAST
 
WYOMING
 
12/30/06
 
10.00
 
437
 
707
 
4.000
 
3.300
 
4.000
 
3.300
 
JACKSON #1 PDNP (BP)
 
Jackson, Gerald R. & Geraldine et al.
 
OCEANA EAST
 
WYOMING
 
12/30/06
 
10.00
 
437
 
707
 
4.000
 
3.300
 
4.000
 
3.300
 
JEWELL #1 PDP
 
Jewell, Harry & Donna Sue III
 
OCEANA EAST
 
WYOMING
 
07/05/06
 
13.00
 
433
 
920
 
1.039
 
1.119
 
1.039
 
1.119
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
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LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

LAMB #1 PDP
 
Lamb, Alfred Neale
 
OCEANA EAST
 
WYOMING
 
10/12/05
 
8.14
 
433
 
971
 
1.039
 
1.119
 
1.039
 
1.119
 
LAMB #1 PDP
 
Lamb, Wilda Faye
 
OCEANA EAST
 
WYOMING
 
10/12/05
 
8.14
 
433
 
973
 
1.039
 
1.119
 
1.039
 
1.119
 
LAMB #1 PDNP
 
Lamb, Alfred Neale
 
OCEANA EAST
 
WYOMING
 
10/12/05
 
8.14
 
433
 
971
 
1.039
 
1.119
 
1.039
 
1.119
 
LAMB #1 PDNP
 
Lamb, Wilda Faye
 
OCEANA EAST
 
WYOMING
 
10/12/05
 
8.14
 
433
 
973
 
1.039
 
1.119
 
1.039
 
1.119
 
LANDIS #1 PDP
 
Landis, Todd et al
 
CLEAR FORK
 
WYOMING
 
05/27/05
 
750.00
 
433
 
936
 
1.500
 
1.670
 
1.500
 
1.670
 
LANDIS #2 PDP
 
Landis, Todd et al
 
CLEAR FORK
 
WYOMING
 
05/27/05
 
750.00
 
433
 
936
 
1.500
 
1.670
 
1.500
 
1.670
 
LANDIS #3 PDP
 
Landis, Todd et al
 
CLEAR FORK
 
WYOMING
 
05/27/05
 
750.00
 
433
 
936
 
2.500
 
2.470
 
2.500
 
2.470
 
McGRAW #1 PDP
 
McGraw, Minnie  Heirs
 
PECKS MILL - LF
 
LOGAN
 
03/01/02
 
63.54
 
38
 
175
 
10.000
 
9.000
 
10.000
 
9.000
 
MEADOWS #1 PDP
 
Meadows, Gerald
 
BRENTON
 
WYOMING
 
12/14/99
 
5.35
 
403
 
646
 
100.000
 
87.500
 
100.000
 
87.500
 
NLC CHURCH #1 PDP
 
New Life Community Church
 
OCEANA EAST
 
WYOMING
 
12/05/05
 
2.30
 
433
 
954
 
5.000
 
4.850
 
5.000
 
4.850
 
NLC #1 PDNP (BP)
 
New Life Community Church
 
OCEANA EAST
 
WYOMING
 
05/01/07
 
1.31
 
442
 
337
 
5.000
 
4.850
 
5.000
 
4.850
 
OWENS #1 PDP
 
Owens, Glenetta
 
GARDEN GAP
 
WYOMING
 
07/02/98
 
62.00
 
397
 
773
 
20.000
 
18.300
 
20.000
 
18.300
 
PCHC 1309 B PDP
 
Spears, Denvil
 
OCEANA
 
WYOMING
 
06/30/06
 
614.68
 
433
 
991
 
1.813
 
1.523
 
1.813
 
1.523
 
PCHC 1309 B PDP
 
Spears, Eula
 
OCEANA
 
WYOMING
 
06/30/06
 
614.68
 
433
 
993
 
1.813
 
1.523
 
1.813
 
1.523
 
PCT #115 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

PCT #128 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
1.500
 
1.230
 
0.775
 
0.635
 
PCT #129 PDP (APO)
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #130 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #131 PDP (APO)
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.410
 
1.155
 
PCT #132 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #133 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.000
 
1.640
 
1.035
 
0.850
 
PCT #134 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.000
 
4.100
 
2.585
 
2.120
 
PCT #134 PDNP (BP)
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.000
 
4.100
 
2.585
 
2.120
 
PCT #135 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #136 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
12.500
 
10.025
 
6.465
 
5.300
 
PCT #137 PDP (APO)
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #138 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.290
 
1.060
 
PCT #140 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
1.500
 
1.230
 
0.775
 
0.635
 
PCT #141 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #142 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
0.500
 
0.410
 
0.260
 
0.215
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

PCT #143 PDP (APO)
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #145 PDNP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
3.000
 
2.460
 
1.274
 
1.554
 
PCT #146 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
1.500
 
1.230
 
0.775
 
0.635
 
PCT #149 PDNP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.292
 
1.059
 
PCT #150 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.290
 
1.060
 
PCT #152 PDP (APO)
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.290
 
1.060
 
PCT #153 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.290
 
1.060
 
PCT #154 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
18.500
 
15.170
 
9.565
 
7.845
 
PCT #156 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
1.500
 
1.230
 
0.775
 
0.635
 
PCT #157 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.410
 
1.155
 
PCT #160 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
2.500
 
2.050
 
1.410
 
1.155
 
PCT #161 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #162 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #163 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,808.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #164 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

PCT #166 PDP
 
R&B Petroleum (farmout)
 
YUKON - N
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
5.500
 
4.510
 
2.955
 
2.425
 
PCT #167 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
2.500
 
2.050
 
1.410
 
1.155
 
PCT #168 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
9.000
 
7.380
 
4.655
 
3.815
 
PCT #169 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
1.500
 
1.230
 
0.775
 
0.635
 
PCT #173 PDNP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
5.500
 
4.510
 
2.844
 
2.332
 
PCT #175 PDP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
2.500
 
2.050
 
1.410
 
1.155
 
PCT #176 PDNP
 
R&B Petroleum (farmout)
 
YUKON - S
 
McDOWELL
 
08/01/03
 
7,809.50
 
513
 
9
 
12.500
 
10.250
 
6.465
 
5.300
 
PENNINGTON #1 PDP
 
Pennington, Chauncey Greg & Verna
 
CLEAR FORK
 
WYOMING
 
07/29/05
 
1.00
 
433
 
942
 
2.500
 
2.550
 
2.500
 
2.550
 
PENN VA. #920 PDP
 
Rayland (wellbore assignment)
 
ANAWALT
 
McDOWELL
 
11/14/96
 
WELLBORE
 
470
 
754
 
100.000
 
87.500
 
100.000
 
87.500
 
SHORT, A. #1 PDP
 
Short, Agnes
 
CLEAR FORK
 
WYOMING
 
05/04/06
 
10.92
 
433
 
938
 
2.000
 
2.225
 
2.000
 
2.225
 
SHORT, A. #1 PDP
 
Childress, Glenna Sue
 
CLEAR FORK
 
WYOMING
 
05/04/05
 
10.00
 
433
 
897
 
2.000
 
2.225
 
2.000
 
2.225
 
SHORT, A. #1 PDP
 
Short, Roy & Elga
 
CLEAR FORK
 
WYOMING
 
04/26/05
 
4.00
 
433
 
895
 
2.000
 
2.225
 
2.000
 
2.225
 
SMITH #1 PDP
 
Smith, Byron & Reba
 
GILBERT CREEK
 
MINGO
 
01/01/98
 
36.70
 
91
 
301
 
20.000
 
19.100
 
20.000
 
19.100
 
SPEARS #1 PDP
 
Spears, Denvil
 
OCEANA EAST
 
WYOMING
 
06/30/06
 
95.00
 
433
 
991
 
4.500
 
3.690
 
4.500
 
3.690
 
SPEARS #1 PDP
 
Spears, Eula
 
OCEANA EAST
 
WYOMING
 
06/30/06
 
95.00
 
433
 
993
 
4.500
 
3.690
 
4.500
 
3.690
 

 

--------------------------------------------------------------------------------

 
EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

STEPP #1 PDP
 
Stepp, Grover C. & Madeleen C.
 
OCEANA
 
WYOMING
 
03/10/06
 
4.00
 
433
 
910
 
6.500
 
5.500
 
6.500
 
5.500
 
STEPP #1 PDNP (BP)
 
Stepp, Grover C. & Madeleen C.
 
OCEANA
 
WYOMING
 
03/10/06
 
4.00
 
433
 
910
 
6.500
 
5.500
 
6.500
 
5.500
 
TINSLEY #1 PDNP
 
Tinsley, Rhein
 
GILBERT CREEK
 
MINGO
 
04/15/02
 
180.47
         
100.000
 
77.500
 
100.000
 
77.500
 
TOLER, C. #1 PDP
 
Toler, Cordie Lee
 
CLEAR FORK
 
WYOMING
 
04/09/05
 
42.20
 
433
 
908
 
1.500
 
1.670
 
1.500
 
1.670
 
TOLER, D. #1 PDP
 
Toler, Danny Lee & Rita Fay
 
CLEAR FORK
 
WYOMING
 
08/01/02
 
44.50
 
433
 
893
 
25.374
 
20.568
 
25.374
 
20.568
 
TOLER, D.R. #1 PDP
 
Toler, Dewey Ray
 
OCEANA EAST
 
WYOMING
 
04/04/06
 
0.07
 
433
 
952
 
4.000
 
3.280
 
4.000
 
3.280
 
TOLER, D.R. #1 PDNP (BP)
 
Toler, Dewey Ray
 
OCEANA EAST
 
WYOMING
 
04/04/06
 
0.07
 
433
 
952
 
4.000
 
3.280
 
4.000
 
3.280
 
TOLER, J. #1 PDP
 
Toler, Daniel D. & Rosana
 
CLEAR FORK
 
WYOMING
 
09/13/05
 
19.00
 
433
 
964
 
2.500
 
2.550
 
2.500
 
2.550
 
TOLER, J. #1 PDP
 
Toler, Danny Lee & Rita Fay
 
CLEAR FORK
 
WYOMING
 
05/15/05
 
4.00
 
433
 
891
 
2.500
 
2.550
 
2.500
 
2.550
 
TOLER, K. #1 PDP
 
Toler, Kenneth E. & Shirley A.
 
CLEAR FORK
 
WYOMING
 
04/09/05
 
19.00
 
433
 
901
 
43.500
 
35.940
 
43.500
 
35.940
 
TOLER, M. #1 PDP
 
Toler, Marian
 
CLEAR FORK
 
WYOMING
 
04/20/05
 
25.00
 
433
 
918
 
2.500
 
2.550
 
2.500
 
2.550
 
TOLER, T. #1 PDP
 
Toler, Tommy & Leda
 
CLEAR FORK
 
WYOMING
 
04/09/05
 
10.79
 
433
 
926
 
2.000
 
2.225
 
2.000
 
2.225
 
WEST, S. #1 PDP
 
West, Stanley D. & Patricia K.
 
CLEAR FORK
 
WYOMING
 
01/17/03
 
11.30
 
433
 
930
 
27.675
 
25.009
 
27.675
 
25.009
 
WEST, S. #2 PDNP
 
Davis, Leonard (1/14 int)
 
CLEAR FORK
 
WYOMING
 
05/05/05
 
196.74
 
433
 
981
 
2.500
 
2.550
 
2.500
 
2.550
 
WEST, S. #2 PDNP
 
Laughlin, James H.  (1/14 int)
 
CLEAR FORK
 
WYOMING
 
05/02/05
 
196.74
 
433
 
983
 
2.500
 
2.550
 
2.500
 
2.550
 

 

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EXHIBIT A  ALL WELLS
CLASSIC OIL & GAS
RESOURCES, INC.
 
WELL
 
LEASE
         
LEASE
 
LEASE
 
RECORDING
 
BPO
 
BPO
 
APO
 
APO
 
NAME
 
NAME
 
PROSPECT
 
COUNTY
 
DATE
 
ACRES
 
BOOK
 
PAGE
 
WI
 
NRI
 
WI
 
NRI
 

WEST, S. #2 PDNP
 
West, Stanley D. & Patricia K. (1/7 interest)
 
CLEAR FORK
 
WYOMING
 
04/27/05
 
196.74
 
433
 
979
 
2.500
 
2.550
 
2.500
 
2.550
 
WEST, S. #2 PDNP
 
Zupanick, Joe (5/7 int)
 
CLEAR FORK
 
WYOMING
 
09/30/05
 
196.74
 
433
 
977
 
2.500
 
2.550
 
2.500
 
2.550
 
WEST, S. #3 PDP
 
Davis, Leonard (1/14 int)
 
CLEAR FORK
 
WYOMING
 
05/05/05
 
196.74
 
433
 
981
 
5.000
 
4.125
 
5.000
 
4.125
 
WEST, S. #3 PDP
 
Laughlin, James H.  (1/14 int)
 
CLEAR FORK
 
WYOMING
 
05/02/05
 
196.74
 
433
 
983
 
5.000
 
4.125
 
5.000
 
4.125
 
WEST, S. #3 PDP
 
West, Stanley D. & Patricia K. (1/7 interest)
 
CLEAR FORK
 
WYOMING
 
04/27/05
 
196.74
 
433
 
979
 
5.000
 
4.125
 
5.000
 
4.125
 
WEST, S. #3 PDP
 
Zupanick, Joe (5/7 int)
 
CLEAR FORK
 
WYOMING
 
09/30/05
 
196.74
 
433
 
977
 
5.000
 
4.125
 
5.000
 
4.125
 
WEST ET AL #1 PDP
 
West, Stanley, Smith, Joyce, West, Oscar
 
CLEAR FORK
 
WYOMING
 
05/17/05
 
2.00
 
433
 
975
 
2.000
 
2.225
 
2.000
 
2.225
 
WRIGHT, B. #1 PDP
  
Wright, Brian H.
  
KIMBALL
  
WYOMING
  
12/02/05
  
9.355
  
513
  
104
  
4.500
  
3.715
  
4.500
  
3.715
 

 

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