**Exhibit 10.31**

 

WHEN RECORDED, THISINSTRUMENT SHOULD BE RETURNED TO:

 

DavidG. Stolfa

3300South Columbine Circle

Englewood,CO 80113

 

**NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURALPERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROMTHIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOURSOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.**

 

**DEED OFTRUST, MORTGAGE, SECURITY AGREEMENT,**

**ASSIGNMENTOF PRODUCTION AND PROCEEDS,**

**FINANCINGSTATEMENT AND FIXTURE FILING**

**FROMREDWOOD ENERGY PRODUCTION, L.P.**

**TO MICHAELM. LOGAN, AS TRUSTEE, AND**

**BANK OFOKLAHOMA, NATIONAL ASSOCIATION**

 

THISINSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS. 

THISINSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES. 

THISINSTRUMENT COVERS AS-EXTRACTED COLLATERAL.

 

THEOIL AND GAS INTERESTS INCLUDED IN THE PROPERTY COVERED HEREBY WILL BE FINANCEDAT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN, OR THEDESCRIPTION OF WHICH IS INCORPORATED IN, EXHIBIT “A” ATTACHED HERETO AND MADE APART HEREOF, AND THIS FINANCING STATEMENT IS TO BE FILED OR FILED FORRECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS PURSUANT TO APPLICABLELAW.

 

THOSEPORTIONS OF THE COLLATERAL WHICH ARE MINERALS OR OTHER SUBSTANCES OF VALUEWHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION, OILAND GAS), AND THE ACCOUNTS RELATING THERETO, WILL BE FINANCED AT THE WELLHEADSOF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN, OR THE DESCRIPTION OFWHICH IS INCORPORATED IN, EXHIBIT “A”. MORTGAGOR HAS AN INTEREST IN SUCH EXTRACTED MINERALS AND OTHERSUBSTANCES OF VALUE BEFORE EXTRACTION.

 

SOMEOF THE PERSONAL PROPERTY CONSTITUTING A PORTION OF THE COLLATERAL IS OR IS TOBE AFFIXED TO THE PROPERTIES DESCRIBED IN, OR THE DESCRIPTION OF WHICH ISINCORPORATED IN, EXHIBIT “A”. MORTGAGOR HAS AN INTEREST OF RECORD IN THE REALESTATE CONCERNED, WHICH IS DESCRIBED IN, OR THE DESCRIPTION OF WHICH ISINCORPORATED IN, EXHIBIT “A”.

 

**A POWER OF SALE HAS BEEN GRANTED IN THISINSTRUMENT.  A POWER OF SALEMAY ALLOW THE TRUSTEE OR THE MORTGAGEE TO TAKE THE COLLATERAL AND SELL ITWITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGORHEREUNDER.**

 

**MORTGAGOR HEREBY AUTHORIZES BOK TO FILE ONE OR MORE FINANCINGSTATEMENTS COVERING ALL PERSONAL PROPERTY OF MORTGAGOR.**

 

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**DEED OFTRUST, MORTGAGE, SECURITY AGREEMENT,**

**ASSIGNMENTOF PRODUCTION AND PROCEEDS,**

**FINANCINGSTATEMENT AND FIXTURE FILING**

 

THIS DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OFPRODUCTION AND PROCEEDS, FINANCING STATEMENT AND FIXTURE FILING (this“Instrument”), dated as of December 31, 2008, is from REDWOOD ENERGYPRODUCTION, L.P., a Texas limited partnership (“Mortgagor”), with an address atOne Maritime Plaza, Suite 700, San Francisco, California 94111, to MICHAELM. LOGAN, as trustee, with an address at 1675 Broadway, Suite 1650,Denver, Colorado 80202 (“Trustee”), and to BANK OF OKLAHOMA, NATIONALASSOCIATION, a national banking association (“BOK”), with an address at 1675Broadway, Suite 1650, Denver, Colorado 80202.

 

Pursuant to the terms of an Amended and Restated Term Loan Agreementdated as of December 31, 2008, as the same may hereafter be amended,modified, extended or amended and restated from time to time (the “Term LoanAgreement”), BOK is to make an amortizing term loan (the “Loan”) toMadisonville Midstream LLC (“Borrower”). The Loan is being guaranteed by Mortgagor.

 

All of the property described under 1 through 8 below is hereincollectively called the “Collateral”:

 

1.          Allof the present right, title and interest of Mortgagor and any and alladditional interests hereafter acquired by Mortgagor (all of the foregoingbeing herein collectively called the “Interests”), including without limitationthe Working Interests defined on Exhibit “A” attached hereto and NetRevenue Interests defined on Exhibit “A” attached hereto: (a) in andto all of the fee estates, surface estates, easements, rights-of-way, mineralestates, leasehold estates, oil and gas leases, oil, gas and mineral leases,licenses, subleases and sublicenses described or referred to inExhibit “A” attached hereto and made a part hereof or covering or relatingto all or any part of the land described in Exhibit “A” or the descriptionof which is incorporated in Exhibit “A”, and (b) in and to any otherinterests covering or relating to all or any part of the land described inExhibit “A” or the description of which is incorporated inExhibit “A” (the “Land”);

 

2.          Allof the oil, gas, casinghead gas, coalbed methane and other hydrocarbons,whether solid, liquid or gaseous, and all other associated or relatedsubstances (“Hydrocarbons”) owned by Mortgagor and attributable to any of theInterests, including without limitation all of the severed and extractedHydrocarbons owned by Mortgagor and any and all “as-extracted collateral” (asdefined in the applicable version of the Uniform Commercial Code);

 

3.          Allof the items incorporated as part of or attributed or affixed to any of thereal property included in the Interests;

 

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4.           Allwells, platforms, derricks, casing, tubing, tanks, tank batteries, separators,dehydrators, compressors, rods, pumps, flow lines, water lines, gas lines,machinery, pipelines, power lines and other goods and equipment, and all otherpersonal property and fixtures, now or hereafter owned, leased or used byMortgagor and attributable to any of the Interests, including withoutlimitation any and all such items which are used or purchased for theproduction, treatment, storage, transportation, manufacture or sale ofHydrocarbons and any and all such items described on Exhibit “A”;

 

5.           Allof the inventory, accounts, contract rights, chattel paper, paymentintangibles, promissory notes, supporting obligations and general intangiblesof Mortgagor, whether heretofore or hereafter arising, in connection with theInterests and any other contract or agreement relating to the exploration forHydrocarbons, the operation of any property for the production of Hydrocarbonsor the treatment, storage, transportation, gathering, handling, processing,manufacture, sale or marketing of Hydrocarbons, including without limitationany of the foregoing described on Exhibit “A” and any and all operating,pooling, commodity hedge, swap, exchange, forward, futures, floor, collar orcap agreements entered into by or on behalf of Mortgagor or to which Mortgagoris a party or has rights;

 

6.           Alllogs, maps, geologic data, seismic data, gravitational data, magnetic data,other geophysical data, geochemical data, engineering data, formation tests,core samples, drilling reports, division orders, transfer orders, titleopinions, reserve reports, lease files, well files and other information, dataand records, whether in paper, electronic or any other form, and relatedcomputer hardware and software relating to or used in connection with any ofthe Interests, to the extent that Mortgagor has the right to grant a mortgageand security interest therein;

 

7.           Allof the rights, privileges, benefits, hereditaments and appurtenances in any waybelonging, incidental or appertaining to any of the property described underParagraphs 1 through 6 above; and

 

8.           Allof the proceeds and products of the property described under Paragraphs lthrough 7 above, including without limitation condemnation awards and theproceeds of any and all title insurance policies and other insurance policiescovering all or any part of said property and, to the extent they mayconstitute proceeds, instruments, accounts, chattel paper, payment intangibles,promissory notes, supporting obligations, securities, general intangibles andcontract rights.

 

IN CONSIDERATION of ten dollars ($10.00) in hand paid to Mortgagor, andfor other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, Mortgagor hereby:

 

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A.         Grants,bargains, sells, assigns, transfers, pledges, mortgages and conveys theCollateral to Trustee, WITH POWER OF SALE pursuant to this Instrument andapplicable law, for the benefit of BOK, but subject to the rights of BOK underthe assignment made in paragraph C below;

 

B.          Grants,bargains, sells, assigns, transfers, pledges, mortgages and grants a securityinterest in the Collateral to BOK, WITH POWER OF SALE pursuant to thisInstrument and applicable law;

 

TO HAVE AND TO HOLD the Collateral to BOK and its successors andassigns forever, and TO HAVE AND TO HOLD the Collateral to Trustee and hissuccessors and assigns forever, IN TRUST, subject to all of the terms,conditions, covenants and agreements herein set forth, for the security andbenefit of BOK; and

 

C.          Assignsto BOK all of the severed and extracted Hydrocarbons produced from orattributed to any of the Collateral, together with all amounts that becomepayable to Mortgagor with respect to any of the Collateral, whether now ownedor hereafter acquired, and all of the proceeds thereof.

 

AND in furtherance thereof Mortgagor warrants, represents, covenantsand agrees as follows:

 

ARTICLE I

 

Obligations

 

Section 1.1             ThisInstrument is executed, acknowledged and delivered by Mortgagor to secure andenforce the following obligations (herein called the “Obligations”):

 

A.         Paymentof and performance of all obligations of Borrower under or in connection withthe Promissory Note dated December 31, 2008, as the same may be amended,renewed, extended or substituted for (the “Note”), made by Borrower in the faceamount of $6,697,847.18, payable to the order of BOK on or before December 31,2011 (or such earlier date as may be specified in the Term Loan Agreement), withinterest at the rates specified in the Term Loan Agreement;

 

B.          Allindebtedness, liabilities and obligations of Borrower or Mortgagor to BOK, ofevery kind and character, now existing or hereafter arising, pursuant to theTerm Loan Agreement;

 

C.          Allother indebtedness, liabilities and obligations of Borrower or Mortgagor toBOK, of every kind and character, now existing or hereafter arising, whetherdirect or indirect, primary or secondary, joint, several or joint and several(including, without limitation, Mortgagor’s guaranty of the Note and the Loan, anyand all obligations of Borrower or Mortgagor to BOK for fees,

 

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costsand expenses pursuant to or in connection with any loan agreements now or hereafterin force and any hedging obligations that Borrower or Mortgagor may hereafterincur to BOK), it being contemplated that Borrower or Mortgagor may hereafterbecome indebted to BOK in such further sums;

 

D.          Paymentof all sums advanced and costs and expenses incurred by BOK (whether directlyor indirectly or on its behalf by Trustee and including without limitation allreasonable legal fees) in connection with the Obligations or any part thereof,any renewal, extension or change of or substitution for the Obligations or anypart thereof, or the acquisition or perfection of the security therefor,whether such advances, costs and expenses were made or incurred at the requestof Mortgagor, Trustee or BOK;

 

E.          Paymentof all other indebtedness and liabilities and performance of all otherobligations of Mortgagor to BOK arising pursuant to this Instrument or inconnection with this Instrument; and

 

F.          Allrenewals, extensions, amendments and changes of, or substitutions orreplacements for, all or any part of the items described under A through Eabove; provided that such renewals, extensions, amendments, changes of, orsubstitutions or replacements for, all or any part of the foregoing:

 

(1)     shall not together in unpaid principal amount aggregate morethan $20,000,000 at any time, which amount contemplates all futures advances;

 

(2)     shallhave been made on or before December 31, 2011; and

 

(3)     shallcompletely mature prior to December 31, 2013.

 

Section 1.2             Themaximum amount of the Obligations that may be outstanding at any time or fromtime to time that shall be secured by this Instrument, including as a mortgageor as a pledge or assignment of Hydrocarbons, is $20,000,000.

 

ARTICLE II

 

Warranties, Representationsand Covenants

 

Section 2.1             Mortgagorwarrants, represents and covenants to and with BOK that: (a) Mortgagor hasthe right to receive at all times the “Net Revenue Interest” specified inExhibit “A” of all Hydrocarbons produced from the wells located on theCollateral; (b) Mortgagor’s share of development and operating costs withrespect to any of the wells or properties included in the Collateral is nogreater than the “Working Interest” specified in Exhibit “A” for that

 

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wellor property (unless Mortgagor’s right to receive production proceeds from suchwell or property has been increased by a proportionate amount over theapplicable “Net Revenue Interest” specified for such well or property inExhibit “A”); (c) Mortgagor is the lawful owner of good anddefensible title to the Collateral, free and clear of all liens, securityinterests, encumbrances and burdens, except liens, security interests and othermatters permitted by the terms of the Term Loan Agreement; (d) each loan,the payment of which constitutes an Obligation hereunder, is or shall be for abusiness or commercial purpose; and (e) so long as any or all parts of theObligations remain unpaid or unsatisfied, Mortgagor will defend the title tothe Collateral against the claims of all persons whomsoever claiming or toclaim the same or any part thereof.

 

Section 2.2             Mortgagorcovenants that, so long as any part of the Obligations remains unpaid orunsatisfied, unless BOK shall have otherwise consented in writing:

 

A.         Mortgagorshall promptly and, insofar as not contrary to applicable law, at Mortgagor’sown expense, file and refile in such offices, at such times and as often as maybe necessary, this Instrument and every other instrument in addition orsupplemental hereto, including applicable financing statements, as may benecessary to create, perfect, maintain and preserve the lien, encumbrance andsecurity interest intended to be created hereby and the rights and remedies ofBOK and Trustee hereunder;

 

B.          Mortgagorshall execute, acknowledge and deliver to BOK and/or Trustee such other andfurther instruments and do such other acts as in the reasonable opinion of BOKmay be necessary or desirable to more fully identify and subject to the lien,encumbrance and security interest and assignment created hereby any propertyintended by the terms hereof to be covered hereby, to assure the first prioritythereof, and otherwise to effect the intent of this Instrument, promptly uponrequest of BOK and at Mortgagor’s expense; and

 

C.          Ifthe title, interest, lien or encumbrance, as the case may be, of Mortgagor, BOKor Trustee to the Collateral or any part thereof, or the security of this Instrument,or the rights or powers of BOK or Trustee hereunder, shall be attacked, eitherdirectly or indirectly, or if any legal proceedings are commenced involvingMortgagor or the Collateral, Mortgagor shall promptly give written noticethereof to BOK and at Mortgagor’s own expense shall take all reasonable stepsdiligently to defend against any such attack or proceedings; and BOK and/orTrustee may take such independent action in connection therewith as it may in itsdiscretion deem advisable, and all costs and expenses,

 

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including,without limitation, reasonable attorneys’ fees and legal expenses, incurred byBOK or Trustee in connection therewith shall be a demand obligation owing byMortgagor to BOK, shall bear interest at the rate provided in the Note, andshall be a part of the Obligations.

 

ARTICLE III

 

Collection of Proceeds ofProduction

 

Section 3.1             Pursuantto the assignment made by Mortgagor in paragraph C of the granting clause ofthis Instrument, BOK is entitled to receive all of the severed and extractedHydrocarbons produced from or attributed to all of the Interests, together withall of the proceeds thereof. Mortgagor acknowledges and agrees that saidassignment is intended to be an absolute and unconditional assignment and notmerely a pledge of or creation of a security interest therein or assignment as additionalsecurity.  Mortgagor hereby authorizesand directs all parties producing, purchasing, receiving or having in theirpossession any such Hydrocarbons or proceeds to treat and regard BOK as theparty entitled, in Mortgagor’s place and stead, to receive such Hydrocarbonsand proceeds; and said parties shall be fully protected in so treating andregarding BOK and shall be under no obligation to see to the application by BOKof any such proceeds received by it.  Notwithstandingthe foregoing, so long as there is no Event of Default (as defined inSection 5.1 below), Mortgagor shall continue to receive all the severedand extracted Hydrocarbons produced or attributed to all of the Interests,together with all of the proceeds thereof.

 

Section 3.2             Allof the proceeds received by BOK pursuant to Section 3.1 shall be appliedby BOK in accordance with the terms of the Term Loan Agreement andSection 5.10 below.

 

Section 3.3             Uponany sale of any of the Collateral by or for the benefit of BOK pursuant toArticle V, the Hydrocarbons thereafter produced from or attributed to thepart of the Collateral so sold, and the proceeds thereof, shall be included insuch sale and shall pass to the purchaser free and clear of the provisions ofthis Article.

 

Section 3.4             BOK ishereby absolved from all liability for failure to enforce collection of anysuch Hydrocarbons or proceeds and from all other responsibility in connectiontherewith, except the responsibility to account to Mortgagor for proceedsactually received.

 

Section 3.5             Mortgagorshall indemnify BOK against all claims, actions, liabilities, judgments, costs,

 

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reasonableattorneys’ fees and other charges of whatsoever kind or nature (herein called“Claims”) made against or incurred by BOK as a consequence of the assertion,either before or after the payment in full of the Obligations, that BOKreceived Hydrocarbons or proceeds pursuant to this Article which wereclaimed by or due to third persons.  BOKshall have the right to employ attorneys and to defend against any Claims, andunless furnished with reasonable indemnity, BOK shall have the right to pay orcompromise and adjust all Claims. Mortgagor shall indemnify and pay to BOK allsuch amounts as may be paid in respect thereof or as may be successfullyadjudicated against BOK.  The liabilitiesof Mortgagor as set forth in this Section shall survive the termination ofthis Instrument.

 

Section 3.6             Nothingin this Instrument shall be deemed or construed to create a delegation to orassumption by BOK of the duties and obligations of Mortgagor under anyagreement or contract relating to the Collateral or any portion thereof, andall of the parties to any such contract shall continue to look to Mortgagor forperformance of all covenants and other obligations and the satisfaction of allrepresentations and warranties of Mortgagor thereunder, notwithstanding theassignment of production and proceeds herein made or the exercise by BOK, priorto foreclosure, of any of its rights hereunder or under applicable law.

 

ARTICLE IV

 

Termination

 

If all of the Obligations of Mortgagor shall be paid or performed infull pursuant to the terms and conditions of this Instrument and theinstruments evidencing the Obligations and if BOK has no further obligation tomake advances to Mortgagor, then BOK shall, promptly after the request ofMortgagor, execute, acknowledge and deliver to Mortgagor proper instrumentsevidencing the termination of this Instrument. Mortgagor shall pay all reasonable legal fees and other expensesincurred by BOK for preparing and reviewing such instruments of termination andthe execution and delivery thereof, and BOK may require payment of the sameprior to delivery of such instruments. Otherwise, this Instrument shall remain and continue in full force andeffect.

 

ARTICLE V

 

Default

 

Section 5.1             Theoccurrence of any “Event of Default” (as described in the Term Loan Agreement),including without limitation the expiration of any applicable grace

 

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period(an “Event of Default”), shall, automatically (as described in the Term LoanAgreement), or at the option of BOK, make all amounts then remaining unpaid onthe Obligations immediately due and payable, and the liens, encumbrances andsecurity interests evidenced or created hereby shall be subject to foreclosurein any manner provided for herein or provided for by law.

 

Section 5.2             Uponthe occurrence and during the continuance of any Event of Default, BOK and/orTrustee may elect to treat the fixtures included in the Collateral as realproperty, as personal property, or, if so permitted by applicable law, as both,and proceed to exercise such rights as apply to the type or types of propertyselected.

 

Section 5.3             Uponthe occurrence and during the continuance of any Event of Default, in additionto all other rights and remedies herein conferred, BOK and/or Trustee shallhave all of the rights and remedies of a mortgagee and trustee under a deed oftrust or a mortgage with respect to all of the Collateral.  This Instrument shall be effective as amortgage as well as a deed of trust and, upon the occurrence of an Event ofDefault, may be foreclosed as to any of the Collateral in any manner permittedby applicable law, and any foreclosure suit may be brought by Trustee or BOK;and to the extent, if any, required to cause this Instrument to be so effectiveas a mortgage and security agreement as well as a deed of trust, Mortgagorhereby grants and mortgages and grants a security interest in the Collateral toBOK upon the terms set forth in this Instrument.  The provisions set forth in thisSection 5.3 shall not in any way limit any other provision of thisInstrument.  BOK and/or Trustee shall, tothe extent permitted by applicable law, have the right and power, but not theobligation, to enter upon and take immediate possession of the real propertyincluded in the Collateral or any part thereof, to exclude Mortgagor therefrom,to hold, use, operate, manage and control such real property, to make all suchrepairs, replacements, alterations, additions and improvements to the same asBOK and/or Trustee may deem proper, to sell all of the severed and extractedHydrocarbons included in the same subject to the provisions of Article III,to demand, collect and retain all other earnings, proceeds and other sums dueor to become due with respect to such real property, accounting for andapplying to the payment of the Obligations only the net earnings arisingtherefrom after charging against the receipts therefrom all costs, expenses,charges, damages and losses incurred by reason thereof plus interest thereon atan annual rate which equals the default rate of interest payable on overdueprincipal, as described in the Term Loan Agreement, as fully and effectually asif BOK and/or Trustee were the absolute owner of such real property and withoutany liability to Mortgagor in connection therewith.

 

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Section 5.4             Uponthe occurrence and during the continuance of any Event of Default, BOK and/orTrustee, in lieu of or in addition to exercising any other power, right orremedy herein granted or by law or equity conferred, may proceed by an actionor actions in equity or at law for the seizure and sale of the real propertyincluded in the Collateral or any part thereof, for the specific performance ofany covenant or agreement herein contained or in aid of the execution of anypower, right or remedy herein granted or by law or equity conferred, for theforeclosure or sale of such real property or any part thereof under thejudgment or decree of any court of competent jurisdiction, for the appointmentof a receiver pending any foreclosure hereunder or the sale of such realproperty or any part thereof or for the enforcement of any other appropriateequitable or legal remedy.

 

Section 5.5             Uponthe occurrence and during the continuance of any Event of Default, in additionto all other powers, rights and remedies herein granted or by law or equityconferred, BOK shall have all of the rights and remedies of an assignee andsecured party granted by applicable law, including the Uniform Commercial Code,and shall, to the extent permitted by applicable law, have the right and power,but not the obligation, to take possession of the personal property included inthe Collateral, and for that purpose BOK may enter upon any premises on whichany or all of such personal property is located and take possession of and operatesuch personal property or remove the same therefrom.  BOK may require Mortgagor to assemble suchpersonal property and make it available to BOK at a place to be designated byBOK which is reasonably convenient to both parties.  The following presumptions shall exist andshall be deemed conclusive with regard to the exercise by BOK of any of itsremedies with respect to personal property:

 

Upon the occurrence and during the continuance of an Event of Default,Trustee, its successor or substitute, is authorized and empowered and it shallbe its special duty at the request of BOK to sell the Collateral or any partthereof situated in the State of Texas at the courthouse of any county in theState of Texas or such other location as provided by applicable law in whichthe Collateral is situated, at public venue to the highest bidder for cashbetween the hours of 10 o’clock a.m. and 4 o’clock p.m. on the firstTuesday in any month after having given notice of such sale in accordance withthe statutes of the State of Texas then in force governing sales of real estateunder powers conferred by deeds of trust.

 

Section 5.6             Uponthe occurrence and during the continuance of any Event of Default, BOK and/orTrustee may, with respect to all or any portion of the Collateral, subject

 

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toany mandatory requirements of applicable law, sell or have sold the realproperty or interests therein included in the Collateral or any part thereof atone or more sales, as an entirety or in parcels, at such place or places andotherwise in such manner and upon such notice as may be required by law or bythis Instrument, or, in the absence of any such requirement, as BOK and/orTrustee may deem appropriate.  BOK and/orTrustee may postpone the sale of such real property or interests therein or anypart thereof by public announcement at the time and place of such sale, andfrom time to time thereafter may further postpone such sale by publicannouncement made at the time of sale fixed by the preceding postponement.  Sale of a part of such real property orinterests therein or any defective or irregular sale hereunder will not exhaustthe power of sale, and sales may be made from time to time until all suchproperty is sold without defect or irregularity or the Obligations are paid infull.  BOK and/or Trustee shall have theright to appoint one or more attorneys-in-fact to act in conducting theforeclosure sale and executing a deed to the purchaser.  It shall not be necessary for any of theCollateral at any such sale to be physically present or constructively in thepossession of BOK and/or Trustee.

 

Section 5.7             BOKor any other person owning, directly or indirectly, any interest in any of theObligations shall have the right to become the purchaser at any sale madepursuant to the provisions of this Article V and shall have the right tocredit upon the amount of the bid made therefor the amount payable to it underor in connection with the Obligations. Recitals contained in any conveyance to any purchaser at any sale madehereunder will conclusively establish the truth and accuracy of the matterstherein stated, including without limitation nonpayment of the Obligations andadvertisement and conduct of such sale in the manner provided herein orprovided by law.  Mortgagor herebyratifies and confirms all legal acts that BOK and/or Trustee may do in carryingout the provisions of this Instrument.

 

Section 5.8             Effectiveupon the occurrence and during the continuance of any Event of Default, Mortgagorhereby waives and relinquishes, to the maximum extent permitted by law, andsubject to any mandatory requirements of applicable law, Mortgagor herebyagrees that Mortgagor shall not at any time hereafter have or assert, any rightunder any law pertaining to: marshalling, whether of assets or liens, the saleof property in the inverse order of alienation, the exemption of homesteads,the administration of estates of decedents, appraisement, valuation, stay,extension, redemption, subrogation, or abatement, suspension, deferment,diminution or reduction of any of the Obligations (including, withoutlimitation, setoff), now or hereafter in force. Mortgagor expressly agrees that BOK and/or Trustee

 

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mayoffer the Collateral as a whole or in such parcels or lots as BOK and/orTrustee, in its sole discretion elects, regardless of the manner in which theCollateral may be described.

 

Section 5.9             Allcosts and expenses (including reasonable attorneys’ fees, legal expenses,filing fees, and mortgage, transfer, stamp and other excise taxes) incurred byBOK and/or Trustee in perfecting, protecting and enforcing its rightshereunder, whether or not an Event of Default shall have occurred, shall be ademand obligation of Mortgagor to BOK and shall bear interest at the rateprovided in the Note, all of which shall be part of the Obligations.

 

Section 5.10           Theproceeds of any sale of the Collateral or any part thereof made pursuant tothis Article V shall be applied as follows:

 

A.            First, to thepayment of all costs and expenses incident to the enforcement of thisInstrument, including, without limitation, a reasonable compensation to theagents, attorneys and counsel of BOK and/or Trustee;

 

B.            Second, to thepayment or prepayment of the Obligations, in such order as BOK shall elect; and

 

C.            Third, theremainder, if any, shall be paid to Mortgagor or such other person or personsas may be entitled thereto by law.

 

Section 5.11           Uponany sale made under the powers of sale herein granted and conferred, thereceipt of BOK and/or Trustee will be sufficient discharge to the purchaser orpurchasers at any sale for the purchase money, and such purchaser or purchasersand the heirs, devisees, personal representatives, successors and assignsthereof will not, after paying such purchase money and receiving such receiptof BOK and/or Trustee, be obligated to see to the application thereof or be inany way answerable for any loss, misapplication or non-application thereof.

 

ARTICLE VI

 

Trustee

 

Section 6.1             Trusteemay resign in writing addressed to BOK or be removed at any time with orwithout cause by an instrument in writing duly executed by BOK.  In case of the death, resignation or removalof Trustee, a successor Trustee may be appointed by BOK without other formalitythan an appointment and designation in writing unless otherwise required byapplicable law.  Such appointment anddesignation will be full evidence of the

 

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rightand authority to make the same and of all facts therein recited, and upon themaking of any such appointment and designation, this Instrument will vest inthe named successor trustee all the right, title and interest of Trustee in allof the Collateral, and said successor will thereupon succeed to all the rights,powers, privileges, immunities and duties hereby conferred upon Trustee.  All references herein to Trustee will bedeemed to refer to the trustee from time to time acting hereunder.

 

Section 6.2             BOK shallindemnify Trustee against all claims, actions, liabilities, judgments, costs,attorneys’ fees or other charges of whatsoever kind or nature made against orincurred by Trustee, and arising out of the performance by Trustee of theduties of Trustee hereunder.

 

ARTICLE VII

 

Miscellaneous Provisions

 

Section 7.1             Eachand every right, power and remedy hereby granted to BOK and/or Trustee shall becumulative and not exclusive, and each and every right, power and remedywhether specifically hereby granted or otherwise existing may be exercised fromtime to time and as often and in such order as may be deemed expedient by BOKand/or Trustee, and the exercise of any such right, power or remedy will not bedeemed a waiver of the right to exercise, at the same time or thereafter, anyother right, power or remedy. All changes to and modifications of thisInstrument must be in writing and signed by Mortgagor and BOK.

 

Section 7.2             Ifany provision hereof or of any of the other documents constituting, evidencingor creating all or any part of the Obligations is invalid or unenforceable inany jurisdiction, the other provisions hereof or of said documents shall remainin full force and effect in such jurisdiction and the remaining provisionshereof will be liberally construed in favor of BOK and Trustee in order tocarry out the provisions hereof and of such other documents. The invalidity ofany provision of this Instrument in any jurisdiction will not affect thevalidity or enforceability of any such provision in any other jurisdiction.

 

Section 7.3             ThisInstrument will be deemed to be and may be enforced from time to time as acontract, financing statement, real estate mortgage, or security agreement, andfrom time to time as any one or more thereof, as is appropriate underapplicable state law.  A carbon,photographic or other reproduction of this Instrument or any financingstatement in connection herewith shall be sufficient as a financing statementfor any and all purposes.

 

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Section 7.4             Notwithstandinganything to the contrary contained herein, no rate of interest requiredhereunder or under the Obligations shall exceed the maximum legal rate underapplicable law, and, in the event any such rate is found to exceed such maximumlegal rate, Mortgagor shall be required to pay only such maximum legal rate.

 

Section 7.5             Insofaras permitted by otherwise applicable law, this Instrument and the Obligationsshall be construed under and governed by the laws of the State of Colorado(excluding choice-of-law and conflict-of-law rules); provided, however, that,with respect to any portion of the Collateral located outside of the State ofColorado, the laws of the place in which such property is located shall applyto the extent necessary to permit BOK and/or Trustee to enforce or realize uponits rights and remedies hereunder with respect to such property, and any suchenforcement or realization proceedings shall be conducted in compliance withthe applicable laws of the state where the Collateral is located.

 

Section 7.6             Thisinstrument may be executed in any number of counterparts, each of which willfor all purposes be deemed to be an original, and all of which are identicalexcept that: (a) to facilitate recordation, in particular counterpartshereof, portions of Exhibit “A” hereto which describe properties situatedin counties or parishes other than the county or parish in which thecounterpart is to be recorded have been omitted, and (b) to accommodatedifferent execution formalities for different states in which the Collateral islocated, the signature blocks and title pages in counterparts to be filedin certain states may contain captions, witnesses, acceptances and otherformalities not included in other counterparts. Each counterpart shall be deemed to be an original for all purposes, andall counterparts shall together constitute but one and the same instrument.

 

Section 7.7             Unlessotherwise specified in Exhibit “A” hereto, all recording references in Exhibit “A”hereto are to the official real property records of the county in which theaffected land is located.  The referencesin Exhibit “A” hereto to liens, encumbrances and other burdens shall notbe deemed to recognize or create any rights in third parties.

 

Section 7.8             Alldeliveries and notices hereunder shall be deemed to have been duly made orgiven if made or given in conformity with the provisions of the Term LoanAgreement.

 

Section 7.9             ThisInstrument shall bind and inure to the benefit of the respective successors andassigns of

 

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Mortgagor,BOK and Trustee, including, without limitation, any and all other banks,lending institutions and parties which may participate in the indebtednessevidenced by the Obligations or any of them. Notwithstanding any other provision contained herein, if any propertyinterest granted by this Instrument does not vest on the execution and deliveryof this Instrument, it shall vest, if at all, no later than 20 years after theexecution and delivery of this Instrument. As used herein, the term “person” shall mean individual, corporation,limited liability company, partnership, joint venture, agency or other form ofentity or association.

 

Section 7.10           Someof the above goods are or are to become fixtures on the Land.  The above described minerals or othersubstances of value which may be extracted from the earth (including withoutlimitation oil and gas), and the accounts relating thereto will be financed atthe wellhead of the well or wells located on the Land.  This Instrument is to be filed for record in,among other places, the real estate records of each county in which theaffected real estate is located; to wit, all of those listed in Exhibit “A.”Mortgagor is the owner of a record interest in a portion of the real estateconcerned.  The mailing address ofMortgagor and the address of BOK from which information concerning the securityinterest may be obtained are as set forth above.

 

Section 7.11           BOKand/or Trustee shall be entitled to enforce payment of any indebtedness andperformance of any other of the Obligations secured hereby and to exercise allrights and powers under this Instrument or under any other instrument or otheragreement or any laws now or hereafter in force, notwithstanding the fact thatsome or all of said indebtedness and other Obligations secured hereby may nowor hereafter be otherwise secured, whether by mortgage, deed of trust, pledge,lien, assignment or otherwise.  Neitherthe acceptance of this Instrument nor its enforcement, whether by court actionor pursuant to the power of sale or other powers herein contained shallprejudice or in any manner affect BOK’s right to realize upon or enforce anyother security now or hereafter held by BOK, it being agreed that BOK shall beentitled to enforce this Instrument and any other security now or hereafterheld by BOK in such order and manner as it may in its absolute discretiondetermine.

 

SECTION 7.12       STATUTE OFFRAUDS NOTICE.  THIS WRITTEN MORTGAGE ANDTHE OTHER WRITTEN DOCUMENTS EXECUTED BY MORTGAGOR IN CONNECTION WITH THE LOANREPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BECONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.  THERE ARE NOUNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.

 

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EXECUTED as of the date first above written.

 
|             | REDWOOD  ENERGY PRODUCTION, L.P. |
|------------------|----------------------------------|
|             | By:                              | Redwood  Energy Company, |
|             |                             | its General Partner |
|             |                             |   |
|             |                             | By: |   /s/ Stuart J. Doshi |
|             |                             |   |   Stuart  J. Doshi, |
|             |                             |   |   President  and Chief Executive Officer |
|             |                             |
| STATE OF TEXAS   | )                                |
|             | )   ss.                     |
| COUNTY OF HARRIS | )                                |

 

This instrument was acknowledged before me on December 31, 2008,by Stuart J. Doshi, as the President and Chief Executive Officer of RedwoodEnergy Company, a Texas corporation, the General Partner of REDWOOD ENERGYPRODUCTION, L.P., a Texas limited partnership, on behalf of said limitedpartnership Given under my hand and official seal.

 
|   |                        |
|--------|-----------------------------|
|   | /s/ Ann R. Razo             |
|   | Ann R. Razo, Notary  Public |
|   | (Name  Printed)             |

 

(SEAL)                  Mycommissionexpires:                           , 20

 

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**PREAMBLE TO**

 

**EXHIBIT “A”**

 

1.                                       Well names,unit designations, unit tract descriptions and descriptions of undividedleasehold interests, Net Revenue Interests and Working Interests contained in Exhibit “A”shall not be deemed to limit the interests covered hereby.

 

2.                                       Reference ismade to the land descriptions contained in the documents of title recorded asdescribed in Exhibit “A”.  To theextent that any of the land descriptions in Exhibit “A” is incorrect ornot legally sufficient, the land descriptions contained in the leases or otherdocuments recorded as described in Exhibit “A” are incorporated herein bythis reference.

 

3.                                       Unless providedotherwise, all recording references in Exhibit “A” are to the officialreal property records of the county or counties in which the Interests arelocated and in which records such documents are or in the past have beencustomarily recorded, whether Deed Records, Oil and Gas Records, oil and GasLease Records or other records.

 

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EXHIBIT A

 

MADISON COUNTY, TEXAS

 

As used herein, the “Rodessa/Sligo Interval” means thestratigraphic equivalent of those sands, zones, and horizons occurring belowthe surface of the earth encountered between the depths of 11,427 feet and12,378 feet (electric log measurements) in the Ruby Magness Well No. 1 locatedin the Amy Boatwright Survey, A-7, Madison County, Texas.

 

As used herein and in the Instrument (which is defined in theunderlying Deed of Trust), “Working Interest” or “WI” means, withrespect to a lease or a unit, Mortgagor’s (as defined in the Instrument) undividedownership, operating, and expense-bearing interest (expressed as a percentage)of the costs of exploring, drilling, and operating for, and producingHydrocarbons (as defined in the Instrument) from such lease or unit.

 

As used herein and in the Instrument, “Net Revenue Interest” or“NRI” means with respect to a lease or a unit, Mortgagor’s share ofHydrocarbons (expressed as a percentage) attributable to its Working Interestand produced from or attributable to a unit or lease well after deducting all landownerroyalties, overriding royalties, nonparticipating royalties, productionpayments, and other similar burdens or payments out of production.

 

**Redwood Energy Production, L.P. — “Ruby Magness Gas Unit No. 1”**

 

Those certain lands and leases located within the Ruby Magness Gas UnitNo. 1 and described in the Third Amended Pooling Designation of the RedwoodEnergy Production, L.P.-Ruby Magness Gas Unit No. 1 acknowledged February 22,2005, and recorded in Volume 780, Page 240, Official Records, Madison County,Texas. This Instrument is intended to cover any and all interests of Mortgagorin and to said lands and leases, but the representations and warranties ofMortgagor with respect to the Working Interest and Net Revenue Interest setforth below shall apply **INSOFAR AND ONLY INSOFAR**as said lands and leases in said Unit cover and include the Rodessa/SligoInterval.

 
| WORKING INTEREST      |   | 100.000   | % |
|-----------------------|--------|-----------|---|
| NET REVENUE  INTEREST |   | 75.133294 | % |

 

**Redwood Energy Production, L.P. — “Angela Fannin Gas Unit No. 1”**

 

Those certain lands and leases located within the Angela Fannin GasUnit No. 1 and described in the Amended Pooling Designation of the RedwoodEnergy Production, L.P.-Angela Fannin Gas Unit No. 1 acknowledged November 7,2005, and recorded in Volume 780, Page 235, Official Records, Madison County,Texas. This Instrument is intended to cover any and all interests of Mortgagorin and to said lands and leases, but the representations and warranties ofMortgagor with respect to the Working Interest and

 

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EXHIBIT A

 

MADISON COUNTY, TEXAS

 

NetRevenue Interest set forth below shall apply **INSOFARAND ONLY INSOFAR**as said lands and leases in said Unit cover andinclude the Rodessa/Sligo Interval.

 
| WORKING INTEREST |   | 100.000   | % |
|-----------------------|--------|-----------|---|
| NET REVENUE  INTEREST |   | 69.916167 | % |

 

**Redwood Energy Production, L.P. — “Mitchell Gas Unit”**

 

1.                                       Oil, Gas andMineral Lease between W.H. Scott, et ux, as lessor, and W.T. Barrett, aslessee, dated 8/12/1952, recorded in Vol. 100, Pg. 438, Deed Records of MadisonCounty, Texas.

 

2.                                       Oil, Gas andMineral Lease between P.W. Harper, et ux, as lessor, and W.T. Barrett, aslessee, dated 8/12/1952, recorded in Vol. 100, Pg. 448, Deed Records of MadisonCounty, Texas.

 

3.                                       Oil, Gas andMineral Lease between Helen Daily Susman, et al, as lessor, and W.T. Barrett,as lessee, dated 10/16/1952, recorded in Vol. 100, Pg. 443, Deed Records ofMadison County, Texas.

 

4.                                       Oil, Gas andMineral Lease between Ralph A. Johnston, et al, as lessor, and L.C. Oldham, Jr.,as lessee, dated 2/16/1953, recorded in Vol. 103, Pg. 271, Deed Records ofMadison County, Texas.

 

5.                                       Oil, Gas andMineral Lease between Ralph A. Johnston, et al, as lessor, and L.C. Oldham, Jr.,as lessee, dated 2/16/1953, recorded in Vol. 103, Pg. 276, Deed Records ofMadison County, Texas.

 

6.                                       Oil, Gas andMineral Lease between Virginia M. Robinson, as lessor, and W.T. Barrett, aslessee, dated 9/5/1953, recorded in Vol. 100, Pg. 469, Deed Records of MadisonCounty, Texas.

 

7.                                       Oil, Gas andMineral Lease between J.P. Sanders, et ux, as lessor, and W.T. Barrett, aslessee, dated 8/13/1952, recorded in Vol. 100, Pg. 465, Deed Records of MadisonCounty, Texas.

 

8.                                       Oil, Gas andMineral Lease between Lummie Morgan, et ux, as lessor, and W.T. Barrett, aslessee, dated 8/25/1952, recorded in Vol. 100, Pg. 459, Deed Records of MadisonCounty, Texas.

 

9.                                       Oil, Gas andMineral Lease between Grace Upchurch, et al, as lessor, and W.T. Barrett, aslessee, dated 8/12/1952, recorded in Vol. 100, Pg. 454, Deed Records of MadisonCounty, Texas.

 

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EXHIBIT A

 

MADISON COUNTY, TEXAS

 

ThisInstrument is intended to cover any and all interests of Mortgagor in and tothe above-described lands and leases, but the representations and warranties ofMortgagor with respect to the Working Interests and Net Revenue Interests setforth below shall apply INSOFAR AND ONLY INSOFAR as said lands and leases coverand include the Rodessa/Sligo Interval.

 
| WORKING INTEREST      |   | 100.000 | % |
|-----------------------|--------|---------|---|
| NET REVENUE  INTEREST |   | 70.00   | % |

 

**Redwood Energy Production, L.P. — “Wilson Well”**

 

Oil, Gas and Mineral Lease between Lorene Wilson, et al, as lessor, andL.C. Oldham, Jr., as lessee, dated 11/12/1953, recorded in Vol. 108, Pg.105, Deed Records of Madison County, Texas. This Instrument is intended tocover any and all interests of Mortgagor in and to said lease and the landscovered thereby, but the representations and warranties of Mortgagor withrespect to the Working Interest and Net Revenue Interest set forth below shallapply **INSOFAR AND ONLY INSOFAR**assaid lands and lease cover and include the Rodessa/Sligo Interval.

 
| WORKING INTEREST      |   | 100.000 | % |
|-----------------------|--------|---------|---|
| NET REVENUE  INTEREST |   | 70.00   | % |

 

**Madisonville Net Profits Interest**

 

Mortgagor’s Working Interest is subject to that certain Assignment ofNet Profits Interest, effective as of December 29, 2000, from Mortgagor toPanther Rodessa, L.P. et al.

 

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