WYOMING

     

    MORTGAGE,
      SECURITY AGREEMENT,

    FINANCING
      STATEMENT AND ASSIGNMENT OF PRODUCTION AND REVENUES

     

    FROM

     

    RANCHER
      ENERGY CORP.

    a
      Nevada
      corporation d/b/a

    RANCHER
      ENERGY OIL & GAS CORPORATION

    (Mortgagor
      and Debtor)

     

    TO

     

    GASROCK
      CAPITAL LLC

    (Mortgagee
      and Secured Party)

     

    FOR
      PURPOSES OF FILING THIS INSTRUMENT AS A FINANCING STATEMENT, THE MAILING ADDRESS
      OF MORTGAGOR/DEBTOR IS 999 EIGHTEENTH STREET, SUITE 3400, DENVER, COLORADO
      80202; THE MAILING ADDRESS OF MORTGAGEE/SECURED PARTY IS 1301 MCKINNEY STREET,
      SUITE 2800, HOUSTON, TEXAS 77010.

     

    THIS
      INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, AND COVERS FUTURE
      ADVANCES AND PROCEEDS. INTERESTS IN OIL, GAS, MINERALS AND OTHER AS-EXTRACTED
      COLLATERAL OR IN ACCOUNTS RESULTING FROM THE SALE THEREOF, WHICH ARE INCLUDED
      IN
      THE MORTGAGED PROPERTY, WILL BE FINANCED AT WELLHEADS LOCATED ON THE LANDS
      ASSOCIATED WITH THE PIPELINE DESCRIBED IN EXHIBIT
      A
      HERETO.

     

    PERSONAL
      PROPERTY CONSTITUTING A PORTION OF THE MORTGAGED PROPERTY MAY BE OR MAY IN
      THE
      FUTURE BE AFFIXED TO THE LANDS DESCRIBED IN EXHIBIT
      A
      HERETO.

     

    A
      POWER
      OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY ALLOW MORTGAGEE
      TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A
      FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS INSTRUMENT.

     

    THIS
      FINANCING STATEMENT IS TO BE FILED, AMONG OTHER PLACES, IN THE REAL ESTATE
      RECORDS.

     

    *********************************

     

    This
      instrument was prepared by Ephraim del Pozo, PORTER & HEDGES, L.L.P., 1000
      Main Street, 36th
      Floor,
      Houston, Texas 77002.

     

    ATTENTION
      OF RECORDING OFFICER:
      This
      instrument is a mortgage of both real and personal property and is, among other
      things, a Security Agreement and Financing Statement under the Uniform
      Commercial Code. This instrument creates a lien on rights in or relating to
      lands of Mortgagor which are described in Exhibit
      A
      hereto.

     

    RECORDED
      DOCUMENT SHOULD BE RETURNED TO:

     

    PORTER
      & HEDGES, L.L.P.

    1000
      Main
      Street, 36th
      Floor

    Houston,
      Texas 77002

    Attn:
      Ephraim del Pozo 

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    MORTGAGE,
      SECURITY AGREEMENT,

    FINANCING
      STATEMENT AND ASSIGNMENT OF PRODUCTION and revenues

     

    (THIS
      INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)

     

    ARTICLE I

     

    GRANT
      OF LIENS AND SECURITY INTERESTS

    


    KNOW
      ALL
      MEN BY THESE PRESENTS: That as of October 16, 2007 the undersigned
      RANCHER ENERGY CORP., a
      Nevada
      corporation doing business in the State of Wyoming as RANCHER
      ENERGY OIL & GAS CORP.
      (“Mortgagor”),
      with
      its principal office in Colorado, and whose mailing address is 999 Eighteenth
      Street, Suite 3400, Denver, Colorado 80202, for valuable consideration, the
      receipt of which is hereby acknowledged, and in consideration of the premises
      and debt hereinafter mentioned, has granted, bargained, sold, conveyed,
      transferred and assigned, and by these presents does GRANT, BARGAIN, SELL,
      WARRANT, CONVEY, MORTGAGE, PLEDGE, TRANSFER, ASSIGN AND SET OVER to GASROCK
      CAPITAL LLC, a
      Delaware limited liability company, whose address is 1301 McKinney Street,
      Suite
      2800, Houston, Texas 77010, and its successors and assigns (“Mortgagee”),
      with
      a power of sale, for itself and as agent for BP
      CORPORATION NORTH AMERICA, INC.,
      an
      Indiana corporation (together with its successors and assigns, “Swap
      Counterparty”),
      parties under that certain Intercreditor Agreement dated as of October 16,
      2007
      (as ratified, amended, extended, restated or otherwise modified from time to
      time, the “Intercreditor
      Agreement”),
      the
      following property,
      whether real, personal or mixed, whether now owned or hereafter acquired under
      law or in equity (collectively, the “Mortgaged
      Property”);
      the
      inclusion of certain specific types and items of property and interests in
      one
      or more of the following Paragraphs are not intended in any way to limit the
      effect of the more general descriptions:

     

    A. All
      of
      Mortgagor’s present and future rights, titles, interests and estates, now owned
      or hereafter acquired by Mortgagor, in and to those certain oil, gas and mineral
      leases, mineral interests, mineral servitudes, royalty interests, overriding
      royalty interests, production payments, net profits interests, fee interests,
      carried interests, reversionary interests and all other rights, titles,
      interests or estates described on Exhibit
      A
      attached
      hereto and made a part hereof or in, on or under any lands described in
Exhibit
      A,
      whether
      such rights, titles, interests or estates or such lands are correctly described
      therein or not (all of which rights, titles, interests and estates described
      in
      this Paragraph A are hereinafter included within the term “Subject
      Interests”).
      The
      term “oil, gas and mineral leases,” as used in this instrument and in
Exhibit
      A
      includes, in addition to oil, gas and mineral leases, oil and gas leases, oil,
      gas and sulphur leases, other mineral leases, co-lessor’s agreements and
      extensions, amendments, ratifications and subleases of all or any of the
      foregoing, all as may be appropriate.

     

    B. All
      of
      Mortgagor’s present and future rights, titles, interests and estates, now owned
      or hereafter acquired by Mortgagor, in and to present and future drilling,
      spacing, proration or production units, as created by the terms of any
      unitization, communitization and pooling agreements and orders, and all
      properties, property rights and estates created thereby which include, belong
      or
      appertain to the Subject Interests, including, without limitation, all such
      units formed voluntarily or under or pursuant to any Law relating to any of
      the
      Subject Interests. As used herein, the term “Law” means all applicable statutes,
      laws, ordinances, regulations, orders, writs, injunctions, or decrees of any
      state, commonwealth, nation, territory, possession, county, township, parish,
      municipality, or Tribunal, and the term “Tribunal” means any court or
      governmental department, commission, board, bureau, agency, or instrumentality
      of the United States or of any state, commonwealth, nation, territory,
      possession, county, parish, or municipality, whether now or hereafter
      constituted or existing.

     

    
      
        
        

      

      
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    C. All
      present and future oil, gas, casinghead gas, drip gasoline, natural gasoline,
      distillate, all other liquid or gaseous hydrocarbons produced or to be produced
      in conjunction therewith, all products, by-products and all other substances
      derived therefrom or the processing thereof, and all other similar minerals,
      now
      owned or hereafter acquired by Mortgagor, now or hereafter accruing to,
      attributable to or produced from the Subject Interests or to which Mortgagor
      now
      or hereafter may be entitled as a result or by virtue of Mortgagor’s ownership
      of the Subject Interests (collectively, “Hydrocarbons”).

     

    D. All
      present and future sulphur, lignite, coal, uranium, thorium, iron, geothermal
      steam, water, carbon dioxide, helium and all other minerals, ores or substances
      of value (whether similar to the foregoing or not), and the products and
      proceeds therefrom now owned or hereafter acquired by Mortgagor, including,
      without limitation, all gas resulting from the in-situ combustion of coal or
      lignite now or hereafter accruing to, attributable to or produced from the
      Subject Interests or to which Mortgagor now or hereafter may be entitled as
      a
      result of or by virtue of Mortgagor’s ownership of the Subject Interests
      (collectively, “Other
      Minerals”).

     

    E. All
      present and future oil and gas wells, disposal and injection wells, rigs,
      improvements, fixtures, machinery and other equipment, inventory and articles
      of
      personal property or movables, wherever located, now owned or hereafter acquired
      by Mortgagor, including, without limitation, connection apparatus and flow
      lines
      from wells to tanks, wells, pipelines, gathering lines, trunk lines, lateral
      lines, flow lines, compressor, dehydration and pumping equipment, pumping
      plants, gas plants, processing plants, pumps, dehydration units, separators,
      heater treaters, valves, gauges, meters, derricks, rig substructures, buildings,
      tanks, reservoirs, tubing, rods, liquid extractors, engines, boilers, tools,
      appliances, cables, wires, tubular goods, machinery, supplies and any and all
      other equipment, inventory and articles of personal property of any kind or
      character whatsoever appurtenant to, or used or held for use in connection
      with
      the production of Hydrocarbons or Other Minerals from the Subject Interests,
      or
      now or hereafter located on any of the lands encumbered by any of the Subject
      Interests (the “Lands”),
      or
      used on or about the Lands in connection with the operations thereon, together
      with all present and future improvements or products of, accessions, attachments
      and other additions to, tools, parts and equipment used in connection with,
      and
      substitutes and replacements for, all or any part of the foregoing (all of
      the
      types or items of property and interests described in this Paragraph E are
      hereinafter collectively referred to as the “Personal
      Property”).

     

    F. All
      present and future rights, titles, interests and estates now owned or hereafter
      acquired by Mortgagor (including, without limitation, all rights to receive
      payments) under or by virtue of all easements, permits, licenses, rights-of-way,
      surface leases, franchises, servitudes, division orders, transfer orders and
      other agreements relating or pertaining to purchasing, exchanging, exploring
      for, developing, operating, treating, processing, storing, marketing or
      transporting Hydrocarbons now or hereafter found in, on or under, or produced
      from, any of the Subject Interests, or under or by virtue of any contract
      relating in any way to all or any part of the Mortgaged Property otherwise
      described herein, including, without limitation, farmout contracts, farmin
      contracts, operating or joint operating agreements, trade letter agreements
      and
      all agreements creating rights-of-way for ingress and egress to and from the
      Subject Interests (all of such rights, titles, interests and estates referred
      to
      or described in this Paragraph F are hereinafter collectively referred to as the
“Subject
      Contracts”).

     

    
      
        
        

      

      
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    G. All
      present and future accounts (including, but not limited to, all open accounts
      receivable and accounts receivable arising under or pursuant to any joint
      operating agreements, division orders or other agreements, documents or
      instruments relating to any of the Subject Interests), general intangibles
      (including right to proceeds under Swap Agreements, as defined in the Credit
      Agreement), chattel paper, documents, instruments, cash and noncash proceeds
      and
      other rights, now owned or hereafter acquired by Mortgagor, arising from or
      by
      virtue of, or from the voluntary or involuntary sale or other disposition of,
      or
      collections with respect to, or insurance proceeds payable with respect to,
      or
      proceeds payable by virtue of warranty or other claims against manufacturers
      of,
      or claims against any other person or entity with respect to, all or any part
      of
      the Mortgaged Property described in this Paragraph G or otherwise (all of which
      types and items of property and interests described in this Paragraph G are
      hereinafter collectively referred to as the “Accounts”).

     

    H. All
      present and future tenements, hereditaments, appurtenances, profits and
      properties in anyway appertaining, belonging, affixed or incidental to, or
      used
      or useful in connection with, all or any part of the Mortgaged Property
      otherwise described herein, now owned or hereafter acquired by Mortgagor,
      including, without limitation, all reversions, remainders, carried interests,
      tolls, rents, revenues, issues, proceeds, earnings, income, products, profits,
      deposits, easements, permits, licenses, servitudes, surface leases,
      rights-of-way and franchises relating to all or any part of the Mortgaged
      Property.

     

    I. All
      pipelines owned and/or operated by Mortgagor for the gathering, transmission,
      or
      distribution of Hydrocarbons including, without limitation, those pipelines
      described on Exhibit
      A
      which is attached hereto,
      and any interests in real property relating thereto
      (collectively called the “Pipelines”).

     

    J. All
      tracts and parcels of real property described or referred to in Exhibit
      A
      attached hereto, or the description of which is incorporated in Exhibit
      A
      by reference to any other instrument or document associated with the Pipelines
      (collectively, the “Lands
      Associated with Pipelines”).
      

     

    K. All
      leases, leaseholds, easements, rights-of-way, licenses, franchises, privileges,
      permits, ordinances, grants, rights, consents, servitudes, surface leases or
      rights, amendatory grants and interests in land for the installation,
      maintenance and operation of the Pipelines or the assets associated with the
      Pipelines or any portion thereof, now owned or held by Mortgagor including,
      without limitation, those leases, leaseholds, easements, rights-of-way,
      licenses, franchises, privileges, permits, ordinances, grants, rights, consents,
      servitudes, surface leases or rights, amendatory grants and interests in land
      applicable to the Pipelines or the Pipeline Assets (as defined below) owned
      or
      held by Mortgagor and those leases, leaseholds, easements, rights-of-way,
      licenses, franchises, privileges, permits, ordinances, grants, rights, consents,
      servitudes, surface leases or rights, amendatory grants and interests in land
      owned or held by Mortgagor and described in Exhibit
      A
      attached hereto or arising by virtue of the documents described in Exhibit
      A
      (collectively, the “Rights-of-Way
      and Franchises”).

     

    
      
        
        

      

      
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    L. All
      other
      assets of Mortgagor now or hereafter situated on any of the Lands Associated
      with Pipelines or the Rights-of-Way and all Franchises, fixtures, improvements,
      equipment, surface or subsurface machinery, facilities, supplies, replacement
      parts, vehicles of every description, all process control computer systems
      and
      equipment or other property of whatsoever kind or nature, including, without
      limitation, all buildings, structures, machinery, gas processing plants,
      stations, substations, pumps, pumping stations, meter houses, metering stations,
      regulator houses, ponds, tanks, scrapers and scraper traps, fittings, valves,
      connections, cathodic or electrical protection by-passes, regulators, drips,
      meters, pumps, pumping units, pumping stations, storage or tankage facilities,
      engines, pipes, gates, telephone and telegraph lines, electric power lines,
      poles, wires, casings, radio towers, fixtures, mechanical equipment, electrical
      equipment, machine shops and other equipment, used or useful in connection
      therewith; together with all of Mortgagor’s liquid hydrocarbons, carbon dioxide,
      natural gas liquids, refined petroleum products and other inventory fuels,
      carbon, chemicals, electric energy, and other consumable materials or products
      manufactured, processed, generated, produced, transmitted, stored (whether
      above
      or below ground) or purchased by Mortgagor for sale, exchange, distribution,
      consumption or transmission by Mortgagor, including, without limitation, off
      system gas, drip gas and line fill (collectively, the “Pipeline
      Assets”).

     

    M. All
      other
      interests of every kind and character which Mortgagor now has or at any time
      hereafter acquires in and to the types and items of property and interests
      described in Paragraphs A, B, C, D, E, F, G, H, I, J, K and L preceding and
      all
      property which is used or useful in connection with the Mortgaged Property
      and
      the proceeds and products of all of the foregoing, whether now owned or
      hereafter acquired.

     

    N. To
      further secure the full and complete payment and performance of the
      Indebtedness, Mortgagor, as debtor, hereby grants to Mortgagee and Mortgagee’s
      successors in title and assigns, as secured party, a first and prior security
      interest in and to the following types and items of property and interests
      now
      owned or hereafter acquired by Mortgagor (all of which are included within
      the
      term “Mortgaged Property”): (a) all present and future Personal Property,
      Subject Contracts and Accounts; (b) all present and future Subject Interests,
      Hydrocarbons and Other Minerals insofar as the same consist of as-extracted
      collateral (including Accounts), as defined in and subject to the Uniform
      Commercial Code as enacted, amended and in effect in each jurisdiction in which
      any of the Mortgaged Property is situated (the “UCC”),
      and
      for which the creation and perfection of a security interest or lien therein
      is
      governed by the provisions of the UCC; (c) all present and future other
      Mortgaged Property described in Paragraphs “A” through “L” above consisting of
      Accounts, contract rights, general intangibles, chattel paper, documents,
      instruments, inventory, equipment, fixtures and other goods and articles of
      personal property of any kind or character defined in and subject to the UCC;
      (d) all present and future increases, profits, combinations, reclassifications,
      improvements and products of, accessions, attachments and other additions to,
      tools, parts and equipment used in connection with, and substitutes and
      replacements for, all or any part of the Mortgaged Property described in this
      or
      any other clause of this paragraph; (e) all present and future Accounts,
      contract rights, general intangibles, chattel paper, documents, instruments,
      cash and noncash proceeds and other rights arising from or by virtue of, or
      from
      the voluntary or involuntary sale or other disposition of, or collections with
      respect to, or insurance proceeds payable with respect to, or proceeds payable
      by virtue of warranty or other claims against manufacturers of, or claims
      against any other person or entity with respect to, all or any part of the
      Hydrocarbons, the Other Minerals or the Mortgaged Property described in this
      or
      any other clause of this paragraph; and (f) all present and future security
      for
      the payment to Mortgagor of any of the Mortgaged Property described in this
      or
      any other clause of this paragraph and goods which gave or will give rise to
      any
      of such Mortgaged Property or are evidenced, identified, or represented therein
      or thereby; provided that nothing in this paragraph shall be deemed to permit
      any action prohibited by this instrument or by terms incorporated in this
      instrument.

     

    
      
        
        

      

      
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    In
      the
      event that Mortgagor acquires additional undivided interests in some or all
      of
      the Mortgaged Properties, this Mortgage shall automatically encumber such
      additions or increases to Mortgagor's interest in the Mortgaged Properties
      without need of further act or document. Further, in the event Mortgagor becomes
      the owner of an interest in any part of the lands described in Exhibit
      A
      or the
      documents described on Exhibit
      A
      or
      otherwise subject to or covered by the Mortgaged Properties, this Mortgage
      shall
      automatically encumber such ownership interest of Mortgagor without need of
      further act or document. 

    


    For
      the
      same consideration, Mortgagor hereby grants to Mortgagee any and all rights
      of
      Mortgagor to liens and security interests in the Mortgaged Property securing
      payment of proceeds from the sale of production from the Mortgaged Property,
      including, but not limited to, those liens and security interests provided
      for
      in the Uniform Commercial Code as adopted by the State of Wyoming (and any
      successor statute thereto or any similar statute in any state where the
      Mortgaged Property is located). 

     

    TO
      HAVE
      AND TO HOLD all and singular the Mortgaged Property and all other property
      which, by the terms hereof, has or may hereafter become subject to the lien
      and/or security interest of this Mortgage, Security Agreement, Financing
      Statement and Assignment of Production and Revenues (the “Mortgage”),
      together with all rights, hereditaments and appurtenances in anywise belonging
      to Mortgagee or assigns forever. Any additional right, title or interest which
      Mortgagor may hereafter acquire or become entitled to in the interests,
      properties, Lands, and premises aforesaid, or in the oil, gas or other minerals
      in and under or produced from the Lands and leases shall inure to the benefit
      of
      and be covered by this Mortgage and constitute “Mortgaged
      Property,”
the
      same as if expressly described and conveyed herein. Mortgagor hereby binds
      itself, its successors and assigns, to warrant and forever defend all and
      singular the above described property, rights, and interests constituting the
      Mortgaged Property to Mortgagee and to his assigns forever, against every person
      whomsoever lawfully claiming or to claim the same or any part thereof.


     

    
      
        
        

      

      
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    ARTICLE II

     

    INDEBTEDNESS
      SECURED

     

    This
      Mortgage is made to secure and enforce the payment of the following
      indebtedness, obligations and liabilities:

     

    
      	 	
              (a)

            	
              All
                sums advanced under the terms of that certain Term Note dated as
                of even
                date herewith, in the face amount of $12,240,000 executed by Mortgagor
                and
                made payable to Mortgagee bearing interest and payable as therein
                provided, and containing the usual provisions in notes of this character,
                and all renewals, rearrangements, amendments, modifications and extensions
                thereof (whether one or more, the “Note”).

            


    

     

    
      	 	
              (b)

            	
              All
                Obligations of Mortgagor owed
                to Mortgagee defined in or arising pursuant to the terms of that
                certain
                Term Credit Agreement dated as of even date herewith, and all
                modifications, amendments, and restatements thereto (the “Credit
                Agreement”).

            


    

     

    
      	 	
              (c)

            	
              Payment
                of any sums which may be advanced or paid by Mortgagee under the
                terms
                hereof on account of the failure of Mortgagor to comply with the
                covenants
                of Mortgagor contained herein; and all other indebtedness of Mortgagor
                arising pursuant to the provisions of this
                Mortgage.

            


    

     

    
      	 	
              (d)

            	
              All
                obligations of Mortgagor owed to Swap Counterparty, as counterparty
                under
                those certain Permitted Swap Agreements defined in or arising pursuant
                to
                the terms of that certain Credit Agreement, including without limitation,
                that certain ISDA Master Agreement dated as of October 16, 2007 between
                Mortgagor and Swap Counterparty, as referenced in the Intercreditor
                Agreement (together with all schedules and confirmations in respect
                thereof, as amended, supplemented, restated, extended or replaced
                from
                time to time).

            


    

     

    
      	 	
              (e)

            	
              All
                obligations of RANCHER
                ENERGY WYOMING, LLC,
                a
                Wyoming limited liability company, owed to Mortgagee arising pursuant
                to
                the terms of that certain Guaranty dated as of even date herewith,
                and all
                modifications, amendments, and restatements
                thereto.

            


    

     

    
      	 	
              (f)

            	
              All
                renewals, extensions, replacements and modifications of indebtedness
                described, referred to or mentioned in paragraphs (a) through (e)
                above,
                and all substitutions therefor, in whole or in
                part.

            


    

     

    
      	 	
              (g)

            	
              The
                word “Indebtedness”
                wherever used in this Mortgage shall refer to all present and future
                debts, obligations and liabilities described or referred to in this
                Article II or otherwise in this Mortgage; provided however, this
                Mortgage
                does not secure any obligation of Mortgagor to Mortgagee arising
                under the
                ORRI (as referenced and described in the Credit
                Agreement).

            


    

     

    
      
        
        

      

      
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    ARTICLE III

     

    REPRESENTATIONS
      AND WARRANTIES

    


    By
      execution of this Mortgage, Mortgagor does hereby adopt and ratify all of
      Mortgagor’s warranties and representations set forth in the Credit Agreement;
      and all the warranties and representations set forth in the Credit Agreement
      as
      they relate to the properties described on Exhibit
      A
      attached
      thereto are hereby made and adopted with respect to the properties listed on
      Exhibit
      A
      attached
      hereto. In addition, Mortgagor hereby represents and warrants as
      follows:

     

    
      	 	
              (a)

            	
              Organization
                and Good Standing.
                Mortgagor is a corporation duly organized, validly existing and in
                good
                standing under the laws of Nevada, having all powers necessary to
                carry on
                its businesses and to enter into and consummate the transactions
                contemplated by the Credit Agreement and hereunder. Mortgagor is
                authorized to do business in all other jurisdictions wherein the
                character
                of the properties owned or held by them or the nature of the business
                transacted by them makes such qualification necessary or
                desirable.

            


    

     

    
      	 	
              (b)

            	
              No
                Conflicts or Consents.
                The execution and delivery by Mortgagor of this Mortgage, the performance
                of its obligations under this Mortgage, and the consummation of the
                transaction contemplated by this Mortgage does not and will not (i)
                conflict with any provision of (A) any domestic or foreign law, statute,
                rule or regulation, (B) the Bylaws of Mortgagor, or (C) any agreement,
                judgment, license, order or permit applicable to or binding upon
                Mortgagor, (ii) result in the acceleration of any Indebtedness (as
                defined
                in the Credit Agreement) owed by Mortgagor, or (iii) result in or
                require
                the creation of any Lien (as defined in the Credit Agreement) upon
                any
                assets or properties of Mortgagor, except as expressly contemplated
                in the
                Credit Agreement. Except as expressly contemplated in this Mortgage,
                no
                consent, approval, authorization or order of, and no notice to or
                filing
                with, any court or governmental authority or third party is required
                in
                connection with the execution, delivery or performance by Mortgagor
                of
                this Mortgage or to consummate any transactions contemplated by this
                Mortgage.

            


    

     

    
      	 	
              (c)

            	
              Enforceable
                Obligations.
                This Mortgage, when executed and delivered by Mortgagor, will be
                legal,
                valid and binding obligations of Mortgagor enforceable in accordance
                with
                its terms except as such enforcement may be limited by bankruptcy,
                insolvency or similar laws of general application relating to the
                enforcement of creditors’ rights or by principles of equity applicable to
                the enforcement of creditors’ rights
                generally.

            


    

     

    
      	 	
              (d)

            	
              Title.
                Mortgagor is the lawful owner of the Mortgaged Property and has good
                right
                and authority to convey, pledge, mortgage and assign the Mortgaged
                Property. Mortgagor has good and defensible title to and is possessed
                of
                the Mortgaged Property; the Mortgaged Property is free of any and
                all
                liens and encumbrances, except Permitted Encumbrances as defined
                in the
                Credit Agreement. 

            


    

     

    
      
        
        

      

      
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              (e)

            	
              Leases.
                All of the oil, gas and/or mineral leases constituting all or part
                of the
                Mortgaged Property (the “Leases”)
                are in full force and effect. All covenants, express or implied,
                in
                respect thereof of any Leases, or of any assignment thereof, which
                may
                affect the validity of any of the Leases, have been
                performed.

            


    

     

    
      	 	
              (f)

            	
              Revenue
                and Cost Bearing Interest.
                That Mortgagor’s ownership of the Subject Interest and the undivided
                interests therein as specified on attached Exhibit
                A
                will, after giving full effect to all Permitted Encumbrances (as
                defined
                in the Credit Agreement), afford Mortgagor not less than those net
                interests in the production from or allocated to such Subject Interest
                as
                is specified on attached Exhibit
                A
                and will cause Mortgagor to bear not more than that portion of the
                costs
                of drilling, developing and operating the wells or units identified
                on
                Exhibit
                A,
                unless there is a proportionate increase in Mortgagor’s net revenue
                interest in such property.

            


    

     

    
      	 	
              (g)

            	
              Power
                to Create Lien.
                Mortgagor has full power and lawful authority to bargain, grant,
                sell,
                mortgage, assign, transfer, convey, pledge and hypothecate and grant
                a
                security interest in all of the Mortgaged Property all in the manner
                and
                form herein provided and without obtaining the waiver, consent or
                approval
                of any lessor, sublessor, governmental agency or entity or other
                party
                whomsoever or whatsoever, except to the extent the approval or consent
                of
                the State of Wyoming or the Department of the Interior, United States
                of
                America, as the case may be, is required by applicable law or regulation
                to the transfer, deed or assignment of an interest in any of the
                Mortgaged
                Property.

            


    

     

    
      	 	
              (h)

            	
              Taxes.
                Except for taxes accrued but not yet due and payable, all (a)
                property
                taxes, (b) Severance Taxes, (c) Ad Valorem Taxes, (d) conservation
                taxes,
                and (e) any other taxes of any kind, excluding only income taxes
                and
                franchise taxes, imposed on Mortgagor or any producer in connection
                with
                or as a result of its ownership of interests in the Mortgaged Properties
                have been paid. For purposes of this Paragraph, “Ad
                Valorem Taxes” means taxes imposed annually on Mortgagor which are based
                on or measured by the estimated value (at the time such taxes are
                assessed) of any Hydrocarbons situated within the Mortgaged Property
                as
                calculated by the governing authority where located and “Severance
                Taxes” means taxes imposed at the time Hydrocarbons are produced from a
                well which are based on or measured by the amount or value of such
                production. 

            


    

     

    
      	 	
              (i)

            	
              Rentals
                Paid; Leases in Effect.
                All rentals and royalties due and payable in accordance with the
                terms of
                the Leases comprising a part of the Subject Interest have been duly
                paid
                or provided for and all Leases or subleases comprising a part of
                the
                Subject Interest are in full force and
                effect.

            


    

     

    
      	 	
              (j)

            	
              Operation
                of Mortgaged Property.
                The Mortgaged Property (and properties unitized therewith) is being
                maintained, operated and developed in a good and workmanlike manner
                according to practices and procedures that are standard in the petroleum
                industry and in conformity with all applicable laws and all rules,
                regulations and orders of all duly constituted authorities having
                jurisdiction and in conformity with the provisions of all Leases,
                subleases or other contracts comprising a part of the Subject Interests
                and other contracts and agreements forming a part of the Mortgaged
                Property; specifically in this connection, (i) no Mortgaged Property
                is
                subject to having allowable production 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)
                and
                (ii) none of the wells comprising a part of the Mortgaged Property
                (or
                properties unitized therewith) are deviated from the vertical more
                than
                the maximum permitted by applicable laws, regulations, rules and
                orders,
                and such wells are, in fact, bottomed under and are producing from,
                and
                the well bores are wholly within, the Mortgaged Property (or, in
                the case
                of wells located on properties unitized therewith, such unitized
                properties). 

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

       

      
        
        

      

    

    
      	 	
              (k)

            	
              Environmental
                Laws.
                Mortgagor (a) is and has in the past been in compliance with all
                Environmental Laws (as defined in the Credit Agreement) and all permits,
                requests and notifications relating to health, safety or the environment
                applicable to Mortgagor or any of its properties, assets, operations
                and
                businesses; (b) where applicable, has obtained or caused to be obtained
                and adhered to and currently possesses all necessary permits and
                other
                approvals necessary to store, dispose of and otherwise handle Hazardous
                Materials (as defined in the Credit Agreement) and to operate, where
                applicable, its properties, assets and businesses; (c) where applicable,
                will report or cause to be reported, to the extent required by all
                federal, state and local statutes, laws, ordinances, regulations,
                rules,
                permits, judgments, orders and decrees, all sites owned and/or operated
                by
                Mortgagor where any Hazardous Materials are released, treated, stored
                or
                disposed of and (d) has not used, stored, or released any Hazardous
                Materials in excess of amounts allowed by Environmental Law. Except
                as set
                forth in any environmental reports provided by Mortgagor to Mortgagee,
                there is (x) no location on any property currently or previously
                owned or
                operated by Mortgagor where Hazardous Materials have entered or are
                likely
                to enter into the soil or groundwater or such property, none of which
                releases (i) either individually, or in the aggregate, has had or
                may be
                expected to have a material adverse effect on Mortgagor’s business or (ii)
                has violated or reasonably may be expected to violate any Environmental
                Laws, and (y) no on-site or off-site location to which Mortgagor
                has
                released or transported Hazardous Materials or arranged for the
                transportation or disposal of Hazardous Materials, which is or is
                likely
                to be the subject of any federal, state, local or foreign enforcement
                action or any investigation which could lead to any claims against
                any
                such entity for any clean-up cost, remedial work, damage to natural
                resources, common law or legal liability, including, but not limited
                to,
                claims under CERCLA.

            


    

     

    
      	 	
              (l)

            	
              Pipelines
                and Pipeline Assets.
                To Mortgagor’s knowledge, all Pipelines and Pipeline Assets have been
                constructed and operated in conformity with all applicable laws,
                rules,
                regulations and orders of all regulatory authorities having
                jurisdiction.

            


    

     

    Any
      fractions or percentages specified on attached Exhibit
      A
      in
      referring to Mortgagor’s interests are solely for the purposes of the warranties
      made by Mortgagor above and shall in no manner limit the quantum of interest
      with respect to any Subject Interests or with respect to any Unit or Well
      identified on Exhibit
      A.
      If any
      of the Lands covered by the Subject Interests or Lands Associated with Pipeline
      or other instrument mentioned on Exhibit
      A
      are
      incorrectly described, then nevertheless this Mortgage shall cover all
      Mortgagor’s interest in such Subject Interests, the Lands Associated with
      Pipeline and other instrument as to all of the lands covered thereby, unless
      limited by express words to the contrary on Exhibit
      A.

     

    ARTICLE IV

     

    COVENANTS
      OF MORTGAGOR

     

    In
      consideration of the Indebtedness hereinabove described, Mortgagor, for itself
      and its successors and assigns, covenants and agrees as follows:

     

    A. Defend
      Title.
      Mortgagor will not create or suffer to be created or permit to exist any lien,
      or security interest senior to, 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,
      except Permitted Encumbrances (as defined in the Credit Agreement). Except
      for
      the Permitted Encumbrances (as defined in the Credit Agreement), 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
      and security interests created hereby so long as any of the Indebtedness secured
      hereby remains unpaid. Except for the Permitted Encumbrances (as defined in
      the
      Credit Agreement), should an adverse claim be made against or a cloud develop
      upon the title to any part of the Mortgaged Property, Mortgagor agrees it will
      immediately defend against such adverse claim or take appropriate action to
      remove such cloud at Mortgagor’s cost and expense, and Mortgagor further agrees
      that Mortgagee may take such other action as Mortgagee reasonably deems
      advisable to protect and preserve its interests in the Mortgaged Property,
      and
      in such event Mortgagor will indemnify Mortgagee against any and all costs,
      attorneys’ fees and other expenses which it may reasonably incur in defending
      against any such adverse claim or taking action to remove any such
      cloud.

     

    B. Correct
      Defects.
      Upon
      request of Mortgagee, Mortgagor will promptly correct any defect which may
      be
      discovered after the execution and delivery of this Mortgage, in the Note above
      described or other documents executed in connection herewith, in the execution
      or acknowledgment hereof or thereof or in the description of the Mortgaged
      Property, and will execute, acknowledge, and deliver such division orders,
      transfer orders and other assurances and instruments as shall, in the opinion
      of
      Mortgagee, be necessary or proper to convey and assign to Mortgagee all of
      the
      Mortgaged Property herein conveyed or assigned, or intended to be
      so.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    C. Notifications.
      Mortgagor will notify Mortgagee of the destruction, loss, termination or
      acquisition of any Mortgaged Property within two (2) Business Days (as defined
      in the Credit Agreement) thereof.

     

    D. Pooling.
      Except
      as required by law, rule or regulation, Mortgagor will not, without the prior
      written consent of Mortgagee, which consent shall not be unreasonably withheld,
      voluntarily pool or unitize all or any part of the Mortgaged Property where
      the
      pooling or unitization would result in the diminution of Mortgagor’s net revenue
      interest in production from the pooled or unitized lands. Immediately after
      the
      formation of any pool or unit in accordance herewith, Mortgagor will furnish
      to
      Mortgagee a conformed copy of the pooling agreement, declaration of pooling,
      or
      other instrument creating the pool or unit. The interest of Mortgagor included
      in any pool or unit attributable to the Mortgaged Property or any part thereof
      shall become a part of the Mortgaged Property and shall be subject to liens
      and
      security interests hereof in the same manner and with the same effect as though
      the pool or unit and the interest of Mortgagor therein were specifically
      described in Exhibit
      A
      hereto.
      In the event any proceedings of any governmental body which could result in
      pooling or unitizing all or any part of the Mortgaged Property are commenced,
      Mortgagor shall give immediate written notice thereof to Mortgagee.

     

    E. Maintenance
      and Operation of Mortgaged Property.

     

    
      	 	
              (a)

            	
              Mortgagor
                will, from time to time, pay or cause to be paid before they become
                delinquent and payable all taxes, assessments and governmental charges
                lawfully levied or assessed upon the Mortgaged Property or any part
                thereof, or upon or arising from any of the rents, issues, revenues,
                profits and other income from the Mortgaged Property, or incident
                to or in
                connection with the production of Hydrocarbons or other minerals
                therefrom, or the operation and development thereof; provided, that
                the
                foregoing covenant shall be suspended so long as the amount, applicability
                or validity of any such charges is being diligently contested in
                good
                faith by appropriate proceedings and if Mortgagor shall have set
                up
                reserves therefor which are adequate under generally accepted accounting
                principles.

            


    

     

    
      	 	
              (b)

            	
              Mortgagor
                will at its own expense do or cause to be done all things reasonably
                necessary to preserve and keep in full repair, working order and
                efficiency (subject to reasonable wear and tear) all of the Mortgaged
                Property, including, without limitation, all equipment, machinery
                and
                other tangible or movable personal property, and from time to time
                will
                make or cause to be made all the needful and proper repairs, renewals
                and
                replacements so that at all times the state and condition of the
                Mortgaged
                Property will be fully preserved and maintained in accordance with
                the
                standards of a prudent operator.

            


    

     

    
      	 	
              (c)

            	
              Mortgagor
                will promptly pay and discharge before delinquent, or cause to be
                promptly
                paid or discharged before delinquent, 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, leases, sub-leases, contracts and agreements
                described or referred to herein or affecting Mortgagor’s interests in the
                Mortgaged Property, and will do or cause to be done all other things
                necessary to keep unimpaired Mortgagor’s rights with respect thereto and
                prevent any forfeiture thereof or default thereunder; provided that
                Mortgagor may contest such obligations under such assignments, deeds,
                leases, sub-leases and contracts and agreements in good faith and
                by
                appropriate proceedings after giving Mortgagee appropriate indemnity
                against any loss resulting from such contest. Mortgagor will operate
                or
                cause to be operated the Mortgaged Property in a good and workmanlike
                manner consistent with prudent operator practices and in material
                compliance with all applicable contracts and agreements and in compliance
                with all applicable 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
                therefrom, except for noncompliance which could not reasonably be
                expected
                to have a Material Adverse Effect. Mortgagor will do or cause to
                be done
                such development work as may be reasonably necessary to the prudent
                and
                economic operation of the Mortgaged Property in accordance with the
                most
                approved practices of operators in the
                industry.

            


    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (d)

            	
              If
                any tax is levied or assessed against the Indebtedness described
                herein or
                any part thereof, or against this Mortgage, or against Mortgagee
                with
                respect to said Indebtedness or any part thereof or this Mortgage
                (excluding, however, any income tax payable by Mortgagee), Mortgagor
                shall
                promptly pay the same.

            


    

     

    
      	 	
              (e)

            	
              Do
                all things necessary to keep unimpaired Mortgagor’s rights and remedies in
                or under the Mortgaged Property and shall not abandon, sell, convey,
                assign, lease or otherwise transfer any right, title or interest
                of
                Mortgagor in, to, or under the Pipelines or the Pipeline Assets,
                or
                consent to any of the foregoing, directly or indirectly, without
                the
                express prior written consent of
                Mortgagee.

            


    

     

    
      	 	
              (f)

            	
              Perform
                or cause to be performed, each and all covenants, agreements, terms,
                conditions and limitations imposed upon Mortgagor or its predecessors
                in
                interest and expressly contained in any assignment or other form
                of
                conveyance, under or through which the Pipelines, Pipeline Assets,
                Lands
                Associated with Pipeline, or Rights-of-Way and Franchises, or an
                undivided
                interest therein are now held, and perform or cause to be performed
                all
                (expressed or implied) covenants and obligations imposed upon Mortgagor
                in
                connection with any document or instrument relating
                thereto.

            


    

     

    
      	 	
              (g)

            	
              Cause,
                or in the event Mortgagor is not the operator of the Pipeline Assets,
                use
                its best efforts to cause, the Pipeline Assets to be maintained,
                developed, and continuously operated for the gathering, storing,
                transmission and distribution of Hydrocarbons in a good and workmanlike
                manner as would be operated by a prudent operator and in compliance
                with
                all applicable operating agreements and contracts, and all applicable
                federal, state, and local laws, rules and regulations, excepting
                those
                being diligently contested in good faith, except for noncompliance
                which
                could not reasonably be expected to have a Material Adverse
                Effect.

            


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (h)

            	
              Cause,
                or in the event Mortgagor is not the operator of the Pipeline Assets,
                use
                its best efforts to cause, the Pipelines to be kept in good and effective
                operating condition (reasonable wear and tear excepted), and all
                repairs,
                renewals, replacements, additions and improvements thereof or thereto,
                needful to the gathering, storing, transmission and distribution
                of
                Hydrocarbons through the Pipelines, to be promptly
                made.

            


    

     

    F. Taxes/Insurance.
      Mortgagor will carry with standard insurance companies satisfactory to
      Mortgagee, insurance with respect to the Mortgaged Property against such
      liabilities, casualties, risks and contingencies and in amounts as is customary
      in the industry; and acceptable certificates evidencing the same thereof shall
      be delivered to Mortgagee in accordance with the Credit Agreement. Mortgagor
      will at all times maintain workers’ compensation insurance with a responsible
      insurance company where required by, and in accordance with, the laws of the
      state (i) in which the Mortgaged Property is located or (ii) which requires
      workers’ compensation to be maintained on such employees. In the event Mortgagor
      shall fail or neglect to pay any taxes, general or special, or shall fail or
      neglect to relieve the Mortgaged Property from any lien which might become
      superior or equal to the lien of this Mortgage, or fail to carry such workers’
compensation or other insurance, Mortgagee, at its option, may pay such taxes,
      liens, charges or encumbrances, or any part thereof, or effect such workmen’s
      compensation insurance, and Mortgagor will promptly reimburse Mortgagee, as
      the
      case may be, therefor; and any and all such sums so paid hereunder shall be
      paid
      by Mortgagor upon demand at Mortgagee’s principal offices, and shall constitute
      a part of the Indebtedness.

     

    G. Operation
      by Third Parties.
      All or
      portions of the Mortgaged Property may be comprised of interests in the Subject
      Interests which are other than working interests or which may be operated by
      a
      party or parties other than Mortgagor and with respect to all or any such
      Subject Interests and properties as may be comprised of interests other than
      working interests or which may be operated by parties other than Mortgagor,
      Mortgagor’s covenants set forth in Article IV are modified to require that
      Mortgagor use its best efforts to obtain compliance with such covenants by
      the
      working interest owners or the operator or operators of such Subject Interest.
      

     

    H. Labor/Materials.
      Mortgagor agrees to promptly pay before delinquent, or cause to be paid before
      delinquent, all bills for labor and materials incurred in the operation of
      the
      Mortgaged Property, except any that is being contested in good faith and as
      to
      which satisfactory accruals have been provided; will promptly pay its share
      of
      all costs and expenses incurred under any joint operating agreement affecting
      the Mortgaged Property or any portion thereof; will furnish Mortgagee, as and
      when requested, full information as to the status of any joint account
      maintained with others under any such operating agreement; will not take any
      action to incur any liability or lien thereunder; and will not enter into any
      new operating agreement or amendment of existing operating agreement affecting
      the Mortgaged Property that would diminish or alter Mortgagor’s net revenue
      interest therein, all without prior written consent of Mortgagee.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    I. Inspections.
      Mortgagor will permit Mortgagee and its accredited agents, representatives,
      attorneys and employees (“Mortgagee
      Parties”)
      at all
      times to go upon, examine, inspect and remain on the Mortgaged Property, at
      Mortgagee Parties’ sole risk and liability and will furnish Mortgagee, upon
      request, all pertinent information regarding the development and operation
      of
      the Mortgaged Property.

     

    J. Legal
      Proceedings.
      Mortgagor will promptly notify Mortgagee or other holder or holders of the
      Indebtedness, in writing, of the commencement of any legal proceedings affecting
      the Mortgaged Property or any part thereof, and will take such action as may
      be
      necessary to preserve its and Mortgagee’s rights affected thereby; and should
      Mortgagor fail or refuse to take any such action, Mortgagee may at its election
      take such action on behalf and in the name of Mortgagor and at Mortgagor’s cost
      and expense.

     

    K. Existence.
      Mortgagor will maintain its corporate existence and will maintain and procure
      all necessary franchises and permits to the end that Mortgagor shall be and
      continue to be a corporation in good standing in the state of its organization
      and in the state wherein the Mortgaged Property is located, with full power
      and
      authority to own and operate all of the Mortgaged Property as contemplated
      herein until this Mortgage shall have been fully satisfied.

     

    L. Waivers.
      Mortgagor hereby expressly waives any and all rights or privileges of
      marshalling of assets, sale in inverse order of alienation, notices,
      appraisements, redemption and any prerequisite to the full extent permitted
      by
      applicable law, in the event of foreclosure of the lien or liens and/or security
      interests created herein. Mortgagee at all times shall have the right to release
      any part of the Mortgaged Property now or hereafter subject to the lien or
      security interest of this Mortgage, any part of the proceeds of production
      or
      other income herein or hereafter assigned or pledged, or any other security
      it
      now has or may hereafter have securing the Indebtedness, without releasing
      any
      other part of the Mortgaged Property, proceeds or income, and without affecting
      the liens or security interests hereof as to the part or parts thereof not
      so
      released, or the right to receive future proceeds and income.

     

    M. Legal
      and Other Expenses.
      Upon
      demand of Mortgagee, Mortgagor will promptly pay all reasonable and customary
      costs and expenses heretofore or hereafter incurred by Mortgagee for legal,
      accounting, engineering or geological services rendered to it in connection
      with
      the making of the initial or any future loan to Mortgagor secured in whole
      or in
      part by the liens and security interests hereof or in the enforcement of any
      of
      Mortgagee’s rights hereunder. The obligations of Mortgagor hereunder shall
      survive the non-assumption of this Mortgage in a case commenced under Title
      11
      of the United States Code or other similar law of the United States of America,
      the State of Wyoming or any other jurisdiction and be binding upon Mortgagor,
      or
      a trustee, receiver, custodian or liquidator of Mortgagor appointed in any
      such
      case.

     

    N. Disposition.
      Without
      prior approval and written consent of Mortgagee, Mortgagor will not sell,
      assign, lease, transfer or otherwise dispose of all or any portion of the
      Mortgaged Property except as provided in the Credit Agreement, nor shall
      Mortgagor mortgage, pledge or otherwise encumber the Mortgaged Property or
      any
      part thereof, regardless of whether the lien or encumbrance is senior,
      coordinate, junior, inferior or subordinate to the lien and security interest
      created hereby, except for Permitted Encumbrances (as defined in the Credit
      Agreement) and as provided in the Credit Agreement.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    O. Notice
      of Assignments.
      Upon
      request of Mortgagee, Mortgagor will execute and deliver written notices of
      assignments to any persons, corporations or other entities owing or which may
      in
      the future owe to Mortgagor monies or accounts arising in connection with any
      of
      the following matters: (a) any oil, gas or mineral production from the
      Mortgaged Property; (b) any gas contracts, processing contracts or other
      contracts relating to the Mortgaged Property; or (c) the operation of or
      production from any part of the Mortgaged Property. Such notices of assignments
      shall advise the third parties that all of the monies or accounts described
      above have been assigned to Mortgagee, and if required by Mortgagee, shall
      also
      require and direct that future payments thereof, including amounts then owing
      and unpaid, be paid directly to the Lockbox (as defined in the Credit Agreement)
      or directly to the Lender Account, as such terms are defined in the Credit
      Agreement.

     

    P. Prohibitions
      Ineffective.
      Any
      (i) mortgage, pledge, or encumbrance, or (ii) unitization, pooling, or
      communitization (except as required by law, rule or regulation) or other action
      or instrument in violation of the prohibitions contained in this Article
      IV
      shall be
      of no force or effect against Mortgagee.

     

    Q. Environmental
      Laws.
      Mortgagor will comply at all times with all federal, state and local laws,
      regulations, and ordinances applicable to the Mortgaged Property, including,
      without limitation, all environmental protection and hazardous waste
      requirements, and in this regard:

     

    (1) Mortgagor
      will comply with any and all applicable local, state and federal laws,
      ordinances, rules, regulations and orders (a) related to any natural or
      environmental resource or media located on, above, within, in the vicinity
      of,
      related to or affected by the Mortgaged Property, or (b) required for the
      performance or conduct of its operations.

     

    (2) To
      the
      extent Mortgagor has received a written request, Mortgagor will forthwith notify
      Mortgagee in writing of any request from any governmental agency or other entity
      for information on any releases of Hazardous Materials from, affecting or
      related to the Mortgaged Property; notify Mortgagee of any actual, proposed
      or
      threatened any testing or other investigation by any governmental agency or
      other entity concerning the environmental condition of or related to such
      property; provide to Mortgagee such information as Mortgagee shall request
      concerning the generation, storage, disposal, transportation or other
      management, if any, of any Hazardous Materials.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (3) Mortgagor
      will neither conduct nor permit the conduct (and Mortgagor represents and
      warrants that to Mortgagor’s knowledge, there has not been conducted) on the
      Mortgaged Properties (or on any other lands or properties in the vicinity
      thereof) of any activity or operation which is in violation of any statute,
      rule, regulation, ordinance or other lawful enactment of any governmental body
      or agency relative to the maintenance of environmental quality, including but
      not limited to, the Comprehensive Environmental Response, Compensation, and
      Liability Act of 1980 (42 U.S.C.A. §9601, et seq.)
      and
      the Clean Water Act (33 U.S.C.A. §1251, et seq.).
      Mortgagor agrees that it will not permit any hazardous substance, as defined
      in
      Section 101(14) of the Comprehensive Environmental Response, Compensation,
      and
      Liability Act of 1980 (42 U.S.C.A. §9601(14), as amended) to be deposited,
      stored, disposed of, placed or otherwise come to be located on the lands covered
      and affected by the Mortgaged Property (or on any other lands or properties
      in
      the vicinity thereof), except those used in daily operations in compliance
      with
      applicable laws. To
      the full extent permitted by applicable law, Mortgagor agrees to defend,
      indemnify and hold harmless Mortgagee and its directors, officers, employees,
      attorneys and agents (“Indemnified
      Parties”)
      from and against any and all loss, cost, expense or liability (including
      reasonable attorneys’ fees and court costs) incurred by any Indemnified Party in
      connection with or otherwise arising out of any and all claims or proceedings
      (whether brought by a private party, governmental agency or otherwise) for
      bodily injury, property damage, abatement, remediation, environmental damage
      or
      impairment or any other injury or damage resulting from or relating to any
      hazardous or toxic substance or contaminated material located upon, migrating
      into, from or through or otherwise relating to the Mortgaged Property (whether
      or not the release of such materials was caused by Mortgagor, a tenant or
      subtenant of Mortgagor, a prior owner, a tenant or subtenant of any prior owner
      or any other party and whether or not the alleged liability is attributable
      to
      the handling, storage, generation, transportation or disposal of such substance
      or the mere presence of the substance on the Mortgaged Property), which any
      Indemnified Party may incur due to the making of the loan evidenced by the
      Note,
      the exercise of any of its rights under this Mortgage, or otherwise. For the
      purposes of the indemnity contained in this paragraph, hazardous or toxic
      substances or contaminated material include but are not limited to asbestos
      and
      those substances within the scope of all federal, state and local environmental
      laws and ordinances, including the Resource Conservation and Recovery Act,
      the
      Comprehensive Environmental Response, Compensation and Liability Act and the
      Superfund Amendment and Reauthorization Act of 1986. The provisions of this
      paragraph shall survive any foreclosure of the liens created by this Mortgage,
      conveyance in lieu of foreclosure and the repayment of the Indebtedness and
      the
      discharge and release of this Mortgage.

     

    R. Amendments
      to Mineral Leases.
      Except
      as required by law, rule or regulation, or as permitted in the Credit Agreement,
      Mortgagor will not, without the prior written consent of Mortgagee, which
      consent shall not be unreasonably withheld, enter into any material amendment
      to
      any Lease described herein unless any such amendment does not adversely affect
      Mortgagor’s liens or security interests hereunder.

     

    
      
        
        

      

      
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    ARTICLE V

     

    DEFEASANCE,
      RESPECTING FORECLOSURE

    AND
      OTHER REMEDIES

     

    A. In
      case
      Mortgagor defaults on payment of any Indebtedness when due or one or more Events
      of Default (as defined in the Credit Agreement) occur (each, an “Event
      of Default”),
      then,
      and in any such event, the whole of the principal of the Indebtedness due and
      remaining unpaid, together with all interest accrued thereon, may, at the option
      of the holder thereof, without notice (including, but not limited to, notice
      of
      intention to accelerate maturity and notice of acceleration of maturity) or
      demand, which are, to the full extent permitted by applicable law, waived by
      Mortgagor, be declared immediately due and payable. A POWER OF SALE HAS BEEN
      GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW MORTGAGEE TO TAKE THE
      MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION
      UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE. The parties hereto are cognizant
      of and acknowledge the foreclosure sale by statutory advertisement and sale
      under Wyo. Stat.§§ 34-4-101 et
      seq.
      (the
“Wyoming
      Statutory Foreclosure Act”).
      It is
      the intent of the parties that the provisions herein relating to the power
      of
      sale granted herein are to be subject to the provisions of the Wyoming Statutory
      Foreclosure Act. Additionally, it is the intent of the parties that the power
      of
      sale granted herein may be exercised by Mortgagee pursuant to the terms and
      provisions of the Wyoming Statutory Foreclosure Act. Mortgagee, is hereby
      authorized and empowered to appoint any one or more persons as his
      attorney(s)-in-fact to act as trustee under its name, place and stead, such
      appointment to be evidenced by a written instrument executed by Mortgagee,
      or
      its 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 Mortgagee, or its
      successor or substitute; and all acts done or performed by such
      attorney(s)-in-fact shall be valid, lawful and binding as if done or performed
      by Mortgagee, or its successor or substitute. No single sale or series of sales
      by Mortgagee or any trustee shall extinguish the lien or exhaust the power
      of
      sale hereunder except with respect to the items of property sold, but such
      lien
      and power shall exist for so long as and may be exercised in any manner by
      law
      or as herein provided as often as the circumstances require to give Mortgagee
      full relief hereunder. The purchaser at any such sale shall not assume, nor
      shall his or its heirs, legal representatives, successors or assigns, be deemed
      to have assumed, by reason of the acquisition of property or rights mortgaged
      hereunder, any liability or obligation of any lessee or operator of the
      Mortgaged Property, or any part thereof, arising by reason of any occurrence
      taking place prior to such sale. It shall not be necessary to have present,
      or
      to exhibit at any such sale, any of the personal property subject to the lien
      or
      security interest hereof.

     

    B. Upon
      the
      happening of any of the Events of Default, Mortgagee shall be entitled to all
      of
      the rights, powers and remedies afforded a secured party by the Uniform
      Commercial Code with reference to the personal property, as-extracted collateral
      and fixtures in which Mortgagee has been granted a security interest hereby,
      or
      Mortgagee may proceed as to both the real and personal property covered
      hereby.

     

    
      
        
        

      

      
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    C. Mortgagee
      is authorized to receive the proceeds of said sale or sales and apply the same
      as follows:

     

    FIRST:
      to
      the payment of all necessary costs and expenses incident to the enforcement
      of
      this Mortgage;

     

    SECOND:
      to any and all Indebtedness then hereby secured, application to be made in
      such
      order and in such manner as the holder of said Indebtedness may, in its
      discretion, elect, subject, however, to the terms of the Intercreditor Agreement
      (to the extent such agreement remains in effect);

     

    THIRD:
      the balance, if any, to Mortgagor or its successors or assigns.

     

    D. It
      is
      agreed that in any deed or deeds given by Mortgagee, any and all statements
      of
      fact or other recitals therein made as to the identity of the holder or holders
      of the Indebtedness, or as to the default in the payments thereof or any part
      thereof, or as to the breach of any covenants herein contained, or as to the
      request to sell, notice of sale, time, place, terms and manner of sale, and
      receipt, application, and distribution of the money realized therefrom, or
      as to
      the due and proper appointment of a trustee, and, without being limited by
      the
      foregoing, as to any other additional act or thing having been done by
      Mortgagee, shall be taken by all courts of law and equity as prima facie
      evidence that the statements or recitals state facts and are without further
      question to be so accepted; and Mortgagor does hereby ratify and confirm any
      and
      all acts that Mortgagee may lawfully do in the premises by virtue of the terms
      and conditions of this Mortgage.

     

    E. Mortgagee
      may, at its election, proceed by suit or suits, at law or in equity, to enforce
      the payment of the Indebtedness in accordance with the terms hereof and of
      the
      note, notes or guaranties evidencing it, and to foreclose the lien and/or
      security interest of this Mortgage as against all or any portion of the
      Mortgaged Property and to have such property sold under the judgment or decree
      of a court of competent jurisdiction.

     

    F. It
      is
      expressly understood that Mortgagee may be a purchaser of the Mortgaged
      Property, or of any part thereof, at any sale thereof, whether such sale be
      under the power of sale hereinabove vested in Mortgagee or upon any other
      foreclosure of the lien and/or security interest hereof, or otherwise; and
      Mortgagee so purchasing shall, upon any such purchase, acquire good title to
      the
      Mortgaged Property so purchased, free of the lien and/or security interest
      of
      this Mortgage and free of all rights of redemption in Mortgagor.

     

    G. The
      rights of entry, sale, or suit, as hereinabove or hereinafter conferred, are
      cumulative of all other rights and remedies herein or by law or in equity
      provided, and shall not be deemed to deprive Mortgagee of any such other legal
      or equitable rights or remedies, by judicial proceedings or otherwise,
      appropriate to enforce the conditions, covenants and terms of this Mortgage
      and
      of any note or guaranty reflecting the Indebtedness, and the employment of
      any
      remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent
      employment of any other appropriate remedy or remedies.

     

    H. To
      the
      full extent Mortgagor may do so under applicable law, Mortgagor agrees that
      Mortgagor will not at any time insist upon, plead, claim or take the benefit
      or
      advantage of any law now or hereafter in force providing for any appraisement,
      valuation, stay, extension or redemption, and Mortgagor, for itself and its
      successors and assigns, and for any and all persons ever claiming any interest
      in the Mortgaged Property, to the extent permitted by law, hereby waives and
      releases all rights of redemption, valuation, appraisement, stay of execution,
      notice of intention to mature or declare due the whole of the Indebtedness,
      notice of election to mature or declare due the whole of the Indebtedness and
      all rights to a marshaling of the assets of Mortgagor, including the Mortgaged
      Property, or to a sale in inverse order of alienation in the event of
      foreclosure of the liens and security interests hereby created. Mortgagor shall
      not have or assert any right under any statute or rule of law pertaining to
      the
      marshaling of assets, sale in inverse order of alienation, or other matters
      whatever to defeat, reduce or affect the right of Mortgagee under the terms
      of
      this Mortgage to a sale of the Mortgaged Property for the collection of the
      Indebtedness without any prior or different resort for collection, or the right
      of Mortgagee under the terms of this Mortgage to the payment of such
      indebtedness out of the proceeds of sale of the Mortgaged Property in preference
      to every other claimant whatever. If any law referred to in this paragraph
      and
      now in force, of which Mortgagor or Mortgagor’s successors and assigns and such
      other persons claiming any interest in the Mortgaged Property might take
      advantage despite this paragraph, shall hereafter be repealed or cease to be
      in
      force, such law shall not thereafter be deemed to preclude the application
      of
      this paragraph.

     

    
      
        
        

      

      
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    (a) To
      the
      extent permitted by Wyoming law, Mortgagor agrees that Mortgagee shall be
      entitled to seek a deficiency judgment from Mortgagor and any other party
      obligated on the Note or guaranty of the Note equal to the difference between
      the amount owing on the Note and the amount for which the Mortgaged Property
      was
      sold pursuant to a judicial or nonjudicial foreclosure sale;

     

    (b) Mortgagor
      expressly recognizes that this section will, to the extent permitted by Wyoming
      law, constitute a waiver of potential rights which may otherwise permit
      Mortgagor and other persons against whom recovery of deficiencies is sought
      or
      guarantors independently (even absent the initiation of deficiency proceedings
      against them) to present competent evidence of the fair market value of the
      Mortgaged Property as of the date of foreclosure and offset against any
      deficiency the amount by which the foreclosure sale price is determined to
      be
      less than fair market value;

     

    (c) Mortgagor
      further recognizes and agrees that this waiver will, to the extent permitted
      by
      Wyoming law, create an irrebuttable presumption that the foreclosure sale price
      is equal to the fair market value of the Mortgaged Property for purposes of
      calculating deficiencies owed by Mortgagor, other Mortgagors on the Note,
      guarantors, and others against whom recovery of a deficiency is
      sought;

     

    (d) Alternatively,
      in the event this waiver is determined by a court of competent jurisdiction
      to
      be unenforceable, the following shall be the basis for the finder of fact’s
      determination of the fair market value of the Mortgaged Property as of the
      date
      of the foreclosure sale in proceedings governed by the Wyoming Statutory
      Foreclosure Act (as amended from time to time):

     

    (i) The
      Mortgaged Property shall be valued in an “as is” condition as of the date of the
      foreclosure sale, without any assumption or expectation that the Mortgaged
      Property will be repaired or improved in any manner before a resale of the
      Mortgaged Property after foreclosure;

     

    
      
        
        

      

      
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    (ii) The
      valuation shall be based upon an assumption that the foreclosure purchaser
      desires a prompt resale of the Mortgaged Property for cash promptly (but no
      later than twelve months) following the foreclosure sale;

     

    (iii) All
      reasonable closing costs customarily borne by the seller in a commercial real
      estate transaction should be deducted from the gross fair market value of the
      Mortgaged Property, including, without limitation, commercially reasonable
      brokerage commissions, a survey of the Mortgaged Property, tax prorations,
      reasonable attorney’s fees, and reasonable marketing costs;

     

    (iv) The
      gross
      fair market value of the Mortgaged Property shall be further discounted to
      account for any estimated holding costs associated with maintaining the
      Mortgaged Property pending sale, including, without limitation, utilities
      expenses,reasonable property management fees (for property similar to the
      Mortgaged Property), taxes and assessments (to the extent not accounted for
      in
      (d)(iii) above), and other reasonable maintenance expenses;

     

    (v) Any
      expert opinion testimony given or considered in connection with a determination
      of the fair market value of the Mortgaged Property must be given by persons
      having at least five years experience in appraising property similar to the
      Mortgaged Property and who have conducted and prepared a complete written
      appraisal of the Mortgaged Property taking into consideration the factors set
      forth above.

     

    ARTICLE VI

     

    ASSIGNMENT
      OF PRODUCTION AND REVENUES

    (this
      “Assignment”)

    


    Production

    


    A. In
      addition to the conveyance to Mortgagee herein made, Mortgagor does hereby
      transfer, assign, deliver and convey unto Mortgagee, its successors and assigns,
      all of the oil, gas and other minerals produced, saved or sold from the
      Mortgaged Property and attributable to the interest of Mortgagor therein
      subsequent to 7:00 A.M. on the 1st day of the month in which this Mortgage
      is
      executed, together with the proceeds of any sale thereof (“Hydrocarbon
      Proceeds”);
      Mortgagor hereby directs any purchaser now or hereafter taking any production
      from the Mortgaged Property to pay to Mortgagee such Hydrocarbon Proceeds
      derived from the sale thereof, and to continue to make payments directly to
      Mortgagee until notified in writing by Mortgagee to discontinue the same; and
      the purchaser of any such production shall have no
      duty or obligation to inquire into the right of Mortgagee to receive the same,
      what application is made thereof, or as to any other matter;
      and the
      payment made to Mortgagee shall be binding and conclusive as between such
      purchaser and Mortgagor. Mortgagor further agrees to perform all such acts,
      and
      to execute all such further assignments, transfer and division orders, and
      other
      instruments as may be required or desired by Mortgagee or any other party to
      have such Hydrocarbon Proceeds so paid to Mortgagee.

     

    
      
        
        

      

      
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    Revenues

    


    B. In
      addition to the conveyance
      to Mortgagee herein made, Mortgagor does hereby transfer, assign, deliver and
      convey unto Mortgagee, its successors and assigns, all the income, revenues,
      rents, issues, profits and proceeds arising from the Pipelines relating to
      the
      Mortgaged Property whether due, payable or accruing (collectively, the
“Revenues”)
      under any and all present and future contracts or other agreements relating
      to
      the transmission of the Hydrocarbons or the ownership of all or any portion
      of
      the Mortgaged Property. Mortgagor
      hereby directs any payor to pay to Mortgagee such Revenues derived from such
      contracts and agreements, and to continue to make payments directly to Mortgagee
      until notified in writing by Mortgagee to discontinue the same; and the
      payor
      shall have no duty or obligation to inquire into the right of Mortgagee to
      receive the same, what application is made thereof, or as to any other
      matter;
      and the
      payment made to Mortgagee shall be binding and conclusive as between such payor
      and Mortgagor.
      Mortgagor agrees to perform all such acts, and to execute all such further
      assignments, transfers and other instruments as may be required or desired
      by
      Mortgagee or any party in order to have said Revenues so paid to Mortgagee.
      

     

    General

    


    C. Mortgagee
      is fully authorized to (i) receive and receipt for said Revenues and
Hydrocarbon
      Proceeds;
      (ii) 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 said Revenues and Hydrocarbon
      Proceeds
      and apply the proceeds thereof to the payment of the Indebtedness, when
      received, regardless of the maturity of any of the Indebtedness, or any
      installment thereof, and (iii) execute any instrument in the name of Mortgagor
      to facilitate any of the foregoing. Upon receipt of written instructions from
      Mortgagor, Mortgagee agrees to release to Mortgagor any Revenues and
Hydrocarbon
      Proceeds
      belonging to third parties; provided that Mortgagee shall not be liable for
      any
      delay, neglect, or failure to effect collection of any Revenues and Hydrocarbon
      Proceeds
      or to take any other action in connection therewith or hereunder; but shall
      have
      the right, at its election, 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 costs, expenses and reasonable attorney’s
      fees incurred in connection therewith being paid by Mortgagor. Unless
      Mortgagee has claimed or is claiming, for its benefit Revenues and
Hydrocarbon
      Proceeds
      belonging to third parties and not attributable to the Mortgaged Property,
      Mortgagor hereby agrees to indemnify Mortgagee against all claims, actions,
      liabilities, judgments, costs, charges and reasonable attorneys’ fees made
      against or incurred by it, based on the assertion that it received Revenues
      claimed by third persons either before or after the payment in full of the
      Indebtedness. Mortgagee shall have the right to defend against any such claims,
      actions and judgments, employing its attorneys therefor, and if it is not
      furnished with reasonable indemnity, it shall have the right to compromise
      and
      adjust any such claims, actions and judgments. Mortgagor agrees to indemnify
      and
      pay to Mortgagee any and all such claims, judgments, costs, charges and
      reasonable attorney’s fees as may be paid in any judgment, release or discharge
      thereof or as may be adjudged against Mortgagee. 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 Mortgaged Property. Mortgagor hereby
      further transfers and assigns to Mortgagee any and all such liens, security
      interests, financing statements or similar interests of Mortgagor attributable
      to its interest in the Mortgaged Property and Revenues and Hydrocarbon
      Proceeds
      arising under or created by any statutory provision, judicial decision or
      otherwise. The power of attorney granted to Mortgagee in this paragraph, being
      coupled with an interest, shall be irrevocable so long as the Indebtedness
      or
      any part thereof remains unpaid.

     

    
      
        
        

      

      
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    D. Should
      any
      purchaser or other party taking the production from the Mortgaged Property
      or
      owing payment to Mortgagor fail to make prompt payment to Mortgagee in
      accordance with this Assignment, Mortgagee shall, if permitted by law and by
      the
      terms of the existing contracts, have the right at Mortgagor’s expense to demand
      a change of connection and to designate another purchaser or other party with
      whom a new connection may be made, without any liability on the part of
      Mortgagee in making such selection, so long as ordinary care is used in the
      making thereof; and failure of Mortgagor to consent to and promptly effect
      such
      change of connection shall constitute an event of default hereunder, and the
      whole Indebtedness may be immediately declared due and payable, at the option
      of
      Mortgagee, and the Mortgaged Property shall become subject to the foreclosure
      proceedings hereunder.

     

    E. Mortgagor
      authorizes and empowers Mortgagee to receive, hold and collect all sums of
      money
      paid to Mortgagee in accordance with this Assignment, and to apply the same
      as
      hereinafter provided, all without any liability or responsibility on the part
      of
      Mortgagee, save and except as to good faith in so receiving and applying such
      sums. All payments provided for in this Assignment shall be paid promptly to
      Mortgagee, and any provisions contained in any note or notes evidencing the
      Indebtedness or any part thereof to the contrary notwithstanding, Mortgagee
      may
      apply the same or so much thereof as it elects to the payment of the
      Indebtedness, application to be made in such manner as it may elect, regardless
      of whether the application so made shall exceed the payments of principal and
      interest then due as provided in the note or notes evidencing the Indebtedness.
      After such application has been so made by Mortgagee, the balance of any such
      payment or payments remaining shall be paid to Mortgagor. Mortgagee agrees
      to
      give Mortgagor written notice simultaneously with its notice to the purchaser
      that such payments are to be paid to Mortgagee in accordance with the terms
      of
      this Article.

     

    F. It
      is
      understood and agreed that should such payments provided for by this Assignment
      be less than the sum or sums then due on the Indebtedness, such sum or sums
      then
      due shall nevertheless be paid by Mortgagor in accordance with the provisions
      of
      the note, notes, guaranty agreements or other instrument or instruments
      evidencing the Indebtedness, and neither this Assignment nor any provisions
      hereof shall in any manner be construed to affect the terms and provisions
      of
      such note, notes, guaranty agreements or other instrument or instruments
      evidencing the Indebtedness. Likewise, neither this Assignment nor any
      provisions hereof shall in any manner be construed to affect the liens, rights,
      title and remedies herein granted securing the Indebtedness or Mortgagor’s
      liability therefor. The rights under this Assignment are cumulative of all
      other
      rights, remedies, and powers granted under this Mortgage, and are cumulative
      of
      any other security which Mortgagee now holds or may hereafter hold to secure
      the
      payment of the Indebtedness.

     

    
      
        
        

      

      
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    G. Should
      Mortgagor receive any of the proceeds which under the terms hereof should have
      been remitted to Mortgagee, Mortgagor will immediately remit same in full to
      Mortgagee.

     

    H. Upon
      payment in full of all Indebtedness, the remainder of such proceeds held by
      Mortgagee, if any, shall be paid over to Mortgagor, and a release of the
      interest hereby assigned will be made by Mortgagee to Mortgagor at its request
      and its expense.

     

    I. Mortgagee
      shall not be liable for any failure to collect, or for any failure to exercise
      diligence in collecting, any funds assigned hereunder. Mortgagee shall be
      accountable only for funds actually received.

     

    Mortgagor
      hereby acknowledges that this Assignment is intended to be presently,
      unconditionally and immediately effective. Furthermore, Mortgagor agrees that
      Mortgagee is not required to assert any affirmative act, including the
      institution of any legal proceedings, to enforce this Assignment.

     

    ARTICLE VII

     

    ADDITIONAL
      REMEDIES

     

    A. If
      Mortgagor should fail to comply with any of the covenants or obligations of
      Mortgagor hereunder, then Mortgagee may perform the same for the account and
      at
      the expense of Mortgagor but shall not be obligated so to do, and any and all
      expenses incurred or paid in so doing shall be payable by Mortgagor to
      Mortgagee, with interest at the rate agreed upon in the Credit Agreement, from
      the date when same was so incurred or paid, and the amount thereof shall be
      payable on demand and shall be secured by and under this Mortgage, and the
      amount and nature of such expense and the time when paid shall be presumptively
      established by the affidavit of Mortgagee or any officer or agent thereof;
      provided, however, that the exercise of the privileges granted in this paragraph
      shall in nowise be considered or constitute a waiver of the right of Mortgagee
      upon the happening of an Event of Default hereunder to declare the Indebtedness
      at once due and payable in the manner provided under the terms of the Credit
      Agreement but shall be cumulative of such right and all other rights herein
      given.

     

    B. In
      case
      any one or more of the Events of Default shall happen, then in each and every
      such case Mortgagee or any part thereof, whether or not the Indebtedness shall
      have been declared due and payable, in addition to the other rights and remedies
      hereunder, may exercise the following additional remedy, but shall not be
      obligated so to do: Mortgagee may enter into and upon and take possession of
      all
      or any part of the Mortgaged Property and each and every part thereof and may
      exclude Mortgagor, its agents and servants wholly therefrom and have, hold,
      use,
      operate, manage and control the Mortgaged Property and each and every part
      thereof and produce the oil, gas and other minerals therefrom and market the
      same, all at the sole risk and expense of Mortgagor and at the expense of the
      Mortgaged Property, applying the net proceeds so derived, first, to the cost
      of
      maintenance and operation of such Mortgaged Property; second, to the payment
      of
      all Indebtedness secured hereby, principal and interest, application to be
      made
      first to interest and then to principal; and the balance thereof, if any, shall
      be paid to Mortgagor. Upon such payment of all such costs and Indebtedness,
      the
      Mortgaged Property shall be returned to Mortgagor in its then condition and
      Mortgagee shall not be liable to Mortgagor for any damage or injury to the
      Mortgaged Property except such as may be caused through his, its or their fraud
      or willful misconduct.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    C. Mortgagor
      does hereby designate Mortgagee as Mortgagor’s agent to exercise each and every
      remedy set forth herein and to conduct any and all operations and take any
      and
      all action reasonably necessary to do so.

     

    ARTICLE VIII

     

    MISCELLANEOUS

     

    A. Any
      provision in any document that may be executed in connection herewith to the
      contrary notwithstanding, Mortgagee shall in no event be entitled to receive
      or
      collect, nor shall any amounts received hereunder be credited so that Mortgagee
      shall be paid as interest, a sum greater than that authorized by law. If any
      possible construction of this Mortgage or any instrument evidencing the
      Indebtedness, or any or all other notes, guaranties or papers relating to the
      Indebtedness, seems to indicate any possibility of a different power given
      to
      Mortgagee, or any authority to ask for, demand, or receive any larger rate
      of
      interest, such as a mistake in calculation or wording, this clause shall
      override and control, and proper adjustments shall be made
      accordingly.

     

    B. This
      Mortgage, for convenience only, has been divided into Articles and paragraphs,
      and it is understood that the rights, powers, privileges, duties and other
      legal
      relations of Mortgagor and Mortgagee, shall be determined from this Mortgage
      as
      an entirety and without regard to the aforesaid division into Articles and
      paragraphs and without regard to headings prefixed to such
      Articles.

     

    C. The
      terms
      used to designate any of the parties herein shall be deemed to include the
      heirs, successors and assigns of such parties; the term “successors”
shall
      include the heirs, trustees and legal representatives; and the term
“Mortgagee”
shall
      also include any lawful owner, holder or pledgee of any Indebtedness. Whenever
      the context requires, reference herein made to the single number shall be
      understood to include the plural and the plural shall likewise be understood
      to
      include the singular. Words denoting sex shall be construed to include the
      masculine, feminine, and neuter when such construction is appropriate, and
      specific enumeration shall not exclude the general, but shall be construed
      as
      cumulative.

     

    D. Every
      right and remedy provided for herein shall be cumulative of each and every
      other
      right or remedy of Mortgagee, whether herein or otherwise conferred, and may
      be
      enforced concurrently therewith, and the unenforceability or invalidity of
      any
      one or more provisions, clauses, sentences or paragraphs of this Mortgage shall
      not render any other provision, clause, sentence or paragraph unenforceable
      or
      invalid. No security theretofore, herewith or subsequently taken by Mortgagee
      shall in any manner impair or affect the security given by this Mortgage or
      any
      security by endorsement or otherwise presently or previously given, and all
      security shall be taken, considered and held as cumulative. In addition to
      the
      rights and remedies expressly set forth herein, Mortgagee shall be entitled
      to
      all other rights and remedies at law and in equity, which rights and remedies,
      together with rights and remedies described above are cumulative.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    E. This
      Mortgage shall be binding upon the parties, their respective successors and
      assigns, and shall inure to the benefit of Mortgagee, and the covenants and
      agreements herein contained shall constitute covenants running with the
      land.

     

    F. It
      is
      contemplated by the parties hereto that from time to time additional interests
      and properties may or will be added to the interests and properties in
Exhibit
      A
      attached
      hereto by means of supplemental indentures identifying this Mortgage and
      describing such interests and properties to be so added and included, and upon
      the execution of any such supplemental indenture, the lien, rights, titles
      and
      interests created herein shall immediately attach to and be effective as of
      the
      date of such supplemental indenture in respect to any such interests and
      properties so described, and the same being included in the term “Mortgaged
      Property,”
as
      used herein.

     

    G. This
      Mortgage shall be deemed, and may be enforced from time to time, as a chattel
      mortgage, real estate mortgage, Mortgage, security agreement, assignment or
      contract, or as one or more thereof.

     

    H. Without
      in any manner limiting the generality of any of the foregoing hereof, some
      portions of the personal property described hereinabove are or are to become
      fixtures on the Lands or Lands Associated with Pipeline described herein or
      to
      which reference is made herein. In addition, the security interest created
      hereby under applicable provisions of the Uniform Commercial Code attaches
      to
      minerals, including oil, gas and other as-extracted collateral, or accounts
      resulting from the sale thereof, at the wellhead or minehead located on the
      Lands or Lands Associated with Pipeline described or to which reference is
      made
      herein.

     

    I. This
      Mortgage may be filed as provided in Article 9 of the Wyoming Uniform Commercial
      Code relating to the granting of security interests. In this connection, this
      instrument will be presented to a filing officer under the Uniform Commercial
      Code to be filed in the real estate records as a Financing Statement covering
      minerals and fixtures, pursuant to Section 9.502(c) of the Wyoming Uniform
      Commercial Code.

     

    J. For
      purposes of filing this Mortgage as a financing statement, the addresses for
      Mortgagor, as the debtor, and Mortgagee, as the secured party, are as set forth
      hereinabove.

     

    K. The
      failure or delay of Mortgagee to file or give any notice as to this Mortgage,
      or
      to exercise any right, remedy or option to declare the maturity of the principal
      debt, or any other sums hereby secured, or the payment by Mortgagee of any
      taxes, liens, charges or assessments, shall not be taken or deemed a waiver
      of
      any rights to exercise such right or option or to declare any such maturity
      as
      to any past or subsequent violations of any of such covenants or stipulations,
      and shall not waive or prejudice any right or lien hereunder. Any election
      or
      failure by Mortgagee to exercise any rights, remedies or options hereunder
      shall
      not constitute a waiver or prejudice the exercise of other rights or remedies
      existing hereunder. All rights, powers, immunities, remedies and liens of
      Mortgagee existing and to exist hereunder or under any other instruments, and
      all other or additional security, and Mortgagee’s rights at law and in equity,
      shall be cumulative and not exclusive, each of the other; and Mortgagee shall,
      in addition to the remedies herein expressly provided, be entitled to such
      other
      remedies as may now or hereafter exist at law or in equity for securing and
      collecting the Indebtedness, for enforcing the covenants herein, and for
      foreclosing the liens hereof. Resort by Mortgagee to any remedy provided for
      hereunder or at law or in equity shall not prevent concurrent or subsequent
      resort to the same or any other remedy or remedies.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    L. In
      the
      event of a conflict between the terms and provisions of this Mortgage and those
      of the Credit Agreement, the terms and provisions of the Credit Agreement shall
      govern and control.

     

    M. This
      Mortgage is executed by Mortgagee solely for the purpose of acknowledging and
      accepting the benefits conferred on Mortgagee and to evidence the agreements
      of
      Mortgagee set forth herein.

     

    N. Mortgagor
      and Mortgagee intend to contract in strict compliance with applicable usury
      law
      from time to time in effect. In furtherance thereof, the parties stipulate
      and
      agree that none of the terms and provisions contained in this Mortgage 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 charged by applicable law from time to time in effect. No
      Borrower nor any present or future guarantors, endorsers or other Persons
      hereafter becoming liable for payment of the Indebtedness shall ever be liable
      for unearned interest thereon or shall ever be required to pay interest thereon
      in excess of the maximum amount that may be lawfully charged under applicable
      law from time to time in effect. Mortgagee expressly disavows any intention
      to
      charge or collect excessive unearned interest or finance charges in the event
      the maturity of any Indebtedness is accelerated. If (a) the maturity of any
      Indebtedness is accelerated for any reason, (b) any Indebtedness is prepaid
      and
      as a result any amounts held to constitute interest are determined to be in
      excess of the legal maximum, or (c) Mortgagee or any other holder of any or
      all of the Indebtedness shall otherwise collect moneys which are determined
      to
      constitute interest which would otherwise increase the interest on any or all
      of
      the Indebtedness to an amount in excess of that permitted to be charged by
      applicable law then in effect, then all such sums determined to constitute
      interest in excess of such legal limit shall, without penalty, be promptly
      applied to reduce the then outstanding principal of the related Indebtedness
      or,
      at Mortgagor’s or such holder’s option, promptly returned to Mortgagor or the
      other payor thereof upon such determination. In determining whether or not
      the
      interest paid or payable under any specific circumstance exceeds the maximum
      amount permitted under applicable law, Mortgagor or Mortgagee (and any other
      payors thereof) shall to the greatest extent permitted under applicable law,
      (x)
      characterize any non principal payment as an expense, fee or premium rather
      than
      as interest, (y) exclude voluntary prepayments and the effects thereof, and
      (z)
      amortize, prorate, allocate and spread the total amount of interest throughout
      the entire contemplated term of the instruments evidencing the Indebtedness
      in
      accordance with the amounts outstanding from time to time thereunder and the
      maximum legal rate of interest from time to time in effect under applicable
      law
      in order to lawfully charge the maximum amount of interest permitted under
      applicable law.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    O. This
      Mortgage supersedes all prior agreements between the parties with respect to
      its
      subject matter and constitutes (along with the documents referred to in this
      Mortgage) a complete and exclusive statement of the terms of the agreement
      between the parties with respect to its subject matter. This Agreement may
      not
      be amended except by a written agreement executed by the party to be charged
      with the amendment. This Agreement will be governed by, and construed in
      accordance with, the laws of the State of Wyoming, regardless of the laws that
      might otherwise govern under principles of conflict of laws
      thereof.

     

    


     

    (Signature
      page to follow)

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      




    IN
      WITNESS WHEREOF, this instrument is executed as of the date first referenced
      above.

     

    MORTGAGOR/DEBTOR:

     

    


    RANCHER
      ENERGY CORP.,

    a
      Nevada
      corporation

    d/b/a
      RANCHER ENERGY OIL & GAS CORP.

    


    


    By:         
       /s/
      John
      Works                                      
 

    John
      Works,

    President
      and Chief Executive Officer

     

     

     

    Signature
      Page to Wyoming Mortgage

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    MORTGAGEE:

     

    GASROCK
      CAPITAL LLC,

    a
      Delaware limited liability company

     

    


    By:          /s/
      Marshall Lynn Bass_____________ 

    Marshall
      Lynn Bass,

    Principal

     

     

     

    Signature
      Page to Wyoming Mortgage

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    ACKNOWLEDGMENTS

    


    

      
        	
                THE
                  STATE OF COLORADO

              	
                §

              
	 	
                §

              
	
                COUNTY
                  OF DENVER

              	
                §

              


      



    The
      foregoing Mortgage,
      Security Agreement, Financing Statement, and Assignment of Production and
      Revenues
      was
      acknowledged before me this 11th day of October, 2007, by John Works,
      President and Chief Executive Officer of RANCHER ENERGY CORP., a Nevada
      corporation doing business as RANCHER ENERGY OIL & GAS CORP.

    


    WITNESS
      my hand and official seal.

    


    


    Alyssa
      Bodden

    Notary
      Public

    


    My
      Commission expires: 11/10/08

     

     

    


    Acknowledgement
      Page to Wyoming Mortgage

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    
      
        	
                THE
                  STATE OF TEXAS 

              	
                §

              
	
                 

              	
                §

              
	
                COUNTY
                  OF HARRIS 

              	
                §

              


      

    

     

    The
      foregoing Mortgage,
      Security Agreement, Financing Statement, and Assignment of
      Production and
      Revenues
      was
      acknowledged before me this 10th day of October, 2007, by Marshall
      Lynn Bass, Principal of GASROCK CAPITAL LLC, a Delaware limited liability
      company.

     

    WITNESS
      my hand and official seal.

    


    


    Rhonda
      Muschalik

    Notary
      Public

    


    My
      Commission expires: 12/11/09

    


    


    


    Acknowledgement
      Page to Wyoming Mortgage

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A 

    TO
      WYOMING MORTGAGE

    


    Oil
      and Gas Properties

     

    This
      Exhibit
      A
      sets
      forth the description of the property interests covered by the Mortgage to
      which
      this Exhibit
      A
      is
      attached. All of the terms defined in the Mortgage are used in this Exhibit
      A
      with the
      same meanings given therein. This Exhibit
      A
      and the
      Mortgage cover and include the following:

     

    (a) Mortgagor’s
      interest in the Mortgaged Property as such may be enlarged by the discharge
      of
      any payments out of production or by the removal of any charges or encumbrances
      together with Mortgagor’s interests in, to and under or derived from all
      renewals and extensions of any oil, gas and mineral leases described herein,
      it
      being specifically intended hereby that any new oil and gas lease (i) in which
      an interest is acquired by Mortgagor after the termination or expiration of
      any
      oil and gas lease, the interests of Mortgagor in, to and under or derived from
      which are subject to the lien and security interest hereof, and (ii) that covers
      all or any part of the property described in and covered by such terminated
      or
      expired leases, shall, to the extent, and only to the extent such new oil and
      gas lease may cover such property, be considered a renewal or extension of
      such
      terminated or expired lease; and

     

    (b) All
      right, title and interest of Mortgagor in, to and under or derived from all
      existing and future permits, licenses, easements and similar rights and
      privileges that relate to or are appurtenant to any of the described leases
      and/or lands.

     

    Notwithstanding
      the intention of this Agreement to cover all of the right, title and interest
      of
      Mortgagor in and to the described leases and/or lands, Mortgagor hereby
      specifically warrants and represents that the interests covered by this
Exhibit
      A
      are not
      greater than the working interest (without a proportionate increase in the
      associated NRI) nor less than the net revenue interest, overriding royalty
      interest, net profit interest, production payment interest or other interest
      payable out of or measured by production set forth in connection with each
      oil
      and gas well described in this Exhibit
      A.
      In the
      event Mortgagor owns any other or greater interest, such additional interest
      shall also be covered by and included in this Agreement. The designation
“Working Interest” or “WI” means an interest owned in an oil, gas, and mineral
      lease that determines the cost bearing percentage of the owner of such interest.
      The designation “Net Revenue Interest” or “NRI” means net revenue interest, or
      that portion of the production attributable to the owner of a working interest
      after deduction for all royalty burdens, overriding royalty burdens, or other
      burdens on production, except severance, production, windfall profits and other
      similar taxes. The designation “Overriding Royalty Interest” or “ORRI” means an
      interest in production which is free of any obligation for the expense of
      exploration, development and production, bearing only its pro rata share of
      severance, production, windfall profits and other similar taxes.

     

    Exhibit
      A

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A-1


     

    Subject
      Interests

     

     

     

    Exhibit
      A


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A-2

     

    Pipelines
      and Lands Associated with Pipelines

     

    All
      pipelines, gathering systems and related fixtures and equipment associated
      with
      the Subject Interests.

     

     

     

    Exhibit
      A