Document:

Unassociated Document

    EXHIBIT
      10.6

     

    [TX]

     

    DEED
      OF
      TRUST, MORTGAGE,

    ASSIGNMENT,
      SECURITY AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

    

    FROM

    FOOTHILLS
      TEXAS, INC.

    (Organizational
      I.D. Number 4192631)

     

    TO

    JOHN
      K.
      HOWIE, TRUSTEE

     

    AND

    J.
      ARON
& COMPANY, AGENT

     

    Dated
      September 8, 2006

     

    THIS
      INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF
      FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL.

     

    THIS
      INSTRUMENT COVERS, AMONG OTHER THINGS, (A) GOODS WHICH ARE OR ARE TO BECOME
      FIXTURES RELATED TO THE REAL PROPERTY DESCRIBED HEREIN, AND (B) AS-EXTRACTED
      COLLATERAL RELATED TO THE REAL PROPERTY DESCRIBED HEREIN (INCLUDING WITHOUT
      LIMITATION OIL, GAS, OTHER MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY
      BE
      EXTRACTED FROM THE EARTH AND ACCOUNTS ARISING OUT OF THE SALE AT THE WELLHEAD
      OR
      MINEHEAD THEREOF). THIS INSTRUMENT IS TO BE FILED FOR RECORD, AMONG OTHER
      PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES REFERENCED
      IN
EXHIBIT
      A
      HERETO
      AND SUCH FILING SHALL SERVE, AMONG OTHER PURPOSES, AS A FIXTURE FILING AND
      AS A
      FINANCING STATEMENT COVERING AS-EXTRACTED COLLATERAL. THE MORTGAGOR HAS AN
      INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY CONCERNED, WHICH
      INTEREST IS DESCRIBED IN SECTION 1.1 OF THIS INSTRUMENT.

     

    A
      POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW
      THE
      TRUSTEE (AS HEREINAFTER DEFINED) TO TAKE THE MORTGAGED PROPERTIES AND SELL
      THEM
      WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR
      (AS
      HEREINAFTER DEFINED) UNDER THIS MORTGAGE.

     

    
      	
              WHEN
                RECORDED OR FILED RETURN TO:

               

              Thompson
                & Knight L.L.P.

              1700
                Pacific Avenue, Suite 3300

              Dallas,
                Texas 75201

              Attention:
                Sharon Nye

            	
              THIS
                DOCUMENT PREPARED BY:

               

              Shad
                E. Sumrow, Esq.

              Thompson
                & Knight L.L.P.

              1700
                Pacific Avenue, Suite 3300

              Dallas,
                Texas 75201

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    DEED
      OF
      TRUST, MORTGAGE, 

    ASSIGNMENT,
      SECURITY AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

    (this
      “Mortgage”)

     

    ARTICLE
      I. 

     

    Granting
      Clauses; Secured Indebtedness

     

    Section
      1.1.  Grant
      and Mortgage.
      Foothills
      Texas, Inc., a Delaware corporation
      (herein
      called “Mortgagor”),
      in
      consideration of the sum of One Thousand Dollars ($1000.00) to Mortgagor in
      hand
      paid, and in order to secure the payment of the secured indebtedness hereinafter
      referred to and the performance of the obligations, covenants, agreements,
      warranties and undertakings of Mortgagor hereinafter described, does hereby
      (a)
      GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN AND SET OVER to John
      K. Howie,
      Trustee
      (the “Trustee”),
      and
      grant to Trustee a POWER OF SALE (pursuant to this Mortgage and applicable
      law)
      with respect to the following described properties, rights, and interests to
      the
      extent the same are located in (or cover properties located in) the State of
      Texas or in any other state pursuant to the law of which a deed of trust is
      a
      lawful security instrument (the “Mortgaged
      Properties”):

     

    A  The
      oil,
      gas and/or other mineral properties, mineral servitudes, and/or mineral rights
      which are described in Exhibit
      A
      attached
      hereto and made a part hereof;

     

    B  Without
      limitation of the foregoing, all other right, title and interest of Mortgagor
      of
      whatever kind or character (whether now owned or hereafter acquired by operation
      of law or otherwise) in and to (i) the oil, gas and/or mineral leases or
      other agreements described in Exhibit A
      hereto
      and (ii) the lands described or referred to in Exhibit A
      (or
      described in any of the instruments described or referred to in Exhibit A),
      without
      regard to any limitations as to specific lands or depths that may be set forth
      in Exhibit A hereto or in any of the leases or other agreements described in
      Exhibit A hereto;

     

    C  All
      of
      Mortgagor’s interest (whether now owned or hereafter acquired by operation of
      law or otherwise) in and to all presently existing and hereafter created oil,
      gas and/or mineral unitization, pooling and/or communitization agreements,
      declarations and/or orders, and in and to the properties, rights and interests
      covered and the units created thereby (including units formed under orders,
      rules, regulations or other official acts of any federal, state or other
      authority having jurisdiction), which cover, affect or otherwise relate to
      the
      properties, rights and interests described in clause A or B above;

     

    D  All
      of
      Mortgagor’s interest in and rights under (whether now owned or hereafter
      acquired by operation of law or otherwise) all presently existing and hereafter
      created operating agreements, equipment leases, production sales contracts,
      processing agreements, transportation agreements, gas balancing agreements,
      farmout and/or farm-in agreements, salt water disposal agreements, area of
      mutual interest agreements, and other contracts and/or agreements which cover,
      affect, or otherwise relate to the properties, rights and interests described
      in
      clause A, B or C above or to the operation of such properties, rights and
      interests or to the treating, handling, storing, processing, transporting or
      marketing of oil, gas, other hydrocarbons, or other minerals produced from
      (or
      allocated to) such properties, rights and interests (including those contracts
      listed in Exhibit
      A
      hereto),
      as same may be amended or supplemented from time to time;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    E  All
      of
      Mortgagor’s interest (whether now owned or hereafter acquired by operation of
      law or otherwise) in and to all improvements, fixtures, and other real and/or
      personal property (including all wells, pumping units, wellhead equipment,
      tanks, pipelines, flow lines, gathering lines, compressors, dehydration units,
      separators, meters, buildings, injection facilities, salt water disposal
      facilities, and power, telephone and telegraph lines), and all easements,
      servitudes, rights-of-way, surface leases, licenses, permits and other surface
      rights, which are now or hereafter used, or held for use, in connection with
      the
      properties, rights and interests described in clause A, B or C above, or in
      connection with the operation of such properties, rights and interests, or
      in
      connection with the treating, handling, storing, processing, transporting or
      marketing of oil, gas, other hydrocarbons, or other minerals produced from
      (or
      allocated to) such properties, rights and interests; and

     

    F  All
      rights, estates, powers and privileges of Mortgagor appurtenant to the foregoing
      rights, interests and properties.

     

    TO
      HAVE
      AND TO HOLD the Mortgaged Properties unto the Trustee, and its successors or
      substitutes in this trust, and to its or their successors and assigns, in trust,
      however, upon the terms, provisions and conditions herein set forth. Mortgagor
      will warrant and defend title to the Property (as hereinafter defined), free
      and
      clear of all liens, security interests, and encumbrances except for Permitted
      Liens (as defined in the Credit Agreement, hereinafter defined) against the
      claims and demands of all persons claiming or to claim the same or any part
      thereof. 

     

    Section
      1.2.  Scope
      of Mortgage.
      This
      Mortgage is a deed of trust and mortgage of both real and personal property,
      a
      security agreement, a financing statement and an assignment, and also covers
      goods which are or are to become fixtures, as-extracted collateral, and all
      proceeds thereof.

     

    Section
      1.3.  Grant
      of Security Interest.
      In
      order to further secure the payment of the secured indebtedness hereinafter
      referred to and the performance of the obligations, covenants, agreements,
      warranties, and undertakings of Mortgagor hereinafter described, Mortgagor
      hereby grants to Agent (as hereinafter defined) a security interest in the
      entire interest of Mortgagor (whether now owned or hereafter acquired by
      operation of law or otherwise) in and to:

     

    (a)  all
      oil,
      gas, other hydrocarbons, and other minerals produced from or allocated to the
      Mortgaged Properties, and any products processed or obtained therefrom (herein
      collectively called the “Production”),
      together with all proceeds of Production (regardless of when the Production
      to
      which such proceeds relate occurred), and together with all liens and security
      interests securing payment of the proceeds of the Production, including those
      liens and security interests provided for under (i) statutes enacted in the
      jurisdictions in which the Mortgaged Properties are located, or (ii) statutes
      made applicable to the Mortgaged Properties under federal law (or some
      combination of federal and state law);

     

    (b)  without
      limitation of any other provisions of this Section 1.3, all payments received
      in
      lieu of Production (regardless of when such payments accrued, and/or the events
      which gave rise to such payments occurred), including “take or pay” payments and
      similar payments, payments received in settlement of or pursuant to a judgment
      rendered with respect to take or pay or similar obligations or other obligations
      under a production sales contract, payments received in buyout or buydown or
      other settlement of a production sales contract, and payments received under
      a
      gas balancing or similar agreement as a result of (or received otherwise in
      settlement of or pursuant to judgment rendered with respect to) rights held
      by
      Mortgagor as a result of Mortgagor (and/or its predecessors in title) taking
      or
      having taken less gas from lands covered by a Mortgaged Property (or lands
      pooled or unitized therewith) than their ownership of such Mortgaged Property
      would entitle them to receive (the payments described in this subsection (b)
      being herein called “Payments
      in Lieu of Production”);

     

    
      
        
        

      

      
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    (c)  all
      equipment, inventory, improvements, fixtures, accessions, goods and other
      personal property of whatever nature now or hereafter located on or used or
      held
      for use in connection with the Mortgaged Properties (or in connection with
      the
      operation thereof or the treating, handling, storing, processing, transporting,
      or marketing of Production), and all licenses and permits of whatever nature
      now
      or hereafter used or held for use in connection with the Mortgaged Properties
      (or in connection with the operation thereof or the treating, handling, storing,
      processing, transporting, or marketing of Production), and all renewals or
      replacements of the foregoing or substitutions for the foregoing;

     

    (d)  all
      contracts, contract rights, choses in action (i.e., rights to enforce contracts
      or to bring claims thereunder) and other general intangibles (regardless of
      whether the same arose, and/or the events which gave rise to the same occurred,
      on or before or after the date hereof) related to the Mortgaged Properties,
      the
      operation thereof (whether Mortgagor is operator or non-operator), or the
      treating, handling, separation, stabilization, storing, processing,
      transporting, gathering, or marketing of Production (including any of the same
      relating to payment of proceeds of Production or to payment of amounts which
      could constitute Payments in Lieu of Production);

     

    (e)  without
      limitation of the generality of the foregoing, any rights and interests of
      Mortgagor under any present or future hedge or swap agreements, cap, floor,
      collar, exchange, forward or other hedge or protection agreements or
      transactions relating to interest rates or to crude oil, natural gas or other
      hydrocarbons, or any option with respect to any such agreement or transaction
      now existing or hereafter entered into by or on behalf of
      Mortgagor;

     

    (f)  all
      geological, geophysical, engineering, accounting, title, legal, and other
      technical or business data concerning the Mortgaged Properties, the Production
      or any other item of Property (as hereinafter defined) which are now or
      hereafter in the possession of Mortgagor or in which Mortgagor can otherwise
      grant a security interest, and all books, files, records, magnetic media, and
      other forms of recording or obtaining access to such data;

     

    (g)  without
      limitation of or by any of the foregoing, all rights, titles and interests
      now
      owned or hereafter acquired by Mortgagor in any and all goods, inventory,
      equipment, as-extracted collateral, documents, money, instruments, intellectual
      property, certificated securities, uncertificated securities, investment
      property, letters of credit, rights to proceeds of written letters of credit
      and
      other letter-of-credit rights, commercial tort claims, deposit accounts, payment
      intangibles, general intangibles, contract rights, chattel paper (including
      electronic chattel paper and tangible chattel paper), rights to payment
      evidenced by chattel paper, software, supporting obligations and accounts,
      wherever located, and all rights and privileges with respect thereto (all of
      the
      properties, rights and interests described in subsections (a), (b), (c), (d),
      (e), and (f) above, subsection (h) below, and this subsection (g) being herein
      sometimes collectively called the “Collateral”);
      and

     

    (h)  all
      proceeds of the Collateral (the Mortgaged Properties, the Collateral and the
      proceeds of the Mortgaged Properties and of the Collateral being herein
      sometimes collectively called the “Property”).

     

    Except
      as
      otherwise expressly provided in this Mortgage, all terms in this Mortgage
      relating to the Collateral and the grant of the foregoing security interest
      which are defined in the applicable Uniform Commercial Code (the “UCC”)
      shall
      have the meanings assigned to them in Article 9 (or, absent definition in
      Article 9, in any other Article) of the UCC, as those meanings may be amended,
      revised or replaced from time to time. Notwithstanding the foregoing, the
      parties intend that the terms used herein which are defined in the UCC have,
      at
      all times, the broadest and most inclusive meanings possible. Accordingly,
      if
      the UCC shall in the future be amended or held by a court to define any term
      used herein more broadly or inclusively than the UCC in effect on the date
      of
      this Mortgage, then such term, as used herein, shall be given such broadened
      meaning. If the UCC shall in the future be amended or held by a court to define
      any term used herein more narrowly, or less inclusively, than the UCC in effect
      on the date of this Mortgage, such amendment or holding shall be disregarded
      in
      defining terms used in this Mortgage.

     

    
      
        
        

      

      
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    Section
      1.4.  Loan
      Documents and Other Obligations.
      This
      Mortgage is made to secure and enforce the payment and performance of the
      following obligations, indebtedness, loans, and liabilities:

     

    (a)  All
      indebtedness and other obligations of Foothills Resources, Inc., a Nevada
      corporation (“Parent”)
      now or
      hereafter incurred or arising pursuant to the provisions of that certain Credit
      and Guaranty Agreement dated as of September 8, 2006 among Parent, certain
      Subsidiaries of Parent, J. Aron & Company, individually and in its capacity
      as Administrative Agent for the benefit of the Lenders (in such capacity as
      Administrative Agent is herein called “Agent”),
      and
      the lenders from time to time parties thereto (such lenders being herein called
      “Lenders”)
      and all
      supplements thereto and amendments or modifications thereof, and all agreements
      given in substitution therefor or in restatement, renewal or extension thereof,
      in whole or in part (such Credit Agreement as the same may from time to time
      be
      supplemented, amended or modified, and all other agreements given in
      substitution therefor or in restatement, renewal or extension thereof, in whole
      or in part, being herein called the “Credit
      Agreement”);

     

    (b)  The
      Loans
      (as defined in the Credit Agreement) that may be made from time to time by
      Lenders to Parent pursuant to the Credit Agreement, and all promissory notes
      evidencing such Loans, bearing interest as provided in the Credit Agreement
      and
      having a final maturity date on or before September 8, 2010, unless otherwise
      extended pursuant to the Credit Agreement;

     

    (c)  All
      indebtedness and other obligations of Mortgagor now or hereafter incurred or
      arising pursuant to the provisions of the Credit Agreement;

     

    (d)  All
      indebtedness, covenants and other obligations now or hereafter incurred or
      arising pursuant to the provisions of the Credit Agreement, this Mortgage or
      any
      other instrument now or hereafter evidencing, governing, guaranteeing or
      securing the “secured indebtedness” (as hereinafter defined) or any part thereof
      or otherwise executed in connection with any advance or loan evidenced or
      governed by the Credit Agreement (the Credit Agreement, this Mortgage and such
      other instruments being herein sometimes collectively called the “Loan
      Documents”);
      and

     

    (e)  Without
      limiting the generality of the foregoing, all post-petition interest, expenses,
      and other duties and liabilities with respect to indebtedness or other
      obligations described above in this Section
      1.4,
      which
      would be owed but for the fact that they are unenforceable or not allowable
      due
      to the existence of a bankruptcy, reorganization, or similar
      proceeding.

     

    Section
      1.5.  Secured
      Indebtedness.
      The
      indebtedness referred to in Section 1.4, and all renewals, extensions and
      modifications thereof, and all substitutions therefor, in whole or in part,
      are
      herein sometimes referred to as the “secured indebtedness” or the “indebtedness
      secured hereby.”

     

    Section
      1.6.  Limit
      on Secured Indebtedness and Collateral.
      It is
      the intention of Mortgagor, Agent and Lenders that this Mortgage not constitute
      a fraudulent transfer or fraudulent conveyance under any state or federal law
      that may be applied hereto. Mortgagor, and by their acceptance hereof, Agent
      and
      Lenders hereby acknowledge and agree that, notwithstanding any other provision
      of this Mortgage: (a) the indebtedness secured hereby shall be limited to the
      maximum amount of indebtedness that can be incurred or secured by Mortgagor
      without rendering this Mortgage voidable under applicable law relating to
      fraudulent conveyances or fraudulent transfers, and (b) the Property granted
      by
      Mortgagor hereunder shall be limited to the maximum amount of Property that
      can
      be granted by Mortgagor without rendering this Mortgage voidable under
      applicable law relating to fraudulent conveyances or fraudulent
      transfers.

     

    
      
        
        

      

      
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    ARTICLE
      II.

     

    Representations,
      Warranties and Covenants

     

    Section
      2.1.  Mortgagor
      represents, warrants, and covenants
      as
      follows:

     

    (a)  Title
      and Permitted Encumbrances.
      Mortgagor has, and Mortgagor covenants to maintain, good and defensible title
      to
      the fee interests in real property and the oil and gas leasehold interests
      comprising the Property, in each case free and clear of all liens, security
      interests, and encumbrances except for Permitted Liens (as defined in the Credit
      Agreement). The ownership by Mortgagor of the Mortgaged Properties does and
      will, with respect to each well or unit identified on Exhibit
      A,
      attached hereto and made a part hereof, entitle Mortgagor to receive (subject
      to
      the terms and provisions of this Mortgage) a decimal or percentage share of
      the
      oil, gas and other hydrocarbons produced from, or allocated to, such well or
      unit equal to not less than the decimal or percentage share set forth, for
      such
      well or unit, in the column headed “Net Revenue Interest” on Exhibit
      A,
      and
      cause Mortgagor to be obligated to bear a decimal or percentage share of the
      cost of operation of such well or unit equal to not more than the decimal or
      percentage share set forth, for such well or unit, in the column headed “Working
      Interest” on Exhibit
      A
      without
      a corresponding and proportional increase in Mortgator’s “Net Revenue Interest”
attributable thereto. The above-described shares of production which Mortgagor
      is entitled to receive and shares of expenses which Mortgagor is obligated
      to
      bear are not and will not be subject to change (other than changes which arise
      pursuant to non-consent provisions of operating agreements described in
Exhibit
      A
      in
      connection with operations hereafter proposed), except, and only to the extent
      that, such changes are reflected in Exhibit
      A.
      There
      is not and will not be any unexpired financing statement covering any part
      of
      the Property on file in any public office naming any party other than Agent
      as
      secured party and other than Permitted Liens (as defined in the Credit
      Agreement) allowed under Section 6.2(a)(ii) of the Credit Agreement.

     

    (b)  [Reserved].
      

     

    (c)  Not
      Abandon Wells; Participate in Operations.
      Mortgagor will not, without prior written consent of Agent, abandon, or consent
      to the abandonment of, any well producing from the Mortgaged Properties (or
      properties unitized therewith) so long as such well is capable (or is subject
      to
      being made capable through drilling, reworking or other operations which it
      would be commercially feasible to conduct) of producing oil, gas, or other
      hydrocarbons or other minerals in commercial quantities (as determined without
      considering the effect of this Mortgage). Mortgagor will not, without prior
      written consent of Agent, elect not to participate in a proposed operation
      on
      the Mortgaged Properties where the effect of such election would be the
      forfeiture either temporarily (i.e. until a certain sum of money is received
      out
      of the forfeited interest) or permanently of any interest in the Mortgaged
      Properties.

     

    (d)  Defense
      of Mortgage.
      If the
      validity or priority of this Mortgage or of any rights, titles, liens or
      security interests created or evidenced hereby with respect to the Property
      or
      any part thereof or the title of Mortgagor to the Property shall be endangered
      or questioned or shall be attacked directly or indirectly or if any legal
      proceedings are instituted against Mortgagor with respect thereto, Mortgagor
      will give prompt written notice thereof to Agent and at Mortgagor’s own cost and
      expense will diligently endeavor to cure any defect that may be developed or
      claimed, and will take all reasonably necessary and proper steps for the defense
      of such legal proceedings, including the employment of counsel, the prosecution
      or defense of litigation and the release or discharge of all adverse claims,
      and
      Trustee and Agent, or either of them (whether or not named as parties to legal
      proceedings with respect thereto), are hereby authorized and empowered to take
      such additional steps as in their judgment and discretion may be reasonably
      necessary or proper for the defense of any such legal proceedings or the
      protection of the validity or priority of this Mortgage and the rights, titles,
      liens and security interests created or evidenced hereby, including the
      employment of independent counsel, the prosecution or defense of litigation,
      the
      compromise or discharge of any adverse claims made with respect to the Property,
      the purchase of any tax title and the removal of prior liens or security
      interests, and all expenditures so made of every kind and character shall be
      a
      demand obligation (which obligation Mortgagor hereby expressly promises to pay)
      owing by Mortgagor to Agent or Trustee (as the case may be) and shall bear
      interest from the date expended until paid at the rate described in Section
      2.3
      hereof, and the party incurring such expenses shall be subrogated to all rights
      of the person receiving such payment.

     

    
      
        
        

      

      
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    (e)  Insurance.
      Mortgagor will carry insurance as required under the Credit Agreement. In the
      event of foreclosure of this Mortgage, or other transfer of title to the
      Property in extinguishment in whole or in part of the secured indebtedness,
      all
      right, title and interest of Mortgagor in and to such policies then in force
      concerning the Property and all proceeds payable thereunder shall thereupon
      vest
      in the purchaser at such foreclosure or other transferee in the event of such
      other transfer of title.

     

    (f)  Further
      Assurances.
      Mortgagor will, on request of Agent, (i) promptly correct any defect, error
      or omission which may be discovered in the contents of this Mortgage, or in
      any
      other Loan Document, or in the execution or acknowledgment of this Mortgage
      or
      any other Loan Document; and (ii) execute, acknowledge, deliver and record
      and/or file such further instruments (including further deeds of trust,
      mortgages, security agreements, financing statements, continuation statements,
      and assignments of production, accounts, funds, contract rights, general
      intangibles, and proceeds) and do such further acts as may be necessary,
      desirable or proper to carry out more effectively the purposes of this Mortgage
      and the other Loan Documents and to more fully identify and subject to the
      liens
      and security interests hereof any property intended to be covered hereby,
      including any renewals, additions, substitutions, replacements, or appurtenances
      to the Property. Mortgagor shall pay all reasonable costs connected with any
      of
      the foregoing.

     

    (g)  Not
      a
      Foreign Person.
      Mortgagor is not a “foreign person” within the meaning of the Internal Revenue
      Code of 1986, as amended, (hereinafter called the “Code”),
      Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien, foreign
      corporation, foreign partnership, foreign trust or foreign estate as those
      terms
      are defined in the Code and any regulations promulgated
      thereunder).

     

    Section
      2.2.  Compliance
      by Operator.
      As to
      any part of the Mortgaged Properties which is not a working interest, Mortgagor
      agrees to take all commercially reasonable action and to exercise all rights
      and
      remedies as are reasonably available to Mortgagor to cause the owner or owners
      of the working interest in such properties to comply with the covenants and
      agreements contained herein; and as to any part of the Mortgaged Properties
      which is a working interest but which is operated by a party other than
      Mortgagor, Mortgagor agrees to take all commercially reasonable action and
      to
      exercise all rights and remedies as are reasonably available to Mortgagor
      (including all rights under any operating agreement) to cause the party who
      is
      the operator of such property to comply with the covenants and agreements
      contained herein.

     

    
      
        
        

      

      
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    Section
      2.3.  Performance
      on Mortgagor’s Behalf.
      Mortgagor agrees that, if Mortgagor fails to perform any act or to take any
      action which hereunder Mortgagor is required to perform or take, or to pay
      any
      money which hereunder Mortgagor is required to pay, Agent, in Mortgagor’s name
      or its own name, may, but shall not be obligated to, perform or cause to be
      performed such act or take such action or pay such money, and any expenses
      so
      incurred by Agent and any money so paid by Agent shall be a demand obligation
      owing by Mortgagor to Agent (which obligation Mortgagor hereby expressly
      promises to pay) and Agent, upon making such payment, shall be subrogated to
      all
      of the rights of the person, corporation or body politic receiving such payment.
      Each amount due and owing by Mortgagor to Trustee and/or Agent and/or any Lender
      pursuant to this Section 2.3 or other sections of this Mortgage that
      specifically refer to this Section 2.3 shall bear interest each day, from the
      date of such expenditure or payment until paid, at a rate then in effect with
      respect to the Loans; all such amounts, together with such interest thereon,
      shall be a part of the secured indebtedness and shall be secured by this
      Mortgage.

     

    Section
      2.4.  Recording.
      Mortgagor will cause this Mortgage and all amendments and supplements thereto
      and substitutions therefor and all financing statements and continuation
      statements relating thereto to be recorded, filed, re-recorded and refiled
      in
      such manner and in such places as Trustee or Agent shall reasonably request
      and
      will pay all such recording, filing, re-recording and refiling taxes, fees
      and
      other charges.

     

    Section
      2.5.  Reporting
      Compliance.
      Mortgagor agrees to comply with any and all reporting requirements applicable
      to
      the transaction evidenced by the secured indebtedness which are set forth in
      any
      law, statute, ordinance, rule, regulation, order or determination of any
      governmental authority, and further agrees upon request of Agent to furnish
      Agent with evidence of such compliance.

     

    Section
      2.6.  Release
      of Mortgage.
      If all
      of the secured indebtedness be paid in full and no further obligation shall
      exist to provide credit or advance funds to Mortgagor or the maker of any
      promissory note (or other obligor with respect to other indebtedness) secured
      hereby, then, at Mortgagor’s request and expense, this Mortgage shall be
      released as provided in the Credit Agreement; provided, however, that,
      notwithstanding such release, the indemnifications, and other rights, which
      are
      provided herein or in the Credit Agreement to continue following the release
      hereof shall continue in effect unaffected by such release; and provided that
      if
      any payment to any Lender or Agent is held to constitute a preference or a
      voidable transfer under applicable state or federal laws or if for any other
      reason any Lender or Agent is required to refund such payment to the payor
      thereof or to pay the amount thereof to any third party, this Mortgage shall
      be
      reinstated to the extent of such payment or payments.

     

    ARTICLE
      III.

     

    Assignment
      of Production, Accounts, and Proceeds

     

    Section
      3.1.  Assignment
      of Production.
      Mortgagor does hereby absolutely and unconditionally assign, transfer and set
      over to Agent all Production which accrues to Mortgagor’s interest in the
      Mortgaged Properties, all proceeds of such Production and all Payments in Lieu
      of Production (herein collectively referred to as the “Production
      Proceeds”),
      together with the immediate and continuing right to collect and receive such
      Production Proceeds. Mortgagor directs and instructs any and all purchasers
      of
      any Production to pay to Agent all of the Production Proceeds accruing to
      Mortgagor’s interest until such time as such purchasers have been furnished with
      evidence that all secured indebtedness has been paid and that this Mortgage
      has
      been released. Mortgagor agrees that no purchasers of the Production shall
      have
      any responsibility for the application of any funds paid to Agent.

     

    
      
        
        

      

      
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    Section
      3.2.  Effectuating
      Payment of Production Proceeds to Agent.
      Independent of the foregoing provisions and authorities herein granted,
      Mortgagor agrees to execute and deliver any and all transfer orders, division
      orders and other instruments that may be requested by Agent or that may be
      required by any purchaser of any Production for the purpose of effectuating
      payment of the Production Proceeds to Agent. If under any existing sales
      agreements, other than division orders or transfer orders, any Production
      Proceeds are required to be paid by the purchaser to Mortgagor so that under
      such existing agreements payment cannot be made of such Production Proceeds
      to
      Agent, Mortgagor’s interest in all Production Proceeds under such sales
      agreements and in all other Production Proceeds which for any reason may be
      paid
      to Mortgagor shall, when received by Mortgagor, constitute trust funds in
      Mortgagor’s hands and shall be immediately paid over to Agent. Without
      limitation upon any of the foregoing, Mortgagor hereby constitutes and appoints
      Agent as Mortgagor’s special attorney-in-fact (with full power of substitution,
      either generally or for such periods or purposes as Agent may from time to
      time
      prescribe) in the name, place and stead of Mortgagor to do any and every act
      and
      exercise any and every power that Mortgagor might or could do or exercise
      personally with respect to all Production and Production Proceeds (the same
      having been assigned by Mortgagor to Agent pursuant to Section 3.1 hereof),
      expressly inclusive, but not limited to, the right, power and authority
      to:

     

    (a)  Execute
      and deliver in the name of Mortgagor any and all transfer orders, division
      orders, letters in lieu of transfer orders, indemnifications, certificates
      and
      other instruments of every nature that may be requested or required by any
      purchaser of Production from any of the Mortgaged Properties for the purposes
      of
      effectuating payment of the Production Proceeds to Agent or which Agent may
      otherwise deem necessary or appropriate to effect the intent and purposes of
      the
      assignment contained in Section 3.1; and

     

    (b)  If
      under
      any product sales agreements other than division orders or transfer orders,
      any
      Production Proceeds are required to be paid by the purchaser to Mortgagor so
      that under such existing agreements payment cannot be made of such Production
      Proceeds to Agent, to make, execute and enter into such sales agreements or
      other agreements as are necessary to direct Production Proceeds to be payable
      to
      Agent;

     

    giving
      and granting unto said attorney-in-fact full power and authority to do and
      perform any and every act and thing whatsoever necessary and requisite to be
      done as fully and to all intents and purposes, as Mortgagor might or could
      do if
      personally present; and Mortgagor shall be bound thereby as fully and
      effectively as if Mortgagor had personally executed, acknowledged and delivered
      any of the foregoing certificates or documents. The powers and authorities
      herein conferred upon Agent may be exercised by Agent through any person who,
      at
      the time of the execution of the particular instrument, is an officer of Agent.
      The power of attorney herein conferred is granted for valuable consideration
      and
      hence is coupled with an interest and is irrevocable so long as the secured
      indebtedness, or any part thereof, shall remain unpaid. All persons dealing
      with
      Agent or any substitute shall be fully protected in treating the powers and
      authorities conferred by this paragraph as continuing in full force and effect
      until advised by Agent that all the secured indebtedness is fully and finally
      paid. Agent may, but shall not be obligated to, take such action as it deems
      appropriate in an effort to collect the Production Proceeds and any reasonable
      expenses (including reasonable attorney’s fees) so incurred by Agent shall be a
      demand obligation of Mortgagor and shall be part of the secured indebtedness,
      and shall bear interest each day, from the date of such expenditure or payment
      until paid, at the rate described in Section 2.3 hereof.

     

    Section
      3.3.  Change
      of Purchaser.
      To the
      extent a default has occurred hereunder and is continuing, should any person
      now
      or hereafter purchasing or taking Production fail to make payment promptly
      to
      Agent of the Production Proceeds, Agent shall, subject to then existing
      contractual prohibitions, have the right to make, or to require Mortgagor to
      make, a change of purchaser, and the right to designate or approve the new
      purchaser, and Agent shall have no liability or responsibility in connection
      therewith so long as ordinary care is used in making such
      designation.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section
      3.4.  Application
      of Production Proceeds.
      Any
      Production Proceeds received by Agent shall be applied by Agent in accordance
      with the provisions of the Credit Agreement.

     

    Section
      3.5.  Release
      From Liability; Indemnification.
      Agent
      and its successors and assigns are hereby released and absolved from all
      liability for failure to enforce collection of the Production Proceeds and
      from
      all other responsibility in connection therewith, except the responsibility
      of
      each to account to Mortgagor for funds actually received by each. Mortgagor
      agrees to indemnify and hold harmless Agent (for purposes of this paragraph,
      the
      term “Agent”
shall
      include the directors, officers, partners, employees and agents of Agent and
      any
      persons or entities owned or controlled by or affiliated with Agent) from and
      against all claims, demands, liabilities, losses, damages (including
      consequential damages), causes of action, judgments, penalties, costs and
      expenses (including reasonable attorneys’ fees and expenses) imposed upon,
      asserted against or incurred or paid by Agent by reason of the assertion that
      Agent received, either before or after payment in full of the secured
      indebtedness, funds from the Production claimed by third persons (and/or funds
      attributable to sales of Production which (i) were made at prices in excess
      of the maximum price permitted by applicable law or (ii) were otherwise
      made in violation of laws, rules, regulations and/or orders governing such
      sales), and Agent shall have the right to defend against any such claims or
      actions, employing attorneys of its own selection, and if not furnished with
      indemnity satisfactory to it, Agent shall have the right to compromise and
      adjust any such claims, actions and judgments, and in addition to the rights
      to
      be indemnified as herein provided, all amounts paid by Agent in compromise,
      satisfaction or discharge of any such claim, action or judgment, and all court
      costs, attorneys’ fees and other expenses of every character expended by Agent
      pursuant to the provisions of this section shall be a demand obligation (which
      obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to
      Agent and shall bear interest, from the date expended until paid, at the rate
      described in Section 2.3 hereof. The foregoing indemnities shall not terminate
      upon the release, foreclosure or other termination of this Mortgage but will
      survive such release, foreclosure of this Mortgage or conveyance in lieu of
      foreclosure, or other termination, and the repayment of the secured indebtedness
      and the discharge and release of this Mortgage and the other documents
      evidencing and/or securing the secured indebtedness. WITHOUT
      LIMITATION, IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR AGREES THAT THE
      FOREGOING RELEASES AND INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH
      RESPECT TO ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING
      CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS AND
      EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) WHICH IN WHOLE OR
      IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER)
      INDEMNIFIED PARTY.
      Notwithstanding the foregoing, however, such indemnities shall not apply to
      any
      particular indemnified party (but shall apply to the other indemnified parties)
      to the extent the subject of the indemnification is caused by or arises out
      of
      the gross negligence or willful misconduct of such particular indemnified
      party.

     

    Section
      3.6.  Mortgagor’s
      Absolute Obligation to Pay Loans.
      Nothing
      herein contained shall detract from or limit the Obligations of Mortgagor under
      the Loan Documents, and any and all other secured indebtedness, at the time
      and
      in the manner provided herein and in the Loan Documents, regardless of whether
      the Production and Production Proceeds herein assigned are sufficient to pay
      same, and the rights under this Article III shall be cumulative of all other
      rights under the Loan Documents.

     

    
      
        
        

      

      
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    ARTICLE
      IV.

     

    Remedies
      Upon Default

     

    Section
      4.1.  Default.
      The
      term “default” as used in this Mortgage shall mean the occurrence of an
“Event
      of
      Default”
as
      defined in the Credit Agreement.

     

    Section
      4.2.  Acceleration
      of Secured Indebtedness.
      The
      secured indebtedness may be (and in certain circumstances shall automatically
      be) accelerated as provided in the Credit Agreement

     

    Section
      4.3.  Pre-Foreclosure
      Remedies.
      Upon
      the occurrence of a default, Agent is authorized, prior or subsequent to the
      institution of any foreclosure proceedings, to enter upon the Property, or
      any
      part thereof, and to take possession of the Property and all books and records
      relating thereto, and to exercise without interference from Mortgagor any and
      all rights which Mortgagor has with respect to the management, possession,
      operation, protection or preservation of the Property. If necessary to obtain
      the possession provided for above, Agent may invoke any and all remedies to
      dispossess Mortgagor. Mortgagor agrees to peacefully surrender possession of
      the
      Property upon default if requested by Agent. All costs, expenses and liabilities
      of every character incurred by Agent in managing, operating, maintaining,
      protecting or preserving the Property shall constitute a demand obligation
      (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor
      to Agent and shall bear interest from date of expenditure until paid at the
      rate
      described in Section 2.3 hereof, all of which shall constitute a portion of
      the
      secured indebtedness and shall be secured by this Mortgage and by any other
      instrument securing the secured indebtedness. In connection with any action
      taken by Agent pursuant to this Section 4.3, AGENT
      SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY
      ACT
      OR OMISSION OF AGENT (INCLUDING AGENT’S OWN NEGLIGENCE) IN MANAGING THE PROPERTY
      UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR
      BAD
      FAITH OF AGENT,
      nor
      shall Agent be obligated to perform or discharge any obligation, duty or
      liability of Mortgagor arising under any agreement forming a part of the
      Property or arising under any Permitted Lien (as defined in the Credit
      Agreement) or otherwise arising. Mortgagor hereby assents to, ratifies and
      confirms any and all actions of Agent with respect to the Property taken under
      this Section 4.3, other than gross negligence, willful misconduct, or bad faith
      of Agent.

     

    Section
      4.4.  Foreclosure.

     

    (a)  Upon
      the
      occurrence of a default, Trustee is authorized and empowered and it shall be
      Trustee’s special duty at the request of Agent to sell the Mortgaged Properties,
      or any part thereof, as an entirety or in parcels as Agent may elect, at such
      place or places and otherwise in the manner and upon such notice as may be
      required by law or, in the absence of any such requirement, as Trustee may
      deem
      appropriate. If Trustee shall have given notice of sale hereunder, any successor
      or substitute Trustee thereafter appointed may complete the sale and the
      conveyance of the property pursuant thereto as if such notice had been given
      by
      the successor or substitute Trustee conducting the sale. Cumulative of the
      foregoing and the other provisions of this Section 4.4, as to any portion of
      the
      Mortgaged Properties located in the State of Texas (or within the offshore
      area
      over which the United States of America asserts jurisdiction and to which the
      laws of such state are applicable with respect to this Mortgage and/or the
      liens
      or security interests created hereby), such sales of all or any part of such
      Mortgaged Properties shall be conducted at the courthouse of any county (whether
      or not the counties in which such Mortgaged Properties are located are
      contiguous) in the State of Texas in which any part of such Mortgaged Properties
      is situated or which lies shoreward of any Mortgaged Property (i.e., to the
      extent a particular Mortgaged Property lies offshore within the reasonable
      projected seaward extension of the relevant county boundary), at public vendue
      to the highest bidder for cash between the hours of ten o’clock a.m. and four
      o’clock p.m. on the first Tuesday in any month or at such other place, time and
      date as provided by the statutes of the State of Texas then in force governing
      sales of real estate under powers conferred by deed of trust, after having
      given
      notice of such sale in accordance with such statutes;

     

    
      
        
        

      

      
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    (b)  Upon
      the
      occurrence of a default, this Mortgage may be foreclosed as to the Other
      Mortgaged Properties, or any part thereof, in any manner permitted by applicable
      law;

     

    (c)  Upon
      the
      occurrence of a default, Agent may exercise its rights of enforcement with
      respect to the Collateral under the Texas Business and Commerce Code, as
      amended, or under the UCC or any other statute in force in any state to the
      extent the same is applicable law. Cumulative of the foregoing and the other
      provisions of this Section 4.4:

     

    (i)  Agent
      may
      enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to
      take possession of, assemble and collect the Collateral or to render it
      unusable; and

     

    (ii)  Agent
      may
      require Mortgagor to assemble the Collateral and make it available at a place
      Agent designates which is mutually convenient to allow Agent to take possession
      or dispose of the Collateral; and

     

    (iii)  written
      notice mailed to Mortgagor as provided herein at least five (5) days prior
      to
      the date of public sale of the Collateral or prior to the date after which
      private sale of the Collateral will be made shall constitute reasonable notice;
      and

     

    (iv)  in
      the
      event of a foreclosure of the liens and/or security interests evidenced hereby,
      the Collateral, or any part thereof, and the Mortgaged Properties, or any part
      thereof, may, at the option of Agent, be sold, as a whole or in parts, together
      or separately (including where a portion of the Mortgaged Properties is sold,
      the Collateral related thereto may be sold in connection therewith);
      and

     

    (v)  the
      expenses of sale provided for in clause FIRST of Section 4.7 shall include
      the
      reasonable expenses of retaking the Collateral, or any part thereof, holding
      the
      same and preparing the same for sale or other disposition; and

     

    (vi)  should,
      under this subsection, the Collateral be disposed of other than by sale, any
      proceeds of such disposition shall be treated under Section 4.7 as if the same
      were sales proceeds. 

     

    (d)  To
      the
      extent permitted by applicable law, the sale hereunder of less than the whole
      of
      the Property shall not exhaust the powers of sale herein granted or the right
      to
      judicial foreclosure, and successive sale or sales may be made until the whole
      of the Property shall be sold, and, if the proceeds of such sale of less than
      the whole of the Property shall be less than the aggregate of the indebtedness
      secured hereby and the expense of conducting such sale, this Mortgage and the
      liens and security interests hereof shall remain in full force and effect as
      to
      the unsold portion of the Property just as though no sale had been made;
      provided, however, that Mortgagor shall never have any right to require the
      sale
      of less than the whole of the Property. In the event any sale hereunder is
      not
      completed or is defective in the opinion of Agent, such sale shall not exhaust
      the powers of sale hereunder or the right to judicial foreclosure, and Agent
      shall have the right to cause a subsequent sale or sales to be made. Any sale
      may be adjourned by announcement at the time and place appointed for such sale
      without further notice except as may be required by law. The Trustee or his
      successor or substitute acting under power of sale may appoint or delegate
      any
      one or more persons as agent to perform any act or acts necessary or incident
      to
      any sale held by it (including the posting of notices and the conduct of sale),
      and such appointment need not be in writing or recorded. Any and all statements
      of fact or other recitals made in any deed or deeds, or other instruments of
      transfer, given in connection with a sale as to nonpayment of the secured
      indebtedness or as to the occurrence of any default, or as to all of the secured
      indebtedness having been declared to be due and payable, or as to the request
      to
      sell, or as to notice of time, place and terms of sale and the properties to
      be
      sold having been duly given, or, with respect to any sale by the Trustee, or
      any
      successor or substitute trustee, as to the refusal, failure or inability to
      act
      of Trustee or any substitute or successor trustee or the appointment of any
      substitute or successor trustee, or as to any other act or thing having been
      duly done, shall be taken as prima facie evidence of the truth of the facts
      so
      stated and recited. Notwithstanding any reference herein to the Credit Agreement
      or any other Loan Document, all persons dealing with the Mortgaged Properties
      shall be entitled to rely on any document, or certificate, of Agent as to the
      occurrence of an event, such as an Event of Default, and shall not be charged
      with or forced to review any provision of any other document to determine the
      accuracy thereof. With respect to any sale held in foreclosure of the liens
      and/or security interests covered hereby, it shall not be necessary for the
      Trustee, Agent, any public officer acting under execution or order of the court
      or any other party to have physically present or constructively in his/her
      or
      its possession, either at the time of or prior to such sale, the Property or
      any
      part thereof.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Section
      4.5.  Effective
      as Mortgage.
      This
      instrument shall be effective as a mortgage as well as a deed of trust and
      upon
      the occurrence of a default may be foreclosed as to the Mortgaged Properties,
      or
      any portion thereof, in any manner permitted by applicable law, and any
      foreclosure suit may be brought by Trustee or by Agent. To the extent, if any,
      required to cause this instrument to be so effective as a mortgage as well
      as a
      deed of trust, Mortgagor hereby mortgages the Mortgaged Properties to Agent.
      In
      the event a foreclosure hereunder as to the Mortgaged Properties, or any part
      thereof, shall be commenced by Trustee, or his substitute or successor, Agent
      may at any time before the sale of such properties direct Trustee to abandon
      the
      sale, and may then institute suit for the foreclosure of this Mortgage as to
      such properties. It is agreed that if Agent should institute a suit for the
      foreclosure of this Mortgage, Agent may at any time before the entry of a final
      judgment in said suit dismiss the same, and require Trustee, its substitute
      or
      successor, to sell the Mortgaged Properties, or any part thereof, in accordance
      with the provisions of this Mortgage. 

     

    Section
      4.6.  Receiver.
      In
      addition to all other remedies herein provided for, Mortgagor agrees that,
      upon
      the occurrence of a default, Agent shall as a matter of right be entitled to
      the
      appointment of a receiver or receivers for all or any part of the Property,
      whether such receivership be incident to a proposed sale (or sales) of such
      property or otherwise, and without regard to the value of the Property or the
      solvency of any person or persons liable for the payment of the indebtedness
      secured hereby, and Mortgagor does hereby consent to the appointment of such
      receiver or receivers, waives any and all defenses to such appointment, and
      agrees not to oppose any application therefor by Agent, and agrees that such
      appointment shall in no manner impair, prejudice or otherwise affect the rights
      of Agent under Article III hereof. Mortgagor expressly waives notice of a
      hearing for appointment of a receiver and the necessity for bond or an
      accounting by the receiver. Nothing herein is to be construed to deprive Agent
      or any Lender of any other right, remedy or privilege it may now or hereafter
      have under the law to have a receiver appointed. Any money advanced by Agent
      in
      connection with any such receivership shall be a demand obligation (which
      obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to
      Agent and shall bear interest, from the date of making such advancement by
      Agent
      until paid, at the rate described in Section 2.3 hereof.

     

    Section
      4.7.  Proceeds
      of Foreclosure.
      The
      proceeds of any sale held in foreclosure of the liens and/or security interests
      evidenced hereby shall be applied:

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    FIRST,
      to the
      payment of all necessary costs and expenses incident to such foreclosure sale,
      including all court costs and charges of every character in the event foreclosed
      by suit or any judicial proceeding and including a reasonable fee to the Trustee
      if such sale was made by the Trustee acting under the provisions of Section
      4.4.(a);

     

    SECOND,
      to the
      payment of the secured indebtedness (including the principal, interest and
      attorneys’ fees due and unpaid under the Credit Agreement and the amounts due
      and unpaid and owed under this Mortgage) in such manner and order as provided
      by
      the Credit Agreement; and

     

    THIRD,
      the
      remainder, if any there shall be, shall be paid to Mortgagor, or to Mortgagor’s
      heirs, devisees, representatives, successors or assigns, or such other persons
      as may be entitled thereto by law.

     

    Section
      4.8.  Lender
      as Purchaser.
      Any
      Lender shall have the right to become the purchaser at any sale held in
      foreclosure of the liens and/or security interests evidenced hereby, and any
      Lender purchasing at any such sale shall have the right to credit upon the
      amount of the bid made therefor, to the extent necessary to satisfy such bid,
      the secured indebtedness owing to such Lender, or if such Lender holds less
      than
      all of such indebtedness, the pro rata part thereof owing to such Lender,
      accounting to all other Lenders not joining in such bid in cash for the portion
      of such bid or bids apportionable to such non-bidding Lender or
      Lenders.

     

    Section
      4.9.  Foreclosure
      as to Matured Debt.
      Upon
      the occurrence of a default, Agent shall have the right to proceed with
      foreclosure of the liens and/or security interests evidenced hereby without
      declaring the entire secured indebtedness due, and in such event, any such
      foreclosure sale may be made subject to the unmatured part of the secured
      indebtedness and shall not in any manner affect the unmatured part of the
      secured indebtedness, but as to such unmatured part, this Mortgage shall remain
      in full force and effect just as though no sale had been made. The proceeds
      of
      such sale shall be applied as provided in Section 4.7 except that the amount
      paid under clause SECOND thereof shall be only the matured portion of the
      secured indebtedness and any proceeds of such sale in excess of those provided
      for in clauses FIRST and SECOND (modified as provided above) shall be applied
      as
      provided in Section 3.4 hereof. Several sales may be made hereunder without
      exhausting the right of sale for any unmatured part of the secured
      indebtedness.

     

    Section
      4.10.  Remedies
      Cumulative.
      All
      remedies herein provided for are cumulative of each other and of all other
      remedies existing at law or in equity and are cumulative of any and all other
      remedies provided for in any other Loan Document, and, in addition to the
      remedies herein provided, there shall continue to be available all such other
      remedies as may now or hereafter exist at law or in equity for the collection
      of
      the secured indebtedness and the enforcement of the covenants herein and the
      foreclosure of the liens and/or security interests evidenced hereby, and the
      resort to any remedy provided for hereunder or under any such other Loan
      Document or provided for by law shall not prevent the concurrent or subsequent
      employment of any other appropriate remedy or remedies.

     

    Section
      4.11.  Discretion
      as to Security.
      Agent
      may resort to any security given by this Mortgage or to any other security
      now
      existing or hereafter given to secure the payment of the secured indebtedness,
      in whole or in part, and in such portions and in such order as may seem best
      to
      Agent in its sole and absolute discretion, and any such action shall not in
      any
      way be considered as a waiver of any of the rights, benefits, liens or security
      interests evidenced by this Mortgage.

     

    Section
      4.12.  Mortgagor’s
      Waiver of Certain Rights.
      To the
      full extent Mortgagor may do so, 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 Mortgagor, Mortgagor’s heirs, devisees,
      representatives, successors and assigns, and for any and all persons ever
      claiming any interest in the Property, to the extent permitted by applicable
      law, hereby waives and releases all rights of appraisement, valuation, stay
      of
      execution, redemption, notice of intention to mature or declare due the whole
      of
      the secured indebtedness, notice of election to mature or declare due the whole
      of the secured indebtedness and all rights to a marshaling of assets of
      Mortgagor, including the Property, or to a sale in inverse order of alienation
      in the event of foreclosure of the liens and/or 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, the exemption of homestead, the administration of estates of
      decedents, or other matters whatever to defeat, reduce or affect the right
      under
      the terms of this Mortgage to a sale of the Property for the collection of
      the
      secured indebtedness without any prior or different resort for collection,
      or
      the right under the terms of this Mortgage to the payment of the secured
      indebtedness out of the proceeds of sale of the Property in preference to every
      other claimant whatever. If any law referred to in this section and now in
      force, of which Mortgagor or Mortgagor’s heirs, devisees, representatives,
      successors or assigns or any other persons claiming any interest in the
      Mortgaged Properties or the Collateral might take advantage despite this
      section, shall hereafter be repealed or cease to be in force, such law shall
      not
      thereafter be deemed to preclude the application of this section.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Section
      4.13.  Mortgagor
      as Tenant Post-Foreclosure.
      In the
      event there is a foreclosure sale hereunder and at the time of such sale
      Mortgagor or Mortgagor’s representatives, successors or assigns or any other
      persons claiming any interest in the Property by, through or under Mortgagor
      are
      occupying or using the Property, or any part thereof, each and all shall
      immediately become the tenant of the purchaser at such sale, which tenancy
      shall
      be a tenancy from day to day, terminable at the will of either landlord or
      tenant, at a reasonable rental per day based upon the value of the property
      occupied, such rental to be due daily to the purchaser. To the extent permitted
      by applicable law, the purchaser at such sale shall, notwithstanding any
      language herein apparently to the contrary, have the sole option to demand
      immediate possession following the sale or to permit the occupants to remain
      as
      tenants at will. In the event the tenant fails to surrender possession of said
      property upon demand, the purchaser shall be entitled to institute and maintain
      a summary action for possession of the property (such as an action for forcible
      entry and detainer) in any court having jurisdiction. 

     

    ARTICLE
      V.

     

    Miscellaneous

     

    Section
      5.1.  Effective
      as a Financing Statement.
      This
      Mortgage covers goods which are or are to become fixtures on the real property
      described herein, and this Mortgage shall be effective as a financing statement
      filed as a fixture filing with respect to all fixtures included within the
      Property. This Mortgage shall also be effective as a financing statement, filed
      as a fixture filing, covering as-extracted collateral, minerals and other
      substances of value which may be extracted from the earth (including oil and
      gas), and accounts related thereto, which will be financed at the wellhead
      or
      minehead of the wells or mines located on the Mortgaged Properties. This
      Mortgage is to be filed for record in the real property or other appropriate
      records of each county where any part of the Mortgaged Properties is situated
      or
      which lies shoreward of any Mortgaged Property (i.e., to the extent a Mortgaged
      Property lies offshore within the projected seaward extension of the relevant
      county boundaries), and may also be filed in the offices of the Bureau of Land
      Management or the Minerals Management Service or any relevant state agency
      (or
      any successor agencies). This Mortgage shall also be effective as a financing
      statement covering any other Property and may be filed in any other appropriate
      filing or recording office. The mailing address of Mortgagor is the address
      of
      Mortgagor set forth at the end of this Mortgage and the address of Agent from
      which information concerning the security interests hereunder may be obtained
      is
      the address of Agent set forth at the end of this Mortgage.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
      5.2.  Reproduction
      of Mortgage as Financing Statement.
      A
      carbon, photographic, facsimile or other reproduction of this Mortgage or of
      any
      financing statement relating to this Mortgage shall be sufficient as a financing
      statement for any of the purposes referred to in Section 5.1. Without limiting
      any other provision herein, Mortgagor hereby authorizes Agent to file one or
      more financing statements, or renewal or continuation statements thereof,
      describing the Collateral.

     

    Section
      5.3.  Notice
      to Account Debtors.
      In
      addition to, but without limitation of, the rights granted in Article III
      hereof, Agent may, at any time after a default has occurred that is continuing,
      notify the account debtors or obligors of any accounts, chattel paper,
      negotiable instruments or other evidences of indebtedness included in the
      Collateral to pay Agent directly.

     

    Section
      5.4.  Waivers.
      Agent
      may at any time and from time to time in writing waive compliance by Mortgagor
      with any covenant herein made by Mortgagor to the extent and in the manner
      specified in such writing, or consent to Mortgagor’s doing any act which
      hereunder Mortgagor is prohibited from doing, or to Mortgagor’s failing to do
      any act which hereunder Mortgagor is required to do, to the extent and in the
      manner specified in such writing, or release any part of the Property or any
      interest therein or any Production Proceeds from the lien and security interest
      of this Mortgage, without the joinder of Trustee. Any party liable, either
      directly or indirectly, for the secured indebtedness or for any covenant herein
      or in any other Loan Document may be released from all or any part of such
      obligations without impairing or releasing the liability of any other party.
      No
      such act shall in any way impair any rights or powers hereunder except to the
      extent specifically agreed to in such writing.

     

    Section
      5.5.  No
      Impairment of Security.
      The
      lien, security interest and other security rights hereunder shall not be
      impaired by any indulgence, moratorium or release which may be granted,
      including any renewal, extension or modification which may be granted with
      respect to any secured indebtedness, or any surrender, compromise, release,
      renewal, extension, exchange or substitution which may be granted in respect
      of
      the Property (including Production Proceeds), or any part thereof or any
      interest therein, or any release or indulgence granted to any endorser,
      guarantor or surety of any secured indebtedness.

     

    Section
      5.6.  Acts
      Not Constituting Waiver.
      Any
      default may be waived without waiving any other prior or subsequent default.
      Any
      default may be remedied without constituting a waiver by Agent or any Lender
      of
      the default remedied. Neither failure to exercise, nor delay in exercising,
      any
      right, power or remedy upon any default shall be construed as a waiver of such
      default or as a waiver of the right to exercise any such right, power or remedy
      at a later date. No single or partial exercise of any right, power or remedy
      hereunder shall exhaust the same or shall preclude any other or further exercise
      thereof, and every such right, power or remedy hereunder may be exercised at
      any
      time and from time to time. No modification or waiver of any provision hereof
      nor consent to any departure by Mortgagor therefrom shall in any event be
      effective unless the same shall be in writing and signed by Agent and then
      such
      waiver or consent shall be effective only in the specific instances, for the
      purpose for which given and to the extent therein specified. No notice to nor
      demand on Mortgagor in any case shall of itself entitle Mortgagor to any other
      or further notice or demand in similar or other circumstances. Acceptance of
      any
      payment in an amount less than the amount then due on any secured indebtedness
      shall be deemed an acceptance on account only and shall not in any way excuse
      the existence of a default hereunder (except to the extent waived by Required
      Lenders (as defined in the Credit Agreement) in writing in compliance with
      Section 10.5 of the Credit Agreement).

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Section
      5.7.  Mortgagor’s
      Successors.
      In the
      event the ownership of the Property or any part thereof becomes vested in a
      person other than Mortgagor, then, without notice to Mortgagor, such successor
      or successors in interest may be dealt with, with reference to this Mortgage
      and
      to the indebtedness secured hereby, in the same manner as with Mortgagor,
      without in any way vitiating or discharging Mortgagor’s liability hereunder or
      for the payment of the indebtedness or performance of the obligations secured
      hereby. No transfer of the Property, no forbearance, and no extension of the
      time for the payment of the indebtedness secured hereby shall operate to
      release, discharge, modify, change or affect, in whole or in part, the liability
      of Mortgagor hereunder or for the payment of the indebtedness or performance
      of
      the obligations secured hereby or the liability of any other person hereunder
      or
      for the payment of the indebtedness secured hereby.

     

    Section
      5.8.  [Reserved.]

     

    Section
      5.9.  Application
      of Payments to Certain Indebtedness.
      If any
      part of the secured indebtedness cannot be lawfully secured by this Mortgage
      or
      if any part of the Property cannot be lawfully subject to the lien and security
      interest hereof to the full extent of such indebtedness, then all payments
      made
      shall be applied on said indebtedness first in discharge of that portion thereof
      which is not secured by this Mortgage.

     

    Section
      5.10.  Compliance
      With Usury Laws.
      It is
      the intent of Mortgagor, Lender and all other parties to the Loan Documents
      to
      contract in strict compliance with applicable usury law from time to time in
      effect. In furtherance thereof, it is stipulated and agreed that, as more fully
      provided in the Credit Agreement, none of the terms and provisions contained
      herein shall ever be construed to create a contract to pay, for the use,
      forbearance or detention of money, interest in excess of the maximum amount
      of
      interest permitted to be collected, charged, taken, reserved, or received by
      applicable law from time to time in effect. 

     

    Section
      5.11.  Substitute
      Trustee.
      The
      Trustee may resign by an instrument in writing addressed to Agent, or Trustee
      may be removed at any time with or without cause by an instrument in writing
      executed by Agent. In case of the death, resignation, removal, or
      disqualification of Trustee, or if for any reason Agent shall deem it desirable
      to appoint a substitute or successor trustee to act instead of the herein named
      trustee or any substitute or successor trustee, then Agent shall have the right
      and is hereby authorized and empowered to appoint a successor trustee, or a
      substitute trustee, without other formality than appointment and designation
      in
      writing executed by Agent and the authority hereby conferred shall extend to
      the
      appointment of other successor and substitute trustees successively until the
      indebtedness secured hereby has been paid in full, or until the Property is
      sold
      hereunder. Such appointment and designation by Agent shall be full evidence
      of
      the right and authority to make the same and of all facts therein recited.
      If
      Agent is a corporation or association and such appointment is executed in its
      behalf by an officer of such corporation or association, such appointment shall
      be conclusively presumed to be executed with authority and shall be valid and
      sufficient without proof of any action by the board of directors or any superior
      officer of the corporation or association. Agent may act through an agent or
      attorney-in-fact in substituting trustees. Upon the making of any such
      appointment and designation, all of the estate and title of Trustee in the
      Mortgaged Properties shall vest in the named successor or substitute Trustee
      and
      such successor or substitute shall thereupon succeed to, and shall hold, possess
      and execute, all the rights, powers, privileges, immunities and duties herein
      conferred upon Trustee; but nevertheless, upon the written request of Agent
      or
      of the successor or substitute Trustee, the Trustee ceasing to act shall execute
      and deliver an instrument transferring to such successor or substitute Trustee
      all of the estate and title in the Mortgaged Properties of the Trustee so
      ceasing to act, together with all the rights, powers, privileges, immunities
      and
      duties herein conferred upon the Trustee, and shall duly assign, transfer and
      deliver any of the properties and moneys held by said Trustee hereunder to
      said
      successor or substitute Trustee. All references herein to Trustee shall be
      deemed to refer to Trustee (including any successor or substitute appointed
      and
      designated as herein provided) from time to time acting hereunder.

     

    
      
        
        

      

      
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    Section
      5.12.  No
      Liability for Trustee.
      THE
      TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE
      IN
      GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES
      WHATSOEVER (INCLUDING THE TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS
      NEGLIGENCE OR WILLFUL MISCONDUCT.
      The
      Trustee shall have the right to rely on any instrument, document or signature
      authorizing or supporting any action taken or proposed to be taken by the
      Trustee hereunder, believed by the Trustee in good faith to be genuine. All
      moneys received by Trustee shall, until used or applied as herein provided,
      be
      held in trust for the purposes for which they were received, but need not be
      segregated in any manner from any other moneys (except to the extent required
      by
      law), and Trustee shall be under no liability for interest on any moneys
      received by him hereunder. Mortgagor hereby ratifies and confirms any and all
      acts which the herein named Trustee or its successor or successors, substitute
      or substitutes, shall do lawfully by virtue hereof. Mortgagor will reimburse
      Trustee for, and indemnify and save Trustee harmless against, any and all
      liability and expenses (including attorneys fees) which may be incurred by
      Trustee in the performance of his duties. The foregoing indemnities shall not
      terminate upon the release, foreclosure or other termination of this Mortgage
      but will survive such release, termination and/or foreclosure of this Mortgage,
      or conveyance in lieu of foreclosure, and the repayment of the secured
      indebtedness and the discharge and release of this Mortgage and the other
      documents evidencing and/or securing the secured indebtedness. Any amount to
      be
      paid hereunder by Mortgagor to Trustee shall be a demand obligation owing by
      Mortgagor to Trustee and shall be subject to and covered by the provisions
      of
      Section 2.3 hereof.

     

    Section
      5.13.  Notices.
      All
      notices, requests, consents, demands and other communications required or
      permitted hereunder shall be in writing and shall be deemed sufficiently given
      or furnished if delivered in compliance with and according to Section 10.1
      of
      the Credit Agreement. Notwithstanding the foregoing, or anything else in the
      Loan Documents which may appear to the contrary, any notice given in connection
      with a foreclosure of the liens and/or security interests created hereunder,
      or
      otherwise in connection with the exercise by Agent, any Lender or Trustee of
      their respective rights hereunder or under any other Loan Document, which is
      given in a manner permitted by applicable law shall constitute proper notice;
      without limitation of the foregoing, notice given in a form required or
      permitted by statute shall (as to the portion of the Property to which such
      statute is applicable) constitute proper notice.

     

    Section
      5.14.  Invalidity
      of Certain Provisions.
      A
      determination that any provision of this Mortgage is unenforceable or invalid
      shall not affect the enforceability or validity of any other provision and
      the
      determination that the application of any provision of this Mortgage to any
      person or circumstance is illegal or unenforceable shall not affect the
      enforceability or validity of such provision as it may apply to other persons
      or
      circumstances.

     

    Section
      5.15.  Interpretation,
      etc.
      Within
      this Mortgage, words of any gender shall be held and construed to include any
      other gender, and words in the singular number shall be held and construed
      to
      include the plural, unless the context otherwise requires. Titles appearing
      at
      the beginning of any subdivisions hereof are for convenience only, do not
      constitute any part of such subdivisions, and shall be disregarded in construing
      the language contained in such subdivisions. References herein to any Section
      or
      Exhibit shall be to a Section or an Exhibit, as the case may be, hereof unless
      otherwise specifically provided. The word “or” is not exclusive. The use herein
      of the word “include” or “including”, when following any general statement, term
      or matter, shall not be construed to limit such statement, term or matter to
      the
      specific items or matters set forth immediately following such word or to
      similar items or matters, whether or not nonlimiting language (such as “without
      limitation” or “but not limited to” or words of similar import) is used with
      reference thereto, but rather shall be deemed to refer to all other items or
      matters that fall within the broadest possible scope of such general statement,
      term or matter. This Mortgage has been reviewed and negotiated by sophisticated
      parties with access to legal counsel and no rule of construction shall apply
      hereto or thereto which would require or allow this Mortgage to be construed
      against any party because of its role in drafting this Mortgage. 

     

    
      
        
        

      

      
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    Section
      5.16.  Certain
      Consents.
      Except
      where otherwise expressly provided herein, in any instance hereunder where
      the
      approval, consent or the exercise of judgment of Agent or any Lender is
      required, the granting or denial of such approval or consent and the exercise
      of
      such judgment shall be within the sole discretion of such party, and such party
      shall not, for any reason or to any extent, be required to grant such approval
      or consent or exercise such judgment in any particular manner, regardless of
      the
      reasonableness of either the request or the judgment of such party.

     

    Section
      5.17.  Certain
      Obligations of Mortgagor.
      Without
      limiting Mortgagor’s obligations hereunder, Mortgagor’s liability hereunder
      shall extend to and include all post-petition interest, expenses, and other
      duties and liabilities with respect to Mortgagor’s obligations hereunder which
      would be owed but for the fact that the same may be unenforceable due to the
      existence of a bankruptcy, reorganization or similar proceeding.

     

    Section
      5.18.  Authority
      of Agent.
      The
      persons constituting Lenders may, by agreement among themselves, provide for
      and
      regulate the exercise of rights and remedies hereunder, but, unless and until
      modified to the contrary in writing signed by all such persons and recorded
      in
      the same counties as this Mortgage is recorded, (i) all persons other than
      Mortgagor and its affiliates shall be entitled to rely on the releases, waivers,
      consents, approvals, notifications and other acts (including the appointment
      of
      substitute or successor trustee, or trustees, hereunder and the bidding in
      of
      all or any part of the secured indebtedness held by any one or more Lenders,
      whether the same be conducted under the provisions hereof or otherwise) of
      Agent, without inquiry into any such agreements or the existence of required
      consent or approval of any persons constituting Lender and without the joinder
      of any party other than Agent in such releases, waivers, consents, approvals,
      notifications or other acts and (ii) all notices, requests, consents,
      demands and other communications required or permitted to be given hereunder
      may
      be given to Agent.

     

    Section
      5.19.  Counterparts.
      This
      Mortgage may be executed in several counterparts, all of which are identical,
      except that, to facilitate recordation, certain counterparts hereof may include
      only that portion of Exhibit A which contains descriptions of the properties
      located in (or otherwise subject to the recording or filing requirements and/or
      protections of the recording or filing acts or regulations of) the recording
      jurisdiction in which the particular counterpart is to be recorded, and other
      portions of Exhibit A shall be included in such counterparts by reference only.
      All of such counterparts together shall constitute one and the same instrument.
      Complete copies of this Mortgage containing the entire Exhibit A have been
      retained by Mortgagor and Agent.

     

    Section
      5.20.  Successors
      and Assigns.
      The
      terms, provisions, covenants, representations, indemnifications and conditions
      hereof shall be binding upon Mortgagor, and the successors and assigns of
      Mortgagor, and shall inure to the benefit of Agent, Trustee and each person
      constituting Lender and their respective successors and assigns, and shall
      constitute covenants running with the Mortgaged Properties. Should the agency
      under which Agent serves be terminated, or otherwise cease to exist, Lenders
      (including the respective successors and assigns of each person constituting
      Lender named herein) shall be deemed to be the successors to Agent. All
      references in this Mortgage to Mortgagor, Agent, Trustee or Lenders shall be
      deemed to include all such successors and assigns.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Section
      5.21.  FINAL
      AGREEMENT OF THE PARTIES.
      THE
      WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
      MAY
      NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
      AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
      PARTIES.

     

    Section
      5.22.  CHOICE
      OF LAW.
      WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS MORTGAGE SHALL BE
      CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
      OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
      STATE AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT TO THE EXTENT
      THAT THE LAW OF A STATE IN WHICH A PORTION OF THE PROPERTY IS LOCATED (OR WHICH
      IS OTHERWISE APPLICABLE TO A PORTION OF THE PROPERTY) NECESSARILY GOVERNS WITH
      RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION,
      PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND OTHER RIGHTS
      AND
      REMEDIES OF THE TRUSTEE OR THE AGENT GRANTED HEREIN, THE LAW OF SUCH STATE
      SHALL
      APPLY AS TO THAT PORTION OF THE PROPERTY LOCATED IN (OR WHICH IS OTHERWISE
      SUBJECT TO THE LAWS OF) SUCH STATE.

     

    Section
      5.23.  Place
      of Payment.
      All
      secured indebtedness which may be owing hereunder at any time by Mortgagor
      shall
      be payable at the place designated in the Credit Agreement (or if no such
      designation is made, at the address of Agent indicated at the end of this
      Mortgage), or at such other place as Agent may designate in
      writing.

     

    [The
      remainder of this page is intentionally left blank.]

    
      
        
        

      

      
        19

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, this instrument is executed by Mortgagor on the date set forth
      below in the acknowledgment to be effective as of the date first written
      above.

     

    
      	 	 	 
	 	FOOTHILLS
              TEXAS, INC.
	 
 	 
 	 
 
	
            	By:  	/s/ W. Kirk Bosche
	 	
              

              W.
                Kirk Bosche

              Assistant
                Secretary and Chief Financial
                Officer

            

    

     

    
      	
              The
                address of Agent is:

              85
                Broad Street

              New
                York, New York 10004

               

               

              The
                address of the Trustee is:

              1000
                Louisiana, Suite 550

              Houston,
                Texas 77002

            	
              The
                address of Mortgagor is:

              4540
                California Avenue, Suite 550

              Bakersfield,
                California 93309Unassociated Document

    EXHIBIT
      10.7

    

    When
      recorded,
      please return to:

    Sharon
      Nye

    Thompson
      &
      Knight L.L.P.

    1700
      Pacific
      Avenue,
      Suite
      3300

    Dallas,
      Texas
      75201

     

    CONVEYANCE
      OF
      OVERRIDING
      ROYALTY INTEREST

     

    THIS
      CONVEYANCE
      OF
      OVERRIDING
      ROYALTY INTEREST (as
      from
      time to time supplemented or
      amended,
      this “Conveyance”),
      dated
      as of September 8, 2006, is made from and by Foothills
      Texas, Inc., a Delaware
      corporation (herein
      called
      “WI
      Owner”),
      to
      and in favor of MTGLQ
      Investors, L.P., a Delaware limited partnership, (herein called
      “Royalty
      Owner”).

     

    ARTICLE
      I

     

    Defined
      Terms

     

    Section
      1.1. Defined
      Terms.
      When
      used in this
      Conveyance
      or
      in
      any
      exhibit or
      schedule
      hereto (unless otherwise defined in any such exhibit or
      schedule),
      the following terms have the respective meanings assigned to them in this
      section or
      in
      the
      sections, subsections, exhibits and schedules referred to
      below:

     

    “Affiliate”
means,
      as to any Person,
      each
      other Person
      that
      directly or
      indirectly
      (through one or
      more
      intermediaries or
      otherwise)
      controls, is controlled by, or
      is
      under
      common control with, such Person.
      A
Person
      shall
      be
      deemed to be “controlled by” any other Person
      if
      such
      other Person
      possesses,
      directly or
      indirectly,
      power

     

    (a) to
      vote
      10% or
      more
      of
      the securities or
      other
      equity interests (on a fully diluted basis) having ordinary voting power for
      the
      election of directors, the managing general partner or
      partners
      or
      the
      managing member or
      members;
      or

     

    (b) to
      direct
or
      cause
      the
      direction of the management and policies of such Person
      whether
      by contract or
      otherwise.

     

    “Annual
      Reserve Report”
means
      the final reserve engineering report prepared by, or audited by, WI Owner’s
      independent petroleum reserve engineers for use in connection with WI Owner’s
      annual audited financial statements for any fiscal year.

     

     “Effective
      Time”
means
      7:00 a.m. local time at the locations of the Subject
      Interests,
      respectively, on
      September 1,
      2006.

     

    “Environmental
      Laws”
means
      any and all Laws
      relating
      to the environment or
      to
      emissions, discharges, releases or
      threatened
      releases of pollutants, contaminants, chemicals, or
      industrial,
      toxic or
      hazardous
      substances or
      wastes
      into
      the
      environment including
      ambient
      air, surface water, ground water, or
      land,
      or
      otherwise
      relating to the manufacture, processing, distribution, use, treatment, storage,
      disposal, transport, or
      handling
      of pollutants, contaminants, chemicals, or
      industrial,
      toxic or
      hazardous
      substances or
      wastes.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Fixed
      Rate”
means,
      for any day, the rate of twelve percent (12%) per annum, based on actual days
      elapsed and a year of 360 days.

     

    “Hazardous
      Materials”
means
      any substances regulated under any Environmental
      Law,
      whether
      as pollutants, contaminants, or
      chemicals,
      or
      as
      industrial,
      toxic or
      hazardous
      substances or
      wastes,
      or
      otherwise.

     

    “Hydrocarbons”
means
      oil, gas and all other minerals, whether or not similar to any of the foregoing
      (and including without limitation casinghead gas, condensate, and sulphur,
      but
      excluding lignite and other surface and near surface minerals not produced
      in
      conjunction with oil or gas). As used herein, the term “Hydrocarbons” includes
      all extracted minerals and substances of any kind, whether organic or
      inorganic

     

    “Internal
      Revenue Code”
means
      the United
      States Internal
      Revenue Code of
      1986,
      as
      amended from time to time and any successor statute or
      statutes,
      together with all rules and regulations promulgated with respect
      thereto.

     

    “Law”
means
      any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree,
      permit, concession, franchise, license, agreement or
      other
      governmental restriction of the United
      States or
      any
      state
or
      political
      subdivision thereof or
      of
      any
      foreign country or
      any
      department, province or
      other
      political subdivision thereof. Any reference to a Law
      includes
      any amendment or
      modification
      to such Law,
      and all
      regulations, rulings, and other Laws
      promulgated
      under such Law.

     

    “Month”
means
      the period between 7:00 a.m. Texas
      time
      on
      the first day of each calendar month
      and
      7:00
      a.m. Texas
      time
      on
      the first day of the next succeeding calendar month.

     

    “ORRI”
has
      the
      meaning assigned to such term in Section 2.1.

     

    “ORRI
      Hydrocarbons”
means
      the
      oil,
      gas
      and other minerals attributable
      to the ORRI.

     

    “Permitted
      Encumbrances”
means
      each of the following, to the extent existing on the date of delivery of this
      Conveyance:

     

    (a)
      the
      contracts, agreements, burdens, encumbrances and other matters set forth as
      being applicable to certain of the Subject
      Interests in
      the
      descriptions of such Subject Interests on Exhibit
      A
hereto.

     

    (b)
      liens
      for
      taxes, assessments or
      other
      governmental charges or
      levies
      which
      are
      not due or
      which
      are
      being contested in good faith by appropriate action promptly initiated and
      diligently conducted and for the payment of which WI
      Owner
      has
      reserved adequate funds.

     

    (c)
      liens
      of
      contractors, subcontractors, carriers, warehousemen, mechanics, laborers
or
      materialmen
      or
      other
      like liens arising by law
      or
      contract
      in the ordinary course of business for sums which
      are
      not due or
      which
      are
      being contested in good faith by appropriate action promptly initiated and
      diligently conducted and for the payment of which WI
      Owner
      has
      reserved adequate funds.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (d)
      covenants,
      restrictions, easements, servitudes, permits, conditions, exceptions,
      reservations, minor rights, minor encumbrances, minor irregularities in title
      or
      conventional
      rights of reassignment prior to abandonment which do not materially interfere
      with the occupation, use and enjoyment by WI
      Owner
      or
      Royalty
      Owner of
      their
      respective interests in the Subject
      Interests in
      the
      normal course of business as presently conducted or
      to
      be
      conducted, materially impair the value thereof for the purpose of such business,
      or
      impair
      the value of the ORRI.

     

    (e)
      liens
      of
      operators under joint operating agreements or
      similar
      contractual arrangements with respect to WI
      Owner’s
      proportionate share of the expense of exploration, development and operation
      of
      oil, gas and mineral leasehold or
      fee
      interests owned jointly with others, to the extent that such liens secure sums
      which
      are
      not due or
      which
      are
      being contested in good faith by appropriate action promptly initiated and
      diligently conducted and for the payment of which WI
      Owner
      has
      reserved adequate funds.

     

    (f)
      liens
      and
      security interests in favor of Affiliates
      of
      Royalty
      Owner,
      provided that the same are subject and subordinate to this
      Conveyance.

     

    “Person”
means
      an individual, corporation, general partnership, limited partnership, limited
      liability company, association, joint stock company, trust or
      trustee
      thereof, estate or
      executor
      thereof, court
      or
      governmental unit or any agency or authority thereof, or
      any
      other
      legally recognizable entity.

     

    “Reimbursable
      Expenses”
means
      all costs and expenses paid or
      incurred
      by or
      on
      behalf
      of Royalty
      Owner or
      its
      Affiliates
      which
      are
      related to: (a)
      the
      negotiation, acquisition, ownership, enforcement, or
      termination
      of the ORRI,
      this
      Conveyance,
      or
      any
      waivers or
      amendments
      hereto or
      thereto,
      or
      (b)
      any
      litigation, contest, release or
      discharge
      of any adverse claim or
      demand
      made or
      proceeding
      instituted by any Person
      affecting
      in any manner whatsoever the ORRI,
      any
ORRI
      Hydrocarbons,
      this
      Conveyance,
      the
      enforcement or
      defense
      hereof
      or
      thereof,
      or
      the
      defense of Royalty
      Owner’s
      and
      its Affiliates’
      exercise of their rights hereunder
      or
      thereunder.
      Included among the Reimbursable
      Expenses are
      (i)
      all
      recording and filing fees, (ii)
      all
      actual and reasonable fees and expenses of counsel, engineers, accountants
      and
      other consultants, experts and advisors for Royalty
      Owner and
      its
Affiliates
      and
      mortgagees, and (iii)
      all
      amounts which Royalty
      Owner is
      entitled to receive hereunder
      and
      all
      costs of Royalty
      Owner in
      exercising any of its remedies hereunder.

     

    “Release”
means
      the disposition or release of Hazardous Materials, other than dispositions
      and
      releases done in material compliance with all applicable Laws and for which
      WI
      Owner otherwise has no material remedial obligations.

     

    “Specified
      Taxes”
means
      all ad valorem or
      property
      taxes assessed against the ORRI and all severance
      taxes or similar taxes assessed against or
      measured
      by production and severance of ORRI
      Hydrocarbons or
      the
      value
      thereof.

     

    “Subject
      Hydrocarbons”
means
      that portion of the Hydrocarbons in and under and that may be produced from
      (or,
      to the
      extent pooled or
      unitized,
      allocated to) the Subject
      Lands which
      is
      attributable to the Subject
      Interests (determined
      after deducting all royalties, overriding
      royalties, production payments and
      similar burdens, excluding only the burdens under this
      Conveyance,
      which
      both burden the Subject
      Interests at
      the
Commencement
      Time and
      are
      reflected in the NRI
      Percentage set
      out
      on Schedule
      I).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Subject
      Interests”
      means:

     

    (a)
      All
      of
      the leasehold interests and other property interests described in Exhibit
      A
attached
      hereto; and

     

    (b)
      Without
      limitation of the foregoing, all other right, title and interest (of whatever
      kind or
      character,
      whether legal or
      equitable
      and whether vested or
      contingent)
      of WI
      Owner
      in
      and to
the
      oil,
      gas
      and other minerals in
      and
      under or
      that
      may
      be produced from any Subject
      Lands (including
      interests
      in oil, gas or
      mineral
      leases to the extent the same cover such lands, overriding
      royalties, production payments and
      net
      profits interests in such lands or
      such
      leases, and fee mineral interests, fee royalty interests and other interests
      in
such
      oil,
      gas
      and other minerals)
      even
      though WI
      Owner’s
      interest in such
      oil,
      gas
      and other minerals may
      be
      incorrectly described in, or
      omitted
      from, Exhibit
      A;
      and

     

    (c)
      All
      rights, titles and interests of WI
      Owner
      in
      and
      to, or
      otherwise
      derived from, all presently existing and valid oil, gas or
      mineral
      unitization, pooling, or
      communitization
      agreements, declarations or
      orders
      and in and to the properties covered and the units created thereby
      (including
      all
      units
      formed under orders, rules, regulations, or
      other
      official acts of any federal, state, or
      other
      authority having jurisdiction, voluntary unitization agreements, designations
      or
      declarations,
      and so-called “working interest units” created under operating agreements
or
      otherwise)
      relating to the properties described in subsections (a)
      or
      (b)
      above
      in
      this definition.

     

    “Subject
      Lands”
means
      the lands described or
      referred
      to in Exhibit
      A
or
      in
      the
      leases and other instruments described in Exhibit A.

     

    “Subject
      Wells”
means
      all wells now located on the Subject
      Lands (whether
      fully drilled and completed or
      not)
      or
      hereafter
      drilled on the Subject
      Lands,
      and
      (unless production therefrom is expressly excluded by the terms of the
      descriptions on Exhibit
      A)
      any
      other
      wells now or
      hereafter
      located on lands or
      leases
      pooled, communitized or
      unitized
      with the Subject
      Interests.

     

    “WI
      Percentage”
means,
      with respect to the various Subject Lands, the percentage set forth on Exhibit
      A
      hereto indicating WI Owner’s Working Interest in such Subject Lands, generally
      by reference to “Working Interest,” “WI,” “WI Percentage,” “Mineral Interest,”
“MI,” or words of similar import. 

     

    “Working
      Interest”
means
      the interest owned in oil and gas leaseholds or other oil and gas interests
      (including leasehold interests, operating rights interests or other cost-bearing
      interests, and mineral fee or ownership interests) that determines the
      percentage share of costs borne by the owner of such interest.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      1.2. Rules
      of Construction.
      All
      references in this
      Conveyance
      to
      articles, sections, subsections and other subdivisions refer to corresponding
      articles, sections, subsections and other subdivisions of this
      Conveyance
      unless
      expressly provided otherwise. Titles appearing at the beginning of any of such
      subdivisions are for convenience only and shall not constitute part of such
      subdivisions and shall be disregarded in construing the language contained
      in
      such subdivisions. The words “this
      Conveyance”,
      “this
      instrument”,
      “herein”,
      “hereof”,
      “hereunder”‘
and
      words of similar import refer to this
      Conveyance
      as
      a
      whole and not to any particular subdivision unless expressly so limited. Unless
      the context otherwise requires: “including”
and
      its
      grammatical variations mean “including
      without limitation”;
      “or”
is
      not
      exclusive; words in the singular form shall be construed to include the plural
      and vice versa; words in any gender include all other genders; references
herein
      to
      any
      instrument or
      agreement
      refer to such instrument or
      agreement
      as it may be from time to time amended or
      supplemented;
      and references herein
      to
      any
Person
      include
      such Person’s
      successors and assigns. All references in this
      Conveyance
      to
      exhibits and schedules refer to exhibits and schedules to this
      Conveyance
      unless
      expressly provided otherwise, and all such exhibits and schedules are hereby
      incorporated herein
      by
      reference and made a part hereof
      for
      all
      purposes.

     

    ARTICLE
      II

     

    Granting
      Provisions

     

    Section
      2.1. Granting
      Clause.
      For a
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, WI
      Owner
      does
      hereby GRANT, BARGAIN, SELL, TRANSFER, ASSIGN, CONVEY, WARRANT and DELIVER
      to
Royalty
      Owner an
      overriding
      royalty interest carved
      out of each Subject
      Interest (collectively,
      the “ORRI”)
      equal
      to five percent (5.0%) of the WI
      Percentage of
      all
      oil,
      gas
      and other minerals in,
      under
      and produced from or
      allocable
      to the Subject
      Lands.

     

    TO
      HAVE
      AND
      TO HOLD the ORRI
      unto
      Royalty
      Owner,
      its
      successors and assigns,
      forever. This Conveyance
      is
      made
      with full substitution and subrogation of Royalty
      Owner in
      and to
      all covenants and warranties by others heretofore given or
      made.

     

    Section
      2.2. Non-Cost-Bearing
      Interest.
      Except
      for Specified Taxes (which are for the account of Royalty Owner), the ORRI
      and
      the
ORRI
      Hydrocarbons shall
      be
      free and clear of (a)
      all
      taxes of any kind, (b) all
      costs
      and expenses associated with acquiring, exploring, developing, maintaining,
      producing, operating, reworking, recompleting, and remediating the Subject
      Interests,
      (c)
      all
      royalties, overriding
      royalties, production payments,
      and
      similar charges burdening the Subject
      Interests,
      and (d)
      all costs for separating, gathering, compressing, treating, processing or
      marketing ORRI Hydrocarbons or of transporting ORRI Hydrocarbons to the point
      of
      sale in a condition to meet pipeline or transporter specifications and
      qualifications.
      All of
      the foregoing taxes (other than Specified Taxes), costs and expenses, royalties,
      overriding
      royalties, production payments,
      and
      similar charges shall be paid by WI
      Owner
      promptly,
      on or
      before
      the dates the same become delinquent (unless being disputed in good faith by
      appropriate proceedings being diligently pursued and for which adequate reserves
      have been established). In addition, WI
      Owner
      will
      promptly (and in any event within 30 days after receiving any notice
or
      statement
      for the same) pay all Reimbursable
      Expenses which
      have been incurred and are unpaid and reimburse Royalty
      Owner for
      any
Reimbursable
      Expenses which
      have been paid by or
      on
      behalf
      of Royalty
      Owner.
      Each
      amount which is to be paid by WI
      Owner
      pursuant
      to this Section 2.3
      which
      is
      instead paid by or
      on
      behalf
      of Royalty
      Owner shall
      bear interest at the Fixed
      Rate on
      each
      day from and including
      the
      date
      of such payment until but not including
      the
      date
      repaid by WI
      Owner.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Section
      2.3. Measurement:
      Hydrocarbons
      Lost or
      Used.
      The
ORRI
      shall
      not
      apply to any oil,
      gas
or
      other
      minerals that
      are
      unavoidably lost in the production thereof or
      in
      the
      compression or
      transportation
      of Subject
      Hydrocarbons prior
      to
      the applicable point of sale or
      which
      are
      used by WI
      Owner
      or
      the
      operator of any Subject
      Well for
      the
      production of Subject
      Hydrocarbons or
      for
      the
      compression or
      transportation
      thereof prior to the applicable point of sale, in each case only to the extent
      the same are lost or
      used
      in
      the course of operations which are being conducted prudently and in a good
      and
      workmanlike manner. WI
      Owner
      hereby
      represents, warrants and covenants to Royalty
      Owner that
      production from each Subject
      Well is
      and
      will continue to be measured at a point prior to any point where gas
or
      oil
      from
      such Subject
      Well is
      commingled with gas or
      oil
      from
      any other well or
      wells
      that are not Subject
      Wells.

     

    Section
      2.4. Proportionate
      Reduction.
      In the
      event of title failure with respect to any tract of Subject Lands that causes
      WI
      Owner to own a Working Interest in such tract that is less than the entire
      WI
      Percentage that is described in Exhibit A hereto with respect to such tract
      of
      Subject Lands, the ORRI for such tract shall be reduced in the same proportion
      that such Working Interest bears to the WI Percentage so described for such
      tract; provided, however, that upon any subsequent acquisition of additional
      interests in such Subject Lands by WI Owner (or any Affiliate of WI Owner)
      the
      ORRI shall be increased accordingly until WI Owner (and its Affiliates) have
      acquired the entire WI Percentage in any Subject Lands that is described in
      Exhibit A hereto. Each such reduction or increase shall occur automatically
      without the need for any action by WI Owner or Royalty Owner. No such reduction
      shall be deemed a breach of any representation or warranty made by WI Owner
      in
      Section 4.2.

     

    Section
      2.5. Renewals
      and Extensions.
      This
Conveyance
      and
      the
ORRI
      shall
      apply to WI
      Owner’s
      and
      its Affiliates’
      interests in all renewals, extensions and other similar arrangements of each
      lease (or
      other
      determinable interest) which is included in the Subject
      Interests,
      whether
      such renewals, extensions or
      arrangements
      have heretofore been obtained by WI
      Owner
      or
      are
      hereafter obtained by or
      for
      WI
      Owner
      or
      any
      Affiliate
      thereof
      and whether or
      not
      the
      same are described in Exhibit
      A.
      For
      the
      purposes of the preceding sentence, a new lease that covers the same interest
      (or
      any
      part
      thereof) covered by a prior lease, and which is acquired within one year after
      the expiration, termination, or
      release
      of such prior lease, shall be treated as a renewal or
      extension
      of such prior lease.

     

    ARTICLE
      III

     

    Marketing
      of
      ORRI
      Hydrocarbons and
      Distribution of Proceeds

     

    Section
      3.1 Nature
      of Marketing Arrangements.
      WI
      Owner
      shall
      have the obligation to prudently market, or
      cause
      to
      be prudently marketed, the ORRI
      Hydrocarbons on
      behalf
      of and for the account of Royalty
      Owner in
      arm’s-length transactions with reputable purchasers, with each
      such
      marketing arrangement (including all
      arrangements relating to sales, treating, transportation, compression and
      processing) to be made upon terms and conditions that
      (a)
are
      at
      least as favorable as WI
      Owner
      or
      any
      Affiliate of WI
      Owner
      obtains for WI
      Owner’s
      share
      of oil,
      gas
or
      other
      minerals attributable
      to the Subject
      Interests or
      attributable
      to any other properties in the same field or
      general
      area, (b)
      are
      in accordance with the provisions of the leases making up the Subject Interests,
      (c) give
      due
      regard to the interests of Royalty
      Owner,
      and
(c)
      unless
      otherwise agreed by Royalty Owner from time to time, provide for floating prices
      generally based on spot-market prices plus or
      minus
      a
      basis differential; provided, however, that no ORRI
      Hydrocarbons are
      or
      will
      become subject to any sales arrangement whereby (i)
      payment
      for ORRI
      Hydrocarbons is
      or
      can
      be
      deferred for a substantial period after the month
      in
      which
      the ORRI
      Hydrocarbons are
      delivered (i.e., in the case of oil, in excess of 30 days, and in the case
      of
      gas in excess of 60 days), or
      (ii)
      payments
      may be made other than by checks, drafts, wire transfer or
      similar
      communications for the immediate payment of money. WI
      Owner
      shall
      duly and prudently perform all obligations performable by it under any
      arrangements by which ORRI
      Hydrocarbons are
      sold
or
      otherwise
      marketed, and shall take all appropriate measures to enforce the performance
      under each such arrangement of the obligations of the other parties thereto.
      As
      to any third parties, all acts of WI
      Owner
      in
      marketing the ORRI
      Hydrocarbons and
      all
      sales or
      other
      marketing agreements executed by WI
      Owner
      in
      accordance herewith shall be binding on Royalty
      Owner and
      the
ORRI;
      it
      being understood that the right and obligation to market the ORRI
      Hydrocarbons is
      at all
      times vested in WI
      Owner,
      and
Royalty
      Owner does
      not
      have any such right or
      obligation.
      Accordingly, it shall not be necessary for Royalty
      Owner to
      join
      in any production
      sales or
      marketing
      agreements or
      any
      amendments to existing production
      sales or
      marketing
      agreements.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Section
      3.2 Distribution
      of Funds.
      Until
      notified by Royalty
      Owner to
      the
      contrary, WI
      Owner
      shall
      receive all payments for (or
      on
      account of) ORRI
      Hydrocarbons and
      shall, on or
      before
      noon on the last business day of each calendar month,
      distribute any such payments received during the previous calendar month
      to
Royalty
      Owner, net only of Specified Taxes, by
      wire
      transfer (or, if consented to by Royalty Owner, by check) to such accounts
      (or
      locations)
      as Royalty
      Owner may
      direct from time to time in writing. Royalty
      Owner shall
      have the right at all times, upon written notice sent to WI
      Owner,
      to
      begin receiving payment for (or
      on
      account of) all ORRI
      Hydrocarbons directly
      from the purchasers thereof or
      from
      any
      other parties obligated to make payment therefor. In the event Royalty
      Owner exercises
      its right to receive payment for (or
      on
      account of) ORRI
      Hydrocarbons directly,
      WI
      Owner
      shall
      immediately cause to be prepared and executed such division orders, transfer
      orders, or
      instructions
      in lieu thereof, as Royalty
      Owner (or
      any
      third
      party) may require from time to time to cause payments to be made directly
      to
Royalty
      Owner;
      in the
      event that, for any reason, Royalty
      Owner cannot
      (or
      does
      not)
      receive such payments directly, the same shall be collected by WI
      Owner
      and
      shall
      constitute trust funds in WI
      Owner’s
      hands,
      to be immediately paid over to Royalty
      Owner by
      wire
      transfer or check to such account or
      location
      as Royalty
      Owner may
      direct from time to time in writing (or
      by
      such
      other form of transfer reasonably specified by Royalty
      Owner).

     

    Section
      3.3 Production
      Records, Statements and Payments.
      WI
      Owner
      shall
      keep full, true, and correct records of the
      oil,
      gas, and other hydrocarbons produced
      from or
      attributable
      to the Subject
      Interests,
      and the
      portion attributable to the ORRI.
      Such
      records may be inspected by Royalty
      Owner or
      its
      authorized representatives and copies made thereof at all reasonable times.
      On
or
      before
      the last business day of each Month,
      WI
      Owner
      shall
      send to Royalty
      Owner a
      statement setting forth (i)
      the
      production from the Subject
      Interests for
      the
      preceding Month,
      (ii)
      the
      portion of such production attributable to the ORRI,
      (iii)
      to
      the
      extent Royalty
      Owner does
      not
      receive direct payment of proceeds from sale of ORRI
      Hydrocarbons pursuant
      to Section 3.2
      above,
      the gross proceeds attributable to the sale of ORRI
      Hydrocarbons
      and any
      Specified Taxes deducted therefrom, and (iv)
      such
      other data as Royalty
      Owner may
      reasonably request, in such form as Royalty
      Owner may
      reasonably request.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV

     

    Representations,
      Warranties and Covenants

     

    WI
      Owner
      hereby
      represents, warrants and covenants for the benefit of Royalty
      Owner as
      follows:

     

    Section
      4.1 Operations.
      The
Subject
      Interests and
      properties unitized therewith are being (and, to the extent the same could
      adversely affect the ownership or
      operation
      of the Subject
      Interests after
      the
      date hereof,
      have
      during WI
      Owner’s
      tenure
      of ownership been) maintained, operated and developed in a good and workmanlike
      manner, in accordance with prudent industry standards and in conformity with
      all
      applicable laws, rules, regulations and orders of all duly constituted
      authorities having jurisdiction and in conformity with all oil, gas
or
      their
      mineral leases, deeds and other contracts and agreements forming a part of
      the
Subject
      Interests.
      WI
      Owner
      has
      all
      governmental licenses and permits necessary or
      appropriate
      to own and operate the Subject
      Interests,
      and
WI
      Owner
      has
      not
      received notice of any violations in respect of any such licenses or
      permits.
      WI
      Owner
      shall
      develop, operate and maintain the Subject
      Interests as
      would
      a prudent operator. Decisions with regard to the conduct of operations will
      be
      made by WI
      Owner
      without
      considering the effect of the ORRI
      as
      a
      burden on the Subject
      Interests.
      As to
      any portions of the Subject
      Interests as
      to
      which WI
      Owner
      is
      not
      the operator, WI
      Owner
      shall
      take all such action and exercise all such rights and remedies as are legally
      available to it to cause the operator to so develop, maintain and operate such
      portions of the Subject
      Interests.

     

    Section
      4.2. Title;
      Permitted
      Encumbrances.
      WI
      Owner
      has
      good
      and defensible title to the Subject
      Interests,
      free
      and clear of all liens, security interests, and encumbrances except for
Permitted
      Encumbrances.
      Such
      qualification as to Permitted
      Encumbrances is
      made
      for the sole purpose of limiting the representations and warranties of
WI
      Owner
      made
      herein,
      and is
      not intended to restrict the description of the Subject
      Interests,
      nor is
      it intended that reference herein
      to
      any
Permitted
      Encumbrance shall
      subordinate the ORRI
      to
      such
Permitted
      Encumbrance or
      otherwise
      cause this
      Conveyance
      or
      any
      rights of Royalty
      Owner hereunder
      to
      be
      made subject to, or
      encumbered
      by, such Permitted
      Encumbrance. Subject
      to Section 2.4, WI Owner
      hereby
      binds itself to WARRANT and FOREVER DEFEND all and singular title to the
ORRI
      unto
      Royalty
      Owner,
      its
      successors and assigns,
      against
      every person
      lawfully
      claiming or
      to
      claim
      the same or
      any
      part
      thereof. This Conveyance
      is
      made
      with full substitution and subrogation of Royalty
      Owner in
      and to
      all covenants, representations and warranties by others heretofore given
or
      made
      with
      respect to the Subject
      Interests.

     

    Section
      4.3. Leases,
      Deeds and Contracts; Performance of Obligations.
      The
      oil, gas or
      mineral
      leases, contracts, servitudes, fees, deeds, and other agreements forming a
      part
      of the Subject
      Interests,
      to the
      extent the same cover or
      otherwise
      relate to the Subject
      Interests,
      are in
      full force and effect, and WI
      Owner
      agrees
      to
      so maintain them in full force and effect to the extent a prudent operator,
      without giving effect to the ORRI
      or
      this
      Conveyance,
      would
      do so.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section
      4.4. Compliance
      with Laws.
      The
Subject
      Lands,
      and
WI
      Owner’s
      present and proposed operations thereon, are in compliance in all material
      respects with all applicable Laws,
      including
      all
      Environmental
      Laws;
      (b)
      WI
      Owner
      has
      taken
      all steps reasonably necessary to determine and has determined that no
Release
      of Hazardous Materials has
      occurred on the Subject
      Lands or as a result of operations on the Subject Lands,
      and the
      use which WI
      Owner
      makes
      and
      intends to make of the Subject
      Lands will
      not
      result in any such Release; (c)
      to
      the
      best of WI
      Owner’s
      knowledge, none of such operations of WI
      Owner,
      and
      none of the Subject
      Lands,
      is the
      subject of any federal, state or
      local
      investigation evaluating whether any remedial action is needed to respond to
      a
      Release of any Hazardous
      Materials into
      the
      environment or
      to
      the
      improper storage or
      disposal
      (including
      storage
      or
      disposal
      at offsite locations) of any Hazardous
      Materials;
      (d)
      neither
      WI
      Owner
      nor,
      to
      the best knowledge of WI
      Owner,
      any
      other Person
      has
      filed
      any notice under any Environmental
      Law indicating
      that WI
      Owner
      is
      responsible for the Release into the environment, or
      the
      improper storage or
      disposal,
      of any Hazardous
      Materials that
      are
      now located on, were removed from, or
      are
      in
      any way related to any Subject
      Lands,
      or
      that
      any
Hazardous
      Materials have
      been
      Released, or
      are
      improperly stored or
      disposed
      of, upon any Subject
      Lands;
      and
(e)
      neither
      WI
      Owner
      nor
      any
      of its Affiliates
      otherwise
      has any material contingent liability in connection with operations on any
      Subject
      Lands for
      the
      Release into the environment, or
      the
      improper storage or
      disposal,
      of any Hazardous Materials. WI
      Owner
      will
      not
      cause or
      permit
      the Subject
      Lands or
      WI
      Owner
      to
      be in
      violation of any Environmental
      Laws or
      other
      Laws
      with
      respect to the Subject
      Lands or
      do
      anything or
      permit
      anything to be done which will subject WI
      Owner,
      Royalty
      Owner or
      the
      Subject
      Lands to
      any
      material remedial obligations under any Environmental
      Laws,
      assuming
      in each case disclosure to the applicable governmental authorities of all
      relevant facts, conditions and circumstances, if any, pertaining to the
Subject
      Lands,
      and
WI
      Owner
      will
      promptly notify Royalty
      Owner in
      writing of any existing, pending or,
      to the
      best knowledge of WI
      Owner,
      threatened investigation or
      inquiry
      of a material nature affecting any Subject
      Lands by
      any
      private party or
      governmental
      authority in connection with any Environmental
      Laws.
      WI
      Owner
      will
      take
      all steps reasonably necessary to determine that no Hazardous
      Materials are
      disposed of or
      otherwise
      Released on or
      to
      the
Subject
      Lands in
      violation of any Environmental
      Laws.
      WI
      Owner
      will
      not
      cause or
      permit
      the Release of any Hazardous
      Materials on
      or
      to
      the
Subject
      Lands in
      violation of any Environmental
      Law and
      covenants and agrees to remove or
      remediate
      any Hazardous
      Materials which
      has
      been Released on the Subject
      Lands in
      amounts which would violate any Environmental
      Laws.

     

    Section
      4.5  Pooling
      and Unitization.
      WI
      Owner, at its option, shall have the right and power to pool or combine the
      acreage covered by any portion of the Subject Interests as to the Hydrocarbons
      or any part thereof, with other land or leases to the fullest extent provided
      in
      the underlying leases comprising the portion of the Subject Interests pooled,
      and Royalty Owner does hereby consent to such pooling and agrees that Royalty
      Owner’s ORRI shall be subject to any such pooled unit, provided, however, that
      such consent and agreement of Royalty Owner shall not apply to any such pooling
      or combination of Subject Interests with other acreage owned by WI Owner or
      any
      of its Affiliates and WI Owner agrees that, unless Royalty Owner otherwise
      consents in writing at the time in question, WI Owner will not make any such
      pooling or combination of Subject Interests with any other acreage owned by
      WI
      Owner or any of its Affiliates.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Section
      4.6. Imbalances.

     

    (a)
      Definitions.
      As used
herein,
      “undertake”
means
      that an owner of production from a Subject
      Well takes
      a
      lesser share of oil or
      gas
      produced from such Subject
      Well than
      the
      share which such owner is entitled to take by virtue of its ownership interest,
      determined without regard to any rights under any production balancing agreement
      or
      similar
      arrangement or
      any
      rights under common law
      with
      respect to production balancing, and “overtake”
means
      that an owner of production from a Subject
      Well takes
      a
      greater share of oil or
      gas
      produced from such Subject
      Well than
      the
      share which such owner is entitled to take by virtue of its ownership interest,
      again determined without regard to any rights under any production balancing
      agreement or
      similar
      arrangement or
      any
      rights under common law
      with
      respect to production balancing. If an owner undertakes, the amount of
      production not taken is “underproduction”
and
      if
      an owner overtakes, the extra share of production taken is “overproduction”.

     

    (b)
      No
      Undertakes
      Without
      Consent.
      WI
      Owner
      will
      not
undertake
      or
      overtake
      from
      a
Subject
      Well (either
      for itself or
      on
      behalf
      of Royalty
      Owner) if an Affiliate
      of
      WI
      Owner
      thereby
      overtakes or
      undertakes.
      WI
      Owner
      may
      otherwise elect to undertake
      or
      overtake
      in
      its
      reasonable business judgment exercised for the benefit of itself and
Royalty
      Owner.
      If any
undertake
      by
      WI
      Owner
      occurs
      in
      violation of this subsection (b),
      the
ORRI
      Hydrocarbons shall
      be
      determined (to the maximum extent allowed under applicable Law
      and
      any
      applicable Permitted
      Encumbrances)
      without
      regard thereto.

     

    (c)
      No
      Balancing From Other Properties.
      WI
      Owner
      will
      not
      allow any Subject
      Interest to
      be
      subject to any production balancing arrangement under which one or
      more
      third Persons
      may
      overtake
      a
      portion
      of the production attributable to such Subject
      Interest as
      a
      result of undertakes or
      overtakes
      (or
      other
      actions or
      inactions)
      with respect to properties other than such Subject
      Interest.
      For the
      purposes of this subsection (c),
      a
      production unit in which all parties have uniform interests shall be considered
      to be a single Subject
      Interest.

     

    Section
      4.7. Royalty
      Right to Join in Sales.
      Whenever (after taking into account all other covenants to Royalty
      Owner’s
      Affiliates
      under
      any
      loan agreement or note purchase agreement with WI Owner) WI
      Owner
      has,
      and
      intends to take, the opportunity to sell any part of its retained interest
      (in
      this section called a “Sold
      Retained Interest”)
      in any
      properties and interests subject to this
      Conveyance,
      WI
      Owner
      shall
      insure that Royalty
      Owner has,
      and
      shall cause Royalty Owner to have, the option to sell that portion of the
ORRI
      that
      burdens the properties and interests to be sold (in this section called a
“Sold
      Royalty”)
      as a
      part of such transaction and at a price which is as favorable as that available
      to WI
      Owner
      (taking
      into consideration that such Sold
      Royalty is
      a cost
      free interest). In exercising such option, Royalty Owner may elect to resell
      the
      Sold Royalty to WI Owner (for further sale on to the purchaser) or to sell
      the
      Sold Royalty directly to the purchaser. Any such resale to WI Owner shall be
      without representation or warranty other than Royalty Owner’s special warranty
      of title to the Related Royalty. WI
      Owner
      shall
      give Royalty
      Owner at
      least
      thirty (30) days notice of any such potential sale (or
      of
      any
      material modification in the terms of any sale of which such a notice was
      previously given). Royalty
      Owner has
      no
      obligation to participate in any such transaction or
      otherwise
      to sell all or
      any
      part
      of any ORRI,
      but if
Royalty
      Owner does
      participate in any such transaction, then regardless of any purchase price
      allocations made by the purchaser in such sale to the Sold
      Retained Interest and
      the
Sold
      Royalty,
      WI
      Owner
      and
      Royalty
      Owner shall
      divide between themselves the aggregate purchase price received by both, net
      of
      costs of sale and any taxes (other than income taxes, which shall be the
      separate obligations of WI
      Owner
      and
      Royalty
      Owner),
      with
WI
      Owner
      receiving
      A/C
      and
      Royalty
      Owner receiving
      B/C,
      where:

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	 	
              “A”

            	
              equals
                the net present value attributable to the Sold Retained Interest,
                as
                reasonably derived by Royalty Owner using the most recent Annual
                Reserve
                Report, any other reserve engineering information, and any other
                information supplied by WI Owner which is relevant to the value of
                the
                Sold Retained Interest,

            

    

    

    
      	 	
              “B”

            	
              equals
                the net present value attributable to the Sold Royalty, as reasonably
                derived by Royalty Owner using the most recent Annual Reserve Report,
                

            

    

    any
      other
      reserve engineering information, and any other information then available to
      Royalty Owner which is relevant to the value of the Sold Royalty, taking into
      account that the Sold Royalty is not subject to various costs and expenses
      burdening the Sold Retained Interest, and

    

    
      	 	
              “C”

            	
              equals
                the sum of A plus B;

            

    

    

    provided,
      however, that if WI Owner is dissatisfied with Royalty Owner’s valuations of the
      Sold Retained Interest or the Sold Royalty, or both, then - prior to the sale
      -
      WI Owner shall have the right, at its expense, to have the Sold Retained
      Interest and the Sold Royalty appraised by an independent appraiser selected
      by
      WI Owner (in this section called the “First
      Appraiser”).
      WI
      Owner shall give Royalty Owner written notice of WI Owner’s election to have the
      Sold Retained Interest and the Sold Royalty appraised within ten (10 ) days
      after WI Owner receives written notice of Royalty Owner’s valuations. The
      appraised values as determined by the First Appraiser shall be the values
      assigned to A and B in place of the values determined by Royalty Owner;
      provided, however, that if Royalty Owner is dissatisfied with the appraisal
      of
      the First Appraiser, Royalty Owner shall have the right, at its expense, to
      have
      the Sold Retained Interest and the Sold Royalty appraised by an independent
      appraiser selected by Royalty Owner (in this section called the “Second
      Appraiser”).
      Royalty Owner shall give WI Owner written notice of Royalty Owner’s election to
      have the Sold Retained Interest and the Sold Royalty appraised within ten (10)
      days after Royalty Owner receives a copy of the written appraisal made by the
      First Appraiser. The appraised values of the Sold Retained Interest and the
      Sold
      Royalty as determined by the First Appraiser and the Second Appraiser shall
      be
      averaged, and such averages shall be the values assigned to A and
      B.

     

    ARTICLE
      V

     

    Assignments
      and
      Transfers

     

    Section
      5.1. Assignment
      and Transfer by Royalty Owner.
      Royalty
      Owner may,
      and
      nothing herein
      contained
      shall in any way limit or
      restrict
      the right of Royalty
      Owner to,
      sell,
      convey, assign, mortgage or
      otherwise
      dispose of the ORRI
      (including
      its
      rights, titles, interests, estates, remedies, powers and privileges appurtenant
      or
      incident
      to the ORRI
      under
      this
      Conveyance),
      in
      whole or
      in
      part.
      No change of ownership of the ORRI
      shall
      be
      binding upon WI
      Owner,
      however, until WI
      Owner
      is
      furnished with copies of the original documents evidencing such change. Upon
      receipt by WI
      Owner
      of
      copies
      of the original documents evidencing a sale, conveyance, assignment, mortgage
      or
      other
      disposition of the ORRI,
      WI
      Owner
      shall
      thereafter deal with the transferee Royalty Owner in place of the
      transferring Royalty Owner and
      references herein
      to
      the
Royalty
      Owner shall
      thereafter be deemed to be references to such transferee Royalty Owner, provided
      that the transferring Royalty Owner shall continue to have, and benefit from,
      all rights to indemnification and reimbursement that are provided
      herein.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Section
      5.2. Assignment
      and Transfer by WI
      Owner.
      Any
      sale, conveyance, assignment, mortgage or
      other
      disposition of the Subject
      Interests,
      or
      any
      part
      thereof or
      interest
      therein, by WI
      Owner
      shall
      be
      subject to this
      Conveyance,
      and in
      the instrument effecting such transfer or
      other
      disposition the transferee or
      other
      disposition recipient must expressly recognize and assume all obligations,
      covenants and agreements of WI
      Owner
      hereunder
      with
      respect to the Subject Interests so sold, conveyed, assigned or otherwise
      disposed of (the “Transferred
      Subject Interests”.
      Upon
      any such sale, conveyance, assignment or other disposition of Transferred
      Subject Interests (other than to an Affiliate of the selling WI Owner) in
      connection with which a purchasing WI Owner has so assumed all obligations,
      covenants and agreements of WI Owner hereunder with respect to such Transferred
      Subject Interests, the selling WI Owner’s obligations under this Conveyance
      shall cease as to such Transferred Subject Interests.

     

    Section
      5.3. Covenants
      Running With the Subject
      Interests.
      All
      covenants and agreements of WI
      Owner
      herein
      contained
      shall be deemed to be covenants running with the Subject
      Interests.
      All of
      the provisions hereof
      shall
      inure to the benefit of Royalty
      Owner and
      its
      successors and assigns.

     

    ARTICLE
      VI

     

    Miscellaneous
      Provisions

     

    Section
      6.1. Further
      Assurances.
      WI
      Owner
      agrees
      to
      execute and deliver to Royalty
      Owner,
      and, to
      the extent it is within WI
      Owner’s
      power
      to do so, to cause any third parties to execute and deliver to Royalty
      Owner,
      all
      such other and additional instruments and to do all such further acts and things
      as may be necessary or
      appropriate
      to more fully vest in and assure to Royalty
      Owner all
      of
      the rights, titles, interests, remedies, powers and privileges herein
      granted
      or
      intended
      so to be.

     

    Section
      6.2. No
      Waiver.
      The
      failure of Royalty Owner to insist upon strict performance of a covenant
hereunder
      or
      of
      any
      obligation hereunder,
      irrespective of the length of time for which such failure continues, shall
      not
      be a waiver of Royalty Owner’s right to demand strict compliance in the future.
      No consent or
      waiver,
      express or
      implied,
      to or
      of
      any
      breach or
      default
      in the performance of any obligation hereunder
      shall
      constitute a consent or
      waiver
      to
or
      of
      any
      other breach or
      default
      in the performance of the same or
      any
      other
      obligation hereunder.
      No
      provision of this
      Conveyance
      shall
      be
      deemed a waiver by Royalty
      Owner of
      any
      rights granted to Royalty
      Owner under
      applicable Law
      governing
      overriding royalty interests and the rights of the owners
      thereof.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      6.3. Applicable
      Law.
      This
Conveyance
      and
      the
      rights and obligations of the parties hereunder
      shall,
      without regard to principles of conflicts of laws, be governed by and
      interpreted, construed and enforced in accordance with the laws of the
State
      of
Texas.
      

     

    Section
      6.4. Severability.
      Every
      provision in this
      Conveyance
      is
      intended to be severable. If any term or
      provision
      hereof
      is
      determined to be invalid, illegal or
      unenforceable
      for any reason whatsoever, such invalidity, illegality or
      unenforceability
      shall not affect the validity, legality and enforceability of the remainder
      of
this
      Conveyance.

     

    Section
      6.5.  NO
      LIABILITY OF ROYALTY OWNER; INDEMNITY. NO ROYALTY OWNER INDEMNITEE SHALL
      EVER BE RESPONSIBLE FOR ANY PART OF THE COSTS, EXPENSES OR LIABILITIES INCURRED
      IN CONNECTION WITH: 
       

      (A)
        THE EXPLORING, DEVELOPING, OPERATING, OWNING, MAINTAINING, REWORKING OR
        RECOMPLETING OF THE SUBJECT INTERESTS OR SUBJECT LANDS, ANY OBLIGATIONS OF
        WI OWNER WITH RESPECT TO ANY TAX PARTNERSHIPS BURDENING THE SUBJECT
        INTERESTS, THE PHYSICAL CONDITION OF THE SUBJECT INTERESTS OR THE SUBJECT
        LANDS,
        OR THE HANDLING, TREATING OR TRANSPORTING OF OIL, GAS OR OTHER MINERALS PRODUCED
        FROM THE SUBJECT LANDS (INCLUDING ANY COSTS, EXPENSES, LOSSES OR LIABILITIES
        RELATED TO VIOLATION OF AN ENVIRONMENTAL LAW OR OTHERWISE RELATED TO DAMAGE
        TO
        OR REMEDIATION OF THE ENVIRONMENT, WHETHER THE SAME ARISE OUT OF ROYALTY
        OWNER’S
        OWNERSHIP OF AN INTEREST IN PROPERTY OR OUT OF THE ACTIONS OF
WI OWNER
        OR ROYALTY
        OWNER
        OR OF THIRD PARTIES OR ARISE OTHERWISE), OR

       

      (B)
        THE FAILURE BY WI OWNER TO HAVE GOOD AND DEFENSIBLE TITLE TO THE SUBJECT
        INTERESTS FREE AND CLEAR OF ALL BURDENS, ENCUMBRANCES, LIENS AND TITLE
        DEFECTS (INCLUDING ANY COSTS, EXPENSES, LOSSES OR LIABILITIES SUFFERED BY
        ANY ROYALTY
        OWNER INDEMNITEE
        AS A RESULT OF ANY CLAIM THAT SUCH ROYALTY
        OWNER INDEMNITEE
        MUST DELIVER OR PAY OVER TO ANY PERSON ANY PART OF THE ORRI HYDROCARBONS
        OR ANY PROCEEDS THEREOF AT ANY TIME PREVIOUSLY RECEIVED OR THEREAFTER TO
        BE
        RECEIVED BY SUCH ROYALTY
        OWNER INDEMNITEE),

      

       

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    

      AND
        WI OWNER AGREES TO INDEMNIFY AND HOLD EACH ROYALTY OWNER INDEMNITEE HARMLESS
        FROM AND AGAINST ALL COSTS, EXPENSES, LOSSES AND LIABILITIES INCURRED BY
        ANY
        ROYALTY OWNER INDEMNITEE (I) IN CONNECTION WITH ANY OF THE FOREGOING OR (II)
        IN
        CONNECTION WITH THE ORRI, THIS CONVEYANCE, OR THE TRANSACTIONS AND EVENTS
        (INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF OR HEREOF) AT ANY TIME ASSOCIATED
        WITH OR CONTEMPLATED IN ANY OF THE FOREGOING OR (III) IN CONNECTION WITH
        ANY TAX
        PARTNERSHIP BURDENING ANY OF THE SUBJECT INTERESTS. SUCH INDEMNITY SHALL
        ALSO
        COVER ALL REASONABLE COSTS AND EXPENSES OF ANY ROYALTY OWNER INDEMNITEE,
        INCLUDING REASONABLE LEGAL FEES AND EXPENSES, WHICH ARE INCURRED INCIDENT
        TO THE
        MATTERS INDEMNIFIED AGAINST. AS USED IN THIS ARTICLE VI, “ROYALTY OWNER
        INDEMNITEES” MEANS ROYALTY OWNER AND ROYALTY OWNER’S SUCCESSORS AND ASSIGNS AND
        PURCHASERS (INCLUDING ANY PERSON WHO AT ANY TIME PURCHASES ORRI HYDROCARBONS),
        ALL OF THEIR RESPECTIVE AFFILIATES, AND ALL OF THE OFFICERS, DIRECTORS, AGENTS,
        BENEFICIARIES, TRUSTEES, ATTORNEYS AND EMPLOYEES OF THEMSELVES AND THEIR
        AFFILIATES.

       

      THE
        FOREGOING INDEMNITY SHALL APPLY WHETHER
        OR NOT ARISING OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR
        STRICT
        LIABILITYOF
        ANY ROYALTY OWNER INDEMNITEE AND SHALL APPLY, WITHOUT LIMITATION, TO ANY
        LIABILITY IMPOSED UPON ANY ROYALTY OWNER INDEMNITEE AS A RESULT OF ANY THEORY
        OF
        STRICT LIABILITY OR ANY OTHER DOCTRINE OF LAW, PROVIDED THAT THE FOREGOING
        INDEMNITY SHALL NOT APPLY TO ANY COSTS, EXPENSES, LOSSES OR LIABILITIES INCURRED
        BY ANY ROYALTY OWNER INDEMNITEE TO THE EXTENT PROXIMATELY CAUSED SOLELY BY
        THE
        GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH ROYALTY OWNER INDEMNITEE.
        THE
        FOREGOING INDEMNITY SHALL SURVIVE ANY TERMINATION OF THIS
        CONVEYANCE.

      

    

    Section
      6.6. Counterparts.
      This
Conveyance
      is
      being
      executed in several counterparts, all of which are identical, except that,
      to
      facilitate recordation, in certain counterparts hereof
      only
      that
      portion of Exhibit
      A
which
      contains specific descriptions of the Subject
      Interests located
      in the recording jurisdiction in which the counterpart is to be recorded shall
      be included, and all other portions of Exhibit
      A
shall
      be
      included by reference only. All of such counterparts together shall constitute
      one and the same instrument. Complete copies of this
      Conveyance,
      containing the entire Exhibit
      A,
      have
      been retained by WI
      Owner
      and
      Royalty
      Owner.

     

    IN
      WITNESS
      WHEREOF, THIS
      CONVEYANCE IS
      EXECUTED on the date set forth in the acknowledgment below, to be effective
      for
      all purposes as of the Effective
      Time.

     

    [Remainder
      of page intentionally left blank.]

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	WI
              OWNER:	FOOTHILLS
              TEXAS, INC.
	 
 	 
 	 
 
	 	By:  	/s/
              W.
              Kirk Bosche
	 	
              

              Name:
                W. Kirk Bosche

            
	 	Title:
              Chief Financial Officer and Assistant
              Secretary

    

     

    
      
        
        

      

      
        
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