Document:

Unassociated Document

    
      

    

    Exhibit
      10.8

     

    
      TEXAS

      

      

      NOTICE
        OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY
        REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT
        THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD
        IN THE
        PUBLIC RECORDS:  YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE
        NUMBER.

      

      WHEN
        RECORDED RETURN TO:

      Porter
        & Hedges, L.L.P.

      1000
        Main
        Street, 36th
        Floor

      Houston,
        Texas 77002

      Attn:     Neal
        M. Kaminsky

       

      

      MORTGAGE,
        DEED OF TRUST, ASSIGNMENT OF

      PRODUCTION,
        SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

      

      FROM

      

      GULF
        WESTERN PETROLEUM LP, A TEXAS LIMITED PARTNERSHIP

      

      TO

      

      THOMAS J. PERICH,
        AS TRUSTEE

      

      FOR
        THE BENEFIT OF

      

      METAGE
        FUNDS LIMITED, AS COLLATERAL AGENT

      

      A
        CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT
        IS
        SUFFICIENT AS A FINANCING STATEMENT.

       

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

       

      THIS
        INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

       

      THIS
        INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.

       

      THIS
        INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.

       

      THIS
        INSTRUMENT COVERS AS-EXTRACTED COLLATERAL, MINERALS AND OTHER SUBSTANCES
        OF
        VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION
        OIL
        AND GAS), AND ACCOUNTS RESULTING FROM THE SALE OF AS-EXTRACTED COLLATERAL,
        AND
        WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE
        PROPERTIES DESCRIBED IN EXHIBIT A HERETO.  THIS FINANCING
        STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE
        REAL
        ESTATE RECORDS OR SIMILAR RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES
        LISTED
        ON EXHIBIT A HERETO.  THE MORTGAGOR HAS AN INTEREST OF RECORD
        IN THE REAL ESTATE CONCERNED, WHICH INTEREST IS DESCRIBED IN EXHIBIT A
        ATTACHED HERETO.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      PORTIONS
        OF THE MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO
        OR
        FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN EXHIBIT A
        HERETO.  THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD OR
        RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS
        OF
        EACH COUNTY IN WHICH SAID LAND OR ANY PORTION THEREOF IS LOCATED.  THE
        MORTGAGOR IS THE OWNER OF RECORD INTEREST IN THE REAL ESTATE
        CONCERNED.  THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF
        FINANCING STATEMENTS.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF
        CONTENTS

       

      
        	 	 	
                Page

              
	 	 	 
	
                ARTICLE
                  I Grant of Lien and Indebtedness Secured

              	
                1

              
	 	 
	
                Section
                  1.01

              	
                Grant
                  of Liens

              	
                1

              
	
                 

              	 	 
	
                Section
                  1.02

              	
                Grant
                  of Security Interest

              	
                4

              
	
                 

              	 	 
	
                Section
                  1.03

              	
                Indebtedness
                  Secured

              	
                5

              
	 	 	 
	
                Section
                  1.04

              	
                Fixture
                  Filing, Etc

              	
                5

              
	 	 	 
	
                Section
                  1.05

              	
                Defined
                  Terms

              	
                5

              
	 	 	 
	
                ARTICLE
                  II Assignment of Production, Accounts and Proceeds

              	
                6

              
	 	 
	
                Section
                  2.01

              	
                Assignment

              	
                6

              
	
                 

              	 	 
	
                Section
                  2.02

              	
                [Reserved]

              	
                7

              
	 	 	 
	
                Section
                  2.03

              	
                No
                  Modification of Payment Obligations

              	
                7

              
	 	 	 
	
                Section
                  2.04

              	
                Effectuating
                  Payment of Production Proceeds to Mortgagee

              	
                7

              
	 	 	 
	
                Section
                  2.05

              	
                Application
                  of Production Proceeds

              	
                7

              
	
                 

              	 	 
	
                Section
                  2.06

              	
                Release
                  from Liability; Indemnification

              	
                7

              
	 	 	 
	
                ARTICLE
                  III Representations, Warranties and Covenants

              	
                8

              
	 	 
	
                Section
                  3.01

              	
                Title

              	
                8

              
	 	 	 
	
                Section
                  3.02

              	
                Defend
                  Title

              	
                9

              
	 	 	 
	
                Section
                  3.03

              	
                Not
                  a Foreign Person

              	
                9

              
	 	 	 
	
                Section
                  3.04

              	
                Rentals,
                  Taxes, Insurance and Fees Paid; Leases in Effect

              	
                9

              
	 	 	 
	
                Section
                  3.05

              	
                Operation
                  By Third Parties

              	
                10

              
	 	 	 
	
                Section
                  3.06

              	
                Failure
                  to Perform

              	
                10

              
	 	 	 
	
                Section
                  3.07

              	
                Sale
                  of Mortgaged Property

              	
                10

              
	 	 	 
	
                Section
                  3.08

              	
                Sale
                  of Production

              	
                11

              
	 	 	 
	
                Section
                  3.09

              	
                Operation
                  of Mortgaged Property

              	
                12

              
	 	 	 
	
                Section
                  3.10

              	
                Suits
                  and Claims

              	
                12

              
	 	 	 
	
                Section
                  3.11

              	
                Environmental

              	
                13

              

      

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  3.12

              	
                Not
                  Abandon Wells; Participate in Operations; Non-Operated
                  Interests

              	
                14

              
	
                 

              	 	 
	
                Section
                  3.13

              	
                Condemnation
                  Awards

              	
                14

              
	 	 	 
	
                Section
                  3.14

              	
                Insurance

              	
                15

              
	 	 	 
	
                Section
                  3.15

              	
                Compliance
                  with Leases

              	
                15

              
	 	 	 
	
                Section
                  3.16

              	
                Further
                  Assurance

              	
                15

              
	 	 	 
	
                Section
                  3.17

              	
                Name
                  and Place of Business

              	
                16

              
	 	 	 
	
                Section
                  3.18

              	
                Compliance
                  with Laws and Agreements

              	
                16

              
	 	 	 
	
                Section
                  3.19

              	
                Management

              	
                16

              
	 	 	 
	
                ARTICLE
                  IV Rights and Remedies

              	
                17

              
	 	 
	
                Section
                  4.01

              	
                Event
                  of Default

              	
                17

              
	 	 	 
	
                Section
                  4.02

              	
                Foreclosure
                  and Sale

              	
                17

              
	 	 	 
	
                Section
                  4.03

              	
                Agents

              	
                19

              
	 	 	 
	
                Section
                  4.04

              	
                Judicial
                  Foreclosure; Receivership

              	
                19

              
	 	 	 
	
                Section
                  4.05

              	
                Foreclosure
                  for Installments

              	
                19

              
	 	 	 
	
                Section
                  4.06

              	
                Separate
                  Sales

              	
                20

              
	 	 	 
	
                Section
                  4.07

              	
                Possession
                  of Mortgaged Property

              	
                20

              
	 	 	 
	
                Section
                  4.08

              	
                Occupancy
                  After Foreclosure

              	
                20

              
	 	 	 
	
                Section
                  4.09

              	
                Remedies
                  Cumulative, Concurrent and Nonexclusive

              	
                20

              
	 	 	 
	
                Section
                  4.10

              	
                No
                  Release of Obligations

              	
                21

              
	 	 	 
	
                Section
                  4.11

              	
                Release
                  of and Resort to Collateral

              	
                21

              
	 	 	 
	
                Section
                  4.12

              	
                Waiver
                  of Redemption, Notice and Marshalling of Assets, Etc.

              	
                21

              
	 	 	 
	
                Section
                  4.13

              	
                Discontinuance
                  of Proceedings

              	
                21

              
	 	 	 
	
                Section
                  4.14

              	
                Application
                  of Proceeds

              	
                22

              
	 	 	 
	
                Section
                  4.15

              	
                Resignation
                  of Operator

              	
                22

              
	 	 	 
	
                Section
                  4.16

              	
                Indemnity

              	
                22

              
	 	 	 
	
                ARTICLE
                  V Trustee

              	
                23

              

      

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  5.01

              	
                Duties,
                  Rights, and Powers of Trustee

              	
                23

              
	
                 

              	 	 
	
                Section
                  5.02

              	
                Successor
                  Trustee

              	
                23

              
	
                 

              	 	 
	
                Section
                  5.03

              	
                Retention
                  of Moneys

              	
                23

              
	 	 	 
	
                ARTICLE
                  VI Miscellaneous

              	
                23

              
	 	 
	
                Section
                  6.01

              	
                Instrument
                  Construed as Mortgage, Etc.

              	
                23

              
	 	 	 
	
                Section
                  6.02

              	
                Release
                  of Mortgage

              	
                24

              
	 	 	 
	
                Section
                  6.03

              	
                Severability

              	
                24

              
	 	 	 
	
                Section
                  6.04

              	
                Successors
                  and Assigns of Parties

              	
                24

              
	 	 	 
	
                Section
                  6.05

              	
                Satisfaction
                  of Prior Encumbrance

              	
                24

              
	 	 	 
	
                Section
                  6.06

              	
                Subrogation
                  of Trustee

              	
                24

              
	 	 	 
	
                Section
                  6.07

              	
                Nature
                  of Covenants

              	
                24

              
	 	 	 
	
                Section
                  6.08

              	
                Notices

              	
                25

              
	 	 	 
	
                Section
                  6.09

              	
                Counterparts

              	
                25

              
	 	 	 
	
                Section
                  6.10

              	
                Effective
                  as a Financing Statement

              	
                25

              
	 	 	 
	
                Section
                  6.11

              	
                No
                  Impairment of Security

              	
                25

              
	 	 	 
	
                Section
                  6.12

              	
                Acts
                  Not Constituting Waiver

              	
                25

              
	 	 	 
	
                Section
                  6.13

              	
                Mortgagor’s
                  Successors

              	
                26

              
	 	 	 
	
                Section
                  6.14

              	
                Certain
                  Consents

              	
                26

              
	 	 	 
	
                Section
                  6.15

              	
                Governing
                  Law

              	
                26

              
	 	 	 
	
                Section
                  6.16

              	
                Exculpation
                  Provisions

              	
                26

              
	 	 	 
	
                Section
                  6.17

              	
                FINAL
                  AGREEMENT

              	
                27

              
	 	 	 
	
                Section
                  6.18

              	
                [Reserved]

              	
                27

              
	 	 	 
	
                Section
                  6.19

              	
                Compliance
                  with Usury Laws

              	
                27

              
	 	 	 
	
                Section
                  6.20

              	
                Certain
                  Obligations of Mortgagor

              	
                27

              
	 	 	 
	
                Section
                  6.21

              	
                Authority
                  of Mortgagee

              	
                27

              

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      MORTGAGE,
        DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY 

      AGREEMENT,
        FIXTURE FILING AND FINANCING STATEMENT

       

      This
        MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT,
        FIXTURE FILING AND FINANCING STATEMENT (this “Mortgage”) is
        entered into as of the Effective Date (as hereinafter defined) by GULF
        WESTERN PETROLEUM LP, a Texas limited partnership, whose address for
        notice is 4801 Woodway, Suite 306 W, Houston, Texas
        77056 (“Mortgagor”), to Thomas J. Perich, as
        Trustee, whose address for notice is 600 Travis, Suite 4200, Houston,
        Texas  77002  (“Trustee”), for the benefit of METAGE
        FUNDS LIMITED, whose address for notice is 8 Pollen Street, London,
        England  W1S 1NG, in its capacity as Collateral Agent for the benefit
        of the holders of the Notes (as defined below) (together with its successors
        and
        assigns, the “Mortgagee”).

       

      RECITALS:

       

      A.           Pursuant
        to that certain Securities Purchase Agreement dated as of September 10, 2007
        (as
        amended, restated, supplemented or otherwise modified from time to time,
        the
“Purchase Agreement”), among Gulf Western Petroleum Corporation, a Nevada
        corporation (the “Company”), and NCIM Limited and Metage Funds Limited,
        each of which is a holder of a Note (together with their respective successors
        and assigns, the “Holders”), each individual Holder made loans and
        certain other financial accommodations (collectively, the “Loans”) to
        Company, as evidenced by that certain senior secured convertible notes in
        an
        original aggregate principal amount of $3,700,000 (such notes, together with
        any
        promissory notes or other securities issued in exchange or substitution therefor
        or replacement thereof, and as any of the same may be amended, supplemented,
        restated or modified and in effect from time to time, the
“Notes”).

       

      B.           Mortgagor
        has executed and delivered to Mortgagee that certain Guaranty dated as of
        the
        date hereof (as amended, restated, supplemented or otherwise modified from
        time
        to time, the “Guaranty”), pursuant to which Mortgagor and certain other
        parties have guaranteed all of the “Obligations” under (and as defined in) the
        Guaranty.

       

      C.           Mortgagor
        has agreed that all of the Indebtedness (as defined in Section 1.03
        hereof) is intended to be secured in part by this Mortgage and this Mortgage
        is
        to be recorded in those jurisdictions as set forth on Exhibit A of this
        Mortgage.

       

      D.           Each
        Holder has conditioned its obligation to make the Loans upon the execution
        and
        delivery by Mortgagor of this Mortgage, and Mortgagor has agreed to enter
        into
        this Mortgage.

       

      THEREFORE,
        in order to comply with the terms and conditions of the Purchase Agreement
        and
        for other good and valuable consideration, the receipt and sufficiency of
        which
        are hereby acknowledged, Mortgagor hereby agrees with Trustee and Mortgagee
        as
        follows:

       

      ARTICLE
        I

      Grant
        of Lien and Indebtedness Secured

      

        Section
          1.01     Grant of Liens.  To
          secure payment of the Indebtedness and the performance of the covenants
          and
          obligations herein contained and contained in the Guaranty and any other
          Loan
          Documents (as defined in Section 1.03(b)) to which Mortgagor is a party,
          Mortgagor does by these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE,
          PLEDGE, HYPOTHECATE, TRANSFER and CONVEY unto Trustee and Trustee’s successors
          and substitutes in trust hereunder, WITH A POWER OF SALE, for the use and
          benefit of Mortgagee, the real and personal property, rights, titles, interests
          and estates described in the following paragraphs (a) through (g) (collectively
          called the “Mortgaged Property”):

        
          
            
              
              

            

            
              1

              
                

              

            

            
              
              

            

          

        

        

        (a)           All
          rights, titles, interests and estates now owned or hereafter acquired by
          Mortgagor in and to the oil and gas leases and/or oil, gas and other mineral
          leases, other mineral properties, mineral servitudes and/or mineral rights,
“as
          extracted collateral” as defined in the Applicable UCC (as defined in Section
          1.02) and other interests and estates and the lands and premises covered
          or
          affected thereby which are described on Exhibit A hereto without
          regard to any limitations as to specific lands or depths that may be set
          forth
          in Exhibit A (collectively called the “Hydrocarbon Property”) or
          which Hydrocarbon Property is otherwise referred to herein, and specifically,
          but without limitation, the undivided interests of Mortgagor which are
          more
          particularly described on attached Exhibit A.

         

        (b)           All
          rights, titles, interests and estates now owned or hereafter acquired by
          Mortgagor in and to (i) the properties now or hereafter pooled or unitized
          with any Hydrocarbon Property; (ii) all presently existing or future
          unitization, communitization, pooling agreements and designations, orders
          or
          declarations of pooled units and the units created thereby (including,
          without
          limitation, all units created under orders, regulations, rules or other
          official
          acts of any Federal, State or other governmental body or agency having
          jurisdiction and any units created solely among working interest owners
          pursuant
          to operating agreements or otherwise) which may affect all or any portion
          of the
          Hydrocarbon Property including, without limitation, those units which may
          be
          described or referred to on attached Exhibit A; (iii) all
          operating agreements, production sales or other contracts, processing
          agreements, transportation agreements, gas balancing agreements, farmout
          agreements, farm-in agreements, salt water disposal agreements, area of
          mutual
          interest agreements, equipment leases and other agreements described or
          referred
          to in this Mortgage or which relate to any of the Hydrocarbon Property
          or
          interests in the Hydrocarbon Property described or referred to herein or
          on
          attached Exhibit A or to the production, sale, purchase, exchange,
          processing, handling, storage, transporting or marketing of the Hydrocarbons
          (as
          defined in Section 1.01(c) hereof) from or attributable to such
          Hydrocarbon Property or interests; (iv) all geological, geophysical,
          engineering, accounting, title, legal, and other technical or business
          data
          concerning the Hydrocarbon Property, the Hydrocarbons, or any other item
          of
          Hydrocarbon Property which are in the possession of Mortgagor or in which
          Mortgagor can otherwise grant a security interest, and all books, files,
          records, magnetic media, computer records, and other forms of recording
          or
          obtaining access to such data; and (v) the Hydrocarbon Property described
          on attached Exhibit A and covered by this Mortgage even though
          Mortgagor’s interests therein be incorrectly described or a description of a
          part or all of such Hydrocarbon Property or Mortgagor’s interests therein be
          omitted; it being intended by Mortgagor and Mortgagee herein to cover and
          affect
          hereby all interests which Mortgagor may now own or may hereafter acquire
          in and
          to the Hydrocarbon Property notwithstanding that the interests as specified
          on
Exhibit A may be limited to particular lands, specified depths or
          particular types of property interests.

         

        (c)           All
          rights, titles, interests and estates now owned or hereafter acquired by
          Mortgagor in and to all oil, gas, casinghead gas, condensate, distillate,
          liquid
          hydrocarbons, gaseous hydrocarbons and all products refined therefrom and
          all
          other minerals (collectively called the “Hydrocarbons”) in and under and
          which may be produced and saved from or attributable to the Hydrocarbon
          Property, the lands pooled or unitized therewith and Mortgagor’s interests
          therein, including all oil in tanks and all rents, issues, profits, proceeds,
          products, revenues and other income from or attributable to the Hydrocarbons,
          the Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor’s
          interests therein.

         

        (d)           All
          tenements, hereditaments, appurtenances and properties in anywise appertaining,
          belonging, affixed or incidental to the Hydrocarbon Property, rights, titles,
          interests and estates described or referred to in paragraphs (a) and (b)
          above,
          which are now owned or which may hereafter be acquired by Mortgagor, including,
          without limitation, any and all property, real or personal, now owned or
          hereafter acquired and situated upon, used, held for use, or useful in
          connection with the operating, working, extraction, treatment, marketing,
          gathering, transmission or development of any of such Hydrocarbon Property
          or
          the lands pooled or unitized therewith (excluding drilling rigs, trucks,
          automotive equipment or other personal property which may be taken to the
          premises for the purpose of drilling a well or for other similar temporary
          uses)
          and including any and all oil wells, gas wells, injection wells or other
          wells,
          buildings, structures, field separators, liquid extraction plants, plant
          compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
          systems, field gathering systems, salt water disposal facilities, tanks
          and tank
          batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
          meters, apparatus, goods, inventory, equipment, appliances, tools, implements,
          cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way,
          easements, servitudes, licenses and other surface and subsurface rights
          together
          with all additions, substitutions, replacements, accessions and attachments
          to
          any and all of the foregoing properties.

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

        (e)           Any
          property that may from time to time hereafter, by delivery or by writing of any
          kind, be subjected to the lien and security interest hereof by Mortgagor
          or by
          anyone on Mortgagor’s behalf; and Trustee or Mortgagee is hereby authorized to
          receive the same at any time as additional security hereunder.

         

        (f)           All
          of the rights, titles and interests of every nature whatsoever now owned
          or
          hereafter acquired by Mortgagor in and to the Hydrocarbon Property rights,
          titles, interests and estates and every part and parcel thereof, including,
          without limitation, the Hydrocarbon Property rights, titles, interests
          and
          estates as the same may be enlarged by the discharge of any payments out
          of
          production or by the removal of any charges or Permitted Liens to which
          any of
          the Hydrocarbon Property rights, titles, interests or estates are subject,
          or
          otherwise; all rights of Mortgagor to liens and security interests securing
          payment of proceeds from the sale of production from the Mortgaged Property,
          including, but not limited to, those liens and security interests provided
          in
§9.343 of the Applicable UCC, as amended from time to time, any other statute
          enacted in the jurisdiction in which the Hydrocarbon Property is located
          or
          statute made applicable to the Hydrocarbon Property under federal law (or
          some
          combination of federal and state law); together with any and all renewals
          and
          extensions of any of the Hydrocarbon Property rights, titles, interests
          or
          estates; all contracts and agreements supplemental to or amendatory of
          or in
          substitution for the contracts and agreements described or mentioned above;
          and
          any and all additional interests of any kind hereafter acquired by Mortgagor
          in
          and to the Hydrocarbon Property rights, titles, interests or
          estates.

         

        (g)           All
          accounts, contract rights, inventory, choses in action (i.e., rights to
          enforce contracts or to bring claims thereunder), general intangibles,
          insurance
          contracts and insurance proceeds (regardless of whether the same arose,
          and/or
          the events which gave rise to the same occurred, on or before or after
          the date
          hereof) and all proceeds and products of all such portions of the Hydrocarbon
          Property and payments in lieu of production, whether such proceeds or payments
          are goods, money, documents, instruments, chattel paper, securities, accounts,
          general intangibles, fixtures, real property, or other assets and regardless
          of
          whether such payments accrued, and/or the events which gave rise to such
          payments occurred, on or before or after the date hereof, including, without
          limitation, “take or pay” payments and similar payments, payments received in
          settlement of or pursuant to a judgment rendered with respect to take or
          pay or
          similar obligations or other obligations under a production sales contract,
          payments received in buyout or buydown or other settlement of a production
          sales
          contract, and payments received under a gas balancing or similar agreement
          as a
          result of (or received otherwise in settlement of or pursuant to judgment
          rendered with respect to) rights held by Mortgagor as a result of Mortgagor
          (and/or its predecessors in title) taking or having taken less gas from
          lands
          covered by a Hydrocarbon Property (or lands pooled or unitized therewith)
          than
          its ownership of such Hydrocarbon Property would entitle it to
          receive.

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

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

         

        (i)           All
          licenses, permits and other regulatory approvals held by Mortgagor relating
          to
          the Mortgaged Property.

         

        (j)           All
          proceeds of all of the rights, titles and interests of Mortgagor described
          in
          the foregoing paragraphs (a) through (i) whether such proceeds or payments
          are
          goods, money, documents, instruments, chattel paper, securities, accounts,
          payment intangibles, general intangibles, fixtures, real/immovable property,
          personal/movable property or other assets.

         

        (k)           In
          addition to the rights granted to Trustee and/or Mortgagee in
Section 1.01(f) of this Mortgage, any and all liens, security
          interests, financing statements or similar interests of Mortgagor attributable
          to its interest in the Hydrocarbons and proceeds of runs therefrom arising
          under
          or created by any statutory provision, judicial decision or
          otherwise.

         

        (l)           All
          of Mortgagor’s rights and interests pursuant to the provisions of §9.343 of the
          Applicable UCC and of any similar state or local jurisdiction statute in
          any
          state wherein the Mortgaged Property is located, hereby vesting in Trustee
          and/or Mortgagee all of Mortgagor’s rights as an interest owner to the
          continuing security interest in and liens upon the Mortgaged
          Property.

         

        Any
          fractions or percentages specified on attached Exhibit A in
          referring to Mortgagor’s interests are solely for purposes of the warranties
          made by Mortgagor pursuant to Sections 3.01 and 3.05 hereof
          and shall in no manner limit the quantum of interest affected by this
Section 1.01 with respect to any Hydrocarbon Property or with
          respect to any unit or well identified on said
Exhibit A.

         

        TO
          HAVE
          AND TO HOLD the Mortgaged Property unto Trustee and to its successors and
          assigns forever to secure the payment of the Indebtedness and to secure
          the
          performance of the covenants, agreements, and obligations of Mortgagor
          herein
          contained.

         

        Section
          1.02     Grant of Security
          Interest.  To further secure the Indebtedness, Mortgagor hereby
          grants to Mortgagee a security interest in and to the Mortgaged Property
          (whether now or hereafter acquired by operation of law or otherwise) insofar
          as
          the Mortgaged Property consists of equipment, accounts, contract rights,
          general
          intangibles, insurance contracts, insurance proceeds, inventory, Hydrocarbons,
          fixtures and any and all other personal property of any kind or character
          defined in and subject to the provisions of the Uniform Commercial Code
          presently in effect in the jurisdiction in which the Mortgaged Property
          is
          situated (“Applicable UCC”), including the proceeds and products from any
          and all of such personal property.  Upon the happening of any of the
          Events of Default (as defined in Section 4.01), Mortgagee is and shall be
          entitled to all of the rights, powers and remedies afforded a secured party
          by
          the Applicable UCC with reference to the personal property and fixtures
          in which
          Mortgagee has been granted a security interest herein, or Trustee or Mortgagee
          may proceed as to both the real and personal property covered hereby in
          accordance with the rights and remedies granted under this Mortgage in
          respect
          of the real property covered hereby.  Such rights, powers and remedies
          shall be cumulative and in addition to those granted to Trustee or Mortgagee
          under any other provision of this Mortgage or under any other security
          instrument.  Written notice mailed to Mortgagor as provided herein at
          least ten (10) Business Days prior to the date of public sale of any part
          of the
          Mortgaged Property which is personal property subject to the provisions
          of the
          Applicable UCC, or prior to the date after which private sale of any such
          part
          of the Mortgaged Property will be made, shall constitute reasonable
          notice.  Except as otherwise expressly provided in this Mortgage, all
          terms in this Mortgage relating to the Mortgaged Property and the grant
          of the
          foregoing security interest which are defined in the Applicable UCC shall
          have
          the meanings assigned to them in Article 9 (or, absent definition in Article
          9,
          in any other Article) of the Applicable UCC, as those meanings may be amended,
          revised or replaced from time to time.  Notwithstanding the foregoing,
          the parties intend that the terms used herein which are defined in the
          Applicable UCC have, at all times, the broadest and most inclusive meanings
          possible.

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        Section
          1.03     Indebtedness Secured.  This
          Mortgage is executed and delivered by Mortgagor to secure and enforce the
          following (the “Indebtedness”):

         

        (a)           Payment
          of and performance of any and all indebtedness, obligations and liabilities
          of
          Mortgagor pursuant to the Guaranty including the “Obligations” under and as
          defined in such Guaranty.

         

        (b)           Payment
          of and performance of any and all other indebtedness, obligations and
          liabilities of Mortgagor, the Company and any direct or indirect subsidiary
          of
          the Company (collectively, the “Company Parties” and each, individually,
          a “Company Party”) pursuant to the Purchase Agreement, the Notes, the
          Registration Rights Agreement, the other Security Documents (as defined
          in the
          Notes) and all of the other agreements, documents and instruments contemplated
          thereby and executed in connection therewith (collectively, the “Loan
          Documents”), including, without limitation, (i) principal and interest
          (including without limitation, interest accruing subsequent to the filing
          of a
          petition or other action concerning bankruptcy or other similar proceeding,
          whether or not an allowed claim) on the Notes, (ii) reimbursement obligations
          under any letters of credit, (iii) obligations under any hedging agreements
          with
          any Holder or its respective affiliates, and (iv) obligations owing under
          any
          other Transaction Document; and all renewals, extensions, rearrangements
          and/or
          other modifications of any of the foregoing.

         

        (c)           Any
          sums which may be advanced or paid by Mortgagee, Trustee or any Holder
          under the
          terms hereof or under any other Loan Document on account of the failure
          of
          Mortgagor or any other Company Party to comply with the covenants contained
          herein or in any other Loan Document.

         

        (d)           Without
          limiting the generality of the foregoing, all post-petition interest, expenses
          and other duties and liabilities with respect to indebtedness or other
          obligations described above in this Section 1.03, which would be owed but
          for the fact that they are unenforceable or not allowable due to the existence
          of a bankruptcy, reorganization or similar proceeding.

         

        Section
          1.04     Fixture Filing, Etc.  Without
          in any manner limiting the generality of any of the other provisions of
          this
          Mortgage: (i) some portions of the goods described or to which reference is
          made herein are or are to become fixtures on the land described or to which
          reference is made herein or on attached Exhibit A; (ii) the
          security interests created hereby under applicable provisions of the Applicable
          UCC will attach to Hydrocarbons (minerals including oil and gas), as extracted
          collateral or the accounts resulting from the sale thereof at the wellhead
          or
          minehead located on the land described or to which reference is made herein;
          (iii) this Mortgage may be filed of record in the real estate records as a
          financing statement, and (iv) Mortgagor is the record owner of the real
          estate
          or interests in the real estate comprised of the Mortgaged
          Property.

         

        Section
          1.05     Defined Terms.  Any
          capitalized term used in this Mortgage and not defined in this Mortgage
          shall
          have the meaning assigned to such term in the Purchase Agreement.

         

        
          
            
              
              

            

            
              5

              
                

              

            

            
              
              

            

          

        

        

        ARTICLE
          II

        Assignment
          of Production, Accounts and Proceeds

         

        Section
          2.01     Assignment.  Mortgagor has
          absolutely and unconditionally assigned, transferred, and conveyed, and
          does
          hereby absolutely and unconditionally assign, transfer and convey unto
          Mortgagee, its successors and assigns, all of the Hydrocarbons and all
          products
          obtained or processed therefrom, and the revenues and proceeds now and
          hereafter
          attributable to the Hydrocarbons and said products and all accounts arising
          therefrom or in connection therewith and all payments in lieu of the
          Hydrocarbons such as “take or pay” payments or settlements (all of the
          foregoing, the “Production Proceeds”), together with the immediate and
          continuing right, subject to the remaining provisions of this Section
          2.01 and of Section 4(u) of the Purchase Agreement, to collect and
          receive such Production Proceeds.  The Hydrocarbons and products are
          to be delivered into pipe lines connected with the Mortgaged Property,
          or to the
          purchaser thereof, to the credit of Mortgagee (to the extent of the Mortgagor’s
          interest therein); and all Production Proceeds shall initially be deposited
          into
          a Deposit Account (as defined in the Security Agreement) subject to an
          Account
          Control Agreement (as defined in the Security
          Agreement). No party paying any Production Proceeds shall
          have any duty or obligation to inquire into any of the rights of Mortgagee
          under
          this Section 2.01, what application is made of the Production Proceeds,
          or as to any other matter.  Mortgagor directs and instructs any and
          all purchasers of any Hydrocarbons to pay to such Deposit Accounts all
          of the
          Production Proceeds accruing to Mortgagor’s interest until such time as such
          purchasers have been furnished with evidence that all Indebtedness has
          been paid
          in full in cash and that this Mortgage has been released. 
          Mortgagor agrees that no purchasers of the Hydrocarbons shall have any
          responsibility for the application of any funds paid to
          Mortgagee.  Mortgagor agrees to perform all such acts, and to execute
          all such further assignments, transfer orders and division orders, and
          other
          instruments as may be required or desired by Mortgagee or any party in
          order to
          have the Production Proceeds paid to Mortgagee.  Without limiting the
          generality of the foregoing, (a) until the occurrence and during the
          continuation of an Event of Default, Mortgagor is fully authorized, empowered
          and permitted to receive, receipt and use the Production Proceeds, and
          (b) upon
          the occurrence and during the continuation of an Event of Default, Mortgagee
          is
          fully authorized to receive and receipt for the Production Proceeds; to
          endorse
          and cash any and all checks and drafts payable to the order of Mortgagor
          or
          Mortgagee for the account of Mortgagor received from or in connection with
          the
          Production Proceeds and, in accordance with Section 4.5(b) of the
          Security Agreement, to hold the Production Proceeds in a bank account as
          additional collateral securing the Indebtedness; and to execute transfer
          and
          division orders in the name of Mortgagor, or otherwise, with warranties
          binding
          Mortgagor.  All Production Proceeds received by Mortgagee pursuant to
          this Section 2.01 after an Event of Default has occurred and is
          continuing shall be applied as provided in the other Transaction
          Documents.  Mortgagee shall not be liable for any delay, neglect or
          failure to effect collection of any Production Proceeds or to take any
          other
          action in connection therewith or hereunder; but Mortgagee shall have the
          right,
          exercisable at its election at any time after an Event of Default has occurred
          and is continuing, in the name of Mortgagor or otherwise, to prosecute
          and
          defend any and all actions or legal proceedings deemed advisable by Mortgagee
          in
          order to collect such funds and to protect the interests of Mortgagee and/or
          Mortgagor, with all costs, expenses and attorneys’ fees incurred in connection
          therewith being paid by Mortgagor and until so paid being a part of the
          Indebtedness secured by this Mortgage.  Mortgagor agrees to perform
          all such acts, and to execute all such further assignments, transfer orders
          and
          division orders, and other instruments as may be required or desired by
          Mortgagee or any party in order to effectuate the provisions contained
          in this
Section 2.01.  Mortgagor hereby appoints Mortgagee as its
          attorney-in-fact to pursue any and all rights of Mortgagor to liens on
          and
          security interests in the Hydrocarbons securing payment of proceeds of
          runs
          attributable to the Hydrocarbons, provided Mortgagee shall only be permitted
          to
          exercise such power of attorney granted pursuant to this sentence after
          the
          occurrence and during the continuation of an Event of Default.  The
          power of attorney granted to Mortgagee in this Section 2.01, being
          coupled with an interest, shall be irrevocable so long as the Indebtedness
          or
          any part thereof remains unpaid.

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        Section
          2.02     [Reserved].

         

        Section
          2.03     No Modification of Payment
          Obligations.  Nothing herein contained shall modify or otherwise
          alter, limit or modify the absolute obligation of Mortgagor and the other
          Company Parties to make prompt payment of all principal, interest and other
          amounts owing on the Indebtedness when and as the same become due regardless
          of
          whether the Production Proceeds are sufficient to pay the same and the
          rights
          provided in accordance with the foregoing assignment provision shall be
          cumulative of all other security of any and every character now or hereafter
          existing to secure payment of the Indebtedness.

         

        Section
          2.04     Effectuating Payment of Production Proceeds
          to Mortgagee.  If under any existing sales agreements, other than
          division orders or transfer orders, any Production Proceeds are required
          to be
          paid by the purchaser to Mortgagor so that under such existing agreements
          payment cannot be made of such Production Proceeds to Mortgagee, Mortgagor’s
          interest in all Production Proceeds under such sales agreements and in
          all other
          Production Proceeds which for any reason may be paid to Mortgagor shall,
          when
          received by Mortgagor when an Event of Default exists, constitute trust
          funds in
          Mortgagor’s hands and shall be immediately paid over to
          Mortgagee.  Without limitation upon any of the foregoing, Mortgagor
          hereby constitutes and appoints Mortgagee as Mortgagor’s special
          attorney-in-fact (with full power of substitution, either generally or
          for such
          periods or purposes as Mortgagee may from time to time prescribe) in the
          name,
          place and stead of Mortgagor to do any and every act and exercise any and
          every
          power that Mortgagor might or could do or exercise personally with respect
          to
          all Hydrocarbons and Production Proceeds expressly inclusive, but not limited
          to, giving and granting unto said attorney-in-fact full power and authority
          to
          do and perform any and every act and thing whatsoever necessary and requisite
          to
          be done as fully and to all intents and purposes, as Mortgagor might or
          could do
          if personally present (provided such power of attorney granted pursuant
          to this
          sentence shall only be exercisable by Mortgagee upon the occurrence and
          during
          the continuation of an Event of Default); and Mortgagor shall be bound
          thereby
          as fully and effectively as if Mortgagor had personally executed, acknowledged
          and delivered any of the foregoing certificates or documents.  The
          powers and authorities herein conferred upon Mortgagee may be exercised
          by
          Mortgagee through any person who, at the time of the execution of the particular
          instrument, is an officer of Mortgagee.  The power of attorney herein
          conferred is granted for valuable consideration and hence is coupled with
          an
          interest and is irrevocable so long as the Indebtedness, or any part thereof,
          shall remain unpaid or any commitment to lend under the Purchase Agreement
          remains outstanding.  All persons dealing with Mortgagee or any
          substitute shall be fully protected in treating the powers and authorities
          conferred by this paragraph as continuing in full force and effect until
          advised
          by Mortgagee that all the Indebtedness is fully and totally
          paid.  Mortgagee may, but shall not be obligated to, in accordance
          with the provisions of Section 2.01 above, take such action as it deems
          appropriate in an effort to collect the Production Proceeds and any reasonable
          expenses (including reasonable attorney’s fees) so incurred by Mortgagee shall
          be a demand obligation of Mortgagor and shall be part of the Indebtedness,
          and
          shall bear interest each day, from the date of such expenditure or payment
          until
          paid, at the Interest Rate (as defined in the Notes).

         

        Section
          2.05     Application of Production
          Proceeds.  After an Event of Default hereunder has occurred, all
          Production Proceeds from time to time in the hands of Mortgagee shall be
          applied
          to the payment of the Indebtedness at such times and in such manner and
          order as
          Mortgagee determines in Mortgagee’s sole and absolute discretion.

         

        Section
          2.06     Release from Liability;
          Indemnification.  Mortgagee and its successors and assigns are
          hereby released and absolved from all liability for failure to enforce
          collection of the Production Proceeds and from all other responsibility
          in
          connection therewith, except the responsibility to account to Mortgagor
          for
          funds actually received.  Mortgagor agrees to indemnify and hold
          harmless Mortgagee (for purposes of this paragraph, the term “Mortgagee” shall
          include the directors, officers, partners, employees and agents of Mortgagee
          and
          any persons or entities owned or controlled by or affiliated with Mortgagee
          and
          any other Indemnified Party as defined in Section 4.16 hereof) from and
          against all claims, demands, liabilities, losses, damages (including without
          limitation consequential damages), causes of action, judgments, penalties, costs
          and expenses (including without limitation reasonable attorneys’ fees and
          expenses) imposed upon, asserted against or incurred or paid by Mortgagee
          by
          reason of the assertion that Mortgagee received, either before or after
          payment
          in full of the Indebtedness, funds from the production of oil, gas, other
          hydrocarbons or other minerals claimed by third persons (and/or funds
          attributable to sales of production which were made in violation of laws,
          rules,
          regulations and/or orders governing such sales), and Mortgagee shall have
          the
          right to defend against any such claims or actions, employing attorneys
          of its
          own selection, and if not furnished with indemnity satisfactory to it,
          Mortgagee
          shall have the right to compromise and adjust any such claims, actions
          and
          judgments, and in addition to the rights to be indemnified as herein provided,
          all amounts paid by Mortgagee in compromise, satisfaction or discharge
          of any
          such claim, action or judgment, and all court costs, reasonable attorneys’ fees
          and other expenses of every character expended by Mortgagee pursuant to
          the
          provisions of this section shall be a demand obligation (which obligation
          Mortgagor hereby expressly promises to pay) owing by Mortgagor to Mortgagee
          and
          shall bear interest, from the date expended until paid at the Interest
          Rate (as
          defined in the Notes).  The foregoing indemnities shall not terminate
          upon the release, foreclosure or other termination of this Mortgage but
          will
          survive the release, foreclosure of this Mortgage or conveyance in lieu
          of
          foreclosure, and the repayment of the Indebtedness and the discharge and
          release
          of this Mortgage and the other documents evidencing and/or securing the
          Indebtedness.  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.

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

         

        ARTICLE
          III

        Representations,
          Warranties and Covenants

         

        Mortgagor
          hereby covenants with the Mortgagee, and represents and warrants to the
          Mortgagee that:

         

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

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        Section
          3.02     Defend Title.  This Mortgage
          is a direct first Lien and security interest upon the Mortgaged Property,
          subject only to Permitted Liens.  This Mortgage will always be kept a
          direct first Lien and security interest upon the Mortgaged Property, and
          Mortgagor will not grant, incur or create or suffer to be created or permit
          to
          exist any Lien, security interest or charge prior or junior to or on a
          parity
          with the Lien and security interest of this Mortgage upon the Mortgaged
          Property
          or any part thereof or upon the rents, issues, revenues, profits and other
          income therefrom, other than Permitted Liens.  Mortgagor will warrant
          and defend the title to the Mortgaged Property against the claims and demands
          of
          all other persons whomsoever and will maintain and preserve the Lien created
          hereby so long as any of the Indebtedness secured hereby remains
          unpaid.  Should an adverse claim be made against or a cloud develop
          upon the title to any part of the Mortgaged Property, other than Permitted
          Liens, Mortgagor agrees it will timely defend against such adverse claim
          or take
          appropriate action to remove such cloud at Mortgagor’s cost and expense, and
          Mortgagor further agrees that Trustee and/or Mortgagee may take such other
          action as they deem advisable to protect and preserve their interests in
          the
          Mortgaged Property, and in such event Mortgagor will indemnify Trustee
          and
          Mortgagee against any and all cost, reasonable attorney’s fees and other
          expenses which they may incur in defending against any such adverse claim
          or
          taking action to remove any such cloud.

         

        Section
          3.03     Not a Foreign
          Person.  Mortgagor is not a “foreign person” within the meaning of
          the Internal Revenue Code of 1986, as amended (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
          3.04     Rentals, Taxes, Insurance and Fees Paid;
          Leases in Effect.  All rentals and royalties due and payable in
          accordance with the terms of any leases or subleases comprising a part
          of the
          Hydrocarbon Property and all severance and production taxes payable with
          respect
          to the production therefrom have been duly paid or provided for and all
          leases
          or subleases comprising a part of the Hydrocarbon Property are in full
          force and
          effect.  In addition to the foregoing, Mortgagor shall or shall cause
          to be paid when due, all taxes, permits, licenses, insurance premiums and
          other
          similar amounts with respect to the Mortgaged Property, the Hydrocarbon
          Property
          and the Hydrocarbons.

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

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

         

        Section
          3.06     Failure to
          Perform.  Mortgagor agrees that if Mortgagor fails to perform any
          act or to take any action which Mortgagor is required to perform or take
          hereunder or pay any money which Mortgagor is required to pay hereunder,
          each of
          Mortgagee and Trustee in Mortgagor’s name or its or their own name may, but
          shall not be obligated to, perform or cause to be performed such act or
          take
          such action or pay such money, and any expenses so incurred by either of
          them
          and any money so paid by either of them shall be a demand obligation owing
          by
          Mortgagor to Mortgagee or Trustee, as the case may be, and each of Mortgagee
          and
          Trustee, upon making such payment, shall be subrogated to all of the rights
          of
          the Person receiving such payment.  Each amount due and owing by
          Mortgagor to each of Mortgagee and Trustee pursuant to this Mortgage shall
          bear
          interest from the date of such expenditure or payment or other occurrence
          which
          gives rise to such amount being owed to such Person until paid at the Interest
          Rate, and all such amounts together with such interest thereon shall be
          a part
          of the Indebtedness described in Section 1.03 hereof.

         

        Section
          3.07     Sale of Mortgaged
          Property.  Any proposed sale, transfer, farm-out, assignment or
          other disposition of the Mortgaged Property by the Mortgagor shall be governed
          by the provisions of Section 5(h) of the Purchase Agreement; provided,
          that Mortgagor shall, except after the occurrence and during the continuation
          of
          an Event of Default, be permitted to (i) sell Hydrocarbons in the ordinary
          course of business in compliance with the terms of this Mortgage and (ii)
          sell
          or otherwise dispose of obsolete or worn out equipment or personal property
          which is replaced with property of equal or greater value in the ordinary
          course
          of business.

         

        
          
             

          

          
            10

            
              

            

          

          
             

          

        

         

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

        
          
            
            

          

          
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        Section
          3.09     Operation of Mortgaged
          Property.  The Mortgagor will promptly pay and discharge or cause
          to be paid and discharged all rentals, delay rentals, royalties and indebtedness
          accruing under, and perform or cause to be performed each and every act,
          matter
          or thing required by, each and all of the assignments, deeds, subject leases,
          sub-leases, contracts and agreements described or referred to herein or
          affecting the Mortgagor’s interests in the Mortgaged Property and will do or
          cause to be done all other things necessary to keep unimpaired the Mortgagor’s
          rights with respect thereto and prevent any intentional forfeiture thereof
          or
          default with respect thereto, other than a default which might occur as
          a result
          of cessation of production thereunder.  Except as could not reasonably
          be expected, either individually or in the aggregate, to have a Material
          Adverse
          Effect, the Mortgaged Property (and properties unitized
          therewith) is being (and, to the extent the same could adversely affect
          the
          ownership or operation of such Mortgaged Property after the date hereof,
          have in
          the past been), and hereafter will be maintained (ordinary wear and tear
          excepted), operated and developed in
          a good and workmanlike manner in accordance with
          customary industry standards and in conformity with all
          applicable laws and all rules, regulations and orders of all duly constituted
          authorities having jurisdiction and in conformity with all oil, gas and/or
          other
          mineral leases and other agreements forming part of the Mortgaged Property
          and
          in conformity with all Permitted Liens; specifically in this connection,
          (i) no
          Mortgaged Property is subject to having allowable production after the
          date
          hereof reduced below the full and regular allowable (including the maximum
          permissible tolerance) because of any overproduction (whether or not the
          same
          was permissible at the time) prior to the date hereof and (ii) none of
          the wells
          located on the Mortgaged Property (or properties unitized therewith) are
          or will
          be deviated from the vertical more than the maximum permitted by applicable
          laws, regulations, rules and orders, and such wells are, and will remain,
          bottomed under and producing from, with the well bores wholly within, the
          Mortgaged Property (or, in the case of wells located on properties unitized
          therewith, such unitized properties).  With respect to any Mortgaged
          Property in which Mortgagor is the operator in connection therewith or
          in which
          Mortgagor has a majority working interest (and to the best of Mortgagor’s
          knowledge with respect to any Mortgaged Property in which Mortgagor has
          a
          minority working interest and is not an operator in connection therewith),
          there
          are no dry holes, or otherwise inactive wells, located on any Mortgaged
          Property
          or on lands pooled or unitized therewith (including, without limitation,
          any
          wells which would, if located in Texas, require compliance with Railroad
          Commission Rule 14(b)(2)), except for wells that have been properly plugged
          and
          abandoned or inactive and being maintained in accordance with local, state
          and
          federal law.  Except as disclosed in Schedule 3(s) to the
          Purchase Agreement, the Mortgagor has, and will in the future, possess
          all
          certificates, authorizations, approvals, licenses and permits issued by
          the
          appropriate federal, state or foreign regulatory authorities (collectively,
          “Permits”) necessary to produce, extract, transport and sell the oil,
          gas, minerals and/or other Hydrocarbons in that portion of the Mortgaged
          Property that is producing oil, gas, minerals and/or other
          Hydrocarbons.  Except as disclosed in Schedule 3(s) to the
          Purchase Agreement, Mortgagor has no reason to believe that it will not
          be able
          to obtain Permits as and when necessary to enable the Mortgagor to produce,
          extract, transport and sell the oil, gas, minerals and other Hydrocarbons
          in the
          Mortgaged Property.  Mortgagor has not received written notice of any
          violations in respect of any such licenses or permits described in the
          foregoing
          provisions of this Section 3.09 except for notices of violations received
          prior to the date hereof that have been remedied by Mortgagor.  The
          Mortgagor will operate the Mortgaged Property in a careful and efficient
          manner
          in accordance with the practices of the industry and in compliance with
          all
          applicable contracts and agreements and in compliance with all applicable
          spacings proration and conservation laws of the jurisdiction in which the
          Mortgaged Property is situated, and all applicable laws, rules and regulations
          of every other agency and authority from time to time constituted to regulate
          the development and operation of the Mortgaged Property and the production
          and
          sale of Hydrocarbons and other minerals produced therefrom, except as could
          not
          reasonably be expected, individually or in the aggregate, to have a Material
          Adverse Effect.  The Mortgagor will do or cause to be done, or shall
          participate in, such development work as may be reasonably necessary to
          the
          prudent and economical operation of the Mortgaged Property in accordance
          with
          the approved practices of prudent operators in the industry, including,
          without
          limitation, all to be done that may be appropriate to protect from diminution
          the productive capacity of the Mortgaged Property and each producing well
          thereon.  Upon the reasonable written request of the Mortgagee at
          least five (5) Business Days in advance, and at reasonable times and intervals,
          the Mortgagor will (a) permit the Mortgagee and its respective designated
          representatives to enter upon any part of the Mortgaged Property under
          the
          control of the Mortgagor, and (b) cause the operator of any part of the
          Mortgaged Property not under the control of the Mortgagor to permit the
          Mortgagee and its designated representatives to enter upon the same (to
          the
          extent and subject to the conditions under which the Mortgagor may so enter),
          for the purposes of inspecting the condition and operation thereof.

         

        Section
          3.10     Suits and Claims.  Except to
          the extent disclosed in the Schedules to the Purchase Agreement, there
          are no
          suits, actions, claims, investigations, inquiries, proceedings or demands
          pending (or, to Mortgagor’s knowledge, threatened in writing) which affect the
          Mortgaged Property (including, without limitation, any which challenge
          or
          otherwise pertain to Mortgagor’s title to the Mortgaged Property) and no
          judicial or administrative actions, suits or proceedings pending (or, to
          Mortgagor’s knowledge, threatened in writing) against Mortgagor.

         

        
          
            
              
              

            

            
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        Section
          3.11     Environmental.

         

        (a)           Current
          Status.  The Mortgaged Property and Mortgagor are not in violation
          of Applicable Environmental Laws (as hereinafter defined), or subject to
          any
          existing, pending or, to the best knowledge of Mortgagor, threatened
          investigation or inquiry by any governmental authority or any other person
          under
          or with respect to Applicable Environmental Laws, or subject to any remedial
          obligations under Applicable Environmental Laws, and are in compliance
          with all
          permits and licenses required under Applicable Environmental Laws, other
          than
          with respect to any such violation, investigation, inquiry or remedial
          obligations that could not, individually or in the aggregate, reasonably
          be
          expected to have a Material Adverse Effect and, to the best knowledge of
          Mortgagor, this representation will continue to be true and correct following
          disclosure to the applicable governmental authorities of all relevant facts,
          conditions and circumstances, if any, pertaining to the Mortgaged Property
          and
          Mortgagor.  “Applicable Environmental Laws” shall mean any
          applicable laws, orders, rules, or regulations pertaining to safety, health
          or
          the environment, as such laws, orders, rules or regulations now exist or
          are
          hereafter enacted and/or amended (including, without limitation, the
          Comprehensive Environmental Response, Compensation, and Liability Act of
          1980,
          as amended by the Superfund Amendments and Reauthorization Act of 1986
          (as
          amended, hereinafter called “CERCLA”), the Resource Conservation and
          Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980,
          the
          Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid
          Waste
          Amendments of 1984 (as amended, hereinafter called “RCRA”) and applicable
          state and local law).  Mortgagor undertook, at the time of acquisition
          of the Mortgaged Property, appropriate inquiry into the previous ownership
          and
          uses of the Mortgaged Property consistent with good commercial or customary
          practice.  Mortgagor has taken reasonable steps necessary, consistent
          with customary practice in the industry in which it operates its business,
          to
          determine and has determined that no hazardous substances or solid wastes
          have
          been disposed of or otherwise released at, into, upon or under the Mortgaged
          Property.  The use which Mortgagor makes and intends to make of the
          Mortgaged Property will not result in the use, treatment, storage or disposal
          or
          other release of any hazardous substance or solid waste at, into, upon
          or under
          the Mortgaged Property, except such usage, and temporary storage in anticipation
          of usage, as is in the ordinary course of business and in compliance with
          Applicable Environmental Laws.  The terms “hazardous substance”
and “release” as used in this Mortgage shall have the meanings specified
          in CERCLA, and the terms “solid waste” and “disposal” (or
“disposed”) shall have the meanings specified in RCRA; provided,
          in the
          event either CERCLA or RCRA is amended so as to broaden the meaning of
          any term
          defined thereby, such broader meaning shall apply subsequent to the effective
          date of such amendment and provided further, to the extent that the laws
          of the
          states in which the Mortgaged Properties are located establish a meaning
          for
“hazardous substance,” “release,” “solid waste,” or
“disposal” which is broader than that specified in
          either CERCLA or RCRA,
          such broader meaning shall apply.  The “Associated Property”
(as such term is hereinafter defined) is not in violation of any
          Applicable
          Environmental Laws for which Mortgagor or its predecessors in title to
          the
          Mortgaged Property would be responsible (to the best of Mortgagor’s knowledge
          with respect to Associated Property not owned or operated by
          Mortgagor).  The term “Associated Property” as used in this
          Mortgage shall mean any and all interests in and to (and/or carved out
          of) the
          lands which are described or referred to in Exhibit A hereto, or which
          are otherwise described in any of the oil, gas and/or mineral leases or
          other
          instruments described in or referred to in such Exhibit A, whether
          or not such property interests are owned by Mortgagor.

         

        (b)           Future
          Performance.  Except as could not reasonably be expected,
          individually or in the aggregate, to have a Material Adverse
          Effect, Mortgagor will operate each
          Mortgaged  Property in a careful and efficient manner in accordance
          with the practices of the industry so as not to cause or permit such
          Mortgaged  Property or Mortgagor to be in violation of, and Mortgagor
          shall not do anything or permit anything to be done which will subject
          such
          Mortgaged  Property or any Associated Property to any remedial
          obligations under, or result in noncompliance with applicable permits and
          licenses under, any Applicable Environmental Laws, assuming disclosure
          to the
          applicable governmental authorities of all relevant facts, conditions and
          circumstances, if any, pertaining to the Mortgaged Property or any Associated
          Property and Mortgagor will promptly notify Mortgagee in writing of any
          existing, pending or, to the best knowledge of Mortgagor, threatened
          investigation, claim, suit or inquiry by any governmental authority or
          any
          person in connection with any Applicable Environmental Laws.  Except
          as could not reasonably be expected, individually or in the aggregate,
          to have a
          Material Adverse Effect, Mortgagor will take steps
          necessary to determine that no hazardous substances or solid wastes have
          been
          disposed of or otherwise released on or to the Mortgaged Property or any
          Associated Property.  Except as could not reasonably be expected,
          individually or in the aggregate, to have a Material Adverse
          Effect, Mortgagor will not cause or permit the disposal or
          other release of any hazardous substance or solid waste at, into, upon
          or under
          the Mortgaged Property or any Associated Property.  Mortgagor
          covenants and agrees to keep or cause the Mortgaged Property to be kept
          free of
          any hazardous substance or solid waste (except such use, and temporary
          storage
          in anticipation of use, as is required in the ordinary course of business,
          all
          while in compliance with Applicable Environmental Laws), and to remove
          the same
          (or if removal is prohibited by law, to take whatever action is required
          by
          law), promptly upon discovery at its sole expense.  Upon Mortgagee’s
          reasonable request, at any time and from time to time during the existence
          of
          this Mortgage, but not more often than once every calendar year (so long
          as no
          Event of Default has occurred), Mortgagor will provide at Mortgagor’s sole
          expense an inspection or audit of each Mortgaged  Property from an
          engineering or consulting firm approved by Mortgagee, indicating the presence
          or
          absence of hazardous substances and solid waste on such
          Mortgaged  Property and compliance with Applicable Environmental
          Laws.

        
          
            
            

          

          
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        Section
          3.12     Not Abandon Wells; Participate in
          Operations; Non-Operated Interests.  Mortgagor will not, without
          prior written consent of Mortgagee (not to be unreasonably withheld, delayed
          or
          conditioned), abandon, or consent to the abandonment of, any well producing
          from
          the Mortgaged Property (or properties unitized therewith) so long as such
          well
          is capable (or is subject to being made capable through drilling, reworking
          or
          other operations which it would be commercially feasible to conduct) of
          producing oil, gas, or other Hydrocarbons or other minerals in commercial
          quantities (as determined without considering the effect of this Mortgage),
          except in the ordinary course of business consistent with prudent customs
          and
          practices in the industry in which Mortgagor operates.  Mortgagor will
          not, without prior written consent of Mortgagee (not to be unreasonably
          withheld, delayed or conditioned), elect not to participate in a proposed
          operation on the Mortgaged Properties where the effect of such election
          would be
          the forfeiture either temporarily (i.e. until a certain sum of money is
          received
          out of the forfeited interest) or permanently of any interest in the Mortgaged
          Properties.  All or portions of the Mortgaged Property may be
          comprised of interests in the Hydrocarbon Property or lands pooled or unitized
          therewith which are other than working interests or which may be operated
          by a
          party or parties other than the Mortgagor and with respect to all such
          portions
          of the Mortgaged Property, the Mortgagor’s covenants and agreements as expressed
          in this Article III are modified to require that the Mortgagor use its
          commercially reasonable efforts to cause compliance with such covenants
          and
          agreements by the working interest owners or the operator or operators
          of such
          Hydrocarbon Properties.

         

        Section
          3.13     Condemnation Awards.  If at
          any time all or any portion of the Mortgaged Property shall be taken or
          damaged
          under the power of eminent domain, the award received by condemnation
          proceedings for any property so taken or any payment received in lieu of
          such
          condemnation proceedings shall be paid directly to Mortgagee as agent for
          Mortgagor and all or any portion of such award or payment, at the option
          of
          Mortgagee, shall be applied to the Secured Indebtedness in payment of the
          last
          maturing installments of the Secured Indebtedness or paid over, wholly
          or in
          part, to Mortgagor for any purpose or object satisfactory to
          Mortgagee.  Mortgagor immediately upon obtaining knowledge of the
          institution of any proceedings or negotiations for the condemnation of
          the
          Mortgaged Property, or any portion thereof, will notify Mortgagee of the
          pendency of such negotiations or proceedings.  Mortgagee may
          participate in any such negotiations or proceedings, and Mortgagor from
          time to
          time will execute and deliver to Mortgagee all instruments requested by
          Mortgagee to permit such participation.

        
          
            
            

          

          
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        Section
          3.14     Insurance.  Mortgagor will
          maintain with financially sound and reputable insurance companies insurance
          on
          all its property in at least such amounts and against at least such risks
          (but
          including in any event general liability) as are usually insured against
          in the
          same general area by companies engaged in the same or a similar business
          and in
          any case no less comprehensive in scope than that maintained by the Mortgager
          as
          of the date hereof.  While an Event of Default exists, in the event of
          any loss under any insurance policies so carried by Mortgagor, Mortgagee
          shall
          have the right (but not the obligation) to make proof of loss and collect
          the
          same, and all amounts so received shall be applied toward costs, charges
          and
          expenses (including reasonable attorneys’ fees), if any, incurred in the
          collection thereof, then to the payment, in the order determined by Mortgagee
          in
          its own discretion, of the Indebtedness, and any balance remaining shall
          be
          subject to the order of Mortgagor.  While an Event of Default exists,
          Mortgagee is hereby authorized but not obligated to enforce in its name
          or in
          the name of Mortgagor payment of any or all of said policies or settle
          or
          compromise any claim in respect thereof, and to collect and make receipts
          for
          the proceeds thereof and Mortgagee is hereby appointed Mortgagor’s agent and
          attorney-in-fact to endorse any check or draft payable to Mortgagor in
          order to
          collect the proceeds of insurance (provided Mortgagee shall only be entitled
          to
          enforce the power of attorney provided in this sentence after the occurrence
          and
          during the continuation of an Event of Default). In the event of
          foreclosure of this Mortgage, or other transfer of title to the Mortgaged
          Property in extinguishment in whole or in part of the Indebtedness, all
          right,
          title and interest of Mortgagor in and to such policies then in force concerning
          the Mortgaged Property and all proceeds payable thereunder shall thereupon
          vest
          in the purchaser at such foreclosure or other transferee in the event of
          such
          other transfer of title.

         

        Section
          3.15     Compliance
          with Leases.  Mortgagor (i) will observe and comply in all
          material respects with all of the terms and provisions, express or implied,
          of
          the oil, gas and mineral leases covered by this Mortgage, and any other
          agreements or instruments applicable thereto; and, (ii) except with the
          prior
          written consent of Mortgagee, will not amend or terminate (in any manner
          adverse
          to Mortgagor, Mortgagee, or Mortgagor’s or Mortgagee’s interest in the Mortgaged
          Property or in any manner that could reasonably be expected to result in
          a
          Material Adverse Effect) any of such agreements or surrender, abandon or
          release
          any of such leases in whole or in part so long as any well situated thereon,
          or
          located on any unit containing all or any part of such leases, is capable
          of
          producing oil, gas, casinghead gas or other hydrocarbons in paying
          quantities.  Mortgagor will cause all obligations to the holders of
          royalty interests and all other interests in the Mortgaged Properties to
          be
          promptly discharged and all covenants and conditions, express or implied,
          imposed upon the original lessee or his assigns by every such lease and
          every
          other agreement relative thereto to be fully and promptly performed and
          to cause
          all acts necessary or proper to accomplish the foregoing and prevent the
          breach
          or forfeiture of any such lease to be fully and promptly
          performed.  Mortgagor will furnish to Mortgagee ten (10) day advance
          written notice of any intention not to pay (or immediately at such time
          that it
          anticipates that it will be unable to pay) any delay rentals on the due
          date
          thereof under any such lease.

         

        Section
          3.16     Further Assurance.  Mortgagor
          will, on request of Mortgagee, (i) promptly correct any defect, error or
          omission which may be discovered in the contents of this Mortgage, or in
          any
          other document or instrument executed in connection with any of the Transaction
          Documents, or in the execution or acknowledgment of this Mortgage or any
          other
          document; (ii) execute, acknowledge, deliver and record and/or file such
          further
          instruments (including, without limitation, further deeds of trust, mortgages,
          security agreements, financing statements, continuation statements, and
          assignments of production, accounts, funds, contract rights, general
          intangibles, and proceeds) and do such further acts as may be necessary,
          desirable or proper to carry out more effectively the purposes of this
          Mortgage
          and to more fully identify and subject to the liens and security interests
          hereof any property intended to be covered hereby, including specifically,
          but
          without limitation, any renewals, additions, substitutions, replacements,
          or
          appurtenances to the Mortgaged Property; and (iii) execute, acknowledge,
          deliver, and file and/or record any document or instrument (including
          specifically any financing statement) desired by Mortgagee to protect the
          lien
          or the security interest hereunder against the rights or interests of third
          persons.  Mortgagor shall pay all costs connected with any of the
          foregoing.

        
          
            
            

          

          
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        Section
          3.17     Name and Place of
          Business.  Except as disclosed in writing to Mortgagee, Mortgagor
          has not during the preceding five (5) years been known by or used any other
          corporate or partnership, trade or fictitious name.  Mortgagor will
          not cause or permit any change to be made in its name, identity, state
          of
          formation or corporate or partnership structure, or its federal employer
          identification number unless Mortgagor shall have notified Mortgagee of
          such
          change at least thirty (30) days prior to the effective date of such change,
          and
          shall have first taken all action required by Mortgagee for the purpose
          of
          further perfecting or protecting the liens and security interests in the
          Mortgaged Property created hereby.  Mortgagor’s exact name is the name
          set forth in this Mortgage.  Mortgagor is organized under the laws of
          one of the states comprising the United States (e.g. corporation, limited
          partnership, registered limited liability partnership or limited liability
          company).  Mortgagor is located (as determined pursuant to the UCC) in
          the state under which it is organized, which is as set forth in the preamble
          to
          this Mortgage.  Mortgagor’s principal place of business and chief
          executive office, and the place where Mortgagor keeps its books and records
          concerning the Mortgaged Property (including, particularly, the records
          with
          respect to Production Proceeds from the Mortgaged Property) has for the
          preceding four months, been, and will continue to be (unless Mortgagor
          notifies
          Mortgagee of any change in writing at least thirty (30) days prior to the
          date
          of such change), the address set forth on the signature page of this
          Mortgage.

         

        Section
          3.18     Compliance with Laws and
          Agreements.  Mortgagor is in compliance with all governmental
          requirements applicable to it or its property, including, without limitation,
          all FERC regulations and the USA Patriot Act, and all indentures, agreements
          and
          other instruments binding upon it or its property.  The execution and
          performance of the Transaction Documents, this Mortgage and the other documents
          and instruments contemplated hereby and thereby will not violate the Trading
          with the Enemy Act, as amended, any of the foreign assets control regulations
          of
          the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
          amended) or any enabling legislation or executive order relating thereto,
          the
          Executive Order referred to in the following sentence or the U.S. Bank
          Secrecy
          Act (31 U.S.C. §§ 5311 et seq.).  Mortgagor is not a Person described
          by section 1 of Executive Order 13224 of September 24, 2001 entitled Blocking
          Property and Prohibiting Transactions With Persons Who Commit, Threaten
          to
          Commit or Support Terrorism, 66 Fed. Reg. 49,079 (2001), as amended, and
          Mortgagor does not engage in any transactions or dealings, or is otherwise
          associated with any such Persons.  Mortgagor is not bound by any
          agreement, document, instrument, judgment, decree, order, statute, law,
          rule or
          regulation that limits or could reasonably be expected to limit its performance
          under the Loan Documents or this Mortgage.

         

        Section
          3.19     Management.  If, at any time
          after an Event of Default by Mortgagor, the management or maintenance of
          the
          Mortgaged Property is determined by Mortgagee to be unsatisfactory and
          is not
          corrected within thirty (30) days after notice to Mortgagor, Mortgagor
          will, to
          the extent Mortgagor is entitled under third party agreements affecting
          the
          same, employ, for the duration of such Event of Default, as managing agent
          of
          the Mortgaged Property, any person from time to time designated or approved
          by
          Mortgagee.

        
          
            
            

          

          
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        ARTICLE
          IV

        Rights
          and Remedies

         

        Section
          4.01     Event of Default.  As used in
          this Mortgage, an “Event of Default” means an “Event of Default”,
          as defined under the Notes.

         

        Section
          4.02     Foreclosure and Sale.

         

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

        
          
            
            

          

          
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        (b)           With
          respect to that portion, if any, of the Mortgaged Property situated in
          the State
          of Texas, this instrument may be foreclosed by advertisement and sale as
          provided by applicable Texas statutes.  In such regard, it shall be
          the duty of the Trustee, after advertising the time and place of the sale
          for at
          least 21 days prior to the day of sale, by posting or causing to be posted
          a
          written or printed notice thereof at the courthouse door and by filing
          a copy of
          such notice in the office of the county clerk of each county in which the
          Mortgaged Property or any part thereof may be situated, and serving written
          notice of the proposed sale on each debtor obligated to pay the Indebtedness
          according to the records of Mortgagee, by postage prepaid, certified United
          States mail, at the most recent address for such debtor as shown by the
          records
          of Mortgagee, at least 21 days prior to the day of sale, to sell the Mortgaged
          Property, either as a whole or in parcels, as the Trustee may deem proper,
          at
          public venue at the courthouse of the county in which the Mortgaged Property
          or
          any part thereof may be situated (and being the county designated in the
          notice
          of sale) on the first Tuesday of any  month between the hours of 10:00
          a.m. and 4:00 p.m., to the highest bidder for cash, and after such sale
          to
          execute and deliver to the purchaser or purchasers good and sufficient
          deeds and
          assignments, conveying such property so sold to the purchaser or purchasers
          with
          general warranty of title made on behalf of Mortgagor.  The Trustee,
          or his successor or substitute, is hereby authorized and empowered to appoint
          any one or more persons or entities as his attorneys-in-fact or agents
          to act as
          Trustee under him and in his name, place and stead, such appointment to
          be
          evidenced by a written instrument executed by the Trustee, or his successor
          or
          substitute, to perform any one or more act or acts necessary or incident
          to any
          sale under the power of sale hereunder, including, without limitation,
          the
          posting and filing of any notices, the conduct of the sale and the execution
          and
          delivery of any instruments conveying the Mortgaged Property as a result
          of the
          sale, but in the name and on behalf of the Trustee, or his successor or
          substitute; and all acts done or performed by such attorneys-in-fact or
          agents
          shall be valid, lawful and binding as if done or performed by the Trustee,
          or
          his successor substitute.

         

        (c)           Upon
          the occurrence of an Event of Default, Mortgagee may exercise its rights
          of
          enforcement with respect to the Mortgaged Properties or any part thereof
          under
          the Applicable UCC of any State where any portion of the Mortgaged Properties
          are located or under any other statute in force in any state to the extent
          the
          same is applicable law.  Cumulative of the foregoing and the other
          provisions of this Section 4.02: (i) to the extent permitted by law, upon
          the occurrence and during the continuation of an Event of Default Mortgagee
          may
          enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to
          take possession of, assemble and collect the personal property portion
          of the
          Mortgaged Properties or to render it unusable; (ii) upon the occurrence
          and
          during the continuation of an Event of Default Mortgagee may require Mortgagor
          to assemble the personal property and make it available at a place Mortgagee
          designates which is mutually convenient to allow Mortgagee to take possession
          or
          dispose of the personal property; (iii)  written notice mailed to
          Mortgagor as provided herein at least five (5) days prior to the date of
          public
          sale of the personal property or prior to the date after which private
          sale of
          the personal property will be made shall constitute reasonable notice;
          (iv) in
          the event of a foreclosure of the liens, privileges and/or security interests
          evidenced hereby, the personal property, or any part thereof, and the Mortgaged
          Properties, or any part thereof, may, at the option of Mortgagee, be sold,
          as a
          whole or in parts, together or separately (including, without limitation,
          where
          a portion of the Mortgaged Properties is sold, the personal property related
          thereto may be sold in connection therewith); (v) upon the occurrence and
          during
          the continuation of an Event of Default, Mortgagee or the Trustee may,
          to the
          extent permitted under applicable law, elect to treat the fixtures included
          in
          the Mortgaged Properties either as real property or as personal property,
          or
          both, and proceed to exercise such rights as apply thereto; and (vi) with
          respect to any sale of real property included in the Mortgaged Properties
          made
          under the powers of sale herein granted and conferred, Mortgagee or the
          Trustee
          may, to the extent permitted by applicable law, include in such sale any
          personal property and fixtures included in the Mortgaged Properties and
          relating
          to such real property.

        
          
            
            

          

          
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        Section
          4.03     Agents.  Trustee or his
          successor or substitute may appoint or delegate any one or more persons
          as agent
          to perform any act or acts necessary or incident to any sale held by Trustee,
          including the posting of notices and the conduct of sale, but in the name
          and on
          behalf of Trustee, his successor or substitute.  If Trustee or his
          successor or substitute shall have given notice of sale hereunder, any
          successor
          or substitute trustee thereafter appointed may complete the sale and the
          conveyance of the property pursuant thereto as if such notice had been
          given by
          the successor or substitute trustee conducting the sale.

         

        Section
          4.04     Judicial Foreclosure;
          Receivership.  If any of the Indebtedness shall become due and
          payable and shall not be promptly paid, Trustee or Mortgagee shall have
          the
          right and power to proceed by a suit or suits in equity or at law, whether
          for
          the specific performance of any covenant or agreement herein contained
          or in aid
          of the execution of any power herein granted, or for any foreclosure hereunder
          or for the sale of the Mortgaged Property under the judgment or decree
          of any
          court or courts of competent jurisdiction or for the enforcement of any
          other
          appropriate legal or equitable remedy.  In addition to all other
          remedies herein provided for, Mortgagor agrees that, upon the occurrence
          of an
          Event of Default or any event or circumstance which, with the lapse of
          time or
          the giving of notice, or both, would constitute an Event of Default hereunder,
          Mortgagee shall as a matter of right be entitled to the appointment of
          a
          receiver or receivers for all or any part of the Mortgaged Property, whether
          such receivership be incident to a proposed sale (or sales) of such property
          or
          otherwise, and without regard to the value of the Mortgaged Property or
          the
          solvency of any person or persons liable for the payment of the Indebtedness
          secured hereby, and Mortgagor does hereby consent to the appointment of
          such
          receiver or receivers, waives any and all defenses to such appointment,
          and
          agrees not to oppose any application therefor by Mortgagee, and agrees
          that such
          appointment shall in no manner impair, prejudice or otherwise affect the
          rights
          of Mortgagee under Article II hereof.  Mortgagor expressly
          waives notice of a hearing for appointment of a receiver and the necessity
          for
          bond or an accounting by the receiver.  Nothing herein is to be
          construed to deprive Mortgagee of any other right, remedy or privilege
          it may
          now or hereafter have under the law to have a receiver appointed.  Any
          money advanced by Trustee and/or Mortgagee in connection with any such
          receivership shall be a demand obligation (which obligation Mortgagor hereby
          expressly promises to pay) included in the Indebtedness owing by Mortgagor
          to
          the Trustee and/or Mortgagee and shall bear interest from the date of making
          such advance by Trustee and/or Mortgagee until paid at the Interest
          Rate.

         

        Section
          4.05     Foreclosure for
          Installments.  Mortgagee shall also have the option to proceed
          with foreclosure in satisfaction of any installments of the Indebtedness
          which
          have not been paid when due either through the courts or by directing Trustee
          or
          his successors in trust to proceed with foreclosure in satisfaction of
          the
          matured but unpaid portion of the Indebtedness as if under a full foreclosure,
          conducting the sale as herein provided and without declaring the entire
          principal balance and accrued interest due; such sale may be made subject
          to the
          unmatured portion of the Indebtedness, and any such sale shall not in any
          manner
          affect the unmatured portion of the Indebtedness, but as to such unmatured
          portion of the Indebtedness this Mortgage shall remain in full force and
          effect
          just as though no sale had been made hereunder.  It is further agreed
          that several sales may be made hereunder without exhausting the right of
          sale
          for any unmatured part of the Indebtedness, it being the purpose hereof
          to
          provide for a foreclosure and sale of the security for any matured portion
          of
          the Indebtedness without exhausting the power to foreclose and sell the
          Mortgaged Property for any subsequently maturing portion of the
          Indebtedness.

        
          
            
            

          

          
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        Section
          4.06     Separate Sales.  The
          Mortgaged Property may be sold in one or more parcels and in such manner
          and
          order as Mortgagee, in its sole discretion, may elect, it being expressly
          understood and agreed that the right of sale arising out of any Event of
          Default
          shall not be exhausted by any one or more sales.

         

        Section
          4.07     Possession of Mortgaged
          Property.  Mortgagor agrees to the full extent that it
          lawfully may, that, in case one or more of the Events of Default shall
          have
          occurred and shall not have been remedied, then, and in every such case,
          Trustee
          or Mortgagee shall have the right and power to enter into and upon and
          take
          possession of all or any part of the Mortgaged Property in the possession
          of
          Mortgagor, its successors or assigns, or its or their agents or servants,
          and
          may exclude Mortgagor, its successors or assigns, and all persons claiming
          under
          Mortgagor, and its or their agents or servants wholly or partly therefrom;
          and,
          holding the same, Trustee may use, administer, manage, operate and control
          the
          Mortgaged Property and conduct the business thereof to the same extent
          as
          Mortgagor, its successors or assigns, might at the time do and may exercise
          all
          rights and powers of Mortgagor, in the name, place and stead of Mortgagor,
          or
          otherwise as Trustee shall deem best.  All costs, expenses and
          liabilities of every character incurred by Trustee and/or Mortgagee in
          administering, managing, operating, and controlling the Mortgaged Property
          shall
          constitute a demand obligation (which obligation Mortgagor hereby expressly
          promises to pay) owing by Mortgagor to Trustee and/or Mortgagee and shall
          bear
          interest from date of expenditure until paid at the Interest Rate, all
          of which
          shall constitute a portion of the Indebtedness and shall be secured by
          this
          Mortgage and all other security instruments.

         

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

         

        Section
          4.09     Remedies Cumulative, Concurrent and
          Nonexclusive.  Every right, power and remedy herein given to
          Trustee or Mortgagee shall be cumulative and in addition to every other
          right,
          power and remedy herein specifically given or now or hereafter existing
          in
          equity, at law or by statute (including specifically those granted by the
          Applicable UCC in effect and applicable to the Mortgaged Property or any
          portion
          thereof) each and every right, power and remedy whether specifically herein
          given or otherwise existing may be exercised from time to time and so often
          and
          in such order as may be deemed expedient by Trustee or Mortgagee, and the
          exercise, or the beginning of the exercise, of any such right, power or
          remedy
          shall not be deemed a waiver of the right to exercise, at the same time
          or
          thereafter any other right, power or remedy.  No delay or omission by
          Trustee or Mortgagee in the exercise of any right, power or remedy shall
          impair
          any such right, power or remedy or operate as a waiver thereof or of any
          other
          right, power or remedy then or thereafter existing.

        
          
            
            

          

          
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        Section
          4.10     No Release of
          Obligations.  Neither Mortgagor, any other Company Party, any
          guarantor nor any other person hereafter obligated for payment of all or
          any
          part of the Indebtedness shall be relieved of such obligation by reason
          of (a)
          the failure of Trustee to comply with any request of Mortgagor, or any
          guarantor
          or any other person so obligated to foreclose the lien of this Mortgage
          or to
          enforce any provision hereunder or under the any of the Loan Documents;
          (b) the
          release, regardless of consideration, of the Mortgaged Property or any
          portion
          thereof or interest therein or the addition of any other property to the
          Mortgaged Property; (c) any agreement or stipulation between any subsequent
          owner of the Mortgaged Property and Mortgagee extending, renewing, rearranging
          or in any other way modifying the terms of this Mortgage without first
          having
          obtained the consent of, given notice to or paid any consideration to Mortgagor,
          any other Company Party, any guarantor or such other person, and in such
          event
          Mortgagor, the Company Parties, guarantor and all such other persons shall
          continue to be liable to make payment according to the terms of any such
          extension or modification agreement unless expressly released and discharged
          in
          writing by Mortgagee; or (d) by any other act or occurrence save and except
          the
          complete payment of the Indebtedness and the complete fulfillment of all
          obligations hereunder or under the Loan Documents.

         

        Section
          4.11     Release of and Resort to
          Collateral.  Mortgagee may release, regardless of consideration,
          any part of the Mortgaged Property without, as to the remainder, in any
          way
          impairing, affecting, subordinating or releasing the lien or security interest
          created in or evidenced by this Mortgage or its stature as a first and
          prior
          lien and security interest in and to the Mortgaged Property, and without
          in any
          way releasing or diminishing the liability of any person or entity liable
          for
          the repayment of the Indebtedness.  For payment of the Indebtedness,
          Mortgagee may resort to any other security therefor held by Mortgagee or
          Trustee
          in such order and manner as Mortgagee may elect.

         

        Section
          4.12     Waiver of Redemption, Notice and
          Marshalling of Assets, Etc.  To the fullest extent permitted by
          law, Mortgagor hereby irrevocably and unconditionally waives and releases
          (a)
          all benefits that might accrue to Mortgagor by virtue of any present or
          future
          moratorium law or other law exempting the Mortgaged Property from attachment,
          levy or sale on execution or providing for any appraisement, valuation,
          stay of
          execution, exemption from civil process, redemption or extension of time
          for
          payment; provided, however, that if the laws of any state do not permit
          the
          redemption period to be waived, the redemption period is specifically reduced
          to
          the minimum amount of time allowable by statute; (b) all notices Mortgagee’s
          intention to accelerate maturity of the Indebtedness; and (c) any right
          to a
          marshalling of assets or a sale in inverse order of alienation.  If
          any law referred to in this Mortgage and now in force, of which Mortgagor
          or its
          successor or successors might take advantage despite the provisions hereof,
          shall hereafter be repealed or cease to be in force, such law shall thereafter
          be deemed not to constitute any part of the contract herein contained or
          to
          preclude the operation or application of the provisions hereof.

         

        Section
          4.13     Discontinuance of
          Proceedings.  In case Mortgagee shall have proceeded to invoke any
          right, remedy or recourse permitted hereunder or under the Loan Documents
          and
          shall thereafter elect to discontinue or abandon same for any reason, Mortgagee
          shall have the unqualified right so to do and, in such an event, Mortgagor
          and
          Mortgagee shall be restored to their former positions with respect to the
          Indebtedness, this Mortgage, the Loan Documents, the Mortgaged Property
          and
          otherwise, and the rights, remedies, recourses and powers of Mortgagee
          shall
          continue as if same had never been invoked.

         

        
          
            
              
              

            

            
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        Section
          4.14     Application of Proceeds.  The
          proceeds of any sale of the Mortgaged Property or any part thereof and
          all other
          monies received by Trustee or Mortgagee in any proceedings for the enforcement
          hereof or otherwise, whose application has not elsewhere herein been
          specifically provided for, shall be applied:

         

        (a)           first,
          to the payment of all costs and expenses incurred by Trustee or Mortgagee
          incident to the enforcement of this Mortgage, the Loan Documents or any
          of the
          Indebtedness (including, without limiting the generality of the foregoing,
          expenses of any entry or taking of possession, of any sale, of advertisement
          thereof, and of conveyances, and court costs, compensation of agents and
          employees, reasonable outside legal fees), and to the payment of all other
          charges, expenses, liabilities and advances incurred or made by Trustee
          or
          Mortgagee under this Mortgage or in executing any trust or power
          hereunder;

         

        (b)           second,
          to payment of the Indebtedness in accordance with the Purchase Agreement
          or
          other Transaction Documents; and

         

        (c)           third,
          to Mortgagor or such other persons as may be entitled thereto by law or
          as
          otherwise required by any court of competent jurisdiction.

         

        Section
          4.15     Resignation of Operator.  In
          addition to all rights and remedies under this Mortgage, at law and in
          equity,
          if any Event of Default shall occur and Trustee or Mortgagee shall exercise
          any
          remedies under this Mortgage with respect to any portion of the Mortgaged
          Property (or Mortgagor shall transfer any Mortgaged Property “in lieu of”
foreclosure), Mortgagee or Trustee shall have the right to request that
          any
          operator of any Mortgaged Property which is either Mortgagor or any affiliate
          of
          Mortgagor to resign as operator under the joint operating agreement applicable
          thereto, and no later than 60 days after receipt by Mortgagor of any such
          request, Mortgagor shall resign (or cause such other party to resign) as
          operator of such Mortgaged Property.

        

        Section
          4.16     INDEMNITY.  IN
          CONNECTION WITH ANY ACTION TAKEN BY TRUSTEE AND/OR MORTGAGEE PURSUANT TO
          THIS
          MORTGAGE, TRUSTEE AND/OR MORTGAGEE AND THEIR OFFICERS, DIRECTORS, PARTNERS,
          MEMBERS, INVESTORS, EQUITY HOLDERS, EMPLOYEES, REPRESENTATIVES, AGENTS,
          ADVISORS, ATTORNEYS, ACCOUNTANTS AND EXPERTS AND ANY PERSONS OR ENTITIES
          OWNED
          OR CONTROLLED BY TRUSTEE, OR MORTGAGEE OR ANY SUCH OTHER PERSON OR ENTITY
          (“INDEMNIFIED PARTIES”) SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY
          MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE HAS RECEIVED FUNDS
          FROM THE
          PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS OR ANY ACT OR OMISSION
          OF
          ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING OR CONTROLLING
          THE
          MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY RESULT FROM THE ORDINARY
          NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS CAUSED BY THE GROSS
          NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY, NOR SHALL TRUSTEE
          AND/OR MORTGAGEE BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY
          OR
          LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY
          EACH
          INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY HARMLESS FROM,
          ANY AND
          ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED
          PARTY BY REASON OF THIS MORTGAGE OR THE EXERCISE OF RIGHTS OR REMEDIES
          HEREUNDER; SHOULD TRUSTEE AND/OR MORTGAGEE MAKE ANY EXPENDITURE ON ACCOUNT
          OF
          ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT THEREOF, INCLUDING COSTS,
          EXPENSES AND REASONABLE ATTORNEYS’ FEES, SHALL BE A DEMAND OBLIGATION (WHICH
          OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY) OWING BY MORTGAGOR
          TO
          TRUSTEE AND/OR MORTGAGEE AND SHALL BEAR INTEREST FROM THE DATE EXPENDED
          UNTIL
          PAID AT THE INTEREST RATE, SHALL BE A PART OF THE INDEBTEDNESS AND SHALL
          BE
          SECURED BY THIS MORTGAGE AND ANY OTHER SECURITY INSTRUMENT.  MORTGAGOR
          HEREBY ASSENTS TO, RATIFIES AND CONFIRMS ANY AND ALL ACTIONS OF TRUSTEE
          AND/OR
          MORTGAGEE WITH RESPECT TO THE MORTGAGED PROPERTY TAKEN UNDER THIS
          MORTGAGE.  THE LIABILITIES OF MORTGAGOR AS SET FORTH IN THIS
SECTION 4.16 SHALL SURVIVE THE TERMINATION OF THIS MORTGAGE.

        

        
          
            
              
              

            

            
              22

              
                

              

            

            
              
              

            

          

        

         

        ARTICLE
          V

        Trustee

         

        Section
          5.01     Duties, Rights, and Powers of
          Trustee.  It shall be no part of the duty of Trustee to see to any
          recording, filing or registration of this Mortgage or any other instrument
          in
          addition or supplemental thereto, or to give any notice thereof, or to
          see to
          the payment of or be under any duty in respect of any tax or assessment
          or other
          governmental charge which may be levied or assessed on the Mortgaged Property,
          or any part thereof, or against Mortgagor, or to see to the performance
          or
          observance by Mortgagor of any of the covenants and agreements contained
          herein.  Trustee shall not be responsible for the execution,
          acknowledgment or validity of this Mortgage or of any instrument in addition
          or
          supplemental hereto or for the sufficiency of the security purported to
          be
          created hereby, and makes no representation in respect thereof or in respect
          of
          the rights of Mortgagee.  Trustee shall have the right to advise with
          counsel upon any matters arising hereunder and shall be fully protected
          in
          relying as to legal matters on the advice of counsel.  Trustee shall
          not incur any personal liability hereunder except for Trustee’s own willful
          misconduct; and Trustee shall have the right to rely on any instrument,
          document
          or signature authorizing or supporting any action taken or proposed to
          be taken
          by him hereunder, believed by him in good faith to be genuine.

         

        Section
          5.02     Successor Trustee.  Trustee
          may resign by written notice addressed to Mortgagee or be removed at any
          time
          with or without cause by an instrument in writing duly executed on behalf
          of
          Mortgagee.  In case of the death, resignation or removal of Trustee, a
          successor trustee may be appointed by Mortgagee by instrument of substitution
          complying with any applicable requirements of law, or, in the absence of
          any
          such requirement, without other formality than appointment and designation
          in
          writing.  Written notice of such appointment and designation shall be
          given by Mortgagee to Mortgagor, but the validity of any such appointment
          shall
          not be impaired or affected by failure to give such notice or by any defect
          therein.  Such appointment and designation shall be full evidence of
          the right and authority to make the same and of all the facts therein recited,
          and, upon the making of any such appointment and designation, this Mortgage
          shall vest in the successor trustee all the estate and title in and to
          all of
          the Mortgaged Property, and the successor trustee shall thereupon succeed
          to all
          of the rights, powers, privileges, immunities and duties hereby conferred
          upon
          Trustee named herein, and one such appointment and designation shall not
          exhaust
          the right to appoint and designate a successor trustee hereunder but such
          right
          may be exercised repeatedly as long as any Indebtedness remains unpaid
          hereunder.  To facilitate the administration of the duties hereunder,
          Mortgagee may appoint multiple trustees to serve in such capacity or in
          such
          jurisdictions as Mortgagee may designate.

         

        Section
          5.03     Retention of Moneys.  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.

         

         

        ARTICLE
          VI

        Miscellaneous

         

        Section
          6.01     Instrument Construed as Mortgage,
          Etc.  With respect to any portions of the Mortgaged Property
          located in any state or other jurisdiction the laws of which do not provide
          for
          the use or enforcement of a deed of trust or the office, rights and authority
          of
          Trustee as herein provided, the general language of conveyance hereof to
          Trustee
          is intended and the same shall be construed as words of mortgage unto and
          in
          favor of Mortgagee and the rights and authority granted to Trustee herein
          may be
          enforced and asserted by Mortgagee in accordance with the laws of the
          jurisdiction in which such portion of the Mortgaged Property is located
          and the
          same may be foreclosed at the option of Mortgagee as to any or all such
          portions
          of the Mortgaged Property in any manner permitted by the laws of the
          jurisdiction in which such portions of the Mortgaged Property is
          situated.  This Mortgage may be construed as a mortgage, deed of
          trust, chattel mortgage, conveyance, assignment, security agreement, pledge,
          financing statement, hypothecation or contract, or any one or more of them,
          in
          order fully to effectuate the lien hereof and the purposes and agreements
          herein
          set forth.

        

        
          
            
              
              

            

            
              23

              
                

              

            

            
              
              

            

          

        

         

        Section
          6.02     Release of Mortgage.  At such
          time, if any, as (i) all Indebtedness under the Notes secured hereby shall
          be
          finally and irrevocably paid in full in cash or converted pursuant to the
          Notes,
          (ii) no Notes shall remain outstanding, (iii) all commitments to lend under
          the
          Purchase Agreement shall have terminated and (iv) there shall exist no
          other
          outstanding payment or reimbursement obligations (other than contingent
          indemnification obligations for which no claims shall have been asserted)
          of the
          Mortgagor or any of its Subsidiaries to the Mortgagee under any of the
          Transaction Documents (other than the Warrant or shares exercisable thereunder),
          Mortgagee shall forthwith cause satisfaction and discharge of this Mortgage
          to
          be entered upon the record at the expense of Mortgagor and shall execute
          and
          deliver or cause to be executed and delivered such instruments of satisfaction
          and reassignment as may be appropriate.  

         

        Section
          6.03     Severability.  If any
          provision hereof is invalid or unenforceable in any jurisdiction, the other
          provisions hereof shall remain in full force and effect in such jurisdiction
          and
          the remaining provisions hereof shall be liberally construed in favor of
          Trustee
          and Mortgagee in order to effectuate the provisions hereof, and the invalidity
          or unenforceability of any provision hereof in any jurisdiction shall not
          affect
          the validity or enforceability of any such provision in any other
          jurisdiction.

         

        Section
          6.04     Successors and Assigns of
          Parties.  The term “Mortgagee” as used herein shall mean and
          include any legal owner, holder, assignee or pledgee of any of the Indebtedness
          secured hereby.  The terms used to designate Trustee, Mortgagee and
          Mortgagor shall be deemed to include the respective heirs, legal
          representatives, successors and assigns of such parties.

         

        Section
          6.05     Satisfaction of Prior
          Encumbrance.  To the extent that proceeds of the Notes are used to
          pay indebtedness secured by any outstanding lien, security interest, charge
          or
          prior encumbrance against the Mortgaged Property, such proceeds have been
          advanced by Mortgagee at Mortgagor’s request, and Mortgagee shall be subrogated
          to any and all rights, security interests and liens owned by any owner
          or holder
          of such outstanding liens, security interests, charges or encumbrances,
          irrespective of whether said liens, security interests, charges or encumbrances
          are released, and it is expressly understood that, in consideration of
          the
          payment of such other indebtedness by Mortgagee, Mortgagor hereby waives
          and
          releases all demands and causes of action for offsets and payments to,
          upon and
          in connection with the said indebtedness.

         

        Section
          6.06     Subrogation of Trustee.  This
          Mortgage is made with full substitution and subrogation of Trustee and
          his
          successors in this trust and his and their assigns in and to all covenants
          and
          warranties by others heretofore given or made in respect of the Mortgaged
          Property or any part thereof.

         

        Section
          6.07     Nature of Covenants.  The
          covenants and agreements herein contained shall constitute covenants running
          with the land and interests covered or affected hereby and shall be binding
          upon
          the heirs, legal representatives, successors and assigns of the parties
          hereto.

        

        
          
            
              
              

            

            
              24

              
                

              

            

            
              
              

            

          

        

         

        Section
          6.08     Notices.  All notices,
          requests, consents, demands and other communications required or permitted
          hereunder shall be given or furnished in accordance with the terms of the
          Purchase Agreement relating to the giving of notices (it being agreed to
          and
          understood that delivery to Mortgagor of any such notice, request, consent,
          demand or other communication shall be deemed delivery to
          Mortgagor).

         

        Section
          6.09     Counterparts.  This Mortgage
          is being executed in several counterparts, all of which are identical,
          except
          that to facilitate recordation, if the Mortgaged Property is situated in
          more
          than one jurisdiction, descriptions of only those portions of the Mortgaged
          Property located in, and descriptions of the Prior Mortgages (as defined
          herein)
          for, the jurisdiction in which a particular counterpart is recorded shall
          be
          attached as Exhibit A thereto.  An Exhibit A containing
          a description of all Mortgaged Property wheresoever situated will be attached
          to
          that certain counterpart to be attached to a Financing Statement and filed
          with
          the Secretary of State of Texas in its Uniform Commercial Code
          Records.  Each of such counterparts shall for all purposes be deemed
          to be an original and all such counterparts shall together constitute but
          one
          and the same instrument providedthat a facsimile signature shall
          be considered due execution and shall be binding upon the signatory thereto
          with
          the same force and effect as if the signature were an original, not a facsimile
          signature.

         

        Section
          6.10     Effective as a Financing
          Statement.  This Mortgage, among other things, covers goods which
          are or are to become fixtures on the real property described herein and
          covers
          as-extracted collateral related to the real/immovable property described
          herein.  This Mortgage shall be effective as a financing statement (i)
          filed as a fixture filing with respect to all fixtures included within
          the
          Mortgaged Property, (ii) covering as-extracted collateral with respect
          to all
          as-extracted collateral included within the Mortgaged Property (including,
          without limitation, all oil, gas, other minerals and other substances of
          value
          which may be extracted from the earth at the wellhead or minehead) and
          (iii)
          covering all other Mortgaged Property.  This Mortgage is to be filed
          for record in the real/immovable property records of each county or parish
          where
          any part of the Mortgaged Property is situated 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).  The mailing
          address of Mortgagor is the address of Mortgagor set forth at the end of
          this
          Mortgage and the address of Mortgagee from which information concerning
          the
          security interests hereunder may be obtained is the address of Mortgagee
          set
          forth at the end of this Mortgage.  Nothing contained in this
          paragraph shall be construed to limit the scope of this Mortgage nor its
          effectiveness as a financing statement covering any type of
          property.  A carbon, photographic, facsimile or other reproduction of
          this Mortgage or of any financing statement relating to this Mortgage shall
          be
          sufficient as a financing statement for any of the purposes referred to
          this
          Section.  Without limiting any other provision herein, Mortgagor
          hereby authorizes Mortgagee to file, in any filing or recording office,
          one or
          more financing statements and any renewal or continuation statements
          thereof.

         

        Section
          6.11     No Impairment of
          Security.  To the extent allowed by applicable law, the
          lien, privilege, security interest and other security rights hereunder
          shall not
          be impaired by any indulgence, moratorium or release which may be granted
          including, but not limited to, any renewal, extension or modification which
          may
          be granted with respect to any secured obligations, or any surrender,
          compromise, release, renewal, extension, exchange or substitution which
          may be
          granted in respect of the Mortgaged Property (including, without limitation,
          Production Proceeds), or any part thereof or any interest therein, or any
          release or indulgence granted to any borrower, endorser, guarantor or surety
          of
          any Indebtedness.

         

        Section
          6.12     Acts Not Constituting
          Waiver.  Any Event of Default may be waived without waiving any
          other prior or subsequent Event of Default.  Any Event of Default may
          be remedied without waiving the Event of Default remedied.  Neither
          failure to exercise, nor delay in exercising, any right, power or remedy
          upon
          any Event of Default shall be construed as a waiver of such Event of Default
          or
          as a waiver of the right to exercise any such right, power or remedy at
          a later
          date.  No single or partial exercise of any right, power or remedy
          hereunder shall exhaust the same or shall preclude any other or further
          exercise
          thereof, and every such right, power or remedy hereunder may be exercised
          at any
          time and from time to time.  No modification or waiver of any
          provision hereof nor consent to any departure by Mortgagor therefrom shall
          in
          any event be effective unless the same shall be in writing and signed by
          Mortgagee and then such waiver or consent shall be effective only in the
          specific instances, for the purpose for which given and to the extent therein
          specified.  No notice 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 Indebtedness shall be deemed an acceptance on
          account
          only and shall not in any way excuse the existence of an Event of Default
          hereunder.

        

        
          
            
              
              

            

            
              25

              
                

              

            

            
              
              

            

          

        

         

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

         

        Section
          6.14     Certain Consents.  Except
          where otherwise expressly provided herein, in any instance hereunder where
          the
          approval, consent or the exercise of judgment of Mortgagee is required,
          the
          granting or denial of such approval or consent and the exercise of such
          judgment
          shall be within the sole discretion of Mortgagee in its reasonable credit
          judgment, and Mortgagee 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
          6.15     GOVERNING
          LAW.  WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW,
          THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
          BY
          THE LAWS OF THE STATE OF 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 MORTGAGED
          PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE
          MORTGAGED PROPERTY) NECESSARILY OR, IN THE SOLE DISCRETION OF THE MORTGAGEE,
          APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS
          RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, PRIVILEGES,
          SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE TRUSTEE OR MORTGAGEE
          GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF
          THE
          MORTGAGED PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS
          OF)
          SUCH STATE.

         

        Section
          6.16     EXCULPATION
          PROVISIONS.  EACH
          OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS
          MORTGAGE; AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE
          TERMS
          OF THIS MORTGAGE; THAT IT HAS IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED
          AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS
          OF THIS
          MORTGAGE; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF
          ITS
          CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS MORTGAGE;
          AND
          HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS MORTGAGE;
          AND THAT
          IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS MORTGAGE RESULT IN ONE
          PARTY
          ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
          RELIEVING
          THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY.  EACH PARTY
          HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
          ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS MORTGAGE ON THE BASIS
          THAT
          THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION
          IS
          NOT “CONSPICUOUS.”

        

        
          
            
              
              

            

            
              26

              
                

              

            

            
              
              

            

          

        

         

        Section
          6.17     FINAL AGREEMENT.  THE
          TRANSACTION DOCUMENTS, THIS MORTGAGE AND THE SECURITY DOCUMENTS AND THE
          OTHER
          WRITTEN DOCUMENTS EXECUTED IN CONNECTION THEREWITH REPRESENT THE FINAL
          AGREEMENT
          BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR,
          CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE
          ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         

        Section
          6.18     [Reserved]

         

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

         

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

         

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

         

        [rest
          of
          page intentionally left blank; signature page follows]

         

        
          
            
              
              

            

            
              27

              
                

              

            

            
              
              

            

          

        

        

        WITNESS
          THE EXECUTION HEREOF, this 10th day of September, 2007, to be effective
          as of
          said date (the “Effective Date”).

         

        
          	 	
                  MORTGAGOR:  

                	 
	 	 	 
	 	
                  GULF
                    WESTERN PETROLEUM, LP,  

                	 
	 	
                  a
                    Texas limited partnership  

                	 
	 	 	 	 	 
	 	
                  By:

                	
                  Wharton
                    Resources, LLC, 

                	 
	 	 	
                  a
                    Delaware limited liability company, 

                	 
	 	 	
                  its
                    general partner 

                	 
	 	 	 	 	 
	 	 	
                  By:

                	
                    /s/  Donald
                    L. Sytsma

                	 
	 	 	
                  Name:

                	
                    Donald
                    L. Sytsma

                	 
	 	 	
                  Title:

                	
                    CFO

                	 

        

        

         

         

        The
          name
          and address of the Debtor/Mortgagor is:

        

        Gulf
          Western Petroleum, LP

        4801
          Woodway Drive

        Suite
          306
          W

        Houston,
          TX  77056

        

         

        The
          name
          and address of the Secured Party/Mortgagee is:

        

        

        Metage
          Funds Limited, as Collateral Agent

        8
          Pollen
          Street

        London,
          England W1S 1NG

        Attention:  Miles
          Staude

      

       

       

       

      Signature
        Page to Texas Mortgage

      
        

        
          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

         

        
          	
                  STATE
                    OF TEXAS

                	
                  )

                	 
	 	
                  )

                	 
	
                  COUNTY
                    OF HARRIS

                	
                  )

                	 
	 	
                  )

                	 
	
                  CITY
                    OF HOUSTON

                	
                  )

                	 

        

        

         

         

        The
          foregoing instrument was acknowledged before me this 10th day of
September, 2007, by Donald L. Sytsma as CFO of
GULF WESTERN PETROLEUM LP, a Texas limited partnership,
          on
          behalf of said limited partnership.

         

        

         

        Witness
          my hand and official seal.

         

        My
          Commission
          Expires:                
 November 18,
          2009                

         

         

        
          	 	
                   
                    /s/  Yazmin E. Leyva

                	 
	 	
                  Notary
                    Public

                	 

        

         

        Signature
          Page to Texas
          Mortgage

         

        
          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

        

        EXHIBIT
          A

        

        Property
          Descriptions

        

        [To
          include property description, county, description of interest in property
          and
          units, working interest/royalty interest, etc.]Unassociated Document

    
      

    

    Exhibit
      10.9

     

    KANSAS

    

    

    

    WHEN
      RECORDED RETURN TO:

    Porter
      & Hedges, LLP

    1000
      Main
      Street, 36th
      Floor

    Houston,
      Texas 77002

    Attn:     Nick
      D. Nicholas

     

    MORTGAGE,
      ASSIGNMENT OF

    PRODUCTION,
      SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

    

    FROM

    

    GULF
      WESTERN PETROLEUM LP, A TEXAS LIMITED PARTNERSHIP

    

    TO

    

    METAGE
      FUNDS LIMITED, AS COLLATERAL AGENT

    

    A
      CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
      SUFFICIENT AS A FINANCING STATEMENT.

     

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

     

    THIS
      INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

     

    THIS
      INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.

     

    THIS
      INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.

     

    THIS
      INSTRUMENT COVERS AS-EXTRACTED COLLATERAL, MINERALS AND OTHER SUBSTANCES OF
      VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL
      AND GAS), AND ACCOUNTS RESULTING FROM THE SALE OF AS-EXTRACTED COLLATERAL,
      AND
      WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE
      PROPERTIES DESCRIBED IN EXHIBIT A HERETO.  THIS FINANCING
      STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
      ESTATE RECORDS OR SIMILAR RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED
      ON EXHIBIT A HERETO.  THE MORTGAGOR HAS AN INTEREST OF RECORD
      IN THE REAL ESTATE CONCERNED, WHICH INTEREST IS DESCRIBED IN EXHIBIT A
      ATTACHED HERETO.

     

    PORTIONS
      OF THE MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR
      FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN EXHIBIT A
      HERETO.  THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD OR
      RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS
      OF
      EACH COUNTY IN WHICH SAID LAND OR ANY PORTION THEREOF IS LOCATED.  THE
      MORTGAGOR IS THE OWNER OF RECORD INTEREST IN THE REAL ESTATE
      CONCERNED.  THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF
      FINANCING STATEMENTS.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    TABLE
      OF
      CONTENTS

     

    
      	 	 	
              Page

            
	 	 	 
	
              ARTICLE
                I Grant of Lien and Indebtedness Secured

            	
              1

            
	 	 
	
              Section
                1.01

            	
              Grant
                of Liens

            	
              1

            
	
               

            	 	 
	
              Section
                1.02

            	
              Grant
                of Security Interest

            	
              4

            
	 	 	 
	
              Section
                1.03

            	
              Indebtedness
                Secured

            	
              5

            
	 	 	 
	
              Section
                1.04

            	
              Fixture
                Filing, Etc

            	
              5

            
	 	 	 
	
              Section
                1.05

            	
              Defined
                Terms

            	
              5

            
	 	 	 
	
              ARTICLE
                II Assignment of Production, Accounts and Proceeds

            	
              6

            
	 	 
	
              Section
                2.01

            	
              Assignment

            	
              6

            
	
               

            	 	 
	
              Section
                2.02

            	
              [Reserved]

            	
              7

            
	 	 	 
	
              Section
                2.03

            	
              No
                Modification of Payment Obligations

            	
              7

            
	 	 	 
	
              Section
                2.04

            	
              Effectuating
                Payment of Production Proceeds to Mortgagee

            	
              7

            
	 	 	 
	
              Section
                2.05

            	
              Application
                of Production Proceeds

            	
              7

            
	 	 	 
	
              Section
                2.06

            	
              Release
                from Liability; Indemnification

            	
              8

            
	 	 	 
	
              ARTICLE
                III Representations, Warranties and Covenants

            	
              8

            
	 	 
	
              Section
                3.01

            	
              Title

            	
              8

            
	 	 	 
	
              Section
                3.02

            	
              Defend
                Title

            	
              9

            
	 	 	 
	
              Section
                3.03

            	
              Not
                a Foreign Person

            	
              9

            
	 	 	 
	
              Section
                3.04

            	
              Rentals,
                Taxes, Insurance and Fees Paid; Leases in Effect

            	
              9

            
	 	 	 
	
              Section
                3.05

            	
              Operation
                By Third Parties

            	
              10

            
	 	 	 
	
              Section
                3.06

            	
              Failure
                to Perform

            	
              10

            
	 	 	 
	
              Section
                3.07

            	
              Sale
                of Mortgaged Property

            	
              10

            
	
               

            	 	 
	
              Section
                3.08

            	
              Sale
                of Production

            	
              11

            
	
               

            	 	 
	
              Section
                3.09

            	
              Operation
                of Mortgaged Property

            	
              12

            
	 	 	 
	
              Section
                3.10

            	
              Suits
                and Claims

            	
              12

            
	 	 	 
	
              Section
                3.11

            	
              Environmental

            	
              13

            

    

    

    
      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

    

     

    
      	
              Section
                3.12

            	
              Not
                Abandon Wells; Participate in Operations; Non-Operated
                Interests

            	
              14

            
	
               

            	 	 
	
              Section
                3.13

            	
              Condemnation
                Awards

            	
              14

            
	
               

            	 	 
	
              Section
                3.14

            	
              Insurance

            	
              15

            
	
               

            	 	 
	
              Section
                3.15

            	
              Compliance
                with Leases

            	
              15

            
	
               

            	 	 
	
              Section
                3.16

            	
              Further
                Assurance

            	
              15

            
	
               

            	 	 
	
              Section
                3.17

            	
              Name
                and Place of Business

            	
              16

            
	
               

            	 	 
	
              Section
                3.18

            	
              Compliance
                with Laws and Agreements

            	
              16

            
	
               

            	 	 
	
              Section
                3.19

            	
              Management

            	
              16

            
	
               

            	 	 
	
              ARTICLE
                IV Rights and Remedies

            	
              17

            
	 	 
	
              Section
                4.01

            	
              Event
                of Default

            	
              17

            
	
               

            	 	 
	
              Section
                4.02

            	
              Foreclosure
                and Sale

            	
              17

            
	
               

            	 	 
	
              Section
                4.03

            	
              Agents

            	
              19

            
	
               

            	 	 
	
              Section
                4.04

            	
              Judicial
                Foreclosure; Receivership

            	
              19

            
	
               

            	 	 
	
              Section
                4.05

            	
              Foreclosure
                for Installments

            	
              19

            
	
               

            	 	 
	
              Section
                4.06

            	
              Separate
                Sales

            	
              19

            
	
               

            	 	 
	
              Section
                4.07

            	
              Possession
                of Mortgaged Property

            	
              20

            
	
               

            	 	 
	
              Section
                4.08

            	
              Occupancy
                After Foreclosure

            	
              20

            
	
               

            	 	 
	
              Section
                4.09

            	
              Remedies
                Cumulative, Concurrent and Nonexclusive

            	
              20

            
	
               

            	 	 
	
              Section
                4.10

            	
              No
                Release of Obligations

            	
              20

            
	
               

            	 	 
	
              Section
                4.11

            	
              Release
                of and Resort to Collateral

            	
              21

            
	
               

            	 	 
	
              Section
                4.12

            	
              Waiver
                of Redemption, Notice and Marshalling of Assets, Etc.

            	
              21

            
	
               

            	 	 
	
              Section
                4.13

            	
              Discontinuance
                of Proceedings

            	
              21

            
	
               

            	 	 
	
              Section
                4.14

            	
              Application
                of Proceeds

            	
              21

            
	
               

            	 	 
	
              Section
                4.15

            	
              Resignation
                of Operator

            	
              22

            
	
               

            	 	 
	
              Section
                4.16

            	
              INDEMNITY

            	
              22

            
	 	 	 
	
              ARTICLE
                V [INTENTIONALLY OMITTED]

            	
              22

            

    

    

    
      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

    

     

    
      	
              ARTICLE
                VI Miscellaneous

            	
              23

            
	 	 
	
              Section
                6.01

            	
              Release
                of Mortgage

            	
              23

            
	
               

            	 	 
	
              Section
                6.02

            	
              Severability

            	
              23

            
	
               

            	 	 
	
              Section
                6.03

            	
              Successors
                and Assigns of Parties

            	
              23

            
	
               

            	 	 
	
              Section
                6.04

            	
              Satisfaction
                of Prior Encumbrance

            	
              23

            
	
               

            	 	 
	
              Section
                6.05

            	
              Subrogation
                of Mortgagee

            	
              23

            
	
               

            	 	 
	
              Section
                6.06

            	
              Nature
                of Covenants

            	
              23

            
	
               

            	 	 
	
              Section
                6.07

            	
              Notices

            	
              23

            
	
               

            	 	 
	
              Section
                6.08

            	
              Counterparts

            	
              24

            
	
               

            	 	 
	
              Section
                6.09

            	
              Effective
                as a Financing Statement

            	
              24

            
	
               

            	 	 
	
              Section
                6.10

            	
              No
                Impairment of Security

            	
              24

            
	
               

            	 	 
	
              Section
                6.11

            	
              Acts
                Not Constituting Waiver

            	
              24

            
	
               

            	 	 
	
              Section
                6.12

            	
              Mortgagor’s
                Successors

            	
              25

            
	
               

            	 	 
	
              Section
                6.13

            	
              Certain
                Consents

            	
              25

            
	
               

            	 	 
	
              Section
                6.14

            	
              GOVERNING
                LAW

            	
              25

            
	
               

            	 	 
	
              Section
                6.15

            	
              EXCULPATION
                PROVISIONS

            	
              25

            
	
               

            	 	 
	
              Section
                6.16

            	
              FINAL
                AGREEMENT

            	
              26

            
	
               

            	 	 
	
              Section
                6.17

            	
              [Reserved]

            	
              26

            
	
               

            	 	 
	
              Section
                6.18

            	
              Compliance
                with Usury Laws

            	
              26

            
	
               

            	 	 
	
              Section
                6.19

            	
              Certain
                Obligations of Mortgagor

            	
              26

            
	 	 	 
	
              Section
                6.20

            	
              Authority
                of Mortgagee

            	
              26

            

    

    

    
      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

    

     

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

     

    This
      MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING
      AND FINANCING STATEMENT (this “Mortgage”) is entered into as of
      the Effective Date (as hereinafter defined) by GULF WESTERN PETROLEUM
      LP, a Texas limited partnership, whose address for notice is 4801
      Woodway, Suite 306 W, Houston, Texas
      77056 (“Mortgagor”), to METAGE FUNDS
      LIMITED, whose address for notice is Pollen Street, London,
      England  W1S 1NG, in its capacity as Collateral Agent for the benefit
      of the holders of the Notes (as defined below) (together with its successors
      and
      assigns, the “Mortgagee”).

     

    RECITALS:

     

    A.           Pursuant
      to that certain Securities Purchase Agreement dated as of September 10, 2007
      (as
      amended, restated, supplemented or otherwise modified from time to time, the
      “Purchase Agreement”), among Gulf Western Petroleum Corporation, a Nevada
      corporation (the “Company”), and the investors listed on the Schedule
      of Buyers thereto, each of which is a holder of a Note (together with their
      respective successors and assigns, the “Holders”), each individual Holder
      made loans and certain other financial accommodations (collectively, the
“Loans”) to Company, as evidenced by that certain senior secured
      convertible notes in an original aggregate principal amount of $3,700,000 (such
      notes, together with any promissory notes or other securities issued in exchange
      or substitution therefor or replacement thereof, and as any of the same may
      be
      amended, supplemented, restated or modified and in effect from time to time,
      the
“Notes”).

     

    B.           Mortgagor
      has executed and delivered to Mortgagee that certain Guaranty dated as of the
      date hereof (as amended, restated, supplemented or otherwise modified from
      time
      to time, the “Guaranty”), pursuant to which Mortgagor and certain other
      parties have guaranteed all of the “Obligations” under (and as defined in) the
      Guaranty.

     

    C.           Mortgagor
      has agreed that all of the Indebtedness (as defined in Section 1.03
      hereof) is intended to be secured in part by this Mortgage and this Mortgage
      is
      to be recorded in those jurisdictions as set forth on Exhibit A of this
      Mortgage.

     

    D.           Each
      Holder has conditioned its obligation to make the Loans upon the execution
      and
      delivery by Mortgagor of this Mortgage, and Mortgagor has agreed to enter into
      this Mortgage.

     

    THEREFORE,
      in order to comply with the terms and conditions of the Purchase Agreement
      and
      for other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, Mortgagor hereby agrees with Mortgagee as
      follows:

     

    ARTICLE
      I

    Grant
      of Lien and Indebtedness Secured

     

    Section
      1.01     Grant of Liens.  To secure
      payment of the Indebtedness and the performance of the covenants and obligations
      herein contained and contained in the Guaranty and any other Loan Documents
      (as
      defined in Section 1.03(b)) to which Mortgagor is a party, Mortgagor does by
      these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, PLEDGE,
      HYPOTHECATE, TRANSFER and CONVEY unto Mortgagee and Mortgagee's successors
      and
      substitutes in trust hereunder, WITH A POWER OF SALE, the real and personal
      property, rights, titles, interests and estates described in the following
      paragraphs (a) through (g) (collectively called the “Mortgaged
      Property”):

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    (a)           All
      rights, titles, interests and estates now owned or hereafter acquired by
      Mortgagor in and to the oil and gas leases and/or oil, gas and other mineral
      leases, other mineral properties, mineral servitudes and/or mineral rights,
“as
      extracted collateral” as defined in the Applicable UCC (as defined in Section
      1.02) and other interests and estates and the lands and premises covered or
      affected thereby which are described on Exhibit A hereto without
      regard to any limitations as to specific lands or depths that may be set forth
      in Exhibit A (collectively called the “Hydrocarbon Property”) or
      which Hydrocarbon Property is otherwise referred to herein, and specifically,
      but without limitation, the undivided interests of Mortgagor which are more
      particularly described on attached Exhibit A.

     

    (b)           All
      rights, titles, interests and estates now owned or hereafter acquired by
      Mortgagor in and to (i) the properties now or hereafter pooled or unitized
      with any Hydrocarbon Property; (ii) all presently existing or future
      unitization, communitization, pooling agreements and designations, orders or
      declarations of pooled units and the units created thereby (including, without
      limitation, all units created under orders, regulations, rules or other official
      acts of any Federal, State or other governmental body or agency having
      jurisdiction and any units created solely among working interest owners pursuant
      to operating agreements or otherwise) which may affect all or any portion of
      the
      Hydrocarbon Property including, without limitation, those units which may be
      described or referred to on attached Exhibit A; (iii) all
      operating agreements, production sales or other contracts, processing
      agreements, transportation agreements, gas balancing agreements, farmout
      agreements, farm-in agreements, salt water disposal agreements, area of mutual
      interest agreements, equipment leases and other agreements described or referred
      to in this Mortgage or which relate to any of the Hydrocarbon Property or
      interests in the Hydrocarbon Property described or referred to herein or on
      attached Exhibit A or to the production, sale, purchase, exchange,
      processing, handling, storage, transporting or marketing of the Hydrocarbons
      (as
      defined in Section 1.01(c) hereof) from or attributable to such
      Hydrocarbon Property or interests; (iv) all geological, geophysical,
      engineering, accounting, title, legal, and other technical or business data
      concerning the Hydrocarbon Property, the Hydrocarbons, or any other item of
      Hydrocarbon Property which are in the possession of Mortgagor or in which
      Mortgagor can otherwise grant a security interest, and all books, files,
      records, magnetic media, computer records, and other forms of recording or
      obtaining access to such data; and (v) the Hydrocarbon Property described
      on attached Exhibit A and covered by this Mortgage even though
      Mortgagor’s interests therein be incorrectly described or a description of a
      part or all of such Hydrocarbon Property or Mortgagor’s interests therein be
      omitted; it being intended by Mortgagor and Mortgagee herein to cover and affect
      hereby all interests which Mortgagor may now own or may hereafter acquire in
      and
      to the Hydrocarbon Property notwithstanding that the interests as specified
      on
Exhibit A may be limited to particular lands, specified depths or
      particular types of property interests.

     

    (c)           All
      rights, titles, interests and estates now owned or hereafter acquired by
      Mortgagor in and to all oil, gas, casinghead gas, condensate, distillate, liquid
      hydrocarbons, gaseous hydrocarbons and all products refined therefrom and all
      other minerals (collectively called the “Hydrocarbons”) in and under and
      which may be produced and saved from or attributable to the Hydrocarbon
      Property, the lands pooled or unitized therewith and Mortgagor’s interests
      therein, including all oil in tanks and all rents, issues, profits, proceeds,
      products, revenues and other income from or attributable to the Hydrocarbons,
      the Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor’s
      interests therein.

     

    (d)           All
      tenements, hereditaments, appurtenances and properties in anywise appertaining,
      belonging, affixed or incidental to the Hydrocarbon Property, rights, titles,
      interests and estates described or referred to in paragraphs (a) and (b) above,
      which are now owned or which may hereafter be acquired by Mortgagor, including,
      without limitation, any and all property, real or personal, now owned or
      hereafter acquired and situated upon, used, held for use, or useful in
      connection with the operating, working, extraction, treatment, marketing,
      gathering, transmission or development of any of such Hydrocarbon Property
      or
      the lands pooled or unitized therewith (excluding drilling rigs, trucks,
      automotive equipment or other personal property which may be taken to the
      premises for the purpose of drilling a well or for other similar temporary
      uses)
      and including any and all oil wells, gas wells, injection wells or other wells,
      buildings, structures, field separators, liquid extraction plants, plant
      compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
      systems, field gathering systems, salt water disposal facilities, tanks and
      tank
      batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
      meters, apparatus, goods, inventory, equipment, appliances, tools, implements,
      cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way,
      easements, servitudes, licenses and other surface and subsurface rights together
      with all additions, substitutions, replacements, accessions and attachments
      to
      any and all of the foregoing properties.

     

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

    (e)           Any
      property that may from time to time hereafter, by delivery or by writing of
      any
      kind, be subjected to the lien and security interest hereof by Mortgagor or
      by
      anyone on Mortgagor’s behalf; and Mortgagee is hereby authorized to receive the
      same at any time as additional security hereunder.

     

    (f)           All
      of the rights, titles and interests of every nature whatsoever now owned or
      hereafter acquired by Mortgagor in and to the Hydrocarbon Property rights,
      titles, interests and estates and every part and parcel thereof, including,
      without limitation, the Hydrocarbon Property rights, titles, interests and
      estates as the same may be enlarged by the discharge of any payments out of
      production or by the removal of any charges or Permitted Liens to which any
      of
      the Hydrocarbon Property rights, titles, interests or estates are subject,
      or
      otherwise; all rights of Mortgagor to liens and security interests securing
      payment of proceeds from the sale of production from the Mortgaged Property,
      including, but not limited to, those liens and security interests provided
      in
§9-339a (or statute providing substantially similar rights in whole or in part)
      of the Applicable UCC, as amended from time to time, any other statute enacted
      in the jurisdiction in which the Hydrocarbon Property is located or statute
      made
      applicable to the Hydrocarbon Property under federal law (or some combination
      of
      federal and state law); together with any and all renewals and extensions of
      any
      of the Hydrocarbon Property rights, titles, interests or estates; all contracts
      and agreements supplemental to or amendatory of or in substitution for the
      contracts and agreements described or mentioned above; and any and all
      additional interests of any kind hereafter acquired by Mortgagor in and to
      the
      Hydrocarbon Property rights, titles, interests or estates.

     

    (g)           All
      accounts, contract rights, inventory, choses in action (i.e., rights to enforce
      contracts or to bring claims thereunder), general intangibles, insurance
      contracts and insurance proceeds (regardless of whether the same arose, and/or
      the events which gave rise to the same occurred, on or before or after the
      date
      hereof) and all proceeds and products of all such portions of the Hydrocarbon
      Property and payments in lieu of production, whether such proceeds or payments
      are goods, money, documents, instruments, chattel paper, securities, accounts,
      general intangibles, fixtures, real property, or other assets and regardless
      of
      whether such payments accrued, and/or the events which gave rise to such
      payments occurred, on or before or after the date hereof, including, without
      limitation, “take or pay” payments and similar payments, payments received in
      settlement of or pursuant to a judgment rendered with respect to take or pay
      or
      similar obligations or other obligations under a production sales contract,
      payments received in buyout or buydown or other settlement of a production
      sales
      contract, and payments received under a gas balancing or similar agreement
      as a
      result of (or received otherwise in settlement of or pursuant to judgment
      rendered with respect to) rights held by Mortgagor as a result of Mortgagor
      (and/or its predecessors in title) taking or having taken less gas from lands
      covered by a Hydrocarbon Property (or lands pooled or unitized therewith) than
      its ownership of such Hydrocarbon Property would entitle it to
      receive.

     

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

     

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

    (i)           All
      licenses, permits and other regulatory approvals held by Mortgagor relating
      to
      the Mortgaged Property.

     

    (j)           All
      proceeds of all of the rights, titles and interests of Mortgagor described
      in
      the foregoing paragraphs (a) through (i) whether such proceeds or payments
      are
      goods, money, documents, instruments, chattel paper, securities, accounts,
      payment intangibles, general intangibles, fixtures, real/immovable property,
      personal/movable property or other assets.

     

    (k)           In
      addition to the rights granted to Mortgagee in Section 1.01(f) of
      this Mortgage, any and all liens, security interests, financing statements
      or
      similar interests of Mortgagor attributable to its interest in the Hydrocarbons
      and proceeds of runs therefrom arising under or created by any statutory
      provision, judicial decision or otherwise.

     

    (l)           All
      of Mortgagor’s rights and interests pursuant to the provisions of §9-339a (or
      statute providing substantially similar rights in whole or in part) of the
      Applicable UCC and of any similar state or local jurisdiction statute in any
      state wherein the Mortgaged Property is located, hereby vesting in Mortgagee
      all
      of Mortgagor’s rights as an interest owner to the continuing security interest
      in and liens upon the Mortgaged Property.

     

    Any
      fractions or percentages specified on attached Exhibit A in
      referring to Mortgagor’s interests are solely for purposes of the warranties
      made by Mortgagor pursuant to Sections 3.01 and 3.05 hereof
      and shall in no manner limit the quantum of interest affected by this
Section 1.01 with respect to any Hydrocarbon Property or with
      respect to any unit or well identified on said
Exhibit A.

     

    TO
      HAVE
      AND TO HOLD the Mortgaged Property unto Mortgagee and to its successors and
      assigns forever to secure the payment of the Indebtedness and to secure the
      performance of the covenants, agreements, and obligations of Mortgagor herein
      contained.

     

    Section
      1.02     Grant of Security
      Interest.  To further secure the Indebtedness, Mortgagor hereby
      grants to Mortgagee a security interest in and to the Mortgaged Property
      (whether now or hereafter acquired by operation of law or otherwise) insofar
      as
      the Mortgaged Property consists of equipment, accounts, contract rights, general
      intangibles, insurance contracts, insurance proceeds, inventory, Hydrocarbons,
      fixtures and any and all other personal property of any kind or character
      defined in and subject to the provisions of the Uniform Commercial Code
      presently in effect in the jurisdiction in which the Mortgaged Property is
      situated (“Applicable UCC”), including the proceeds and products from any
      and all of such personal property.  Upon the happening of any of the
      Events of Default (as defined in Section 4.01), Mortgagee is and shall be
      entitled to all of the rights, powers and remedies afforded a secured party
      by
      the Applicable UCC with reference to the personal property and fixtures in
      which
      Mortgagee has been granted a security interest herein, or Mortgagee may proceed
      as to both the real and personal property covered hereby in accordance with
      the
      rights and remedies granted under this Mortgage in respect of the real property
      covered hereby.  Such rights, powers and remedies shall be cumulative
      and in addition to those granted to Mortgagee under any other provision of
      this
      Mortgage or under any other security instrument.  Written notice
      mailed to Mortgagor as provided herein at least ten (10) Business Days prior
      to
      the date of public sale of any part of the Mortgaged Property which is personal
      property subject to the provisions of the Applicable UCC, or prior to the date
      after which private sale of any such part of the Mortgaged Property will be
      made, shall constitute reasonable notice.  Except as otherwise
      expressly provided in this Mortgage, all terms in this Mortgage relating to
      the
      Mortgaged Property and the grant of the foregoing security interest which are
      defined in the Applicable UCC shall have the meanings assigned to them in
      Article 9 (or, absent definition in Article 9, in any other Article) of the
      Applicable UCC, as those meanings may be amended, revised or replaced from
      time
      to time.  Notwithstanding the foregoing, the parties intend that the
      terms used herein which are defined in the Applicable UCC have, at all times,
      the broadest and most inclusive meanings possible.

    

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

     

    Section
      1.03     Indebtedness Secured.  This
      Mortgage is executed and delivered by Mortgagor to secure and enforce the
      following (the “Indebtedness”):

     

    (a)           Payment
      of and performance of any and all indebtedness, obligations and liabilities
      of
      Mortgagor pursuant to the Guaranty including the “Obligations” under and as
      defined in such Guaranty.

     

    (b)           Payment
      of and performance of any and all other indebtedness, obligations and
      liabilities of Mortgagor, the Company and any direct or indirect subsidiary
      of
      the Company (collectively, the “Company Parties” and each, individually,
      a “Company Party”) pursuant to the Purchase Agreement, the Notes, the
      Registration Rights Agreement, the other Security Documents (as defined in
      the
      Notes) and all of the other agreements, documents and instruments contemplated
      thereby and executed in connection therewith (collectively, the “Loan
      Documents”), including, without limitation, (i) principal and interest
      (including without limitation, interest accruing subsequent to the filing of
      a
      petition or other action concerning bankruptcy or other similar proceeding,
      whether or not an allowed claim) on the Notes, (ii) reimbursement obligations
      under any letters of credit, (iii) obligations under any hedging agreements
      with
      any Holder or its respective affiliates, and (iv) obligations owing under any
      other Transaction Document; and all renewals, extensions, rearrangements and/or
      other modifications of any of the foregoing.

     

    (c)           Any
      sums which may be advanced or paid by Mortgagee or any Holder under the terms
      hereof or under any other Loan Document on account of the failure of Mortgagor
      or any other Company Party to comply with the covenants contained herein or
      in
      any other Loan Document.

     

    (d)           Without
      limiting the generality of the foregoing, all post-petition interest, expenses
      and other duties and liabilities with respect to indebtedness or other
      obligations described above in this Section 1.03, which would be owed but
      for the fact that they are unenforceable or not allowable due to the existence
      of a bankruptcy, reorganization or similar proceeding.

     

    Section
      1.04     Fixture Filing, Etc.  Without
      in any manner limiting the generality of any of the other provisions of this
      Mortgage: (i) some portions of the goods described or to which reference is
      made herein are or are to become fixtures on the land described or to which
      reference is made herein or on attached Exhibit A; (ii) the
      security interests created hereby under applicable provisions of the Applicable
      UCC will attach to Hydrocarbons (minerals including oil and gas), as extracted
      collateral or the accounts resulting from the sale thereof at the wellhead
      or
      minehead located on the land described or to which reference is made herein;
      (iii) this Mortgage may be filed of record in the real estate records as a
      financing statement, and (iv) Mortgagor is the record owner of the real estate
      or interests in the real estate comprised of the Mortgaged
      Property.

     

    Section
      1.05     Defined Terms.  Any
      capitalized term used in this Mortgage and not defined in this Mortgage shall
      have the meaning assigned to such term in the Purchase Agreement.

    

    
      
        
          
          

        

        
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    ARTICLE
      II

    Assignment
      of Production, Accounts and Proceeds

     

    Section
      2.01     Assignment.  Mortgagor has
      absolutely and unconditionally assigned, transferred, and conveyed, and does
      hereby absolutely and unconditionally assign, transfer and convey unto
      Mortgagee, its successors and assigns, all of the Hydrocarbons and all products
      obtained or processed therefrom, and the revenues and proceeds now and hereafter
      attributable to the Hydrocarbons and said products and all accounts arising
      therefrom or in connection therewith and all payments in lieu of the
      Hydrocarbons such as “take or pay” payments or settlements (all of the
      foregoing, the “Production Proceeds”), together with the immediate and
      continuing right, subject to the remaining provisions of this Section
      2.01 and of Section 4(u) of the Purchase Agreement, to collect and
      receive such Production Proceeds.  The Hydrocarbons and products are
      to be delivered into pipe lines connected with the Mortgaged Property, or to
      the
      purchaser thereof, to the credit of Mortgagee (to the extent of the Mortgagor’s
      interest therein); and all Production Proceeds shall initially be deposited
      into
      a Deposit Account (as defined in the Security Agreement) subject to an Account
      Control Agreement (as defined in the Security
      Agreement). No party paying any Production Proceeds shall
      have any duty or obligation to inquire into any of the rights of Mortgagee
      under
      this Section 2.01, what application is made of the Production Proceeds,
      or as to any other matter.  Mortgagor directs and instructs any and
      all purchasers of any Hydrocarbons to pay to such Deposit Accounts all of the
      Production Proceeds accruing to Mortgagor’s interest until such time as such
      purchasers have been furnished with evidence that all Indebtedness has been
      paid
      in full in cash and that this Mortgage has been released. 
      Mortgagor agrees that no purchasers of the Hydrocarbons shall have any
      responsibility for the application of any funds paid to
      Mortgagee.  Mortgagor agrees to perform all such acts, and to execute
      all such further assignments, transfer orders and division orders, and other
      instruments as may be required or desired by Mortgagee or any party in order
      to
      have the Production Proceeds paid to Mortgagee.  Without limiting the
      generality of the foregoing, (a) until the occurrence and during the
      continuation of an Event of Default, Mortgagor is fully authorized, empowered
      and permitted to receive, receipt and use the Production Proceeds, and (b)
      upon
      the occurrence and during the continuation of an Event of Default, Mortgagee
      is
      fully authorized to receive and receipt for the Production Proceeds; to endorse
      and cash any and all checks and drafts payable to the order of Mortgagor or
      Mortgagee for the account of Mortgagor received from or in connection with
      the
      Production Proceeds and, in accordance with Section 4.5(b) of the
      Security Agreement, to hold the Production Proceeds in a bank account as
      additional collateral securing the Indebtedness; and to execute transfer and
      division orders in the name of Mortgagor, or otherwise, with warranties binding
      Mortgagor.  All Production Proceeds received by Mortgagee pursuant to
      this Section 2.01 after an Event of Default has occurred and is
      continuing shall be applied as provided in the other Loan
      Documents.  Mortgagee shall not be liable for any delay, neglect or
      failure to effect collection of any Production Proceeds or to take any other
      action in connection therewith or hereunder; but Mortgagee shall have the right,
      exercisable at its election at any time after an Event of Default has occurred
      and is continuing, in the name of Mortgagor or otherwise, to prosecute and
      defend any and all actions or legal proceedings deemed advisable by Mortgagee
      in
      order to collect such funds and to protect the interests of Mortgagee and/or
      Mortgagor, with all costs, expenses and attorneys’ fees incurred in connection
      therewith being paid by Mortgagor and until so paid being a part of the
      Indebtedness secured by this Mortgage.  Mortgagor agrees to perform
      all such acts, and to execute all such further assignments, transfer orders
      and
      division orders, and other instruments as may be required or desired by
      Mortgagee or any party in order to effectuate the provisions contained in this
      Section 2.01.  Mortgagor hereby appoints Mortgagee as its
      attorney-in-fact to pursue any and all rights of Mortgagor to liens on and
      security interests in the Hydrocarbons securing payment of proceeds of runs
      attributable to the Hydrocarbons, provided Mortgagee shall only be permitted
      to
      exercise such power of attorney granted pursuant to this sentence after the
      occurrence and during the continuation of an Event of Default.  The
      power of attorney granted to Mortgagee in this Section 2.01, being
      coupled with an interest, shall be irrevocable so long as the Indebtedness
      or
      any part thereof remains unpaid.

    

    
      
        
          
          

        

        
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    Section
      2.02     [Reserved].

     

    Section
      2.03     No Modification of Payment
      Obligations.  Nothing herein contained shall modify or otherwise
      alter, limit or modify the absolute obligation of Mortgagor and the other
      Company Parties to make prompt payment of all principal, interest and other
      amounts owing on the Indebtedness when and as the same become due regardless
      of
      whether the Production Proceeds are sufficient to pay the same and the rights
      provided in accordance with the foregoing assignment provision shall be
      cumulative of all other security of any and every character now or hereafter
      existing to secure payment of the Indebtedness.

     

    Section
      2.04     Effectuating Payment of Production Proceeds
      to Mortgagee.  If under any existing sales agreements, other than
      division orders or transfer orders, any Production Proceeds are required to
      be
      paid by the purchaser to Mortgagor so that under such existing agreements
      payment cannot be made of such Production Proceeds to Mortgagee, Mortgagor’s
      interest in all Production Proceeds under such sales agreements and in all
      other
      Production Proceeds which for any reason may be paid to Mortgagor shall, when
      received by Mortgagor when an Event of Default exists, constitute trust funds
      in
      Mortgagor’s hands and shall be immediately paid over to
      Mortgagee.  Without limitation upon any of the foregoing, Mortgagor
      hereby constitutes and appoints Mortgagee as Mortgagor’s special
      attorney-in-fact (with full power of substitution, either generally or for
      such
      periods or purposes as Mortgagee may from time to time prescribe) in the name,
      place and stead of Mortgagor to do any and every act and exercise any and every
      power that Mortgagor might or could do or exercise personally with respect
      to
      all Hydrocarbons and Production Proceeds expressly inclusive, but not limited
      to, giving and granting unto said attorney-in-fact full power and authority
      to
      do and perform any and every act and thing whatsoever necessary and requisite
      to
      be done as fully and to all intents and purposes, as Mortgagor might or could
      do
      if personally present (provided such power of attorney granted pursuant to
      this
      sentence shall only be exercisable by Mortgagee upon the occurrence and during
      the continuation of an Event of Default); and Mortgagor shall be bound thereby
      as fully and effectively as if Mortgagor had personally executed, acknowledged
      and delivered any of the foregoing certificates or documents.  The
      powers and authorities herein conferred upon Mortgagee may be exercised by
      Mortgagee through any person who, at the time of the execution of the particular
      instrument, is an officer of Mortgagee.  The power of attorney herein
      conferred is granted for valuable consideration and hence is coupled with an
      interest and is irrevocable so long as the Indebtedness, or any part thereof,
      shall remain unpaid or any commitment to lend under the Purchase Agreement
      remains outstanding.  All persons dealing with Mortgagee or any
      substitute shall be fully protected in treating the powers and authorities
      conferred by this paragraph as continuing in full force and effect until advised
      by Mortgagee that all the Indebtedness is fully and totally
      paid.  Mortgagee may, but shall not be obligated to, in accordance
      with the provisions of Section 2.01 above, take such action as it deems
      appropriate in an effort to collect the Production Proceeds and any reasonable
      expenses (including reasonable attorney’s fees) so incurred by Mortgagee shall
      be a demand obligation of Mortgagor and shall be part of the Indebtedness,
      and
      shall bear interest each day, from the date of such expenditure or payment
      until
      paid, at the Interest Rate (as defined in the Notes).

     

    Section
      2.05     Application of Production
      Proceeds.  After an Event of Default hereunder has occurred, all
      Production Proceeds from time to time in the hands of Mortgagee shall be applied
      to the payment of the Indebtedness at such times and in such manner and order
      as
      Mortgagee determines in Mortgagee’s sole and absolute discretion.

     

    
      
         

      

      
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    Section
      2.06     Release from Liability;
      Indemnification.  Mortgagee and its successors and assigns are
      hereby released and absolved from all liability for failure to enforce
      collection of the Production Proceeds and from all other responsibility in
      connection therewith, except the responsibility to account to Mortgagor for
      funds actually received.  Mortgagor agrees to indemnify and hold
      harmless Mortgagee (for purposes of this paragraph, the term “Mortgagee” shall
      include the directors, officers, partners, employees and agents of Mortgagee
      and
      any persons or entities owned or controlled by or affiliated with Mortgagee
      and
      any other Indemnified Party as defined in Section 4.16 hereof) from and
      against all claims, demands, liabilities, losses, damages (including without
      limitation consequential damages), causes of action, judgments, penalties,
      costs
      and expenses (including without limitation reasonable attorneys’ fees and
      expenses) imposed upon, asserted against or incurred or paid by Mortgagee by
      reason of the assertion that Mortgagee received, either before or after payment
      in full of the Indebtedness, funds from the production of oil, gas, other
      hydrocarbons or other minerals claimed by third persons (and/or funds
      attributable to sales of production which were made in violation of laws, rules,
      regulations and/or orders governing such sales), and Mortgagee shall have the
      right to defend against any such claims or actions, employing attorneys of
      its
      own selection, and if not furnished with indemnity satisfactory to it, Mortgagee
      shall have the right to compromise and adjust any such claims, actions and
      judgments, and in addition to the rights to be indemnified as herein provided,
      all amounts paid by Mortgagee in compromise, satisfaction or discharge of any
      such claim, action or judgment, and all court costs, reasonable attorneys’ fees
      and other expenses of every character expended by Mortgagee pursuant to the
      provisions of this section shall be a demand obligation (which obligation
      Mortgagor hereby expressly promises to pay) owing by Mortgagor to Mortgagee
      and
      shall bear interest, from the date expended until paid at the Interest Rate
      (as
      defined in the Notes).  The foregoing indemnities shall not terminate
      upon the release, foreclosure or other termination of this Mortgage but will
      survive the release, foreclosure of this Mortgage or conveyance in lieu of
      foreclosure, and the repayment of the Indebtedness and the discharge and release
      of this Mortgage and the other documents evidencing and/or securing the
      Indebtedness.  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.

     

    ARTICLE
      III

    Representations,
      Warranties and Covenants

     

    Mortgagor
      hereby covenants with the Mortgagee, and represents and warrants to the
      Mortgagee that:

     

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

     

    
      
         

      

      
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    Section
      3.02     Defend Title.  This Mortgage
      is a direct first Lien and security interest upon the Mortgaged Property,
      subject only to Permitted Liens.  This Mortgage will always be kept a
      direct first Lien and security interest upon the Mortgaged Property, and
      Mortgagor will not grant, incur or create or suffer to be created or permit
      to
      exist any Lien, security interest or charge prior or junior to or on a parity
      with the Lien and security interest of this Mortgage upon the Mortgaged Property
      or any part thereof or upon the rents, issues, revenues, profits and other
      income therefrom, other than Permitted Liens.  Mortgagor will warrant
      and defend the title to the Mortgaged Property against the claims and demands
      of
      all other persons whomsoever and will maintain and preserve the Lien created
      hereby so long as any of the Indebtedness secured hereby remains
      unpaid.  Should an adverse claim be made against or a cloud develop
      upon the title to any part of the Mortgaged Property, other than Permitted
      Liens, Mortgagor agrees it will timely defend against such adverse claim or
      take
      appropriate action to remove such cloud at Mortgagor’s cost and expense, and
      Mortgagor further agrees that Mortgagee may take such other action as it deems
      advisable to protect and preserve their interests in the Mortgaged Property,
      and
      in such event Mortgagor will indemnify Mortgagee against any and all cost,
      reasonable attorney’s fees and other expenses which it may incur in defending
      against any such adverse claim or taking action to remove any such
      cloud.

     

    Section
      3.03     Not a Foreign
      Person.  Mortgagor is not a “foreign person” within the meaning of
      the Internal Revenue Code of 1986, as amended (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
      3.04     Rentals, Taxes, Insurance and Fees Paid;
      Leases in Effect.  All rentals and royalties due and payable in
      accordance with the terms of any leases or subleases comprising a part of the
      Hydrocarbon Property and all severance and production taxes payable with respect
      to the production therefrom have been duly paid or provided for and all leases
      or subleases comprising a part of the Hydrocarbon Property are in full force
      and
      effect.  In addition to the foregoing, Mortgagor shall or shall cause
      to be paid when due, all taxes, permits, licenses, insurance premiums and other
      similar amounts with respect to the Mortgaged Property, the Hydrocarbon Property
      and the Hydrocarbons.

    

    
      
        
          
          

        

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

     

    Section
      3.06     Failure to
      Perform.  Mortgagor agrees that if Mortgagor fails to perform any
      act or to take any action which Mortgagor is required to perform or take
      hereunder or pay any money which Mortgagor is required to pay hereunder,
      Mortgagee 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 Mortgagee and any money so paid by it
      shall be a demand obligation owing by Mortgagor to Mortgagee, and Mortgagee,
      upon making such payment, shall be subrogated to all of the rights of the Person
      receiving such payment.  Each amount due and owing by Mortgagor to
      Mortgagee pursuant to this Mortgage shall bear interest from the date of such
      expenditure or payment or other occurrence which gives rise to such amount
      being
      owed to such Person until paid at the Interest Rate, and all such amounts
      together with such interest thereon shall be a part of the Indebtedness
      described in Section 1.03 hereof.

     

    Section
      3.07     Sale of Mortgaged
      Property.  Any proposed sale, transfer, farm-out, assignment or
      other disposition of the Mortgaged Property by the Mortgagor shall be governed
      by the provisions of Section 5(h) of the Purchase Agreement; provided,
      that Mortgagor shall, except after the occurrence and during the continuation
      of
      an Event of Default, be permitted to (i) sell Hydrocarbons in the ordinary
      course of business in compliance with the terms of this Mortgage and (ii) sell
      or otherwise dispose of obsolete or worn out equipment or personal property
      which is replaced with property of equal or greater value in the ordinary course
      of business.

     

    
      
         

      

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

    

    
      
        
          
          

        

        
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    Section
      3.09     Operation of Mortgaged
      Property.  The Mortgagor will promptly pay and discharge or cause
      to be paid and discharged all rentals, delay rentals, royalties and indebtedness
      accruing under, and perform or cause to be performed each and every act, matter
      or thing required by, each and all of the assignments, deeds, subject leases,
      sub-leases, contracts and agreements described or referred to herein or
      affecting the Mortgagor’s interests in the Mortgaged Property and will do or
      cause to be done all other things necessary to keep unimpaired the Mortgagor’s
      rights with respect thereto and prevent any intentional forfeiture thereof
      or
      default with respect thereto, other than a default which might occur as a result
      of cessation of production thereunder.  Except as could not reasonably
      be expected, either individually or in the aggregate, to have a Material Adverse
      Effect, the Mortgaged Property (and properties unitized
      therewith) is being (and, to the extent the same could adversely affect the
      ownership or operation of such Mortgaged Property after the date hereof, have
      in
      the past been), and hereafter will be maintained (ordinary wear and tear
      excepted), operated and developed in
      a good and workmanlike manner in accordance with
      customary industry standards and in conformity with all
      applicable laws and all rules, regulations and orders of all duly constituted
      authorities having jurisdiction and in conformity with all oil, gas and/or
      other
      mineral leases and other agreements forming part of the Mortgaged Property
      and
      in conformity with all Permitted Liens; specifically in this connection, (i)
      no
      Mortgaged Property is subject to having allowable production after the date
      hereof reduced below the full and regular allowable (including the maximum
      permissible tolerance) because of any overproduction (whether or not the same
      was permissible at the time) prior to the date hereof and (ii) none of the
      wells
      located on the Mortgaged Property (or properties unitized therewith) are or
      will
      be deviated from the vertical more than the maximum permitted by applicable
      laws, regulations, rules and orders, and such wells are, and will remain,
      bottomed under and producing from, with the well bores wholly within, the
      Mortgaged Property (or, in the case of wells located on properties unitized
      therewith, such unitized properties).  With respect to any Mortgaged
      Property in which Mortgagor is the operator in connection therewith or in which
      Mortgagor has a majority working interest (and to the best of Mortgagor’s
      knowledge with respect to any Mortgaged Property in which Mortgagor has a
      minority working interest and is not an operator in connection therewith),
      there
      are no dry holes, or otherwise inactive wells, located on any Mortgaged Property
      or on lands pooled or unitized therewith, except for wells that have been
      properly plugged and abandoned or inactive and being maintained in accordance
      with local, state and federal law.  Except as disclosed in Schedule
      3(s) to the Purchase Agreement, the Mortgagor has, and will in the future,
      possess all certificates, authorizations, approvals, licenses and permits issued
      by the appropriate federal, state or foreign regulatory authorities
      (collectively, “Permits”) necessary to produce, extract, transport and
      sell the oil, gas, minerals and/or other Hydrocarbons in that portion of the
      Mortgaged Property that is producing oil, gas, minerals and/or other
      Hydrocarbons.  Except as disclosed in Schedule 3(s) to the
      Purchase Agreement, Mortgagor has no reason to believe that it will not be
      able
      to obtain Permits as and when necessary to enable the Mortgagor to produce,
      extract, transport and sell the oil, gas, minerals and other Hydrocarbons in
      the
      Mortgaged Property.  Mortgagor has not received written notice of any
      violations in respect of any such licenses or permits described in the foregoing
      provisions of this Section 3.09 except for notices of violations received
      prior to the date hereof that have been remedied by Mortgagor.  The
      Mortgagor will operate the Mortgaged Property in a careful and efficient manner
      in accordance with the practices of the industry and in compliance with all
      applicable contracts and agreements and in compliance with all applicable
      spacings proration and conservation laws of the jurisdiction in which the
      Mortgaged Property is situated, and all applicable laws, rules and regulations
      of every other agency and authority from time to time constituted to regulate
      the development and operation of the Mortgaged Property and the production
      and
      sale of Hydrocarbons and other minerals produced therefrom, except as could
      not
      reasonably be expected, individually or in the aggregate, to have a Material
      Adverse Effect.  The Mortgagor will do or cause to be done, or shall
      participate in, such development work as may be reasonably necessary to the
      prudent and economical operation of the Mortgaged Property in accordance with
      the approved practices of prudent operators in the industry, including, without
      limitation, all to be done that may be appropriate to protect from diminution
      the productive capacity of the Mortgaged Property and each producing well
      thereon.  Upon the reasonable written request of the Mortgagee at
      least five (5) Business Days in advance, and at reasonable times and intervals,
      the Mortgagor will (a) permit the Mortgagee and its respective designated
      representatives to enter upon any part of the Mortgaged Property under the
      control of the Mortgagor, and (b) cause the operator of any part of the
      Mortgaged Property not under the control of the Mortgagor to permit the
      Mortgagee and its designated representatives to enter upon the same (to the
      extent and subject to the conditions under which the Mortgagor may so enter),
      for the purposes of inspecting the condition and operation thereof.

     

    Section
      3.10     Suits and Claims.  Except to
      the extent disclosed in the Schedules to the Purchase Agreement, there are
      no
      suits, actions, claims, investigations, inquiries, proceedings or demands
      pending (or, to Mortgagor’s knowledge, threatened in writing) which affect the
      Mortgaged Property (including, without limitation, any which challenge or
      otherwise pertain to Mortgagor’s title to the Mortgaged Property) and no
      judicial or administrative actions, suits or proceedings pending (or, to
      Mortgagor’s knowledge, threatened in writing) against Mortgagor.

    

    
      
        
          
          

        

        
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    Section
      3.11     Environmental.

     

    (a)           Current
      Status.  The Mortgaged Property and Mortgagor are not in violation
      of Applicable Environmental Laws (as hereinafter defined), or subject to any
      existing, pending or, to the best knowledge of Mortgagor, threatened
      investigation or inquiry by any governmental authority or any other person
      under
      or with respect to Applicable Environmental Laws, or subject to any remedial
      obligations under Applicable Environmental Laws, and are in compliance with
      all
      permits and licenses required under Applicable Environmental Laws, other than
      with respect to any such violation, investigation, inquiry or remedial
      obligations that could not, individually or in the aggregate, reasonably be
      expected to have a Material Adverse Effect and, to the best knowledge of
      Mortgagor, this representation will continue to be true and correct following
      disclosure to the applicable governmental authorities of all relevant facts,
      conditions and circumstances, if any, pertaining to the Mortgaged Property
      and
      Mortgagor.  “Applicable Environmental Laws” shall mean any
      applicable laws, orders, rules, or regulations pertaining to safety, health
      or
      the environment, as such laws, orders, rules or regulations now exist or are
      hereafter enacted and/or amended (including, without limitation, the
      Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
      as amended by the Superfund Amendments and Reauthorization Act of 1986 (as
      amended, hereinafter called “CERCLA”), the Resource Conservation and
      Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
      Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
      Amendments of 1984 (as amended, hereinafter called “RCRA”) and applicable
      state and local law).  Mortgagor undertook, at the time of acquisition
      of the Mortgaged Property, appropriate inquiry into the previous ownership
      and
      uses of the Mortgaged Property consistent with good commercial or customary
      practice.  Mortgagor has taken reasonable steps necessary, consistent
      with customary practice in the industry in which it operates its business,
      to
      determine and has determined that no hazardous substances or solid wastes have
      been disposed of or otherwise released at, into, upon or under the Mortgaged
      Property.  The use which Mortgagor makes and intends to make of the
      Mortgaged Property will not result in the use, treatment, storage or disposal
      or
      other release of any hazardous substance or solid waste at, into, upon or under
      the Mortgaged Property, except such usage, and temporary storage in anticipation
      of usage, as is in the ordinary course of business and in compliance with
      Applicable Environmental Laws.  The terms “hazardous substance”
and “release” as used in this Mortgage shall have the meanings specified
      in CERCLA, and the terms “solid waste” and “disposal” (or
“disposed”) shall have the meanings specified in RCRA; provided,
      in the
      event either CERCLA or RCRA is amended so as to broaden the meaning of any
      term
      defined thereby, such broader meaning shall apply subsequent to the effective
      date of such amendment and provided further, to the extent that the laws of
      the
      states in which the Mortgaged Properties are located establish a meaning for
      “hazardous substance,” “release,” “solid waste,” or
“disposal” which is broader than that specified in either
      CERCLA or RCRA,
      such broader meaning shall apply.  The “Associated Property”
(as such term is hereinafter defined) is not in violation of any Applicable
      Environmental Laws for which Mortgagor or its predecessors in title to the
      Mortgaged Property would be responsible (to the best of Mortgagor’s knowledge
      with respect to Associated Property not owned or operated by
      Mortgagor).  The term “Associated Property” as used in this
      Mortgage shall mean any and all interests in and to (and/or carved out of)
      the
      lands which are described or referred to in Exhibit A hereto, or which
      are otherwise described in any of the oil, gas and/or mineral leases or other
      instruments described in or referred to in such Exhibit A, whether
      or not such property interests are owned by Mortgagor.

     

    (b)           Future
      Performance.  Except as could not reasonably be expected,
      individually or in the aggregate, to have a Material Adverse
      Effect, Mortgagor will operate each
      Mortgaged  Property in a careful and efficient manner in accordance
      with the practices of the industry so as not to cause or permit such
      Mortgaged  Property or Mortgagor to be in violation of, and Mortgagor
      shall not do anything or permit anything to be done which will subject such
      Mortgaged  Property or any Associated Property to any remedial
      obligations under, or result in noncompliance with applicable permits and
      licenses under, any Applicable Environmental Laws, assuming disclosure to the
      applicable governmental authorities of all relevant facts, conditions and
      circumstances, if any, pertaining to the Mortgaged Property or any Associated
      Property and Mortgagor will promptly notify Mortgagee in writing of any
      existing, pending or, to the best knowledge of Mortgagor, threatened
      investigation, claim, suit or inquiry by any governmental authority or any
      person in connection with any Applicable Environmental Laws.  Except
      as could not reasonably be expected, individually or in the aggregate, to have
      a
      Material Adverse Effect, Mortgagor will take steps
      necessary to determine that no hazardous substances or solid wastes have been
      disposed of or otherwise released on or to the Mortgaged Property or any
      Associated Property.  Except as could not reasonably be expected,
      individually or in the aggregate, to have a Material Adverse
      Effect, Mortgagor will not cause or permit the disposal or
      other release of any hazardous substance or solid waste at, into, upon or under
      the Mortgaged Property or any Associated Property.  Mortgagor
      covenants and agrees to keep or cause the Mortgaged Property to be kept free
      of
      any hazardous substance or solid waste (except such use, and temporary storage
      in anticipation of use, as is required in the ordinary course of business,
      all
      while in compliance with Applicable Environmental Laws), and to remove the
      same
      (or if removal is prohibited by law, to take whatever action is required by
      law), promptly upon discovery at its sole expense.  Upon Mortgagee’s
      reasonable request, at any time and from time to time during the existence
      of
      this Mortgage, but not more often than once every calendar year (so long as
      no
      Event of Default has occurred), Mortgagor will provide at Mortgagor’s sole
      expense an inspection or audit of each Mortgaged  Property from an
      engineering or consulting firm approved by Mortgagee, indicating the presence
      or
      absence of hazardous substances and solid waste on such
      Mortgaged  Property and compliance with Applicable Environmental
      Laws.

    

    
      
        
          
          

        

        
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    Section
      3.12     Not Abandon Wells; Participate in
      Operations; Non-Operated Interests.  Mortgagor will not, without
      prior written consent of Mortgagee (not to be unreasonably withheld, delayed
      or
      conditioned), abandon, or consent to the abandonment of, any well producing
      from
      the Mortgaged Property (or properties unitized therewith) so long as such well
      is capable (or is subject to being made capable through drilling, reworking
      or
      other operations which it would be commercially feasible to conduct) of
      producing oil, gas, or other Hydrocarbons or other minerals in commercial
      quantities (as determined without considering the effect of this Mortgage),
      except in the ordinary course of business consistent with prudent customs and
      practices in the industry in which Mortgagor operates.  Mortgagor will
      not, without prior written consent of Mortgagee (not to be unreasonably
      withheld, delayed or conditioned), elect not to participate in a proposed
      operation on the Mortgaged Properties where the effect of such election would
      be
      the forfeiture either temporarily (i.e. until a certain sum of money is received
      out of the forfeited interest) or permanently of any interest in the Mortgaged
      Properties.  All or portions of the Mortgaged Property may be
      comprised of interests in the Hydrocarbon Property or lands pooled or unitized
      therewith which are other than working interests or which may be operated by
      a
      party or parties other than the Mortgagor and with respect to all such portions
      of the Mortgaged Property, the Mortgagor’s covenants and agreements as expressed
      in this Article III are modified to require that the Mortgagor use its
      commercially reasonable efforts to cause compliance with such covenants and
      agreements by the working interest owners or the operator or operators of such
      Hydrocarbon Properties.

     

    Section
      3.13     Condemnation Awards.  If at
      any time all or any portion of the Mortgaged Property shall be taken or damaged
      under the power of eminent domain, the award received by condemnation
      proceedings for any property so taken or any payment received in lieu of such
      condemnation proceedings shall be paid directly to Mortgagee as agent for
      Mortgagor and all or any portion of such award or payment, at the option of
      Mortgagee, shall be applied to the Secured Indebtedness in payment of the last
      maturing installments of the Secured Indebtedness or paid over, wholly or in
      part, to Mortgagor for any purpose or object satisfactory to
      Mortgagee.  Mortgagor immediately upon obtaining knowledge of the
      institution of any proceedings or negotiations for the condemnation of the
      Mortgaged Property, or any portion thereof, will notify Mortgagee of the
      pendency of such negotiations or proceedings.  Mortgagee may
      participate in any such negotiations or proceedings, and Mortgagor from time
      to
      time will execute and deliver to Mortgagee all instruments requested by
      Mortgagee to permit such participation.

    

    
      
        
          
          

        

        
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    Section
      3.14     Insurance.  Mortgagor will
      maintain with financially sound and reputable insurance companies insurance
      on
      all its property in at least such amounts and against at least such risks (but
      including in any event general liability) as are usually insured against in
      the
      same general area by companies engaged in the same or a similar business and
      in
      any case no less comprehensive in scope than that maintained by the Mortgager
      as
      of the date hereof.  While an Event of Default exists, in the event of
      any loss under any insurance policies so carried by Mortgagor, Mortgagee shall
      have the right (but not the obligation) to make proof of loss and collect the
      same, and all amounts so received shall be applied toward costs, charges and
      expenses (including reasonable attorneys’ fees), if any, incurred in the
      collection thereof, then to the payment, in the order determined by Mortgagee
      in
      its own discretion, of the Indebtedness, and any balance remaining shall be
      subject to the order of Mortgagor.  While an Event of Default exists,
      Mortgagee is hereby authorized but not obligated to enforce in its name or
      in
      the name of Mortgagor payment of any or all of said policies or settle or
      compromise any claim in respect thereof, and to collect and make receipts for
      the proceeds thereof and Mortgagee is hereby appointed Mortgagor’s agent and
      attorney-in-fact to endorse any check or draft payable to Mortgagor in order
      to
      collect the proceeds of insurance (provided Mortgagee shall only be entitled
      to
      enforce the power of attorney provided in this sentence after the occurrence
      and
      during the continuation of an Event of Default).  In the event of
      foreclosure of this Mortgage, or other transfer of title to the Mortgaged
      Property in extinguishment in whole or in part of the Indebtedness, all right,
      title and interest of Mortgagor in and to such policies then in force concerning
      the Mortgaged Property and all proceeds payable thereunder shall thereupon
      vest
      in the purchaser at such foreclosure or other transferee in the event of such
      other transfer of title.

     

    Section
      3.15     Compliance
      with Leases.  Mortgagor (i) will observe and comply in all
      material respects with all of the terms and provisions, express or implied,
      of
      the oil, gas and mineral leases covered by this Mortgage, and any other
      agreements or instruments applicable thereto; and, (ii) except with the prior
      written consent of Mortgagee, will not amend or terminate (in any manner adverse
      to Mortgagor, Mortgagee, or Mortgagor’s or Mortgagee’s interest in the Mortgaged
      Property or in any manner that could reasonably be expected to result in a
      Material Adverse Effect) any of such agreements or surrender, abandon or release
      any of such leases in whole or in part so long as any well situated thereon,
      or
      located on any unit containing all or any part of such leases, is capable of
      producing oil, gas, casinghead gas or other hydrocarbons in paying
      quantities.  Mortgagor will cause all obligations to the holders of
      royalty interests and all other interests in the Mortgaged Properties to be
      promptly discharged and all covenants and conditions, express or implied,
      imposed upon the original lessee or his assigns by every such lease and every
      other agreement relative thereto to be fully and promptly performed and to
      cause
      all acts necessary or proper to accomplish the foregoing and prevent the breach
      or forfeiture of any such lease to be fully and promptly
      performed.  Mortgagor will furnish to Mortgagee ten (10) day advance
      written notice of any intention not to pay (or immediately at such time that
      it
      anticipates that it will be unable to pay) any delay rentals on the due date
      thereof under any such lease.

     

    Section
      3.16     Further Assurance.  Mortgagor
      will, on request of Mortgagee, (i) promptly correct any defect, error or
      omission which may be discovered in the contents of this Mortgage, or in any
      other document or instrument executed in connection with any of the [Loan]
      [Transaction] Documents, or in the execution or acknowledgment of this Mortgage
      or any other document; (ii) execute, acknowledge, deliver and record and/or
      file
      such further instruments (including, without limitation, further deeds of trust,
      mortgages, security agreements, financing statements, continuation statements,
      and assignments of production, accounts, funds, contract rights, general
      intangibles, and proceeds) and do such further acts as may be necessary,
      desirable or proper to carry out more effectively the purposes of this Mortgage
      and to more fully identify and subject to the liens and security interests
      hereof any property intended to be covered hereby, including specifically,
      but
      without limitation, any renewals, additions, substitutions, replacements, or
      appurtenances to the Mortgaged Property; and (iii) execute, acknowledge,
      deliver, and file and/or record any document or instrument (including
      specifically any financing statement) desired by Mortgagee to protect the lien
      or the security interest hereunder against the rights or interests of third
      persons.  Mortgagor shall pay all costs connected with any of the
      foregoing.

    

    
      
        
          
          

        

        
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    Section
      3.17     Name and Place of
      Business.  Except as disclosed in writing to Mortgagee, Mortgagor
      has not during the preceding five (5) years been known by or used any other
      corporate or partnership, trade or fictitious name.  Mortgagor will
      not cause or permit any change to be made in its name, identity, state of
      formation or corporate or partnership structure, or its federal employer
      identification number unless Mortgagor shall have notified Mortgagee of such
      change at least thirty (30) days prior to the effective date of such change,
      and
      shall have first taken all action required by Mortgagee for the purpose of
      further perfecting or protecting the liens and security interests in the
      Mortgaged Property created hereby.  Mortgagor’s exact name is the name
      set forth in this Mortgage.  Mortgagor is organized under the laws of
      one of the states comprising the United States (e.g. corporation, limited
      partnership, registered limited liability partnership or limited liability
      company).  Mortgagor is located (as determined pursuant to the UCC) in
      the state under which it is organized, which is as set forth in the preamble
      to
      this Mortgage.  Mortgagor’s principal place of business and chief
      executive office, and the place where Mortgagor keeps its books and records
      concerning the Mortgaged Property (including, particularly, the records with
      respect to Production Proceeds from the Mortgaged Property) has for the
      preceding four months, been, and will continue to be (unless Mortgagor notifies
      Mortgagee of any change in writing at least thirty (30) days prior to the date
      of such change), the address set forth on the signature page of this
      Mortgage.

     

    Section
      3.18     Compliance with Laws and
      Agreements.  Mortgagor is in compliance with all governmental
      requirements applicable to it or its property, including, without limitation,
      all FERC regulations and the USA Patriot Act, and all indentures, agreements
      and
      other instruments binding upon it or its property.  The execution and
      performance of the Transaction Documents, this Mortgage and the other documents
      and instruments contemplated hereby and thereby will not violate the Trading
      with the Enemy Act, as amended, any of the foreign assets control regulations
      of
      the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
      amended) or any enabling legislation or executive order relating thereto, the
      Executive Order referred to in the following sentence or the U.S. Bank Secrecy
      Act (31 U.S.C. §§ 5311 et seq.).  Mortgagor is not a Person described
      by section 1 of Executive Order 13224 of September 24, 2001 entitled Blocking
      Property and Prohibiting Transactions With Persons Who Commit, Threaten to
      Commit or Support Terrorism, 66 Fed. Reg. 49,079 (2001), as amended, and
      Mortgagor does not engage in any transactions or dealings, or is otherwise
      associated with any such Persons.  Mortgagor is not bound by any
      agreement, document, instrument, judgment, decree, order, statute, law, rule
      or
      regulation that limits or could reasonably be expected to limit its performance
      under the Loan Documents or this Mortgage.

     

    Section
      3.19     Management.  If, at any time
      after an Event of Default by Mortgagor, the management or maintenance of the
      Mortgaged Property is determined by Mortgagee to be unsatisfactory and is not
      corrected within thirty (30) days after notice to Mortgagor, Mortgagor will,
      to
      the extent Mortgagor is entitled under third party agreements affecting the
      same, employ, for the duration of such Event of Default, as managing agent
      of
      the Mortgaged Property, any person from time to time designated or approved
      by
      Mortgagee.

    

    
      
        
          
          

        

        
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    ARTICLE
      IV

    Rights
      and Remedies

     

    Section
      4.01     Event of Default.  As used in
      this Mortgage, an “Event of Default” means an “Event of Default”,
      as defined under the Notes.

     

    Section
      4.02     Foreclosure and Sale.

     

    (a)           If
      an Event of Default shall occur and be continuing, Mortgagee shall have the
      right and option to proceed with foreclosure and to sell, to the extent
      permitted by law, all or any portion of the Mortgaged Property at one or more
      sales, as an entirety or in parcels, at such place or places in otherwise such
      manner and upon such notice as may be required by law, or, in the absence of
      any
      such requirement, as Mortgagee may deem appropriate, and to make conveyance
      to
      the purchaser or purchasers.  Where the Mortgaged Property is situated
      in more than one jurisdiction, notice as above provided shall be posted and
      filed in all such jurisdictions (if such notices are required by law), and
      all
      such Mortgaged Property may be sold in any such jurisdiction and any such notice
      shall designate the jurisdiction where such Mortgaged Property is to be
      sold.  Nothing contained in this Section 4.02 shall be
      construed so as to limit in any way Mortgagee's rights to sell the Mortgaged
      Property, or any portion thereof, by private sale if, and to the extent that,
      such private sale is permitted under the laws of the applicable jurisdiction
      or
      by public or private sale after entry of a judgment by any court of competent
      jurisdiction so ordering.  Mortgagor hereby irrevocably appoints
      Mortgagee to be the attorney of Mortgagor and in the name and on behalf of
      Mortgagor to execute and deliver any deeds, transfers, conveyances, assignments,
      assurances and notices which Mortgagor ought to execute and deliver and do
      and
      perform any and all such acts and things which Mortgagor ought to do and perform
      under the covenants herein contained and generally, to use the name of Mortgagor
      in the exercise of all or any of the powers hereby conferred on
      Mortgagee.  At any such sale: (i) whether made under the power
      herein contained or any other legal enactment, or by virtue of any judicial
      proceedings or any other legal right, remedy or recourse, it shall not be
      necessary for Mortgagee to have physically present, or to have constructive
      possession of, the Mortgaged Property (Mortgagor hereby covenanting and agreeing
      to deliver to Mortgagee any portion of the Mortgaged Property not actually
      or
      constructively possessed by Mortgagee immediately upon demand by Mortgagee)
      and
      the title to and right of possession of any such property shall pass to the
      purchaser thereof as completely as if the same had been actually present and
      delivered to purchaser at such sale, (ii) each instrument of conveyance
      executed by Mortgagee shall contain a general warranty of title, binding upon
      Mortgagor and its successors and assigns, (iii) each and every recital
      contained in any instrument of conveyance made by Mortgagee shall conclusively
      establish the truth and accuracy of the matters recited therein, including,
      without limitation, nonpayment of the Indebtedness, advertisement and conduct
      of
      such sale in the manner provided herein and otherwise by law, (iv) any and
      all prerequisites to the validity thereof shall be conclusively presumed to
      have
      been performed, (v) the receipt of Mortgagee or of such other party or
      officer making the sale shall be a sufficient discharge to the purchaser or
      purchasers for its purchase money and no such purchaser or purchasers, or its
      assigns or personal representatives, shall thereafter be obligated to see to
      the
      application of such purchase money, or be in any way answerable for any loss,
      misapplication or nonapplication thereof, (vi) to the fullest extent
      permitted by law, Mortgagor shall be completely and irrevocably divested of
      all
      of its right, title, interest, claim and demand whatsoever, either at law or
      in
      equity, in and to the property sold and such sale shall be a perpetual bar
      both
      at law and in equity against Mortgagor, and against any and all other persons
      claiming or to claim the property sold or any part thereof, by, through or
      under
      Mortgagor, and (vii) to the extent and under such circumstances as are
      permitted by law, Mortgagee may be a purchaser at any such sale, and shall
      have
      the right, after paying or accounting for all costs of said sale or sales,
      to
      credit the amount of the bid upon the amount of the Indebtedness (in the order
      of priority set forth in Section 4.14 hereof) in lieu of cash
      payment.

    

    
      
        
          
          

        

        
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    (b)           With
      respect to that portion, if any, of the Mortgaged Property situated in the
      State
      of Kansas, this instrument may be foreclosed by advertisement and sale if
      provided by applicable Kansas statutes.  In such regard, it shall be
      the duty of the Mortgagee, after advertising the time and place of the sale
      for
      at least 21 days prior to the day of sale, by posting or causing to be posted
      a
      written or printed notice thereof at the courthouse door and by filing a copy
      of
      such notice in the office of the county clerk of each county in which the
      Mortgaged Property or any part thereof may be situated, and serving written
      notice of the proposed sale on each debtor obligated to pay the Indebtedness
      according to the records of Mortgagee, by postage prepaid, certified United
      States mail, at the most recent address for such debtor as shown by the records
      of Mortgagee, at least 21 days prior to the day of sale, to sell the Mortgaged
      Property, either as a whole or in parcels, as the Mortgagee may deem proper,
      at
      public venue at the courthouse of the county in which the Mortgaged Property
      or
      any part thereof may be situated (and being the county designated in the notice
      of sale) on the first Tuesday of any  month between the hours of 10:00
      a.m. and 4:00 p.m., to the highest bidder for cash, and after such sale to
      execute and deliver to the purchaser or purchasers good and sufficient deeds
      and
      assignments, conveying such property so sold to the purchaser or purchasers
      with
      general warranty of title made on behalf of Mortgagor.  The Mortgagee,
      or its successor or substitute, is hereby authorized and empowered to appoint
      any one or more persons or entities as his attorneys-in-fact or agents to act
      as
      agent of it and in its name, place and stead, such appointment to be evidenced
      by a written instrument executed by the Mortgagee, or its successor or
      substitute, to perform any one or more act or acts necessary or incident to
      any
      sale under the power of sale hereunder, including, without limitation, the
      posting and filing of any notices, the conduct of the sale and the execution
      and
      delivery of any instruments conveying the Mortgaged Property as a result of
      the
      sale, but in the name and on behalf of the Mortgagee, or its successor or
      substitute; and all acts done or performed by such attorneys-in-fact or agents
      shall be valid, lawful and binding as if done or performed by the Mortgagee,
      or
      its successor or substitute.

     

    (c)           Upon
      the occurrence of an Event of Default, Mortgagee may exercise its rights of
      enforcement with respect to the Mortgaged Properties or any part thereof under
      the Applicable UCC of any State where any portion of the Mortgaged Properties
      are located or under any other statute in force in any state to the extent
      the
      same is applicable law.  Cumulative of the foregoing and the other
      provisions of this Section 4.02: (i) to the extent permitted by law, upon
      the occurrence and during the continuation of an Event of Default Mortgagee
      may
      enter upon the Mortgaged Properties or otherwise upon Mortgagor’s premises to
      take possession of, assemble and collect the personal property portion of the
      Mortgaged Properties or to render it unusable; (ii) upon the occurrence and
      during the continuation of an Event of Default Mortgagee may require Mortgagor
      to assemble the personal property and make it available at a place Mortgagee
      designates which is mutually convenient to allow Mortgagee to take possession
      or
      dispose of the personal property; (iii)  written notice mailed to
      Mortgagor as provided herein at least five (5) days prior to the date of public
      sale of the personal property or prior to the date after which private sale
      of
      the personal property will be made shall constitute reasonable notice; (iv)
      in
      the event of a foreclosure of the liens, privileges and/or security interests
      evidenced hereby, the personal property, or any part thereof, and the Mortgaged
      Properties, or any part thereof, may, at the option of Mortgagee, be sold,
      as a
      whole or in parts, together or separately (including, without limitation, where
      a portion of the Mortgaged Properties is sold, the personal property related
      thereto may be sold in connection therewith); (v) upon the occurrence and during
      the continuation of an Event of Default, Mortgagee may, to the extent permitted
      under applicable law, elect to treat the fixtures included in the Mortgaged
      Properties either as real property or as personal property, or both, and proceed
      to exercise such rights as apply thereto; and (vi) with respect to any sale
      of
      real property included in the Mortgaged Properties made under the powers of
      sale
      herein granted and conferred, Mortgagee may, to the extent permitted by
      applicable law, include in such sale any personal property and fixtures included
      in the Mortgaged Properties and relating to such real property.

    

    
      
        
          
          

        

        
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    Section
      4.03     Agents.  Mortgage or its
      successor or substitute may appoint or delegate any one or more persons as
      agent
      to perform any act or acts necessary or incident to any sale held by
      Mortgagee,  including the posting of notices and the conduct of sale,
      but in the name and on behalf of Mortgagee, its successor or
      substitute.  If Mortgagee or its successor or substitute shall have
      given notice of sale hereunder, any successor or substitute 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 conducting the
      sale.

     

    Section
      4.04     Judicial Foreclosure;
      Receivership.  If any of the Indebtedness shall become due and
      payable and shall not be promptly paid, Mortgagee shall have the right and
      power
      to proceed by a suit or suits in equity or at law, whether for the specific
      performance of any covenant or agreement herein contained or in aid of the
      execution of any power herein granted, or for any foreclosure hereunder or
      for
      the sale of the Mortgaged Property under the judgment or decree of any court
      or
      courts of competent jurisdiction or for the enforcement of any other appropriate
      legal or equitable remedy.  In addition to all other remedies herein
      provided for, Mortgagor agrees that, upon the occurrence of an Event of Default
      or any event or circumstance which, with the lapse of time or the giving of
      notice, or both, would constitute an Event of Default hereunder, Mortgagee
      shall
      as a matter of right be entitled to the appointment of a receiver or receivers
      for all or any part of the Mortgaged Property, whether such receivership be
      incident to a proposed sale (or sales) of such property or otherwise, and
      without regard to the value of the Mortgaged Property or the solvency of any
      person or persons liable for the payment of the Indebtedness secured hereby,
      and
      Mortgagor does hereby consent to the appointment of such receiver or receivers,
      waives any and all defenses to such appointment, and agrees not to oppose any
      application therefor by Mortgagee, and agrees that such appointment shall in
      no
      manner impair, prejudice or otherwise affect the rights of Mortgagee under
      Article II hereof.  Mortgagor expressly waives notice of a
      hearing for appointment of a receiver and the necessity for bond or an
      accounting by the receiver.  Nothing herein is to be construed to
      deprive Mortgagee of any other right, remedy or privilege it may now or
      hereafter have under the law to have a receiver appointed.  Any money
      advanced by Mortgagee in connection with any such receivership shall be a demand
      obligation (which obligation Mortgagor hereby expressly promises to pay)
      included in the Indebtedness owing by Mortgagor to Mortgagee and shall bear
      interest from the date of making such advance by Mortgagee until paid at the
      Interest Rate.

     

    Section
      4.05     Foreclosure for
      Installments.  Mortgagee shall also have the option to proceed
      with foreclosure in satisfaction of any installments of the Indebtedness which
      have not been paid when due either through the courts or proceeding with
      foreclosure in satisfaction of the matured but unpaid portion of the
      Indebtedness as if under a full foreclosure, conducting the sale as herein
      provided and without declaring the entire principal balance and accrued interest
      due; such sale may be made subject to the unmatured portion of the Indebtedness,
      and any such sale shall not in any manner affect the unmatured portion of the
      Indebtedness, but as to such unmatured portion of the Indebtedness this Mortgage
      shall remain in full force and effect just as though no sale had been made
      hereunder.  It is further agreed that several sales may be made
      hereunder without exhausting the right of sale for any unmatured part of the
      Indebtedness, it being the purpose hereof to provide for a foreclosure and
      sale
      of the security for any matured portion of the Indebtedness without exhausting
      the power to foreclose and sell the Mortgaged Property for any subsequently
      maturing portion of the Indebtedness.

     

    Section
      4.06     Separate Sales.  The
      Mortgaged Property may be sold in one or more parcels and in such manner and
      order as Mortgagee, in its sole discretion, may elect, it being expressly
      understood and agreed that the right of sale arising out of any Event of Default
      shall not be exhausted by any one or more sales.

    

    
      
        
          
          

        

        
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    Section
      4.07     Possession of Mortgaged
      Property.  Mortgagor agrees to the full extent that it lawfully
      may, that, in case one or more of the Events of Default shall have occurred
      and
      shall not have been remedied, then, and in every such case, Mortgagee shall
      have
      the right and power to enter into and upon and take possession of all or any
      part of the Mortgaged Property in the possession of Mortgagor, its successors
      or
      assigns, or its or their agents or servants, and may exclude Mortgagor, its
      successors or assigns, and all persons claiming under Mortgagor, and its or
      their agents or servants wholly or partly therefrom; and, holding the same,
      Mortgagee may use, administer, manage, operate and control the Mortgaged
      Property and conduct the business thereof to the same extent as Mortgagor,
      its
      successors or assigns, might at the time do and may exercise all rights and
      powers of Mortgagor, in the name, place and stead of Mortgagor, or otherwise
      as
      Mortgagee shall deem best.  All costs, expenses and liabilities of
      every character incurred by Mortgagee in administering, managing, operating,
      and
      controlling the Mortgaged Property shall constitute a demand obligation (which
      obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to
      Mortgagee and shall bear interest from date of expenditure until paid at the
      Interest Rate, all of which shall constitute a portion of the Indebtedness
      and
      shall be secured by this Mortgage and all other security
      instruments.

     

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

     

    Section
      4.09     Remedies Cumulative, Concurrent and
      Nonexclusive.  Every right, power and remedy herein given to
      Mortgagee shall be cumulative and in addition to every other right, power and
      remedy herein specifically given or now or hereafter existing in equity, at
      law
      or by statute (including specifically those granted by the Applicable UCC in
      effect and applicable to the Mortgaged Property or any portion thereof) each
      and
      every right, power and remedy whether specifically herein given or otherwise
      existing may be exercised from time to time and so often and in such order
      as
      may be deemed expedient by Mortgagee, and the exercise, or the beginning of
      the
      exercise, of any such right, power or remedy shall not be deemed a waiver of
      the
      right to exercise, at the same time or thereafter any other right, power or
      remedy.  No delay or omission by Mortgagee in the exercise of any
      right, power or remedy shall impair any such right, power or remedy or operate
      as a waiver thereof or of any other right, power or remedy then or thereafter
      existing.

     

    Section
      4.10     No Release of
      Obligations.  Neither Mortgagor, any other Company Party, any
      guarantor nor any other person hereafter obligated for payment of all or any
      part of the Indebtedness shall be relieved of such obligation by reason of
      (a)
      the failure of Mortgagee to comply with any request of Mortgagor, or any
      guarantor or any other person so obligated to foreclose the lien of this
      Mortgage or to enforce any provision hereunder or under the any of the Loan
      Documents; (b) the release, regardless of consideration, of the Mortgaged
      Property or any portion thereof or interest therein or the addition of any
      other
      property to the Mortgaged Property; (c) any agreement or stipulation between
      any
      subsequent owner of the Mortgaged Property and Mortgagee extending, renewing,
      rearranging or in any other way modifying the terms of this Mortgage without
      first having obtained the consent of, given notice to or paid any consideration
      to Mortgagor, any other Company Party, any guarantor or such other person,
      and
      in such event Mortgagor, the Company Parties, guarantor and all such other
      persons shall continue to be liable to make payment according to the terms
      of
      any such extension or modification agreement unless expressly released and
      discharged in writing by Mortgagee; or (d) by any other act or occurrence save
      and except the complete payment of the Indebtedness and the complete fulfillment
      of all obligations hereunder or under the Loan Documents.

    

    
      
        
          
          

        

        
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    Section
      4.11     Release of and Resort to
      Collateral.  Mortgagee may release, regardless of consideration,
      any part of the Mortgaged Property without, as to the remainder, in any way
      impairing, affecting, subordinating or releasing the lien or security interest
      created in or evidenced by this Mortgage or its stature as a first and prior
      lien and security interest in and to the Mortgaged Property, and without in
      any
      way releasing or diminishing the liability of any person or entity liable for
      the repayment of the Indebtedness.  For payment of the Indebtedness,
      Mortgagee may resort to any other security therefor held by Mortgagee in such
      order and manner as Mortgagee may elect.

     

    Section
      4.12     Waiver of Redemption, Notice and
      Marshalling of Assets, Etc.  To the fullest extent permitted by
      law, Mortgagor hereby irrevocably and unconditionally waives and releases (a)
      all benefits that might accrue to Mortgagor by virtue of any present or future
      moratorium law or other law exempting the Mortgaged Property from attachment,
      levy or sale on execution or providing for any appraisement, valuation, stay
      of
      execution, exemption from civil process, redemption or extension of time for
      payment; provided, however, that if the laws of any state do not permit the
      redemption period to be waived, the redemption period is specifically reduced
      to
      the minimum amount of time allowable by statute; (b) all notices Mortgagee’s
      intention to accelerate maturity of the Indebtedness; and (c) any right to
      a
      marshalling of assets or a sale in inverse order of alienation.  If
      any law referred to in this Mortgage and now in force, of which Mortgagor or
      its
      successor or successors might take advantage despite the provisions hereof,
      shall hereafter be repealed or cease to be in force, such law shall thereafter
      be deemed not to constitute any part of the contract herein contained or to
      preclude the operation or application of the provisions hereof.

     

    Section
      4.13     Discontinuance of
      Proceedings.  In case Mortgagee shall have proceeded to invoke any
      right, remedy or recourse permitted hereunder or under the Loan Documents and
      shall thereafter elect to discontinue or abandon same for any reason, Mortgagee
      shall have the unqualified right so to do and, in such an event, Mortgagor
      and
      Mortgagee shall be restored to their former positions with respect to the
      Indebtedness, this Mortgage, the Loan Documents, the Mortgaged Property and
      otherwise, and the rights, remedies, recourses and powers of Mortgagee shall
      continue as if same had never been invoked.

     

    Section
      4.14     Application of Proceeds.  The
      proceeds of any sale of the Mortgaged Property or any part thereof and all
      other
      monies received by Mortgagee in any proceedings for the enforcement hereof
      or
      otherwise, whose application has not elsewhere herein been specifically provided
      for, shall be applied:

     

    (a)           first,
      to the payment of all costs and expenses incurred by Mortgagee incident to
      the
      enforcement of this Mortgage, the Loan Documents or any of the Indebtedness
      (including, without limiting the generality of the foregoing, expenses of any
      entry or taking of possession, of any sale, of advertisement thereof, and of
      conveyances, and court costs, compensation of agents and employees, reasonable
      outside legal fees), and to the payment of all other charges, expenses,
      liabilities and advances incurred or made by Mortgagee under this Mortgage
      or in
      executing any trust or power hereunder;

    

    
      
        
          
          

        

        
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    (b)           second,
      to payment of the Indebtedness in accordance with the Purchase Agreement or
      other Transaction Documents; and

     

    (c)           third,
      to Mortgagor or such other persons as may be entitled thereto by law or as
      otherwise required by any court of competent jurisdiction.

     

    Section
      4.15     Resignation of Operator.  In
      addition to all rights and remedies under this Mortgage, at law and in equity,
      if any Event of Default shall occur and Mortgagee shall exercise any remedies
      under this Mortgage with respect to any portion of the Mortgaged Property (or
      Mortgagor shall transfer any Mortgaged Property “in lieu of” foreclosure),
      Mortgagee shall have the right to request that any operator of any Mortgaged
      Property which is either Mortgagor or any affiliate of Mortgagor to resign
      as
      operator under the joint operating agreement applicable thereto, and no later
      than 60 days after receipt by Mortgagor of any such request, Mortgagor shall
      resign (or cause such other party to resign) as operator of such Mortgaged
      Property.

     

    Section
      4.16     INDEMNITY.  IN
      CONNECTION WITH ANY ACTION TAKEN BY MORTGAGEE PURSUANT TO THIS MORTGAGE,
      MORTGAGEE AND ITS OFFICERS, DIRECTORS, PARTNERS, MEMBERS, INVESTORS, EQUITY
      HOLDERS, EMPLOYEES, REPRESENTATIVES, AGENTS, ADVISORS, ATTORNEYS, ACCOUNTANTS
      AND EXPERTS AND ANY PERSONS OR ENTITIES OWNED OR CONTROLLED BY MORTGAGEE OR
      ANY
      SUCH OTHER PERSON OR ENTITY (“INDEMNIFIED PARTIES”) SHALL NOT BE LIABLE
      FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE
      HAS RECEIVED FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS
      OR ANY ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING,
      OPERATING OR CONTROLLING THE MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY
      RESULT FROM THE ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS
      IS
      CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY,
      NOR SHALL MORTGAGEE BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY
      OR
      LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY
      EACH
      INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY HARMLESS FROM, ANY
      AND
      ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED
      PARTY BY REASON OF THIS MORTGAGE OR THE EXERCISE OF RIGHTS OR REMEDIES
      HEREUNDER; SHOULD MORTGAGEE MAKE ANY EXPENDITURE ON ACCOUNT OF ANY SUCH
      LIABILITY, LOSS OR DAMAGE, THE AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND
      REASONABLE ATTORNEYS’ FEES, SHALL BE A DEMAND OBLIGATION (WHICH OBLIGATION
      MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY) OWING BY MORTGAGOR TO MORTGAGEE
      AND
      SHALL BEAR INTEREST FROM THE DATE EXPENDED UNTIL PAID AT THE INTEREST RATE,
      SHALL BE A PART OF THE INDEBTEDNESS AND SHALL BE SECURED BY THIS MORTGAGE AND
      ANY OTHER SECURITY INSTRUMENT.  MORTGAGOR HEREBY ASSENTS TO, RATIFIES
      AND CONFIRMS ANY AND ALL ACTIONS OF MORTGAGEE WITH RESPECT TO THE MORTGAGED
      PROPERTY TAKEN UNDER THIS MORTGAGE.  THE LIABILITIES OF MORTGAGOR AS
      SET FORTH IN THIS SECTION 4.16 SHALL SURVIVE THE TERMINATION OF THIS
      MORTGAGE.

     

     

    ARTICLE
      V

    [INTENTIONALLY
      OMITTED]

     

    
      
        
          
          

        

        
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    ARTICLE
      VI

    Miscellaneous

     

    Section
      6.01     Release of Mortgage.  At such
      time, if any, as (i) all Indebtedness under the Notes secured hereby shall
      be
      finally and irrevocably paid in full in cash or converted pursuant to the Notes,
      (ii) no Notes shall remain outstanding, (iii) all commitments to lend under
      the
      Purchase Agreement shall have terminated and (iv) there shall exist no other
      outstanding payment or reimbursement obligations (other than contingent
      indemnification obligations for which no claims shall have been asserted) of
      the
      Mortgagor or any of its Subsidiaries to the Mortgagee under any of the
      Transaction Documents (other than the Warrant or shares exercisable thereunder),
      Mortgagee shall forthwith cause satisfaction and discharge of this Mortgage
      to
      be entered upon the record at the expense of Mortgagor and shall execute and
      deliver or cause to be executed and delivered such instruments of satisfaction
      and reassignment as may be appropriate.  

     

    Section
      6.02     Severability.  If any
      provision hereof is invalid or unenforceable in any jurisdiction, the other
      provisions hereof shall remain in full force and effect in such jurisdiction
      and
      the remaining provisions hereof shall be liberally construed in favor of
      Mortgagee in order to effectuate the provisions hereof, and the invalidity
      or
      unenforceability of any provision hereof in any jurisdiction shall not affect
      the validity or enforceability of any such provision in any other
      jurisdiction.

     

    Section
      6.03     Successors and Assigns of
      Parties.  The term “Mortgagee” as used herein shall mean and
      include any legal owner, holder, assignee or pledgee of any of the Indebtedness
      secured hereby.  The terms used to designate Mortgagee and Mortgagor
      shall be deemed to include the respective heirs, legal representatives,
      successors and assigns of such parties.

     

    Section
      6.04     Satisfaction of Prior
      Encumbrance.  To the extent that proceeds of the Notes are used to
      pay indebtedness secured by any outstanding lien, security interest, charge
      or
      prior encumbrance against the Mortgaged Property, such proceeds have been
      advanced by Mortgagee at Mortgagor’s request, and Mortgagee shall be subrogated
      to any and all rights, security interests and liens owned by any owner or holder
      of such outstanding liens, security interests, charges or encumbrances,
      irrespective of whether said liens, security interests, charges or encumbrances
      are released, and it is expressly understood that, in consideration of the
      payment of such other indebtedness by Mortgagee, Mortgagor hereby waives and
      releases all demands and causes of action for offsets and payments to, upon
      and
      in connection with the said indebtedness.

     

    Section
      6.05     Subrogation of
Mortgagee.  This Mortgage is made with full substitution
      and subrogation of Mortgagee and its successors and assigns in and to all
      covenants and warranties by others heretofore given or made in respect of the
      Mortgaged Property or any part thereof.

     

    Section
      6.06     Nature of Covenants.  The
      covenants and agreements herein contained shall constitute covenants running
      with the land and interests covered or affected hereby and shall be binding
      upon
      the heirs, legal representatives, successors and assigns of the parties
      hereto.

     

    Section
      6.07     Notices.  All notices,
      requests, consents, demands and other communications required or permitted
      hereunder shall be given or furnished in accordance with the terms of the
      Purchase Agreement relating to the giving of notices (it being agreed to and
      understood that delivery to Mortgagor of any such notice, request, consent,
      demand or other communication shall be deemed delivery to
      Mortgagor).

    

    
      
        
          
          

        

        
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    Section
      6.08     Counterparts.  This Mortgage
      is being executed in several counterparts, all of which are identical, except
      that to facilitate recordation, if the Mortgaged Property is situated in more
      than one jurisdiction, descriptions of only those portions of the Mortgaged
      Property located in, and descriptions of the Prior Mortgages (as defined herein)
      for, the jurisdiction in which a particular counterpart is recorded shall be
      attached as Exhibit A thereto.  An Exhibit A containing
      a description of all Mortgaged Property wheresoever situated will be attached
      to
      that certain counterpart to be attached to a Financing Statement and filed
      with
      the Secretary of State of Texas in its Uniform Commercial Code
      Records.  Each of such counterparts shall for all purposes be deemed
      to be an original and all such counterparts shall together constitute but one
      and the same instrument providedthat a facsimile signature shall
      be considered due execution and shall be binding upon the signatory thereto
      with
      the same force and effect as if the signature were an original, not a facsimile
      signature.

     

    Section
      6.09     Effective as a Financing
      Statement.  This Mortgage, among other things, covers goods which
      are or are to become fixtures on the real property described herein and covers
      as-extracted collateral related to the real/immovable property described
      herein.  This Mortgage shall be effective as a financing statement (i)
      filed as a fixture filing with respect to all fixtures included within the
      Mortgaged Property, (ii) covering as-extracted collateral with respect to all
      as-extracted collateral included within the Mortgaged Property (including,
      without limitation, all oil, gas, other minerals and other substances of value
      which may be extracted from the earth at the wellhead or minehead) and (iii)
      covering all other Mortgaged Property.  This Mortgage is to be filed
      for record in the real/immovable property records of each county or parish
      where
      any part of the Mortgaged Property is situated 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).  The mailing
      address of Mortgagor is the address of Mortgagor set forth at the end of this
      Mortgage and the address of Mortgagee from which information concerning the
      security interests hereunder may be obtained is the address of Mortgagee set
      forth at the end of this Mortgage.  Nothing contained in this
      paragraph shall be construed to limit the scope of this Mortgage nor its
      effectiveness as a financing statement covering any type of
      property.  A carbon, photographic, facsimile or other reproduction of
      this Mortgage or of any financing statement relating to this Mortgage shall
      be
      sufficient as a financing statement for any of the purposes referred to this
      Section.  Without limiting any other provision herein, Mortgagor
      hereby authorizes Mortgagee to file, in any filing or recording office, one
      or
      more financing statements and any renewal or continuation statements
      thereof.

     

    Section
      6.10     No Impairment of
      Security.  To the extent allowed by applicable law, the lien,
      privilege, security interest and other security rights hereunder shall not
      be
      impaired by any indulgence, moratorium or release which may be granted
      including, but not limited to, any renewal, extension or modification which
      may
      be granted with respect to any secured obligations, or any surrender,
      compromise, release, renewal, extension, exchange or substitution which may
      be
      granted in respect of the Mortgaged Property (including, without limitation,
      Production Proceeds), or any part thereof or any interest therein, or any
      release or indulgence granted to any borrower, endorser, guarantor or surety
      of
      any Indebtedness.

     

    Section
      6.11     Acts Not Constituting
      Waiver.  Any Event of Default may be waived without waiving any
      other prior or subsequent Event of Default.  Any Event of Default may
      be remedied without waiving the Event of Default remedied.  Neither
      failure to exercise, nor delay in exercising, any right, power or remedy upon
      any Event of Default shall be construed as a waiver of such Event of Default
      or
      as a waiver of the right to exercise any such right, power or remedy at a later
      date.  No single or partial exercise of any right, power or remedy
      hereunder shall exhaust the same or shall preclude any other or further exercise
      thereof, and every such right, power or remedy hereunder may be exercised at
      any
      time and from time to time.  No modification or waiver of any
      provision hereof nor consent to any departure by Mortgagor therefrom shall
      in
      any event be effective unless the same shall be in writing and signed by
      Mortgagee and then such waiver or consent shall be effective only in the
      specific instances, for the purpose for which given and to the extent therein
      specified.  No notice 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 Indebtedness shall be deemed an acceptance on account
      only and shall not in any way excuse the existence of an Event of Default
      hereunder.

    

    
      
        
          
          

        

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

     

    Section
      6.13     Certain Consents.  Except
      where otherwise expressly provided herein, in any instance hereunder where
      the
      approval, consent or the exercise of judgment of Mortgagee is required, the
      granting or denial of such approval or consent and the exercise of such judgment
      shall be within the sole discretion of Mortgagee in its reasonable credit
      judgment, and Mortgagee 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
      6.14     GOVERNING
      LAW.  WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW,
      THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
      BY
      THE LAWS OF THE STATE OF KANSAS 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 MORTGAGED
      PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION OF THE
      MORTGAGED PROPERTY) NECESSARILY OR, IN THE SOLE DISCRETION OF THE MORTGAGEE,
      APPROPRIATELY GOVERNS WITH RESPECT TO PROCEDURAL AND SUBSTANTIVE MATTERS
      RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS, PRIVILEGES,
      SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE MORTGAGEE GRANTED
      HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF THE MORTGAGED
      PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF) SUCH
      STATE.

     

    Section
      6.15     EXCULPATION
      PROVISIONS.  EACH OF THE PARTIES HERETO SPECIFICALLY
      AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT IT IS CHARGED
      WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT HAS IN FACT
      READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE
      OF
      THE TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS BEEN REPRESENTED
      BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
      ITS EXECUTION OF THIS MORTGAGE; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY
      IN
      ENTERING INTO THIS MORTGAGE; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS
      OF
      THIS MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME
      ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY
      FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT
      WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
      OF
      THIS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
      PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

    

    
      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

    

     

    Section
      6.16     FINAL AGREEMENT.  THE [LOAN]
      [TRANSACTION] DOCUMENTS, THIS MORTGAGE AND THE SECURITY DOCUMENTS AND THE OTHER
      WRITTEN DOCUMENTS EXECUTED IN CONNECTION THEREWITH REPRESENT THE FINAL AGREEMENT
      BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE
      ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     

    Section
      6.17     [Reserved].

     

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

     

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

     

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

     

    [Remainder
      of page intentionally left blank; signature page follows]

     

    
      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

    

    

    WITNESS
      THE EXECUTION HEREOF, this 10th day of September, 2007, to be effective as
      of
      said date (the “Effective Date”).

     

    
      	 	
              MORTGAGOR:  

            	 
	 	 	 
	 	
              GULF
                WESTERN PETROLEUM, LP,  

            	 
	 	
              a
                Texas limited partnership  

            	 
	 	 	 	 	 
	 	
              By:

            	
              Wharton
                Resources, LLC, 

            	 
	 	 	
              a
                Delaware limited liability company, 

            	 
	 	 	
              its
                general partner 

            	 
	 	 	 	 	 
	 	 	
              By:

            	
              /s/  Donald
                L. Sytsma

            	 
	 	 	
              Name:

            	
              Donald
                L. Sytsma

            	 
	 	 	
              Title:

            	
              CFO

            	 

    

    

     

    The
      name
      and address of the Debtor/Mortgagor is:

    

    Gulf
      Western Petroleum, L.P.

    4801
      Woodway Drive

    Suite
      306
      W

    Houston,
      TX  77056

    

     

    The
      name
      and address of the Secured Party/Mortgagee is:

    

    Metage
      Funds Limited, as Collateral Agent

    8
      Pollen
      Street

    London,
      England W1S 1NG

    Attention:  Tom
      Sharp

     

    Signature
      Page to Kansas Mortgage

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              STATE
                OF TEXAS

            	
              )

            	 
	 	
              )

            	 
	
              COUNTY
                OF HARRIS

            	
              )

            	 
	 	
              )

            	 
	
              CITY
                OF HOUSTON

            	
              )

            	 

    

    

     

    

     

    The
      foregoing instrument was acknowledged before me this 10th day of
September, 2007, by Donald L. Sytsma as CFO of GULF
      WESTERN PETROLEUM LP, a Texas limited partnership, on behalf of said
      limited partnership.

     

     

     

    Witness
      my hand and official seal.

     

    My
      Commission Expires:  November 18, 2009 

     

    
      	 	
                /s/  Yazmin
                E. Leyva

            	 
	 	
              Notary
                Public

            	 

    

     

    Signature
      Page to Kansas
      Mortgage

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      A

    

    Property
      Descriptions

    

    
      	 
	
              Mound
                Branch Project

            
	 	 	 	 	 	 	 	 	 
	
              Lessor

            	
              Lease
                Date /

            	 	
              Royalty

            	
              HBP

            	
              Number
                of Acres

            	
              Legal
                Description

            	
              County

            	
              State

            
	 	
              Lease
                Exp. Date

            	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              Bellar
                Family Farm, LLC

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              12/10/2005

            	
              3years

            	
               1/8

            	
              no

            	
              Total
                Acres 125

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              12/10/2008

            	 	 	 	 	
              Section
                29:

            	 	 
	 	 	 	 	 	 	
              E/2NE/4,NE/4SE/4,N/2SE/4SE/4

            	 	 
	 	 	 	 	 	 	
              Lying
                North of County Rd

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Eugene
                R. & Catherine S. Perkins

            	 	 	 	 	
              Total
                Acres 320

            	 	 	 
	
              Lease
                Date-

            	
              2/11/2006

            	
              3years

            	
               1/8

            	 	
              Lease
                (1) 160

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              2/11/2009

            	 	 	 	 	
              Section
                18: NE/4

            	 	 
	
              Lease
                Date-

            	
              2/11/2006

            	
              3years

            	
               1/8

            	 	
              Lease
                (2) 160

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              2/11/2009

            	 	 	 	 	
              Section
                18:

            	 	 
	 	 	 	 	 	 	
              E/2SW/4,
                W/2SE/4

            	 	 
	
              Tom
                & Angela Russell,

            	 	 	 	 	
              Total
                Acres 563

            	 	 	 
	
              Preston
                & Christina Jones

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              2/25/2006

            	
              3years

            	
               1/8

            	 	
              Lease
                (1) 280

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              2/25/2009

            	 	 	 	 	
              Section
                21: NE/4NW/4, lying East of County RD, NE/4

            	 	 
	 	 	 	 	 	 	
              Section
                22: W/2SW/4, SW/4NW/4

            	 	 
	
              Lease
                Date-

            	
              2/25/2006

            	
              3years

            	
               1/8

            	 	
              Lease
                (2) 283

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              2/25/2009

            	 	 	 	 	
              Section
                15: SW/4

            	 	 
	 	 	 	 	 	 	
              Section
                22: N/2NW/4, SE/4NW/4

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              Howard
                E. & Debbie J. Unruh

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              2/25/2006

            	
              3years

            	
               1/8

            	 	
              Total
                Acres 200

            	
              Township
                30 South, Range 11 East of 6th P.M.

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              2/25/2009

            	 	 	 	 	
              Section
                21: SE/4, NE/4SW/4, SE/4SW/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Alvin
                V. Schibbelhute

            	 	 	 	
              no

            	
              Total
                Acres 400

            	 	 	 

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              Lease
                Date-

            	
              10/1/2005

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (1) - 240 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/1/2008

            	 	 	 	 	
              Section
                12: SE/4, E/2SW/4

            	 	 
	
              Lease
                Date-

            	
              10/1/2005

            	
              3
                years

            	
               1/8

            	
              n/a

            	
              Lease
                (2) - 160 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/1/2008

            	 	 	 	 	
              Section
                7: SW/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              David
                Denton

            	 	 	 	 	
              Total
                Acres 640

            	 	 	 
	
              Lease
                Date-

            	
              10/13/2005

            	
              3
                years

            	
               1/8

            	
              n/a

            	
              Lease
                (1) - 320 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/13/2008

            	 	 	 	 	
              Section
                16: N/2

            	 	 
	
              Lease
                Date-

            	
              10/13/2005

            	
              3
                years

            	 	
              n/a

            	
              Lease
                (2) - 320 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/13/2008

            	 	 	 	 	
              Section
                16: S/2

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Dennis
                Bryan

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              9/6/2005

            	
              3
                years

            	
               1/8

            	
              n/a

            	
              Total
                Acres 80

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              9/6/2008

            	 	 	 	 	
              Section
                19: E/2NE/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Robert
                Adams

            	 	 	 	 	
              Total
                Acres 920

            	 	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	
               1/8

            	
              n/a

            	
              Lease
                (1)  160 Acres

            	
              Township
                30 South, Range 11 East  E/2 NW/4, W/2 NE/4,
                Sec32

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              T30S-R11E,
                Elk County, Kansas

            	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (2) 160 Acres

            	
              Township
                30 South Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              Section
                35: NE/4

            	 	 
	
              Robert,
                Lakin, Linda Adams

            	 	 	 	 	 	 	 	 
	
              Alice
                M. & Marion Brunetti

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	 	 	
              Lease
                (3)- 240 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              Section
                27: E/2SW/4, SE/4

            	 	 
	
              Robert,
                Lakin, Linda Adams

            	 	 	 	 	 	 	 	 
	
              Alice
                M. & Marion Brunetti

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (4)- 80 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              Section
                35: W/2NW/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Robert
                A., Larkin & Linda T.

            	 	 	 	 	 	 	 	 
	
              Adams

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	 	 	
              Lease
                (5)- 120 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              Section
                23: SE/4SE/4

            	 	 
	 	 	 	 	 	 	
              Section
                24: S/2SW/4

            	 	 

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              Robert
                A., Larkin & Linda T.

            	 	 	 	 	 	 	 	 
	
              Adams

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/17/2005

            	
              3
                years

            	 	 	
              Lease
                (6) 160 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              10/17/2008

            	 	 	 	 	
              Section
                25: N/2NW/4

            	 	 
	 	 	 	 	 	 	
              Section
                26: E/2NE/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Phyllis
                A. & Neal F. Osborn Trustees of the

            	 	 	 	 	 	 	 	 
	
              Phyllis
                A. Osborn Trust

            	 	 	 	 	
              Total
                Acres 640

            	 	 	 
	
              Lease
                Date-

            	
              3/16/2006

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (1) 240 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              3/16/2009

            	 	 	 	 	
              Section
                15: W/2SE/4

            	 	 
	 	 	 	 	 	 	
              Section
                22: NE/4

            	 	 
	
              Lease
                Date-

            	
              3/16/2006

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (2) 160 Acres

            	
              Township
                30 South Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              3/16/2009

            	 	 	 	 	
              Section
                27: NE/4

            	 	 
	 	
              3/16/2006

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (3) 240 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              3/16/2009

            	 	 	 	 	
              Section
                22: SE/4, E/2SW/4

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Babst
                Family Limited Partnership

            	 	 	 	 	
              Total
                Acres 2524.1

            	 	 	 
	
              Lease
                Date-

            	
              10/22/2005

            	
              1year*

            	
               1/8

            	 	
              Lease
                (1) - 649.55 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Original
                Lease Term 1yr.

            	
              10/22/2006

            	 	 	 	 	
              Section
                30: Lots 1,2,3,4 E2,a/d/a All

            	 	 
	
              Lease
                extended 2 more years new exp date

            	
              10/22/2008

            	 	 	 	 	
              Township
                30 South, Range 11 East

            	 	 
	 	 	 	 	 	 	
              Section
                25: N/2S/2 lying North

            	 	 
	 	 	 	 	 	 	
              (2
                Ac.) and East County Rd., NE/4

            	 	 
	 	 	 	 	 	 	
              lying
                East County (12 Ac.)

            	 	 
	
              Babst
                Family Limited Partnership

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/22/2005

            	
              1year*

            	
               1/8

            	 	
              Lease
                (2) - 239.34 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Original
                Lease Term 1yr.

            	
              10/22/2006

            	 	 	 	 	
              Section
                31: Lot 1 (39.34), NE/4NW/4,

            	 	 
	
              Lease
                extended 2 more years new exp date

            	
              10/22/2008

            	 	 	 	 	
              N/2NE/4,
                a/d/a N/2N/2

            	 	 
	 	 	 	 	 	 	
              Section
                32: N/2NW/4

            	 	 
	
              Babst
                Family Limited Partnership

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/22/2005

            	
              1
                yr*

            	 	 	
              Lease
                (3) - 626.60 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Original
                Lease Term 1yr.

            	
              10/22/2006

            	 	 	 	 	
              Section
                18: Lots 1,2,3,4

            	 	 
	
              Lease
                extended 2 more years new exp date

            	
              10/22/2008

            	 	 	 	 	
              E/2W/2,
                E/2, a/d/a All

            	 	 
	
              Babst
                Family Limited Partnership

            	 	 	 	 	 	 	 	 

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              Lease
                Date-

            	
              10/22/2005

            	
              3years

            	 	 	
              Lease
                (4) - 320 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              10/22/2008

            	 	 	 	 	
              Section
                29: W/2

            	 	 
	
              Babst
                Family Limited Partnership

            	 	 	 	 	 	 	 	 
	
              Lease
                Date-

            	
              10/22/2005

            	
              3years

            	 	 	
              Lease
                (5) - 688.61 Acres

            	
              Township
                30 South, Range 12 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date

            	
              10/22/2008

            	 	 	 	 	
              Section
                19: Lots 1,2,3,4,

            	 	 
	 	 	 	 	 	 	
              E/2,
                a,d,a All ( 632.11 ac. )

            	 	 
	
              *Leases
                where originally one year with

            	 	 	 	 	 	
              Township
                30 South, Range 11 East

            	 	 
	
              option
                to extend 2 additional years which

            	 	 	 	 	 	
              Section
                24: All that part of the

            	 	 
	
              was
                exercised before lease expired

            	 	 	 	 	 	
              SE/4NE/4,
                E/2SE/4 lying East of

            	 	 
	
              new
                expiration date is 10/22/08

            	 	 	 	 	 	
              County
                Road ( 56.5 ac. )

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              M.
                Ruth Royse, Trustee of the M. Ruth Royce

            	 	 	 	 	
              Total
                Acres 640

            	 	 	 
	
              Lease
                Date-

            	
              3/20/2006

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (1) 320 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              3/20/2009

            	 	 	 	 	
              Section
                10: W/2

            	 	 
	
              Lease
                Date-

            	
              3/20/2006

            	
              3
                years

            	
               1/8

            	 	
              Lease
                (2) 320 Acres

            	
              Township
                30 South, Range 11 East

            	
              Elk

            	
              KS

            
	
              Lease
                Exp. Date-

            	
              3/20/2009

            	 	 	 	 	
              Section
                10: E/2

            	 	 
	 	 	 	 	 	 	 	 	 
	
              Margaret
                P. Tidwell

            	 	 	 	 	 	
              Section
                29, 30 Various

            	
              Elk

            	
              KS

            
	 	 	 	 	 	 	
              The
                West Half of the Northeast Quarter (W/2 NE/4) of Section 29;
                AND

               

              The
                East Half of the Northwest Quarter (E/2NW4) except a tract described
                as
                follows: beginning at the Northwest corner of the Northeast Quarter
                of the
                Northwest Quarter (NE/4 NW/4)  of Section 29 and running thence
                South 3 chains, thence South 71 degrees East five chains, thence
                East 5
                Chains, thence North 64 degrees and 30 minutes East 12 Chains to
                the
                Quarter Section corner on the North side of Section 29, thence West
                along
                Section line 20 chains to place of beginning; AND

               

            	 	 

    

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      	
              Lease
                Date-

            	
              7/13/2005

            	
              1year

            	 	 	
              Total
                Acres 959

            	
              Southwest
                Quarter of the Northwest Quarter (SW/4  NW/4) and the North half
                of the Southwest Quarter (N/2 SW/4 and the Southeast Quarter of the
                Southwest Quarter (SE/4 SW/4) of Section 29; AND

               

              North
                Half of the Southeast Quarter (N/2 SE/4) and the Southeast Quarter
                of the
                Southeast Quarter (SE/4 SE/4) of Section 30; AND

               

              Northeast
                Quarter and the East Half of the Northwest Quarter (NE/4 E/2 NW/4)
                of
                Section 30: AND

               

              West
                Half of the Northeast Quarter and East Half of the Northwest Quarter
                (W/2
                N/4 and  E/2 N/4) , except 4 acres off Southwest corner of
                Section 19; AND

               

               

              Southeast
                Quarter and twenty-tow acres off East side of the Northeast Quarter
                of the
                Southwest Quarter (NE/4 SW/4) of Section19, all in Township 30 South
                Range
                11 East of the 6th P. M., containing 1011 acres more or less, elk
                County,
                Kansas

            	 	 
	
              Lease
                Exp. Date

            	
              HPD

            	 	 	 	 	 	 	 

    

    

    Lease
      Holder: Gulf Western Petroleum, LP;   In conjunction with the
      Mound Branch Development Agreement between Orbit Energy, LLC and Gulf Western
      Petroleum, LP (GWP) dated September  01, 2006,  GWP
      purchases all of Orbit’s working and associated net revenue interests in
      approximately 8,800 gross acres, existing drilled wells, and associated
      equipment in the Mound Branch Project.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]