Document:

Unassociated Document

    Exhibit
      10.33

     

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

     

    DEED
      OF TRUST, MORTGAGE, ASSIGNMENT, 

    SECURITY
      AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

     

    FROM

     

    
      TEKOIL
        AND GAS GULF COAST, LLC, AS BORROWER
(Mortgagor,
      Debtor, and Assignor)

    (Organizational
      I.D. Number 4286069)

     

    TO

     

    JOHN
      HOWIE, AS TRUSTEE

     

    AND

     

    J.
      ARON & COMPANY, AS AGENT

    (Mortgagee,
      Secured Party and Assignee)

     

    Dated
      May
      11, 2007

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    
      	
              WHEN
                RECORDED OR FILED RETURN TO:

               

              Bracewell
                & Giuliani LLP

              711
                Louisiana, Suite 2300

              Houston,
                Texas 77002

              Attention:
                Brandie M. Martin

            	
              THIS
                DOCUMENT PREPARED BY:

               

              Feras
                Gadamsi

              Bracewell
                & Giuliani LLP

              711
                Louisiana, Suite 2300

              Houston,
                Texas 77002

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    DEED
      OF TRUST, MORTGAGE, ASSIGNMENT, 

    SECURITY
      AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

    
      (THIS
        "MORTGAGE")

       

    

    ARTICLE
      I

    
      GRANTING
        CLAUSES; SECURED INDEBTEDNESS

       

    

    Section
      1.1. Grant
      and Mortgage.
      Tekoil
      and Gas Gulf Coast, LLC,
      a
      Delaware limited liability company, (herein called "Mortgagor"),
      in
      consideration of the sum of Ten Dollars ($10.00) to Mortgagor in hand paid,
      and
      in order to secure the payment of the secured indebtedness hereinafter referred
      to and the performance of the obligations, covenants, agreements, warranties
      and
      undertakings of Mortgagor hereinafter described, does hereby (a) GRANT, BARGAIN,
      SELL, CONVEY, TRANSFER, ASSIGN AND SET OVER to John
      Howie,
      as
      Trustee (the "Trustee"),
      and
      grant to Trustee a POWER OF SALE (pursuant to this Mortgage and applicable
      law)
      with respect to the following described properties, rights, and interests to
      the
      extent the same are located in the State of Texas and to the fullest extent
      such
      properties, rights and interests may be granted to the Trustee and made the
      subject of a deed of trust and the foreclosure procedures applicable thereto
      under the applicable laws of the State of Texas (the "Deed
      of Trust Mortgaged Properties"),
      and
      (b) to the extent any of the following properties, rights and interests are
      not
      granted to and held by the Trustee pursuant to clause (a) above, GRANT, BARGAIN,
      SELL, CONVEY, TRANSFER, MORTGAGE, ASSIGN AND SET OVER to Agent (as hereinafter
      defined in Section 1.4(a)), with mortgage covenants, and upon the statutory
      mortgage condition for the breach of which this Mortgage may be subject to
      foreclosure as provided by law, the following described rights, interest and
      properties (the "Other
      Mortgaged Properties"):

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    F. Without
      limitation of the generality of the foregoing, all of Mortgagor's interest
      in
      and to all liens, security interests, and encumbrances granted to Mortgagor
      under or pursuant to that certain Deed of Trust, Mortgage, Assignment, Security
      Agreement, Fixture Filing and Financing Statement dated as of May 11, 2007
      executed by Masters Pipeline, L.L.C. in favor of Mark Western, as Trustee for
      the benefit of Mortgagor; and

     

    G. All
      rights, estates, powers and privileges appurtenant to the foregoing rights,
      interests and properties.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    (g) without
      limitation of or by any of the foregoing, all rights, titles and interests
      now
      owned or hereafter acquired by Mortgagor in any and all goods, inventory,
      equipment, as-extracted collateral, documents, money, instruments, intellectual
      property, certificated securities, uncertificated securities, investment
      property, letters of credit, rights to proceeds of written letters of credit
      and
      other letter-of-credit rights, commercial tort claims, deposit accounts, payment
      intangibles, general intangibles, contract rights, chattel paper (including
      electronic chattel paper and tangible chattel paper), rights to payment
      evidenced by chattel paper, software, supporting obligations and accounts,
      wherever located, and all rights and privileges with respect thereto;

     

    (h) without
      limitation of or by any of the foregoing, all rights, remedies, claims, powers
      and privileges of any kind arising under or pursuant to (i) that certain
      Indemnity Agreement dated May 11, 2007 among Master's Resources, LLC, Masters
      Oil & Gas, LLC, and Tekoil and Gas Gulf Coast, LLC (the "Masters
      Indemnity Agreement")
      and
      (ii) that certain Pledge and Security Agreement dated May 11, 2007 between
      Masters Resources, L.L.C. and Tekoil and Gas Gulf Coast, LLC ("Masters
      Pledge and Security Agreement")
      (all
      of the properties, rights and interests described in subsections (a), (b),
      (c),
      (d), (e), (f), and (g) above, subsection (i) below, and this subsection (h)
      being herein sometimes collectively called the "Collateral");
      and

     

    (i) all
      proceeds of the Collateral (the Mortgaged Properties, the Collateral and the
      proceeds of the Mortgaged Properties and of the Collateral being herein
      sometimes collectively called the "Property").

     

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

     

    
      
        
        

      

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

     

    (a) All
      indebtedness and other obligations of Mortgagor now or hereafter incurred or
      arising pursuant to the provisions of that certain Credit and Guaranty Agreement
      dated as of May 11, 2007, by and among Mortgagor, Tekoil & Gas Corporation
      and the other guarantors party thereto, J. Aron & Company, individually and
      in its capacity as Administrative Agent for the benefit of the Lenders (in
      such
      capacity as Administrative Agent is herein called "Agent"),
      and
      the lenders from time to time parties thereto (such lenders together with any
      affiliates of such lenders to whom any obligations described in Section 1.4(c)
      are owed are herein called "Lenders")
      and all
      supplements thereto and amendments or modifications thereof, and all agreements
      given in substitution therefor or in restatement, renewal or extension thereof,
      in whole or in part (such Credit and Guaranty Agreement as the same may from
      time to time be supplemented, amended or modified, and all other agreements
      given in substitution therefor or in restatement, renewal or extension thereof,
      in whole or in part, being herein called the "Credit
      Agreement");

     

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

     

    (c) Payment
      of and performance of any and all present or future obligations of Mortgagor
      according to the terms of any agreement providing for options, swaps, floors,
      caps, collars, forward sales or forward purchases involving interest rates,
      commodities or commodity prices, equities, currencies, bonds, or indexes based
      on any of the foregoing, or any other derivative agreement or other similar
      agreement or arrangement, in each case now existing or hereafter entered into
      between Mortgagor and one or more Lenders (or any one or more affiliates of
      any
      Lenders); provided that if any such counterparty ceases to be a Lender under
      the
      Credit Agreement or an affiliate of a Lender under the Credit Agreement, such
      obligations shall be included in the secured indebtedness only to the extent
      such obligations arise from transactions entered into prior to the time such
      counterparty ceased to be a Lender under the Credit Agreement or an affiliate
      of
      a Lender under the Credit Agreement;

     

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

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    ARTICLE
      II

    
      REPRESENTATIONS,
        WARRANTIES AND COVENANTS

       

    

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

     

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

     

    (b) Condition
      of Personal or Movable Property.
      The
      equipment, inventory, improvements, fixtures, goods and other tangible
      personal/movable property forming a part of the Property are and will remain
      in
      good repair and condition and are and will be adequate for the normal operation
      of the Property in accordance with prudent industry standards; all of such
      Property is, and will remain, located on the Mortgaged Properties, except for
      that portion thereof which is or shall be located elsewhere (including that
      usually located on the Mortgaged Properties but temporarily located elsewhere)
      in the course of the normal operation of the Property.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    (h) Gas
      Regulatory Matters.
      Mortgagor has, to the extent required by applicable law, filed with the
      appropriate state and federal agencies all necessary rate and collection filings
      and all necessary applications for well determinations under the Natural Gas
      Act
      of 1938, as amended, the Natural Gas Policy Act of 1978, as amended, and the
      rules and regulations of the Federal Energy Regulatory Commission (the
      "FERC")
      thereunder, and each such application has been approved by or is pending before
      the appropriate state or federal agency.

     

    (i) Mortgagor's
      Address.
      The
      address of Mortgagor's place of business, residence, chief executive office
      and
      office where Mortgagor keeps its records concerning accounts, contract rights
      and general intangibles is as set forth on its signature page hereof, and,
      except as disclosed in the Credit Agreement, there has been no change in the
      location of Mortgagor's place of business, residence, chief executive office
      and
      office where it keeps such records and no change of Mortgagor's name during
      the
      four months immediately preceding the date of this Mortgage. Mortgagor hereby
      represents and warrants that its organizational number is 4286069,
      the
      state
      of its formation is Delaware and the correct spelling of Mortgagor is as set
      forth in its signature block below.

     

    Section
      2.2. Compliance
      by Operator.
      As to
      any part of the Mortgaged Properties which is not a working interest, Mortgagor
      agrees to take all 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 Properties 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 available to
      Mortgagor (including all rights under any operating agreement) to cause the
      party who is the operator of such property to comply with the covenants and
      agreements contained herein.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    ARTICLE
      III

    
      ASSIGNMENT
        OF PRODUCTION, ACCOUNTS, AND PROCEEDS

       

    

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

    ARTICLE
      IV

    
      REMEDIES
        UPON DEFAULT

       

    

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

     

    Section
      4.2. Acceleration
      of Secured Indebtedness.
      Upon
      the occurrence and during the continuance of a default, the secured indebtedness
      may be (and in certain circumstances shall automatically be) accelerated as
      provided in the Credit Agreement

     

    Section
      4.3. Contracts.
      After
      the occurrence and during the continuation of a default, the Agent may, at
      its
      option, in
      the
      place and stead of Mortgagor, exercise any rights of Mortgagor under the
      contracts that constitute Collateral, including without limitation the Masters
      Indemnity Agreement and the Masters Pledge and Security Agreement (herein
      collectively referred to as the "Contracts")
      in
      accordance with the terms thereof. Without limitation of the foregoing,
      Mortgagor agrees that under the foregoing circumstances, Agent may give notices,
      consents and demands and make elections under the Contracts, modify or waive
      the
      terms of the Contracts and enforce the Contracts, in each case, to the same
      extent and on the same terms as Mortgagor might have done, and Mortgagor
      authorizes any counterparty to the Contracts to follow the instructions of
      the
      Agent and ignore the instructions of the Mortgagor with respect to Mortgagor's
      rights under or with respect to any Contract following notice of a default
      and
      until notice from Agent that such default has ceased to exist or is waived.
      It
      is understood and agreed that notwithstanding the exercise of such rights and/or
      the taking or such actions by Agent, as between Mortgagor and Agent, Mortgagor
      shall remain liable for performance of its obligations under the
      Contracts.

     

    
      
        
        

      

      
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    Section
      4.4. Pre-Foreclosure
      Remedies.
      Upon
      the occurrence and during the continuance of a default, Agent is authorized,
      prior or subsequent to the institution of any foreclosure proceedings, to enter
      upon the Property, or any part thereof, and to take possession of the Property
      and all books and records relating thereto, and to exercise without interference
      from Mortgagor any and all rights which Mortgagor has with respect to the
      management, possession, operation, protection or preservation of the Property.
      If necessary to obtain the possession provided for above, Agent may invoke
      any
      and all remedies to dispossess Mortgagor. Mortgagor agrees to peacefully
      surrender possession of the Property upon default if requested by Agent. All
      costs, expenses and liabilities of every character incurred by Agent in
      managing, operating, maintaining, protecting or preserving the Property shall
      constitute a demand obligation (which obligation Mortgagor hereby expressly
      promises to pay) owing by Mortgagor to Agent and shall bear interest from date
      of expenditure until paid at the rate described in Section 2.3 hereof, all
      of
      which shall constitute a portion of the secured indebtedness and shall be
      secured by this Mortgage and by any other instrument securing the secured
      indebtedness. In connection with any action taken by Agent pursuant to this
      Section 4.4, AGENT
      SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM ANY
      ACT
      OR OMISSION OF AGENT (INCLUDING AGENT'S OWN NEGLIGENCE) IN MANAGING THE PROPERTY
      UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
      AGENT,
      nor
      shall Agent be obligated to perform or discharge any obligation, duty or
      liability of Mortgagor arising under any agreement forming a part of the
      Property or arising under any Permitted Lien (as defined in the Credit
      Agreement) or otherwise arising. Mortgagor hereby assents to, ratifies and
      confirms any and all actions of Agent with respect to the Property taken under
      this Section 4.4, other than gross negligence or willful misconduct of
      Agent.

     

    Section
      4.5. Foreclosure.
      

     

    (a) Upon
      the
      occurrence and during the continuance of a default, Trustee is authorized and
      empowered and it shall be Trustee's special duty at the request of Agent to
      sell
      the Deed of Trust Mortgaged Properties, or any part thereof, as an entirety
      or
      in parcels as Agent may elect, at such place or places and otherwise in the
      manner and upon such notice as may be required by law or, in the absence of
      any
      such requirement, as Trustee may deem appropriate. If Trustee shall have given
      notice of sale hereunder, any successor or substitute Trustee thereafter
      appointed may complete the sale and the conveyance of the property pursuant
      thereto as if such notice had been given by the successor or substitute Trustee
      conducting the sale. Cumulative of the foregoing and the other provisions of
      this Section 4.5: As to any portion of the Deed of Trust 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 Deed of Trust Mortgaged
      Properties shall be conducted at the courthouse of any county (whether or not
      the counties in which such Deed of Trust Mortgaged Properties are located are
      contiguous) in the State of Texas in which any part of such Deed of Trust
      Mortgaged Properties is situated or which lies shoreward of any Deed of Trust
      Mortgaged Property (i.e., to the extent a particular Deed of Trust 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.

     

    
      
        
        

      

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

     

    (c) Upon
      the
      occurrence and during the continuance of a default, Agent may exercise its
      rights of enforcement with respect to the Collateral under the Texas Business
      and Commerce Code, as amended, or under the Uniform Commercial Code or any
      other
      statute in force in any state to the extent the same is applicable law.
      Cumulative of the foregoing and the other provisions of this Section
      4.5:

     

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

     

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

     

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

     

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

     

    (v) the
      expenses of sale provided for in clause FIRST
      of
      Section 4.8 shall include the reasonable expenses of retaking the Collateral,
      or
      any part thereof, holding the same and preparing the same for sale or other
      disposition; and

     

    (vi) should,
      under this subsection, the Collateral be disposed of other than by sale, any
      proceeds of such disposition shall be treated under Section 4.8 as if the same
      were sales proceeds.

     

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

     

    
      
        
        

      

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    Section
      4.10. Foreclosure
      as to Matured Debt.
      Upon
      the occurrence and during the continuance of a default, Agent shall have the
      right to proceed with foreclosure of the liens and/or security interests
      evidenced hereby without declaring the entire secured indebtedness due, and
      in
      such event, any such foreclosure sale may be made subject to the unmatured
      part
      of the secured indebtedness and shall not in any manner affect the unmatured
      part of the secured indebtedness, but as to such unmatured part, this Mortgage
      shall remain in full force and effect just as though no sale had been made.
      The
      proceeds of such sale shall be applied as provided in Section 4.8 except that
      the amount paid under clause SECOND
      thereof
      shall be only the matured portion of the secured indebtedness and any proceeds
      of such sale in excess of those provided for in clauses FIRST
      and
SECOND
      (modified as provided above) shall be applied as provided in Section 3.4 hereof.
      Several sales may be made hereunder without exhausting the right of sale for
      any
      unmatured part of the secured indebtedness.

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
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    ARTICLE
      V

    
      MISCELLANEOUS

       

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    Section
      5.8. Subrogation
      to Existing Liens.
      To the
      extent that the proceeds of the Loans have been used to pay indebtedness secured
      by certain outstanding liens, security interests, charges or prior encumbrances
      against the Property, such proceeds have been advanced at Mortgagor's request,
      and the Lenders (and Trustee and Mortgagee on behalf of the Lenders) 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 indebtedness, Mortgagor hereby waives and releases all
      demands and causes of action for offsets and payments to, upon and in connection
      with the said indebtedness.

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

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

    
      	 	 	 
	 	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Mark
              Western
	 	
              

              Name:
                Mark Western

              Title:  
                CEO and Chairman of the Board of Directors

            

    

    

    
      	
              The
                address of Agent is:

               

              85
                Broad Street

              New
                York, New York 10004

            	
              The
                address of Mortgagor is:

               

              25050
                I-45 North, Suite 525

              The
                Woodlands, Texas 77380

              Attention:
                Mark Western

            
	 	 
	
              The
                address of the Trustee is:

               

              1000
                Louisiana, Suite 550

              Houston,
                Texas 77002

            	 
	 	 

    

    ACKNOWLEDGMENT

     

    
      	THE STATE OF TEXAS	)	 	 
	 	)	 	 
	COUNTY OF HARRIS	)	 	 

    

     

    This
      instrument was acknowledged before me on this 11 day of May, 2007, by Mark
      Western, as CEO and Chairman of the Board of Directors of Tekoil & Gas
      Corporation, a Delaware corporation, Managing Member of Tekoil and Gas Gulf
      Coast, LLC, a Delaware limited liability company acting on behalf of such
      Delaware limited liability company.

     

    GIVEN
      UNDER MY HAND AND SEAL OF OFFICE, this the 11 day of May, 2007.

    
      	 	 	 	 
	 	 	 	 
	
            	 	 	
              /s/
                Rhondee Damon

            
	
            	 	 	
              

              Notary
                Public, State of Texas

            
	
            	 	 	
            
	 	 	 	 
	 	 	 	
              Rhondee
                Damon

            
	 	 	 	
              

              (Printed
                Name)

            

    

     

    RHONDEE
      M. DAMON

    Notary
      Public, State of Texas

    My
      Commission Expires

    April
      26,
      2009

     

    
      
 

      Signature
        Page to Deed of Trust

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

    

    EXHIBIT
      A

     

    DESCRIPTION
      OF MORTGAGED PROPERTIES

     

    The
      designation "Working Interest" or "WI" or "GWI" when used in this Exhibit means
      an interest owned in an oil, gas, and mineral lease that determines the
      cost-bearing percentage of the owner of such interest. The designation "Net
      Revenue Interest" or "NRI" or "NRIO" or "NRIG" means that portion of the
      production attributable to the owner of a working interest after deduction
      for
      all royalty burdens, overriding royalty burdens or other burdens on production,
      except severance, production, and other similar taxes. The designation
      "Overriding Royalty Interest" "ORRI" means an interest in production which
      is
      free of any obligation for the expense of exploration, development, and
      production, bearing only its pro rata share of severance, production, and other
      similar taxes and, in instances where the document creating the overriding
      royalty interest so provides, costs associated with compression, dehydration,
      other treating or processing, or transportation of production of oil, gas,
      or
      other minerals relating to the marketing of such production. The designation
      "Royalty Interest" or "RI" means an interest in production which results from
      an
      ownership in the mineral fee estate or royalty estate in the relevant land
      and
      which is free of any obligation for the expense of exploration, development,
      and
      production, bearing only its pro rata share of severance, production, and other
      similar taxes and, in instances where the document creating the royalty interest
      so provides, costs associated with compression, dehydration, other treating
      or
      processing or transportation of production of oil, gas, or other minerals
      relating to the marketing of such production. Each amount set forth as "Working
      Interest" or "WI" or "GWI" or "Net Revenue Interest" or "NRI" or "NRIO" or
      "NRIG" is the Mortgagor's interest after giving full effect to, among other
      things, all Liens permitted by the Transaction Documents and after giving full
      effect to the agreements or instruments set forth in this Exhibit A and any
      other instruments or agreements affecting Mortgagor's ownership of the
      Hydrocarbons.

     

    Any
      reference in this Exhibit A to wells or units is for warranty of interest,
      administrative convenience, and identification and shall not limit or restrict
      the right, title, interest, or Properties covered by this Deed of Trust. All
      right, title, and interest of Mortgagor in the Properties described herein
      and
      in Exhibit A are and shall be subject to this Deed of Trust, regardless of
      the
      presence of any units or wells not described herein.

     

    The
      reference to book or volume and page herein and in Exhibit A refer to the
      recording location of each respective Mortgaged Properties described herein
      and
      in Exhibit A in the county where the land covered by the Mortgaged Properties
      is
      located.

    

      Exhibit
        A
        to Deed of TrustUnassociated Document

    
      Exhibit
        10.34

       

      BLOCKED
        DEPOSIT ACCOUNT CONTROL AGREEMENT

    

     

    This
      Blocked Deposit Account Control Agreement dated as of May 11, 2007 (this
“Agreement”)
      among
TEKOIL
      AND GAS GULF COAST, LLC,
      a
      Delaware limited liability company (the “Debtor”),
      J.
      ARON & COMPANY,
      as
      administrative agent for the beneficiaries (the “Secured
      Party”)
      and
AMEGY
      BANK NATIONAL ASSOCIATION,
      a
      national banking association, in its capacity as a “bank” as defined in Section
      9-102 of the UCC (in such capacity, the “Financial
      Institution”).
      Capitalized terms used but not defined herein shall have the meaning assigned
      thereto in the Pledge and Security Agreement, dated as of May 11, 2007, among
      the Debtor, the other Grantors party thereto, and the Secured Party (as amended,
      restated, supplemented or otherwise modified from time to time, the
“Security
      Agreement”).
      Capitalized terms used but not otherwise defined herein or in the Security
      Agreement shall have the meaning assigned thereto in the Credit and Guaranty
      Agreement, dated as of May 11, 2007, among the Debtor, Tekoil & Gas
      Corporation, other guarantors party thereto, various lenders, and the Secured
      Party, as administrative agent for the various lenders. All references herein
      to
      the “UCC” shall mean the Uniform Commercial Code as in effect in the State of
      New York.

     

    Section
      1. Establishment
      of Deposit Account.
      The
      Financial Institution hereby confirms and agrees that:

     

    (a) The
      Financial Institution has established account number XXXXXXX
      in the
      name “Tekoil
      and Gas Gulf Coast - Blocked Receivable Account”
(such
      account and any successor account, the “Deposit
      Account”)
      and
      the Financial Institution shall not change the name or account number of the
      Deposit Account without the prior written consent of the Secured Party;
      and

     

    (b) The
      Deposit Account is a “deposit account” within the meaning of Section
      9-102(a)(29) of the UCC.

     

    Section
      2. Control
      of the Deposit Account.

     

    (a) The
      Deposit Account shall be under the control of the Secured Party. The Secured
      Party shall at all times have "control" (as defined in Section 9-104 of the
      Uniform Commercial Code as adopted in the state of New York) of the Deposit
      Account. The Financial Institution shall comply with instructions originated
      by
      the Secured Party directing disposition of funds in the Depository Account
      without further consent by the Debtor.

     

    (b) The
      Secured Party shall have exclusive dominion and control over the Deposit
      Account. Neither the Debtor nor any person acting through or on behalf of the
      Debtor shall have any right of access to or withdrawal from the Deposit Account,
      and the Financial Institution shall not comply with any instructions originated
      by the Debtor or any such person directing disposition of funds in the Deposit
      Account.

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (c) Upon
      receipt of a funding disbursement notice (a "Disbursement
      Notice")
      from
      the Secured Party to the Financial Institution's address as set forth in Section
      11 of this Agreement, the Financial Institution will initiate a federal funds
      wire transfer of all or a portion of collected funds, as indicated in such
      Disbursement Notice (subject to the Financial Institution's funds availability
      policy), in the Deposit Account to the master/operating account, (account number
      XXXXXXX)
      of the
      Debtor with the Financial Institution (or such other account as may be
      designated in writing by the Secured Party in such Disbursement
      Notice).

    

    (d) The
      Financial Institution has established a unique U.S. Postal Service address,
      P.O.
      Box 4346, Dept. 938, Houston, Texas 77210-4346 (the "Lockbox").
      The
      Debtor will cause its account debtors to remit payment of the Debtor's accounts
      receivable to the Lockbox. The Financial Institution shall have exclusive and
      unrestricted access to, and use of, the Lockbox for purposes of handling such
      remittances. The Financial Institution will collect, open and process for
      deposit into the Deposit Account all mail received in the Lockbox in accordance
      with the procedures set forth on Exhibit
      A
      attached
      hereto.

     

    Section
      3. Subordination
      of Lien; Waiver of Set-Off.
      In the
      event that the Financial Institution has or subsequently obtains by agreement,
      by operation of law or otherwise a security interest in the Deposit Account
      or
      any funds credited thereto, the Financial Institution hereby agrees that such
      security interest shall be subordinate to the security interest of the Secured
      Party. Money and other items credited to the Deposit Account will not be subject
      to deduction, set-off, banker’s lien, or any other right in favor of any person
      other than the Secured Party (except that the Financial Institution may set
      off
      (i) all amounts due to the Financial Institution in respect of customary fees
      and expenses for the routine maintenance and operation of the Deposit Account
      and (ii) the face amount of any checks which have been credited to such Deposit
      Account but are subsequently returned unpaid because of uncollected or
      insufficient funds).

     

    Section
      4. Certain
      Matters Affecting Financial Institution.

     

    (a) Neither
      this Agreement nor the Security Agreement imposes or creates any obligation
      or
      duty of Financial Institution except for those expressly set forth in this
      Agreement, and no implied obligations shall be read into this Agreement against
      Financial Institution.

    

    (b) Financial
      Institution may rely on notices and communications it reasonably believes have
      been given by an authorized representative of Administrative Agent or Debtor,
      and Financial Institution shall have no obligation to review or confirm that
      actions taken pursuant to any such notice in accordance with this Agreement
      comply with any other agreement or document.

    

    (c) If
      Debtor
      becomes subject to a bankruptcy proceeding or if Financial Institution is
      otherwise served with legal process which Financial Institution believes affects
      funds deposited in the Deposit Account, Financial Institution shall have the
      right to place a hold on funds in the Deposit Account until such time as
      Financial Institution receives an appropriate court order or other assurances
      satisfactory to Financial Institution establishing that funds may continue
      to be
      disbursed in accordance with this Agreement. 

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (d) If
      at any
      time Financial Institution, in good faith, is in doubt as to the action it
      should take under this Agreement, Financial Institution shall have the right
      (i)
      to place a hold on funds in the Deposit Account until such time as Financial
      Institution receives an appropriate court order or other assurances satisfactory
      to Financial Institution as to the disposition of funds in the Deposit Account,
      or (ii) to commence an interpleader action in an appropriate court and to take
      no further action except in accordance with joint instructions from
      Administrative Agent and Debtor or in accordance with the final order of the
      court in such action.

    

    (e) All
      Financial Institution's obligations under this Agreement shall be subject to
      applicable laws and regulations. Nothing in this Agreement shall require
      Financial Institution to act in violation of any law or regulation.

    

    (f) Financial
      Institution will not be liable to any party hereunder for any expense, claim,
      cause of action, liability, loss, damage or cost arising out of or relating
      to
      the Deposit Account or this Agreement other than those resulting from Financial
      Institution’s acts or omissions constituting gross negligence or willful
      misconduct, and Debtor agrees to indemnify and hold Financial Institution
      harmless from any such expense, claim, cause of action, liability, loss, damages
      or cost. 

    

    (g)
      Financial Institution shall not be liable for losses or delays resulting from
      computer malfunction, interruption of communication facilities, labor
      difficulties, acts of God, terrorist acts, and other causes beyond Financial
      Institution’s reasonable control. In no event shall Financial Institution be
      liable for any indirect, special, consequential, exemplary or punitive damages
      including, without limitation, lost profits.

     

    Section
      5. Choice
      of Law.
      This
      Agreement and the Deposit Account shall each be governed by the laws of the
      State of New York. Regardless of any provision in any other agreement, for
      purposes of the UCC, New York shall be deemed to be the Financial Institution’s
      jurisdiction (within the meaning of Section 9-304 of the UCC) and the Deposit
      Account shall be governed by the laws of the State of New York.

     

    Section
      6 Interpleader.
      If
      at any
      time Financial Institution receives conflicting claims to or demands regarding
      the Deposit Accounts and reasonably believes it may become subject to liability
      as a result of complying with this Agreement or any instructions from Secured
      Party, Bank may (a) freeze and hold all funds in the Deposit Accounts pending
      resolution of such issues, and/or (b) interplead all Deposit Account funds
      and
      deposits in an action commenced in a court of competent jurisdiction naming
      Debtor, Secured Party, and any competing claimants as defendants. Upon
      interpleading such funds, Financial Institution will be released from all
      further liability under this Agreement and the costs and expenses of Financial
      Institution relating to the interpleader action, including filling fees and
      reasonable attorneys fees, shall be paid by Debtor and, if Debtor fails to
      pay,
      Secured Party shall pay such fees.

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      7. Conflict
      with Other Agreements.
      

     

    (a) In
      the
      event of any conflict between this Agreement (or any portion thereof) and any
      other agreement now existing or hereafter entered into, the terms of this
      Agreement shall prevail;

     

    (b) No
      amendment or modification of this Agreement or waiver of any right hereunder
      shall be binding on any party hereto unless it is in writing and is signed
      by
      all of the parties hereto; and

     

    (c) The
      Financial Institution hereby confirms and agrees that: 

     

    (i) There
      are
      no other agreements entered into between the Financial Institution and the
      Debtor with respect to the Deposit Account; and

     

    (ii) It
      has
      not entered into, and until the termination of this Agreement, will not enter
      into, any agreement with any other person relating the Deposit Account and/or
      any funds credited thereto pursuant to which it has agreed to comply with
      instructions originated by such persons as contemplated by Section 9-104 of
      the
      UCC.

     

    Section
      8. Adverse
      Claims.
      The
      Financial Institution does not know of any liens, claims or encumbrances
      relating to the Deposit Account. If any person asserts any lien, encumbrance
      or
      adverse claim (including any writ, garnishment, judgment, warrant of attachment,
      execution or similar process) against the Deposit Account, the Financial
      Institution will promptly notify the Secured Party and the Debtor thereof.
      

     

    Section
      9. Maintenance
      of Deposit Account.
      In
      addition to, and not in lieu of, the obligation of the Financial Institution
      to
      honor instructions as set forth in Section 2 hereof, the Financial Institution
      agrees to maintain the Deposit Account as follows:

     

    (a) Statements
      and Confirmations.
      Upon
      receipt of a written request by Secured Party, the Financial Institution will
      promptly send copies of all statements, confirmations and other correspondence
      concerning the Deposit Account simultaneously to each of the Debtor and the
      Secured Party at the address for each set forth in Section 11 of this Agreement;
      and

     

    (b) Tax
      Reporting.
      All
      interest, if any, relating to the Deposit Account, shall be reported to the
      Internal Revenue Service and all state and local taxing authorities under the
      name and taxpayer identification number of the Debtor.

     

    Section
      10. Representations,
      Warranties and Covenants of the Financial Institution.
      The
      Financial Institution hereby makes the following representations, warranties
      and
      covenants:

     

    (a) The
      Deposit Account has been established as set forth in Section 1 and such Deposit
      Account will be maintained in the manner set forth herein until termination
      of
      this Agreement; and 

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (b) This
      Agreement is the valid and legally binding obligation of the Financial
      Institution.

     

    Section
      11. Indemnification
      of Financial Institution.
      The
      Debtor and the Secured Party hereby agree that (a) the Financial Institution
      is
      released from any and all liabilities to the Debtor and the Secured Party
      arising from the terms of this Agreement and the compliance of the Financial
      Institution with the terms hereof, except to the extent that such liabilities
      arise from the Financial Institution’s negligence and (b) the Debtor, its
      successors and assigns shall at all times indemnify and save harmless the
      Financial Institution from and against any and all claims, actions and suits
      of
      others arising out of the terms of this Agreement or the compliance of the
      Financial Institution with the terms hereof, except to the extent that such
      arises from the Financial Institution’s negligence, and from and against any and
      all liabilities, losses, damages, costs, charges, counsel fees and other
      expenses of every nature and character arising by reason of the same, until
      the
      termination of this Agreement.

     

    Section
      12. Successors;
      Assignment.
      The
      terms of this Agreement shall be binding upon, and shall inure to the benefit
      of, the parties hereto and their respective corporate successors or heirs and
      personal representatives who obtain such rights solely by operation of law.
      The
      Secured Party may assign its rights hereunder only with the express written
      consent of the Financial Institution and by sending written notice of such
      assignment to the Debtor.

     

    Section
      13. Notices.
      Any
      notice, request or other communication required or permitted to be given under
      this Agreement shall be in writing and deemed to have been properly given when
      delivered in person, or when sent by telecopy or other electronic means and
      electronic confirmation of error free receipt is received or two (2) days after
      being sent by certified or registered United States mail, return receipt
      requested, postage prepaid, addressed to the party at the address set forth
      below.

    

      
        	 	
                Debtor:

              	 	
                Tekoil
                  and Gas Gulf Coast, LLC

              
	 	 	 	
                25045
                  I-45 North, Suite 525

              
	 	 	 	
                The
                  Woodlands, Texas 77380

              
	 	 	 	
                Attention:
                  Mark Western

              
	 	 	 	
                Telecopier:
                  281-364-8007

              
	 	 	 	 
	 	
                Secured
                  Party:

              	 	
                J.
                  Aron & Company

              
	 	 	 	
                85
                  Broad Street

              
	 	 	 	
                New
                  York, New York 10004

              
	 	 	 	
                Attention:
                  Steve Bunkin

              
	 	 	 	
                Telecopier:
                  212-428-3675

              
	 	 	 	 
	 	
                with
                  a copy to:

              	 	
                Goldman
                  Sachs E&P Capital

              
	 	 	 	
                1000
                  Louisiana, Suite 550

              
	 	 	 	
                Houston,
                  Texas 77002

              
	 	 	 	
                Attention:
                  John K. Howie

              
	 	 	 	
                Telecopier:
                  713-658-2603

              

      

    

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	 	
                Financial
                  Institution:

              	 	
                Amegy
                  Bank National Association

              
	 	 	 	
                Five
                  Post Oak Park

              
	 	 	 	
                4400
                  Post Oak Parkway

              
	 	 	 	
                Houston,
                  TX 77027

              
	 	 	 	
                Attention:
                  Mark Serice

              
	 	 	 	
                Telecopier:
                  ___________

              
	 	 	 	 
	 	 	 	
                And

              
	 	 	 	 
	 	 	 	
                Amegy
                  Bank National Association

              
	 	 	 	
                Five
                  Post Oak Park

              
	 	 	 	
                4400
                  Post Oak Parkway

              
	 	 	 	
                Houston,
                  TX 77027

              
	 	 	 	
                Attention:
                  Kacy Karl

              
	 	 	 	
                Telecopier:
                  713-561-0186

              

      

    

     

    Any
      party
      may change its address for notices in the manner set forth above.

    
       

    

    Section
      14. Termination.
      The
      obligations of the Financial Institution to the Secured Party pursuant to this
      Agreement shall continue in effect until the security interest of the Secured
      Party in the Deposit Account has been terminated pursuant to the terms of the
      Security Agreement and the Secured Party has notified the Financial Institution
      of such termination in writing. The Secured Party agrees to provide Notice
      of
      Termination in substantially the form of Exhibit
      B
      hereto
      to the Financial Institution upon the request of the Debtor on or after the
      termination of the Secured Party’s security interest in the Deposit Account
      pursuant to the terms of the Security Agreement. The termination of this
      Agreement shall not terminate the Deposit Account or alter the obligations
      of
      the Financial Institution to the Debtor pursuant to any other agreement with
      respect to the Deposit Account.

     

    Section
      15. Counterparts.
      This
      Agreement may be executed in any number of counterparts, all of which shall
      constitute one and the same instrument, and any party hereto may execute this
      Agreement by signing and delivering one or more counterparts.

     

    [Remainder
      of page intentionally left blank.]

     

    
      BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    IN
      WITNESS WHEREOF, the parties hereto have caused this Blocked Deposit Account
      Control Agreement to be executed as of the date first above written by their
      respective officers thereunto duly authorized.

    
      	 	 	 
	 	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 	 
	 	 
	 	
              By:
                Tekoil & Gas Corporation, its Managing  Member

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Mark
              Western 
	 	
              

              Name:
                Mark Western

              Title:
                CEO and Chairman of the Board of

              Directors

            

    

     

    
      SIGNATURE
        PAGE
        TO
        BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              J.
                ARON & COMPANY,

            
	 	
              as
                Secured Party

            
	 
 	 
 	 
 
	
            	By:  	 /s/
              Colleen Foster 
	 	
              

              Name:
                Colleen Foster

              Title:
                Managing Director

            

    

     

    
      
        SIGNATURE
          PAGE
          TO
          BLOCKED
          DEPOSIT
          ACCOUNT
          CONTROL
          AGREEMENT

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

    

     

    
      	 	 	 
	 	
              AMEGY
                BANK NATIONAL ASSOCIATION

            
	 	
              as
                Financial Institution

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Kenneth R. Batson, III 
	 	
              

              Name:
                Kenneth R. Batson, III

              Title:
                Vice President

            

    

     

    SIGNATURE
      PAGE
      TO
      BLOCKED
      DEPOSIT
      ACCOUNT
      CONTROL
      AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    EXHIBIT
      A

    TO
      BLOCKED DEPOSIT ACCOUNT CONTROL AGREEMENT

    

    EXHIBIT
      A

    

    Financial
      Institution Procedures for Lockbox Management:

    

    (Capitalized
      terms used in this Exhibit
      A
      have the
      same meaning stated in the Agreement to which this Exhibit
      A
      is
      attached.)

    

    1) Mail
      from Lockbox.
      The
      Financial Institution will retrieve mail from the Lockbox from time to time
      in
      accordance with the Financial Institution's regular lockbox collection
      schedules.

    

    2) Inspections
      of Items.
      Items
      contained in the envelopes recovered from the Lockbox will be inspected and
      handled as follows:

    

    
      	
              (a)

            	
              Payees.
                An item not bearing an acceptable payee designation, as set forth
                in the
                specifications, or a reasonable variation thereof, will not be deposited
                in the Deposit Account. If a necessary endorsement of a payee other
                than
                the Debtor is missing, the item will not be deposited into the Deposit
                Account.

            

    

    

    
      	
              (b)

            	
              Dates.
                An item will be deposited into the Deposit Account whether it is
                stale-dated, post dated or does not bear a
                date.

            

    

    

    
      	
              (c)

            	
              Amounts.
                If the written and numeric amounts of an item differ, the written
                amount
                shall control over the numeric amount unless the written amount is
                ambiguous. If the amount of an item cannot be determined from application
                of the preceding sentence, or if the amount is missing altogether,
                the
                item will not be deposited into the Deposit
                Account.

            

    

    

    
      	
              (d)

            	
              Drawer's
                Signatures.
                For an item in which the drawer's signature is missing, the Financial
                Institution will deposit it into the Deposit Account and affix a
                stamp
                requesting the drawee bank or other payor to contact the drawer for
                authority to pay the item.

            

    

    

    
      	
              (e)

            	
              Alterations.
                An item which appears to the Financial Institution to have been materially
                altered will not be deposited into the Deposit
                Account.

            

    

    

    
      	
              (f)

            	
              Other
                Language.
                The Financial Institution will not examine the front and back sides
                of
                items to detect handwritten or typed "paid in full" or similar language.
                Such items will be deposited into the Deposit Account and the Financial
                Institution shall have no liability to the Debtor or the Secured
                Party for
                depositing such items.

            

    

    

    
      	
              (g)

            	
              International
                Payments.
                An item denominated in foreign currency and drawn on a foreign bank
                will
                not be deposited into the Deposit Account but will be submitted for
                collection only. An appropriate advice will be forwarded to the Debtor.
                The Financial Institution shall not be responsible for fluctuation
                in
                exchange rates.

            

    

    

      EXHIBIT
        A
        TO
BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3) Processing
      Procedures.
      Items
      found acceptable for deposit under Section 2 of this Exhibit
      A
      will be
      encoded, photocopied, endorsed and deposited into the Deposit Account. The
      endorsement will be the standard endorsement for lockbox items as used by the
      Financial Institution from time to time, and this endorsement will function
      as
      the endorsement of the payee of the item. In order to maximize daily receipts
      and funds availability, the Financial Institution will make deposits throughout
      the day in anticipation of major check clearing deadlines. The Financial
      Institution will send the following to the Debtor in accordance with the
      Financial Institution's customary and standard practices for maintenance of
      a
      Deposit Account:

     

    
      	(a) 	
              photocopies
                of deposited items and the original accompanying
                papers.

            

      	 	 

      	(b)	
              one
                deposit ticket copy for each deposit.

            

      	 	 

      	
              (c)

            	
              except
                as set forth in Section 2(g) of this Exhibit
                A,
                original items unacceptable for deposit under Section 2 of this
                Exhibit
                A,
                accompanying papers and other miscellaneous written communications
                received through the lockbox.

            

    

    

    4) Microfilm.
      All
      deposited items will be microfilmed in processing sequence for reference
      purposes. The Financial Institution will retain such microfilm for at least
      two
      years and will provide photocopies of deposited items to the Debtor within
      said
      time upon request and payment of the Financial Institution's retrieval and
      photocopying charges.

     

    
      EXHIBIT
        A
        TO
BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    TO
      BLOCKED DEPOSIT ACCOUNT CONTROL AGREEMENT

     

    [Letterhead
      of the Secured Party]

     

    [Date]

     

    [Name
      and
      Address of the Financial Institution]

     

    Attention:

     

    
      	 	
              Re:

            	
              Termination
                of Blocked Deposit Account Control
                Agreement

            

    

     

    You
      are
      hereby notified that the Blocked Deposit Account Control Agreement dated as
      of
      May 11, 2007 among Tekoil and Gas Gulf Coast, LLC, you and the undersigned
      (a
      copy of which is attached) is terminated and you have no further obligations
      to
      the undersigned pursuant to such Agreement. Notwithstanding any previous
      instructions to you, you are hereby instructed to accept all future directions
      with respect to account number(s) __________________from Tekoil and Gas Gulf
      Coast, LLC. This notice terminates any obligations you may have to the
      undersigned with respect to such account, however nothing contained in this
      notice shall alter any obligations which you may otherwise owe to Tekoil and
      Gas
      Gulf Coast, LLC pursuant to any other agreement.

     

    You
      are
      instructed to deliver a copy of this notice by facsimile transmission to Tekoil
      and Gas Gulf Coast, LLC.

     

    
      	 	 	 
	 	
              Very
                truly yours,

            
	 	 
	 	
              J.
                ARON & COMPANY,

            
	 	
              as
                Secured Party

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	 	
              

            
	 	Name: 	 

              

            
	 	Title: 	 

              

            

    

     

    
      EXHIBIT
        B TO
        BLOCKED
        DEPOSIT
        ACCOUNT
        CONTROL
        AGREEMENT

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