Document:

Unassociated Document

    EXHIBIT
      10.4

     

     

    PLEDGE
      AND SECURITY AGREEMENT

     

    dated
      as of September 8, 2006

     

    between

     

    EACH
      OF THE GRANTORS PARTY HERETO

     

    and

     

    J.
      ARON & COMPANY,

     

    as
      the Secured Party

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    TABLE
      OF CONTENTS

     

    
      	 	 	
               Page

            
	
              SECTION
                1 DEFINITIONS

            	 	
              1

            
	
              1.1
                General Definitions

            	 	
              1

            
	
              1.2
                Definitions; Interpretation

            	 	
              7

            
	 	 	 
	
              SECTION
                2 GRANT OF SECURITY

            	 	
              7

            
	
              2.1
                Grant of Security

            	 	
              7

            
	
              2.2
                Certain Limited Exclusions

            	 	
              8

            
	 	 	 
	
              SECTION
                3 SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE

            	 	
              8

            
	
              3.1
                Security for Obligations

            	 	
              8

            
	
              3.2
                Continuing Liability Under Collateral

            	 	
              9

            
	 	 	 
	
              SECTION
                4 REPRESENTATIONS AND WARRANTIES AND COVENANTS

            	 	
              9

            
	
              4.1
                Generally

            	 	
              9

            
	
              4.2
                Investment Related Property; Investment Related Property
                Generally

            	 	
              11

            
	
              4.3
                Pledged Equity Interests

            	 	
              13

            
	
              4.4
                Investment Accounts

            	 	
              15

            
	
              4.5
                Letter of Credit Rights

            	 	
              16

            
	
              4.6
                Commercial Tort Claims

            	 	
              16

            
	 	 	 
	
              SECTION
                5 FURTHER ASSURANCES; ADDITIONAL GRANTORS

            	 	
              16

            
	
              5.1
                [Reserved]

            	 	
              16

            
	
              5.2
                Further Assurances

            	 	
              16

            
	
              5.3
                Additional Grantors

            	 	
              17

            
	 	 	 
	
              SECTION
                6 SECURED PARTY APPOINTED ATTORNEY-IN-FACT

            	 	
              18

            
	
              6.1
                Power of Attorney

            	 	
              18

            
	
              6.2
                No Duty on the Part of Secured Party or Lender Parties

            	 	
              19

            
	
               

            	 	 
	
              SECTION
                7 REMEDIES

            	 	
              19

            
	
              7.1
                Generally

            	 	
              19

            
	
              7.2
                Application of Proceeds

            	 	
              21

            
	
              7.3
                Sales on Credit

            	 	
              21

            
	
              7.4
                Deposit Accounts

            	 	
              21

            
	
              7.5
                Investment Related Property

            	 	
              21

            
	
              7.6
                Intellectual Property

            	 	
              22

            
	
              7.7
                Cash Proceeds

            	 	
              23

            
	 	 	 
	
              SECTION
                8 AGENT

            	 	
              24

            
	 	 	 
	
              SECTION
                9 CONTINUING SECURITY INTEREST; TRANSFER OF LOANS

            	 	
              25

            
	 	 	 
	
              SECTION
                10 STANDARD OF CARE; SECURED PARTY MAY PERFORM

            	 	
              25

            
	 	 	 
	
              SECTION
                11 MISCELLANEOUS

            	 	
              25

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      
        	
                SCHEDULES:

              	
                4.1
                  — General Information

              
	 	
                4.3
                  — Investment Related Property

              
	 	
                4.5
                  — Description of Letters of Credit

              
	 	
                4.6
                  — Commercial Tort Claims

              
	
                 

              	 
	
                EXHIBITS:

              	
                A
—
                  Pledge Supplement

              
	 	
                B
—
                  Deposit Account Control
                  Agreement

              

      

    

     

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

       

    

    PLEDGE
      AND SECURITY AGREEMENT

     

    This
      PLEDGE
      AND SECURITY AGREEMENT,
      dated
      as of September 8, 2006 (this “Agreement”),
      between EACH
      OF THE UNDERSIGNED,
      whether
      as an original signatory hereto or as an Additional Grantor (as herein defined)
      (each, a “Grantor”),
      and
J. ARON
      & COMPANY, as
      administrative agent for the Lender Parties (as herein defined) (in such
      capacity, the “Secured
      Party”).

     

    RECITALS:

     

    WHEREAS,
      reference is made to that certain Credit and Guaranty Agreement, dated as of
      the
      date hereof (as it may be amended, restated, supplemented or otherwise modified
      from time to time, the “Credit
      Agreement”),
      by
      and among Foothills Resources, Inc., a Nevada corporation (“Company”),
      certain Subsidiaries of Company, the lenders party thereto from time to time
      (the “Lenders”),
      J.
      ARON & COMPANY,
      as Lead
      Arranger and Syndication Agent, and Secured Party;

     

    WHEREAS,
      in
      consideration of the extensions of credit and other accommodations of Lenders
      as
      set forth in the Credit Agreement each Grantor has agreed to secure such
      Grantor’s obligations under the Transaction Documents as set forth herein;
      and

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the agreements, provisions and covenants
      herein contained, each Grantor and the Secured Party agree as
      follows:

     

    SECTION
      1  DEFINITIONS

     

    1.1  General
      Definitions

    .
      In this
      Agreement, the following terms shall have the following meanings:

     

    “Account
      Debtor”
      shall
      mean each Person who is obligated on a Receivable or any Supporting Obligation
      related thereto.

     

    “Accounts”
      shall
      mean all “accounts” as defined in Article 9 of the UCC.

     

    “Agreement”
      shall
      have the meaning set forth in the preamble.

     

    “Additional
      Grantors”
      shall
      have the meaning assigned in Section 5.3. 

     

    “Assigned
      Agreements”
      shall
      mean all agreements and contracts to which such Grantor is a party as of the
      date hereof, or to which such Grantor becomes a party after the date hereof,
      including each Material Contract, as each such agreement may be amended,
      supplemented or otherwise modified from time to time.

     

    “Cash
      Proceeds”
      shall
      have the meaning assigned in Section 7.7.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Chattel
      Paper”
      shall
      mean all “chattel paper” as defined in Article 9 of the UCC, including
“electronic chattel paper” or “tangible chattel paper”, as each term is defined
      in Article 9 of the UCC.

     

    “Collateral”
      shall
      have the meaning assigned in Section 2.1.

     

    “Collateral
      Records”
      shall
      mean books, records, ledger cards, files, correspondence, customer lists,
      blueprints, technical specifications, manuals, computer software, computer
      printouts, tapes, disks and related data processing software and similar items
      that at any time evidence or contain information relating to any of the
      Collateral or are otherwise necessary or helpful in the collection thereof
      or
      realization thereupon.

     

    “Collateral
      Support”
      shall
      mean all property (real or personal) assigned, hypothecated or otherwise
      securing any Collateral and shall include any security agreement or other
      agreement granting a lien or security interest in such real or personal
      property.

     

    “Commercial
      Tort Claims”
      shall
      mean all “commercial tort claims” as defined in Article 9 of the UCC,
      including all commercial tort claims listed on Schedule 4.6 (as such schedule
      may be amended or supplemented from time to time).

     

    “Commodities
      Accounts”
      shall
      mean all “commodity accounts” as defined in Article 9 of the UCC.

     

    “Copyright
      Licenses”
      shall
      mean any and all agreements providing for the granting of any right in or to
      Copyrights (whether such Grantor is licensee or licensor
      thereunder).

     

    “Copyrights”
      shall
      mean all United States and foreign copyrights, all mask works fixed in
      semi-conductor chip products (as defined under 17 U.S.C. 901 of the U.S.
      Copyright Act), whether registered or unregistered, now or hereafter in force
      throughout the world, all registrations and applications therefor, all rights
      corresponding thereto throughout the world, all extensions and renewals of
      any
      thereof, the right to sue for past, present and future infringements of any
      of
      the foregoing, and all proceeds of the foregoing, including licenses, royalties,
      income, payments, claims, damages, and proceeds of suit.

     

    “Credit
      Agreement”
      shall
      have the meaning set forth in the recitals.

     

    “Deposit
      Accounts”
      (i)
      shall mean all “deposit accounts” as defined in Article 9 of the UCC and (ii)
      shall include, without limitation, all of the accounts listed on Schedule 4.3
      under the heading “Deposit Accounts” (as such schedule may be amended or
      supplemented from time to time).

     

    “Documents”
      shall
      mean all “documents” as defined in Article 9 of the UCC.

     

    “Equipment”
      shall
      mean: (i) all “equipment” as defined in Article 9 of the UCC, (ii) all
      machinery, manufacturing equipment, data processing equipment, computers, office
      equipment, furnishings, furniture, appliances, fixtures and tools (in each
      case,
      regardless of whether characterized as equipment under the UCC) and (iii) all
      accessions or additions thereto, all parts thereof, whether or not at any time
      of determination incorporated or installed therein or attached thereto, and
      all
      replacements therefor, wherever located, now or hereafter existing, including
      any fixtures.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “General
      Intangibles”
      (i)
      shall mean all “general intangibles” as defined in Article 9 of the UCC,
      including “payment intangibles” also as defined in Article 9 of the UCC and (ii)
      shall include, without limitation, all interest rate or currency protection
      or
      hedging arrangements, all tax refunds, all licenses, permits, concessions and
      authorizations, all Assigned Agreements and all Intellectual Property (in each
      case, regardless of whether characterized as general intangibles under the
      UCC).

     

    “Goods”
      (i)
      shall mean all “goods” as defined in Article 9 of the UCC and (ii) shall
      include, without limitation, all Inventory and Equipment (in each case,
      regardless of whether characterized as goods under the UCC).

     

    “Grantors”
      shall
      have the meaning set forth in the preamble.

     

    “Instruments”
      shall
      mean all “instruments” as defined in Article 9 of the UCC.

     

    “Insurance”
      shall
      mean: (i) all insurance policies covering any or all of the Collateral
      (regardless of whether the Secured Party is the loss payee thereof) and (ii)
      any
      key man life insurance policies.

     

    “Intellectual
      Property”
      shall
      mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the
      Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets,
      and
      the Trade Secret Licenses.

     

    “Inventory”
      shall
      mean: (i) all “inventory” as defined in Article 9 of the UCC and (ii) all goods
      held for sale or lease or to be furnished under contracts of service or so
      leased or furnished, all raw materials, work in process, finished goods, and
      materials used or consumed in the manufacture, packing, shipping, advertising,
      selling, leasing, furnishing or production of such inventory or otherwise used
      or consumed in any Grantor’s business; all goods in which any Grantor has an
      interest in mass or a joint or other interest or right of any kind; and all
      goods which are returned to or repossessed by any Grantor, all computer programs
      embedded in any goods and all accessions thereto and products thereof (in each
      case, regardless of whether characterized as inventory under the
      UCC).

     

    “Investment
      Accounts”
      shall
      mean the Securities Accounts, Commodities Accounts and Deposit
      Accounts.

     

    “Investment
      Related Property”
      shall
      mean: (i) all “investment property” (as such term is defined in Article 9 of the
      UCC) and (ii) all of the following (regardless of whether classified as
      investment property under the UCC): all Pledged Equity Interests, the Investment
      Accounts, and certificates of deposit.

     

    “Lender”
      shall
      have the meaning set forth in the recitals.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Lender
      Parties”
      means
      the Lenders and shall include, without limitation, all former Lenders to the
      extent that any Obligations owing to such Persons were incurred while such
      Persons were Lenders and such Obligations have not been paid or satisfied in
      full. 

     

    “Letter
      of Credit Right”
      shall
      mean “letter-of-credit right” as defined in Article 9 of the UCC.

     

    “Money”
      shall
      mean “money” as defined in the UCC.

     

    “Patent
      Licenses”
      shall
      mean all agreements providing for the granting of any right in or to Patents
      (whether such Grantor is licensee or licensor thereunder).

     

    “Patents”
      shall
      mean all United States and foreign patents and applications for letters patent
      throughout the world, all reissues, divisions, continuations,
      continuations-in-part, extensions, renewals, and reexaminations of any of the
      foregoing, all rights corresponding thereto throughout the world, and all
      proceeds of the foregoing, including licenses, royalties, income, payments,
      claims, damages, and proceeds of suit and the right to sue for past, present
      and
      future infringements of any of the foregoing.

     

    “Payment
      Intangible”
      shall
      have the meaning specified in Article 9 of the UCC.

     

    “Pledge
      Supplement”
      shall
      mean any supplement to this agreement in substantially the form of Exhibit
      A.

     

    “Pledged
      Debt”
      shall
      mean all Indebtedness owed to each Grantor issued by the obligors named
      thereunder, the instruments evidencing such Indebtedness, and all interest,
      cash, instruments and other property or proceeds from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any or
      all
      of such Indebtedness.

     

    “Pledged
      Equity Interests”
      shall
      mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests
      and
      Pledged Trust Interests.

     

    “Pledged
      LLC Interests”
      shall
      mean all interests in any limited liability company, including all limited
      liability company interests listed on Schedule 4.3 under the heading “Pledged
      LLC Interests” (as such schedule may be amended or supplemented from time to
      time) and the certificates, if any, representing such limited liability company
      interests and any interest of such Grantor on the books and records of such
      limited liability company or on the books and records of any securities
      intermediary pertaining to such interest and all dividends, distributions,
      cash,
      warrants, rights, options, instruments, securities and other property or
      proceeds from time to time received, receivable or otherwise distributed in
      respect of or in exchange for any or all of such limited liability company
      interests.

     

    “Pledged
      Partnership Interests”
      shall
      mean all interests in any general partnership, limited partnership, limited
      liability partnership or other partnership, including all partnership interests
      listed on Schedule 4.3 under the heading “Pledged Partnership Interests” (as
      such schedule may be amended or supplemented from time to time) and the
      certificates, if any, representing such partnership interests and any interest
      of such Grantor on the books and records of such partnership or on the books
      and
      records of any securities intermediary pertaining to such interest and all
      dividends, distributions, cash, warrants, rights, options, instruments,
      securities and other property or proceeds from time to time received, receivable
      or otherwise distributed in respect of or in exchange for any or all of such
      partnership interests.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Pledged
      Stock”
      shall
      mean all shares of capital stock owned by such Grantor, including all shares
      of
      capital stock described on Schedule 4.3 under the heading “Pledged Stock” (as
      such schedule may be amended or supplemented from time to time), and the
      certificates, if any, representing such shares and any interest of such Grantor
      in the entries on the books of the issuer of such shares or on the books of
      any
      securities intermediary pertaining to such shares, and all dividends,
      distributions, cash, warrants, rights, options, instruments, securities and
      other property or proceeds from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all of such shares.

     

    “Pledged
      Trust Interests”
      shall
      mean all interests in a Delaware statutory trust or other trust, including
      all
      trust interests listed on Schedule 4.3 under the heading “Pledged Trust
      Interests” (as such schedule may be amended or supplemented from time to time)
      and the certificates, if any, representing such trust interests and any interest
      of such Grantor on the books and records of such trust or on the books and
      records of any securities intermediary pertaining to such interest and all
      dividends, distributions, cash, warrants, rights, options, instruments,
      securities and other property or proceeds from time to time received, receivable
      or otherwise distributed in respect of or in exchange for any or all of such
      trust interests.

     

    “Proceeds”
      shall
      mean: (i) all “proceeds” as defined in Article 9 of the UCC, (ii) payments
      or distributions arising from any Investment Related Property and
      (iii) whatever is receivable or received when Collateral or proceeds are
      sold, exchanged, collected or otherwise disposed of, whether such disposition
      is
      voluntary or involuntary.

     

    “Receivables”
      shall
      mean all rights to payment, whether or not earned by performance, for goods
      or
      other property sold, leased, licensed, assigned or otherwise disposed of, or
      services rendered or to be rendered, including all such rights constituting
      or
      evidenced by any Account, Chattel Paper, Instrument, General Intangible or
      Investment Related Property, together with all of Grantor’s rights, if any, in
      any goods or other property giving rise to such right to payment and all
      Collateral Support and Supporting Obligations related thereto and all
      Receivables Records.

     

    “Receivables
      Records”
      shall
      mean (i) all original copies of all documents, instruments or other
      writings or electronic records or other Records evidencing the Receivables,
      (ii) all books, correspondence, credit or other files, Records, ledger
      sheets or cards, invoices, and other papers relating to Receivables, including
      all tapes, cards, computer tapes, computer discs, computer runs, record keeping
      systems and other papers and documents relating to the Receivables, whether
      in
      the possession or under the control of Grantor or any computer bureau or agent
      from time to time acting for Grantor or otherwise, (iii) all evidences of
      the filing of financing statements and the registration of other instruments
      in
      connection therewith, and amendments, supplements or other modifications
      thereto, notices to other creditors or Lender Parties, and certificates,
      acknowledgments, or other writings, including lien search reports, from filing
      or other registration officers, (iv) all credit information, reports and
      memoranda relating thereto and (v) all other written or nonwritten forms of
      information related in any way to the foregoing or any Receivable.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    “Record”
      shall
      have the meaning specified in Article 9 of the UCC.

     

    “Secured
      Obligations”
      shall
      have the meaning assigned in Section 3.1.

     

    “Secured
      Party”
      shall
      have the meaning set forth in the preamble.

     

    “Securities”
      shall
      mean any stock, shares, partnership interests, voting trust certificates,
      certificates of interest or participation in any profit-sharing agreement or
      arrangement, options, warrants, bonds, debentures, notes, or other evidences
      of
      indebtedness, secured or unsecured, convertible, subordinated or otherwise,
      or
      in general any instruments commonly known as “securities” or any certificates of
      interest, shares or participations in temporary or interim certificates for
      the
      purchase or acquisition of, or any right to subscribe to, purchase or acquire,
      any of the foregoing.

     

    “Securities
      Accounts”
      shall
      mean all “securities accounts” as defined in Article 8 of the
      UCC.

     

    “Supporting
      Obligation”
      shall
      mean all “supporting obligations” as defined in Article 9 of the
      UCC.

     

    “Trade
      Secret Licenses”
      shall
      mean any and all agreements providing for the granting of any right in or to
      Trade Secrets (whether such Grantor is licensee or licensor thereunder).

     

    “Trade
      Secrets”
      shall
      mean all trade secrets and all other confidential or proprietary information
      and
      know-how now or hereafter owned or used in, or contemplated at any time for
      use
      in, the business of such Grantor (all of the foregoing being collectively called
      a “Trade Secret”), whether or not such Trade Secret has been reduced to a
      writing or other tangible form, including all documents and things embodying,
      incorporating, or referring in any way to such Trade Secret, the right to sue
      for past, present and future infringement of any Trade Secret, and all proceeds
      of the foregoing, including licenses, royalties, income, payments, claims,
      damages, and proceeds of suit.

     

    “Trademark
      Licenses”
      shall
      mean any and all agreements providing for the granting of any right in or to
      Trademarks (whether such Grantor is licensee or licensor
      thereunder).

     

    “Trademarks”
      shall
      mean all United States, state and foreign trademarks, trade names, corporate
      names, company names, business names, fictitious business names, internet domain
      names, trade styles, service marks, certification marks, collective marks,
      logos, other source or business identifiers, designs and general intangibles
      of
      a like nature, all registrations and applications for any of the foregoing,
      all
      extensions or renewals of any of the foregoing, all of the goodwill of the
      business connected with the use of and symbolized by the foregoing, the right
      to
      sue for past, present and future infringement or dilution of any of the
      foregoing or for any injury to goodwill, and all proceeds of the foregoing,
      including licenses, royalties, income, payments, claims, damages, and proceeds
      of suit.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “UCC”
      shall
      mean the Uniform Commercial Code as in effect from time to time in the State
      of
      New York or, when the context implies, the Uniform Commercial Code as in effect
      from time to time in any other applicable jurisdiction.

     

    “United
      States”
      shall
      mean the United States of America.

     

    1.2  Definitions;
      Interpretation.
      All
      capitalized terms used herein (including the preamble and recitals hereto)
      and
      not otherwise defined herein shall have the meanings ascribed thereto in the
      Credit Agreement or, if not defined therein, in the UCC. References to
“Sections,” “Exhibits” and “Schedules” shall be to Sections, Exhibits and
      Schedules, as the case may be, of this Agreement unless otherwise specifically
      provided. Section headings in this Agreement are included herein for convenience
      of reference only and shall not constitute a part of this Agreement for any
      other purpose or be given any substantive effect. Any of the terms defined
      herein may, unless the context otherwise requires, be used in the singular
      or
      the plural, depending on the reference. The use herein of the word “include” or
“including”, when following any general statement, term or matter, shall not be
      construed to limit such statement, term or matter to the specific items or
      matters set forth immediately following such word or to similar items or
      matters, whether or not nonlimiting language (such as “without limitation” or
“but not limited to” or words of similar import) is used with reference thereto,
      but rather shall be deemed to refer to all other items or matters that fall
      within the broadest possible scope of such general statement, term or matter.
      If
      any conflict or inconsistency exists between this Agreement and the Credit
      Agreement, the Credit Agreement shall govern. All references herein to
      provisions of the UCC shall include all successor provisions under any
      subsequent version or amendment to any article of the UCC.

     

    SECTION
      2  GRANT
      OF SECURITY

     

    2.1  Grant
      of Security.
      Each
      Grantor hereby grants to the Secured Party a security interest and continuing
      lien on all of such Grantor’s right, title and interest in, to and under all
      personal property of such Grantor including, but not limited to the following,
      in each case whether now owned or existing or hereafter acquired or arising
      and
      wherever located (all of which being hereinafter collectively referred to as
      the
“Collateral”):

     

    (a)  Accounts;

     

    (b)  Chattel
      Paper;

     

    (c)  Documents;

     

    (d)  General
      Intangibles;

     

    (e)  Goods;

     

    (f)  Instruments;

     

    (g)  Insurance;

     

    (h)  Intellectual
      Property;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (i)  Investment
      Related Property;

     

    (j)  Letter
      of
      Credit Rights;

     

    (k)  Money;

     

    (l)  Receivables
      and Receivable Records;

     

    (m)  Commercial
      Tort Claims;

     

    (n)  to
      the
      extent not otherwise included above, all Collateral Records, Collateral Support
      and Supporting Obligations relating to any of the foregoing; and 

     

    (o)  to
      the
      extent not otherwise included above, all Proceeds, products, accessions, rents
      and profits of or in respect of any of the foregoing.

     

    2.2  Certain
      Limited Exclusions.
      Notwithstanding anything herein to the contrary, in no event shall the security
      interest granted under Section 2.1 hereof attach to any lease, license,
      contract, property rights or agreement to which any Grantor is a party or any
      of
      its rights or interests thereunder if and for so long as the grant of such
      security interest shall constitute or result in (i) the abandonment,
      invalidation or unenforceability of any right, title or interest of any Grantor
      therein or (ii) in a breach or termination pursuant to the terms of, or a
      default under, any such lease, license, contract, property rights or agreement
      (other than to the extent that any such term would be rendered ineffective
      pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor
      provision or provisions) of any relevant jurisdiction or any other applicable
      law (including the Bankruptcy Code) or principles of equity), provided however
      that such security interest shall attach immediately at such time as the
      condition causing such abandonment, invalidation or unenforceability shall
      be
      remedied and to the extent severable, shall attach immediately to any portion
      of
      such Lease, license, contract, property rights or agreement that does not result
      in any of the consequences specified in (i) or (ii) above. It is the intention
      of Grantors (other than Company) and Secured Party that this Agreement not
      constitute a fraudulent transfer or fraudulent conveyance under any state or
      federal law that may be applied hereto. Each Grantor (other than Company) and,
      by its acceptance hereof, Secured Party hereby acknowledges and agrees that,
      notwithstanding any other provision of this Agreement: (a) the indebtedness
      secured hereby shall be limited to the maximum amount of indebtedness that
      can
      be incurred or secured by such Grantor without rendering this Agreement subject
      to avoidance under Section 548 of the United States Bankruptcy Code or any
      comparable provisions of any applicable state or federal law, and (b) the
      Collateral pledged by such Grantor hereunder shall be limited to the maximum
      amount of Collateral that can be pledged by such Grantor without rendering
      this
      Agreement subject to avoidance under Section 548 of the United States Bankruptcy
      Code or any comparable provisions of any applicable state or federal
      law.

     

    SECTION
      3  SECURITY
      FOR OBLIGATIONS; GRANTORS REMAIN LIABLE

     

    3.1  Security
      for Obligations.
      This
      Agreement secures, and the Collateral is collateral security for, the prompt
      and
      complete payment or performance in full when due, whether at stated maturity,
      by
      required prepayment, declaration, acceleration, demand or otherwise (including
      the payment of amounts that would become due but for the operation of the
      automatic stay under Section 362(a) of the Bankruptcy Code (and any
      successor provision thereof)), of all Obligations with respect to every Grantor
      (the “Secured
      Obligations”).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    3.2  Continuing
      Liability Under Collateral.
      Notwithstanding anything herein to the contrary, (i) each Grantor shall
      remain liable for all obligations under the Collateral and nothing contained
      herein is intended or shall be a delegation of duties to the Secured Party
      or
      any Lender Party and (ii) each Grantor shall remain liable under each of
      the agreements included in the Collateral, including any agreements relating
      to
      Pledged Partnership Interests or Pledged LLC Interests, to perform all of the
      obligations undertaken by it thereunder all in accordance with and pursuant
      to
      the terms and provisions thereof and neither the Secured Party nor any Lender
      Party shall have any obligation or liability under any of such agreements by
      reason of or arising out of this Agreement or any other document related thereto
      nor shall the Secured Party nor any Lender Party have any obligation to make
      any
      inquiry as to the nature or sufficiency of any payment received by it or have
      any obligation to take any action to collect or enforce any rights under any
      agreement included in the Collateral, including any agreements relating to
      Pledged Partnership Interests or Pledged LLC Interests, and (iii) the
      exercise by the Secured Party of any of its rights hereunder shall not release
      any Grantor from any of its duties or obligations under the contracts and
      agreements included in the Collateral. 

     

    SECTION
      4  REPRESENTATIONS
      AND WARRANTIES AND COVENANTS

     

    4.1  Generally.
      

     

    (a)  Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants that:

     

    (i)
        it
      owns
      the Collateral purported to be owned by it or otherwise has the rights it
      purports to have in each item of Collateral and, as to all Collateral whether
      now existing or hereafter acquired, in each case free and clear of any and
      all
      Liens, rights or claims of all other Persons other than Permitted
      Liens;

     

    (ii)
        it
      has
      indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented
      from time to time): (w) the type of organization of such Grantor, (x) the
      jurisdiction of organization of such Grantor, (y) its organizational
      identification number, if any, and (z) the jurisdiction where the chief
      executive office or its sole place of business is (or the principal residence
      if
      such Grantor is a natural person), and for the one-year period preceding the
      date hereof has been, located.

     

    (iii)
        the
      full
      legal name of such Grantor is as set forth on Schedule 4.1(A) and it has not
      done in the last five (5) years, and does not do, business under any other
      name
      (including any trade-name or fictitious business name) except for those names
      set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented
      from time to time);

     

    (iv)
        except
      as
      provided on Schedule 4.1(C), it has not changed its name, jurisdiction of
      organization, chief executive office or sole place of business (or principal
      residence if such Grantor is a natural person) or its corporate structure in
      any
      way (e.g, by merger, consolidation, change in corporate form or otherwise)
      within the past five (5) years;

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (v)
        it
      has
      not within the last five (5) years become bound (whether as a result of merger
      or otherwise) as debtor under a security agreement entered into by another
      Person, which has not heretofore or contemporaneously herewith been
      terminated;

     

    (vi)
        upon
      the
      filing of all UCC financing statements naming each Grantor as “debtor” and the
      Secured Party as “secured party” and describing the Collateral in the filing
      offices set forth opposite such Grantor’s name on Schedule 4.1(D) hereof (as
      such schedule may be amended or supplemented from time to time) and other
      filings delivered by each Grantor, upon execution of a control agreement in
      the
      form of Exhibit B hereto with respect to any Deposit Account, and upon
      consent of the issuer with respect to Letter of Credit Rights, the security
      interests granted to the Secured Party hereunder constitute valid and perfected
      Liens (subject in the case of priority only to Permitted Liens) on all of the
      Collateral;

     

    (vii)
        all
      actions and consents, including all filings, notices, registrations and
      recordings necessary for the exercise by the Secured Party of the voting or
      other rights provided for in this Agreement or the exercise of remedies in
      respect of the Collateral have been made or obtained;

     

    (viii)
        other
      than the financing statements filed in favor of the Secured Party and financing
      statements perfecting Revolving Indebtedness and First Lien Hedging Obligations,
      no effective UCC financing statement, fixture filing or other instrument similar
      in effect under any applicable law covering all or any part of the Collateral
      is
      on file in any filing or recording office except for financing statements for
      which proper termination statements have been delivered to the Secured Party
      for
      filing;

     

    (ix)
        no
      authorization, approval or other action by, and no notice to or filing with,
      any
      Governmental Authority or regulatory body is required for either (i) the pledge
      or grant by any Grantor of the Liens purported to be created in favor of the
      Secured Party hereunder or (ii) the exercise by Secured Party of any rights
      or
      remedies in respect of any Collateral (whether specifically granted or created
      hereunder or created or provided for by applicable law), except (A) for the
      filings contemplated by clause (vii) above, (B) with respect to voting
      rights, such proxies and other instruments as may be delivered in accordance
      with Section 4.2(c)(3), and (C) as may be required, in connection with
      the disposition of any Investment Related Property, by laws generally affecting
      the offering and sale of Securities;

     

    (x)
        each
      material Receivable (a) is and will be the legal, valid and binding obligation
      of the Account Debtor in respect thereof, representing an unsatisfied obligation
      of such Account Debtor, (b) is enforceable in accordance with its terms,
      (c) is not subject to any setoffs, defenses, taxes, counterclaims (except
      with respect to refunds, returns and allowances in the ordinary course of
      business with respect to damaged merchandise) and (d) is in compliance with
      all applicable laws, whether federal, state, local or foreign;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (xi)
        none
      of
      the Account Debtors in respect of any material Receivable is the government
      of
      the United States, any agency or instrumentality thereof, any state or
      municipality or any foreign sovereign; and

     

    (xii)
        no
      material Receivable is evidenced by, or constitutes, an Instrument or Chattel
      Paper which has not been delivered to, or otherwise subjected to the control
      of,
      the Secured Party.

     

    (b)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that:

     

    (i)
        except
      for the security interest created by this Agreement, it shall not create or
      suffer to exist any Lien upon or with respect to any of the Collateral, except
      Permitted Liens, and such Grantor shall defend the Collateral against all
      Persons at any time claiming any interest therein;

     

    (ii)
        it
      shall
      not produce or use and will use commercially reasonable efforts to prevent
      any
      Collateral to be used, unlawfully or in violation of any provision of this
      Agreement or any applicable statute, regulation or ordinance or any policy
      of
      insurance covering the Collateral;

     

    (iii)
        it
      shall
      not take or permit any action which could impair the Secured Party’s rights in
      the Collateral; and

     

    (iv)
        it
      shall
      keep and maintain at its own cost and expense satisfactory and complete records
      of the Collateral in accordance with its ordinary business
      practices.

     

    4.2  Investment
      Related Property; Investment Related Property Generally. 

     

    (a)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that:

     

    (i)
        in
      the
      event it acquires rights in any Investment Related Property after the date
      hereof, it shall deliver to the Secured Party a completed Pledge Supplement,
      substantially in the form of Exhibit A attached hereto, together with all
      Supplements to Schedules thereto, reflecting such new Investment Related
      Property and all other Investment Related Property. Notwithstanding the
      foregoing, it is understood and agreed that the security interest of the Secured
      Party shall attach to all Investment Related Property immediately upon any
      Grantor’s acquisition of rights therein and shall not be affected by the failure
      of any Grantor to deliver a supplement as required hereby;

     

    (ii)
        except
      as
      provided in the next sentence of this clause (ii), in the event such
      Grantor receives any dividends, interest or distributions arising from any
      Investment Related Property, or any securities or other property upon the
      merger, consolidation, liquidation or dissolution of any issuer of any
      Investment Related Property, then (a) such dividends, interest or distributions
      and securities or other property shall be included in the definition of
      Collateral without further action and (b) such Grantor shall immediately take
      all steps, if any, necessary or advisable to ensure the validity, perfection,
      priority and, if applicable, control of the Secured Party over such Investment
      Related Property (including delivery thereof to the Secured Party) and pending
      any such action such Grantor shall be deemed to hold such dividends, interest,
      distributions, securities or other property in trust for the benefit of the
      Secured Party and shall be segregated from all other property of such Grantor.
      Notwithstanding the foregoing, so long as no Event of Default shall have
      occurred and be continuing, the Secured Party authorizes each Grantor to retain
      all ordinary cash dividends and distributions paid in the normal course of
      the
      business of the issuer and consistent with the past practice of the issuer
      and
      all scheduled payments of interest;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    (iii)
        each
      Grantor consents to the grant by each other Grantor of a Security Interest
      in
      all Investment Related Property to the Secured Party.

     

    (b)  Delivery
      and Control.
      Each
      Grantor agrees that with respect to any Investment Related Property in which
      it
      currently has rights it shall comply with the provisions of this Section on
      or
      before the Closing Date and with respect to any Investment Related Property
      hereafter acquired by such Grantor it shall comply with the provisions of this
      Section immediately upon acquiring rights therein, in each case in form and
      substance satisfactory to the Secured Party. With respect to any Investment
      Related Property that is represented by a certificate or that is an “instrument”
(other than any Investment Related Property credited to a Securities Account)
      it
      shall cause such certificate or instrument to be delivered to the Secured Party,
      indorsed in blank by an “effective indorsement” (as defined in
      Section 8-107 of the UCC), regardless of whether such certificate
      constitutes a “certificated security” for purposes of the UCC. With respect to
      any Investment Related Property that is an “uncertificated security” for
      purposes of the UCC (other than any “uncertificated securities” credited to a
      Securities Account), it shall cause the issuer of such uncertificated security
      to either (i) register the Secured Party as the registered owner thereof on
      the
      books and records of the issuer or (ii) execute an agreement in form and
      substance satisfactory to the Secured Party, pursuant to which such issuer
      agrees to comply with the Secured Party’s instructions with respect to such
      uncertificated security upon and during the continuation of an Event of Default
      without further consent by such Grantor. 

     

    (c)  Voting
      and Distributions.
      So long
      as no Event of Default shall have occurred and be continuing: 

     

    (i)
        except
      as
      otherwise provided under the covenants and agreements relating to Investment
      Related Property in this Agreement or elsewhere herein or in the Credit
      Agreement, each Grantor shall be entitled to exercise or refrain from exercising
      any and all voting and other consensual rights pertaining to the Investment
      Related Property or any part thereof for any purpose not inconsistent with
      the
      terms of this Agreement or the Credit Agreement; provided, no Grantor shall
      exercise or refrain from exercising any such right if the Secured Party shall
      have notified such Grantor that, in the Secured Party’s reasonable judgment,
      such action would have a Material Adverse Effect on the value of the Investment
      Related Property or any part thereof; and provided further, such Grantor shall
      give the Secured Party at least five (5) Business Days prior written notice
      of
      the manner in which it intends to exercise, or the reasons for refraining from
      exercising, any such right; it being understood, however, that neither the
      voting by such Grantor of any Pledged Stock for, or such Grantor’s consent to,
      the election of directors (or similar governing body) at a regularly scheduled
      annual or other meeting of stockholders or with respect to incidental matters
      at
      any such meeting, nor such Grantor’s consent to or approval of any action
      otherwise permitted under this Agreement and the Credit Agreement, shall be
      deemed inconsistent with the terms of this Agreement or the Credit Agreement
      within the meaning of this Section 4.2(c)(i)(1), and no notice of any such
      voting or consent need be given to the Secured Party; and

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (ii)
        the
      Secured Party shall promptly execute and deliver (or cause to be executed and
      delivered) to each Grantor all proxies, and other instruments as such Grantor
      may from time to time reasonably request for the purpose of enabling such
      Grantor to exercise the voting and other consensual rights when and to the
      extent which it is entitled to exercise pursuant to clause (1)
      above;

     

    (iii)
        Upon
      the
      occurrence and during the continuation of an Event of Default: 

     

    (A)  upon
      the
      written notice of Secured Party, all rights of each Grantor to exercise or
      refrain from exercising the voting and other consensual rights which it would
      otherwise be entitled to exercise pursuant hereto shall cease and all such
      rights shall thereupon become vested in the Secured Party who shall thereupon
      have the sole right to exercise such voting and other consensual rights;
      and

     

    (B)  in
      order
      to permit the Secured Party to exercise the voting and other consensual rights
      which it may be entitled to exercise pursuant hereto and to receive all
      dividends and other distributions which it may be entitled to receive hereunder:
      (1) each Grantor shall promptly execute and deliver (or cause to be executed
      and
      delivered) to the Secured Party all proxies, dividend payment orders and other
      instruments as the Secured Party may from time to time reasonably request and
      (2) the each Grantor acknowledges that the Secured Party may utilize the power
      of attorney set forth in Section 6.

     

    4.3  Pledged
      Equity Interests. 

     

    (a)  Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants that:

     

    (i)
        Schedule
      4.3 (as such schedule may be amended or supplemented from time to time) sets
      forth under the headings “Pledged Stock”, “Pledged LLC Interests,” “Pledged
      Partnership Interests” and “Pledged Trust Interests,” respectively, all of the
      Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged
      Trust Interests, if any, owned by any Grantor and such Pledged Equity Interests
      constitute the percentage of issued and outstanding shares of stock, percentage
      of membership interests, percentage of partnership interests or percentage
      of
      beneficial interest of the respective issuers thereof indicated on such
      Schedule;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (ii)
        it
      has
      not acquired any equity interests of another entity or substantially all the
      assets of another entity within the past five (5) years;

     

    (iii)
        it
      is the
      record and beneficial owner of the Pledged Equity Interests free of all Liens,
      rights or claims of other Persons other than Permitted Liens and there are
      no
      outstanding warrants, options or other rights to purchase, or shareholder,
      voting trust or similar agreements outstanding with respect to, or property
      that
      is convertible into, or that requires the issuance or sale of, any Pledged
      Equity Interests;

     

    (iv)
        without
      limiting any other provision hereof, no consent of any Person including any
      other general or limited partner, any other member of a limited liability
      company, any other shareholder or any other trust beneficiary is necessary
      or
      desirable in connection with the creation, perfection or first priority status
      of the security interest of the Secured Party in any Pledged Equity Interests
      or, except any proxies or other instruments that may be delivered in accordance
      with Section 4.2(c)(3), the exercise by the Secured Party of the voting or
      other rights provided for in this Agreement or the exercise of remedies in
      respect thereof; 

     

    (v)
        none
      of
      the Pledged LLC Interests nor Pledged Partnership Interests are or represent
      interests in issuers that are: (a) registered as investment companies, (b)
      are
      dealt in or traded on securities exchanges or markets or (c) have opted to
      be
      treated as securities under the uniform commercial code of any
      jurisdiction;

     

    (b)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that:

     

    (i)
        without
      the prior written consent of the Secured Party, it shall not vote to enable
      or
      take any other action to: (a) amend or terminate any partnership agreement,
      limited liability company agreement, certificate of incorporation, by-laws
      or
      other organizational documents in any way that materially changes the rights
      of
      such Grantor with respect to any Investment Related Property or adversely
      affects the validity, perfection or priority of the Secured Party’s security
      interest, (b) permit any issuer of any Pledged Equity Interest to issue any
      additional stock, partnership interests, limited liability company interests
      or
      other equity interests of any nature or to issue securities convertible into
      or
      granting the right of purchase or exchange for any stock or other equity
      interest of any nature of such issuer unless such equity interest is subject
      to
      this Agreement and is permitted by the Credit Agreement, (c) other than as
      permitted under the Credit Agreement, permit any issuer of any Pledged Equity
      Interest to dispose of all or a material portion of their assets, (d) waive
      any
      material default under or breach of any material terms of organizational
      document relating to the issuer of any Pledged Equity Interest or the terms
      of
      any Pledged Debt, or (e) cause any issuer of any Pledged Partnership Interests
      or Pledged LLC Interests which are not securities (for purposes of the UCC)
      on
      the date hereof to elect or otherwise take any action to cause such Pledged
      Partnership Interests or Pledged LLC Interests to be treated as securities
      for
      purposes of the UCC; provided, however, notwithstanding the foregoing, if any
      issuer of any Pledged Partnership Interests or Pledged LLC Interests takes
      any
      such action in violation of the foregoing in this clause (e), such Grantor
      shall
      promptly notify the Secured Party in writing of any such election or action
      and,
      in such event, shall take all steps necessary or advisable to establish the
      Secured Party’s “control” thereof;

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    (ii)
        it
      shall
      comply with all of its obligations under any partnership agreement or limited
      liability company agreement relating to Pledged Partnership Interests or Pledged
      LLC Interests and shall use commercially reasonable efforts to enforce all
      of
      its rights with respect to any Investment Related Property;

     

    (iii)
        each
      Grantor consents to the grant by each other Grantor of a security interest
      in
      all Investment Related Property to the Secured Party and, without limiting
      the
      foregoing, consents to the transfer of any Pledged Partnership Interest and
      any
      Pledged LLC Interest to the Secured Party or its nominee following an Event
      of
      Default and to the substitution of the Secured Party or its nominee as a partner
      in any partnership or as a member in any limited liability company with all
      the
      rights and powers related thereto; and

     

    (iv)
        it
      shall
      notify the Secured Party of any default under any Pledged Debt that has caused,
      either in any case or in the aggregate, a Material Adverse Effect.

     

    4.4  Investment
      Accounts. 

     

    (a)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that:

     

    (i)
        With
      respect to any Investment Related Property consisting of Securities Accounts
      or
      Securities Entitlements, it shall cause the securities intermediary maintaining
      such Securities Account or Securities Entitlement to enter into an agreement
      substantially in form and substance satisfactory to the Secured Party pursuant
      to which it shall agree to comply with the Secured Party’s “entitlement orders”
without further consent by such Grantor. With respect to any Investment Related
      Property that is a “Deposit Account,” it shall cause the depositary institution
      maintaining such account to enter into an agreement substantially in the form
      of
      Exhibit B hereto (or such other form satisfactory to the Secured Party),
      pursuant to which the Secured Party shall have “control” (within the meaning of
      Section 9-104 of the UCC) over such Deposit Account. 

     

    (ii)
        In
      addition to the foregoing, if any issuer of any Investment Related Property
      is
      located in a jurisdiction outside of the United States, each Grantor shall
      take
      such additional, commercially reasonable actions, including causing the issuer
      to register the pledge on its books and records or making such filings or
      recordings, in each case as may be necessary or advisable, under the laws of
      such issuer’s jurisdiction to insure the validity, perfection and priority of
      the security interest of the Secured Party. Upon the occurrence of an Event
      of
      Default, the Secured Party shall have the right, without notice to any Grantor,
      to transfer all or any portion of the Investment Related Property to its name
      or
      the name of its nominee or agent. In addition, the Secured Party shall have
      the
      right at any time, without notice to any Grantor, to exchange any certificates
      or instruments representing any Investment Related Property for certificates
      or
      instruments of smaller or larger denominations. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.5  Letter
      of Credit Rights. 

     

    (a)  Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants that:

     

    (i)
        all
      material letters of credit to which such Grantor has rights is listed on
      Schedule 4.5 (as such schedule may be amended or supplemented from time to
      time)
      hereto; and

     

    (ii)
        it
      has
      obtained the consent of each issuer of any material letter of credit to the
      assignment of the proceeds of the letter of credit to the Secured
      Party.

     

    (b)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that with respect to any material letter
      of
      credit hereafter arising it shall obtain the consent of the issuer thereof
      to
      the assignment of the proceeds of the letter of credit to the Secured Party
      and
      shall deliver to the Secured Party a completed Pledge Supplement, substantially
      in the form of Exhibit A attached hereto, together with all Supplements to
      Schedules thereto.

     

    4.6  Commercial
      Tort Claims. 

     

    (a)  Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants that Schedule 4.6 (as such schedule
      may
      be amended or supplemented from time to time) sets forth all Commercial Tort
      Claims of each Grantor; and

     

    (b)  Covenants
      and Agreements.
      Each
      Grantor hereby covenants and agrees that with respect to any Commercial Tort
      Claim hereafter arising it shall deliver to the Secured Party a completed Pledge
      Supplement, substantially in the form of Exhibit A attached hereto, together
      with all Supplements to Schedules thereto, identifying such new Commercial
      Tort
      Claims.

     

    
      	SECTION
              5  	
              FURTHER
                ASSURANCES; ADDITIONAL
                GRANTORS

            

    

     

    5.1  [Reserved]. 

     

    5.2  Further
      Assurances. 

     

    (a)  Each
      Grantor agrees that from time to time, at the expense of such Grantor, that
      it
      shall promptly execute and deliver all further instruments and documents, and
      take all further action, that may be necessary or desirable, or that the Secured
      Party may reasonably request, in order to create and/or maintain the validity,
      perfection or priority of and protect any security interest granted or purported
      to be granted hereby or to enable the Secured Party to exercise and enforce
      its
      rights and remedies hereunder with respect to any Collateral. Without limiting
      the generality of the foregoing, each Grantor shall:

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

    (i)
        file
      such
      financing or continuation statements, or amendments thereto, and execute and
      deliver such other agreements, instruments, endorsements, powers of attorney
      or
      notices, as may be necessary or desirable, or as the Secured Party may
      reasonably request, in order to perfect and preserve the security interests
      granted or purported to be granted hereby;

     

    (ii)
        take
      all
      actions necessary to ensure the recordation of appropriate evidence of the
      liens
      and security interest granted hereunder in the Intellectual Property with any
      intellectual property registry in which said Intellectual Property is registered
      or in which an application for registration is pending, including the United
      States Patent and Trademark Office, the United States Copyright Office, the
      various Secretaries of State, and the foreign counterparts on any of the
      foregoing;

     

    (iii)
        at
      any
      reasonable time, upon request by the Secured Party, allow inspection of the
      Collateral by the Secured Party, or persons designated by the Secured Party;
      and

     

    (iv)
        at
      the
      Secured Party’s request, appear in and defend any action or proceeding that may
      affect such Grantor’s title to or the Secured Party’s security interest in all
      or any part of the Collateral. 

     

    (b)  Each
      Grantor hereby authorizes the Secured Party to file a Record or Records,
      including financing or continuation statements, and amendments thereto, in
      any
      jurisdictions and with any filing offices as the Secured Party may determine,
      in
      its sole discretion, are necessary or advisable to perfect the security interest
      granted to the Secured Party herein. Such financing statements may describe
      the
      Collateral in the same manner as described herein or may contain an indication
      or description of collateral that describes such property in any other manner
      as
      the Secured Party may determine, in its sole discretion, is necessary, advisable
      or prudent to ensure the perfection of the security interest in the Collateral
      granted to the Secured Party herein, including describing such property as
“all
      assets” or “all personal property, whether now owned or hereafter acquired.”
Each Grantor shall furnish to the Secured Party from time to time statements
      and
      schedules further identifying and describing the Collateral and such other
      reports in connection with the Collateral as the Secured Party may reasonably
      request, all in reasonable detail.

     

    5.3  Additional
      Grantors.
      From
      time to time subsequent to the date hereof, additional Persons may become
      parties hereto as additional Grantors (each, an “Additional
      Grantor”),
      by
      executing a Counterpart Agreement. Upon delivery of any such counterpart
      agreement to the Secured Party, notice of which is hereby waived by Grantors,
      each Additional Grantor shall be a Grantor and shall be as fully a party hereto
      as if Additional Grantor were an original signatory hereto. Each Grantor
      expressly agrees that its obligations arising hereunder shall not be affected
      or
      diminished by the addition or release of any other Grantor hereunder, nor by
      any
      election of Secured Party not to cause any Subsidiary of Company to become
      an
      Additional Grantor hereunder. This Agreement shall be fully effective as to
      any
      Grantor that is or becomes a party hereto regardless of whether any other Person
      becomes or fails to become or ceases to be a Grantor hereunder.

     

    
      
        
        

      

      
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    SECTION
      6  SECURED
      PARTY APPOINTED ATTORNEY-IN-FACT

     

    6.1  Power
      of Attorney

    .
      Each
      Grantor hereby irrevocably appoints the Secured Party (such appointment being
      coupled with an interest) as such Grantor’s attorney-in-fact, with full
      authority in the place and stead of such Grantor and in the name of such
      Grantor, the Secured Party or otherwise, from time to time in the Secured
      Party’s discretion to take any action and to execute any instrument that the
      Secured Party may deem reasonably necessary or advisable to accomplish the
      purposes of this Agreement, including the following: 

     

    (a)  upon
      the
      occurrence and during the continuance of any Event of Default, to obtain and
      adjust insurance required to be maintained by such Grantor or paid to the
      Secured Party pursuant to the Credit Agreement; 

     

    (b)  upon
      the
      occurrence and during the continuance of any Event of Default, to ask for,
      demand, collect, sue for, recover, compound, receive and give acquittance and
      receipts for moneys due and to become due under or in respect of any of the
      Collateral; 

     

    (c)  upon
      the
      occurrence and during the continuance of any Event of Default, to receive,
      endorse and collect any drafts or other instruments, documents and chattel
      paper
      in connection with clause (b) above; 

     

    (d)  upon
      the
      occurrence and during the continuance of any Event of Default, to file any
      claims or take any action or institute any proceedings that the Secured Party
      may deem necessary or desirable for the collection of any of the Collateral
      or
      otherwise to enforce the rights of the Secured Party with respect to any of
      the
      Collateral; 

     

    (e)  to
      prepare and file any UCC financing statements against such Grantor as
      debtor;

     

    (f)  to
      prepare, sign, and file for recordation in any intellectual property registry,
      appropriate evidence of the lien and security interest granted herein in the
      Intellectual Property in the name of such Grantor as assignor;

     

    (g)  to
      take
      or cause to be taken all actions necessary to perform or comply or cause
      performance or compliance with the terms of this Agreement, including access
      to
      pay or discharge taxes or Liens (other than Permitted Liens) levied or placed
      upon or threatened against the Collateral (except to the extent such taxes
      or
      liens are being contested by any Grantor in good faith by appropriate
      proceedings and for which adequate reserves have been established in accordance
      with GAAP), the legality or validity thereof and the amounts necessary to
      discharge the same to be determined by the Secured Party in its sole discretion,
      any such payments made by the Secured Party to become obligations of such
      Grantor to the Secured Party, due and payable immediately without demand;

     

    (h)  upon
      the
      occurrence and during the continuance of any Event of Default, generally to
      sell, transfer, pledge, make any agreement with respect to or otherwise deal
      with any of the Collateral as fully and completely as though the Secured Party
      were the absolute owner thereof for all purposes; and 

     

    
      
        
        

      

      
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    (i)  to
      do, at
      the Secured Party’s option and such Grantor’s expense, at any time or from time
      to time, all acts and things that the Secured Party deems reasonably necessary
      to protect, preserve or realize upon the Collateral and the Secured Party’s
      security interest therein in order to effect the intent of this Agreement,
      all
      as fully and effectively as such Grantor might do.

     

    6.2  No
      Duty on the Part of Secured Party or Lender Parties.
      The
      powers conferred on the Secured Party hereunder are solely to protect the
      interests of the Lender Parties in the Collateral and shall not impose any
      duty
      upon the Secured Party or any Lender Party to exercise any such powers. The
      Secured Party and the Lender Parties shall be accountable only for amounts
      that
      they actually receive as a result of the exercise of such powers, and neither
      they nor any of their officers, directors, employees or agents shall be
      responsible to any Grantor for any act or failure to act hereunder, except
      for
      their own gross negligence or willful misconduct.

     

    SECTION
      7  REMEDIES

     

    7.1  Generally.
      

     

    (a)  If
      any
      Event of Default shall have occurred and be continuing, the Secured Party may
      exercise in respect of the Collateral, in addition to all other rights and
      remedies provided for herein or otherwise available to it at law or in equity,
      all the rights and remedies of the Secured Party on default under the UCC
      (whether or not the UCC applies to the affected Collateral) to collect, enforce
      or satisfy any Secured Obligations then owing, whether by acceleration or
      otherwise, and also may pursue any of the following separately, successively
      or
      simultaneously:

     

    (i)
        require
      any Grantor to, and each Grantor hereby agrees that it shall at its expense
      and
      promptly upon request of the Secured Party forthwith, assemble all or part
      of
      the Collateral as directed by the Secured Party and make it available to the
      Secured Party at a place to be designated by the Secured Party that is
      reasonably convenient to both parties; 

     

    (ii)
        enter
      onto the property where any Collateral is located and take possession thereof
      with or without judicial process;

     

    (iii)
        prior
      to
      the disposition of the Collateral, store, process, repair or recondition the
      Collateral or otherwise prepare the Collateral for disposition in any manner
      to
      the extent the Secured Party deems appropriate; and

     

    (iv)
        without
      notice except as specified below or under the UCC, sell, assign, lease, license
      (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral
      or any part thereof in one or more parcels at public or private sale, at any
      of
      the Secured Party’s offices or elsewhere, for cash, on credit or for future
      delivery, at such time or times and at such price or prices and upon such other
      terms as the Secured Party may deem commercially reasonable.

     

    
      
        
        

      

      
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    (b)  The
      Secured Party or any Lender Party may be the purchaser of any or all of the
      Collateral at any public or private (to the extent to portion of the Collateral
      being privately sold is of a kind that is customarily sold on a recognized
      market or the subject of widely distributed standard price quotations) sale
      in
      accordance with the UCC and the Secured Party, as collateral agent for and
      representative of the Lender Parties, shall be entitled, for the purpose of
      bidding and making settlement or payment of the purchase price for all or any
      portion of the Collateral sold at any such sale made in accordance with the
      UCC,
      to use and apply any of the Secured Obligations as a credit on account of the
      purchase price for any Collateral payable by the Secured Party at such sale.
      Each purchaser at any such sale shall hold the property sold absolutely free
      from any claim or right on the part of any Grantor, and each Grantor hereby
      waives (to the extent permitted by applicable law) all rights of redemption,
      stay and/or appraisal which it now has or may at any time in the future have
      under any rule of law or statute now existing or hereafter enacted. Each Grantor
      agrees that, to the extent notice of sale shall be required by law, at least
      ten
      (10) days notice to such Grantor of the time and place of any public sale or
      the
      time after which any private sale is to be made shall constitute reasonable
      notification. The Secured Party shall not be obligated to make any sale of
      Collateral regardless of notice of sale having been given. The Secured Party
      may
      adjourn any public or private sale from time to time by announcement at the
      time
      and place fixed therefor, and such sale may, without further notice, be made
      at
      the time and place to which it was so adjourned. Each Grantor agrees that it
      would not be commercially unreasonable for the Secured Party to dispose of
      the
      Collateral or any portion thereof by using Internet sites that provide for
      the
      auction of assets of the types included in the Collateral or that have the
      reasonable capability of doing so, or that match buyers and sellers of assets.
      Each Grantor hereby waives any claims against the Secured Party arising by
      reason of the fact that the price at which any Collateral may have been sold
      at
      such a private sale was less than the price which might have been obtained
      at a
      public sale, even if the Secured Party accepts the first offer received and
      does
      not offer such Collateral to more than one offeree. If the proceeds of any
      sale
      or other disposition of the Collateral are insufficient to pay all the Secured
      Obligations, Grantors shall be liable for the deficiency and the fees of any
      attorneys employed by the Secured Party to collect such deficiency. Each Grantor
      further agrees that a breach of any of the covenants contained in this Section
      will cause irreparable injury to the Secured Party, that the Secured Party
      has
      no adequate remedy at law in respect of such breach and, as a consequence,
      that
      each and every covenant contained in this Section shall be specifically
      enforceable against such Grantor, and such Grantor hereby waives and agrees
      not
      to assert any defenses against an action for specific performance of such
      covenants except for a defense that no default has occurred giving rise to
      the
      Secured Obligations becoming due and payable prior to their stated maturities.
      Nothing in this Section shall in any way alter the rights of the Secured Party
      hereunder. 

     

    (c)  The
      Secured Party may sell the Collateral without giving any warranties as to the
      Collateral. The Secured Party may specifically disclaim or modify any warranties
      of title or the like. This procedure will not be considered to adversely effect
      the commercial reasonableness of any sale of the Collateral.

     

    (d)  The
      Secured Party shall have no obligation to marshall any of the Collateral.

     

    
      
        
        

      

      
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    7.2  Application
      of Proceeds.
      Except
      as expressly provided elsewhere in this Agreement, all proceeds received by
      the
      Secured Party in respect of any sale, any collection from, or other realization
      upon all or any part of the Collateral shall be applied in full or in part
      by
      the Secured Party against, the Secured Obligations in the following order of
      priority: first, to the payment of all costs and expenses of such sale,
      collection or other realization, including reasonable compensation to the
      Secured Party and its agents and counsel, and all other expenses, liabilities
      and advances made or incurred by the Secured Party in connection therewith,
      and
      all amounts for which the Secured Party is entitled to indemnification hereunder
      (in its capacity as the Secured Party and not as a Lender) and all advances
      made
      by the Secured Party hereunder for the account of the applicable Grantor, and
      to
      the payment of all costs and expenses paid or incurred by the Secured Party
      in
      connection with the exercise of any right or remedy hereunder or under the
      Credit Agreement, all in accordance with the terms hereof or thereof; second,
      to
      the extent of any excess of such proceeds, to the payment of all other Secured
      Obligations for the ratable benefit of the Lenders; and third, to the extent
      of
      any excess of such proceeds, to the payment to or upon the order of such Grantor
      or to whosoever may be lawfully entitled to receive the same or as a court
      of
      competent jurisdiction may direct.

     

    7.3  Sales
      on Credit.
      If
      Secured Party sells any of the Collateral upon credit, Grantor will be credited
      only with payments actually made by purchaser and received by Secured Party
      and
      applied to indebtedness of the Purchaser. In the event the purchaser fails
      to
      pay for the Collateral, Secured Party may resell the Collateral and Grantor
      shall be credited with proceeds of the sale.

     

    7.4  Deposit
      Accounts.
      If any
      Event of Default shall have occurred and be continuing, the Secured Party may
      apply the balance from any Deposit Account or instruct the bank at which any
      Deposit Account is maintained to pay the balance of any Deposit Account to
      or
      for the benefit of the Secured Party.

     

    7.5  Investment
      Related Property.
      Each
      Grantor recognizes that, by reason of certain prohibitions contained in the
      Securities Act and applicable state securities laws, the Secured Party may
      be
      compelled, with respect to any sale of all or any part of the Investment Related
      Property conducted without prior registration or qualification of such
      Investment Related Property under the Securities Act and/or such state
      securities laws, to limit purchasers to those who will agree, among other
      things, to acquire the Investment Related Property for their own account, for
      investment and not with a view to the distribution or resale thereof. Each
      Grantor acknowledges that any such private sale may be at prices and on terms
      less favorable than those obtainable through a public sale without such
      restrictions (including a public offering made pursuant to a registration
      statement under the Securities Act) and, notwithstanding such circumstances,
      each Grantor agrees that any such private sale shall be deemed to have been
      made
      in a commercially reasonable manner and that the Secured Party shall have no
      obligation to engage in public sales and no obligation to delay the sale of
      any
      Investment Related Property for the period of time necessary to permit the
      issuer thereof to register it for a form of public sale requiring registration
      under the Securities Act or under applicable state securities laws, even if
      such
      issuer would, or should, agree to so register it. If the Secured Party
      determines to exercise its right to sell any or all of the Investment Related
      Property, upon written request, each Grantor shall and shall cause each issuer
      of any Pledged Stock to be sold hereunder, each partnership and each limited
      liability company from time to time to furnish to the Secured Party all such
      information as the Secured Party may request in order to determine the number
      and nature of interest, shares or other instruments included in the Investment
      Related Property which may be sold by the Secured Party in exempt transactions
      under the Securities Act and the rules and regulations of the Securities and
      Exchange Commission thereunder, as the same are from time to time in
      effect.

     

    
      
        
        

      

      
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    7.6  Intellectual
      Property.
      

     

    (a)  Anything
      contained herein to the contrary notwithstanding, upon the occurrence and during
      the continuation of an Event of Default: 

     

    (i)
        the
      Secured Party shall have the right (but not the obligation) to bring suit or
      otherwise commence any action or proceeding in the name of any Grantor, the
      Secured Party or otherwise, in the Secured Party’s sole discretion, to enforce
      any Intellectual Property, in which event such Grantor shall, at the request
      of
      the Secured Party, do any and all lawful acts and execute any and all documents
      required by the Secured Party in aid of such enforcement and such Grantor shall
      promptly, upon demand, reimburse and indemnify the Secured Party as provided
      in
      Section 10 of the Credit Agreement in connection with the exercise of its rights
      under this Section, and, to the extent that the Secured Party shall elect not
      to
      bring suit to enforce any Intellectual Property as provided in this Section,
      each Grantor agrees to use all reasonable measures, whether by action, suit,
      proceeding or otherwise, to prevent the infringement of any of the Intellectual
      Property by others and for that purpose agrees to diligently maintain any
      action, suit or proceeding against any Person so infringing as shall be
      necessary to prevent such infringement;

     

    (ii)
        upon
      written demand from the Secured Party, each Grantor shall grant, assign, convey
      or otherwise transfer to the Secured Party an absolute assignment of all of
      such
      Grantor’s right, title and interest in and to the Intellectual Property and
      shall execute and deliver to the Secured Party such documents as are necessary
      or appropriate to carry out the intent and purposes of this Agreement;

     

    (iii)
        each
      Grantor agrees that such an assignment and/or recording shall be applied to
      reduce the Secured Obligations outstanding only to the extent that the Secured
      Party (or any Lender Party) receives Cash Proceeds in respect of the sale of,
      or
      other realization upon, the Intellectual Property; 

     

    (iv)
        within
      five (5) Business Days after written notice from the Secured Party, each Grantor
      shall make available to the Secured Party, to the extent within such Grantor’s
      power and authority, such personnel in such Grantor’s employ on the date of such
      Event of Default as the Secured Party may reasonably designate, by name, title
      or job responsibility, to permit such Grantor to continue, directly or
      indirectly, to produce, advertise and sell the products and services sold or
      delivered by such Grantor under or in connection with the Trademarks, Trademark
      Licenses, such persons to be available to perform their prior functions on
      the
      Secured Party’s behalf and to be compensated by the Secured Party at such
      Grantor’s expense on a per diem, pro-rata basis consistent with the salary and
      benefit structure applicable to each as of the date of such Event of Default;
      and

     

    (v)
        the
      Secured Party shall have the right to notify, or require each Grantor to notify,
      any obligors with respect to amounts due or to become due to such Grantor in
      respect of the Intellectual Property, of the existence of the security interest
      created herein, to direct such obligors to make payment of all such amounts
      directly to the Secured Party, and, upon such notification and at the expense
      of
      such Grantor, to enforce collection of any such amounts and to adjust, settle
      or
      compromise the amount or payment thereof, in the same manner and to the same
      extent as such Grantor might have done;

     

    
      
        
        

      

      
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    (A)  all
      amounts and proceeds (including checks and other instruments) received by
      Grantor in respect of amounts due to such Grantor in respect of the Collateral
      or any portion thereof shall be received in trust for the benefit of the Secured
      Party hereunder, shall be segregated from other funds of such Grantor and shall
      be forthwith paid over or delivered to the Secured Party in the same form as
      so
      received (with any necessary endorsement) to be held as cash Collateral and
      applied as provided by Section 7.7 hereof; and

     

    (B)  Grantor
      shall not adjust, settle or compromise the amount or payment of any such amount
      or release wholly or partly any obligor with respect thereto or allow any credit
      or discount thereon.

     

    (b)  If
      (i) an
      Event of Default shall have occurred and, by reason of cure, waiver,
      modification, amendment or otherwise, no longer be continuing, (ii) no other
      Event of Default shall have occurred and be continuing, (iii) an assignment
      or
      other transfer to the Secured Party of any rights, title and interests in and
      to
      the Intellectual Property shall have been previously made and shall have become
      absolute and effective, and (iv) the Secured Obligations shall not have become
      immediately due and payable, upon the written request of any Grantor, the
      Secured Party shall promptly execute and deliver to such Grantor, at such
      Grantor’s sole cost and expense, such assignments or other transfer as may be
      necessary to reassign to such Grantor any such rights, title and interests
      as
      may have been assigned to the Secured Party as aforesaid, subject to any
      disposition thereof that may have been made by the Secured Party; provided,
      after giving effect to such reassignment, the Secured Party’s security interest
      granted pursuant hereto, as well as all other rights and remedies of the Secured
      Party granted hereunder, shall continue to be in full force and effect; and
      provided further, the rights, title and interests so reassigned shall be free
      and clear of any Liens granted by or on behalf of the Secured Party and the
      Lender Parties.

     

    (c)  Solely
      for the purpose of enabling the Secured Party to exercise rights and remedies
      under this Section 7.6 and at such time as the Secured Party shall be lawfully
      entitled to exercise such rights and remedies, each Grantor hereby grants to
      the
      Secured Party, to the extent it has the right to do so, an irrevocable,
      nonexclusive license (exercisable without payment of royalty or other
      compensation to such Grantor), subject, in the case of Trademarks, to sufficient
      rights to quality control and inspection in favor of such Grantor to avoid
      the
      risk of invalidation of said Trademarks, to use, operate under, license, or
      sublicense any Intellectual Property now owned or hereafter acquired by such
      Grantor, and wherever the same may be located.

     

    7.7  Cash
      Proceeds.
      All
      proceeds of any Collateral received by any Grantor consisting of cash, checks
      and other near-cash items (collectively, “Cash
      Proceeds”)
      shall
      be held by such Grantor in trust for the Secured Party and shall be applied
      and
      paid as provided in Sections 2.10 and 2.11 of the Credit Agreement. Any Cash
      Proceeds received by the Secured Party (whether from a Grantor or otherwise):
      (i) if no Event of Default shall have occurred and be continuing, shall be
      applied and paid as provided in Sections 2.10 and 2.11 of the Credit Agreement
      and (ii) if an Event of Default shall have occurred and be continuing, may,
      in
      the sole discretion of the Secured Party, (A) be held by the Secured Party
      for
      the ratable benefit of the Lender Parties, as collateral security for the
      Secured Obligations (whether matured or unmatured) and/or (B) then or at any
      time thereafter may be applied by the Secured Party against the Secured
      Obligations then due and owing. 

     

    
      
        
        

      

      
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    SECTION
      8  AGENT

     

    The
      Secured Party has been appointed to act as secured party hereunder by Lenders
      and, by their acceptance of the benefits hereof, the other Lender Parties.
      The
      Secured Party shall be obligated, and shall have the right hereunder, to make
      demands, to give notices, to exercise or refrain from exercising any rights,
      and
      to take or refrain from taking any action (including the release or substitution
      of Collateral), solely in accordance with this Agreement and the Credit
      Agreement. In furtherance of the foregoing provisions of this Section, each
      Lender Party, by its acceptance of the benefits hereof, agrees that it shall
      have no right individually to realize upon any of the Collateral hereunder,
      it
      being understood and agreed by such Lender Party that all rights and remedies
      hereunder may be exercised solely by the Secured Party for the benefit of
      Lenders in accordance with the terms of this Section. Secured Party may resign
      at any time by giving thirty (30) days’ prior written notice thereof to Lenders
      and the Grantors, and Secured Party may be removed at any time with or without
      cause by an instrument or concurrent instruments in writing delivered to the
      Grantors and Secured Party signed by the Required Lenders. Upon any such notice
      of resignation or any such removal, Required Lenders shall have the right,
      upon
      five (5) Business Days’ notice to the Secured Party, following receipt of the
      Grantors’ consent (which shall not be unreasonable withheld or delayed and which
      shall not be required while an Event of Default exists), to appoint a successor
      Secured Party. Upon the acceptance of any appointment as Secured Party hereunder
      by a successor Secured Party, that successor Secured Party under this Agreement.
      Upon the acceptance of any appointment as Administrative Agent under the terms
      of the Credit Agreement by a successor Administrative Agent, that successor
      Administrative Agent shall thereby also be deemed the successor Secured Party
      and such successor Secured Party shall thereupon succeed to and become vested
      with all the rights, powers, privileges and duties of the retiring or removed
      Secured Party under this Agreement, and the retiring or removed Secured Party
      under this Agreement shall promptly (i) transfer to such successor Secured
      Party all sums, Securities and other items of Collateral held hereunder,
      together with all records and other documents necessary or appropriate in
      connection with the performance of the duties of the successor Secured Party
      under this Agreement, and (ii) execute and deliver to such successor
      Secured Party such amendments to financing statements, and take such other
      actions, as may be necessary or appropriate in connection with the assignment
      to
      such successor Secured Party of the security interests created hereunder,
      whereupon such retiring or removed Secured Party shall be discharged from its
      duties and obligations under this Agreement. After any retiring or removed
      Secured Party’s resignation or removal hereunder as the Secured Party, the
      provisions of this Agreement shall inure to its benefit as to any actions taken
      or omitted to be taken by it under this Agreement while it was the Secured
      Party
      hereunder.

     

    
      
        
        

      

      
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    SECTION
      9  CONTINUING
      SECURITY INTEREST; TRANSFER OF LOANS

     

    This
      Agreement shall create a continuing security interest in the Collateral and
      shall remain in full force and effect until the payment in full of all Secured
      Obligations, the cancellation or termination of the Commitments, be binding
      upon
      each Grantor, its successors and assigns, and inure, together with the rights
      and remedies of the Secured Party hereunder, to the benefit of the Secured
      Party
      and its successors, transferees and assigns. Without limiting the generality
      of
      the foregoing, but subject to the terms of the Credit Agreement, any Lender
      may
      assign or otherwise transfer any Loans held by it to any other Person, and
      such
      other Person shall thereupon become vested with all the benefits in respect
      thereof granted to Lenders herein or otherwise. Upon the payment in full of
      all
      Secured Obligations, the cancellation or termination of the Commitments, the
      security interest granted hereby shall terminate hereunder and of record and
      all
      rights to the Collateral shall revert to Grantors. Upon any such termination
      the
      Secured Party shall, at Grantors’ expense, execute and deliver to Grantors such
      documents as Grantors shall reasonably request to evidence such termination.
      

     

    SECTION
      10  STANDARD
      OF CARE; SECURED PARTY MAY PERFORM

     

    Except
      for the exercise of reasonable care in the custody of any Collateral in its
      possession and the accounting for moneys actually received by it hereunder,
      the
      Secured Party shall have no duty as to any Collateral or as to the taking of
      any
      necessary steps to preserve rights against prior parties or any other rights
      pertaining to any Collateral. The Secured Party shall be deemed to have
      exercised reasonable care in the custody and preservation of Collateral in
      its
      possession if such Collateral is accorded treatment substantially equal to
      that
      which the Secured Party accords its own property. Neither the Secured Party
      nor
      any of its directors, officers, employees or agents shall be liable for failure
      to demand, collect or realize upon all or any part of the Collateral or for
      any
      delay in doing so or shall be under any obligation to sell or otherwise dispose
      of any Collateral upon the request of any Grantor or otherwise. If any Grantor
      fails to perform any agreement contained herein, the Secured Party may itself
      perform, or cause performance of, such agreement, and the expenses of the
      Secured Party incurred in connection therewith shall be payable by each Grantor
      under Section 10.2 of the Credit Agreement.

     

    SECTION
      11  MISCELLANEOUS

     

    Any
      notice required or permitted to be given under this Agreement shall be given
      in
      accordance with Section 10.1 of the Credit Agreement. No failure or delay on
      the
      part of the Secured Party in the exercise of any power, right or privilege
      hereunder or under any other Transaction Document shall impair such power,
      right
      or privilege or be construed to be a waiver of any default or acquiescence
      therein, nor shall any single or partial exercise of any such power, right
      or
      privilege preclude other or further exercise thereof or of any other power,
      right or privilege. All rights and remedies existing under this Agreement and
      the other Transaction Documents are cumulative to, and not exclusive of, any
      rights or remedies otherwise available. In case any provision in or obligation
      under this Agreement shall be invalid, illegal or unenforceable in any
      jurisdiction, the validity, legality and enforceability of the remaining
      provisions or obligations, or of such provision or obligation in any other
      jurisdiction, shall not in any way be affected or impaired thereby. All
      covenants hereunder shall be given independent effect so that if a particular
      action or condition is not permitted by any of such covenants, the fact that
      it
      would be permitted by an exception to, or would otherwise be within the
      limitations of, another covenant shall not avoid the occurrence of a Default
      or
      an Event of Default if such action is taken or condition exists. This Agreement
      shall be binding upon and inure to the benefit of the Secured Party and Grantors
      and their respective successors and assigns. No Grantor shall, without the
      prior
      written consent of the Secured Party given in accordance with the Credit
      Agreement, assign any right, duty or obligation hereunder. This Agreement and
      the other Transaction Documents embody the entire agreement and understanding
      between Grantors and the Secured Party and supersede all prior agreements and
      understandings between such parties relating to the subject matter hereof and
      thereof. Accordingly, the Transaction Documents 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. This Agreement
      may
      be executed in one or more counterparts and by different parties hereto in
      separate counterparts, each of which when so executed and delivered shall be
      deemed an original, but all such counterparts together shall constitute but
      one
      and the same instrument; signature pages may be detached from multiple separate
      counterparts and attached to a single counterpart so that all signature pages
      are physically attached to the same document.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

       

    

    THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
      GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW
      PROVISIONS.

     

    NOTWITHSTANDING
      ANYTHING HEREIN TO THE CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO
      THE
      SECURED PARTY PURSUANT TO THIS AGREEMENT ARE SUBJECT TO THE PROVISIONS OF THE
      INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF
      THE
      INTERCREDITOR AGREEMENT AND THIS AGREEMENT, THE TERMS OF THE INTERCREDITOR
      AGREEMENT SHALL GOVERN AND CONTROL.

     

    [Remainder
      of page intentionally left blank.]

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, each Grantor and the Secured Party have caused this Agreement
      to be duly executed and delivered by their respective officers thereunto duly
      authorized as of the date first written above.

     

    
      	 	 	 
	 	
              FOOTHILLS
                RESOURCES, INC.,

              a Grantor

            
	 
 	 
 	 
 
	 	By:  	/s/
              W.
              Kirk Bosche
	 	
              
W.
              Kirk Bosche
	 	Assistant
              Secretary and Chief Financial Officer

    

     

    
      	 	 	 
	 	
              FOOTHILLS
                CALIFORNIA, INC.,

              a Grantor

            
	 
 	 
 	 
 
	 	By:  	/s/ W. Kirk Bosche
	 	
              
W.
              Kirk Bosche
	 	Assistant
              Secretary and Chief Financial Officer

    

     

    
      	 	 	 
	 	
              FOOTHILLS
                OKLAHOMA, INC.,

              a Grantor

            
	 
 	 
 	 
 
	 	By:  	/s/ W. Kirk Bosche
	 	
              
W.
              Kirk Bosche
	 	Assistant
              Secretary and Chief Financial Officer

    

     

    
      	 	 	 
	 	
              FOOTHILLS
                TEXAS, INC.,

              a
                Grantor

            
	 
 	 
 	 
 
	 	By:  	/s/ W. Kirk Bosche
	 	
              
W.
              Kirk Bosche
	 	Assistant
              Secretary and Chief Financial Officer

    

     

    
      	 	 	 
	 	
              J.
                ARON
                & COMPANY,

              as
                the Secured Party

            
	 
 	 
 	 
 
	 	By:  	/s/
              Colleen Foster
	 	
              
Authorized
              SignatoryUnassociated Document

    EXHIBIT
      10.5

     

    [TX]

     

    DEED
      OF
      TRUST, MORTGAGE,

    ASSIGNMENT,
      SECURITY AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

    

    FROM

    FOOTHILLS
      TEXAS, INC.

    (Organizational
      I.D. Number 4192631)

     

    TO

    JOHN
      K.
      HOWIE, TRUSTEE

     

    AND

    J.
      ARON
& COMPANY, AGENT

     

    Dated
      September 8, 2006

     

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

     

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

     

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

     

    
      	
              WHEN
                RECORDED OR FILED RETURN TO:

               

              Thompson
                & Knight L.L.P.

              1700
                Pacific Avenue, Suite 3300

              Dallas,
                Texas 75201

              Attention:
                Sharon Nye

            	
              THIS
                DOCUMENT PREPARED BY:

               

              Shad
                E. Sumrow, Esq.

              Thompson
                & Knight L.L.P.

              1700
                Pacific Avenue, Suite 3300

              Dallas,
                Texas 75201

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    DEED
      OF
      TRUST, MORTGAGE, 

    ASSIGNMENT,
      SECURITY AGREEMENT, FIXTURE FILING

    AND
      FINANCING STATEMENT

    (this
      “Mortgage”)

     

    ARTICLE
      I.  

     

    Granting
      Clauses; Secured Indebtedness

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

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

     

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

     

    (e)  without
      limitation of the generality of the foregoing, any rights and interests of
      Mortgagor under any present or future hedge or swap agreements, cap, floor,
      collar, exchange, forward or other hedge or protection agreements or
      transactions relating to interest rates or to crude oil, natural gas or other
      hydrocarbons, or any option with respect to any such agreement or transaction
      now existing or hereafter entered into by or on behalf of Mortgagor (provided
      that the Collateral, as defined herein, shall not include any rights and
      interests under any such agreements or transactions entered into between
      Mortgagor and J. Aron & Company, a New York general
      partnership);

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

    (a)  All
      indebtedness and other obligations of Foothills Resources, Inc., a Nevada
      corporation (“Parent”),
      now
      or hereafter incurred or arising pursuant to the ISDA Agreement and all
      indebtedness and obligations of Mortgagor now or hereafter incurred or arising
      under any guaranty now or hereafter given by Mortgagor of the ISDA Agreement
      or
      the indebtedness and obligations thereunder. As used herein, “ISDA
      Agreement”
refers
      collectively to (i) that certain ISDA Master Agreement dated as of September
      8,
      2006 between Parent and J. Aron & Company, a New York general partnership,
      (ii) all transactions and transaction confirmations entered into in connection
      with such ISDA Master Agreement, (iii) all supplements, amendments or
      modifications of or to such ISDA Master Agreement, any such transaction, or
      any
      such transaction confirmation, and (iv) all agreements given in substitution
      for
      any of the foregoing or in restatement, renewal or extension of any of the
      foregoing, in whole or in part.

     

    (b)  All
      indebtedness and other obligations of Mortgagor, Parent or any subsidiary of
      Parent now or hereafter incurred or arising pursuant to any Specified
      Transaction. As used herein, “Specified
      Transaction”
means
      (a) any transaction (including any agreement with respect thereto) now existing
      or hereafter entered into between Mortgagor, Parent, or any subsidiary of Parent
      with J. Aron & Company or any subsidiary of J. Aron & Company that (i)
      is a rate swap transaction, swap option, basis swap, forward rate transaction,
      commodity swap, commodity option, commodity spot transaction, equity or equity
      index swap, equity or equity index option, bond option, interest rate option,
      foreign exchange transaction, cap transaction, floor transaction, collar
      transaction, currency swap transaction, cross-currency rate swap transaction,
      currency option, weather swap, weather derivative, weather option, credit
      protection transaction, credit swap, credit default swap, credit default option,
      total return swap, credit spread transaction, repurchase transaction, reverse
      repurchase transaction, buy/sell-back transaction, securities lending
      transaction, or forward purchase or sale of a security, commodity or other
      financial instrument or interest (including any option with respect to any
      of
      these transactions) or (ii) is a type of transaction that is similar to any
      transaction referred to in clause (i) that is currently, or in the future
      becomes, recurrently entered into the financial markets (including terms and
      conditions incorporated by reference in such agreement) and that is a forward,
      swap, future, option or other derivative on one or more rates, currencies,
      commodities, equity securities or other equity instruments, debt securities
      or
      other debt instruments, or economic indices or measures of economic risk or
      value, or (b) any combination of any of the foregoing transactions.

     

    (c)  [RESERVED].

     

    (d)  [RESERVED].

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (e)  All
      indebtedness, covenants and other obligations now or hereafter incurred or
      arising pursuant to the provisions of this Mortgage or any other document or
      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 of the agreements or instruments described
      in
      the preceding subsections (a), (b), (c) or (d). This Mortgage, all other
      documents or instruments now or hereafter evidencing, governing, guaranteeing
      or
      securing the secured indebtedness, and all of the agreements or instruments
      described or referred to in the preceding subsections (a), (b), (c) or (d)
      are
      herein collectively called the “Transaction
      Documents”.

     

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

     

    Section
      1.5.  Certain
      Definitions.
      The
      indebtedness and other obligations 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.”
Each
      person or entity to whom any secured indebtedness is owing is herein called
      a
“Creditor”.
      The
      ISDA Agreement is herein sometimes referred to as the “Creditor
      Agreement”.
      J.
      Aron & Company, acting for itself or as on behalf of any other Creditors, is
      herein called the “Agent”.

     

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

     

    ARTICLE
      II.  

     

    Representations,
      Warranties and Covenants

     

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

     

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

     

    
      
        
        

      

      
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    (b)  [Reserved].
      

     

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

     

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

     

    (e)  Insurance.
      Mortgagor will carry insurance as required under the Transaction Documents.
      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 Transaction Document, or in the execution or acknowledgment of this
      Mortgage or any other Transaction Document; and (ii) execute, acknowledge,
      deliver and record and/or file such further instruments (including further
      deeds
      of trust, mortgages, security agreements, financing statements, continuation
      statements, and assignments of production, accounts, funds, contract rights,
      general intangibles, and proceeds) and do such further acts as may be necessary,
      desirable or proper to carry out more effectively the purposes of this Mortgage
      and the other Transaction Documents and to more fully identify and subject
      to
      the liens and security interests hereof any property intended to be covered
      hereby, including any renewals, additions, substitutions, replacements, or
      appurtenances to the Property. Mortgagor shall pay all reasonable costs
      connected with any of the foregoing.

     

    
      
        
        

      

      
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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).

     

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

     

    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
      Creditor pursuant to this Section 2.3 or other sections of this Mortgage that
      specifically refer to this Section 2.3 shall bear interest each day, from the
      date of such expenditure or payment until paid, at a rate then in effect with
      respect to the Loans; all such amounts, together with such interest thereon,
      shall be a part of the secured indebtedness and shall be secured by this
      Mortgage.

     

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

     

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

     

    Section
      2.6.  Release
      of Mortgage.
      If all
      of the secured indebtedness be paid in full and no further obligation shall
      exist to provide credit or advance funds to Mortgagor or the maker of any
      promissory note (or other obligor with respect to other indebtedness) secured
      hereby, then, at Mortgagor’s request and expense, this Mortgage shall be
      released as provided in the Creditor Agreement; provided, however, that,
      notwithstanding such release, the indemnifications, and other rights, which
      are
      provided herein or in the Transaction Documents to continue following the
      release hereof shall continue in effect unaffected by such release; and provided
      that if any payment to any Creditor 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 Creditor 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.

     

    
      
        
        

      

      
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    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.

     

    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;

     

    
      
        
        

      

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

     

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

     

    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 Creditor Agreement.

     

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

     

    
      
        
        

      

      
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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 under
      the Transaction Documents, and any and all other secured indebtedness, at the
      time and in the manner provided herein and in the Transaction 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 Transaction 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 Creditor Agreement.

     

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

     

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

     

    
      
        
        

      

      
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    Section
      4.4.  Foreclosure.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    Section
      4.8.  Creditor
      as Purchaser.
      Any
      Creditor 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
      Creditor 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 Creditor, or if such Creditor holds
      less
      than all of such indebtedness, the pro rata part thereof owing to such Creditor,
      accounting to all other Creditors not joining in such bid in cash for the
      portion of such bid or bids apportionable to such non-bidding Creditor or
      Creditors.

     

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

     

    
      
        
        

      

      
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    Section
      4.10.  Remedies
      Cumulative.
      All
      remedies herein provided for are cumulative of each other and of all other
      remedies existing at law or in equity and are cumulative of any and all other
      remedies provided for in any other Transaction 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 Transaction
      Document or provided for by law shall not prevent the concurrent or subsequent
      employment of any other appropriate remedy or remedies.

     

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

     

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

     

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

     

    
      
        
        

      

      
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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 property or other appropriate
      records of each county where any part of the Mortgaged Properties is situated
      or
      which lies shoreward of any Mortgaged Property (i.e., to the extent a Mortgaged
      Property lies offshore within the projected seaward extension of the relevant
      county boundaries), and may also be filed in the offices of the Bureau of Land
      Management or the Minerals Management Service or any relevant state agency
      (or
      any successor agencies). This Mortgage shall also be effective as a financing
      statement covering any other Property and may be filed in any other appropriate
      filing or recording office. The mailing address of Mortgagor is the address
      of
      Mortgagor set forth at the end of this Mortgage and the address of Agent from
      which information concerning the security interests hereunder may be obtained
      is
      the address of Agent set forth at the end of this Mortgage.

     

    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 Transaction 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.

     

    
      
        
        

      

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

     

    Section
      5.6.  Acts
      Not Constituting Waiver.
      Any
      default may be waived without waiving any other prior or subsequent default.
      Any
      default may be remedied without constituting a waiver by Agent or any Creditor
      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 in writing in compliance with the relevant Transaction
      Document).

     

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

     

    Section
      5.8.  [Reserved.]

     

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

     

    Section
      5.10.  Compliance
      With Usury Laws.
      It is
      the intent of Mortgagor, Creditors and all other parties to the Transaction
      Documents to contract in strict compliance with applicable usury law from time
      to time in effect. In furtherance thereof, it is stipulated and agreed that,
      as
      more fully provided in the Transaction Documents, 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. 

     

    
      
        
        

      

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

     

    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 the Creditor
      Agreement. Notwithstanding the foregoing, or anything else in the Transaction
      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 Creditor or Trustee
      of
      their respective rights hereunder or under any other Transaction 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.

     

    
      
        
        

      

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

     

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

     

    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 Creditor 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 Creditors may, by agreement among themselves, provide
      for
      and regulate the exercise of rights and remedies hereunder, but, unless and
      until modified to the contrary in writing signed by all such persons and
      recorded in the same counties as this Mortgage is recorded, (i) all persons
      other than Mortgagor and its affiliates shall be entitled to rely on the
      releases, waivers, consents, approvals, notifications and other acts (including
      the appointment of substitute or successor trustee, or trustees, hereunder
      and
      the bidding in of all or any part of the secured indebtedness held by any one
      or
      more Creditors, 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 Creditor 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.

     

    
      
        
        

      

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

     

    Section
      5.20.  Successors
      and Assigns.
      The
      terms, provisions, covenants, representations, indemnifications and conditions
      hereof shall be binding upon Mortgagor, and the successors and assigns of
      Mortgagor, and shall inure to the benefit of Agent, Trustee and the persons
      constituting Creditors 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, Creditors
      shall be deemed to be the successors to Agent. All references in this Mortgage
      to Mortgagor, Agent, Trustee or Creditors shall be deemed to include all of
      their respective successors and assigns.

     

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

     

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

     

    Section
      5.23.  Place
      of Payment.
      All
      secured indebtedness which may be owing hereunder at any time by Mortgagor
      shall
      be payable at the place designated in the Creditor 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.

     

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

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

              W.
                Kirk Bosche

              Assistant
                Secretary and Chief Financial Officer

            
	 	 

    

    

    
      	
              The
                address of Agent is:

              85
                Broad Street

              New
                York, New York 10004

               

               

              The
                address of the Trustee is:

              1000
                Louisiana, Suite 550

              Houston,
                Texas 77002

            	 	
              The
                address of Mortgagor is:

              4540
                California Avenue, Suite 550

              Bakersfield,
                California 93390

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