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Home My WebLink About917348 ~ \. '\ " \ (0[552 When recorded or filed return to: Hunter Energy LLC Attn: Alan C. O'Hare 8000 South Chester, Suite 375 Centennial, Colorado 80112 "-_. --- - - .-.- --- +.+ -- _~ h.______ RECEIVED 4/10/2006 at 9:02 AM RECEIVING # 917348 BOOK: 616 PAGE: 552 JEANNE WAGNER LINCOLN COUNTY CLERK, KEMMERER, WY MORTGAGE (WITH POWER OF SALE), ASSIGNMENT OF PROCEEDS OF PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT From HUNTER ENERGY LLC, as Mortgagor To JDW, INC., as Mortgagee Dated as of January 19,2006 FILED IN PARK, DINT A AND LINCOLN COUNTIES, WYOMING TillS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES THE PAYMENT OF FUTURE ADVANCES, AND COVERS PROCEEDS OF COLLATERAL. TillS INSTRUMENT COVERS MINERALS UPON THEIR EXTRACTION FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS), AND THE ACCOUNTS RELATED THERETO, WillCH WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN THE GRANTING CLAUSE AND EXHIBIT A. TillS INSTRUMENT COVERS GOODS WillCH ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN, AND IS TO BE FILED FOR RECORD AS A FIXTURE FILING, AMONG OTHER PLACES, IN THE REAL ESTATE OR COMPARABLE RECORDS OF THE COUNTIES REFERENCED IN EXHIBIT A HERETO. .. .'.·;'.·..·i_·..,...·.~.,.· .',""-, '<' ;:'_;..;'d,;...=;>.'.....·~.·.......;.,~··: ,.. . . "-:.,_." :·.,..,....·....':>0:......111...,.'"' .....,..·~;"..~~a...:;·..:. '," "'. -.' I, ....:¡..-v.r.II:1:,... 'I:.~. ,'.' " ~- ,. :' :t._ \;o..:~ft ~.i;':':;~;.,;: ',,,'" : '-.", '.":..' ',,'," ,';7, .''''f.OU'.c:n;'~:i'''dJ;;,'''''·.'. '...'.',_;;._.I.....·.~.·.·.!.~.,., .....;!. .... ff~l~~~~!~~~~~I~~f~;i¡ ~:::;¡:~;~~::r~~::; ._~~~~:~ l~~~·mi~i;Fm¡m:;t~i ;':,!,:t!t?¡!,;!,1\"!';':' '_i'~-'(f..1.-."t.,.~ , . I , ',I. '¡'''-; ..Ii';' I '.' ',," ,'. ' . . '. ',_";" .' L' ."'. '. , .: -'.'.,~, 1,;.. . '. . . . ". ....-':-..:.'~-::>..,...-. '. ....'.';..';'...',..... ....... ·~:-:,.'r".;'..,....~::a-.':I;.....-vI'J,·~~;.·r;-.· --:..J" "'~:II.C:::":." .':" ~·,·,·t·~,~:"·:.'f.ur.:.~·.,,~t!:.t,,~."'ï1';:.·_'J'f.;... ."':';.'~....~..¡'1.4>;.;t 0917:148 C00553 MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN THE GRANTING CLAUSE AND EXHIBIT A. A POWER OF SALE HAS BEEN GRANTED IN TillS INSTRUMENT A POWER OF SALE MAY ALLOW THE MORTGAGEE TO SELL THE MORTGAGED PROPERTIES WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER TillS INSTRUMENT. ~:.¡.""",.,...¡~ ,.··.....·11;....'....,',...... ;·:;:;:::;:::<:;::Sh. ::::::::,..:.::;:t:::;:¡ :í::>,~:~íf:k:~ ~,~~I ~it~~r-~ilJ ~~fJ;:~ k::~~~::::;~:~l!'f -~~!~~t~1~~i~ ....·.·'-4·.·.o¡.:n'r, "':,,-. '.' "", ~ , , ." : ' . . . - .'" ... . ... ," " .'....,.....~.......-..... .. '..:.".~..,__..,.~,,_t"',' ..,~..."",h, ...... . ":..' ". ,·,·";~¡1~· '. 1."''''''}L''i..8 09 11 ,-} ![ MORTGAGE (WITH POWER OF SALE), ASSIGNMENT OF PROCEEDS OF PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT "OC554 MORTGAGE (WITH POWER OF SALE), ASSIGNMENT OF PROCEEDS OF PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT ("Mortgage"), dated as of January 19, 2006, from HUNTER ENERGY LLC, a Delaware limited liability company, with an address at 8000 South Chester, Suite 375, Centennial,. Colorado 80112 ("Mortgagor'), to secure the payment of all indebtedness and the performance of all obligations as hereinafter described of Mortgagor owing to JDW, INC., a Texas corporation, with an address at 1300 South University, Suite 410, Ft. Worth, Texas 76107 ("Mortgagee"). RECITALS A. Mortgagee has agreed to make a loan to Mortgagor in the aggregate principal amount of FIVE HUNDRED THOUSAND UNITED STATES DOLLARS (US$500,000) which loan is evidenced by that certain Secured Promissory Note by Mortgagor, of even date herewith, payable to the order of Mortgagee (together with any renewals, extensions or modifications thereof, the "Secured Promissory Note"). B. In order to secure the performance of all Mortgagor's obligations under the Secured Promissory Note, Mortgagor has agreed to enter into this Mortgage. GRANTING CLAUSE NOW THEREFORE, Mortgagor, in order to secure the indebtedness and obligations hereinafter described, does hereby MORTGAGE, GRANT, BARGAIN, SELL, TRANSFER, ASSIGN and CONVEY to Mortgagee to secure the Secured Indebtedness (as hereinafter defined), and 'grant the Mortgagee the POWER OF SALE over, in and to the following described rights, interests and estates (sometimes referred to herein, individually, as a "Mortgaged Property" and, collectively, as the "Mortgaged Properties"): 1. Oil and Gas Producine: Properties and Rie:hts ofWav. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any in and to: (i) the oil, gas and mineral leases described on Exhibit A attached hereto and made a pm1 hereof for all purposes, and any instrument executed in amendment, correction, modification, confirmation, renewal or extension of any such leases; (ii) the 0'ïI, gas and other minerals in and under the lands, if any, covered by the oil, gas and mineral leases described in Exhibit A and/or the lands spaced, pooled or unitized therewith; (iii) the oil, gas and other mineral interests and estates, if any, in and under the lands covered by the leases described in Exhibit A including, but not limited to, working interests, royalties, overriding royalties, net profits interests and production payments; (iv) any and all oil and gas units, if any, covering, in whole or in part, the lands covered by, or derived or carved from, the leases described in Exhibit A and/or the lands spaced, pooled or unitized therewith; (v) all pooling, communitization, unitization and similar orders of governmental authorities, bodies and commissions, if any, that cover all or any portion of the land described on Exhibit A; (vi) the lands described on Exhibit A and all lands, spaced, pooled, unitized or communitized therewith and (vii) the easements and rights-of-way, if any, benefiting any of the above described properties, including, without limitation, any easements and rights of way described or referred to in Exhibit A. It is expressly understood and agreed that unless and until Mortgagee shall succeed to legal title in any Mortgaged Property, Mortgagee shall not be liable in respect of the performance of any covenant or obligation of Mortgagor concerning such Mortgaged Property. MORTGAGE - Page 1 II- '-·:;:;~'·i':.ln~':'!':¡~I:':I·r:;¡' '.,':';';~,;',,;:' :1,' "", ',If';-,';~ ¡:':',¡U;!;',', '<!: ';:¡J ::·f;c.'~'¡ u> - .' .-, 'j' ;"':-1!):'~\l.'It:"" - .' " ",.,,!, :'¡,,';' '·;·¡'·¡·~S!'~~~'·""'·I:.'i:r· ·I_'c"~" !:.C:~""'''~Y-'I :<"1' ' ,;: ", . .:,¡. \:.1: ';.I.'r! i"',,~, '.' .' .. '." '. ',' , ,. " ~I'~!~" .!\ ~.·.;I:. ;.;~',; .;.....'.. ",' . "¡""~ .: ..:.' .....~.i:¡.:..:.:.. 091.'7:148 COf555 2. Wells. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all oil wells, gas wells and other wells now or hereafter located on any of the lands described or referred to on Exhibit A, whether or not such wells are specifically described or referred to on Exhibit A. 3. Equipment. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all equipment, tanks, derricks, fixtures, houses, pumps, jacks, casings, tubing, rods, cable lines, pipe lines, flow lines, separators, buildings, machinery, tools, pipe and all other equipment, appurtenances, apparatus, appliances and property of every kind and character, movable or immovable, now or at any time hereafter located on any of the lands described or referred to on Exhibit A or which may now or hereafter be used or obtained in connection therewith. 4. Contract Rie:hts. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all presently existing and hereafter created contracts, rights under contracts, operating agreements, mineral purchase agreements, rights-of-way, easements, surface leases, penn its, licenses, pooling or unitization agreements, pooling assignations and pooling orders, equipment leases, production sales agreements, purchase agreements, exchange and/or processing agreements, transportation agreements, fannout and/or farm-in agreements, salt water disposal agreements, and all other contracts or agreements pertaining to or affecting the lands, leases or wells described or referred to on Exhibit A or now or hereafter affecting any of the rights now or hereafter coveted hereby which are useful or appropriate in drilling for, producing, treating, handling, storing, transporting or marketing of oil, gas or other minerals from any of the lands, leases or wells described or referred to on Exhibit A or from any properties unitized or pooled therewith. 5. Hvdrocarbons. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all other "as extracted collateral" as that tenn is defined in Section 34.1-9-102 of the Wyoming Unifonn Commercial Code, as hereafter amended and revised (hereafter referred to as the "UCC'), produced from or attributable to the lands described or referred to in paragraph I above, and other minerals, and all products refined therefrom, and all other minerals in and under, and that may be produced and saved from, the lands, leases or wells described or referred to on Exhibit A. 6. Accounts and General Intane:ibles. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all: (i) "accounts," "as extracted collateral," and "general intangibles" and "proceeds" as those tenns are defined in the uee arising in connection with the sale or other disposition of the property described in paragraphs 1 through 5 above, and (ii) any and all contract rights and general intangibles arising from or in connection with the property described in paragraphs 1 through 5 above, including without limitation all geological, geophysical, engineering, accounting, title, legal, and other technical or business data concerning such leases and/or such lands and the production therefrom which are in the possession of Mortgagor or in which Mortgagor can otherwise grant a lien, and all books, files, records, magnetic media, computer records and other forms of recording or obtaining access to such data. 7. Proceeds and Products. An undivided Sixteen and Sixty-Six One Hundredths Percent (16.66%) interest in all of Mortgagor's right, title and interest, now owned or hereafter acquired, if any, in and to all of the proceeds and products of the property described in paragraphs 1 through 6 above whether presently existing or hereafter created or arising. - Page 2 !1~mŒ~~i;¡f:' ., . 0" ....""." ..,., '.".".,< . ...,' ~ '.c.:"~"'·">;""."~;fJ'a,....·,....· '..... . ... . .,.'" ",''';''''''':~--'''''',-..,. ....~......~""-'.,-,.."_.,...""."...........,..-"...'".,,....... 091.7~~L\8 to 0[556 TO HAVE AND TO HOLD unto Mortgagee the Mortgaged Properties, together with all rights, hereditaments and appurtenances in any way pertaining or belonging thereto unto said Mortgagee and its successors and assigns, and for the uses and purposes hereinafter set forth. The expression "Mortgagor's successors" as used herein shall mean each and all of Mortgagor's successors and assigns. Mortgagor hereby binds Mortgagor and Mortgagor's successors to warrant and forever defend, all and singular, the Mortgaged Properties unto Mortgagee and its successors and permitted assigns, forever, against every person whomsoever lawfully claiming or to claim the same or any part thereof, and Mortgagor, for Mortgagor and Mortgagor's successors does hereby covenant with Mortgagee, its successors and assigns, that Mortgagor is the owner of, and has good right, title and authority to mortgage and convey, the Mortgaged Properties; that all oil and gas and other leasehold estates described in Exhibit A are valid and subsisting on the lands therein described or referred to; that such leasehold estates are subject to no liens, burdens or charges, except such as are expressly set forth in Exhibit A or of record in the county of such leasehold estate; that all rentals and royalties due and payable under the leases described in Exhibit A have been duly paid; and that all severance and production taxes payable with respect to production from the Mortgaged Properties have been duly paid. ARTICLE 1 SECURED INDEBTEDNESS 1.1 Secured Indebtedness. This Mortgage is given to secure the following indebtedness, obligations and liabilities: (i) the indebtedness evidenced by the Secured Promissory Note; and (ii) all indebtedness arising pursuant to the provisions of this Mortgage, together with any and all renewals, extensions and modifications of such debts, obligations and liabilities or any part thereof (collectively, the "Secured Indebtedness"). 1.2 Increase in Secured Indebtedness. It is presently contemplated by Mortgagor and Mortgagee that the Secured Indebtedness may be increased, modified, renewed and/or extended; provided that in the event of such increase, renewal, modification and/or extension, such indebtedness shall not be deemed to be secured by this Mortgage and to be part of the Secured Indebtedness. ARTICLE 2 REPRESENTATIONS AND COVENANTS OF MORTGAGOR 2.1 Title and Permitted Encumbrances. Mortgagor has, and Mortgagor covenants to maintain, good and defensible title to the Mortgaged Properties, free and clear of all liens, security interests and encumbrances, other than the following (collectively, the "Permitted Encumbrances "): (i) the contracts, agreements, burdens, encumbrances and other matters set forth in the descriptions of certain of the Mortgaged Properties on Exhibit A hereto, (ii) the liens and security interests evidenced by this Mortgage, (iii) statutory liens for taxes which are not yet delinquent, (iv) liens under operating agreements, pooling orders and unitization agreements, and mechanics' and materialmen's liens, with respect to obligations that are not yet due, (v) the liens, security interests and encumbrances described or referred to on Exhibit B hereto, and (vi) minor defects and irregularities applicable to any oil and gas property generally, so long as such defects and irregularities neither (A) are liens which secure other indebtedness or obligations, nor (B) materially impair the value of such property or the use thereof for purposes for which such property is held and are not such as to affect materially title thereto. Mortgagor will warrant and defend title to the Mortgaged Properties, subject to Permitted Encumbrances, against the claims and demands of all persons claiming or to claim the same or any part thereof. 2.2 No Defaults Under Leases. The oil, gas and/or mineral leases, contracts, servitudes and other agreements forming a part of the Mortgaged Properties, to the extent the same cover and otherwise MORTGAGE - Page 3 \,. ~·"·'4.",.",,,,,,~,,,,,¡.._.,,,,.,,,,,,,,,_ .,.,.,_.,.:..._,..",....._['"...;:r:'..~,i<~.<.;,I...tr.'.-¡<..., "'7.".-< .,. .,..,.-,.":~....~.",...,.". .' _.:;'N""'~"",,- ;...,.....¡..............,;....... . . ·-.l./Ut.M!<...·"<õt-<f.'foH2>,:M:·''\:!.'.··..;otlo·'·"'··:,··.'-,·,'.;OC...,'..... ,. _.....C..,·.·.'..·. ....\~..'..I'i'..".".,.;...,. . ,-,.~,.;.·'.I·,;........:,....,... 091.7:148 ·'Ìrr;~7 f: U\..vv relate to the Mortgaged Properties, are in full force and effect. For so long as Mortgagor has maintained its interest in any Mortgaged Property, to the knowledge of Mortgagor, all rents, royalties and other payments due and payable under such leases, contracts, servitudes and other agreements, or under any Permitted Encumbrances, or otherwise attendant to the ownership or operation of such Mortgaged Properties have been and will continue to be properly and timely paid. Mortgagor is not in default with respect to the obligations, if any, of Mortgagor (and Mortgagor is not aware of any default by any third party with respect to such third party's obligations) under any ofthe oil and gas leases or otherwise attendant to the ownership or operation of any Mortgaged Property, where such default could adversely affect the ownership or operation of such Mortgaged Property. 2.3 Sale of Production. No Mortgaged Property is subject to any contractual or other arrangement (i) whereby payment for production from such Mortgaged Property is to be deferred for a substantial period after the month in which such production is delivered (i.e., in the case of oil, not in excess of 60 days, and in the case of gas, not in excess of 90 days) or (ii) whereby payments are to be made to Mortgagor other than by checks, drafts, wire transfer advises or other similar writings, instruments or communications for the immediate payment of money. Except for production sales contracts, processing agreements or transportation agreements (or other agreements relating to the marketing of production) listed on Exhibit A (in connection with the Mortgaged Properties to which they relate), no Mortgaged Property is subject to any contractual or other arrangement for the sale of production which cannot be canceled on 120 days (or less) notice. Neither Mortgagor nor, to the knowledge of Mortgagor, any of its predecessors in title, has received any prepayment (including, but not limited to, payments for gas not taken pursuant to "take or pay" or other similar arrangements) for any oil, gas or other hydrocarbons produced or to be produced from the Mortgaged Properties after the date hereof. No Mortgaged Property is subject to any "take or pay" or other similar arrangement (i) which can be satisfied in whole or in part by the production or transportation of gas from other properties or (ii) as a result of which production from the Mortgaged Properties may be required to be delivered to one or more third parties without payment (or without full payment) therefor as a result of payments made, or other actions taken, with respect to other properties. There is no Mortgaged Property with respect to which Mortgagor or, to the knowledge of Mortgagor, any of its predecessors in title has, prior to the date hereof, taken more gas ("overproduced") or less ("underproduced") from the lands covered thereby (or pooled or unitized therewith) than its ownership interest in such Mortgaged Property would entitle it to take. No Mortgaged Property is subject to a gas balancing arrangement under which one or more third parties may take a portion of the production attributable to sllch Mortgaged Property without payment (or without full payment) therefor as a result of production having been taken from, or as a result of other actions or inactions with respect to, other properties. No Mortgaged Property is subject at the present time to any regulatory refund obligation and, to the knowledge of Mortgagor, no facts exist which might cause the same to be imposed. To the extent the representations in this section are made with respect to a Mortgaged Property which is a working interest which is operated by a party other than Mortgagor, and the matters covered by such representations are the responsibility of such party under applicable agreements, such representations are made to the knowledge of Mortgagor after reasonable investigation. 2.4 Operation of Morte:ae:ed Properties. The Mortgaged Properties (and properties unitized therewith) are being (and, to the knowledge of Mortgagor, to the extent the same could adversely affect the ownership or operation of the Mortgaged Properties after the date hereof, have in the past been) maintained, operated and developed in a good and workmanlike manner, in accordance with existing joint operating agreements and prudent industry practices and in conformity with all applicable laws and all rules, regulations and orders of all duly constituted authorities having jurisdiction and in conformity with all oil, gas and/or other mineral leases and other contracts and agreements forming a part of the Mortgaged Properties and in conformity with Permitted Encumbrances. There are no dry holes, or otherwise inactive wells, located on the Mortgaged Properties or on lands pooled or unitized therewith, except for wells that have been plugged and abandoned. To the extent the representations in this section MOR¡9N1:f>\ Page 4 1t::::!~',:::.J ~~Wm~ilW?) ~_~m~:; .' . ·:";'!I~::r.~r.¡:..·,.,: ',.:\"':'- ,..:~;;:: '··'-';t:·;:,,~.·:~··:..·~·;!i»t··¡:r':·. ·"~""'-".;'¡·.,:'·.~.I" "., '_-. ~, " . ". .' "'~!':''=':''to',. .' ,,':·¡.!6·I·.·.!.~"'·,·,'· , ::'£,i:,h~'2itfU·~. .j'~~!I·~):.:o:.';t'l'·' ;. ··,·:·,'.~In·.·.·';.·t··;7 ~.".' ;,...... :.\ '. ..;.,.'.............. 091.17:1(\8 nr,E:"S !.i", v 8.-> are made with respect to a Mortgaged Property which is a working interest which is operated by a party other than Mortgagor, and the matters covered by such representations are the responsibility of such party under appliCable agreements, such representations are made to the knowledge of Mortgagor after reasonable investigation. 2.5 General Covenants. Mortgagor, for Mortgagor and Mortgagor's successors, covenants (i) to carry, or cause to be carried, insurance coverage for the Mortgaged Properties in amounts and covering such losses as are customary in the industry; (ii) to pay, or cause to be paid, prior to delinquency, all lawful taxes of every character in respect of all of the Mortgaged Properties, and all taxes in respect of the oil, gas and other minerals produced and to be produced from the Mortgaged Properties, or incident to and in connection with the operation or development thereof and the production of oil, gas and other minerals therefrom, as well as all Federal or State income taxes payable generally by Mortgagor, regardless of their relation to the Mortgaged Properties, and to pay, as and when due, all State and Federal Social Security taxes, payments and contributions for which Mortgagor may be liable; provided that Mortgagor shall not be required to payor cause tobe paid such taxes if the payment thereof is being contested in good faith; (iii) in respect of all the Mortgaged Properties, promptly to pay all bills for labor and material (provided that Mortgagor shall not be required to payor cause to be paid such bills if the payment thereof is being contested in good faith), and never to permit to be fixed thereon any lien, even though inferior to the lien hereof, for any such billswhich may be legally due and payable and never to permit to be created or to exist, in respect of any ofthe Mortgaged Properties, any other or additional lien, on a parity with or superior to the lien hereof; (iv) that Mortgagee, or its duly-authorized agent or agents, shall, upon reasonable prior notice to Mortgagor, have the right to go upon, examine, inspect and remain on the Mortgaged Properties during regular business hours; (v) to cause written notice to be given promptly to Mortgagee of every adverse claim or demand made by any person affecting the Mortgaged Properties in any manner, or of any proceedings instituted with respect thereto, and at Mortgagor's own cost and expense to endeavor to cure diligently any defect that may be developed or claimed, and to take all necessary and proper steps, in Mortgagor's discretion, for the defense of such legal proceedings, including but not limited to, the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims, and to indemnify and hold Mortgagee harmless from and against any and all such costs and expenses, including, but not limited to, any and all costs, loss, damage, or liability which it may suffer or incur on account of the failure of the title to all or any part of the Mortgaged Properties, or on account of the failure or inability of Mortgagor for any reason to convey the rights, title and interests which this Mortgage and the assignment contained in Article 5 purport to convey or assign, and all amounts at any time so payable by Mortgagor hereunder shall be secured by the lien hereof and by said assignment; (vi) at any time and trom time to time, upon request by Mortgagee, to execute and deliver to Mortgagee, any and all additional instruments and further assurances as may be necessary or proper to effect the intent of these presents; (vii) to keep accurate books and records in accordance with generally accepted accounting principles consistently applied in which full, true and correct entries shall be promptly made as to all operations on the Mortgaged Properties, all such books and records to be subject at all times, upon reasonable prior notice to Mortgagor, during regular business hours, to inspection by Mortgagee, or its duly authorized agent or agents; (viii) from time to time, upon request of Mortgagee, promptly to furnish to Mortgagee such financial statements and reports relating to the Mortgaged Properties as Mortgagee may reasonably request; (ix) to maintain continuously Mortgagor's existence, and its right to do business in the State of Wyoming (to the extent such right to do business is required under Wyoming law); (x) to pay all Secured Indebtedness in accordance with the terms thereof and hereof, or when the maturity thereof may be accelerated in accordance with the terms thereof or hereof, and (xi) to notify Mortgagee immediately if it becomes aware of the occurrence of any default or of any fact, condition or event that only with the giving of notice or passage of time or both, could become a default hereunder, or the failure of Mortgagor to observe" any of its undertakings hereunder. MORTGAGE - Page 5 ~ · .·'¡·I"'~~~.':¡~.:L·r.I:I·¡;l·;;J;I;;;\7·:I:..'1;'a:",">!~~"\'~,¡;w...oH!.~... 'd'!I"'~' '. '. '.'.' . .". ";'_:.'":-:"::'.'::"~">{;_.'; ;')';' .:.~.: ',',' .·.·I~.~.:¡~.':i:.n;I'I.:.> ';'i:"..·~þ~;;~I~:;·;·"""·joIt' ·:···TI'~-_<~.··.:.:·:'." . .'::·:::"';"';.7'¡'-'-'JiI,.:',..:., '..'~'. ;:......:o'~.:.:.;... 091.7:148 (0('559 2.6 Sale or Disposal. Mortgagor will not, without the prior written consent of Mortgagee (which consent shall not be unreasonably conditioned, delayed or withheld), sell, exchange, lease, transfer, or otherwise dispose of any part of or interest in, the Mortgaged Properties other than sales of production which are made in the ordinary course of business and in compliance with the provisions of this Mortgage (provided that nothing in the immediately preceding clause shall be construed as limiting Mortgagee's rights under Article 5 of this Mortgage). Mortgagor shall account fully and faithfully for, and if Mortgagee so elects, shall promptly payor turn over to Mortgagee the proceeds in whatever form received ITom disposition in any manner of the Mortgaged Properties. Mortgagor shall at all times keep the Mortgaged Properties and its proceeds separate and distinct from other property of Mortgagor and shall keep accurate and complete records of the Mortgaged Properties and its proceeds. 2.7 Not Abandon Wells. Mortgagor will not, without the prior written consent of Mortgagee consent to the abandonment of any well producing ITom the Mortgaged Properties (or properties unitized therewith) so long as such well is capable (or is subject to being 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). 2.8 Compliance bv Operator. With respect to any part of the Mortgaged Properties which is not a working interest, Mortgagor agrees to take all such action and to exercise all rights and remedies as are available to Mortgagor to cause the owner or owners of the working interest in such properties to comply with the covenants and agreements contained herein. With respect to any part of the Mortgaged Properties which is a working interest but which is operated by a party other than Mortgagor, Mortgagor agrees to take all such action and to exercise all rights and remedies as are available to Mortgagor (including, but not limited to, all rights under any operating agreements) to cause the party who is the operator of such property to comply with the covenants and agreements contained herein. Mortgagor will immediately notify Mortgagee of any failure of the operator of any of the Mortgaged Properties to perform any such obligation, and in cooperation with Mortgagee, will take such steps as may be expedient to secure compliance therewith, or obtain appointment of a different operator. 2.9 No Impairment of Rie:hts. Any and all covenants in this Mortgage may from time to time, by instrument in writing signed by Mortgagee and delivered to Mortgagor, be waived to such extent and in such manner as Mortgagee may desire, but no such waiver shall ever affect or impair Mortgagee's rights or liens hereunder, except to the extent so specifically stated in such written instrument. ARTICLE 3 HAZARDOUS MATERIALS 3.1 Definitions. When used herein, the following terms shall have the respective meanings specified below (such meanings to be equally applicable to both the singular and the plural of the terms defined): UEnvironmental Law" means any law, judgment, rule, order, regulation, statute, ordinance, decree or requirement of any Governmental Authority regulating, relating to or imposing liability or standards of conduct or remedial obligations concerning environmental protection matters, including without limitation, Hazardous Materials, as now or may at any time hereafter be in effect. uGovernmental Authority" means any national or government, any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. Page 6 .~::~::~:.~::::~;~~! ~~i~j ~¡:::::~::~ ·I:':?":~~~:;:!:~:'; .. ..____~_.M..__ , .........."". .~..~- ...~_..--.......___'"'.....d. ......_. .., . . ...~'.."....~ ., " '-".¡ '.____..,.~. ..........-..........-........ . ~, . ...'--.:......--""...,..--'''''~_...-....................... '-","-'" "....-"'.. . .',.., "'O"~",~.'XIN,,,._,,,.. -.''''' ~ ,-" , :.....,. . ". :~.:':'-"" . . . 091.'7a~18 ( (1('560 UHazardous Materials" means any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances, regulated substances, or petroleum products (including hydrocarbons), defined or regulated as such in or under any Environmental Law. 3.2 Morteaeor's Environmental Warranties. Mortgagorhereby represents and warrants that, as of the date of this Mortgage, to its knowledge: (a) No Hazardous Materials are located on the Mortgaged Properties in violation of any Environmental Law now in effect, and neither Mortgagor nor any other person for whose conduct Mortgagor may be liable has caused or permitted any Hazardous Materials to be placed, held, located or disposed of on, under or at the Mortgaged Properties or any part thereof in violation of, or subject to any remedial obligation under, any Environmental Law now in effect. (b) No part of the Mortgaged Properties is being used for the disposal, storage, treatment, processing or other handling of Hazardous Materials in violation of, or subject to any remedial obligation under, any Environmental Law now in effect, nor is any part of the Mortgaged Properties affected by any Hazardous Materials contamination. (c) No property adjoining the Mortgaged Properties is being used for the disposal, storage, treatment, processing or other handling of Hazardous Materials in violation of, or subject to any remedial obligation under, any Environmental Law now in effect nor is any other property adjoining the Mortgaged Properties affected by Hazardous Materials contamination. (d) No investigation, administrative order, consent and agreement, notice of violation or noncompliance, litigation or settlement with respect to Hazardous Materials or Hazardous Materials contamination is proposed, threatened, anticipated or in existence with respect to the Mortgaged Properties. The Mortgaged Property is not currently on any federal or state "Superfund" or "Superlien" list. (e) No storage tanks are located on, under or at the Mortgaged Properties in violation of any Environmental Law now in effect. (t) Mortgagor has undertaken all appropriate inquiry into the previous ownership and uses of the Mortgaged Properties consistent with good commercial or customary practice in an effort to minimize liability associated with Hazardous Materials or Hazardous Materials contamination. (g) The Mortgaged Property is in compliance with all Environmental Laws now in effect and permits, licenses and registrations required under applicable Environmental Laws now in effect. 3.3 Morteaeor's Environmental Covenants. Mortgagor agrees to (i) give notice to Mortgagee immediately upon Mortgagor's acquiring knowledge of any fact or circumstance represented or warranted in Section 3.2 hereof; (ii) use its best efforts, with respect to any of the Mortgaged Properties which is a working interest but which is operated by a party other than Mortgagor, to cause the party who is the operator of such Mortgaged Properties promptly to comply with all Environmental Laws then in effect affecting the Mortgaged Properties and comply with and keep in effect, or cause to be complied with and kept in effect, all permits, licenses and registrations required by Environmental Laws with respect to the Mortgaged Properties; (iii) cause to be operated and managed the Mortgaged Properties in a manner consistent with good environmental management and engineering practices; and (iv) cause to be exercised due care and prudence in connection with the Mortgaged Properties to avoid incurring liabilities under Environmental Laws then in effect, to prevent any release of Hazardous Materials, to minimize the risk of loss or damage in the event of any release of Hazardous Materials, and to remediate any release of MORTGAGE - Page 7 ). ,," ¡ ,-,"00&..""",."" -.1.....·.,. ..~.."..'"...... .~,... ............."........ ".<."'_~._....." ''''''''''C- '..:c,.,.....,'-""_."'-"....,.,... ...., _........ .,...."'.......,.-.........,...,,",,.:'-. ",.~ ............ ."','''''-- 091_17a~18 00561 Hazardous Materials in accordance with Environmental Laws then in effect. Upon reasonable prior notice, during regular business hours, Mortgagor will permit Mortgagee (by its employees, agents and contractors) to enter upon and conduct (and Mortgagor will cooperate in the conduct of) environmental investigations of the Mortgaged Properties, using such consultants, methods and procedures, having such scope, following such schedule, and producing such reports as Mortgagee may reasonably request. In addition, if Mortgagor fails or refuses to do so in accordance herewith, Mortgagor will permit Mortgagee (by its employees, agents or contractors) to enter upon any of the Mortgaged Properties or to take such other actions as it deems necessary or advisable to perform the obligations of Mortgagor hereunder which Mortgagor has failed or refused to perform. Mortgagee shall have no obligation to conduct any environmental investigation of the Mortgaged Properties or perform any of Mortgagor's obligations hereunder and any such action by Mortgagee shall be for the sole purpose of protecting Mortgagee's security for the repayment of the Secured Indebtedness and shall not under any circumstances be construed to give Mortgagee the right to participate or constitute participation in the management of Mortgagor or the Mortgaged Properties. 3.4 Indemnification. Mortgagor shall defend, indemnify and hold harmless Mortgagee and its employees and agents from any and all liabilities (including strict liability), actions, demands, penalties, losses, out-of-pocket costs or expenses (including, without limitation, reasonable consultant's fees, investigation and laboratory fees, attorneys' fees and expenses, and response or remedial costs), suits, any future amounts (whether before or after the release of any liens against the Mortgaged Properties) to be paid, incurred or suffered by or asserted against any indemnified party by any person or entity or Governmental Authority for, with respect to, or as a direct or indirect result of, or arising out of (i) any violation of or remedial obligation under any Environmental Law resulting from any act or omission of Mortgagor existing or occurring on or before the date (the "Release Date'') Mortgagee becomes the owner of the Mortgaged Properties on or in respect of which such violation occurs, or (ii) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or release from the Mortgaged Properties of any Hazardous Materials resulting from any act or omission of Mortgagor existing or occurring on or before the date the Release Date. 3.5 Survival. The representations, covenants, warranties and indemnifications contained in Sections 3.1 through 3.4 hereof shall survive the release of this Mortgage and all liens which Mortgagee may have against any Mortgaged Property. ARTICLE 4 RESPECTING DEFAULTS AND CERTAIN REMEDIES OF THE MORTGAGEE 4.1 Default. The term "defalllt", as used herein, shall mean the occurrence of any of the following events: (i) Mortgagor shall default in the due performance or observance by it of the covenants contained in Section 2.5(i), 2.5(iii), 2.5(ix), 2.5(x), or 2.5(xi) hereof, or (ii) Mortgagor shall default in the due performance or observance by it of any term, covenant or agreement contained in this Mortgage other than those specified in clause (i) of this Section 4.1, and such failure shall continue for thirty (30) days after the earlier of: (1) notice of such default from M0I1gagee; or (2) Mortgagee is notified of such default or should have been so notified pursuant to the provisions of Section 2.5(xi) hereof; or (iii) the breach by Mortgagor of any warranty or representation contained herein. Upon the occurrence of a default, Mortgagee shall be entitled to exercise the rights granted to it in this Article 4. 4.2 Performance on Morte:ae:or's Behalf. If Mortgagor should fail to keep or perform any covenant whatsoever contained in this Mortgage, Mortgagee may, but shall not be obligated to any person to do so, perform or attempt to perform said covenant, and any such payment so made or expense incurred in the performance or attempted performance of any such covenant shall be a part of the indebtedness hereby secured, and Mortgagor promises, upon demand, to pay to Mortgagee at the office of Mortgagee at - Page 8 lli;~;m;m~~;~¡f~~!: iwr::.::;~:~;;:: ¡*;;~i~;~:;i::;~::: ;' . ,. . ................,... .....,., .",' ." .,' ·r.., .~.. -., . ."-., " ."~..,, .--,.. :,:.;' ,~. ... .... .;', '': :~~"'..,,.. ,.....J..;................. , :......;::..¥'-':,·-':.......'·.··r' .;- " 1';I·~.¡r.;.L,.~: .. .1.' "-.. ···'·'·I..'·'·'·.·····t!.::·,:,.,· .'..,.,. .. ........;.......". 091.7:ì48 (('1'562 the address of Mortgagee stated above, all sums so advanced or paid by it with interest at the highest permitted lawful rate per annum from date when paid or incurred by Mortgagee. No such payment by Mortgagee shall constitute a waiver of any such default. In addition to the lien hereof, Mortgagee shall be subrogated to all rights and liens securing the payment of any debt, claim, tax or assessment for the payment of which Mortgagee may make an advance. 4.3 Foreclosure. Upon the occurrence of a default, Mortgagee may, at its option do anyone or more of the following: (a) without demand or presentment, notice of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notices, all of which the Mortgagor hereby expressly waives to the full extent permitted by applicable law, declare the entire unpaid balance of principal of the Secured Indebtedness, and all accrued interest thereon, immediately due and payable; (b) in addition to any and every other remedy, the Mortgagee may foreclose this Mortgage pursuant to the power of public sale contained herein in accordance with the laws of the State of Wyoming. Mortgagee shall give notice of sale and shall sell and dispose of the Mortgaged Property en masse or in separate parcels (as the Mortgagee may elect) in accordance with the laws of the State of Wyoming. The costs and expenses incurred by the Mortgagee in the exercise of any of the remedies provided in this Mortgage shall be secured by this Mortgage.; (c) it is intended by the foregoing provisions of Subsection 4.3(b) that the Mortgagee shall sell be entitled to sell not only that portion of the Mortgaged Property that is realty ("Mortgaged Realty"), but also the personal property and other interests constituting a part of the Mortgaged Property, or any part thereof, along with the Mortgaged Realty, or any part thereof, all as a unit and as a part of a single sale as provided by Wyoming law, or may sell any part of the Mortgaged Property separately from the remainder of the Mortgaged Property. It shall not be necessary to have present or to exhibit at any such sale any of the personal property subject to the lien hereof.; (d) enter upon and take possession of the Mortgaged Property and remove the fixtures or personal property or any part hereof, with or without judicial process, and, in connection therewith, without any responsibility or liability on the part of Mortgagee, take possession of any property located on or in the Mortgaged Property which is not a part of the Mortgaged Property and hold or store such property at Mortgagor's expense; (e) require Mortgagor to assemble that portion of the Mortgaged Property that is fixtures or personal property or any part thereof, and make it available to the Mortgagee at a place to be designated by the Mortgagee which is reasonably convenient to Mortgagor and the Mortgagee; (t) exercise any or all of the remedies granted to a secured party under the uee, including without limitation, after notification, if any, hereafter provided in this Subsection 4.3(f), the right to sell, lease or otherwise dispose of, at the office of the Mortgagee, or on the Mortgaged Realty, or elsewhere, as chosen by the Mortgagee, all or any part of the Mortgaged Property constituting fixtures or personal property in its then condition, or following any commercially reasonable preparation or processing, and each Sale (as used herein the term "Sale" means any such sale, lease or other disposition made pursuant to this Subsection 4.3 (£)) may be as a unit or in parcels, by public or private proceedings, and by way of one or more contracts), and, at any Sale, it shall not be necessary to exhibit such fixtures or personal property, or part thereof, being sold. The Sale of any part of such fixtures or personal property shall not exhaust the Mortgagee's Power of Sale, but Sales may be made from time to time until the Secured Indebtedness is paid and performed in full. Reasonable notification of the time and place ofany public Sale pursuant to this Subsection 4.3(t). or reasonable notification of the time after which any private sale is to be made pursuant to this Subsection 4.3(£), shall be sent to Mortgagor and to any other person entitled under the Dee to notice; provided, that if the fixtures or personal property, or part thereof, being sold is perishable, or threatens to decline speedily in value, or is of a type customarily sold on a recognized market, Mortgagee may sell, lease or otherwise dispose of such fixtures or personal property, or part thereof, being sold, leased or otherwise dispose of such fixtures or personal property, or part thereof, being sold, leased or otherwise disposed of without notification, advertisement or other notice of any kind. It is agreed that notice sent or given not less than ten (10) calendar days prior to the taking of the action to which the notice relates, is reasonable notification and notice for the purposes of this Subsection 4.3(t); (g) retain any or all of the Mortgaged Property which is fixtures or personalty in satisfaction of the MORTGAGE - Page 9 ~ ,. ,....- ':~':õJõ;rt"I:'~~~~':~:'-':"";; :0;..:,''',;' 0;:(. ',,',' '·-··:'~'!.:'I·\';1' :i!" ''l:0';'~ . .-. --::.'.~':¡::~!'~~;;<:¡:~' '."<:; ':".:;::,", .'i-·;i:ili:~:'::t3'~:~,.:~; .'-. ··~'-":·.:.Jr'.3rt~"ii"1J~··:,·.;,:oJ.~.<&<'::':'J'~i" :,:,.;,.,~.. -':r;-·':·..··.t',·, ':-.", '" ,,-,. .-:.:J ·':'-II'¡".:~""'''~T,t~'·:·,.·y.·:. ,"~ ;-,~.:-.-;'.o:'¡....!...~..... 091.7:148 C00563 secured indebtedness whenever the circumstances are such that the Mortgagee is entitled to do so under the DCC; and (h) in lieu of or in addition to exercising the Power of Sale hereinabove given, proceed by suit or suits, at law or in equity, to enforce the payment of the Secured Indebtedness in accordance with the terms hereof and of the notes evidencing it, to enforce the specific performance of any covenant or agreement contained herein or in the aid of the execution of any power herein granted, to appoint a receiver pending any foreclosure hereunder or the sale of the Mortgaged Property, to foreclose the lien of this Mortgage as against all or any portion of the Mortgaged Property and to have said Mortgaged Property sold under the judgment or decrees of a court of competent jurisdiction. On or at any time after the filing of judicial proceedings to protect or enforce the rights of the Mortgagee, the Mortgagee, as a matter of right and without regard to the sufficiency of the security and without any showing of insolvency, fraud or mismanagement on the plrt of Mortgagor, shall be entitled to the appointment of a receiver of the Mortgaged Property, and of the income, rents, issues and profits thereof. 4.4 Application of Proceeds. Mortgagee is authorized to receive the proceeds of said Sale or Sales made pursuant to Section 4.3 and apply the same as follows: First, to the payment of all necessary costs and expenses incident to the execution of this Mortgage; second, to the payment of the Secured Indebtedness in such order as the Mortgagee shall elect; and third, to the balance, if any, remaining after the full and final payment of the Secured Indebtedness, to Mortgagor or any other person lawfully entitled thereto. 4.5 Rie:ht to Immediate Possession Upon Foreclosure. In case the lien hereof shall be foreclosed by MOl1gagee's Sale, or by judicial action, the purchaser at any such sale shall receive, as an incident to his ownership, following the expiration of any applicable period of redemption possession of the property purchased, and Mortgagor agrees for Mortgagor and for all persons claiming under Mortgagor, that if Mortgagor or any such person shall thereafter hold possession of said property, or any part thereof, Mortgagor or the parties so holding possession shall be considered as tenants at sufferance of the purchaser at foreclosure sale, and anyone occupying the property after demand made for possession thereof shall be guilty of forcible detainer and shall be subject to eviction and removal, forcible or otherwise, with or without process of law, and all damages by reason thereof are hereby expressly waived. 4.6 Morte:ae:ee as Purchaser. It is agreed that Mortgagee or any successor Mortgagee may be the purchaser of the Mortgaged Properties, or of any part thereof, at any sale thereof, whether such sale be under the power of sale hereinabove vested in the Mortgagee, or upon any other foreclosure of the lien hereof or otherwise, and Mortgagee so purchasing shall, upon any such purchase following which the Mortgagor fails to redeem as provided by applicable law, acquire good title to the Mortgaged Properties so purchased, free of the lien of these presents. 4.7 Remedies Cumulative. The rights and remedies hereinabove expressly conferred are cumulative of all other rights and remedies herein, or by law or in equity provided, and shall not be deemed to deprive the Mortgagee of any such other legal or equitable rights or remedies, by judicial proceedings or otherwise, appropriate to enforce the conditions, covenants and terms of this Mortgage and of the Secured Promissory Note, and the employment of any remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent employment of any other appropriate remedy or remedies. 4.8 No Implied Waiver. No failure of Mortgagee to declare any default or to exercise any right or remedy herein provided in anyone or more instances or for any period of time, and no acquiescence in or acceptance by Mortgagee of any later defective notice or performance hereunder, shall be deemed a waiver or agreement to modify any provision hereof. Mortgagee shall at all times have the right, notwithstanding any such prior acquiescence or forbearance, without any prior notice or demand, to require strict performance of each and every tenll and provision hereof. At any time when any default is MO - Page 10 ,:'::;r.:t~~:':::::;:~ ~~~~I ~~~::,¡;r.t ~t:~i~~~:~;~:;:~' . '...-.-.¡....~.~....,: I ",~,- ._ '. .',. _, ~.~; -~. '. ". :, ...',.;.jl;.;.¡.;.;,;.;..,.... '-". '.~ "',;'" .'. '.'." '..J' t':: .~ . .~ '. ..- ,-1 ,;,.'......¡-..,'. .:O·¡:I··"'~ ~_\.' "-:""f'¡':;r,~:'~)!;~.~"I·' ':',1., 091:7:,,48 CO[564 continuing hereunder, Mortgagee may, without any prior notice to Mortgagor except such notice as may be herein otherwise required, exercise any right or remedy of Mortgagee arising by reason of such default, notwithstanding the length of time such default has been continuing or the occurrence in the past of similar events or other defaults for which no remedy has been invoked. 4.9 Morte:ae:or's Waiver of Certain Rie:hts. 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 enforced providing for any appraisement, valuation, stay, extension or redemption, and Mortgagor, for Mortgagor and Mortgagor's successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Properties, 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 marshalling of assets of Mortgagor, including the Mortgaged Properties, or to a sale in inverse order of alienation in the event of a 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 marshalling 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 of Mortgagee under the terms of this Mortgage to a sale of the Mortgaged Properties for the collection of the Secured Indebtedness without any prior or different resort for collection, or the right of Mortgagee under the terms of this Mortgage to the payment of the Secured Indebtedness out of the proceeds of the sale of the Mortgaged Properties 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 successors or assigns or any other persons claiming any interest in the Mortgaged Properties might take advantage despite this section, shall hereafter be repealed or cease to be enforced, such law shall not thereafter be deemed to preclude the application of this section. ARTICLE 5 ASSIGNMENT OF PROCEEDS OF SALE OF PRODUCTION 5.1 Assie:nment. As further security for the payment of the Secured Indebtedness and the performance of Mortgagor's covenants under this Mortgage, Mortgagor does hereby transfer, collaterally assign and convey unto Mortgagee all of the interest of Mortgagor in the oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, and other minerals in and under, and that may be produced from, the Mortgaged Properties together with the proceeds of the sale thereof and all accounts, contract rights, and other general intangibles under which such proceeds may arise (collectively, "Proceeds of Sale of Production "). Upon written notice from Mortgagee following the occurrence and during the continuation of a default hereunder, pipeline companies and others purchasing the oil, gas and other minerals produced and to be produced from said property are hereby authorized and directed to pay directly to Mortgagee the interest of Mortgagor in the proceeds of the sale of the oil, gas and other minerals produced and to be produced from said property, and to continue such payments until they have been furnished with a release hereof executed in writing by Mortgagee, and the receipt of Mortgagee for moneys so paid to it shall be a full and complete release, discharge and acquittance to any such pipeline company or other purchaser, to the extent of all amounts so paid. Mortgagor directs and instructs all pipeline companies, or other purchasers of the oil, gas and other minerals produced from said property, to pay promptly to Mortgagee, at the address of Mortgagee stated above, the interest of Mortgagor in the proceeds of the sale thereof. Upon the occurrence and during the continuation of a default hereunder, Mortgagee is authorized to receive and collect the proceeds of the sale of the oil, gas and other minerals assigned to it hereunder, and to apply the funds so received first toward the payment of the expenses, if any, incurred in the collection thereof, including operating expenses to the extent Mortgagee deems the same necessary or appropriate, then in such order as Mortgagee shall elect toward the payment ofthe Secured Indebtedness, any balance remaining after the full and final payment of the MORTGAGE - Page 11 II.. _ ,,_·..·____.H_.____..._. .~._..4....__..._..... ..,.,.-..........,'-...... .....-,\-....,......""...,-... ·..··_·,·.·.;.·.·.·.1. (\91.I,'1:1C\8 (00565 Secured Indebtedness, to be held subject to the order of Mortgagor. Mortgagee shall have the right, at its sole option, at any time, and from time to time, to release to, or on the order of, Mortgagor all or any portion of the funds assigned to Mortgagee hereunder, and no such release shall affect or impair the lien of this Mortgage or the validity and affect of the assignment contained in this Section 5.1. Mortgagee shall never be under any obligation to enforce the collection of the funds assigned to it hereunder, nor shall it ever be liable for failure to exercise diligence in the collection of such funds, but it shall only be accountable for the sums that it shall actually receive. Upon the full and final payment of the Secured Indebtedness, Mortgagee, at the request of Mortgagor, and at Mortgagor's expense, shall execute and deliver to Mortgagor a reassignment hereof, without recourse, representations, or warranties. Independent of the foregoing provisions, Mortgagor agrees to execute and deliver any and all transfer orders, division orders and other instruments that maybe requested by Mortgagee or that may be required by any purchaser of any production for the purpose of effectuating payment of the proceeds of production to Mortgagee. If under any existing sales agreements, other than division orders or transfer orders, payments of proceeds of production are required to be paid by the purchaser to Mortgagor so that under such existing agreements payment cannot be made directly to Mortgagee, then upon the occurrence and during the continuation of a default hereunder, Mortgagor's interest in all such proceeds of production under such sales agreements and in all other proceeds of production which may for any reason be paid to Mortgagor shall, when received by Mortgagor, constitute trust funds in Mortgagor's hands and shall be immediately paid over to Mortgagee. Mortgagor shall provide Mortgagee with current updated information as to the names, addresses and other contact information for purchasers of the production as set forth in this Section 5.1. 5.2 Power of Attornev. Upon the occurrence and during the continuation of a default hereunder, Mortgagor hereby designates and appoints Mortgagee as Mortgagor's true and lawful agent and attorney- in-fact (with full power of substitution, either generally or for such limited periods or purposes as Mortgagee may from time to time prescribe), with full power and authority, for and on behalf and in the name of Mortgagor, to execute; acknowledge and deliver all such division orders, transfer orders, certificates and other documents of every nature, with such covenants, warranties, indemnities and other provisions as may from time to time, in the opinion of Mortgagee, be necessary or proper to effectuate the intent and purpose of the assignment contained in Section 5.1 hereof. Mortgagor shall be bound thereby as fully and effectively as if Mortgagor had personally executed, acknowledged and delivered any such division order, transfer order, certificate and other document. The powers and authorities herein conferred on Mortgagee may be exercised by Mortgagee through any person who, at the time of the execution of a particular instrument, is an authorized representative of Mortgagee. The power of attorney conferred by this Section 5.2 is granted for a valuable consideration and hence is couplGd with an interest and is irrevocable so long as the Secured Indebtedness, or any part thereof, shall remain unpaid. Upon written notice from Mortgagee following the occurrence and during the continuation of a default hereunder, all persons dealing with Mortgagee, or any person thereof above designated, or any substitute, shall be fully protected in treating the powers and authorities conferred by this paragraph as continuing in full force and 'effect until advised by Mortgagee that all the Secured Indebtedness is fully and finally paid. 5.3 Release and Indemnity. Mortgagee and its successors and assigns are hereby absolved from all liability for failure to enforce collection of the proceeds of production and from all other responsibility in connection therewith, except the responsibility to account to Mortgagor for funds actually received and for the consequences of Mortgagee's own willful misconduct. Mortgagor agrees to indemnify and hold . harmless Mortgagee, the Mortgagee and their directors, officers, partners, employees and agents, from any and all claims, demands, liabilities, losses, damages (including without limitation consequential damages), causes of action, judgments, penalties, costs and expenses (including without lim itation reasonable attorneys' fees and expenses) imposed upon, asserted against or incurred or paid by Mortgagee by reason of the assertion that Mortgagee received, either before or after payment in full of the Secured Indebtedness, funds from the production of oil, gas or other hydrocarbons or other minerals claimed by t:~:tm:~:*::~:~~ .~~:)~.t~.:~~~:~ :-~m~m~t~l m~;~t~~~¡;~~~ ¡~¡¡~¡¡¡j¡~¡¡~!~~~:. . .=--'......,.......:.-..-.'''. .......~ "'..-.""'..,._....,,....,. .'"''''","",'._~''., .j.'. .. ,'.-." ·.....__-~~'~_~·o-,':'.._ .. . .-...,."'..."'.......... ·;'..'.'~~.I.......·'.,...."_.*,..,-,,..u...,.......;-... '.. -~...":....-.,, ,. """ .." . ..,.. ".' ... ...:...,.".-.... (or566 ()9j.7~1t.'\8 .' 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 oflaws, rules, regulations ånd/or orders governing such sales), and Mortgagee shall have the right to defend against any such claims or actions, employing attorneys of its own selection, and if not furnished with indemnity satisfactory to it, Mortgagee shall have the right to compromise and adjust such claims, actions and judgments. In addition to the rights to indemnify it as herein provided, all amounts paid by Mortgagee 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 Mortgagee pursuant to the provisions of this Section 5.3 shall be deemed an obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Mortgagee and shall bear interest, from the date expended until paid, at an interest rate equal to five percent (5.0%) per annum. The obligations of Mortgagor as set forth herein shall survive the release of this Mortgage. 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 negligence or willful misconduct of such particular indemnified party. 5.4 Oblieation to Pay Secured Indebtedness Absolute. Nothing herein contained shall detract from or limit the obligation to make prompt payment of the Secured Promissory Note at the time and in the manner provided therein, regardless of whether the Proceeds of Sale of Production herein assigned are sufficient to pay the same. The rights of Mortgagee under this Article V shall be cumulative of all other rights of Mortgagee. 5.5 Limitation on Exercise of Assienment. Mortgagee agrees that it will not exercise any of its rights under this Article V until after the occurrence and during the continuation of a default hereunder. ARTICLE 6 MISCELLANEOUS 6.1 Defeasance. If the Secured Indebtedness be paid, perfonned and discharged in accordance with the terms of this instrument and the other instruments evidencing it, and if Mortgagor shall well and truly perform all of Mortgagor's covenants contained herein, then this conveyance shall become null and void and be released at Mortgagor's request and expense; otherwise, it shall remain in full force and effect, provided that no release hereof shall impair Mortgagor's warranties and indemnities contained herein. 6.2 Cumulative Riehts. The rights, titles, interests, liens and powers hereunder are cumulative of each other and of all other rights, titles, interests, liens and powers which may now or hereafter exist to secure the payment of the Secured Indebtedness or any part thereof. 6.3 Limitation on Aereements. No provision herein or in any promissory note, instrument, or any other loan document executed by Mortgagor evidencing the Secured Indebtedness shall require the payment or permit the collection of interest in excess of the maximum pennitted by applicable law. If any excess of interest in such respect is provided for herein or in any such prom issory note, instrument, or any other loan document, the provisions of this paragraph shall govern, and Mortgagor shall not be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by applicable law. The intention of the parties being to confonn strictly to the applicable usury laws now in force, all sums payable under promissory notes, instruments and other loan documents executed by Mortgagor evidencing the Secured Indebtedness are hereby reduced and shall be held subject to reduction to the highest allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. MORTGAGE - Page 13 I.. , .....:.................. ,··,......"'"'~..··,C····..···.'··".;I..·.......· _,. . ."'.'. ·,"'·.'.J.:·.'-"'J.·~'I·...:..;,.'.· .'. .,..~,". ..p.." . ....,.....-,., .'. , 091.7a48 (0('567 6.4 No Liability for the Mort£!a£!ee. THE MORTGAGEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY THE MORTGAGEE IN GOOD FAITH, OR OTHERWISE BE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE MORTGAGEE'S NEGLIGENCE), EXCEPT FOR THE MORTGAGEE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Mortgagee 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 Mortgagee hereunder, believed by the Mortgagee in good faith to be genuine. Mortgagor hereby ratifies and confirms any and all acts which the Mortgagee or the Mortgagee's successor or successors, or substitute or substitutes, shall do lawfully by virtue hereof. Mortgagor shall reimburse the Mortgagee for, and indemnify and save the Mortgagee harmless against, any and all liability and expenses (including reasonable attorneys' fees) which may be incurred by the Mortgagee in the performance of its duties. The foregoing indemnity shall survive the termination of this Mortgage and the repayment of the Secured Indebtedness. Any amounts to be paid hereunder by Mortgagor to the Mortgagee shall be a demand obligation owing by Mortgagor to the Mortgagee and shall bear interest at a rate equal to five percent (5.0%) per annum. 6.5 Security A£!reement and Grant of Security Interest. With respect to all personal property and fixtures, if any, constituting a part of the Mortgaged Properties, this Mortgage shall likewise be a security agreement, and for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and for the purpose of further securing payment and performance of the Secured Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in all rights now owned and at any time hereafter acquired by Mortgagor in all of the following (the "Collateral'): (i) the Mortgaged Properties, (ii) all "as extracted collateral," as that term is defined in the UCC, including without limitation, all oil, gas and other minerals produced from the Mortgaged Properties, (iii) all accounts and general intangibles arising in connection with the sale or other disposition of such production, or arising otherwise out of orin connection with the Mortgaged Properties, or any part thereof, and (iv) all equipment, other personal property, and fixtures at any time used on the Mortgaged Properties or in connection with such production. Mortgagor represents and warrants that, except for any financing statement filed by Mortgagee, no financing statement covering the Collateral, or any part thereof, has been filed with any filing officer, and no other security interest has attached or been perfected in the Collateral, or in any part thereof. The above goods which are to become fixtures will be on the real estate hereinabove described or referred to. The above minerals or the like (including oil and gas) or accounts will be financed at the well head(s) or mine head(s) of the well(s) or mine(s) located on the real estate hereinabove described or referred to. This instrument may be filed for record as a financing statement in the real estate records of Park, Uintah, Lincoln and Johnson Counties, Wyoming. A carbon, photographic or other reproduction of this Mortgage shall be sufficient as a financing statement. Mortgagor hereby represents and warrants to Mortgagee that Mortgagor does have an interest of record in and to the real estate hereinabove described or referred to. Proceeds and products of all collateral described in this Section 6.5 are also covered. 6.6 Effectiveness as Financin£! Statement. This Mortgage shall constitute a financing statement and fixture filing and Mortgagee shall have the right at any time, and Mortgagor hereby specifically authorizes Mortgagee, to file this Mortgage as a financing statement, but the failure of Mortgagee to do so shall not impair the validity and enforceability of this Mortgage in any respect whatsoever. Mortgagor also authorizes Mortgagee to file financing statements describing the Collateral. Unless otherwise stated herein or in an instrument filed or recorded subsequent to the filing of this Mortgage, the address of Mortgagee from which information may be obtained concerning the liens and security interests herein granted is the address set forth above for Mortgagee. This financing statement covers all rights, titles and interests now or at any time hereafter required by Mortgagor in all of the Collateral. The Collateral includes (i) goods which are or are to become fixtures on the lands described or referred to on Exhibit A (or the oil and gas leases described on Exhibit A and/or the lands spaced, pooled or unitized therewith), ~:.:;:;:::.:.:6:':¡~¡:~ 1:·t¡6I.1.·"~..&'JIII·, Q~~~'~!:~~~~~:' !i~~æ?~ '-- ..·.:.:.;.:.:...¡""Q...r..1't..;.,...T...i"~...·~.·~C.Uu.:_~~·...~..~¡("!,·.¡o'..:;·.r'..¡,j.~j~(".·~"}5~..I>JaÇ4;'-· ",' . "','. '.:.~. .:·;,·,·.:..i:';.¡I.......:or;.:..".¡...i': t.." VL:~.::::C~tI;:..~¡O~U~t"IYß'.'t\;:\o'õI"¡;l""·:'J,~.·..:,.,~ .,~ '..·.";.-s¡l¡Ii.;.¡;,....!'Io'>r,;.\."__^.....!~";.~·:.:.A..h:;ï:>.·,.ll'i.";'.~.'.~" 091.7:.148 ()r~,68 \i \.. ...... and (ii) "as extracted collateral" (as defined in the UCC), and minerals or the like (including oil and gas) or the accounts which are to be financed at the wellhead or minehead of the wells or mines located on the land described or referred to in Exhibit A and/or the lands spaced, pooled or unitized therewith (or the oil and gas leases described on Exhibit A and/or the lands spaced, pooled or unitized therewith). The addresses of Mortgagor as "debtor" and Mortgagee as "secured party" are as follows: Debtor Secured Party Hunter Energy LLC 8000 S. Chester, Suite 375 Centennial, Colorado 80112 JDW, Inc. 1300 S. University Drive, Suite 410 Ft. Worth, Texas 76107 6.7 Successors and Assi!!ns. This Mortgage is binding upon Mortgagor, Mortgagor's successors, and shall inure to the benefit of Mortgagee, and its successors and assigns, and the provisions hereof shall likewise be covenants running with the land. 6.8 Counterparts. This Mortgage may be simultaneously executed in a number of identical counterparts, each of which, for all purposes, shall be deemed an original, and all of which, collectively, shall constitute one and the same document. 6.9 No Termination of Power of Attornev. No power of attorney granted herein by Mortgagor shall terminate upon any disability of Mortgagor. 6.10 Invaliditv of Certain Provisions. If any provision of this Mortgage is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Mortgage, the legality, validity and enforceability of the remaining provisions shall not be affected thereby; and in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Mortgage, a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid and enforceable. 6.11 Other Collateral Has No Effect. Etc. The liens provided for herein shall not affect or be affected by any other security or guaranty now or hereafter existing with respect to the Secured Indebtedness, nor shall they be affected by the release of any such other security or guaranty. 6.12 Enforcement. This instrument shall be deemed to be and may be enforced from time to time as an assignment, real estate mortgage, security agreement or financing statement, and from time to time as anyone or more thereof. 6.13 Captions. The captions, headings and arrangements used in this Mortgage are for convenience only and do not in any way affect, limit, amplify or modify the terms hereof. 6.14 Mort!!a!!ee's Consent. Except where otherwise expressly provided herein, in any instance hereunder where the approval, consent or the exercise of judgment by Mortgagee is required, the granting or denial of such approval or consent in the exercise of such judgment shall be within the sole discretion of Mortgagee, and Mortgagee shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment in any particular manner, regardless of the reasonableness of either the request or Mortgagee's judgment. 6.15 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·STA TE OF WYOMING. MORTGAGE - Page 15 " " ,;,·,,·.·.·1~.·;·.!11..;·:·;!i~· I: .:.,:,:. :'·~·:"¡·;'!'"'~'JI·i.X;~'!;¡..a;,'è.-- '; 'W" '. "1 ':. ..{" ,". '.~'. )..'~.. ...":::c.,~~ :.,' ·,·.·.·.·.~'·I·.·..I!.L·.: .::: .,:~C'"~".:"..~l.1t.',;.j:."!:\!;;'U:i:t¡..:;I:. :",-.~:,):..;.........,.,,: -'-': "','" ~" ¡:.,.... ;~ò;'fê"~;\.:O;.j.i.~~i'~··,·..;·'. "c" , .~, ò·; ','. ~;.,<."'~.Xi..¡.., n91.7~148 ... COC569 6.16 Authorization to Record Morteaee. Mortgagor hereby expressly authorizes Mortgagee and Mortgagee to record this Mortgage in the records of Park, Uinta and Lincoln Counties, Wyoming. 6.17 Rule Aeainst Perpetuities Savines Provision. This Mortgage creates a lien against, among other things, certain real property interests which vest in Mortgagor in the future. For purposes of compliance with the rule against perpetuities, it is agreed that the lien created by this Mortgage shall not attach to real property interests which vest in Mortgagor after the date which is one day less than 21 years from the date hereof. The effective date of the assignment contained in Article 5 is the 11+4. day of January, 2006 at 7:00A.M. EXECUTED on the date of the notary certification below to be effective as of the date first above written. Mortgagor: HUNTER ENERGY LLC By: ~L Name: Alan C. O'Hare Title: President STATE OF COLORADO ) COUNTY OF ~ ~ ss. This instrument was acknowledged before me on the IT day of January, 2006, by Alan C. O'Hare, President of Hunter Energy LLC, a Delaware limited liability company. JltdL ~\\\\"III""",/~ ~\\" ~v.NI N 8~ 111;: ~..>..fj ........ ~.~ <§. ,~.- .. x ~ ~.. e. ~ ~ ....., 0 TAR I,··. ~ ... . 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"mS ~~~~~~~~~~~~~~~~~~~~g~g~g~g!¡~~~~~~g~~~~~~~g~ ..J co~ ~ a; ~ ~ ~ g (¡)'f ~ 'f ~ ~ ~ re o¡: ~ 'f N (¡)~ (Q.n (QeD:::! a; ~:! ~ N Cf r.:.. .z iD ~ a; ~ Cf iò;::: ~ ÚÚ~ÚÚÚÚ ~Ú~ÚÚÚÚ~Ú~Ú Ú Ú Ú ~ÚÚÚÚ~Ú~ úú~ú~ú w WUJ...WWWUJ ...W...WWWW...W...W W W W ...WWWW...WN WW...W...W ..J mml-mmmm I-ml-mmmml-ml-m m m m I-mmmml-mz mml-ml-m W :æ c( z w m c( w ..J co co co N co ~ " co co co co co N N ~ ~ co N o ;1; ~ ~ ~ co co II) 10 M o ~ ~ 0> N o ~ ~ .,. " .... o 9 II) o co M o .,. ~ N M ~ II) co 0> 0 N ... 0 0 0 0 0 .... 0 0 ~ ~ ~ ~ ~ ~ ~ 0 ~ e ~ 0 0 0 0 W ~ ~ ~ ~ ~ ~ ~ ~ ~ m c( w ~ 0 0 0 0 0 0 0 0 ..J .... .... .... .... .... !I.. (ñ co d .,. ~ ~ Z ~ oJ c( I- o l- II) w 0:: o c( 1-. W Z :¡¡ c( o ~ ..J ~ o I- VI W 0:: o « I- W Z ø z :E ~ , ...........;.".. .... '.' .-....,..........,.. - ..................., '--···n ............ ". '., .......~. '-........,.""""'.:..:. 091.7:J48 .."......-_':-O'~,...."'_.",.. ...;;.....-:os.ø__........_,."...........,_........._.~~.,_ EXHffiIT B CERTAIN PERMITTED ENCUMBRANCES None. 3500065_LDOC ~1¡~~1m¡¡~~~::~:~~ r::::l:i:;i:¡~:::!:ff:,:' ~t!iMbl~~~·~ "<4.",',',',',''''. '.. '.. .'.... ..._.......,......,....... rOCt::'~13 \j '\.l(