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HomeMy WebLinkAbout930467 OOO!=;,J·4 f / f\ car tl U) r LVj-V WHEN RECORDED RETURN TO: VINSON & ELKINS L.L.P. First City Tower 1001 Fannin St., Suite 2500 Houston, TX 77002-6760 Atln: Linda Daugherty Lincoln and Crook Counties, Wyoming RECEIVED 6/18/2007 at 1 :53 PM RECEIVING # 930467 BOOK: 662 PAGE: 534 JEANNE WAGNER LINCOLN COUNTY CLERK, KEMMERER, WY MORTGAGE, LINE OF CREDIT MORTGAGE, DEED OF TRUST, ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT AND FINANCING STATEMENT FROM CORKRAN ENERGY, LP, AS MORTGAGOR, A TEXAS LIMITED PARTNERSlßP, WHOSE ADDRESS IS: 2219 Westlake Drive, Suite 120, Austin, TX 78746 (ORGANIZATIONAL I.D. No. 14341310) TO CIT CAPITAL USA INc., AS MORTGAGEE, WHOSE ADDRESS IS: 505 Fifth Avenue, 10th Floor, New York, NY 10017 (TAXPAYER I.D. No. 36-3871861) A CARBON, PHOTOGRAPHIC, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT. 32510JOv.l O~i304f~ 7 000535 A POWER OF SALE HAS BEEN GRANTED IN TillS INSTRUMENT. IN CERTAIN STATES. A POWER OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS INSTRUMENT. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS. THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES. THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY. THIS INSTRUMENT COVERS AS-EXTRACTED COLLATERAL AND MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS) AND WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE PROPERTIES DESCRIBED IN THE EXHmlTS HERETO. THIS FINANCING STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED ON THE EXHmlTS HERETO. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED, WHICH INTEREST IS DESCRIBED IN THE EXHmITS ATTACHED HERETO. PORTIONS OF THE MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN THE EXHIBITS HERETO. TillS FINANCING STATEMENT IS TO BE FILED FOR RECORD OR RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF EACH COUNTY IN WHICH SAID LAND OR ANY PORTION THEREOF IS LOCATED. THE MORTGAGOR IS THE OWNER OF RECORD INTERESTS IN THE REAL ESTATE CONCERNED. THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS. 32510JOv.l 09.3046.7 Section 1.01 Section 1.02 Section 1.03 Section 1.04 Section 1.05 Section 2.01 Section 2.02 Section 3.01 Section 3.02 Section 3.03 Section 3.04 Section 3.05 Section 3.06 Section 3.07 Section 4.01 Section 4.02 Section 4,03 Section 4.04 Section 4.05 Section 4.06 Section 4.07 Section 4.08 Section 4.09 Section 4.10 Section 4.11 Section 4.12 Section 4.13 Section 4.14 Section 5.01 325101Ov.l 000536 TABLE OF CONTENTS Page ARTICLE I GRANT OF LIEN AND INDEBTEDNESS SECURED Grant of Liens................... ...................... ............ ......... ..... .............. ............. 1 Grant of Security Interest............................................................................ 4 Indebtedness Secured.................................................................................. 4 Pro Rata Benefit.......................................................................................... 5 Defined Tenns ... ....... ......... ............ ...... ............ .... .... ............ ........................ 5 ARTICLE II ASSIGNMENT OF AS-EXTRACTED COLLATERAL Assignment.................................................................................................. 6 No Modification ofPavrnent Obligations ................................................... 7 ARTICLE III , REPRESENTATIONS. WARRANTIES AND COVENANTS Title............................................................................................................. 7 Defend Title................................................................................................. 7 Not a Foreign. Person................................................................................... 8 Power to Create Lien and Security.............................................................. 8 Revenue and Cost Bearin~ Interest ............................................................. 8 Abandon. Sales............................................................................................ 8 Failure to Perfonn ....................................................................................... 8 ARTICLE IV RIGHTS AND REMEDIES Event of Default.......................................................................................... 9 Foreclosure and Sale................................................................................... 9 Judicial Foreclosure: Receivership........... ................ ........... ............ .......... 10 Foreclosure for Installments.... ..... ............. .......................................... ...... 10 Separate Sales............................................................................................ 11 Possession of Mortgaged Property......................... ..... ..... ................... ...... 11 Occupancy After Foreclosure............ ................................ ..... ................... 11 Remedies Cumulative. Concurrent and Nonexclusive.............................. 12 No Release of Obligations... ......... ............. ............... ......... ....................... .12 Release of and Resort to Collateral........................................................... 12 Waiver of Redemption. Notice and Marshalling of Assets. Etc. .............. 12 Discontinuance of Proceedings ..................... ..... ........ .......... ....... ...... ........ 13 Application of Proceeds........ .................... ..... ............... .......... ....... ........... 13 Indemnity ..............................................................................................,... 13 ARTICLE V MISCELLANEOUS Instrument Construed................................................................................ 14 0930467 Section 5.02 Section 5.03 Section 5.04 Section 5.05 Section 5.06 Section 5,07 Section 5.08 Section 5.09 Section 5.10 Section 5.11 Section 5.12 000537 Release of Mortgage..................... .......... ... ...... .... ....... ....... ...... .................. 14 Severabilitv................................................................................................ 14 Successors and Assigns of Parties...... ......... ............... ............................... 14 Satisfaction of Prior Encumbrance.... ...... ......... ........................ ......... ........ 14 Nature of Covenants................................................................................... 15 Notices....................................................................................................... 15 Counterparts.............................................................................................. 15 Governing Law.......................................................................................... 15 Financing Statement: Fixture Filing................................... ....... ................ 15 Exculpation Provisions....... ....... ............ ......... ........ ......... .... ............. ......... 16 References...........................,..................................................................... 16 Exhibit A - Hydrocarbon Property 325 IOlOv. I O~i3046? 000-538 MORTGAGE, LINE OF CREDIT MORTGAGE. DEED OF TRUST, ASSIGNMENT OF AS-EXTRACTED COLLATERAL. SECURITY AGREEMENT AND FINANCING STATEMENT This MORTGAGE, LINE OF CREDIT MORTGAGE, MORTGAGE, ASSIGNMENT OF AS- EXTRACTED COLLATERAL, SECURITY AGREEMENT AND FINANCING STATEMENT (this "Mortgage") is entered into as of the effective time and date hereinafter stated (the "Effective Date") by CORKRAN ENERGY, LP, a Texas limited partnership, whose address is 2219 Westlake Drive, Suite 120, Austin, TX 78746 (the "Mortgagor"), in favor of CIT CAPITAL USA INC., INC., whose address is 505 Fifth Avenue, 10th Floor, New York, NY 10017, as administrative agent (in such capacity, together with its successors and assigns in such capacity, "Mortgagee"), and the Lenders and the other holders of the Indebtedness as defined herein. RECITALS: A. On even date herewith, Mortgagor, as borrower, the financial institutions ITom time to time party thereto (the "Lenders") and Mortgagee, as administrative agent for the Lenders, are executing a Credit Agreement (such agreement, as may ITom time to time be amended or supplemented, the "Credit Agreement"), pursuant to which, upon the terms and conditions stated therein, the Lenders have agreed to make loans and other extensions of credit to Mortgagor. B. Mortgagee and the Lenders have conditioned their obligations under the Credit Agreement upon the execution and delivery by Mortgagor of this Mortgage, and Mortgagor has agreed to enter into this Mortgage to secure its obligations under the Credit Agreement. C. Therefore, in order to comply with the terms and conditions of the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor hereby agrees as follows: ARTICLE I GRANT OF LIEN AND INDEBTEDNESS SECURED Section 1.01 Grant of Liens. To secure payment of the Indebtedness (as hereinafter defmed) and the performance of the covenants and obligations herein contained, Mortgagor does hereby MORTGAGE, ASSIGN, WARRANT, HYPOTHECATE and PLEDGE to Mortgagee with a POWER OF SALE (pursuant to Mortgage and applicable law), and grants a security interest in, the real and personal property, rights, titles, interests and estates described in the following Section 1.01 (a) through (g) (collectively called the "Mortgaged Proµerty"): (a) All rights, titles, interests and estates now owned or hereafter acquired by Mortgagor in and to the oil and gas leases and/or oil, gas and other mineral leases and other interests and estates and the lands and premises covered or affected thereby which are described on Exhibit A hereto (collectively called the "Hydrocarbon Property") or which Hydrocarbon 1 Ofi30467 tOO.f!lS39 Property is otherwise referred to herein, and specifically, but without limitation, the undivided interests of Mortgagor which are more particularly described on attached Exhibit A. (b) All rights, titles, interests and estates now owned or hereafter acquired by Mortgagor in and to (i) the properties now or hereafter pooled or unitized with the Hydrocarbon Property; (ii) all presently existing or future unitization, communitization, pooling agreements and declarations of pooled units and the units created thereby (including, without limitation, all units created under orders, regulations, rules or other official acts of any Federal, State or other governmental body or agency having jurisdiction and any units created solely among working interest owners pursuant to operating agreements or otherwise) which may affect all or any portion of the Hydrocarbon Property including, without limitation, those units which may be described or referred to on attached Exhibit A; (iii) all agreements described or referred to in this Mortgage or which relate to any of the Hydrocarbon Property or interests in the Hydrocarbon Property described or referred to herein or on attached Exhibit A; (iv) all geological, geophysical, engineering, accounting, title, legal and other technical or business data concerning the Mortgaged Property, the Hydrocarbons or any other item of Property which are in the possession of any Mortgagor and in which such Mortgagor can grant a security interest without violating any restrictions on assignment therein, and all books, files, records, magnetic media, computer records and other fOnTIS of recording or obtaining access to such data; and (v) the Hydrocarbon Property described on attached Exhibit A and covered by this Mortgage even though Mortgagor's interests therein be incorrectly described or a description of a part or all of such Hydrocarbon Property or Mortgagor's interests therein be omitted; it being intended by Mortgagor and Mortgagee herein to cover and affect hereby all interests which Mortgagor may now own or may hereafter acquire in and to the Hydrocarbon Property notwithstanding that the interests as specified on Exhibit A may be limited to particular lands, specified depths or particular types of property interests. (c) All rights, titles, interests and estates now owned or hereafter acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined therefrom and all other minerals (collectively called the "Hydrocarbons") which may be produced and saved from or attributable to the Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's interests therein, including all oil in tanks and all rents, issues, profits, proceeds, products, revenues and other income from or attributable to the Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's interests therein which are subjected or required to be subjected to the Liens and security interests of this Mortgage. (d) All tenements, hereditaments, appurtenances and properties in anywise appertaining, belonging, affixed or incidental to the Hydrocarbon Property, rights, titles, interests and estates described or referred to in paragraphs (a) and (b) above, which are now owned or which may hereafter be acquired by Mortgagor, including, without limitation, any and all property, real or personal, now owned or hereafter acquired by Mortgagor, held for use, or useful in connection with the development of any of such Hydrocarbon Property or the lands pooled or unitized therewith and other surface and subsurface rights together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing properties. 2 0'930467 000540 (e) Any property that may from time to time hereafter, by delivery or by writing of any kind, be subjected to the Lien and security interest hereof by Mortgagor or by anyone on Mortgagor's behalf. (f) All of the rights, titles and interests of every nature whatsoever now owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property rights, titles, interests and estates and every part and parcel thereof, including, without limitation, the Hydrocarbon Property rights, titles, interests and estates as the same may be enlarged by the discharge of any payments out of production or by the removal of any charges or Permitted Encumbrances (as hereinafter defined in Section 3.01) to which any ofthe Hydrocarbon Property rights, titles, interests or estates are subject, or otherwise; all rights of Mortgagor to Liens and security interests securing payment of proceeds from the sale of production from the Mortgaged Property; together with any and all renewals and extensions of any of the Hydrocarbon Property rights, titles, interests or estates; all contracts and agreements supplemental to or amendatory of or in substitution for the contracts and agreements described or mentioned above; and any and all additional interests of any kind hereafter acquired by Mortgagor in and to the Hydrocarbon Property rights, titles, interests or estates. (g) All property of every kind and character which the Mortgagor has or at any time hereafter acquires, whether real or personal property, tangible or intangible, or mixed, all other interests of every kind and character which Mortgagor has or at any time hereafter acquires in and to the types and items of property and interests described in Section 1.01(a) through (f) preceding, all property which is used or useful in connection with the Mortgaged Property or otherwise, and the proceeds and products of all of the foregoing, whether now owned or hereafter acquired, including, without limitation: (i) All present and future personal property; (ii) All present and future increases, profits, combinations, reclassifications, improvements and products of, accessions, attachments and other additions to, tools, parts and equipment used in connection with, and substitutes and replacements for, all or any part of the Mortgaged Property described in this or any other clause of this Section 1.01(g); (iii) All present and future As-extracted collateral, Accounts, Equipment, Inventory, contract rights, General Intangibles, Chattel Paper, Documents, Instruments, Fixtures, cash and noncash Proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or insurance proceeds or unearned insurance premiums payable with respect to, or proceeds payable by virtue of warranty or other claims against manufacturers of, or claims against any other person or entity with respect to, all or any part of the Hydrocarbons or the Mortgaged Property; and (iv) All present and future security for the payment to the Mortgagor of any of the Mortgaged Property and goods which gave or will give rise to any of such Mortgaged Property or are evidenced, identified, or represented therein or thereby. 3 09304f;'7, 00054:1 Any fractions or percentages specified on attached Exhibit A in referring to Mortgagor's interests are solely for purposes of the warranties made by Mortgagor pursuant to Sections 3.01 and 3.05 hereof and shall in no manner limit the quantum of interest affected by this Section 1.01 with respect to any Hydrocarbon Property or with respect to any unit or well identified on said Exhibit A. TO HA VB AND TO HOLD the Mortgaged Property unto Mortgagee and to Mortgagee's successors and assigns forever, upon the terms, provisions and conditions herein set forth. Section 1.02 Grant of Security Interest. The Mortgagor hereby grants to the Mortgagee, for its benefit and the benefit of the Lenders, a security interest in and to all of the Mortgagor's right, title and interest in and to the following Mortgaged Property now owned or at any time hereafter acquired by the Mortgagor or in which the Mortgagor now has or at any time in the future may acquire any right, title or interest and whether now existing or hereafter coming into existence (collectively, the "Collateral") as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Indebtedness (as defined herein): (1) all Accounts relating to the Mortgaged Property; (2) all General Intangibles (including, without limitation, rights in and under any Swap Agreement) and all rights under insurance contracts and rights to insurance proceeds relating to the Mortgage; (3) all Inventory, all Equipment and all Fixtures relating to the Mortgaged Property; (4) all Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a writing); (5) all As-extracted collateral relating to the Mortgaged Property; and (6) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, third-party guarantees and other Supporting Obligations given with respect to any of the foregoing. Section 1.03 Indebtedness Secured. This Mortgage is executed and delivered by Mortgagor to secure and enforce the following (collectively, the "Indebtedness"): (a) Payment of and performance of any and all indebtedness, obligations and liabilities, including interest whether accruing pre-petition or post-petition, of the Mortgagor pursuant to the Credit Agreement or any other Loan Document, whether now existing or hereafter arising and being in the original principal amount of Fifty Million and 00/100 United States Dollars (US $50,000,000.00) with final maturity on or before June 6, 2010. (b) Any sums which may be advanced or paid by Mortgagee or the Lenders under the terms hereof or of the Credit Agreement or any Loan Document on account of the failure of the Mortgagor, or any of Mortgagor's Subsidiaries to comply with the covenants of 4 O~}304f)7 0005-42 Mortgagor contained herein or in the Credit Agreement or any other Loan Document; and all other indebtedness of the Mortgagor arising pursuant to the provisions of this Mortgage. (c) Any additional loans or advances made by any Lender to or for the benefit of the Mortgagor or any other Subsidiary of the Mortgagor pursuant to the Credit Agreement or any other Loan Document (it being contemplated that the Lenders may lend additional sums to the Mortgagor pursuant to the Credit Agreement from time to time, but shall not be obligated to do so, and the Mortgagor agrees that the payment of any such additional loans shall be secured by this Mortgage). (d) Payment of and performance of any and all present or future obligations of Mortgagor (or any Subsidiary of the Mortgagor with respect to Swap Agreements) under any Loan Document or Swap Agreement between the Mortgagor or any Subsidiary and any Lender or any Affiliate of any Lender while such Person (or, in the case of an Affiliate of a Lender, the Person affiliated therewith) is a Lender, to the Mortgagor, the Mortgagee, the Issuing Banks, the Lenders and each Affiliate of a Lender party to a Swap Agreement between such Affiliate and Mortgagor (or any Subsidiary of Mortgagor), including any Swap Agreement between such Persons in existence prior to the date hereof ("Secured Swap Agreements"). For the avoidance of doubt, a Swap Agreement ceases to be a Secured Swap Agreement under this Mortgage if the Person that is the counterparty to the Mortgagor or a Subsidiary under such Swap Agreement ceases to be a Lender under the Credit Agreement (or, in the case of an Affiliate of a Lender, the Person affiliated therewith ceases to be a Lender under the Credit Agreement). (e) Performance of all Letters of Credit executed from time to time by Mortgagor or any Subsidiary of Mortgagor under or pursuant to the Credit Agreement and all reimbursement obligations for drawn or undrawn portions under any Letter of Credit now outstanding or hereafter issued under or pursuant to the Credit Agreement. (1) All renewals, extensions, amendments and changes of, or substitutions or replacements for, all or any part of the Obligations described under Section 1.03 (a) through (e). Section 1.04 Pro Rata Benefit. This Mortgage is executed and granted for the pro rata benefit and security of the Lenders, any Person secured hereby and any and all future holders of an interest in the Indebtedness and the interest thereon for so long as same remains unpaid and thereafter for so long as any Lender or any Person secured hereby (or any Lender Affiliate) has any obligations under the Credit Agreement or any Secured Swap Agreement to lend money or issue Letters of Credit in favor of Mortgagor or has any obligations under any Secured Swap Agreements or until the Liens hereby created are released by the Mortgagee or such Person; it being understood and agreed that possession of any Note (or any replacements of any said Note) at any time by Mortgagor shall not in any manner extinguish the Indebtedness, such Notes or this Mortgage securing payment thereof, and the Mortgagor shall have the right to issue and reissue any of the Notes from time to time as its interest or as convenience may require, without in any manner extinguishing or affecting the Indebtedness, the obligations under any of the Notes, or the security of this Mortgage. Section 1.05 Defined Terms. Any capitalized term used in this Mortgage and not defined in this Mortgage shall have the meaning assigned to such term in the Credit Agreement, 5 O~ia04.·~7 000543 and any capitalized or uncapitalized tenns which are defined in the Unifonn Commercial Code on the date hereof shall have the meaning assigned thereto. As used herein, "Unifonn Commercial Code" means the Unifonn Commercial Code presently in effect in the State of Wyoming, as the same may be amended fi.-om time to time, and any successor statute thereto, except to the extent that the Unifonn Commercial Code of some other jurisdiction applies mandatorily. ARTICLE II ASSIGNMENT OF AS-EXTRACTED COLLATERAL Section 2.01 Assignment. (a) The Mortgagor has absolutely and unconditionally assigned, transferred, conveyed and granted a security interest, and does hereby absolutely and unconditionally assign, transfer, convey and grant a security interest unto the Mortgagee, its successors and assigns, in and to: (i) its As-extracted collateral located in or relating to Oil and Gas Properties located in the county where this Mortgage is filed, including without limitation, all As- extracted collateral relating to the Hydrocarbon Properties, the Hydrocarbons and all products obtained or processed therefi.-om; (ii) the revenues and proceeds now and hereafter attributable to such Oil and Gas Properties, Hydrocarbon Properties, including the Hydrocarbons, and said products and all payments in lieu, such as "take or pay" payments or settlements; and (iii) all amounts and proceeds hereafter payable to or to become payable to Mortgagor or now or hereafter relating to any part of the subject interests or the surface rights and all amounts, sums, monies, revenues and income which become payable to the Mortgagor from, or with respect to, any of the Mortgaged Property, present or future, now or hereafter constituting a part of the Mortgaged Property. (b) The Hydrocarbons and products are to be delivered into pipe lines connected with the Mortgaged Property, or to the purchaser thereof, to the credit of the Mortgagee, free and clear of all taxes, charges, costs, and expenses; and all such revenues and proceeds shall be paid directly to the Mortgagee, at its banking offices in New York, New York with no duty or obligation of any party paying the same to inquire into the rights of the Mortgagee to receive the same, what application is made thereof, or as to any other matter. The Mortgagor agrees to perfonn all such acts, and to execute all such further assignments, transfers and division orders, and other instruments as may be required or desired by the Mortgagee or any party in order to have said proceeds and revenues so paid to the Mortgagee. In addition to any and all rights of a secured party under Sections 9-607 and 9-609 of the Unifonn Commercial Code, the Mortgagee is fully authorized to receive and receipt for said revenues and proceeds; to endorse and cash any and all checks and drafts payable to the order of the Mortgagor or the Mortgagee for the account of the Mortgagor received fi.-om or in connection with said revenues or proceeds and to hold the proceeds thereof in a bank account as additional collateral securing the Indebtedness; and to execute transfer and division orders in the name of the Mortgagor, or otherwise, with warranties binding the Mortgagor. During the continuation of an Event of Default, all proceeds received by the Mortgagee pursuant to this grant and assignment shall be at the Mortgagee's sole discretion 6 09304Æ;7 00(1154'1 either remitted to the Mortgagor or applied as provided in Section 4.13. The Mortgagee shall not be liable for any delay, neglect, or failure to effect collection of any proceeds or to take any other action in connection therewith or hereunder; but the Mortgagee shall have the right, at its election, in the name of the Mortgagor or otherwise, to prosecute and defend any and all actions or legal proceedings deemed advisable by the Mortgagee in order to collect such funds and to protect the interests of the Mortgagee, and/or the Mortgagor, with all costs, expenses and attorneys' fees incurred in connection therewith being paid by the Mortgagor. The Mortgagor hereby appoints the Mortgagee as its attorney-in-fact to pursue any and all rights of the Mortgagor to Liens on and security interests in the Hydrocarbons securing payment of proceeds of runs attributable to the Hydrocarbons. In addition to the rights granted to the Mortgagee in Section 1.01 of this Mortgage, the Mortgagor hereby further transfers and assigns to the Mortgagee any and all such Liens, security interests, fmancing statements or similar interests of the Mortgagor attributable to its interest in the Hydrocarbons and proceeds of runs therefrom arising under or created by any statutory provision, judicial decision or otherwise. The power of attorney granted to the Mortgagee in this Section 2.01, being coupled with an interest, shall be irrevocable so long as the Indebtedness or any part thereof remains unpaid. Until such time as an Event of Default has occurred and is continuing, the Mortgagee hereby grants to the Mortgagor a license to sell and receive proceeds rrom the sale of Hydrocarbons, which license shall automatically terminate upon such Event of Default and for so long as the same continues. Section 2.02 No Modification of Payment Obligations. Nothing herein contained shall modify or otherwise alter the obligation of Mortgagor to make prompt payment of all principal and interest owing on the Indebtedness when and as the same become due regardless of whether the proceeds of the Hydrocarbons are sufficient to pay the same and the rights provided in accordance with the foregoing assignment provision shall be cumulative of all other security of any and every character now or hereafter existing to secure payment of the Indebtedness. Nothing in this Article II is intended to be an acceptance of collateral in satisfaction of the Indebtedness. ARTICLE III REPRESENTATIONS. WARRANTIES AND COVENANTS Mortgagor hereby represents, warrants and covenants as follows: Section 3.01 Title. To the extent of the undivided interests specified on attached Exhibit A, Mortgagor has good and defensible title to and is possessed of the Mortgaged Property. The Mortgaged Property is free of any and all Liens except Liens permitted to be placed on the Mortgaged Properties under Section 9.03 of the Credit Agreement (collectively, the "Permitted Encumbrances"). Section 3.02 Defend Title. This Mortgage is, and always will be kept, a direct first priority Lien and security interest upon the Mortgaged Property subject only to Permitted Encumbrances (and no intent to subordinate the first priority of the Liens created hereby is intended or inferred), and Mortgagor will not create or suffer to be created or permit to exist any Lien, security interest or charge prior to or on a parity with the Lien and security interest of this Mortgage upon the Mortgaged Property or any part thereof or upon the rents, issues, revenues, profits and other income thererrom. Mortgagor will warrant and defend the title to the 7 0930467 OO~S45 Mortgaged Property against the claims and demands of all other persons whomsoever and will maintain and preserve the Lien created hereby so long as any of the Indebtedness secured hereby remains unpaid. Should an adverse claim be made against or a cloud develop upon the title to any part of the Mortgaged Property other than Permitted Encumbrances, Mortgagor agrees it will immediately defend against such adverse claim or take appropriate action to remove such cloud at Mortgagor's cost and expense, and Mortgagor further agrees that Mortgagee may take such other action as they deem advisable to protect and preserve their interests in the Mortgaged Property, and in such event Mortgagor will indemnify Mortgagee against any and all cost, attorney's fees and other expenses which they may incur in defending against any such adverse claim or taking action to remove any such cloud. Section 3.03 Not a Foreign Person. Mortgagor is not a "foreign person" within the meaning of the Code, Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and any regulations promulgated thereunder). Section 3.04 Power to Create Lien and Security. The Mortgagor has full power and lawful authority to grant, bargain, sell, assign, transfer and convey a security interest in all of the Mortgaged Property and the Collateral in the manner and form herein provided. No authorization, approval, consent or waiver of any lessor, sublessor, Goverilmental Authority or other party or parties whomsoever is required in connection with the execution and delivery by Mortgagor of this Mortgage except to the extent the approval or consent of the Department of the Interior, United States of America or similar Governmental Authority, as the case may be, is required by applicable law or regulation to the transfer or assignment of an interest in any of the Mortgaged Property. Section 3.05 Revenue and Cost Bearing Interest. Mortgagor's ownership of the Hydrocarbon Property and the undivided interests therein as specified on attached Exhibit A will, after giving full effect to all Permitted Encumbrances, afford Mortgagot not less than those net interests (expressed as a fraction, percentage or decimal) in the production from or which is allocated to such Hydrocarbon Property. Section 3.06 Abandon. Sales. Mortgagor will not sell, lease, assign, transfer or otherwise dispose or abandon any of the Mortgaged Property except as permitted by the Credit Agreement. Section 3.07 Failure to Perform. Mortgagor agrees that if Mortgagor fails to perform any act or to take any action which Mortgagor is required to perform or take hereunder or pay any money which Mortgagor is required to pay hereunder, Mortgagee, in Mortgagor's name or its or their own name, may, but shall not be obligated to, perform or cause to perform such act or take such action or pay such money, and any expenses so incurred by either of them and any money so paid by either of them shall be a demand obligation owing by Mortgagor to Mortgagee, and Mortgagee, upon making such payment, shall be subrogated to all of the rights of the Person receiving such payment. Each amount due and owing by Mortgagor to Mortgagee pursuant to this Mortgage shall bear interest from the date of such expenditure or payment to such Person until paid at the post-default rate set forth in Section 3.02(c) of the Credit 8 O~~}J0467 Ot!l~,t¡:"}46 Agreement, and all such amounts together with such interest thereon shall be a part of the Indebtedness described in Section 1.03 hereof. ARTICLE IV RIGHTS AND REMEDIES Section 4.01 Event of Default. An "Event of Default" under the Credit Agreement shall be an Event of Default under this Mortgage. Section 4.02 Foreclosure and Sale. (a) If an Event of Default shall occur and be continuing, Mortgagee shall have the right and option to proceed with foreclosure and to sell, to the extent permitted by law, all or any portion ofthe Mortgaged Property at one or more sales, as an entirety or in parcels, at such place or places in otherwise such manner and upon such notice as may be required by law, or, in the absence of any such requirement, as Mortgagee may deem appropriate, and to make conveyance to the purchaser or purchasers. Where the Mortgaged Property is situated in more than one jurisdiction, notice as above provided shall be posted and filed in all such jurisdictions (if such notices are required by law), and all such Mortgaged Property may be sold in any such jurisdiction and any such notice shall designate the jurisdiction where such Mortgaged Property is to be sold. Nothing contained in this Section 4.02 shall be construed so as to limit in any way Mortgagee's rights to sell the Mortgaged Property, or any portion thereof, by private sale if, and to the extent that, such private sale is permitted under the laws of the applicable jurisdiction or by public or private sale after entry of a judgment by any court of competent jurisdiction so ordering. Mortgagor hereby irrevocably appoints Mortgagee to be the attorney of Mortgagor and in the name and on behalf of Mortgagor to execute and deliver any deeds, transfers, conveyances, assignments, assurances and notices which Mortgagor ought to execute and deliver and do and perform any and all such acts and things which Mortgagor ought to do and perform under the covenants herein contained and generally, to use the name of Mortgagor in the exercise of all or any of the powers hereby conferred on Mortgagee. At any such sale: (i) whether made under the power herein contained or any other legal enactment, or by virtue of any judicial proceedings or any other legal right, remedy or recourse, it shall not be necessary for Mortgagee to have physically present, or to have constructive possession of, the Mortgaged Property (Mortgagor hereby covenanting and agreeing to deliver to Mortgagee any portion of the Mortgaged Property not actually or constructively possessed by Mortgagee immediately upon demand by Mortgagee) and the title to and right of possession of any such property shall pass to the purchaser thereof as completely as if the same had been actually present and delivered to purchaser at such sale, (ii) each instrument of conveyance executed by Mortgagee shall contain a general warranty of title, binding upon Mortgagor and their successors and assigns, (iii) each and every recital contained in any instrument of conveyance made by Mortgagee shall conclusively establish the truth and accuracy of the matters recited therein, including, without limitation, nonpayment of the Indebtedness, advertisement and conduct of such sale in the manner provided herein and otherwise by law, (iv) any and all prerequisites to the validity thereof shall be conclusively presumed to have been performed, (v) the receipt of Mortgagee or of such other party or officer making the sale shall be a sufficient discharge to the purchaser or purchasers for its purchase money and no such purchaser or purchasers, or its assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof, (vi) to the fullest extent permitted by law, Mortgagor 9 0.3304f)? OOØ}S4t<i' shall be completely and irrevocably divested of all of its right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the property sold and such sale shall be a perpetual bar both at law and in equity against Mortgagor, and against any and all other persons claiming or to claim the property sold or any part thereof, by, through or under Mortgagor, and (vii) to the extent and under such circumstances as are permitted by law, Mortgagee may be a purchaser at any such sale, and shall have the right, after paying or accounting for all costs of said sale or sales, to credit the amount of the bid upon the amount of the Indebtedness (in the order of priority set forth in Section 4.13 hereof) in lieu of cash payment. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PROPERTIES AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS MORTGAGE. WARNING: THIS MORTGAGE CONTAINS A POWER OF SALE AND UPON DEFAULT MAY BE FORECLOSED BY ADVERTISEMENT. IN FORECLOSURE BY ADVERTISEMENT AND THE SALE OF THE MORTGAGED PROPERTY IN CONNECTION THEREWITH. NO HEARING IS REQUIRED. (b) If an Event of Default shall occur and be continuing, this Mortgage may be foreclosed as to the Mortgaged Properties, or any part thereof, in any manner permitted by applicable law. Cumulative of the foregoing and the other provisions of this Section 4.02, as to any portion of the Mortgaged Properties located 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, the Mortgagee may foreclose this Mortgage by executory process subject to, and on the terms and conditions required or permitted by, applicable law, and shall have the right to appoint a keeper of such Mortgaged Properties. Section 4.03 Judicial Foreclosure; Receivership. If any of the Indebtedness shall become due and payable and shall not be promptly paid, Mortgagee shall have the right and power to proceed by a suit or suits in equity or at law, whether for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for any foreclosure hereunder or for the sale of the Mortgaged Property under the judgment or decree of any court or courts of competent jurisdiction, or for the appointment of a receiver pending any foreclosure hereunder or the sale of the Mortgaged Property under the order of a court or courts of competent jurisdiction or under executory or other legal process, or for the enforcement of any other appropriate legal or equitable remedy. Any money advanced by Mortgagee in connection with any such receivership shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to the Mortgagee and shall bear interest from the date of making such advance by Mortgagee until paid at the at the rate per annum charged on amounts not paid when due under Section 3. 02( c) of the Credit Agreement. Section 4.04 Foreclosure for Installments. Mortgagee shall also have the option to proceed with foreclosure in satisfaction of any installments of the Indebtedness which have not been paid when due either through the courts or by proceeding with foreclosure in satisfaction of 10 O~~304fJ.7 OOÚ548 the matured but unpaid portion of the Indebtedness as if under a full foreclosure, conducting the sale as herein provided and without declaring the entire principal balance and accrued interest due; such sale may be made subject to the unmatured portion of the Indebtedness, and any such sale shall not in any manner affect the unmatured portion of the Indebtedness, but as to such unmatured portion of the Indebtedness this Mortgage shall remain in full force and effect just as though no sale had been made hereunder. It is further agreed that several sales may be made hereunder without exhausting the right of sale for any unmatured part of the Indebtedness, it being the purpose hereof to provide for a foreclosure and sale of the security for any matured portion of the Indebtedness without exhausting the power to foreclose and sell the Mortgaged Property for any subsequently maturing portion of the Indebtedness. Section 4.05 Separate Sales. The Mortgaged Property may be sold in one or more parcels and in such manner and order as Mortgagee, in its sole discretion, may elect, it being expressly understood and agreed that the right of sale arising out of any Event of Default shall not be exhausted by anyone or more sales. Section 4.06 Possession of Mortgaged Property. Mortgagor agrees to the full extent that they lawfully may, that, in case one or more ofthe Events of Default shall have occurred and shall not have been remedied, then, and in every such case, Mortgagee shall have the right and power to enter into and upon and talœ possession of all or any part of the Mortgaged Property in the possession of Mortgagor, its successors or assigns, or its or their agents or servants, and may exclude Mortgagor, its successors or assigns, and all persons claiming under Mortgagor, and its or their agents or servants wholly or partly there:f.Ì"om; and, holding the same, Mortgagee may use, administer, manage, operate and control the Mortgaged Property and conduct the business thereof to the same extent as Mortgagor, its successors or assigns, might at the time do and may exercise all rights and powers of Mortgagor, in the name, place and stead of Mortgagor, or otherwise as Mortgagee shall deem best. All costs, expenses and liabilities of every character incurred by Mortgagee in administering, managing, operating, and controlling the Mortgaged Property shall constitute a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Mortgagee and shall bear interest :f.Ì"om date of expenditure until paid at the post-default rate set forth in Section 3.02(c) of the Credit Agreement, all of which shall constitute a portion of the Indebtedness and shall be secured by this Mortgage and all other Security Instruments. Section 4.07 Occupancy After Foreclosure. In the event there is a foreclosure sale hereunder and at the time of such sale any Mortgagor or Mortgagor's heirs, devisees, representatives, successors or assigns or any other person claiming any interest in the Mortgaged Property by, through or under any Mortgagor, are occupying or using the Mortgaged Property or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy :f.Ì"om day to day, terminable at the will of either the landlord or tenant, or at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser; to the extent permitted by applicable law, the purchaser at such sale shall, notwithstanding any language herein apparently to the contrary, have the sole option to demand immediate possession following the sale or to permit the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession 11 O~J304G7 0{)0549 of the Mortgaged Property (such as an action for forcible entry and detainer) in any court having jurisdiction. Section 4.08 Remedies Cumulative. Concurrent and Nonexclusive. Every right, power and remedy herein given to Mortgagee shall be cumulative and in addition to every other right, power and remedy herein specifically given or now or hereafter existing in equity, at law or by statute (including specifically those granted by the Uniform Commercial Code in effect and applicable to the Mortgaged Property or any portion thereof) each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and so often and in such order as may be deemed expedient by the Mortgagee, and the exercise, or the beginning of the exercise, of any such right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter any other right, power or remedy. No delay or omission by Mortgagee in the exercise of any right, power or remedy shall impair any such right, power or remedy or operate as a waiver thereof or of any other right, power or remedy then or thereafter existing. Section 4.09 No Release of Obligations. Neither Mortgagor, any Guarantor nor any other Person hereafter obligated for payment of all or any part of the Indebtedness shall be relieved of such obligation by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor, or any Guarantor or any other Person so obligated to foreclose the Lien of this Mortgage or to enforce any provision hereunder or under the Credit Agreement; (b) the release, regardless of consideration, of the Mortgaged Property or any portion thereof or interest therein or the addition of any other property to the Mortgaged Property; (c) any agreement or stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending, renewing, rearranging or in any other way modifying the terms of this Mortgage without first having obtained the consent of, given notice to or paid any consideration to Mortgagor, any Guarantor or such other Person, and in such event Mortgagor, Guarantor and all such other Persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement unless expressly released and discharged in writing by Mortgagee; or (d) by any other act or occurrence save and except the complete payment of the Indebtedness and the complete fulfillment of all obligations hereunder or under the Credit Agreement. Section 4.10 Release of and Resort to Collateral. Mortgagee may release, regardless of consideration, any part of the Mortgaged Property without, as to the remainder, in any way impairing, affecting, subordinating or releasing the Lien or security interest created in or evidenced by this Mortgage or its stature as a first and prior Lien and security interest in and to the Mortgaged Property, and without in any way releasing or diminishing the liability of any person or entity liable for the repayment of the Indebtedness. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. Section 4.11 Waiver of Redemption. Notice and Marshalling of Assets. Etc. To the fullest extent permitted by law, Mortgagor hereby irrevocably and unconditionally waives and releases (a) all benefits that might accrue to Mortgagor by virtue of any present or future moratorium law or other law exempting the Mortgaged Property from attachment, levy or sale on execution or providing for any appraisement, valuation, stay of execution, exemption from civil process, redemption or extension of time for payment; (b) all notices of any Event of Default or 12 O~j304f)7 000550 of Mortgagee's intention to accelerate maturity of the Indebtedness or of Mortgagee's election to exercise or his actual exercise of any right, remedy or recourse provided for hereunder or under the Credit Agreement; and (c) any right to a marshalling of assets or a sale in inverse order of alienation. If any law referred to in this Mortgage and now in force, of which Mortgagor or its successor or successors might take advantage despite the provisions hereof, shall hereafter be repealed or cease to be in force, such law shall thereafter be deemed not to constitute any part of the contract herein contained or to preclude the operation or application of the provisions hereof; provided, however, that if the laws of any state do not permit the redemption period to be waived, the redemption period is specifically reduced to the minimum amount of time allowable by statute. Section 4.12 Discontinuance of Proceedings. In case Mortgagee shall have proceeded to invoke any right, remedy or recourse permitted hereunder or under the Credit Agreement and shall thereafter elect to discontinue or abandon same for any reason, Mortgagee shall have the unqualified right so to do and, in such an event, Mortgagor and Mortgagee shall be restored to their former positions with respect to the Indebtedness, this Mortgage, the Credit Agreement, the Mortgaged Property and otherwise, and the rights, remedies, recourses and powers of Mortgagee shall continue as if same had never been invoked. Section 4.13 Application of Proceeds. The proceeds of any sale of the Mortgaged Property or any part thereof and all other monies received by Mortgagee in any proceedings for the enforcement hereof or otherwise, whose application has not elsewhere herein been specifically provided for, shall be applied: (a) First, to the extent permitted by applicable law, to the payment of all expenses incurred by Mortgagee incident to the enforcement of this Mortgage, the Credit Agreement or any of the Indebtedness (including, without limiting the generality of the foregoing, expenses of any entry or taking of possession, of any sale, of advertisement thereof, and of conveyances, and court costs, compensation of agents and employees and legal fees), and to the payment of all other charges, expenses, liabilities and advances incurred or made by Mortgagee under this Mortgage or in executing any trust or power hereunder; (b) Second, as set forth in Section IO.02(c) of the Credit Agreement. Section 4.14 Indemnitv. IN CONNECTION WITH ANY ACTION TAKEN BY MORTGAGEE, ANY PERSON SECURED HEREBY AND/OR ANY LENDER PURSUANT TO TillS MORTGAGE, MORTGAGEE AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE HAS RECEIVED FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS OR ANY ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING OR CONTROLLING THE MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY RESULT FROM THE ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF AN INDEMNIFIED PARTY, NOR SHALL MORTGAGEE, ANY PERSON SECURED HEREBY AND/OR ANY LENDER BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY EACH 13 f)' I{ "J> '. ~~~J\04f)7 00055:'S.. INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF TillS MORTGAGE OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER; SHOULD MORTGAGEE, ANY PERSON SECURED HEREBY AND/OR ANY LENDER MAKE ANY EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND ATTORNEYS' F~ES, SHALL BE A DEMAND OBLIGATION (WHICH OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY) OWING BY MORTGAGOR TO MORTGAGEE, ANY PERSON SECURED HEREBY AND/OR ANY LENDER AND SHALL BEAR INTEREST FROM THE DATE EXPENDED UNTIL PAID AT THE POST- DEFAULT RATE SET FORTH IN SECTION 3.02(C) OF THE CREDIT AGREEMENT, SHALL BE A PART OF THE INDEBTEDNESS AND SHALL BE SECURED BY TillS MORTGAGE AND ANY OTHER SECURITY INSTRUMENT. MORTGAGOR HEREBY ASSENTS TO, RATIFIES AND CONFIRMS ANY AND ALL ACTIONS OF MORTGAGEE, ANY PERSON SECURED HEREBY AND/OR ANY LENDERS WITH RESPECT TO THE MORTGAGED PROPERTY TAKEN UNDER AND IN COMPLIANCE WITH THE TERMS OF TillS MORTGAGE. THE LIABILITIES OF THE MORTGAGOR AS SET FORTH IN TillS SECTION 4.16 SHALL SURVIVE THE TERMINATION OF TillS MORTGAGE. ARTICLE V MISCELLANEOUS Section 5.01 Instrument Construed. This Mortgage may be construed as a mortgage, deed of trust, chattel mortgage, conveyance, assignment, security agreement, pledge, financing statement, hypothecation or contract, or anyone or more of them, in order fully to effectuate the Lien hereof and the purposes and agreements herein set forth. Section 5.02 Release of Mortgage. If all Indebtedness secured hereby shall be paid and the Credit Agreement and all of the Commitments thereunder terminated, Mortgagee shall forthwith cause satisfaction and discharge of this Mortgage to be entered upon the record at the expense of Mortgagor and shall execute and deliver or cause to be executed and delivered such instruments of satisfaction and reassignment as may be appropriate. Otherwise, this Mortgage shall remain and continue in full force and effect. Section 5.03 Severability. If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions hereof shall be liberally construed in favor of Mortgagee in order to effectuate the provisions hereof, and the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of any such provision in any other jurisdiction. Section 5.04 Successors and Assigns of Parties. The term "Mortgagee" as used herein shall mean and include any legal owner, holder, assignee or pledgee of any of the Indebtedness secured hereby. The terms used to designate Mortgagee and Mortgagor shall be deemed to include the respective heirs, legal representatives, successors and assigns of such parties. Section 5.05 Satisfaction of Prior Encumbrance. To the extent that proceeds of the Credit Agreement are used to pay indebtedness secured by any outstanding Lien, security interest, charge or prior encumbrance against the Mortgaged Property, such proceeds have been 14 0930467 000552 advanced by Mortgagee at Mortgagor's request, and Mortgagee shall be subrogated to any and all rights, security interests and Liens owned by any owner or holder of such outstanding Liens, security interests, charges or encumbrances, irrespective of whether said Liens, security interests, charges or encumbrances are released, and it is expressly understood that, in consideration of the payment of such other indebtedness by Mortgagee, Mortgagor hereby waives and releases all demands and causes of action for offsets and payments to, upon and in connection with the said indebtedness. Section 5.06 Nature of Covenants. The covenants and agreements herein contained shall constitute covenants running with the land and interests covered or affected hereby and shall be binding upon the heirs, legal representatives, successors and assigns of the parties hereto. Section 5.07 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 by registered or certified United States mail, postage prepaid, or by personal service (including express or courier service) at the addresses specified in Section 12.01 of the Credit Agreement (unless changed by similar notice in writing given by the particular party whose address is to be changed). Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of delivery at the address and in the manner provided herein, upon receipt; provided that, service of notice as required by the laws of any state in which portions of the Mortgaged Property may be situated shall for all purposes be deemed appropriate and sufficient with the giving of such notice. Section 5.08 Counterparts. This Mortgage is being executed in several counterparts, all of which are identical, except that to facilitate recordation, if the Mortgaged Property is situated in more than one county, descriptions of only those portions of the Mortgaged Property located in the county in which a particular counterpart is recorded shall be attached as Exhibit A thereto. An Exhibit A containing a description of all Mortgaged Property wheresoever situated will be attached to that certain counterpart to be attached to a Financing Statement and filed with the Secretary of State of Delaware in the Uniform Commercial Code Records. Each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument. Section 5.09 Governing Law. Insofar as permitted by otherwise applicable law, this Mortgage and the indebtedness shall be construed under and governed by the laws of the State of Wyoming (excluding choice of law and conflict of law rules). Section 5.10 Financing Statement: Fixture Filing. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Mortgaged Property and is to be filed or filed for record in the real estate records of each jurisdiction where any part of the Mortgaged Property (including said fixtures) are situated. This Mortgage shall also be effective as a financing statement covering As-extracted collateral, including minerals or the like (including oil and gas and all other substances of value which may be extracted from the ground) and accounts financed at the wellhead or minehead of wells or mines located on the properties subject to the Uniform Commercial Code and is to be filed for record in the real estate records of each jurisdiction where any part of the Mortgaged Property is 15 0930467 000553 situated. In addition, Mortgagor shall execute and deliver to Mortgagee, upon Mortgagee's request, any financing statements or amendments thereof or continuation statements thereto that Mortgagee may require to perfect a security interest in said items or types of property. Mortgagor shall pay all costs of filing such instruments. Section 5.11 Exculpation Provisions. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ TillS MORTGAGE; AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF TillS MORTGAGE; THAT IT HAS IN FACT READ TillS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF TillS MORTGAGE; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF TillS MORTGAGE; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO TillS MORTGAGE; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF TillS MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSmILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF TillS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS." Section 5.12 References. The words "herein," "hereof," "hereunder" and other words of similar import when used in this Mortgage refer to this Mortgage as a whole, and not to any particular article, section or subsection. Any reference herein to a Section shall be deemed to refer to the applicable Section of this Mortgage unless otherwise stated herein. Any reference herein to an exhibit or schedule shall be deemed to refer to the applicable exhibit or schedule attached hereto unless otherwise stated herein. Each reference to the phrase "any Person secured hereby" in this Mortgage shall include the counterparties to the Secured Swap Agreements. 16 O~:l304f)7, 000554 Executed on June ~2007, to be effective as of the 6th day of June, 2007 (the "Effective Date"). CORKRAN ENERGY, LP By: Hummingbird Investments, LLC, its general partner "- BY:~ Name: DemlÏs Corkran Title: President ~ --' ------ Signature Page - Wyoming Mortgage O~~30467 STATE OF ~/',15 COUNTY OF ~,,;~..> 000555 § § § The foregoing instrument was acknowledged before me by Dennis Corkran, as President of Hummingbird Investments, LLC, general partner of Corkran Energy, LP, a Texas limited partnership, this ð day of June, 2007. Witness my hand and official seal. I ~()'Y\AÙ E .RI.\Jð-' Notary Pu lie My Commission Expires: -03'" ~O - '2 D l\ [SEAL] ~p STEPHANIE E. RIOS ~ * * Notary Public STATE OF TEXAS My Comm. 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',..,..,. ,,':Tbe4e:sé.r.iptibp$1!re: gÏ"\l'en hy fractions ofeneh sec:ti~l1, 'Sectiol1nU1~beJ:,Tò\v:~shj~.µndR,n;rg ::~·:~(j}:': é.>~~~le:',d '.'- ,..; ';,"<':";' ,... ',' "'.,.,,, ,.... ",','d"J".· '.'..:;/',: .-.:.;',;:. ,'y;"f\P;Q,¥ 1~fter·pqY;Qµ,t'iÌ:B,P.(}r·l:b~fore payoÙt" ,WI = "Woddng i:nter~st", NIy= lhetl·èvCnl1eIir~cre~t"; ~ "~~7;: !~rôYältY intere.st~',;ORRI :="oyeiTid.ing .royal ty in tcrest'/ "-"" .'" ,,:'.,.,. ,·'J1~';;'(f~:,l~~li~n ,,'i~Z2~sJR.;i7-Èi,ref~rs to Township 22 South,R~geJ7 East The d~scription'!N¡2, øf"{!1~~E'l'4:òtScctiQn S¡T-23"S;R-3.7-E" refetsto the North half of th~ Söutheästquarter of Sec'tioti8, t~j$lllp;2g South; Range 37EasL, '" " ~ ~. , . , , . Ft.açtiQIlS ·~reirnc,tlQñ:söfø. $:C!:ctiGl1. . ;Flracti!t¡lJ!s mayalsö be writ.ten wi:th alpl1ae:haroclers a-s,r¡iÜmerntØrS _d F.rtanericCItJ:nrnètel:s as df¡,lf9i1¡l1nt;ìa:~er.s.. ,·Jfore::œ.nJp:l e,',NW/4 ':"', ~be.'þ4otth:~vest ,oJl.~"'ctl]t):rter.()'fa. ;sectio.l1l. ' Exhibit A (lO~557 O~~304~7. LINCOLN COUNTY. WYOMING Fontene11e Unit and ,Font Federal 'Veils All of Grantor's right, title and ìnterestin and to the following described Oil and Gas Leaae(s) , and/or Oil, Gàs and MinetalLease(s)~ insofar as. said lease(s) covers the lands described below: Lessor: Lessee: Date: Recorded: , 'Description: United States of America - Serial No. W 3850 1 Uriknown. February 28, 1983 Not required. Towns:hip,·25 North, Range 111 West, 6 Ih PM, Lincoln County, Wyoming Section 6: Lots 6 and 7, the E/2 of the SW/4 and the SFJ4 'Section 7: Lots 3 and 4, the E/2 oftbe SW/4 and the SE/4 Section 5: The W/2 All in Lincoiln County, Wyoming 0.0.0'-""-8 . \1,,» ~i.. ,")~) I, 09.304h7 ~ I- m ... :J: X W ...: ~ > ~ cC > 0 a: "'" en , 0, ,ã: (0 ,..... a: (0' 0 0 0 0 ci , ã: z C) .E E ¡ 0 ~ :¿. c j ~ 0 0 ::I C 0 c' ' Õ 0 "8 u c C L- ;:j ::¡ CD ... as >- ... UJ ~ CD E. as z 1:: 'i z ;: ::> ~ -I W Z W 1-' Z 0 - u. ¡ II) 0 0 0 g 0 C\I ... ,..... . D. ,..... -