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

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

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

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.

THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.

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

This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT (this “ Mortgage ”) is entered into as of the Effective Date (as hereinafter defined) by VELOCITY ENERGY PARTNERS LP , a Delaware limited partnership, whose address for notice is 523 North Sam Houston Parkway East, Suite 175, Houston, Texas 77060   (“ Mortgagor ”), to R. Ford Francis, as Trustee, whose address for notice is Francis, Nelson & Brison, 1560 Kanawha Boulevard East, Charleston, WV  25311 (“ Trustee ”), for the benefit of CLASSIC OIL & GAS RESOURCES, INC. , a Kentucky corporation, whose address for notice is 416 W. Brannon Road, Nicholasville, KY  40356, and in its capacity as collateral agent for the benefit of the holders of the Note (as defined below) (together with its successors and assigns, the “ Mortgagee ”).

A.           This Mortgage is made pursuant to that certain Promissory Note dated as of September 1_, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “ Promissory Note ” or the “ Note ”), between Mortgagor and the holder of the Note (together with their respective successors and assigns, the “ Mortgagee ”), to secure the payment of the Note ( as well as the other items constituting “ Indebtedness ” pursuant to Section 1.03 hereof) as provided in that certain definitive, legally Letter of Intent between the Parties hereto dated September 4, 2009, effective July 1, 2009 (“LOI” or “Purchase Agreement”).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Section 1.02        Grant of Security Interest .  To further secure the Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in and to the Mortgaged Property (whether now or hereafter acquired by operation of law or otherwise) insofar as the Mortgaged Property consists of equipment, accounts, contract rights, general intangibles, insurance contracts, insurance proceeds, inventory, Hydrocarbons, fixtures and any and all other personal property of any kind or character defined in and subject to the provisions of the Uniform Commercial Code presently in effect in the jurisdiction in which the Mortgaged Property is situated (“ Applicable UCC ”), including the proceeds and products from any and all of such personal property.  Upon the happening of any of the Events of Default (as defined in Section 4.01 ), Mortgagee is and shall be entitled to all of the rights, powers and remedies afforded a secured party by the Applicable UCC with reference to the personal property and fixtures in which Mortgagee has been granted a security interest herein, or Trustee or Mortgagee may proceed as to both the real and personal property covered hereby in accordance with the rights and remedies granted under this Mortgage in respect of the real property covered hereby.  Such rights, powers and remedies shall be cumulative and in addition to those granted to Trustee or Mortgagee under any other provision of this Mortgage or under any other security instrument.  Written notice mailed to Mortgagor as provided herein at least five (5) Business Days prior to the date of public sale of any part of the Mortgaged Property which is personal property subject to the provisions of the Applicable UCC, or prior to the date after which private sale of any such part of the Mortgaged Property will be made, shall constitute reasonable notice. Except as otherwise expressly provided in this Mortgage, all terms in this Mortgage relating to the Mortgaged Property and the grant of the foregoing security interest which are defined in the Applicable UCC shall have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the Applicable UCC, as those meanings may be amended, revised or replaced from time to time.  Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Applicable UCC have, at all times, the broadest and most inclusive meanings possible.

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

(a)          Payment of and performance of any and all indebtedness, obligations and liabilities of Mortgagor pursuant to the Note.

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

(c)          Any sums which may be advanced or paid by Mortgagee, Trustee or any Buyer under the terms hereof or under any other Loan Documents on account of the failure of Mortgagor or any other Mortgagor Party to comply with the covenants contained herein or in any other Loan Document and all other indebtedness of the Mortgagor Parties arising pursuant to the provisions of the Loan Documents, this Mortgage and any other documents or instruments executed in connection therewith.

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

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

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

Section 2.01       Assignment .  Mortgagor does hereby absolutely and unconditionally assign, transfer and convey unto Mortgagee, its successors and assigns, all of the Hydrocarbons and all products obtained or processed therefrom, which accrue to Mortgagor’s interest in the Mortgaged Properties, and the revenues and proceeds now and hereafter attributable to the Hydrocarbons and said products and all accounts arising therefrom or in connection therewith and all payments in lieu of the Hydrocarbons such as “take or pay” payments or settlements (all of the foregoing, the “ Production Proceeds ”), together with the immediate and continuing right after the occurrence of and during the continuation of an Event of Default, subject to the remaining provisions of this Section 2.01 , to collect and receive such Production Proceeds. The Hydrocarbons and products are to be delivered into pipelines connected with the Mortgaged Property, or to the purchaser thereof, to the credit of Mortgagee (to the extent of the Mortgagor’s interest therein); and all Production Proceeds shall initially be deposited into a separate account (the “ Deposit Account ”).  No party paying any Production Proceeds shall have any duty or obligation to inquire into any of the rights of Mortgagee under this Section 2.01 , what application is made of the Production Proceeds, or as to any other matter.  Mortgagor directs and instructs any and all purchasers of any Hydrocarbons to pay to such Deposit Account all of the Production Proceeds accruing to Mortgagor’s interest until such time as such purchasers have been furnished with evidence that all Indebtedness has been paid in full in cash and that this Mortgage has been released.  Mortgagor agrees that no purchasers of the Hydrocarbons shall have any responsibility for the application of any funds paid to Mortgagee.  Mortgagor agrees to perform all such acts, and to execute all such further assignments, transfer orders and division orders, and other instruments as may be required or desired by Mortgagee or any party in order to have the Production Proceeds paid to Mortgagee after the occurrence of and during the continuation of an Event of Default. Upon the occurrence and during the continuation of an Event of Default, Mortgagee is fully authorized to receive and receipt for the Production Proceeds; to endorse and cash any and all checks and drafts payable to the order of Mortgagor or Mortgagee for the account of Mortgagor received from or in connection with the Production Proceeds and to hold the Production Proceeds in a bank account as additional collateral securing the Indebtedness; and to execute transfer and division orders in the name of Mortgagor, or otherwise, with warranties binding Mortgagor.  All Production Proceeds received by Mortgagee pursuant to this Section 2.01 after an Event of Default has occurred shall be applied as provided herein or, to the extent not inconsistent with this Mortgage, in the other Loan Documents.  Mortgagee shall not be liable for any delay, neglect or failure to effect collection of any Production Proceeds or to take any other action in connection therewith or hereunder; but Mortgagee shall have the right, exercisable at its election at any time after an Event of Default has occurred and is continuing, in the name of Mortgagor or otherwise, to prosecute and defend any and all actions or legal proceedings deemed advisable by Mortgagee in order to collect such funds and to protect the interests of Mortgagee and/or Mortgagor, with all reasonable costs, expenses and attorneys’ fees incurred in connection therewith being paid by Mortgagor and until so paid being a part of the Indebtedness secured by this Mortgage.  Mortgagor agrees to perform all such acts, and to execute all such further assignments, transfer orders and division orders, and other instruments as may be required or desired by Mortgagee or any party in order to effectuate the provisions contained in this Section 2.01 .  Mortgagor hereby appoints Mortgagee as its attorney-in-fact to pursue any and all rights of Mortgagor to liens on and security interests in the Hydrocarbons securing payment to Mortgagee of proceeds of runs attributable to the Hydrocarbons, provided Mortgagee shall only be permitted to exercise such power of attorney granted pursuant to this sentence after the occurrence and during the continuation of an Event of Default.  The power of attorney granted to Mortgagee in this Section 2.01 , being coupled with an interest, shall be irrevocable so long as the Indebtedness or any part thereof remains unpaid.

Section 2.02       [Reserved].

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

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

Section 2.05        Application of Production Proceeds .  So long as no Event of Default has occurred, the Production Proceeds received by Mortgagee shall be paid directly into a Deposit Account in accordance with Section 2.01 hereof.  After an Event of Default hereunder has occurred and during the continuation of an Event of Default, all Production Proceeds from time to time in the hands of Mortgagee shall be applied to the payment of the Indebtedness at such times and in such manner and order as Mortgagee determines in Mortgagee’s sole and absolute discretion.

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