MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT AND FINANCING STATEMENT
FROM
SUN RIVER ENERGY, INC.,
a Colorado corporation
TO
NOVA LEASING, LLC,
a Wyoming limited liability company
Dated as of ______________, 2006
"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."
"THE MORTGAGED PROPERTY INCLUDES OIL AND GAS INTERESTS AND WILL BE FINANCED AT
THE WELLHEADS OF ▇▇▇▇▇ LOCATED ON THE PROPERTIES DESCRIBED IN EXHIBIT A ATTACHED
HERETO, AND THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS."
"THIS INSTRUMENT ALSO COVERS PROCEEDS OF THE MORTGAGED PROPERTY."
WHEN RECORDED AND FILED, RETURN TO:
MORTGAGE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
THIS MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT
AND FINANCING STATEMENT dated as of ____________, 2006 is from SUN RIVER ENERGY,
INC., a Colorado corporation, the Mortgagor and Debtor hereunder (herein called
the "Mortgagor") to NOVA LEASING, LLC, a Wyoming limited liability company, the
Mortgagee and Secured Party hereunder (herein collectively called the
"Mortgagee").
W I T N E S S E T H :
WHEREAS, Mortgagee has entered into a Promissory Note dated
_______________, 2006 (the "Note") with Mortgagee, pursuant to the terms of
which Mortgagor has agreed to pay Mortgagee the sum of SIX MILLION SIX HUNDRED
THOUSAND AND 00/100ths DOLLARS ($6,600,000.00) together with interest at the
rate of seven and one half Per Cent (7 1/2%) per annum, in accordance with the
terms thereof. Principal and interest are due and payable in full on October 15,
2008. The principal balance of the Note, together with interest then accrued,
may be paid at any time prior to maturity subject to the terms of the Note.
NOW, THEREFORE, in consideration of the premises and of the
debts and agreements mentioned hereinabove and other good and valuable
consideration, the parties hereby agree as follows:
1. For purposes of this mortgage, unless the context requires otherwise:
A. "oil and gas leases" shall include oil, gas and mineral leases and shall
also include subleases and assignments of operating rights.
B. "Hydrocarbons" shall mean oil, gas and other liquid or gaseous
Hydrocarbons.
C. "Production Sale Contracts" shall mean contracts now in effect, or
hereinafter entered into by the Mortgagor, or Mortgagor's predecessors in
interest, for the sale, purchase, exchange or processing of Hydrocarbons
produced from the lands described in Exhibit A attached hereto and made a part
hereof.
D. "lands described in Exhibit A" shall include any lands which are either
described in Exhibit A or the description of which is incorporated in Exhibit A
by reference to another instrument or document, and shall also include any and
all lands now or hereafter unitized or pooled with lands which are either
described in Exhibit A or the description of which is incorporated in Exhibit A
by reference.
E. "Operating Equipment" shall mean all surface or subsurface machinery,
equipment, facilities, supplies or other property of whatsoever kind or nature
(excluding drilling rigs, trucks, automotive equipment or other property taken
to the premises to drill a well or for other similar temporary uses) now or
hereafter located on or under any of the lands described in Exhibit A which are
useful for the production, treatment, storage or transportation of Hydrocarbons,
including, but not by way of limitation, all oil ▇▇▇▇▇, gas ▇▇▇▇▇, water ▇▇▇▇▇,
injection ▇▇▇▇▇, casing, tubing, rods, pumping units ,and engines, Christmas
trees, derricks, separators, gun barrels, flow lines, tanks, gas systems (for
gathering, treating and compression), chemicals, solutions, water systems (for
treating, disposal and injection), power plants, poles, lines, transformers,
starters and controllers, machine shops, tools, storage yards and equipment
stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks, loading docks, and shipping
facilities.
F. "Mortgaged Property" shall mean the properties, rights and interests
hereinafter described and defined as the "Mortgaged Property."
G. "Indebtedness" and "Note" shall have the respective meanings set forth
in Section 1.2 of Article I hereof.
2. The Mortgagor, for and in consideration of the premises and the debts
hereinafter and hereinabove mentioned, has granted, and does by these presents
MORTGAGE, WARRANT, GRANT, BARGAIN, SELL, TRANSFER, CONVEY AND GRANT a security
interest to Mortgagee, its successors and assigns, in and to all of the
Mortgagor's right, title and interest, whether now owned or hereafter acquired,
in all of the hereinafter described properties, rights and interests; and
insofar as such properties, rights and interests consist of equipment, general
intangibles, accounts, contract rights, inventory, fixtures, proceeds of
collateral or any other personal property of a kind or character defined in or
subject to the applicable provisions of the Uniform Commercial Code, Mortgagor
hereby grants to Mortgagee, a security interest therein; namely:
(a) the lands described in Exhibit A, and the oil and gas leases, fee,
mineral, overriding royalty and other interests which are specifically described
or capable of derivation from the description in Exhibit A;
(b) the presently existing unitization, communitization and pooling
agreements and the properties covered and units created thereby (including all
units formed under orders, regulations, rules or other official acts of any
federal, state or other governmental agency having jurisdiction) which are
specifically described in Exhibit A or, though not described, which relate to
any of the properties and interests specifically described in Exhibit A;
(c) the Hydrocarbons which are in, under, upon, produced or to be produced
from the lands described in Exhibit A;
(d) the Production Sale Contracts;
(e) the Operating Equipment;
(f) all easements, permits, licenses, servitudes and rights of way situated
upon, used or useful or held for use in connection with the lands described in
Exhibit A;
(g) all division orders, transfer orders, title opinions and other similar
or dissimilar documents or instruments having regard to, useful in connection
with or required for the sale, exchange, disposition and transportation of
Hydrocarbons from the lands described in Exhibit A;
(h) without limiting the foregoing, all of Mortgagor's right, title and
interest, whether now owned or hereafter acquired by operation of law or
otherwise in and to the oil and gas leases, Hydrocarbons, Production Sale
Contracts, lands described in Exhibit A, Operating Equipment, and all other
interests in property of every kind or character, insofar as they relate to or
cover the lands described or referred to in Exhibit A, even though such rights,
title and interests be incorrectly or insufficiently described or referred to
therein, or a description thereof be omitted from Exhibit A;
(i) all proceeds (including without limitation, insurance proceeds and
proceeds from sale, barter or exchange) and additions and accessions to any or
all of the foregoing,
together with any and all corrections or amendments to, or renewals or
extensions or ratifications of, any of the same or of any instrument relating
thereto and all contracts, operating agreements, records, logs, tenements,
hereditaments and appurtenances now existing or in the future obtained in
connection with any of the aforesaid, and all other things of value and incident
thereto which Mortgagor might at any time have or be entitled to,
all of the aforesaid properties, rights and interests, together with any
additions thereto which may be subjected to the lien of this mortgage by means
of supplements hereto, being hereinafter called the "Mortgaged Property."
Mortgagor may substitute collateral and property in value equal to or greater
than the Mortgaged Property in which case the substituted property shall become
the Mortgaged Property. Mortgagee agrees to release the original Mortgaged
Property upon satisfactory substitution.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee to secure the
payment of the Indebtedness and to secure the performance of the obligations of
the Mortgagor herein contained.
ARTICLE I
INDEBTEDNESS SECURED
The Mortgagor in consideration of the premises and to induce
the Mortgagee to make the loans above described, hereby covenants and agrees
with the Mortgagee as follows:
1.1 Items of Indebtedness Secured. The following items of indebtedness are
secured hereby:
(a) The Note;
(b) Any sums advanced or expenses for costs incurred (including, without
limitation, all attorneys' fees and other legal, management and consulting
expenses) by the Mortgagee (or any receiver appointed hereunder) which are made
or incurred pursuant to or permitted by law, the terms hereof, plus interest
thereon at the rate herein specified or otherwise agreed upon, from the date of
the advances or the incurring of such expenses or costs until reimbursed;
(c) Any extensions or renewals of all such indebtedness described above,
whether or not Mortgagor executes any extension agreement or renewal instrument.
1.2 Indebtedness and Note Defined. All of the above items of indebtedness
are hereinafter and hereinbefore collectively referred to as "the Indebtedness."
Any promissory note evidencing any part of the Indebtedness, including, without
limitation, the Note, is hereinafter referred to as a "Note".
ARTICLE II
PARTICULAR COVENANTS AND WARRANTIES OF MORTGAGOR
2.1 Payment of the Indebtedness. The Mortgagor will duly and punctually pay
the Indebtedness, including each and every obligation owing on account of the
Note.
2.2 Warranties. The Mortgagor warrants that:
(a) the oil and gas leases described in Exhibit A hereto are valid,
subsisting leases, superior and paramount to all other oil and gas leases
respecting the properties to which they pertain;
(b) the Mortgagor, to the extent of the interests specified in Exhibit A,
has valid and indefeasible title to each property right or interest constituting
the Mortgaged Property and has a good and legal right to grant and convey the
same to the Mortgagee, it being understood that the Mortgagor's interest in each
oil and gas lease shall exceed the Mortgagor's net interest in production from
such lease to the extent of the Mortgagor's proportionate share of the burden of
all royalties, overriding royalties and other such payments out of production;
(c) the Mortgaged Property is free from all encumbrances or liens
whatsoever, except as permitted by the provisions of Section 2.5(e) hereof;
(d) the Mortgagor is not obligated, by virtue of any prepayment under any
contract providing for the sale by Mortgagor of Hydrocarbons which contains a
"take or pay" clause or under any similar arrangement, to deliver Hydrocarbons
at some future time without then or thereafter receiving full payment therefore;
and
(e) Mortgagor will warrant and forever defend the Mortgaged Property unto
the Mortgagee against every person whomsoever lawfully claiming the same or any
part thereof, and Mortgagor will maintain and preserve the lien hereby created
so long as any of Indebtedness remains unpaid.
2.3 Further Assurances. The Mortgagor will execute and deliver such other
and further instruments and will do such other and further acts as in the
opinion of the Mortgagee may be necessary or desirable to carry out more
effectually the purposes of this mortgage, including, without limiting the
generality of the foregoing,
(a) prompt correction of any defect which may be hereafter discovered in
the title to the Mortgaged Property or in the execution and acknowledgment of
this mortgage, the Note, or any other document executed in connection herewith;
and
(b) prompt execution and delivery of all division or transfer orders which
in the opinion of the Mortgagee are needed to transfer effectually to the
Mortgagee the assignment of proceeds of production from the Mortgaged Property.
2.4 Payment of Taxes. So long as the Indebtedness or any part thereof
remains unpaid, Mortgagor shall pay or cause to be paid promptly and in all
events prior to delinquency all taxes, assessments and governmental charges now
or hereafter assessed or imposed upon or with respect to, measured by or charged
against the Mortgaged Property, the development, operation, production, sale and
transmission of the Hydrocarbons, or this mortgage and the Indebtedness or
assessed against or imposed upon Mortgagor because of the Mortgagor's ownership
of the Mortgaged Property or any part thereof.
2.5 Operation of the Mortgaged Property. So long as the Indebtedness or any
part thereof remains unpaid, and whether or not the Mortgagor is the operator of
the Mortgaged Property, the Mortgagor shall, at the Mortgagor's own expense:
(a) Do or cause to be done all things necessary to keep unimpaired the
Mortgagor's rights in the Mortgaged Property and not, except in the ordinary
course of business, abandon any well or forfeit, surrender or release any oil
and gas lease or any rights in the Mortgaged Property;
(b) Cause the lands described in Exhibit A to be maintained, developed,
protected against drainage, and continuously operated for the production of
Hydrocarbons in a good and workmanlike manner as would a prudent operator, and
in accordance with generally accepted practices, applicable operating
agreements, and all applicable federal, state and local laws, rules and
regulations, excepting those being contested in good faith;
(c) Cause to be paid, promptly as and when due and payable, all rentals and
royalties payable in respect of the Mortgaged Property, and all expenses
incurred in or arising from the operation or development of the Mortgaged
Property;
(d) Cause the Operating Equipment to be kept in good and effective
operating condition, and all repairs, renewals, replacements, additions and
improvements thereof or thereto, and needful to the production of Hydrocarbons
from the lands described in Exhibit A, to be promptly made;
(e) Cause the Mortgaged Property to be kept free and clear of liens,
charges and encumbrances of every character, other than (l) the lien hereof, (2)
taxes constituting a lien but not due and payable, (3) defects or irregularities
in title, and liens, charges or encumbrances, which are not such as to interfere
materially with the development, operation or value of the Mortgaged Property
and not such as to affect materially title thereto, (4) those being contested by
the Mortgagor in good faith and in such manner as not to jeopardize the
Mortgagee's rights in and to the Mortgaged Property, and (5) those consented to
in writing by the Mortgagee; and
(f) Carry with standard insurance companies and in amounts satisfactory to
the Mortgagee the following public liability and property damage insurance in
respect of all activities in which the Mortgagor might incur personal liability
for the death of or injury to an employee or third person, or damage to or
destruction of another's property; and (2) to the extent such insurance is
carried by others engaged in similar undertakings in the same general areas in
which the Mortgaged Property is located, insurance in respect of the Operating
Equipment, against loss or damage by fire, lightning, hail, tornado, flood,
explosion and other similar risks, with loss payable endorsements in favor of
the Mortgagee, as its interests may appear and a provision for maximum time for
prior written notice to the Mortgagee of cancellation; and the Mortgagee may
apply any part or all proceeds of such insurance when it may receive the same
toward part or full satisfaction of the Indebtedness whether or not then due, or
may at its sole option deliver all or part of such proceeds to the Mortgagor for
the repair or replacement of such parts of the Mortgaged Property as may have
been damaged or destroyed.
2.6 Recording and Filing. The Mortgagor will promptly, and at the
Mortgagor's sole expense, record, register, deposit and file this and every
other instrument in addition or supplemental hereto in such offices and places
and at such times and as often as may be necessary to create, preserve, protect
and renew the lien hereof as a first lien on real or personal property, as the
case may be, and the rights and remedies of the Mortgagee and otherwise will do
and observe all things or matters necessary or expedient to be done or observed
by reason of any law or regulation of any State or of the United States of
America or of any other competent authority, for the purpose of effectively
creating, maintaining and preserving the lien hereof on the Mortgaged Property.
2.7 Sale or Mortgage of the Mortgaged Property. Except for sales of severed
Hydrocarbons in the ordinary course of the Mortgagor's business and the lien and
security interest created by this instrument, the Mortgagor will not sell,
convey, mortgage, pledge, or otherwise dispose of or encumber the Mortgaged
Property nor any portion thereof, nor any of the Mortgagor's right, title or
interest therein, without first securing the written consent of the Mortgagee;
and the Mortgagor will not enter into any arrangement with any gas pipeline
company or other consumer of Hydrocarbons regarding the Mortgaged Property
whereby said gas pipeline company or consumer may set off any claim against the
Mortgagor by withholding payment for any Hydrocarbons actually delivered.
2.8 No Governmental Approvals. The Mortgagor warrants that no approval or
consent of any regulatory or administrative commission or authority, or of any
other governmental body, is necessary to authorize the execution and delivery of
this instrument or of the Note, or to authorize the observance or performance by
the Mortgagor of the covenants herein or contained in the Note, or that such
approvals as are required have been obtained or will be obtained promptly.
2.9 Right of Entry. The Mortgagor will permit the Mortgagee, employees of
the Mortgagee and such other persons or entities as the Mortgagee may in its
discretion designate, reasonable access to the Mortgaged Property and to the
field offices and other offices, including the principal place of business, of
the Mortgagor to inspect and examine the Mortgaged Property and to inspect,
review and reproduce, as necessary, any books, records, accounts, contracts or
other documents of the Mortgagor.
ARTICLE III
Assignment of Production
3.1 Assignment of Hydrocarbons. The Mortgagee is entitled to receive all of
the Hydrocarbons in and under which may be produced and saved from or
attributable to the Mortgaged Property, together with all of the proceeds
thereof, effective as of the date of this instrument. The Mortgagor acknowledges
and agrees that said assignment is intended to be an absolute and unconditional
assignment and not merely a pledge of or creation of a security interest therein
or assignment as additional security. The Mortgagor hereby authorizes and
directs any owner, lessor or party to a lease or other contract comprising or
affecting the Mortgaged Property and their respective successors and assigns to
treat and regard the Mortgagee as the party entitled, in the Mortgagor's place
and stead, to receive said Hydrocarbons and proceeds and to exercise all rights
of the Mortgagor with respect thereto; and said parties shall be fully protected
in so treating and regarding the Mortgagee and shall be under no obligation to
see to the application by the Mortgagee of any such proceeds received by it. For
its convenience, the Mortgagee may, with respect to any or all such hydrocarbons
or proceeds, permit the Mortgagor to receive such Hydrocarbons or proceeds until
the occurrence of and during the continuance of any Event of Default. The
exercise of the rights granted to the Mortgagee hereunder to permit the
Mortgagor to receive such Hydrocarbons prior to the occurrence and continuance
of an Event of Default shall not in any way waive the right of the Mortgagee to
demand and receive such Hydrocarbons and proceeds thereafter attributable to the
Mortgaged Property and shall not in any way diminish the absolute and
unconditional right of the Mortgagee to receive all of said Hydrocarbons and
proceeds and cash proceeds not theretofore expended or distributed by the
Mortgagor. Notwithstanding the above, Mortgagee hereby represents to Mortgagor
that it will not make any demand to receive any such Hydrocarbons or proceeds
unless and until an Event of Default has occurred. The Mortgagor hereby agrees
that upon (i) written notice from the Mortgagee or (ii) the occurrence and
during the continuance of an Event of Default, whichever shall first occur, all
cash, proceeds, instruments and other property of whatever kind or character
received by the Mortgagor on account of the Mortgaged Property, whether received
by the Mortgagor in the exercise of its collection rights hereunder or
otherwise, shall be remitted to the Mortgagee or deposited to an account with
the Mortgagee in the form received (properly assigned or endorsed to the order
of the Mortgagee or for collection and in accordance with the Mortgagee's
instructions) not later than the first banking business day following the day of
receipt, to be applied as provided in Section 3.2 hereof and, until so applied,
may be held by the Mortgagee in a separate account under the dominion and
control of the Mortgagee on which the Mortgagor may not draw. The Mortgagor
agrees not to commingle any such property, following the occurrence of any such
Event of Default, with any of its other funds or property and agrees to hold the
same upon an express trust for the Mortgagee until remitted to the Mortgagee.
3.2 Application of Proceeds. All payments of proceeds received by the
Mortgagee pursuant to Section 3.1 of this mortgage shall be placed in a cash
collateral account at Mortgagee and on the first business day of each calendar
month applied as follows:
First: To the payment and satisfaction of the interest accrued on the Note
as of the date of such application.
Second: To the payment and satisfaction of all costs and expenses incurred
in connection with the collection of such proceeds, and the payment and
reimbursement of all items of the Indebtedness not evidenced by any Note.
Third: To the amounts of principal due and owing on the Note as of the date
of such application.
Fourth: The balance, if any, shall either be applied on the then unmatured
principal amounts of the Note, such application to be on such of the Note and
installments thereof as the Mortgagee may select, or, at the option of the
Mortgagee, released to the Mortgagor.
3.3 No Liability of the Mortgagee in Collecting. The Mortgagee is hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned and from all other responsibility in connection therewith, except the
responsibility to account to the Mortgagor for funds actually received.
3.4 Assignment Not a Restriction of the Mortgagee's Rights. Nothing herein
contained shall detract from or limit the absolute obligation of the Mortgagor
to make payment of the Indebtedness regardless of whether the proceeds assigned
by this Article are sufficient to pay the same, and the rights under this
Article shall be in addition to all other security now or hereafter existing to
secure the payment of the Indebtedness.
3.5 Status of Assignment. Notwithstanding the other provisions of this
Article, the Mortgagee or any receiver appointed in judicial proceedings for the
enforcement of this instrument shall have the right to receive all of the
Hydrocarbons herein assigned and the proceeds therefrom after the Note has been
declared due and payable in accordance with the provisions of Section 4.1 hereof
and to apply all of said proceeds as provided in Section 3.2 hereof. Upon any
sale of the Mortgaged Property or any part thereof pursuant to Article V of this
mortgage, the Hydrocarbons thereafter produced from the property so sold, and
the proceeds therefrom, shall be included in such sale and shall pass to the
purchaser free and clear of the assignment contained in this Article.
3.6 Indemnity. The Mortgagor agrees to indemnify the Mortgagee against all
claims, actions, liabilities, judgments, costs, attorneys' fees or other charges
of whatsoever kind or nature (all hereinafter in this Section 3.6 called
"claims") made against or incurred by it as a consequence of the assertion,
either before or after the payment in full of the Indebtedness, that it received
Hydrocarbons herein assigned or the proceeds thereof claimed by third persons,
and the Mortgagee shall have the right to defend against any such claims,
employing attorneys therefore, and unless furnished with reasonable indemnity,
shall have the right to pay or compromise and adjust all such claims. The
Mortgagor will indemnify and pay to the Mortgagee any and all such amounts as
may be paid in respect thereof or as may be successfully adjudged against the
Mortgagee. The obligations of the Mortgagor as hereinabove set forth in this
Section 3.6 shall survive the release of this mortgage.
ARTICLE IV
Events of Default
4.1 Events of Default Hereunder. In case any one or more of the following
events shall occur ("Events of Default") and shall not have been remedied:
(a) default in the payment of principal or of interest on any Note, or in
the payment of any other Indebtedness secured hereby, when due;
(b) any indebtedness of the Mortgagor shall become or shall be declared to
be due and payable prior to its expressed maturity by reason of any default by
the Mortgagor in the performance or observance of any obligation or by reason of
the existence of any condition constituting a default in respect of such
indebtedness;
(c) a judgment for the payment of money rendered against the Mortgagor
shall remain unsatisfied and in effect for a period of thirty (30) consecutive
days without a stay of execution;
(d) the Mortgagor shall (l) become insolvent, (2) generally fail to pay, or
admit in writing its inability to pay, debts as they become due, (3) make a
general assignment for the benefit of creditors, (4) apply for, consent to, or
acquiesce in the appointment of, a trustee, receiver or other custodian for the
Mortgagor or any property thereof, or (5) commence any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law (or consent to or acquiesce in any such case or
proceeding commenced against it);
(e) a trustee, receiver or other custodian shall be appointed for the
Mortgagor and shall not be discharged within thirty (30) days, or any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law shall be commenced against the Mortgagor and
(if not consented to or acquiesced in by the Mortgagor) shall remain for thirty
(30) days undismissed;
(f) any of the Mortgaged Property shall be seized or taken by any
governmental or similar authority, on any order of attachment, garnishment or
any other writ shall be issued, or any other lawful creditor's remedy shall be
exercised or attempted to be exercised, with respect thereto;
(g) the Mortgagor shall fail to maintain the lien and priority of this
instrument as against any other person or entity;
(h) the Mortgaged Property shall be the subject of any foreclosure
proceeding (whether judicial or by power of advertisement and sale) by anyone
other than Mortgagee;
(i) any warranty or representation made by the Mortgagor herein or in
connection herewith shall prove to be untrue in any material respect;
(j) The Mortgagor shall fail to perform and observe faithfully and
punctually its covenants and obligations hereunder; or
(k) the title of the Mortgagor to the Mortgaged Property or any substantial
part thereof shall become the subject matter of litigation which would or might,
in the Mortgagee's opinion, upon final determination result in substantial
impairment or loss of the security provided by this instrument.
then and in such event the Mortgagee, at its option, may declare the entire
unpaid principal of and the interest accrued on the Note and all other
Indebtedness secured hereby to be forthwith due and payable, without any notice
or demand of any kind, both of which are hereby expressly waived.
ARTICLE V
Enforcement of the Security
5.1 Power of Sale of Real Property Constituting a Part of the Mortgaged
Property. Upon the occurrence of an Event of Default, the Mortgagee shall have
the right and power to sell (the power of advertisement and sale permitted and
provided for by Wyoming Statutes being hereby expressly granted to Mortgagee by
Mortgagor), to the extent permitted by law, at one or more sales, as an entirety
or in parcels, as it may elect, the real property constituting a part of the
Mortgaged Property, at such place or places and otherwise in such manner and
upon such notice as may be required by law, or, in the absence of any such
requirement, as the Mortgagee may deem appropriate, and to make conveyance to
the purchaser or purchasers; and the Mortgagor shall warrant title to such real
property to such purchaser or purchasers. The Mortgagee may postpone the sale of
all or any portion of such real property by public announcement at the time and
place of such sale, and from time to time thereafter may further postpone such
sale by public announcement made at time of sale fixed by the preceding
postponement. The right of sale hereunder shall not be exhausted by one or any
sale, and the Mortgagee may make other and successive sales until all of the
estate be legally sold.
5.2 Rights of the Mortgagee With Respect to Personal Property Constituting
a Part of the Mortgaged Property. Upon the occurrence of an Event of Default,
the Mortgagee will have all rights and remedies granted by law, and particularly
by the Uniform Commercial Code, including, but not limited to, the right to take
possession of all personal property constituting a part of the Mortgaged
Property, and for this purpose the Mortgagee may enter upon any premises on
which any or all of such personal property is situated and take possession of
and operate such personal property (or any portion thereof) or remove it
therefrom. The Mortgagee may require the Mortgagor to assemble such personal
property and make it available to the Mortgagee at a time and place which is
reasonably convenient to all parties. Unless such personal property is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Mortgagee will give the Mortgagor reasonable
notice of the time and place of any public sale or of the time after any private
sale or other disposition of such personal property is to be made. This
requirement of sending reasonable notice will be met if the notice is mailed by
first-class mail, postage prepaid, to the Mortgagor at the address shown below
the signatures at the end of this instrument at least ten (10) days before the
time of the sale or disposition.
5.3 Rights of the Mortgagee With Respect to Fixtures Constituting a Part of
the Mortgaged Property. Upon the occurrence of an Event of Default, the
Mortgagee may elect to treat the fixtures constituting a part of the Mortgaged
Property as either real property collateral or personal property collateral and
proceed to exercise such rights as apply to such type of collateral.
5.4 Judicial Proceedings. Upon occurrence of an Event of Default, the
Mortgagee, in lieu of or in addition to exercising any power of sale hereinabove
given, may proceed by a suit or suits in equity or at law, either for a
foreclosure hereunder, or for the sale of the Mortgaged Property, or for the
specific performance of any covenant or agreement herein contained or in aid of
the execution of any power herein granted, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged Property, or for
the enforcement of any other appropriate legal or equitable remedy.
5.5 Possession of the Mortgaged Property. It shall not be necessary for the
Mortgagee to have physically present or constructively in their possession at
any sale held by the Mortgagee or by any court, receiver or public officer any
or all of the Mortgaged Property, and the Mortgagor shall deliver to the
purchaser at such sale on the date of sale the Mortgaged Property purchased by
such purchasers at such sale, and if it should be impossible or impracticable
for any of such purchasers to take actual delivery of the Mortgaged Property,
then the title and right of possession to the Mortgaged Property shall pass to
the purchaser at such sale as completely as if the same had been actually
present and delivered.
5.6 Certain Aspects of a Sale. The Mortgagee shall have the right to become
the purchaser at any sale held by the Mortgagee, by any court, receiver or
public officer, and the Mortgagee shall have the right to credit upon the amount
of the bid made therefore the amount payable out of the net proceeds of such
sale to it. Recitals contained in any conveyance made to any purchaser at any
sale made hereunder shall conclusively establish the truth and accuracy of the
matters therein stated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, and the interest accrued
on, the Note after the same have become due and payable, advertisement and
conduct of such sale in the manner provided herein.
5.7 Receipt to Purchaser. Upon any sale, whether made under the power of
sale herein granted and conferred or by virtue of judicial proceedings, the
receipt of the Mortgagee, or of the officer making sale under judicial
proceedings, shall be sufficient discharge to the purchaser or purchasers at any
sale for his or their purchase money, and such purchaser or purchasers, or his
or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Mortgagee or of such office
therefore, be obliged to see to the application of such purchase money, or be in
anywise answerable for any loss, misapplication or nonapplication thereof.
5.8 Effect of Sale. Any sale or sales of the Mortgaged Property, whether
under the power of sale herein granted and conferred or by virtue of judicial
proceedings, shall operate to divest all right, title, interest, claim and
demand whatsoever either at law or in equity, of the Mortgagor of, in and to the
premises and the property sold, and shall be a perpetual bar, both at law and in
equity, against the Mortgagor, the Mortgagor's successors or assigns, and
against any and all persons claiming or who shall thereafter claim all or any of
the property sold from, through or under the Mortgagor, or the Mortgagor's
successors or assigns. Nevertheless, the Mortgagor, if requested by the
Mortgagee to do so, shall join in the execution and delivery of all proper
conveyances, assignments and transfers of the properties so sold.
5.9 Application of Proceeds. The proceeds of any sale of the Mortgaged
Property, or any part thereof, whether under the power of sale herein granted
and conferred or by virtue of judicial proceedings, shall be applied as follows:
First: To the payment of all expenses incurred by the Mortgagee in the
performance of its duties including, without limiting the generality of the
foregoing, expenses of any entry or taking of possession, of any sale or
advertisement thereof, and of conveyances, and as well, court costs,
compensation of agents and employees and reasonable attorneys' fees.
Second: To the payment of the Note and of the other items of Indebtedness
with interest to the date of such payment.
Third: Any surplus thereafter remaining shall be paid to the Mortgagor or
the Mortgagor's successors or assigns, as their interests shall appear.
5.10 Liability for Deficiency. The Mortgagor will remain liable for any
deficiency owing to the Mortgagee after application of the proceeds of any sale
of the Mortgaged Property as set forth in Section 5.9 of this mortgage.
5.11 The Mortgagor's Waiver of Appraisement, Marshaling, and Other Rights.
The Mortgagor agrees, to the full extent that the Mortgagor may lawfully so
agree, that the Mortgagor will not at any time insist upon or plead or in any
manner whatever claim the benefit of any appraisement, valuation, stay,
extension or redemption law now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this instrument or the absolute sale of
the Mortgaged Property or the possession thereof by any purchaser at any sale
made pursuant to any provision hereof, or pursuant to the decree of any court of
competent jurisdiction; but the Mortgagor, for the Mortgagor and all who may
claim through or under the Mortgagor, so far as the Mortgagor or those claiming
through or under the Mortgagor now or hereafter lawfully may, hereby waives the
benefit of all such laws. The Mortgagor, for the Mortgagor and all who may claim
through or under the Mortgagor, waives, to the extent that the Mortgagor may
lawfully do so, any and all right to have the Mortgaged Property marshaled upon
any foreclosure of the lien hereof, or sold in inverse order of alienation, and
agrees that the Mortgagee or any court having jurisdiction to foreclose such
lien may sell the Mortgaged Property as an entirety or in separate parts. If any
law in this paragraph referred to and now in force, of which the Mortgagor or
the Mortgagor's successor or successors might take advantage despite the
provisions hereof, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the provisions of this
paragraph.
5.12 Costs and Expenses. All costs and expenses (including attorneys' fees
and other legal, management and consulting expenses) incurred by the Mortgagee
in protecting and enforcing its rights hereunder, shall constitute a demand
obligation owing by the Mortgagor to the party incurring such costs and expenses
and shall draw interest at an annual rate equal to the highest rate of interest
from time to time accruing under the Note plus one percent (1%) until paid, all
of which shall constitute a portion of the Indebtedness.
5.13 Operation of the Mortgaged Property by the Mortgagee. Upon the
occurrence of an Event of Default and in addition to all other rights herein
conferred on the Mortgagee, the Mortgagee shall have the right and power, but
shall not be obligated, to enter upon and take possession of any of the
Mortgaged Property, and to exclude the Mortgagor, and the Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that the Mortgagor shall be at the time entitled and in its
place and stead. The Mortgagee, or any person, firm or corporation designated by
the Mortgagee, may operate the same without any liability to the Mortgagor in
connection with such operations, except to use ordinary care in the operation of
such properties, and the Mortgagee, or any person, firm or corporation
designated by the Mortgagee, shall have the right to collect, receive and
receipt for all Hydrocarbons produced and sold from said properties, to make
repairs, purchase machinery and equipment, conduct work-over operations, drill
additional ▇▇▇▇▇ and to exercise every power, right and privilege of the
Mortgagor with respect to the Mortgaged Property. When and if the expenses of
such operation and development (including costs of unsuccessful work-over
operations or additional ▇▇▇▇▇) have been paid and the Indebtedness paid, said
properties shall, if there has been no sale or foreclosure, be returned to the
Mortgagor.
ARTICLE VI
Miscellaneous Provisions
6.1 Right to Perform the Mortgagor's Obligations. Each and every covenant
herein contained shall be performed and kept by the Mortgagor at the Mortgagor's
sole expense. If the Mortgagor shall fail to perform or keep any of the
covenants of whatsoever kind or nature contained in this instrument, the
Mortgagee, or any receiver appointed hereunder, may, but shall not be obligated
to, perform or keep, or caused to be performed or kept, the same in the
Mortgagor's behalf, and the Mortgagor hereby agrees to reimburse the Mortgagee
or such receiver (as the case may be) on demand for all expenses incurred in
connection therewith plus interest thereon at an annual rate equal to the
highest rate of interest from time to time accruing under the Note plus one
percent (1%) until paid. The undertaking of such performance by the Mortgagee or
such receiver (as the case may be) as aforesaid shall not obligate the Mortgagee
or such receiver (as the case may be) to continue such performance or to engage
in such performance or performance of any other act in the future, shall not
relieve the Mortgagor from the observance or performance of any covenant or
agreement contained in this instrument or constitute a waiver of default
hereunder and shall not affect the right of the Mortgagee to accelerate the
payment of the Indebtedness or to resort to any other of its rights or remedies
hereunder or under applicable law.
6.2 Defense of Claims. The Mortgagor will notify the Mortgagee, in writing,
promptly of the commencement of any legal proceedings affecting the lien hereof
or the Mortgaged Property, or any part thereof, and will take such action,
employing attorneys agreeable to the Mortgagee, as may be necessary to preserve
the Mortgagor's and the Mortgagee's rights affected thereby; and should the
Mortgagor fail or refuse to take any such action, the Mortgagee may, upon giving
prior written notice thereof to the Mortgagor, take such action in behalf and in
the name of the Mortgagor and at the Mortgagor's expense. Moreover, the
Mortgagee may take such independent action in connection therewith as it may in
its discretion deem proper, the Mortgagor hereby agreeing that all sums advanced
or all expenses incurred in such actions plus interest at an annual rate equal
to the highest rate of interest from time to time accruing under the Note plus
one percent (1%), will, on demand, be reimbursed to the Mortgagee or any
receiver appointed hereunder.
6.3 The Mortgaged Property to Revert. If the Indebtedness shall be fully
paid and the covenants herein contained shall be well and truly performed, then
all of the Mortgaged Property shall revert to the Mortgagor and the entire
estate, right, title and interest of the Mortgagee shall thereupon cease; and
the Mortgagee in such case shall, upon the request of the Mortgagor and at the
Mortgagor's cost and expense, deliver to the Mortgagor proper instruments
acknowledging satisfaction of this instrument.
6.4 Renewals, Amendments and Other Security. Renewals and extensions of the
Indebtedness may be given at any time and amendments may be made to agreements
relating to any part of such Indebtedness or the Mortgaged Property, and the
Mortgagee may take or may now hold other security for the Indebtedness without
notice to or consent of the Mortgagor. The Mortgagee may resort first to such
other security or any part thereof, or from time to time to either or both, even
to the partial or complete abandonment of either security, and such action shall
not be a waiver of any rights conferred by this instrument, which shall continue
as a first lien upon the Mortgaged Property not expressly released until the
Note and all other Indebtedness secured hereby is fully paid.
6.5 Construction of Instrument as an Assignment. This instrument shall be
deemed to be and may be enforced from time to time as an assignment, chattel
mortgage, contract, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof.
6.6 Limitation on Interest. No provision of this instrument or of the Note
shall require the payment or permit the collection of interest in excess of the
maximum permitted by law or which is otherwise contrary to law. If any excess of
interest in such respect is herein or in the Note provided for, or shall be
adjudicated to be so provided for herein or in the Note, the Mortgagor shall not
be obligated to pay such excess.
6.7 Unenforceable or Inapplicable Provisions. If any provision hereof or of
the Note is invalid or unenforceable in any jurisdiction, the other provisions
hereof or of the Note shall remain in full force and effect in such
jurisdiction, and the remaining provisions hereof shall be liberally construed
in favor of the Mortgagee in order to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the Mortgaged Property is situated shall be deemed inapplicable to, and not used
in, the interpretation hereof.
6.8 Rights Cumulative. Each and every right, power and remedy herein given
to the Mortgagee shall be cumulative and not exclusive; and 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 the 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.
6.9 Indemnification. The Mortgagor shall indemnify the Mortgagee and hold
it harmless against, and the Mortgagee shall not be liable for any loss, cost or
damage, including, without limitation, attorneys' fees, resulting from exercise
by the Mortgagee of any right, remedy, power, or privilege conferred upon it by
this instrument or any other instrument pertaining hereto, or from the attempt
or failure of the Mortgagee to exercise any such right, remedy, power or
privilege; and notwithstanding any provision hereof to the contrary, the
foregoing indemnity shall in all respects continue and remain in full force and
effect even though all Indebtedness may be fully paid and the lien of this
instrument released.
6.10 Partial Release. No release from the lien of this instrument of any
part of the Mortgaged Property by the Mortgagee shall in anywise alter, vary or
diminish the force, effect or lien of this instrument against the balance or
remainder of the Mortgaged Property.
6.11 Waiver by the Mortgagee. Any and all covenants in this instrument may
from time to time by instrument in writing signed by the Mortgagee be waived to
such extent and in such manner as the Mortgagee may desire, but no such waiver
shall ever affect or impair either the Mortgagee's rights or liens hereunder,
except to the extent specifically stated in such written instrument.
6.12 Successors and Assigns. This instrument is binding upon the Mortgagor,
the Mortgagor's successors and permitted assigns, and shall inure to the benefit
of the Mortgagee, its successors and assigns, and the provisions hereof shall
likewise be covenants running with the land.
6.13 Article and Section Headings. The article and section headings in this
instrument are inserted for convenience of reference and shall not be considered
a part of this instrument or used in its interpretation.
6.14 Recording References in Exhibit A. Unless otherwise indicated, the oil
and gas leases, licenses or other instruments of title described in each
numbered paragraph in Exhibit A hereto cover all Hydrocarbons in and under the
land described in the same paragraph. The Mortgagor's share of development and
operating costs with respect to each of the indicated ▇▇▇▇▇ described in Exhibit
"A" hereto is the "Working Interest" specified for each such well and the
Mortgagor's share of participation in gross production of interests described in
Exhibit "A" hereto is the "Net Revenue Interest" specified for each such well
described in Exhibit "A" hereto.
6.15 Special Filing as Financing Statement. This mortgage shall likewise be
a security agreement and a Financing Statement. This mortgage shall be filed for
record, among other places, in the real estate records of each county in which
the oil and gas leases described in Exhibit A hereto, or any part thereof, are
situated, and, when filed in such counties shall be effective as a financing
statement covering fixtures located on oil and gas properties (and accounts
arising therefrom) which are to be financed at the wellhead of the ▇▇▇▇▇ located
on the real estate described in Exhibit A hereto (and accounts arising
therefrom).
6.16 Notices. All notices, statements, or other instruments authorized or
required to be given hereunder shall be directed to the respective parties at
the following addresses:
As to Mortgagor: Sun River Energy, Inc.
______________________________
______________________________
______________________________
Fax No:_______________________
As to Mortgagee: Nova lEASING llc
▇.▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
______________________________
Fax No:_______________________
and all such notices, statements or instruments shall be deemed to have been
given when delivered, or if sent by mail, on the third business day after the
same have been deposited in the mails, so addressed, with postage prepaid,
registered and with return receipt requested; or if sent by telex or telegram,
four (4) hours after the same have been deposited with an operating telex or
telegraph operator for immediate transmission; or if delivered by any other
means, on the date actually received by the party to whom such notice is
directed.
6.17 Survival of Representations and Warranties. All representations and
warranties of the Mortgagor contained in this instrument shall survive the
execution and delivery of this instrument, the making of the loans and advances
hereunder, and the execution and delivery of the evidence of such loans and
advances and the security therefore.
6.18 Choice of Law. This mortgage shall be construed and enforced in
accordance with and governed by the laws of the State of Wyoming.
MORTAGOR AND DEBTOR:
SUN RIVER ENERGY, INC.,
a Colorado corporation
By: ___________________
Title: ___________________
STATE OF______________ )
) SS
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me by
_________________, ______________________ of ___________________________, this
day of , 2006.
Witness my hand and official seal.
___________________________
Notary Public
My Commission Expires:
___________________________