J O H N A G O R D O N -B L A K E G A R A T A * J O H N M M c C O L L A M * B J D U P L A N T I S * L V C O O L E Y S * C W E L L E E A G A N J R * M A N C E L G A R S A U O J R C H R I S T O P H E R E J A N K t S A R A S M A C K L E T O N P H I L I P N A S P R O O I T E S B E N J A M I N B B L A N C H t T J E A N N E P B R E C K I N R I D G E OOY C W A L L C Y N T H I A A N I C H O L S O N C A T H Y E C H E S S I N W I L L I A M T D " Z U R I L L A M A R G A R E T O S W O R D S W I L L I A M r 1 A I U E Y A L A N C W O L F J A M E S C S L A T T E N HJ S A M U E L E M A S U R P A U L C F LL I N O T O N S T E V E N W C O P L E Y J A M E S L W E I S S

D E B O R A H C U N N I N G H A M FOSHEC R I C H A R D C . M A T H C N Y W I L L A R O H H E N S O N

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G O R D O N . A R A T A , M C C O L L A M & D U P L A N T I S

A T T O R N C Y S A T LAW

PLACE ST C H A R L E S

201 ST C H A R L E S A V E N U E

A O ' - F L O O R

NEW O R L E A N S . L O U I S I A N A 7 0 I 7 0 - A O O O

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iry 13, 199?

Ref: 2C98-16624

J A S O N A T J U M O N V 1 L L E J U D I T H W G I O R L A N D O

A N T H O N Y C M A R I N O

M A R I O N W E L K 3 R N W E I N S T O C K

F R A N C E S M B O U I L L I O N

R E B E C C A W G R M S C R C O M E A U X

M A R T I N C L A N DRI E U

K A T H Y M A N C H E S T E R B O R B A S

A G R E G O R Y G R I M S A L

D O N N A P H I L L I P S C U R R A U L T

S C O T T A O C O N N O R

D O U G L A S O Lc S P U N

J M W H I T E

E R N E S T E S V C N S O N C P E C K MA T N C J P

D O U G L A S H M c C O L L A M

A R L E N E L O M B A R D

D E N I S C S W O R D S E U 2 . d C T M L G O R D O N

Hand Delivered. Ms. LaNelle Boehm Minerals Management Service Adjudication Unit, MS 5421 1201 Elmwood Park Boulevard New Orleans, LA 70123-2390

Re: OCS-G Area

MINERALS UANAGcMc.Ti iZ"V»SE

LEASING & tNVikU.laltiJ

1014, Block 145, Ship Shoal

Dear Ms. Boehm:

Enclosed please f i n d an o r i g i n a l Assignment, S e c u r i t y Agreement and Financing Statement (Louisiana) f r o m F i d e l i t y O i l Co. to CIBC I n c . Please f i l e the re ferenced ins t rument i n t o the OCS-G 1014 lease f i l e f o r f i l i n g purposes o n l y . Our check i n the sum of $25.00 t o cover your fee f o r t h i s service i s enclosed.

Please stamp a copy of t h i s l e t t e r t o evidence y o u r receipt o f t h i s f i l i n g . Should you have any ques t ions , please c a l l me.

Very t r u l y yours,

Marion Welborn Weinstock

MWW:dtv:8567H

ici c- cm

ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT

(LOUISIANA)

FROM

FIDELITY O I L CO. ( T a x p a y e r I . D . No 41-6025690)

TO

CIBC INC. as C o l l a t e r a l Agent

(Taxpayer I.D. No. 58-1760354)

For the B e n e f i t of The Prudential Insurance Company of America

Dated January 12, 1993

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"THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS."

• T H I S INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."

"THE OIL AND GAS INTERESTS INCLUDED I N THE MORTGAGED PROPERTY WILL BE FINANCED AT THE WELLHEADS OF THE WELLS LOCATED ON THE PROPERTIES D"'SCRIBED IN EXHIBIT A HERETO."

"THOSE PORTIONS OF THE MORTGAGED PROPERTY WHICH ARE MINERALS OR OTHER SUBSTANCES OF VALUE WHICH MAY BB EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE ACCOUNTS

RELATING THERETO, WILL BE FINANCED AT THB WELLHEADS OF THE WELLS LOCATED ON THB PROPERTIES DBSCRIBED I N EXHIBIT A HERETO, AND THIS FINANCING STATEMENT IS TO BB FILED FOR RECORD, AMONG OTHBR PLACES, WITH THE CLBRR OF CuURT I N ANY PARISH I N LOUISIANA OR IN THB CASE OF ORLEANS PARISH, WITH THB RECORDER OF MORTGAGES, FOR FILING I N THB UCC RBCORDS."

"THE DEBTOR HAS AN INTEREST OF RECORD I N THE REAL ESTATB CONCERNED, WHICH IS DESCRIBED I N EXHIBIT A HERETO."

•THIS INSTRUMENT '-' I 'LL BB FILED AS A FIXTURB F I L I N G . SOME OP THE GOODS CONSTITUTING .1 PORTION OF THE COLLATERAL ARE TO BECOME, AFTER PLACEMENT ON THE IMMOVABLE PROPERTIES DESCRIBED I N EXHIBIT "A" HERETO, COMPONENT PARTS OF SUCH LAND, BUILDINGS AND OTHER

CONSTRUCTIONS AND ARE USED IN THE CONDUCT OF A TRADE, BUSINESS, OCCUPATION OR OTHER COMMERCIAL OR INDUSTRIAL ACTIVITY."

WHEN RECORDED AND/OR FILED RETURN THIS INSTRUMENT TO:

Thomas P. Donahue The Prudent ia l Insurance Company o f America c /o Prudent ia l C a p i t a l Group 717 N. Harwood, Su i t e 2670 Dal las , Tex is 75201

2 r«kbr,'cibt2/t»Mj-U,W

ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT (LOUISIANA)

THIS ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT, da t ed as of January 12, 1993, ( t h i s "Secur i ty Agreement") i s from FIDELITY OIL CO., a Delaware c o r p o r a t i o n (herein c a l l e d the • D e b t o r " ) , 3333 East Broadway, Su i t e 1212, Bismarck, Bur le igh County , North Dakota 58501, t o CIBC INC. , a Delaware c o r p o r a t i o n , as c o l l a t e r a l agent f o r the b e n e f i t o f The P ruden t i a l Insurance Company of America and the other ho lders of Notes ( c o l l e c t i v e l y , the "Secured P a r t y - ) i s sued pursuant t o the Note Agreement r e f e r r e d t o be low (herein, i n such capaci ty , toge ther w i t h any successor(s) t h e r e t o i n such c a p a c i t y , c a l l e d the " C o l l a t e r a l A g e n t " ) , 425 L e x i n g t o n Avenue, 7 t h F loor , New York, New York 10017.

C a p i t a l i z e d terms not de f ined h e r e i n s h a l l have the meanings a s c r i b e d t o them i n the Note Agreement ( h e r e i n a f t e r d e f i n e d ) unless the con tex t otherwise r equ i r e s . A l l terms def ined h e r e i n o r i n the Note Agreement i n the s ingu la r s h a l l have the same meaning when used i n the p l u r a l and v i c e versa .

1 . The Debtor, c e r t a i n f i n a n c i a l i n s t i t u t i o n s (herein t o g e t h e r w i t h t h e i r successors and assigns, such f i n a n c i a l i n s t i t u t i o n s c o l l e c t i v e l y c a l l e d the "Lenders"), the C o l l a t e r a l Agent and Canadian I m p e r i a l Bank of Commerce, a Canadian chartered bank, as agent f o r the Lenders (he re in , i n such capac i ty , together w i t h any successor(s) t he re to i n such capac i ty , c a l l e d the "Agent") have entered i n to a c e r t a i n Cred i t Agreement, dated as o f October 6, 1992 (as the same may be amended, supplemented, r e s t a t ed or o t h e r w i s e modif ied and i n e f f e c t f rom t ime to t ime, h e r e i n cal led the "Cred i t Agreement") pursuant t o which, upon the terms and s u b j e c t t o the c o n d i t i o n s t he r e in set f o r t h ( i ) the Lenders have ag reed t o make c e r t a i n term loans, ( i i ) the Lenders agreed t o issue anc* p a r t i c i p a t e i n one o r more l e t t e r s o f c r e d i t f o r the account of t h l e b t o r and ( i i i ) the Lenders agreed t o make c e r t a i n revo lv ing l o ..us t o the Debtor ( c o l l e c t i v e l y r e f e r r e d to here in as the "CIBC Loans") .

2 . By Act of C o l l a t e r a l Mortgage, Pledge and Assignment of P roduc t i on and Secu r i t y Agreement (Louisiana) (as f rom t ime t o time amended, supplemented o r modi f ied and i n e f f e c t , the "Mortgage") d a t e d October 6, 1992, Debtor ha3 mortgaged, pledged, hypothecated and granted a s e c u r i t y i n t e r e s t anto any f u t u r e holder o r holders o f t h a t ce r t a in c o l l a t e r a l mortgage note dated October 6, 1592 made by Debtor i n the p r i n c i p a l amount of T h i r t y - F i v e M i l l i o n Dollars ($35,000,000) (the "Mortgage Note") described i n s a id Mortgage on a l l Debtor 's r i g h t , t i t l e and i n t e r e s t i n , t o , and under the o i l , gas and re la ted p r o p e r t i e s and i n t e r e s t s t he r e in which are more p a r t i c u l a r l y descr ibed or r e f e r r e d t o i n said Mortgage (the "Mortgaged Property") , and such Mortgage Note has been paraphed "Ne V a r i e t u r " by Catherine M. Sforza, a Notary Publ ic , t o i d e n t i f y the same w i t h the Mortgage.

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3. CIBC, Inc . i s the cur ren t ho lde r of the Mortgage Note p u r s u a n t to that c e r t a i n Assignment, S e c u r i t y Agreement and F i n a n c i n g Statement (Louisiana) dated as o f October 6, 1992 from the Deb to r to CIBC, Inc:. as c o l l a t e r a l agent f o r the b e n e f i t of the Lender Par t ies r e f e r r e d t o i n the C r e d i t Agreement (the "CIBC S e c u r i t y Agreement").

4 . The Debtor and the Secured Par ty w i l l en ter i n t o a Note Agreement, dated as o f January 13, 199: (as the same may be amended, supplemented, r e s t a t ed or o therwise m o d i f i e d and i n e f f e c t f r o m t i m e to time, h e r e i n c a l l e d the "Note Agreement") pursuant t o w h i c h , upon the terms and subjec t t o the cond i t ions set f o r t h t h e r e i n the Debtor has agreed t o s e l l and the Secured Party has ag reed t o purchase f rom the Debtor senior secured promissory notes i n t h e aggregate p r i n c i p a l amount of $15,000,000 a t 100% of such aggrega te p r i n c i p a l amount (the "Notes") .

5. The Notes t o be purchased s h a l l be dated the date of i s s u e thereof , to mature December 31 , 2000, t o bear i n t e r e s t on the u n p a i d balance thereof f r o m the date t he reo f u n t i l such Notes s h a l l have become due and payable a t the r a t e o f 8.43% per annum and on overdue payments at the ra te s p e c i f i e d t h e r e i n .

6. I t i s a c o n d i t i o n precedent t o the purchase of the Notes by t he Secured Party t h a t the Debtor execute t h i s instrument and t h a t CIBC, I n c . , the Agent, the Lenders and the Secured Party s h a l l execu te that c e r t a i n I n t e r c r e d i t o r Agreement dated January 13, 1993 ( t h e " I n t e r c r e d i t o r Agreement") whereby the Lender Part ies and the Secured Party w i l l agree that the Lender Par t ies and the Secured P a r t y s h a l l share the s e c u r i t y i n t e r e s t , mortgage, and pledge and assignment of the C o l l a t e r a l equa l ly and r a t a b l y as spec i f i ed i n t h e I n t e r c r e d i t o r Agreement and s h a l l have pro r a t a and p a r i passu use and benef i t t h e r e o f .

7. Reference i s hereby made to the Mortgage f o r a l l purposes o f t h i s Security Agreement, and s p e c i f i c a l l y but wi thout l i m i t a t i o n r e f e r e n c e i s hereby made to the Mortgage f o r the d e f i n i t i o n of the Mortgaged Property a f f e c t e d by sa id Mortgage.

8. I t i s i n the best i n t e r e s t s of the Debtor to cause to be executed on i t s beha l f t h i s instrument inasmuch as the Debtor w i l l d e r i v e subs tant ia l d i r e c t and i n d i r e c t b e n e f i t s f rom the proceeds o f the sale to the Secured Party of the Notes.

9. As a c o n d i t i o n precedent t o the purchase of the Notes by t h e Secured Party, F i d e l i t y O i l Holdings , Inc . (the "Guarantor") has executed and d e l i v e r e d a Guaranty, dated January 8, 1993 i n f a v o r of the Secured Party guaranteeing the ob3 iga t ions of the D e b t o r .

10. For a l l purposes of t h i s ins t rument , unless the context o the rwise requires:

2 r«kbfY/cibel'tu« U dr2

A. " o i l and gas leases" s include o i l , gas and mineral leases, subleases and assi--, ents thereof, operating r i g h t s , and shall also include subleases and assignments of operating rights.

B. "Hydrocarbons" shall mean o i l . gas, casinghead gas, d r i p gasoline, natural gasoline, condensate, d i s t i l l a t e , l i q u i d hydrocarbons, gaseous hydrocarbons, and a l l products refined thereupon and a l l other minerals.

C. "Production Sale Contracts" shall mean contracts now i n effect, or hereafter entered i n t o by or on behalf of the Debtor, or entered into by the Debtor's predecessors in interest , or t h e i r respective agents or operators f o r the sale, purchase, exchange, gathering, transportation, treating or processing of Hydrocarbons produced from the lands described in Exhibit A attached hereto and made a part hereof or under the o i l and gas leases, mineral rights, mineral servitudes, overriding royalties, royalties and other interests described i n Exhibit A attached hereto and made a t a r t hereof.

D. "lands described i n Exhibit A" shall include any lands which are either described i n Exhibit A or the description of which is incorporated i n Exhibit A by reference to another instrument or document or which are covered or af ected by any o i l and gas lease, mineral, mineral servitude, overriding royalty, royalty or other interest described i n Exhibit A, and shall also include any lands now or hereafter unitized or pooled with lands which are either described i n Exhibit A or the description of which i s incorporated i n Exhibit A i.y reference.

E. "Operating Equipment" s h a l l mean a l l corporeal movable property of whatever kind or character (in uding surface or subsurface machinery, goods, equipment, fixtures, inventory, f a c i l i t i e s , supplies or other property of whatsoever kind or nature) now or hereafter owned by the Cebtor and placed or to be placed on or under any of the lands described i n Exhibit A which are used or to be used for the production, gathering, treatment, processing, storage or transportation of Hydrocarbons (together with a l l accessions, additions and attachments to any thereof), including, but not by way of l i m i t a t i o n , a l l o i l wells, gas wells, water wells, injection wells, casing, tubing, tubular goods, rods, pumping units and engines, Christmas trees, platforms, derrick*;, separators, compressors, gun barrels, flow lines, tanks, gas systems (for gathering, treating and compression), pipelines (including gathering lines, l a t e r a l s and trunklines) , 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,

f-kte-'cibclui-j b * ?

telephone and other communication systems, roads, loading docks, loading racks and shipping f a c i l i t i e s .

P. "Col la tera l" shall mean the properties, r ights and interests here inaf ter described f.nd defined as the Col la tera l .

G. "Indebtedness" shal l have the meaning set f o r t h in Section 1.2 hereof.

H. "Lender Parties" shal l have the meaning set f o r t h in A r t i c l e V I I hereof.

I . "Lien 1 1 s ha l l mean any secur i ty in ' -ast, mortgage, pledge, hypothecation, assignment, a->.oo6 . arrangement, encumbrance, l i e n (statutory or othe' .hsrge against or interest in property to secure of a debt cr performance of an obl iga t ion cr oth*r p.-. cy or preferent ia l arrangement of any kind or n «*••-& *cs -*r.

J . "Note Docur<u»i. sha±i „5:e Note Agreement, the Notes, the Guaranty, th-5* f lo re s^ . Lhe Mortgage Note (as defined in the Mortgage) t h i s Security Agreement, the Hydrocarbon Disposi t ion L- t t e r (as defined i n the Note Agreement) and each other agreement, document or instrument delivered in connection w: ..he Note Agreement and the Notes.

K. "Permittee. Liens" shal l mean:

(a) Liens securing payment of the Indebtedness granted pursuant to any Note Document;

(b) Liens securing payment of any indebtedness and l i a b i l i t i e s of the Debtor under the Credit Agreement; provided any such Lien s h a l l be subject to the In tercredi tor Agreement and sha l l be pari passu with the Liens which secure the p r i n c i p a l amounts and accrued interest outstanding hereunder and under the Notes;

(c) Liens for taxes, assessments or other govern­mental charges or levies not at the time delinquent or thereafter payable without penalty or being d i l i gen t l y contested i n good f a i t h by appropriate proceedings and for which adequate reserves i n accordance wi th generally accepted accounting pr inc ip les consistently applied ("GAAP") s h a l l have been set aside on i t s books;

(d) Liens of carr iers , warehousemen, mechanics, materialmen, operators and landlords incurred in the ordinary course of business (including Liens arising under operating, pooling or un i t i za t i on agreements of a scope and nature customary i n the o i l and gas industry) for sums not overdue or being d i l i g e n t l y contested in good f a i t h by appropriate proceedings and f o r which

4 n*bry'cK*l'tu<-i-k.«V2

adequate reserves i n accordance w i t h GAAP s h a l l have teen set aside on i t s books;

(e) L iens i n c u r r e d i n the o rd ina ry course of business i n connec t ion w i t h workmen's compensation, unemployment insurance o r o t h e r forms ot governmental i ; surance o r b e n e f i t s , or t o secure performance of tenders, s t a t u t o r y o b l i g a t i o n s , leases and contracts (other than f o r borrowed money) entered i n t o i n the ordinary course of business o r t o secure o b l i g a t i o n s on surety or appeal bonds;

( f ) d e f e c t s or i r r e g u l a r i t i e s i n t i t l e , and l i e n s , charges o r encumbrances on the Mortgaged Property, which are not such as t o i n t e r f e r e m a t e r i a l l y w i t h the development, o p e r a t i o n c r value o f the Mortgaged Property and not such as t o a f f e c t m a t e r i a l l y t i t l e the re to ;

(g) judgment Liens i n exis tence less than 15 days a f t e r the e n t r y thereof o r w i t h respect t o which execution has been stayed o r the payment o f which i s covered i n f u l l ( sub jec t t o a customary deduct ib le) by insurance main ta ined w i t h responsible insurance companies; and

(h) those s p e c i f i c a l l y consented t o i n w r i t i n g by the Secured Pa r ty .

L. "Guaranty" s h a l l mean the guaranty executed by F i d e l i t y O i l Ho ld ings , I n c . , a Delaware co rpora t ion dated as of January 13, 1993 f o r the b e n e f i t o f the Secured r-arty.

M. "Ob l iga t i ons " s h a l l mean a l l o b l i g a t i o n s (monetary o r otherwise) o f the Debtor and each other Obl igor a r i s i n g under or i n connec t ion w i t h t h i s S e c u r i t y Agreement, the Notes and each other Note Document.

N. "Yield-Maintenance Amount" s h a l l have the meaning spec i f i ed i n the Note Agreement.

NOW, THBREFORB. the Debtor, f o r and i n cons ide ra t ion of the premises and of the debts h e r e i n a f t e r mentioned, does hereby grant t o the Co l l a t e r a l Agent f o r the pro r a t a and p a r i passu b e n e f i t of t h e Secured Party a s e c u r i t y i n t e r e s t i n and/or does hereby pledge and d e l i v e r t o the C o l l a t e r a l Agent, as a p p l i c a b l e , f o r the pro r a t a and par i passu use and b e n e f i t o f the Secured Party, a l l the D e b t o r ' s r i g h t , t i t l e and i n t e r e s t , whether now owned or he rea f te r acqu i r ed , i n and t o the f o l l o w i n g :

(a) the Hydrocarbons which are i n , under, upon, produced or to be produced f rom the lands descr ibed i n E x h i b i t A (the "Hydrocarbon Proper ty" ) i n c l u d i n g , wi thou t l i m i t a t i o n , a l l of Debtor'8 i n v e n t o r y of Hydrocarbons the re f rom i n a l l forms,

5 r-kUty/cibcl UMI » ar?

whether now owned o r h e r e a f t e r a c q u i r e d and wherever locaced, and the products t h e r e o f produced and saved frcm or a l l oca t ed t o the Hydrocarbon Proper ty (such i n v e n t o r y and products being he re in c a l l e d " I n v e n t o r y " ) ; i n c l u d i n g wi thout l i m i t a t i o n Inventory loca ted on land desc r ibed or r e f e r r e d t o as or comprising a p a r t o f the Hydrocarbon Proper ty;

(b) the P roduc t ion Sale C o n t r a c t s ;

(c) the Opera t ing Equipment;

(d) the Mortgage Note, which i s c u r r e n t l y held by the C o l l a t e r a l Agent who acknowledges and agrees tha t said Mortgage Note i s h e l d by i t f o r t he pro ra ta and p a r i passu use and b e n e f i t o f the Lender P a r t i e s and the Secured Party as the Lender P a r t i e s and Secured Pa r ty may agree;

(e) a l l o f Deb tor ' s accounts o f any k i n d , whether now e x i s t i n g or h e r e a f t e r a r i s i n g and r e s u l t i n g from the sale of Hydrocarbons i n , under, upon, produced or to b< produced and saved from or a t t r i b u t a b l e t o t he Hydrocarbon Property, whether such accounts a r i se f rom the sale of such Hydrocarbons a t the wellhead o r a t some other p o i n t (the "Accounts"); and a l l r i gh t s now o r h e r e a f t e r e x i s t i n g i n and to a l l s ecu r i t y agreements, leases o r other c o n t r a c t s securing or otherwise r e l a t i n g to any Accounts or any c h a t t e l paper, documents or instruments;

( f ) a l l o f Debtor ' s goods, whether now e x i s t i n g or hereaf ter acqu i red , tha t a f t e r be ing located or placed upon land comprising p a r t of the Hydrocarbon Property c o n s t i t u t e or w i l l become component pa r t s of s a i d land, the bu i ld ings or other cons t ruc t ions located the reon , and which are used by Debtor i n the conduct of Debtor ' s t r a d e , business, occupation or other commercial or i n d u s t r i a l a c t i v i t y (the " F i x t u r e s " ) ;

(g) a l l o f Debtor ' s general i n t a n g i b l e s of any k ind , whether now e x i s t i n g or h e r e a f t e r a r i s i n g , wnich comprise a par t of the Hydrocarbon Property ( the "General I n t a n g i b l e s " ) ; a l l cha t t e l paper, documents and ins t ruments r e l a t i n g to the General I n t a n g i b l e s ; and a l l r i g h t s now or hereaf te r e x i s t i n g i n and to a l l s e c u r i t y agreements, leases , and other contracts securing or o therwise r e l a t i n g t o any General In tangib les or any such c h a t t e l papers, documents and instruments;

(h) toge ther w i t h any and a l l co r rec t ions or amendments LO, or renewals, extension o r r a t i f i c a t i o n s o f , or replacements o r s u b s t i t u t i o n s f o r . any of the same, or any instrument r e l a t i n g there to or t o the lands described i n Exhibi t A, a l l accounts, c o n t r a c t s , cont rac t r i g h t 3 , opt ions , nominee agreements, opera t ing agreements, processing agreements, f a r m i n agreements, farmout agreements, j o i n t venture agreements, e x p l o r a t i o n agreements, bottomhole

6 fidelity 'c*c J u i « It a r t

agreements, d ryho le agreements, suppor t agreements, acreage c o n t r i b u t i o n agreements, insurance p o l i c i e s , t i t l e op in ions , t i t l e abs t r ac t s , t i t l e m a t e r i a l s and i n f o r m a t i o n , f i l e s , records , w r i t i n g s , data bases, i n f o r m a t i o n , systems, logs, w e l l cores, f l u i d samples, p r o d u c t i o n data and r e p o r t s , we l l t e s t i n g data and repor t s , maps, seismic and geophysica l , g e o l o g i c a l and chemical data and i n f o r m a t i o n , i n t e r p r e t a t i v e and a n a l y t i c a l repor ts of any k i n d or nature ( i n c l u d i n g , w i t h o u t l i m i t a t i o n , reserve s t u d i e s and reserve e v a l u a t i o n s ) , computer hardware and sof tware and a l l documentation t h e r e f o r o r r e l a t i n g t h e r e t o ( i n c l u d i n g , wi thou t l i m i t a t i o n , a l l l i censes r e l a t i n g t o or cove r ing such computer hardware, so f tware and/or documentation), t r a d e secrets, trademarks, s e rv i ce marks and business names and the g o o d w i l l of the business r e l a t i n g t h e r e t o , copyr igh t s , copyr ight r e g i s t r a t i o n s , unpatented i n v e n t i o n s , patent a p p l i c a t i o n s and pa ten ts , r i g h t s - o f - w a y , f r a n c h i s e s , easements, se rv i tudes , su r face leases, permi ts , l i c enses , tenements, hereditaments, appurtenances, general i n t a n g i b l e s , rents , issues, p r o f i t s , products and proceeds, i n each case whether now or he rea f t e r e x i s t i n g or a r i s i n g , and t o the e x t e n t used or t o be used i n connection w i t h , covering, r e l a t i n g t o , or a r i s i n g f rom or i n connection w i t h any of the a f o r e s a i d p roper t i e s , r i g h t s and i n t e r e s t s referenced i n clauses (a) through (g) above of t h i s g r a n t i n g clause and a l l o ther t h i n g s of value and inc ident the re to ( i n c l u d i n g , without l i m i t a t i o n , any and a l l l i en s , l i e n r i g h t s , s e c u r i t y i n t e r e s t s and other r i g h t s and i n t e r e s t s ) which the Debtor might a t any time have or be e n t i t l e d t o , whether now or h e r e a f t e r e x i s t i n g or a r i s i n g ,

( i ) the proceeds, products , a d d i t i o n s t o , s u b s t i t u t i o n s f o r , and accessions o f , any and a l l o f the p roper ty described i n subparagraphs (a) through (g) above, i n c l u s i v e ,

( a l l of Debtor 's r i g h t , t i t l e and i n t e r e s t i n , to and under the a f o r e s a i d p r o p e r t i e s , r i g h t s and i n t e r e s t s , together w i t h any a d d i t i o n s there to which may be sub jec t ed t o t h " l i e n and secur i ty i n t e r e s t of t h i s instrument by means o f suppl en j n t s he re to , being h e r e i n a f t e r c a l l e d the " C o l l a t e r a l " . )

Subject , however, to ( i ) the r e s t r i c t i o n s , exceptions, r e s e r v a t i o n s , c o n d i t i o n s , l i m i t a t i o n s , i n t e r e s t s and o ther matters, i f any, set f o r t h o r r e fe r red t o i n the s p e c i f i c de sc r i p t i ons of such proper t ies and in t e re s t s i n E x h i b i t A ( inc lud ing a l l present ly e x i s t i n g r o y a l t i e s , o v e r r i d i n g r o y a l t i e s , payments out of p r o d u c t i o n and other burdens which are taken i n t o cons ide ra t ion i n computing any percentage, decimal or f r a c t i o n a l i n t e r e s t as set f o r t h i n E x h i b i t A) , ( i i ) the assignment o f product ion contained in A r t i c l e I I I hereof , but only i n s o f a r and so long as sa id assignment o f production i s not inopera t ive under the p rov i s ions of S e c t i o n 3.5 hereof , and ( i i i ) the c o n d i t i o n that ne i t he r the C o l l a t e r a l Agent nor the Secured Pa r ty s h a l l be l i a b l e i n any

7 r.d'bry/-irO'ii«« U *rt

respect for the performance of any covenant or obl iga t ion of the Debtor i n respect of the Col la te ra l .

The maximum amount or l i m i t of the pledge of the Mortgage Note provided herein i s hereby f ixed at $35,000,000.

The Debtor, i n consideration of the premises, hereby covenants and agrees with the Col la tera l Agent and the Secured Party as f o l l o w s :

ARTICLE I

Indebtedness Sec;

1.1 Items of Indebtedness Securec. Th* fo l lowing items of indebtedness are secured hereby:

(a) The Notes, and a l l other Obligations of the Debtor to the Secured Party ar is ing under or in connection with the Note Agreement and the other Note Documents whether fo r pr incipal , in te res t , fees, Yield-Maintenance Amount or otherwise;

(b) A l l obligations and l i a b i l i t i e s of F ide l i ty Oi l Holdings, Inc. under and i n connection with the Guaranty,

(c) Any sums advanced or expenses or costs incurred by the Collateral Agent or the Secured Party (or any receiver appointed hereunder) which are made or incurred pursuant to , or permitted by, 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 j n t i l reimbursed; and

(u; Any promissory note taken i n extension or renewal of or in replacement or subs t i tu t ion f o r any of the Notes or any Indebtedness described i n (a) - (c) and any extensions or renewals or replacements of a l l such Indebtedness described i n paragraphs (a) - (c) above whether or not the Debtor executes any extension agreements, renewal promissory notes or renewal security instruments.

1.2 Indebtedness Defined- A l l the above items of indebtedness are hereinafter c o l l e c t i v e l y referred to as the "Indebtedness''.

8

ARTICLE I I

P a r t i c u l a r Covenants and Warranties of the Debtor

2.1 Payment of the Indebtedness. The Debtor w i l l duly and p u n c t u a l l y pay the Indebtedness, i n c l u d i n g without l i m i t a t i o n each and every o b l i g a t i o n owing on account of the Notes.

2.2 Warranties. The Debtor warrants and represents t o the C o l l a t e r a l Agent and the Secured Party t h a t a) to the Debtor's knowledge a f t e r due i n q u i r y , the o i l and gas leases described i n E x h i b i t A hereto are v a l i d , s u b s i s t i n g leases, superior and paramount to a l l other o i l and gas leases respecting the properties t o which they p e r t a i n , (b) t o the Debtor's knowledge a f t e r due i n q u i r y , a l l producing wells located on the lands described i n E x h i b i t A have been d r i l l e d , operated and produced i n conformity w i t h a l l applicable laws, rules and r e g u l a t i o n s of a l l a u t h o r i t i e s h a v i n g j u r i s d i c t i o n , and are subject t o no pe n a l t i e s on account of p a s t production, and such wells are i n f a c t bottomed under and are prod u c i n g from, and the well bores are wholly w i t h i n , the lands d e s c r i b e d i n Exh i b i t A, (c) the Debtor, t o the extent of the i n t e r e s t specified i n E x h i b i t A, has good and defensible t i t l e t o each property r i g h t or i n t e r e s t c o n s t i t u t i n g the C o l l a t e r a l or the Mortgaged Property except f o r defects and i r r e g u l a r i t i e s i n t i t l e w h i c h are not such as t o i n t e r f e r e m a t e r i a l l y w i t h the development, o p e r a t i o n or value of such pro p e r t i e s and assets and not such as t o m a t e r i a l l y a f f e c t t i t l e thereto, and except as n o t i f i e d i n w r i t i n g t o t h e Secured Party on or p r i o r t o the date hereof concerning c e r t a i n assignments which have not been obtained and approved, as t h e case may bn, as of such date, and has a good and legal r i g h t t o g r a n t and cor.vey the same t o the C o l l a t e r a l Agent, i t being understood that the Debtor's i n t e r e s t i n each o i l and gas lease s h a l l exceed the Debtor's net i n t e r e s t i n production from such l e a s e t o the extent of the Debtor's proportionate share of the burden of a l l r o y a l t i e s , o v e r r i d i n g r o y a l t i e s and other such payments out ot" production, (d) the C o l l a t e r a l i s free from a l l encumbrances or l i e n s , except as may be s p e c i f i c a l l y set f o r t h i n E x h i b i t A or as permitted by the pr o v i s i o n s of Section 2.5(e) h e r e o f , (e) the Debtor i s not o b l i g a t e d , by v i r t u e of any prepayment under any contract providing f o r the sale by the Debtor o f Hydrocarbons which contains a "take or pay" clause or under any s i m i l a r arrangement, t o d e l i v e r Hydrocarbons at some f u t u r e time w i t h o u t then or t h e r e a f t e r r e c e i v i n g f u l l payment therefor, and ( f ) t o t he Debtor's best knowledge a f t e r due i n q u i r y , each of the o i l and gas leases described i n E x h i b i t A i s i n f u l l force and e f f e c t and a l l r o y a l t i e s due and payable have been timely and c o r r e c t l y p a i d , and a l l severance and production taxes w i t h respect thereto have been timely and c o r r e c t l y paid. The Debtor w i l l warrant and f o r e v e r defend the C o l l a t e r a l and the Mortgaged Property unto the C o l l e r a l Agent against every person whomsoever l a w f u l l y claiming t h e same or any part thereof, and the Debtor w i l l maintain and preserve the C o l l a t e r a l and the Mortgaged Property free from a l l

9 rxkbty/ciKI'iu-c U ii2

encumbrances or l i e n s , except as s p e c i f i c a l l y set f o r t h on Exh ib i t A o r as permi t ted by Sec t ion 2 . 5 ( e ) , and the Debtor w i l l maintain and preserve the l i e n and s e c u r i t y i n t e r e s t hereby created so long as any o f the Indebtedness remains unpa id .

2.3 Further Assurances. The Debtor w i l l execute and d e l i v e r such o the r and f u r t h e r instruments and w i l l do such other and f u r t h e r acts as i n the reasonable o p i n i o n o f the C o l l a t e r a l Agent i s necessary or d e s i r a b l e to ca r ry out more e f f e c t i v e l y the purposes of t h i s ins t rument , i n c l u d i n g , v. thout l i m i t i n g the g e n e r a l i t y of the f o r e g o i n g , (a) prompt c o r r e c t i o n of any ma te r i a l d e f e c t which may h e r e a f t e r be d i scovered i n the t i t l e t o the C o l l a t e r a l and the Mortgaged Proper ty o r any de fec t i n the e x e c u t i o n , acknowledgment and d e l i v e r y o f t h i s ins t rument , or any o t h e r Note Document, the c r ea t i on and issuance of any Note, or any o t h e r document executed i n connect ion he rewi th , and (b) prompt e x e c u t i o n and d e l i v e r y a f t e r an event o f d e f a u l t of a l l no t ices to p a r t i e s producing, purchasing or r e c e i v i n g proceeds o f product ion f r o m the Mortgaged Proper ty , and a l l d i v i s i o n orders or t r a n s f e r o r d e r s , any of which , i n the op in ion o f the C o l l a t e r a l Agent, i s needed to t r a n s f e r e f f e c t i v e l y or t o a s s i s t i n t r a n s f e r r i n g e f f e c t i v e l y to the C o l l a t e r a l Agent t he assigned proceeds of p r o d u c t i o n from the Mortgaged Proper ty .

2.4 Taxes. Subjec t to the D e b t o r ' s r i g h t t o contest the same, the Debtor w i l l pay, before the same become de l inquen t , a l l t a x e s , assessi *nts and governmental charges l e g a l l y imposed upon t h i s instrument o r upon the C o l l a t e r a l o r the Mortgaged Property, o r upon the i n t e r e s t s of the C o l l a t e r a l Agent or the Secured Party t h e r e i n , or upon the income and p r o f i t s d e r i v e d from the C o l l a t e r a l o r the Mortgaged P r o p e r t i e s .

2.5 Operation o f the Mortgaged Proper ty . So long as the Indebtedness or any p a r t thereof remains unpaid , and t o the extent t h e Debtor i s the opera tor of the Mortgaged Property, the Debtor s h a l l , a t the Deb to r ' s own expense do the f o l l o w i n g , and to the e x t e n t the Debtor i s not the opera tor . Debtor s h a l l use i t s best e f f o r t s to cause the operator, a t D e b t o r ' s own expense t o do the f o l l o w i n g :

(a) Do o r cause to be done a l l th ings necessary t o keep unimpaired the Debtor 's r i g h t s i n the C o l l a t e r a l and the Mortgaged Proper ty and not , except i n the o rd inary course of business, abandon any w e l l or f o r f e i t , surrender or release any o i l and gas lease or any r i g h t s i n the C o l l a t e r a l and the Mortgaged Proper ty , or enter i n t o any operat ing agreement wi th respect to the Mortgaged Proper ty , w i thou t the p r i o r w r i t t e n consent of the C o l l a t e r a l Agent;

(b) Cause the lands descr ibed i n E x h i b i t A tc be maintained, developed, p ro t ec t ed against drainage, and continuously operated f o r the p r o d u c t i o n of Hydrocarbons i n a good and workmanlike manner as would a prudent operator , and

10 fidcbty-irxl'tuti ii dri

i n accordance w i t h g e n e r a l l y accepted p r a c t i c e s , appl icable operat ing agreements, and a l l a p p l i c a b l e f e d e r a l , s ta te and l o c a l laws, r u l e s and r e g u l a t i o n s , except ing those being contested i n good f a i t h ;

(c) Fay, o r cause t o be p a i d , promptly as and when due and payable, a l l r en t a l s and r o y a l t i e s payable i n respect of the C o l l a t e r a l and the Mortgaged Property, and a l l expenses incurred i n o r a r i s i n g f r o m i he opera t ion or development of the >'iOrtgaged Proper ty ;

(d) Cause t o the e x t e n t n e e d f u l to the product ion of Hydrocarbons f rom the lands descr ibed i n E x h i b i t A, the Operating Equipment t o be kep t i n good and e f f e c t i v e operat ing cond i t ion , and a l l r e p a i r s , renewals, replacements, addi t ions and improvements '--hereof o r there*"*', to be promptly made;

(e) Cause the C o l l a t e r a l ai._ the Mortgaged Property . be kept f r e e and c lear of l i e n s , charges and encumbrances CL every characcer, other than th- i Permit ted L iens ; and

( f ) Carry w i t h a p p r o p r i a t e insurance companies w i t h respect to i t s p rope r t i e s and business against such casual t ies and cont ingencies and of such types and i n 'juch amounts as i s customary by others engaged i n s i m i l a r undertakings i n the same general areas i n which the Mortgaged Property and C o l l a t e r a l i s loca ted , i n c l u d i n g wi thout l i m i t a t i o n , i f customary, w e l l blow-out insurance and insurance i n respect of the Cperat ing Equipment, aga ins t loss or damage by f i r e , l i g h t n i n g , h a i l , tornado, e x p l o s i o n and o ther s i m i l a r r i s k s .

2.6 ^ i l i n g , e t c . The Debtor w i l l p rompt ly , and at the D e b t o r ' s expense, f i l e t h i s and every o ther instrument i n add i t i on o r supplemental he re to i n such o f f i c e s and places and at such times and as o f ton as may be necessary t o preserve, p r o t e c t and renew the l i e n and s e c u r i t y i n t e r e s t hereof as a l i e n on and p r i o r perfected s e c u r i t y i n t e r e s t ( sub jec t on ly t o the i n t e r e s t o f the Lenders and t h e Agent under the Credi t Agreement and r e l a t e d documents) i n personal proper ty and the r i g h t s and remedies o f the C o l l a t e r a l Agent and the Secured Party, and otherwise w i l l do and observe a l l t h i n g s or matters necessary o r expedient to be done or observed by reason of any a p p l i c a b l e law o r r e g u l a t i o n of any State or of the U n i t e d States of America or o f any other competent a u t h o r i t y , fc -t h e purpose of e f f e c t i v e l y c r e a t i n g , main ta in ing and preserving the l i e n and s e c u r i t y i n t e r e s t hereof on and i n the C o l l a t e r a l .

2.7 Sale or Mortga-re of the C o l l a t e r a l . Except f o r sales of severed Hydrocarbons i n th< ordinary course of the Debtor 's bus-, less and the l i e n and - u r i t y i n t e r e s t created by t h i s instrument, the Debtor w i ) i r.cx s e l l , convey, pledge, grant a s e c u r i t y i n t e r e s t i n or o therwise dispose o f or encumber the C o l l a t e r a l nor any p o r t i o n t h e r e o f , nor any of the Debtor 's r i g h t , t i t l e or i n t e r e s t t h e r e i n , except as otherwise agreed to i n w r i t i n g

11 r-dcirr>.cibcruiij u dr:

by the Secured Party; and the Debtor w i l l not enter into any arrangement with any gas pipeline company or other consumer of Hydrocarbons regarding the Mortgaged Property or Collateral whereby sa id gas pipeline company or consumer i s granted a contractual right to set off any take or pay claim against the Debtor by withholding payment for any Hydrocarbons actually delivered.

2.8 Right of Bntry. The Debtor w i l l permit (or i f the Debtor i s not the operator with respect to any particular property, wil l use its best efforts to cause such operator to permit) the Collateral Agent or the Secured Party, or the agents of either of them, at the cost and expense of the Debtor, at reasonable times and intervals and upon reasonable notice, to enter upon the Mortgaged Property, and a l l parts thereof, for lhe purpose of investigating and inspecting the condition and operation of the Collateral.

2.9 Corporate Debtor. The Debtor w i l l continue to be duly qualified to transact business in each state where the conduct of i t s business requires i t to be qualif ied.

ARTICLE I I I

Assignment ot Production 3.1 Assignment. As further security for the payment of the

Indebtedness, the Debtor hereby transfers, assigns, warrants and conveys to the Collateral Agent for the use and benefit of the Secured Party, effective as of the date hereof, at 7:0U A.M., local time, a l l of Debtor's right, t i t l e , and interest in and to a l l Hydrocarbons which are thereafter produced from and which accrue to the Mortgaged Property, and a l l proceeds therefrom. Al l parties producing, purchasing or receiving any of Debtor's right, t i t l e , and interest in and to a l l Hydrocarbons, or having such, or proceeds therefrom, in their possession for which they or others are accountable to the Collateral Agent by virtue of the provisions of this Article, are authorized p i directed to treat and regard the Collateral Agent as the assic, oe and transferee of the Debtor and entitled in the Debtor's place and stead to receive any of Debtor's right, t i t l e , and interest in and to a l l Hydrocarbons and a l l proceeds therefrom; and said parties and each of them shall be fully protected in so treating and regarding the Collateral Agent and shall be under no obligation to see to the application by the Collateral Agent of any such proceeds or payments received by i t . The maximum amount or limit of the pledge and assignment contained in this Article I I I is hereby fixed at $35,000,000.

3.2 Application of Proceeds. A l l "---.v-Trents received by the Collateral Agent pursuant to Section 3.? of shall be placed in a cash collateral account at the princip. ice of the Collateral Agent and on the f i r s t business day of eae, alendar month applied as follows:

12 fNkbty/cibcJ/uir, b drj

F i r s t : To the paymcr-t and s a t i s f a c t i o n of a l l reasonable costs and expenses incurred i n connect ion w i t h the c o l l e c t i o n of such proceeds, and to the payment of a l l items of the Indebtedness not evidenced by any Note i n c l u d i n g , wi thout l i m i t a t i o n , any unpaid costs and expenses of the C o l l a t e r a l Agent u;der t h i s Mortgage.

Second: To the payment o f those items of the Indebtedness t hen due and owing t o the Secured Party outs tanding at t he time of such payment.

T h i r d : To the payment o f the remaining unpaid Indebtedness.

f o u r t h : The balance, i f any, a f t e r the Indebtedness has been paid i n f u l l , s h a l l be re leased t o the Debtor .

3.3 No L i a b i l i t y of the C o l l a t e r a l Agent i n C o l l e c t i n g . The C o l l a t e r a l Agent i s hereby absolved f rom a l l l i a b i l i t y f o r f a i l u r e t o enforce c o l l e c t i o n of any proceeds so assigned (and no sue. f a i l u r e ; s h a l l be deemed to be a wa iver of any r i g h t of the C o l l a t e r a l Agent or the Secured Par ty under t h i s A r t i c l e ) and from a l l o ther r e s p o n s i b i l i t y i n connec t ion therewi th , except the r e s p o n s i b i l i t t o accou-it to the Debtor f o r funds a c t u a l l y r e c e i v e d .

3 .4 Assignment Does Not A f f e c t Obl igat ions Ql Debtor • N o t h i n g herein conta ined sha l l d e t r a c t f rom or l i m i t the absolute o t l i g a t i o n of the Debtor to make payment of the Indebtedness regard less of whether the proceeds pledged and assigned by t h i s A r t i c l e are s u f f i c i e n t t o pay the same, and the r i g h t s under t h i s A r t i c l e sha l l be i n a d d i t i o n to a l l o t h e r secur i ty nc ->r he rea f te r e x i s t i n g to secure the payment of the Indebtedne: and of a l l o b l i g a t i o n s f o r which the Mortgage Note may be pledged as s e c u r i t y .

3.5 s tatus o f Assignment. Notwi ths tanding the other pro­v i s i o n s of t h i s A r t i c l e , the C o l l a t e r a l Agent or any receiver appoin ted i n j u d i c i a l proceedings f o r the enforcement of t h i s ins t rument , s h a l l have the r i g h t t o r ece ive a l l of the Hydrocarbons h e r e i n assigned and the proceeds t h e r e f r o m and to apply a l l of said proceeds as provided i n Section 3.2 hereof a f t e r the occurrence of an event of d e f a u l t hereunder. Upon any sale of the Mortgaged P rope r ty or any p a r t thereof pursuant t o the terms o f the Mortgage o r thc sale of the C o l l a t e r a l or nny pa r t thereof pursuant to A r t i c l e V, the Hydrocarbons t h e r e a f t e r produced f rom the property so s o l d , and the proceeds there f rom, s h a l l be i n c l ' . '.ed i n such sale and s h a l l pass t o the purchaser f r e e and clear of the assignment conta ined i n t h i s A r t i c l e .

3.6 Indemnity. The Debtor agrees t o indemnify the C o l l a t e r a l Agent and the Secured Party aga ins t a l l c la ims, act ions , l i a b i l i t i e s , judgments, costs, reasonable a t torney3 ' fees or other charges of whatsoever k ind or na ture ( a l l h e r e i n a f t e r i n t h i s

13

Section 3.6 called "claims") made against or incurred by them or any of them as a consequence of the assertion, either before or a f t e r the payment in f u l l of the Indebtedness, that they or any of them received Hydrocarbons herein assigned or the proceeds thereof claimed by t h i r d persons, and the Collateral Agent and the Secured Party shalL have the right to defend against any such claims, employing attorneys therefor, and unless furnished with reasonable indemnity, they or any of them shall have the rig h t to pay or compromise and adjust a l l such claims. The Debtor w i l l indemnify and pay to the Collateral Agent or the Secured Psrty, as the case may be, any and a l l such amounts as may be paid i n respect thereof or as may be successfully adjudged against the Collat -ral Agent or the Secured Party or any of them. The obligations of -he Debtor as hereinabove set f o r t h i n this Section 3.6 shall survive the release, termination, foreclosure or assignment of this instrument or any sale hereunder.

4.1 Events of Default Hereunder. The occurrence of an Event of Default under the Note Agreement shall constitute an 'event of de f a u l t " hereunder.

5.1 Rights of the Collateral Agent wich Respect to the Collateral • Upon the occurrence of an event of default and i f such event shall be continuing, the Collateral Agent w i l l have a l l r i g h t s and remedies granted by law, and pa r t i c u l a r l y by Chapter 9 of the Louisiana Commercial Laws ( Ta. R.S. 10:9-101 e_£ aeg) . Unless sucn personal property is peritnable or threatens to decline speedily in value or i s of a type customarily sold on a recognized market, the Collateral Agent w i l l give the Debtor reasonable notice of the time and place of any public sale or of the time after which any private sale or other intended disposition of such personal property is to be made. This requirement of sending reasonable notice w i l l be met i f the notice i s mailed by f i r s t - c l a s s mail, postage prepaid, to the Debtor 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 • 2 Rights Qf t_hg Collateral Agent with Respect to Collateral • Upon the occurrence of an evenv of default and i f such event of default s h a l l be continuing, the Collateral Agent w i l l have a l l rights and remedies granted by law, and particularly by any applicable Uniform Commercial Coda, inducing, but not limited t o , the right to take possession of a l l personal property constituting a part of the Collateral, and fo.v t h i s purpose the Collateral Agent may enter upon any premises on v.Uch any or a l l of

ARTICLE IV

Events of D- fault

ARTICLE V

Enforcement of the Secur i ty

14 T>dcbty/crVI'-*t«-lf,.*3

such personal property i s si tuated and take possession of and operate such personal property (or any port ion thereof) or remove i t therefrom. The Col la te ra l Ayent may require the Debtor to assemble such personal property and make i t available to the C o l l a t e r a l Agent at a place to be designated by the Collateral Agent which is reasonably convenient to a l l par t ies . Unless such personal property i s perishable or threatens to decline speedily i n value or is of a type customarily t o l d on a recognized market, the C o l l a t e r a l Agent w i l l give the Debtor reasonable notice of the time and place of any public sale or of the time a f t e r which any private sa le or other d ispos i t ion of such personal property i s to be made. This requirement of sending reasonable notice w i l l be met i f the n o t i c e i s mailed by f i r s t - c l a s s mai l , postage prepaid, to the Debtor at the address shown i n the signatures at the end of th i s instrument at least ten (10) days before the time of the sale or d i s p o s i t i o n .

5.3 Judicial Proceedings. Upon occurrence of an event of d e f a u l t and i f such event shal l be continuing, the Collateral Agent may proceed by a su i t or sui ts i n equity or at law, whether f o r a foreclosure hereunder, or f o r the sale of the Col la tera l , or f o r the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or f o r the appointment of a receiver pending any foreclosure here­under or the sale of the Col la tera l , or f o r the enforcement of any other appropriate legal or equitable remedy.

5.4 Executory Process. Solely fo r purposes of executory process under applicable Louisiana law, the Debtor hereby acknowledges the indebtedness owed under the Indebtedness, CONFESSES JUDGMENT thereon and consents that judgment be rendered and signed, whether during the court 's term or during vacation, i n f a v o r of the Col la te ra l Agent, f o r the benefit of the Secured Party, fo r the f u l l amount of the Indebtedness, including but not l i m i t e d to, the Notes and the other Obligations in p r inc ipa l , i n t e r e s t , Yield-Maintenance Amount and attorneys' fees, together w i t h a l l charges and expenses whatsoever pursuant to th i s instrument and the Note Agreement. Upon the occurrence and during the continuance of an event of defaul t , ani in addition to a l l of i t s r ights , powers and remedies under th i s instrument and applicable law, the Col la te ra l Agent may, at i t s option, cause a l l or any part of the Col la te ra l to be seized and sold under executory process or under w r i t of f i e r i facias issued i n execution of an ordinary judgment obtained upon the Indebtedness, without appraisement to the highest bidder, f o r cash or under such terms as the Collateral Agent deems acceptable. The Debtor hereby waives a i l and every appraisement of the Collateral and waives and renounces the benef i t of appraisement and the benefi t of a l l laws r e l a t i v e to the appraisement of the Collateral seized and sold under executory or other legal process. The Debtor agrees to waive, and does hereby spec i f i c a l l y waive:

15 i . - ' tu- f U dr?

(a) the b e n e f i t of appraisement provided f o r i n A r t i c l e s 2332, 2336, 2723 and 2724, Louis iana Code of C i v i l Procedure, and a l l other laws c o n f e r r i n g such b e n e f i t s ;

(b) the demand and three (3) days delay accorded by A r t i c l e s 2639 and 2721, Louisiana Code of C i v i l Procedure;

(c) the n o t i c e of seizure r e q u i r e d by A r t i c l e s 2293 and 2721, Louisiana Code of C i v i l Procedure;

(d) the t h r e e (3) days delay p rov ided by A r t i c l e s 2331 and 2722, Lou i s iana Code of C i v i l Procedure;

(e) the b e n e f i t of the o the r p r o v i s i o n s of A r t i c l e s 2331, 2722 and 2723, Louisiana Code o f C i v i l Procedure;

( f ) the b e n e f i t of the p r o v i s i o n s of any other a r t i c l e s of the Louis iana Code of C i v i l Procedure not s p e c i f i c a l l y mentioned above; and

(g) a l l r i g h t s of d i v i s i o n and d i scuss ion w i t h respect t o the Indebtedness.

I n the event the C o l l a t e r a l Agent e l e c t s , a t i t s o p t i o n , to e n t e r s u i t v ia o r d i n a r i a on the Indebtedness, i n a d d i t i o n to the f o r e g o i n g confession o f judgment, the Debtor hereby waives c i t a t i o n , other l e g a l process and l e g a l delays and hereby consents t h a t judgment f o r the unpaid p r i n c i p a l due on the Indebtedness, t oge the r wi th i n t e r e s t , a t to rneys ' f ees , costs and other charges t h a t may be due on the Indebtedness, be rendered and signed immediate ly .

5.5 Certain Aspects of a Sale. The Secured Party and the C o l l a t e r a l Agent s h a l l have the r i g h t t o become the purchaser at any sale held by the C o l l a t e r a l Agent or by any cour t , receiver or p u b l i c o f f i c e r , and the Secured Party or the C o l l a t e r a l Agent s h a l l have the r i g h t t o c r e d i t w o n the amount o f the b i d made t he re fo r the amount payable out OL e net proceeds of such sale t o i t .

5.6 A p p l i c a t i o n o f Proceeds. The proceeds of any sale of the C o l l a t e r a l , or any p a r t t he reo f , i n c l u d i n g , but not l i m i t e d t o , the Mortgage Note, s h a l l be app l i ed as f o l l o w s :

F i r s t : To the payment and s a t i s f a c t i o n of a l l reasonable costs and expenses incurred by the C o l l a t e r a l Agent i n the performance o f i t s dut ies i n c l u d i n g , w i thou t l i m i t i n g the genera l i ty of t he fo rego ing , costs and expenses of any entry, o r taking o f possession, of any sa le , o r advertisement thereof, and o f conveyances, and as w e l l , court costs, compensation o f agents, keepers and employees and reasonable l ega l fees.

16 ridel,ry/ciVZ'uiig-U.<Jr2

Second: To Lhe payment of the Indebtedness outs tanding a t the time of such payment.

T h i r d : To the payment of the remaining unpaid Indebtedness t o the Secured Pa r ty .

Fpurth: Any surplus t h e r e a f t e r remaining a f t e r the Indebtedness has been paid i n f u l l , s h a l l be p a i d t o the Debtor or the Debtor ' s successors or assigns, as t h e i r i n t e r e s t s s h a l l appear.

A l l payments s h a l l be paid i n t o such account as the C o l l a t e r a l Agent s h a l l s p e c i f y f r o m time t o t ime i n same day o r immediately a v a i l a b l e funds. The C o l l a t e r a l Agent s h a l l promptly r emi t i n same day funds to the Secured Party ies p ro r a t a share o f such payments r e c e i v e d by the C o l l a t e r a l Agent as p rov ided i n the I n t e r c r e d i t o r Agreement.

5.7 Costs and Expenses. A l l reasonable costs and expenses ( i n c l u d i n g reasonable a t t o rneys ' fees) i ncu r red by the C o l l a t e r a l Agent and the Secured Party i n p r o t e c t i n g and e n f o r c i n g t h e i r r i g h t s hereunder, s h a l l c o n s t i t u t e a demand o b l i g a t i o n owing by the Debtor to the p a r t y i n c u r r i n g such cos ts and expenses and sha l l draw i n t e r e s t a t an annual ra te equal t o the g rea te r o f ( i ) 10.43% o r ( i i ) 2% over the Prime Rate o f i n t e r e s t charged by Morgan Guaranty Trust Company of New York.

5.8 Appointment of and Opera t ion of the C o l l a t e r a l bv a Keeper. Pursuant t o the a u t h o r i t y contained i n La.R.S. 9:5136 t h r o u g h 9:5140.1, the Debtor and the C o l l a t e r a l Agent do hereby express ly designate the C o l l a t e r a l Agent or i t s designee to be keeper or rece iver ("Keeper") f o r the b e n e f i t of the C o l l a t e r a l Atj«?i,:. or any assignee o f the C o l l a t e r a l Agent, such d . s i 7 n a t i o a to oak » e f f e c t immediately upon any se i zu re o f any o f he under w r i t o f execute y process o r under w r i t o f seques t ra t ion or f i e r i fac ias as an incident t o an a c t i o n brought by the C o l l a t e r a l Agent. The f ees o f the Keeper rchall not exceed f i v e percent (5%) of the amount due o r sued f o r o r c la imed or sought t o be p ro tec ted , preserved or e n f o r c e d i n the proceeding f o r the r e c o g n i t i o n of the secur i ty i n t e r e s t created hereby, and the payment of such fees s h a l l be secured by the s e c u r i t y i n t e r e s t i n the C o l l a t e r a l granted i n t h i s ins t rument . The Keeper shal? have the r i g h t and power to the e x t e n t permit ted by app l i cab l e law, but s h a l l not be o b l i g a t e d , to e n t e r jpon and take possession of any o f the C o l l a t e r a l , and to exc lude the Debtor, and the Debtor ' s agents o r servants , wholly t he r e f rom, and t o h o l d , use, admin i s t e r , manage and operate the same t o the ex ten t t h a t the Debtor s h a l l be a t the t ime e n t i t l e d and i n i t s piace and stead. The Keeper, or any person, f i r m or c o r p o r a t i o n designated by the Keeper, may operate the same without any l i a b i l i t y t c the Debtor i n connect ion w i t h such operat ions, except to use o r d i n a r y care i n the opera t ion of such p roper t i e s , and the Keepe*" or any person, f i r m or co rpo ra t i cn designated by the Keeper, sha l l have the r i g h t t o c o l l e c t , receive and r ece ip t f o r

17 ridtlity/cibc2'ui«-U dr2

a l l Hydrocarbons produced and so ld f rom s a i d p r o p e r t i e s , to make r e p a i r s , purchase machinery and equipment, conduct work-over o p e r a t i o n s , d r i l l a d d i t i o n a l wel l s and t o exerc ise every power, r i g h t and p r i v i l e g e o f t h - Debtor w i t h respect t o the C o l l a t e r a l . When and i f the expenses of such o p e r a t i o n and development t i n -e l u d i n g costs of unsuccess fu l work-over opera t ions o r a d d i t i o n a l w e l l s ) have been p a i d and the Indebtedness p a i d , s a id proper t ies s h a l l , i f there has been no sale or f o r e c l o s u r e , be r e tu rned to the D e b t o r .

ARTICLE V I

Miscel laneous Prov i s ions

6 .1 Actions o r Advances by the C o l l a t e r a l Agent- Each and e v e r y covenant h e r e i n conta ined s h a l l be performed and kept by the Debtor so le ly at the D e b t o r ' s expense. I f the Debtor s h a l l f a i l to p e r f o r m or keep any o f the covenants of whatsoever k i n d or nature con ta ined i n t h i s i n s t rumen t , the C o l l a t e r a l Agent, the Secured P a r t y or any r ece ive r appointed hereunder, may, but s h a l l not be o b l i g a t e d to , take a c t i o n and/or make advances t o pe r fo rm the same on the Debtor's b e h a l f , and the Debtor hereby agrees t o repay the expense of such a c t i o n and such advances upon demand p lus in t e res t a t an annual ra te equal t o the grea ter o f ( i ) 10.43% or ( i i ) 2% o v e r the Prime Rate o f i n t e r e s t charged by Morgan Guaranty Trust Company of New York u n t i l pa id o r , i n the event any promissory note evidences such indebtedness, upon the terms and cond i t i ons thereof . No such advance o r a c t i o n by the C o l l a t e r a l Agent, the Secured P a r t y or any r e c e i v e r appointed hereunder s h a l l be deemed to r e l i e v e the Debtor f r o m any d e f a u l t hereunder.

6.2 Defense o f Cla ims . The Debtor w i l l n o t i f y the C o l l a t e r a l Agent , i n w r i t i n g , p rompt ly o f the commencement of any lega l proceedings a f f e c t i n g the l i e n or s e c u r i t y i n t e r e s t hereof or the C o l l a t e r a l , or any p a r t the reof , and w i l l take such ac t ion , employing a t torneys acceptable t o the C o l l a t e r a l Agent, as may b* necessary or a p p r o p r i a t e t o preserve the Debtor's. , t l .e C o l l a t e r a l A g e n t ' s and the Secured Pa r ty ' s r i g h t s a f f e c t e d thereby and/or to h o l d harmless the C o l l a t e r a l Agent and the Secured Party i n respect o f such proceedings; and should the Debtor f a i l or r e fuse to take any such ac t ion , the C o l l a t e r a l Agent o r the Secured Party may, upon g i v i n g p r i o r w r i t t e n no t i ce thereof t o the Debtor, take such a c t i o n i n behalf and i n the name of the Debtor and a t the Debtor 's expense. Moreover, t he C o l l a t e r a l Agent and the Secured Par'.y may t ake such independent a c t i o n i n connect ion t h e r e w i t h as i t or they may i n i t s or t h e i r d i s c r e t i o n deem proper , the Debtor hereby agreeing that a l l sums advanced or a l l expenses i n c u r r e d i n such a c t i o n s plus i n t e r e s t a t an annual ra te equal t o the grea te r of ( i ) 10.43% or ( i i ) 2% over the Prime Rate of i n t e r e s t charged by Morgan Guaranty Trust Company ot New York u n t i l p a i d , w i l l , on demand, be reimbursed, as a p p r o p r i a t e , to the C o l l a t e r a l Agent, the Secured Pa r ty , or any r e c e i v e r appointed hereunder. The o b l i g a t i o n s of the

18 r,Jtlify.'cibc2.'uiit-U dr?

Deb to r as hereinabove set f o r t h i n t h i s Sec t ion 6.2 s h a l l su rv ive t h e release, t e r m i n a t i o n , f o r e c l o s u r e o r assignment of t h i s in s t rument or any sa le hereunder.

6.3 Costs and Expenses. A l l co s t s , expenses and advances ( i n c l u d i n g , w i t h o u t l i m i t a t i o n , cos t o f defense o f c la ims, a t t o r n e y s fees, t axes , insurance, and opera t ions cost) i n c u r r e d or p a i d by the Secured Party i n p r e s e r v i n g and p r o t e c t i n g the Mortgaged Property and/or the C o l l a t e r a l and i n p rese rv ing , p r o t e c t i n g and e n f o r c i n g i t s r i g h t s hereunder and/or under the Mortgage Note s h a l l c o n s t i t u t e a demand o b l i g a t i o n owing by the Deb to r to the p a r t y i n c u r r i n g such cos t s and expenses and s h a l l draw i n t e r e s t a t an annual ra te equal t o the greater of ( i ) 10.43% o r ( i i ) 2% over the Prime Rate o f i n t e r e s t charged by Morgan Guaranty Trust Company of New York u n t i l p a i d , a l l of which s h a l l c o n s t i t u t e a p o r t i o n o f the Indebtedness.

6.4 Renewals. Amendments and Other Secur i ty . Renewals and ex tens ions of the Indebtedness may be g iven a t any t ime and amendments may be made t o agreements r e l a t i n g to any p a r t o f such Indebtedness pursuant t o amendments executed i n accordance w i t h the te rms of such agreements or the C o l l a t e r a l and the C o l l a t e r a l Agent and the Secured Par ty may take or may now hold other s e c u r i t y f o r t h e Indebtedness, a l l wi thout n o t i c e t o o r consent of the Debtor u n l e s s otherwise r e q u i r e d by such agreement. The C o l l a t e r a l Agent o r t he Secured Party may resor t f i r s t t o such other s e c u r i t y or any p a r t thereof or f i r s t t o the s e c u r i t y he r e in g iven o r any par t t h e r e o f , cr from t ime t o time t o e i t h e r or both, even t o the p a r t i a l or complete abandonment of e i t h e r s e c u r i t y , and such ac t i on s h a l l not bo a waiver o f any r i g h t s c o n f e r r e d by t h i s ins t rument , w h i c h s h a l l cont inue as a l i o n upon and p r i o r pe r f ec t ed s e c u r i t y i n t e r e s t (subject o n l y t o the i n t e r e s t o f the Lenders and the Agent under the Credit Agreement and r e l a t e d documents) i n the C o l l a t e r a l n o t expressly re leased u n t i l the Notes and a l l other Indebtedness secured hereby are f u l l y pa id .

6.5 L i m i t a t i o n pn I n t e r e s t . No p r o v i s i o n of t h i s inscrument o r o f the Notes, the Note Agreement o r any o'-her Note Dc oment, or any other document d e l i v e r e d i n connec t ion wit'-: the Note Agreement, t he Notes or any o t h e r Note Document s h a l l requi re the payment or p e r m i t the c o l l e c t i o n of i n t e r e s t i n excess of the maximum p e r m i t t e d by law o r which i s o therwise cont ra ry t o law. I f any excess of i n t e r e s t i n such respect i s h e r e i n or i n the Notes or i n any other Nots Document provided f o r , o r s h a l l be ad jud i ca t ed to be so provided f o r h e r e i n or i n the Notes or i n any o ther Note Document, the Debtor s h a l l not be o b l i g a t e d to pay such excess.

6.6 Unenforceable or I n a p p l i c a b l e Provis ions . I f any p r o v i s i o n hereof o r o c the Notes i s i n v a l i d or unenforceable i n any j u r i s d i c t i o n , the o the r provis ions hereof or of the Notes s h a l l remain i n f u l l f o r c e and e f f e c t i n such j u r i s d i c t i o n , and the remaining p rov i s ions hereof s h a l l be l i b e r a l l y construed i n favor o f the C o l l a t e r a l Agent and che Secured Party i n order to

19 Tidcbry'crtK'/uMt-U.di?

e f f e c t u a t e the p r o v i s i o n s hereof, and the i n v a l i d i t y of any p r o v i s i o n hereof i n any j u r i s d i c t i o n s h a l l not a f f e c t the v a l i d i t y o r e n f o r c e a b i l i t y of any such p r o v i s i o n i n any other j u r i s d i c t i o n . Any reference herein contained to a s t a t u t e or law of a st a t e i n which no part of the Mortgaged Property or C o l l a t e r a l i s si t u a t e d s h a l l be deemed in a p p l i c a b l e t o , and not used i n , the i n t e r p r e t a t i o n hereof.

6.7 Rights Cumulative. Each and every r i g h t , power and remedy herein given t o the C o l l a t e r a l Agent or th-* Secured Party s h a l l be cumulative and not exclusive; and each " J every r i g h t , power and remedy whether s p e c i f i c a l l y herein gi or otherwise e x i s t i n g may be exercised from time t o time and so o f t e n and i n such order as may be deemed expedient by the C o l l a t e r a l Agent or th e Secured Party, as the case may be, and the e;.ercise, or the begi n n i n g of the exercise, of any such r i g h t , power or remedy s h a l l n o t be deemed a waiver of the r i g h t t o exercise, at the same time o r t h e r e a f t e r , any other r i g h t , power or remedy. No delay or omission by the C o l l a t e r a l Agent or the Secured Party i n the e x e r c i s e of any r i g h t , power or remedy s h a l l impair any such r i g h t , power or remedy or operate as a waiver thereof or of any other r i g h t , power or remedy then or t h e r e a f t e r e x i s t i n g .

6.8 Waiver by the C o l l a t e r a l Agent. Any and a l l covenants i n t h i s instrument may from time t o time by instrument i n w r i t i n g s i g n e d by the C o l l a t e r a l Agent be waived t o such extent and i n - h manner as the C o l l a t e r a l Agent may d e s i r e , but no such wai\ r ever a f f e c t or impair the C o l l a t e r a l Agent's or the Secure' * r * r i g h t s or l i e n s or s e c u r i t y i n t e r e s t s hereunder, excep ie e x t e n t s p e c i f i c a l l y s t a t e d i n such w r i t t e n instrument.

6.9 Successors and Assign*. This instrument i s bir. . t h e Debtor, tlie Debtor's successors and assigns, and s h a l l inur- ; th e b e n e f i t of the C o l l a t e r a l Agent, the Secured Party and t h e i r r espective successors and assigns.

6.10 A r t i c l e and Section Headings. The a r t i c l e and section headings i n t h i s instrument are i n s e r t e d f o r convenience of reference and s h a l l not be considered a part of t h i s instrument or used i n i t s i n t e r p r e t a t i o n .

6.11 Execution i n Counterparts. This instrument may be executed i n any number of counterparts, each of which s h a l l f o r a l l purposes be deemed t o be an o r i g i n a l and a l l of which ara i d e n t i c a l , except t h a t , to f a c i l i t a t e f i l i n g , i n any p a r t i c u l a r counterpart p o r t i o n s of Exhibit A hereto which describe properties s i t u a t e d i n parishes other than the parish i n which such counterpart i s t o be t i l e d may have been omitted.

6.12 Special F i l i n g as Financing Statement. This Assignment, S e c u r i t y Agreement and Financing Statement s h a l l be f i l e d f o r .recvrr" as a f i n a n c i n g statement covering minerals (including o i l and . the Production Sales Contracts, the operating Equipment,

20 fidelity'c*c2/iu«-b drt

t h e Mortgage Note and goods located on o i l and gas pr o p e r t i e s , and accounts a r i s i n g from the sale of minerals at the wellheads of the w e l l s located on the lands described i n E x h i b i t A hereto and as a f i x t u r e f i l i n g . At the option of the C o l l a t e r a l Agent, a carbon, photographic or other reproduction of t h i s instrument or of any f i n a n c i n g statement covering the C o l l a t e r a l or any p o r t i o n thereof s h a l l be s u f f i c i e n t as a financing statement and may be f i l e d as such.

6.13 Notices. Except as otherwise s p e c i f i c a l l y provided f o r h e r e i n , a l l notices, demands, i n s t r u c t i o n s and other communications r e q u i r e d or permitted t o be given t o or made upon any party hereto s h a l l be i n w r i t i n g . Any notice required or permitted t o be given hereunder s h a l l be s u f f i c i e n t l y given i f , mailed and properly addressed w i t h postage prepaid or i f p r o p e r l y addressed and sent by p r e p a i d courier s e r v i c e i f t r a n s m i t t e d by f a c s i m i l e and properly addressed, and such f a c s i m i l e i s confirmed. Unless otherwise s p e c i f i e d i n a no t i c e sent or d e l i v e r e d i n accordance w i t h the f o r e g o i n g provisions of t h i s Section 6.13, notices, demands, i n s t r u c t i o n s and other communications i n w r i t i n g s h a l l be given to o r made upon the respective p a r t i e s hereto a t t h e i r respective addresses (or to t h e i r respective f a c s i m i l e numbers) indicated on t h e signature page(s) hereof.

6.14 Security I n t e r e s t i n Mortgage Note. Without l i m i t a t i o n o f any other provisions of t h i s Assignment, Security Agreement and Financing Statement, i t i s expressly agreed t h a t the security i n t e r e s t hereby granted i n the Mortgage Note, as defined i n the Mortgage, i s expressly mad^ and w i l l be perfected i n accordance w i t h the provisions of Chapter 9 of the Louisiana Commercial Laws (La.R.S. 10:9-101 fit figj.) .

6.15 L i m i t a t i o n s on Mortgage Note. The C o l l a t e r a l Agent hereby covenants and agrees, f o r i t s e l f and on behalf of the Secured Party and any and a l l f u t u r e holJers of the Mortgage Note, t h a t : (a) although the Mortgage Note i s by i t s terms payable on demand, payment thereof ^ h a l l not be demanded by the C o l l a t e r a l Agent unless or u n t i l an event of d e f a u l t under t h i s Assignment, S e c u r i t y Agreement and Financing Statement s h a l l have occurred and be c o n t i n u i r g ; (b) notwithstanding the p r i n c i p a l amount of the Mortgage Note or the i n t e r e s t r a t e s t i p u l a t e d t h e r e i n , the l i a b i l i t y of the Debtor thereunder s h a l l be l i m i t e d t o , and the C o l l a t e r a l Agent s h a l l not enforce the same f o r an amount exceed­i n g , the aggregate amount of ( i ) a l l the Indebtedness, including p r i n c i p a l , i n t e r e s t , Yield-Maintenance Amount, fees, d e f e r r a l and delinquency charges, and costs of whatever kind or character, ( i i ) a l l caxes, assessments, or l i e n s superior t o the l i e n created by t h e Mortgage o*. the CIBC Security Agreement and t h i s Security Agreement, and ( i i i ) a l l other costs r c c r u i n g pursuant to the Mortgage including, but not l i m i t e d t o , compensation of a Keeper and reimbursement f o r taxes and r e p a i r s ; and, the indebtedness of th e Debtor under the Mortgage Note s h a l l be deemed to be l i m i t e d as pro v i d e d i n t h i s Section 6.15; and (c) the C o l l a t e r a l Agent w i l l

21 fidebty/cthcl'ui^-U dr:

n o t s e l l , a s s i g n , d e l i v e r o r o t h e r w i s e s u r r e n d e r p o s s e s s i o n of t he M o r t g a g e Note, o r any p a r t i a l i n t e r e s t t h e r e i n , t o any o t h e r p a r t y o r p a r t i e s except upon and s u b j e c t t o s u c h te rms as w i l l r e n d e r the M o r t g a g e Note, o r such p a r t i a l i n t e r e s t , s u b j e c t t o t h e p r o v i s i o n s o f t h i s S e c t i o n 6 . 1 5 .

6 .16 GO VERM NG LAW. THIS ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT SHALL BE GOVERNED BY AND CONSTRUED I N ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, INCLUDING BUT NOT LIMITED TO, CHAPTER 9 OF THE LOUISIANA COMMERCIAL LAWb ( L A . R . S . 1 0 : 9 - 1 0 1 g l SEQ.) .

ARTICLE V I I

C o n f i r m a t i o n o f CIBC S e c u r i t y Agreement and Consent o f CIBC I n c . and C a n a d i a n I m p e r i a l Bank

o f Commerce, as Agent f o r t h e Lenders

The Lenders have extended c r e d i t t o t he D e b t o r pu r suan t t o t h e C r e d i t Agreemen t . As a c o n d i t i o n p receden t t o making the i n i t i a l loans under t h e C r e d i t Agreement and i s suance o f t he i n i t i a l l e t t e r s o f c r e d i t pu r suan t t o t h e C r e d i t Agreement , t he D e b t o r executed t h e CIBC S e c u r i t y Agreement whereby t h e Debtor g r a n t e d a s e c u r i t y i n t e r e s t i n a n d / o r p l e d g e d and d e l i v e r e d , a3 a p p l i c a b l e , f o r t h e p r o r a t a and p a r i pa s su use and b e n e f i t o f CIBC I n c . , the Agent and t h e Lenders u n d e r the C r e d i t Agreement ( c o l l e c t i v e l y t h e "Leader P a r t i e s " ) , a l l o f the D e b t o r ' s r i g h t , t i t l e and i n t e r e s t , w h e t h e r now o r owned o r h e r e a f t e r a c q u i r e d i n a n d t o the C o l l a t e r a l , i n c l u d i n g b u t n o t l i m i t e d t o t he Mortgage N o t e , and the D e b t o r hereby c o n f i r m s such g r a n t o f s e c u r i t y i n t e r e s t and p l e d g e , as s e c u r i t y f o r a l l o f t he Indeb tedness as d e f i n e d i n the CIBC S e c u r i t y Agreement .

The D e b t o r h e r e b y acknowledges and c o n f i r m s t h e e x e c u t i o n a n d d e l i v e r y t o CIBC I n c . o f t he M o r t g a g e Note wh ich c o n s t i t u t e s a l e g a l and b i n d i n g o b l i g a t i o n o f t he D e b t o r , and the D e b t o r f u r t h e r acknowledges and c o n f i i m s the p l edge o f t h e Mortgage Note i n f a v o r o f C TBC T n e , as c o l l a t e r a l agen t , i n accordance w i t h a l l o f t he t e r m s o f the CIBC S e c u r i t y Agreement and n o t h i n g c o n t a i n e d h e r e i n s h a l l be c o n s t r u e d as a r e i s suance o f t h e Mortgage Note under the C I B C S e c u r i t y Agreement r e s u l t i n g i n a l o s s o r i m p a i r m e n t of t he c o n t i n u i n g p e r f e c t i o n o f the p ledge o f t h e Mortgage Note f r o m t h e d a t e o f e x e c u t i o n o f t h e CIBC S e c u r i t y Agreement and t h e d e l i v e r y o f t h e Mortgage No te p u r s u a n t t o t h e CIBC S e c u r i t y Agreement .

The D e b t o r f u r t h e r acknowledges and c o n f i r m s t h a t t he e x e c u t i o n o f t h i s S e c u r i t y Agreement s h a l l n o t ha .e t h e e f f e c t o f c a n c e l l i n g or n o v a t i n g t h e CIBC S e c u r i t y Agreement o r t h e g r a n t o f t h e s e c u r i t y i n t e r e s t and p ledge e f f e c t e d pu r suan t t h e r e t o , i t b e i the D e b t o r ' s f u l l i n t e n t t h e t t h i s S e c u r i t y Agreement and the C I B c S e c u r i t y Agreement s h a l l be c u m u l a t i v e i n n a t u r e and t h a t t h i s S e c u r i t y Agreement s h a l l remain i n f u l l f o r c e and e f f e c t u n t i l t he I n d e b t e d n e s s as d e f i n e d i n t h i s S e c u r i t y Agreement i s p a i d i n f u l l

22 fide l r 'cibcT u i i { ' l i dr2

. d t h a t the CIBC S e c u r i t y Agreement s h a l l remain i n f u l l f o r . e and e f f e c t u n t i l the Indebtedness as d e f i n e d i n the CIBC Security Agreement i s paid i n f u l l .

AND NOW, CIBC Inc., as c o l l a t e r a l agent f o r the b e n e f i t of t he Lerder P a r t i e s r e f e r r e d t o i n the Credit Agreement anri as th e current holder of the Mortgage Note, and Canadian Imperial Bank o f Commerce, as agent f o r the Lenders under the Credit Agreement, i n t e r v e n e herein f o r the purpose of consenting t o the Debtor's execution of t h i s S e c u r i t y Agreement i n favor of the Secured Party e . l f o r the purpose of acknowledging and hereby confirming that

... .r a f t e r the date of t h i s S e c u r i t y Agreement, CIBC Inc. i s ..ding .he C o l l a t e r a l Note i n pledge f o r the pro r a t a and p a r i

y4;. u. ' and b e n e f i t of the Lender P a r t i e s under the CIBC Security Ag-. uei and the Secured Party under t h i s Security Agreement.

IN WITNESS WHEREOF, the Debtor, C o l l a t e r a l Agent and the Intervenors has exe jut e d or caused t o be executed t h i s Assignment, S e c u r i t y i i i e t ' »nt and Financing Statement on the day, month and year f i r s t above w r i t t e n .

DEBTOR

FIDELITY OIL CO.

23 ridclity/cibc2/u>if -U 4r3

The name and mailing address of the Debtor i s :

F i d e l i t y Oil Co. 3333 blast Broadway Suite 1212 Bismarck, ND 53501 (Taxpayer I.D. No. 41-6025690)

COLLATERAL AGENT

CIBC INC.

By: Printed Elaine: \ft1 n.*.i bt i k Titles l777 t^Oj^U-

INTERVENORS:

BEST AVAiLABLE COPY Z^-ru^^UC^ Printed Name: 1&L7&&££S-

CANADIAN IMPERIAL BANK OF C0Mt>.2LCB

The name and mailing address ot the Collateral Ajent and th<* Intervenors i s :

CIBC Inc., as Collateral Agent 425 Lexington Avenue, 7th Floor New York, New York 10C17 (Taxpayer I.D. No. 58-1760354)

Canadian Imperial Bank of Commerce 425 Lexington Avenue, 7th Floor New York, New York 10017

This Instrument Was Prepared By:

Thomas P. Donahue The Prudential Insurance Company of America c/o Prudential Capital Group 717 N. Harwood, Suite 2670 Dallas, Texas 75201

24 ndciny'ciixr'M.it-udrt

STATE OF NEW YORK

COUNTY OF NEW YORK

S S ss. s

BE IT REMEMBERED that I , Moira Feeney, a Notary Public duly q u a l i f i e d , commissioned, sworn and acting i n and for the County and State aforesaid, hereby c e r t i f y t on t h i s 12th day of January, 1993, there appeared before me tt llowing persons:

John F. Renner, the President c corporation whose address i s 32 Bismarck, Burleigh County, Norti

i d e l i t y Oil Co., a Delaware East Broadway, Suite 1212,

Dakota 58501.

Marybeth Ross, the Vice President of CIBC Inc., a Delaware corporation whose address i s 425 Lexington Avenue, 7th Floor, New York, New Vork 10017.

Marybeth Ross, the authorized signatory of Canadian Imperial Bank of Commerce, New York Agency, a bank chartered under the laws of Car A whose address i s 425 Lexington Avenue, 7th Floor, New lork. New York 10017.

Before me on t h i s day personally appeared the aforementioned persons, to me knov»ri to be the i d e n t i c a l person who subscribed the name of the respective makers thereof to the foregoing instrument i n the capacity set f o r t h opposite the name of such persons above, and each such person acknowledged to me that he executed the same as h i s free and voluntary act and deed, as the free and voluntary act and deed of the corporation set opposite his name for the uses and purposes therein set fo r t h .

Witness my hand and o f f i c i a l seal.

Notary Public Residing at

My commission expires:

M0IHA FEbNbV rJota-y Public Sua of NY

No. 24-4MW61 Qualified In Kings Co

Commisiion Expires 2-1&-94

[Seal ]

tiEST MAILABLE COPY

25 f i d e l i t y / c i b c 2 / a s s i g - l a . d r 2

EXHIBIT A To Assignment. Security Agreement and Financing Statement, dated

January 12. 1993 from F i d e l i t y Oil Co. to CIBC Inc.. as Collateral Agent

List of Properties

1. Depth limit a t i o n s , u n i t designations, unic tract descriptions and descriptions of undivided leasehold interests, w e l l names, "Operating Interests", "Working Interests' and "Net Revenue Interests" contained i n t h i s Exhibit A and the i s t ing of any percentage, decimal or f r a c t i o n a l interest i n this 2xhibit A s h a l l not be deemed to l i m i t or otherwise diminish the interests being subjected to the l i e n , security interest and encumbrance of t h i s instrument.

2. Some of the land descriptions i n this Exhibit A may refer only t o a portion of the land covered by a particular lease. This instrument is not limited to the land described i n Exhibit A but i s intended to cover the entire interest of the Debtor i n any lease described in Exhibit A even i f such interest relates to land not described in Exhibit A. Reference i s made to the land descriptions contained in the documents of t i t l e recorded as described i n this Exhibit A. To the extent that the land descriptions i n this E xhibit A are incomplete, incorrect or not legally s u f f i c i e n t , the land descriptions contained i n the documents so recorded are incorporated herein by this reference.

3. References in Exhibit A to instruments on f i l e i n the publi c records are made for a l l purposes. Unless provided otherwise, a l l recording references i n Exhibit A are to the o f f i c i a l lease records maintained by the Minerals Management Service, U.S. Department of the Interim Gulf of Mexico Region, and i n which records such documents are or in the past have been customarily recorded.

4. A statement herein that a certain interest described herein i s subject to the terms of certain described or referred to agreements, instruments or other matters shall not operate to subject such interest to any such agreement, instrument or other matter except to the extent that such agreement, instrument or matter i s otherwise v a l i d and presently subsisting nor sha l l such statement be deemed to constitute a recognition by the parties hereto that any such agreement, instrument cr other matter i s v a l i d and presently subsisting.

[Do not detach t h i s page]

fidtlity/cibcJ » » « I i dr2

maiuai wa m

L a a a l O a a c r l p t i O n :

that certain Olt and Saa Leaaa fraa tka Uni t aai Stataa af Aaarlea, aa Laaaor, ta fatty Oil Coapany and Continental OU Caaa any, aa Laaa aaa , datad effective January 1, 1977 and deelenated aa OC»-0 3394 and cevertng o i l af Sleek 140, Veral l len Araa, aa eh ean en OCS O f f i c i a l Laaa Int Hap, Law tel ane Hap B e . 3 centatnlnf epprealeetely 5.000.00 aerae, but lesOfAA AMD CeiLY IHMPAI aa I t ce r» taa i / 2 and 1/2 w / 4 af aaid Mack , ceaprtalng approxlnataly 3,125 acraa.

tin, Atfl

.005150 .003719 .004127 .002972 <2> .009207 .OOaaM .007420 .003349

C D M l flguraa eipplled ky tba Operate*, Kettflald lxploration Coapeny, due ta tke aba ante af underlying deetaeentetlen.

<2> AeMltlenel reyeut prevlded far wltb reapect to Aojulla ubaraby keafleld ecrne 20X af Aejulle'e APO Intereet.

S a U i ISLAND SLOCK 172

Legal Descript ion:

that c e r t a i n O i l and Saa Laaaa between tne U n i t e d State ef Aaer lca, ae Leeeor, end Chevron U.S.A. I n c . , ee Leeeee, e f f e c t i v e Ju ly 1 . 1983, deelgneted ee OCS-O 5494, end covering a l l o f Sleek 172, Eugene ielend Area, OCS O f f i c i a l leeetnt Nap, Louiaiana Nep No. 4 conta in ing epproxlaetely 5,000 acres.

122 APO.

UI H i CD VI U i (1)

1000 .082333 .080000 .065861

C D N i l f igures euppl led by the Operator, Newfield Exp lo re t ion Coapeny, due to the absence of under ly ing documentation.

VffT CAHHPJ. KIT MP I TIM, l i f l g MJ

..•sal Deicription:

t ha t ce r t a i n O i l and Gee Laaaa between tha United Statea of America, ae Leeeor, end Conoco, Inc . end Anadarko Production Coapany, ae Leaaaea, e f f e c t i v e Ju l y 1 , 1985. deelgneted ea OCS-O 7619, and covering e t l of Block 401, Meat Caaeron MTOO, Weet Add i t i on , OCS Off ( d e l Leaeing Nep, Louielene Pep No. IA containing epproxlaete ly 5,000 acres, but INSOFAR AND ONLY INSOFAR ae i t extends f roa the surfece of the eer th down to end Inc lud ing but not below the depth of 7361 feet True Ver t i ce l Depth (TVO) ee i d e n t i f i e d on the e l e c t r i c (og of the Newfield Ueet Caaeron 401 OCS-G 7619 84. 1 U e l l .

l i f t APO

V± MBJ. i i ) V I MBJ. ; i )

.100000 .073000 .080000 .058600

( 1 ) NRI f lguree euppl led by the Operator, Newfield Exploret ion Coapany, due to the absence of under ly ing documentation.

W»T tnHE PJ BIOCK 231 nHP 3*9

Legal Oeeerlptlent

(1) Oil and Saa Loaaa bataaan tba United Stataa of America, aa Lessor, and FM* Opereting Coapany, ae Laaaaa, date* effective July 1, 19S8, designated ee OCS-S 9405 end ceverlnfl alt of Black 211, treat Camertn Aree, OCS O f f i c i o ! Laaaing Nap, Louieiena Nap • o . 1 containing approxiaately 5,000 acrea.

2. Oil and Saa Leaee between the United Stata eof America, ae Leaear, and FN* Operating Coapeny, ee Laaaae, dated effective July 1, 1987, designated ee OCS-6 8626 end covering i l l of Block 240, Weet Caaaron Area, OCS O f f i c i a l Leasing Nap, Louieiena Nap • a . 1 containing approxlaetely 5.000 acree.

UL HfJ (1) UL U i Cll

.010667 .008516 .008533 .006813 (2) .019200 .015128 .015380 .012263

( 1 ) NBI figures supplied by tke Operetor. Newfield fxploration Coapeny. due to the absence of underlying documentation.

(2) Additional payout provided for with respect to Aq-jila whereby Newfield earns 208 of

Aquila's APO intereat .

SOUTH TIMBALIER BLOCK 194

Legal Deacription:

that certain O i l and Gaa Lease by and between Lhe United Statea of America, Leaaor, and Exxon Corporation, Leasee, deted July I , 1983, designated aa OCS-G 5610, covering a l l of Block 194, South Timbalier Area. OCS Leaaing Kap, Louiaiana Map No. 6, and containing approximately 5,000 acrea, INSOFAR AND ONLY INSOFAR as said lease includes r i g h t s from the surface down to 100 feet below the stratigraphic equivalent of 11,937 feet subsea aa d r i l l e d l n the South Tinbalier Block 194 No. 1 U e l l , and LESS AND EXCEPT a l l reservoirs or 8ands I n communication wit h reBervoira or sands currently producing from wells located w i t h i n or a t t r i b u t a b l e to South Timbalier 172 Unit or South Timbalier Block 170.

Working Intereat Net Revenue Interest

Before Ptyout Under the Participation Agreement.

Aasigned Premiae8 0.1000000 Except U e l l No. 1

Ue l l No. 1 0.1000000 Before Payout of Uell

U e l l No. 1 0.1000000 After Payout of Uell

0.0713333

0.073C000

0.0713333

After Payout Under tbe Participation Ag* eement

Assigned Premises 0.0800000 Except Wsll No. 1

Uel l No. 1 0.0800000 Before Payout of Uell

Uell No. 1 0.0800000 After Payout of Uell

0.0570666

0.0584000

0.0570666

SOUTH TIMBALIER BLOCK 193

Legal Description:

that certain O i l and Gas Lease by and between the United States of America, Lessor, and Forest O i l Corporation and Harbert Energy Corporation, Lessee, dated Mey 1, 1990, designated as OCS-G 12024, covering a l l of Block 193, South Timbalier Area, OCS Leasing Map, Louisiana Map No. 6, and containing approximately 5,000 acrea.

Working Interest Net Revenue Interest

Before Payout Under the 0.1000000 0.0813333 Participation Agreement

After Payout Under the Participation Agreement

0.0800000 0.0650666

SHIP SHOAL BLOCK 156

Legal Deacription:

that certain O i l and Gaa Lease by and be /een the United States of America, Lessor, and Corpus C h r l a t l Exploration Company, Lessee, dated May 1, 1989, designated as OCS-G 10770, covering a l l of Block 156, Ship Shoal Area, OCS Leasing Map, Louisiana Map No. 5, containing approximately 5,000 acrea, but INSOFAR AND ONLY INSOFAR aa i t covera the Southeast Quarter (SE/4) of the Southeast Quarter (SE/4) of aaid block, comprising approximately 312.50 acrea, and INSOFAR AND ONLY INSOFAR aa i t extends from the aurface of said Southeast Quarter (SE/4) of Southeast Quarter (SE/4) down to 100 feet below the stratigraphic equivalent of 11,286 feet subsea aa d r i l l e d i n the Ship Shoal Block 156 \-3 Well.

Eefore Payout Under the Participation Agreement

Well No. 3 Before Payout of Well

Working Interest

0.1000000

Net Revenue Interest

0.0730000

Well No. 3 After Payout of Well

0.0700000 0.0569333

Assigned Premises Except tor Well No. 3

0.0700000 0.0569333

After Payout Undar tha Participation Agreeaent

Well No. 3 0.0800000 Before Payout of Well

Well No. 3 0.0560000 After Payout of W i l l

Assigned Premises 0.0560000 Except for Well No. 3

0.0584000

0.0455466

0.0455466

/ / • A / / $

SHIP SHOAL SLOCK 157

Legal Descr ip t ion :

that certain Oil and Gas Lease by end betucsn the United States of America, Lessor, and Conoco Inc. and Exxon Corporation, Lessee, dated July 1, 1987, designated as OCS-G 8709, covering a l l of BL. ck i ? v . Ship Shoal Area, OCS Leasing Map, Louisiana Map No. 5, containing approximately 5,000 acres, but INSOFAR AND ONLY INSOFAR as said leaae covers the Southwest Quarter (SW/4) of ss id block, comprising approximately 1,250 acres, and INSOFAR AND ONLY INSOFAR as i t extends from the surface of said Southwest Quarter (SW/A) down to a depth of 11,732 feet subsea as identified on the e lectr ic log of the Ship Shoal Block 157 Well No. 1.

Before Payout Under thi Participation Agreeaent

Well No. 1 Before Payout of Well

Well No. 1 A f t e r Payout of Well

Assigned Premises Except for We?l No. 1

Working Interest

0.1000000

0.1000000

0.1000000

Net Revenue Interest

0.0730000

0.0713333

0.0713333

After Payout Under the Participation Agreement

Well No. 1 0.0800000 Before Payout of Well

Well No. 1 0.0800000 After Payout of Well

Assigned Premises 0.080000C Except for Well Nu. 1

0.0584000

0.0570666

0.0570666

SHIP SBOAL BLOCK 171

Legal Daacrlptlon:

that cat Oil and Gaa Laaee by and between the United Statea of Aaerlca, Leaaor, and Corpus Chrlatl Exploration Conpany, Laaaae, dated July 1, 1 "V dealgnated aa OCS-G 10772, covering a l l of Block 171. Ship Shoal Area, -eaains Map, Louiaiana Map No. 5, containing approxiaately 5,000 acraa, but INSOFAR AND ONLY INSOFAR aa lc covers tha Northeaat Quarter (NE/4) of the Northeast Quarter (NE/4) of aaid block, comprising approxiaately 312.50 acrea, and INSOFAR AND ONLY INSOFAR aa i t extenda froa the aurface of aaid Northeaat Quarter (NE/4) of Northeaat Quarter (NE/4) down to 100 feet below the stratigraphic equivalent of 11,147 feet subsea as drilled in the Ship Shoal Block 171 A-4 Wall.

Working Intereat Net Revenue Intereat

••fora. Payout Under the 0.0700000 0.0569333 Participation Agreeaent

After Payout Under tha Participation Agreement

0.0560000 0.0455466

* IP SBOAL BLOCK 197

Legal Description:

that certain 01'. and Gas Lraee by and betveen th . United States of Aaar). a, Lessor, and Hewile.'d Expi Tat ton Cw, My, Leaa' e, -ated May 1, 1990. dealgnated aa OCS-G 1191 f , loverlnt a l l of I V ' i 197, ..hip Shoal Area, OCS Laaaing Map, Louisiana Map Hc. 5, contai.il..«, ipytokl ists ly 5,000 acraa.

Working Interest Mat Avenue fatg est

Before raj/cut Under tba 0.0750000 0.0613000 Participation Agreeaent

Af tar Payout Under tba Participation Agreeaent

0.0600000 0.0492000

1 / /

SHIP SHOAL BLOfX 145

Li.&<*l Descr ipt ion:

that cer ta in O i l r.nd Gaa Lease by and between the Ur.ited States of America, Lesaor, .i,id Continental O i l Company, Ci t ies Service Production Company, The At l an t i c R i ' / n ing Comprny, ^nd Tidewater O i l Comrany, Lesse;, dated Hay I , 1962 dea l^ . t t tv i as OCS-G >0H, covering Block 145. \>,1 I bhr-al Area, as shown on o f f i c i i , leasing map \- No. 5, Outer Contii c i . : t 1 SIrelf Leasing Map, Louisiana Otfahore Operations, containing approxi^e ely 5,000 acrea:

(A) Aa to that po- t ion of said leaae which n e t i t f * from the surface to 100 feef below the atratlgraph*c equivalent of the be^e of the rVrch Quarter (NO) Sa id *r *-een at a depth of 10.S57 ieet i n ISF/Sonic log f o r th t Ship Shoai 155 Nc. C-l Well : (NOTE: Although the As J . Bcset.' from At lan t i c R ich f i e ld f.t N - v f l c l d of interest i n this p o r t i o n of tii»j leise included personal or movshle orOi»ei **•/, leasehold equipment, p i p e l i n o . platforms, materials ar.d Inventor'ea located on rc c e d by the Working In te res t s P .r". to the extent a t t r ibu tab le or a l l i,>ble thereto, i t did exclude the equipment described aa f o j i o w s ; ARCO's coomv.nico;4or, syseerc and equipment located on the Ship Shoal Bloc- J , ; " V Platform: one (1) nevr-.i ».oot microwave rack which encompasses on* Farlon 6«~0A) reuunc'ant mlciwave t . d l o , two (2) microwave dishes, support interlace equipm end associated e l l i p t i c * . ! transmission l i n e s . ]

Working Interest Net Revenue Interest

Before Payout Under the Participation Agreement

A l i g n e d Premises Except f o r D-4 Wei:

0.07500CO 0.061750C

D-4 Well Before Payout of Weil

0.1000000 0.082 j333

After Payout Under the Participation Agreeaent

D-4 Well 0.07500C3 Af te r Payout of Well

Assigned Premises C.0600000 Except f o r D-4 Well

D-4 Well O.oo. .000 Before Paycut of Well

0.0*17500

0.0494000

0.0656666

D-4 Well Af t e r Payout of Well

ti C W J O C O 0.0494000

.HIP SHOAL BLOCX 145 (Continued)

(B) As to a l l remaining portions of the aaid leaae apart fron that described in part (A) abova:

Working Inteieat Net Revenue Interest

Before Payout Under '.he 0.0500000 0.0411665 Participation Agree jent

After Payout Under the 0.0400000 0.0329332 Participation Agreeaent

WKST CAMEBOW BLOCK 109

Legal Descr ip t ion :

that cert» in Oi l and Gaa Laaaa by nd between tb. United States of Aaarlea. Lesaor, ar.i Chevron U.S.A. I n c . , Leasee, dated Jul 1, 1985, designated aa CV. -C 7601, covering a l l of Block 109, beat Caaeron Area. OCS Leaaing Hap, LoulriiaLU. Amp No. 1, containing approximately 5,000 acrsa .

forking Intsrsst Nat Revenue Intsraat

Before Payout tlu.er tba 0.O8OJ000 0.0658667 Participatloa

After Payout Under tha Participation Agreeaent

0.0640000 0.0526933

A VERMILION BLOCK 155

Legal Descr ip t ion :

that cer ta in O i l and Gas Lease by nnd between the United S'.ctea of America, Leaaor. and Culf O i l Corpont ion , Tenneeo O i l Company, Columbia Gas Development Corporation, and Samedan Offshore Corporation, Lessee, dated December 1, 1974, designated as OCS-G 2872, coveting a l l of Block 155, Vermilion Area, OCS O l f i c i a l Leaaing Map, Louisiana Map ho. 3, containing approximately 5,000 acrea:

(A) tas t Half (E/2) of said b i t c k to a l i depths ind deptha i n the Weat Half (W/2) thereof below 14.136 fee t :

Working Interest Not Revenu? In . - r ^ t

Befcr, Payout Under the 0.0600000 0.0497000 P^rtiv Ipat. 'on Afl'*?m«ut

Ai t i> V.\j 'Att fJnder the 0.0430000 0.0397600 Per t ic .v .t ion Agreement

(B) West Hail (W/2) of aaid block but only from the aurface to a depth of 14, , 36 fee t :

Working Interest Net Rev^ive Interest

Before Payout Under the 0.0^-26571 O.C365857 Pa r t i c i pa t i on Agreement

Af t e r r. youc Una.-"" tbe P a r t i c i p a t i o n Agreement

0.0342856 0.0292685