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HomeMy WebLinkAbout955163RECEIVED 8/27/2010 at 11:03 AM RECEIVING 955163 BOOK: 752 PAGE: 631 JEANNE WAGNER LINCOLN COUNTY CLERK, KEMMERER, WY MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT (with Power of Sale) March 31, 2010 FROM TOKLAN OIL AND GAS CORPORATION an Oklahoma corporation and SAND SPRINGS OIL GAS COMPANY an Oklahoma corporation 060631 (MORTGAGORS, GRANTORS AND DEBTORS) TO PAM P. SCHLOEDER, TRUSTEE AND BANK OF OKLAHOMA, NATIONAL ASSOCIATION (MORTGAGEE, BENEFICIARY AND SECURED PARTY) The mailing address of Bank of Oklahoma, National Association, and Trustee is P.O. Box 2300, Tulsa, Oklahoma 74102 -2300, and the mailing address of Mortgagors, Grantors and Debtors is 2642 East 21 Street, Suite 250, Tulsa, Oklahoma 74114. This instrument was prepared by Gary R. McSpadden, Crowe Dunlevy, 321 South Boston Avenue, Suite 500, Tulsa, Oklahoma 74103 -3313, and contains after- acquired property provisions and covers future advances and proceeds to the fullest extent permitted by applicable law, Attention of Recording Officers: This instrument covers oil, gas, minerals, fixtures, as- extracted collateral, accounts and general intangibles under the UCC and is, among other things, a chattel mortgage, a fixture filing and a security agreement and financing statement covering fixtures and as- extracted collateral under the UCC. This instrument is to be filed and recorded as a mortgage and as a financing statement or chattel mortgage (covering oil, gas, minerals, fixtures, as- extracted collateral, accounts and general intangibles) in the real estate records of each County in which the lands of Mortgagors described in Exhibit A hereto are located and, where applicable, is to be tract indexed with respect to all lands described in said Exhibit A. The oil and gas included in the Mortgaged Property will be financed at the wellhead or minehead of the wells or mines located on the leases or real property constituting a part of the Mortgaged Property. When recorded return to: Gary R. McSpadden, Crowe Dunlevy, 321 South Boston Avenue, Suite 500, Tulsa, Oklahoma 74103 -3313. NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS WITHIN THE STATE OF TEXAS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER. Lincoln County, Wyoming 000632 MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT (WITH POWER OF SALE) This Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment (with Power of Sale) (hereinafter referred to as the "Mortgage dated as of March 31, 2010, is executed, jointly and severally, by TOKLAN OIL AND GAS CORPORATION, an Oklahoma corporation, and SAND SPRINGS OIL GAS COMPANY, an Oklahoma corporation (collectively, "Mortgagors which have a mailing address at 2642 East 21 Street, Suite 250, Tulsa, Oklahoma 74114, to PAM P. SCHLOEDER, as Trustee; whose address is P.O. Box 2300, Tulsa, Oklahoma 74102 -2300 (hereinafter together with her successors and substitutes in trust, referred to as "Trustee and to and for the benefit of BANK OF OKLAHOMA, NATIONAL ASSOCIATION, as mortgagee, beneficiary and secured party, which has a mailing address of P.O. Box 2300, Tulsa, Oklahoma 74102 -2300 "Mortgagee WITNESSETH: A. Mortgagors, as borrowers, and Mortgagee, as lenders, are parties to a certain Revolving Credit Agreement dated as of December 31, 1998, as amended and modified by the First Amendment thereto dated as of February 16, 1999, and by the Second Amendment thereto dated as of June 30, 2000, and by the Third Amendment thereto dated as of June 30, 2001, and by the Fourth Amendment thereto dated as of September 30, 2002, and by the Fifth Amendment thereto dated as of September 30, 2003, and by the Sixth Amendment thereto dated as of September 30, 2004, and by that certain Business Loan Agreement dated as of September 30, 2007, and by that certain Seventh Amendment thereto dated as of September 30, 2008 (collectively the "Existing Credit Agreement B. As of even date herewith, Mortgagors have entered into a certain Eighth Amendment to Revolving Credit Agreement, whereby Mortgagee has agreed to modify certain terms of the Existing Credit Agreement (the "Eighth Amendment to Credit Agreement C. In order to induce Mortgagee to enter into the Eighth Amendment to Credit Agreement, Mortgagee has requested that Mortgagors execute and deliver this Mortgage whereby Mortgagors, jointly and severally, shall convey in trust and grant a first priority mortgage lien and security interest in certain properties of Mortgagors, as security for the Indebtedness described herein, including without limitation, the indebtedness described in the Existing Credit Agreement, as amended by the Eight Amendment to Credit Agreement. D. Mortgagors represent that all acts necessary to constitute this Mortgage, as a valid mortgage, deed of trust, security agreement, financing statement and assignment with respect to the right, title and interest of Mortgagors in the Mortgaged Property (as hereinafter defined) as security for the Indebtedness (as hereinafter defined) have been done. E. For all purposes of this instrument, unless the context otherwise requires: "Collateral" shall have the meaning given such term in section 8.10(a) of this Mortgage. 000633 "Contracts" shall mean contracts now in effect, or hereafter entered into by Mortgagors, Mortgagors' predecessors in interest, or by any other parties to the extent that Mortgagors have any right or interest thereto or thereunder, for the sale, purchase, exchange or processing of Hydrocarbons produced from the Lands Described in Exhibit A which is attached hereto and made a part hereof. "Credit Agreement" shall mean the Existing Credit Agreement as described in the Recitals hereof, as amended by the Eighth Amendment to Credit Agreement as described in the Recitals hereof, as the same hereafter may be amended, modified, restated or replaced, from time to time. "Date of Commencement" shall mean the date upon which Mortgagee shall at any time hereafter notify Mortgagors following the occurrence of an event of default that Mortgagee has elected to have proceeds of production paid to an account at Mortgagee pursuant to the terms described herein. "Default Rate" shall mean the rate of interest provided in the Note for delinquent payments. "Hydrocarbons" shall mean oil, casinghead gas, gas and other liquid or gaseous hydrocarbons. "Indebtedness" shall have the meaning stated in Section l .l hereof. "Lands Described in Exhibit A" shall mean the leasehold or other interests described in Exhibit A hereto, and shall also include Mortgagors' interest in any lands now or hereafter unitized or pooled with interests described in Exhibit A. "Loans" shall mean all loans and extensions of credit made by Mortgagee under the Note. "Note" shall have the meaning stated in Section 1.1 hereof. "Oil and Gas Leases" shall include oil, gas and mineral leases and faun -out agreements and shall also include subleases and assignments of operating rights. "Operating Equipment" shall mean all surface or subsurface machinery, equipment, facilities or other property of whatsoever kind or nature (excluding drilling rigs, drill pipe, tanks, mud pumps, trucks, automotive equipment or other property taken to the premises to drill a well or for other similar temporary uses) now or hereafter located on and attributable to any of the Lands described in Exhibit A which are used or useful or held for use in connection with the production, treatment, storage or transportation of oil, gas and other Hydrocarbons, including, but not by way of limitation, all oil wells, gas wells, water wells, injection wells, casing, tubing, rods, pumping units and engines, Christmas trees, derricks, separators, gun barrels, flow lines, tanks, gas systems (for treatment, disposal, or injection), power plants, poles, lines, transformers, starters, and controllers, machine shops, tools, storage yards and equipment stored 2 0006 therein, buildings and camps, telegraph, telephone and other communication systems, roads, loading racks and shipping facilities. "Permitted Encumbrances" shall include and consist of (a) Liens for current ad valorem taxes which have not yet become delinquent or which, if delinquent, are being contested by Mortgagors in good faith although in this latter event, Mortgagee shall have the right, if it elects, to require Mortgagors to deposit with Mortgagee moneys or securities to assure the payment of such delinquent taxes when the proper amount is finally adjudged; (b) possible mechanic's or materialman's liens and operator's liens for current bills for operation or development of the Mortgaged Property so long as the same shall be discharged prior to the institution of any proceedings for the enforcement thereof or which are being contested in good faith, after notice to Mortgagee and with such deposit or security as Mortgagee may designate to assure final payment, if any, thereof should such lien be adjudged to be enforceable; and (c) all (i) royalties, excess royalties, overriding royalties or other payments out of production of record or currently being paid pursuant to division orders; (ii) joint operating agreements, farmout agreements and exploration agreements of record; (iii) all oil, gas and other mineral sales, purchase, marketing and processing agreements of record; (iv) unitization and pooling agreements, drilling or spacing orders, production orders or pooling orders or any other order, rule or regulation of any governmental agency of record; and (v) minor title defects to the extent that they do not adversely affect the value of the Mortgaged Property as collateral for the Indebtedness and do not impair Mortgagors' rights to receive proceeds of production with respect to said Mortgaged Property; provided, however, any reference to the term "Permitted Encumbrances" shall in no manner indicate any acknowledgment of any such claim, lien or interest by Trustee or Mortgagee, nor shall such use or reference subordinate any interest of Trustee or Mortgagee under this Mortgage or the Note to the holder of any such claim, lien or interest. "Security Instruments" shall mean this Mortgage, the Security Instruments described in the Credit Agreement and any and all other writings at any time securing or purporting to secure, or to create or to evidence security interests, liens and like interests to secure, payment of any indebtedness secured in whole or in part by the Mortgage. "UCC" shall mean the Uniform Commercial Code in effect at the time in the State of Oklahoma, and as amended or reenacted from time to time, or if it is determined by a court of law that the laws of another state or jurisdiction should be applied with respect to certain of the Mortgaged Property, then the Uniform Commercial Code or similar laws in effect at the time in the relevant state or jurisdiction with respect to that portion of the Mortgaged Property shall apply. NOW, THEREFORE, Mortgagors, for and in consideration of the premises and of the debts and trusts hereinafter mentioned, have granted, bargained, sold, warranted, mortgaged, assigned, pledged, transferred and conveyed, and by these presents do, jointly and severally, grant, bargain, sell, warrant, mortgage, assign, pledge, transfer and convey, with power of sale, unto the Trustee herein named and her successors and assigns, for the use and benefit of Mortgagee, all of Mortgagors' right, title and interest, whether now owned or hereafter acquired, in: 3 GRANTING CLAUSE ONE e00635 The Lands Described in Exhibit A, and the Oil and Gas Leases, the easements, rights of way, permits, licenses, the minerals, overriding royalty, royalty and other rights, titles and interests which cover or relate to the Lands Described in Exhibit A, whether or not such rights, titles and interests be correctly or sufficiently described or referred to therein, GRANTING CLAUSE TWO The right to operate and the operating, unitization and pooling agreements and orders of regulatory agencies providing for pooling and unitization (whether now or hereafter made) and the properties covered and the units created thereby (including all units formed under orders, regulations, rules or other official acts of any federal, state, provincial or other governmental agency having jurisdiction) which are specifically described in Exhibit A or which relate to any of the Lands Described in Exhibit A, the Oil and Gas Leases, and any other rights, titles or interests therein, whether or not such agreements and orders be described in said Exhibit A, and the operating agreements, transportation contracts, lease records, well records and production records which relate to any of the properties and interests described in Exhibit A, GRANTING CLAUSE THREE The Hydrocarbons which are in, under, upon, produced or to be produced from the Lands Described in Exhibit A, The Contracts, The Operating Equipment, GRANTING CLAUSE FOUR GRANTING CLAUSE FIVE GRANTING CLAUSE SIX All Accounts (including without limitation, all contracts and contract rights), Contract Rights, Goods (including Inventory and Equipment), Fixtures, General Intangibles, Payment Intangibles, Instruments (including promissory notes), Documents, Chattel Paper (including Electronic Chattel Paper), Supporting Obligations, Letter of Credit Rights, Investment Property, Deposit Accounts, Commercial Tort Claims, As- Extracted Collateral, including without limitation, a firs priority lien against any and all present or future statutory lien rights and priorities of Mortgagor under Okla. Stat. Title 52, Sections 549.1 through 549.12, as amended from time to time, or otherwise, and any and all Proceeds of any of the foregoing (as such terms are defined in Article 9 of the UCC) relating to or arising out of the sale, purchase, marketing, exchange, processing, treating, 4 0 compressing, handling, transporting, transmitting, gathering or other disposition of oil, gas, as- extracted collateral and other Hydrocarbons from time to time produced from the Lands Described in 'Exhibit A, including without limitation, any and all contracts, contract rights, accounts, general intangibles and payment intangibles or any other rights to the payment of money or other monies due or to become due (of whatever type, nature, item or category) from Mortgagee or any Bank Affiliate to Mortgagors or any monetary or economic benefit or other value added, accrued, created or arising under, out of or pursuant to any Hedge Agreement, together with all schedules, annexes, exhibits and other attachments thereto, or any transactions entered into in connection with such Hedge Agreement, including any hedges, swaps or other derivative products transactions or confirmations entered into in connection therewith or pursuant thereto, and GRANTING CLAUSE SEVEN All other interests of every kind and character in all of the real and personal properties respectively described or referred to above, together with all proceeds thereof, and any and all corrections or amendments to, or renewals, extensions or ratifications of, any of the same, or of any instrument relating thereto, and all fixtures, rights -of -way, franchises, permits, licenses, improvements, easements, tenements, hereditaments and appurtenances now existing or in the future obtained in connection with any of the aforesaid, and all other things of value and incident thereto which Mortgagors might at any time have been or may hereafter become entitled to, all the aforesaid properties, rights and interests, together with any additions thereto which may be subjected to the lien of this instrument by means of supplements hereto. All of the properties, rights and interests described or referred to hereinabove are collectively referred to herein as the "Mortgaged Property and the same are subject to (a) Permitted Encumbrances; and (b) the condition that Trustee and Mortgagee shall not be liable in any respect for the performance of any covenant or obligation of Mortgagors in respect of the Mortgaged Property. TO HAVE AND TO HOLD the Mortgaged Property, together with all and singular the rights, privileges, contracts and appurtenances now or hereafter at any time before the foreclosure or release hereof, in anywise appertaining or belonging thereto, unto Trustee and to Trustee's successors, assigns or substitutes hereunder and to their successors and assigns, forever, and Mortgagors, jointly and severally, hereby bind and obligate themselves and their respective successors and assigns, to warrant and forever defend, all and singular, the Mortgaged Property unto Trustee and Trustee's successors, assigns or substitutes hereunder and to their successors and assigns, against the lawful claims of any and all persons whomsoever claiming, or to claim the same, or any part thereof. This conveyance is made in trust, however, upon the terms and provisions hereinafter set out, to secure the full and final payment of all sums owing or to become owing, including principal, interest and attorneys' fees, upon the Note and the other Indebtedness to Mortgagee described in Article I below. 5 000637 And Mortgagors, jointly and severally, for themselves and their respective successors in interest, have COVENANTED, DECLARED AND AGREED with Trustee and Mortgagee for the use and benefit of Mortgagee and its successors and assigns and do by these presents, jointly and severally, COVENANT, DECLARE AND AGREE, as follows: ARTICLE I INDEBTEDNESS SECURED AND DEFEASANCE 1.1 This Mortgage is made to secure and enforce the following Note, obligations, indebtedness and liabilities, all of which are included within the term "Indebtedness as used in this Mortgage: (a) All amounts owing or to become owing upon that certain Promissory Note dated as of even date herewith, executed by Mortgagors, jointly and severally, payable to the order of Mortgagee in the original principal amount of $20,000,000.00, evidencing a revolving line of credit established by Mortgagee for the benefit of Mortgagors and being described in the Credit Agreement as the Note (the "Note which Note also contains customary provisions for acceleration of maturity in the event of the contingencies therein stated, all as provided and set out in the Note which is incorporated herein by reference and made a part hereof for all purposes; (b) All renewals, extensions, substitutions, changes in form, consolidations, replacements and rearrangements of the Note; (c) All indebtedness arising pursuant to the provisions of this Mortgage, the Credit Agreement and each of the Security Instruments which Mortgagors have executed or hereafter execute to secure the Note; (d) All costs, expenses, fees, liabilities, obligations and payments incurred or made by Mortgagee or Trustee pursuant to the provisions of Sections 2.2(i), 2.2(k), 2.2(q), 2.2(v), 2.3, 3.1(a), 3.8, 6.3, 6.11, 6.12, 6.18 and 8.11(0 hereof, together with the interest accrued thereon; (e) Any and all existing indebtedness or contingent liabilities now or hereafter owing by Mortgagors to Mortgagee and any and all future changes in or with respect to the indebtedness now or hereafter secured hereby (including but not limited to changes in interest rate) which may hereafter be agreed upon by Mortgagors and Mortgagee or any holder or holders of the Note, it being specifically provided that this Mortgage shall secure all other sums owing or hereafter at any time prior to the final release hereof to become owing by Mortgagors to Mortgagee, whether direct or indirect, primary or secondary, fixed or contingent, including future advances, and shall further secure all unpaid balances, whether by renewals, extensions, substitutions, rearrangements or otherwise, of all of said items; (0 Any and all liabilities and obligations of every nature and howsoever created, direct, indirect, absolute, contingent or otherwise, whether now existing or hereafter arising, created or accrued, of Mortgagors, any of their subsidiaries, or any other Person (other than Mortgagee or any Affiliate of Mortgagee) from time to time 6 7 000638 owed or owing under any of the. Loan Documents to Mortgagee or any Bank Affiliate in connection with any Hedge Agreement, including but not limited to obligations and liabilities arising in connection with or as a result of early or premature termination, cancellation, rescission, buy back, reversal or assignment or other transfer of a Hedge Agreement to which Mortgagee or any Bank Affiliate is a counter -party, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Mortgagor(s), subsidiary or other affiliate, would have accrued on any Indebtedness, whether or not a claim is allowed thereagainst for such interest in the related bankruptcy proceedings), reimbursement obligations, fees, expenses, indemnification or otherwise; and (g) Maximum Amount Secured. Notwithstanding any other provisions, even if inconsistent, in any of the Loan Documents, the maximum amount secured by the lien of this Mortgage shall not exceed the aggregate principal amount at any one time outstanding of $50,000,000.00, plus interest thereon, as well as costs and attorneys' fees and any interest due thereon. 1.2 If all of the Indebtedness secured hereby is paid off and discharged at the maturity thereof according to its terms, and Mortgagors shall well and truly perform all of the covenants contained herein, then this conveyance shall cease and terminate, and this Mortgage shall be released in due form at Mortgagors' expense, otherwise to remain and continue in full force and effect. After issuance of a full release, Mortgagee may destroy the Note and this Mortgage. Provided, however, the Note collateralized hereunder may permit borrowing, repayment and reborrowing; therefore, prior to the termination of the Commitments provided for in the Credit Agreement, a zero principal balance with respect thereto shall not affect the security of this Mortgage, and this Mortgage, as well as the interest of Mortgagee hereunder, will remain in full force and effect, notwithstanding a zero balance under any facility provided for in the Credit Agreement. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS 2.1 Mortgagors, jointly and severally, represent, warrant and covenant that they are solvent; that they are the lawful and valid owner and holder of the Mortgaged Property as set forth in Exhibit A; that they have good and legal right and authority to grant, bargain, sell, transfer, convey, assign, pledge and mortgage the Mortgaged Property and to make the covenants, representations, warranties and assignments contained in this Mortgage; that all Oil and Gas Leases or interests therein and all Contracts, processing contracts, franchises, licenses and other agreements described as part of the Mortgaged Property are valid and subsisting and are in full force and effect and all of the express or implied terms or provisions of such leases, agreements, licenses, etc., and all laws, rules and regulations applicable thereto have been complied with; that all rents, royalties and other payments due and payable under each of the leases and any contracts and other instruments constituting a part of the Mortgaged Property have been properly and timely paid and that all oil and gas severance and production taxes payable by Mortgagors have been duly paid; that all wells on the Mortgaged Property have been drilled and operated in accordance with the laws, rules and regulations of all governmental bodies and agencies exercising jurisdiction over such wells; that they are the owners of the full 8 000639 interest in each item of Mortgaged Property or of an undivided interest in the particular item of property or contract described of not less than that set forth in the Credit Agreement; that the Mortgaged Property is free and clear from all liens, mortgages, charges, encumbrances and burdens whatsoever except (i) the liens evidenced by this Mortgage and (ii) Permitted Encumbrances; that they are not obligated by virtue of any prepayment under any contract for the sale by Mortgagors of Hydrocarbons which contains a "take or pay" clause or under any similar arrangement to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor; and that they hereby warrant and agree to forever defend the title to the Mortgaged Property against the claims of all persons whomsoever claiming or to claim the same or any part thereof; 2.2 So long as the Indebtedness secured hereby or any part thereof remains unpaid, Mortgagors, jointly and severally, covenant and agree with Trustee, Mortgagee and their respective successors and assigns as follows: (a) Mortgagors will make, or cause to be made, prompt payment of the Note and of all installments of principal or interest thereon as the same become due, and also of all other Indebtedness secured hereby; (b) Any stamp, documentary or transaction taxes, which may be required to be paid with respect to the Loans or the Note or any of the Security Instruments executed by Mortgagors will be paid immediately upon request unless, by applicable state law in the case of mortgage taxes, it shall be unlawful for Mortgagors to pay such tax or to reimburse Mortgagee therefor; (c) All of the Mortgaged Property will be preserved and kept in good repair and efficient operating condition, and Mortgagors will use their best efforts to cause to be made promptly all repairs, renewals, replacements, additions and improvements which are needed in connection with any part of the Mortgaged Property. Mortgagors will do or cause to be done all things that may reasonably be necessary in accordance with the most approved practices of prudent operators in the industry to maintain, and to protect from diminution, the productive capacity of each producing well now or hereafter included in the Mortgaged Property including but not limited to cleaning out and reconditioning of wells, recompletion of wells at higher levels, drilling of substitute wells to the same fonnation and drilling of additional wells to conform to changed spacing regulations or to satisfy offset requirements. Mortgagors will continuously operate or cause to be operated the Mortgaged Property in a careful and efficient manner and in compliance with all applicable proration and conservation laws and all other laws, rules and regulations of all governmental bodies and agencies exercising jurisdiction. Mortgagors will do or cause to be done such development work as may reasonably be necessary for the prudent and economical handling of the Mortgaged Property in accordance with the most approved practices of prudent operators in the industry; (d) All Oil and Gas Leases and wells which (or interests in which) may be included among the Mortgaged Property will be continuously maintained, developed and operated in a good and workmanlike manner; 000640 (e) Mortgagors will observe and comply with (or cause to be observed and complied with) all of the terms and provisions, express or implied, of the Oil and Gas Leases which (or interests in which) constitute a part of the Mortgaged Property and of any assignments or subleases thereof under which Mortgagors hold, or their predecessors in interest held, title in order to keep such leases or assignments in full force and effect. Mortgagors will comply with all laws, rules and regulations applicable to such leases or cause the same to be complied with and will pay or cause to be paid all rentals, royalties or other payments with respect thereto. Mortgagors will not permit the surrender, abandonment, release or termination of any such oil and gas lease, in whole or in part, so long as it is capable of producing Hydrocarbons in commercial quantities; and Mortgagors also will protect all of the Mortgaged Property against drainage of Hydrocarbons thereunder by reason of production on other properties; (f) Mortgagors will observe and comply with all of the terms and provisions of all easements, licenses, franchises, permits and contracts (both existing and future) which are part of the Mortgaged Property or which are needed incident to the operation of any of the Mortgaged Property. Without limiting the foregoing, Mortgagors agree to comply fully with all covenants and make timely payments of all amounts payable under gas purchase and gas processing contracts held by Mortgagors and also to perform fully all obligations and covenants of Mortgagors as the seller under all Contracts and processing contracts held by Mortgagors incident to the Mortgaged Property; (g) Mortgagors will cause all debts and liabilities of any character, including, without limitation, all debts and liabilities for labor, material and equipment incurred in the operation, maintenance or expansion of the Mortgaged Property to be promptly paid. Nothing in this Mortgage will be construed, however, as a waiver of the lien of this Mortgage as a first and prior lien against the Mortgaged Property; (h) Mortgagors will keep or cause to be kept (if Mortgagors are non operators) such part of the Mortgaged Property which is of an insurable nature and of a character usually insured by persons operating similar properties insured with companies of recognized responsibility satisfactory to Mortgagee against loss or damage by fire or tornado and from other causes customarily insured against, and all policies evidencing such insurance shall contain clauses providing that the proceeds therefrom shall be payable to Trustee and Mortgagee as their interests may appear; and in the event of any loss under any of said policies, Mortgagee shall have the right to collect the same, and all amounts so received shall be applied toward costs, charges and expenses, if any, incurred in the collection thereof, then to the payment of the Indebtedness, whether or not then matured, and any balance remaining shall be subject to the order of Mortgagors; provided, however, that Mortgagors may be permitted by Mortgagee to receive all of said proceeds so collected for the sole purpose of reimbursing Mortgagors for proper expenditures made in repairing or restoring the damaged property and the payment of said proceeds from said policies to Mortgagors for the purpose provided for herein shall not impair any right, title, interest or lien hereunder; and Mortgagee is hereby authorized but not obligated to enforce in its name or in the name of Mortgagors payment of any and all of said policies or to settle or compromise any claim in respect thereof, and to collect and make receipts for the proceeds thereof. From time to time, Mortgagee may waive 9 000641: certain of the insurance requirements herein contained, but any such waiver must be in writing and any waiver will be revocable upon written notice to Mortgagors; (i) If the validity or priority of this Mortgage or of any rights, titles, liens or interests created or evidenced hereby with respect to the Mortgaged Property or any part thereof shall be endangered or questioned or shall be attacked directly or indirectly or if any legal proceedings are instituted against Mortgagors with respect thereto, Mortgagors will give written notice thereof to Trustee and Mortgagee promptly and, at Mortgagors' own cost and expense, Mortgagors will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, including, but not limited to, the employment of counsel agreeable to Trustee and Mortgagee, the prosecution or defense of litigation and the release or discharge of all adverse claims. Trustee and Mortgagee (whether or not named as .a party to legal proceedings with respect thereto), are hereby authorized and empowered to take such additional steps as in their judgment and discretion may be necessary or proper for the defense of any such legal proceedings, including, but not limited to, the prosecution or defense of litigation and the compromise or discharge of any adverse claims made with respect to the Mortgaged Property, and all expense so incurred of every kind and character, including, without limitation, attorneys' fees, shall be a demand obligation owing by Mortgagors, shall be a part of the Indebtedness secured hereby, and shall bear interest at the Default Rate from the date of expenditure until paid. The party incurring such expenses shall be subrogated to all rights of the person receiving such payment; (j) Except for Permitted Encumbrances, Mortgagors will not grant or suffer or permit any security interest, charge, assessment, mortgage, lien or encumbrance to be hereafter claimed or created on or against any of the Mortgaged Property, and should such a lien other than a Permitted Encumbrance become attached hereafter in any manner to any part of the Mortgaged Property (even though inferior and subordinate to this Mortgage) without the prior written consent of Trustee and Mortgagee, Mortgagors will cause such lien to be promptly discharged. Without limiting this prohibition against liens and encumbrances, it is expressly made to include federal, provincial and state tax liens, franchise tax liens, abstracts of judgment, and mechanic's and materialman's lien claims; (k) Mortgagors will pay all taxes, assessments and governmental charges of every kind and character legally charged, levied or assessed against the Mortgaged Property, or any part thereof, or against the interest of Trustee or Mortgagee therein or upon the income and profits from the Mortgaged Property, and all franchise taxes, production, severance, or other similar taxes or charges, before any such taxes and assessments shall become delinquent, but Mortgagors shall have the right to contest any such tax, assessment or charge, in good faith, and, while any such contest is pending, shall not be in default hereunder; and, in the event Mortgagors should fail or refuse to pay or discharge the same, Trustee, Mortgagee, or the holder of the Indebtedness, shall have the right, but shall not be obligated, to pay and discharge said tax or other charges and shall be subrogated to the rights, liens and equities thereof, and the amount so paid, together with interest at the Default Rate from the date of payment, shall be added to, and shall be a part of the Indebtedness secured hereby; 10 C430642 (1) None of the buildings, improvements, or tangible personal property constituting portions of the Mortgaged Property will be removed or destroyed, without first obtaining the written consent of Trustee and Mortgagee; provided, however, that as to any Mortgaged Property not operated by Mortgagors, Mortgagors shall not consent to the removal or destruction of any such buildings, improvements or tangible personal property and, provided further, that property of such nature which is, in the good faith opinion of Mortgagors or the operators of such properties, worn out, obsolete or no longer useful in the operation of the property on which the same is located may be removed, salvaged, replaced or otherwise taken from the property on which the same shall be located; (m) Subject to the provisions of Section 8.11 hereof, without first securing the written consent of Trustee and Mortgagee, Mortgagors will not surrender, abandon, assign, sell, convey or otherwise dispose of, lease or sublease, any portion of the Mortgaged Property or any of Mortgagors' rights, titles and /or interests therein or thereto; (n) Mortgagors will keep accurate books and records in accordance with sound accounting principles in which full, true and correct entries shall be promptly made as to all operations on the Mortgaged Property and of all the operations of Mortgagors, so as at all times accurately and adequately to reflect the assets, liabilities, income and expenses of Mortgagors, and all of such books and records kept by Mortgagors shall at all times during reasonable business hours be subject to inspection by Trustee and Mortgagee and their duly accredited representatives, and at such intervals as may be requested by them and in any event at least each year, Mortgagors shall make a report of operations of the Mortgaged Property for the period since the last report in such form as Mortgagee prescribes setting out full data as to production, revenues and expenses and such other information as may be reasonably requested; (o) Mortgagors will, if requested by Mortgagee, furnish Mortgagee any information or data possessed by Mortgagors with respect to the Mortgaged Property, and in the case of Oil and Gas Leases full information shall be furnished with regard to the wells drilled or reworked or drilling or reworking operations being conducted thereon, including, without limitation, electrical logs, core analyses and well pressure reports. Copies of any reserve reports or studies which Mortgagors cause to be made or otherwise obtains with respect to the Mortgaged Property or portions thereof shall also be furnished to Mortgagee promptly; (p) Mortgagors will promptly, on request of Trustee or Mortgagee, correct any defect, error or omission which may be discovered in the contents of this Mortgage or in the execution or acknowledgment thereof, and will promptly execute and deliver any and all additional instruments as may be requested from time to time by Trustee or Mortgagee to correct such defect, error or omission or to describe more fully or particularly any of the Mortgaged Property or to identify any additional properties which are or become subject to this Mortgage or which are intended to be included herein; (q) Mortgagors will pay all engineering or appraisal fees, recording fees, abstract fees, attorneys' fees, and all other costs and expenses of every character incurred 11 000643 in connection with the making, closing and servicing of this Mortgage and any other Security Instruments, and will reimburse Trustee and Mortgagee from and against all claims, demands, liabilities and causes of action asserted against them on account of any act performed or omitted to be performed under this Mortgage or any other Security Instruments or on account of any transaction arising out of or in any way connected with the Mortgaged Property or with this Mortgage, save and except for their willful misconduct. In the event that Mortgagee should itself pay for expenses incurred in the way of attorneys' fees or other similar costs in connection with the Indebtedness, such as for example, charges for checking titles and handling legal matters connected with the making, closing or servicing of the Indebtedness hereby secured or should pay directly any recording or filing fees or other expense incident to registering or recording instruments, Mortgagors shall promptly reimburse Trustee and Mortgagee for all such sums. Any such sums not reimbursed shall become a part of the Indebtedness secured by this Mortgage and shall bear interest at the Default Rate from the date advanced until paid; (r) Mortgagors will make available to Trustee or Mortgagee, or their engineers, attorneys or representatives, at any time requested, Mortgagors' complete files on and all contracts pertaining to the Mortgaged Property, including all files containing data regarding the development and operation of (or the production from) the Mortgaged Property, and in the event Trustee or Mortgagee should take possession of the Mortgaged Property under this Mortgage, they shall be entitled to possession of all such files and contracts. Should this Mortgage be foreclosed (howsoever such foreclosure may be effected), the purchaser at the foreclosure sale shall be entitled to all such files; (s) Mortgagors shall furnish Trustee and Mortgagee with abstracts of title on any of the Mortgaged Property requested by Trustee or Mortgagee that are in existence in the event the priority of this mortgage is contested or otherwise brought into question or in connection with the exercise of rights and remedies afforded to Trustee or Mortgagee in connection herewith and shall also furnish Trustee or Mortgagee with carbon or photostat copies of any title opinions that Mortgagors has or may hereafter obtain affecting any part of the Mortgaged Property; (t) Mortgagors' primary records concerning the Mortgage Property will be retained at Tulsa, Oklahoma; (u) Any time upon request, and from time to time upon request, Mortgagors will execute and deliver written Notices of Assignment to any persons or corporations owing or which may in the future (while this Mortgage remains unreleased) owe to Mortgagors moneys or accounts arising in connection with any of the following matters: (i) any oil, gas or mineral production from the Mortgaged Property; (ii) any gas contracts, processing contracts or other contracts described (either in the general or specific descriptions) in this instrument or any exhibit hereto; 12 000644 (iii) the operation of any part of the Mortgaged Property; or (iv) all amounts and accounts which may accrue otherwise in connection with the Mortgaged Property or the operation or production thereof; advising such third parties that all such moneys and accounts have been assigned to Mortgagee and requiring and directing that future payments thereof (including amounts then owing and unpaid) be paid to Mortgagee in accordance with the assignments set out in Article III below; (v) Mortgagors authorize Mortgagee and its agents to file a record pursuant to Article 9 of the Uniform Commercial Code in order to establish and maintain the validity and priority of Mortgagee's security interests, and Mortgagors shall bear all costs related thereto, including all Uniform Commercial Code (lien) searches required by Mortgagee. Mortgagors authorize Mortgagee to file such additional Uniform Commercial Code financing statements and amendments as Mortgagee may deem necessary, convenient or expedient. Mortgagee shall have the right at any time to file this Mortgage as a financing statement, but the failure to do so shall not impair the validity and enforceability of this Mortgage in any respect whatsoever. Mortgagors hereby irrevocably appoint Mortgagee and its successor and assigns as its attorney -in -fact, which agency is coupled with an interest, to prepare, execute and file or record with the appropriate public offices, in Mortgagors' behalf, financing statements, continuation statements, applications for registration and like papers, either with no signature by any party or signed only by Mortgagee, as appropriate, to create, perfect or preserve Mortgagee's security interests and rights in or to any of the Mortgage Property. (w) Mortgagors will execute and deliver upon request by Trustee or Mortgagee and from time to time upon request, such additional security agreements, financing statements and other assurances as may be desired by Trustee or Mortgagee with reference to properties (of any classification) described or intended to be described in this instrument or any exhibit hereto either in the general or specific descriptions and including, without limitation, items of after acquired property; (x) Mortgagors will promptly and (insofar as not contrary to applicable law) at their own expense record and rerecord, file and refile and register and reregister this instrument and every other instrument in addition or supplemental hereto that shall be required by law in order to perfect and maintain the lien and security interest intended to be created hereby in such manner and places and within such times as may be necessary to perfect and maintain such lien and security interest and preserve and protect the rights and remedies of Trustee and Mortgagee and will furnish satisfactory evidence of every such recording, filing and registration to Trustee and Mortgagee; and (y) The interest in any unit attributable to any of the Mortgaged Property, whether pooled or unitized, will be subject to the lien and security interest hereof in the same manner and with the same effect as though the unit and the interest of Mortgagors therein were specifically described in Exhibit A hereto. 13 CI 0645 2.3 Mortgagors agree that if Mortgagors fail to perform any act which Mortgagors are required to perform hereunder or to pay any money which Mortgagors are required to pay hereunder, Trustee or Mortgagee may, but shall not be obligated to, perform or cause to be performed such act and pay such money, and any expenses so incurred by Trustee or Mortgagee and any money so paid by Trustee or Mortgagee shall be demand obligations owing by Mortgagors and shall bear interest from the date so incurred at the Default Rate until paid by Mortgagors and shall be added to and shall be a part of the Indebtedness secured hereby and shall be secured by the lien evidenced by this Mortgage and by any other instrument securing the Indebtedness secured hereby, and Trustee or Mortgagee, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. ARTICLE III ASSIGNMENT 3.1 For the purpose of additionally securing the payment of all items of the Indebtedness and to provide an additional means of paying the Indebtedness and as cumulative of any and all rights and remedies herein provided for, Mortgagors, jointly and severally, hereby TRANSFER, ASSIGN, GRANT, CONVEY AND SET OVER to Mortgagee and its successors in interest and the holders of the Indebtedness secured hereby, and grant to Mortgagee as Secured Party a security interest in, all of the following: (a) All Hydrocarbons and other minerals, and the proceeds therefrom, produced and to be produced from the interests of Mortgagors in the Oil and Gas Leases, mineral interests, properties, and other interests now or hereafter constituting a part of the Mortgaged Property and Mortgagors hereby authorize and empower Mortgagee from and after 12:01 o'clock a.m. of the Date of Commencement (as defined below), to demand, collect and receive said Hydrocarbons and other minerals, and the proceeds therefrom, produced and to be produced from the Mortgaged Property, and to execute any release, receipt, division order, transfer order and relinquishment or other instrument that may be required or necessary to collect and receive such production or the proceeds therefrom and Mortgagors hereby authorize and direct all purchasing companies, pipeline companies, gathering companies and others purchasing Hydrocarbons or other mineral production from said properties or having in their possession any production from said properties or the proceeds therefrom, to pay and deliver to Mortgagee all such production or proceeds therefrom accruing. All parties producing, purchasing and receiving said Hydrocarbons and other minerals and the proceeds therefrom are hereby authorized and directed to treat Mortgagee as the person entitled in Mortgagors' place and stead to receive the same on or after the Date of Commencement; and further those parties will be fully protected in so treating Mortgagee and will be under no obligation to see to the application by Mortgagee of any such proceeds received by it. Mortgagors agree that all division orders, transfer orders, receipts and other instruments which Mortgagee may from time to time execute and deliver for the purpose of collecting or receipting for such production or the proceeds therefrom may be relied upon in all respects, and that the same shall be binding upon Mortgagors and Mortgagors' successors and assigns. Mortgagors agree to indemnify and keep and hold Mortgagee free and harmless from all parties whomsoever having or claiming an adverse interest in said Oil and Gas Leases, properties, plants, or interests or the production or proceeds therefrom, and in this 14 15 40646 respect, Mortgagors agree to pay all expenses, costs, charges and reasonable attorneys' fees that may be incurred by Mortgagee as to any of said matters; (b) All amounts or proceeds payable to or to become payable to Mortgagors or to which Mortgagors are or become entitled on and after the Date of Commencement under all Contracts now or hereafter to become a part of the Mortgaged Property; and (c) All amounts, sums, revenues and income which become payable to Mortgagors on and after the Date of Commencement from any of the Mortgaged Property (including any after acquired properties) or under any contract, present or future, relating to any gas pipeline system or processing plant or unit now or hereafter constituting a part of the Mortgaged Property. 3.2 Mortgagors agree to execute such transfer orders, payment orders, division orders and other instruments as may be needed by Mortgagee or requested by it incident to its having all assigned payments made directly to it at its office in Tulsa, Oklahoma. Mortgagors and Mortgagee hereby authorize and direct all such pipeline companies, purchasers, transporters and other parties owing or to owe moneys to Mortgagors and included in the Assignment made in this Article III, upon the occurrence of the Date of Commencement, to pay such amounts directly to Mortgagee as follows: Bank of Oklahoma, National Association P. O. Box 2300 Tulsa, Oklahoma 74102 -2300 Attn: Energy Department For the Account of: Toklan Oil and Gas Corporation or Sand Springs Oil Gas Company, as applicable and such authorization shall continue until this Mortgage is released or Mortgagee may, in its discretion, give such purchaser notice that it has suspended such assignment until further notice in order that Mortgagors may again receive direct such amounts. Mortgagee is authorized to collect, receive and receipt for all such amounts and no party making payment shall have any responsibility to see to the application of any funds paid to Mortgagee but shall be fully protected in making such payment to Mortgagee under the assignments herein contained. Should Mortgagee bring suit against any third party for collection of any amounts or sums included within this assignment (and Mortgagee shall have the right to bring any such suit) it may sue either in its own name or in the name of Mortgagors. 3.3 If, under any existing Contracts, any proceeds are required to be paid by the purchaser or transporter directly to Mortgagors so that under such Contracts payment cannot be made for such proceeds of runs to Mortgagee in the absence of foreclosure, then Mortgagors' interest in all proceeds under such Contracts and in all other proceeds or payments which for any reason may be paid to Mortgagors shall, after the Date of Commencement, constitute trust funds in its hands (and Mortgagors, as Debtors, jointly and severally, grant to Mortgagee, as Secured Party, a security interest in all Mortgagors' interests in such proceeds) and shall be immediately paid over to Mortgagee. 16 e00649 3.4 If default or an event of default has occurred, all payments received by Mortgagee pursuant to this Article III shall be deposited by Mortgagee in a collateral collection account of Mortgagors established at Mortgagee (the "Collection Account Mortgagee shall be entitled to retain all funds paid into the Collection Account and to apply the same as received to the Indebtedness in such order and to such extent as Mortgagee shall determine in its discretion. 3.5 Mortgagee is hereby absolved from all liability for failure to enforce collection of any proceeds so assigned and from all other responsibility in connection therewith, except the responsibility to account to Mortgagors for funds actually received. 3.6 Nothing contained herein shall detract from or limit the absolute obligation of Mortgagors to make payment of the Indebtedness regardless of whether the proceeds assigned by and applied pursuant to this Article are sufficient to pay the same, and the rights under this Article shall be in addition to all other security now or hereafter existing to secure the payment of the Indebtedness. 3.7 Notwithstanding the other provisions of this Article, Mortgagee and, to the extent that may be specified by Mortgagee at the time, any receiver appointed at the request of Mortgagee in judicial proceedings for the enforcement of this instrument shall have the right to receive all of the Hydrocarbons herein assigned and the proceeds therefrom after the Note has been declared due and payable in accordance with the provisions of Article VI hereof and to apply all of said proceeds in accordance with Section 6.9 hereof. Upon any sale of the Mortgaged Property or any part thereof pursuant to this Mortgage, the Hydrocarbons thereafter produced from the property so sold, and the proceeds therefrom, shall be included in such sale and shall pass to the purchaser free and clear of the assignment contained in this Article. 3.8 Mortgagors agree to indemnify Mortgagee against all liabilities, actions, claims, judgments, costs, attorneys' fees or other charges of whatsoever kind or nature (all hereinafter in this Section 3.8 called "claims made against or incurred by Mortgagee as a consequence of the assertion, either before or after the payment in full of the Indebtedness, that Mortgagee received Hydrocarbons herein assigned or the proceeds thereof claimed by third persons, and Mortgagee shall have the right to defend against any such claims, employing attorneys therefor, and unless furnished with reasonable indemnity, it shall have the right to pay or compromise and adjust any such claims, actions and judgments, and in addition to the rights to be indemnified as herein provided, all amounts paid by Mortgagee in compromise, satisfaction or discharge of any such claims, and all court costs, attorneys' fees and other expenses of every character incurred by Mortgagee pursuant to the provisions of this Section 3.8 shall be demand obligations owing by Mortgagors and shall bear interest at the Default Rate from date of expenditure until paid. The obligations of Mortgagors as hereinabove set forth in this Section 3.8 shall survive the foreclosure or release of this Mortgage. 3.9 In accordance with applicable law, Mortgagee may waive its lien against the Mortgaged Property or any portion thereof, to the extent such property is found to be environmentally impaired, and may exercise any and all rights and remedies of an unsecured creditor against Mortgagors and all of Mortgagors' assets and property for the recovery of any deficiency, including, without limitation, seeking an attachment order. No such waiver shall be final or binding on Mortgagee unless and until a final money judgment is obtained against e00648 Mortgagors. As between Mortgagee and Mortgagors, Mortgagors shall have the burden of proving that the release or threatened release was not knowingly or negligently caused or contributed to, or knowingly or willfully permitted or acquiesced to by Mortgagors or any related party (or any affiliate or agent of Mortgagors or any related party) and that Mortgagors made written disclosure thereof to Mortgagee or that Mortgagee otherwise obtained actual knowledge thereof prior to Mortgagors' delivery of the Note to Mortgagee. Notwithstanding anything to the contrary contained in the Mortgage or any of the Loan Documents described or defined in the Credit Agreement, Mortgagors shall be fully and personally liable for all judgments and awards entered against Mortgagors, and such liability shall not be limited by the original principal amount of the obligations secured by this Mortgage. Mortgagors' obligations hereunder shall survive the foreclosure, deed in lieu of foreclosure, release, reconveyance or any other transfer of the Mortgaged Property or this Mortgage. For the purposes of any action brought under this section, Mortgagors hereby waive the defense of laches and any applicable statute of limitations. ARTICLE IV WAIVER AND PARTIAL RELEASE 4.1 Mortgagee or its successor in interest to the Indebtedness may at any time and from time to time in writing: (a) Waive compliance by Mortgagors with any covenant herein made by Mortgagors to the extent and in the manner specified in such writing; (b) Consent to Mortgagors doing any act which hereunder they are prohibited from doing, or to Mortgagors failing to do any act which hereunder Mortgagors are required to do to the extent and in the manner specified in such writing; or (c) Release any part of the Mortgaged Property or any interest therein, or any assigned production or proceeds from the lien of this Mortgage. No such act by Mortgagee shall in any way impair its rights hereunder except to the extent specifically agreed to by Mortgagee in such writing. 4.2 The lien and other security rights of Mortgagee hereunder shall not be impaired by any indulgence, including, but not limited to: (a) Any forbearance, renewal, extension or modification which Mortgagee may grant with respect to any Indebtedness secured hereby; or (b) Any surrender, compromise, release, renewal, extension, exchange or substitution which Mortgagee may grant in respect to any item of the Mortgaged Property or any part thereof or any interest therein; or (c) Any release or indulgence granted to Mortgagors or to any endorser, guarantor or surety of any Indebtedness secured hereby. 17 000649 ARTICLE V POSSESSION UNTIL DEFAULT Unless an event of default specified in Section 6.1 hereof shall occur, and Mortgagee or Trustee or a receiver designated by Mortgagee shall take possession of the Mortgaged Property, Mortgagors shall retain possession of the Mortgaged Property (except for the proceeds of Hydrocarbon production and other assigned income to be paid to Mortgagee under Article III) and shall manage, operate, develop and use the same and every part thereof, subject, however, to all of the terms and provisions of this Mortgage. ARTICLE VI REMEDIES IN EVENT OF DEFAULT 6.1 The term "default" or "event of default" as used in this Mortgage shall mean the occurrence of any of the following events: (a) Payment of the Note (or any payment of principal or interest thereon) or of any of the other Indebtedness shall not be made as the same shall become due and payable, whether at maturity or when accelerated pursuant to any power to accelerate contained herein or in the Credit Agreement, the Note or other Security Instruments; (b) Any representation made to Mortgagee by Mortgagors incident to procurement of the Loans develops to be untrue or inaccurate in any material respect; (c) The failure of Mortgagors to timely and properly observe, keep or perform any covenant, agreement, warranty or condition required to be observed, kept or performed either herein, in the Credit Agreement or in any other Security Instrument, if such failure continues for twenty (20) days after (i) it shall have become known or should have become known to Mortgagors, or (ii) written notice and demand shall have been given to Mortgagors by Mortgagee for the performance of such covenant, agreement, warranty or condition, whichever is earlier; (d) The failure of Mortgagors, upon request by Mortgagee, to pay over to Mortgagee within five (5) days after receipt thereof any proceeds of the sale of the Hydrocarbons and other minerals produced, saved or sold from the Mortgaged Property or any other sums or proceeds accruing under contracts (existing or future) herein assigned which are paid after the Date of Commencement to Mortgagors rather than to Mortgagee, as provided in Article III hereof; (e) Mortgagors shall (i) become insolvent or be unable to pay their debts as they mature, (ii) fail to pay their debts generally as they mature, (iii) apply for or consent to the appointment of a receiver, custodian, trustee or liquidator of Mortgagors or of all or a substantial part of their assets, (iv) file a voluntary petition in bankruptcy, (v) make a general assignment for the benefit of creditors, (vi) file a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any insolvency law, or (vii) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against Mortgagors in any bankruptcy, reorganization or insolvency proceedings; 18 19 .00650 (f) An order, judgment or decree shall be entered by any court of competent jurisdiction, approving a petition seeking reorganization of Mortgagors appointing a receiver, custodian, trustee or liquidator of Mortgagors or of all or a substantial part of their assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days, or a petition in bankruptcy or reorganization shall be filed against Mortgagors and shall not be dismissed within sixty (60) days after such filing; or (g) The occurrence of any Event of Default under the Credit Agreement. 6.2 After the occurrence of a default, Mortgagee shall have the option at its election, of declaring, any or all Indebtedness to be immediately due and payable, and the liens evidenced hereby shall be subject to foreclosure, as Mortgagee may elect, in any manner provided for herein or provided for or required by law. 6.3 After the occurrence of a default, Trustee and Mortgagee, or either of them, are authorized prior or subsequent to the institution of any foreclosure proceedings to enter upon the Mortgaged Property, or any part thereof, and to exercise without interference from Mortgagors any and all rights which Mortgagors have with respect to the management, possession and operation of the Mortgaged Property. All costs, expenses and liabilities of every character (including costs of unsuccessful workover operations or additional wells or dry holes) incurred by Trustee or Mortgagee in managing, operating and maintaining such properties, including, without limitation, costs of additional drilling and reworking, whether successful or unsuccessful, shall constitute demand obligations owing by Mortgagors and shall draw interest at the Default Rate until paid, all of which shall be added to and constitute a portion of the Indebtedness secured hereby. 6.4 After the occurrence of a default, and if such event shall be continuing, Trustee shall have the right and power to sell, to the extent permitted by law, at one or more sales, as an entirety or in parcels, as Trustee may elect, the Mortgaged Property, at such place or places and otherwise in such manner and upon such notice as may be required by law, or, in the absence of any such requirement, as Trustee may deem appropriate, and to make conveyance to the purchaser or purchasers; and Mortgagors shall warrant title to the Mortgaged Property to such purchaser or purchasers. Trustee may postpone the sale of all or any portion of the Mortgaged Property by public announcement at the time and place of such sale and from time to time thereafter may further postpone such sale by public announcement made at the time of sale fixed by the preceding postponement. The right of sale hereunder shall not be exhausted by one or any sale, and Trustee may make other and successive sales until all of the Mortgaged Property be legally sold. It shall not be necessary for Trustee to have physically present at any such sale, or to have constructively in its possession, any or all of the personal property covered by this instrument, and Mortgagors shall deliver all of such personal property to the purchaser at such sale on the date of sale, and if it should be impossible or impracticable to take actual delivery of such property, then the title and right of possession to such property shall pass to the purchaser at such sale as completely as if the same had been actually present and delivered. 6.5 After occurrence of a default, and if such event shall be continuing, Trustee or Mortgagee, in lieu of or in addition to exercising the power of sale hereinabove and hereafter given, may proceed by a suit or suits in equity or at law, whether for a foreclosure hereunder, or 000651 for the sale of the Mortgaged Property, or for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for the appointment of a receiver pending any foreclosure hereunder or the sale of the Mortgaged Property, or for the enforcement of any other appropriate legal or equitable remedy. In addition to all other remedies herein provided for, Mortgagors agree that after an event of default has occurred, Trustee or Mortgagee shall, as a matter of right, be entitled to the appointment of a receiver or receivers to be designated by Mortgagee for all or any part of the Mortgaged Property whether such receivership be incident to a proposed sale of such properties (or any of them) or otherwise, and Mortgagors do hereby consent to the appointment of such receiver or receivers, and to the maximum extent permitted by law, waives any and all rights to notice and hearing regarding such appointment or appointments, and to the maximum extent permitted by law, waives any and all rights to notice and hearing regarding such appointment or appointments. 6.6 Mortgagee or any other holder or holders of any portion of the Indebtedness (including any participant or participants with Mortgagee in the Loans) shall have the right to become the purchaser at any sale held by Trustee or by any court, receiver or public. officer, and shall have the right to credit upon the amount of the bid made therefor the amount payable out of the net proceeds of such sale to it. Recitals contained in any conveyance made to any purchaser at any sale made hereunder shall conclusively establish the truth and accuracy of the matters therein stated, including, without limiting the generality of the foregoing, statements as to any of the following, namely, the amount of principal advanced and outstanding on the Note; the nonpayment of the unpaid principal sum of the Indebtedness; the amount of interest accrued; and that the advertisement and conduct of such sale was in the manner provided herein and that any successor or substitute Trustee acting hereunder has been duly appointed. 6.7 Upon any sale, whether made under the power of sale herein granted and conferred or by virtue of judicial proceedings, the receipt of Trustee, or the officer making sale under judicial proceedings, shall be sufficient discharge to the purchaser or purchasers at any sale for his or their purchase money, and such purchaser or purchasers, his or their assigns or personal representatives, shall not, after paying such purchase money and receiving such receipt of Trustee or of such officer therefor, be obliged to see to the application of such purchase money, or be in anywise answerable for any loss, misapplication or nonapplication thereof. 6.8 Any sale or sales of the Mortgaged Property, whether under the power of sale herein granted and conferred or by virtue of judicial proceedings, shall operate to divest all right, title, interest, claim and demand whatsoever either at law or in equity, of Mortgagors of, in and to the premises and the property sold, and shall be a perpetual bar, both at law and in equity, against Mortgagors, Mortgagors' successors or assigns, and against any and all persons claiming or who shall thereafter claim all or any of the property sold from, through or under Mortgagors, or Mortgagors' successors or assigns; nevertheless, Mortgagors, if requested by Trustee or Mortgagee so to do, shall join in the execution and delivery of all proper conveyances, assignments and transfers of the properties so sold. 6.9 Upon any foreclosure sale of the Mortgaged Property, or any part thereof, the proceeds of such sale or sales shall be applied, to the extent permitted by law, as follows: 20 C 652 First: To pay all fees, charges and costs of conducting the sale and advertising the Mortgaged Property, and to pay any prior liens or encumbrances unless such sale is made subject thereto, and to pay necessary costs, or reimburse Mortgagee for advances, including, without limitation, to protect and maintain the Mortgaged Property, and to pay taxes, insurance premiums, reasonable accountants' fees, reasonable appraisers' fees, reasonable environmental engineers' fees, court costs, and reasonable attorneys' fees and other reasonable costs, with interest on Mortgagee's advances at the highest default rate provided under the Loans; Second: To the payment of the Note and of the other items of Indebtedness with interest to the date of such payment; and Third: Any surplus thereafter remaining shall be paid to whomever shall be lawfully entitled thereto, as ordered by the court in the foreclosure proceedings, and if to Mortgagors, only upon delivery and surrender of possession of the Mortgaged Property sold and conveyed, together with all records and materials relating thereto, and provided that in the event the net proceeds of such sale or sales shall not be sufficient to pay in full the indebtedness and obligations hereby secured, Mortgagors shall be liable for, and hereby promises and agrees to pay, any deficiency with respect thereto, on demand. If the proceeds of a foreclosure sale of less than the whole of the Mortgaged Property sold shall be less than the aggregate of the Indebtedness, this Mortgage and the lien hereof shall remain in force and effect as to the unsold portion of the Mortgaged Property, just as though no sale had been made; provided, however, that Mortgagors shall never have any right to require the sale of less than the whole of the Mortgaged Property, but Mortgagee shall have the right, at its sole election, to request the sale of less than the whole of the Mortgaged Property. In the event any sale hereunder is not completed or is defective in the opinion of Mortgagee, such sale shall not exhaust the right of foreclosure sale hereunder, and Mortgagee shall have the right to cause a subsequent sale or sales to be made hereunder. The purchaser at the sale shall not be responsible for the application of the proceeds. 6.10 Mortgagors agree to the full extent that Mortgagors may lawfully so agree, that Mortgagors will not at any time insist upon or plead or in any manner whatever claim the benefit of any homestead, appraisement, valuation, stay, extension or redemption law now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this instrument or the absolute sale of the Mortgaged Property or the possession thereof by any purchaser at any sale made pursuant to any provisions hereof, or pursuant to the decree of any court of competent jurisdiction; but Mortgagors, so far as Mortgagors or those claiming through or under Mortgagors now or hereafter lawfully may, hereby waive the benefit of all such laws; provided, however, that appraisement of the Mortgaged Property located in the State of Oklahoma is hereby expressly waived or not, at the option of Trustee and Mortgagee, such option to be exercised prior to or at the time the judgment is rendered in any foreclosure hereof (whether by power of sale, judicial foreclosure or otherwise). Mortgagors, for Mortgagors and all who may 21 claim through or under Mortgagors, waive, to the extent that Mortgagors may lawfully do so, any and all right to have the Mortgaged Property marshaled upon any foreclosure of the lien hereof, or sold in inverse order of alienation, and agrees that Trustee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property as an entirety. If any law in this paragraph referred to and now in force of which Mortgagors or Mortgagors' successor or successors might take advantage despite the provisions hereof, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the agreement herein contained or to preclude the operation or application of the provisions of this paragraph. 6.11 All costs and expenses (including attorneys' fees) incurred by Trustee or Mortgagee in protecting and enforcing the rights of Trustee and Mortgagee hereunder, shall constitute a demand obligation owing by Mortgagors to Trustee and Mortgagee and shall draw interest at the Default Rate, all of which shall be added to and constitute a portion of the Indebtedness. 6.12 Upon the occurrence of a default and in addition to all other rights herein conferred on Trustee and Mortgagee, Trustee or Mortgagee (or any person, firm or corporation designated by Mortgagee) shall have the right and power, but shall not be obligated, to enter upon and take possession of any of the Mortgaged Property, and to exclude Mortgagors, and Mortgagors' agents or servants, wholly therefrom, and to hold, use, administer, manage and operate the same to the extent that Mortgagors shall be at the time entitled and in its place and stead. Trustee or Mortgagee, or any person, firm or corporation designated by Trustee or Mortgagee, may operate the same without any liability to Mortgagors in connection with such operations, except to use ordinary care in the operation of said properties, and shall have the right to collect, receive and receipt for all Hydrocarbons produced and sold from said properties, to make repairs, purchase machinery and equipment, conduct workover operations, drill additional wells, and to exercise every power, right and privilege of Mortgagors with respect to the Mortgaged Property, the costs and expenses of which shall be added to and constitute a portion of the Indebtedness and shall bear interest at the Default Rate. When and if the expenses of such operation and development (including costs of unsuccessful workover operations or additional wells) have been paid and the Indebtedness paid, said properties shall, if there has been no sale or foreclosure, be returned to Mortgagors. 6.13 Subject to Section 6.14 as to any Mortgaged Property located within the State of Texas, any sale by Trustee of the Mortgaged Property may be made in any County in which any part of the Mortgaged Property to be sold at such sale may be situated. Trustee may elect to sell by power of sale the Mortgaged Property which is land and improvements or which Mortgagee has elected to treat as land and improvements and, upon such election, such notice of event of default and election to sell shall be given as may then be required by law. Thereafter, upon the expiration of such time and the giving of such notice of sale as may then be required by law, at the time and place specified in the notice of sale, Trustee shall sell such property, or any portion thereof specified by Mortgagee, at public auction to the highest bidder for cash in lawful money of the United States. Trustee may, and upon request of Mortgagee shall, from time to time, postpone the sale by public announcement thereof at the time and place noticed therefor. If the Mortgaged Property consists of several parcels or interests, Mortgagee may designate the order in which the same shall be offered for sale or sold. Mortgagors waive all rights to direct the order in which any of the Mortgaged Property will be sold in the event of any sale under this 22 000654 Mortgage, and also any right to have any of the Mortgaged Property marshaled upon any sale. In the case of a sale under this Mortgage, the said property, real, personal and mixed, may be sold in one parcel or more than one parcel. Should Mortgagee desire that more than one such sale or other disposition be conducted, Mortgagee may, at its option, cause the same to be conducted simultaneously, or successively on the same day, or at such different days or times and in such order as Mortgagee may deem to be in its best interest. Any person, including Mortgagors, Trustee or Mortgagee, may purchase at the sale. Upon any sale, Trustee shall execute and deliver to the purchaser or purchasers a deed or deeds conveying the property or interest so sold, but without any covenant or warranty whatsoever, express or implied, whereupon such purchaser or purchasers shall be let into immediate possession. Mortgagee, from time to time before Trustee's sale pursuant to this section, may rescind any notice of breach or default and of election to cause to be sold the Mortgaged Property by executing and delivering to Trustee a written notice of such rescission, which notice, shall also constitute a cancellation of any prior declaration of default and demand for sale. The exercise by Mortgagee of such right of rescission shall not constitute a waiver of any breach or default then existing or subsequently occurring or impair the right of Mortgagee to execute and deliver to Trustee, as above provided, other declarations of default and demand for sale, and notices of breach or default, the obligations hereof, nor otherwise affect any provision, covenant or condition of the Note and /or of this Mortgage or any of the rights, obligations or remedies of the parties thereunder or hereunder. 6.14 Any sale by Trustee of any part of the Mortgaged Property located in the State of Texas may be made in any County in which any part of the Mortgaged Property to be sold at such sale may be situated, provided that the notice hereinafter mentioned shall designate the County where the item of property will be sold. All items of property may be sold singly, or together, or in lots or parcels, and in such order, as to Trustee may seem expedient. The items of property shall be sold at the door of the County Courthouse in the County in which the sale is held, and between the hours of 10:00 o'clock in the forenoon and 4:00 o'clock in the afternoon of the first Tuesday in any month, after having given notice (including notice to Mortgagor) of such sale in accordance with the applicable statute of Texas now in force governing sales of real estate under powers of sale conferred by deed of trust. If such applicable statute hereafter should be amended to provide a different notice of sale applicable to sales of real estate under power of sale in a deed of trust, then Trustee may, in its sole discretion, give either the notice of sale now provided to be given or that prescribed by the amended statute. Trustee (or a person or persons selected by Trustee) shall give notice of each such proposed sale by posting written notice of the time, place and terms of sale for at least twenty -one (21) consecutive days preceding the date of the sale at the Courthouse door of the County in which the sale is to be made. In addition to the foregoing notice or notices to be posted by Trustee (or a person or persons selected by Trustee), the holder of the indebtedness to which the power of sale is related, shall, serve written notice of the proposed sale by certified mail on each debtor obligated to pay such indebtedness according to the records of such holder. The service of such notice shall be completed upon deposit of the notice, enclosed in a postpaid wrapper, properly addressed to such debtor at the most recent address as shown by the records of the holder of such indebtedness, in a post office or official depository under the care and custody of the United States Postal Service. The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service. In this respect and to the full extent it may legally do so, Mortgagors, jointly and severally, also expressly covenant, stipulate, and agree that: (a) the 23 000655 address of Mortgagors set out in the introduction to this Mortgage shall conclusively be deemed and considered to be and remain at all time the most recent address of all debtors obligated to pay the Indebtedness as shown by the records of the holders of such indebtedness, provided such address may be changed from time to time only by express written notice of change thereof signed by all debtors obligated to pay the Indebtedness and actually delivered to and received by the holder of the Indebtedness and setting forth a new address which shall conclusively be deemed and considered to be and remain at all times thereafter the most recent address of all debtors obligated to pay the Indebtedness as shown by the records of the holder of such indebtedness until changed in the manner herein provided, (b) the records of the holder of the Indebtedness shall not be deemed to reflect any change in the name or identity of the debtors obligated to pay the Indebtedness (to whom notice of a proposed sale shall be required to be mailed as provided for above) unless and until express written notice of such change signed by all debtors obligated to pay the Indebtedness shall have been actually delivered to and received by the holder of the Indebtedness, and (c) no notice of such sale or sales other than the notices hereinabove provided shall be required to be given to Mortgagors or any other persons and any other notice is expressly waived. The provisions hereof with respect to posting and giving notices of sale are intended to comply with the provisions of the Revised Civil Statutes of Texas as in force and effect on the date hereof, and in the event the requirement for any notice under such statutes shall be eliminated or the prescribed manner of giving same modified by future amendment to such statutes, Trustee may give notice in accordance with such statutes as in force and effect on the date hereof (in which case Mortgagors waive the notice requirements of any such amended statutes), or the requirement for such particular notice may be stricken from or modified in this instrument in conformity with such amendment, at the election of Trustee. The manner herein prescribed for serving or giving any notice, other than that to be posted or caused to be posted by Trustee, shall not be deemed exclusive but such notice or notices may be given in any other manner which may be permitted by applicable law. Any one or more such sales may be conducted in the same month, or in successive or different months as Trustee may deem expedient. Trustee, her successor or substitute, may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any and each such sale, including the posting of notices and the conduct of sale, but Trustee shall execute any and all deeds as Trustee. In the event of any and each such sale, Trustee is authorized to execute and deliver to the purchaser or purchasers of the property sold good and sufficient deeds and /or other instruments of conveyance therefor, in fee simple, with covenants of general warranty, or otherwise, as to the said Trustee may seem expedient, and any such sale shall be a perpetual bar against Mortgagors, and each of Mortgagors' successors in interest, as to the property so sold. 6.15 This instrument shall be effective as a mortgage as well as a deed of trust, and upon the occurrence of a default hereunder this instrument may be foreclosed as to any of the Mortgaged Property in any manner permitted by the laws of the state in which any part of the Mortgaged Property is situated, and any foreclosure suit may be brought by the Trustee or by Mortgagee. In the event a foreclosure hereunder shall be commenced by the Trustee, or his substitute or successor, Mortgagee may at any time before the sale of the Mortgaged Property direct the said Trustee to abandon the sale, and may then institute suit for the collection of the Note and the other Indebtedness, and for the foreclosure of this Mortgage. It is agreed that if Mortgagee should institute a suit for the collection of the Note or any other Indebtedness and for the foreclosure of this Mortgage, Mortgagee may at any time before the entry of a final judgment 24 000656 in said suit dismiss the same, and require the Trustee, his substitute or successor to sell the Mortgaged Property in accordance with the provisions of this Mortgage. 6.16 In case foreclosure is instituted by the Trustee under the power of sale provisions herein but such foreclosure is not completed, Mortgagors shall pay all expenses incurred by the Trustee in connection with such foreclosure, include reasonable attorneys' fees. 6.17 In the event that Mortgagors have an equity of redemption and the Mortgaged Property is sold pursuant to the power of sale or otherwise under or by virtue of this section, the purchaser may, during any redemption period allowed, make such repairs or alterations on said property as may be reasonably necessary for the proper operation, care, preservation, protection and insuring thereof. Any sums so paid together with interest thereon from the time of such expenditures at the Default Rate (if not prohibited by law, otherwise at the highest lawful contract rate) shall be added to and become a part of the amount required to be paid for redemption from such sale. 6.18 Notwithstanding any other provisions of this Mortgage, any lease of oil, gas or other minerals covered by this Mortgage which are subject to the Mineral Leasing Act of 1920 as amended, and the regulations promulgated thereunder, shall not be sold or otherwise disposed of to any party other than the citizens of the United States, or to associations of such citizens or to any corporation organized under the laws of the United States, or any state or territory thereof that are qualified to own or control interests in such leases under the provisions of such Act and regulations, or to persons who may acquire ownership or interest in such leases under the provisions of 30 U.S.C. §184(g) if applicable, as such Act or regulations are now or may be from time to time in effect. 6.19 With respect to all of the Mortgaged Property located in the State of Oklahoma, Mortgagors hereby confer on Mortgagee the power to sell such of the Mortgaged Property and the interests of all other persons therein in the manner provided in the "Oklahoma Power of Sale Mortgage Foreclosure Act," 46 O.S. Supp. 1986 43 -47, as the same may be hereafter amended. With respect to all of the Mortgaged Property located in the State of Wyoming, Mortgagors hereby confer on Mortgagee the power to foreclose such of the Mortgaged Property by advertisement and sale in the manner provided by Wyo. Stat. Ann. 34 -4 -101, et seq., as the same may be hereafter amended. Mortgagee, at its option, may either exercise the power of sale or foreclose this Mortgage as provided by law. ARTICLE VII CONCERNING TRUSTEE 7.1 Mortgagee may at any time by instrument in writing remove Trustee or any successor or substitute trustee without cause, and such power of removal may be exercised as frequently and at such times as Mortgagee deems proper. In case of death, removal, resignation, inability, refusal or failure of Trustee herein named to act, a successor or substitute trustee may be appointed by Mortgagee by instrument in writing but without any other formality, and each such successor or substitute trustee appointed hereunder shall succeed to all of the estates, rights, titles, interests, powers, remedies and duties of the predecessor Trustee, and the right to appoint a successor or substitute trustee may be exercised at any time and from time to time. 25 000657 7.2 TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING TRUSTEE'S NEGLIGENCE), EXCEPT FOR TRUSTEE'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by him hereunder, believed by him in good faith to be genuine. All monies received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other monies (except to the extent required by law), and Trustee shall be under no liability for interest on any monies received by him hereunder. Mortgagors will reimburse Trustee for, and indemnify and hold her harmless against, any and all liability and expenses (including reasonable attorneys' fees) which may be incurred by him in the performance of its duties hereunder. The foregoing indemnity shall not terminate upon release, foreclosure or other termination of this Mortgage. ARTICLE VIII MISCELLANEOUS 8.1 In those instances where provision is made in this instrument to the effect that costs and expenses incurred or advances made by Mortgagee or Trustee shall constitute demand obligations owing by Mortgagors and shall draw interest and shall constitute a portion of the Indebtedness secured by this Mortgage, it is agreed that in the event no demand is made prior to the final maturity of the Note, then the maturity of such items shall be contemporaneous with the final maturity of the Note, howsoever such maturity may occur. 8.2 This instrument shall be deemed to be and may be enforced from time to time as a mortgage, an assignment, chattel mortgage, contract, deed of trust, financing statement (covering fixtures, as- extracted collateral and the Collateral, as defined hereafter), open -end real estate mortgage, or security agreement, and from time to time as any one or more thereof. With respect to property located in jurisdictions where a mortgage is utilized to grant liens in real property, all references herein to Trustee shall be deemed references to Mortgage, and Mortgagee shall have and may enforce any and all rights and remedies hereto conferred on Trustee. As to all items of personal property and intangibles constituting a part of the Mortgaged Property, this instrument shall constitute a security agreement in addition to its being a mortgage on those parts of the Mortgaged Property which are classified as real property, and any copy of this instrument may be filed of record either as a mortgage on real property or as a security agreement and a financing statement or as both. 8.3 Each and every right, option, power and remedy given herein to Trustee or Mortgagee shall be cumulative and not exclusive; and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Trustee or Mortgagee, and the exercise, or the beginning of the exercise, of any such right, option, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter, any other right, option, power or remedy. No delay or omission by Trustee or Mortgagee in the exercise of any right, option, power or remedy shall impair any such right, option, power or remedy then or thereafter existing. 26 000658 8.4 Should Trustee or Mortgagee take possession of the Mortgaged Property upon the happening of an event of default, or should a receiver be appointed at the instance of Trustee or Mortgagee to take possession of the Mortgaged Property, Trustee, Mortgagee or the receiver, as the case may be, shall also have the right to take possession of all automobiles, trucks, tractors, bulldozers, vehicles, furniture, office equipment, office space and any other thing or things pertaining to Mortgagors' operations of the Mortgaged Property or used or useful in connection with the operations of the Mortgaged Property without any rental therefor. During any period of time in which operations of the Mortgaged Property are conducted by Trustee, Mortgagee or a receiver or designated representative of Trustee or Mortgagee, such operations may, in the discretion of Mortgagee, be conducted in the name of Mortgagors and all reports required by law to be made to governmental agencies or authorities may be made in the name of Mortgagors acting by such party in possession, as operating agent. 8.5 The Note and all other Indebtedness secured hereby which may be owing at any time by Mortgagors shall be payable at Mortgagee's main Tulsa banking office at 101 East Second Street, Tulsa, Oklahoma, 74103 or at the mailing address of P. O. Box 2300, Tulsa, Oklahoma 74102 -2300. 8.6 It is the intent of Mortgagee and Mortgagors in the execution of the Note, this Mortgage and all other instruments now or hereafter securing the Note or executed in connection therewith or under any other written or oral agreement by Mortgagors in favor of Mortgagee to contract in strict compliance with applicable usury law. In furtherance thereof, Mortgagee and Mortgagors stipulate and agree that none of the terms and provisions contained in the Note, this Mortgage or any other instrument securing the Note or executed in connection herewith, or in any other written or oral agreement by Mortgagors in favor of Mortgagee, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law. Neither Mortgagors nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of the Note or the other indebtedness secured hereby shall ever be obligated to pay interest on the Note or on indebtedness arising under any instrument securing the Note or executed in connection therewith, or in any other written or oral agreement by Mortgagors in favor of Mortgagee, at a rate in excess of the maximum interest that may be lawfully charged under applicable law, and the provisions of this paragraph shall control over all other provisions of the Note, this Mortgage and any other instruments now or hereafter securing the Note or executed in connection herewith or any other oral or written agreements which may be in apparent conflict herewith. Mortgagee expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of the Note is accelerated. If the maturity of the Note shall be accelerated for any reason or if the principal of the Note is paid prior to the end of the term of the Note, and as a result thereof the interest received for the actual period of existence of the loan evidenced by the Note exceeds the amount of interest that would have accrued at the applicable maximum lawful rate, Mortgagee shall, at its option, either refund to Mortgagors the amount of such excess or credit the amount of such excess against the principal balance of the Note then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of the excess interest. In the event that Mortgagee shall collect monies and /or any other thing of value which are deemed to constitute interest which would increase the effective interest rate on the Note or the other indebtedness secured hereby to a rate in excess of that permitted to be charged by 27 060659 applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of Mortgagee, be either immediately returned to Mortgagors or credited against the principal balance of the Note then outstanding or the other indebtedness secured hereby, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Mortgage, Mortgagors acknowledge that they believe the loan evidenced by the Note to be non usurious and agree that if, at any time, Mortgagors should have reason to believe that any of such loans are in fact usurious, they will give Mortgagee notice of such condition, and Mortgagors agree that Mortgagee shall have ninety (90) days after receipt of such notice in which to make appropriate refund or other adjustment in order to correct such condition if in fact such exists. The term "applicable law" as used in this paragraph shall mean the laws of the State of Oklahoma or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future. 8.7 The terms, provisions, covenants and conditions hereof shall be binding upon Mortgagors and the successors and assigns of Mortgagors, and shall inure to the benefit of Trustee and Mortgagee, and their respective successors and assigns. It is expressly agreed and understood that the term "Mortgagor" wherever used in this instrument refers to the party named at the beginning of this instrument as Mortgagors and legal representatives and successors in interest of such party to any part of the Mortgaged Property. It is also expressly recognized and agreed that whenever the terms "Mortgagee" is used, it is intended to include any successor holder of the Indebtedness secured by this Mortgage to whom the Indebtedness may be assigned or transferred although until written notice is delivered that Mortgagee has executed an assignment of said Indebtedness, Mortgagors shall be entitled to regard and shall treat Mortgagee as the holder of the Indebtedness secured. Terms of the masculine gender used herein shall include the feminine and neuter genders, and terms of the neuter gender shall include all genders. All capitalized terms used herein, but not otherwise defined, shall have the meaning given such term in the Credit Agreement. 8.8 If any provision hereof or of the Note is invalid or unenforceable in any jurisdiction, the other provisions hereof or of the Note shall remain in full force and effect in such jurisdiction, and the remaining provisions hereof shall be liberally construed in favor of Trustee and Mortgagee in order to effectuate the provisions hereof, and the invalidity of any provision hereof in any jurisdiction shall not affect the validity or enforceability of any such provision in any other jurisdiction. Any reference herein contained to a statute or law of a state in which no part of the Mortgaged Property is situated shall be deemed inapplicable to, and not used in, the interpretation hereof. 8.9 The article headings in this Mortgage are inserted for convenience and shall not be considered a part of this instrument or used in its interpretation. 8.10 Without limiting any of the provisions of this instrument, Mortgagors, as "Debtors," jointly and severally, expressly GRANT, to and in favor of Mortgagee, as "Secured Party," a first priority, continuing and continuous security interest in all of the Collateral, and covenant and agree with Mortgagee, as such Secured Party, as follows: 28 29 000660 (a) In addition to any other remedies granted in this instrument to Mortgagee, Mortgagee, as Secured Party, may, in the event of any default, proceed under the UCC as to all or any part of the personal property (tangible or intangible) and fixtures included in the Mortgaged Property (such portion of the Mortgaged Property being herein referred to as "Collateral including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of, lease or utilize the Collateral and any part of parts thereof in any manner authorized or permitted under the UCC after default by Debtors, and to apply the proceeds thereof toward payment of any costs and expenses and attorneys' fees and legal expenses thereby incurred by Secured Party, and toward payment of Debtors' obligations secured hereby including the Note and all other Indebtedness described in Article I above in such order or manner as Secured Party may elect; (b) The rights of Secured Party in the event of default shall include, without limitation, the right to take possession of the Collateral and to enter upon any premises where same may be situated for such purpose without being deemed guilty of trespass and without liability for damages thereby occasioned, and to take any action deemed necessary or appropriate or desirable by Secured Party, at its option and in its discretion, to repair, refurbish or otherwise prepare the Collateral for sale, lease or other use or disposition as herein authorized; (c) To the extent permitted by law, Debtors agree that if any notice of sale is mailed, postage prepaid, to Debtors at the address first shown herein at least five (5) days before the time of the sale or disposition, such notice shall be deemed reasonable and shall fully satisfy any requirement for giving of said notice; (d) Secured Party is expressly granted the right, in the event of default, at its option, to transfer at any time to itself or to its nominee the Collateral, or any part thereof, and to receive the moneys, income, proceeds or benefits attributable or accruing thereto and to hold the same as security for Debtors' obligations or to apply it on the principal and interest or other amounts owing on any of Debtors' obligations, whether or not then due, in such order or manner as Secured Party may elect. All rights to marshaling of assets of Debtors, including any such right with respect to the Collateral, are hereby waived; (e) All recitals in any instrument of assignment or any other instrument executed by Secured Party incident to sale, transfer, assignment, lease or other disposition or utilization of the Collateral or any part thereof hereunder shall be full proof of the matters stated therein and no other proof shall be requisite to establish full legal propriety of the sale or other action taken by Secured Party or of any fact, condition or thing incident thereto and all prerequisites of such sale or other action or of any fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred; (f) Secured Party may require Debtors to assemble any movable Collateral and make it available to Secured Party at a place to be designated by Secured Party that is reasonably convenient to both parties. All expenses of retaking, holding, preparing for 30 000661 sale, lease or other use or disposition, selling, leasing or otherwise using or disposing of the Collateral and the like which are incurred or paid by Secured Party as authorized or permitted hereunder, including also all attorneys' fees, legal expenses and costs, shall be a demand obligation owing by Debtors, shall be a part of the Indebtedness secured hereby, and shall bear interest at the Default Rate from the date incurred; and (g) This instrument covers minerals or the like (including oil and gas) extracted and to be extracted, as well as accounts and general intangibles resulting from the sale thereof at the wellhead or minehead, and Debtors have an interest of record in all such real estate. The recording of this Mortgage in the applicable real estate mortgage records of the County Clerks of the various Counties in which any Mortgaged Property is located shall constitute the recording of this Mortgage as a Financing Statement, including without limitation, as a fixture filing financing statement in each such County in compliance with the UCC in effect in such State. This Mortgage shall also be effective as a financing statement covering any other property and may be filed in any other appropriate filing or recording office. 8.11 In order to facilitate Mortgagors' handling of certain of its routine matters pertaining to its Oil and Gas Leases and the operation thereof, Trustee and Mortgagee agree that unless and until they shall give notice to Mortgagors to the contrary, Trustee and Mortgagee shall be deemed to have consented to Mortgagors doing any of the following routine business matters relating to the Mortgaged Property so long as done in good faith and as a prudent operator: (a) execute releases of Oil and Gas Leases on which there is no Hydrocarbon production and which have expired by the terms of the leases; (b) abandon wells which have ceased to be productive in commercial quantities and incident to such abandonment to dispose of the Operating Equipment in or on said well; (c) execute Contracts so long as such contracts recognize the right of Mortgagee to collect the proceeds thereof pursuant to the Assignrnent contained in Article III hereof; and (d) execute farm -out agreements and assignments without the joinder of Mortgagee which cover only oil and gas lease acreage (or interest therein) on which there has been no well within the preceding two years and which is not then held by oil or gas production from a well located elsewhere on the same lease or upon a unit in which portions of said lease are included. 8.12 Mortgagee or Trustee may commence, appear in, defend or prosecute any assigned claim or action; and Mortgagee or Trustee may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee or Trustee, but shall not he responsible for any failure to collect any claim or award regardless of the cause of the failure. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Mortgage upon any portion of the Mortgaged Property not then or theretofore released as security for the full amount of the Indebtedness, Mortgagee or 600662 Trustee may, from time to time and without notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation, (iii) grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed, at any time and at Mortgagee and Trustee's option, any parcel, portion or all of the Mortgaged Property, (v) take or release any other or additional security for any Indebtedness or (vi) compromise or make other arrangements with debtors in relation thereto. 8.13 Any notice, request, demand, report or other instrument which may be required or permitted to be given to or furnished to or served upon any party hereto or other person succeeding to any interest of a party hereto shall be deemed sufficiently given or furnished or served if in writing and delivered to such party or person or to an officer of such party or person or deposited in the United States mail in a sealed envelope with postage prepaid, addressed, if to Mortgagors, to Mortgagors' address set forth in the first paragraph of this instrument, and if to Trustee or Mortgagee, to their address set forth in the first paragraph of this instrument, or at such other address as the party or person to be addressed shall have previously designated by written notice to the party or person giving such notice or furnishing such report or making such request or demand. Unless otherwise expressly provided in this Mortgage, every provision for notice, demand, consent or request shall be deemed fulfilled only upon compliance with the notice provisions contained in this Section 8.13, and it is hereby provided that, as to Mortgaged Property situated in the State of Texas, service of a notice required by Tex. Property Code 51.002 shall be considered complete when the requirements of that statute are met. 8.14 Any person or entity purporting to have or to take a junior mortgage or other lien under the Mortgaged Property or any interest therein shall be subject to the rights of Mortgagee to amend, modify, increase, vary, alter or supplement this Mortgage, the Note, any of the Indebtedness, or any of the Loan Documents, and to extend the maturity date of the Indebtedness and to increase the amount of the Indebtedness and to waive or forebear the exercise of any of its rights and remedies hereunder or under any of the other Loan Documents and to release any collateral or security for the indebtedness secured hereby, in each and every case without obtaining the consent of the holder of such junior lien and without the lien or security interest of this Mortgage losing its priority over the rights of any such junior lien. 8.15 In the event that any provision of this Mortgage shall be inconsistent with any provision of the statutes or common law governing the foreclosure of this Mortgage in the State wherein any of the Mortgaged Property is located (the "Foreclosure Laws the provisions of the Foreclosure Laws shall take precedence over the provisions of this Mortgage, but shall not invalidate or render unenforceable any other provision of this Mortgage that can be construed in a manner consistent with the Foreclosure Laws. 8.16 Either party hereto may designate a new or different address for notice purposes to the other party by complying with the terms and provisions hereof. 8.17 THIS MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE PROCEDURAL OR REMEDIAL LAWS OF THE STATE IN WHICH THE MORTGAGED PROPERTY IS SITUATED (THE "SITUS STATE (WITHOUT GIVING EFFECT TO THE SITUS 31 32 000663 STATE'S PRINCIPLES OF CONFLICTS OF LAW), EXCEPT TO THE EXTENT THAT THE LAWS OF THE UNITED STATES OF AMERICA AND ANY RULES, REGULATIONS OR ORDERS ISSUED OR PROMULGATED THEREUNDER, APPLICABLE TO THE AFFAIRS AND TRANSACTIONS ENTERED INTO BY MORTGAGEE, OTHERWISE PREEMPT THE SITUS STATE LAW, IN WHICH EVENT FEDERAL LAW SHALL CONTROL. MORTGAGORS, JOINTLY AND SEVERALLY, HEREBY IRREVOCABLY SUBMIT TO THE NON EXCLUSIVE JURISDICTION OF ANY SITUS STATE COURT OR FEDERAL COURT SITTING IN TULSA, OKLAHOMA, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE, AND MORTGAGORS HEREBY AGREE AND CONSENT THAT IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SITUS STATE COURT OR FEDERAL COURT SITTING IN TULSA, OKLAHOMA, MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO MORTGAGORS AT THE ADDRESS OF MORTGAGORS FOR THE GIVING OF NOTICES PURSUANT TO SECTION 8.13 HEREOF, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED. 8.18 Mortgagors acknowledge that (i) the Mortgage and the other documents have been negotiated in Oklahoma, and (ii) the documents contemplate the making of advances and payment of Indebtedness in Oklahoma; therefore, Mortgagors hereby agree that the documents, including the provisions with respect to the making of any disbursements, the creation of any monetary obligations and the rights accruing and compensation payable to Mortgagee in connection with such loans and obligations shall be governed by and construed in accordance with the laws of the State of Oklahoma, except that where otherwise required by applicable local law, any exercise by Mortgagee of its remedies under this Mortgage shall be conducted in accordance with the applicable law where the Mortgaged Property is situated. 8.19 All agreements between Mortgagors and Mortgagee are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid to the holder of the Note for the use, forbearance or retention of the money advanced thereunder or hereunder exceed the highest lawful rate permissible. If, from any circumstances whatsoever, fulfillment of any provisions of this Mortgage or the Note or any other Loan Documents at the time performance of such provision shall be due shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable thereto or hereto, then the obligations to be fulfilled shall be reduced to the limit of such validity and, if from any circumstances Mortgagee shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. This provision shall control every other provision of the Loan Documents. 8.20 Waiver of Jury Trial. MORTGAGORS AND MORTGAGEE HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) 33 0664 BETWEEN MORTGAGORS AND MORTGAGEE ARISING OUT OF OR IN ANY WAY RELATED TO THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT, OR ANY RELATIONSHIP BETWEEN MORTGAGORS AND MORTGAGEE. THIS PROVISION IS A MATERIAL INDUCEMENT TO MORTGAGEE TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS. NOTHING HEREIN CONTAINED SHALL PREVENT OR PROHIBIT MORTGAGORS FROM INSTITUTING OR MAINTAINING A SEPARATE ACTION AGAINST MORTGAGEE WITH RESPECT TO ANY ASSERTED CLAIM. FURTHER, MORTGAGORS AGREES TO THE FOLLOWING: WAIVER OF CONSUMER RIGHTS MORTGAGORS WAIVE THEIR RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES- CONSUMER PROTECTION ACT, SECTION 17.41, ET SEQ., TEXAS BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTION. AFTER CONSULTATION WITH AN ATTORNEY OF MORTGAGORS' OWN SELECTION, MORTGAGORS VOLUNTARILY CONSENT TO THIS WAVIER. 8.21 If there is any conflict or inconsistency between the terms of this Mortgage and the Credit Agreement, the terms of the Credit Agreement shall control. 8.22 THIS WRITTEN MORTGAGE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 8.23 Well names included on Exhibit A are for identification purposes and in no way limit, impair or diminish the rights and interests granted under this Mortgage; provided, however, it is Mortgagors' intent to mortgage all of Mortgagors' interests in the wells that are identified by name on Exhibit A, whether or not such interests are correctly or fully described on Exhibit A or in this Mortgage, and such interests are included for all purposes within the definition of "Lands Described in Exhibit A." 8.24 This instrument may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and one instrument, and all of which are identical, except that to facilitate recordation, in any particular counterpart portions of Exhibit A hereto which describe properties situated in counties other than the county in which such counterpart is to be recorded may have been omitted. Counterparts with complete Exhibit A are being delivered to Trustee and Mortgagee. 8.25 A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGORS UNDER THIS MORTGAGE. eou 8.26 WARNING: THIS MORTGAGE CONTAINS A POWER OF SALE AND UPON DEFAULT MAY BE FORECLOSED BY ADVERTISEMENT. IN FORECLOSURE BY ADVERTISEMENT AND THE SALE OF THE MORTGAGED PROPERTY IN CONNECTION THEREWITH, NO HEARING IS REQUIRED AND THE ONLY NOTICE REQUIRED IS THE PUBLICATION OF NOTICE IN A LOCAL NEWSPAPER. 8.27 Information concerning, and copies of, any documents referred to in this Mortgage, as well as information concerning the parties to this Mortgage may be obtained from the Mortgagee at the address specified for it on the cover page of this Mortgage. [SIGNATURES APPEAR ON FOLLOWING PAGE.] 34 000666 IN WITNESS WHEREOF, this instrument is executed in multiple counterparts as of the day and year first above written, and delivered to Trustee and Mortgagee in Tulsa, Oklahoma, by the undersigned, which shall be deemed the date hereof whether this instrument is actually signed on said date or before or after said date. Commission No: My Commission Expires: [SEAL] TOKLAN OIL p'I D G, S CO PORATION, an Oklahoma corp By Patr ck B. Cobb, President SAND SPRINGS Oklahoma co By STATE OF OKLAHOMA ss. COUNTY OF TULSA The foregoing instrument was acknowledged before me on this /4 day of May, 2010, by Patrick B. Cobb, President of Toklan Oil and Gas Corporation, and President of Sand Springs Oil Gas Company. WITNESS my hand and official seal the day and year above written. Notary Publi Marilyn McGee Notaq Public in and for '!ATE OF OKLAHOMA Comrnlsaion 02006763 F:oj)Eu,s: April 19, 2014 35 L i GAS COMPANY, an io/ O� p�i Patrick B. Cobb, President "Mortgagors and Debtors" Anderson Canyon 22 -17 42 -18D LESSOR: LESSEE: LEASE DATE: RECORDED: DESCRIPTION: 2009657.01 EXHIBIT A OOO667 To Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment dated as of March 31, 2010, from Toklan Oil and Gas Corporation, as Mortgagors, Grantors and Debtors, to Pam P. Schloeder, as Trustee, and to and on behalf of BANK OF OKLAHOMA, NATIONAL ASSOCIATION, as Mortgagee, Beneficiary and Secured Party. LINCOLN COUNTY, WYOMING Section 17-25N-111W Section 18- 25N -111W United States Dept. of Interior, Bureau of Land Management Energetics Operating Company July 1, 1978 N/A N/2 of Section 17- 25N -111W, Lincoln County, WY; and Lots 1, 2, NE /4, E/2 NW /4 of Section 18-25N-111W, Lincoln County, WY