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Home My WebLink About900666 F~EOEIVED MORTGAGE, DEED OF TRU&T ~. URI ,~., ,~a ~T, FINANCING STATElVlENT AND ASSIG~ENT OF PRODUCTION FROM TIlE PROSPECTIVE INVESTMENT AND TRADING COMPANY, LTD., an Oklahoma corporation Federal Tax ID. No. 73-0950294 anti PITCO INVESTMENTS, LTD., a Texas limited partnership Federal Tax LD. No. 73-1575622 (Mortgagors, Debtors and Grantors) TO PRLAP, INC., TRUSTEE AND BANK OF AMERICA, N. A. '(Mortgagee, Notehohler and Secured Party) The mailing address of Bank of America, N. A. is 10"' Floor 515 South Boulder Avenue Tulsa, Oklahoma 74103 Attention:Mr. Michael D. Earl and the mailing address of the Trustee is 901 Main Street Dallas, Tx 75202-3714 and the mailing addr :ss of the Mortgagors, Debtors and Grantors is 2162 East 61st Street P.O. Box 702323, Tulsa, Oklahoma '74! 70. This instrument Was i~repared by Kenneth F. Albright, Albright, Rusher & Hardcastle, 2600 Bank of America Center, 15 West 6a~ Street, Tulsa, Oklahoma 74119, and contains after- acquired property promsions and covers future advances. Attention of Recording Officers: This instrument covers oil, gas and minerals and fixtures and is among other things, a chattel mortgage and a security agreement and a financing sthtement under the Uniform Commercial Code. This instn~rrtent creates a lien on rights in or relating to the lands of the Mortgagors which are described in Exhibit A ennexed hereto. This instrument ~s to be filed and recorded, among other places, as a mortgage, deed of trust and as a financing statement or chattel mortgage (covering fixtures, oil, gas and other minerals) 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. When recorded return to: Kenneth F. Atbright Albright, Rusher & Hacdcastle 2600 Bank of America Cemer 15 West 6m Street Tulsa, Oklahoma 74119 MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION (with Power of Sale) KNOW ALL MEN BY TI-IISSE PRESENTS: THIS Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment of Production (with Power of Sale), dated as of October 31, 2003, ~s executed by THE PROSPECTiVE INVESTMENT AND TRADING COMPANY, LTD., an Oklahoma corporation ("Pitco"), and PITCO INVESTMENTS, LTD., a Texas limited partnership ("Pitco Ltd.") (Pitco and Pitco Ltd. being hereinafter referred to, collectively, as the 'Mortgagors"), all Mortgagors having a mailing address of P. 0. Box 702320, Tulsa, Oklahoma 74170, Attention: Adam C. Singer, to PRLAP, INC., as the successor Trustee for the benefit of the Bank, as hereinafter defined (hereinafter '.:ogether with successors and substitutes in trust, referred to as the "Trustee"), whose address is 901 Main Street, Dallas, Tx 75202-3714 and BANK OF AMERICA, N. A., having a mailing address of 10~' Floor, 515 South Boulder Avenue, Tulsa, Oklahoma 74103 (the "Bank"). RECITALS I. As of the date hereof, Mortgagor and Mortgagee have entered into that certain Revolving Credit Agreement (the "Credit A~reement"), which Credit AgTeement provides for the establishment of a revolving line of credit extended by Mortgagee for the benefit of Mortgagor; and II. Mortgagor and Morgagee desire to secure the pa)anent of all amounts owing and to become owing upon the Indebtedness described in the Credit Agreement, by this Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment (hereinafter referred to as the "Mortgage"); and HI. For all purposes of fi.is instrument, unless the context otherwise requires: (A) "Oil and gas leases" shall include oil, gas and mineral leases and farm-out agreements and shall also include subleases and assignments of operating rights. (B) "Hydrocarbons" shall mean oil, casinghead gas, gas and other liquid or gaseous hydrocarbons. (C) "Production Sale Contracts" shall mean contracts now in effect, or hereafter entered into by the Mortgagors, the MoCrgagors' predecessors in interest, or by any other parties to fl~e extent that Mortgagors have any fight 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. (D) "Mortgagors" shall mean Pitco and Pitco Ltd., jointly and severally, as their interests shall appear. (E) "Lands described in Exhibit A" shall include any lands, the description of which is contained in Exhibit A hereto or is incorporated in Exhibit A by reference to another instrument or document, and shall also include any lands now or hereafter unitized or pooled with lands which are either described in Exhibit A or the description of which is incorporated in Exhibit A by reference. (F) "Operating Equipm:nt" shall mean all surface or subsurfi~ce machinery, equipment, facilities or other property of whatso:ver kind or nature (excluding drilling rigs, drill pipe, tanks, mud pumlSs, 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 any of the Lands described in Exhibit A which are used or useful or he'~d for use in connection with the production, treatment, storage or transportation of oil, gas aad 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 therein, buildings and camps, telegraph, telephone and other communicatim, ss'stems, roads, loading racks and shipping facilities. (G) "Note" and "Indebtedness" shall have the meaning stated in Section 1.1 hereof. ' (H) "Oil and Gas Properties" shall mean all of the oil and gas properties, both those now owu~ed and those to be hereafler :acquired by the Mortgagors and located or to be located on the Lands described in Exhibit A, and shall include any interests in oil, casinghead gas, gas and other Hydrocarbons or minerals .in place, all oil, gas and other Ilydrocarbon or mineral leases and rights therein, all oil, gas and tither mineral rights, wells, equipment and other properties, whether producing or' non-producing (including storage facilities), used or useful primarily and principally for the exploration and/or deve!opment and/or production and/or storage and/or processing of gas but up to the point of connection' with any gathering system or for the exploration and/or development and/or production and/or stora~';e of oil or condensate, and royalties in or based upon the production of oil, gas and other Hydrocar~'ons or minerals. (I) "Security Instruments" shall mean the Mortgage, the Security Instruments described in the Credit Agreement and v.ny 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 plart by this Mortgage. (J) "Default Rate" shWl mean the rate of interest provided in the Note for delinquent payments. NOW, THEREFORE, the 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, with POWER OF SALE, and by these presents do grant, bargain, sell, warrant, mortgage, assign, pledge, transfer and convey unto the Trustee and the Trustee's successors and assigns, with POWER OF SALE, for the use and benefit of the Bank, all of Mortgagors' right, title and interest, whether now owned or hereafter acquired, ~n: GRANTING CLAUSE ONE The Lands described in Exhibit A, and the oil and gas leases, the mineral, overriding royalty, royalty and other interests which co ~,er or relate to the Lands described in Exhibit A, whether or not such rights, titles and interests be correc;ly or sufficiently described or referred to therein, GRANTING CLAUSE TWO 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 goveTnmental agency having jurisdiction) which are specifically described m Exhibit A or which relate to any office properties and interests described in Exhibit A 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, GRANTING CLAUSE FOUR The Production Sale Contracts, GRANTING CLAUSE FIVE The Operating Equipment, GRANTING CLAUSE SlX All other interests of every 'kind and character in all Oil and Gas ProPerties and the real and personal properties included therein which Mortgagors may now own or hereafter acquire at any time prior to the payment in full of all Indebtedness; provided, however, the gross working interests (GWI) and net revenue interests (NRI) of Mortgagors encumbered by and subject to the lien of this instrument shall initially include, insofar as specified wells named on Exhibit i annexed to the Credit AgTeement are concerned, only the minimum GWl and NRI, respectively, as specified on Exhibit I annexed to the Credit Agreement as "PITCO GWI" and "PITCO NIH," respectively, and as "Investments GWI" and "Investments NRI," respectively, it being further provided, understood and stipulated that such initial minimum PITCO GWI and P[ICO NRI and Investment GWI and Investment N1LI, respectively, shall be 'effective as a limitation against the Trustee and the Bank only for so long as and to the limited extent that legal title to any such additional GWI or NRI (defined in Section 7.16 of the Credit Agreement as the "Affiliated Entities Interests") in excess thereof now or hereafter held of record by Mortgagor in its own name, as nominee or otherwise for the Affiliated Entities, entities and/or individuals, in excess of the minimum specified P1TCO GWT and PITCO NRI and Investments GWI and Investments NRI therein of such Mortgagor set forth onrExhibit I to the Credit Agreement, is held by such Mortgagor for, on behalf and as nominee of one or mort of the Affiliated Entities, entities and/or individuals set forth on Exhibit I to the Credit Agreement and further in no event in excess of the respective GWI and NRI constituting Affiliated Entities Interests of such Affiliated Entities as specified on Exhibit I to the Credit Agreement and it is further provided, shpulated and acknowledged that the promsions hereof shall not operate to limit, impair or otherwise restrict the GWI, NRI or other oil and gas mining and mineral or other property or related interests of any of the Mortgagors from being subject hereto and encumbered hereby insofar as any future or hereafter acquir.ed legal and equitable GWI, NRT or other such interests of any of the Mortgagors in any of the Mortgaged Property of any type, character or nature are concerned; together with any and all corre,ztions or amendments to, or renewals, extensions or ratifications of any of the same, or of any instrument relating thereto, and all nghts-of-way, franchises, permits, licenses, improvements, easements, tenements, hereditaments and appurtenances now existing or in the future obtained in com~ection with any of the aforesaid, and all other things of value and incident thereto which Mortgagors might at any tittle have been or may hereafter become entitled to, all the aforesaid properties, rights and interests, together ~vith any additions thereto which may be subjected to the lien of this instrument by means of supplements hereto, all of the above being hereinafter collectively called the "Mortgaged Property." Subject, however, to the ':ot~dition that the Trustee and the Bank shall not be liable in any respect for the performance of any cove;~ant 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 the Bank, and the Bank's successors and assigns (and/or with respect to,real property and fixtures now or hereafter located ~n any state in which this instrument will be const:u4d as a deed of trust, unto Trustee and to the Trustee's successors, assigns or substitutes hereunder for tke benefit of the Bank) and to their respective successors and assigns, forever, and Mortgagors hereby jointly and severally bind and obligate themselves, and their respective successors and assigns, to warrant and forever defend, all and singular, the Mortgaged Property unto the Bank and unto Trustee and the Trustee's and the Bank's successors, assigns or substitutes hereunder and to its successors and assigns, against the lawful claims of any and all persons whomsoever claiming, or to claim the same, or any part ff~ereof This conveyance is made in trust, however, upon the terms and provisions hereinafter set out, to secure the full and final paynent of all sums owing or to become owing, including principal, interest and attorneys' fees, upon the Note a~d the other Indebtedness to the Bank described in Article I below. And Mortgagors, for themselves, and their respective successors in interest, have COVENANTED, DECLARED AND AGREED with the Trustee for the use and benefit of the Bank and its successors and assigns, and do by these presents 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 terna "Indebtedness," as used in this Mortgage: (a) Particularly Described Note: All amounts owing or to become owing upon the Note jointly and severally executed of even date herewith by the Mortgagors, payable to the order of the Bank in the maximum principal amount of $75,000,000. Interest shall accrue on any past due interest and on the principal amount of the Note from time to nme outstanding at the Applicable Rate described in the Credit Agreement. ~Ihe Note is payable in monthly installments of interest only, payable as' it accrues on the last day of each applicable Interest Period (defined and described in the Credit Agreement) together witl[ rronthly principal installments as required to comply with the MCR feature of the Commitment as d~scfibed and defined in the Credit Agreement payable on the last day of each calendar month commencirg November 30, 2003, with all unpaid pnncipal and interest due and payable at maturity on October 31, 2005. After maturity (whether by acceleration or otherwise) the Note shall bear interest 'at the Default Rate payable on demand. Interest shall be calculated on the basis of the actual number of days elapsed (365 or 366) in a year of 365 days. The Note also contains customary provisions for, acceleration of maturity in the event of the contingencies therein stated, and mandatory principal prepay~nents, all as provided and set out in the Note which is incorporated herein by reference and made a par'~ hereof for all purposes; (b) All indebtedness arising pursuant to the provisions of this Mortgage, the Credit Agreement and each of the other Seimrity Instruments which Mortgagors have executed or hereafter execute to secure the Note describec, al~:ove, and, including without limitation, any and all obligations, contingent or otherwise, now or hercaD'er existing, arising out of any and all Risk Management Agu'eements (as described and defined in the Credit Agreement) or transactions pertaining thereto with the Bank or any participant therewith in the Credit Agreement; (c) All renewals, extensions, substitutions, changes m form, replacements and rearrangements of the indebtedness described in (a) and (b) above; (d) All costs, expens;.s, fees, liabilities, obligations and payments incurred or made by the Bank pursuant to the provisions of Sections 2.2(0, 2.2(k), 2.2(q), 2.3, 3.1(a), 3.9, 6.3, 6.11, 6.12 and 8.10(0 hereof, together with the interest accrued thereon; and 1.2 Defeasance. 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. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS 2.1 Each Mortgagor repr:sents, warrants and covenants that it is solvent; that it is a lawful and valid owner and holder of the Mortgaged Property more particularly described in Exhibit A annexed hereto, including Exhibit A-1 as to l:itc0, and Exhibit A-2 as to Pitco Ltd.; that it has good and legal power, right and authority to grant, bargaifl, sell, transfer, convey, assign, pledge and mortgage the Mortgaged Property and to make the ooovenants, representations, warranties and assignments contained in this Mortgage; that all oil and gas leases or interests therein and all Production Sate Contracts, processing contracts, franchises, licenses m{d other agreements described as part of the Mortgaged Property are valid and subsisting and are in full, fm ce and effect m~d all of the express or implied terms or provisions of snch 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 instn~mcnts constituting a part of the Mortgaged Property have been properly and timely paid and that all oil a~d 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 fifll interest in each item of Mortgaged Property or of an undivided interest in the particular item of proper['/o~' contract described of not less than that set forth in Exhibit I to the Credit Agreement; that the Mortgag;sd Property is free and clear fi-om all liens, mortgages, charges, encumbrances and burdens 'vhatsoever except (i) the liens evideuced by this Mortgage, (ii) Permitted Encmnbrances as hereinafter defined and (iii) the equitable interests held pursuant to the Credit Agreement; that except as other,v~se described in Exhibit I to the Credit Agreement, it is 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 undei' any similar arrangement to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefore; and that it hereby warrants and agrees to forever defend the title to the Mortgaged Property against the claims of all persons whomsoever claiming or to claim the same or any p,art ~thereof. 2.2 So long as the Indebte::lness secured hereby or any part thereof remains unpaid, Mortgagors covenant and agree with the Trustee, the Bank and their successors and assigns as follows (for purposes of this section the "Bank" shall mean the Bank and/or any hokler of the Indebtedness, incinding any person or entity fi'om time to time holding participations in the Indebtedness): (a) Mortgagors will .make prompt payment of the Note and of all instalhnents 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 respdct to the loans or the Note or any of the Security Instruments executed by Mortgagors to the Bank will be paid immediately upcn 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 the Mortgagee therefor. (c) All of the Mortgag3d Property will be preserved and kept in good repair and efficient operating condition, and Mortgagors will cause to be made promptly all repairs, renewals, replacements, additions and improvements which are needed in connection with any part of the Mortgaged Property. The Mortgagors will do or cause to be done all things that may reasonably be necessary in accordance' wiJh 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 ff~e Mortgaged Property including but not limited to cleaning out and reconditioning of wells, rec6mpletion of wells at higher levels, drilling of substitute wells to the same formation and drilling of additional wells to conform to changed spacing regulations or to satisfy offset requirements. The Mortgagors will continuously operate or cause to be operated the Mortgaged Property in a careful ~ad efficient manner and in compliance with all 'applicable proration and conservation laws and ail Other laws, rules and regulations of all governmental bodies and agencies exercising jurisdiction. Th~ Mortgagors Will do or cause to be done such development work as may reasonably be necessary f~r the prudent and economical handling of ttie Mortgaged Property in accordance with the mosx a?proved 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 w,ll be continuously maintained, developed and operated in a good and workmanlike manner. (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 wlfich) constitute a part of the Mmtgaged Property and of any assignments or subleases thereof under which Mortgagors hold, or el?eib: predecessors in interest held, title in order to keep such leases or assignments in full forc:s and effect. Mortgagors will comply with all laws, rules and regulations applicable to such lease., 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 Oil and Gas Properties included in the Mortgaged Property against drainage of Hydrocarbons thereunder by reason of Production 9n other properties. (0 Mortgagors will 6bserve 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, M6rtgagors agree to comply fiflly with all covenants and make timely payments of all amounts payable tinder gas purchase and gas processing contracts held by Mortgagors and also to perfbrrn fully all obligations and covenants of Mortgagors as the seller under 'all Production Sale Contracts and processing contracts held by Mortgagors incident to the Mortgaged Property. · ' (g) Mortgagors will cauise all debts and liabilities of any Character for which they are responsible, including, without limitatiou; 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 construedl however, as a waiver of the lien of this Mortgage as a first and prior lien against the Mortgaged Praperty. (h) Mortgagors Will kelep or cause to be kept (either Mortgagors or, if applicable, take all reasonable steps to cause the operator of the Proven Reserves [as such term is defined m the Credit Agreement]) to be adequate!y insured by financially sound and reputable insurers Mortgagors' motor vehicles and all other property of a character usually insured by businesses engaged in the same or similar businesses (eXck ding equipment if applicable), including the Mortgaged Property. If such steps can be taken by Mertgagors, upon written demand by the Bank any insurance policies covering the Mortgaged Property sha~l be endorsed to provide for payment of losses to the Bank as its interest may appear and to provide timt such policies may not be canceled, reduced 6r affected in any manner for any reason without thirty (30)days prior notice to the Bank; and such insurance shall be against fire, casualty and any oth, erlhazards normally insured against and shall be in the amount of the full insurable value (less a re?asbnable deductible not to exceed amounts customary in the industry for similarly situated businesses and properties) of the property insured. Mortgagors shall maintain or, where applicable, take all re!hsonable steps to cause the operators of the Proven Reserves to maintain adequate insurance by.financially sound and reputable insurers, with the following coverages; insurance against damage ~to persons and property, including comprehensive general liability, worker's compensation where required by applicable law and automobile liability. (i) If the validity or prierity 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 ithereto, the Mortgagors will give written notice thereof to the Trustee and the Bank promptly and, at Mortgagors' own cost and expense, Mortgagors will diligently endeavor to cure any defect that may '~)e developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, including, but not li~mted to, the employment of counsel agreeable to the Trustee and the Bank, the prosecution or defense of litigation and the release or discharge of all adverse claims. If Borrower is in default hereunder or under the Credit Agreement, the Trustee and the Bank (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. ilefense 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 chm'acter, including, without limitation, attorncys'~ fees, shall be a dmnand obligation owing by Mortgagors, shall be a part of the Indebtedness sect~'red hereby, and shall bear interest at the Default Rate i?om the date of expenditure until paid. The !party incmTing such expenses shall be subrogated to all rights of the person receiving such pa)'me:nt. ~ (j) Except for Permitted Encumbrances as hereinafter defined, 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 inferigr and subordinate to this Mortgage) without the prior written consent of the Trustee and the Bm3k, 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 ldnd and character legally charged: le'4ed or assessed against the Mortgaged Property, or any part thereof, or against the interest of the Trustee or the Bank therein or upon the income and profits fi'om the Mortgaged Property, and,all fi'anchise 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 fitith, 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 upon a final, nonappealable detemfination, the Trustee, the Bank, 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 subrog;.ated to the rights, liens and equities thereof, and the amount so paid, together with interest at the Default Rate fi'om the date of payment, shall be added to, and shall be a part of the Indebtedness secui'ed hereby. ' (1) Except in the ordinm,y course and normal operation of Mortgagors' business, none of the buildings, improvements, or tangible personal propen'y constituting portions of the Mortgaged Property will be removed-' or ,destroyed, without first obtaining the written consent of the Trustee and the Bank; provided, however, that as to any Mortgaged Property not operated by Mortgagors, MortgagorS shall not conzent to tbe removal or destruction of any such buildings, improvements or tangible personal Property arid, provided further, that property of such nature which is, in the good faith opinion of Mortgagors c.r the operators of such properties, worn out, obsolete or no longer useful in the operation of the prope(~ty on which the same is located may be removed, salvaged, replaced or otherwise taken from the property on which the same shall be located. (tn) Subject to the provisions of Section 8.12 hereof, Mortgagors will not surrender, abandon, ass~ign, sell, convey or otl;erwise dispose of, lease or sublease, any portion of the Mortgaged Property or any of Mortgagors' ri~J~ts..; titles and/or interests therein or thereto except in compliance with the provisions of Section 6.14~ oflthe Credit Agreement. (n) Mortgagors will keels accurate books and records in accordance with sound accounting principles in which full, trueI. .and correct entries shall be promptly made as to all operations on the Mortgaged Property and. off 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 Mort'gagors shall at all times during reasonable business hours upon reasonable notice be subject to inspection by the Trustee and the Bank and their duly accredited representatives, and at such intervals as ~iay'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 fbrm as the prescribed in the Credit Agreement. (o) Mortgagors will, i£requested by the Bank, furnish the Bank any information or data possessed by Mortgagors with respect ~t0 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 obtain with respect'to the Mortgaged Property or portions thereof shall also be furnished to the Bank promptly upon request thereby. (p) Mortgagors will prdn:ptly, on request'of the Trustee or the Bank, con-ect any defect, error or omission which may be. discovered in the contents of this Mortgage or in the execution or aclmowledgment fl~ereof, and will promptly execute and deliver any and all additional instruments as may be requested from time' to time by the Trustee or the Bank 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 7 included herein. (q) Mortgagors will ~eimburse the Trustee and the Bank from and against all claims, demands, liabilities and causes of ac!tion 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 its willful miscr)ncluct In the event that tbe Bank should itself pay for reasonable expenses incurred in the way of attorneYs" fees or other similar costs in connection with the Indebtedness, such as for example, charges for ehecldng titles and handling legal matters which are permitted under the terms of the Loan Documents 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 the Trustee and the Bank for all such sums. Any such sums not timely reimbursed pursuant to the Credit Agreement shall become a part of the Inde.btedness secured by this Mortgage and shall bear interest at the Default Rate from the date advanced ur'ti] paid. (r) Mortgagors will make available to the Trustee or the Bank, or their engineers, attorneys or representatives, at any time ~i'equested pursuant to the Credit Agreement, Mortgagors' com)lete files on and ali contracts pertaining to the Mortgaged Property, including all files containing data regarding the development and oper'ation of(or the production from) the Mortgaged Property, and in the event the Trustee or the Bank should take possession of the Mortgaged Property under this Mortgage, they shall be entitled to possession of all such files and contracts or full and complete copras thereof Should this Mortgage be £oreclosed (howsoever such foreclosure may be effected), the purchaser at the foreclosure sale shall l:e entitled to all such files or full and complete copies thereof. (s) Mortgagors shall £uruish the Trustee and the Bank with abstracts of title on any of the Mortgaged Property requested by the Trustee or the Bank from time to time which have been prepared pertaining to an5' of the Mortgaged Property and shall also furnish the Trustee or the Bank with carbon or photostat ~:opies of any title opinions that Mortgagors have or may hereafter obtain affecting any part of the Mortgaged Property. (t) The principal office ar.d place of business of Mortgagors will be retained at Tulsa, Oklahoma. (n) Any time upon request and from time to time upon request, Mortgagors will execute and deliver written Notices of A:~signment to any persons or corporations owing or which may in the fi.~ture (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 minzral production fi'om 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; (iii) the operation of any part of the Mollgaged Property; or (iv) ali amounts and accounts which may accrue otherwise in connection with the Mortgaged Property or the operatit~n ~r production thereof; advising such third part/es '~:hat all such moneys and accounts have been assigned to the Bank and requinng and directing t~at.future payments thereof (including amounts then owing and unpaid) be paid to the Bank in acco;dance with the assignments set out in Article HI below; (~') Mortgagors will, pron~ptly upon request by the Trustee or the Bank, and at any time upon request, properly execute f. nd file in the filing offices as the Trustee or the Bank may request, any Financing Statement, any continuation or extension of Financing Statement, or other documer/ts desired by the Trustee or the Bank in connection with the Uniform Commercial Code in the particular state. - (w) Mortgagors will execute and deliver upon request by the Trustee or the Bank and fi'om time to time upon request, such _additional security agreements, financing statements and other assurances as may be desired by the ~Trustee or the Bank 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 ingluding, without ]imitation, items of after-acquired property. (x) Mortgagors will prc,rnptly and (insofar as not contrary to applicable law) at its own expense record and rerecord, file i~nd, 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 securi_ty interest intended to be created hereby in such manner and places and · within such times as may ')e necessary to perfect and maintain such lien and security interest and preserve and protect the rights and remedies of the Trustee and the Bank and will fi~rnish satisfactory evidence of every such recording, filing and registration to the Trustee and the Bank. 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, the Trustee or the Bank 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 the Trustee or the Bank and any money so paid by the Trustee or the Bank shall be demand obl:gations owing by Mortgagors and shall bear interest frown the date so incurred at the Default Rate tmtil 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 hdebtedness secured hereby, and the Trustee or the Bank, upon making such payment, shall be subrcgat, ed to all of the rights of the person, corporation or body politic receiving such payment. ARTICLE HI ASSIGNMENT 3.1 For the purpose of additionally securing the payment of all items of the Indebtedness and to provide an additional meant'; o:' paying the Indebtedness and as cumulative of any and all rights and remedies herein provided for, Mortgagors hereby TRANSFER, ASSIGN, GRANT, CONVEY AND SET OVER to the Bank and its successo~s m interest and the holders of the Indebtedness secured hereby, and grant to the Bank as Secured Party a security interest in, all of the following: (a) All Hydrocarbor:~s 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 me Bank from and after 12:01 o'clock am. on 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 therefi'om and Mortgagors hereby authorize and direct all purchasing companies, pipeline companies, gathering companies and others purchasing Hydrocarbons or other mineral production fi'om said properties or having in their possessiqn any production from said properties or the proceeds therefrom3 to pay and deliver to the Bank all sugh production or proceeds therefrom accruing. All parties producing, purchasing and receiving said Hydrocarbons and other minerals and the proceeds therefi'om are hereby authorized and directed to treat the Bank 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 the Bank and will be tinder no obligation to see to the application by the Bank of any such proceeds received by it. Mortgagors agree that all division orders, transfer orders, receipts and other instruments which the Bank may from time to time execute and deliver ft~r the purpose of collecting or receipting for' such production or the proceeds therefrom maybe relied upon in all respects, and that the same shall be binding upon Mortgagors and Mortgagors' successors and assigns. Mortgagors agree t( indermfify and keep and hold the Bank 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 respect, Mortgagors agree to pay all expenses, costs, charges and' reasonable attorneys' fees that may be incurred by the Bank as to any of said matters. 0a) All amounts or prcl. ceeds payable to or to become payable to Mortgagors or to which Mortgagors are or becomel, entitled on and after the Date of Commencement tinder all gas sales contracts, all oil, distillate ~or condensate sales contracts, all gas transportation contracts, all gas processing contracts and all Production Sale Conh-acts now or hereafter to become a part of the Mortgaged Property. (c) All amounts, sun"is, ievenues and income which become payable to Mortgagor son and after the Date of Commence:'nent 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 hereafte7 constituting a part of the Mortgaged Property. 3.2 Mortgagors agree to~ ex)cute such transfer orders, payment orders, division orders and other instruments as may be needed by the Bank or requested by it incident to its having all assil,med payments made directly to it at its main banking office in Tulsa, Oklahoma. Mortgagors and the Bank hereby authorize and direct all such pipeline companies, purchasers, transporters and other parties owing or to owe moneys to any of the Mortgagors and included in the Assignment made in this Article IH, upon the occurrence of the Date of Commencement, to pay such amounts directly to the Bank as follows: 9 Bank .of America, N. A. 10ti, Floor 515 SOuth Boulder Avenue Tulsa; Oklahoma 74103 Attention: Mr. Michael D. Earl Fo!' the Account of: Th5 P?ospective Investment and Trading Company, Ltd. 'and such authorization shall continue until this Mortgage is released or the Bank may, in its discretion, give such purchaser notice that it has suspended such assignment until further notice in order that Mortgagors may again receive, directly such amounts. The Bank is authorized to collect, receive and receipt for all such amounts ap.d no party making payment shall have any responsibility to see to the application of any funds paid to .the Bank but shall be fully protected in making such payment to the Bank under the assignments herein~ cc'ntained. Should the Bank bring suit against any third party for collection of any amounts or sumsinclad~d within this assignment (and the Bank shall have the right to bring any such suit) it may sue either ir~ its own name or in the name of Mortgagors. 3.3 The "Date Of Commence.,ment" as such term is used in this Article III shall be the date upon which the Bank shall at any .time l~ereafter notify the Mortgagors that the Bank desires to have proceeds of production paid to an account atithe Bank pursuant to the te~xns described herein. 3.4 If under any existing ~Production Sale Contracts, gas sales agreements or products sales contracts, other than division orders or tr~:nsfer orders, or under any gas transportation contract, any proceeds are required to be paid by the purc. haser or transporter directly to Mortgagors so that under such existing agreements payment cannot be made for such proceeds of runs to the Bank in the absence of foreclosure, then Mortgagors' interest ir ail proceeds under such sales agreement 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 b. ands (and Mortgagors, as Debtors, grant to the Bank, as Secured Party, a security interest in all Mortg.~g6rs' interest in such proceeds) and shall be immediately paid over to the Bank. ..' 3.5 So long as no default.or 'zvent of default has occun'ed and any applicable gq'ace or curative period has lapsed, all Payments received by the Bank pursuant to this Article III shall be deposited by the Bank in a collateral collection account held in the name of Pitco (for and on behalf of all the Mortgagors) and established at the Bank (the, "Collection Account") and, on the last daY of each calendar month (the "Application Date") commertcing with the first month following the Date of Commencement, the Bank shall debit the Collection Account in an amount sufficient to pay each of the following items, in the following order (if they have :'mt.already been paid): FirSt: To the payment :and satisfaction of all costs and expenses incurred by the Bank in connection with the collection of such proceeds, and the pay~nent and reimbursement of all items of the Indebtedness off'.er {han the Note; Second: To the payment o'f all unpaid accrued interest on the Note then due and payable; Third: To the payment oflall unpaid principal amounts of the Note then due and payable; and Fourth: The balance, if any, shall be deposited to Pitco's checking account at the Bank. If default or an event of default has occurred and any applicable grace or curative period has lapsed, the Bank shall be entitled to retain!all funds paid into the Collection Account and to apply the same as received to the Indebtedness ig s~lch order and to such extent as the Bank shall determine in its discretion. If the Application Date shall be ia Saturday, Sunday or a legal banking holiday generally recognized in Tulsa, Oklahoma, the amounts toi be deposited and applied by the Bank shall be deposited and applied on the last business day next preceding the Application Date that is not a Saturday, SundaY or legal bankihg holiday, but the amount to b~ applied to accrued interest on the Note shall nevertheless be the amount accrued up to, but not includirig, 1.he Application Date. 3.6 The Bank is hereby at'solved from all liability for failure to enforce collection of any proceeds so assigned and from all other responsibility in connection therewith, except the responsibility to account to the Mortgagors for funds actu:dly received. 3.7 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. 3.8 Notwithstanding the Other provisions of this Article, the Bank and, to the extent that maybe specified by the Bank at the time, any receiver appointed at the request of the Bank in judicial proceedings for the enforceme~nt 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 provisio~s of Article VI hereof and to apply all of said proceeds in accordance with Section 6.9 hereof Upon av¥ sale of the Mortgaged Property or any part thereof pursuant to this Mortgage, the Hydrocarbons thersafter produced from the properly so sold, and-the proceeds therefi'om, shall be included in such sale and shall pass to the purchaser free and clear of the assignment contained in this Article. 3.9 Mortgagors agree to iodemnify the Bank against all liabilities, actions, claims, judgments, costs, attorneys' fees or other char;es of whatsoever ldnd or nature (all hereinafter in this Section 3.9 called "claims") made against or iticua'ed by it as a consequence of the assemon, either before or after the payment in full of the lndebte:dne:;s, that it received Hydrocarbons herein assigned or the proceeds thereof claimed by third persons, and 'the~Bank shall have the right to defend against any such claims, employing attorneys therefbr, and unle~';s furnished with reasonable indemnity, it shall have the right to pay or compromise and adjust any ?uch claims, actions and judgments, and in addition to the rights to be indemnified as herein provided, all amounts paid by the Bank m compromise, satisfaction or discharge of any such claims, and all courtlcosts, attorneys' fees and other expenses of every character incurred by the Bank pursuant to the promsions o.~' this Section 3.9 shall be obligations owing by the Mortgagors and shall bear interest at the Default Rate f,'om date of expenditure until paid within thirty (30) days of the Bank's billing Borrower therefor. The ob~.igations of Mortgagors as hereinabove set forth in this Section 3.9 shall survive the foreclosure or release of this Mortgage. ARTICLE IV WAIVER AND PARTIAL RELEASE 4.1 Th~ Bank or its successor in interest to the Indebtedness may at any time and from time to time in writing: (a) Waive compliance by Mortgagor with any covenant herein made by Mortgagors to the extent and in the manner specifi,~d in such writing; (b) Consent to Mortgagors' doing any act Which hereunder it is prohibited from doing, or to Mortgagors' failing to do any act which hereunder Mortgagors are required to do to the extent and in the mmmer specified in such writing; or (c) Release any part O[the Mortgaged Property or any interest therein, or any assigned prodoction or proceeds from the lien Of this Mortgage. No such act by the Bank shall m anyway impair its rights hereunder except to the extent specifically agreed to by the Bank in such writing. 4.2 The lien and other sec?rity rights of the Bank hereunder shall not be impaired by any indulgence, including, but not limited to: (a) Any forbearance, renewal, extension or modification which the Bank may grant with respect to any Indebtedness secure~d h?reby; or (b) Any surrender, compromise, release, renewal, extension, exchange or substitution which the Bank may grant in respec ~ to any item of the Mortgaged Property or any part thereof or any interest therein; or (c) Any release or indhlgcnce granted to Mortgagors or to any endorser, guarantor or surety of any Indebtedness secured herebY. ARTICLE V PossEsSION UNTIL DEFAULT 5.1 Unless an event of default specified in Section 6.1 hereof shall occur, following the lapse of any applicable grace or curative period pertaining thereto, and the Bank, or the Trustee, or a receiver designated by the Bank shall take possession of the Mortgaged Property, the Mortgagors shall retain possession of the Mortgaged 'Property (except for the proceeds of Hydrocarbon production and other assigned income to be paid to the Bank under ga-title HI) and shall manage, operate, develop and use the same and every part thereof, su. bject, however, to all of the terrns and provisions of this Mortgage. 11 ARTICLE VI REMEDIES IN EYENT OF DEFAULT 6.1 The term "default" Or %vent of default" as used in this Mortgage shall mean the occurrence of any one or more of the Defaults Or Events of Default as described and defined in Section 8.1 of the Credit Agreement or the failure of M~rtgagors, upon written request by Bank, to pay over to the Bank within five (5) days after receipt ~:hereof any proceeds of the sale of the Hydrocarbons and Other minerals produced, saved or sold fi'om the Mortgaged Property or any other sums or proceeds accruing under contracts (existing or .futur~)iherein assigned which are paid after the Date of Commencement to Mortgagors rather than to the Bank, as provided in Article III hereof. 6.2 Following the lapse Of'any applicable grace or curative period after the occurrence of a default and continuation thereof, the ,'~Bank shall have the option at its election, of declaring, any or all Indebtedness to be immediate!y due and payable, and the liens evidenced hereby shall be subject to foreclosure, as the Bank may el~ct, in any manner provided tbr herein or provided for or required by law. 6.3 Following the lapse .of ;any applicable grace or curative period after the occurrence of a default and continuation thereof, the Trustee and the Bank, or either of them, are authorized prior or subsequent to the institution of any fo[ec.~osure 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 unsuccessfifl workover operations or additional wells or dry holes) incurred by the :Tr~)stee or the Bank in managing, operating and maintaining such properties, including, without limitation,: costs of additional drilling and reworking, whether successful or unsuccessful, shall constituti: 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 Following the lapse of ~any applicable grace or curative period after the~ occurrence of a default and if such event shall be continuing, the Trustee shall have the fight and power to sell, to the extent permit'ted by law, at one ot more sales, as an entirety or in parcels, as the Trustee may elect, the Mortgaged prOperty, at such place or places and otherwise in such manner and upon such notice as may be required bylaw, or, in the absence of any such requirement, as the Trustee may deem appropriate, and .to make conveyance to the t'~urehaser or purchasers; and Mortgagors shall specially warrant title to the Mortgaged Property to such purchaser or purchasers by, through and under Mortgagors but not otherwise. The 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 fi-om time to time thereafter may further postpone such sale by public announc'~ment 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 the Trustee may make other and successive sales until all of the Mortgaged Property be legally sold. It shall not be necessary for the Trustee to have physically pr:es~nt 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 s, lc[ sale on the date of sale, and if it should be impossible or impracticable to take actual delivery of such t:.~ro?erty, 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 Following the 'lapse of any applicable grace or curative period after occurrence of a default and if such event shall be continuing, ti~e Trustee or the Bank, 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 for th~ sale of the Mortgaged Property, or for the specific performance of any covenant Or agreement herein cc,ntained or in aid of the execution of any power herein granted, or for the appointment of a receiver pev.ding 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, Mortgag0rsl agree that after an event of default following the lapse of any .applicable grace or curative period has occurred, the Trustee or the Bank shall, as a matter of right, be entitled to the appointment of a receiver or recleivers to be designated by the Bank 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 dc he:reby consent to the appointment of such receiver or receivers. 6.6. The Bank or any other' holder or holders of any portion of the Indebtedness (including any participant or participants with the Bank in the loans) shall have the right to become the purchaser at any sale held by the Trustee or by any court, receiver or public officer, and shall have the right to credit upon the amount of the bid made tl~erefor 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 receip, t of the 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 rezeiving such receipt of the 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 :;he Mortgaged Property, whether under the power of sale herein granted and conferred or by virtue ofjudic?al proceedings, shall operate to divest all right, title, interest, claim and demand whatsoever either ct l~w or in equity, of the Mortgagors of, in and to the premises and the property sold, and shall be a .perpetual bar, both at law and inequity, against the Mortgagors, the 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 the Mortgagors, or Mortgagors' successors or assigns; nevertheless, Mortgagors, if requested by the Trustee or the Bank so to do, Shall join in the execution and delivery of all proper conveyances, assignments and transfers of the properties so sold. 6.9 The proceeds of any sale, of the Mortgaged Property or any part thereof, whether under the power of sale herein granted and conferred or by virtue of judicial proceedings, shall be applied, to the extent permitted bylaw, as follows: First: To the payment of. all reasonable expenses incurred by the Trustee or the Bank in the performance of their duties including reasonable expenses of any entry or taking of possession, of any sale, of advertisement thereof, and of conveyances, and as well, court costs, compensation of agents and employees and legal fee=:; of the Trustee and the Bank; Second: To the payment 3f t;he Note and of the other ~tems of Indebtedness with interest to the date of such payment; and Third: Any surplus thereafter remaining shall be paid to Mortgagors or Mortgagors' successors or assigns, as their interests ,shall appear. 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 row or hereafter in ibrce, in order to prevent or hinder the enforcement or '7oreclosure 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, howev:sr, ,that appraisement of the Mortgaged Property located in the State of Oklahoma is hereby expressly waived or not, at the option of the Trustee and the Bank, such option to be executed prior to or at the time the judgment is rendered in any foreclosure hereof. Mortgagors, for Mortgagors and all who may claim through or under Mortgagors, waive, to the extent that Mortgagors may lawfully do so, any and dl right to have the Mortgaged Property marshaled upon any foreclosure of the lien hereof, or sold in ir~verse order of alienation, and agree that the Trustee or any court having jurisdiction to foreclose suct lien may sell the Mortgaged Property as an entirety. If any law in this paragraph referred to and now :n 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 lhe agreement herein contained or to preclude the operation or application of the provisions of this paragraph. 6.11 If Mortgagors are ~n default hereunder, all costs and expenses (including attorneys' fees) incurred by the Trustee or the Bank in protecting and enforcing the rights of the Trustee and the Batik hereunder, shall constitute a demand obligation owing by Mortgagors to the Trustee and the Bank and shall draw interest at the De:t'ault Rate, all of which shall be added to and constitute a portion of the Indebtedness. 6.12 Upon the occurrence of an Event of Default and in addition to all other rights herein conferred on the Trustee and the Bank, .the Trustee or the Bank (or any person, finn or corporation designated by the Bank) 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 therefi-om, 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. The Trustee or the Bank, or any person, firm or corporation designated by thee Trustee or the Bank, 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 :ight to collect, receive and receipt for all Hydrocarbons produced and sold -., .-524 from said properties, to make,repairs, purchase machinery and equipment, conduct workover operations, drill additional wells, and to :¢~xercise every power, right and privilege of Mortgagors with respect to the Mortgaged Property, the coSt:~ and expenses of which shall be added to and constitute a portion of the Indebtedness and shall bear ir',tei'est 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 With respect to all of the Mortgaged Property located in the State .of Oklahoma, Mortgagors hereby confer on the Bank thc( 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 OS. Supp. 1991, §§ 43-47, as the same may be hereafter amended. With respect to all of the Mortgaged Property located in the State rffWyoming, Mortgagors hereby confer on the Bank the power to sell such Mortgaged Property in the rammer provided in 34 Wyo. Stat Sections 4-101, et seq., as the same may be hereafter amended. To the eXtent this instrument covers property located in the State of New Mexico, pursuant to § 39-5-19, NMS,4. (1978), the redemption period for the Mortgaged Property therein located is shortened to one (1) month.i The Bank, at its option, may either exercise the power of sale or foreclose this Mortgage as provided by law. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A 'POWER OF SALE MAY ALLOW THE, BANK xCMORTGAGEE) TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING! TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGORS UNDER THIS MORTGAGE. 6.14 The following provisions apply to real property and fixtures located in the State of Montana: Upon the occurrence of an E6~znt,, of Default, Trustee shall have the right and power to sell, to the extent pelTnitted by law, at one or rnori: sales, as an entirety or in parcels, as it may elect, all of Mortgagors' estate, right, title and interest: therein, all at such places and otherwise in such manner and upon such notice as may be required b). Title 71, Chapter 1, Parts 1 and 2, MOntana Code Annotated, or other applicable law, or, in the abs~mce of such requirement, as Trustee may deem appropriate and to make conveyance to the purchaser ~r purchasers. Trustee may postpone the sale of all or any portion of such property by public armouncement at the time and place of such sale, and from time to time therea~ler may further postpone such sale by pablic announcement made at the time and place of sale fixed by the preceding postponement. ' 6.15 The following provi;~i0ns apply to real property and fixtures located in the State of North Dakota: (a) Upon the occurrence:: of an Event of Default, Mortgagors hereby aUthorize and empower Trustee to foreclose this Mortgage by judicial proceedings or to sell the Mortg"aged Property at public auction and convey the same :to the purchaser in fee Simple in accordance with the statute, and outof the moneys arising from such sale, to retain an amount equal to the sum of the obligations secured hereby plus all interest thereon including, without limitation, all legal costs and charges of such foreclosure and the maximum attorneys' fees permitted by law, which costs, charges and fees Mortgagors herein agree re. pay. (b) Mortgagors and Bank'each agree that the provisions of the Short-Term Mortgage Redemption Act shall govern this Mortgage. 6.16 Any sale by the Trustze 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 df propm~y maybe sold singly, or together, or in lots or parcels, and i~ such order, as to the Trustee m.'ayi seem expedient. The items of property shall be sold at the door of the County Courthouse in the Comity~in which the sale is held, and between the hours of 10:00 o'clock in the forenoon and 4:00 o'clock in ~he afternoon of the first Tuesday in any month,' after haVing given notice (including notice to Mortgagor) c!f such sale in accordance with the applicable statute of Texas now in force governing sales of real esta'te under powers of sale conferred by deed of trust. If such applicable statute hereafter should be amcndzd to provide a different notice of sale apPlicable to sales of real estate under power of sale in a deed c~f trust, then the Trustee may, in its sole discretion, give either the notice of sale now provided to be giveri or that prescribed by the amended statute. The Trustee (or a person'or persons selected by the Trustee) shall give notice of each such proposed sale by posting written notice of the time, place and terms of s~:le 7or at least twenty-one (21) consecutive days preceding the date of the sale at the Courthouse door of th'.e County in which the sale is to be made. In addition to the foregoing notice or notices to be posted l~y t[ie Trustee (or a person or persons selected by the Trustee), the holder of the indebtedness to which the i~oWer 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 Ceb';or at the most recent address as shown by the records of the holder of such indebtedness, in a post offic~ o? official depository under the care and custody of the United States Postal Service. The affidavit of ary person having knowledge of the facts to the effect that such service was completed shall be primafiJce zvidence of the fact of service. In this respect and to the full extent it may legally do so, Mortgagors also exPressly covenant, stipulate and agree that: (a) the address of Mortgagors set out in the introduction tc 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 such indebtedness as shown by the records of the holders of such indebtedness, provided such address maybe changed from time to time only by express written notice of ct!ange thereof signed by all debtors obligated to pay such indebtedness and actually delivered to and received by the holder of such 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 debtor,, obligated to pay such 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 expi'ess written notice of such change signed by all debtors obligated to pay such 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 e~otices 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 fi~ture amendment to such statutes, the 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 reqmrement for such particular notice may be stricken from or modified in this instrument in conformity with such an~endment, at the election of the Trustee. The manner herein prescribed for serving or giving any notice:, oI:her than that to be posted or caused to be posted by the 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 mcntlis as the Trustee may deem expedient. The Trustee, his successor or substitute, may appoint or d:legate any one or more persons as agent tO perform any act or acts necessaD, or incident to any and each such sale, including the posting of notices and the conduct of sale, but the Trustee shall execute any and ~:'.11 deeds as Trustee. In the event of any and each such sale, the Trustee is authorized to execute and d~liv:er to the purchaser or purchasers of the property sold good and sufficient deeds and/or other instrumehts 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 Mortgagon';' sfmcessors in interest, as to the property so sold. 6.17 Notwithstanding any other provisions of this Mortgage, any lease of oil, gas or other nfinerals covered by this Mortgage which are subject to fl~e 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 tinder 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. ARTICLE VIi CONCERNING THE TRUSTEE 7.1 The Bank may at any time by instrument in writing remove the Trustee or any successor or substitute n'ustee without cause, and such power of removal may be exercised as frequently and at such times as the Bank deems proper. In case of death, removal, resignation, inability, refusal or failure of the Trustee herein named to act, a successor or substitute trustee may be appointed by the Bank by.instrument in uniting but without any other formality, and each such successor or substitute trustee appoinfed 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 fi'om time to t~me. By virtue of the execution and delivery of this Mortgage, the Bank hereby appoints PRLAP, Inc. as the successor Ti-ustee for all purposes. ARTICLE ~ 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 'the Bank or the 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 fl~e final maturity of the Note described in Article I above, then the maturity of such items shall be contemporaneous with the final 15 526 maturity of the Note described in Article I, howsoever such matur/ty may occur. 8.2 This instrument shall be'deemed to be and may be enforced from time to time as an assignment, chattel mortgage, contract, deed of trust, financing statement, open-end real estate mortgage, or security agreement, and from time t~ t!me as any one or more thereof. 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, arid any copy of this instnm~ent 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 fight: option, power and remedy given herein to the Trustee or the Bank shall be cumulative and not exclusive; and each and every right, power and remedy whether specifically herein given or otherwise existing male be exercised from time to time and as often and in such order as may be deemed expedient by the Trustee or the Bank, and the exercise, or the beginning of the exercise, of any such fight, option, power or remedy shall not be deemed a waiver of the fight to exercise, at the same time or thereafter, any other right, option, power or remedy. No delay or omission by the Trustee or the Bank in the exercise of any fight, option, power or remedy shall impair any such right, option, power or remedy then or thereafter existing. 8.4 Should the Trustee m' the Bank take possession of the Mortgaged Property upon the happemng of an event of default, or shoul~l a receiver be appointed at the instance of the Trustee or the Bank to take possession of the Mortgaged Property, the Trustee, Bank or the receiver, as the case may be, shall also have the right to take possession of all automobiles, tracks, 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 except only for the Exempt Assets described and defined in the Credit Agreement. During any period of time in which operations of the Mortgaged Property are conducted by the Trustee, the Bank or a rt:ceiver or designated representative of the Trustee or the Bank, such operations may, in the discreti6n of the Bank, be conducted in the name of Mortgagors and all reports required by laTM to be made to governmental agencies or attthofities 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 maybe owing at any time by Mortgagors shall be payable at the main banking office of the Bank at Bank of America Center, 515 South Boulder Avenue, Tulsa, Oklahoma, 74103, 8.6 No provision of this Mortgage or of the Note shall require the payment or permit the collection of interest in excess Of the maximum permitted by law. If any excess of interest in such respect is herein or in the Note provided for, or shall be adjudicated to be so provided for herein or in the Note, Mortgagors shall not be obligated to pay suc.h interest in excess office amount permitted by law. 8.7 The terms, provisions, covenants and conditions hereof shall be binding upon Mortgagors and the successors and assigns of Mo~[agors, and shall inure to the benefit of the Trustee and the Bank, 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 o f such party to any part of the Mortgaged Property. It is also expressly .recognized and agreed that whenever the term "Bank' is used it is intended to be the same as the term ."Mol{tgagee," and that the use of either of said terms is intended to include any successor holder of the Ind:btedness secured by this Mortgage to whom the Indebtedness may be assigned or transferred although until written notice is delivered that the Bank has executed an assignment of said Indebtedness, the Mortgagors shall be entitled to regard and shall treat the Bank as the holder of the Indebtedness secured. T~,rn~s of the masculine gender used herein shall include the feminine and neuter genders, and terms of'l~e'neuter gender shall include all genders. 8.8 If any provision hereof or of the Note ~s invalid or unenforceable in any jurisdiction, the otfier provisions hereof or of the Note shall remain in fi.~ll force and effect in such jurisdiction, and the remaining provisions hereof shall be liberally construed in favor of the Trustee and the Bank in order to effectuate the provisions hereof; and the invalidity of any provision hereof in any jurisdiction shall not affect the validity or enforceabi!ity 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 ihis Mortgage are inserted for convenience and shall not be considered a part of this instrument or use0' iff its interpretation. 8.10 Without limiting any of the provisions of this instrument, Mortgagors, as "Debtors," expressly GRANT unto the Trustee and tk.e Bank, as "Secured Party," a security interest in. all of the Mortgaged Property .(now or hereafter ekisi:ing including all proceeds and products hereof) which ~naybe subject to the Uniform Commercial Code :as the same may be in force and effect in one or more of the states in which the Mortgaged Property. or a portion thereof is situated, and Mortgagors grant unto the Trustee and the Bank all Accounts, Contract. RightS, General Intangibles and Proceeds (as defined in Article 9 of the Uniform Commercial Code) rel~'ting to or arising out of the sale or other disposition of oil, gas and other Hydrocarbons from time to ti:ne.,produced fi'om the Mortgaged Property, and covenant and agree with the Trustee and the Banlq as such. Secured Party, that: (a) In addition to any other remedies granted in this instrmnent to the Trustee or the Bank, the Trustee or the Bank, as £ec.~red Party, may, in the event of any default (following the lapse of any applicable grace or curative period), proceed under said Uniform Commercial Code as to all or any part of the personal prope, rty (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 l~ower 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 said Uniform Commercial Co;Je after default by the Debtors (following the lapse of any applicable grace or curative period), and t/~ a!~ply the proceeds thereof toward payment of any costs and expenses and attorneys' fees and legal expenses thereby incurred by the Secured Party, and toward payment of the Debtors' obligations sec-ared hereby including the Note and all other Indebtedness described in Article I above in such order or manner as the Secured Party may elect; (b) The rights of the Secured Party in the event of default (following the lapse of any applicable grace or curative perioc) 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 the Secured Party, at its option and in its discretion, to repair, refi~rbish or otherwise prepare the Collateral for sale, lease or other use or disposition as herein authori:,~ed; (c) To the extent permilted by law, Debtors agree that if any notice of sale is mailed, postage prepaid, to Debtors at the acidress 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) The Secured Party is expressly granted the right, in the event of default (following the lapse of any applicable grace or curative period), 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 the Debtors' obligations or to apply it on the principal and interest or other amounts owing on any of the Debtors' obligations, ,whether or not then due, in such order or manner as the Secured Paltry 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 the Secured Party incident to sale, trm~sff, r, assigmment, 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 the Secured Party or of any fact, condition or thirg 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; (t) The Secured Part', may require Debtors to assemble any movable Collateral and make it available to the Secured Pm~o' at a place to be designated by the Secured Party that is reasonably convenient to both parties; all expenses of retaking, holding, preparing for sale, lease or other use or disposition, selling, lea'si~g or otherwise using or disposing of the Collateral and the like which are incurred or paid by the Secured Party as authorized or pern~itted hereunder, including also hll 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 resulting from the sale thereof at the wellhead or minehead, and the Debtors have an interest of' record in all such real estate. The recording of this Mortgage in the applicable real estate mortgage recording records of the County Clerks or Registrar of Deeds of the various Counties in which any Mortgaged Property is located shall constitute the recording of this Mortgage as a Financing Statement in each such County in compliance with the Uniform Commercial Code in effect in such State.. 8.11 The term ,Permitted Eacumbrances" as used in'Sections 2 1 and 2.2 of this Mortgage shall 17 include and consist of the foIiowing: (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, the Bank shall have the right, if it ~lects, to require Mortgagors to deposit with it 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 proceedipgs tbr the enforcement thereof or which are being contested in good faith, after notice to the Bank and with such deposit or security as the Bank 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 p~,,id 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 an&Px;ocessing 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 goven:mental agency of record; and (v) rmnor title defects to the extent that they do not adversely affect ff.e value of the Mortgaged Property as collateral for the Indebtedness and do not impair the Mortgagors'~rights to receive proceeds of production with respect to said Mortgaged Property. The reference to and use of the term "Permitted Encumbrances" in the Mortgage shall in no manner indicate any aclmowledgmem of any such claim, lien or interest by the Trustee or the Bank, nor shall such use or reference subordinate troy interest of the Trustee or the Bank under this Mortgage or the Note to the holder of any such claim, lien or interest. 8.12 h~ order to facilitate Mortgagors' handling of certain of its routine matters pertaining to its oil and gas leases and the operation thereof, the Trustee and the Bank agree that unless and until they shall give notice to Mortgagors to thC contrary after a default has occun'ed, the Trustee and the Bank 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 l.eases; (b) abandon wells which have ceased to be productive m commercial quantities and incident to such abandonment to dis[os,~ of the Operating Equipment in or on said well; (c) execute Production Sale Contracts so long as such contracts recognize the right of the Bank to collect the proceeds thereOf pursuant to the Assignment contained in Article 1/1 hereof; (d) execute farm-out agreements and assignments without the joinder of the Bank; and (e) lease and/or sell in accordance with the tmTns and provismns of the Credit Agremnent, including without limitation, Section 6.14 thereof. 8.13 The Bank or the Trustee may at anytime and from time to time release any part of the Mortgaged Property from the lien and secu~ty interest created hereby and any such release may be made without notice to the Mortgagors and without affecting the personal liability of the Mortgagors or of any other person for the payment of the 2ndebtedness hereby secured. No release of any part of the Mortgaged Property shall in anywise alter, vary or diminish the force or effect of this instrument on the balance of the Mortgaged Property. 8.14 Notwithstanding the foregoing warranties and covenants of Mortgagors concerning certmn activities and responsibilities thereof pertaining to the Mortgaged Property, insofar as Mortgaged Property for which neither Mortgagor5 nor any affiliate or subsidiary thereof are the operator (i.e. Mortgagors' interests therein is as a non-operator thereof) are concerned, Mortgagors' obligations and duties hereunder shall be to diligently exercise its best efforts to cause the operator to comply with such warranties and covenants imposed on Mortgagors by virtue of this Mortgage. Furthermore, in the event of a conflict between Mortgagors' obligations and duties imposed pursuant to the Credit Agreement and this Mortgage, the Credit Agreemmt shall be deemed controlling to the fullest extent permitted by applicable law. ,. ' 8.15 Any notice, request, ',demand, report or other instrument which may be required or pernfitted t6 be given to or furnished to Or served upon any party hereto o;/- other person succeeding to any interest of a pa/t)' hereto shall be deemed ~uf,'ficiently given or furnished or served if in writing and delivered to such 529 party or person or to an officer cf such party or person or deposited ill the United States mail in a sealed envelope with postage prepaid, addressed, if to the Mortgagors, to the Mortgagors' address set forth in the first paragraph of this instrm~ent, and if to the Trustee or the Bank, 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 writlen notice to tlie party or person giving such notice or furnishing such report or making such reqnest or denmr, d. 8.16 This instrnment 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 connty in which such counterpart is to be recorded may have been omitted. Counterparts with colnptete Exhibit A are being delivered to the Trustee and the Bank. IN WITNESS WHEREOF, this instrument is executed as of the 31 '' day of October, 2003, which shall be deemed the date hereof whether this instrument is actually signed on said date or before or after said date. THE PROSPECTIVE INVESTMENT AND TIL-XDING COIvlPANY, LTD., an Oklahon)a']corporation Adam C. Singer, President PITCO INVESTMENTS, LTD., a Texas limited partnership By: The Pitco Company, an Oklahoma corporation, doing business m Texas as Pitco Enterprises,~m., as General Parmer Adam C. Singer, President 2162 East 61 st Street P.O. Box 702320 Tulsa, Oklahoma 74170 "Mortgagors, Grantors and Debtors" TRUSTEE ~---~lichael D. Earl, Senior Vice President 10"~ Floor 515 South Boulder Avenue Tulsa, Oklahoma 74103 "Mortgagee, Noteholder and Secured Party" ' 19 STATE OF OKLAHOMA COUNTY OF TULSA SS. · - 5, 0 The foregoing instrument was acknowledged before me this 31 st day of October, 2003, by Adam C. Singer, as President of TI;dE PROSPECTIVE INVESTMENT AND TRADING COMPANY, LTD., an Oklahoma corporation, for and on behalf of the corporation. My Commission Expires: WITNESS my hand a.'ad Official seal the day and year above written. N~7'P ublic JANET E. SHOOK2 NOTARY PU'BLIC State or Oklahoma, Tulsa County Commission No: 02017511 Commission Expires: Dec, I. 2006 [SEAL] STATE OF OKLAHOMA SS. COUNTY OF TULSA The foregoing instrument was acknowledged before me this 31 st day of October, 2003, by Adam C. Singer, as President of The Pitco Company, an Oklahoma corporation, as general partner of Pitco InVestments, Ltd., a Texas li~ted partnership, for and on behalf of the limited parmership. WITNESS my hand andI official s.eal the day and year above written. My Comnfission Expires: [SEAL] JANET E. SHOOK, NOTARY PUBLIC Stale o1' Oklahoma, Tulsa County Commission No: 02017511 Commission Expires: _Dec. 1,200~66 STATE OF COUNTY SS. The foregoing instrument was aclmowledged before me this 31 st day of October, 2003, by PRLAP, INC. , as President of PRLAP, 1NC., a corporation, for and on behalf of the corporation. WITNESS my hand and official seal the day and year : a,b~ve written. Notary My Commission Expires: [SEAL] STATE OF OKLAHOMA coUNTY OF TULSA JANET P.LYONS Notary Public, Staire of Oklahoma Tulsa County My Commission Expires November 21,2005 Commission ¢t 010'17967 SS,. The foregoing instmmmt was acknowledged before me this 31 st day of October, 2003, by MICHAEL D. EARL, as Semor \ ~ce President of BANK OF AMERICA, N. A.. WITNESS my hand ard official seal the day and year above written. Notar~;~dblic . My Commission Expires: [SEAL] JANET P.LYONS Notary Public, State of Oklahoma Tulsa County My Commission Expires November 21,2005 Commission # 01017967 20 Lands ir~cluded h~ the lease in Lincoln County, Wyoming T. 20 N., R. 119 W., 6m Prin Mer Sec 5: Lots 5, 6= 7, 8: All 17: All T. 21 N., 1L 119 W. Sec 24: All 25: All T. 20N., R. l12W., 6a~Prin Mer. Section 28: EV2E~, NW¼NE¼, NE¼NW¼ 532 L£ASE NUMB£R: LESSOR: LESSEE: LEASE DATE: BOOK; PAGE~ LEGAL DESCRIPTION: LF-ASE NUMBER: LESSOR: LESSEE; LEASE DATE: BOOK~ PAGE: LEGAL DESCRIPTION: LEASE NUMBER: LESSOR: LESSEE~ LEASE DATE: BOOK: PAGE: LEGAL DESCRIPTION: LEASE NUMBER: LESSOR: LESSEE: LEASE DATE: BOOKI PAGE: LEGAL DESCRIPTION: LEASE NUMBER: LESSOR: LESSEE: LEASE'DATE; BOOK~ PAGEI LEGAL DESCRIPTION: 100]308 USA w-112077 PAUl, ~ RU'I*FE~ o8/o~/a3 206 1001583 STA'rE OF WY 82-806 LEONARD J OL'iEISER 10/02/82 100158~ USA w-41142 JAS. O. BREE~IE. JR. 12/01/7] 1002687 USA w-54470 PACIFIC TRANSMISSION SUPPLY CO 05/01/76 157 427 1002940 PETERNAL OTTO D ANR PRODUCTION CORP 01/15/9] £XHIBIT 'A' LINCOLN COUtlTY. WYOMING EXIIIBIT 'A' - PAGE I