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HomeMy WebLinkAboutContract 33219 CITY SECRETARY CONTRACT NO.�- ROAD REPAIR AGREEMENT BETWEEN THE CITY OF FORT WORTH AND 0 6, K � t-5 5i�l f,1 £ ra f..I L L C This Road Repair Agreement, (Agreement), is made and entered into on this thkL_ day of�� 2004 by and between the City of Fort Worth, Texas ("City"), a home rule municipal c rporation of the State of Texas, locate ithinn T ant; Denton, Wise Counties, Texas (Hereinafter referred to as the "City") and (� f115 hr ,N t etc J ("Operator") for the repair of certain streets and/or roadways within the City otFoA Wort , Texas as more fully described herein. WHEREAS, Operator is in the business of drilling gas wells and, in connection therewith, shall be engaged iA drilling and production activities on property known generally as J 1� LBGSe , which abuts, is adjacent to, and/or is accessed by roadways within the City of Fort Worth; and WHEREAS, use of the roadways by the Operator for the purpose of performing the activities described hereinabove may cause damage to the roadways; and WHEREAS,the City and Operator,for the mutual consideration hereinafter stated, desire to enter into this Agreement for Operator to repair said roadways for the duration of the term of this Agreement in consideration of Operator's use of said roadways for the purpose of the activities described hereinabove; IT IS NOW THEREFORE AGREED THAT: ARTICLE 1. REPAIR OBLIGATION 1. Operator shall repair damages caused by Operator or its contractors, subcontractors, employees, and agents, excluding ordinary wear and tear, if any, to roadways that abut the above- described property being used by Operator for the drilling and production of gas wells pursuant to a Gas Well Permit issued to Operator. The repair obligation shall continue even if the ('Jas Well Permit is amended to allow for the drilling of additional gas wells. This obligation shall continue during the term of this Agreement, and Operator shall, prior to the termination of this Agreement, as provided herein, repair such damages to such roadways, excluding ordinary wear and tear, if any, to the condition in which such roadways existed prior to the execution of this Agreement. Operator shall make a videotape of such roadways prior to the start of Operator drilling and operation of its gas wells and shall provide a copy of the videotape to the Director of Transportation and Public Works. Operator shall notify the Director of Transportation and Public Works when drilling or fracing operations are complete so that the Director of Transportation and Public Works can determine if repairs are required. 2. In connection with its obligation to repair said roadways, Operator shall use materials of the same or better quality than those utilized to surface and/or repair the roadways prior to execution of this Agreement and in accordance with the current standards specifications of the City. Deviation from the materials described herein shall not be permitted without the prior written consent of the Director of Transportation and Public Works. Repairs shall be completed in accordance with standard engineering practices acceptable to the City. 3. Operator shall repair the damage to the roadways at its sole cost and expense. 4. During the term of this Agreement, Operator shall periodically inspect the roadways during drilling, fracture stimulation or reworking of the gas well to determine whether or not any damage has occurred as a result of Operator's activities. Immediately upon discovering the existence of any such damage to the roadways, Operator shall undertake to repair and/or remedy same. Upon discovery of damage by the Operator, the Operator will have 48 hours to contact the Director of Transportation and Public Works to work out a schedule of repairs. Repairs shall take place within 30 days or immediately if the damage affects the immediate health and safety of individuals. ARTICLE 2. TERM OF AGREEMENT This Agreement shall commence upon the date indicated above and shall continue in full force and effect until Operator has completed and/or permanently discontinued the activities upon the roadways, as described hereinabove. ARTICLE 3. INSURANCE AND INDEMNITY The Operator shall provide or cause to be provided the insurance described below for each well unless a Gas Well Permit has been issued wherein such insurance has been provided for the issuance of the Gas Well Permit under the terms and conditions described in the Fort Worth "Gas Drilling and Production" Ordinance and such insurance to continue until the well is abandoned and the site restored. In addition to the bond or letter of credit required pursuant to this Agreement and the Fort Worth "Gas Drilling and Production" ordinance, the Operator shall carry a policy or policies of insurance issued by an insurance company or companies authorized to do business in Texas. In the event such insurance policy or policies are cancelled, the Gas Well Pen-nit shall be suspended on such date of cancellation and the Operator's right to operate under such Gas Well Permit shall immediately cease until the Operator files additional insurance as provided herein. I. General Requirements applicable to all policies. a. The City, its officials, employees, agents and officers shall be endorsed as an "Additional Insured" to all policies except Employers Liability coverage under the Operator's Workers Compensation policy. b. All policies shall be written on an occurrence basis except for Environmental Pollution Liability (Seepage and Pollution coverage) and Excess or Umbrella Liability, which may be on a claims-made basis. Page 2 f C. All policies shall be written by an insurer with an A-: VIII or better rating by the most current version of the A. M. Best Key Rating Guide or with such other financially sound insurance carriers acceptable to the City. d. Deductibles shall be listed on the Certificate of Insurance and shall be on a "per occurrence"basis unless otherwise stipulated herein. e. Certificates of Insurance shall be delivered to the City of Fort Worth, Development Department, 1000 Throckmorton Street, Fort worth, Texas 76102, evidencing all the required coverages, including endorsements, prior to the issuance of a Gas Well Permit. f. All policies shall be endorsed with a waiver of subrogation providing rights of recovery in favor of the City. g. Any failure on part of the City to request required insurance documentation shall not constitute a waiver of the insurance requirement specified herein. h. Each policy shall be endorsed to provide the City a ininimum thirty-day notice of cancellation, non-renewal, and/or material change in policy terms or coverage. A ten days notice shall be acceptable in the event of non-payment of premium. i. During the term of the Gas Well Permit, the Operator shall report, in a timely manner, to the Gas Inspector any known loss occurrence which could give rise to a liability claim or lawsuit or which could result in a property loss. j. Upon request, certified copies of all insurance policies shall be furnished to the City. 2.. Standard Commercial General Liability Policy. This coverage must include premises, operations, blowout or explosion, products, completed operations, sudden and accidental pollution, blanket contractual liability, underground resources damage, broad form property damage, independent contractors protective liability and personal injury. This coverage shall be a minimum Combined Single Limit of$1,000,000 per occurrence for Bodily Injury and Property Damage. 3. Excess or Umbrella Liability $ 5,000,000 Excess, if the Operator has a stand-alone Environmental Pollution Liability (EPL)policy. $10,000,000 Excess, if the Operator does not have a stand-alone EPL policy. Coverage must include an endorsement for sudden or accidental. pollution. If Seepage and Pollution coverage is written on a "claims made" basis, the Operator must maintain continuous coverage and purchase Extended Coverage Period Insurance when necessary. 4. Workers Compensation and Employers Liability Insurance a. Workers Compensation benefits shall be'Texas Statutory Limits. b. Employers Liability shall be a minimum of$500,000 per accident. c. Such coverage shall include a waiver of subrogation in favor of the City and provide coverage in accordance with applicable State and Federal laws. 5. Automobile Liability Insurance a. Combined Single Limit of $1,000,000 per occurrence for Bodily Injury and Property Damage. b. Coverage must include all owned, hired and not-owned automobiles. Page 3 6. Certificates of Insurance a. The company must be admitted or approved to do business in the State of Texas, unless the coverage is written by a Surplus.Lines insurer. b. The insurance set forth by the insurance company must be underwritten on forms that have been approved by the Texas State Board of Insurance or ISO, or an equivalent policy form acceptable to the City. c. Sets forth all endorsements and insurance coverage according to requirements and instructions contained herein. d. Shall specifically set forth the notice of cancellation, termination, or change in coverage provisions to the City. All policies shall be endorsed to read "THIS POLICY WILL NOT BE CANCELLED OR NON-RENEWED WITHOUT 30 DAYS ADVANCED WRITTEN NOTICE TO THE OWNER AND THE CITY EXCEPT WHEN THIS POLICY IS BEING CANCELLED FOR NONPAYMENT OF PREMIUM, IN WHICH CASE 10 DAYS ADVANCE WRITTEN NOTICE IS REQUIRED". e. Original endorsements affecting coverage required by this section shall be furnished with the certificates of insurance. 7. The cancellation of any insurance for the sole purpose of the repair of roadways will not release the obligation of the Operator to meet all requirements of insurance and bonding under the Fort Worth"Gas Drilling and Production" Ordinance. 8. Operator shall and hereby does indemnify, defend and save harmless the City, its officers, agents and employees from all suits, actions or claims of any character, name and description brought for or on account of any injuries or damages received as sustained by any person, persons or property on account of the operations of the Operator, its agents, employees, contractors or subcontractors; or on account of any negligent act of fault of the Operator, its agents, employees, contractors or subcontractors in connection with the obligations under this Road Repair Agreement; and shall pay any judgment, with costs, which may be obtained against the City growing out of such injury or damage. ARTICLE 4. PERFORMANCE BONDS I. Operator shall provide a performance bond, unless a performance bond has been provided for the issuance of a Gas Well Permit under the terms and conditions described in Fort Worth "Gas Drilling and Production" ordinance, in an amount not less than the amount necessary to repair the roadways, as determined by the City Director of Transportation and Public Works. 2. Prior to the beginning of any activity pursuant to the issuance of a Gas Well Permit, unless a performance bond has been provided for the issuance of a Gas Well Permit under the terms and conditions described in the Fort Worth "Gas Drilling and Production" Ordinance, Operator shall provide the Gas Inspector with a security instrument in the form of a bond or an irrevocable letter of credit as follows: Page 4 q a. Bond. A bond shall be executed by a reliable bonding or insurance institution authorized to do business in Texas, acceptable to the City. The bond shall become effective on or before the date the Gas Well Permit is issued and shall remain in force and effect for at least a period of six (6) months after the expiration of the Gas Well Permit term or until the well is plugged and abandoned and the site is restored, whichever occurs first. The Operator shall be listed as principal and the instrument shall run to the City, as obligee, and shall be conditioned that the Operator will comply with the terms and regulations of this Ordinance and the City. The original bond shall be submitted to the Director of Transportation and Public Works with a copy of the same provided to the City Secretary and the Gas Inspector. b. Letter of Credit. A letter of credit shall be issued by a reliable bank authorized to do business in Texas and shall become effective on or before the date the Gas Well Permit is issued. The letter of credit shall remain in force and effect for at least a period of six (6) months after the expiration of the Gas Well Permit tern. The City shall be authorized to draw upon such letter of credit to recover any fines or penalties assessed under this ordinance. Evidence of the execution of a letter of credit shall be submitted to the Director of Transportation and Public Works submitting an original signed letter of credit from the banking institution, with a copy of the same provided to the City Secretary and the Gas Inspector. If the Letter of Credit is for t'me period less than the life of the well as required by Ordinance Number 14880, _ agrees to either renew the Letter of Credit or replace the Letter of Credit with a bond in the amount required by the City of Fort Worth Ordinance Number 14 80, on or before 45 days prior to the expiration date of the Letter of Credit. If ' fails to deliver to the City of Fort Worth either the renewal Letter of Credit or replacement bond in the appropriate amount on or before 45 days prior to the expiration date of the Letter of Credit, the City of Fort Worth may draw the entire face amount ot tJ attached Letter of Credit to be held by the City of Fort Worth as security for 's performance of its obligations under Ordinance Number 14880. C. Whenever the Gas Inspector or the Director of Transportation and Public Works Department finds that a default has occurred in the performance of any requirement or condition imposed by this Agreement, a written notice shall be given to Operator. Such notice shall specify the work to be done, the estimated cost and the period of time deemed by the Gas Inspector or the Director of Transportation and Public works Department to be reasonably necessary for the completion of such work. After receipt of such notice, the Operator shall, within the time therein specified, either cause or require the work to be performed, or failing to do so, shall pay over to the City one hundred twenty-five percent (125%) of the estimated cost of doing the work as set forth in the notice. d. The City shall be authorized to draw against any irrevocable letter of credit or bond to recover such amount due from Operator. Upon receipt of such monies, the City shall proceed by such mode as deemed convenient to cause the required work to be performed and completed, but no liability shall be incurred other than for the expenditure of said sum in hand.. e. In the event Operator does not cause the work to be performed and fails or refuses to pay over to the City the estimated cost of the work to be done as set forth irl the notice, or Page 5 �': r, the issuer of the security instrument refuses to honor any draft by the City against the applicable irrevocable letter of credit or bond the City may proceed to obtain compliance and abate the default by way of civil action against Operator, or by criminal action against the Operator,or by both such methods. f. The cancellation of any bond. or letter of credit for the sole purpose of the repair of roadways will not release the obligation of the Operator to meet all requirements of insurance and bonding under the Fort Worth "Gas Drilling and Production" Ordinance. Any bond required by the Fort Worth "Gas Drilling and Production" Ordinance shall stay in full force and effect until the terms and conditions set out in the Ordinance are met. 3. If the cost of the completing the repair is an amount. of $15,000 or less, as determined by the Director of Transportation and Public Works, cash in the amount necessary to complete.the repairs, as determined by the Director of Transportation and Public Works, may be deposited with a bank or escrow agent pursuant to an escrow agreement acceptable and approved by the City ensuring completion of the repair. ARTICLE 5 MISCELLANEOUS PROVISIONS 1. Operator understands and agrees that Operator, its employees, servants, agents, and representatives shall at no time represent themselves to be employees, servants, agents, and/or representatives of the City. The City shall not have any control over the means or methods by which Operator shall perform its obligations hereunder. Operator shall furnish all equipment and materials necessary to perform hereunder and shall at all times be acting as an independent Operator. 2. By entering into this Agreement, the City does not waive, nor shall it be deemed to waive, any immunity or defense that would otherwise be available to it against claims arising by third parties. 3. This Agreement represents the entire agreement between Operator and City for repair of roadways and supersedes all prior negotiations, representations, and/or agreements, either written or oral. This Agreement may be amended only by written instrument signed by the governing body of the City or those authorized to sign on behalf of the City's governing body. ARTICLE 6. FORCE MAJEURE Events of Force Majeure shall mean any contingency or cause beyond the reasonable control of a party including, without limitation, acts of God or the public enemy, war, riot, civil conunotion, insurrection, government or de facto government action (unless caused by acts or omissions of the party), fires, explosions, rain or other weather delays, floods, strikes, slowdowns or work stoppages. Page 6 ARTICLE 7. ASSIGNABILITY/CONSENT Except as otherwise provided herein, or except as may be hereafter determined by the parties, no party to this Agreement may sell, assign,or transfer its interest in this Agreement, or any of its right, duties, or obligations hereunder, without the prior written consent of the other party. Whenever the consent or the approval of a party is required herein, such party shall not unreasonably withhold, delay, or deny such consent or approval. Operator may assign this Agreement to any successor entity to whom the applicable Gas Well Permit has been assigned upon written notice to the City of said assignment. ARTICLE 8. NOTICE Any notice given by one party to the other in connection with this Agreement shall be in writing and shall be by personal delivery; sent by registered mail or certified mail; or by United States Mail, return receipt requested,postage prepaid; to: CITY: Office of the City Manager City of Fort Worth, Texas 1000 Throckmorton Street Fort Worth, Texas 76102 f� OPERATOR S ��, ��1,�� L Op eru+'n — J I", yd Notice shall be deemed to have been received on the date of receipt as shown on the return receipt or other written evidence of receipt. ARTICLE 9. MODIFICATION No waiver or modification of this Agreement or of any covenant, condition, limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. No evidence of any waiver or modification shall be offered or received in evidence in any proceeding arising between the parties hereto out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed. The parties further agree that the provisions of this Article will not be waived unless as herein set forth. ARTICLE 10. SAVINGS/SEVERABILITY In the event that any one or more of the provisions hereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not effect the other provisions, and the Agreement shall be Page 7 construed as if such invalid,illegal, or unenforceable provision had never been contained in this Agreement. ARTICLE 11. GOVERNING LAW AND VENUE This Agreement shall be construed under and governed by, and in accordance with the laws of the State of Texas, and venue for any action arising under the terms and conditions of this Agreement shall lie in the state courts located in Tarrant County,Texas or the United States District Court for the Northern District of Texas,Fort Worth Division, ARTICLE 12. ENTIRE AGREEMENT This Agreement and the exhibits attached hereto, constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and supersede any prior understandings or written or oral agreements between the parties with respect to the subject matter of this Agreement. No amendment, modification, cancellation or alteration of the terms of this Agreement shall be binding on any party hereto unless the same is in writing, dated subsequent to the date hereof, and is duly authorized and executed by the parties hereto. ARTICLE 13. WAIVER OF TERMS AND CONDITIONS The failure of either party to enforce or insist upon compliance with any of the terms or conditions of this Agreement shall not constitute a general waiver or relinquishment of any such terms or conditions, but the same shall be and remain at all times in full force and effect. ARTICLE 14. CAPTIONS The captions contained in this Agreement are for informational purposes only and shall not in any way affect the substantive terms or conditions of this Agreement. ARTICLE 15. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and constitute one and the same instrument. Page 8 IN WITNESSREOF, 't dies o hereby affix their signatures and enter into this Agreement as of the Irday of , 20 ,0. ATTEST: CITY OF FORT WORTH f)M. 0,/A- By. City Secretary IS As i nt City NWaker Director of Devel pment ,�_�-�•-------- ENO M&� I� Q`i]IRT,D APPROVED AS TO FORM AND LEGALITY: B : �_ ssistant C� y Attorney Operator STATE OF TEXAS § COUNTY OF TARRANT § Before me,the undersigned notary public, on this day personally appeared Dale Fisseler, the Assistant City Manager of the City of Fort Worth, Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the instrument for the purposes and consideration therein expressed. Given under my hand and seal of office this day of , 20( . ,o�Pa!,?�94• JONI .•� 'ti,• B JACOBS NOTARY PUBLIC )- -- state of Texas Notary ublic 'F of ''Comm. Exp. 05-27-2007 PageTL STATE OF ex�-i _ § COUNTYOF § Before me, the un ersi epi au ority, a Notary Public in and for the State of Texas, on this day personally appeared e _,known to me to be the person whose name is subscribed to thel f,oregoing instru ent, and acknowledged to me that the same was the act of V RA5 b ,� � a �he corporation) and that he executed the same as the act of said -c (corporation) for the purposes and consideration therein expressed d in e capacit they in st d. Given under my hand and seal of office t 's day of:l i"C , 200(a LPATI! ARK4-TPONG PUBLIC-f:�TE OF OKLAHOMAHUGHES COUNTY Notary Public Commission expires�U1 -U Page 10 OAK HILLS DRILLING & OPERATING, LLC 22S KINGSBERRY RD PO BOX 470 First United Bank and Trust Co. HOLDENVILLE OK 74848-9201 PO Box 790 Holdenville, OK 74848-0790 Borrower's(Buyer's or Lessee's)Name and Address Secured Party's(or Lessor's)Name and Address "I" means the borrowers(buyers or lessees)named above. "You" means the secured party(or lessor)named above. Date: 02/02/06 Loan(-ease or Contract)Number: 2 3 6 0 2 9 5 Additional Information: Section I:Agreement to Provide Insurance:As part of my loan,lease,or (5) to keep the insurance in effect until the debts listed above, and any other debts contract,I agree: which now or later may be secured by the property, are paid. (I understand (1) to insure the property and/or the persons listed in section 2 with the that the property may secure debts in addition to any listed above.) coverages shown in section 3 below; If I Default:If I fail to keep one or more of these promises: (2) to have you named on the policy,with the "status"listed below; (1) I agree that you may (but are not required to) buy insurance to protect your (3) to arrange for the insurance company to notify you that the policy is in interest and add the cost to what I owe you. effect and your status has been noted; (2) I also understand that I may be in default on the underlying debts,and that you (4) to pay for this insurance, including any fee for this endorsement; may decide to invoke other remedies available to you for such default as well. Section 2:Description of Collateral and/or Persons to be Insured: ��k�wOJ�9CIS�591W�E��Z§GTR �gKGLE DRUM MOUNTED ON 1977 GMC 9500 TANDEM AXLE TRUCK VIN #TJJ907VS91177 For awns include: Year Make Model Body Style Vehicle Identification Number Section 3:Coverages:Show the risks,amount of coverage required,and maximum deductible allowed: Homeowner's Coverage: ❑ H.0. ❑ Other(Describe) Deductible: Automobile Coverages: F?S] Fire © Theft Collision Comprehensive ® Liability Deductible: 5 0 0 .0 0 Minimum limits: Life and Disability Coverages: Section 4:Your Status: Show here how the Secured Party(or Lessor)should be listed on the insurance policy: KI Lienholder ❑ Certificate holder ❑ Additional Insured ❑ Mortgagee ❑ Section 5:Insurance Company:This is the insurance company which will provide the insurance coverage: ACCORD Name Address City and State Policy Number Effective: from to Section 6:Insurance Agency and Agent:This is the insurance agency through which I have purchased the required insurance(or intend to): Name Address City and State Telephone Number Section 7:Signatures for Borrowers(Buyers or Lessees)and Authorization to Section 8: Signature for Secured Party(Lessor)and Request for Confirmation: Insurance Agent and Company: I ask that upon receipt of this form the insurance company or agency named above I (we) have made this agreement and have provided the information above. I confirm the policy coverages shown above. have received a copy of this agreement. I (we) request the insurance company and agency shown above to provide the For the Secured Party: First United Bank and Trust Co. coverage(s)listed above,and to show the Secured Party(or Lessor)on the policy with the status shown above. (or Lessor) X I (we) also request that the insurance company or its authorized agent RICHARD CARR immediately confirm the policy to the Secured Party (or Lessor) by signing this SR VP/PRES-HOLDENVLE form and forwarding a copy of the policy to the Secured Party (or Lessor), or Section 9:Signature for Insurance Company and Confirmation: such part of the policy as ay be necessary. By signing below I confirm the insurance coverages agreed to be provided by our OAK'-Ii LLS LLI & 0 ERATING, LLC insured and that you will be notified not less than 10 days before cancellation. X / Please type X DOU P YS GER name, _ . . . - tide, company, and _ phone nwmber X and return to BY: BRE PTE E, DIRECTOR s« "�r or l�or. ratggn R—k,,.C—t— 1— qt 1-1-0 MN aaant F—API Ft--o A/Rn/QR i-Rnn.ig7.7AA1 Inn.-,r rrif fl Application for Letter of Credit Date of Application: 02/02/06 Application&Letter of Credit Number Customer Name & Address Issuing Bank Name & Address OAK HILLS DRILLING & OPERATING, LICRST UNITED BANK 2360295 225 KINGSBERRY RD 102 E MAIN ST PO BOX 470 HOLDENVILLE OK 74848-9201 PO BOX 790 Amount(U.S.Dollars) HOLDENVILLE OK 74848 $50, 000.00 Beneficiary Name & Address Advising Bank Name& Address Expiration Date CITY OF FORT WORTH 1000 THROCKMORTON STREET 01/31/07 { FORT WORTH TEXAS 76102 To Be Available By Drafts Drawn At: FUB ON Sight The undersigned Customer hereby applies to the above named Issuing Bank to establish an IRREVOCABLE LETTER OF CREDIT in behalf of Beneficiary shown herein for any sum or sums not exceeding in the aggregate the Amount (U.S. Dollars) stated above, which amount shall be available by draft(s) drawn as indicated through the Advising Bank(if any) and presented to the Issuing Bank on or before the close of business on the Expiration Date set forth in this Application. Documents to accompany the draft(s)drawn hereunder and other instructions are as follows: A) PRESENTATION OF THE ORIGINAL CREDIT (AS MODIFIED BELOW) TO BANK, B) A SIGNED STATEMENT OF BENEFICIARY (WITH SIGNATURE NOTARIZED) STATING THAT OAK HILLS DRILLING & OPERATING, LLC HAS FAILED TO HONOR THEIR CONTRACTURAL AGREEMENT WITH THE CITY OF FORT WORTH, TEXAS. Collateral offered to secure obligation to Issuin Bank under the requested Letter of Credit is as follows: COOPER 8 X 10 WORKOVER RIG, SINGLE DRUM MOUNTED ON 1977 GMC 9500 TANDEM AXLE TRUCK VIN ##TJJ907V591177 The agreed fee to open the subject Letter of Credit is 500 .00 The opening of the Letter of Credit shall be subject to the Agreement set forth on the reverse side hereof to which undersigned Customer agrees. OAK HILLS DRILLING & OPERATING, LLC � Name of Customer Si ature� DO G P S BRENT PIERCE MANAGER DIRECTOR Title JHA DUOKIS 09/02 AGREEMENT In consideration of Issuing Bank opening at Customer's request an Irrevocable Letter of d) Failure to famish after demand by Issuing Bank any requested financial Credit, the tens of which appear on the reverse hereof, Customer hereby agrees with information or to permit the inspection of books or records of account or the Issuing Bank as follows: making of any misrepresentation to Issuing Bank for the purpose of obtaining credit or an extension of credit; 1. Customer's Obligation to Pay. Customer will pay Issuing upon demand in lawful e) Making or sending notice of an intended bulk transfer; money of the United States of America all moneys paid by Issuing Bank or for which 0 Acceleration of the maturity of any indebtedness; Issuing Bank becomes liable under or pursuant to said Letter of Credit, together with g) Death; interest,con-irrossion and all customary charges;Customer also authorizes Issuing Bank to h) When Issuing Bank, in good faith,believes that the prospects of Customer's charge any of Customer's accounts with Issuing Bank for all moneys so paid or for which performance hereunder are impaired. Issuing Bank becomes liable under said Letter of Credit and Customer agrees at least one day before the same is due to provide Issuing Bank with funds to meet all disbursements or 5. Additional Agreements. payments of any kind or character,together with corrirnission, interest and charges which Issuing Bank has paid prior or to which Issuing Bank is entitled under or pursuant to said a) Customer shall not hold Issuing Bank or its correspondents liable for: Letter of Credit. 1) Delay in or lack of arrival of any property or relative document; 2. Grant of Security Interest Customer grants to Issuing Bank a security interest in: 2) Delay in giving or failure to give notice of arrival or any other notice; 3) Any breach of contract between the shipper or vendor and the consignee or buyer; a) All goods and documents which shall come into control or possession of 4) Failure of any draft to bear adequate reference to the credit,of notation Issuing Bank or any of Issuing Bank's correspondents are the result of to be made on the credit,of the credit to be rendrered or of documents to opening or in connection with any transaction under said Letter of Credit and be forwarded apart from the draft as required by the credit in each the proceeds thereof; instance; b) All property of Customer in Issuing Bank's actual or constructive 5) The fact that any instructions purporting to be those of Customer and possession; believed by Issuing Bank in good faith and in the exercised of ordinary C) All deposits and credits of Customer with,and claims against,Issuing Bank; care to be valid,whether pertaining to the issuance or modification of or d) And all other or additional property in which Customer has conveyed a other acts with reference to the credit, were in any way insufficient, security interest to Issuing Bank. erroneous,unauthorized,fraudulent or otherwise invalid. The security interest granted is given to secure: (a)All payments made or to be made by b) C[stOrrier waives any right to object to and ratifies the action of Issuing Bank Issuing Bank or its correspondents under said Letter of credit;(b)All interest,commissions and its correspondents in the case of any variation between documents or other customary charges in relation to said Letter of Credit, and (c) Any other required by the credit or required by instructions of Customer and documents obligations of Customer to Issuing Bank. accepted by Issuing Bank and its correspondents, unless immediately upon receipt of the documents or of knowledge of the variation Customer send Upon any default by Customer under this Agreement,Issuing Bank is authorized to sell,at notice of objection in writing to Issuing Bank. public or private sale, any of such pledged goods or documents; in the event of any deficiency,Customer will pay the same to Issuing Bank immediately or in the event of any 6. ComMiance with the Credit Issuing Bank may accept or honor as complying with surplus,Issuing Bank shall pay the same to Customer or to the persons entitled thereto. In the credit: the event such goods should suffer any decline in valued Customer will upon demand deliver to Issuing Bank additional collateral to Issuing Bank's satisfaction. Any notice a) Any draft or other documents otherwise in order which may be signed by or required to be given Customer will be reasonable if it is deposited in the United States issued to the administrator, executor, or trustee in bankruptcy of or the Mail,addressed to Customer at the address shown on the front hereof,postage prepaid,ten receiver for any of the property of the party in whose name the credit provides days prior to the event of which Customer is notified. Issuing Bank may require Customer that drafts or documents should be drawn or issued and to assemble the goods and make them available to Issuing Bank at a place to be designated b) Documents of any character which comply with the provisions of "The by Issuing Bank, Attorneys' fees and legal expenses incurred by Issuing Bank in Uniform Customs and Practice for Documentary Credits(1983 Revision),The enforcement of Issuing Bank's rights and remedies hereunder shall be paid by Customer International Chamber of Commerce Brochure No. 400", and any and shall become part of the indebtedness secured hereby. Customer represents, warrants amendments all of which by this reference are incorporated as a part of this and agrees that,except for the security interest in Issuing Bank;(a)no security interest or Agreement,and lien has been created or exists with respect to any of the goods and documents covered c) Documents which comply with the laws or regulations in force in and customs hereby and the proceeds thereof;(b)no financing statement or other security instrument is and usages of the place of negotiation or presentation,and on file in any jurisdiction covering such goods,documents or proceeds;(c)Customer will d) Any documents appearing on their face to be in order. not create or suffer to exist any such security interest or lien and will not permit any such financing statement or other security instrument to be on file; and (d) Customer will 7. Miscellaneous. execute, deliver and file such financing statements and other documents as may be requested by Issuing Bank from time to time to create, perfect and preserve the security a) It is agreed that all directions and correspondence relating to said Letter of interest created hereby. Credit are to be sent at Customers risk and that Issuing Bank does not assume responsibility for any inaccuracy,interruption,error or delay in transmission 3. Insurance and Licenses. Customer will obtain, or will cause to be in existence, or delivery by post,telegraph or cable,or for any inaccuracy of translation. insurance on any goods described in said Letter of Credit against fire and other usual b) If Application for Letter of Credit is signed by two or more parties as risks and against any additional risks which Issuing Bank may request Issuing Bank Customer, their responsibility hereunder shall be joint and several and the is hereby authorized and empowered to collect the amount due under any such reference to Customer herein shall be deemed to refer to each Customer. insurance and apply the same against any of Customers obligations to Issuing Bank c) All obligations of Customer herein are enforceable by any Advising or arising tinder said Letter of Credit or otherwise. As to said goods Customer Participating banks directly as if such bank was the Issuing Bank. represents that any required import or export licenses have been obtained. d) The credit issued pursuant hereto shall be subject to the Uniform Customs and Practice for Documentary Credits (1983 Revision), International 4. Default. Customer shall be in default under this Agreement upon the following acts Chamber of Commerce Brochure No. 400, and where not inconsistent or evens: therewith to Article Five of the Uniform Commercial Code of the state of the principal office of the Issuing Bank. This Agreement shall be construed in a) Failure to perform any obligation in this Agreement or any other instrument accordance with the laws of the state where the principal office of the Issuing delivered to Issuing Bank,including punctual payment of any sum due. Bank is located. b) Financial instability evidenced by: e) In performing any duty hereunder or under the Letter of Credit issued pursuant hereto, the Issuing Bank and any Advising or Participating Bank 1) The commencement of any proceeding or action for reorganization, acts in good faith when it acts on documents appearing regular. Such banks dissolution or liquidation; may disregard any representation of irregularity by Customer or third parties 2) Suspension of Customer's ususal business until and unless Customer obtains an order of a court of competent 3) Insolvency; jurisdiction enjoining said Bank from acting thereon. 4) The filing of a petition under any of the provisions of the Bankruptcy f) As used herein, an Advising Bank is any bank other than the Issuing Bank Act or its amendments by or against any parry signing as customer; notifying the beneficiary hereof of the issuance of this Letter of Credit and,a 5) Application for or appointment of a conservator, rehabilitator, or Participating Bank is any bank which undertakes the risk,in whole or in part, receiver of any of Customer's property in any jurisdiction; of the Customer's failure of performance of any of Customer's obligations 6) Assignment for the benefit of creditors. hereunder or otherwise. c) Any injuction,warrant of attachment or judgment against Customer remaining YKA DUOK18 09102 undissolved undischarged or unstayed for more than 90 days; C HILLS DRILLING & OPERATING, First United Bank and Trust Co. i KINGSBERRY RD PO Box 790 Loan Number 2360295 BOX 470 Holdenville, OK 74848-0790 Date 02/02/06 �DENVILLE OK 74848-9201 Maturity Date 01/31/07 Loan Amount$ 50,000.00 Renewal Of BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS includes each borrower above,jointly and severally. 'You'means the lender,its successors and assigns. ralue received,I promise to pay to you,or your order,at your address listed above the PRINCIPAL sum of ty thousand 6 no/100 Dollars$50,000.00 jingle Advance:I will receive all of this principal sum on 02/02/06 No additional advances are contemplated under this note. lluftiple Advance:The principal sum shown above is the maximum amount of principal I can borrow under this note.On I will receive the amount of$ and future principal advances are contemplated. Conditions:The conditions for future advances are ❑Open End Credit:You and I agree that I may borrow up to the maximum principal sum more than one time.This feature is subject to all other conditions and expires on ❑x Closed End Credit:You and I agree that I may borrow(subject to all other conditions)up to the maximum principal sum only one time. :REST:I agree to pay interest on the outstanding principal balance from FEBRUARY 02, 2006 at the rate of 9.5000 % per year until the index rate changes rariable Rate:This rate may then change as stated below. Index Rate:The future rate will be Equal To the following index rate: FIRST UNITED BANK & TRUST BASE RATE ❑No Index:The future rate will not be subject to any internal or external index.It will be entirely in your control. L�Frequency and Timing:The rate on this note may change as often as A change in the interest rate will take effect The Same Day The Index Changes 0 Limitations: During the term of this loan, the applicable annual interest rate will not be more than N/A %or less than 6.0000 %.The rate may not change more than N/A %each N/A Effect of Variable Rate:A change in the interest rate will have the following effect on the payments: ❑The amount of each scheduled payment will change. ® The amount of the final payment will change. :RUAL METHOD:Interest will be calculated on a ACtual/360 basis. T MATURITY RATE:I agree to pay interest on the unpaid balance of this note owing after maturity,and until paid in full,as stated below: ❑on the same fixed or variable rate basis in effect before maturity(as indicated above). 0 at a rate equal to *SEE ADDITIONAL TERMS* LATE CHARGE:If a payment is made more than days after it is due,I agree to pay a late charge of 'SEE ADDITIONAL TERMS* ADDITIONAL CHARGES:In addition to interest,I agree to pay the following charges which :❑ are ❑ are not included in the principal amount above: MENTS:I agree to pay this note as follows: Interest:I agree to pay accrued interest On Demand, But If No Demand Is Made Then: At Maturity - JANUARY 31, 2007 Principal:I agree to pay the principal On Demand, But If No Demand Is Made Then: At Maturity - JANUARY 31, 2007 Installments:I agree to pay this note in payments.The first payment will be in the amount of$ and will be due A payment of$ will be due thereafter.The final payment of the entire unpaid balance of principal and interest will be due POSE:The purpose of this loan is PERFORMANCE LETTER OF CREDIT IITIONALTERMS:BORROWER AGREES TO PAY $10.00 TIMES THE NUMBER OF DAYS LATE AFTER THE LOAN BECOMES 30 DAYS PAST DUE OR PAST MATURITY. VERSAL NOTE AND SECURITY AGREEMENT Y ¢199<.199`ea�tera S'11—,Inc Sr Cloud,MN Form U, S LAZ OR 11612001 j' r SECURITY SECURITY INTEREST:I give you a security interest in all of the Property described below that I own or have sufficient rights in which to transfer an interest,now or in the future,wherever the Property is or will be located,and all proceeds and products of the Property. 'Property" includes all parts, accessories, repairs, replacements, improvements, and accessions to the Property; any original evidence of title or ownership; and all obligations that support the payment or performance of the Property. "Proceeds" includes anything acquired upon the sale, lease, license, exchange,or other disposition of the Property;any rights and claims arising from the Property;and any collections and distributions on account of the Property. El Accounts and Other Rights to Payment:All rights to payment,whether or not earned by performance,including,but not limited to,payment for property or services sold,leased,rented,licensed,or assigned.This includes any rights and interests(including all liens)which I have by law or agreement against any account debtor or obligor. ❑Inventory:All inventory held for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials,work in process,or materials used or consumed in my business. ®Equipment:All equipment including,but not limited to, machinery,vehicles,furniture, fixtures, manufacturing equipment,farm machinery and equipment,shop equipment,office and record keeping equipment,parts,and tools.The Property includes any equipment described in a list or schedule I give to you,but such a list is not necessary to create a valid security interest in all of my equipment. ❑Instruments and Chattel Paper:All instruments,including negotiable instruments and promissory notes and any other writings or records that evidence the right to payment of a monetary obligation,and tangible and electronic chattel paper. ❑General Intangibles: All general intangibles including, but not limited to, tax refunds, patents and applications for patents, copyrights, trademarks, trade secrets, goodwill, trade names, customer lists, permits and franchises, payment intangibles, computer programs and all supporting information provided in connection with a transaction relating to computer programs,and the right to use my name. ❑Documents:All documents of title including,but not limited to,bills of lading,dock warrants and receipts,and warehouse receipts. ❑Farm Products and Supplies:All farm products including,but not limited to,all poultry and livestock and their young,along with their produce, products, and replacements; all crops, annual or perennial, and all products of the crops; and all feed, seed, fertilizer, medicines, and other supplies used or produced in my farming operations. ❑Government Payments and Programs:All payments,accounts,general intangibles, and benefits including,but not limited to,payments in kind, deficiency payments,letters of entitlement, warehouse receipts,storage payments,emergency assistance and diversion payments. production flexibility contracts,and conservation reserve payments under any preexisting,current,or future federal or state government program. ❑Investment Property: All investment property including, but not limited to, certificated securities, uncertificated securities, securities entitlements,securities accounts,commodity contracts,commodity accounts,and financial assets. ❑Deposit Accounts:All deposit accounts including,but not limited to,demand,time,savings,passbook,and similar accounts. ®Specific Property Description:The Property includes,but is not limited by,the following: COOPER B X 10 WORKOVER RIG, SINGLE DRUM MOUNTED ON 1977 GMC 9500 TANDEM AXLE TRUCK VIN #TJJ907V591177 If this agreement covers timber to be cut,enter real estate description and record owner information: The Property will be used for a ❑ personal® business ❑ agricultural ❑ purpose. Borrower/Owner State of organization/registration(if applicable) Oklahoma ADDITIONAL TERMS OF THE SECURITY AGREEMENT GENERALLY-This agreement secures this note and any other debt I have PURCHASE MONEY SECURITY INTEREST - For the sole purpose of with you,now or later.However,it will not secure other debts if you fail determining the extent of a purchase money security interest arising with respect to such other debts,to make any required disclosure about under this security agreement: la)payments on any nonpurchase money this security agreement or if you fail to give any required notice of the loan also secured by this agreement will not be deemed to apply to the right of rescission. If property described in this agreement is located in Purchase Money Loan, and (b) payments on the Purchase Money Loan another state, this agreement may also, in some circumstances, be will be deemed to apply first to the nonpurchase money portion of the governed by the law of the state in which the Property is located. loan, if any, and then to the purchase money obligations in the order in NAME AND LOCATION-My name indicated on page 1 is my exact legal which the items of collateral were acquired or if acquired at the same name.If I am an individual,my address is my principal residence.If 1 am time,in the order selected by you.No security interest will be terminated not an individual,my address is the location of my chief executive offices by application of this formula. "Purchase Money Loan" means any loan or sole place of business.If I am an entity organized and registered under the proceeds of which, in whole or in part, are used to acquire any state law, my address is located in the state in which I am registered, collateral securing the loan and all extensions, renewals, consolidations unless otherwise indicated on page 2. 1 will provide verification of and refinancing of such loan. registration and location upon your request. I will provide you with at PAYMENTS BY LENDER - You are authorized to pay, on my behalf, least 30 days notice prior to any change in my name,address.or state of charges I am or may become obligated to pay to preserve or protect the organization or registration, secured property(such as property insurance premiums).You may treat OWNERSHIP AND DUTIES TOWARD PROPERTY-I represent that 1 own those payments as advances and add them to the unpaid principal under all of the Property, or to the extent this is a purchase money security the note secured by this agreement or you may demand immediate interest I will acquire ownership of the Property with the proceeds of the payment of the amount advanced. With respect to"consumer loans"as loan.I will defend it against any other claim.Your claim to the Property is defined in Okla. Stat.title 14A 4 3-104, 1 will receive notice as required ahead of the claims of any other creditor. I agree to do whatever you by Okla. Stat.title 14A 4 3-2080) before such sums are added to the require to protect your security interest and to keep your claim in the other amounts secured by this agreement.With respect to all other loans, Property ahead of the claims of other creditors. I will not do anything to and if not otherwise required by law, no such notice is required before harm your position. I will not use the Property for a purpose that will the advances are made and the duties are performed. violate any laws or subject the Property to forfeiture or seizure. INSURANCE-I agree to buy insurance on the Property against the risks I will keep books, records and accounts about the Property and my and for the amounts you require and to furnish you continuing proof of business in general.I will let you examine these records at any reasonable coverage.I will have the insurance company name you as loss payee on time. I will prepare any report or accounting you request, which deals any such policy. You may require added security if you agree that with the Property. insurance proceeds may be used to repair or replace the Property. I will I will keep the Property in my possession and will keep it in good buy insurance from a firm licensed to do business in the state where you repair and use it only for the purpose(s) described on page 1 of this are located.The firm will be reasonably acceptable to you.The insurance agreement. I will not change this specified use without your express will last until the Property is released from this agreement.If I fail to buy written permission. I represent that I am the original owner of the or maintain the insurance for fail to name you as loss payee) you may Property and, if I am not, that I have provided you with a list of prior purchase it yourself. owners of the Property. WARRANTIES AND REPRESENTATIONS - If this agreement includes I will keep the Property at my address listed on page 1 of this accounts,I will not settle any account for less than its full value without agreement, unless we agree I may keep it at another location. If the your written permission. 1 will collect all accounts until you tell me Property is to be used in another state, I will give you a list of those otherwise.I will keep the proceeds from all the accounts and any goods states.I will not try to sell the Property unless it is inventory or I receive which are returned to me or which I take back in trust for you.I will not your written permission to do so. If I sell the Property I will have the mix them with any other property of mine. I will deliver them to you at payment made payable to the order of you and me. your request. If you ask me to pay you the full price on any returned You may demand immediate payment of the debt(s) if the debtor is not a natural person and without your prior written consent; (11 a beneficial interest in the debtor is sold or transferred, or (21 there is a change in either the identity or number of members of a partnership,or Any person who signs within this box does so to give you a security (3)there is a change in ownership of more than 25 percent of the voting interest in the Property described on this T— ;.,arson does not stock of a corporation. '7 promise to pay the note._"I' as used int s ecu rty a reeme nt will will pay all taxes and charges on the Property as they become due. 0 You have the right of reasonable access in order to inspect the Property.I include the borrow rso'ri'`wfio s' s t n this box. will immediately inform you of any loss or damage to the Property. - n ateanIf 1 fail to perform any of my duties under this security agreement,or cm'- any y mortgage, deed of trust, lien or other security interest, you may _ without notice to me perform the duties or cause them to be performed. Your right to perform for me shall not create an obligation to perform and Signed your failure to perform will not preclude you from exercising any of your _ other rights under the law or this security agreement. r i 6:1 996,1991 Bankers Syst¢ms.�nC..St Clq,a,MN Form UN$-LAZ-OK 1 J i1+U � IM r lr r Ej� t6�7001 is or items retaken by myself, I will do so. You may exercise my (1)any deposit account balance I have with you; is with respect to obligations of any account debtors, or other (2)any money owed to me on an item presented to you or in your ;ons obligated on the Property, to pay or perform, and you may possession for collection or exchange;and irce any security interest that secures such obligations. 13)any repurchase agreement or other nondeposit obligation. - f this agreement covers inventory,1 will not dispose of it except in my 'Any amount due and payable under this note" means the total nary course of business at the fair market value for the Property,or at amount of which you are entitled to demand payment under the terms of inimum price established between you and me. this note at the time you set off.This total includes any balance the due I this agreement covers farm products I will provide you, at your date for which you properly accelerate under this note. rest, a written list of the buyers, commission merchants or selling If my right to receive money from you is also owned by someone who its to or through whom I may sell my farm products. In addition to has not agreed to pay this note, your right of set-off will apply to my :e parties named on this written list,I authorize you to notify at your interest in the obligation and to any other amounts I could withdraw on discretion any additional parties regarding your security interest in my sole request or endorsement.Your right of set-off does not apply to farm products. I remain subject to all applicable penalties for selling an account or other obligation where my rights are only as a farm products in violation of my agreement with you and the Food representative. It also does not apply to any Individual Retirement urity Act. In this paragraph the terms farm products, buyers, Account or other tax-deferred retirement account. emission merchants and selling agents have the meanings given to You will not be liable for the dishonor of any check when the dishonor n in the Federal Food Security Act of 1985. occurs because you set off this debt against any of my accounts.I agree f this agreement covers chattel paper or instruments,either as original to hold you harmless from any such claims arising as a result of your Iteral or proceeds of the Property,t will note your interest on the face exercise of your right to set-off. ie chattel paper or instruments. DEFAULT-I will be in default if any one or more of the following occur: IEDIES - I will be in default on this security agreement if 1 am in (1) 1 fail to make a payment on time or in the amount due; (21 1 fail to cult on any note this agreement secures or if I fail to keep any promise keep the Property insured, if required; (3) 1 fail to pay, or keep any tained in the terms of this agreement.If I default,you have all of the promise,on any debt or agreement I have with you;(4)any other creditor is and remedies provided in the note and under the Uniform of mine attempts to collect any debt I owe him through court imercial Code. You may require me to make the secured property proceedings; (5)1 die,am declared incompetent,make an assignment for table to you at a place which is reasonably convenient.You may take the benefit of creditors,or become insolvent feither because my liabilities session of the secured property and sell it as provided by law. The exceed my assets of I am unable to pay my debts as they become due); seeds will be applied first to your expenses and then to the debt. 1 (6)1 make any written statement or provide any financial information that e that 10 days written notice sent to my last known address by first is untrue or inaccurate at the time it was provided; 171 1 do or fail to do s mail will be reasonable notice under the Uniform Commercial Code. something which causes you to believe you will have difficulty collecting current address is on page 1. the amount I owe you; (8) any collateral securing this note is used in a FECTION OF SECURITY INTEREST-I authorize you to file a financing manner or for a purpose which threatens confiscation by a legal authority, ement covering the Property. I will comply with, facilitate, and 19) 1 change my name or assume an additional name without first :rwise assist you in connection with obtaining possession of or notifying you before making such a change; (10) 1 fail to plant, cultivate trol over the Property for purposes of perfecting your security interest and harvest crops in due season if I am a producer of crops; (1 11 any or the Uniform Commercial Code. loan proceeds are used for a purpose that will contribute to excessive ADDITIONAL TERMS OF THE NOTE erosion of highly erodible land or to the conversion of wetlands to produce an agriculturalcommodity,as further explained in 7 C.F.R. Part INITIONS -As used on pages 1 and 2, 'N" means the terms that 1940,Subpart G,Exhibit M. ly to this loan. 'I," "me" or "my" means each Borrower who signs REMEDIES-If I am in default on this note you have,but are not limited note and each other person or legal entity (including guarantors, to,the following remedies: orsers,and sureties)who agrees to pay this note(together referred to (1)You may demand immediate payment of all I owe you under this "us"). "You" or 'your" means the Lender and its successors and note (principal, accrued unpaid interest and other accrued unpaid gns. charges). 'LICABLE LAW -The law of the state of Oklahoma will govern this (2)You may set off this debt against any right I have to the payment !ement. Any term of this agreement which is contrary to applicable of money from you, subject to the terms of the 'SET-OFF" will not be effective, unless the law permits you and me to agree to paragraph herein. i a variation. If any provision of this agreement cannot be enforced (3)You may demand security,additional security,or additional parties irding to its terms, this fact will not affect the enforceability of the to be obligated to pay this note as a condition for not using any ainder of this agreement. No modification of this agreement may be other remedy, le without your express written consent. Time is of the essence in (4)You may refuse to make advances to me or allow purchases on agreement. credit by me. 'MENTS - Each payment I make on this note will first reduce the (5)You may use any remedy you have under state or federal law. punt I owe you for charges which are neither interest nor principal. 161 You may make use of any remedy given to you in any agreement remainder of each payment will then reduce accrued unpaid interest, securing this note. then unpaid principal. If you and I agree to a different application of By selecting any one or more of these remedies you do not give up ments, we will describe our agreement on this note.I may prepay a your right to use later any other remedy.By waiving your right to declare of, or the entire balance of this loan without penalty, unless we an event to be a default,you do not waive your right to consider later the ;ify to the contrary on this note. Any partial prepayment will not event a default if it continues or happens again. ase or reduce any later scheduled payment until this note is paid in full COLLECTION COSTS AND ATTORNEY'S FEES-I agree to pay all costs ess, when I make the prepayment, you and I agree in writing to the of collection, replevin or any other or similar type of cost if I am in trary). default. In addition, if you hire an attorney to collect this note, I also EREST-Interest accrues on the principal remaining unpaid from time agree to pay any fee you incur with such attorney plus court costs :ime, until paid in full. If I receive the principal in more than one (except where prohibited by law).To the extent permitted by the United once,each advance will start to earn interest only when I receive the States Bankruptcy Code, I also agree to pay the reasonable attorney's once. The interest rate in effect on this note at any given time will fees and costs you incur to collect this debt as awarded by any court ly to the entire principal sum outstanding at that time. exercising jurisdiction under the Bankruptcy Code. withstanding anything to the contrary, I do not agree to pay and you WAIVER-I give up my rights to require you to do certain things.I will not not intend to charge any rate of interest that is higher than the require you to: Jmum rate of interest you could charge under applicable law for the (1)demand payment of amounts due fpresentmentl; :nsion of credit that is agreed to in this note (either before or after f2)obtain official certification of nonpayment(protest);or urity). If any notice of interest accrual is sent and is in error, we (3)give notice that amounts due have not been paid (notice of ually agree to correct it,and if you actually collect more interest than dishonor). Ned by law and this agreement,you agree to refund it to me. I waive any defenses I have based on suretyship or impairment of EX RATE - The index will serve only as a device for setting the collateral. rest rate on this note.You do not guarantee by selecting this index,or OBLIGATIONS INDEPENDENT - I understand that I must pay this note margin, that the interest rate on this note will be the same rate you even if someone else has also agreed to pay it(by, for example, signing rge on any other loans or class of loans you make to me or other this form or a separate guarantee or endorsement). You may sue me owers. alone,or anyone else who is obligated on this note,or any number of us iT MATURITY RATE - For purposes of deciding when the "Post together,to collect this note. You may without notice release any party urity Rate" (shown on page 1)applies,the term"maturity"means the to this agreement without releasing any other party-If you give up any of of the last scheduled payment indicated on page 1 of this note or your rights,with or without notice, it will not affect my duty to pay this date you accelerate payment on the note,whichever is earlier. note.Any extension of new credit to any of us,or renewal of this note by GLE ADVANCE LOANS - If this is a single advance loan, you and I all or less than all of us will not release me from my duty to pay it. (Of ect that you will make only one advance of principal. However, you course,you are entitled to only one payment in full.)I agree that you may r add other amounts to the principal if you make any payments at your option extend this note or the debt represented by this note, or cribed in the"PAYMENTS BY LENDER"paragraph on page 2. any portion of the note or debt,from time to time without limit or notice LTIPLE ADVANCE LOANS-It this is a multiple advance loan,you and and for any term without affecting my liability for payment of the note.I pect that you will make more than one advance of principal.If this is will not assign my obligation under this agreement without your prior ,ed end credit, repaying a part of the principal will not entitle me to written approval. itional credit. FINANCIAL INFORMATION - I agree to provide you, upon request, any -OFF - I agree that you may set oft any amount due and payable financial statement or information you may deem necessary. I warrant er this note against any right I have to receive money from you. that the financial statements and information I provide to you are or will 'Right to receive money from you"means: be accurate,correct and complete. NATURES: AGRE€ O HE TERMS OF THIS NOTE(INCLUDING THOSE ON PAGES.11AND 71.I have received a copy on today's date. 0 LS D L ING S OPERATING, LLC BY: 7UG H S, MANAGER : B PIERCE, DIRECTOR NATURE FOR LENDER: - .RICHARD 9HARDCARR s199a,1991 13-k­nkesvemGRVp1//yy,R �ormQ WK0T7 t a�2oc, Ipepe 3 0/31 BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS LOAN DESCRIPTION OAK HILLS DRILLING 6 OPERATING, LLC First United Bank and Trust Co. 225 KINGSBERRY RD PO Box 790 Number 2360295 PO BOX 470 Holdenville, OK 74848-0790 Amount$ 50,000.00 HOLDENVILLE OK 74848-9201 Date 02/02/06 ❑ Refer to the attached Signature Addendum,incorporated herein,for additional Borrowers and their signatures. COMMERCIAL LOAN AGREEMENT LOAN STRUCTURE.This Commercial Loan Agreement(Agreement)contemplates©a single advance term Loan❑a multiple advance draw Loan❑a revolving multiple advance draw Loan.The pnnclpal balance will not exceed S 50,000.00 Borrower will pay down a revolving draw Loan's outstanding Principal to S (Pay Down Balance) (Time Period).This Loan is for ❑agricultural ©business purposes. ❑ Borrower may not voluntarily prepay the Loan in full at any ume. K Borrower may prepay the Loan under the following terms and conditions(Any partial prepayment will not excuse any later scheduled payments until the Loan is paid in full.): ❑ LATE CHARGES.If a payment is made more than days after it is due.Borrower will pay a late charge of FEES.Borrower agrees to pay the following fees in connection with this Loan at closing or as otherwise requested by Lender: REQUESTS FOR ADVANCES.Borrower authorizes Lender to honor a request for an advance from Borrower or any person authorized by Borrower.The requests for an advance must be in writing, by telephone, or any other manner agreed upon by Borrower and Lender, and must specify the requested amount and date and be accompanied with any agreements,documents,and instruments that Lender requires for the Loan.Lender will make same day advances,on any day that Lender is open for business,when the request is received before 2:00 P.M. (Advance Cut-Off Time).Lender will disburse the advance into Borrower's demand deposit account(if any),account number ,or in any other agreed upon manner.All advances will be made in United States dollars. ❑These requests must be made by at least (Number Required To Draw)persons,acting together,of those persons authorized to act on Borrower's behalf. ❑Advances will be made in the amount of at least S (Minimum Amount Of Advance). ❑Advances will be made no more frequently than (Minimum Frequency Of Advance). ❑Discretionary Advances.Lender will make all Loan advances at Lender's sole discretion. ®Obligatory Advances.Lender will make all Loan advances subject to this Agreement's terms and conditions. FINANCIAL INFORMATION.Borrower will prepare and maintain Borrower's financial records using consistently applied generally accepted accounting principles then In effect.Borrower will provide Lender with financial information in a form acceptable to Lender and under the following terms. A.Frequency. Annually, Borrower will provide to Lender Borrower's financial statements, lax returns, annual internal audit reports or those prepared by independent accountants within 30 days after the close of each fiscal year.Any annual financial statements that Borrower provides will be ❑audited statements. ❑reviewed statements. ®compiled statements. ❑ Borrower will provide Lender with interim financial reports on a (Monthly.Quarterly)basis,and within days after the close of this business period.Interim financial statements will be ❑audited ❑reviewed ❑compiled statements. B. Requested Information.Borrower will provide Lender with any other information about Borrower's operations,financial affairs and condition within 30 days after Lender's request. ❑C. Leverage Ratio.Borrower will maintain at all times a ratio of total liabilities to tangible net worth,determined under consistently applied generally accepted accounting principles,of (Tom]Liabilities to Tangible Net Worth Ratio)or less. D.Minimum Tangible Net Worth. Borrower will maintain at all times a total tangible net worth, determined under consistently applied generally accepted accounting principles,of$ (Minimum Tangible Net Worth)or more.Tangible net worth is the amount by which total assets exceed total liabilities.For determining tangible net worth,total assets will exclude all intangible assets,including without limitarion goodwill,patents, trademarks,trade names,copyrights,and franchises.and will also exclude any accounts receivable that do not provide for a repayment schedule. E. Minimum Current Ratio.Borrower will maintain at all times a ratio of current assets to current liabilities,determined udder consistently applied generally accepted accounting principles,of (Minimum Current Ratio)or more. ❑F. Minimum Working Capital.Borrower will maintain at all times a working capital,determined under consistently applied generally accepted accounting principles by subtracting current liabilities from current assets, of$ (Minimum Working Capital)or more. For this determination,current assets exclude (Excluded Current Assets). Likewise, current liabilities include (1)all obligations payable on demand or within one year after the date on which the determination is made,and(2)final maturities and sinking fund payments required to be made within one year after the date on which the determination is made,but exclude all liabilities or obligations that Borrower may renew or extend in a date more than one year from the date of this determination. ATTACHMENTS. The following documents are incorporated by reference into this Agreement: ❑ Asset Based Financing Agreement addendum dated ❑ Commercial Security Agreement addendum dated ❑Other ADDITIONAL TERMS: ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES 10 EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT,ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAIN-ED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT. BY SIGNING THIS AGREEMENT,THE PARTIES AFFIRM THAT NO UNWRITTEN ORAL,AGREEMENT EXISTS BETWEEN THEM. SIGNATURES. By signing under seal,1 agree to a6 the terms and conditions beginning on page I through the bottom of page 2 or this Agreement.Borrower also acknowledges receipt of y. is Agreement. BORROWER: - OAK HILLS DRI OP TING, L Entity Names �' Entity Name Seaq (Seal) Signature DO H HR S, MANAGER Date Signature Date (Seal) (Seal) Signature BY. ENT PIERC YRECTOR Date Signature Date LENDER:First United Bank and Trust Co. Entity Name (Seal) (Seal) Signature RRII CHAR pRCCAAR}R�OLDENVLE Dare Signature Date COMMERCIAL LOAN AGREEMENT:to be used with Form COMMNOTENOT TO BE USED FOR LOANS SUBJECT TO CONSUMER LENDING LAWS �.r ®'[1998,1001 Bankers$,sterns.Inc.,51.C—d.MN Fe COMM AGREE r;1.2004 IOBg¢7 of 11 NITIONS. In this Agreement. the following term have the following Other Liabilities.Borrower will not incur,assume or permit any debt evidenced rigs. by notes,bonds or similar obligations except debt in existence on the date of this rating Terms.Accounting terms that are not specifically defined will have Agreement and fully disclosed to Lender;debt subordinated in payment to Lender :ustomary meanings under consistently applied generally accepted accounting on terms acceptable to Lender;accounts payable incurred in the ordinary course of pies. business and paid under customary rade terms or contested in good faith with .Loan refers to all advances made under the terms of this Agreementresines satisfactory to Lender;or as otherwise agreed to by Lender. Documents. Loan Documents include this Agreement and all documents Notice.Borrower will promptly notify Lender of any material change In financial red pursuant to the terms of this Agreement including all present and future condition,a default under the Loan Documents,or a default under any agreement ssory notes (Notes), security instruments, guaranties, and supporting with a third party which materially and adversely affects Borrower's properrv. nentation as modified,amended or supplemented. operations or financial condition ray. Property is any collateral, real, personal or intangible, that secures Dispose of No Assets.Without Lender's prior written consent,Borrower will not wer's performance of the obligations of this Agreement. sell,lease,assign,or otherwise distribute all or substantially all of Its assets. 4NCES.To the extent pertained by law, Borrower will indemnify Lender fnsurarace.Borrower will obtain and maintain insurance with insurers in amounts told Lender harmless for reliance on any request for advance that Lender and coverages that are acceptable to Lender and customary with industry practice. nably believes to be genuine.Lender's records are conclusive evidence as to This may Include without limitation credit insurance,insurance policies for public amber and amount of advances and the Loan's unpaid principal and interest. liability,fire,hazard and extended risk,workers compensation,and,at Lender's � advance results in an overadvance (when the total amount of the Loan request, business interruption and/or rent loss insurance. Borrower may obtain ds the principal balance)Borrower will pay the overadvance,as requested by insurance from anyone Borrower wants that is acceptable to Lender. Borrower's :r. Regarding Borrower's demand deposit account(s)with Lender. Lender choice of insurance provider will not affect the credit decision or interest rate.At at its option,consider presentation for payment of a check or other charge Lender's request.Borrower will deliver to Lender certified copies of all of these ding available funds as a request for an advance under this Agreement.Any insurance policies, binders or certificates. Borrower will obtain and maintain a payment by Lender will constitute an advance on the Loan. mortgagee or loss payee endorsement for Lender when these endorsements are DITIONS.Borrower will satisfy all of the following conditions before Lender available. Borrower will require all insurance policies to provide at least 10 days s any advances under this Agreement. If this Agreement provides for prior written notice to Lender of cancellation or modification.Borrower consents to uonary advances,satisfaction of these conditions does not commit Lender to Lender using or disclosing information relative to any contract of insurance l :urequired for the Loan for the purpose of replacing this insurance.Borrower also igaadvances.There has not been a default under the Loan Documents nor would a authorizes its insurer and Lender to exchange all relevant information related to II result from making the advance. any contract of insurance executed as required by any Loan Documents. Property Maintenance.Borrower will keep property that Is necessary or useful in mation. Borrower has provided all required documents, information, its business in good working condition by making all needed repairs,replacements ,cations and warranties,all properly executed on forms acceptable to Lender. and improvements and by making payments due on the property. ctions.Borrower has accommodated,to Lender's satisfaction,all inspections. DEFAULT. If the Loan is payable on demand,Lender may demand payment at Htiom and Covenants. Borrower has performed and complied with all any time whether or not any of the following events have occurred.Borrower will tions required for an advance and all covenants in the Loan Documents. be in default if any one or more of the following occur.(I)Burrower fails to make -anties and Representations.The warranties and representations contained in a payment in full when due.(2)Borrower makes an assignment for the benefit of sgreemem am true and correct at the time of making the advance. creditors or becomes insolvent, either because Borrower's liabilities exceed its ueial Statements.Borrower's most recently delivered financial statements and assets or Borrower is unable to pay debts as they become due; or Borrower Ls are current,complete,true and accurate in all material respects and fairly petitions for protection under any bankruptcy,insolvency or dehtor relief laws,or sent Borrower's financial condition. is the subject of such a petition or action and(ails to have the petition or action ruptey Proceedings. No proceeding under the United States Bankruptcy dismissed within a reasonable period of time.(3)Borrower fails to perform any has been commenced by or against Borrower or any of Borrower's affiliates. condition or to keep any promise or covenant on this Agreement or any debt or LRANTIES AND REPRESENTATIONS. Borrower makes these warranties agreement Borrower has with Lender.(4)A default occurs under the terms of any epresentations which will continue as long as this Agreement is in effect. instrument evidencing or pertaining to this Agreement. (5) If Borrower is a !r. Borrower is duly organized, validly existing and in good standing in all producer of crops, Borrower fads to plant, cultivate and harvest crops in due Inctnons in which Borrower operates.Borrower has the power and authority to season. (6) Any loan proceeds are used for a purpose that will contribute to into this transaction and to carry on its business or activity as it is now being excessive erosion of highly erodible land or to the conversion of wetlands to xted. All persons who are required by applicable law and the governing produce an agricultural commodity, as further explained by federal law. (7) menu of Borrower have executed and delivered to Lender this Agreement and Anything else happens that either significantly Impairs the value of the Property or, Loan Documents. unless controlled by the New lersey Banking Law,causes Lender to reasonably ority.The execution,delivery and performance of this Agreement and the believe that Lender will have difficulty collecting the Loan. ation evidenced by the Loan Documents are within Borrower's duly REMEDIES.After Borrower defaults,and after Lender gives any legally required Irized powers, has received all necessary governmental approval, will not notice and opportunity to cure,Lender may at its option use any and all remedies to any provision of law or order of court or governmental agency,and will not Lender has under state or federal law or in any of the Loan Documents,including. to any agreement to which Borrower is a parry or to which Borrower or but not limited to, terminating any commitment or obligation to make additional )wer's property is subject. advances or making all or any part of the amount owing immediately due.Lender e and Place of Business. Other than previously disclosed in writing to may setoff any amount due and payable under the terms of the Loan against er,Borrower has not changed its name or principal place of business within Borrower's right to receive money from Lender,unless prohibited by applicable ast ten years and has not used any other trade or fictitious name. Without law.Except as otherwise required by law,by choosing any one or more of these er's prior written consent, Borrower will not use any other name and will remedies Lender does not give up Lender's right to use any other remedy.Lender .rve Borrower's existing name,trade names and franchises. does not waive a default if Lender chooses not to use a remedy,and may later use Jther Liens. Borrower owns or leases all property that is required for its any remedies if the default continues or occurs again. less and except as disclosed,the property is free and clear of all hens,security COLLECTION EXPENSES AND ATTORNEYS'FEES.To the extent permitted :sts,encumbrances and other adverse interesu. by law, Borrower agrees to pay all expenses of collection, enforcement and pliance With Laws.Borrower is not violating any laws, regulations, rules, protection of Lender's rights and remedies under this Agreement. Expenses s,judgments or decrees applicable to Borrower or its property, except as include,but are not limited to,reasonable attorneys'fees including attorney fees as osed to Lender. permitted by the United States Bankruptcy Code, court costs and other legal racial Statements. Borrower represents and warrants that allfinancial expenses.These expenses will bear interest from the date of payment until paid in menu Borrower provides fairly represent Borrower's financial condition for full at the contract interest rate then in effect for the Loan.FL:Attorneys'fees will be 10 percent of the principal sum due or a larger amount as the court judges as used periods,are current,complete,we and accurate In all material respects, reasonable and just.GA:Attorneys'fees will be 15 percent of the principal and de all direct or contingent liabilities, and that there has been no material interest owing. rise change in Borrower's financial condition,operations or business since the GENERAL PROVISIONS. This Agreement is governed by the laws of the the financial information was prepared. jurisdiction where Lender is located,the United States of America and to the extent rENANTS. Until the Loan and all related debts, liabilities and obligations required,by the laws of the jurisdiction where the Property is located. r the Loan Documents are paid and discharged, Borrower will comply with Joint And Individual Liability And Successors.Each Borrower,individually,has ollowing terms,unless Lender waives compliance in writing, the duty of fully performing the obligations on the Loan.Lender can sue all or any eelion and Disclosure.Borrower will allow Lender or its agents to enter any of the Borrowers upon breach of performance.The duties and benefits of this Loan orrower's premises during mutually agreed upon times,to do the following: will bind and benefit the successors and assigns of Borrower and Lender, nspect, audit, review and obtain copies from Borrower's books, records, Amendment, Integration And Severability. The Loan Documents may not be rs,receipts, and other business related data;(2)discuss Borrower's finances amended or modified by oral agreement.Borrower agrees that any para signing business with anyone who claims to be Borrower's creditor; (3) inspect this Agreement as Borrower is authorized to modify the terms of the Loan ower's Property,audit for the use and disposition of the Property's proceeds; Documents. Borrower agrees that Lender may inform any party who guarantees a whatever Lender decides is necessary to preserve and protect the Property this Loan of any Loan accommodations, renewals, extensions, modification, Lender's interest in the Property. As long as this Agreement is in effect, substitutions,or future advances.The Loan Documents are the complete and final ower will direct all of Borrower's accountants and auditors to permit Lender to expression of the understanding between Borrower and Lender.If any provision of sine and make copies of Borrower's records in their possession, and to the Loan Documents is unenforceable, then the unenforceable provision will be ose to Lender any other information that they know about Borrower's financial severed and the remaining provisions will be enforceable, ition and business operations. Lender may provide Lender's regulator with Waivers And Consent. Borrower, to the extent permitted by law, consents to ired information about Borrower's financial condition,operation and business certain actions Lender may take, and generally waives defenses that may be at of Borrower's parent,subsidiaries or affiliates. available based on these actions or based on the status of a party to the Loan. ness Requirements.Borrower will preserve and maintain its present existence Lender may renew or extend payments on the Loan. Lender may release any good standing in jurisdictions where Borrower is organized and operates. borrower,endorser,guarantor,surety,or any other co-signer.Lender may release, ower will continue its business or activities as presently conducted, by substitute,or impair any Property securing the Loan.Lender's course of dealing, ming licenses, permits and bonds where needed. Borrower will obtain or Lender's forbearance from,or delay in,the exercise of any of Lender's rights, ler's prior written consent before ceasing business or engaging in any line of remedies,privileges,or right to insist upon Borrower's strict performance of any tress that is materially different from its present businessprovisions contained in the Loan Documents,will not be construed as a waiver by Ipliance with Laws. Borrower will not violate any laws, regulations, rules, Lender, unless the waiver Is in writing and signed by Lender. Lender may rs, judgments or decrees applicable to Borrower or Borrower's property, participate or syndicate the Loan and share any information that Lender decides is pt for those which Borrower challenges in good faith through proper necessary about Borrower and the Loan with the other participanu. eedings after providing adequate reserves to fully pay the claim and its appeal Interpretation. Whenever used, the singular includes the plural and the plural Id Borrower lose. On request, Borrower will provide Lender with written includes the singular.The section headings are for convenience only and are not to trice that Borrower has fully and timely paid taxes, assessments and other be used to interpret or define the terms of this Agreement. Unless otherwise :mmental charges levied or imposed on Borrower and Its income,profits and Indicated,the terms of this Agreement shall be construed in accordance with the erty.Borrower will adequately provide for the payment of taxes,assessments Uniform Commercial Code, other charges that have accrued but are not yet due and payable. Notice.Unless otherwise required by law,any notice will be given by delivering it Organizations. Borrower will obtain Lender's written consent before or mailing It by first class mail to the appropriate party's address listed in this nizing, merging into, or consolidating with an enriry; acquiring allor Agreement,or to any other address designated in writing.Notice to one parry will tantially all of the assets of another;or materially changing legal strucm re, be deemed to be nonce to all fames.Time is of the essence, agement,ownership or financial condition. x�® 0 1990 Bankers Systems,Inc.,St.Ctmd,MN Form COMMAGREE7,112004 \ , a GUARANTY First United Bank and Trust Co. PO Box 790 Holdenville Oklahoma Holdenville, OK 74848-0790 (City) (State) FEBRUARY 02, 2006 For good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, and to in- duce First United Bank and Trust Co. (herein, with its participants, successors and assigns, called "Lender"), at its option, at any time or from time to time to make loans or extend other accommodations to or for the account of OAK HILLS DRILLING-& OPERATING, LLC (herein called "Borrower") or to engage in any other transactions with Borrower, the Undersigned hereby absolutely and unconditionally guarantees to Lender the full and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise,of the debts, liabilities and obligations described as follows: A.If this ❑ is checked, the Undersigned guarantees to Lender the payment and performance of the debt, lia- bility or obligation of Borrower to Lender evidenced by or arising out of the following: and any extensions, renewals or replacements thereof(hereinafter referred to as the "Indebtedness"). B.If this ® is checked, the Undersigned guarantees to Lender the payment and performance of each and every debt, liability and obligation of every type and description which Borrower may now or at any time hereafter owe to Lender (whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several, or joint and several; all such debts, liabilities and obligations being hereinafter collectively referred to as the "Indebtedness"). Without limitation, this guaranty includes the following described debt(s): All Present and Future Debts Of The Above Listed Borrower To First United Bank and Trust Co. The Undersigned further acknowledges and agrees with Lender that: 1. No act or thing need occur to establish the liability of the Undersigned hereunder, and no act or thing, except full payment and discharge of all indebtedness, shall in any way exonerate the Undersigned or modify, reduce, limit or release the liability of the Undersigned hereunder. 2. This is an absolute, unconditional and continuing guaranty of payment of the Indebtedness and shall continue to be in force and be binding upon the Undersigned, whether or not all Indebtedness is paid in full, until this guaranty is revoked by written notice actually received by the Lender, and such revocation shall not be effective as to Indebtedness existing or committed for at the time of actual receipt of such notice by the Lender, or as to any renewals, extensions and refinancings thereof. If there be more than one Undersigned, such revocation shall be effective only as to the one so revoking. The death or incompetence of the Undersigned shall not revoke this guaranty, except upon actual receipt of written notice thereof by Lender and then only as to the decedent or the incompetent and only prospectively, as to future transactions,as herein set forth. 3. If the Undersigned shall be dissolved, shall die, or shall be or become insolvent (however defined) or revoke this guaranty, then the Lender shall have the right to declare immediately due and payable, and the Undersigned will forthwith pay to the Lender, the full amount of all Indebtedness, whether due and payable or unmatured. If the Undersigned voluntarily commences or there is commenced involuntarily against the Undersigned a case under the United States Bankruptcy Code, the full amount of all Indebtedness, whether due and payable or unmatured, shall be immediately due and payable without demand or notice thereof. 4.The liability of the Undersigned hereunder shall be limited to a principal amount of $ (if unlimited or if no amount is stated,the Undersigned shall be liable for all Indebtedness,without any limitation as to amount), plus accrued interest thereon and all attorneys' fees, collection costs and enforcement expenses referable thereto. Indebtedness may be created and continued in any amount, whether or not in excess of such principal amount, without affecting or impairing the liability of the Undersigned hereunder. The Lender may apply any sums received by or available to Lender on account of the Indebtedness from Borrower or any other person (except the Undersigned), from their properties, out of any collateral security or from any other source to payment of the excess. Such application of receipts shall not reduce, affect or impair the liability of the Undersigned hereunder. If the liability of the Undersigned is limited to a stated amount pursuant to this paragraph 4, any payment made by the Undersigned under this guaranty shall be effective to reduce or discharge such liability only if accompanied by a written transmittal document, received by the Lender, advising the Lender that such payment is made under this guaranty for such purpose. 5.The Undersigned will pay or reimburse Lender for all costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by Lender in connection with the protection, defense or enforcement of this guaranty in any litigation or bankruptcy or insolvency proceedings. This guaranty includes the additional provisions on page 2,all of which are made a part hereof. This guaranty is ® unsecured; ❑ secured by a mortgage or security agreement dated ❑ secured by IN WITNESS WHEREOF, this guaranty has been duly execut� dersigned the day and year first above written. / BRENT PIERCE 'Unaermgneu'shall rarer to an oersons who sign this guaanty,severally an0 Iomny. f5q�rd ®Bankers Systems,Inc.,St.Cloud,MN 56301 FORM M-240 6/2012002(For Corporate Guarantor use M 250) (page 1 of 21 ADDITIONAL PROVISIONS 6.Whether or not any existing relationship between the Undersigned and Borrower has been changed or ended and whether or not this guaranty has been revoked, Lender may, but shall not be obligated to, enter into transactions resulting in the creation or continuance of Indebtedness, without any consent or approval by the Undersigned and without any notice to the Undersigned. The liability of the Undersigned shall not be affected or impaired by any of the following acts or things (which Lender is expressly authorized to do, omit or suffer from time to time, both before and after revocation of this guaranty, without notice to or approval by the Undersigned): (i) any acceptance of collateral security, guarantors, accommodation parties or sureties for any or all Indebtedness; (ii) any one or more extensions or renewals of Indebtedness (whether or not for longer than the original period) or any modification of the interest rates, maturities or other contractual terms applicable to any Indebtedness; (iii) any waiver, adjustment, forbearance, compromise or indulgence granted to Borrower, any delay or lack of diligence in the enforcement of Indebtedness, or any failure to institute proceedings, file a claim, give any required notices or otherwise protect any Indebtedness; (iv) any full or partial release of, settlement with, or agreement not to sue, Borrower or any other guarantor or other person liable in respect of any Indebtedness; (v) any discharge of any evidence of Indebtedness or the acceptance of any instrument in renewal thereof or substitution therefor; (vi) any failure to obtain collateral security (including rights of setoff) for Indebtedness, or to see to the proper or sufficient creation and perfection thereof, or to establish the priority thereof, or to protect, insure, or enforce any collateral security; or any release, modification, substitution, discharge, impairment, deterioration, waste, or loss of any collateral security; (vii) any foreclosure or enforcement of any collateral security; (viii) any transfer of any Indebtedness or any evidence thereof; lix) any order of application of any payments or credits upon Indebtedness; (x) any election by the Lender under §1 111(b)(2) of the United States Bankruptcy Code. 7. The Undersigned waives any and all defenses, claims and discharges of Borrower, or any other obligor, pertaining to Indebtedness, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, the Undersigned will not assert, plead or enforce against Lender any defense of waiver, release, statute of limitations, res judicata, statute of frauds, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to Borrower or any other person liable in respect of any Indebtedness, or any setoff available against Lender to Borrower or any such other person, whether or not on account of a related transaction. The Undersigned expressly agrees that the Undersigned shall be and remain liable,to the fullest extent permitted by applicable law, for any deficiency remaining after foreclosure of any mortgage or security interest securing Indebtedness, whether or not the liability of Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. The undersigned shall remain obligated, to the fullest extent permitted by law, to pay such amounts as though the Borrower's obligations had not been discharged. 8. The Undersigned further agrees that the Undersigned shall be and remain obligated to pay Indebtedness even though any other person obligated to pay Indebtedness, including Borrower, has such obligation discharged in bankruptcy or otherwise discharged by law. "Indebtedness" shall include post-bankruptcy petition interest and attorneys' fees and any other amounts which Borrower is discharged from paying or which do not otherwise accrue to Indebtedness due to Borrower's discharge, and the Undersigned shall remain obligated to pay such amounts as though Borrower's obligations had not been discharged. 9. If any payment applied by Lender to Indebtedness is thereafter set aside, recovered, rescinded or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor),the Indebtedness to which such payment was applied shall for the purposes of this guaranty be deemed to have continued in existence, notwithstanding such application, and this guaranty shall be enforceable as to such Indebtedness as fully as if such application had never been made. 10. The Undersigned waives any claim, remedy or other right which the Undersigned may now have or hereafter acquire against Borrower or any other person obligated to pay Indebtedness arising out of the creation or perfor- mance of the Undersigned's obligation under this guaranty, including, without limitation, any right of subrogation, contribution, reimbursement, indemnification, exoneration, and any right to participate in any claim or remedy the Undersigned may have against the Borrower, collateral, or other party obligated for Borrower's debts, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law. 11. The Undersigned waives presentment, demand for payment, notice of dishonor or nonpayment, and protest of any instrument evidencing Indebtedness. Lender shall not be required first to resort for payment of the Indebtedness to Borrower or other persons or their properties, or first to enforce, realize upon or exhaust any collateral security for Indebtedness, before enforcing this guaranty. 12. The liability of the Undersigned under this guaranty is in addition to and shall be cumulative with all other liabilities of the Undersigned to Lender as guarantor or otherwise, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary. 13. This guaranty shall be enforceable against each person signing this guaranty, even if only one person signs and regardless of any failure of other persons to sign this guaranty. If there be more than one signer, all agreements and promises herein shall be construed to be, and are hereby declared to be,joint and several in each of every particular and shall be fully binding upon and enforceable against either, any or all the Undersigned. This guaranty shall be effective upon delivery to Lender, without further act, condition or acceptance by Lender, shall be binding upon the Undersigned and the heirs, representatives, successors and assigns of the Undersigned and shall inure to the benefit of Lender and its participants, successors and assigns. Any invalidity or unenforceability of any provision or application of this guaranty shall not affect other lawful provisions and application hereof, and to this end the provisions of this guaranty are declared to be severable. Except as authorized by the terms herein, this guaranty may not be waived, modified, amended, terminated, released or otherwise changed except by a writing signed by the Undersigned and Lender. This guaranty shall be governed by the laws of the State in which it is executed. The Undersigned waives notice of Lender's acceptance hereof. Pe � E� Bankers Systems,Inc.,St.Cloud,MN 56301 FORM MQIo 620.'2007(Far Corporate Guarantor use M-2501 OAK HILLS DRILLING 6 OPERATING, LLC 225 KINGSBERRY RD First United Bank and Trust Co. PO BOX 470 HOLDENVILLE OK 74848-9201 PO Box 750 Ho=dervi_le, OK 74848-0'90 BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS includes each borrower above,jointly and severally. "You"means the lender,its successors and assigns. -Loan Number 2360295 Date FEBRUARY 02, 2006 Maturity Date 01/31/07 Loan Amount 50,000.00 Renewal Of DISBURSEMENT AUTHORIZATION I hereby authorize and request the following disbursement from the loan referenced above. Amount given to me directly ................................... Amount paid on my account N Loan Origination Fee (C) 500.00 AMOUNTS PAID TO OTHERS ON MY BEHALF. Insurance Companies .........._..................................._ Public Officials (C) 63.00 AVAILABLE LETTER OF CREDIT 50 000.00 Comments: '(C): Denotes Fee Paid In Cash N.1.LLS DI{I LIN /6 OPERATING. L:,C I Y: DO G HUM P)iREYS M R �Y: BRENRECTOR x x DISBJHA 37�02