Document:

e10-60magellanwtsbdeedof

Executed Version    3396653.10    ROOSEVELT COUNTY, MONTANA                  DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF   PRODUCTION AND FINANCING STATEMENT   (As-extracted collateral including, but not limited to, oil, gas and other minerals)   Nautilus Poplar LLC          Dated as of September 17, 2014                Please return documents with filing information to:      James R. Leeton, Jr.    Freeman Mills PC    400 W. Illinois, Suite 120    Midland, Texas  79701              THIS DEED OF TRUST (INCLUDING FINANCING STATEMENT) IS TO BE FILED   FOR RECORD IN THE REAL ESTATE RECORDS.   THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS,   SECURES PAYMENT OF FUTURE ADVANCES AND COVERS PROCEEDS OF   COLLATERAL.     THIS INSTRUMENT CONTAINS A NOTICE OF SECURITY INSTRUMENT   AFFECTING REAL PROPERTY IN EACH COUNTY IN WHICH IT IS RECORDED.     THIS INSTRUMENT SHALL BE EFFECTIVE AS, AMONG OTHER THINGS, A   SECURITY AGREEMENT AND FINANCING STATEMENT UNDER THE UNIFORM   COMMERCIAL CODE.  COLLATERAL INCLUDES FIXTURES AFFIXED TO, AS-   EXTRACTED COLLATERAL (INCLUDING, BUT NOT LIMITED TO, OIL, GAS AND   OTHER MINERALS) PRODUCED FROM AND ACCOUNTS ATTRIBUTABLE   THERETO, SAID PRODUCTION AND ACCOUNTS BEING FINANCED AT THE   WELLHEAD OF THE WELLS LOCATED ON THE PROPERTIES DESCRIBED IN   EXHIBIT “A” ATTACHED HERETO AND MADE A PART HEREOF.      

 

          2                  DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,    ASSIGNMENT OF PRODUCTION AND FINANCING STATEMENT     This Deed of Trust, Mortgage, Security Agreement, Assignment of Production and   Financing Statement (this “Mortgage”), to be effective as of September 17, 2014 (the “Effective   Date”),    W I T N E S S E T H:   ARTICLE I.      Granting Clauses; Secured Indebtedness   Section 1.1 Grant of Lien.  NAUTILUS POPLAR, LLC, a Montana limited liability   company, whose address is 1775 Sherman Street, Suite 1950, Denver, Colorado 80203, (herein   collectively called “Grantor,” whether one or more), for and in consideration of the sum of Ten   Dollars ($10.00) to Grantor in hand paid by MARK W. SPARKS, Trustee, whose address is   1501 W. University, Odessa, Texas 79764, for the benefit of Noteholder (as hereinafter defined)   as to all of the Mortgaged Properties (herein called “Trustee”), in order to secure the payment of   the secured indebtedness (as hereinafter defined) and the performance of the obligations,   covenants, agreements, warranties and undertakings of Grantor hereinafter described, does   hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and SET OVER to   Trustee (and where appropriate to effectuate the provisions of Section 4.4 hereof, does hereby   grant to Trustee for the benefit of Noteholder a POWER OF SALE with respect thereto pursuant   to this Mortgage and applicable law, and where appropriate to effectuate the provisions of   Section 4.5 hereof, does hereby MORTGAGE and WARRANT to Noteholder (as hereinafter   defined) the following:    A. The oil, gas and/or other mineral leases which are described in Exhibit A   attached hereto and made a part hereof, and the lands pooled or unitized therewith,   INSOFAR AND ONLY INSOFAR as to those depths and formation from the surface   down to immediately above the top of the Bakken formation, which is defined as the   stratigraphic equivalent of 7032 feet as shown on the electrical log for the Nautilus EPU   119 well (API No. 25-085-21777), located in the NE/4NE/4, Sec. 31, Twp. 29N, R. 51E,   MPM, Roosevelt County, Montana (the “Shallow Rights”), and all oil and gas wells   described in Exhibit A hereto, INSOFAR AND ONLY INSOFAR as such wells are   completed to or producing from the Shallow Rights;     B. Without limitation of the foregoing, all other right, title and interest of   Grantor of whatever kind or character (whether now owned or hereafter acquired by   operation of law or otherwise) in and to the Shallow Rights covering the lands which are   described or referred to in Exhibit A hereto as a part of the descriptions (contained in   such Exhibit A) of oil, gas and/or other mineral properties, or which are otherwise     

 

          3               described in any of the leases described in Exhibit A hereto, even though the interest of   Grantor in such lands may be incorrectly described in, or omitted from, Exhibit A hereto;    C. All of Grantor’s interest (whether now owned or hereafter acquired by   operation of law or otherwise) in and to all presently existing and hereafter created oil,   gas and/or mineral unitization, pooling and/or communitization agreements, declarations   and/or orders, and in and to the properties covered and the units created thereby   (including, without limitation, units formed under orders, rules, regulations or other   official acts of any federal, state or other authority having jurisdiction and so called   “working interest units” created under operating agreements or otherwise), which cover,   affect or otherwise relate solely to the properties described in clause A or B above, in   each case, INSOFAR AND ONLY INSOFAR as to the Shallow Rights;    D. All of Grantor’s interest in and rights under (whether now owned or   hereafter acquired by operation of law or otherwise) all presently existing and hereafter   created operating agreements, equipment leases, production sales, purchase, exchange   and/or processing agreements, transportation agreements, farmout and/or farm-in   agreements, salt water disposal agreements, area of mutual interest agreements, and other   contracts and/or agreements which cover, affect, or otherwise relate solely to the   properties described in clause A, B or C above or to the operation of such properties or to   the treating, handling, storing, transporting or marketing of oil, gas, other hydrocarbons,   or other minerals produced from (or allocated to) such properties, in each case,   INSOFAR AND ONLY INSOFAR as to the Shallow Rights; and      E. All of Grantor’s interest (whether now owned or hereafter acquired by   operation of law or otherwise) in and to all equipment, improvements, materials, supplies,   fixtures and other property (including, without limitation, all wells, pumping units,   wellhead equipment, tanks, pipelines, flow lines, gathering lines, compressors,   dehydration units, separators, meters, buildings, injection facilities, saltwater disposal   facilities, and power, telephone and facsimile lines) and all easements, servitudes, rights-   of-way, surface leases and other surface rights, which are now or hereafter used, or held   for use, solely in connection with the properties described in clauses A, B and C above,   or solely in connection with the operation of such properties, or solely in connection with   the treating, handling, storing, transporting or marketing of oil, gas, other hydrocarbons,   or other minerals produced from (or allocated to) such properties, in each case,   INSOFAR AND ONLY INSOFAR as to the Shallow Rights.     TO HAVE AND TO HOLD the foregoing rights, interests and properties, and all rights,   estates, powers and privileges appurtenant thereto, in each case, INSOFAR AND ONLY   INSOFAR as to the Shallow Rights (herein collectively called the “Mortgaged Properties” and   individually called a “Mortgaged Property”), unto Trustee, and his successors or substitutes in   this trust, and to his or their successors and assigns, in trust, for the benefit of Noteholder   however, upon the terms, provisions and conditions herein set forth.       

 

          4               Section 1.2 Grant of Security Interest.  In order to further secure the payment of the   secured indebtedness and the performance of the obligations, covenants, agreements, warranties,   and undertakings of Grantor hereinafter described, Grantor hereby grants to Noteholder a   security interest in the entire interest of Grantor (whether now owned or hereafter acquired by   operation of law or otherwise) in and to:     (a) the Mortgaged Properties;     (b) all as-extracted collateral and all oil, gas, other hydrocarbons, and other   minerals produced from or allocated to the Mortgaged Properties, and any products   processed or obtained therefrom (herein collectively called the “Production”), and all   liens and security interests  in the Production securing payment of the proceeds of the   Production including, but not limited to, those liens and security interests provided under   statutes enacted in the jurisdictions in which the Mortgaged Properties are located;    (c) all equipment, inventory, improvements, fixtures, accessions, goods and   other personal property of whatever nature now or hereafter located on or used or held for   use solely in connection with the Mortgaged Properties (or solely in connection with the   operation thereof or the treating, handling, storing, transporting, processing, or marketing   of Production) and all renewals or replacements thereof or substitutions therefor;     (d) to the extent assignable all contract rights, contractual rights, and other   general intangibles related to the Mortgaged Properties, the operation thereof (whether   Grantor is operator or non-operator), or the treating, handling, storing, transporting,   processing, or marketing of Production, or under which the proceeds of Production arise   or are evidenced or governed;     (e) to the extent assignable all geological, geophysical, engineering,   accounting, title, legal, and other technical or business data concerning the Mortgaged   Properties, the Production, or any other item of Property (as hereinafter defined) which   are in the possession of Grantor or in which Grantor can otherwise grant a security   interest, and all books, files, records, magnetic media, computer records, and other forms   of recording or obtaining access to such data;     (f) all money, documents, instruments, chattel paper, securities, accounts, or   general intangibles arising from or by virtue of any transaction related to the Mortgaged   Properties or the Production (all of the properties, rights and interests described in   subsections (a), (b), (c), (d), and (e) above and this subsection (f) being herein sometimes   collectively called the “Collateral”); and     (g) all proceeds of the Collateral or payments in lieu of Production (such as   “take or pay” payments), whether such proceeds or payments are goods, money,   documents, instruments, chattel paper, securities, accounts, general intangibles, fixtures,   real property, or other assets (the Mortgaged Properties, the Collateral and the proceeds     

 

          5               of the Collateral and payments in lieu of Production being herein sometimes collectively   called the “Property”).     Section 1.3 Note, Loan Documents, Other Obligations.  This Mortgage is made to   secure and enforce the payment and performance of the following promissory notes, obligations,   indebtedness and liabilities:     (a) A Promissory Note (Revolving Line of Credit Note) dated as of the   Effective Date having an original principal commitment amount of $8,000,000.00   executed by Grantor and payable to the order of West Texas State Bank (“Lender”) on or   before September 30, 2015, bearing interest as therein provided, and containing a   provision for the payment of a reasonable additional amount as attorneys’ fees, and all   other notes given in substitution or replacement therefor or in modification, renewal or   extension thereof, in whole or in part (as from time to time supplemented, amended, or   modified and all other notes given in substitution or replacement therefor, or in   modification, renewal or extension thereof, in whole or in part, being hereinafter called   the “Note” and Lender and each subsequent holder of the Note or any part thereof or   interest therein, or any of the other secured indebtedness being herein called   “Noteholder”);   (b) All indebtedness and other obligations owed to Noteholder now or   hereafter incurred or arising pursuant to or permitted by the provisions of the Note, the   Loan Agreement as set out below, this Mortgage or any other instrument now or hereafter   evidencing, governing, guaranteeing or securing the secured indebtedness or any part   thereof or otherwise executed in connection with the loan evidenced or governed by the   Note or the Loan Agreement (the Note, the Loan Agreement, this Mortgage and such   other instruments being herein sometimes collectively called the “Loan Documents”);   and     (c) All other loans and future advances made by Noteholder to Grantor and all   other debts, obligations and liabilities of Grantor of every kind and character now or   hereafter existing in favor of Noteholder, whether direct or indirect, primary or   secondary, joint or several, fixed or contingent, and whether originally payable to   Noteholder or to a third party and subsequently acquired by Noteholder, including,   without limitation, all obligations of Grantor to Noteholder in connection with letters of   credit issued by Noteholder at the application of Grantor, it being contemplated that   Grantor may hereafter become indebted to Noteholder for such further debts, obligations   and liabilities.    Section 1.4 Future Advances. This Mortgage secures the payment of future advances   of revolving loans which may be made after the date hereof to the same extent as if such future   advances were made on the date of the execution of this Mortgage, although there may be no   advance made on the date of the execution of this Mortgage, and although there may be no   indebtedness outstanding at the time any advance is made.  The total principal amount of secured   indebtedness may decrease or increase from time to time but the total unpaid principal balance so     

 

          6               secured at any one time shall not exceed TEN MILLION DOLLARS AND NO CENTS   ($10,000,000.00), plus interest thereon.  The parties hereby acknowledge and intend that all   advances of the revolving loans, including future advances whenever hereafter made, shall be a   lien from the time this Mortgage is recorded.      Section 1.5 Secured Indebtedness.  The indebtedness referred to in Section 1.3 and   1.4, and all renewals, extensions and modifications thereof, and all substitutions therefor, in   whole or in part, are hereinafter sometimes referred to as the “secured indebtedness” or the   “indebtedness secured hereby.”     ARTICLE II.      Representations, Warranties and Covenants     Section 2.1 Grantor represents, warrants, and covenants as follows:      (a) Title and Permitted Encumbrances.  Grantor has, and Grantor covenants to   maintain, good and defensible title to the Property free and clear of all liens, security   interests, and encumbrances except for Permitted Encumbrances (as defined in the Loan   Agreement); Grantor will warrant and defend title to the Property, subject as aforesaid,   against the claims and demands of all persons claiming or to claim the same or any part   thereof.  With respect to each Mortgaged Property, the ownership of Grantor in such   Mortgaged Property does and will, (i) with respect to each tract of land described in   Exhibit A hereto in connection with such Mortgaged Property, (A) entitle Grantor to   receive (subject to the terms and provisions of this Mortgage) a decimal, percentage or   fractional share of the Production produced from, or allocated to, such tract equal to not   less than the decimal, percentage or fractional share set forth in Exhibit A in connection   with such tract opposite the words “Nautilus Net Revenue Interest” (or words of similar   import), (B) cause Grantor to be obligated to bear a decimal, percentage or fractional   share of the cost of exploration, development and operation of such tract of land not   greater than the decimal, percentage or fractional share set forth in Exhibit A in   connection with such tract opposite the words “Working Interest” (or words of similar   import) and (ii) if such Mortgaged Property is shown in Exhibit A to be subject to a   pooled unit or units, with respect to each such unit, (A) entitle Grantor to receive (subject   to the terms and provisions of this Mortgage) a decimal, percentage or fractional share of   Production produced from, or allocated to, such unit equal to not less than the decimal,   percentage or fractional share set forth in Exhibit A in connection with such Mortgaged   Property opposite the words “Unit Net Revenue Interest” or words of similar import (and   if such Mortgaged Property is subject to more than one unit, words identifying such   interest with such unit), and (B) obligate Grantor to bear a decimal share of the cost of   exploration, development and operation of such unit not greater than the decimal share   set forth in Exhibit A in connection with such Mortgaged Property opposite the words   “Unit Working Interest” or words of similar import (and if such Mortgaged Property is     

 

          7               subject to more than one unit, words identifying such interest with such unit); such shares   of Production which Grantor is entitled to receive, and shares of expenses which Grantor   is obligated to bear, are not and will not be subject to change (other than (i) changes   which arise pursuant to non-consent provisions of operating agreements described in   Exhibit A in connection with such Mortgaged Properties, respectively, in connection with   operations hereafter proposed, (ii) changes resulting from the establishment or   amendment after the date hereof of any pooled unit or units or (iii) increases in the   decimal share of the cost of exploration, development and operation of such Mortgaged   Property or unit in which Grantor is obligated to bear, but only to the extent accompanied   by a proportionate increase in the decimal, percentage or fractional share of Production   produced from, or allocated to, such Mortgaged Property or unit to which Grantor is   entitled) except, and only to the extent that, such changes are reflected in Exhibit A.    There is not and will not be any unexpired financing statement covering any part of the   Property on file in any public office naming any party other than Lender as secured party   and other than in connection with Permitted Encumbrances.  The execution, delivery and   performance of this Mortgage and the creation of the liens hereunder do not violate any   provision or constitute a default under any operating agreement or other instrument to   which Grantor is a party.      (b) Leases and Contracts.  The oil, gas and/or mineral leases, contracts and   other agreements forming a part of the Property, to the extent the same cover or otherwise   relate solely to the lands described or referred to in Exhibit A, are in full force and effect,   and Grantor agrees to maintain them in full force and effect.      (c) Contracts and Credits for Sale of Production.  Neither Grantor, nor its   predecessors in title, have received prepayments (including, but not limited to, payments   for gas not taken pursuant to “take or pay” arrangements) for Production produced or to   be produced from the Mortgaged Properties after the Effective Date, except as expressly   set forth in Exhibit A hereto following the description of each affected Mortgaged   Property.        (d) Condition of Personal Property.  The material inventory, equipment,   fixtures and other material tangible personal property forming a part of the Property are   and will remain, in good repair and condition (ordinary wear and tear excepted and other   than as a result of casualty or condemnation) and are and will be reasonably adequate for   the normal operation of the Property in accordance with past practices and prudent   industry standards; all of such Property is, and will remain, located on the Mortgaged   Properties, except for that portion thereof which is or shall be located elsewhere   (including that usually located on the Mortgaged Properties but temporarily located   elsewhere) but within the same State in the course of the normal operation of the   Property.      (e) Operation of Mortgaged Properties.  The Mortgaged Properties (and   properties unitized therewith) are being (and, to the extent the same could materially   adversely affect the ownership or operation of the Mortgaged Properties after the     

 

          8               Effective Date, during the period that the Mortgage Properties have been operated by   Grantor, have been) and hereafter will be maintained, operated and developed in a good   and workmanlike manner (other than as a result of casualty or condemnation) and in   conformity with all applicable laws and all rules, regulations and orders of all duly   constituted authorities having jurisdiction and in conformity in all material respects with   all oil, gas and/or other mineral leases and other contracts and agreements forming a part   of the Property and in conformity with the Permitted Encumbrances.     (f) Taxes and Other Obligations.  Grantor will pay and discharge when due   all taxes assessed against the Properties unless being contested in good faith by   appropriate proceedings.     (g) Suits and Claims.  As of the Effective Date, there are no material suits,   actions, claims, investigations, inquiries, proceedings or demands pending (or, to   Grantor’s knowledge, threatened in writing) which affect the Property (including, without   limitation, any which challenge or otherwise pertain to Grantor’s title to the Property) and   no material judicial or administrative actions, suits or proceedings pending (or, to   Grantor’s knowledge, threatened in writing) against Grantor.     (h) Organization.  In the event Grantor is a corporation, partnership, or other   legal entity which is not a natural person, Grantor is and will continue to be duly   organized, validly existing and in good standing under the laws of its state of   incorporation or other form of organization and is and will continue to be authorized to   do business in, and in good standing in, each state which the Mortgaged Properties are   located and in each other jurisdiction where the nature of Grantor or the nature of the   business transacted by Grantor makes such qualification necessary.  Grantor has all   requisite corporate or other power to carry on its business and to enter into, and carry out,   the transactions contemplated by the Loan Documents and perform its obligations under   the Loan Documents.  All necessary corporate or other action has been taken to authorize   the execution and delivery by Grantor (and the individuals acting on behalf of Grantor) of   the Loan Documents and to authorize the consummation of the transactions contemplated   by the Loan Documents and the performance by Grantor of its obligations under the Loan   Documents.      (i) Environmental.     (i) Current Status. The Property and Grantor are not in violation of or   subject to any existing, pending or, to the knowledge of Grantor,   threatened (in writing) investigation or inquiry by any governmental   authority or to any remedial obligations under any applicable laws or   regulations pertaining to health or the environment (such laws or   regulations as they now exist or are hereafter enacted and/or amended   hereinafter sometimes collectively called “Applicable Environmental   Laws”).        

 

          9               (ii) Future Performance.  Grantor will not cause or permit the Property   or Grantor to be in violation of, or do anything or permit anything to be   done which will subject the Property to any material remedial obligations   under any Applicable Environmental Laws.     (j) Not a Foreign Person.  Grantor is not a “foreign person” within the   meaning of the Internal Revenue Code of 1986, as amended (hereinafter called the   “Code”), Sections 1445 and 7701.     (k) Payment.  Grantor will make due and punctual payment of the Note and of   all other secured indebtedness and of all installments of principal thereof or interest   thereon, as the same become due and payable, whether at a date for payment of a fixed   installment, or contingent or other payment, or as a result of acceleration or otherwise.    Grantor will timely and properly perform all of the covenants, agreements, and conditions   imposed upon it by this Mortgage or the Loan Documents and will not permit an Event of   Default to occur hereunder or thereunder.     (l) Defense of Mortgage.  If the validity or priority of this Mortgage or of any   material rights, titles, liens or security interests created or evidenced hereby with respect   to the Property or any part thereof or the title of Grantor to the Property shall be   endangered or questioned or shall be attacked directly or indirectly or if any legal   proceedings are instituted against Grantor with respect thereto, Grantor will give prompt   written notice thereof to Noteholder and at Grantor’s own cost and expense will   diligently endeavor to cure any defect that may be developed or claimed, and will take all   necessary and proper steps for the defense of such legal proceedings, including, but not   limited to, the employment of counsel, the prosecution or defense of litigation and the   release or discharge of all adverse claims, and Trustee and Noteholder, or either of them   (whether or not named as parties to legal proceedings with respect thereto), are hereby   authorized and empowered to take such additional steps as in their reasonable judgment   and discretion may be necessary or proper for the defense of any such legal proceedings   or the protection of the validity or priority of this Mortgage and the rights, titles, liens and   security interests created or evidenced hereby.      (m) Further Assurances.  Grantor will, on request of Noteholder, (i) promptly   correct any defect, error or omission which may be discovered in the contents of this   Mortgage, or in any other Loan Document, or in the execution or acknowledgment of this   Mortgage or any other Loan Document; (ii) execute, acknowledge, deliver and record   and/or file such further instruments (including, without limitation, further deeds of trust,   security agreements, financing statements, continuation statements, and assignments of   production, accounts, funds, contract rights, general intangibles, and proceeds) and do   such further acts as may be necessary, desirable or proper to carry out more effectively   the purposes of this Mortgage and the other Loan Documents and to more fully identify   and subject to the liens and security interests hereof any property intended to be covered   hereby, including specifically, but without limitation, any renewals, additions,   substitutions, replacements, or appurtenances to the Property; and (iii) execute,     

 

          10               acknowledge, deliver, and file and/or record any document or instrument (including   specifically any financing statement) reasonably requested by Noteholder to protect the   lien or the security interest hereunder against the rights or interests of third persons other   than holders of Permitted Encumbrances.  Grantor shall pay all reasonable costs   connected with any of the foregoing.     (n) Fees and Expenses; Indemnity.  Grantor will pay all appraisal fees,   recording fees, taxes, brokerage fees and commissions, abstract and other records search   fees, reasonable out-of-pocket attorneys’ fees and expenses and all other reasonable costs   and expenses of every character incurred by Grantor or Noteholder in connection with the   closing of the loan or loans evidenced by the Loan Documents and any and all   amendments, supplements or modifications to such loan transaction or transactions.   Grantor will reimburse Trustee and Noteholder for all expenditures, including reasonable   out-of-pocket attorneys’ fees and expenses, incurred or expended in connection with (i)   the breach by Grantor of any covenant, agreement or condition contained herein or in any   other Loan Document, (ii) Noteholder’s exercise of any of its rights and remedies   hereunder or under any other Loan Document, and (iii) the protection of the Property   during the continuance of an Event of Default and/or Noteholder’s liens and security   interests therein.      (o) Disposition of Property.  Grantor shall account fully and faithfully for and,   if Noteholder so elects, shall promptly pay or turn over to Noteholder the proceeds in   whatever form received from disposition in any manner of any of the Property in   violation of the terms of the Loan Agreement.    (p) No Credits Against Take or Pay Provisions.  Grantor will not, without   prior written consent of Noteholder, authorize the purchaser or transporter of gas from   another property to satisfy such purchaser’s or transporter’s obligations under a “take or   pay” or “take and pay” provision of a gas sales contract covering all or any part of the   Mortgaged Properties by the purchase or transportation of gas from such other property.   (q) Insurance.  If Grantor is the operator of any wells comprising a part of the   Mortgaged Properties, Grantor will keep such part of the Mortgaged Properties which is   of an insurable nature and of a character usually insured by persons operating similar   properties, insured with companies of recognized responsibility reasonably satisfactory to   Noteholder and in such amounts as are reasonably acceptable to Noteholder (and in the   absence of specification of such amounts by Noteholder, in the amount of the full value   of such Mortgaged Properties).     (r) Taxes on Note or Mortgage.  Grantor will promptly pay all income,   franchise and other taxes owing by Grantor and any stamp taxes or other taxes (unless   such payment by Grantor is prohibited by law) which may be required to be paid with   respect to the Note, this Mortgage or any other instrument evidencing or securing any of   the secured indebtedness       

 

          11               Section 2.2 Compliance by Operator.  As to any part of the Mortgaged Properties   which is operated by a party other than Grantor, Grantor agrees to take all such commercially   reasonable action and to exercise all rights and remedies as are available to Grantor (including,   but not limited to, all rights under any Operating Agreement) to cause the party who is the   operator of such Mortgaged Properties to comply in all material respects with the covenants and   agreements contained herein.     Section 2.3 Performance by Noteholder on Grantor’s Behalf.  Grantor agrees that, if   any Event of Default is continuing as a result of Grantor failure to perform any act or to take any   action which hereunder Grantor is required to perform or take, or to pay any money which   hereunder Grantor is required to pay, Noteholder, in Grantor’s name or its own name, may, but   shall not be obligated to, perform or cause to be performed such act or take such action or pay   such money, and any expenses so incurred by Noteholder and any money so paid by Noteholder,   shall be a demand obligation owing by Grantor to Noteholder (which obligation Grantor hereby   expressly promises to pay) and Noteholder, upon making such payment, shall be subrogated to   all of the rights of the person, corporation or body politic receiving such payment.  Each amount   due and owing by Grantor to Noteholder pursuant to this Mortgage shall bear interest each day,   from the date of such expenditure or payment until paid, at a rate equal to the rate as provided for   past-due principal under the Note (provided that, should applicable law provide for a maximum   permissible rate of interest on such amounts, such rate shall not be greater than such maximum   permissible rate); all such amounts, together with such interest thereon, shall be a part of the   secured indebtedness and shall be secured by this Mortgage.     ARTICLE III.      Assignment of Production, Accounts, and Proceeds    Section 3.1 Assignment of Production. Grantor does hereby absolutely and   unconditionally assign, transfer and set over to Noteholder all Production which accrues after the   Effective Date to Grantor’s interest in the Mortgaged Properties (all proceeds of such Production   and payments in lieu of Production such as “take or pay” proceeds and payments in lieu of   Production being herein referred to as the “Production Proceeds”), together with the immediate   and continuing right to collect and receive such Production Proceeds; provided that Noteholder   hereby grants to Borrower a license to continue to collect, receive and use such Production   Proceeds except after an Event of Default.  Grantor will direct and instruct in the event of an   Event of Default any and all purchasers of any Production to pay to Noteholder all of the   Production Proceeds accruing to Grantor’s interest until such time as such purchasers have been   furnished with evidence that all secured indebtedness has been paid and that this Mortgage has   been released.  Grantor agrees that no purchasers of the Production shall have any responsibility   for the application of any funds paid to Noteholder.     Section 3.2 Effectuating Payment of Production Proceeds to Noteholder.  Independent   of the foregoing provisions and authorities herein granted, Grantor agrees to execute and deliver   any and all transfer orders, division orders and other instruments that may be requested by   Noteholder or that may be required by any purchaser of any Production for the purpose of     

 

          12               effectuating payment of the Production Proceeds to Noteholder after an Event of Default.  If   under any existing sales agreements, other than division orders or transfer orders, any Production   Proceeds are required to be paid by the purchaser to Grantor so that under such existing   agreements payment cannot be made of such Production Proceeds to Noteholder after an Event   of Default, Grantor’s interest in all Production Proceeds under such sales agreements and in all   other Production Proceeds which for any reason may be paid to Grantor shall, when received by   Grantor after an Event of Default, constitute trust funds in Grantor’s hands and shall be   immediately paid over to Noteholder.  Without limitation upon any of the foregoing, Grantor   hereby constitutes and appoints Noteholder as Grantor’s special attorney-in-fact (with full power   of substitution, either generally or for such periods or purposes as Noteholder may from time to   time prescribe) in the name, place and stead of Grantor to do any and every act and exercise any   and every power that Grantor might or could do or exercise personally with respect to all   Production and Production Proceeds after an Event of Default (the same having been assigned by   Grantor to Noteholder pursuant to Section 3.1 hereof), expressly inclusive, but not limited to, the   right, power and authority after an Event of Default to:     (a) Execute and deliver in the name of Grantor any and all transfer orders,   division orders, letters in lieu of transfer orders, indemnifications, certificates and other   instruments of every nature that may be requested or required by any purchaser of   Production from any of the Mortgaged Properties for the purposes of effectuating   payment of the Production Proceeds to Noteholder or which Noteholder may otherwise   deem necessary or appropriate to effect the intent and purposes of the assignment   contained in Section 3.1; and     (b) If under any product sales agreements other than division orders or   transfer orders, any Production Proceeds are required to be paid by the purchaser to   Grantor so that under such existing agreements payment cannot be made of such   Production Proceeds to Noteholder, to make, execute and enter into such sales   agreements or other agreements as are necessary to direct Production Proceeds to be   payable to Noteholder;     giving and granting unto said attorney-in-fact full power and authority to do and perform any and   every act and thing whatsoever necessary and requisite to be done as fully and to all intents and   purposes, as Grantor might or could do if personally present; and Grantor shall be bound thereby   as fully and effectively as if Grantor had personally executed, acknowledged and delivered any   of the foregoing certificates or documents.  The powers and authorities herein conferred upon   Noteholder may be exercised by Noteholder after an Event of Default through any person who,   at the time of the execution of the particular instrument, is an officer of Noteholder.  The power   of attorney herein conferred is granted for valuable consideration and hence is coupled with an   interest and is irrevocable so long as the secured indebtedness, or any part thereof (other than   contingent indemnification obligations to the extent no claim giving rise thereto has been   asserted), shall remain unpaid and this Mortgage is unreleased.  All persons dealing with   Noteholder or any substitute, shall be fully protected in treating the powers and authorities   conferred by this paragraph as continuing in full force and effect until advised by Noteholder that   all the secured indebtedness is fully and finally paid and this Mortgage is released.       

 

          13               Section 3.3 Change of Purchaser.  Should any person now or hereafter purchasing or   taking Production fail to make payment promptly to Noteholder of the Production Proceeds after   an Event of Default, Noteholder shall have the right to make, or to require Grantor to make, a   change of connection and the right to designate or approve the purchaser with whose facilities a   new connection shall be made, and Noteholder shall have no liability or responsibility in   connection therewith so long as ordinary care is used in making such designation.      Section 3.4 Application of Production Proceeds.       After an Event of Default, all Production Proceeds from time to time in the hands of Noteholder   shall be applied by it toward the payment of all secured indebtedness (principal, interest,   reasonable out-of-pocket attorneys’ fees and other fees and expenses) at such times and in such   manner and order and to such extent as Noteholder deems advisable.  Any Production Proceeds   from time to time received by Noteholder after an Event of Default shall be credited to, or sent at   the direction of, Borrower.                 Section 3.5 Release From Liability; Indemnification.  Noteholder and its successors and   assigns are hereby absolved from all liability for failure to enforce collection of the Production   Proceeds and from all other responsibility in connection therewith, except the responsibility of   each to account to Grantor for funds actually received by each and for its gross negligence,   willful misconduct and fraud.  Grantor agrees to indemnify and hold harmless Noteholder (for   purposes of this paragraph, the term “Noteholder” shall include the directors, officers, partners,   employees and agents of Noteholder and any persons or entities owned or controlled by or   affiliated with Noteholder) against any and all claims, demands, liabilities, losses, damages   (including without limitation consequential damages), causes of action, judgments, penalties,   reasonable costs and expenses (including without limitation reasonable out-of-pocket attorneys’   fees and expenses) by reason of the assertion that Noteholder received, either before or after   payment in full of the secured indebtedness, funds from the production of oil, gas, other   hydrocarbons or other minerals claimed by third persons (and/or funds attributable to sales of   production which (i) were made at prices in excess of the maximum price permitted by   applicable law or (ii) were otherwise made in violation of laws, rules, regulations and/or orders   governing such sales), and Noteholder shall have the right to defend against any such claims or   actions, employing attorneys of its own selection, and if not furnished with indemnity reasonably   satisfactory to it, Noteholder shall have the right to compromise and adjust any such claims,   actions and judgments, and in addition to the rights to be indemnified as herein provided, all   amounts paid by Noteholder in compromise, satisfaction or discharge of any such claim, action   or judgment, and all court costs, reasonable out-of-pocket attorneys’ fees and other expenses of   every character expended by Noteholder pursuant to the provisions of this section shall be a   demand obligation (which obligation Grantor hereby expressly promises to pay) owing by   Grantor to Noteholder and shall bear interest, from the date expended until paid, at the rate   described in Section 2.3 hereof.  WITHOUT LIMITATION, IT IS THE INTENTION OF   GRANTOR AND GRANTOR AGREES THAT THE FOREGOING INDEMNITIES   SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL   CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING WITHOUT   LIMITATION CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS,     

 

          14               PENALTIES, REASONABLE COSTS AND EXPENSES (INCLUDING WITHOUT   LIMITATION REASONABLE OUT-OF-POCKET ATTORNEYS’ FEES AND   EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF   THE SIMPLE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED   PARTY.  However, such indemnities shall not apply to any particular indemnified party (but   shall apply to the other indemnified parties, it being understood that Noteholder shall be   considered the same indemnified party as its directors, officers, partners, employees and agents)   to the extent the subject of the indemnification is caused by or arises out of the gross negligence,   fraud or willful misconduct of such particular indemnified party.      Section 3.5 Grantor’s Absolute Obligation to Pay Note.  Nothing herein contained   shall detract from or limit the obligations of Grantor to make prompt payment of the Note, and   any and all other secured indebtedness, at the time and in the manner provided herein and in the   Loan Documents, regardless of whether the Production and Production Proceeds herein assigned   are sufficient to pay same, and the rights under this Article III shall be cumulative of all other   rights of Noteholder under the Loan Documents.     ARTICLE IV.      Remedies Upon Default     Section 4.1 Default.  The term “Event of Default” as used in this Mortgage shall mean   the occurrence of any of the following events:     (a) the failure of Grantor to make due and punctual payment of the Note or of   any other secured indebtedness or of any installment of principal thereof or interest   thereon, or any part thereof, as the same shall become due and payable, whether at a date   for payment of a fixed installment or contingent or other payment, or as a result of   acceleration, or otherwise, and such failure is not remedied within five (5) days of written   notice of said non-payment by Noteholder; or     (b) the failure of Grantor to pay over to Noteholder any Production Proceeds   which are receivable by Noteholder under this Mortgage but which are paid to Grantor   rather than Noteholder (either as provided for in Section 3.2 hereof or otherwise), and   such failure is not remedied within 5 days after written notice and demand by Noteholder;   or     (c) the failure of Grantor timely and properly to observe, keep or perform any   covenant, agreement, warranty or condition herein or in any other Loan Document   required to be observed, kept or performed (other than covenant, agreement, warranty or   condition otherwise constituting an Event of Default hereunder or under any other Loan   Document), and such failure is not remedied within the cure or grace period provided or,   if no specific cure period is provided, then within 20 days after written notice and   demand by Noteholder; or       

 

          15               (d) any representation contained herein or in any other Loan Document shall   prove to have been false or misleading in any material respect on the date, or as of which,   made and such representation is not made true and correct (as of the time such corrective   action is taken) within the cure or grace period provided or, if no specific cure period is   provided, then within 20 days after written notice and demand by Noteholder; or     (e) [intentionally omitted]; or     (f) Grantor suffers the entry against it of a judgment, decree or order for relief   by a court of competent jurisdiction in an involuntary case commenced under any   applicable bankruptcy, insolvency or other similar law of any jurisdiction now or   hereafter in effect, including the United States Bankruptcy Code, as amended; or     (g) Grantor suffers the appointment of a receiver, liquidator, assignee,   custodian, trustee, sequestrator or similar official for a substantial part of its Property in a   proceeding brought against it and (1) such appointment is neither made ineffective nor   discharged, released, vacated or fully bonded within thirty days after the making thereof,   or (2) such appointment is consented to, requested by, or acquiesced to by Grantor; or     (h) Grantor commences an action or voluntary case under any applicable   bankruptcy, insolvency or similar law now or hereafter in effect, including the United   States Bankruptcy Code, as amended; or consents to the entry of an order for relief in an   involuntary case under any such law or to the appointment of or taking possession by a   receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of   any substantial part of its assets or any part of the Property; or     (i) Grantor makes a general assignment for the benefit of creditors or fails   generally to pay its debts as such debts become due or takes corporate or other action in   furtherance thereof or in furtherance of any proceeding described in subparagraph (h)   immediately above; or     (j) Grantor suffers a writ or warrant of attachment or any similar process to   be issued by any court against all or any substantial part of its Property, and such writ or   warrant of attachment or any similar process is not stayed, vacated, fully bonded or   released within thirty days after the entry or levy thereof; or     (k) Any of the events referred to above in subsections (c), (d), (f), (g), (h), (i)   and (j) shall occur with respect to any guarantor of the secured indebtedness and shall not   be remedied within the applicable grace period (if any) set forth in such subsections; or    (l) a “default” or “event of default” occurs under any Loan Document, other   than this Mortgage, which defines either such term and the same is not remedied within   the applicable period of cure or grace (if any) provided in such Loan Document.   Section 4.2 Acceleration of Secured Indebtedness.  Upon the occurrence of an Event   of Default described in subsection (f), (g), or (h) of section 4.1 above, all of the secured     

 

          16               indebtedness shall thereupon be immediately due and payable, without presentment, demand,   protest, notice of protest, declaration or notice of acceleration or intention to accelerate, or any   other notice or declaration of any kind, all of which are hereby expressly waived by Grantor.    During the continuance of any other Event of Default, Noteholder at any time and from time to   time may without notice to Grantor or any other person declare any or all of the secured   indebtedness immediately due and payable and all such secured indebtedness shall thereupon be   immediately due and payable, without presentment, demand, protest, notice of protest, notice of   acceleration or of intention to accelerate or any other notice or declaration of any kind, all of   which are hereby expressly waived by Grantor, and the liens evidenced hereby shall be subject to   foreclosure in any manner provided for herein or provided for by law as Noteholder may elect.     Section 4.3 Pre-Foreclosure Remedies.  Upon the occurrence and during the   continuance of an Event of Default, Noteholder is authorized, prior or subsequent to the   institution of any foreclosure proceedings, to enter upon the Property, or any part thereof, and to   take possession of the Property and all books and records relating thereto, and to exercise   without interference from Grantor any and all rights which Grantor has with respect to the   management, possession, operation, protection or preservation of the Property.  All reasonable   costs, expenses and liabilities of every character incurred by Noteholder in managing, operating,   maintaining, protecting or preserving the Property shall constitute a demand obligation (which   obligation Grantor hereby expressly promises to pay) owing by Grantor to Noteholder and shall   bear interest from date of expenditure until paid at the rate described in Section 2.3 hereof, all of   which shall constitute a portion of the secured indebtedness and shall be secured by this   Mortgage and by any other instrument securing the secured indebtedness.  If necessary to obtain   the possession provided for above, Noteholder may invoke any and all lawful remedies to   dispossess Grantor.  In connection with any action taken by Noteholder pursuant to this Section   4.3, Noteholder shall not be liable for any loss sustained by Grantor resulting from any act or   omission of Noteholder in managing the Property unless such loss is caused by the willful   misconduct, gross negligence, fraud or bad faith of Noteholder, nor shall Noteholder be obligated   to perform or discharge any obligation, duty or liability of Grantor arising under any agreement   forming a part of the Property or arising under any Permitted Encumbrance prior to any    foreclosure on, appointment of a receiver for, or deed-in-lieu with respect thereto by or on behalf   of Trustee or Noteholder.  Grantor hereby assents to, ratifies and confirms any and all actions of   Noteholder with respect to the Property taken under this Section 4.3. without wilful misconduct   and bad faith.     Section 4.4 Foreclosure.  Upon the occurrence and during the continuance of an Event   of Default, Trustee, or his successor or substitute, is authorized and empowered and it shall be   his special duty at the request of Noteholder to sell the Mortgaged Properties or any part thereof   as an entirety or in parcels as Noteholder may elect, at such place or places and otherwise in the   manner and upon such notice as may be required by law or, in the absence of any such   requirement, as Trustee may deem appropriate.  To the extent permitted by applicable law, any   sale may be adjourned by announcement at the time and place appointed for such sale without   further notice except as may be required by law.  The sale by Trustee of less than the whole of   the Mortgaged Properties shall not exhaust the power of sale herein granted, and Trustee is   specifically empowered to make successive sale or sales under such power until the whole of the     

 

          17               Mortgaged Properties shall be sold; and, if the proceeds of such sale of less than the whole of the   Mortgaged Properties shall be less than the aggregate of the indebtedness secured hereby and the   expense of executing this trust as provided herein, this Mortgage and the lien hereof shall remain   in full force and effect as to the unsold portion of the Mortgaged Properties just as though no sale   had been made; provided, however, that Grantor shall never have any right to require the sale of   less than the whole of the Mortgaged Properties but Noteholder shall have the right, at its sole   election, to request Trustee to sell less than the whole of the Mortgaged Properties.  After each   sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient   conveyances in the name of Grantor, conveying the property so sold to the purchaser or   purchasers with special warranty of title, and shall receive the proceeds of said sale or sales and   apply the same as herein provided.  The power of sale granted herein shall not be exhausted by   any sale held hereunder by Trustee or his substitute or successor, and such power of sale may be   exercised from time to time and as many times as Noteholder may deem necessary until all of the   Mortgaged Properties have been duly sold and all secured indebtedness has been fully paid.  In   the event any sale hereunder is not completed or is defective in the opinion of Noteholder, such   sale shall not exhaust the power of sale hereunder and Noteholder shall have the right to cause a   subsequent sale or sales to be made hereunder.  Any and all statements of fact or other recitals   made in any deed or deeds given by Trustee or any successor or substitute appointed hereunder   as to nonpayment of the secured indebtedness beyond any applicable cure or grace period or as   to the occurrence of any other Event of Default, or as to Noteholder’s having declared all of said   indebtedness to be due and payable, or as to the request to sell, or as to notice of time, place and   terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or   inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any   substitute or successor trustee, or as to any other act or thing having been duly done by   Noteholder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of   the truth of the facts so stated and recited.  The Trustee or his successor or substitute may appoint   or delegate any one or more persons as agent to perform any act or acts necessary or incident to   any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name   and on behalf of Trustee, his successor or substitute.  If Trustee or his successor or substitute   shall have given notice of sale hereunder, any successor or substitute Trustee thereafter   appointed may complete the sale and the conveyance of the property pursuant thereto as if such   notice had been given by the successor or substitute Trustee conducting the sale.  Cumulative of   the foregoing provisions, it being expressly understood that:     As to Mortgaged Properties located in the State of Texas, such sales of all or any   part of such Mortgaged Properties shall be conducted at the courthouse of any   county (whether or not the counties in which the Mortgaged Properties are located   are contiguous) in the State of Texas in which any part of the Mortgaged   Properties is situated, at public venue to the highest bidder for cash between the   hours of ten o’clock a.m. and four o’clock p.m. (and not later than three hours   after the time of sale set forth in the notice thereof) on the first Tuesday in any   month or at such other place, time and date as provided by the statutes of the State   of Texas then in force governing sales of real estate under powers conferred by   deed of trust, after having given notice of such sale in accordance with such   statutes.       

 

          18               A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE.  A POWER   OF SALE MAY ALLOW TRUSTEE TO TAKE THE MORTGAGED PROPERTIES   AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION   DURING THE CONTINUANCE OF AN EVENT OF DEFAULT BY GRANTOR UNDER   THIS MORTGAGE.     Section 4.5 Effective as Mortgage.  This instrument shall be effective as a mortgage as   well as a deed of trust and upon the occurrence and during the continuance of an Event of   Default may be foreclosed as to any of the Property in any manner permitted by applicable law,   and any foreclosure suit may be brought by Trustee or by Noteholder.  To the extent, if any,   required to cause this instrument to be so effective as a mortgage as well as a deed of trust,   Grantor hereby mortgages the Mortgaged Properties to Noteholder.  In the event a foreclosure   hereunder shall be commenced by Trustee, or his substitute or successor, Noteholder may at any   time before the sale of the Property direct Trustee to abandon the sale, and may then institute suit   for the collection of the Note and/or any other secured indebtedness, and for the foreclosure of   this Mortgage.  It is agreed that if Noteholder should institute a suit for the collection of the Note   or any other secured indebtedness and for the foreclosure of this Mortgage, Noteholder may at   any time before the entry of a final judgment in said suit dismiss the same, and require Trustee,   his substitute or successor to sell the Property in accordance with the provisions of this   Mortgage.     Section 4.6 Receiver.  In addition to all other remedies herein provided for, Grantor   agrees that, upon the occurrence and during the continuance of an Event of Default, Noteholder   shall as a matter of right be entitled to the appointment of a receiver or receivers for all or any   part of the Property, whether such receivership be incident to a proposed sale (or sales) of such   Property or otherwise, and without regard to the value of the Property or the solvency of any   person or persons liable for the payment of the indebtedness secured hereby, and Grantor does   hereby consent to the appointment of such receiver or receivers, waives any and all defenses to   such appointment, and agrees not to oppose any application therefor by Noteholder, and agrees   that such appointment shall in no manner impair, prejudice or otherwise affect the rights of   Noteholder under Article III hereof.  Nothing herein is to be construed to deprive Noteholder of   any other right, remedy or privilege it may now or hereafter have under the law to have a   receiver appointed.  Any money advanced by Noteholder in connection with any such   receivership shall be a demand obligation (which obligation Grantor hereby expressly promises   to pay) owing by Grantor to Noteholder and shall bear interest from the date of making such   advancement by Noteholder until paid, at the rate described in Section 2.3 hereof.     Section 4.7 Proceeds of Foreclosure.  The proceeds of any sale held by Trustee or any   receiver or public officer in foreclosure of the liens and security interests evidenced hereby shall   be applied:     FIRST, to the payment of all necessary costs and expenses incident to such   foreclosure sale, including but not limited to all court costs and charges of every   character in the event foreclosed by suit, and a reasonable fee (not exceeding five percent     

 

          19               (5%) of the gross proceeds of such sale) to Trustee acting under the provisions of   Section 4.4 if foreclosed by power of sale as provided in said section;     SECOND, to the payment of the secured indebtedness (including specifically   without limitation the principal, interest and reasonable out-of-pocket attorneys’ fees due   and unpaid on the Note and the amounts due and unpaid and owed to Noteholder under   this Mortgage) in such manner and order as Noteholder may elect; and     THIRD, the remainder, if any there shall be, shall be paid to Grantor, or to   Grantor’s heirs, devisees, representatives, successors or assigns, or such other persons as   may be entitled thereto by law.   Section 4.8 Noteholder as Purchaser.  Each of Noteholder, Grantor and any guarantor   of the secured indebtedness shall have the right to become the purchaser at any sale held by any   Trustee or substitute or successor or by any receiver or public officer and any Noteholder   purchasing at any such sale shall have the right to credit upon the amount of the bid made   therefor, to the extent necessary to satisfy such bid, the secured indebtedness owing to such   Noteholder, or if such Noteholder holds less than all of such indebtedness, the pro rata part   thereof owing to such Noteholder, accounting to all other Noteholders not joining in such bid in   cash for the portion of such bid or bids apportionable to such non-bidding Noteholder or   Noteholders.     Section 4.9 Personal Property Foreclosure.  Upon the occurrence and during the   continuance of an Event of Default, Noteholder may exercise its rights of enforcement with   respect to the Collateral under the Texas Business and Commerce Code as amended (or under   the Uniform Commercial Code in force in any other state to the extent the same is applicable   law) and in conjunction with, in addition to or in substitution for those rights and remedies:     (a) Noteholder may enter upon Grantor’s premises to take possession of,   assemble and collect the Collateral or to render it unusable; and     (b) Noteholder may require Grantor to assemble the Collateral and make it   available at a place Noteholder designates which is mutually convenient to allow   Noteholder to take possession or dispose of the Collateral; and     (c) written notice mailed to Grantor as provided herein at least fifteen (15)   days prior to the date of public sale of the Collateral or prior to the date after which   private sale of the Collateral will be made shall constitute reasonable notice; and     (d) any sale made pursuant to the provisions of this section shall be deemed to   have been a public sale conducted in a commercially reasonable manner if held   contemporaneously with and upon the same notice as required for the sale of the   Mortgaged Properties under power of sale as provided in Section 4.4 of this Mortgage;   and       

 

          20               (e) in the event of a foreclosure sale, whether made by Trustee under the   terms hereof, or under judgment of a court, the Collateral and the Mortgaged Properties   may, at the option of Noteholder, be sold as a whole; and     (f) it shall not be necessary that Noteholder take possession of the Collateral   or any part thereof prior to the time that any sale pursuant to the provisions of this section   is conducted and it shall not be necessary that the Collateral or any part thereof be present   at the location of such sale; and     (g) prior to application of proceeds of disposition of the Collateral to the   secured indebtedness, such proceeds shall be applied to the reasonable expenses of   retaking, holding, preparing for sale or lease, selling, leasing and the like and the   reasonable out-of-pocket attorneys’ fees and legal expenses incurred by Noteholder; and     (h) any and all statements of fact or other recitals made in any bill of sale or   assignment or other instrument evidencing any foreclosure sale hereunder as to   nonpayment of the secured indebtedness beyond any applicable cure or grace period or as   to the occurrence of any other Event of Default, or as to Noteholder having declared all   of such indebtedness to be due and payable, or as to notice of time, place and terms of   sale and of the properties to be sold having been duly given, or as to any other act or   thing having been duly done by Noteholder, shall be taken as prima facie evidence of the   truth of the facts so stated and recited; and     (i) Noteholder may appoint or delegate any one or more persons as agent to   perform any act or acts necessary or incident to any sale held by Noteholder, including   the sending of notices and the conduct of the sale, but in the name and on behalf of   Noteholder.     Section 4.10 Foreclosure as to Matured Debt. Upon the occurrence and during the   continuance of an Event of Default, Noteholder shall have the right to proceed with foreclosure   of the liens and security interests hereunder without declaring the entire secured indebtedness   due, and in such event, any such foreclosure sale may be made subject to the unmatured part of   the secured indebtedness and shall not in any manner affect the unmatured part of the secured   indebtedness, but as to such unmatured part, this Mortgage shall remain in full force and effect   just as though no sale had been made.  The proceeds of such sale shall be applied as provided in   Section 4.7 except that the amount paid under clause SECOND thereof shall be only the matured   portion of the secured indebtedness and any proceeds of such sale in excess of those provided for   in clauses FIRST and SECOND (modified as provided above) shall be applied as provided in   clause SECOND AND THIRD of Section 3.4 hereof.  Several sales may be made hereunder   without exhausting the right of sale for any unmatured part of the secured indebtedness.     Section 4.11 Remedies Cumulative.  All remedies herein expressly provided for are   cumulative of each other and of all other remedies existing at law or in equity and are cumulative   of any and all other remedies provided for in any other Loan Document, and Trustee and   Noteholder shall, in addition to the remedies herein provided, be entitled to avail themselves of     

 

          21               all such other remedies as may now or hereafter exist at law or in equity for the collection of the   secured indebtedness and the enforcement of the covenants herein and the foreclosure of the   liens and security interests evidenced hereby, and the resort to any remedy provided for   hereunder or under any such other Loan Document or provided for by law shall not prevent the   concurrent or subsequent employment of any other appropriate remedy or remedies.     Section 4.12 Noteholder’s Discretion as to Security.  Noteholder may resort to any   security given by this Mortgage or to any other security now existing or hereafter given to secure   the payment of the secured indebtedness, in whole or in part, and in such portions and in such   order as Noteholder may deem appropriate, and any such action shall not in any way be   considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this   Mortgage.     Section 4.13 Grantor’s Waiver of Certain Rights.  To the full extent Grantor may do so,   Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or   advantage of any law now or hereafter in force providing for any appraisement, valuation, stay,   extension or redemption, and Grantor, for Grantor, Grantor’s heirs, devisees, representatives,   successors and assigns, and for any and all persons ever claiming any interest in the Property, to   the extent permitted by applicable law, hereby waives and releases all rights of redemption,   valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole   of the secured indebtedness, notice of election to mature or declare due the whole of the secured   indebtedness and all rights to a marshaling of assets of Grantor, including the Property, or to a   sale in inverse order of alienation in the event of foreclosure of the liens and/or security interests   hereby created.  To the full extent Grantor may do so, Grantor shall not have or assert any right   under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of   alienation, the exemption of homestead, the administration of estates of decedents, or other   matters whatever to defeat, reduce or affect the right of Noteholder under the terms of this   Mortgage to a sale of the Property for the collection of the secured indebtedness without any   prior or different resort for collection, or the right of Noteholder under the terms of this   Mortgage to the payment of the secured indebtedness out of the proceeds of sale of the Property   in preference to every other claimant whatever.  If any law referred to in this section and now in   force, of which Grantor or Grantor’s heirs, devisees, representatives, successors or assigns or any   other persons claiming any interest in the Mortgaged Properties or the Collateral might take   advantage despite this section, shall hereafter be repealed or cease to be in force, such law shall   not thereafter be deemed to preclude the application of this section.       Section 4.14 Grantor as Tenant Post-Foreclosure.  In the event there is a foreclosure   sale hereunder and at the time of such sale Grantor or Grantor’s heirs, devisees, representatives,   successors or assigns or any other persons claiming any interest in the Property by, through or   under Grantor are occupying or using the Property, or any part thereof, each and all shall   immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy   from day to day, terminable at the will of either landlord or tenant, at a reasonable rental per day   based upon the value of the Property occupied, such rental to be due daily to the purchaser.  To   the extent permitted by applicable law, the purchaser at such sale shall, notwithstanding any   language herein apparently to the contrary, have the sole option to demand immediate possession     

 

          22               following the sale or to permit the occupants to remain as tenants at will.  In the event the tenant   fails to surrender possession of said property upon demand, the purchaser shall be entitled to   institute and maintain a summary action for possession of the property (such as an action for   forcible entry and detainer) in any court having jurisdiction.   Section 4.15 Interest Limitation.  It is the intention of the parties hereto to comply with   all applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the   contrary in any Loan Document, in no event shall any Loan Document require or allow the   payment, taking, receiving or charging or permit the collection of interest in excess of the   maximum amount permitted by applicable usury law, and all such documents shall be subject to   interest reduction to the amount allowed under such laws.  If any such excess of interest is   contracted for, taken, charged, reserved or received, under any Loan Document, or in the event   the maturity of any of the secured indebtedness is accelerated in whole or in part, or in the event   that all or part of the principal or interest of the secured indebtedness shall be prepaid, so that   under any of such circumstances, the amount of interest contracted for, taken, charged or   received, under any Loan Document, and the amount of principal actually outstanding from time   to time under the instruments evidencing the secured indebtedness, shall exceed the maximum   amount of interest permitted by the applicable usury laws, now or hereafter enacted, then in any   such event (a) the provisions of this section shall govern and control, (b) neither Grantor nor any   other person or entity now or hereafter liable for the payment of the secured indebtedness shall   be obligated to pay the amount of such interest to the extent that it is in excess of the maximum   amount of interest permitted by the applicable usury laws, now or hereafter enacted, (c) any such   excess shall be cancelled automatically, (d) any such excess that may have been collected shall   be either applied as a credit against the then unpaid principal amount or refunded to Grantor, at   Noteholder’s option, and (e) the effective rate of interest shall be automatically reduced to the   maximum lawful contract rate allowed under the applicable usury laws, now or hereafter   enacted.  It is further agreed that without limitation of the foregoing, all calculations of the rate   of interest contracted for, taken, charged or received under any Loan Document that are made for   the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be   made, to the extent permitted by the applicable usury laws, now or hereafter enacted, by   amortizing, prorating, allocating and spreading in equal parts during the period of the full stated   term of the loans evidenced by the instruments evidencing the secured indebtedness, all interest   at any time contracted for, taken, charged or received from Grantor or otherwise by Noteholder   in connection with such loans.  Grantor does not agree to pay usurious interest.  Further, the   Noteholder hereby consents to the aforementioned paragraph.  To the extent this provision   conflicts with or is inconsistent with any provision of the Note, the terms of the Note shall   prevail and control.    Section 4.16 Montana Provision.  In the event there is a foreclosure sale hereunder and   at the time of such sale Grantor or Grantor’s heirs, devisees, representatives, successors or   assigns or any other persons claiming any interest in the Property by, through or under Grantor   are occupying or using the Property, or any part thereof, each and all shall immediately become   the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day,   terminable at the will of either landlord or tenant, at a reasonable rental per day based upon the   value of the Property occupied, such rental to be due daily to the purchaser.  To the extent     

 

          23               permitted by applicable law, the purchaser at such sale shall, notwithstanding any language   herein apparently to the contrary, have the sole option to demand immediate possession   following the sale or to permit the occupants to remain as tenants at will.  In the event the tenant   fails to surrender possession of said property upon demand, the purchaser shall be entitled to   institute and maintain a summary action for possession of the property (such as an action for   forcible entry and detainer) in any court having jurisdiction.     ARTICLE V.      Miscellaneous     Section 5.1 Scope of Mortgage.  This Mortgage is a deed of trust and mortgage of   both real and personal property, a security agreement, a financing statement and an absolute   assignment, and also covers proceeds and fixtures.     Section 5.2 Effective as a Financing Statement.  This Mortgage covers goods which   are or are to become fixtures on the real property described herein.  This Mortgage shall be   effective as a financing statement filed as a fixture filing with respect to all fixtures included   within the Property and is to be filed for record in the real estate records of each county where   any part of the Mortgaged Properties (including said fixtures) is situated.  This Mortgage shall   also be effective as a financing statement covering minerals or the like (including oil and gas)   and accounts subject to Subsection (e) of Section 9.103 of the Texas Business and Commerce   Code, as amended, and similar provisions (if any) of the Uniform Commercial Code as enacted   in any other state where the Mortgaged Properties are situated which will be financed at the   wellhead or minehead of the wells or mines located on the Mortgaged Properties and is to be   filed for record in the real estate records of each county where any part of the Mortgaged   Properties is situated.  This Mortgage shall also be effective as a financing statement covering   any other Property and may be filed in any other appropriate filing or recording office.  The   mailing address of Grantor is the address of Grantor set forth at the end of this Mortgage and the   address of Noteholder from which information concerning the security interests hereunder may   be obtained is the address of Noteholder set forth at the end of this Mortgage.     Section 5.3 Reproduction of Mortgage as Financing Statement. A carbon,   photographic or other reproduction of this Mortgage or of any financing statement relating to this   Mortgage shall be sufficient as a financing statement for any of the purposes referred to in   Section 5.2.     Section 5.4 Notice to Account Debtors.  In addition to the rights granted in Article III   hereof, Noteholder may at any time after an Event of Default notify the account debtors or   obligors of any accounts, chattel paper, negotiable instruments or other evidences of   indebtedness included in the Collateral to pay Noteholder directly.     Section 5.5 Waiver by Noteholder.  Noteholder may at any time and from time to time   in writing waive compliance by Grantor with any covenant herein made by Grantor to the extent   and in the manner specified in such writing, or consent to Grantor’s doing any act which     

 

          24               hereunder Grantor is prohibited from doing, or to Grantor’s failing to do any act which hereunder   Grantor is required to do, to the extent and in the manner specified in such writing, or release any   part of the Property or any interest therein or any proceeds of Production from the lien and   security interest of this Mortgage, without the joinder of Trustee, or release any party liable,   either directly or indirectly, for the secured indebtedness or for any covenant herein or in any   other Loan Document, without impairing or releasing the liability of any other party.  No such   act shall in any way impair the rights or powers of Noteholder or Trustee hereunder except to the   extent specifically agreed to by Noteholder in such writing.     Section 5.6 No Impairment of Security.  The lien, security interest and other security   rights of Noteholder hereunder shall not be impaired by any indulgence, moratorium or release   granted by Noteholder including, but not limited to, any renewal, extension or modification   which Noteholder may grant with respect to any secured indebtedness, or any surrender,   compromise, release, renewal, extension, exchange or substitution which Noteholder may grant   in respect of the Property (including without limitation Production Proceeds), or any part thereof   or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety   of any secured indebtedness.      Section 5.7 Acts Not Constituting Waiver by Noteholder.  Noteholder may waive any   default or Event of Default without waiving any other prior or subsequent default or Event of   Default.  Noteholder may remedy any Event of Default without waiving the Event of Default   remedied.  Neither failure by Noteholder to exercise, nor delay by Noteholder in exercising, any   right, power or remedy during the continuance of any Event of Default shall be construed as a   waiver of such Event of Default or as a waiver of the right to exercise any such right, power or   remedy at a later date (unless such Event of Default has been cured or expressly waived by   Noteholder).  No single or partial exercise by Noteholder of any right, power or remedy   hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and   every such right, power or remedy hereunder may be exercised at any time and from time to   time.  No modification or waiver of any provision hereof nor consent to any departure by   Grantor therefrom shall in any event be effective unless the same shall be in writing and signed   by Noteholder and then such waiver or consent shall be effective only in the specific instances,   for the purpose for which given and to the extent therein specified.  No notice to nor demand on   Grantor in any case shall of itself entitle Grantor to any other or further notice of demand in   similar or other circumstances.  Acceptance by Noteholder of any payment in an amount less   than the amount then due on any secured indebtedness shall be deemed an acceptance on account   only and shall not in any way excuse the existence of a default hereunder.     Section 5.8 Grantor’s Successors.  In the event the ownership of the Property or any   part thereof becomes vested in a person other than Grantor, Noteholder may, without notice to   Grantor, deal with such successor or successors in interest with reference to this Mortgage and to   the indebtedness secured hereby in the same manner as with Grantor, without in any way   vitiating or discharging Grantor’s liability hereunder or for the payment of the indebtedness or   performance of the obligations secured hereby.  No transfer of the Property, no forbearance on   the part of Noteholder, and no extension of the time for the payment of the indebtedness secured   hereby given by Noteholder shall operate to release, discharge, modify, change or affect, in     

 

          25               whole or in part, the liability of Grantor hereunder or for the payment of the indebtedness or   performance of the obligations secured hereby or the liability of any other person hereunder or   for the payment of the indebtedness secured hereby.     Section 5.9 Place of Payment.  All secured indebtedness which may be owing   hereunder at any time by Grantor shall be payable at the place designated in the Note (or if no   such designation is made, at the address of Noteholder indicated at the end of this Mortgage), or   at such other place as Noteholder may designate in writing.     Section 5.10 Subrogation to Existing Liens.  To the extent that proceeds of the Note are   used to pay indebtedness secured by any outstanding lien, security interest, charge or prior   encumbrance against the Property, such proceeds have been advanced by Noteholder at   Grantor’s request, and Noteholder shall be subrogated to any and all rights, security interests and   liens owned by any owner or holder of such outstanding liens, security interests, charges or   encumbrances, irrespective of whether said liens, security interests, charges or encumbrances are   released, and it is expressly understood that, in consideration of the payment of such   indebtedness by Noteholder, Grantor hereby waives and releases all demands and causes of   action for offsets and payments to, upon and in connection with the said indebtedness.     Section 5.11 Application of Payments to Certain Indebtedness.  If any part of the   secured indebtedness cannot be lawfully secured by this Mortgage or if any part of the Property   cannot be lawfully subject to the lien and security interest hereof to the full extent of such   indebtedness, then all payments made shall be applied on said indebtedness first in discharge of   that portion thereof which is not secured by this Mortgage.     Section 5.12 Compliance With Usury Laws.  It is the intent of Grantor and Noteholder   and all other parties to the Loan Documents to contract in strict compliance with applicable   usury law from time to time in effect.  In furtherance thereof, it is stipulated and agreed that none   of the terms and provisions contained herein and in the Loan Documents shall ever be construed   to create a contract to pay, for the use, forbearance or detention of money, interest in excess of   the maximum amount of interest permitted to be charged by applicable law from time to time in   effect.       Section 5.13 Trustees.  The Trustee may resign by an instrument in writing addressed to   Noteholder, or Trustee may be removed at any time with or without cause by an instrument in   writing executed by Noteholder.  In case of the death, resignation, removal, or disqualification of   Trustee, or if for any reason Noteholder shall deem it desirable to appoint a substitute or   successor trustee to act instead of the herein named trustee or any substitute or successor trustee   or to appoint an additional trustee or trustees to serve concurrently with Trustee, then Noteholder   shall have the right and is hereby authorized and empowered to appoint a successor trustee, a   substitute trustee or an additional trustee, without other formality than appointment and   designation in writing executed by Noteholder and the authority hereby conferred shall extend to   the appointment of other successor, substitute and additional trustees successively until the   indebtedness secured hereby has been paid in full, or until the Property is sold hereunder.        

 

          26               Section 5.14 No Liability for Trustee.  The Trustee shall not be liable for any error of   judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under   any circumstances whatsoever, except for Trustee’s gross negligence, fraud or willful   misconduct.  The Trustee shall have the right to rely on any instrument, document or signature   authorizing or supporting any action taken or proposed to be taken by him hereunder, believed   by him in good faith to be genuine.  All moneys received by Trustee shall, until used or applied   as herein provided, be held in trust for the purposes for which they were received, but need not   be segregated in any manner from any other moneys (except to the extent required by law), and   Trustee shall be under no liability for interest on any moneys received by him hereunder.    Grantor hereby ratifies and confirms any and all acts which the herein named Trustee or his   successor or successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof.    Grantor will reimburse Trustee for, and save him harmless against, any and all liability and   expenses which may be incurred by him in the performance of his duties.     Section 5.15 Release of Mortgage.  If all of the secured indebtedness be paid (other   than contingent indemnification obligations to the extent no claim giving rise thereto has been   asserted) and Noteholder shall have no further obligation to provide credit or advance funds to   Grantor or the maker of any Note secured hereby, then, and in that event only, all rights under   this Mortgage shall terminate (except to the extent expressly provided herein with respect to   indemnifications and other rights which are expressly to continue following the release hereof)   and the Property shall become wholly clear of the liens, security interests, conveyances and   assignments evidenced hereby, and evidence of such release of liens and security interests shall   be provided by Noteholder in due form at Grantor’s cost.     Section 5.16 Notices. All notices, requests, consents, demands and other   communications required or permitted hereunder or under any other Loan Document shall be in   writing and, unless otherwise specifically provided in such other Loan Document, shall be   deemed sufficiently given or furnished if delivered by personal delivery, by electronic mail, by   expedited delivery service with proof of delivery, or by registered or certified United States mail,   postage prepaid, at the following addresses (unless changed by similar notice in writing given by   the particular party whose address is to be changed).      If to Grantor: Nautilus Poplar, LLC    1775 Sherman Street, Suite 1950    Denver, Colorado 80203     Attn: Mr. Antoine Lafargue, Chief Financial Officer   E-mail: alafargue@magellanpetroleum.com      If to Beneficiary: West Texas State Bank    1501 W. University    Odessa, Texas 79764    Attn:  Mr. Les W. Robbins, President-Midland    E-mail: les@wtstatebk.com         

 

          27               Any such notice or communication shall be deemed to have been given either at the time of   personal delivery or, in the case of delivery service or mail, as of the date of first attempted   delivery at the address and in the manner provided herein, or, in the case of electronic mail, upon   receipt; provided that, service of a notice required by Texas Property Code §51.002, as amended,   or any similar statute in any state where any part of the Mortgaged Properties are located shall be   considered complete when the requirements of the applicable statute for such part of the   Mortgaged Properties located in the respective state are met.       Section 5.17 Invalidity of Certain Provisions.  A determination that any provision of   this Mortgage is unenforceable or invalid shall not affect the enforceability or validity of any   other provision and the determination that the application of any provision of this Mortgage to   any person or circumstance is illegal or unenforceable shall not affect the enforceability or   validity of such provision as it may apply to other persons or circumstances.     Section 5.18 Gender; Titles.  Within this Mortgage, words of any gender shall be held   and construed to include any other gender, and words in the singular number shall be held and   construed to include the plural, unless the context otherwise requires.  Titles appearing at the   beginning of any subdivisions hereof are for convenience only, do not constitute any part of such   subdivisions, and shall be disregarded in construing the language contained in such subdivisions.     Section 5.19 Recording.  Grantor will cause this Mortgage and all amendments and   supplements thereto and substitutions therefor and all financing statements and continuation   statements relating thereto to be recorded, filed, re-recorded and refiled in such manner and in   such places as Trustee or Noteholder shall reasonably request and, to the maximum extent   permitted by applicable law, will pay all such recording, filing, re-recording and refiling taxes,   fees and other charges.     Section 5.20 Lender as Noteholder.  All persons dealing with the Property (other than   Grantor) shall be entitled to assume that Lender is the only Noteholder, and may deal with   Lender (including without limitation accepting from or relying upon full or partial releases   hereof executed by Lender only) without further inquiry as to the existence of other Noteholders,   until given actual notice of facts to the contrary or until this Mortgage is supplemented or   amended of record to show the existence of other Noteholders.     Section 5.21 Reporting Compliance.  Grantor agrees to comply with any and all   reporting requirements applicable to the transaction evidenced by the Note and secured by this   Mortgage which are set forth in any law, statute, ordinance, rule, regulation, order or   determination of any governmental authority, including but not limited to The International   Investment Survey Act of 1976, The Agricultural Foreign Investment Disclosure Act of 1978,   The Foreign Investment in Real Property Tax Act of 1980 and The Tax Reform Act of 1984 and   further agrees upon request of Noteholder to furnish Noteholder with evidence of such   compliance.     Section 5.22 Noteholder’s Consent.  Except where otherwise expressly provided herein,   in any instance hereunder where the approval, consent or the exercise of judgment of Noteholder     

 

          28               is required, the granting or denial of such approval or consent and the exercise of such judgment   shall be within the sole discretion of Noteholder, and Noteholder shall not, for any reason or to   any extent, be required to grant such approval or consent or exercise such judgment in any   particular manner, regardless of the reasonableness of either the request or Noteholder’s   judgment.     Section 5.23 Grantor.  Unless the context clearly indicates otherwise, as used in this   Mortgage, “Grantor” means the grantors named in Section 1.1 hereof or any of them.  The   obligations of Grantor hereunder shall be joint and several.     Section 5.24 Successors and Assigns.  The terms, provisions, covenants and conditions   hereof shall be binding upon Grantor, and the heirs, devisees, representatives, successors and   assigns of Grantor, and shall inure to the benefit of Trustee and Noteholder and their respective   heirs, devisees, representatives, successors and assigns and shall constitute covenants running   with the land described in Exhibit A.  All references in this Mortgage to Grantor, Trustee or   Noteholder shall be deemed to include all such heirs, devisees, representatives, successors,   substitutes and assigns.     Section 5.25 Reporting Requirements.  Grantor agrees to comply with any and all   reporting requirements applicable to the transaction evidenced by the Note and secured by this   Mortgage which are set forth in any law, statute, ordinance, rule, regulation, order or   determination of any governmental authority, including but not limited to The Foreign   Investment in Real Property Tax Act of 1980 and further agrees upon request of Noteholder to   furnish Noteholder with evidence of such compliance.     Section 5.26 CHOICE OF LAW.  WITHOUT REGARD TO PRINCIPLES OF   CONFLICTS OF LAW, THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED IN   ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS   APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN   THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA BUT   IN ANY EVENT CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES   CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS)   SHALL NOT APPLY TO THE LOAN EVIDENCED BY THIS NOTE AND EXCEPT THAT   TO THE EXTENT THAT THE LAW OF ANOTHER STATE IN WHICH A PORTION OF   THE PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A   PORTION OF THE PROPERTY) NECESSARILY GOVERNS WITH RESPECT TO   PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION,   PERFECTION AND ENFORCEMENT OF THE LIENS, SECURITY INTERESTS AND   OTHER RIGHTS AND REMEDIES GRANTED HEREIN, THE LAW OF SUCH OTHER   STATE SHALL APPLY AS TO THAT PORTION OF THE PROPERTY LOCATED IN (OR   OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.     Section 5.27 Loan Agreement.  This Mortgage is subject to the terms and conditions of   that certain Loan Agreement dated as of the Effective Date, by and between Grantor, Lender and   Magellan Petroleum Corporation (as from time to time supplemented, amended and/or restated     

 

          29               and described in this Mortgage as the “Loan Agreement”).  All capitalized terms used but not   defined herein shall have the meanings given such terms in the Loan Agreement.     Section 5.28 Maturity.  The latest final maturity date of the Loans is September 30,   2015.                     [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]     (signature page follows)              

 

NOTICE   THIS MORTGAGE, THE NOTE ASCRIBED ABOVE AND THE ACCOMPANYING   UCC-1 FINANCING STATEMENT AND ~,UAN AGREEMENT AND/OR ANY AND   ALL OTHER DOCUMENTS EXECUTED AT OR .NEAR THE TIME OF THIS   EXECUTION CONSTITUTE A "~.OAN AGREEMENT" AS DEFINED IN SECTION   2b.02(a} OF THE TEXAS BUSINESS &COMMERCE CODE, AND REPRESENTS THE   TINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE   CONTRADICTED BY EVIDENCE OF ~'RIOR, CONTEMPORANEOUS OR   SUBSEQUENT ORAL AGREEMENTS OF THE ~'ARTIES. THERE ARE NO   UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.   IN WITNESS WHEREOF, this instrument is dated to be effective as of the Effective   Date, although is executed on the date of the ackno~cwledgn~ents annexed hereto.   GRANTOR:   NAUTILUS POPLAR LLC, a MoYitana limited   liabiaity company   By: Magellan Petroleu Cozporation, its manager   By:   Antoine Lafargue, Chie Financial Officer   LENDER:   WEST TEXAS STATE BANK   ~:   Les W. Robbixxs, President-Midla~ad   [f)f;t'T) OF~'1'[2US"I', tvtOR7'GAGf;, S1:CUR1'1'X AGRI3EMl:N'1', ASSfGNMEiN'P OF PI~011U("l'10N AND PINANCiNG S"C'A'C'I'sM!'sN3'}    

 

NOTICE   THIS MORTGAGE, THE NOTE DESCRIBED ABOVE AND THE ACCOMPANYING   ITCC-1 FINANCING STATEMENT AND LOAN AGREEMENT AND/OI2 ANY AND   ALL OTHER DOCUMENTS EXECUTED AT OR NEAR THE TIME OF THIS   EXECUTION CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION   26.02(a) OF THE TEXAS BUSINESS &COMMERCE CODE, AND REPRESENTS THE   FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NaT BE   CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR   SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO   UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.   IN WITNESS WHEREOF, this instrument is dated to be effective as of the Effective   Date, although is executed on the date of the acknowledgments annexed hereto.   GRANTOR:   NAUTILUS POPLAR LLC, a Montana limited   Liability company   By: Magellan Petroleum Corporation, its manager   By:   Antoine Lafargue, Chief Financial Officer   LENDER:   WEST TEXAS STATE BANK   By: ~ ~ T-----'   Les W. Robbins, President-Midland   30    

 

STATE OF COLORADO   COUNTY OF _~.`_)~,J\tl ~ §   ~~   This instrument was acknowledged before me on this the ~~ day of September,   2014, by ANTOINE LAFARGUE, as Chief k'inanc~al Officer of MAGELLAN PETROLEUM   CORPORATION, the manager of NAUTILUS PnPLAR LLC, a Montana limited liability   company, on behalf of said limited liability company.   ~~„ ~ ~/   r - ~ L'G~ tip....   NOTARY PUBLIC, STATE 4F COLORADO   r...... A. .,.uF~   MA"f fHEW R. CIARQIELLC~   NQTAFtY PUBLIC   STATE QF GO1~t7FiADfJ   NO"fARY !D 2Q124A58105   MY COMMISSION ~XFlRESAUGt1S`f 30.2016   STATE OF TEXAS §   COUNTY OF MIDLAND §   This instrument was acknowledged before me an the day of September, 2014,   by LES W. ROBBYNS, as 'resident-Midland of WE5T TEXAS STATE BANK, on behalf of   said bank.   NOTARY PUBLIC, STATE OF TEXAS   (DL'I:D O}~'CRUS'I`, MORTGAGE, SECU1211'Y AGItGEMEN7', ASSIGNMENT OF PROI~UCI'ION AND PfNANGINCi STATI MGNT~    

 

STATE OF COLORADO   COUNTY OF   This instrument was acknowledged before me on this the day of September,   2014, by ANTOINE LAFARGUE, as Chief Financial Officer of MAGELLAN PETROLEUM   CORPORATION, the manager of NAUTILUS POPLAR LLC, a Montana limited liability   company, on behalf of said limited liability company.   NOTARY PUBLIC, STATE OF COLORADO   STATE OF TEXAS §   COUNTY OF MIDLAND §   This instrument was acknowledged before me on the —~~"~~y of September, 2014,   by LES W. ROBBINS, as President-Midland of WEST TEXAS STATE BANK, on behalf of   said bank.   ,~~4tHllt/I~ (~C ` ~{ ~/p(~ ./   ~S*ltY rLpG VG~~/{ ~. AIY /\R ~4   _~~'• ~~ ~ NotOry PUbIiC, StCtte Of Texas   ~~,'., ~ My Commission Expires   31    

 

Page 1 of  2      EXHIBIT "A"   Attached to and made a part of the following documents:  (a) Deed of Trust, Mortgage, Security Agreement, Assignment of Production and Financing Statement dated September 17, 2014, from NAUTILUS POPLAR LLC, as Grantor, for the benefit of WEST TEXAS STATE BANK, as Beneficiary; and  (b) UCC-1 Financing Statement from NAUTILUS POPLAR LLC, as Debtor, for the benefit of WEST TEXAS STATE BANK, as Secured Party.   1. If applicable, the terms "BPO WI" and "BPO NRI" in this Exhibit "A" specify the warranted working interest and net revenue interest of Grantor in a particular well or property before the occurrence of a particular event such as payout of costs with respect to such well or property.  The terms "APO WI" and "APO NRI" in this Exhibit "A" specify the warranted working interest and net revenue interest of Grantor in a particular well or property after the occurrence of a particular event such as payout of costs with respect to such well or property.   2. Within each Lease or Assignment description, the following explanations apply:   "Lessor" and "Lessee" refer to the original lessor and lessee set forth in the lease.   "Assignor" and "Assignee" refer to the parties identified in a particular document transferring an interest in the affected properties to Grantor.   The descriptions are given by fractions of each section, Section number, Township and Range.  For example,   T = Township, R = Range, Blk. = Block, Sec. = Section, N = North, S = South, E = East, W = West   The descriptions may also include characterizations of interests described by abbreviations.  For example,   APO = "after pay-out", BPO = "before payout", WI = "working interest", NRI = "net revenue interest", RI = "royalty interest", ORRI = "overriding royalty interest"   The designation "T-29-N, R-50-E" or “T29N-R50E” refers to Township 29 North, Range 50 East.  The description "NE/4 of the NE/4 of Section 36, T-29-N, R-50-E" or "Sec 36: NENE, T29N-R50E " refers to the Northeast quarter of the Northeast quarter of Section 36, Township 29 North, Range 50 East, Roosevelt County, Montana.     Fractions are fractions of a section.  Fractions may also be written with alpha characters as numerators and numeric characters as denominators.  For example, NW/4 = the Northwest one-quarter of a section.                           [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]     

 

Page 2 of  2      ROOSEVELT COUNTY, MONTANA         See Pages 1 through and including 14, attached hereto and made a part hereof, all of such   lands and leases being located in Roosevelt County, Montana.                                                                                                               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]     

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12617 OG EVA DENNY WHITE AND DAVID L. WHITE, W/H, ET   AL, OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3912) 40.00000 12/20/1950 T29N-R50E   SEC 36: NENE   1.00000000 0.87500000 0.87500000   25-085-12619 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4106) 150.52000 12/28/1950 T28N-R52E   SEC 6: LOTS 3 (40.03), 4 (35.23, A/D/A NWNW), 5   (35.26, A/D/A SWNW), SENW   1.00000000 0.87500000 0.87500000   25-085-12620 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4100) 80.00000 1/18/1951 T29N-R51E   SEC 7: N2SE   1.00000000 0.87500000 0.87500000   25-085-12621 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4098) 280.00000 1/9/1951 T29N-R50E   SEC 14: E2NE, SWNE, SE   1.00000000 0.87500000 0.87500000   25-085-12622 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4097) 40.00000 1/8/1951 T29N-R51E   SEC 29: NENE   1.00000000 0.87500000 0.87500000   25-085-12623 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4096) 200.00000 1/9/1951 T29N-R51E   SEC 19: SESW, E2NW, W2NE   1.00000000 0.87500000 0.87500000   25-085-12624 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4095) 119.28000 1/10/1951 T29N-R50E   SEC 12: NESE   T29N-R51E   SEC 7: LOT 3 (39 28 A/D/A NWSW) NESW   1.00000000 0.87500000 0.87500000   25-085-12625 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4094) 39.69000 1/10/1951 T29N-R51E   SEC 30: LOT 1 (39.69, A/D/A NWNW)   1.00000000 0.87500000 0.87500000   25-085-12626 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4093) 40.00000 1/8/1951 T29N-R51E   SEC 28: NENW   1.00000000 0.87500000 0.87500000   25-085-12627 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4108) 60.00000 1/15/1951 T28N-R51E   SEC 4: SWNE, S2NENW   1.00000000 0.87500000 0.87500000   25-085-12628 OG ASSINIBOINE-SIOUX TRIBES   RELINQUISHED TO   GERALD WINSTON MURR   THEN CURRENT OWNER IN 1954   C. H. MURPHY, JR. (4105) 40.00000 1/9/1951 T29N-R51E   SEC 31: SENW   1.00000000 0.87500000 0.87500000   25-085-12629 OG ASSINIBOINE-SIOUX TRIBES   RELINQUISHED TO   RUBY MARIE GREGG RASOR   THEN CURRENT OWNER IN 1956   C. H. MURPHY, JR. (4104) 20.00000 1/10/1951 T29N-R51E   SEC 32: N2NESW   1.00000000 0.87500000 0.87500000   25-085-12630 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4103) 440.00000 1/16/1951 T29N-R51E   SEC 21: E2NE, N2SE, E2SW, SWSW   SEC 28: NWSW, W2NW   SEC 29: NESE   1.00000000 0.87500000 0.87500000   25-085-12632 OG ASSINIBOINE-SIOUX TRIBES   RELINQUISHED TO   HERMAN E. HALLAND, A SINGLE MAN   THEN CURRENT OWNER IN 1955   C. H. MURPHY, JR. (4102) 40.06000 1/10/1951 T29N-R51E   SEC 31: LOT 4 (40.06, A/D/A SWSW)   1.00000000 0.87500000 0.87500000   25-085-12640 OG JAMES MELBOURNE, SINGLE   ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3504) 40.00000 9/26/1950 T29N-R51E   SEC 32: SESW   1.00000000 0.87500000 0.87500000   25-085-12641 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4101) 238.46000 2/23/1951 T29N-R51E   SEC 19: LOTS 1 (39.55, A/D/A NWNW), 2 (39.61,   A/D/A SWNW), 3 (39.65, A/D/A NWSW),  4 (39.65,   A/D/A SWSW) NESW NWSE   1.00000000 0.87500000 0.87500000   25-085-12642 OG JOHN MELVIN YOUNGMAN   ANNE YOUNGMAN, H/W, ET AL   OF THE ASSINIBOINE-SIOUX TRIBES   C. H. MURPHY, JR. (6411) 20.00000 2/24/1951 T29N-R51E   SEC 26: N2SWNW   1.00000000 0.87500000 0.87500000   25-085-12643 OG GLENN W. ZIMMERMAN   MARGARET E. ZIMMERMAN, H/W   THE CARTER OIL COMPANY 160.00000 1/27/1949 T29N-R51E   SEC 28: SE   1.00000000 0.87500000 0.87500000   25-085-12644 OG BUREAU OF LAND MANAGEMENT, AS TRUSTEE FOR   THE ASSINIBOINE-SIOUX TRIBES   ESTHER S. SCHMIDT 1,340.00000 8/1/1950 T28N-R51E   SEC 3: SE   SEC 4: SWNW   SEC 11: S2   SEC 12: W2, W2NE, NENE   SEC 13: NW   SEC 15: NE, S2NENW   T29N-R51E   SEC 30 NESW   1.00000000 0.86500000 0.86500000   25-085-12645 OG FRED J. REYNOLDS   MARY F. REYNOLDS, H/W   THE CARTER OIL COMPANY 280.00000 2/12/1952 T28N-R51E   SEC 9: NWNE   SEC 10: SE, E2SW   1.00000000 0.87500000 0.87500000   1    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12646 OG WILLIAM YOUNGMAN #1   CHARLES JONES SR.   WILLIAM YOUNGMAN #2   STELLA YOUNGMAN   DOUGLAS YOUNGMAN   EVA YOUNGMAN   JOSEPHINE YOUNGMAN YOUPEE   LEROY YOUPEE   CHRISTINE YOUNGMAN NECKLACE   FELIX NECKLACE   NETTIE YOUNGMAN   LAWRENCE YOUNGMAN   RITA L. YOUNGMAN   MICHAEL WAYNE YOUNGMAN   fLORENCE R. YOUNGMAN   C. H. MURPHY, JR. (3815) 40.00000 9/28/1950 T29N-R51E   SEC 31: NESE   1.00000000 0.87500000 0.87500000   25-085-12647 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3465) 360.00000 3/20/1950 T29N-R51E   SEC 29: SESE   SEC 33: W2   1.00000000 0.87500000 0.87500000   25-085-12648 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (3817-A) 40.00000 3/5/1951 T29N-R51E   SEC 32: NWSE   1.00000000 0.87500000 0.87500000   25-085-12653 OG MAUDE FOOTE BUCKLES, WIDOW   AUSTIN R. BUCKLES &   AUDREY E. BUCKLES H/W   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3468) 120.00000 3/31/1950 T28N-R51E   SEC 8: NESE   SEC 22: E2NE   1.00000000 0.87500000 0.87500000   25-085-12654 OG WINONA SIMONS SHANLEY   ERVIN J. SHANLEY, W/H   C. H. MURPHY, JR. (3483) 140.00000 3/5/1951 T29N-R51E   SEC 26: S2SWNW, NWSW   SEC 27: N2SE   1.00000000 0.87500000 0.87500000   25-085-12655 OG LEWIS JAMES SAYERS   CHRISTINE M. SAYERS   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3584) 40.00000 10/16/1950 T29N-R51E   SEC 17: SENW   1.00000000 0.87500000 0.87500000   25-085-12656 OG GEORGE B. BLOUNT   CLARA R. E. BLOUNT, H/W   HENRY BLOUNT   MELISSA H. BLOUNT   ANNA ROSE LONG BAUER   EDWARD E. BAUER   PHILLIPPENA McCLAMMY   ADDIE M. HOVERMAL SANDERS   PHILLIPENA LONG DENNY   GEORGE DENNY   C. H. MURPHY, JR. (3597) 120.08000 10/16/1950 T28N-R51E   SEC 1: LOT 2 (40.08, A/D/A NWNE), S2NE   1.00000000 0.87500000 0.87500000   25-085-12657 OG JEANNIE A. CULBERTSON COOPER   GALE COOPER, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3626) 40.00000 10/16/1950 T29N-R51E   SEC 29: NWNW   1.00000000 0.87500000 0.87500000   25-085-12658 OG JULIUS YOUNGMAN   LIZZIE C. YOUNGMAN, H/W   HOWARD RUSSELL   MARGARET ELK RUSSELL   BESSIE BROWN FERKO   JOHN FERKO   WILLIS TAYLOR   ROGER BROWN   JOHN LONGTREE JR   ESTHER MELBOURNE LONGTREE   MARK LONGTREE   CLARENCE DALE LONGTREE   ALICE L. LONGTREE   IDA LONGTREE   ALICE MARIE LONGTREE CROWE   SHERMAN CROWE   C. H. MURPHY, JR. (3812) 280.00000 10/27/1950 T29N-R51E   SEC 22: W2SE, SESE   SEC 27: NE   1.00000000 0.87500000 0.87500000   2    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12659 OG ANGELINE TAKES THE SHIELD IRON BEAR   CHARLES IRON BEAR   CARMELIA LAMBERT   MAGDALENE STRETCHES HIMSELF   CHARLES HALL JR.   ELIZABETH CANTRELL ST. GERMAINE   ARTHUR ST. GERMAINE   ELWOOD GENE HALL   CHARLENE LOU HALL   MELVIN JAMES HALL   EVERETT HALL   GLADYS RENA HALL   LUCILLE HALL   C. H. MURPHY, JR (3816) 80.00000 10/12/1950 T29N-R50E   SEC 12: N2SW   1.00000000 0.87500000 0.87500000   25-085-12660 OG JOHN MELVIN YOUNGMAN   ANNE YOUNGMAN, H/W   OF THE ASSINIBOINE-SIOUX TRIBES   C. H. MURPHY, JR. (6410) 40.00000 10/21/1953 T28N-R51E   SEC 9: NESE   1.00000000 0.87500000 0.87500000   25-085-12662.000 OG BUREAU OF LAND MANAGEMENT, AS TRUSTEE FOR   THE ASSINIBOINE-SIOUX TRIBES   HENRY H. FORSMAN 620.00000 10/1/1949 T28N-R51E   SEC 23: N2, N2S2, N2S2SW, N2SWSE, NWSESE   SEC 24: SWNW, N2SENW, SWSENW   1.00000000 0.86500000 0.86500000   25-085-12662.001 OG BUREAU OF LAND MANAGEMENT, AS TRUSTEE FOR   THE ASSINIBOINE-SIOUX TRIBES   HENRY H. FORSMAN 100.00000 10/1/1949 T28N-R51E   SEC 23: NESESE, S2S2S2   SEC 24: SESENW   1.00000000 0.86500000 0.86500000   25-085-12664.001 OG EVA DENNY WHITE AND DAVID L. WHITE, WIFE AND   HUSBAND, ET AL, OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3862) 40.00000 11/10/1950 T29N-R50E   SEC 36: NESE   1.00000000 0.87500000 0.87500000   25-085-12664.002 OG DENNEY FRANK HUTCHESON   EVELYN HUTCHESON, H/W   MABLE HUTCHESON ARNOLD   RALPH E. ARNOLD, W/H   RUTH HUTCHESON WILSON   DONAL L. WILSON, W/H   LOLA L. HUTCHESON, SINGLE   FRANK PORTER HUTCHESON, SINGLE   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3862-A) 40.00000 6/4/1951 T29N-R50E   SEC 36: NESE   1.00000000 0.87500000 0.87500000   25-085-12664.003 OG MAYBELLE ATCHESON, OF THE SIOUX TRIBE C. H. MURPHY, JR. (3862-B) 40.00000 7/3/1951 T29N-R50E   SEC 36: NESE, NENE   1.00000000 0.87500000 0.87500000   25-085-12664.004 OG BEULAH I. DENNY, A WIDOW   FRANK A. DENNY, SINGLE   CLAIRE I. SJORDAL   HARTZEL SJORDAL, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3862-C) 40.00000 7/23/1951 T29N-R50E   SEC 36: NESE, NENE   1.00000000 0.87500000 0.87500000   25-085-12681 OG ASSINIBOINE-SIOUX TRIBES RICHFIELD OIL CORPORATION 80.00000 4/2/1954 T29N-R50E   SEC 12: E2NE   1.00000000 0.87500000 0.87500000   25-085-12682 OG LEONARD J. SMITH   LUCILLE B. SMITH, H/W   OF THE ASSINIBOINE-SIOUX TRIBES   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3612) 40.00000 10/16/1950 T29N-R51E   SEC 29: SWNE   1.00000000 0.87500000 0.87500000   25-085-12685 OG WILLIAM WHITRIGHT NO 2, SINGLE   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3616) 40.00000 5/8/1950 T28N-R51E   SEC 9: SWNE   1.00000000 0.87500000 0.87500000   25-085-12686 OG ELAINE ADELAIDE GOINGS ARMSTRONG, OF THE   ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 320.00000 10/22/1974 T29N-R50E   SEC 10: SE   SEC 11: SW   0.75000000 0.80702213 0.60526660   25-085-12686.002 OG LOIS GOINGS YVONNE MACKENZIE   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 320.00000 10/22/1974 T29N-R50E   SEC 10: SE   SEC 11: SW   0.75000000 0.80702213 0.60526660   25-085-12686.003 OG FRANCIS LOUIS GOINGS   CHRISTINA GOINGS   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 320.00000 10/22/1974 T29N-R50E   SEC 10: SE   SEC 11: SW   0.75000000 0.80702213 0.60526660   25-085-12686.004 OG LOUISE GOINGS ARCASA   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 320.00000 10/22/1974 T29N-R50E   SEC 10: SE   SEC 11: SW   0.75000000 0.80702213 0.60526660   25-085-12686.005 OG JEANETTE ELIZABETH GOINGS HAUSER   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 320.00000 10/22/1974 T29N-R50E   SEC 10: SE   SEC 11: SW   0.75000000 0.80702213 0.60526660   3    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12687 OG PATRICK LEO FOOTE, UNDETERMINED ESTATE   MELDA IRON BEAR GONE   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 120.00000 10/22/1974 T29N-R50E   SEC 10: S2NW, SWNE   0.75000000 0.83333333 0.62500000   25-085-12687.002 OG MELDA IRON BEAR GONE   OF THE ASSINIBOINE-SIOUX TRIBES   THE POLUMBUS CORPORATION 120.00000 10/22/1974 T29N-R50E   SEC 10: S2NW, SWNE   0.75000000 0.83333333 0.62500000   25-085-12691 OG MARY FOOTE, A SINGLE WOMAN, MAUDE BUCKLES,   A SINGLE WOMAN, ET AL, OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3577) 320.00000 11/30/1950 T28N-R51E                                             SEC 14: W2   1.00000000 0.87500000 0.87500000   25-085-12692 OG MARY FOOTE, A SINGLE WOMAN, MAUDE BUCKLES,   A SINGLE WOMAN, ET AL, OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3578) 160.00000 11/30/1950 T28N-R51E   SEC 14: SE   1.00000000 0.87500000 0.87500000   25-085-12693 OG ASSINIBOINE-SIOUX TRIBES   REGINALD BIRTHMARK   C. H. MURPHY, JR. (3818-A) 20.00000 7/27/1951 T29N-R51E   SEC 20: S2SESE   1.00000000 0.87500000 0.87500000   25-085-12694 OG ASSINIBOINE-SIOUX TRIBES   REGINALD BIRTHMARK   C. H. MURPHY, JR. (3818-B) 20.00000 7/27/1951 T29N-R51E   SEC 21: E2NWSW   1.00000000 0.87500000 0.87500000   25-085-12695 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4672) 120.00000 7/27/1951 T29N-R50E   SEC 11: SESE   SEC 12: S2SW   1.00000000 0.87500000 0.87500000   25-085-12696 OG BIRDIE LESTER VANCE   LEROY VANCE, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3858) 240.00000 7/31/1950 T28N-R51E   SEC 10: NW, W2SW   1.00000000 0.87500000 0.87500000   25-085-12697 OG ETHEL WHITRIGHT ATKINSON, A WIDOW   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3813) 40.00000 7/18/1950 T28N-R51E   SEC 4: SWSE   1.00000000 0.87500000 0.87500000   25-085-12698 OG JOHN LONGTREE JR   .ESTHER MELBOURNE LONGTREE, H/W   MARK LONGTREE, SINGLE   CLARENCE DALE LONGTREE   ALICE L. LONGTREE, H/W   IDA LONGTREE, SINGLE   ALICE MARIE LONGTREE CROWE   SHERMAN CROWE, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3820) 120.00000 7/12/1950 T29N-R51E   SEC 22: S2NW, NWNW   1.00000000 0.87500000 0.87500000   25-085-12699 OG MARK LONGTREE, SINGLE   CLARENCE DALE LONGTREE   ALICE L. LONGTREE, H/W   IDA LONGTREE, SINGLE   ALICE MARIE LONGTREE CROWE   SHERMAN CROWE, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3819) 320.00000 7/13/1950 T29N-R51E   SEC 22: SW   SEC 27: NW   1.00000000 0.87500000 0.87500000   25-085-12700 OG ASSINIBOINE-SIOUX TRIBES C. H. MURPHY, JR. (4673) 280.00000 7/18/1951 T29N-R51E   SEC 26: SWSW   SEC 27: SW, S2SE   1.00000000 0.87500000 0.87500000   25-085-12701 OG BUREAU OF LAND MANAGEMENT   AS TRUSTEE FOR THE ASSINIBOINE-SIOUX TRIBES   ROCKWOOD BROWN 680.00000 7/1/1950 T29N-R50E   SEC 13: E2   SEC 24: E2, NENW   1.00000000 0.86500000 0.86500000   25-085-12702 OG JAMES SEEDS   JOSEPHINE SEEDS, H/W   RELINQUISHED IN 1976   C. H. MURPHY, JR. (3821) 160.00000 7/12/1950 T28N-R51E   SEC 14: NE   1.00000000 0.87500000 0.87500000   25-085-12703 OG VINA COULTER WAKAN   ALBERT WAKAN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3814) 40.00000 7/12/1950 T29N-R51E   SEC 30: NENW   1.00000000 0.87500000 0.87500000   25-085-12704 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3460) 40.00000 5/8/1950 T29N-R51E   SEC 32: NWNE   1.00000000 0.87500000 0.87500000   25-085-12705 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3461) 360.00000 5/8/1950 T29N-R51E   SEC 32: NENE   SEC 33: E2   1.00000000 0.87500000 0.87500000   25-085-12706 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3462) 40.00000 5/8/1950 T29N-R51E   SEC 29: SWSE   1.00000000 0.87500000 0.87500000   25-085-12707 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3463) 40.00000 5/8/1950 T29N-R51E   SEC 32: SENE   1.00000000 0.87500000 0.87500000   4    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12708 OG JESSE VERNON PEREAU   STELLA B. PEREAU, H/W   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3489) 40.00000 5/4/1950 T29N-R51E   SEC 17: SESE   1.00000000 0.87500000 0.87500000   25-085-12709 OG DOUGLAS YOUNGMAN   EVA I. R. YOUNGMAN, H/W   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3490) 40.00000 5/8/1950 T29N-R51E   SEC 31: NESW   1.00000000 0.87500000 0.87500000   25-085-12710 OG CAROLINE RED, SINGLE WOMAN   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3497) 39.77000 5/8/1950 T29N-R51E   SEC 30: LOT 4 (39.77, A/D/A SWSW)   1.00000000 0.87500000 0.87500000   25-085-12711 OG DOLLY C. AKERS,   AKA SARAH SMITH AKERS, &   JOHN J. AKERS, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3513) 40.00000 5/8/1950 T29N-R51E   SEC 30: SENW   1.00000000 0.87500000 0.87500000   25-085-12712 OG MABEL DUPREE DANIELS   RANDOLPH DANIELS, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3514) 40.00000 5/8/1950 T29N-R51E   SEC 26: NWNW   1.00000000 0.87500000 0.87500000   25-085-12713 OG ALICE ANNIE FOOTE, SINGLE   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3516) 40.00000 5/8/1950 T28N-R51E   SEC 4: LOT 1 (40.00, A/D/A NENE)   1.00000000 0.87500000 0.87500000   25-085-12714 OG AUSTIN R. BUCKLES, AKA   AUSTIN R. SCOTT &   AUDREY M. BUCKLES, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3519) 40.00000 5/12/1950 T28N-R51E   SEC 4: SENE                                        1.00000000 0.87500000 0.87500000   25-085-12715 OG MABEL B. FOOTE BIGHORN   JACOB BIGHORN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3520) 39.98000 5/8/1950 T28N-R51E   SEC 4: LOT 2 (39.98, A/D/A NWNE)   1.00000000 0.87500000 0.87500000   25-085-12716 OG WILLIAM YOUNGMAN #2   STELLA C. YOUNGMAN, H/W   C. H. MURPHY, JR. (3521) 40.00000 5/8/1950 T29N-R51E   SEC 31: NWSE   1.00000000 0.87500000 0.87500000   25-085-12717 OG ESTELLE BAD TEMPER BRIEN   ALBERT BRIEN, W/H   C. H. MURPHY, JR. (3464) 40.00000 5/8/1950 T29N-R51E   SEC 32: SWNE   1.00000000 0.87500000 0.87500000   25-085-12718-A OG JAMES HELMER   MARJORIE L. HELMER, H/W   OF THE SIOUX TRIBE, RELINQUISHED   C. H. MURPHY, JR. (3479) 200.00000 5/8/1950 T29N-R51E   SEC 20: NWNW   T28N-R52E   SEC 20: NW   1.00000000 0.85000000 0.85000000   25-085-12719 OG CHARLES ROBBINS   JULIE ROBBINS, H/W   OF THE ASSINIBOINE-SIOUX TRIBES   C. H. MURPHY, JR. (3480) 160.00000 5/4/1950 T29N-R50E   SEC 25: N2NE, SENE                   T29N-R51E   SEC 31: NENW   1.00000000 0.87500000 0.87500000   25-085-12720 OG MALCOLM DANIEL SMITH   RELINQUISHED, DATE UNKNOWN   C. H. MURPHY, JR. (3496) 279.28000 5/15/1950 T29N-R51E   SEC 7: LOT 4 (39.28, A/D/A SWSW), SESW, S2SE   T29N-R50E   SEC 12: S2SE NWSE   1.00000000 0.87500000 0.87500000   25-085-12721 OG MARY RED FEATHER IRON BEAR   HARRY IRON BEAR, W/H   C. H. MURPHY, JR. (3530) 40.00000 5/8/1950 T28N-R51E   SEC 4: SENW   1.00000000 0.87500000 0.87500000   25-085-12722 OG ADDIE M. HOVERMAIL SANDERS, SINGLE   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3554) 320.00000 5/12/1950 T28N-R51E   SEC 1: S2   1.00000000 0.87500000 0.87500000   25-085-12723 OG THOMAS TRINDER, A SINGLE MAN   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3556) 280.35000 5/8/1950 T28N-R51E   SEC 2: LOTS 1 (40.19, A/D/A NENE),  2 (40.16, A/D/A   NWNE), S2NE, N2SE   T29N-R51E   SEC 30: NWSE   1.00000000 0.87500000 0.87500000   25-085-12724 OG BESSIE F. MCDONALD PALMER   HAROLD PALMER, W/H   OF THE ASSINIBOINE TRIBE   RELINQ TO BESSIE F MCDONALD PALMER IN 1954   C. H. MURPHY, JR. (3557) 40.00000 5/8/1950 T29N-R51E   SEC 30: SWSE   1.00000000 0.87500000 0.87500000   25-085-12725 OG CATHERINE EDER, SINGLE WOMAN,   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3563) 20.00000 5/8/1950 T29N-R51E   SEC 32: S2NESW   1.00000000 0.87500000 0.87500000   25-085-12726 OG ROSE MARY TRINDER SCHMID   MINOR JONES SCHMID, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3571) 40.00000 5/8/1950 T29N-R51E   SEC 29: NESW   1.00000000 0.87500000 0.87500000   25-085-12727 OG SHIRLEY K. HELMER SMITH   KENNETH D. SMITH, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3572) 40.00000 5/15/1950 T29N-R51E   SEC 19: SWSE   1.00000000 0.87500000 0.87500000   25-085-12728 OG LOUISE CAIN KIRN   HENRY JAY KIRN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3574) 40.00000 5/8/1950 T28N-R51E   SEC 24: NWSW   1.00000000 0.87500000 0.87500000   5    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12729 OG MARTHA L. PEREAU   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3580) 40.00000 5/8/1950 T29N-R51E   SEC 16: NWSW   1.00000000 0.87500000 0.87500000   25-085-12730 OG WILLIAM J. DENNY   MELDA O. DENNY, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3581) 40.00000 5/8/1950 T29N-R50E   SEC 36: SESE   1.00000000 0.87500000 0.87500000   25-085-12731 OG FRED DOUGLAS CONNORS   ANITA SHARON CONNORS   CAROL ARLYNE CONNORS   (MINORS)   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3582) 40.00000 5/12/1950 T29N-R51E   SEC 31: SWSE   1.00000000 0.87500000 0.87500000   25-085-12732 OG FRANK KOLLENBAUM   KATHERINE P. KOLLENBAUM, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3591) 40.00000 5/8/1950 T29N-R51E   SEC 19: SESE   1.00000000 0.87500000 0.87500000   25-085-12733 OG MAUDE CAROLINE BOYD HOLLOW   ANTON E. HOLLOW, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3595) 317.80000 5/8/1950 T29N-R51E   SEC 18: LOTS 1 (39.34, A/D/A NWNW), 2 (39.44,   A/D/A SWNW), 3 (39.51, A/D/A NWSW), 4 (39.51,   A/D/A SWSW) E2W2   1.00000000 0.87500000 0.87500000   25-085-12734 OG ROSE FONTAINE LITTLEFIELD SHAFLEY   E. L. SHAFLEY, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3601) 40.00000 5/8/1950 T28N-R51E   SEC 4: NWSE   1.00000000 0.87500000 0.87500000   25-085-12735 OG MILDRED TATSEY DOORE   ROY H. DOORE, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3602) 40.00000 5/8/1950 T29N-R51E   SEC 29: NENW   1.00000000 0.87500000 0.87500000   25-085-12736 OG JOHN HELMER   MYRTLE W. HELMER, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3604) 40.00000 5/8/1950 T29N-R51E   SEC 17: SESW   1.00000000 0.87500000 0.87500000   25-085-12737 OG GLADYS KOLLENBAUM, SINGLE   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3605) 40.00000 5/8/1950 T29N-R51E   SEC 20: NWSW   1.00000000 0.87500000 0.87500000   25-085-12738 OG COLMA KOLLENBAUM   CHARLOTTE S. KOLLENBAUM, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3606) 40.00000 5/8/1950 T29N-R51E   SEC 19: NESE   1.00000000 0.87500000 0.87500000   25-085-12739 OG LIZZIE KOLLENBAUM BOND   GEORGE WILLIAM BOND, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3607) 40.00000 5/8/1950 T29N-R51E   SEC 30: NENE   1.00000000 0.87500000 0.87500000   25-085-12740 OG LOUISE KOLLENBAUM FORREST AND LEROY   FORREST, WIFE AND HUSBAND, OF THE   ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3614) 40.00000 5/8/1950 T29N-R51E   SEC 20: SWSW   1.00000000 0.87500000 0.87500000   25-085-12741 OG GENEVIEVE KOLLENBAUM BRODALE   DOUGLAS BRODALE, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3623) 40.00000 5/11/1950 T29N-R51E   SEC 19: NENE   1.00000000 0.87500000 0.87500000   25-085-12742 OG VIOLET KOLLENBAUM STEIN   AL STEIN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3628) 40.00000 5/11/1950 T29N-R51E   SEC 19: SENE   1.00000000 0.87500000 0.87500000   25-085-12743 OG GLADYS OWNS MEDICINE, SINGLE   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3631) 39.96000 5/11/1950 T28N-R51E   SEC 4: LOT 4 (39.96, A/D/A NWNW)   1.00000000 0.87500000 0.87500000   25-085-12744 OG ROMONA TRINDER CHRISTENSEN   VERNON E. CHRISTENSEN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3642) 40.00000 5/11/1950 T29N-R51E   SEC 29: SESW   1.00000000 0.87500000 0.87500000   25-085-12745 OG LOUISE V. K. BURGE LINDEMAN   ALFRED LINDEMAN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3645) 40.00000 5/11/1950 T29N-R51E   SEC 20: N2SESE, W2NESE   1.00000000 0.87500000 0.87500000   25-085-12746 OG VIVIAN KOLLENBAUM PATTERSON   WESLEY W. PATTERSON, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3646) 40.00000 5/11/1950 T29N-R51E   SEC 20: NESW   1.00000000 0.87500000 0.87500000   25-085-12747 OG SOPHIA BROUGH KAMPFER   LESLIE KAMPFER, W/H   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3647) 40.00000 5/11/1950 T29N-R51E   SEC 29: NWNE   1.00000000 0.87500000 0.87500000   25-085-12748 OG NELLIE EVA JARMAN DE URENA   FRANCISCO DE URENA Y DA FEDERICO, W/H   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3649) 320.20000 5/8/1950 T28N-R51E   SEC 3: LOTS 1 (40.09, A/D/A NENE), 2 (40.06, A/D/A   NWNE), 3 (40.04, A/D/A NENW), 4 (40.01, A/D/A   NWNW) S2N2   1.00000000 0.87500000 0.87500000   6    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12749 OG STEPHEN C. PROCTOR   FLORENCE NIGHTENGALE SCHALLER PROCTOR,   H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3650) 40.00000 5/11/1950 T29N-R51E   SEC 29: SENW   1.00000000 0.87500000 0.87500000   25-085-12750 OG ELSIE LONG LONGEE   AKA ELISE LONG   WILLIAM H. TAFT LONGEE, H/W   GEORGE LONG   SADIE TELEKISH LONG, H/W   HEIRS OF LIONIE LONG   OF THE ASSINIBOINE SIOUX TRIBES   C. H. MURPHY, JR. (3865-A) 39.92000 5/21/1951 T29N-R51E   SEC 31: LOT 2 (39.92, A/D/A SWNW)   1.00000000 0.87500000 0.87500000   25-085-12751 OG BENJAMIN FRANKLIN MCDONALD   AILEEN D. MCDONALD, H/W   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3639) 40.00000 5/11/1950 T29N-R51E   SEC 31: NWNE   1.00000000 0.87500000 0.87500000   25-085-12752 OG JENNIE V. WALKING EAGLE RUSSELL   DANIEL RUSSELL, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3495) 39.75000 6/8/1950 T29N-R51E   SEC 30: LOT 3 (39.75, A/D/A NWSW)   1.00000000 0.87500000 0.87500000   25-085-12753 OG ALTA R. KEISER   WILBUR KEISER, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3506) 40.00000 6/8/1950 T29N-R51E   SEC 31: SESW   1.00000000 0.87500000 0.87500000   25-085-12754 OG CARSON WALKING EAGLE   CATHERINE RICKER WALKING EAGLE, H/W   OF THE ASSINIBOINE-SIOUX TRIBES   C. H. MURPHY, JR. (3508) 39.97000 6/13/1950 T29N-R51E   SEC 31: LOT 3 (39.97, A/D/A NWSW)   1.00000000 0.87500000 0.87500000   25-085-12756 OG LAURA SPOTTED DOG, SINGLE   FLORENCE BURSHIA, A WIDOW   JOSHUA SPOTTED DOG   OWL SHIELD WOMAN SPOTTED DOG, H/W   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3594) 80.00000 6/12/1950 T28N-R51E   SEC 3: N2SW   1.00000000 0.87500000 0.87500000   25-085-12757 OG CLAUDE R. TRINDER   HAZEL R. TRINDER, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3638) 40.00000 6/16/1950 T29N-R51E   SEC 30: SENE   1.00000000 0.87500000 0.87500000   25-085-12758 OG CHARLES SMITH   EMMA LONGEE SMITH, H/W   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3651) 40.00000 6/6/1950 T29N-R51E   SEC 29: NWSE   1.00000000 0.87500000 0.87500000   25-085-12759 OG ALICE I. MURIN, A DIVORCED WOMAN   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3656) 40.00000 6/6/1950 T29N-R51E   SEC 30: SWNE   1.00000000 0.87500000 0.87500000   25-085-12760 OG GLADYS IRENE BURGE MICHAEL   ANTHONY E. MICHAEL, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3690) 40.00000 6/16/1950 T29N-R51E   SEC 20: E2NESE   SEC 21: W2NWSW   1.00000000 0.87500000 0.87500000   25-085-12761 OG BUREAU OF LAND MANAGEMENT, AS TRUSTEE FOR   THE ASSINIBOINE-SIOUX TRIBES   GUY R. CAMPBELL, JR. 440.02000 6/1/1951 T29N-R51E   SEC 34: W2   SEC 35: W2NW   T28N-R51E   SEC 1: LOT 1 (40 02 A/D/A NENE)   1.00000000 0.87500000 0.87500000   25-085-12762 OG ANNA M. BRACKEN   RAY BRACKEN, W/H   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3583) 40.00000 6/8/1950 T29N-R51E   SEC 17: NWSW   1.00000000 0.87500000 0.87500000   25-085-12764 OG ANGELINE T. LAMBERT IRON BEAR   CHARLES IRON BEAR   CARMELITA LAMBERT EAGLE BOY   NELSON EAGLE BOY   MAGDALENE STRETCHES HIMSELF RICKER   CHARLES HALL JR. WIDOWER   ELWOOD GENE HALL   ARLENE F. HALL   CHARLENE L. HALL TERMIN   MELVIN JAMES HALL, SINGLE   EVERETT HALL, SINGLE   GLADYS R. HALL DESJARLAIS, DIVORCED   LUCILLE HALL   ARTHUR RAY ST. GERMAINE   DONNA ST. GERMAINE   ARDIS RAE ST. GERMAIN, A MINOR   TRIPOL, INC., A COLORADO   CORPORATION   240.00000 6/16/1965 T29N-R50E   SEC 12: NW, W2NE   0.75000000 0.71329100 0.53496825   7    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12765 OG JOAN S. LAMBERT WAR CLUB   CHARLES WAR CLUB   GERALD RODNEY BIGSHIELD   OF THE ASSINIBOINE-SIOUX TRIBES   TRIPOL, INC., A COLORADO   CORPORATION   280.00000 6/29/1965 T29N-R50E   SEC 2: E2SE   SEC 11: E2NE, N2SE, SWSE   0.75000000 0.83333333 0.62500000   25-085-12766 OG AMELIA KEYES, A SINGLE WOMAN   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3610) 40.00000 6/8/1950 T29N-R51E   SEC 17: NWNW   1.00000000 0.87500000 0.87500000   25-085-12767 OG WINIFRED ABBOTT SWINDALL   LESLIE SWINDALL, W/H   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3613) 39.74000 6/22/1950 T29N-R51E   SEC 30: LOT 2 (39.74, A/D/A SWNW)   1.00000000 0.87500000 0.87500000   25-085-12768 OG BETTY LOU EDER WELCH   FRANCIS WELCH   OF THE ASSINIBOINE-SIOUX TRIBES, RELINQUISHED   C. H. MURPHY, JR. (3859) 240.00000 9/25/1950 T29N-R51E   SEC 21: S2SE   SEC 28: S2SW, NESW, SENW   1.00000000 0.87500000 0.87500000   25-085-12769 OG CARL BIERE   IMOGENE BIERE, H/W   C. H. MURPHY, JR. (3929-3) 80.00000 9/5/1951 T28N-R51E   SEC 22: E2N2SE (Unit Tract 232)   Sec 22: NWSE, W2NESE (Inside Unit, but Outside of   PA)   1.00000000 0.75000000 0.75000000   25-085-12770 OG JAMES O'CONNOR   PAULINE O'CONNOR, H/W   C. H. MURPHY, JR. (3929-2) 160.00000 9/5/1951 T28N-R51E   SEC 24: N2NW (Unit Tract 233)   SEC 24: N2NE (Outside PA and Outside Unit)   1.00000000 0.75000000 0.75000000   25-085-12771 OG ROOSEVELT COUNTY MONTANA HUNT OIL COMPANY 40.00000 9/5/1941 T28N-R51E   22: N2SE (EPU 232 - E2NESE inside Unit, W2NESE   outside PA, NWSE outside unit)   24: N2NE (EPU 233 - outside PA and outside unit)   T29N-R51E   SEC 30: SESW (HBU)   1.00000000 0.75000000 0.75000000   25-085-12772 OG ALICE V. PEREAU   MARIE SMITH   WILFRED H. SMITH   JESSE V. PEREAU, AKA VERNON J. PEREAU   STELLA BARSE PEREAU   OF THE SIOUX TRIBE RELINQUISHED IN 1953   C. H. MURPHY, JR. (3579) 40.00000 9/29/1950 T29N-R51E   SEC 16: NESW   1.00000000 0.75000000 0.75000000   25-085-12773 OG JOHN KOON   ALICE KOON, H/W   OF THE ASSINIBOINE-SIOUX TRIBES   RELINQUISHED IN 1960   C. H. MURPHY, JR. (3528) 310.64000 5/8/1950 T28N-R52E   SEC 6: LOTS 6 (35.30, A/D/A NWSW), AND 7 (35.34,   A/D/A SWSW), E2SW, SE   1.00000000 0.75000000 0.75000000   25-085-12775 OG WILLIAM KNORR NO 2, SINGLE   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3527) 320.00000 5/8/1950 T28N-R51E   SEC 15: S2   1.00000000 0.75000000 0.75000000   25-085-12776 OG BELVA KENNEDY CORBETT   BELVA KENNEDY CORBETT MCCLAMMY   DANIEL MCCLAMMY, W/H   C. H. MURPHY, JR. (3526) 40.00000 5/4/1950 T29N-R51E   SEC 17: NWNE   1.00000000 0.75000000 0.75000000   25-085-12777 OG ESTHER WALKING EAGLE SPOTTED BULL   ALLEN SPOTTED BULL, W/H   OF THE SIOUX TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3522) 40.00000 5/8/1950 T29N-R51E   SEC 8: SWSW   1.00000000 0.75000000 0.75000000   25-085-12778 OG MERCEDES TAYLOR RUNNING BEAR   AMBROSE RUNNING BEAR, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3491) 40.00000 5/8/1950 T29N-R51E   SEC 29: SENE   1.00000000 0.75000000 0.75000000   25-085-12779 OG CLEMENT D. STANFORD, SINGLE   OF THE SIOUX TRIBE   RELINQUISHED IN 1956   TO CLEMENT D. &   DELLA M STANFORD H/W   C. H. MURPHY, JR. (3600) 40.00000 5/8/1950 T29N-R51E   SEC 32: NWSW   1.00000000 0.75000000 0.75000000   25-085-12780 OG BERNADINE STANFORD RUGGLES   JUSTIN RALPH RUGGLES, W/H   OF THE SIOUX TRIBE   RELINQUISHED IN 1957   C. H. MURPHY, JR. (3603) 40.00000 5/8/1950 T29N-R51E   SEC 32: NENW   1.00000000 0.75000000 0.75000000   25-085-12781 OG AMOS HENRY KENNEDY   RELINQUISHED, DATE UNKNOWN   C. H. MURPHY, JR. (3611) 40.00000 5/8/1950 T29N-R51E   SEC 8: SESW   1.00000000 0.75000000 0.75000000   25-085-12782 OG VIVIAN FRANCES STAFFORD BRITT   JOEL F. BRITT, W/H   OF THE SIOUX TRIBE   RELINQUISHED IN 1958   C. H. MURPHY, JR. (3625) 40.00000 5/11/1950 T29N-R51E   SEC 32: SWSW   1.00000000 0.75000000 0.75000000   8    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12783 OG BERT P. EDER   GLADYS D. EDER, H/W   OF THE SIOUX TRIBE,   RELINQUISHED IN 1957   C. H. MURPHY, JR. (3641) 40.00000 5/11/1950 T28N-R51E   SEC 4: NESE   1.00000000 0.75000000 0.75000000   25-085-12785 OG CHAUNCY WHITRIGHT   VIOLA B. WHITRIGHT, H/W   OF THE SIOUX TRIBE   RELINQUISHED IN 1957 TO   CHAUNCY WHITRIGHT, SR.   CHAUNCY WHITRIGHT, JR.   VIOLA B WHITRIGHT H/W   C. H. MURPHY, JR. (3566) 40.00000 5/8/1950 T28N-R51E   SEC 9: SENE   1.00000000 0.75000000 0.75000000   25-085-12786 OG GEORGE BURSHIA   OF THE ASSINIBOINE-SIOUX TRIBES   RELINQUISHED TO BENJAMIN BURSHIA   HEIR OF GEORGE BURSHIA IN 1953   C. H. MURPHY, JR. (3644) 19.98000 5/15/1950 T28N-R51E   SEC 4: LOT 5 (19.98, A/D/A N2NENW)   1.00000000 0.75000000 0.75000000   25-085-12787 OG BESSIE BROWN FERKO   JOHN FERKO, W/H   OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3617) 40.00000 6/8/1950 T29N-R51E   SEC 21: NENW   1.00000000 0.75000000 0.75000000   25-085-12788 OG JAMES ALVIN MCDONALD, DIVORCED   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3609) 40.00000 5/8/1950 T29N-R51E   SEC 31: SWNE   1.00000000 0.75000000 0.75000000   25-085-12789 OG FANNIE BUCKLES CHARETTE, SINGLE   OF THE ASSINIBOINE-SIOUX TRIBES   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3486) 40.00000 6/8/1950 T28N-R51E   SEC 9: NENE   1.00000000 0.75000000 0.75000000   25-085-12790 OG RAYMOND EDWARD SMITH   CAROL W. SMITH, H/W   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3493) 40.00000 6/8/1950 T29N-R51E   SEC 30: NWNE   1.00000000 0.75000000 0.75000000   25-085-12791 OG EUGENE LEONARD DUPREE   VIOLET PEARL DUPREE, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3569) 320.00000 5/8/1950 T29N-R51E   SEC 18: E2   1.00000000 0.75000000 0.75000000   25-085-12792 OG WALTER ALLEN BUCKLES, SINGLE   OF THE ASSINIBOINE-SIOUX TRIBES   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3488) 40.00000 5/4/1950 T28N-R51E   SEC 4: SESE   1.00000000 0.75000000 0.75000000   25-085-12793 OG RAYMOND BUCKLEY CONNORS   ROSE M. CONNORS, H/W   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3507) 40.00000 5/11/1950 T29N-R51E   SEC 31: SESE   1.00000000 0.75000000 0.75000000   25-085-12794 OG HOWARD R. TRINDER   IVA G. TRINDER, H/W   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1952   C. H. MURPHY, JR. (3487) 40.00000 5/8/1950 T29N-R51E   SEC 29: SWNW   1.00000000 0.75000000 0.75000000   25-085-12795 OG HOWARD L. HELMER   MARGUERITE W. HELMER, H/W   OF THE SIOUX TRIBE   RELINQUISHED IN 1958   C. H. MURPHY, JR. (3476) 200.00000 5/8/1950 T29N-R51E   SEC 20: NWNE   T28N-R52E   SEC 17: SW   1.00000000 0.75000000 0.75000000   25-085-12796 OG GEORGE KIRN   MAGGIE KIRN   OF THE ASSINIBOINE TRIBE   C. H. MURPHY, JR. (3477) 320.00000 5/8/1950 T29N-R50E   SEC 13: W2   1.00000000 0.75000000 0.75000000   25-085-12797 OG DAVID ROY ARCHAMBEAU, DIVORCED   OF THE SIOUX TRIBE   RELINQUISHED IN 1955   C. H. MURPHY, JR. (3648) 40.00000 5/15/1950 T28N-R51E   SEC 4: NESW   1.00000000 0.75000000 0.75000000   25-085-12798 OG GEORGE THOMPSON, JR.   JOSEPHINE M. THOMPSON, H/W   OF THE SIOUX TRIBE   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3562) 40.00000 5/11/1950 T29N-R51E   SEC 30: NESE   1.00000000 0.75000000 0.75000000   25-085-12799 OG WILLIAM KNORR NO 1   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3555) 20.00000 5/8/1950 T28N-R51E   SEC 15: N2NENW   1.00000000 0.75000000 0.75000000   25-085-12800 OG RICHARD H. STANFORD, SINGLE   OF THE SIOUX TRIBE   RELINQUISHED IN 1953   C. H. MURPHY, JR. (3590) 40.00000 5/8/1950 T29N-R51E   SEC 32: SENW   1.00000000 0.75000000 0.75000000   25-085-12801 OG MARIE PEREAU SMITH   WILFRED SMITH, W/H   OF THE ASSINIBOINE TRIBE   RELINQUISHED IN 1952   C. H. MURPHY, JR. (3585) 40.00000 5/11/1950 T29N-R51E   SEC 16: SWSW   1.00000000 0.75000000 0.75000000   9    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12802.001 OG VERA ROBBINS SHERRED AND S. S. SHERRED,   WIFE AND HUSBAND, OF THE SIOUX TRIBE,   RELINQUISHED IN 1954   C. H. MURPHY, JR. (3615) 119.84000 5/8/1950 T29N-R50E   SEC 25: E2SE   SEC 25:  SW, W2SE   T29N-R51E   SEC 31: LOT 1 (39 84 A/D/A NWNW)   1.00000000 0.75000000 0.75000000   25-085-12802.002 OG VERA ROBBINS SHERRED AND S. S. SHERRED,   WIFE AND HUSBAND, OF THE SIOUX TRIBE   C. H. MURPHY, JR. (3615) 240.00000 5/8/1950 T29N-R50E   SEC 25: SW, W2SE   1.00000000 0.75000000 0.75000000   25-085-12818 OG BEN ZIMMERMAN   EDITH MAY ZIMMERMAN   HUSBAND AND WIFE   MAVERICK OIL AND GAS COMPANY 320.25000 4/18/1949 T28N-R51E   SEC 2: LOTS 3 (40.14, A/D/A NENW), 4 (40 11, A/D/A   NWNW), S2NW, SW   1.00000000 0.85000000   25-085-12819 OG MARY DENNY LEE   GLENN LEE, W/H   OF THE SIOUX TRIBE   RELINQUISHED DATE UNKNOWN   C. H. MURPHY, JR. (3689) 40.00000 6/16/1950 T29N-R50E   SEC 36: SENE   1.00000000 0.87500000 0.87500000   25-085-12820 OG KATE WINN SIMONS   HARRY J. SIMONS SR., W/H   OF THE ASSINIBOINE TRIBE   RELINQUISHED TO IN 1954   C. H. MURPHY, JR. 40.00000 5/11/1950 T29N-R51E   SEC 16: SWSE   1.00000000 0.87500000 0.87500000   25-085-12821 OG JOHN M. HELMER   ECHO GAULKE HELMER, H/W   THE CARTER OIL COMPANY 40.00000 10/1/1941 T29N-R51E   SEC 17: SWSW   1.00000000 0.87500000 0.87500000   25-085-12822 OG FLORENCE M. RENZ, A SINGLE WOMAN   ROBERT L. RENZ   SOPHIA RENZ, H/W   THE CARTER OIL COMPANY 80.00000 10/29/1941 T28N-R51E   SEC 3: S2SW   1.00000000 0.87500000 0.87500000   25-085-12823 OG LEO L. COMBS   GLADYS COMBS, HIS WIFE   THE CARTER OIL COMPANY 40.00000 3/6/1942 T29N-R51E   SEC 20: SWNW   1.00000000 0.87500000 0.87500000   25-085-12825 OG FRANK P. SHERBURNE AND MAY SHERBURNE, HIS   WIFE   THE CARTER OIL COMPANY 160.00000 8/14/1947 T29N-R51E   SEC 28: NE   1.00000000 0.87500000 0.87500000   25-085-12826 OG W. B. WALKER   ESTHER N. WALKER, H/W   C. H. MURPHY, JR. (3929-4) 120.00000 9/5/1951 T29N-R51E   SEC 32: S2SE, NESE   1.00000000 0.75000000 0.75000000   25-085-12827 OG FRED J. REYNOLDS   MARY F. REYNOLDS, H/W   C. H. MURPHY, JR. (3929-1) 320.00000 9/5/1951 T28N-R51E   SEC 11: N2   1.00000000 0.75000000 0.75000000   25-085-12829.001 OG DAY INVESTMENTS BALLARD PETROLEUM HOLDINGS, LLC 80.00000 2/6/2003 T29N-R50E   SEC 11: E2NW   0.75000000 0.87500000 0.65625000   25-085-12829.002 OG BLACK STONE MINERALS LP BALLARD PETROLEUM HOLDINGS, LLC 80.00000 8/21/2003 T29N-R50E   SEC 11: E2NW   0.75000000 0.87500000 0.65625000   25-085-12837 OG JOHN D. O'CONNOR   MARIE O'CONNOR, H/W   THE CARTER OIL COMPANY 320.00000 1/18/1949 T28N-R51E   SEC 13: S2   1.00000000 0.87500000 0.87500000   25-085-12838 OG LILLIAN HELMER LILLIBRIDGE   BY JOHN M. HELMER, ATTORNEY-IN-FACT   THE CARTER OIL COMPANY 40.00000 10/9/1944 T29N-R51E   SEC 20: SENW   1.00000000 0.87500000 0.87500000   25-085-12839 OG JOSEPH H. FRERICH   EUNICE FRERICH, H/W   THE CARTER OIL COMPANY 320.00000 1/19/1949 T29N-R51E   SEC 34: E2   1.00000000 0.87500000 0.87500000   25-085-12840 OG FRED FRERICH   MARY FRERICH, H/W   THE CARTER OIL COMPANY 160.30000 1/19/1949 T28N-R51E   SEC 1:  LOTS 3 (40.12, A/D/A NENW), 4 (40.18, A/D/A   NWNW), S2NW   1.00000000 0.87500000 0.87500000   25-085-12841 OG WILLIAM M. JOHNSON, SINGLE   HENRY H. JOHNSON, SINGLE   THE CARTER OIL COMPANY 1,160.00000 10/28/1949 T29N-R51E   SEC 16: SWNW, SESW   SEC 17: NENE, S2NE, N2SE, SWSE, SWNW, NENW,   NESW   SEC 20: NENW, SESW, SWSE, SWNE, E2NE   SEC 21: W2NW, SENW, W2NE   SEC 29: W2SW   SEC 30: SESE   SEC 31: E2NE   SEC 32 W2NW   1.00000000 0.87500000 0.87500000   25-085-12842 OG ALBERT HUBER AND KATIE HUBER, HUSBAND AND   WIFE   C. C. THOMAS 160.00000 12/4/1951 T28N-R51E   SEC 10: NE   1.00000000 0.79000000 0.79000000   25-085-12843.001 OG MARGARET ZIMMERMAN MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12843.002 OG MARILYN TUNNELL, A/K/A MARILYN ZIMMERMAN,   MWDHSSP   MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12843.003 OG GLENN RUSTY ZIMMERMAN, A SINGLE MAN MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12843.004 OG ROBERT A. ZIMMERMAN, MMDHSSP MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/20/1996 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   10    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12843.005 OG JUDY REID, A SINGLE WOMAN MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12843.006 OG TIM J. ZIMMERMAN, A MMDIHSSP MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12843.007 OG BILL B. ZIMMERMAN, TRUSTEE   JIM ZIMMERMAN, AKA JAMES A. ZIMMERMAN,   TRUSTEE   UWO J ALLEN ZIMMERMAN DECEASED   MURPHY EXPLORATION &   PRODUCTION COMPANY   80.00000 8/24/1995 T28N-R51E   SEC 2: S2SE   1.00000000 0.83333333 0.83333333   25-085-12844 OG LEO L. COMBS   GLADYS COMBS, H/W   THE CARTER OIL COMPANY 40.00000 1/19/1949 T29N-R51E   SEC 20: NWSE   1.00000000 0.87500000 0.87500000   25-085-12845.001 OG JOSEPH HOMAN TRUST THE POLUMBUS CORPORATION 320.00000 4/11/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.81250000 0.60937500   25-085-12845.002 OG CAROLYN L. THOMPSON THE POLUMBUS CORPORATION 320.00000 4/5/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.87500000 0.65625000   25-085-12845.003 OG HAROLD HUNT THE POLUMBUS CORPORATION 320.00000 2/12/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.87500000 0.65625000   25-085-12845.004 OG THE MONTANA CONFERENCE ASSOCIATION OF   SEVENTH DAY ADVENTISTS   THE POLUMBUS CORPORATION 320.00000 2/28/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.87500000 0.65625000   25-085-12845.005 OG EDITH RICHARDS, ET AL THE POLUMBUS CORPORATION 320.00000 2/12/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.87500000 0.65625000   25-085-12845.006 OG MELVIN A. BROWN THE POLUMBUS CORPORATION 320.00000 4/11/1974 T29N-R50E   SEC 2: SW   SEC 3: E2SE   SEC 10: SENE   SEC 11: SWNW   0.75000000 0.81250000 0.60937500   25-085-12847 OG THE ZIMMERMAN COMPANY THE POLUMBUS CORPORATION 80.00000 5/20/1974 T29N-R50E   SEC 11: W2NE   0.75000000 0.78531333 0.58898500   25-085-12861 OG JOHN MCGOWAN   JANE S. MCGOWAN, H/W   MURPHY CORPORATION, A LOUISIANA   CORPORATION   120.00000 6/20/1958 T29N-R50E   SEC 3: SWSE   SEC 10: NENE   SEC 11: NWNW   1.00000000 0.87500000 0.87500000   25-085-12864.001 OG JOSEPH R. MCGOWAN   IRENE S. MCGOWAN, H/W   THE POLUMBUS CORPORATION 1,116.82000 2/9/1974 T29N-R50E   SEC 2: LOTS 3 (39.96, A/D/A NENW), 4 (39.22, A/D/A   NWNW), S2NW   SEC 3: LOTS 1 (39.18, A/D/A NENE), 2 (39.16, A/D/A   NWNE), SENE, SW, NWSE   SEC 4: SESE   SEC 9: NENE, SE   SEC 10: SW, NENW, NWNE   SEC 14: S2SW   SEC 23 N2NW   0.75000000 0.85500000 0.64125000   11    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12864.002 OG FRANCIS W. MCGOWAN   MADELINE C. MCGOWAN, H/W   THE POLUMBUS CORPORATION 1,356.82000 2/8/1974 T29N-R50E   SEC 2: LOTS 3 (39.96, A/D/A NENW), 4 (39.22, A/D/A   NWNW), S2NW   SEC 3: LOTS 1 (39.18, A/D/A NENE), 2 (39.16, A/D/A   NWNE), SENE, SW, NWSE   SEC 4: SESE   SEC 9: NENE, SE   SEC 10: SW, NENW, NWNE   SEC 14: S2SW   SEC 23 N2   0.75000000 0.85500000 0.64125000   25-085-12864.003 OG MARY E. KOHL   JOHN KOHL, W/H   THE POLUMBUS CORPORATION 680.00000 2/9/1974 T29N-R50E   SEC 3: SW, NWSE   SEC 4: SESE   SEC 9: NENE, SE   SEC 10: SW NENW NWNE   0.75000000 0.85500000 0.64125000   25-085-12864.004 OG MABEL A. REID   MAXWELL REID, W/H   THE POLUMBUS CORPORATION 680.00000 2/9/1974 T29N-R50E   SEC 3: SW, NWSE   SEC 4: SESE   SEC 9: NENE, SE   SEC 10: SW NENW NWNE   0.75000000 0.85500000 0.64125000   25-085-12864.005 OG GRACE M. MCANALLY   JAMES W. MCANALLY, W/H   THE POLUMBUS CORPORATION 680.00000 2/9/1974 T29N-R50E   SEC 3: SW, NWSE   SEC 4: SESE   SEC 9: NENE, SE   SEC 10: SW NENW NWNE   0.75000000 0.85500000 0.64125000   25-085-12996 OG NELLIE MACDONALD   JAMES MACDONALD, W/H   A. B. COBB, JR. 160.00000 7/25/1952 T29N-R50E   SEC 15: NW   1.00000000 0.82500000 0.82500000   25-085-12616 ROW LAWRENCE E AULT TESTAMENTARY TRUST DTD   11/5/1996   MURPHY EXPLORATION &   PRODUCTION   12/6/2001 PIPELINE EASEMENT FOR WAR CLUB 1 TO EPU "P"   BATTERY AND TULE CREEK PL TO CENTRAL   TANKS ACROSS:   T29N-R50E   SEC 14: E2NE SWNE25-085-12633 ROW USA BIA ROW EPU PIPELINE   25-085-12634 ROW USA BIA ROW EPU PIPELINE MURPHY CORPORATION 12/15/1954 T29N-R50E   SEC 13: PART E2   FOR PIPELINE ROW   25-085-12635 ROW USA BIA ROW EPU PIPELINE MURPHY CORPORATION 10/27/1958 ROW FOR EPU GATHERING SYSTEM  ACROSS:   T28N-R51E, MPM   SEC 3: PART SE   25-085-12636 ROW USA BIA ROW EPU PIPELINE 1/1/1953   25-085-12637 ROW USA BIA ROW TULE CREEK PL 2/20/1963 T29N-R51E   SEC 30: NESW   25-085-12638 ROW ANNA D COULTER GRACE PETROLEUM CORPORATION 1/16/1981 COWAN WESTERN #1 - ROW AND ACCESS   AGREEMENT OVER:   29N-50E   SEC 11: PART OF NW25-085-12639 ROW WILLIAM G COULTER   EARL BAKER   GRACE PETROLEUM CORPORATION 1/16/1981   25-085-12680 ROW VICKI LYNN SMITH MURPHY EXPLORATION &   PRODUCTION COMPANY   4/15/2000 T29N-R51E   SEC 8: SWSWSE   25-085-12688 ROW LAWRENCE E AULT THE POLUMBUS CORPORATION 10/25/1977 BATTERY ROW OVER:   T29N-R50E   SEC 3: SWSW   25-085-12689 ROW LAWRENCE E AULT 8/1/1977 ROW - ACCESS TO REID 10-1 OVER:   T29N-R50E   SEC 10: NWNE   25-085-12690 ROW Zimmerman Inc Nautilus Poplar LLC ROW for Huber #5 SWD - 1 acre wellpad, plus ROW for   pipeline and access road across   T28N-R51E   10: NE NWSE25-085-12814 ROW BIA FORT PECK EPU ROW BALLARD PETROLEUM HOLDINGS 9/27/2002 ROW TO ACCESS EPU 44-19H:   T29N-R51E, MPM   Sec 19: SESE   SEC 30: NENE   12    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12815 ROW BIA FORT PECK EPU ROW BALLARD PETROLEUM HOLDINGS LLC 10/29/2002 29N-51E   SEC 19: SWSE   FOR ROAD ROW 380 FT LONG AND 50 FT WIDE TO   ACCESS TO EPU 44-19H WELL25-085-12862 ROW JOHN MCGOWAN   JANE S. MCGOWAN, H/W   MURPHY CORPORATION, A LOUISIANA   CORPORATION   10/20/1961 T29N-R50E   SEC 3: SWSE   SEC 10: NWNE   ROW FOR PIPELINE25-085-12866.000 ROW ROBERT & ROSEMARY CLARK MURPHY OIL CORPORATION 8/31/1961 TULE CREEK GATHERING SYSTEM   50' WIDE EASEMENT FOR PIPELINE ACROSS:   T29N-R49E   SEC 3: SE   SEC 4: LOTS 2(39.74), 3 (39.78), 4(39.80), SWNE,   W2SE, S2NW   CONTAINING 272 73 RODS M/L25-085-12867 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 11/9/1972 ROW - 2ND EXTENSION TO EAST POPLAR   PIPELINE OVER:   T29N-R51E   SEC 17: NWNE, SENW   SEC 18: E2   SEC 19: E2E2   SEC 30: NENE   T28N-R51E   SEC 2 LOTS 1 AND 2 S2NE N2SE25-085-12868 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 12/15/1954 THIRD EXTENSION TO EPU PIPELINE GATHERING   SYSTEM OVER:   T29N-R51E   SEC 17: SESW, SESE   SEC 18: E2, W2   SEC 33: E2 W225-085-12869 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 11/1/1955 T29N-R51E   SEC 7: NWSE, NESW, SENW   SEC 8: SESW, NWSE   SEC 16: W2SESE, NWSE   SEC 17: SESE, NWNW   SEC 18: E2   SEC 33: ALL25-085-12870 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 3/1/1956 T29N-R51E   SEC 29: SWSE, SESW   SEC 32: NENE, NWNE   SEC 33: W225-085-12871 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 7/1/1956 PIPELINE ROW ACROSS   T29N-R50E   SEC 12: SENE   T29N-R51E   SEC 7: LOT 2 SENW25-085-12872 ROW FRANK KOLLENBAUM MURPHY OIL CORPORATION 9/10/1975 T29N-R51E   SEC 19: SESE   25-085-12873 ROW JESSIE J KIRN SR THE POLUMBUS CORPORATION 7/24/1974 PIPELINE ROW OVER:   T29N-R50E   13: NWNW   25-085-12874.000 ROW GERTRUDE WALLETT MURPHY OIL CORPORATION 8/31/1961 TULE CREEK GATHERING SYSTEM   50' WIDE EASEMENT FOR PIPELINE ACROSS:   T29N-R49E   SEC 12: SE   T29N-R50E   SEC 7: LOT 4 (39.48 SWSW), SESW   CONTAINING 330 00 RODS M/L25-085-12876 ROW GEORGE ROGERS ANDERSON MURPHY EXPLORATION &   PRODUCTION   12/1/2000 TULE CREEK 8' WIDE & 2081' LONG  PIPELINE ROW   AND EASEMENT OVER:   T29N-R50E   SEC 14: W2SE25-085-12877 ROW BIA FORT PECK EPU ROW MURPHY OIL CORPORATION 11/1/2001 PIPELINE EASEMENT ACROSS:   29N-50E   SEC 11: SESE   13    

 

EXHIBIT A   *Lease Number Type Lease Name Original Lessee Name Gross Acres Effective Date Legal Description Working   Interest   Lease Net   Revenue Interest   Nautilus Net   Revenue   Interest   25-085-12878 ROW BIA FORT PECK EPU ROW BALLARD PETROLEUM HOLDINGS LLD 12/3/2002 EPU 34-11H ACCESS ROAD AND WELL LOCATION   ACROSS:   T28N-R51E   SEC 11: SWSE   CONTAINING 20 91 RODS M/L25-085-12879 ROW HARRY MASON   BEATRICE MASON, H/W   MURPHY CORPORATION 9/1/1961 TULE CREEK PIPELINE ROW 50 FT WIDE OVER:   T29N-R49E, MPM   SEC 11: SE   T29N-R50E, MPM   SEC 7: SESE25-085-12880.001 ROW LILY O'GRADY, AKA LILLY O'GRADY   IRENE ANGELO   MURPHY CORPORATION 9/12/1961 TULE CREEK PIPELINE ROW, 50 FT IN WIDTH   OVER:   T29N-R49E, MPM   SEC 4: E2E2   SEC 10: N2NE, SENE   SEC 11: N2N2 SWNW25-085-12880.002 ROW ROBERT CLARK ET AL MURPHY CORPORATION - 8/31/1961 TULE CREEK GATHERING SYSTEM   50' WIDE EASEMENT FOR PIPELINE ACROSS:   T29N-R49E, MPM   SEC 4: E2E2   10: N2NE, SENE   11: N2N2, SWNW   CONTAINING 315 54 RODS M/L25-085-12894 ROW BLUE OX COMPANY NAUTILUS POPLAR LLC NA 9/1/2011 SURFACE USE AGREEMENT OVER:   T29N-R51E   SEC 29: SWNW   ACCESS TO EPU 12025-085-12896 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 4/10/2013 SURFACE USE AGREEMENT OVER:   T29N-R51E   SEC 34: SE   25-085-12897 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 4/10/2013 SURFACE USE AGREEMENT OVER:   T29N-R51E   SEC 28: SE, E2SW, SWSW   25-085-12898 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 4/10/2013 SURFACE USE AGREEMENT OVER:   T29N-R51E   SEC 32: SWSE, E2SE   25-085-12900 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 9/23/2013 POWER LINE ROW OVER:   T28N-R51E   SEC 2: NW   25-085-12901 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 10/28/2013 PIPE LINE ROW OVER:   T28N-R51E   SEC 2: NW   25-085-12902 ROW ZIMMERMAN INC NAUTILUS POPLAR NA 10/22/2013 SURFACE USE AGREEMENT OVER:   T28N-R51E   SEC 11: N2   14Unassociated Document

Exhibit 4.1

 

GENERATION ZERO GROUP, INC.

2014 STOCK INCENTIVE PLAN

ARTICLE I -- PREAMBLE

1.1           This 2014 Stock Incentive Plan of Generation Zero Group, Inc. (the "Company") is intended to secure for the Company and its Affiliates the benefits arising from ownership of the Company's Common Stock by the Employees, Officers, Directors and Consultants of the Company and its Affiliates, all of whom are and will be responsible for the Company's future growth.  The Plan is designed to help attract and retain for the Company and its Affiliates personnel of superior ability for positions of exceptional responsibility, to reward Employees, Officers, Directors and Consultants for their services and to motivate such individuals through added incentives to further contribute to the success of the Company and its Affiliates. With respect to persons subject to Section 16 of the Act, transactions under this Plan are intended to satisfy the requirements of Rule 16b-3 of the Act.

1.2           Awards under the Plan may be made to an Eligible Person in the form of (i) Incentive Stock Options (to Eligible Employees only); (ii) Nonqualified Stock Options; (iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any combination of the foregoing.

1.3           The Company’s board of directors and majority shareholder adopted the Plan effective on September 19, 2014 (the "Effective Date").  Unless sooner terminated as provided elsewhere in this Plan, this Plan shall terminate upon the close of business on the day next preceding the tenth (10th) anniversary of the Effective Date.  Award Agreements outstanding on such date shall continue to have force and effect in accordance with the provisions thereof.

1.4           The Plan shall be governed by, and construed in accordance with, the laws of the State of North Carolina (except its choice-of-law provisions).

1.5           Capitalized terms shall have the meaning provided in Article II unless otherwise provided in this Plan or any related Award Agreement.

ARTICLE II -- DEFINITIONS

DEFINITIONS.  Except where the context otherwise indicates, the following definitions apply:

2.1           "Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

2.2           "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or hereinafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

 

2.3           "Award" means an award granted to a Participant in accordance with the provisions of the Plan, including, but not limited to, Stock Options, Restricted Stock, Stock Awards, Performance Shares, or any combination of the foregoing.

2.4           "Award Agreement" means the separate written agreement evidencing each Award granted to a Participant under the Plan.

2.5           "Board of Directors" or "Board" means the Board of Directors of the Company, as constituted from time to time.

2.6           “Bylaws” means the Company’s bylaws as amended from time to time. 

 

2.7           "Change of Control" means (i) the adoption of a plan of merger or consolidation of the Company with any other corporation or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the approval by the Board of Directors of an agreement providing for the sale or transfer (other than as security for obligations of the Company) of substantially all the assets of the Company; or (iii) in the absence of a prior expression of approval by the Board of Directors, the acquisition of more than 20% of the Company's voting capital stock by any person within the meaning of Rule 13d-3 under the Act (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company).

  

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2.8           "Code" means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.

2.9           "Committee" means a committee of two or more members of the Board appointed by the Board in accordance with Section 3.2 of the Plan.  In the event the Board of Directors of the Company is not comprised of at least three members, the Company shall form a Compensation Committee (including at least one representative nominated by the secured note holders of the Company and at least one shareholder representative).

2.10           "Common Stock" means the Company’s common stock.

2.11           "Company" means Generation Zero Group, Inc., a Nevada corporation.

2.12           "Consultant" means any person, including an advisor engaged by the Company or an Affiliate to render bona fide consulting or advisory services to the Company or an Affiliate, other than as an Employee, Director or Non-Employee Director.

2.13           "Director" means a member of the Board of Directors of the Company.

2.14           "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.

2.15           "Effective Date" shall be the date set forth in Section 1.3 of the Plan.

2.16           "Eligible Employee" means an Eligible Person who is an Employee of the Company or any Affiliate.

2.17           "Eligible Person" means any Employee, Officer, Director, Non-Employee Director or Consultant of the Company or any Affiliate, except for instances where services are in connection with the offer or sale of securities in a capital-raising transaction, or they directly or indirectly promote or maintain a market for the Company’s securities, subject to any other limitations as may be provided by the Code, the Act, or the Board.  In making such determinations, the Board may take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’s success, and such other factors as the Board in its discretion shall deem relevant.

2.19           “Employee” means an individual who is a common-law employee of the Company or an Affiliate including employment as an Officer.  Mere service as a Director or payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate.

2.20           "ERISA" means the Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended.

2.21           "Fair Market Value" means:

(a) for purposes of an Incentive Stock Option, if there is a market for the Company’s stock, on a stock exchange or in an over-the-counter market, or otherwise, the Fair Market Value shall be the mean between the highest and lowest quoted selling prices on the valuation date of the Incentive Stock Option, or if there were no sales of the Company’s Common Stock on the valuation date, the Fair Market Value shall be the weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date.  If a valuation pursuant to this paragraph is not available, the appropriate method described in Section 20.2031-2 of the Treasury Regulations adopted under the Code shall be used for the Fair Market Value, and 

 

(b) for all other purposes, the mean between the highest and lowest quoted selling prices of the Common Stock (if actual sales price information on such trading day is not available, the mean between the bona fide bid and asked prices on such trading day shall be used) on the trading day immediately prior to the date on which a determination is being made pursuant to this Section 2.21 (the “Mean Selling Price”), as reported by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), or if the Common Stock is not traded on NASDAQ, the Mean Selling Price in the over-the-counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Fair Market Value shall be the Mean Selling Price on such exchange; and, provided further, that if the Common Stock is not quoted or listed by any organization, the fair value of the Common Stock, as determined by the Board, whose determination shall be conclusive, shall be used.  In no event shall the Fair Market Value of any share of Common Stock be less than its par value.

  

2

  

2.22           "Grant Date" means, as to any Award, the latest of:

(a) the date on which the Board authorizes the grant of the Award; or

 

(b) the date the Participant receiving the Award becomes an Employee or a Director of the Company or its Affiliate, to the extent employment status is a condition of the grant or a requirement of the Code or the Act; or

 

(c) such other date (later than the dates described in (a) and (b) above) as the Board may designate and as set forth in the Participant's Award Agreement.

2.23           "Immediate Family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

2.24           "Incentive Stock Option" means a Stock Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and is granted under Article IV of the Plan and designated as an Incentive Stock Option in a Participant's Award Agreement.

2.25           "Non-Employee Director" shall have the meaning set forth in Rule 16b-3 under the Act.

2.26           "Nonqualified Stock Option" means a Stock Option not intended to qualify as an Incentive Stock Option and is not so designated in the Participant's Award Agreement.

2.27           “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Act.

2.28           "Option Period" means the period during which a Stock Option may be exercised from time to time, as established by the Board and set forth in the Award Agreement for each Participant who is granted a Stock Option.

2.29           "Option Price" means the purchase price for a share of Common Stock subject to purchase pursuant to a Stock Option, as established by the Board and set forth in the Award Agreement for each Participant who is granted a Stock Option.

2.30           “Outside Director” means a Director who either (i) is not a current employee of the Company or an "affiliated corporation" (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an "affiliated corporation" receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an "affiliated corporation" at any time and is not currently receiving direct or indirect remuneration from the Company or an "affiliated corporation" for services in any capacity other than as a Director or (ii) is otherwise considered an "outside director" for purposes of Section 162(m) of the Code.

 

 

2.31           "Participant" means an Eligible Person to whom an Award has been granted and who has entered into an Award Agreement evidencing the Award or, if applicable, such other person who holds an outstanding Award.

2.32           "Performance Objectives" shall have the meaning set forth in Article IX of the Plan.

2.33           "Performance Period" shall have the meaning set forth in Article IX of the Plan.

2.34           "Performance Share" means an Award under Article IX of the Plan of a unit valued by reference to the Common Stock, the payout of which is subject to achievement of such Performance Objectives, measured during one or more Performance Periods, as the Board, in its sole discretion, shall establish at the time of such Award and set forth in a Participant's Award Agreement.

  

3

  

2.35           "Plan" means this Generation Zero Group, Inc. 2014 Stock Incentive Plan, as it may be amended from time to time.

2.36           “Reporting Person” means a person required to file reports under Section 16(a) of the Act.

2.37           "Restricted Stock" means an Award under Article VII of the Plan of shares of Common Stock that are at the time of the Award subject to restrictions or limitations as to the Participant's ability to sell, transfer, pledge or assign such shares, which restrictions or limitations may lapse separately or in combination at such time or times, in installments or otherwise, as the Board, in its sole discretion, shall determine at the time of such Award and set forth in a Participant's Award Agreement.

2.38           "Restriction Period" means the period commencing on the Grant Date with respect to such shares of Restricted Stock and ending on such date as the Board, in its sole discretion, shall establish and set forth in a Participant's Award Agreement.

2.39           "Retirement" means retirement as determined under procedures established by the Board or in any Award, as set forth in a Participant's Award Agreement.

2.40           “Rule 16b-3” means Rule 16b-3 promulgated under the Act or any successor to Rule 16b-3, as in effect from time to time.  Those provisions of the Plan which make express reference to Rule 16b-3, or which are required in order for certain option transactions to qualify for exemption under Rule 16b-3, shall apply only to a Reporting Person.

2.41           "Stock Award" means an Award of shares of Common Stock under Article VIII of the Plan.

2.42           "Stock Option" means an Award under Article IV or Article V of the Plan of an option to purchase Common Stock. A Stock Option may be either an Incentive Stock Option or a Nonqualified Stock Option.

2.43           "Ten Percent Stockholder" means an individual who owns (or is deemed to own pursuant to Section 424(d) of the Code), at the time of grant, stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Affiliates.

2.44           "Termination of Service" means (i) in the case of an Eligible Employee, the discontinuance of employment of such Participant with the Company or its Subsidiaries for any reason other than a transfer to another member of the group consisting of the Company and its Affiliates and (ii) in the case of a Director who is not an Employee of the Company or any Affiliate, the date such Participant ceases to serve as a Director. The determination of whether a Participant has discontinued service shall be made by the Board in its sole discretion. In determining whether a Termination of Service has occurred, the Board may provide that service as a Consultant or service with a business enterprise in which the Company has a significant ownership interest shall be treated as employment with the Company.

 

 

ARTICLE III – ADMINISTRATION

3.1           The Plan shall be administered by the Board of Directors of the Company.  The Board shall have the exclusive right to interpret and construe the Plan, to select the Eligible Persons who shall receive an Award, and to act in all matters pertaining to the grant of an Award and the determination and interpretation of the provisions of the related Award Agreement, including, without limitation, the determination of the number of shares subject to Stock Options and the Option Period(s) and Option Price(s) thereof, the number of shares of Restricted Stock or shares subject to Stock Awards or Performance Shares subject to an Award, the vesting periods (if any) and the form, terms, conditions and duration of each Award, and any amendment thereof consistent with the provisions of the Plan.  The Board may adopt, establish, amend and rescind such rules, regulations and procedures as it may deem appropriate for the proper administration of the Plan, make all other determinations which are, in the Board’s judgment, necessary or desirable for the proper administration of the Plan, amend the Plan or a Stock Award as provided in Article XI, and terminate or suspend the Plan as provided in Article XI.  All acts, determinations and decisions of the Board made or taken pursuant to the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan or any Award Agreement, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all persons.

  

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3.2           The Board may, to the full extent permitted by and consistent with applicable law and the Company’s Bylaws, and subject to Subparagraph 3.2(b) hereinbelow, delegate any or all of its powers with respect to the administration of the Plan to a Committee consisting of not fewer than two members of the Board each of whom shall qualify (at the time of appointment to the Committee and during all periods of service on the Committee) in all respects as a Non-Employee Director and as an Outside Director.

(a)           If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not consistent with the provisions of the Plan, as may be adopted from time to time by the Board.

(b)           The Board may abolish the Committee at any time and reassume all powers and authority previously delegated to the Committee.

(c)           In addition to, and not in limitation of, the right of any Committee so designated by the Board to administer this Plan to grant Awards to Eligible Persons under this Plan, the full Board of Directors may from time to time grant Awards to Eligible Persons pursuant to the terms and conditions of this Plan, subject to the requirements of the Code, Rule 16b-3 under the Act or any other applicable law, rule or regulation. In connection with any such grants, the Board of Directors shall have all of the power and authority of the Committee to determine the Eligible Persons to whom such Awards shall be granted and the other terms and conditions of such Awards.

3.3           Without limiting the provisions of this Article III, and subject to the provisions of Article X, the Board is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants and to the Company, with respect to an outstanding Award in the event of a Change of Control as described in Article X or other similar event. Such action may include, but shall not be limited to, establishing, amending or waiving the form, terms, conditions and duration of an Award and the related Award Agreement, so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, an accelerated release of restrictions or other modifications. The Board may take such actions pursuant to this Section 3.3 by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in an Award and the related Award Agreement, or by taking action with respect to individual Participants from time to time.

3.4           Subject to the provisions of Section 3.9, the maximum aggregate number of shares of Common Stock which may be issued pursuant to Awards under the Plan shall be 8,000,000 shares. Such shares of Common Stock shall be made available from authorized and unissued shares of the Company.

(a)           For all purposes under the Plan, each Performance Share awarded shall be counted as one share of Common Stock subject to an Award.

(b)           If, for any reason, any shares of Common Stock (including shares of Common Stock subject to Performance Shares) that have been awarded or are subject to issuance or purchase pursuant to Awards outstanding under the Plan are not delivered or purchased, or are reacquired by the Company, for any reason, including but not limited to a forfeiture of Restricted Stock or failure to earn Performance Shares or the termination, expiration or cancellation of a Stock Option, or any other termination of an Award without payment being made in the form of shares of Common Stock (whether or not Restricted Stock), such shares of Common Stock shall not be charged against the aggregate number of shares of Common Stock available for Award under the Plan and shall again be available for Awards under the Plan. In no event, however, may Common Stock that is surrendered or withheld to pay the exercise price of a Stock Option or to satisfy tax withholding requirements be available for future grants under the Plan.

(c)           The foregoing subsections (a) and (b) of this Section 3.4 shall be subject to any limitations provided by the Code or by Rule 16b-3 under the Act or by any other applicable law, rule or regulation.

  

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3.5           Each Award granted under the Plan shall be evidenced by a written Award Agreement, which shall be subject to and shall incorporate (by reference or otherwise) the applicable terms and conditions of the Plan and shall include any other terms and conditions (not inconsistent with the Plan) required by the Board.

3.6           The Company shall not be required to issue or deliver any certificates for shares of Common Stock under the Plan prior to:

(a)           any required approval of the Plan by the shareholders of the Company; and

(b)           the completion of any registration or qualification of such shares of Common Stock under any federal or state law, or any ruling or regulation of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable.

3.7           The Board may require any Participant acquiring shares of Common Stock pursuant to any Award under the Plan to represent to and agree with the Company in writing that such person is acquiring the shares of Common Stock for investment purposes and without a view to resale or distribution thereof.  Shares of Common Stock issued and delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed and any applicable federal or state laws, and the Board may cause a legend or legends to be placed on the certificate or certificates representing any such shares to make appropriate reference to any such restrictions. In making such determination, the Board may rely upon an opinion of counsel for the Company.

3.8           Except as otherwise expressly provided in the Plan or in an Award Agreement with respect to an Award, no Participant shall have any right as a shareholder of the Company with respect to any shares of Common Stock subject to such Participant's Award except to the extent that, and until, one or more certificates representing such shares of Common Stock shall have been delivered to the Participant. No shares shall be required to be issued, and no certificates shall be required to be delivered, under the Plan unless and until all of the terms and conditions applicable to such Award shall have, in the sole discretion of the Board, been satisfied in full and any restrictions shall have lapsed in full, and unless and until all of the requirements of law and of all regulatory bodies having jurisdiction over the offer and sale, or issuance and delivery, of the shares shall have been fully complied with.

 

 

3.9           The total amount of shares with respect to rights of outstanding Awards (both as to the number of shares and the Option Price(s) or other purchase price(s) of such shares, as applicable) shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Common Stock of the Company resulting from payment of a stock dividend on the Common Stock, a stock split or subdivision or combination of shares of the Common Stock, or a reorganization or reclassification of the Common Stock, or any other change in the structure of shares of the Common Stock. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional shares which might otherwise become subject to an Award. All adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Incentive Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code.

3.10           No director or person acting pursuant to authority delegated by the Board shall be liable for any action or determination under the Plan made in good faith.  The members of the Board shall be entitled to indemnification by the Company in the manner and to the extent set forth in the Company's Articles of Incorporation, as amended, Bylaws or as otherwise provided from time to time regarding indemnification of Directors.

3.11           The Board shall be authorized to make adjustments in any performance based criteria or in the other terms and conditions of outstanding Awards in recognition of unusual or nonrecurring events affecting the Company (or any Affiliate, if applicable) or its financial statements or changes in applicable laws, regulations or accounting principles. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem necessary or desirable to reflect any such adjustment. In the event the Company (or any Affiliate, if applicable) shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Board may, in its sole discretion, make such adjustments in the terms of outstanding Awards under the Plan as it shall deem appropriate.

  

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3.12           Subject to the express provisions of the Plan, the Board shall have full power and authority to determine whether, to what extent and under what circumstances any outstanding Award shall be terminated, canceled, forfeited or suspended. Notwithstanding the foregoing or any other provision of the Plan or an Award Agreement, all Awards to any Participant that are subject to any restriction or have not been earned or exercised in full by the Participant shall be terminated and canceled if the Participant is terminated for cause, as determined by the Board in its sole discretion.

ARTICLE IV -- INCENTIVE STOCK OPTIONS

4.1           The Board, in its sole discretion, may from time to time on or after the Effective Date grant Incentive Stock Options to Eligible Employees, subject to the provisions of this Article IV and Articles III and VI and subject to the following conditions:

(a)           Incentive Stock Options shall be granted only to Eligible Employees, each of whom may be granted one or more of such Incentive Stock Options at such time or times determined by the Board.

 

(b)           The Option Price per share of Common Stock for an Incentive Stock Option shall be set in the Award Agreement, but shall not be less than (i) one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date, or (ii) in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the Grant Date.

 

(c)           An Incentive Stock Option may be exercised in full or in part from time to time within ten (10) years from the Grant Date, or such shorter period as may be specified by the Board as the Option Period and set forth in the Award Agreement; provided, however, that, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, such period shall not exceed five (5) years from the Grant Date; and further, provided that, in any event, the Incentive Stock Option shall lapse and cease to be exercisable upon a Termination of Service or within such period following a Termination of Service as shall have been determined by the Board and set forth in the related Award Agreement; and provided, further, that such period shall not exceed the period of time ending on the date three (3) months following a Termination of Service, unless employment shall have terminated:

(i)           as a result of Disability, in which event such period shall not exceed the period of time ending on the date twelve (12) months following a Termination of Service; or

(ii)           as a result of death, or if death shall have occurred following a Termination of Service (other than as a result of Disability) and during the period that the Incentive Stock Option was still exercisable, in which event such period may not exceed the period of time ending on the earlier of the date twelve (12) months after the date of death;

and provided, further, that such period following a Termination of Service or death shall in no event extend beyond the original Option Period of the Incentive Stock Option.

(d)           The aggregate Fair Market Value of the shares of Common Stock with respect to which any Incentive Stock Options (whether under this Plan or any other plan established by the Company) are first exercisable during any calendar year by any Eligible Employee shall not exceed one hundred thousand dollars ($100,000), determined based on the Fair Market Value(s) of such shares as of their respective Grant Dates; provided, however, that to the extent permitted under Section 422 of the Code, if the aggregate Fair Market Values of the shares of Common Stock with respect to which Stock Options intended to be Incentive Stock Options are first exercisable by any Eligible Employee during any calendar year (whether such Stock Options are granted under this Plan or any other plan established by the Company) exceed one hundred thousand dollars ($100,000), the Stock Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as  Nonqualified Stock Options.

(e)           No Incentive Stock Options may be granted more than ten (10) years from the Effective Date.

(f)            The Award Agreement for each Incentive Stock Option shall provide that the Participant shall notify the Company if such Participant sells or otherwise transfers any shares of Common Stock acquired upon exercise of the Incentive Stock Option within two (2) years of the Grant Date of such Incentive Stock Option or within one (1) year of the date such shares were acquired upon the exercise of such Incentive Stock Option.

  

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4.2           Subject to the limitations of Section 3.4, the maximum aggregate number of shares of Common Stock subject to Incentive Stock Option Awards shall be the maximum aggregate number of shares available for Awards under the Plan.

4.3           The Board may provide for any other terms and conditions which it determines should be imposed for an Incentive Stock Option to qualify under Section 422 of the Code, as well as any other terms and conditions not inconsistent with this Article IV or Articles III or VI, as determined in its sole discretion and set forth in the Award Agreement for such Incentive Stock Option. 

 

4.4           Each provision of this Article IV and of each Incentive Stock Option granted hereunder shall be construed in accordance with the provisions of Section 422 of the Code, and any provision hereof that cannot be so construed shall be disregarded.

 

ARTICLE V -- NONQUALIFIED STOCK OPTIONS

5.1           The Board, in its sole discretion, may from time to time on or after the Effective Date grant Nonqualified Stock Options to Eligible Persons, subject to the provisions of this Article V and Articles III and VI and subject to the following conditions:

(a)           Nonqualified Stock Options may be granted to any Eligible Person, each of whom may be granted one or more of such Nonqualified Stock Options, at such time or times determined by the Board.

(b)           The Option Price per share of Common Stock for a Nonqualified Stock Option shall be set in the Award Agreement and may be less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date; provided, however, that the exercise price of each Nonqualified Stock Option granted under the Plan shall in no event be less than the par value per share of the Company’s Common Stock.

(c)           A Nonqualified Stock Option may be exercised in full or in part from time to time within the Option Period specified by the Board and set forth in the Award Agreement; provided, however, that, in any event, the Nonqualified Stock Option shall lapse and cease to be exercisable upon a Termination of Service or within such period following a Termination of Service as shall have been determined by the Board and set forth in the related Award Agreement.

5.2           The Board may provide for any other terms and conditions for a Nonqualified Stock Option not inconsistent with this Article V or Articles III or VI, as determined in its sole discretion and set forth in the Award Agreement for such Nonqualified Stock Option.

ARTICLE VI -- INCIDENTS OF STOCK OPTIONS

6.1           Each Stock Option shall be granted subject to such terms and conditions, if any, not inconsistent with this Plan, as shall be determined by the Board and set forth in the related Award Agreement, including any provisions as to continued employment as consideration for the grant or exercise of such Stock Option and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority.

6.2           Except as hereinafter described, a Stock Option shall not be transferable by the Participant other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Participant only by the Participant or the Participant's guardian or legal representative.  In the event of the death of a Participant, any unexercised Stock Options may be exercised to the extent otherwise provided herein or in such Participant's Award Agreement by the executor or personal representative of such Participant's estate or by any person who acquired the right to exercise such Stock Options by bequest under the Participant's will or by inheritance. The Board, in its sole discretion, may at any time permit a Participant to transfer a Nonqualified Stock Option for no consideration to or for the benefit of one or more members of the Participant's Immediate Family (including, without limitation, to a trust for the benefit of the Participant and/or one or more members of such Participant's Immediate Family or a corporation, partnership or limited liability company established and controlled by the Participant and/or one or more members of such Participant's Immediate Family), subject to such limits as the Board may establish. The transferee of such Nonqualified Stock Option shall remain subject to all terms and conditions applicable to such Nonqualified Stock Option prior to such transfer. The foregoing right to transfer the Nonqualified Stock Option, if granted by the Board shall apply to the right to consent to amendments to the Award Agreement. 

 

  

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6.3           Shares of Common Stock purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Board, subject to limitations set forth in the Stock Option Award Agreement. The Board may, in its sole discretion, permit the exercise of a Stock Option by payment in cash or by tendering shares of Common Stock (either by actual delivery of such shares or by attestation), or any combination thereof, as determined by the Board. In the sole discretion of the Board, payment in shares of Common Stock also may be made with shares received upon the exercise or partial exercise of the Stock Option, whether or not involving a series of exercises or partial exercises and whether or not share certificates for such shares surrendered have been delivered to the Participant. The Board also may, in its sole discretion, permit the payment of the exercise price of a Stock Option by the voluntary surrender of all or a portion of the Stock Option. Shares of Common Stock previously held by the Participant and surrendered in payment of the Option Price of a Stock Option shall be valued for such purpose at the Fair Market Value thereof on the date the Stock Option is exercised.  

6.4           The holder of a Stock Option shall have no rights as a shareholder with respect to any shares covered by the Stock Option (including, without limitation, any voting rights, the right to inspect or receive the Company’s balance sheets or financial statements or any rights to receive dividends or non-cash distributions with respect to such shares) until such time as the holder has exercised the Stock Option and then only with respect to the number of shares which are the subject of the exercise.  No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

6.5           The Board may permit the voluntary surrender of all or a portion of any Stock Option granted under the Plan to be conditioned upon the granting to the Participant of a new Stock Option for the same or a different number of shares of Common Stock as the Stock Option surrendered, or may require such voluntary surrender as a condition precedent to a grant of a new Stock Option to such Participant. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at such Option Price, during such Option Period and on such other terms and conditions as are specified by the Board at the time the new Stock Option is granted. Upon surrender, the Stock Options surrendered shall be canceled and the shares of Common Stock previously subject to them shall be available for the grant of other Stock Options.

6.6           The Board may at any time offer to purchase a Participant's outstanding Stock Option for a payment equal to the value of such Stock Option payable in cash, shares of Common Stock or Restricted Stock or other property upon surrender of the Participant's Stock Option, based on such terms and conditions as the Board shall establish and communicate to the Participant at the time that such offer is made.

6.7           The Board shall have the discretion, exercisable either at the time the Award is granted or at the time the Participant discontinues employment, to establish as a provision applicable to the exercise of one or more Stock Options that, during a limited period of exercisability following a Termination of Service, the Stock Option may be exercised not only with respect to the number of shares of Common Stock for which it is exercisable at the time of the Termination of Service but also with respect to one or more subsequent installments for which the Stock Option would have become exercisable had the Termination of Service not occurred.

ARTICLE VII -- RESTRICTED STOCK

7.1           The Board, in its sole discretion, may from time to time on or after the Effective Date award shares of Restricted Stock to Eligible Persons as a reward for past service and an incentive for the performance of future services that will contribute materially to the successful operation of the Company and its Affiliates, subject to the terms and conditions set forth in this Article VII.

7.2           The Board shall determine the terms and conditions of any Award of Restricted Stock, which shall be set forth in the related Award Agreement, including without limitation:

(a)           the purchase price, if any, to be paid for such Restricted Stock, which may be zero, subject to such minimum consideration as may be required by applicable law; 

 

  

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(b)           the duration of the Restriction Period or Restriction Periods with respect to such Restricted Stock and whether any events may accelerate or delay the end of such Restriction Period(s);

(c)           the circumstances upon which the restrictions or limitations shall lapse, and whether such restrictions or limitations shall lapse as to all shares of Restricted Stock at the end of the Restriction Period or as to a portion of the shares of Restricted Stock in installments during the Restriction Period by means of one or more vesting schedules;

(d)           whether such Restricted Stock is subject to repurchase by the Company or to a right of first refusal at a predetermined price or if the Restricted Stock may be forfeited entirely under certain conditions;

(e)            whether any performance goals may apply to a Restriction Period to shorten or lengthen such period; and

(f)            whether dividends and other distributions with respect to such Restricted Stock are to be paid currently to the Participant or withheld by the Company for the account of the Participant.

7.3           Awards of Restricted Stock must be accepted within a period of thirty (30) days after the Grant Date (or such shorter or longer period as the Board may specify at such time) by executing an Award Agreement with respect to such Restricted Stock and tendering the purchase price, if any. A prospective recipient of an Award of Restricted Stock shall not have any rights with respect to such Award, unless such recipient has executed an Award Agreement with respect to such Restricted Stock, has delivered a fully executed copy thereof to the Board and has otherwise complied with the applicable terms and conditions of such Award.

7.4           In the sole discretion of the Board and as set forth in the Award Agreement for an Award of Restricted Stock, all shares of Restricted Stock held by a Participant and still subject to restrictions shall be forfeited by the Participant upon the Participant's Termination of Service and shall be reacquired, canceled and retired by the Company. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement with respect to an Award of Restricted Stock, in the event of the death, Disability or Retirement of a Participant during the Restriction Period, or in other cases of special circumstances (including hardship or other special circumstances of a Participant whose employment is involuntarily terminated), the Board may elect to waive in whole or in part any remaining restrictions with respect to all or any part of such Participant's Restricted Stock, if it finds that a waiver would be appropriate.

7.5           Except as otherwise provided in this Article VII, no shares of Restricted Stock received by a Participant shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of during the Restriction Period.

7.6           Upon an Award of Restricted Stock to a Participant, a certificate or certificates representing the shares of such Restricted Stock will be issued to and registered in the name of the Participant. Unless otherwise determined by the Board, such certificate or certificates will be held in custody by the Company until (i) the Restriction Period expires and the restrictions or limitations lapse, in which case one or more certificates representing such shares of Restricted Stock that do not bear a restrictive legend (other than any legend as required under applicable federal or state securities laws) shall be delivered to the Participant, or (ii) a prior forfeiture by the Participant of the shares of Restricted Stock subject to such Restriction Period, in which case the Company shall cause such certificate or certificates to be canceled and the shares represented thereby to be retired, all as set forth in the Participant's Award Agreement.  It shall be a condition of an Award of Restricted Stock that the Participant deliver to the Company a stock power endorsed in blank relating to the shares of Restricted Stock to be held in custody by the Company.

7.7           Except as provided in this Article VII or in the related Award Agreement, a Participant receiving an Award of shares of Restricted Stock Award shall have, with respect to such shares, all rights of a shareholder of the Company, including the right to vote the shares and the right to receive any distributions, unless and until such shares are otherwise forfeited by such Participant; provided, however, the Board may require that any cash dividends with respect to such shares of Restricted Stock be automatically reinvested in additional shares of Restricted Stock subject to the same restrictions as the underlying Award, or may require that cash dividends and other distributions on Restricted Stock be withheld by the Company or its Affiliates for the account of the Participant. The Board shall determine whether interest shall be paid on amounts withheld, the rate of any such interest, and the other terms applicable to such withheld amounts.

  

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ARTICLE VIII -- STOCK AWARDS

8.1           The Board, in its sole discretion, may from time to time on or after the Effective Date grant Stock Awards to Eligible Persons in payment of compensation that has been earned or as compensation to be earned, including without limitation compensation awarded or earned concurrently with or prior to the grant of the Stock Award, subject to the terms and conditions set forth in this Article VIII.

8.2           For the purposes of this Plan, in determining the value of a Stock Award, all shares of Common Stock subject to such Stock Award shall be set in the Award Agreement and may be less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date.

8.3           Unless otherwise determined by the Board and set forth in the related Award Agreement, shares of Common Stock subject to a Stock Award will be issued, and one or more certificates representing such shares will be delivered, or maintained as book entry at the stock transfer agent, to the Participant as soon as practicable following the Exercise date of such Stock Award. Upon the issuance of such shares and the delivery of one or more certificates representing such shares to the Participant, such Participant shall be and become a shareholder of the Company fully entitled to receive dividends, to vote and to exercise all other rights of a shareholder of the Company. Notwithstanding any other provision of this Plan, unless the Board expressly provides otherwise with respect to a Stock Award, as set forth in the related Award Agreement, no Stock Award shall be deemed to be an outstanding Award for purposes of the Plan.

ARTICLE IX -- PERFORMANCE SHARES

9.1           The Board, in its sole discretion, may from time to time on or after the Effective Date award Performance Shares to Eligible Persons as an incentive for the performance of future services that will contribute materially to the successful operation of the Company and its Affiliates, subject to the terms and conditions set forth in this Article IX.

9.2           The Board shall determine the terms and conditions of any Award of Performance Shares, which shall be set forth in the related Award Agreement, including without limitation:

(a)            the purchase price, if any, to be paid for such Performance Shares, which may be zero, subject to such minimum consideration as may be required by applicable law;

(b)            the performance period (the "Performance Period") and/or performance objectives (the "Performance Objectives") applicable to such Awards;

(c)            the number of Performance Shares that shall be paid to the Participant if the applicable Performance Objectives are exceeded or met in whole or in part; and

(d)            the form of settlement of a Performance Share.

9.3           At any date, each Performance Share shall have a value equal to the Fair Market Value of a share of Common Stock.

9.4           Performance Periods may overlap, and Participants may participate simultaneously with respect to Performance Shares for which different Performance Periods are prescribed. 

 

9.5           Performance Objectives may vary from Participant to Participant and between Awards and shall be based upon such performance criteria or combination of factors as the Board may deem appropriate, including, but not limited to, minimum earnings per share or return on equity. If during the course of a Performance Period there shall occur significant events which the Board expects to have a substantial effect on the applicable Performance Objectives during such period, the Board may revise such Performance Objectives.

9.6           In the sole discretion of the Board and as set forth in the Award Agreement for an Award of Performance Shares, all Performance Shares held by a Participant and not earned shall be forfeited by the Participant upon the Participant's Termination of Service. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement with respect to an Award of Performance Shares, in the event of the death, Disability or Retirement of a Participant during the applicable Performance Period, or in other cases of special circumstances (including hardship or other special circumstances of a Participant whose employment is involuntarily terminated), the Board may determine to make a payment in settlement of such Performance Shares at the end of the Performance Period, based upon the extent to which the Performance Objectives were satisfied at the end of such period and pro-rated for the portion of the Performance Period during which the Participant was employed by the Company or an Affiliate; provided, however, that the Board may provide for an earlier payment in settlement of such Performance Shares in such amount and under such terms and conditions as the Board deems appropriate or desirable.

  

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9.7           The settlement of a Performance Share shall be made in cash, whole shares of Common Stock or a combination thereof and shall be made as soon as practicable after the end of the applicable Performance Period.  Notwithstanding the foregoing, the Board in its sole discretion may allow a Participant to defer payment in settlement of Performance Shares on terms and conditions approved by the Board and set forth in the related Award Agreement entered into in advance of the time of receipt or constructive receipt of payment by the Participant.

9.8           Performance Shares shall not be transferable by the Participant. The Board shall have the authority to place additional restrictions on the Performance Shares including, but not limited to, restrictions on transfer of any shares of Common Stock that are delivered to a Participant in settlement of any Performance Shares.

ARTICLE X -- CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES

10.1          Upon the occurrence of a Change of Control and unless otherwise provided in the Award Agreement with respect to a particular Award:

(a)            all outstanding Stock Options shall become immediately exercisable in full, subject to any appropriate adjustments in the number of shares subject to the Stock Option and the Option Price, and shall remain exercisable for the remaining Option Period, regardless of any provision in the related Award Agreement limiting the exercisability of such Stock Option or any portion thereof for any length of time;

(b)            all outstanding Performance Shares with respect to which the applicable Performance Period has not been completed shall be paid out as soon as practicable as follows:

(i)            all Performance Objectives applicable to the Award of Performance Shares shall be deemed to have been satisfied to the extent necessary to earn one hundred percent (100%) of the Performance Shares covered by the Award;

(ii)            the applicable Performance Period shall be deemed to have been completed upon occurrence of the Change of Control;

(iii)            the payment to the Participant in settlement of the Performance Shares shall be the amount determined by the Board, in its sole discretion, or in the manner stated in the Award Agreement, as multiplied by a fraction, the numerator of which is the number of full calendar months of the applicable Performance Period that have elapsed prior to occurrence of the Change of Control, and the denominator of which is the total number of months in the original Performance Period; and

(iv)            upon the making of any such payment, the Award Agreement as to which it relates shall be deemed terminated and of no further force and effect.

(c)            all outstanding shares of Restricted Stock with respect to which the restrictions have not lapsed shall be deemed vested, and all such restrictions shall be deemed lapsed and the Restriction Period ended.

 

10.2          Anything contained herein to the contrary notwithstanding, upon the dissolution or liquidation of the Company, each Award granted under the Plan and then outstanding shall terminate; provided, however, that following the adoption of a plan of dissolution or liquidation, and in any event prior to the effective date of such dissolution or liquidation, each such outstanding Award granted hereunder shall be exercisable in full and all restrictions shall lapse, to the extent set forth in Section 10.1(a), (b) and (c) above.

  

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10.3          After the merger of one or more corporations into the Company or any Affiliate, any merger of the Company into another corporation, any consolidation of the Company or any Affiliate of the Company and one or more corporations, or any other corporate reorganization of any form involving the Company as a party thereto and involving any exchange, conversion, adjustment or other modification of the outstanding shares of the Common Stock, each Participant shall, at no additional cost, be entitled, upon any exercise of such Participant's Stock Option, to receive, in lieu of the number of shares as to which such Stock Option shall then be so exercised, the number and class of shares of stock or other securities or such other property to which such Participant would have been entitled to pursuant to the terms of the agreement of merger or consolidation or reorganization, if at the time of such merger or consolidation or reorganization, such Participant had been a holder of record of a number of shares of Common Stock equal to the number of shares as to which such Stock Option shall then be so exercised. Comparable rights shall accrue to each Participant in the event of successive mergers, consolidations or reorganizations of the character described above. The Board may, in its sole discretion, provide for similar adjustments upon the occurrence of such events with regard to other outstanding Awards under this Plan. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional shares which might otherwise become subject to an Award. All adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Incentive Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code.

 

ARTICLE XI -- AMENDMENT AND TERMINATION

11.1          Subject to the provisions of Section 11.2, the Board of Directors at any time and from time to time may amend or terminate the Plan as may be necessary or desirable to implement or discontinue the Plan or any provision hereof.  To the extent required by the Act or the Code, however, no amendment, without approval by the Company's shareholders, shall:

(a)           materially alter the group of persons eligible to participate in the Plan;

(b)            except as provided in Section 3.4, change the maximum aggregate number of shares of Common Stock that are available for Awards under the Plan;

(c)           alter the class of individuals eligible to receive an Incentive Stock Option or increase the limit on Incentive Stock Options set forth in Section 4.1(d) or the value of shares of Common Stock for which an Eligible Employee may be granted an Incentive Stock Option.

11.2           No amendment to or discontinuance of the Plan or any provision hereof by the Board of Directors or the shareholders of the Company shall, without the written consent of the Participant, adversely affect (in the sole discretion of the Board) any Award theretofore granted to such Participant under this Plan; provided, however, that the Board retains the right and power to:

 (a)           annul any Award if the Participant is terminated for cause as determined by the Board; and

 (b)           convert any outstanding Incentive Stock Option to a Nonqualified Stock Option.

11.3           If a Change of Control has occurred, no amendment or termination shall impair the rights of any person with respect to an outstanding Award as provided in Article X.

ARTICLE XII -- MISCELLANEOUS PROVISIONS

12.1          Nothing in the Plan or any Award granted hereunder shall confer upon any Participant any right to continue in the employ of the Company or its Affiliates or to serve as a Director or shall interfere in any way with the right of the Company or its Affiliates or the shareholders of the Company, as applicable, to terminate the employment of a Participant or to release or remove a Director at any time.  Unless specifically provided otherwise, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Company or its Affiliates for the benefit of their respective employees unless the Company shall determine otherwise.  No Participant shall have any claim to an Award until it is actually granted under the Plan and an Award Agreement has been executed and delivered to the Company.  To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Board, be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as provided in Article VII with respect to Restricted Stock and except as otherwise provided by the Board.

 

  

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12.2          The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. Any provision herein relating to compliance with Rule 16b-3 under the Act shall not be applicable with respect to participation in the Plan by Participants who are not subject to Section 16 of the Act.

12.3          The terms of the Plan shall be binding upon the Company, its successors and assigns.

12.4          Neither a Stock Option nor any other type of equity-based compensation provided for hereunder shall be transferable except as provided for in Section 6.2. In addition to the transfer restrictions otherwise contained herein, additional transfer restrictions shall apply to the extent required by federal or state securities laws.  If any Participant makes such a transfer in violation hereof, any obligation hereunder of the Company to such Participant shall terminate immediately.

12.5          This Plan and all actions taken hereunder shall be governed by the laws of the State of North Carolina.

12.6          Each Participant exercising an Award hereunder agrees to give the Board prompt written notice of any election made by such Participant under Section 83(b) of the Code, or any similar provision thereof.

12.7          If any provision of this Plan or an Award Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Award Agreement, it shall be stricken, and the remainder of the Plan or the Award Agreement shall remain in full force and effect.

12.8          The grant of an Award pursuant to this Plan shall not affect in any way the right or power of the Company or any of its Affiliates to make adjustments, reclassification, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or to dissolve, liquidate or sell, or to transfer all or part of its business or assets. 

 

12.9          The Plan is not subject to the provisions of ERISA or qualified under Section 401(a) of the Code.

12.10        If a Participant is required to pay to the Company an amount with respect to income and employment tax withholding obligations in connection with (i) the exercise of a Nonqualified Stock Option, (ii) certain dispositions of Common Stock acquired upon the exercise of an Incentive Stock Option, or (iii) the receipt of Common Stock pursuant to any other Award, then the issuance of Common Stock to such Participant shall not be made (or the transfer of shares by such Participant shall not be required to be effected, as applicable) unless such withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the Company.  To the extent provided by the terms of an Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock.

 

 

  

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