HomeMy WebLinkAbout964895MORTGAGE AND DEED OF TRUST
(Oil and Gas Properties)
FROM
DAVID M. REAVIS
A Texas Resident;
LODESTONE OPERATING INC.,
A Delaware corporation;
(Taxpayer I.D. No. 27- 0047593); and
LODESTONE OPERATING, LLC,
A Texas Limited Liability Company,
(Taxpayer I.D. No. 26- 3188760)
Collectively, "Mortgagor"
TO
BARRY BRUCE CONRAD II, TRUSTEE
AND
PARK CITIES BANK, Mortgagee
(Taxpayer I.D. No. 75- 2899572)
Dated effective as of May 18, 2012
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF
SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY
AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON
DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE.
THIS INSTRUMENT IS A MORTGAGE OF BOTH REAL AND PERSONAL
PROPERTY AND IS, AMONG OTHER THINGS, A MORTGAGE OF CHATTELS, A
SECURITY AGREEMENT AND A FINANCING STATEMENT.
"THIS INSTRUMENT CONTAINS AFTER ACQUIRED PROPERTY PROVISIONS."
"THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES."
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU
MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS
INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS:
YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.
001.40
THIS INSTRUMENT WAS PREPARED BY, AND RECORDED COUNTERPARTS
RECEIVED 6/4/2012 at 1 1:07 AM
RECEIVING 964895
BOOK: 787 PAGE: 149
JEANNE WAGNER
LINCOLN COUNTY CLERK, KEMMERER, WY
SHOULD BE RETURNED TO:
MCGOWEN FOWLER, PLLC
2602 McKinney Avenue
Suite 305
Dallas, Texas 75204
Attention: James P. McGowen, Esq.
MORTGAGE AND DEED OF TRUST
THIS MORTGAGE AND DEED OF TRUST (the "Mortgage" or "Deed of
Trust is from DAVID M. REAVIS, a Texas resident; LODESTONE OPERATING
INC., a Delaware corporation; and LODESTONE OPERATING, LLC, a Texas limited
liability company, herein called (collectively, the "Mortgagor to Barry Bruce Conrad II,
of Dallas, Texas, as Trustee "Trustee for the benefit of PARK CITIES BANK, (the
"Mortgagee (or, if the provisions of Section 9.5 are applicable, to the Mortgagee). The
addresses of the Mortgagor and the Mortgagee are set forth in Section 9.14 hereof.
DEFINITIONS
ARTICLE I
1.1. For all purposes of this Mortgage, unless the context otherwise requires:
"Accounts and Contract Rights" shall mean all accounts (including accounts in
the form of joint interest billings), contract rights and general intangibles of the
Mortgagor now or hereafter existing, or hereafter acquired by, or on behalf of, the
Mortgagor or the Mortgagor's successors in interest, relating to the sale, purchase,
exchange, transportation or processing of Hydrocarbons produced or to be produced from
the Mortgaged Property, together with all accounts and proceeds accruing to the
Mortgagor attributable to the sale of Hydrocarbons produced from the Mortgaged
Property.
"Code" shall mean the Uniform Commercial Code as in effect in each of the
jurisdictions where the Mortgaged Property is situated.
"Credit Agreement" shall mean the Credit Agreement between the Mortgagor and
Mortgagee pursuant to which one or more of the Notes were issued, as the Credit
Agreement may be amended from time to time.
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"Effective Date" shall mean 7:00 a.m. on the first day of the calendar month in
which the execution of this Mortgage occurs.
"Event of Default" shall have the meaning stated in Article VII of this Mortgage.
"Exhibit A" shall mean, unless specifically indicated otherwise, Exhibit A
attached hereto.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline and condensate and all other liquid or gaseous hydrocarbons.
"Indebtedness" or "Secured Indebtedness" shall mean all the indebtedness,
obligations, and liabilities described or referred to in Section 3.1 of this Mortgage.
"Lands" shall mean the lands described in Exhibit A and shall include any lands,
the description of which is contained in Exhibit A or incorporated in Exhibit A by
reference to another instrument or document, including, without limitation, all lands
described in the &Oil and Gas Leases, and shall also include any lands now or hereafter
unitized, pooled, spaced, or otherwise combined, whether by statute, order, agreement,
declaration or otherwise, with lands the description of which is contained in Exhibit A or
is incorporated in Exhibit A by reference.
"Loan Papers" or "Loan Documents" shall mean the Notes, this Mortgage, and all
other documents, instruments and loan or credit agreements delivered to the Mortgagee at
any time in connection with the Indebtedness.
"Mortgaged Property" shall have the meaning stated in Article II of this Mortgage.
"Net Revenue Interest" shall mean Mortgagor's share of the total production of
oil, gas and other hydrocarbons produced from the Lands, after deducting Mortgagor's
share of all lessors' royalties, overriding royalties, production payments and other
payments out of, or measured by, production.
"Notes" shall mean the promissory note or notes identified in Section 3.1 of this
Mortgage, and all renewals, extensions, replacements and modifications thereof.
"Oil and Gas Leases" shall mean, collectively, oil, gas and mineral leases, oil and
gas leases, oil leases, gas leases, other mineral leases, subleases and assignments of
operating rights pertaining to any of the foregoing, and all other interests pertaining to any
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001.5.
of the foregoing; including, without limitation, all royalty and overriding royalty interests,
production payments and net profit interests, mineral fee interests, and all contingent
reversionary and carried interests relating to any of the foregoing and all other rights
therein which are described and /or which reference may be made on Exhibit A and /or
which cover or relate to any of the Lands.
"Operating Equipment" shall mean all personal property and fixtures pertaining,
affixed or incidental to, situated upon or used or useful in connection with all or any part
of the Mortgaged Property, including, without limitation, all surface or subsurface
machinery, equipment, facilities, or other property of whatsoever kind or nature
(excluding drilling rigs, trucks, automotive equipment or other property taken to the
premises to drill a well or for other similar temporary uses) now or hereafter located on
any of the Lands which are useful for the production, treatment, storage or transportation
of oil or gas, including, but not by way of limitation, all oil wells, gas wells, water wells,
injection wells, easing, tubing, rods, pumping units and engines, Christmas trees,
derricks, separators, gun barrels, flow lines, tanks, gas systems, (for gathering, treating
and compression), water systems (for treating, disposal and injection), power plants,
poles, lines, transformers, starters and controllers, machine shops, tools, storage yards and
equipment stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks and shipping facilities.
"Section" and "Article" shall mean and refer to a section or article of this
Mortgage, unless specifically indicated otherwise.
"Subject Interests" shall have the meaning stated in Article 11 of this Mortgage.
"Trustee" shall mean the Trustee identified in the first paragraph of this Mortgage
and any other person who may from time to time be serving as duly appointed substitute
trustee hereunder.
"Well Data" shall mean all logs, drilling reports, division orders, transfer orders,
operating agreements, abstracts, title opinions, files, records, memoranda and other
written information in the possession or control of the Mortgagor relating to any wells
located on any of the lands described in Exhibit A.
ARTICLE II
GRANTING CLAUSE MORTGAGED PROPERTY
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2.1. The Mortgagor, for and in consideration of the premises and of the
Indebtedness hereinafter defined, has GRANTED, BARGAINED, SOLD,
WARRANTED, MORTGAGED, PLEDGED, ASSIGNED, TRANSFERRED and
CONVEYED, and by these presents does GRANT, BARGAIN, SELL, WARRANT,
MORTGAGE, PLEDGE, ASSIGN, TRANSFER and CONVEY, unto the Trustee and to
the Trustee's substitutes and successors in this trust, with power of sale, for the benefit of
the Mortgagee, or, if the provisions of Section 9.5 hereof are applicable, unto the
Mortgagee with power of sale, all the Mortgagor's and Guarantor's right, title and
interest, whether now owned or hereafter acquired, in all of the hereinafter described
properties, rights and interests; and, insofar as such properties, rights and interests consist
of equipment, general intangibles, accounts, contract rights, inventory, fixtures, proceeds
and products of collateral or any other personal property of a kind or character defined in
or subject to the applicable provisions of the Code, the Mortgagor and Guarantor hereby
grant to the Mortgagee a security interest therein, whether now owned or hereafter
acquired, namely:
2.1.1 All of those certain Oil and Gas Leases, Lands, interests, and other
properties (all such Oil and Gas Leases, Lands, interests and other properties being herein
called the "Subject Interests as hereinafter further defined) which are described on
Exhibit A and /or to which reference may be made on Exhibit A and /or which cover any
of the Lands described on Exhibit A and /or which are covered by any of the leases
described on Exhibit A, which Exhibit A is made a part of this Mortgage for all purposes,
and is incorporated herein by reference as fully as if copied at length in the body of this
Mortgage at this point;
2.1.2 All rights, titles, interests, and estates now owned or hereafter acquired by
the Mortgagor in and to (i) any and all properties now or hereafter pooled or unitized with
any of the Subject Interests, and (ii) all presently existing or future unitization,
communitization, and pooling agreements and the units created thereby which include all
or any part of the Subject Interests, including, without limitation, all units formed under
or pursuant to any laws. The rights, titles, interests, and estates described in this Section
2.1.2 shall also be included within the term "Subject Interests" as used herein.
2.1.3 All presently existing and future agreements hereafter entered into between
the Mortgagor or Guarantor and any third party that provide for acquisition by the
Mortgagor or Guarantor of any interest in any of the properties or interests specifically
described in Exhibit A or which relate to any of the properties and interests specifically
described in Exhibit A;
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2.1.4 The Hydrocarbons (including inventory) which are in, under, upon,
produced or to be produced from or attributable to the Lands and /or the Subject Interests;
2.1.5 The Accounts and Contract Rights;
2.1.6 The Operating Equipment;
2.1.7 The Well Data; and
2.1.8 The rights and security interests of the Mortgagor or Guarantor held by the
Mortgagor or Guarantor to secure the obligation of the first purchaser to pay the purchase
price of the Hydrocarbons, including, without limitation, those accruing to the Mortgagor
or Guarantor pursuant to Section 9.319 of the Code (or, effective July 1, 2001, Section
9.341 of the Code) as enacted in Texas as the Business and Commerce Code together
with any and all accounts, proceeds, substitutions, replacements, corrections or
amendments to, or renewals, extensions or ratifications of, any of the foregoing, or of any
instrument relating thereto;
2.1.9 All surface leases, rights -of -way, franchises, easements, servitudes, licenses,
privileges, tenements, hereditaments and appurtenances now existing or in the future
obtained in connection with any of the aforesaid, and all other things of value and
incident thereto which the Mortgagor or Guarantor may at any time have or be entitled to;
and
2.1.10 All and any different and additional rights of any nature, of value or
convenience in the enjoyment, development, operation or production, in any wise, of any
property or interest included in any of the foregoing clauses, and in all revenues, income,
rents, issues, profits and other benefits arising therefrom or from any contract now in
existence or hereafter entered into pertaining thereto, and in all rights and claims accrued
or to accrue for the removal by anyone of oil and gas from, or other act causing damage
to, any of such properties or interests; all the aforesaid properties, rights and interests,
together with any additions thereto which may be subjected to the lien of this Mortgage
by means of supplements hereto, being hereinafter called the "Mortgaged Property
Subject, however, to (1) the restrictions, exceptions, reservations, conditions,
limitations, interests and other matters, if any, set forth or referred to in the specific
descriptions of such properties and interests in Exhibit A (including all presently existing
royalties, overriding royalties, payments out of production and other burdens which are
referred to in Exhibit A and which are taken into consideration in computing the decimal
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0®1.54
or fractional interest as set forth in Exhibit A); (ii) any operator's lien arising by operation
of applicable law or pursuant to the provisions of an operating agreement designating a
person other than the Mortgagor as operator, and which has been perfected under
applicable law or of which the Mortgagee has constructive or actual notice as of the date
hereof; (iii) the assignment of production contained in Article V hereof; and (iv) the
condition that neither the Trustee nor the Mortgagee shall be liable in any respect for the
performance of any covenant or obligation of the Mortgagor or Guarantor with respect to
the Mortgaged Property;
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, his
successors and substitutes in this trust, forever, for the benefit of the Mortgagee, or, if the
provisions of Section 9.5 hereof are applicable, unto Mortgagee, its successors and
assigns, forever, to secure the payment of the Indebtedness and to secure the performance
of the obligations of the Mortgagor contained herein.
INDEBTEDNESS SECURED
ARTICLE III
3.1. Notes and Indebtedness. This Mortgage is given to secure the following
indebtedness, obligations and liabilities:
3.1.1 All indebtedness evidenced by that certain promissory note (together with all
renewals, extensions, and modifications thereof) executed by the Mortgagor and payable
to the order of the Mortgagee, dated as of May 18, 2012, in the original principal amount
of $5,000,000, which note bears interest as provided therein and contains provisions for
payment of attorneys' fees as therein set forth;
3.1.2 The Obligations (as such term is defined in the Credit Agreement);
3.1.3 Any sums advanced as expenses or costs incurred by, or on behalf of, the
Mortgagee (or any receiver appointed hereunder) which are made or incurred pursuant to,
or permitted by, the terms of this Mortgage or the other Loan Papers, plus interest thereon
at the rate herein specified or otherwise agreed upon, from the date of advance or
expenditure until reimbursed; and
3.1.4 All other and additional debts, obligations and liabilities of every kind and
character of the Mortgagor now or hereafter owed to the Mortgagee, regardless of
whether such debts, obligations and liabilities are specifically listed and described above
or are direct or indirect, primary or secondary, joint, several, or joint and several, fixed or
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contingent, and whether incurred by the Mortgagor as a maker, endorser, guarantor,
surety or otherwise, and regardless of whether such present or future debts, obligations
and liabilities may, prior to their acquisition by the Mortgagee, be or have been payable
to, or be or have been in favor of, some other person or have been acquired by the
Mortgagee in a transaction with one other than the Mortgagor, together with any and all
renewals and extensions of such debts, obligations and liabilities, or any part thereof (it
being contemplated that the Mortgagee may in the future lend additional sums of money
to the Mortgagor, from time to time, but shall not be obligated to do so, and that all such
additional sums and loans shall be part of the Indebtedness; and
3.2. Final Maturity. Unless earlier payment is required by the terms of the Notes,
the Notes shall mature on the Final Maturity Date. Unless amended or accelerated
pursuant to the Loan Papers, the term "Final Maturity Date" means May 31, 2013.
ARTICLE IV
COVENANTS, REPRESENTATIONS, WARRANTIES
AND AGREEMENTS OF MORTGAGOR
The Mortgagor covenants, represents, warrants, and agrees that:
4.1. Payment of Indebtedness. The Mortgagor will duly and punctually pay or
cause to be paid all of the Indebtedness.
4.2. Warranties. (a) The Oil and Gas Interests are valid, subsisting leases or
mineral interests, superior and paramount to all other oil and gas leases respecting the
properties to which they pertain; (b) the Mortgagor, to the extent of the interest specified
in Exhibit A, has valid and defensible title to each property right or interest constituting
the Mortgaged Property and has a good and legal right to make the grant and conveyance
made in this Mortgage, it being understood that the Mortgagor's interest in each Oil and
Gas Lease or Operating Equipment shall exceed Mortgagor's Net Revenue Interest in
production from such Oil and Gas Interests to the extent of the Mortgagor's proportionate
share of all royalties, overriding royalties, and other such payments out of production
burdening the Mortgagor's interest in each such Oil and Gas Interests; (c) the
Mortgagor's present Net Revenue Interest in the Mortgaged Property is not less than that
specified in Exhibit A; (d) the Mortgaged Property is free from all encumbrances or liens
whatsoever, except as may be specifically set forth in Exhibit A or as permitted by the
provisions of Section 4.5.6; and (c) the Mortgagor is not obligated, by virtue of any
deficiency presently existing under any contract providing for the sale by the Mortgagor
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of Hydrocarbons which contains a "take or pay" clause or under any similar arrangement,
to deliver Hydrocarbons at some future time without then or thereafter receiving full
payment therefor. The Mortgagor will warrant and forever defend the Mortgaged Property
unto the Trustee and the Trustee's successors or substitutes hereunder, for the benefit of
the Mortgagee against every person whomsoever lawfully claiming the same or any part
thereof, and the Mortgagor will maintain and preserve the lien and security interest
hereby created so long as any of the Indebtedness remains unpaid.
4.3. Further Assurances. The Mortgagor will execute and deliver such other
and further instruments and will do such other and further acts as in the opinion of the
Trustee or the Mortgagee may be necessary or desirable to carry out more effectively the
purposes of this Mortgage, including, without limiting the generality of the foregoing, (a)
prompt correction of any defect which may hereafter be discovered in the title to the
Mortgaged Property or in the execution and acknowledgment of this Mortgage, any
Notes, or any other document used in connection herewith or at any time delivered to the
Mortgagee in connection with any Indebtedness, and (b) prompt execution and delivery of
all division or transfer orders that in the opinion of the Trustee or the Mortgagee are
needed to transfer effectively the assigned proceeds of production from the Mortgaged
Property to the Mortgagee.
4.4. Taxes. Subject to the Mortgagor's right to contest the same in good faith and
by appropriate proceedings, the Mortgagor will promptly pay all taxes, assessments and
governmental charges legally imposed upon this Mortgage or upon the Mortgaged
Property or upon the interest of the Trustee or the Mortgagee therein, or upon the income,
profits, proceeds and other revenues thereof; provided that, in the alternative, the
Mortgagor may, in the event of the enactment of such a law, and must, if it is unlawful for
the Mortgagor to pay such taxes, prepay that portion of the Indebtedness which the
Mortgagee in good faith determines is secured by property covered by such law within 60
days after demand therefor by the Mortgagee.
4.5. Operation of the Mortgaged Property. So long as the Indebtedness or any part
thereof remains unpaid, and whether or not the Mortgagor is the operator of the
Mortgaged Property, the Mortgagor shall, at the Mortgagor's own expense and subject to
the terms of the Loan Papers:
4.5.1 Maintain, develop and operate the Subject Interests in a good and
workmanlike manner and will observe and comply with all of the terms and provisions,
express or implied, of the Oil and Gas Leases in order to keep the Oil and Gas Leases in
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001.57
full force and effect so long as the Oil and Gas Leases are capable of producing
Hydrocarbons in commercial quantities;
4.5.2 Comply in all material respects with all contracts and agreements applicable
to or relating to the Mortgaged Property or the production and sale of Hydrocarbons
therefrom and all applicable proration and conservation laws of the jurisdictions in which
the Mortgaged Property is located, and all applicable laws, rules and regulations of every
agency and authority from time to time constituted to regulate the development and
operation of the Mortgaged Property and the production and sale of Hydrocarbons
therefrom;
4.5.3 Commence such development as may be reasonably necessary to the prudent
and economical operation of the Mortgaged Property, including such work as may be
appropriate to protect the Mortgaged Property from diminution in the production capacity
thereof and against drainage of Hydrocarbons thereunder by reason of production on other
properties;
4.5.4 At all times, maintain, preserve and keep all Operating Equipment in proper
repair, working order and condition, and make all necessary or appropriate repairs,
renewals, replacements, additions and improvements thereto, so that the efficiency of
such Operating Equipment shall at all times be properly preserved and maintained,
provided that no item of Operating Equipment need be so repaired, renewed, replaced,
added to or improved, if the Mortgagor shall in good faith determine that such action is
not necessary or desirable for the continued efficient and profitable operation of the
business of the Mortgagor, and that the failure to take such action will not prejudice the
interests of the Mortgagee;
4.5.5 Not abandon or cease developing, maintaining, operating and producing
Hydrocarbons from, or cause or permit its agent to abandon, cease developing,
maintaining, operating, and producing Hydrocarbons from, any producing Mortgaged
Property without first having undertaken and completed all reasonably prudent measures
under the circumstances to restore such producing Mortgaged Property to economic
production, and then only if the aggregate projected future ad valorem and severance
taxes and operating expenses with respect to said Mortgaged Property exceed the
projected future gross revenues attributable thereto;
4.5.6 Cause the Mortgaged Property to be kept free and clear of all liens, security
interests, charges and encumbrances of every character, other than (i) the lien and security
interest hereof, (ii) taxes constituting a lien but not due and payable, (iii) minor defects or
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irregularities in title, and liens, security interests, charges or encumbrances, which are not
such as to interfere materially with the development, operation or value of the Mortgaged
Property and not such as to affect materially title thereto, (iv) those set forth in Exhibit A,
(v) those being contested by the Mortgagor in good faith in such manner as not to
jeopardize the Mortgagee's rights in and to the Mortgaged Property, and (vi) those
hereafter consented to in writing by the Mortgagee;
4.5.7 Maintain or cause to be maintained insurance with such insurers, in such
amounts and covering such risks as shall be substantially in accordance with industry
practice, including, without limitation, the following insurance: (i) workmen's
compensation insurance and public liability and property damage insurance in respect of
all activities in which the Mortgagor might incur personal liability for the death or injury
of an employee or third person, or damage to or destruction of another's property; and (ii)
to the extent such insurance is carried by others engaged in similar undertakings in the
same general areas in which the Mortgaged Property is located, insurance in respect of the
Operating Equipment, against loss or damage by fire, lightning, hail, tornado, explosion,
well blowouts and other similar risks; and
4.5.8 Not sell, convey, trade, exchange, pool or unitize any portion of the
Mortgaged Property or any of Mortgagor's rights, titles, or interests therein or thereto,
except as specifically provided otherwise herein;
provided, however, that with respect to Mortgaged Property which is operated by
operators other than the Mortgagor, the Mortgagor shall not be obligated itself to perform
any undertakings contemplated by the covenants and agreements contained herein which
are performable only by such operators and are beyond the control of the Mortgagor; and
provided further, that the Mortgagor agrees to promptly take all actions available to the
Mortgagor under any operating agreement or otherwise to bring about the performance of
any such undertaking required to be performed by such operators.
4.6. Recording. The Mortgagor will promptly and at the Mortgagor's expense,
record, register, deposit and file this Mortgage and every other instrument in addition or
supplemental hereto in such offices and places and at such times and as often as may be
necessary to preserve, protect and renew the lien and security interest hereof as a first lien
and security interest on real or personal property, as the case may be, and the rights and
remedies of the Trustee and of the Mortgagee, and otherwise will do and perform all
matters or things necessary or expedient to be done or observed by reason of any law or
regulation of any state or of the United States or of any other competent authority, for the
purpose of effectively creating, maintaining and preserving the lien and security interest
hereof on the Mortgaged Property.
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4.7. Records, Statements and Reports. The Mortgagor will keep proper books of
record and account in which complete correct entries will be made of the Mortgagor's
transactions in accordance with sound accounting principles consistently applied and will
furnish or cause to be furnished to the Mortgagee (a) all reports required under the Loan
Papers, and (b) such other information concerning the business and affairs and financial
condition of the Mortgagor as the Mortgagee may from time to time reasonably request.
4.8. No Governmental Approvals. The Mortgagor warrants that no approval or
consent of any regulatory or administrative commission or authority, or of any other
governmental body, is necessary to authorize the execution and delivery of this
instrument, or any of the other Loan Papers or the Notes, or to authorize the observance
or performance by the Mortgagor of the covenants herein or therein contained.
4.9. Right of Entry. The Mortgagor will permit the Trustee or the Mortgagee, or
the agents or designated representatives of either of them, to enter upon the Mortgaged
Property, and all parts thereof, for the purpose of investigating and inspecting the
condition and operation thereof.
ASSIGNMENT OF PRODUCTION
ARTICLE VV
5.1. Assignment. As further security for the payment of the Indebtedness and
performance of the obligations contained herein, the Mortgagor hereby transfers, assigns,
warrants and conveys to the Mortgagee all Hydrocarbons, and the proceeds and products
obtained or processed therefrom (such proceeds and products being in this Article V
called "Proceeds produced and to be produced from, or which accrue by pooling,
unitization or otherwise, to the Mortgaged Property. All parties producing, purchasing or
receiving any such Hydrocarbons, or having such, or Proceeds therefrom, in their
possession for which they or others are accountable to the Mortgagee by virtue of the
provisions of this Article V, are authorized and directed to treat and regard the Mortgagee
as the assignee and transferee of the Mortgagor and entitled in the Mortgagor's place and
stead to receive such Hydrocarbons and all Proceeds therefrom; and such parties and each
of them shall be fully protected in so treating and regarding the Mortgagee, and shall be
under no obligation to see to the application by the Mortgagee of any such proceeds or
payments received by the Mortgagee.
5.2. Payments. This Article V constitutes a present assignment effective as of the
Effective Date, but in the event that the Mortgagee should elect not to exercise
immediately its right to receive Hydrocarbons or Proceeds, then the purchasers or other
persons obligated to make such payment shall continue to make payment to Mortgagor
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until such time as written demand has been made upon them by the Mortgagee that
payment be made directly to the Mortgagee. Such failure to notify shall not in any way
waive the right of the Mortgagee to receive any payments not theretofore paid out to the
Mortgagor before the giving of written notice. In the event payments are made directly to
the Mortgagee, and then, at the request of the Mortgagee, payments are for a period or
periods of time paid to the Mortgagor, the Mortgagee shall nevertheless have the
continuing right, effective upon written ;notice, to require that future payments be again
made to the Mortgagee.
5.3. No Restriction on the Rights. Nothing herein contained shall detract from or
limit the absolute obligation of the Mortgagor to make payment of the Indebtedness
regardless of whether the Hydrocarbons and Proceeds assigned by this Article V are
sufficient to pay the same, and the rights under this Article V shall be in addition to all
other security now or hereafter existing to secure the payment of the Indebtedness.
5.4. Use of Proceeds. The Mortgagee or any receiver appointed in judicial
proceedings for the enforcement of this Mortgage shall have the right to receive all of the
Hydrocarbons herein assigned and the Proceeds therefrom and may, in the sole discretion
of the Mortgagee, apply all of such Proceeds as follows or in such other order of priority
as the Mortgagee may determine:
First: To the payment and satisfaction of all costs and expenses incurred
in connection with the collection of such Proceeds, and the payment and
reimbursement of all items of the indebtedness not evidenced by the Notes;
Second: To the payment and satisfaction of principal and accrued
interest on the Notes and all other items of Indebtedness payable pursuant to the
Loan Papers, then due and payable in such order or priority as the Mortgagee may
determine; and
Third: Any surplus thereafter remaining shall be paid to the Mortgagor or
the Mortgagor s successors or assigns, as their interests may appear of record.
Upon any sale of the Mortgaged Property or any part thereof pursuant to Article VIII, the
Hydrocarbons thereafter produced from the Mortgaged Property so sold, and the Proceeds
therefrom, shall be included in such sale and shall pass to the purchaser free and clear of
the assignment contained in this Article V.
5.5. Mortgagee as Agent and Attorney-in--Fact. The Mortgagor hereby irrevocably
designates and appoints the 'vlortg. gee as t!le Mortgagor's true and lawful agent and
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attorney -in -fact (with full power c; substitution, either generally or for such limited
periods or purposes as the Mortgagee may from time to time prescribe), with full power
and authority, for and on behalf and in the name of the Mortgagor, to execute,
acknowledge and deliver all such division orders, transfer orders, certificates and other
documents of every nature, with such covenants, warranties, indemnities and other
provisions as may from time to time, in the opinion of the Mortgagee, be necessary or
proper to effectuate the intent and purpose of the assignment contained in Section 5.1
hereof The Mortgagor shall be bound thereb; as fully and effectively as if the Mortgagor
had personally executed, acknowledged and delivered any such division order, transfer
order, certificate and other documents. The powers and authorities herein conferred on
the Mortgagee may be exercised by the Mortgagee through any person who, at the time of
the execution of a particular instrument, is an officer of the Mortgagee. The power of
attorney conferred by this Section 5.5 is granted for a valuable consideration and hence is
coupled with an interest and is irrevocable so long as the Indebtedness, or any part
thereof, shall remain unpaid. All persons dealing with the Mortgagee, or any officer
thereof above designated, or any substitute, shall be fully protected in treating the powers
and authorities conferred by this Section 5.5 as continuing in full force and effect until
advised in writing by the Mortgagee that all the Indebtedness is fully and finally paid.
5.6. Indemnity. The Mortgagor agrees to indemnify the Mortgagee on a
current basis against all claims, actions, liabilities, judgments, costs, attorneys' fees
or other charges of whatsoever kind or nature (all hereinafter in this Section 5.6
called "claims made against or incurred by the Mortgagee as a consequence of the
assertion, either before or after the payment in full of the Indebtedness, that the
Mortgagee received Hydroca.rboiis herein assigned or the proceeds thereof claimed
by third persons, and the Mortgagee shall have the exclusive right to defend against
any such claims, employing attorneys therefor, and unless furnished with
reasonable indemnity, the Mortgagee shall have the right to pay or compromise and
adjust all such claims. The Mortgagor will indemnify and pay to the Mortgagee any
and all such amounts as may be raid in respect thereof or as may be successfully
adjudged against the Mortgagee. The obligations of the Mortgagor as hereinabove
set forth in this Section 5.6 shall survive the release of this instrument.
ARTICLE VI
ADDITIONS TO MORTGAGED PROPERTY: SUBROGATION
6.1. Additions to i4ortria. .d Property. It is understood and agreed that the
Mortgagor may periodically 6ubeci additional properties to the lien and security interest
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of this Mortgage. In the event that ad; iticnal properties are to be subjected to the lien and
security interest hereof, the parties hereto agree to execute a supplemental mortgage,
satisfactory in form and substance to the Mortgagee, together with any security
agreement, financing statement or other security instrument required by the Mortgagee,
all in form and substance satisfactory to the Mortgagee and in a sufficient number of
executed (and, where necessary Or apprupriate, acknowledged) counterparts for recording
purposes. Upon execution of such s;upplerrmentai mortgage, all additional properties
thereby subjected to the lien and security inter st of this Mortgage shall become part of
the Mortgaged Property for all purposes.
6.2. Subrogation. To the extent that the proceeds of any Indebtedness was or is
used to pay any indebtedness or obligations secured by any lien, security interest, charge
or prior encumbrance against the Mortgaged Properties and such proceeds have been or
will be advanced by the Mortgagee to the Mortgagor or to any other person, entity, taxing
authority or governmental body, then the Mot tgagee shall be subrogated to any and all of
such liens, security interests, charges or prior encumbrances, irrespective of whether such
liens, security interests, charges or prior encumbrances are released (unless such release is
executed by the Mortgagee).
ARTICLE Vil
EVENTS OF DEF AULT
7.1. Events of Default. In case a,ry one or more of the following `Events of
Default' shall occur and shall not have been remedied:
7.1.1 Any event of default c,r default specified in the Loan Papers (other than
this Mortgage) or other agreement or contract existing at the date hereof or hereinafter
entered into between the Morigagot and the Mortgagee shall have occurred and the cure
period, if any, with respect thereto shall have elapsed;
7.1.2 The failure of the Noces to be paid at the maturity thereof, whether stated
or by acceleration;
7.1.3 The failure or refusal of the Mortgagor to punctually and properly observe,
keep and perform any covenant, agreement oa undertaking contained in this Mortgage or
contained in any other mortgage, deed of :rust,, security agreement, collateral pledge
agreement, assignment, or contract cri any kind, securing or assuring the payment of the
Indebtedness which is not a defauh or event of default covered by Section 7.1.1 above,
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and such failure or refusal shall not have been cured thirty (30) days after receipt of notice
of same by the Mortgagor from the 1‘.4ortgagee; and
7.1.4 If any representation or warranty made by the Mortgagor herein or in any
other agreement securing or evidencing all or any portion of the Indebtedness proves
untrue in any material respect; then and in any such event the Mortgagee, at its sole
option and discretion, may declare all or arty portion of the unpaid principal of and the
interest accrued on the Notes and all cWer indebtedness secured hereby to be immediately
due and payable, without any notice or demand of any kind, all of which are hereby
expressly waived.
ENFORCEMENT OF THE SECURITY
ARTICLE VIII
8.1. General Remedies. Upiri the occurrence and during the continuance of an
Event of Default, the Mortgagee may, at its sole option and discretion, subject to any
mandatory requirements or limitations of law then in force and applicable thereto:
8.1.1 Exercise all of the rights, remedies, powers and privileges of the
Mortgagor with respect to the Mortgaged Properly or any part thereof, give or withhold
all consents required therein which the Mortgagor would otherwise be entitled to give or
withhold, and perform or attempt to pe for r any covenants in this Mortgage which the
Mortgagor is obligated to perform; provided that, no payment or performance by the
Mortgagee shall constitute a 'vaver of any Event of Default, and the Mortgagee shall be
subrogated to all rights and liens securing the payment of any debt, claim, tax, or
assessment for the payment of which the Mortgagee may make an advance or pay;
8.1.2 Appoint as a matter c right, or seek the appointment of, a receiver or
receivers to serve without bond for all or airy part of the Mortgaged Property, whether
such receivership be incident to a proposed sale thereof or otherwise, and the Mortgagor
does hereby consent to the appointment of such receiver or receivers to serve without
bond and does hereby agree not to appose aria application therefor by the Mortgagee and
does hereby agree that then;; shaii he no necessity of showing fraud, insolvency or
mismanagement by the Mortgagor for the appointment of a receiver or receivers of the
Mortgaged Properties;
8.1.3 Execute and deliver to such person or persons as may be designated by the
Mortgagee appropriate powers of attorney to act for and on behalf of the Mortgagor in all
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0
transactions with any fedora: state ;a a agency relating to any of the Mortgaged
Property; and
8.1.4 Exercise any and all o.. ne.r :tights or remedies granted to the Mortgagee
pursuant to the provisions r,r an of the Loan Papers or by law; provided, that the
Mortgagee shall have no obligation o Oio or refrain from doing any of the acts, or to make
or refrain from making any paynm nt. ce[erped to in this Section 8.1. Any receiver or
receivers of the Mortgaged Property, o; any por9.ion thereof, shall serve without bond.
8.2. Power of Sale: Abandonrne t of Sale. The Mortgagee may, where permitted
by law request the Trustee is proccee ith foreclosure, and in such event the Trustee is
hereby authorized and empowered, nod it shail lac his special duty, upon such request of
the Mortgagee, to sell the lylortgagec l'roperq or any part thereof, at public auction to the
highest bidder or bidders for cash, ai. the courthouse door of the county (or judicial district
thereof) in the State wherein the La ,ds then subject to the lien and security interest hereof
are situated; provided that if the Lands are situated in more than one county (or judicial
district thereof), and if permitted by applicable iaw. such sale of the Mortgaged Property,
or part thereof, may be made i0 any county i r the State wherein any part of the Lands then
subject to the lien and security inters hereo, e situated. Any such sale shall be made at
public outcry, on the day of any rre,j_ h. during the hours of such day, and after written
notices thereof have been publicly punted in maces and for such time periods and all
persons and entities entitled to notice d reof have received such notice, all as required by
applicable law. The affidavit of any nersor `raving; knowledge of the facts to the effect
that such service of notice was completed shall be prima facie evidence of the facts of
service of notice, l: the app to.'; rn it ::e as of the Effective Date hereof should
hereafter be amended to renw e a different s.otce of sale applicable to sales of property of
the nature of the Mortgaged Propeitt under power of sales conferred by mortgages or
deeds of trust, the "Trustee roa. 4r his sole: disci- etion, and to the extent permitted by
applicable law, either give the notice of sale by applicable law in effect on the
Effective Date or the notice or sale req by the amended law; and nothing herein shall
be deemed to require the Mor gater, or T ustee to perform, and the Mortgagee and
Trustee shall not be required to do, h act ether than as required by applicable law in
effect at the time of any such :,;rip. Artea .iuch sale. the Trustee shall make to the purchaser
or purchasers thereunder gen and u :ent. deee and assignments, in the name of the
Mortgagor, conveying the Moriga3ed Prr,petty, or any part thereof, so sold to the
purchaser or purchasers will. appropriate wa.;ran.i•.s of title on behalf of the Mortgagor.
Sale of a part of the Morij aieed P;operiy :,lt 1 ;lot exhaust the power of sale, and sales
may be made from time to tirne ur:ti, the ir..tebtedness is paid and performed in full. It
shall not be necessary to ha' r;•res: ;n hr to eahitot at any such sale any of the personal
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001.65
property. In addition to the right., and powers of sale granted under the preceding
provisions of this Section 8.2. if de sae R is made in the payment of any installment of or
performance of, the indebtedness, :Mor at its option, at once, or at any time
thereafter while any rnatureO h sty lIn e tt lains unpaid, without declaring the entire
Indebtedness to be die and payable r, n o,..a t ei in writing direct the Trustee to enforce
this trust and to sell the Mortgaged 1 :perL. :;ubiet.t to such unmatured Indebtedness and
the liens and security interests sectaring its 'ayrnent. in the same manner, on the same
terms, at the same place and time., -anai after having given notice in the same manner, all
as provided in the preceding prov; tions of this See;tion 8.2. After such sale, the Trustee
shall make due conveyance the 1.w: :baser 'r ru chasers. Sales made without maturing
the Indebtedness may be made heretiader wi never there is a default in the payment of
any installment of the Indebtedness withuu e; har.isting the power of sale granted hereby,
and without affecting in any tvaty t bowel of sale granted under this Section 8.2 or the
unmatured balance of the indebtedness (except as to any proceeds of any sale which the
Mortgagee may appiy as a r "epapiter :t on he indebtedness) or the liens and security
interests securing payment o the lrel btedne s, 6 is intended by each of the foregoing
provisions of this 5tes,lis211_82 that We 'f resn'te nay, where permitted by law. after any
request or direction by the IY1c ;:rtt ar-::;cl; not only the Subject interests but also all items
constituting a part of the 1l iort teal,. :cb o ,c or any part thereof, together with the
Lands, or any part thereof, all as a Li :,it and as a pao of the single sale, or may sell any part
of the Mortgaged Property se' aratel∎ the ,enainder of the Mortgaged Property. It is
agreed that in any deed or deeds g 'rel by 'Ole Trustee any and all statements of fact or
other recitals therein made as to the i lr :nti t o f the Mortgagee, or as to the occurrence or
existence of any i .ent of ?'et'au;.. or as the acceleration of the maturity of the
Indebtedness, or as :o the rem tesi t n r e f ,ale time, place, terms, and manner of
sale and receipt, diso. money realized therefrom, or as to the
due and proper appointmen. of ,.si,srirute and„ without being limited by the
foregoing, as to any other aca or tutu a having br..�n duly done by the Mortgagee or by the
Trustee, shall be taken by ad courts at_ law and equity as prima facie evidence that such
statements or recitals are for ,1 1 core,:: statements of the facts and are without
further question to be so ace,:_ lte± `a_ M. rtg.ngor does hereby ratify and confirm any
and all acts that the. Tiustet: ?;r.:•r.Jnn by virtue hereof. In the event of the
resignation or deatr of -he T :.as;ee
make any such sale pen .)rm a:\
Mortgagee, without. cause, \4 rt. a`..
shall thereupon succeeu to he
to and vested in the Trustee ':,uci al
by any person who then the pre_,
any other duly au'ac =zed
refusal.. or inability, for any reason, to
the iFt. ser eirt declared, or, at the option of the
r ia} writing, a substitute 'Trustee who
!es, t: r t,hts, powers, and trusts here;n granted
aintme :rt may be wade on behalf of the Mortgagee
oa ;ce a esident, or the cashier or secretary, or
got he: Mortgagee. In the event of the
Mortgage and Deed
'ht.. U Inc, and i!' 1 '.l,:r t�nL i. ,`�.c 1.' i Siill� u i3OCIPStOIle Ov`. :.irlg,
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resignation or death of any such substitute Trustee, or his failure, refusal, or inability to
make any such sale or perform such trusts, or, at the option of the Mortgagee, without
cause, successive substitute Trustees may thereafter, from time to time, be appointed in
the same manner. In the event a foreclosure hereunder should be commenced by Trustee
in accordance with this Section, Mortgagee may at any time before the sale direct Trustee
to abandon the sale, and may then institute suit for the collection of the Indebtedness,
and /or for the foreclosure of the liens hereof
8.3. Judicial proceedings: Receiver. This Mortgage shall be effective as a
mortgage as well as a deed of trust and may be foreclosed as to any of the property
covered hereby in any manner permitted by the laws of any state in which any part of the
Mortgaged Property is situated, and any foreclosure suit may be brought, to the extent
permitted by law, by the Trustee or by the Mortgagee. Upon occurrence of an Event of
Default, the Trustee or the Mortgagee, in lieu of or in addition to exercising the power of
sale hereinabove given, may proceed, where permitted by law, by a suit or suits in equity
or at law, whether for a foreclosure hereunder, or for the sale of the Mortgaged Property,
or for the specific performance of any covenant or agreement herein contained or in aid of
the execution of any power herein granted, or without any showing of fraud, insolvency
or mismanagement by the Mortgagor, for the appointment of a receiver or receivers of the
Mortgaged Property and of the income, rents issues, products, profits and proceeds
thereof (any such receiver or receivers to serve without bond) pending any foreclosure
hereunder or the sale of the Mortgaged Property, or for the enforcement of any other
appropriate legal or equitable remedy. The appointment of a receiver shall in no manner
affect the rights of the Mortgagee under Article V hereof if Mortgagee should institute a
suit for the collection of the Indebtedness, and /or for a foreclosure of the Liens hereof, it
may at any time before the entry of a final judgment in said suit dismiss the same, and,
where permitted by law, require Trustee to sell the Mortgaged Property, or any part
thereof, in accordance with the provisions of this Mortgage.
8.4. Certain Aspects of a Sale. The Mortgagee shall have the right to become the
purchaser at any sale of the Mortgaged Property held by the Trustee or by any court,
receiver or public officer, and the Mortgagee shall have the right to credit upon the
amount of the bid made therefor, the amount payable out of the net proceeds of such sale
to it. Recitals contained in any conveyance made to any purchaser at any sale made
hereunder shall conclusively establish the truth and accuracy of the matters therein stated,
including, without limiting the generality of the foregoing, nonpayment of the unpaid
principal sum of, interest accrued on, and fees payable in respect of, the Indebtedness
after the same have become due and payable, and advertisement and conduct of such sale
in the manner provided herein or appointment of any successor Trustee hereunder.
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8.5. Receipt to Purchaser. Upon any sale, whether made under the power of sale
herein granted and conferred or by virtue of judicial proceedings, the receipt of the
Trustee, the Mortgagee, or of the officer making such sale under judicial proceedings,
shall be sufficient discharge to the purchaser or purchasers at any sale for his or their
purchase money, and such purchaser or purchasers, or his or their assigns or personal
representatives, shall not, after paying such purchase money and receiving such receipt of
the Trustee, the Mortgagee or of such officer therefor, be obligated to see to the
application of such purchase money, or be in anywise answerable for any loss,
misapplication or nonapplication thereof
8.6. Effect of Sale. Any sale or sales of the Mortgaged Property, whether under
the power of sale herein granted and conferred or by virtue of judicial proceedings, where
permitted by law, shall operate to divest all right, title, interest, claim and demand
whatsoever either at law or in equity, of the Mortgagor of, in, and to the premises and the
property sold, and shall be a perpetual bar, both at law and in equity, against the
Mortgagor, and the Mortgagor's successors or assigns, and against any and all persons
claiming or who shall thereafter claim all or any of the property sold from, through, or
under the Mortgagor, or the Mortgagor's successors or assigns. Nevertheless, the
Mortgagor, if requested by the Trustee or the Mortgagee to do so, shall join in the
execution and delivery of all proper conveyances, assignments and transfers of the
properties so sold.
8.7. Application of Proceeds. The proceeds of any sale of the Mortgaged Property,
or any part thereof, whether under the power of sale herein granted and conferred or by
virtue of judicial proceedings, shall be applied as follows:
First: To the payment of all expenses incurred by the Trustee or the
Mortgagee in the performance of his or its duties including, without limiting the
generality of the foregoing, all expenses of any entry, or taking of possession, of
any sale, of advertisement thereof, and of conveyances, and, as well, court costs,
compensation of agents and employees and legal fees;
Second: To the payment of the principal and accrued interest on the Notes
and all other items of Indebtedness arising pursuant to the Loan Papers, in such
order or priority as the Mortgagee may determine; and
Third: Any surplus thereafter remaining shall be paid to the Mortgagor or
the Mortgagor's successors or assigns, as their interests shall appear of record.
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8.8. Mortgagor's Waiver of Appraisement, Marshaling, etc. Rights. The
Mortgagor agrees, to the full extent that the Mortgagor may lawfully so agree, that the
Mortgagor will not at any time insist upon or plead or in any manner whatever claim the
benefit of any appraisement, valuation, stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this
Mortgage or the absolute sale of the Mortgaged Property or the possession thereof by any
purchaser at any sale made pursuant to any provision hereof, or pursuant to the decree of
any court of competent jurisdiction; but the Mortgagor, for the Mortgagor and all who
may claim through or under the Mortgagor, so far as the Mortgagor or those claiming
through or under the Mortgagor now or hereafter lawfully may, hereby waives the benefit
of all such laws. The Mortgagor, for the Mortgagor and all who may claim through or
under the Mortgagor, waives, to the extent that the Mortgagor may lawfully do so, any
and all right to have the Mortgaged Property marshaled upon any foreclosure of the lien
hereof, or sold in inverse order of alienation, and agrees that the Mortgagee or the Trustee
or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property as
an entirety. If any law in this Section 8.8 referred to and now in force, of which the
Mortgagor or the Mortgagor's successor or successors might take advantage despite the
provisions hereof, shall hereafter be repealed or cease to be in force, such law shall not
thereafter be deemed to constitute any part of the contract herein contained or to preclude
the operation or application of the provisions of this Section 8.8.
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER
OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED
PROPERTIES AND SELL THEM WITHOUT GOING TO COURT IN A
FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR UNDER THIS
MORTGAGE.
8.10. Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as the agent of Mortgagor to act in the name, place, and stead of Mortgagor in
the exercise of each and every remedy set forth herein and in conducting any and all
operations and taking any and all action reasonably necessary to do so, recognizing such
agency in favor of Mortgagee to be coupled with the interests of Mortgagee under this
Mortgage and, thus, irrevocable so long as this Mortgage is in force and effect.
8.11. Costs and Expenses. All costs, expenses (including attorneys fees), and
payments incurred or made by the Trustee or the Mortgagee in protecting and enforcing
its rights hereunder, shall constitute a demand obligation owing by the Mortgagor to the
party incurring such or making costs, expenses, or payments and shall bear interest at a
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rate per annum equal to the maximum rate of interest permitted by applicable law, all of
which shall constitute a portion of the Indebtedness.
8.12. Operation of the Mortgaged Property by the Trustee or the Mortgagee.
Upon the occurrence of an Event of Default and in addition to all other rights herein
conferred on the Trustee or the Mortgagee, the Trustee or the Mortgagee (or any person,
firm or corporation designated by the Mortgagee) shall have the right and power, but shall
not be obligated, to enter upon and take possession of any of the Mortgaged Property
without the necessity of posting bond, and to exclude the Mortgagor, and the Mortgagor's
agents or servants, wholly therefrom, and to hold, use, administer, manage and operate
the same to the extent that the Mortgagor shall be at the time entitled to do any of such
things and in the Mortgagor's place and stead. The Trustee or the Mortgagee (or any
person, firm or corporation designated by the Trustee or the Mortgagee) may operate the
same without any liability or duty to the Mortgagor in connection with such operations,
except to use ordinary care in the operation of such Mortgaged Property, and the Trustee
or the Mortgagee or any person, firm or corporation designated by the Trustee or the
Mortgagee, shall have the right to collect and receive all Hydrocarbons produced and sold
from the Mortgaged Property, to make repairs, purchase machinery and equipment,
conduct work -over operations, drill additional wells and to exercise every power, right
and privilege of the Mortgagor with respect to the Mortgaged Property. When and if the
expenses of such operation and development (including costs of unsuccessful work -over
operations or additional wells) have been paid and the Indebtedness paid, such Mortgaged
Property shall, if there has been no sale or foreclosure thereof, be returned to the
Mortgagor.
813. No Additional Duties Created. Notwithstanding any provision of this Article
VIII or any other provision of this Mortgage, with respect to that portion of the
Mortgaged Property located in any jurisdiction, the Trustee or Mortgagee, as applicable,
shall be entitled to enforce the rights and remedies described therein with respect to such
portion of the Mortgaged Property in such jurisdiction in accordance with the laws in
effect in such jurisdiction at the time such enforcement action is taken, and the Mortgagor
hereby waives its right to require the Trustee or Mortgagee, as applicable, to comply with
any contrary terms and provisions of this Mortgage in such circumstance, it being the
intention of the Mortgagor and Mortgagee that the waivers of Mortgagor herein and the
powers granted to the Trustee and Mortgagee herein are for the sole benefit of the
Mortgagee and are neither intended to limit the rights and powers of the Trustee or the
Mortgagor, as applicable, nor intended to establish a standard or duty of performance by
Trustee or the Mortgagor, as applicable, in excess of or in addition to that required by the
laws of such jurisdiction as in effect at the time the particular right or remedy is sought to
be enforced.
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ARTICLE IX
MISCELLANEOUS
9.1. Advances by the Mortgagee. Each and every covenant herein contained shall
be performed and kept by the Mortgagor solely at the Mortgagor's expense. If the
Mortgagor shall fail to perform or keep any of the covenants of whatsoever kind or nature
contained in this Mortgage, the Mortgagee or any receiver appointed hereunder, may, but
shall not be obligated to, make advances to perform the same in the Mortgagor's behalf,
and the Mortgagor hereby agrees to repay such sums upon demand plus interest at a rate
per annum equal to the maximum rate of interest permitted by applicable law. No such
advance shall be deemed to relieve the Mortgagor from any Event of Default hereunder.
92. Defense of Claims. The Mortgagor will notify the Mortgagee, in writing,
promptly of the commencement of any legal proceedings affecting or which could
adversely affect the lien and security interest hereof or the status of or title to the
Mortgaged Property, or any part thereof, and will take such action, employing attorneys
agreeable to the Mortgagee, as may be necessary to preserve the Mortgagor's and the
Trustee's or Mortgagee's rights affected thereby; and should the Mortgagor fail or refuse
to take any such action, the Trustee or the Mortgagee may take such action on behalf and
in the name of the Mortgagor and at the Mortgagor's expense. Moreover, the Trustee or
the Mortgagee may take such independent action in connection therewith as it may in its
discretion deem proper without any liability or duty to the Mortgagor except to use
ordinary care, the Mortgagor hereby agreeing that all sums advanced or all expenses
incurred in such actions plus interest at the maximum rate of interest permitted by
applicable law, will, on demand, be reimbursed to the Trustee, the Mortgagee or any
receiver appointed hereunder.
9.3. Defeasance. If the Indebtedness shall be paid and discharged in full and
the Mortgagee has no commitment to advance amounts to the Mortgagor, then, and in
that case only, this Mortgage shall become null and void and the interests of the
Mortgagor in the Mortgaged Property shall become wholly clear of the lien and security
interest created hereby, and such lien and security interest shall be released in due course
at the cost of the Mortgagor. The Trustee and /or the Mortgagee will, at the Mortgagor's
expense, execute and deliver to the Mortgagor all releases and other instruments
reasonably requested by the Mortgagor for the purpose of evidencing the release and
discharge of the lien and security interest created hereunder. Otherwise this Mortgage
shall remain and continue in full force and effect.
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9.4. Renewals. Amendments and Other Security. Renewals and extensions of the
Indebtedness may be given at any time and amendments may be made to the Mortgage,
the Loan Papers and any other agreements relating to any part of such Indebtedness, and
the Trustee or the Mortgagee may take or may hold other security for the Indebtedness
without notice to or consent of the Mortgagor. The Trustee or the Mortgagee may resort
first to such other security or any part thereof or first to the security herein given or any
part thereof, or from time to time to either or both, even to the partial or complete
abandonment of either security, and such action shall not be a waiver of any rights
conferred by this Mortgage, which shall continue as a first lien and security interest upon
the Mortgaged Property not expressly released until all Indebtedness secured hereby is
fully paid.
9.5. Instrument an Assignment. Etc.; Grant to Mortgagee. This Mortgage shall be
deemed to be and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, pledge, or security
agreement, and from time to time as any one or more thereof; and to the extent that any
particular jurisdiction wherein a portion of the Mortgaged Property is situated does not
recognize or permit the Mortgagor to grant, bargain, sell, warrant, mortgage, pledge,
assign, transfer, or convey the Mortgagor's rights, titles, and interests to the Trustee for
the benefit of the Mortgagee in the manner herein adopted, then, with respect to the
Mortgaged Property located in such jurisdiction, the Mortgagor does hereby grant,
bargain, sell, warrant, mortgage, pledge, assign, transfer, and convey unto the Mortgagee,
with power of sale (if permitted by applicable law), the Mortgaged Property to secure the
Indebtedness and the obligations of the Mortgagor contained herein and the references
herein to the rights and powers of or rights and powers granted by the Mortgagor to the
Trustee shall be deemed to be rights and powers of or rights and powers granted by the
Mortgagor to the Mortgagee.
9.6. Limitation on Interest. No provision of this Mortgage or of the other Loan
Papers, shall require the payment or permit the collection of interest in excess of the
maximum permitted by law or which is otherwise contrary to law. If any excess of
interest in such respect is herein or in the other Loan Papers provided for, or shall be
adjudicated to be so provided for herein or in the other Loan Papers, the Mortgagor shall
not be obligated to pay such excess.
9.7. Unenforceable or Inapplicable Provisions. If any provision of this Mortgage
or in any of the other Loan Papers is invalid or unenforceable in any jurisdiction, the other
provisions hereof or of any of the other Loan Papers shall remain in full force and effect
in such jurisdiction, and the remaining provisions hereof shall be liberally construed in
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 24 of 42
00172
favor of the Trustee and /or the Mortgagee in order to effectuate the provisions hereof, and
the invalidity of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction. Any reference herein
contained to statute or law of a state in which no part of the Mortgaged Property is
situated shall be deemed inapplicable to, and not used in, the interpretation hereof
9.8. Rights Cumulative. Each and every right, power and remedy herein given to
the Trustee or the Mortgagee shall be cumulative and not exclusive; and each and every
right, power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and so often and in such order as may be deemed expedient
by the Trustee or the Mortgagee, as the case may be, and the exercise, or the beginning of
the exercise, of any such right, power or remedy shall not be deemed a waiver of the right
to exercise, at the same time or thereafter, any other right, power or remedy. No delay or
omission by the Trustee or the Mortgagee in the exercise of any right, power or remedy
shall impair any such right, power or remedy or operate as a waiver thereof or of any
other right, power or remedy then or thereafter existing.
9.9. Waiver of Covenants by Mortgagee. Any and all covenants in this Mortgage
may from time to time by instrument in writing signed by the Mortgagee be waived to
such extent and in such manner as the Mortgagee may desire, but no such waiver shall
ever affect or impair the Mortgagee's rights and remedies or liens and security interests
hereunder, except to the extent specifically stated in such written instrument.
9.10. Successors and Assigns.
9.10.1 This instrument is binding upon the Mortgagor, and the Mortgagor's heirs,
successors and assigns, and shall inure to the benefit of the Trustee and the Mortgagee,
and their respective successors and assigns, and the provisions hereof shall likewise be
covenants running with the Lands.
9.10.2 The parties hereto agree that the Notes may be transferred without the
necessity for a notarial act of transfer thereof, and that any such transfer shall carry with it
into the hands of any future holder or holders of the Notes full and entire subrogation of
title in and to the Notes to any and all rights and privileges under this instrument herein
granted to the Mortgagee, as holder of the Notes. This Mortgage is for the benefit of the
Mortgagee and for such other person or persons as may from time to time become or be
the holders of any of the Indebtedness, and this Mortgage shall be transferable and
negotiable, with the same force and effect and to the same extent as the Indebtedness may
be transferable.
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 25 of 42
00173
9.11. Article and Section Headings. The article and section headings in this
instrument are inserted for convenience and shall not be considered a part of this
Mortgage or used in its interpretation.
9.12. Counterpart. This Mortgage may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original, and all of
which arc identical except that, to facilitate recordation in any particular county or parish,
counterpart portions of Exhibit A which describe properties situated in parishes or
counties other than the county or parish in which such counterpart is to be recorded may
be omitted. Exhibit A might not be paginated and any pagination might not be
consecutive.
9.13. Special Filing as Financing Statement. This Mortgage shall likewise be a
Security Agreement and a Financing Statement and Mortgagor, as Debtor, hereby grants
to the Mortgagee, its successors and assigns, as Secured Party, a security interest in all
personal property, fixtures, accounts, equipment, inventory, contract rights and general
intangibles described or referred to in granting Sections 2.1.1 through 2.1.10 of Article II
hereof and all proceeds and products from the sale, lease or other disposition of the
Mortgaged Property or any part thereof. The addresses shown in Section 9.14 hereof are
the addresses of the Debtor and Secured Party and information concerning the security
interest may be obtained from the Secured Party at its address. Without in any manner
limiting the generality of any of the foregoing provisions hereof: (a) some portion of the
goods described or to which reference is made herein arc or are to become fixtures on the
Lands described or to which reference is made herein; (b) the minerals and the like
(including oil and gas) included in the Mortgaged Property and the accounts resulting
from the sale thereof will be financed at the wellhead(s) or minehead(s) of the well(s) or
mine(s) located on the Lands described or to which reference is made herein; and (e) this
Mortgage is to be filed of record, among other places, in the real estate records of each
county in which the Lands, or any part thereof, are situated, as a financing statement, but
the failure to do so will not otherwise affect the validity or enforceability of this
instrument.
9.14. Notices. Whenever this Mortgage requires or permits any consent,
approval, notice, request, or demand from one party to another, the consent, approval,
notice, or demand must be in writing to be effective and shall be deemed to have been
given on the day it is enclosed in an envelope, properly stamped, sealed, and deposited, in
the United States Mail, certified, return receipt requested, addressed to the party to be
notified at the address stated below (or such other address as may have been designated
by written notice):
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 26 of 42
00174
MORTGAGOR DEBTOR
DAVID M. REAVIS
1605 Hwy 181, #169
Portland, Texas 78374
LODESTONE OPERATING, INC.
1605 Hwy 181, #169
Portland, Texas 78374
LODESTONE OPERATING LLC
1605 Hwy 181, #169
Portland, Texas 78374
MORTGAGEE SECURED PARTY
PARK CITIES BANK
5307 E. Mockingbird Lane
Suite 350
Dallas, Texas 75206
Attn: Barry B. Conrad
008'5
9.15. No Waiver by Mortgagee. No course of dealing on the part of Mortgagee,
its officers or employees, nor any failure or delay by Mortgagee with respect to exercising
any of its rights or remedies hereunder shall operate as a waiver thereof nor shall the
exercise or partial exercise of any such right or remedy preclude the subsequent exercise
thereof or the exercise of any other right or remedy.
9.16. Governing Agreement. This Mortgage is made pursuant and subject to the
terms and provisions of the Credit Agreement. In the event of a direct conflict between
the terms and provisions of this Mortgage and those of the Credit Agreement, the terms
and provisions of the Credit Agreement shall govern and control. The inclusion in this
Mortgage of provisions not addressed in the Credit Agreement shall not be deemed a
conflict, and all such additional provisions contained herein shall be given full force and
effect.
9.17. Drafting of Mortgage. Mortgagor declares that it has contributed to the
drafting of this Mortgage or has had the opportunity to have it reviewed by its counsel
before signing it and agrees that it has been purposefully drawn and correctly reflects its
understanding of the transaction that it contemplates.
9.18. Execution by Mortgagee and Trustee: Corrections. The Mortgagee and /or
the Trustee may at any time without obtaining the consent of the Mortgagor execute this
Mortgage (and have such execution witnessed or acknowledged) for any purposes which
either of them deems necessary or appropriate and, if deemed appropriate, subsequently
file this Mortgage of record. Additionally, in the event it is determined that Exhibit A
contains any errors or inaccurate or incomplete descriptions of the Oil and Gas Leases
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 27 of 42
and Lands intended to be covered hereby, the Mortgagee may, without obtaining the
consent of the Mortgagor, attempt to correct any such errors and make accurate and
complete any such inaccuracies or misdescriptions and, if deemed appropriate,
subsequently file this Mortgage of record.
9.19. Governing Law. This Mortgage is intended to be performed in the State of
Texas and the substantive laws of such State and or the United States of America shall
govern the validity, construction, enforcement and interpretation of this Mortgage, unless
otherwise specified herein or unless the laws of another state require the application of
the laws of such state.
9.20. NOTICE: THIS DOCUMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Mortgage effective as of May 18, 2012.
MORTGAGOR:
DAVID RE VIS
David M. eavis, s ividually
LODESTONE OPERATING, INC.
A Delaw, e corporation
LODESTONE OPERATING LLC
A Texas ited liability com•any
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 28 of 42
Davi M. Rea is,
Managing Mem
00176
STATE OF TEXAS
COUNTY OF DALLAS
known to me
MARY KATE WILDER
My Commission Expires
September 23, 2014
proved to me on the oath of
ACKNOWLEDGEMENT
4-.
Before me, a notary public in and for this state, on this )53 day of May, 2012,
personally appeared David M. Reavis, individually and in his capacity as President of
Lodestone Operating, Inc. and Managing Member of Lodestone Operating, LLC, to me
known to be the identical person who subscribed the name of the maker thereof to the
foregoing instrument and acknowledged to me that he executed the same as his free and
voluntary act and deed for the uses and purposes therein set forth.
nn
Before me, a Notary Public on this day personally
'�'l� A�V`- 'IIP�� Y Y P Y
appeared David M. Reavis,
sh-
Given under my hand and seal of office this ay of May A.D., 2012.
u proved to me through Texas Driver License No. If expiring 6p LOi (p
proved to me through
to be the person whose name is subscribed to the foregoing instrument and acknowledged
to me that she executed the same for the purposes and consideration therein expressed.
Notary Pu is in and for the State of Texas
Address of Notary Public:
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 29 of 42
00177
EXHIBIT A
TO MORTGAGE AND DEED OF TRUST
Dated effective May 18, 2012
This Exhibit A sets forth the description of certain property interests covered by
the Mortgage and Deed of Trust. All of the terms defined in the Mortgage and Deed of
Trust are used in this Exhibit A with the same meanings given therein.
This Exhibit A and the Mortgage and Deed of Trust cover and include the
following:
(a) All right, title and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the oil, gas and mineral leases and
mineral interests described herein and /or lands described in and subject to such oil, gas
and mineral leases (regardless, as to such leases and /or lands, of any surface acreage
and /or depth limitations set forth in any description of any of such oil, gas and mineral
leases), and all right, title and interest, whether now owned and existing or hereafter
acquired or arising, of Mortgagor in and to any of the oil, gas and minerals in, on or under
the lands, if any, described on this Exhibit, including, without limitation, all contractual
rights, fee interests, leasehold interests, overriding royalty interests, non participating
royalty interests, mineral interests, production payments, net profits interests or any other
interest measured by or payable out of production of oil, gas or other minerals from the
oil, gas and mineral leases and /or lands described herein; and
(b) All of the foregoing interests of Mortgagor as such interests may be
enlarged by the discharge of any payments out of production or by the removal of any
charges or encumbrances, together with all interests, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to and under or derived from all renewals
and extensions of any oil, gas and mineral leases described herein, it being specifically
intended hereby that any new oil and gas lease (i) in which an interest is acquired by
Mortgagor after the termination or expiration of any oil and gas lease, the interests of
Mortgagor in, to and under or derived from which are subject to the lien and security
interest hereof, and (ii) that covers all or any part of the property described in and covered
by such terminated or expired leases, shall, to the extent, and only to the extent such new
oil and gas lease may cover such property, be considered a renewal or extension of such
terminated or expired lease; and
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
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00178
(c) All right, title and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to and under or derived from any
operating, farmout and bidding agreements, assignments and subleases, whether or not
described in this Exhibit, to the extent, and only to the extent, that such agreements,
assignments and subleases (i) cover or include any present right, title and interest of
Mortgagor in and to the leases and /or lands described in this Exhibit, or (ii) cover or
include any other undivided interests now or hereafter held by Mortgagor in, to and under
the described leases and /or lands, including, without limitation, any future operating,
farmout and bidding agreements, assignments, subleases and pooling, unitization and
communitization agreements and the units created thereby (including, without limitation,
all units formed under orders, regulations, rules or other official acts of any governmental
body or agency having jurisdiction) to the extent and only to the extent that such
agreements, assignments, subleases, or units cover or include the described leases and /or
lands; and
(d) All right, title and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to and under or derived from all presently
existing and future advance payment agreements, oil, casinghead gas and gas sales,
exchange and processing contracts and agreements, including, without limitation, those
contracts and agreements that are described on this Exhibit, to the extent, and only to the
extent, those contracts and agreements cover or include the described leases and /or lands;
and
(e) All right, title and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to and under or derived from all existing
and future permits, licenses, easements and similar rights and privileges that relate to or
are appurtenant to any of the described leases and /or lands.
Notwithstanding the intention of the Mortgage and Deed of Trust to cover
all of the right, title and interest of Mortgagor in and to the described leases and /or lands,
whether now owned and existing or hereafter acquired or arising, Mortgagor hereby
specifically warrants and represents that the interests covered by this Exhibit are not
greater than the working interest nor less than the net revenue interest, overriding royalty
interest, net profit interest, production payment interest, royalty interest or other interest
payable out of or measured by production set forth in connection with each oil and gas
well described in this Exhibit. In the event Mortgagor owns any other or greater interest,
such additional interest shall also be covered by and included in the Mortgage and Deed
of Trust.
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 31 of 42
00179
Any reference herein to Wells or Units is for warranty of interest,
administrative convenience and identification and is not intended to limit or restrict the
right, title, interest of properties covered by the Mortgage and Deed of Trust and all of
Mortgagor's right, title and interest in the Lands, Subject Interests and Mortgaged
Property described herein are and shall be subject to the Mortgage and Deed of Trust,
regardless of the presence of any Units or Wells not herein referenced.
The Leases covered by the Mortgage and Deed of Trust shall include all
leases and force pooled interests now or thereafter owned by Mortgagor included within
the geographic areas set forth in this Exhibit whether or not the schedules of leases
included in this Exhibit list all such leases.
No depth limitation exception contained in any description of leases and
other real property interests set forth in this Exhibit shall exclude from the grants of the
Mortgaged Property and collateral contained in the Mortgage and Deed of Trust any
depth owned by Mortgagor within the geographic area described in this Exhibit for such
leases and other real property interests.
The designation "Working Interest" or "WI" when used in this Exhibit means an
interest owned in an oil, gas, and mineral lease that determines the cost bearing
percentage of the owner of such interest. The designation "Net Revenue Interest" or
means that portion of the production attributable to the owner of a working interest after
deduction for all royalty burdens, overriding royalty burdens or other burdens on
production, except severance, production, and other similar taxes. The designation
"Overriding Royalty Interest" or "ORRI" means an interest in production which is free of
any obligation for the expense of exploration, development, and production, bearing only
its pro rata share of severance, production, and other similar taxes and, in instances where
the document creating the overriding royalty interest so provides, costs associated with
compression, dehydration, other treating or processing, or transportation of production of
oil, gas, or other minerals relating to the marketing of such production. The designation
"Royalty Interest" or "RI" means an interest in production which results from an
ownership in the mineral fee estate or royalty estate in the relevant land and which is free
of any obligation for the expense of exploration, development, and production, bearing
only its pro rata share of severance, production, and other similar taxes and, in instances
where the document creating the royalty interest so provides, costs associated with
compression, dehydration, other treating or processing or transportation of production of
oil, gas, or other minerals relating to the marketing of such production.
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 32 of 42
The references to book or volume and page herein refer to the recording location
of each respective Mortgaged Property described herein in the county /parish where the
land covered by the Mortgaged Property is located.
This Mortgage and Deed of Trust covers all lands, leases and properties of the
Mortgagor, whether now owned or hereafter acquired, located in any county /parish
identified elsewhere in this Exhibit or located in any county /parish wherein this Mortgage
and Deed of Trust has been recorded.
(THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY)
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 33 of 42
00181
Oil and Gas Properties
All working interest, royalty interest and mineral interest owned by David M. Reavis,
Lodestone Operating Inc. and Lodestone Operating, LLC, as well as all working interest,
royalty interest and mineral interest owned by David M. Reavis, Lodestone Operating
Inc. and Lodestone Operating, LLC.
Table 11
Sweetwater Co., Wy. Leases Legal Descriptions
WELL NAME AND LOCATION:
Bird Canyon Federal #10 -27
Township 26 North, Range 111 West, 6 P.M.
Section 27: NE /4
Sweetwater County, Wyoming
ASSOCIATED LEASES AND LANDS
Lessor: United States
Lease WYW -37670
Lease Date: January 1, 1973
Description: Township 27 North, Range 111 West, 6 P.M.
Section 27: N/2
Sweetwater County, Wyoming
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 34 of 42
00182
Lodestone Operating, Inc.
Federal 10 27
Sweetwater
WY
S 27 T26N R 111W NE NW
1.00000
0.78688
Lodestone Operating, Inc.
Raptor 40 18
Lincoln
WY
S 18T 24N 111W Lots 5 &6 E /2NW /4
and Lots 7 8 E2 SW4
1.00000
0.79523
Lodestone Operating, Inc.
Buckhom Canyon 10
Sweetwater
WY
S 3 T 25N R 111W SW NW
1.00000
067500
Lodestone Operating, Inc.
Buckhom Canyon 30
Sweetwater
WY
S 3 T 25N R 111W NW SW
1.00000
067500
Lodestone Operating, Inc.
Buckhom Canyon 40
Sweetwater
WY
S 3 T 25N R 111W SE SE
1.00000
067500
Lodestone Operating, Inc.
Chapel Canyon 30
Sublette
WY
S 18 T28N R 111 W NE SW
1.00000
0.83333
Lodestone Operating, Inc.
Lone Tree 12 30
Uintah
WY
S 30 T 13N R 113W SW NW
1.00000
061250
Lodestone Operating, Inc.
Cabello
San Juan
Utah
S15 T 36S R 23E NWNW
1.00000
0.87500
Lodestone Operating, Inc.
Case Canyon 2
San Juan
Utah
S 33 T37S R24E SESW
1.00000
0.80000
Elm Ridge Erploralion
Case Canyon Unit
San Juan
Utah
S 33 737S R24E SLM SESW S2SE S3 Lots
3 4 S2NW, SW, W2SE S4 Lots 12,3
S2NE NESE
0.28763
023727
Lodestone Operating, Inc.
Hunt State 1
San Juan
Utah
S 2 T35 R 23E SWNE
1.00000
0.80000
Lodestone Operating, Inc.
Cave Canyon 1 -33
San Juan
Utah
S 33 T37S R24E SWSE
0.8807
0.7046
Lodestone Operating, Inc.
Shipp 1 10
Lea
NM
S 10 T17S R 37E SESE
1.00000
0.81250
Omega Energy Corp.
Charles Jacobs
Wharton
TX
I.R.R. Co. Survey No. 37, A-232, Victoria
County, Tx
1.00000
0.72500
Omega Energy Corp.
Stdebeck
Live Oak
TX
NE/2 Farm Tract #4909, Block #105 of
the Dr. Charles F. Simmons Nueces
Farm Subdivision
1.00000
061250
Oil and Gas Properties
All working interest, royalty interest and mineral interest owned by David M. Reavis,
Lodestone Operating Inc. and Lodestone Operating, LLC, as well as all working interest,
royalty interest and mineral interest owned by David M. Reavis, Lodestone Operating
Inc. and Lodestone Operating, LLC.
Table 11
Sweetwater Co., Wy. Leases Legal Descriptions
WELL NAME AND LOCATION:
Bird Canyon Federal #10 -27
Township 26 North, Range 111 West, 6 P.M.
Section 27: NE /4
Sweetwater County, Wyoming
ASSOCIATED LEASES AND LANDS
Lessor: United States
Lease WYW -37670
Lease Date: January 1, 1973
Description: Township 27 North, Range 111 West, 6 P.M.
Section 27: N/2
Sweetwater County, Wyoming
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 34 of 42
00182
RELATED CONTRACTS:
Contract: Farmout Agreement
Date: December 20, 1982
Parties: Energetics, Inc. and Southland Royalty Company
Lands Covered: Township 27 North, Range 111 West, 6th P.M.
Section 27: W /2NE /4, NW /4
And other lands not included in this assignment
Contract: Farmout Agreement
Date: November 18, 1982
Parties: Energetics, Inc. and Natural Gas Corporation of California, et al.
Lands Covered: Township 27 North, Range 111 West, 6th P.M.
Section 27: N/2
and other lands not included in this assignment
Contract: Farmout Agreement
Date: November 15, 1982
Parties: Energetics, Inc. and Marvin Wolf
Lands Covered: Township 27 North, Range 111 West, 6th P.M.
Section 27: N/2
and other lands not included in this assignment
WELL NAME AND LOCATION:
Buckhorn Canyon 10 3
Township 25 North, Range 111 West, 6 P.M.
Section 3: SW /4 NW /4
Sweetwater County, Wyoming
WELL NAME AND LOCATION:
Buckhorn Canyon 30 3
Township 25 North, Range 111 West, 6 P.M.
Section 3: NW /4 SW /4
Sweetwater County, Wyoming
WELL NAME AND LOCATION:
Buckhorn Canyon 40 3
Township 25 North, Range 111 West, 6 P.M.
Section 3: SE /4 SE /4
Sweetwater County, Wyoming
ASSOCIATED LEASES AND LANDS
Lessor: USA WYW- 112550
Original Lessee: Terra Resources, Inc.
Date: August 1, 1988
Description: Township 25 North, Range 111 West, 6 P.M.
Section 3: Lots 8 and 9 (Dependent Resurvey) (formerly described as
Lot 4, SW /4NW /4)
Sweetwater County, Wyoming
Lessor: USA WYW- 111297
Original Lessee: Terra Resources, Inc.
Date: June 1, 1988
Description: Township 25 North, Range 111 West, 6 P.M.
Section 3: Lots 7,10 and 15 -18, inclusive (Dependent Resurvey)(formerly
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 35 of 42
00183
Lessor:
Original Lessee:
Date:
Description:
EXHIBIT Caballo 1 -15 Legal Description
WELL
LEASES
Caballo 1 -15
Lessor:
Lease Date
Legal Description:
Section 15: NW /4
EXHIBIT Cave Canyon 1 -33 Legal Description
WELL
LEASES
Cave Canyon 1 -33
Lessor:
described as Lot 3, SE /4NW /4, SW /4)
Sweetwater County, Wyoming
USA WYW- 104980
Terra Resources, Inc.
August 1, 1987
Township 25 North, Range 111 West, 6th P.M.
Section 3: Lots 13, 14, 19, 20 (Dependent Resurvey)(formerly
described as SE /4)
Sweetwater County, Wyoming
API No:
Location:
API No:
Location:
43- 037 -31403
NW /4 NW /4 Sec. 15, T36S -R23E, SLM
San Juan County, Utah
USA UTU -62953
8/1/73
Township 36 South, Range 23 East, SLM
Limited from the surface to approx. 6869'
Containing 160.00 acres, more or less
43- 037 -31276
SW /4 SE /4 Sec. 33, T37S -R24E, SLM
San Juan County, Utah
USA UTU -40751
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 36 of 42
00184
Lease Date
Legal Description:
Section 33: S2
EXHIBIT Cave Canyon 2 -33 Legal Description
WELL
LEASES
Cave Canyon 2 -33
Lessor:
Lease Date
Legal Description:
Section 33: S2
API No:
Location:
EXHIBIT Cave Canyon (Ismay) Unit Legal Description
WELLS
Cave Canyon (Ismay) Unit
Area Wells, operated by
Elm Ridge Exploration
Co., LLC
LEASES
Lessor:
Lease Date:
Legal Description:
9/1/1978
Township 37 South, Range 24 East, SLM
Limited from the surface to 6,085'
Containing 320.00 acres, more or less
43- 037 -31286
SE /4 SW /4 Sec. 33, T37S -R24E, SLM
San Juan County, Utah
USA UTU -40751
9/1/1978
Township 37 South, Range 24 East, SLM
Limited from the surface to 6,085'
Containing 320.00 acres, more or less
API No: Various
Location: Sec. 3, Sec. 4, T38S -R24E SLM
Sec. 33, T37S -R24E SLM
USA UTU -47876
10/1/1981
Township 38 South, Range 24 East, SLM
Section 3: Lots 3, 4, S2NW, SW, W2SE
Section 4: Lots 1, 2, 3, S2NE, NESE
Township 37 South, Range 24 East, SLM
Section 33: SESW, S2SE
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 37 of 42
00185
From surface down to the base of the Ismay zone of the Paradox formation in the Cave Canyon
(Ismay) Unit Area, operated by Elm Ridge Exploration Co., LLC, covering:
Lincoln Co., Wy Leases Legal Descriptions
WELL NAME AND LOCATION:
Raptor 40 -18
Township 24 North, Range 111 West, 6 P.M.
Section 18: C SW /4
Lincoln County, Wyoming
ASSOCIATED
Lessor:
Lease
Lease Date:
Lessee:
Description:
LEASES AND LANDS
United States
WYW -61042
February 1, 1978
Clair L. Johnson
Township 24 North, Range 111West, 6 P.M.
Section 18: Lot 7 (19.26), 8 (19.16), E /2SW /4
Lincoln County, Wyoming
Sublette Co., Wy Leases Legal Descriptions
WELL NAME AND LOCATION:
Chapel Canyon 30 -18
Township 28 North, Range 111 West, 6 P.M.
Section 18: NE /4 SW /4
Sublette County, Wyoming
ASSOCIATED LEASES AND LANDS:
Lessor: Rock Springs National Bank, Successor Trustee for the Fear Family
Trust
Lessee:
Lease Date:
Recorded:
Description:
Lessor:
Lessee:
Lease Date:
Recorded:
Description:
Lessor:
Lessee:
Crown
February 12, 1999
Book 110 O &G, at Page 563, as Reception No. 272292
Township 28 North, Range 111 West, 6 P.M.
Section 18: Lot 3 (19.62), 4 (20.28), NE /4SW /4 (33.00), SE /4SW /4
(26.00) (Land in the E /2SW /4 is the acreage reserved by the Fear family
below the High Line Canal as it was in 1931.)
Containing 98.90 acres.
Sublette County, Wyoming
Lillian Steadman Gilbert, Jennifer Rose Gilbert and Alicia Ann Gilbert
Crown
August 19, 1999
Book 112 O &G, at Page 219, as Reception No. 275027
Township 28 North, Range 111 West, 6 P.M.
Section 18: NE /4 SW /4 (7.00), SE /4SW /4 (14.00). Land in the E /2SW /4
reserved by the Gilbert (Reardon) family above the line of the High Line
Canal as it was in 1931.
Sublette County, Wyoming
1 National Bank of Kemmerer, Trustee for the Fear Family Trust
Thomas F. Stroock
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 38 of 42
00186
Lease Date: Not known
Recorded: Book 48, at Page 632
Description: Township 28 North, Range 111 West, 6 P.M.
Section 18: E /2SW /4 LESS those lands lying east or above the line of
survey of the High Line Canal
Sublette County, Wyoming
WELL NAME AND LOCATION:
Charles Jacobs #1
Victoria County, Texas
Wellbore and Limited Depths Conveyed:
WELLBORE ONLY OF THE CHARLES JACOBS NO. 1 WELL, API NUMBER
42- 469- 30282, LOCATED IN THE I.R.R. CO. SURVEY NO. 37, A -232, VICTORIA
COUNTY, TEXAS AND FURTHER LIMITED ONLY TO THE DEPTHS BETWEEN
8,775' AND 8,822'
LEASES SUBJECT TO LIMITED DEPTH WELLBORE -ONLY CONVEYANCE
All recording references are to the Deed, Oil and Gas, or Official Records of Victoria
County, Texas
Date 01.25.73
Lessor James Levert Brady, et al
Lessee W.S. Gordon, Jr.
Recording Data 822/568
Date 01.25.73 (amended 7.12.74, recorded 852/279
Lessor Edith I. Stovall, Individually and as Co- Independent Executrix and Co-
Trustee: Guy F. Stovall, Jr. as Co- Independent Executor and Co- Trustee,
And Geraldine Stovall Garrett, Co- Trustee of the Estate and under the
Testamentary Trust of Guy F. Stovall, Deceased
Lessee W.S. Gordon, Jr.
Recording Data 820/204
Date 01.25.73 (ratified on 5/8/73, recorded 830/424)
Lessor G.H. Harfst, Jr. and Catherine H. Couey
Lessee W.S. Gordon, Jr.
Recording Data 827/201
Date 0107.20.73
Lessor Hugh R. Goodrich, Thomas E. Berry, Trustee and Priscilla Goodrich
Rea, acting herein by and through her agent and attorney -in -fact, Hugh R. Goodrich (Special
Power of Attorney effective 7.01.73, recorded 830/426)
Lessee Florida Gas Exploration Company
Recording Data 831/734 (Memorandum)
Date 03.09.73 (corrected on 9.9.73, recorded 853/791)
Lessor Floy Barnhardt Saville, Individually and as Independent Co- Executrix and
Co- Trustee under Will of Wilson Gordon Saville, Deceased; and Bank of
the Southwest National Association, Houston, Independent Co- Executor
and Co- Trustee under Will of Wilson Gordon Saville, Deceased
Lessee W.S. Gordon
Recording Data 822/578
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 39 of 42
00187
Date
Lessor
Lessee
Recording Data
Date
Lessor
Lessee
Recording Data
Lodestone Hunt State 1 2 Legal Description
State of Utah #ML 48563, Dated 7/1/2000 containing 638.76 acres, being Sec. 2, All, in T35S-
R23E, SLM, San Juan County, Utah;
And including, to the extent owned by Assignor, all rights in and to the existing wellbore, being the
D. J. Simmons State #1 -2, located in the SW /4 NE /4 of the above Section.
Shipp 10 -1
WELL NAME:
FIELD:
COUNTY, STATE:
LEASE DESCRIPTION
Lease Date:
Lease Name:
Lessee:
Description:
Recordation:
Lessor:
Lessee:
Lease Date:
Description:
Lessor:
Lessee:
Lease Date:
Description:
04.05.72 (as amended 7.10.74, recorded 850/394)
Charley Y. Jacobs and wife, Esther
Robert N. Millard
813/506
01.25.73
Elvira Vogel Adams
W.S. Gordon, Jr.
820/198
SHIPP 10 -1
HUMBLE
LEA COUNTY, NEW MEXICO
08/27/1969
Elbert D. Shipp et al
Pubco Petroleum Corporation
Township 17 South, Range 37 East
Section 10: E/2 E/2 SE /4 and E/2 W/2 E/2 SE /4
Book 266, Page 772
King Properties, Inc., by Donald W. Stephens, President
Lodestone Operating, Inc.
07/01/2008
Township 17 South, Range 37 East, N.M. P.M.
Section 10: W /2W/2 E /2SE /4
Orion Properties., by Donald W. Stephens, President
Lodestone Operating, Inc.
07/01/2008
Township 17 South, Range 37 East, N.M. P.M.
Section 10: W /2W/2 E /2SE /4
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
Page 40 of 42
00188
Lessor: Suzanne Ship Cunningham, Trustee of the Suzanne Ship Cunningham
Revocable Trust Dated 7/13/2001
Lessee: Lodestone Operating, Inc.
Lease Date: 05/02/2008
Description: Township 17 South, Range 37 East, N.M. P.M.
Section 10: East 60 acres of SE /4
Recordation: Book 1585, Page 368
Lessor: Western Commerce Bank, Trustee of the Francis J. Freeman Revocable
Trust, dated 2/08/1983, by Rita R. Neal, Senior Vice President Trust
Officer
Lessee: Lodestone Operating, Inc.
Lease Date: 05/14/2008
Description: Township 17 South, Range 37 East, N.M. P.M.
Section 10: East 60 acres of SE /4
Recordation: Book 1585, Page 936
Lessor: William Marshall Shipp Pamela Ann Dixon Shipp, Trustees of the
William
Marshall Shipp Pamela Ann Dixon Shipp Rev. Trust Dated 6 -29 -2001
Lessee: Lodestone Operating, Inc.
Lease Date: 05/02/2008
Description: Township 17 South, Range 37 East, N.M. P.M.
Section 10: East 60 acres of SE /4
Recordation: Book 1585, Page 366
WELL NAME AND LOCATION:
W.H. Striebeck #1
Live Oak County, Texas
Lease Description:
80 acres, more or less, being the NE /2 of Farm Tract #4049 in Block #105 of the
Dr. Charles F. Simmons Nueces River Farm Subdivision as per map or plat recorded
In Volume 1, Page 234 et seq, of the Plat Records of Live Oak County, Texas, to which Plat and
recordation thereof reference is hereby made for all pertinent purposes.
Only the rights and interests in and to the oil, gas and other minerals located between the depths
of 4,000 feet subsurface and 7,100 feet subsurface; and all rights and interests, including the oil,
gas other minerals, above and below such depth interval are excepted and excluded from this
lease, together with all rights and privileges applicable thereto, including those necessary to
develop the oil, gas and other minerals excepted from the Lease.
O &G Lease Description:
Oil and Gas Lease by and between Loyce L. Striebeck, Individually and as Independent Executrix
of the Estate of William H. Striebeck, III, Deceased, as Lessor, and Lodestone Operating, Inc., as
Lessee, date July 29 2005, recorded in Volume 39, Page 716 of the Oil and Gas Lease Records
of Live Oak County, Texas
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
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00189
Non Oil and Gas Collateral:
Life Insurance Proceeds on the life of David M. Reavis with Insurance
Company, Policy No.
All of the Membership Interests in Lodestone Operating, LLC, a Texas limited liability
company.
All of the shares of Lodestone Operating, Inc., a Delaware corporation.
Mortgage and Deed of Trust, David M. Reavis, Lodestone Operating Inc. and Lodestone Operating, LLC
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