ANALYZE THIS, CALCULATE THAT

1. ANALYZE THIS, CALCULATE THAT Written and Presented by Donna Reeves & Sarah Broyles, CDOA Special Thanks to Stephen Horgan, CDOA; & Stephanie Sullivan, CPL who helped with the development of the materials presented herein National Association of Division Order Analysts 36th Annual Institute Washington Marriott Wardman Park Hotel Washington, D.C. September 23 – 25, 2009

2. Introduction • Define Division Order / Division of Interest – • Some use the term Division of Interest and Division Order interchangeably, however: • Division of Interest – Complete Ownership / Payment Records for a property or a tract within a property. • Division Order – Actual physical document that sets out • Property name • Legal description • Owner’s name and address • Decimal interest for said property • Interest Type for said property • Covenants and provisions relative to the sale of Oil or Gas and/or Distribution of Proceeds. • Basic Division Order • Issued to the individual interest owner setting out his interest as described above • Indemnifying • Issued to a party who receives proceeds on behalf of another party(s) and then further distributes those proceeds

3. Overview of Division Order Job Functions • The responsibilities of the Division Order Analyst can be categorized into two major functions – • Set up the Ownership on producing oil and gas properties • so that production proceeds are paid timely and correctly – • at the proper ownership decimal • and in compliance with State Statues and all applicable agreements • This includes – • Newly Drilled Well, both Operated and Non-Operated • Acquisition • Third Party Purchase Property • Maintain the ownership through the life of the well (or, in the case of a Third Party Purchaser, for the life of the applicable Contract), based on receipt of • Assignments, Conveyance Documents • Probate Proceedings • Judgments or Settlements rendered by a Court relative to litigation, etc.

4. Traits and Skill Set of the Division Order Analyst • Detail Oriented; Possess Patience; Good Communicator and Listener • Interact with the interest owners – • RI, ORRI, WI – in these producing properties • Via phone, emails, and correspondence • Interact with In-house Accountants, Marketers and Legal Council, Lease Analyst • Division Orders, Marketing, Accounting and Lease Records have to be “best friends” – Co-Dependent Relationship • Open lines of Communication • Liaison with Industry Counterparts • Our Counterparts at other companies – Division Order Analysts, Landman, Lease Analyst • Their Accountants • Their Marketers

5. Traits and Skill Set of the Division Order Analyst • One might describe our role as a “Cross between an Accountant and a Paralegal” • Accountant – in that in our ownership set-up and transfers of interest, we have understand how it will impact the money. We are basically ‘writing a check’ • Paralegal – in that we must understand the legal requirements for ‘Clear and Marketable Title’ for each state in which your company does business

6. Establishing Ownership Records for a New Property • Notice of a New Property • The Division Order Analyst may receive one or more of the following documents as notice of New Property:

7. Operated Properties • Authority for Expenditure (AFE) • Internal Company Document, detailing information about the proposed well • Drill Site Report / Well Information Summary / Release of Well Location • Should contain Well Name; Location; GWI of Participants; Company Leases Held by Proposed Well; Applicable Agreements; Any Special Considerations • Drilling Title Opinion • This Opinion may cover the drill site only, not the entire proposed spacing. • Daily Drilling Report

8. Non-Operated Property • Authority for Expenditure (AFE) • Internal Company Document, advising that well has been proposed and your company has agreed to participate in the drilling and operations of said well • Drilling Title Opinion, provided by the Operator • It may be possible to be on a Distribution List to receive Drilling Reports from the Operator • Notice from Accounting advising that you have received payment on a well that is not set up • Receipt of Division Order from Purchaser / Payor

9. Third Party Purchase Property • Contract Notice / Contract Summary • In-House Notification from Marketing Group, that gives – • Applicable Wells Subject to Contract • Market Percentage that is being sold to your company

10. Property Acquisition • Copy of Purchase and Sale Agreement (PSA) • Copy of the Assignment • Internal Company Document, advising that Company is acquiring certain properties from ‘Company X’ • Listing of Properties from Company Business & Development Group

11. Monitoring Data To Determine When Ownership Records Should Be Set Up Operated • Company Drilling Reports, to determine when well has been successfully completed as a producer • Division Order Title Opinion • Review of Oil & Gas Leases for any special provisions relative to payment of production proceeds • Review of Applicable Agreements to be assured Payment / Ownership Records will be set up accordingly • Pooling / Unit Agreement • Are all lands within Pooling / Unit Agreement covered on the Division Order Title Opinion? • Joint Operating Agreement (JOA) • Farmin / Farmout Agreement • Internal Agreements • Marketing Agreements • Review of State Statutes to be assured that proceeds are paid in accordance with the Statutory Requirements for applicable state

12. Monitoring Data To Determine When Ownership Records Should Be Set Up Non-Operated • Follow-Ups with Internal Landman and/or Operator, to determine when well has been successfully completed as a producer • It may be possible to be on a Distribution List to receive Drilling Reports from the Operator • Division Order Title Opinion • Review of Applicable Marketing Agreements to be assured Payment / Ownership Records will be set up accordingly • Will your Company be marketing under the JOA with the Operator? • Will your Company be marketing its full GWI under a separate contract and distribute its proportionate share to its burden interests? • Will your Company be marketing its NRI only under a separate contract and receive its NRI only? • Internal Agreements

13. Monitoring Data To Determine When Ownership Records Should Be Set UpThird Party Purchase Property • How will disbursements be handled? • 100% to Operator / Marketing Party for Further Distribution • Who remits taxes? • Remit Proceeds on behalf of Operator / Marketing Party • Who will provide payment information? • Is this a Newly Completed Well and the Operator should provide a Division Order Title Opinion? • Is this a producing property that is now contracted with your company and your pay records will be set up based on the prior disburser’s paysheet? • Are there any special circumstances of which your company should be aware? • Tax Exempt Entities • Special Lease Provisions for certain Royalty Owners • Please note that it is the responsibility of the Operator / Marketing Party to advise the Third Party Purchaser of any special terms stipulated in the applicable oil and gas leases or other pertinent agreements • Since the Purchaser is not a party to the Oil & Gas Lease, JOA, etc., they would not be aware of such special provisions unless notified. • Review of Applicable Marketing Agreements to be assured Payment / Ownership Records will be set up accordingly

14. Monitoring Data To Determine When Ownership Records Should Be Set UpProperty Acquisition • When is the Acquisition scheduled to close? • How soon after the closing will your company be responsible for operations, marketing and payment of production proceeds? • Is there a Transition Agreement that sets out the time frame for the responsibilities of the Assignor and the Assignee? • Review of Marketing Data / Agreements to be assured Payment / Ownership Records will be set up accordingly • Will this acquisition cause a change in payment arrangements • What percentage was previously marketed by Predecessor? • If it was less than 100%, are you able to determine why? • Who previously held the Basic Division Order? • Predecessor in Title • Former Purchaser • How will you obtain the payment records? • Electronic Data that can be data mapped and downloaded into your existing system • Manual Input from ‘Hard Copies’ of the predecessor’s DOI’s • What procedures are in place to notify the Interest Owners? • Will Revenue Check serve as notice? • Will there be an Insert that is mailed with the check? • Will Division Orders be issued prior to checks being issued?

15. Documents Affecting Division Order Calculations • Once we have determined that a Division Of Interest (“DOI”) is needed for a property, let’s look at the documents / agreements that affect the calculations to establish the DOI. • Many of the documents used in oil and gas negotiations or operations affect the net revenue interests of not only the mineral owners but working interest owners as well. The following pages will provide you with a sample guideline of what to look for in the most common forms of agreements.

16. Agreements • Oil & Gas Leases • Division Order Title Opinions • Curative Documents • Joint Operating Agreements • Assignments, Conveyances & Bills of Sale • Pooling/Communitization Agreements • Farmout/Farmin Agreements • Unitization Agreements

17. Types of Interests • Mineral Interests • Leased – subject to an valid oil & gas lease • Unleased – not subject to an oil & gas lease; this interest may participate in the drilling of the well by executing the JOA; in some states this interest can be forced pooled • Royalty Interests • Non-Participating Royalty Interests – interest in the proceeds that is carved out of leased mineral interest; no executive rights • Term Royalty Interests – interest in the proceeds that is limited in time or as long as there is production • Overriding Royalty Interests • Usually created as a result of an assignment • Some oil & gas leases provide for an override

18. Types of Interests • Production Payments • interest in the proceeds that is tied to a specific dollar amount or specific production amount • Net Profits Interests • interest in a specific percentage of the profits of a WI Party. This interest can only be paid by that WI Party and is usually handled through the Joint Interest Billing process

19. Types of Interests • Working Interests • Participating – participates in the drilling and operations of the well • Non-Consenting Working Interests – elects to not participate in the drilling and operations of a well. This party can usually back-in for a full or proportionate share after certain obligations have been met • Carried Working Interests – interest that is borne and “carried” by the participating working interest parties • Unleased Mineral Interest – can join in the execution of the Joint Operating Agreement and participate in the drilling and operations of the well, as to his proportionate 8/8 mineral interest

20. 1/8 = 0.125000 or 12.50% 7/8 = 0.875000 or 87.50% 3/16 = 0.187500 or 18.75% 13/16 = 0.812500 or 81.25% 1/16 = 0.062500 or 6.25% 1/4 = 0.250000 or 25% 3/4 = 0.750000 or 75% And our most favorite: 1.000000 or 100% Numbers Frequently Used by the Division Order Analyst

21. Acreage Covered Mineral Interest Royalty Provision Pooling Provision Take-in-Kind Provision Proportionate Reduction Provision Change of Ownership Provision Normally states total surface acres Usually found on Broker’s report States amount of negotiated royalty (fixed or sliding scale), products, pricing, when payment due Authorization to pool acreage with other leases Allows for Lessor to take oil in kind Allows for any rental payments and/or royalty payments to be reduced if Lessor owns a lesser interest than stated in the lease Gives the Lessor and the Lessee the right to convey all, or a portion thereof, of its interest Oil & Gas LeasesAgreement by and between the Mineral Owner & Lessee (i.e. the Working Interest Party)

22. Entireties Clause Depth Limitations Pugh Clauses Shut-In Royalty Clause Special Clauses / Addendum to the Lease Acreage included in lease must be taken into consideration as lease applies to unit Sets out any depth limitations or specific formations Allows for all non-producing acreage to be released at end of primary term Establishes procedures for maintaining lease when well has been temporarily shut-in Added Clauses may alter / supercede terms set forth in above form lease Oil & Gas LeasesAgreement by and between the Mineral Owner & Lessee (i.e. the Working Interest Party)

23. Division Order Title OpinionsAgreement by and between the Operator / Non-Operator and the Title Attorney • Provides Lease Well or Unit acreage and legal description • Documents Examined, including any prior title opinions rendered • Date range of documents examined • Summary of Oil & Gas Leases Included in Unit • Chain of Title • Agreements Applicable to Unit Calculations

24. Division Order Title OpinionsAgreement by and between the Operator / Non-Operator and the Title Attorney • Patent Information • Easements • Encumbrances (Mortgages, Liens) • Taxes • Title Requirements • Calculations (Before Payout & After Payout)

25. Wills Probate Proceedings Affidavits of Heirship Affidavits of Marital History Affidavits of Identity Affidavits of Non-Production Name Change Documents Merger Documents Stipulations of Interest Release of Liens Ratifications Quiet Title Suit Documents Disclaimers of Interest Deeds/Correction Deeds Assignments/Correction Assignments Trust Agreements Quit Claims Release of Lien Release of Oil & Gas Leases Release of Mortgages Subordination Agreements Curative DocumentsThese documents may be part of the materials examined by the Title Attorney to depict the Initial Ownership. These Curative Documents also play a large part in the ongoing maintenance / updates on a producing property.

26. Joint Operating AgreementsAgreement by and between the Working Interest Parties • The Joint Operating Agreement (“JOA”) is an agreement / document executed by all parties participating in the development of a particular field or geographical area. However, it may be limited to the drilling of a particular well. • The JOA sets forth procedures for the development, drilling and operations of the field or well. • We will discuss later in this presentation how certain terms of the JOA can affect the DOI

27. Example #1 – Lease Well Beetle Bailey #1 • Joint Operating Agreement provides for all WI owners to share proportionately as to the first 1/8 • WI Parties, subject to JOA • Sarge Oil & Gas Corp. 50% GWI • General Petroleum Company 25% GWI • BB Minerals, Inc. 25% GWI • One (1) Oil and Gas Lease, granted by Beetle Bailey • Covering the NE/4 of Sec 4, T19S, R29E, Eddy County, New Mexico • Provides for a 1/8 RI • Lessor owns 100% of the Minerals • Lease Well • No pooling agreement • Well spacing is limited to NE/4 of Sec 4, T19S, R29E (i.e. the exact description of the above oil and gas lease)

28. Example #1: Lease WellBeetle Bailey #1 - 160 Acres Royalty Interests: Beetle Bailey 100% MI x 12.5% RI = 12.50% Net RI (can also be expressed as 1/8) Working Interest Owners: Sarge Oil & Gas Corp. 50% GWI x (100% - 12.5%) = 43.75% Net WI (can also be expressed as 50% of 7/8) General Petroleum Company 25%GWI x (100% - 12.5%) = 21.875% Net WI (can also be expressed as 25% of 7/8) BB Minerals, Inc. 25% GWI x (100% - 12.5%) = 21.875% Net WI (can also be expressed as 25% of 7/8) DOI Interests .12500000 RI .43750000 WI .21875000 WI .21875000 WI 1.00000000 TOTAL

29. Maintaining Ownership Through the Life of the WellAssignments, Conveyances & Bills of Sale • An assignment or conveyance document serves three basic functions: • Assigns rights and delegates duties between Assignor and Assignee • Allocates liabilities between the Assignor and Assignee. • Same may possibly create obligations in addition to those imposed by the oil and gas lease. • Note: It should be noted that the Assignment process does not necessarily adjust the rights of the original Lessor or previous Assignees. • The Assignment should specifically address what liabilities and obligations remain with the Assignor and which are to be assumed by the Assignee. • Notice to others that a transfer of interest in the lease has taken place, by placing same of record in the county/parish records.

30. Assignments, Conveyances & Bills of Sale • These Documents should set out: • Grantor(s) or Assignor(s) / Grantee(s) or Assignee(s) • Appropriate Words of Conveyance • Acreage / Property covered by document • Consideration • Interest being conveyed • Type of Interest (ORR, WI, PP) • Percentage or Fraction of Interest being Conveyed • Reservations • Partial Interest • Depths or Formations • Overriding Royalty • Effective Date • Agreements Affected • Joint Operating Agreements • Oil & Gas Leases • Other Assignments • AMI’s • Additionally, the Conveyance Document Should Be: • In Writing and Signed by the Grantor • Delivered to, and accepted by, the Grantee (preferably signed by Grantee) • Be Acknowledged • Filed of Record in County / Parish in which oil and gas interest is located

31. Assignments, Conveyances & Bills of SaleTypes of Conveyances: • ASSIGNMENT / CONVEYANCE / DEED • If this involves a Working Interest: Check the JOA for Preferential Rights. If stricken, make the change. If not stricken- confirm with Landman that your Company has been offered or has rejected the offer to obtain its proportionate share of the interest being sold. • MINERAL DEED – Only minerals are conveyed. The owner has executive rights (i.e. can sign / execute a lease) • ROYALTY DEED – A mineral owner conveys the royalty but retains the minerals interest. • Grantee owns royalty only, can’t execute a lease

32. Assignments, Conveyances & Bills of SaleTypes of Conveyances : • QUIT CLAIM DEED – if the quit claim deed doesn’t contain a fraction or decimal, the grantor is conveying his current as well as any subsequent interest he may acquire. If the owner acquires an additional interest in the future and the original deed cited a fraction or decimal, you would need another conveyance for the subsequently acquired interest. • WARRANTY DEED – grantor guarantees/warrants title. If the Grantor owns both surface & minerals they are both conveyed unless reserved in the instrument • TRUSTEE’S DEED - if the interest was conveyed to the Trust (i.e. to the Trustees of the Trust), it must be conveyed out of the Trust by Deed. • Some Companies may require that when you get a Deed into a Trustee or Trust that you must request a copy of the Trust Agreement or Declaration of Trust. • This assures that you have knowledge of the Current Trustees, Successor Trustees, Powers of the Trustee, as well as the terms for termination of the Trust.

33. Assignments, Conveyances & Bills of SaleAffect on DOI • Beetle Bailey has decided to convey a 1/8 mineral interest to his cousin, George Bailey and wife, Joy Bailey. • How will this affect our existing DOI on the Beetle Bailey #1?

34. Example #2: Beetle Bailey #1After Conveyance to George Bailey & Joy Bailey Royalty Interests: Beetle Bailey 87.5% MI x 12.5% RI = 10.9375% Net RI (can also be expressed as 7/8 x 1/8) George Bailey & Joy Bailey 12.5% MI x 12.5% RI = 1.5625% Net RI (can also be expressed as 1/8 x 1/8) Working Interest Owners: Sarge Oil & Gas Corp. 50% GWI x (100% - 12.5%) = 43.75% Net WI (can also be expressed as 50% of 7/8) General Petroleum Company 25%GWI x (100% - 12.5%) = 21.875% Net WI (can also be expressed as 25% of 7/8) BB Minerals, Inc. 25% GWI x (100% - 12.5%) = 21.875% Net WI (can also be expressed as 25% of 7/8) DOI Interests .10937500 RI .01562500 RI .43750000 WI .21875000 WI .21875000 WI 1.00000000 TOTAL

35. Transfer Document of Record

36. How was the property owned? Separate Property Community Property Subject to a Life Estate Trustees of a Trust Other Are there any unusual circumstances involving this account? Revenues previously paid to a bank / financial institution per terms of mortgage Revenues previously paid per terms of a special agreement Subject to a Life Estate Does the Life Estate Owner have authority to transfer this interest? It will be necessary to review the documents creating said Life Estate Suspended Pending Litigation Other Check List:In reviewing the Conveyance Documentation received, please consider –

37. Check List:In reviewing the Conveyance Documentation received, please consider – • Is the Assignor listed on the Assignment / Conveyance one and the same as set up on your company records? • If not, do you have sufficient documentation to establish chain of title from the entity on your records into the Assignor reflected on the Assignment / Conveyance? • If not, what other documentation do you need? • For example, if said Assignment is from the Executor(s) of the Estate of John Miller, deceased, and your records show this interest credited to John Miller, you would need the probate proceedings relative to the Estate of John Miller. • If this interest was owned jointly, have all parties executed the Assignment / Conveyance? • For example, if said interest is credited to Joe Smith and Carolyn Smith, have both joined in the execution of the Assignment / Conveyance? • If not, what other documentation do you need? • Is one of the parties now deceased? • Is the property subject to divorce proceedings? • Is the property subject to an additional conveyance? • Does one party have Power of Attorney for the other?

38. Check List:In reviewing the Conveyance Documentation received, please consider – • Does the Assignment / Conveyance involve an interest that is owned or will be owned in Trust? • In most states, title is vested in the Trustees of a Trust • If the interest is currently owned in Trust, the conveyance should be from the Trustees of the Trust • If the interest will be owned in Trust, the interest should be conveyed to the Trustees of the Trust • There are some states – such as Oklahoma, Florida and Kansas where the Trust is considered an entity capable of holding title. There may be other states, as well. • It has become a more common practice to accept Deeds whereby the interest is conveyed to the Trust, especially if the Trustee and/or Beneficiary are set out in the conveyance. • When in doubt and before you suspend, consult your Legal Department • Please note: The preparation of a Trust Agreement does not necessarily transfer title into the Trustees of said Trust. There must be a conveyance into the Trustees; or, in the alternative, the Trust Agreement itself can contain words of conveyance.

39. Does the Assignment / Conveyance contain proper words of conveyance? What is the specific interest being conveyed? All Percentage / Fraction of Assignor’s interest Specific Percentage / Fraction – i.e. 20% interest in . . . Is the conveyed interest limited to a certain property / wellbore / county, etc.? Does the Assignor reserve any interests? If conveyance is to multiple parties, does it specify the interest being conveyed to each recipient? Does the total of the interests for each recipient total 100% of the interest formerly owned by the Assignor? Check List:In reviewing the Conveyance Documentation received, please consider –

40. Does the Assignment reflect a consideration for the grant? This may be “for $10.00 and other valuable consideration…” This may be denoted “for love and affection…” What is the effective date of the Assignment / Conveyance? What are your company policies regarding effective date of transfer on your ownership records? Check List:In reviewing the Conveyance Documentation received, please consider –

41. Check List:In reviewing the Conveyance Documentation received, please consider – • Does the description of the property being conveyed coincide with the legal description contained on your company records? • If not, is there “Mother Hubbard” language such as – • “It is the intent of the Assignor to convey all properties located in Martin County, Texas, regardless whether correctly described herein” • “It is the intent of the Assignor to convey all properties located in the State of Texas, regardless whether correctly described herein” • If not, have you requested the correct Assignment from the Assignee (i.e. recipient)? • Please note that it is possible that the description on the Assignment may not match exactly with the legal description in your company records. However, if the lands described (or a portion thereof) are encompassed by the lands held by the well / unit tract, more than likely you can consider the Assignment applicable to your property. • The Henry #1 well is described as the SW/4 of Section 5. • You receive an Assignment covering the S/2 of Section 5. • Since the SW/4 is a part of the S/2, the Assignment would be applicable, provided all other references, such as Township, Surveys, Blocks, etc. match.

42. Check List:In reviewing the Conveyance Documentation received, please consider – • Has the Assignment / Conveyance been executed by the Assignor / Grantor? • The Assignment MUST be executed by the Assignor. • Has the Assignment / Conveyance been executed by the Assignee / Grantee? • Although it is preferred that the Assignment be executed by the Assignee (i.e. recipient), it is not uncommon for the Assignment to be executed only by the Grantor. • Has the Assignment / Conveyance been recorded in the county(s) where the properties are located?

43. Probate • It has been said that “No one is assured of anything except death and taxes”. Unfortunately, interest owners in a well do not live forever and there is a necessity to transfer ownership to the heirs and/or devisees of the estate of a decedent. • There are two basic types of probate proceedings • Intestate(where the decedent died without a will) • Testate(where the decedent died with a will).

44. Testate Probate • To transfer an interest in accordance with testate proceedings, it usually common industry practice to require a copy of the following: • Death Certificate • Letters Testamentary • Will • Order Admitting Will to Probate • Some companies may also request an Affidavit, completed by the executor of the estate, stating that all debts and taxes have been paid or the estate has sufficient funds to pay same. • Some states, such as Oklahoma and Louisiana, the Court of Jurisdiction issues a final decree that sets forth the recognized heirs of the estate and how all assets of the decedent should be distributed. • If the Probate document contains an error in the property description or as to the fractional or decimal interest of the deceased, you may need a correction to the Order. This correction is called “Nunc Pro Tunc Order”.

45. Intestate Probate • To transfer an interest for an intestate estate, the following documents should be required: • Death Certificate • Affidavit of Heirship, completed by two disinterested persons, setting forth the marital history and any heirship information relative to the decedent. The Affidavit of Heirship is basically a synopsis of the decedent’s life. • Some companies may base requirements for Ancillary Probate (rather than accepting an Affidavit of Heirship) on the Interest Owner’s Annual Royalty Proceeds. • Some companies may also require an Affidavit of Facts stating that all debts and taxes have been paid or that the estate has sufficient funds to pay same. • Some states, such as Louisiana, require a final decree issued by the Court even in an intestate probate proceeding. • Know if State has Community Property; Know Intestate Laws

46. Foreign Probate • If a person dies owning oil, gas and/or mineral interests in a state of which he/she was not a resident, Ancillary Probate Proceedings should be opened in the state where the well is located. • Probate proceedings conducted in one state ordinarily will have no effect on the passage of title in another state. • It would be as if the decedent left no Will and his interests would vest in accordance with the Laws of Descent and Distribution of the state in which the well is located. • Some states will accept a less formal filing of probate. • In Texas, for example, record title can be amended by filing an exemplified copy of the Will and Order Admitting Will to Probate in the Deed Records of the county(s) where the property is located. • In New Mexico, an executor of the estate may file an exemplified copy of the Will, Order Admitting Will to Probate and any other court issued estate documents, along with a completed Statement of Domiciliary Foreign Personal Representative in the District Court of the county(s) in which the property is located. To distribute revenues to the heirs or devisees under the will, New Mexico statute also requires the executor or the Domiciliary Foreign Personal Representative to prepare and file of record deeds to the heirs or devisees of the estate. • The Analyst should familiarize himself / herself with the current probate laws of the states in which the leases and/or wells under his/her jurisdiction are located.

47. Testate ProbateAffect on DOI • George Bailey is now deceased. His Will has been admitted to Probate in Eddy County, New Mexico (i.e. the location of the Bailey #1 well). • His Will states that Joy’s 50% of the community property shall be owned outright by Joy. George’s share – i.e. the remaining 50% - is to be split between his 2 children, Donald and Susan.

48. Example #3: Beetle Bailey #1After Testate Probate on Estate of George Bailey George Bailey & Joy Bailey 12.5% MI x 12.5% RI or 1.5625% RI is now vested as: Joy Bailey 50% x 12.5% MI x 12.5% RI = .78125% Net RI Donald Bailey 25% x 12.5% MI x 12.5% RI = .390625% Net RI Susan Bailey 25% x 12.5% MI x 12.5% RI = .390625% Net RI DOI Interests 0.00781250 RI 0.00390625 RI 0.00390625 RI 0.0156250 TOTAL

49. Intestate ProbateAffect on DOI / Scenario #1 • George Bailey is now deceased. • He left no Will • Affidavit of Heirship lists his heirs as: • Joy Bailey – surviving spouse • Donald Bailey – son, age 24 • Susan Bailey – daughter, age 20 • Both Donald and Susan are the children of George Bailey and of Joy Bailey.

50. Example #4: Beetle Bailey #1After Demise of George Bailey, who died IntestateScenario #1 New Mexico Property / Texas Property George Bailey & Joy Bailey 12.5% MI x 12.5% RI or 1.5625% RI is now vested as: Joy Bailey 100% x 12.5% MI x 12.5% RI = 1.5625% Net RI • Per New Mexico Law, if the Date of Death is after July 1, 1973, the Surviving Spouse inherits 100% Let’s suppose this property is located in Texas. The Ownership would vest the same. • Per Texas Law, if a person dies without a Will, owning community property – • If all children are the issue of the decedent and the surviving spouse, the surviving spouse receives 100% of the Community Property. • If all children are not the issue of the decedent and the surviving spouse, the surviving spouse receives his/her 50% outright. The remaining 50% is then vested in equal shares to all issue of the decedent. DOI Interests 0.01562500 RI 0.0156250 TOTAL