EXHIBIT 10
OIL AND GAS LEASE
(Five year Paid-up Lease with Option)
THIS AGREEMENT made and entered into this 29h day of April, 2006, by and
between Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxx Xxxxx, and Xxxxxxx Xxxxxxx, hereinafter
called Lessor (whether one or more) and Krafty Admiral Enterprises Limited,
hereinafter called Lessee.
WITNESSETH: Lessor for and in consideration of Ten and No/100
Dollars ($10.00) and other good and valuable consideration in hand paid, receipt
of which is hereby acknowledged, and of the agreements of Lessee hereinafter set
forth, hereby , grants, demises, leases and lets exclusively unto said Lessee
the lands hereinafter described for the purpose of prospecting, exploring and
geophysical and other methods, drilling, mining, operating for and producing oil
or gas, or both, including, but not as a limitation, casinghead gas, casinghead
gasoline, gas-condensate (distillate) and any substance, whether similar or
dissimilar produced in a gaseous state, together with the right to construct and
maintain pipe lines, telephone and electric lines, tanks, power stations, ponds,
roadways, plants, equipment and structures thereon to produce, save and take
care of said oil and gas, and the exclusive right to inject air, gas, water,
brine and other fluids from any source into the subsurface strata and any and
all other rights and privileges necessary, incident to, or convenient for the
economical operation of said land, alone or conjointly with neighboring land,
for the production, saving and taking care of oil and gas and the injection of
air, gas, water, brine, and other fluids into the subsurface strata, said lands
being situated in the County of St. Xxxxxxx, State of Arkansas, and being
described as follows, to-wit:
SEE EXHIBIT "A"
it being the purpose and intent of Lessor to lease, and Lessor does hereby
lease, all of the lands or interests in lands owned by Lessor which adjoin the
lands above described or which lie in the section of sections herein specified
whether or not herein completely and accurately described, together with and
including any accretions thereto which may have formed, may now be forming or
may hereafter form. For all purposes of this lease, said land shall be deemed to
contain 1498.86 acres, more or less.
Subject to the other provisions herein contained, this lease shall remain
in force for a term of five (5) years from this date (herein called "primary
term" and as long thereafter as oil and gas, or either of them, is produced from
the above described land or drilling operations are continuously prosecuted as
hereinafter provided. "Drilling Operations" included operations for the drilling
of a new well, the reworking, deepening or plugging back of a well or hole or
other operations conducted in an effort to obtain or reestablish production of
oil or gas; and drilling operations shall be considered to be "continuously
prosecuted" if not more than 180 days shall elapse between the completion or
abandonment of one well or hole and the commencement of drilling operations on
another well or hole. If, at the expiration of the primary term of this lease,
oil or gas is not being produced from the above described land but Lessee is
then engaged in drilling operations, this lease shall continue in force so long
as drilling operations are continuously prosecuted; and if production of oil and
gas results from any such drilling operations, this lease shall continue in
force so long as oil or gas shall be produced. If, after the expiration of the
primary term of this lease, production from the above described land should
cease, this lease shall not terminate if Lessee is then prosecuting drilling
operation, or within 180 days after each such cessation of production commences
drilling operations, and this lease shall remain in force so long as such
operations are continuously prosecuted, and if production results therefrom,
then as long thereafter as oil or gas is produced from the described land. In
consideration of the premises, Lessee covenants and agrees to the following:
1. To deliver, free of cost, to Lessor at the xxxxx, or to the credit
of Lessor in the pipeline to which the xxxxx may be connected, the
equal nineteen percent (19%) part of oil and other liquid
hydrocarbons produced and saved from the leased premises, or, at
Lessee's option, to pay to Lessor such nineteen percent (19%)
royalty the market price at the well for such oil and other
liquid hydrocarbons of like grade and gravity prevailing on the
day such oil and other liquid hydrocarbons are run from the lease.
2. Lessee shall pay Lessor nineteen percent (19%) of the proceeds
derived from the sale of all gas (including substances contained
in such gas) produced, saved, and sold by Lessee. Proceeds are
defined as the actual amount received by the Lessee for the sale
of said gas. In calculating the proceeds derived from the sale of
gas produced, saved and sold by Lessee, Lessee shall be entitled
to share equally cost of gathering, transportation, treatment,
compression, processing and marketing costs that are incurred by
Lessee in connection with the sale of such gas.
3. Obligations of the parties hereunder shall be the same as if this
lease contained provisions for the payment of periodic delay
rentals throughout the primary term hereof and each such delay
rental had been timely paid and accepted by Lessor. For the same
consideration recited above, the adequacy and sufficiency of which
are acknowledged, Lessor grants, conveys and assigns to Lessee the
right-of-way and easement to construct, install, lay, operate,
repair, maintain and replace one or more pipelines on the above
described lands for the purpose of transporting on, over and
across such lands, oil, gas, water, condensate, distillate or
other hydrocarbons or minerals produced from said lands or from
other lands not covered by this lease. The rights herein granted
may be exercised at any time and from time to time while this
lease is in force and effect and for any extension periods
thereafter, and the easement and right of way herein granted shall
run with the above described lands for as long as such lease is in
force and effect and as long thereafter as any pipelines laid
thereon pursuant thereto are used or useful to Lessee, its
successors and assigns. Lessee agrees to pay Lessor $4.00 per rod
for each pipeline so installed as liquidated damages to compensate
Lessor for any and all surface use, interruption or other damages
that may be incurred or arise as a result of the use, installation
and maintenance, and operation of such pipeline. Such pipelines
shall be buried to a sufficient depth so as not to interfere with
Lessor's existing surface use of said lands, but in no event shall
they be required to be buried 36" below the surface. Lessee will
xxxx the location of any such pipelines so as to identify their
location on the grounds in accordance with applicable laws, rules
and regulations.
4. A well capable of producing gas or gas-condensate in paying
quantities located on the leased premises ( or acreage pooled or
consolidated with all or a portion of the leased premises into a
unit for the drilling or operation of such well) is at any time
shut in and no gas or gas-condensate therefrom is sold or used off
the premises or for the manufacture of gasoline or other products,
nevertheless such shut-in well shall be deemed to be a well on the
leased premises producing gas in paying quantities and this lease
will continue in force during all of the time or times while such
well is so shut in, whether before or after the expiration of the
primary term hereof. Lessee shall use reasonable diligence to
market gas or gas-condensate capable of being produced from
shut-in well but shall be under no obligation to market such
products under terms, conditions or circumstances which, in
Lessee's judgment exercised in good faith, are unsatisfactory.
Lessee shall be obligated to pay or tender to Lessor within 45
days after the expiration of each period of one year in length
(annual period) during which such well is so shut in, as royalty,
an amount equal to $5.00 per acre to the acreage covered by this
lease as to which the leasehold rights are, at the end of such
annual period, owned by the Lessee making such payment; provided
that, if Lessor owns less that the full and entire royalty
interest in such acreage, such payment shall be part (calculated
on a royalty-acre basis) of said amount as Lessor's royalty
interest bears to the full and entire royalty interest in such
acreage; and provided further that, if gas or gas-condensate from
such well is sold or used as aforesaid before the end of any such
annual period, or if, at the end of any such annual period, this
lease is being maintained in force and effect otherwise than by
reason of such shut in well, Lessee shall not be obligated to pay
or tender, for that particular annual period, said sum of money.
Such payment shall be deemed a royalty under all provisions of
this lease. Such payment shall be made or tendered to Lessor or to
Lessor's credit in the ________________________________________
Bank at _______________________, which bank and its successors
shall continue as the depository regardless of changes in the
ownership of said land or the right to receive royalty hereunder.
Royalty ownership as of the last day of each such annual period as
shown by Lessee's records shall govern the determination of the
party or parties entitled to receive such payment.
5. If Lessor owns a less interest in the land covered by this lease
than the entire and undivided fee simple mineral estate therein,
then whether or not such less interest is referred to or described
herein, all royalties herein provided shall be paid Lessor only in
the proportion (calculated on a royalty-acre basis) which the
royalty interest owned by him in said land bears to the full and
entire royalty interest in said land.
6. If the estate of either party hereto is assigned or sublet, and
the privilege of assigning or subletting in whole or in part is
expressly allowed, the express and implied covenants hereof shall
extend to the sub lessees, successors and assigns of the parties;
and in the event of an assignment or subletting by Lessee, Lessee
shall be relieved and discharged as to the leasehold rights so
assigned or sublet from any liability to Lessor thereafter
accruing upon any of the covenants or conditions of this lease,
either express or implied. No change in the ownership of the land
or royalties, however accomplished, shall operate to enlarge the
obligations or diminish the rights of the Lessee or require
separate measuring or installation of separate tanks by Lessee.
Notwithstanding any actual or constructive knowledge of or notice
to Lessee, no change in the ownership of said land or the right to
receive royalties hereunder, or of any interest therein whether by
reason of death, conveyance or any other matter, shall be binding
on Lessee (except at Lessee's option in any particular case) until
90 days after Lessee has been furnished written notice thereof,
and the supporting information hereinafter referred to, by the
party claiming as a result of such change in ownership or
interest. Such notice shall be supported by original or certified
copies of all documents and other instruments or proceedings
necessary in Lessee's opinion to establish ownership of the
claiming property.
7. Lessee may, at any time, execute and deliver to Lessor or place of
record a release covering all or any part of the acreage embraced
in the leased premises or covering any one or more zones,
formations or depths underlying all or any part of such acreage,
and thereupon shall be relieved of all obligations thereafter to
accrue with respect to the acreage, zones, formations or depths
covered by such release.
8. Lessee is granted the right, from time to time while this lease is
in force, to pool into a separate drilling or operating unit or
units all or any part of the land covered by this lease with other
land, lease or leases, or interest therein (whether such other
interests are pooled by a voluntary agreement on the part of the
owners therefore by the exercise of a right to pool by the Lessees
thereof), when in the Lessee's judgment it is necessary or
advisable in order to promote conservation, to properly develop or
operate the land and interest to be pooled, or to obtain a
multiple production allowable from any government agency having
control over such matters. Moreover, if any governmental
regulation or order shall permit or prescribe a spacing pattern
for the development of a field wherein the above described land,
or a portion thereof, is located, or allocate a producing
allowable based on acreage per well, then any such unit may
embrace such additional or lesser amount of acreage as may be so
permitted or prescribed or as may be permitted in such allocation
of allowable. In lieu of the royalties elsewhere herein specified,
except shut-in gas well royalties, Lessor shall receive on
production from an area so pooled only such portion of the
royalties which, in the absence of such pooling would be payable
hereunder to Lessor on production from the land covered by this
lease which is placed in the pooled area as the amount of the
surface acreage in the land covered by this lease which is placed
in the pooled area bears to the amount of the surface acreage of
the entire pooled area. Nothing herein contained shall authorize
or affect any transfer of any title to any leasehold, royalty or
other interest pooled pursuant hereto. The commencement of a well,
the conduct of other drilling operations, the completion of a well
or of a dry hole, or the operation of a producing well on the
pooled area, shall be considered for all purposes (except for
royalty purposes) the same as if said well were located upon, or
such drilling operations were conducted upon, the lands covered by
this lease whether or not such well is located upon, or such
drilling operations were located upon, or such drilling operations
were conducted upon, the lands covered by this lease whether or
not
such well is located upon, or such drilling operations are
conducted upon, said lands. Lessee may terminate any pooling
effected pursuant hereto at any time the pooled unit is not
producing and no drilling operations are being conducted thereupon
by executing and filing of record in the county or counties in
which the pooled area is located a written declaration of the
termination of such pooling, provided that the poking of all
interests not covered by this lease which comprise a part of such
pooled unit be also terminated in some effective manner.
9. Lessee shall have the right to use, free of cost, gas, oil and
water found on said land for its operation, except water from the
xxxxx of the Lessor. When required by the Lessor, the Lessee shall
bury its pipelines below plow depth and shall pay reasonable
damages for injury by reason of its operations to growing crops on
said land. No well shall be drilled nearer than 200 feet to any
house or barn or other structure on said premises as of the date
of this Lease without the written consent of the Lessor. Lessee
shall have the right at any time during, or after the expiration
of this Lease to enter upon the property and to remove all
machinery, fixtures, and other structures placed on said premises,
including the right to draw and remove all casing, but the Lessee
shall be under no obligation to do so.
10. Lessor hereby warrants and agrees to defend the title to the lands
herein described, but if the interest of Lessor covered by this
lease is expressly stated to be less than the entire fee or
mineral estate, Lessor's warranty shall be limited to the interest
so stated. Lessee may purchase or lease the rights of any party
claiming any interest in said land and exercise such rights as may
be obtained thereby but Lessee shall not suffer any forfeiture nor
incur any liability to Lessor by reason thereof. Lessee shall have
the right at any time to pay for Lessor, any mortgages, taxes or
other lien on said lands, in the event of default of payment by
Lessor, and be subrogated to the rights of the holder thereof, any
such payments made by Lessee for Lessor may be deducted from any
amounts of money which may become due Lessor under this lease.
11. In the event Lessor considers that Lessee is in breach of any of
its obligations hereunder, Lessor shall notify Lessee in writing
of the facts relied upon as constituting a breach hereof, and
Lessee, if in breach hereof, shall have sixty (60) days after
receipt of such notice in which to commence the compliance with
the obligations imposed by virtue of this lease. Until such time
as Lessee has been given the above described written notice and
opportunity to cure any asserted breach, Lessee shall not be
considered in default under the terms of this lease.
12. Should Lessee be prevented from complying with any express or
implied covenant of this lease, from conducting drilling or
reworking operations thereon or from producing oil or gas
therefrom by reason or scarcity of or inability to obtain or to
use equipment or material, by operation of force majeure, by any
Federal or State law or order, rule or regulation of governmental
authority, or by any other cause beyond the reasonable control of
Lessee, then while so prevented, Lessee's obligation to comply
with such covenant shall be suspended, and Lessee shall not be
liable in damages for failure to comply therewith; and this lease
shall be extended while and so long as Lessee is prevented by any
such cause from conducting drilling or reworking operations on or
from producing oil or gas from the leased premises; and the time
while Lessee is so prevented shall not be counted against Lessee,
anything in this lease to the contrary notwithstanding.
13. This lease and all provisions thereof shall be applicable to,
binding upon and enforceable by the parties thereto and their
respective successors and assigns. Reference herein to Lessor and
Lessee shall include reference to their respective successors and
assigns, it being expressly agreed that Lessor and Lessee shall
have the right to assign. Should any one or more of the parties
named above as Lessors not execute this lease, it shall
nevertheless be finding upon the party or parties executing the
same. In the event of any offer acceptable to Lessor, or to
Lessor's successor in interest, at any time or times during the
original or extended term hereof, for a lease to commence upon the
expiration or earlier termination of the original or extended term
hereof, the Lessor, prior to acceptance thereof, shall give the
Lessee, with respect to each such offer, written notice thereof
and a copy of said offer including the name and address of the
proposed purchaser of Lessee; and Lessee shall have the option and
right of first refusal for thirty (30) days after the receipt of
such notice within which to elect to lease the Premises on the
terms of said offer. If Lessee shall elect to lease the Premises
pursuant to the option and first refusal herein granted, it shall
give notice of such election within such thirty (30) day period.
Lessee's failure at any time to exercise its option under this
paragraph shall not affect this lease and the continuance of
Lessee's right and options under this and any other paragraph
herein.
14. Each wife/husband above named hereby joins in the execution and
delivery of this lease for the purpose of conveying, releasing and
relinquishing unto Lessee, for the purpose and consideration
aforesaid, all of his/her right, title, interest and estate in and
to said land, including any rights of dower/curtsey and homestead
which he/she may have therein.
15. OPTION TO EXTEND PRIMARY TERM FOR PAID-UP LEASE: Lessee is hereby
given the option to extend the primary term of this lease for an
additional five (5) years from the expiration of the original
primary term hereof. This option may be exercised by Lessee at any
time during the original primary term by paying the sum of $450.00
per net mineral acre to Lessor or to the credit of the Lessor
mailed to Lessor at the above address, (which address is Lessor's
agents and shall continue as the depository regardless of changes
in ownership of said land). This payment shall be based upon the
number of net mineral acres then covered by this lease and not at
such time being maintained by other provisions hereof. This
payment may be made by the check or draft of the Lessee mailed or
delivered to Lessor or to said bank at any time during the
original primary term hereof. If such bank (or any successor bank)
should fail, liquidate or be succeeded by another bank, or for any
reason fail or refuse to accept payment, Lessee shall not be held
in default for failure to make such payment until thirty (30) days
after the Lessor's delivery to Lessee of a proper recordable
instrument naming another bank as agent to receive such payment.
If, at the time this payment is made, various parties are entitled
to specific amounts according to Lessee's records; this payment
may be divided between said parties and paid in the same
proportion. Should this option be exercised as herein provided, it
shall be considered for all purposed as though this lease
originally provided for a primary term of ten (10) years.
IN WITNESS WHEREOF, this lease is executed as of the day and year first
above written.
This Lease is signed by each Lessor as of the date of the acknowledgment
below, but is effective as of the Effective Date stated above.
Lessor:
/s/ Xxxxx Xxxxxx
/s/ Xxxx Xxxxx
/s/ Xxxx Xxxxx
/s/ Xxxxxxx Xxxxxxx
Lessee:
/s/ Xxxxxxxx Xxxxxx
Krafty Admiral Enterprises, Ltd.
ACKNOWLEDGEMENTS
STATE OF Texas ss.
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COUNTY OF Tarrant ss.
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This instrument was acknowledged before me on this 29 day of
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April , 2006 , by
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Xxxxx Xxxxxx .
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/s/ Xxxx Xxxxxxxx Crelia____________________
Notary Public in and for the State of: _Texas__________________
Printed Name: Xxxx Xxxxxxxx Xxxxxx
My Commission Expires: May 25, 2009
STATE OF Nevada ss.
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COUNTY OF Washoe ss.
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This instrument was acknowledged before me on this 3rd day of
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May , 2006 , by
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Xxxx Xxxxx .
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/s/_Susan K. Lewis___________________
Notary Public in and for the
State of: ___Nevada__________________
Printed Name: Xxxxx X. Xxxxx
My Commission Expires:
STATE OF Illinois ss.
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COUNTY OF Xxxxxxxxxx xx.
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This instrument was acknowledged before me on this 1st day
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of May , 2006 , by
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Xxxx Xxxxx .
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_______________________________
/s/ Xxxxxx Fellhiemer
--------------------
Notary Public in and for the State of: ___ Illinois
------------------
Printed Name: Xxxxxx Fellhiemer
My Commission Expires: June 4, 2008
STATE OF Illinois ss.
--------------------------------
COUNTY OF Xxxxxxxxxx xx.
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This instrument was acknowledged before me on this 4th day of
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May , 2006 , by
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Xxxxxxx Xxxxxxx .
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/s/ Xxxxxxx X. Ottarski_____________________________________
Notary Public in and for the State of: ____________Illinois_________
Printed Name: / Xxxxxxx X. Ottarski_____________________________________
My Commission Expires: June 3, 2007
ADDENDUM
(ADDITIONAL PRIVISIONS)
ATTACHED TO AND MADE A PART OF THAT CERTAIN OIL, GAS AND MINERAL LEASE (PAID-UP)
DATED APRIL 18, 2006 BY AND BETWEEN XXXXX XXXXXX, XXXX XXXXX, XXXX XXXXX AND
XXXXXXX XXXXXXX, AS LESSORS, AND KRAFTY ADMIRAL ENTERPRISES LIMITED, LESSEE,
COVERING 1498.86 ACRES, MORE OR LESS, IN ST. XXXXXXX COUNTY, ARKANSAS.
PAID-UP
The consideration paid to Lessor for this Lease includes consideration in lieu
of delay rental provisions, thus no payment of delay rentals is required
hereunder.
HARD MINERALS
This Lease covers only oil, gas and all other related hydrocarbons and
constituent elements that may be produced through the bore of a well producing
oil or gas.
WATER WELL
Lessee may not use any existing water well on the leased premises without
Lessor's prior written consent. Not withstanding the foregoing, Lessee may drill
new water xxxxx on the leased premises and use the water drawn therefrom in its
operations. After cessation of Lessee's use of any water well which may be
drilled by Lessee on the leased premises, and prior to the plugging or removing
the casing therefrom, Lessee shall tender such water well, excluding surface
equipment, to the Lessor, and if the Lessor elects in a timely manner to accept
same, such water well shall be and become the property of the Lessor. Without
the prior written consent of Lessor, Lessee shall not draw water from the leased
premises if doing so would unreasonably restrict Lessor's use of water for
agricultural purposes.
XXXX
After the expiration of the primary term hereof or any extension thereof,
production from the leased premises shall maintain this Lease in force only as
to that part of the leased premises located within the maximum spacing acreage
allowed by Arkansas law for the pooled unit(s) and/or proration unit(s) for such
well(s).
ROYALTY DEDUCTIONS
Royalties shall be paid without deductions for costs of producing, gathering,
treating, compressing, transporting or otherwise making production ready for
sale. Oil shall be delivered free of cost into the tank, or pipeline, and gas
shall be delivered free of cost into the pipeline. Lessor is responsible for any
severance and/or other taxes assessed on royalties. The lessee will make
continuous payments to the lessor ninety (90) days after the lessee is in
receipt of funds from the well being put in production. The payments will
continue as long as the well is deemed profitable above and beyond expenses by
the lessee or is considered a shut-in well as stipulated in the written lease.
DRILL SITE DAMAGES
In lieu of actual damages, Lessee agrees to pay to Lessor, as liquidated
damages, the sum of Two Thousand Five Hundred Dollars ($2,500.00) for each drill
site located on the leased premises. Any said drill site shall not exceed three
(3) acres each.
MEMORANDUM OF LEASE
To preserve the confidentiality of the terms and provisions hereof, the lessee
may withhold this Lease from record and this Lease may be identified in a
Memorandum of Oil, Gas and Mineral Lease that may be executed contemporaneously
herewith and may be filed in the official records of St. Xxxxxxx County,
Arkansas.
OPTIONAL EXTENSION OF PRIMARY TERM
Lessee is hereby given the option, to be exercised on or before the expiration
of the primary term of this
Lease, of extending this Lease for a period of five (5) additional years, as to
all or any portion of the acreage then held hereunder, which would expire unless
so extended. The only action required by the Lessee to exercise this option
being the payment to Lessor at the address above, the additional sum of Four
hundred fifty Dollars ($450.00) per net mineral acre so extended. If this Lease
is extended as to only a portion of the acreage covered hereby, Lessee shall
designate such portion by a recordable instrument. The right of Lessee to extend
this Lease as provided herein is at the option, but not the obligation, of
Lessee. Should this option be exercised, as herein provided, it shall be
considered for all purposes as though this Lease originally provided for a
primary term of ten (10) years, insofar as this Lease covers the lands for which
this Lease was extended.
SURFACE RESTORATION
If any soil on the leased premises is contaminated as a result of Lessee's
operations, Lessee shall restore same to as near its original condition as
practicable. Should Lessee fail to restore the leased premises within a
reasonable time, not to exceed six (6) months, after Lessee's receipt of written
notice from Lessor, Lessor may restore the premises and be entitled to recover
from Lessee Lessor's actual cost thereof. Whenever Lessee abandons any oil and
gas well located on the leased premises, Lessee shall, Lessee shall promptly
{not to exceed (6) months} remove all tanks, pipes, buildings, structures,
machinery or equipment used solely by Lessee in connection with drilling or
operating said well. Lessee shall further clean out or fill all pits or dumps
appurtenant to the abandoned well, remove and haul away all sludge and oil
soaked earth and take out, remove all foundations, pipes, structures and other
objects installed by Lessee within three (3) feet of the surface of the ground,
and clean and smooth out the surface of the ground surrounding the well site and
in as near the condition existing as of the date of this lease as is reasonably
practicable. Should Lessee fail to remove the said materials and structures or
to carry out any of the activities described in this paragraph with the time
period heretofore set forth within this paragraph, Lessor shall be entitled to
carry out such activities and recover from Lessee Lessor's actual cost thereof.
FRESH WATER PROTECTION
Lessee shall protect all sub surface fresh water sources, as recommended, or
required by the governmental agency responsible for fresh water protection in
the State of Arkansas. Lessor shall conduct its operations on the leased
premises so as not to interfere or harm the water xxxxx or aquifers located
under said lands or Lessor's irrigation methods.
DRILL SITE LOCATION
No less than thirty (30) days prior to commencement of drilling operations upon
the leased land, the Lessee shall notify the Lessor and farm operator in writing
of the proposed location of any well. Lessee shall notify the Lessor in writing
of the proposed location of any well. Lessee shall stake out the proposed
drilling site upon notification to Lessor. The notice shall be accompanied by
all filings made by the Lessee with the Arkansas Oil and Gas Commission with
respect to the proposed well. No drilling or other production activities shall
be conducted within 400 feet of any existing dwelling or permanent structure or
within 200 feet of any water well or other improvement.
PIPELINE DEPTH
Without prior written approval to allow a lesser minimum depth is obtained from
Lessor and farm operator, all pipelines constructed by Lessee on the Leased
premises shall be buried to a minimum depth of five (5) feet below the surfaces.
TRANSPORT PIPELINE
Without the prior written consent of Lessor, Lessee shall not place a pipeline
on the leased premises to process production from xxxxx on adjacent lands,
unless a portion of the leased premises is included within the proration unit
for said well.
ROAD INGRESS AND EGRESS
Lessee shall disclose in advance the location of any well site as well as the
desired location of any roads into the leased premises for ingress and egress to
the well site from a public road. The location of the
desired means of access shall be subject to the approval of Lessor and farm
operator, who will not unreasonably withhold such approval. To the extent
reasonably practicable, Lessee shall conduct its operations in a manner that
causes the least interference with improvements now located on the leased
premises.
CONFIDENTIALITY
Lessor agree to treat as confidential (i) the financial terms of this Lease,
including, without limitation, bonuses, royalties, damage payments or other
consideration paid or agreed to be paid by Lessee, and (ii) all engineering,
geological and geophysical data, seismic data, other data, reports, maps and
information (the "Confidential Information"), whether or not in writing,
associated with the leased premises and derived from Lessor, to the extent not
already public. Lessor agrees not to disclose Confidential Information to third
parties without the prior written consent of Lessee.
LIABILITY AND HOLD HARMLESS PROVISIONS
The Lessor shall not be or be held responsible or liable in any manner for any
damage whatsoever to any property of the Lessee, real or personal, resulting
from fires originating upon the leased lands of the Lessor adjacent thereto, or
from any cause except such as may be caused by or result from the negligence of
Lessor, its agents or employees, nor shall Lessor be liable for any damage or
for any injury, including death, to employees, business guests or invitees of
Lessee, except such as may be caused by or result from the negligence of Lessor,
its agents or employees, nor shall Lessee have any liability or responsibility
for any such damage or injury resulting from fire except such as may be caused
by or result from the operations of Lessee, its agents or employees.
Lessee agrees to and shall indemnify and hold the Lessor harmless from any
expense, cost, loss, claim, demand, liens, encumbrances, action, cause of action
or liability of any and all character whatsoever resulting from, caused by,
contributed to or arising out of Lessee's operations on the leased premises.
Upon receiving notice of the assertion of any such claim, Lessor shall notify
Lessee within a reasonable time of any such action or suit or the assertion of
any such claim and Lessee may have its attorney appear therein, either alone or
in association with Lessor's attorneys (as Lessor may elect) in defending any
such action or suit, with each party paying the expenses of its or his own
attorney(s).
The Lessee shall be liable for and agrees to pay Lessor for:
a. Any and all loss incurred and injuries suffered by reasons of
damage to or destruction of Lessor's merchantable timber or
forest growth of a class less than merchantable caused by or
arising out of the negligence of Lessee, its employees, its
employees, agents or contractors. The measure of damage for
any loss of forest growth of a class less than merchantable
shall be construed to mean an amount equivalent to the fair
and reasonable replacement cost thereof.
b. All fire prevention costs incurred by, or imposed upon Lessor,
as a result of operations conducted by Lessee, its employees,
agents or contractors on the leased premises, or on lands
pooled/unitized therewith.
c. All damage to livestock, growing crops, fruits, trees, forest
vegetation, grasses, fences, ditches, buildings and/or other
improvements located upon the leased premises, which are
caused by or arise out of the operations of the Lessee, its
employees, its employees, agents or contractors. Payment for
such damage shall be made to the Lessor or Lessor's tenants or
the surface owners of any portion of the leased premises not
owned by the Lessor, whichever has sustained such damage.
d. All damages to the land due to it being rendered incapable of
producing crops, as a result of the operations of Lessee, its
employees, agents or contractors, regardless of negligence.
e. The above damage provision set forth in (a) and (b) above
applies only to damages other than constructing and cleaning
of roadways
ASSUMPTION OF ENVIRONMENTAL LIABILITY
Lessee, its successors and assigns, shall indemnify and hold harmless Lessor and
Lessor's heirs and assigns, from and against all costs, losses, damages,
injuries, claims, demands and expenses, including legal expenses, of whatever
nature, on account of, resulting from, or arising out of the presence of toxic
materials or hazardous substances, including, but not limited to, uncontained
petroleum products, upon or in the leased land and any hazardous or
injury-causing condition hereafter coming into existence upon the leased land
resulting from the presence of such materials or substances resulting from or
arising out of Lessee's operations on the leased premises. Lessee's obligation
hereunder shall include costs incurred in remedying any environmental problems
or hazards occasioned by the existence of the said materials or substances,
including remediation required by federal or state law or regulation,
remediation required as the result of legal action brought by private parties,
or acts of remediation reasonably in response to potential liabilities on
account of said environmental problems or hazards. Lessee's obligation hereunder
shall include indemnification for all fines and assessments imposed by the State
of Arkansas, the United States of America, or any other governmental authority,
on account of, resulting from, or arising out of the existence of the said
materials and substances. All surface pits shall be lined with plastic to
protect the leased land against contamination. Lessee shall protect all
freshwater sources, both surface and subsurface, from contamination. The
provisions of this paragraph shall survive the termination or extinguishment of
this Lease pursuant to the provisions of this Lease or by operation of law.
PRUDENT OPERATIONS REQUIRED
Lessee shall diligently and in accordance with the best oil field practices
endeavor to complete all xxxxx as commercial producers. These practices shall
include the taking of sidewall cores, the making of drill stem tests,
acidization, hydrafacing or other completion practices, whether similar or
dissimilar, when necessary or desirable to adequately appraise or test oil
bearing formations for good shows of oil or gas, in such manner as considered to
be consistent with good current oil field practices.
COMMENCEMENT OF DRILLING OPERATIONS
The words "commencement of drilling operations," or words of similar import, in
this Lease shall mean a substantial step in preparing to drill a well on the
leased premises or lands pooled therewith, including but not limited to the
commencement of operations to construct a well site or roads to such well site
with continued due diligence thereafter.
COSTS OF LITIGATION
Lessee shall pay all reasonable attorney's fees incurred by Lessor in connection
with any lawsuit in which Lessor prevails by final adjudication and judgment,
which lawsuit results form Lessee's failure to perform under the terms of this
Lease or Lessee's breach of the covenants set forth herein.
CONFLICTS
In the event of a conflict between the terms of this Exhibit "B" and the printed
Lease, the terms of this Exhibit shall control.
DRILLING OBLIGATION
On of before eighteen (18) months from the Effective Date of this lease, Lessee
agrees to commence actual drilling operations of a well at an acceptable surface
location on the leased premises and drill such well to a depth sufficient to
adequately test the Fayetteville Shale Formation. If the Leases have not
otherwise previously terminated, Lessee shall commence, or cause to be commenced
operations for the drilling of a second well (the "Second Obligation Well")
anywhere on the Leased Premises, or lands pooled/unitized therewith, within
thirty (30) months from the Effective Date, all Leases shall terminate. If the
Leases have not otherwise previously terminated, Lessee shall commence, or cause
to be commenced operations for the drilling of a third well (the "Third
Obligation Well") anywhere on the Leased Premises, or lands pooled/unitized
therewith, within forty-two (42) months from the Effective Date, all Leases
shall terminate.
If the Leases have not otherwise previously terminated, Lessee shall commence,
or cause to be commenced operations for the drilling of a fourth well (the
"Fourth Obligation Well") anywhere on the Leased Premises, or lands
pooled/unitized therewith, within fifty-four (54) months from the Effective
Date, all Leases shall terminate. The First Obligation Well, the Second
Obligation Well, the Third Obligation Well and the Fourth Obligation Well shall
be collectively referred to as the "Obligation Xxxxx" and individually referred
to as an "Obligation Well".
If Lessee fails to timely drill any Obligation Well as required hereunder, the
Leases shall terminate as to all lands not then held by one or more other
Obligation Xxxxx. Each producing Obligation Well shall be deemed to hold (i) as
to a producing lease well not in a pooled unit(s) and/or proration unit(s) up to
an acreage equal to a drill spacing for a gas well and a drill spacing for an
oil well, as applicable; (ii) as to a producing lease well that is located
within a pooled unit(s) and/or a proration unit(s), the Lease shall remain in
force as to that acreage of the leased premises located within the pooled
unit(s) and/or proration unit(s).
Lessee may, in its sole discretion, designate any new well drilled on the Leased
Premises as an Obligation Well regardless of when such well is drilled Lessee
may shorten the timetable for drilling xxxxx it is required to drill pursuant to
this
The terms and provisions of this Exhibit "B" are in addition to all of the terms
and provisions contained in the Lease and are intended to be covenants running
with the Lease and the leased premises and shall be binding upon and inure to
the benefit of the successors and assigns of the parties.
LESSOR: LESSOR:
/s/ Xxxxx Xxxxxx /s/ Xxxx Xxxxx
By: _________________________________ By: ________________________________
XXXXX XXXXXX XXXX XXXXX
LESSOR: LESSOR:
/s/ Xxxx Xxxxx /s/ Xxxxxxx Xxxxxxx
By: _________________________________ By: ________________________________
XXXX XXXXX XXXXXXX XXXXXXX
LESSEE:
/s/ Xxxxxxxx Xxxxxx
Crafty Admiral Enterprises, Ltd.
ACKNOWLEDGEMENTS
STATE OF Texas ss.
-------------------------------
COUNTY OF Tarrant ss.
--------------------------
This instrument was acknowledged before me on this 12 day of
-------------
May , 2006 , by
--------------------------------------------- -----------------
Xxxxx Xxxxxx .
-----------------------------------------------------------------------------
/s/ Xxxx Xxxxxxxx Crelia____________________
Notary Public in and for the State of: _Texas_________
Printed Name: Xxxx Xxxxxxxx Xxxxxx
My Commission Expires: May 25, 2009
STATE OF Nevada ss.
----------------------------
COUNTY OF Washoe ss.
-----------------------
This instrument was acknowledged before me on this 3rd day of
-------------
May , 2006 , by
--------------------------------------------- -----------------
Xxxx Xxxxx .
-----------------------------------------------------------------------------
/s/ Xxxx Xxxxx
Notary Public in and for the State
of: ___Nevada__________________
Printed Name: Xxxx Xxxxx
My Commission Expires: March 8, 0000
XXXXX XX Xxxxx ss.
----------------------------------------
COUNTY OF Tarrant ss.
-----------------------------------
This instrument was acknowledged before me on this 12th day
------------------
of May ,
--------------------------------------------
2006 , by
---------------------
Xxxx Xxxxx .
----------------------------------------------------------------------------
/s/ Xxxxx Xxxxx
Notary Public in and for the
State of: Illinois
Printed Name: Xxxxx Xxxxx
My Commission Expires: February 22, 0000
XXXXX XX Xxxxxxxx ss.
--------------------------------
COUNTY OF Xxxxxxxxxx xx.
------------------------
This instrument was acknowledged before me on this 4th day of
--------------
May , 2006 , by
------------------------ ------------
Xxxxxxx Xxxxxxx .
-----------------------------------------------------------------------------
/s/ Charity Stanis_____________________________________
Notary Public in and for the State of: ____________Illinois_________
Printed Name: /s/ Xxxxxxx Xxxxxx __________________________________
My Commission Expires: December 1, 2009
END OF ADDENDUMS
AFTER RECORDING, PLEASE RETURN TO:
KRAFTY ADMIRAL ENTERPRISES LIMITED
XXXXX 000, 0000 XXXXXXXXXX
XXXXXXX XXXXXXXX X.X.
ADDENDUM #2
(ADDITIONAL PROVISIONS)
ATTACHED TO AND MADE A PART OF THAT CERTAIN OIL, GAS AND MINERAL LEASE (PAID-UP)
DATED APRIL 18, 2006 BY AND BETWEEN XXXXX XXXXXX, XXXX XXXXX, XXXX XXXXX AND
XXXXXXX XXXXXXX, AS LESSORS, AND KRAFTY ADMIRAL ENTERPRISES LIMITED, LESSEE,
COVERING 1498.86 ACRES, MORE OR LESS, IN ST. XXXXXXX COUNTY, ARKANSAS.
TRUE LEGAL NAME
Amended for the true and legal name of the Lessee, as defined in the Lease, as
Crafty Admiral Enterprises, Ltd. The parties further agree that in all other
respects the terms and conditions of the Lease remain in full force and effect
and unaltered and that any reference to lessee in said Lease shall mean Crafty
Admiral Enterprises, Ltd as if originally named therein.
ROYALTY DEDUCTIONS
Royalties shall be paid without deductions for costs of producing, gathering,
treating, compressing, transporting or otherwise making production ready for
sale. Oil shall be delivered free of cost into the tank, or pipeline, and gas
shall be delivered free of cost into the pipeline. Lessor is responsible for any
severance and/or other taxes assessed on royalties. The lessee will make
continuous payments to the lessor ninety (90) days after the lessee is in
receipt of funds from the well being put in production. The payments will
continue as long as the well is deemed profitable above and beyond expenses by
the lessee or is considered a shut-in well as stipulated in the written lease.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the day and date set forth above.
LESSOR: LESSOR:
/s/ Xxxxx Xxxxxx /s/ Xxxx Xxxxx
By: ________________________________ By: __________________________________
XXXXX XXXXXX XXXX XXXXX
LESSOR: LESSOR:
/s/ Xxxx Xxxxx /s/ Xxxxxxx Xxxxxxx
By: __________________________________ By: __________________________________
XXXX XXXXX XXXXXXX XXXXXXX
LESSEE:
/s/ Xxxxxxxx Xxxxxx
Crafty Admiral Enterprises, Ltd.
ACKNOWLEDGEMENTS
STATE OF Illinios ss.
----------------------------------
COUNTY OF Xxxxxxxxxx xx.
-----------------------------
This instrument was acknowledged before me on this 12 day of
-------------
May , 2006 , by
--------------------------------------------- ---------------
Xxxxx Xxxxxx .
------------------------------------------------------------------------------
/s/ Xxxxxx X. Kellheime____________________
Notary Public in and for the State of: Illinios________
Printed Name: Xxxxxx X. Kellheime
My Commission Expires:
STATE OF Nevada ss.
----------------------------
COUNTY OF Washoe ss.
-----------------------
This instrument was acknowledged before me on this 11th day of
-----------
May , 2006, by
----------------- --------
Xxxx Xxxxx .
-----------------------------------------------------------------------------
/s/ Xxxx Xxxxx
Notary Public in and for the State
of: ___Nevada__________________
Printed Name: Xxxx Xxxxx
My Commission Expires: March 8, 0000
XXXXX XX Xxxxx ss.
----------------------------------------
COUNTY OF Tarrant ss.
-----------------------------------
This instrument was acknowledged before me on this 12th day
------------------
of May ,
---------------------------------------------
2006 , by
---------------------
Xxxx Xxxxx .
----------------------------------------------------------------------------
/s/ Xxxxx Xxxxx
Notary Public in and for the
State of: Illinois
Printed Name: Xxxxx Xxxxx
My Commission Expires: February 22, 0000
XXXXX XX Xxxxxxxx ss.
--------------------------------
COUNTY OF Xxxxxxxxxx xx.
------------------------
This instrument was acknowledged before me on this 124th day
---------------
of May , 2006 , by
------------------------ ------------
Xxxxxxx Xxxxxxx .
----------------------------------------------------------------------------
/s/ Charity Stanis_____________________________________
Notary Public in and for the State of: ____________Illinois_________
Printed Name: /s/ Xxxxxxx Xxxxxx __________________________________
My Commission Expires: December 1, 2009
ADDENDUM #3
(REVISION TO EXHIBIT "A")
ATTACHED TO AND MADE A PART OF THAT CERTAIN OIL, GAS AND MINERAL LEASE (PAID-UP)
DATED APRIL 18, 2006 BY AND BETWEEN XXXXX XXXXXX, XXXX XXXXX, XXXX XXXXX AND
XXXXXXX XXXXXXX, AS LESSORS, AND KRAFTY ADMIRAL ENTERPRISES LIMITED, LESSEE,
COVERING 1498.86 ACRES, MORE OR LESS, IN ST. XXXXXXX COUNTY, ARKANSAS.
REVISION TO EXHIBIT "A"
Exhibit "A" has been amended and attached to provide a xxxxxx and more detailed
description of the property which agrees with descriptions on the title search
documents and to remove the property described as the N 1/2 of the NW 1/4 of ss.
7, T4N-R1W in which no mineral rights or interest is held by Xxxxx X. Xxxxxx,
and/or Xxxx Xxxx Xxxxx and/or Xxxx Xxxxxxxx Xxxxx and/or Xxxxxxx Xxxx Xxxxxxx
(Xxxxx). The mineral rights and the property have previously been reserved and
appear to be owned by A.N. Xxxxx, his heirs or assigns.
REVISION TO ACERAGE
Amend all references to acres being acquired to read 1,426.68 to remove the
72.18 acres being the property described as the N 1/2 of the NW 1/4 of ss. 7,
T4N-R1W in which no mineral rights or interest is held by Xxxxx X. Xxxxxx,
and/or Xxxx Xxxx Xxxxx and/or Xxxx Xxxxxxxx Xxxxx and/or Xxxxxxx Xxxx Xxxxxxx
(Xxxxx). The mineral rights and the property have previously been reserved and
appear to be owned by A.N. Xxxxx, his heirs or assigns.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
day and date set forth above.
LESSOR: LESSOR:
/s/ Xxxxx Xxxxxx /s/ Xxxx Xxxxx
By: ________________________________ By: _____________________________________
XXXXX XXXXXX XXXX XXXXX
LESSOR: LESSOR:
/s/ Xxxx Xxxxx /s/ Xxxxxxx Xxxxxxx
By: ________________________________ By: _____________________________________
XXXX XXXXX XXXXXXX XXXXXXX
LESSEE:
/s/ Xxxxxxxx Xxxxxx
Crafty Admiral Enterprises, Ltd.
ACKNOWLEDGEMENTS
STATE OF Illinios ss.
----------------------------------
COUNTY OF Xxxxxxxxxx xx.
-----------------------------
This instrument was acknowledged before me on this 21 day of
-------------
June , 2006 , by
---------------------------------------- ---------------
Xxxxx Xxxxxx .
---------------------------------------------------------------------------
/s/ Xxxxxx X. Kellheime________________
Notary Public in and for the State of:
Illinios__________________
Printed Name: Xxxxxx X. Kellheime
My Commission Expires: June 4, 2008
STATE OF Nevada ss.
----------------------------
COUNTY OF Washoe ss.
-----------------------
This instrument was acknowledged before me on this 21th day of
-----------
June , 2006, by
------------------ --------
Xxxx Xxxxx .
-----------------------------------------------------------------------------
/s/ Xxxx Xxxxx
Notary Public in and for the
State of: ___Nevada__________________
Printed Name: Xxxx Xxxxx
My Commission Expires: March 8, 0000
XXXXX XX Xxxxx ss.
----------------------------------------
COUNTY OF Tarrant ss.
-----------------------------------
This instrument was acknowledged before me on this 12th day
------------------
of June , 2006 , by
------------- ---------------------
Xxxx Xxxxx .
------------------------------------------------------------------------------
/s/ Xxxxxxxxx X. Xxxxxx
Notary Public in and for the State of: Illinois
Printed Name: Xxxxxxxxx X. Xxxxxx
My Commission Expires: August 8, 2008
STATE OF Illinois ss.
--------------------------------
COUNTY OF Xxxxxxxxxx xx.
------------------------
This instrument was acknowledged before me on this 124th day
---------------
of May , 2006 , by
------------------------ ------------
Xxxxxxx Xxxxxxx .
------------------------------------------------------------------------------
/s/ Xxxxx Xxxxxxxx
Notary Public in and for the State of: ____________Illinois_________
Printed Name: Xxxxx Xxxxxxxx
My Commission Expires: October 17, 2007
EXHIBIT "A"
REVISED JUNE 20, 2006
ATTACHED TO AND MADE A PART OF THAT OFFER TO ACQUIRE OIL, GAS AND MINERAL LEASE
DATED APRIL 18, 2006 BETWEEN XXXXX XXXXXX AND XXXX XXXXX AND XXXX XXXXX AND
XXXXXXX XXXXXXX AND CRAFTY ADMIRAL ENTERPRISES LIMITED.
PROPERY DESCRIPTION
ST XXXXXXX COUNTY:
SOUTHWEST QUARTER (SW 1/4) OF SECTION FIVE (SS. 5), TOWNSHIP FOUR (4) NORTH,
RANGE ONE (1) WEST
EAST HALF (E 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF SECTION SIX (SS. 6),
TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
LOTS ONE (1), TWO (2), SEVEN (7) AND NINE (9) IN THE NORTH HALF (N 1/2) OF
SECTION SIX (SS. 6), TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
WEST HALF (W 1/2) OF THE SOUTHEAST QUARTER (SE 1/4) OF SECTION SIX (SS. 6),
TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
FRL. SOUTHWEST QUARTER (SW 1/4) OF SECTION SIX (SS. 6), TOWNSHIP FOUR (4) NORTH,
RANGE ONE (1) WEST
NORTHEAST QUARTER (NE 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION EIGHT
(SS. 8), TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
NORTHWEST QUARTER (NW 1/4) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION EIGHT
(SS. 8), TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
SOUTH HALF (S 1/2) OF THE NORTHEAST QUARTER (NE 1/4) OF SECTION EIGHT (SS. 8),
TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
LOTS THREE (3), FOUR (4), FIVE (5), SIX (6) AND TEN (10) OF NORTH HALF (N 1/2)
OF SECTION SIX (SS. 6), TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
NORTHEAST QUARTER (NE 1/4) OF SECTION SEVEN (SS. 7), TOWNSHIP FOUR (4) NORTH,
RANGE ONE (1) WEST
NORTHWEST QUARTER (NW 1/4) OF SECTION EIGHT (SS. 8), TOWNSHIP FOUR (4) NORTH,
RANGE ONE (1) WEST
NORTHEAST QUARTER (NE 1/4) OF THE SOUTHEAST QUARTER (SE 1/4) OF SECTION EIGHT
(SS. 8), TOWNSHIP FOUR (4) NORTH, RANGE ONE (1) WEST
LOT EIGHT (8) IN THE NORTH HALF (N 1/2) OF SECTION SIX (SS. 6), TOWNSHIP FOUR
(4) NORTH, RANGE ONE (1) WEST
TOTAL GROSS ACRES: 1,426.68 ACRES
THIS AGREEMENT COVERS ALL OF THE MINERAL OWNERSHIP OF XXXXX X. XXXXXX (1/2) AND
XXXX XXXX XXXXX (1/6) AND XXXX XXXXXXXX XXXXX (1/6) AND XXXXXXX XXXX XXXXXXX
(XXXXX) (1/6) EACH SECTION DESCRIBED ABOVE AND SECTIONS ADJACENT THERETO WITHOUT
REGARD TO THE ADEQUACY OF THE DESCRIPTION.
END OF ADDENDUM #3
AFTER RECORDING, PLEASE RETURN TO:
CRAFTY ADMIRAL ENTERPRISES LIMITED
XXXXX 000, 0000 XXXXXXXXXX
XXXXXXX XXXXXXXX X.X.
XXXXXX X0X0X0
