DRAGON ENERGY CORPORATION NEW ORLEANS, LOUISIANA 70130-6155
DRAGON
ENERGY
CORPORATION
000
XXXXXXX
XXXXXX,
XXXXX
0000
XXX
XXXXXXX,
XXXXXXXXX
00000-0000
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FAX
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TELEPHONE
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(000)
000-0000
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(504)
586-1717
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August
23, 2004
Argyle
Energy, Inc.
00000
Xxxxxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Attention:
Xx. Xxxxx X. Xxxxxx
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Xxxxxxx
Crossroads Prospect (Prospect No.
20)
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Escambia
County
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Gentlemen:
When
accepted by you in the manner provided hereinafter, this letter shall constitute
a contract and agreement ("Agreement") between DRAGON ENERGY CORPORATION
("Dragon") and ARGYLE ENERGY, INC. ("Argyle"), concerning those certain Oil,
Gas
and Mineral Leases (the "Leases") described more particularly in the list of
leases and lands attached hereto as Exhibit "I." Argyle has expressed a desire
to acquire an interest in the Leases by drilling a test well in search of oil
and/or gas on the Leases, and this letter will evidence the agreement between
Dragon and Argyle with respect thereto.
For
and
in consideration of the covenants, obligations, and undertakings set forth
herein, Dragon and Argyle hereby agree as follows:
1.
CASH
CONSIDERATION
Concurrently,
with the execution of this Agreement by Dragon and Argyle, Argyle has paid
to
Dragon the sum of One Hundred Thousand and 00/100 Dollars ($100,000.00) in
cash
(the "Cash Consideration"). Argyle shall not have accepted this Agreement,
and
this Agreement shall not be in force and effect as between Dragon and Argyle,
until Argyle has delivered to Dragon the full amount of the Cash
Consideration.
2.
TITLE
INFORMATION AND TITLE OPINIONS
Dragon
makes no representation or warranty, either expressed or implied, concerning
its
title to the Leases. Upon the request of Argyle, Dragon shall furnish to Argyle
copies of the Leases and all title data and title opinions relating to the
Leases in the possession of Dragon as of the effective date of this Agreement.
Thereafter, Argyle shall obtain such additional title data and title opinions
as
it
deems
necessary in connection with the drilling of the Test Well. Argyle shall bear
and pay one hundred percent (100%) of the total costs and expenses of such
additional title data and drillsite title opinions.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
2
3.
TEST
WELL
3.1.
On
or before
September 30, 2005, and subject to the availability of a drilling rig, tubular
goods, and other equipment and services required for the drilling and completion
of the Test Well, Argyle agrees to commence, or to cause to be commenced, the
actual drilling of a well in search of oil or gas at a mutually acceptable
legal
location in Xxxxxxx 00, Xxxxxxxx 0 Xxxxx, Xxxxx 0 Xxxx, Xxxxxxxx County, Alabama
(the "Test Well"). Argyle shall cause such drilling operations to be prosecuted
with diligence and in a workmanlike manner consistent with the practices of
a
prudent operator until the Test Well shall have been drilled to a depth of
(a)
14,850 feet TVD below the surface of the earth, or (b) a depth sufficient to
test adequately and conclusively the stratigraphic equivalent of the Smackover
Formation as
seen
in
the interval between 13,684 feet and 14,016 feet in the Dragon Energy
Corporation-ATIC 23-4 #1 well located in Xxxxxxx 00, Xxxxxxxx 0 Xxxxx, Xxxxx
0
Xxxx, Xxxxxxxx County, Alabama, whichever is the shallower depth (the "Objective
Depth"), or to such other depth as the parties hereto may agree, as provided
hereinafter.
3.2.
Argyle
agrees to pay and bear one hundred percent (100%) of the total cost, risk,
liability, and expense incurred in connection with the drilling of the Test
Well
to its Objective Depth and all logging, coring, and testing of the Test Well
provided or permitted under this Agreement prior to a decision concerning a
completion attempt therein. For purposes of this Agreement, the point in time
when the Test Well has been drilled to its Objective Depth and all such logging,
coring and testing of the Test Well prior to a decision concerning a completion
attempt therein has been completed shall be referred to hereinafter as "Casing
Point."
3.3.
During
the
course of drilling the Test Well to Casing Point, Argyle shall perform, or
cause
to be performed, the following services with respect to the Test
Well:
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(a)
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Argyle
shall cause a survey of the location of the Test Well to be made,
cause
such location to be staked, and secure drilling permits for the
Test Well.
As soon as
is
practicable after the execution of this Agreement, Argyle shall
furnish to
Dragon a survey plat showing the staked location of the Test
Well.
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(b)
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Argyle
shall prepare, or cause to be prepared, the Test Well location and
the
access thereto, and shall settle or pay surface damages, if any,
occasioned by these operations.
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(c)
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Argyle
shall furnish, or cause to be furnished, an appropriate drilling
rig,
equipment, labor, mud and chemicals, surface casing, protection casing
if
necessary, cement, water, and fuel; shall move the drilling rig on
and off
location; and shall perform such other services as
may be
required to drill the Test Well to its Objective
Depth.
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(d)
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Argyle
shall furnish such on-site geological and engineering supervision,
as
is
necessary or appropriate.
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(e)
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Argyle
shall, on a daily basis, maintain an estimate of the total expenses
incurred to date for the drilling of the Test Well and shall include
such
information, along with the daily progress of the drilling of the
Test
Well, in the daily drilling reports to Dragon provided for in Section
3.3.
(g) (i).
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(f)
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During
the drilling of the Test Well, Argyle shall conduct such coring and
testing as would a reasonably prudent operator. Upon reaching the
Objective Depth, Argyle shall run, from the base of the surface casing
of
the Test Well to its Objective Depth, such electrical induction logs,
neutron density logs, or other logs as may be necessary to properly
test
the Objective Depth for the presence of oil and/or gas in commercial
quantities.
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Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
3
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(g)
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Argyle
agrees that Dragon and its representatives shall, at all times,
have
access at their own risk to the xxxxxxx floor of the Test Well
to witness
all operations thereon and to inspect the logs and other records
kept with
respect to the Test Well. Argyle shall provide Dragon with at least
twenty-four (24) hours written notice concerning the anticipated
time that
any logging, coring, testing, completion, or plugging operations
will take
place on the Test Well to allow Dragon, or its representatives,
sufficient
time to be present at the well site to witness the same. Further,
Argyle
agrees to furnish to Dragon copies of each of the
following:
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(i)
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daily
drilling reports;
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(ii)
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core
analyses;
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(iii)
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mud
logs;
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(iv)
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electrical
induction logs and surveys and neutron density
logs;
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(v)
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velocity
surveys;
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(vi)
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well
test and completion reports; and
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(vii)
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all
reports made to any state or federal
agency.
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3.4. When
the Test
Well has been drilled to its Objective Depth and the logging, coring, and
testing provided in Section 3.3.(f) have been completed, Argyle or Dragon shall
have the right to have additional logs, cores, or other tests made or run in
the
Test Well to aid in a decision whether to attempt a completion therein;
provided, however, that Argyle shall have the right to veto any such proposed
additional logs, cores, or other tests if Argyle, in its sole judgment,
determines that such proposed logs, cores, or other tests would unduly
jeopardize the Test Well or the geological formation into which it has been
drilled. Any such additional logging, coring and testing shall be proposed
in
the manner provided in Article VI.B.1 of the Operating Agreement referred to
hereinafter. If Argyle approves any such proposal for additional logging, coring
and testing, Argyle shall be liable for 100% of the cost related thereto. In
the
event that Argyle does not elect to conduct such additional testing and Dragon
elects to conduct such testing, Dragon shall be liable for all costs incurred
and all damage to the well bore during such testing.
3.5.
(a) In the event that Argyle
is unable to reach the Objective Depth in the Test Well, or having reached
such
Objective Depth, is unable to complete the Test Well because of subsurface
conditions or formations, including without limitation heaving shale, domal
formations, and excessively high pressure water sands or cavities, that would
render further drilling operations by a prudent operator impracticable, or
because of mechanical conditions in the Test Well beyond Argyle's control,
Argyle shall plug and abandon the Test Well and restore the drillsite premises
thereof pursuant to the provisions of Section 3.6.
(b)
Thereafter, Argyle shall determine, it its sole discretion, whether to commence
or to cause to be commenced, within sixty (60) days after the date that plugging
operations on the Test Well are completed, the actual drilling of a substitute
well for oil and/or gas (the "Substitute Test Well") at a mutually acceptable
location on the Leases. The Substitute Test Well shall be drilled under the
same
terms and conditions as the Test Well. If the Substitute Test Well is commenced
in a timely manner and completed as a producer of oil and/or gas in commercial
quantities, the Substitute Test Well shall take the place of the Test Well
for
purposes of this Agreement, and as used herein, the term "Test Well" shall
include the Substitute Test Well.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
4
3.6.
(a)
In the event that Argyle commences the actual drilling of the Test Well as
provided in this Article 3, and reaches the Objective Depth of the Test Well
but
both Argyle and Dragon elect not to attempt to complete the Test Well, Argyle
shall plug and abandon the Test Well and shall restore the drillsite premises
pursuant to the requirements of the Leases and applicable laws and regulations,
unless operations are conducted pursuant to Section 3.7, and Argyle shall bear
one hundred percent (100%) of the total costs, risks, liabilities, and expenses
of such plugging, abandonment, and surface restoration operations.
(b)
In
the event that Argyle commences the actual drilling of the Test Well as provided
in this Article 3, and reaches the Objective Depth of the Test Well and both
Argyle and Dragon participate in the unsuccessful attempt to complete the Test
Well, Argyle and Dragon shall plug and abandon the Test Well and shall restore
the drillsite premises pursuant to the requirements of the Leases and applicable
laws and regulations, unless operations are conducted pursuant to Section 3.7,
and the costs, risks, liabilities, and expenses of such plugging, abandonment,
and surface restoration operations shall be borne by the parties in their
respective after casing point working interests, (the "ACP Interest"). The
ACP
Interests of Argyle and Dragon are seventy-five percent (75%) and twenty five
percent (25%) respectively.
(c)
In
the event that Argyle commences the actual drilling of the Test Well as provided
in this Article 3, and reaches the Objective Depth of the Test Well and either
Argyle or Dragon elects not to participate in a proposed completion attempt
in
the Test Well, the completion attempt will be subject to the provisions of
Section 4.3, and if unsuccessful, the Consenting Party shall plug and abandon
the Test Well and shall restore the drillsite premises pursuant to the
requirements of the Leases and applicable laws and regulations, unless
subsequent operations are conducted, and the Consenting Party shall bear (100%)
of the total costs, risks, liabilities, and expenses of such plugging,
abandonment, and surface restoration operations.
3.7.
(a)
After the Test Well has been drilled to Casing Point and Argyle and Dragon
have
elected not to attempt to complete the Test Well as a well capable of producing
oil and/or gas in commercial quantities, Argyle or Dragon may propose deepening,
sidetracking, or any other operations in the Test Well prior to the plugging
and
abandonment thereof. Any such additional logging, coring and testing shall
be
proposed in the manner provided in
Article
VI.B. I of the Operating Agreement referred to hereinafter.
(b)
If
Argyle and Dragon elect to participate in the operation proposed under Section
3.7.(a), the cost, risk, liability, and expense incurred in connection therewith
shall be borne by the parties in their respective ACP Interest.
(c)
In
the event that either Argyle or Dragon elects not to participate in the relevant
Section 3.7.(a) operation (the "Non-Consenting Party"), and the proposing party
(the "Consenting Party") thereafter elects not to proceed therewith, Argyle
shall plug and abandon the Test Well and restore the drillsite premises thereof
pursuant to the provisions of Section 3.6. In the event that either Argyle
or
Dragon elects not to participate in the relevant Section 3.7.(a) operation,
and
such operation is pursued by the Consenting Party, the Non-Consenting Party
shall surrender and relinquish to the Consenting Party, all of the right, title,
and interest of the Non-,Consenting Party in and to the Test Well and the
Leases; and the Consenting Party shall bear the full cost, risk, liability,
and
expense incurred in connection with the relevant operation. Such surrender
of
the interest of the Non-Consenting Party in the Leases shall not create an
obligation on the part of the Consenting Party to reimburse the Non-Consenting
Party for sums previously paid by the Non-Consenting Party under the terms
of
this Agreement. The Non- Consenting Party shall execute any assignments or
other
documents in favor of the Consenting Party necessary to divest the
Non-Consenting Party of such rights and interests.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
5
3.8.
Subject
to
the provisions of Section 11.1., Argyle may, at its option, subcontract the
performance of all or any part of its responsibilities and obligations
hereunder; provided, however, that no such subcontract shall be regarded as
an
assignment of Argyle's responsibilities or obligations hereunder or as having
the effect of relieving Argyle of its contractual responsibilities and
obligations hereunder.
3.9.
Argyle
shall, during all operations conducted by it pursuant to this Agreement in
connection with the exploration for, or production of, oil and/or gas on the
Leases, I comply with any and all applicable laws, rules, and regulations of
any
governmental authority having jurisdiction over such operations, and with all
of
the terms, covenants, arid conditions either expressed or implied, set forth
in
the Leases, this Agreement, and the Operating Agreement referred to
hereinafter.
4.
COMPLETION
ATTEMPT ON THE TEST WELL
4.1.
The
decision
whether to attempt to complete the Test Well as a well capable of producing
oil
and/or gas in commercial quantities shall be governed by the relevant provisions
of the Operating Agreement referred to hereinafter, and all operations in
connection with any such completion attempt shall be governed by the terms
of
such Operating Agreement, except to the extent that they conflict with the
terms
hereof.
4.2.
Subject
to
the right to elect not to participate in a completion attempt in the Test Well,
as
provided
in Section 4.3, Argyle and Dragon agree to bear seventy-five percent (75%)
and
twenty five percent (25%) respectively, of the cost, risk, liability, and
expense incurred in connection with any completion attempt on the Test Well,
including without limitation all expenses incurred in equipping the Test Well
for production. For purposes of this agreement, Dragon and Argyle agree that
all
costs and expenses of labor, services, materials, and equipment used and
incurred in a completion attempt in the Test Well that are not included in
the
cost of drilling the Test Well to Casing Point or conducting any operations
therein pursuant to Section 3.7 shall be deemed to be costs of completion and
equipping for production, including, without limitation, (a) costs of casing
and
associated equipment, (b) cement and cementing service, (c) tubing, (d) packers,
(e) Christmas tree, (f) perforation, (g) formation treatment and stimulation,
(h) rig time, (i) engineering supervision, (j) surface handling facilities,
and
(k) administrative overhead as
provided
in Exhibit "C" to the Operating Agreement referred to hereinafter.
4.3.
In
the event
that either Argyle or Dragon elects not to participate in a proposed completion
attempt in the Test Well, and such completion attempt is pursued by the
Consenting Party, the Non-Consenting Party shall surrender and relinquish to
the
Consenting Party, all of the right, title, and interest of the Non-Consenting
Party in and to the Test Well and the Leases; and the Consenting Party shall
be
the operator for such completion attempt and all subsequent operations on the
Leases and shall bear the full cost, risk, liability, and expense incurred
in
connection with such completion attempt. Such surrender of interests of the
Non-
Consenting Party in the Leases shall not create an obligation on the part of
the
Consenting Party to reimburse the Non-Consenting Party for sums previously
paid
by the Non-Consenting Party under the terms of this agreement. The
Non-Consenting Party shall execute any assignments or other documents in favor
of the Consenting Party necessary to divest the Non-Consenting Party of such
rights and interests.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
6
5.
ASSIGNMENTS
OF INTEREST
5.1.
When
the
Test Well has been drilled to Casing Point and the logging, coring, and testing
provided in Section 3.3.(f) have been completed, and Argyle has complied with
all of the terms and provisions of this Agreement, Dragon shall assign to
Argyle, by recordable instrument of conveyance in form and substance identical
to the form of Assignment of Oil and Gas Leases attached hereto as Exhibit
"II"
(the "Lease Assignment"), an undivided seventy-five percent (75%) interest
in
and to (a) the Leases, (b) the Test Well and all oil, gas and related
hydrocarbons produced, saved, and marketed there from, (c) all other personal
property and equipment located on the Leases, and (d) all appurtenances thereto.
For purposes of this Agreement, the referenced percentage shall sometimes be
referred to herein as
Argyle's
"Lease Ownership Percentage."
5.2.
The
specific
provisions governing the assignment of interest in the Leases from Dragon to
Argyle described in Section 5.1, are set forth in the Lease Assignment, the
terms and provisions of which are incorporated into this Agreement for all
purposes. In the event of a conflict between the provisions of the Lease
Assignment and the provisions of this Agreement, the provisions of this
Agreement shall govern and control.
5.3.
Prior
to Argyle earning an assignment of its interest in
the
Leases as provided in Section 5.1 above, Dragon shall maintain all of the Leases
through delay rental payments as
may be
required. During the time Dragon is maintaining said Leases, Dragon shall,
as
necessary, present Argyle with an invoice no more than sixty (60) days prior
to
a delay rental payment being due, and Argyle shall have fifteen (15) days from
the date an invoice is received within which to pay such invoice. Should Argyle
fail to timely pay an invoice as provided herein, Argyle shall forever forfeit
all of its rights hereunder, and neither party to this Agreement shall have
any
recourse against the other, and this Agreement shall terminate. Should Argyle
timely pay such invoice, all of Argyle's rights hereunder shall be maintained.
Subsequent to Argyle earning an assignment of its rights hereunder, and after
receiving an Assignment of its interest from Dragon, all delay rental and other
lease maintenance payments shall be made by Argyle pursuant to the terms of
the
Joint Operating Agreement attached hereto as
Exhibit
IV.
6.
OPERATING
AGREEMENT
6.1.
Concurrently
with the execution of this Agreement, Dragon and Argyle have executed an
Operating Agreement identical in form and substance to the form of Operating
Agreement attached hereto and made a part hereof as
Exhibit
"IV" (the "Operating Agreement") that names Argyle as "Operator" and Dragon
as
"Non-Operator."
6.2.
All
operations in connection with the Test Well shall be governed by the applicable
provisions of the Operating Agreement, to the extent that such provisions are
not inconsistent with the provisions of this Agreement. All operations in
connection with any subsequent well located on the Leases, including the
decision to drill or not to drill, shall be governed by the applicable
provisions of the Operating Agreement, to the extent that such provisions are
not inconsistent with the provisions of this Agreement.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
7
7.
RELATIONSHIP
OF PARTIES - TAXATION
7.1.
It
is not
the purpose of this Agreement to create, and this Agreement shall not be
construed as creating, a joint venture, partnership, or other relation whereby
any party to this Agreement shall be liable for the acts, either of omission
or
commission, of any other party hereto. Furthermore, the respective rights and
obligations of the parties hereto shall, in all respects, be several and not
joint, and shall be governed by the express provisions hereof.
7.2.
Dragon
and
Argyle agree that the provisions of the Operating Agreement shall govern their
relationship, for U.S. federal and state income taxation purposes.
8.
AREA
OF MUTUAL INTEREST
8.1.
An
area of
mutual interest that covers all of lands within the area outlined on the plat
attached hereto as
Exhibit
"III," the "AMI" is hereby established by the parties hereto.
8.2.
Should
any
party hereto acquire, either directly or indirectly, a leasehold, farmout or
similar interest, within the AMI, while this Agreement or the Operating
Agreement are in effect, the acquiring party shall give notice of such
acquisition to the non-acquiring party, advise them of the terms and conditions
of said acquisition and furnish copies of all pertinent information. Any
non-acquiring party shall have a
period
of
ten (10) days (or twenty four (24) hours, exclusive of Saturdays, Sundays and
Holidays), in case a well is being drilled within the AMI, in which to elect
to
share in such acquisition to the extent of their ACP Interest. If the non-
acquiring party elects to participate in such acquisition, it shall pay its
ACP
Interest of the acquisition costs for such acquired interest within fifteen
(15)
days of its
election
to participate. Failure of the non-acquiring party to pay its share of
acquisition costs within the fifteen (15) day period shall, at the acquiring
party's election, be deemed an election not to participate.
9.
INDEMNITY
and INSURANCE
9.1.
Argyle
agrees to assume responsibility for and indemnify, hold harmless, release and
defend Dragon, its successors and assigns, from and against any liability to
the
extent such liability arose from or is based upon events, actions, conditions,
circumstances or omissions incurred or created by Argyle in connection with
the
drilling of any well (s) as provided for hereunder, and, for all subsequent
operations by Argyle that relate in any way to or are incurred in connection
with Argyle's operations conducted hereunder and from and against any
obligations, losses, damages, claims, demands, suits, costs, expenses,
penalties, fines, liens and liabilities whatsoever (including reasonable
attorney's fees and expenses), accruing or relating to the owning, developing,
exploring, operating and maintaining the Leases insofar arid only insofar
as
such
ownership, development, exploration, operations, and maintenance pertain to
the
Leases. No claims for consequential, punitive, exemplary or other similar types
of damages or loss of business opportunity may be asserted by any party hereto.
For liabilities that arise from operations after Dragon has elected to
participate in the completion or subsequent operations for the Test Well, this
indemnity provision shall be superceded by the terms of the Operating
Agreement.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
8
9.2.
Argyle
shall, before work is commenced hereunder and at all times during the term
of
this Agreement, maintain or cause to be maintained insurance at its own expense
with reliable insurance companies authorized to do business in the state or
states in which the work is to be performed hereunder. The policies shall
provide the minimum insurance coverage for the benefit of Dragon as
required
in Exhibit "D" to the Operating Agreement. Argyle shall, before work is
commenced hereunder, submit to Dragon, certificates of insurance evidencing
that
satisfactory coverage of the types and limits set forth in Exhibit "D" to the
Operating Agreement is in effect. Policies providing for such coverage shall
contain provisions that no cancellation or material changes in the policies
shall become effective except upon thirty (30) days advance written notice
thereof to Dragon, that Dragon is named as
an
additional
insured, that rights of subrogation against Dragon have been waived, and the
certificates of insurance furnished to Dragon shall evidence these
provisions.
10.
NOTICES
10.1.
All
notices,
consents, approvals, requests, demands, and other communications required or
permitted to be given hereunder or in connection with the transactions
contemplated hereby shall be in writing and delivered in person or by United
States mail, courier service, telegram, telex, telecopier or any other form
of
facsimile, postage or charges prepaid, and addressed to each party at the
addresses listed below in accordance with the notice provisions of the Operating
Agreement:
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If
to Dragon:
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Dragon
Energy Corporation
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000
Xxxxxxx Xxxxxx, Xxxxx 0000
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Xxx
Xxxxxxx, Xxxxxxxxx 00000-0000
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Attention:
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Xx.
XxXxxx X. Xxxxxx
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Email:
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xxxxxxxxxxxx@xxxXxxxxx.xxx
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Office
Telephone:
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(000)
000-0000
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Office
Fax:
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(000)
000-0000
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If
to Argyle:
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Argyle
Energy, Inc.
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00000
Xxxxxxxxxx, Xxxxx 000
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Xxxxxxx,
Xxxxx 00000
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Attention:
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Xx.
Xxxxx X. Xxxxxx
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Email:
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xxx@xx-xxxxxx.xxx
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Office
Telephone:
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(000)
000-0000
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Office
Fax:
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(000)
000-0000
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10.2.
Dragon
and
Argyle may change the address to which such communications are to be directed
by
giving written notice to the other party in the manner provided in Section
8.1.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
9
11.
GENERAL
PROVISIONS
11.1.
Any
assignment of interest by Argyle shall expressly be made subject to all of
the
terms, covenants, provisions, and conditions of this Agreement and the Operating
Agreement and shall provide that the assignee identified therein agrees to
ratify this Agreement at Dragon's request. No such assignment shall be binding
upon Dragon until thirty (30) days after Argyle shall have furnished to Dragon
a
certified copy of the recorded instrument or instruments evidencing the same.
An
assignment by Argyle of all of its interest in the Leases will only relieve
Argyle of liabilities and obligations arising hereunder from and after the
date
that said assignment is fully executed by all parties.
11.2.
After
the
effective date of this Agreement and prior to Argyle's being entitled to receive
the Assignment of Leases provided for in Section 5.1., Argyle shall be liable
for one hundred percent (100%) of all costs in connection with extensions or
renewals of the Leases, delay rentals, shut-in well payments, minimum royalties,
and other similar payments. After Argyle has become entitled to receive the
assignment provided for in Section 5.1., Argyle and Dragon shall be liable
for
their Lease Ownership Percentage of such extensions or renewals of the Leases,
delay rentals, shut-in well payments, minimum royalties, and other similar
payments.
11.3.
If
the Test
Well is not commenced by the commencement date specified in Article 3, or if
the
Test Well (or Substitute Test Well) is not drilled to Casing Point, this
Agreement shall terminate and all parties shall thereupon be relieved of any
further obligation hereunder, and no interest in the Leases or other rights
will
have been earned by Argyle, and Dragon shall have no recourse of any kind
whatsoever against Argyle. If a Test Well is not commenced, but all other
obligations are fulfilled, this agreement shall terminate and Argyle shall
be
relieved of all other obligations and no refund of the Cash Consideration shall
be due to Argyle.
11.4.
The
parties
hereto agree to execute such additional instruments, agreements, or documents
as
may be necessary to effectuate the intentions of this Agreement.
11.5.
Article
and
section numbers used in this Agreement refer to articles and sections of this
Agreement unless otherwise specifically described, '1'he section headings
contained herein are inserted for convenience only and shall not control or
affect the meaning or construction of any provision hereof.
11.6.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of Louisiana and, subject to the provisions of Section 11.1.,
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
11.7.
This
Agreement constitutes the entire agreement between the parties and supersedes
any and all other written or oral agreements or understandings between the
parties concerning the subject matter hereof. No modification or amendment
of
the terms and provisions of this Agreement shall be effective unless in writing
and signed by the party against whom enforcement is sought.
11.8.
This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original hereof for all purposes, and all of which, when taken
together, shall constitute one and the same instrument.
Argyle
Energy, Inc.
Attention:
Xx. Xxxxx X. Xxxxxx
August
23, 2004
Page
10
11.9.
This
Agreement shall be effective as
of
August
1, 2004, notwithstanding the date set out on the first page hereof and shall
remain in effect so long as
any of
the
Leases subject to this agreement remain or are continued in force, whether
by
production, extension, renewal, or otherwise, unless this Agreement is sooner
terminated by the terms hereof.
If
the
foregoing reflects your understanding of our agreement in connection with the
subject matter hereof, please execute two (2) counterparts of this Agreement
in
the space provided below and return one such executed counterpart to Dragon
at
the address indicated in Section 8.1., the remaining counterpart should be
retained for your files.
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Very
truly yours,
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DRAGON
ENERGY CORPORATION
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||
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By:
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/s/
XxXxxx X. Xxxxxx
|
|
|
XxXXXX
X. XXXXXX
|
||
|
PRESIDENT
|
|
MJF:rs
|
|
|
Attachment
|
|
|
AGREED
TO AND ACCEPTED
|
|
|
this
30th day of November, 2004.
|
|
ARGYLE
ENERGY, INC.
|
||
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BY:
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/s/
Xxxxx X. Xxxxxx
|
|
|
XXXXX
X. XXXXXX
|
||
|
SENIOR
VICE-PRESIDENT
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