OIL AND GAS LEASE PURCHASE CONTRACT
THIS OIL AND GAS LEASE PURCHASE CONTRACT (this "Contract") is made and entered
into as of the Effective Date (hereinafter defined), by and between SCOPE
OPERATING COMPANY, a Texas Corporation, ("Seller') and KEYSTONE SILVER MINES,
INC., an Idaho corporation, ("Purchaser"), for and in consideration of the
mutual terms, provisions and covenants contained herein, and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged and confessed, and in respect thereof the parties hereto agree as
follows:
1. CONTRACT TO ASSIGN. Seller agrees to grant, sell, transfer, assign and
convey to Purchaser, A 25% WORKING INTEREST (18.75% NET REVENUE INTEREST),
in and to that certain Oil and Gas Lease(s) (the "Lease(s)"), together with
the same interest in all personal property and equipment located on and
associated with the Lease(s) and the other property to be delivered to
Purchaser hereunder (such property and equipment, the Lease(s), and all
property rights connected with the Lease(s) shall be referred to herein
collectively as the "Lease Property")
LEASE(S)
Lease: Xxxxx
County: Xxxxxxxxxx
State: Kansas
Acres: 90
W.I. 25%
N.R.I.: 18.75%
(More particularly described in Exhibit A, attached to and made a part of this
contract by reference.)
2. PURCHASE PRICE.
The purchase price for the lease property shall be $62,500, and shall be
paid by Purchaser to Seller, subject to the other terms and conditions
provided herein, on or before the effective date. The balance due, $62,500,
can be paid in cash or company stock at the discretion of the purchaser. If
paid in company stock, the number of shares issued to Seller shall be
625,000 ($0.10 per share).
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3. LEASE PROPERTY INFORMATION. On or before the Effective Date, Seller shall
furnish to Purchaser, at Seller's expense, legible copies of any and all
documents, materials or information in Seller's possession related to the
Lease(s) and the Lease Property, including but not limited to, the
following:
(i) All agreements and contracts relation to ownership and operation of the
Lease Property, including all Operating Agreements (herein so called)
regarding oil and gas operations, water injection and pipeline
transportation;
(ii) All delay rental receipts and other documents and information sufficient to
show proof of how the Lease(s) have been kept effective since execution;
(iii)All division orders, division order title opinions, pipeline title opinions
and all other title opinions regarding the Lease(s);
(iv) All drilling and production information in possession of Seller regarding
the Lease(s), including mud logs and electric logs;
(v) copies of all documents and information regarding utility expenses, and
repair and maintenance costs, incurred in the operation of the Lease
Property;
(vi) copies of all governmental licenses, permits and other documents, including
federal and state oil and gas regulatory reports and filling, regarding the
Lease(s) and the Lease Property;
(vii) All insurance policies covering the Lease Property;
(viii) A complete, itemized and detailed inventory of the Lease Property; and
(ix) All maps, plans, surveys and geologic information, and any and all other
information in Seller's possession, related to the Lease(s) and the Lease
Property.
4. CLOSING. The sale and purchase of the Lease Property, shall be consummated
at a closing (the "Closing") to be held at Seller's or such other site as
may be mutually acceptable to the parties hereto, on or before the
Effective Date (such date being the "Closing Date").
5. DELIVERIES AT CLOSING. At Closing, Seller shall (i) deliver an Assignment
(herein so called) of the Lease Property in recordable form, which
Assignment shall include warranties that Seller possesses good and
marketable title to the Lease(s) and the Lease Property, that the Lease(s)
and the Lease Property are free and clear of any liens and encumbrances,
and that the Lease(s) is in full force and effect, (ii) execute and deliver
to Purchaser notices to all production purchasers from the Lease(s) of its
assignment to Purchaser, and transfer orders directing purchasers of
production from the Lease(s) to make payment to Purchaser, (iii) execute
and deliver to purchaser all regulatory forms and documents necessary or
appropriate to transfer title, operations, production and all other matters
regarding the Lease Property to Purchaser, (iv) deliver to Purchaser all
original files, documents and records pertaining to the Lease(s) and the
Lease Property, (v) obtain the written consent of the Lease(s) lessors to
the assignment contemplated herein, and (vi) furnish and/or execute all
other documents reasonably required to close the purchase and sale of the
Lease Property (including a xxxx of sale for the items of personal property
constituting the Lease Property). In case of dispute as to the form of the
Assignment, the appropriate form promulgated by the American Association of
Professional Landmen (A.A.P.L.) shall be used. Possession of the Lease
Property shall be delivered to the Purchaser at closing. Both prior and
subsequent to Closing, Seller and Purchaser shall cooperate with and assist
each other in the transfer and assignment of the Lease(s) and the Lease
Property to Purchaser by taking all reasonable and appropriate actions
requested by the other party, including the execution by Seller of release
documents, such as a release of interest in and to any division orders
affecting the Lease(s).
6. PRORATIONS. All production revenue from the Lease(s), and all taxes
attributable to ownership to the Lease Property (including, all severance
taxes, all ad valorem taxes assessed by any city, county, district, school
or city or county education district, and all personal taxes), shall be
prorated between Purchaser and Seller through the Closing Date for the
month and year in which the Closing is held, based on the tax and other
statements for such month or year; provided, however, that if such tax or
other statements for the subject time period are not available on the
Closing Date, proration of taxes shall be made on the basis of taxes
assessed in the previous applicable time period. Payment for a party's
portion of production from the Lease(s) shall be remitted promptly upon
receipt of payment from the production purchaser, such payment to reflect
the amount Seller would have received if production had been sold to the
production purchaser by Seller directly.
7. SELLER'S COVENANTS. Seller hereby covenants to and agrees with Purchaser as
follows:
(i) Seller shall keep and perform all of the obligations to be performed by the
lessee under the Lease(s);
(ii) Seller shall obtain all such written consents and approvals as may be
required in order to permit Seller to perform its obligations under this
Contract, specifically including the written consent of the Lease(s)
lessors and required under the Lease(s);
(iii)Seller shall conduct all operations on the Lease Property in accordance
with prudent oil and gas standards and all applicable laws, after execution
of this Contract, Purchaser shall have the right to approve all new
contracts or other agreements entered into, and all amendments,
modifications or terminations of such contracts or agreements, respecting
the Lease(s) and all Lease Property; and
(iv) Seller shall cause all trade accounts and costs and expenses of operation
and maintenance of the Lease Property to be promptly paid when due.
8. SELLER REPRESENTATIONS. In addition to the representations and warranties
contained in other paragraphs of this Contract, Seller hereby represents
and warrants to Purchaser, which representations and warranties shall be
true and correct as of, and shall survive the termination or expiration of
this Contract, and the truth of which shall be a condition precedent to
Purchaser's obligations hereunder, that:
(i) All Lease Property is in compliance with all laws, rules and regulations,
of all federal, state, municipal and other oil and gas regulatory
departments, commissions, boards, bureaus, agencies and instrumentalities,
having jurisdiction over the Lease Property, and Seller has obtained and
possess all permits and approvals from such regulators as are necessary to
operate the Lease(s) in its current condition;
(ii) There are not actions, suits, proceedings, investigations or set of facts,
which are existing, pending or, to the best knowledge and belief of Seller,
threatened or asserted against Seller or any portion of item of the Lease
Property, whether at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or otherwise existing, and
Seller has not received any notices of any condemnation actions, special
assessments or increase to the asserted valuation of taxes or other
impositions of any nature which are pending or being contemplated with
respect to the Lease Property or any portion thereof.
(iii)There are no liens (recorded or unrecorded), assessments, or security
interests against the Lease(s) or against any portion of the Lease
Property, nor are there any actions pending which would result in the
creation of any lien or claim against the Lease(s) or Lease Property, and
Seller shall not create or voluntarily permit to be created any liens,
easements or other conditions affecting any portion of the Lease(s) or the
Lease Property without the prior written consent of Purchaser. At the
conclusion of all Program activities, there will be no unpaid bills or
claims in connection with any construction, repair, maintenance, drilling,
development or other work performed or material purchased in connection
with the Lease(s) or the Lease Property, and no part of the Lease Property
has been destroyed or damaged by fire or other casualty;
(iv) Seller has all requisite power and authority to own its property, operate
its business where now conducted, enter into this Contract and consummate
the transactions herein contemplated, and if other than an individual is
duly authorized to do business and validity existing under the laws of the
state of its formation, and by proper action has duly authorized the
execution and delivery of this contract and the consummation of the
transaction herein contemplated, and no permission, approval or consent by
third parties or governmental authorities is required in order for Seller
to consummate this Contract, and the party signing this Contract on behalf
of Seller has the power and authority to sign this Contract on behalf of
Seller, and the other parties having ownership interests in the Lease(s)
and Lease Property;
(v) This Contract is a valid obligation of Seller and is binding upon Seller in
accordance with its terms:
(vi) Seller is the owner of good and marketable title to the Lease(s) and all
Lease Property, free and clear of any liens, deeds of trust, pledges,
security interests, leases, charges, encumbrances or restrictions of any
kind;
(vii)Seller is not a party to or bound under any indenture, mortgage, deed of
trust or loan agreement or any other agreements which in any way affects
the Lease(s) or the Lease Property, and to the best of its knowledge,
Seller is not a party to, nor bound by, any agreement or any order or
decree of any court or governmental agency which might to a material degree
adversely affect any portion of the Lease(s) of the Lease Property;
(viii) The executed copy of the Lease(s) which has been or will be delivered to
Purchaser in accordance with the terms of this Contract (and to be assigned
at closing) are and shall be true and correct; the Lease(s) is in full
force and effect, and is being held by production, or if not being held by
production, the Lease(s) is otherwise being validly held by some other
appropriate action (e.g., commencement of drilling operations, or payment
of rentals or shut-in royalties to all necessary lessors); the Lease(s)
shall not be further modified or amended without the prior written consent
of Purchaser, no other party has any purchase option, right of first
refusal, or other interest in the Lease(s); no lessor has given Seller
notice of its intention to terminate the Lease(s); and there are no pending
claims (whether monetary or otherwise) made against Seller as lessee under
the Lease(s); and
(ix) All permits, licenses and certificates which have been obtained by Seller
with respect to the Lease(s) shall be maintained through closing and Seller
knows of no reason why same will not continue unimpaired after the
assignment of the Lease(s) to Purchaser.
9. PURCHASER REPRESENTATIONS. Purchaser hereby represents and warrants to
Seller as follows:
(i) Purchaser has all requisite power and authority to own its property,
operate its business where now conducted, enter into this contract and
consummate the transactions herein contemplated, and if other than an
individual is duly authorized to do business and validly existing under the
laws of the state of its formation, and by proper action has duly
authorized the execution and delivery of this Contract and the consummation
of the transaction herein contemplated, and no permission, approval or
consent by third parties or governmental authorities is required in order
for Purchaser to consummate this Contract, and the party signing this
Contract on behalf of Purchaser has the power and authority to sign this
Contract on behalf of Purchaser; and
(ii) Neither the execution nor delivery of this Contract by Purchaser will
result in a violation or breach of any term or provision or constitute a
default under any agreement to which Purchaser is a party.
10. SUBSEQUENT DISCLOSURES; RELIANCE. In the event that either party hereto
should discover that any representation or warranty made by it is untrue or
inaccurate, it shall promptly inform the other party in writing of its
discovery. Each party's obligations hereunder are expressly conditioned
(which condition may be waived by the party to whose benefit the
representation or warranty is made) upon the lack of any material variance
with respect to the truth and accuracy of all warranties and
representations which are made by the other party. All warranties and
representations contained herein shall survive the Closing. Seller
acknowledges and agrees that Purchaser has and will rely upon the
covenants, agreements, representations, and warranties set forth in this
Contract in purchasing the Lease Property and that said covenants,
agreements, representations, and warranties are essential conditions but
for which Purchaser would not acquire the Lease Property. The covenants,
agreements, representations, and warranties herein contained shall be
binding upon Seller, its successors, assigns, and legal representatives,
shall inure to the benefit of Purchaser, its successors, assigns and legal
representatives, and shall survive the Closing of the sale and purchase of
the Lease Property. If any representation of Seller contained herein is
untrue as of the Closing, this Contract may be terminated by Purchaser.
11. BROKERS. Purchaser and Seller hereby represent and warrant that they have
not incurred any liability or obligation for any broker's or finder's fees,
commissions or similar costs or expenses in connection with the sale of the
Lease Property, and each agrees to indemnify, defend and hold the other
harmless from and against any such liability or obligation which may be
asserted against the other party by through or under it.
12. MISCELLANEOUS PROVISIONS. Purchaser and Seller hereby agree to be bound by
the following terms and provisions:
A. NOTICES. Unless otherwise provided, all notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
delivered for all purposes, (I) on the date of actual receipt if delivered
in person, (ii) on the date of actual receipt if sent via facsimile and a
confirmation copy is sent via commercial delivery or parcel service, (iii)
whether received or not, on the date deposited with a commercial delivery
or parcel service if delivery is documented by such service, and (iv)
whether received or not, on the date deposited with the United States
Postal Service, if sent via registered or certified mail, postage prepaid,
return receipt requested; and, in the case of (iii) and (iv) above, when
addressed to the intended recipient at the address set forth on the
signature page of this Contract or at such other address as a party hereto
may specify by notice in compliance with the requirements of this
Paragraph.
B. ENTIRE AGREEMENT. This contract contains the complete and entire agreement
between the parties hereto with respect to the matter contained herein and
cannot be varied except by written agreement. The parties hereto agree that
there are no other agreements, understanding, representations or warranties
between the parties hereto which are not expressly set forth herein, and
that the terms and provisions of this Contract supersede all other
agreements, understanding, representations or warranties between the
parties hereto which may have arisen heretofore or contemporaneously
herewith.
C. EFFECTIVE DATE. The term "Effective Date", as used herein, shall mean the
latter of the two dates on which this Contract is signed by Seller and
Purchaser, as indicated under their signatures below, which latter date
shall be the date of final execution and agreement by the parties hereto;
provided, however, if the last party to execute this Contract fails to
complete the date of execution below the party's signature, the Effective
Date shall mean that date shown below the first party to sign and date this
Contract.
D. BUSINESS DAY. If any date of performance hereunder falls on a Saturday,
Sunday or legal holiday, such date of performance shall be deferred to the
next day which is not a Saturday, Sunday or legal holiday.
E. SEVERABILITY. In case any one or more of the provisions contained in this
Contract shall for any reason be held to be invalid, illegal, or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and this Contract shall be construed as if such invalid,
illegal, or unenforceable provision is severed and deleted from this
Contract.
F. COUNTERPARTS; FACSIMILE EXECUTION. This contract may be executed in a
number of identical counterparts, and for convenience may be executed via
facsimile. Each such counterpart shall be deemed an original for all
purposes and all such counterparts shall collectively, constitute one
agreement, but, in making proof of this contract, it shall be necessary to
produce or account for more that one counterpart. Each party shall be
entitled to rely upon the other's execution and delivery of this Contract
via facsimile for all purposes and in making proof of this Contract.
G. HEADINGS. The headings on the Paragraphs and Sub-paragraphs of this
Contract are for convenience only and shall in no way enlarge, limit or in
any way effect the scope or meaning of the terms and provisions of this
Contract.
IN WITNESS WHEREOF, Purchaser and Seller have executed this Contract to be
effective as of the Effective Date as evidenced by their respective signatures
below.
PURCHASER: SELLER:
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KEYS STONE SILVER MINES, INC SCOPE OPERATING COMPANY
By: \s\ S. Xxxx Xxxxxxx BY: \s\ S. Xxxx Xxxxxxx
----------------------- -------------------------
Name: S. Xxxx Xxxxxxx Name: S. Xxxx Xxxxxxx
Title: President Title: President
Date: April 11, 2000 Date: April 11, 2000
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EXHIBIT A
LEASE: Xxxxx
INTERESTS: 25% W.I., 18.75% N.R.I.
PRICE: $62,500
DESCRIPTION: The Xxxxx is composed of the following:
That certain Oil, Gas and Mineral Lease dated December 15, 1997, executed by
Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx, Husband and Wife; Xxxxx X. Xxxxx and Xxxx
X. Xxxxx, Husband and Wife, as Lessor to Potato Creek L.L.C., as Lessee, said
lease being recorded in Book 465, Page 413 in so far as said Lease covers the
following described land in Xxxxxxxxxx County, State of Kansas:
Lot 6: and the North three-fourths (3/4) of Lot 7 lying East of the river, less
railroad right of way; the North three-fourths (3/4) of the NW/4 of the SE/4
lying west of Highway 169, except railroad right of way; all in Section 30,
T345, R17E, Xxxxxxxxxx County, Kansas, containing 90 acres more or less.
