Fill and Sign the Chiron Corp Form 10 Q Received 08092002 160020

KY -Rental, Pooling (Rev. 8/99) OIL AND GAS LEASE This Oil and Gas Lease (the “Lease”) is dated _____ (the “Effective Date”). The parties to this Lease are _____ , as Lessor (whether one or more), whose address is _____ , and _____, as Lessee, whose address is _____ . 1. Lease Description . In consideratio n of Ten Dollars ($10.00) paid by Lessee, and other good and valuable considerations, the receipt and sufficiency of which are acknowledged, and for the covenants contained in this Lease, Lessor grants, leases, and lets exclusively to Lessee the following described land (the “Land”) in the District/Township of _____ , _____ County, Kentucky, and bound substantially by lands now or formerly owned as follows: On the North by: On the East by: On the South by: On the West by: ; being the same land acquired by Lessor in that instrument recorded in Book/Volume _____, page of _____, of the ______ Records of the county in which the Land is located. The Land is estimated to compr ise ______ acres, whether the tract or tracts contain more or less, which acreage figure may be relied on by Lessee in determining the amount of rentals or other payments provided for in this Lease. In addition to the Land described above, this Lease also covers all accretions and any strips or parcels of land now or later owned by Lessor which are contiguous or adjacent to the Land, including any interest in the Land which Lessor may later acquire by reversion, prescription, or otherwise, together with al l oil, gas, and their constituents underlying lakes, rivers, streams, roads, easements, and rights of way which traverse or adjoin any of the Land. All of the Land and rights of Lessor that are covered by and the subject of this Lease may be referred to a s the “lease premises.” 2. Term of Lease . This Lease shall be in force for a primary term of _____ years from the Effective Date, and as long thereafter as oil or gas or other substances covered by this Lease are produced in paying quantities from the le ase premises or from lands pooled with the lease premises, or this Lease is maintained in force pursuant to any of its other provisions. 3. Lease Rights Granted . Lessee shall have and is granted by Lessor, during the term of this Lease, the exclusive rig ht to enter on the Land to conduct geological, geophysical and seismic surveys and explorations, and to operate for, produce and save oil, gas, and sulfur produced in connection with oil and gas; together with the right to drill wells, recondition producin g wells and re -drill and use abandoned well on the Land for all those purposes; together with rights -of-way and servitudes on, over, and through the Land for roads, pipelines, telephone, electric power lines, structures, plants, drips, tanks, stations, str uctures for machinery, gates, meters, regulators, tools, appliances, materials and other equipment that may be used in exploring for and producing oil, gas, and sulfur storage of gas and liquids, and all other rights and privileges necessary, incident to a nd convenient for the operation of the Land for production and transportation of oil, gas, and sulfur, and the injection of gas, air, water, or other fluids for the enhanced recovery and production of oil, gas, and sulfur; together with the right to use oi l, gas, and water from the Land free of cost to Lessee for all such purposes, except water from Lessor’s wells or ponds; to remove, either during or after the term of this Lease, any and all property and improvements placed or located on the Land by Lessee , including the right to draw and remove casing; together with the right of ingress, egress, and regress on, over, and through the Land for any of the purposes of this Lease. 4. Delay Rental Payments . If operations for drilling are not commenced on the l ease premises, or on acreage pooled with the lease premises, as provided in Section 6 below, on or before one (1) year from the Effective Date, this Lease shall terminate as to both Lessor and Lessee unless Lessee, on or before the expiration of that perio d, shall pay or tender to Lessor, or to the credit of Lessor in _____ Bank, or any successor depository, the sum of _____ Dollars ($_____), the “delay rental,” which shall extend for twelve (12) months the time within which drilling operations may be comme nced. Thereafter, annually, in like manner and on like payments or tenders of delay rental, the commencement of drilling operations may be further deferred for periods of twelve (12) months each during the primary term. Drilling operations shall be deeme d to be commenced when the first material is placed on the lease premises or when the first work, other than surveying or staking the location, is done which is necessary for the operations. 5. Royalty Payments . The royalties reserved by Lessor, and whic h shall be paid by Lessee, are: (a) on oil (including but not limited to distillate and condensate) _____ (_____) of that produced and saved from the lease premises, the same to be delivered at the wells or to the credit of Lessor in the pipeline to which the wells may be connected, provided; however, Lessee, at its option, may from time to time purchase the royalty oil, paying not less than the price prevailing in the pricing area for oil of like grade and gravity at the time of delivery; (b) on gas, inclu ding casinghead gas and all other gaseous or vaporous substances, produced from the Land and sold or used off the lease premises or in the manufacture of gasoline or in the extraction of sulphur or any other product, the market value at the wells of _____ (_____) of the gas sold or used, with the market value at the wells in no event to exceed the net proceeds received by Lessee calculated or allocated back to the wells from which produced, making allowance and deduction for a fair and reasonable charge for gathering, compressing, and making the gas merchantable, provided, that on gas sold at the wells, the royalty shall be _____ (____) of the net proceeds received by Lessee from the sale, all allowances and deductions, and provided further that, if any sale of gas is regulated as to price by any governmental agency having the jurisdiction, the market value or net proceeds shall in no event exceed the amount received by Lessee, not subject to refund, calculated, or allocated back to the wells from which produ ced, making allowance and deduction for a fair and reasonable charge for gathering, compressing, and making the gas merchantable, and which amount may be further adjusted up or down prospectively or retrospectively when the price or rate authorized by the governmental agency is finally determined; (c) on sulphur extracted and marketed, One Dollar ($1.00) per long ton. Lessor agrees to pay any and all taxes levied or assessed on the Lessor’s interest in the production of oil, gas, and sulphur from the lease premises and Lessee is authorized to pay the taxes and assessments on behalf of Lessor and to deduct the amount so paid from any monies payable to Lessor. In the event any extraneous substance (being any substance that is obtained from sources other than the lease premises or lands pooled or unitized with the lease premises) is injected into subsurface strata in connection with secondary, tertiary, or other enhanced recovery operations, any like substance thereafter produced, or contained in oil or gas pr oduced from the strata shall be deemed to be part of the extraneous substance injected until the total volume equals the total volume of the extraneous substance injected, and no royalty shall be payable on any extraneous substance. During any period (whe ther before or after expiration of the primary term) where there is a gas well on the lease premises or on a unit that includes all or a part of the lease premises, however designated, capable of producing gas and gas is not being sold or used on or off th e lease premises and the well or wells are shut -in and there is no current production of oil or operations on any part of the lease premises sufficient to keep this Lease in force, Lessee shall be obligated to pay or tender as shut -in rental an amount (whi ch shall be the same and shall be paid regardless of the number of shut -in wells and regardless of whether the shut -in well or wells be located on the lease premises or on other acreage included in a unit) for each twelve (12) month period equal to the ann ual rental provided for in this Lease and it will be considered that gas is produced, for all purposes of this Lease, during any period that a well or wells are shut -in; such amount for the first twelve (12) month period to be payable within ninety (90) da ys following shutting -in of the last well, and payment for each subsequent twelve (12) month period shall be payable on or before the beginning date of each subsequent twelve (12) month period. The amount of each rental payment or tender may be paid by ch eck or draft of Lessee in the same manner as provided in Section 4, and the payments may be commenced and continued either during or beyond the primary term. Lessee’s failure to properly pay rental payments shall render the Lessee liable for the amount du e but shall not operate to terminate this Lease. Lessee shall use reasonable diligence to market gas capable of being produced from a shut -in well or wells, but shall be under no obligation to market gas under terms, conditions, or circumstances which, in Lessee’s judgment, exercised in good faith, are unsatisfactory. 6. Pooling . Lessee is given and granted the right, at its option, at any time and from time to time, within the primary term or at any time during which this Lease may be extended by any of its provision, to pool, unitize, and reform, enlarge and/or reduce a unit or pool, and repool all or any part or parts of the lease premises or rights, depths, strata, or formations, with any other land in the vicinity of the Lease, or with any leasehold, operating, or other rights or interests in other land to create units of such size and surface acreage as Lessee may desire but containing not more than eighty (80) acres for an oil well and not more than six hundred forty (640) acres for a gas well plus, in each case, a ten percent (10%) acreage tolerance. If at any time larger units are specified or permitted under any then applicable law, rule, regulation, or order of any governmental authority for the drilling, completion or operation of a well, or fo r obtaining maximum allowable, any unit may be established or enlarged to conform to the size authorized or permitted. Each unit or reformation of a unit may be created by governmental authority or by recording in the appropriate county office a declarati on containing a description of the pooled or unitized acreage. Any well which is commenced, or is drilled, or is on any part of any lands which have been or later pooled with the lease premises shall, except for the payment of royalties, be considered a w ell commenced, drilled, and producing on the lease premises subject to this Lease. There shall be allocated to the portion of the lease premises included in any unit, pooling or repooling the proportion of the actual production from all lands unitized, po oled or repooled as the portion of lease premises, computed on an acreage basis, bears to the entire acreage of the lands unitized, pooled or repooled. The production so allocated shall be considered for the purpose of payment or delivery of royalty to be the entire production from the portion of the lease premises included in the unit, pooling or repooling in the same manner as though produced from the portion of the lease premises under the terms of this Lease. A unit established by the terms of this Le ase shall be valid and effective for all purposes of this Lease even though there may be land, oil, and gas rights, royalty, and/or leasehold interests in land within the unit which are not pooled or unitized, or even though there may be a failure of the leasehold title (in whole or in part) to any tract or interest included in a pooled unit. 7. Warranty and Lesser Interest . Lessor warrants and agrees to defend the title to the Land, covenants that Lessee will have quiet enjoyment under this Lease, covena nts that Lessee shall have the benefit of the doctrine of after -acquired title, and covenants that Lessee, at its option, may discharge any tax, mortgage, or other lien on the Land in the event of default in payment by Lessor, and be subrogated to the righ ts of the holder of a mortgage or lien with the right to enforce same and apply royalties and payments accruing under this Lease toward satisfying same. Without impairment of Lessee’s rights under this warranty in event of failure of title, it is agreed t hat if Lessor owns an interest in the Land less than the entire oil and gas estate covered by this Lease, then the rentals and royalties to be paid Lessor shall be reduced proportionately. 8. Notices . Failure to pay or an error in paying any rental or ot her payment due Lessor shall not constitute a ground for forfeiture of this Lease and shall not affect Lessee’s obligation to make a payment, but Lessee shall not be considered in default on account of a failure or error until Lessor has first given Lessee written notice of the non -payment and Lessee shall have failed for a period of thirty (30) days after receipt of the notice to make the payment. 9. Ownership Changes . The rights of Lessor or Lessee may be assigned or transferred in whole or in part, but no change or division in ownership of the lease premises, shut -in rentals, storage rentals, or royalties, or in the status of Lessor or Lessee, however accomplished, shall operate to enlarge the obligations or diminish the rights of Lessee. No change in ownership or status of Lessor shall be binding on Lessee until thirty (30) days after Lessee shall have been furnished by U.S. mail, at Lessee’s principal place of business, with a certified copy of the recorded instrument or instruments satisfactory to th e Lessee, evidencing the change in ownership. In the event of the death of any person entitled to any payment provided for in this Lease, Lessee may pay or tender the same to the credit of the deceased or to the estate of the deceased until the time Lesse e is furnished with proper evidence of the appointment and qualification of an executor or administrator of the estate or, if there be none, evidence satisfactory to Lessee as to the heirs or devisees of the deceased and that all debts of the estate have b een paid. If at any time two or more parties are entitled to or adversely claim all or any part of any sums payable under the terms of this Lease, Lessee may pay or tender the sums either jointly to the parties or separately to each in accordance with the ir respective ownership. If six or more parties become entitled to royalty, Lessee may withhold payment unless and until furnished with a recordable instrument executed by all parties designating an agent to receive payment for all. In the event of assig nments of this Lease as to a segregated portion of the lease premises, shut -in rentals, and storage rentals payable under the terms of this Lease shall be apportionable between the several leasehold owners ratably according to the surface area of each, and the failure to pay shut -in rentals or storage rentals on a segregated portion of the lease premises shall not affect the rights of the party holding any other segregated portion. In the event of assignment, in whole or in part, liability for breach of an y obligation of this Lease shall rest exclusively on the owner of this Lease or of a portion of the Lease who commits the breach. 10. Release of Lease . Lessee, at any time, and from time to time, may surrender this Lease as to all or any part or parts of the lease premises by tendering an appropriate instrument of surrender to the Lessor or filing for record a release or releases of this Lease as to any part or all of the Land, and then this Lease and the rights and obligations of the parties shall termin ate as to the part or parts so surrendered. On each surrender as to any part or parts of the lease premises all payments specified in this Lease shall be proportionately reduced on an acreage basis, and Lessee shall maintain the rights to the surrendered portion as may be appropriate to its enjoyment of the portion not surrendered. Lessee shall have the right at any time during or after the expiration of this Lease to remove all machinery, equipment, fixtures, buildings, or other structures placed on the lease premises by Lessee, including the right to pull and remove all casing. If this Lease is ever terminated, forfeited, or expires, the Lessee (or Lessee’s successors or assigns) shall execute a release or other form of document terminating or releasing the Lease, and file it of record in the county or counties where the lease premises are located. If the Lessee or Lessee’s successor or assigns fail to release or cancel the Lease, on its forfeiture, termination, or expiration, the then current owner of the Land may compel a cancellation of the Lease pursuant to any applicable or operable law or statute, in effect, in the state in which the Land is located. 11. Adverse Claims . In case of notice of or an adverse claim to the lease premises, affecting all or any part of the shut -in rentals, storage rentals or royalties, Lessee may withhold payment or delivery of the same until the ownership is determined by compromise, or by final decree of a court of competent jurisdiction, and to this end Lessee may file a petition for interpleader. 12. Surface Use . No well shall be drilled nearer than two hundred (200) feet of any house or barn now on the lease premises without the written consent of Lessor. Lessee shall pay for damages caused by Lessee’s operations t o growing crops on the Land. When requested by Lessor, prior to the laying of any pipeline, Lessee shall bury Lessee’s pipeline below plow depth on cultivated lands. 13. Storage . Lessee shall have the exclusive right to use any stratum or strata underly ing the lease premises for the storage of gas or liquids and may, for such purpose, reopen and restore to operation any and all abandoned wells on the lease premises and may drill new wells for the purpose of injecting and storing gas or liquids in a strat um or strata and withdrawing the gas or liquids. If Lessee intends to use the premises for such purpose, or determines that it is using the premises, Lessee may deliver to Lessor or have recorded in the county or counties in which this Lease is recorded a declaration that the premises are being used, or from a specified date will be used, for gas or liquid storage, and thereafter Lessee shall have the exclusive right to use the premises for gas or liquid storage until the time as Lessee delivers to Lessor or have recorded in the county or counties a surrender of the right granted to Lessee by this section of the Lease or until Lessee shall intentionally abandon the right to use the premises for storage. During the period or periods that Lessee utilizes the lease premises for the storage of gas or liquids, the royalties provided in this Lease to be paid to Lessor shall accrue and become payable only on the gas and liquids that are taken from the lease premises by Lessee over and above the amount which Lessee stores or has stored in the stratum or strata. For and during the period or periods that Lessee uses the lease premises for storage, Lessee shall pay Lessor a minimum rental of One Dollar ($1.00) per acre per year on the number of acres covered by this L ease, this payment to be made not later than sixty (60) days from and after the end of each twelve (12) month period during which the lease premises are utilized for storage. Lessee is expressly granted the right to use so much of the surface of the premi ses as is reasonably necessary in the exercise of the rights granted to Lessee by this section. The rights granted to Lessee by this section shall continue in force for the period of time specified, but this Lease, insofar as it grants to Lessee the right to prospect and explore for, and produce oil and gas from stratum or strata other than those employed in storage, shall not be continued in force solely by the storage of gas or liquids as provided in this section. 14. Regulations and Delays . Lessee’s o bligations under this Lease, whether express or implied, shall be subject to all applicable laws, rules, regulations, and orders of any governmental authority having jurisdiction, including restrictions on the drilling and production of wells, and the pric e of oil, gas, and other substances. When drilling, reworking, production or other operations are prevented or delayed by any laws, rules, regulations or orders, or by the inability to obtain necessary permits, equipment, services, material, water, electr icity, fuel, access or easements, or by fire, flood, adverse weather conditions, war, sabotage, rebellion, insurrection, riot, strike, or labor disputes, or by inability to obtain a satisfactory market for production or failure of purchasers or carriers to take or transport production, or by any other cause not reasonably within Lessee’s control, this Lease shall not terminate because of the prevention or delay, and shall be maintained in force and effect for so long as the prevention or delay continues, an d for ninety (90) days thereafter, or so long as this Lease is maintained in force by some other provisions, whichever is the later date. Lessee shall not be liable for the breach of any express or implied covenants of this Lease when drilling, production , or other operations are so prevented, delayed, or interrupted. 15. Breach or Default . In the event Lessor considers that Lessee has not complied with the express or implied obligations of this Lease, Lessor shall notify Lessee in writing of the facts relied on as constituting a breach of the obligations. Lessee shall then have sixty (60) days after receipt of that notice within which to meet or commence to meet all or any part of the breaches alleged by Lessor. The service of the notice shall be prece dent to the bringing of any action by Lessor for any cause, and no action shall be brought until the lapse of sixty (60) days after service of the notice on Lessee. Neither the service of the notice nor the doing of any acts by Lessee aimed to meet all or any of the alleged breaches shall be deemed an admission or presumption that Lessee has failed to perform all of Lessee’s obligations. However, after production of oil or gas has been obtained from the Land or land pooled with all or part of the lease pr emises this Lease shall not be subject to forfeiture or loss, either in whole or part, for failure to comply with the express or implied obligations of this Lease except after final judicial ascertainment of the failure and after Lessee has been given a pe riod of sixty (60) days after any final ascertainment to prevent a loss or forfeiture by complying with and discharging the obligations which the Lessee has been judicially determined to be in default. 16. Dower and Homestead . Lessor expressly relinquish es dower and releases and waives all rights under and by virtue of the homestead exemption laws of the state in which the lease premises are situated insofar as the same in any way affects the purposes for which this Lease is made. 17. Title Curative . Le ssor agrees to execute affidavits, ratifications, amendments, and other instruments as may be necessary to carry out the purposes of this Lease. 18. Execution . Should any one or more of the parties named as Lessor fail to execute this Lease, it shall nev ertheless be binding on the party or parties who execute it, and additional parties may execute this Lease as Lessor, and this Lease shall be binding on each party executing it notwithstanding that such party is not named as Lessor; and all of the provisio ns of this Lease shall inure to the benefit of and be binding on the parties and their respective heirs, legal representatives, successors, and assigns. This Lease is executed by Lessor as of the date of the acknowledgment below, but shall be effective a s of the Effective Date stated above. Lessor Individual Acknowledgment State of ______________________ County of ____________________ The foregoing instrument was acknowledged before me this __________ day of ____________________, __________, by _____________________________________. Notary Public in and for the State of Printed Name: Serial Number, if any:_______________ Commission Expires: Corporate Acknowledgment State of ______________________ County of ____________________ The foregoing instrument was acknowledged before me this __________ day of ____________________, __________, by ______________________________ of ______________________________ , a __________ corporation, on behalf of the corporation. Notary Public in and for the State of Printed Name: Serial Number, if any:_______________ Commission Expires: This Lease was prepared by: Whose address is: After Recording Return to: Whose address is: