STATE OF TEXAS
COUNTY OF GREGG
KNOW ALL MEN BY THESE PRESENTS:
THIS AGREEMENT is made and entered into the 10th day of January, 1999, by and between JOHN D. LANDOWNER and wife, MARY O. LANDOWNER (hereinafter called "Optionor" whether one or more), whose address is 234 Bottomland Place, Crackerland, Texas 76341, and DEEP POCKETS OIL COMPANY (hereinafter called "Optionee"), whose address is 1133 Skyview Tower, Houston, Texas 77044.
1. For and in consideration of the sum of Ten and No/100 Dollars ($10.00) cash in hand paid by Optionee to Optionor, the receipt and sufficiency of which are hereby acknowledged and confessed, and in consideration of the agreements herein contained, but subject to the terms and conditions hereinafter set forth, Optionor has granted and conveyed, and does hereby grant and convey, unto Optionee, for a period expiring one (1) year from the date of the latest of Optionor's notarial acknowledgments appearing hereon (herein called "Option Period"), the exclusive and irrevocable right and option to acquire one or more oil and gas leases (a "Lease") covering all or a portion of those certain lands situated in Gregg County, Texas, and described on Exhibit A attached hereto and made a part hereof, together with the exclusive and irrevocable right, during the Option Period, to conduct or cause to be conducted geological, geophysical, torsion balance, seismic or magnetometer or electrical surveys, or other examinations for the purpose of exploring said lands for the possible existence of, or presence of structures favorable to the occurrence of oil, gas or other liquid hydrocarbons.
2. Should Optionee acquire a Lease, it shall be in the same form as the form of lease marked Exhibit B attached hereto and made a part hereof.
3. To exercise that portion of the option granted herein to acquire a Lease, prior to the expiration of the Option Period, Optionee shall (a) complete the original Lease by dating it, inserting the names/addresses of the parties, inserting in Paragraph 1 the number of acres being leased and a legal description of the premises to be covered by the Lease and (b) mail or deliver to Optionor the Lease and Optionee's bonus check or draft payable to Optionor in an amount equal to Twenty-Five and No/100 Dollars ($ 25.00) per acre for each net mineral acre to be covered by the Lease. Immediately upon timely receipt of a Lease and check or draft payable as provided above, Optionor shall execute, acknowledge and return the Lease to Optionee. If, at the expiration of the Option Period, Optionee has not exercised the option in accordance with the provisions hereof, this Agreement shall in all respects terminate and be of no further force or effect without necessity of notice, demand or putting in default. Upon expiration of the Option Period, when requested in writing by Optionor to do so, Optionee shall promptly execute and deliver to Optionor a proper recordable release hereof.
4. (a) Optionee agrees to indemnify Optionor and to save and hold Optionor harmless from and against any claim, liability, loss, cost or expense for or on account of property damages of every character or injury to or death of a person or persons resulting from or arising out of the operations conducted or caused to be conducted by it in connection with any of Optionee's operations pursuant hereto. (b) The consideration paid Optionor hereunder covers and includes full and complete consideration for the damage to the surface of the above described premises which may occur in the normal course of geophysical (including 3-D seismic) operations. Should, however, there be any damage beyond such scope - be it to land, buildings, improvements, structures, water wells or other personal property or fixtures situated upon the said premises, Optionee shall immediately either (i) repair such damage, (ii) replace the damaged property or (iii) pay Optionor the reasonable replacement value of the damaged property.
5. Optionor expressly reserves unto itself and its successors and assigns the full enjoyment and use of the land covered hereby and all rights with respect to the surface and subsurface thereof for any and all purposes except those granted and to the extent granted to Optionee hereby. Without limiting the foregoing, Optionor reserves the right to explore by any method, drill for, and produce, treat, store and transport any minerals other than oil, gas, liquid hydrocarbons and their respective constituent products. All of the rights retained by Optionor and the rights granted to Optionee herein shall be exercised in such a manner that neither shall unduly interfere with the operations of the other upon the lands covered hereby.
6. If, while this Agreement is in force, Optionor is not conducting operations on the premises covered hereby by reason of (a) any law, order, rule or regulation (whether or not subsequently determined to be invalid) or (b) flood, storm, riot, war or insurrection or (c) any cause, whether similar or dissimilar (except financial), beyond the reasonable control of Optionee, the Option Period hereof shall be extended until ninety (90) days after the removal of such delaying cause, and this Agreement may be extended thereafter as if such delay had not occurred.
7. Optionor covenants to and with Optionee that Optionor will execute any and all reasonable amendments to this Agreement or any Lease, which are necessary to ensure that (a) the lands covered are properly and sufficiently described or (b) Optionor has executed in all capacities necessary to grant to Optionee all of the rights owned or controlled by Optionor.
8. The rights of either party hereunder may be assigned in whole or in part, and the provisions hereof shall extend to their respective heirs, successors and assigns; but no change or division in ownership of the land, however accomplished, shall operate to enlarge the obligations or diminish the rights of Optionee; and no change or division in such ownership shall be binding on Optionee until thirty (30) days after Optionee shall have been furnished by registered U.S. mail at its address shown above with a certified copy of recorded instrument or instruments evidencing same. In the event of assignment hereof, liability for breach of any obligation hereunder shall rest exclusively upon the owner of this Agreement or of a portion thereof who commits such breach.
9. This Agreement is subject to all restrictions, easements, agreements and instruments affecting the lands covered hereby and presently appearing of record in the county in which such lands are situated.
10. Optionee is hereby granted the right to extend the Option Period for an additional six (6) months from the expiration of the original Option Period. This right may be exercised by Optionee at any time during the last month of the original Option Period by paying the sum of Ten and No/100 Dollars ($ 10.00) per net mineral acre to Optionor by depositing such payment in the U.S. Mail to Optionor at the address first set forth above (or such other address as Optionor may hereafter furnish Optionee in writing). Should this right be exercised as herein provided, it shall be considered for all purposes as though this Agreement originally provided for an Option Period of one year and six months.
11. This Agreement may be executed in multiple originals, all of which shall be considered counterparts of one another. This Agreement shall be binding upon the parties who execute it as and when executed, whether or not executed by all parties, and shall be binding upon and inure to the benefit of the respective heirs, successors, representatives and assigns of the parties hereto.
IN WITNESS WHEREOF, this instrument is executed on the date first above written.