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HomeMy WebLinkAbout2001-481FILE REFERENCE FORM 1 2001-481 X Additional File Exists Additional File Contains Records Not Public, According to the Public Records Act Other FILE(S) Date Initials Amendment to Surface Use Agreement [copy is attached] 04/29/04 JR Amendment to Surface Use Agreement [original is attached] 08/30/04 JR Modification, Clarification & Ratification of Oil, Gas & Mineral Lease — Ordinance No. 2005-126 01/16/05 JR Assignment of Gas Well Surface Use Agreement — Ordinance No. 2005-202 07/26/05 JR Underground Pipeline Easement Agreement [original is attached] 04/28/06 JR Amendment to Modification, Clarification and Ratification of Oil, Gas & Mineral Lease — Ordinance No. 2006-173 06/20/06 JR Fourth Amendment to Surface Use Agreement — Ordinance No. 2012-039 02/21/12 JR S \Our Documepts\Ordinances\01\Oi1 and Gas Lease Ordinance doc ORDINANCE NO ��1— 4181 AN ORDINANCE ALLOWING THE NEGOTIATION OF THE BEST BID FOR A CONTRACT FOR THE OIL AND GAS LEASE AGREEMENT AT THE MUNICIPAL AIRPORT IN SUBSTANTIALLY THE SAME FORM AS BID 2769, AND PROVIDING AN EFFECTIVE DATE (BID 2769 OIL AND GAS LEASE AGREEMENT AWARDED TO SUPERIOR P&E LLC /ENEXCO, INC) WHEREAS, The City Council of the City of Denton has heretofore determined that it is advisable to lease for oil and gas purposes certain real property located at the Denton Municipal Airport, Denton, Texas, and WHEREAS, in compliance with Chapter 71 of the Texas Natural Resources Code (the "Code") the City published notice of its intention to lease such real property for oil and gas purposes once a week for three consecutive weeks in a newspaper with general circulation and published in Denton County, Texas, and WHEREAS, in compliance with the Code, the City Council of the City of Denton held a public hearing, and WHEREAS, Pursuant to the Code, the City of Denton desires to negotiate the lease of the property for oil and gas well development with the best bid submitted by Superior P&E LLC / Enexco, Inc in substantially the same form as outlined in Exhibit A for approximately 554 14 acres, and WHEREAS, Superior desires to enter into lease negotiations for the land at the airport for oil and gas well development and after negotiation, to enter into a lease for the land at the airport for oil and gas well development and to agree to pay to the City the agreed upon amounts, NOW THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION 1 The City Manager or his designee are hereby authorized to negotiate and execute a lease agreement between the City of Denton and Superior P&E LLC / Enexco, Inc in return for the payment(s) as outlined in Attachment A for the approximately 554 14 acres of Municipal Airport property in accordance with the agreed upon Oil ,Gas and Mineral Lease and Surface Use Agreement substantially the same form(s) as those attached to and incorporated by reference herein as Exhibit B and Exhibit C _SECTION 2 This ordinance shall become effective immediately upon its passage and approval PASSED AND APPROVED this the Aoday of h&laa2001 ATTEST JENNIFER WALTERS, CITY SECRETARY �Ai/ /. ,'l / r • TO LEGAL FORM .. •. , . , • om Pa �.e — ., •. Exhibit A TABULATION SHEET BID# 2769 Date 12-6-01 OIL AND GAS LEASE AGREEMENT No. DESCRIPTION VENDOR �' ,'&E%Enr iP exco "Prrinciple I'I' �4,Place of Business Dallas ROYALTY TO LESSOR NOT LESS THAN (1 /5) OF ALL OIL & GAS PRODUCED FROM SAID LAND One Fifth (1/5) 1 (IF GREATER THAN 1/5, PLEASE SPECIFY) ALL ANNUAL DELAY RENTAL OF NOT LESS $50 THAN ($10 00) PER ACRE (IF GREATER THAN (One Weil) 2 $10 00 PER ACRE, SPECIFY) SHUT-IN PAYMENT OF NOT LESS THAN TWENTY & NO/100 ($20 00) PER ACRE (IF $25 00 3 GREATER THAN $20 00 PER ACRE) BONUS MONEY AS SPECIFIED BY BIDDER A ACRES X $ _ TOTAL BONUS MONEY FOR 554 14 Acres BONUS MONEY AS SPECIFIED IN THE BID & X $200=$110,828 4 WITH THE MINIMUM TO BE $175 00 PER ACRE 2769 EXHIBIT B S \Our Docum1nts\Contracts\02\Redline Enexco Oil Gas & Mineral Lease doe OIL, GAS AND MINERAL LEASE CITY OF DENTON AIRPORT THIS OIL, GAS AND MINERAL LEASE (the "Lease") is made this 17th day of January, 2002 (the `Effective Date"), between The City of Denton, Denton, Texas, acting herein by and through its City Manager, Michael A Conduff, duly authorized by resolution to execute this Lease ("LESSOR"), whose address is 215 East McKinney, Denton, Texas 76201 and Enexco, Inc ("LESSEE"), whose address is 3500 Oak Lawn Avenue, Suite 390, LB #15, Dallas, Texas 75219 WITNESSETH• 1 Lease of Land. LESSOR in consideration of a bonus of One Hundred Ten Thousand Eight Hundred Twenty-eight Dollars and Sixty Cents ($110,828 60), in hand paid, of the royalties herein provided, and of the agreements of LESSEE herein contained, hereby leases and lets exclusively unto LESSEE for the purpose of investigating, exploring, prospecting, drilling and mining for and producing oil, gas and all associated minerals, conducting exploration, geologic and geophysical surveys by seismograph, core test, gravity and magnetic methods, injecting gas, water and other fluids into subsurface strata, laying pipe lines, building roads, tanks power stations, telephone lines and other structures thereon and on, over and across lands owned or claimed by LESSOR, to produce, save, take care of, treat, transport and own said products, the following described land in Denton County, Texas, to -wit TRACT 1 The land described in condemnation proceedings identified by Cause No 3922 filed on November 30, 1943 between the City of Denton and R M Evers, et at and subsequently filed in Volume 1675, Page 546 of the Real Property Records of Denton County, Texas, containing 147 26 acres, 2 26 acres of which is in a public road, in the William Wilburn Survey, Abstract Number 1419 TRACT 2 The land described in that Warranty Deed dated December 23, 1943 between P,T Underwood and wife Jimmie Underwood and the City of Denton recorded in Volume 304, Page 503 of the Real Property Records of Denton County, Texas, containing 74 94 acres, 175 acres of which is in a public road, in the Thomas Toby Survey, Abstract Number 1285 TRACT 3 The land described in that Warranty Deed dated January 18, 1944 between Mrs Ellen Pearl Corbin, a widow, Hugh C Corbin and wife, Sue Lou Corbin, John S Corbin, Alice Corbin Brown and husband W O Brown, Grace Corbin, a feme sole, Georgia Corbin, a feme sole, James E Corbin and wife, Johnnie Corbin, Mrs Gertie Corbin Hurst and husband, G E Hurst, and the City of Denton, recorded in Volume 305, Page 216 of the Real Property Records of Denton County, Texas, containing 33194 acres, 2 61 acres of which is in a public road, in the Wm Smith Survey, Abstract Number 1188, and the Wm Neill Survey, Abstract Number 970 For all purposes of this Lease, said land is estimated to comprise 554 14 acres, whether it actually comprises more or less However, there is expressly excepted from this Lease and reserved to LESSOR, its successors and assigns, all vanadium, uranium, plutonium, thonum, fissionable minerals and all other minerals of every kind and character in, on and under the land, except only oil, gas, casmghead gas and their byproducts and such other hydrocarbon substances, carbon dioxide and sulfur as are necessarily produced with and incidental to the production of oil and gas, or either of them 2. Reservation. There is hereby excepted and reserved to LESSOR the full use of the land covered hereby and all rights with respect to the surface and subsurface thereof for any and all purposes and all minerals except those expressly leased and only to the extent herein leased to LESSEE The Surface Use Agreement shall govern the use of the surface by LESSEE 3 Prrmary Term This is a paid up lease and subject to the other provisions here contained, this Lease shall be for a term of three (3) years from the Effective Date (the "Primary Term") and as long thereafter as oil, gas and other minerals are produced in paying quantities from said land or land with which said land is pooled hereunder 4 Royalty As royalty, LESSEE covenants and agrees to pay a As a royalty on oil (including all hydrocarbons produced in liquid form at the mouth of the well and also condensate, distillate, and other liquid hydrocarbons recovered from oil or gas run through a separator or similar equipment) one -fifth (115) of the gross production or the market value thereof, at the option of LESSOR, the value to be determined by (i) the highest posted price, plus premium, if any, offered or paid for oil, condensate, distillate, or other liquid hydrocarbons, respectively, of a like type and gravity for the field where produced and when run, or (n) the highest market price offered or paid for the field where produced and when run LESSEE agrees that before any gas produced from the land is sold, used or processed in a plant, it will be run, free or cost to the parties entitled to royalties, through an adequate oil and gas separator of conventional type or other equipment at least as efficient to the end that all liquid hydrocarbons recoverable from the gas by such means will be recovered Upon written consent of the royalty owners, the requirement that gas be run through a separator or other equipment may be waived upon terms and conditions as prescribed by them b As a royalty on any gas, which is defined as all hydrocarbons and gaseous substances not defined as oil in subparagraph 4 b above, produced from any well on the land (except as provided in this Lease with respect to gas processed in a plant), one -fifth (115) of the gross production or the market value thereof, at the option of LESSOR, the value to be based on the highest market price paid or offered to a third party LESSEE under a gas purchase agreement negotiated at arms' length for gas of comparable quality and quantity in the general area where produced and when run, or the gross price paid or offered to the producer, whichever is greater c As a royalty on any gas processed in a plant, one -fifth (115) of the residue gas and the liquid hydrocarbons extracted or the market value thereof, at the option of LESSOR The royalty percentage shall be applied to 100% of the total plant production of residue gas attributable to gas produced from this Lease, and on 50% or that percent accruing to LESSEE, whichever is greater, of the total plant production of liquid hydrocarbons attributable to the gas produced from this Lease, except if liquid hydrocarbons are 642660 2 /SP3/29121/0103/011602 recovered from gas processed in a plant in which LESSEE or an affiliate owns an interest, then the royalty percentage for liquid hydrocarbons shall be 50% or the highest percent accruing to a third party processing gas through the plant under a processing agreement negotiated at arms' length The respective royalties on residue gas and on liquid hydrocarbons shall be determined by (i) the highest market price paid or offered for any gas (or liquid hydrocarbons) of a comparable quality in the general area or (ii) the gross price paid or offered for such residual gas, or the weighted average gross selling price for the respective grades of liquid hydrocarbons, F O B the plant in which the gas is processed, whichever is greater d On all substances, including, but not limited to carbon dioxide and sulfur, permitted to be produced from the land by virtue of this Lease, and products, except liquid hydrocarbons, produced or manufactured from gas, and for which no royalty is otherwise specified in this Lease, LESSOR shall have and be entitled to the royalty percentage of that produced or saved to be delivered to LESSOR, free of all costs, or, at the option of LESSOR, which may be exercised from time to time, LESSEE shall account to LESSOR for the royalty percentage of the market value thereof, which market value shall be deemed to be the greater of (1) the highest market price of each product for the same month in which the product is produced, or (11) the average gross sale price of each product for the same in e Accounting and payment to LESSOR of royalties from the production of oil and gas from any well shall commence no later than ninety (90) days after the date the well commences first production Thereafter, all accountings and payments of royalties shall be made on or before the last day of the calendar month following the calendar month in which the production occurred Should LESSEE at any time fail to make royalty payments to LESSOR on or before the last day of the third calendar month following the calendar month in which the production occurred, this Lease shall automatically terminate unless the payments are made within thirty (30) days after written notice is given to LESSEE Any royalties provided for in this Lease which are not paid to LESSOR within the applicable time penods specified in this paragraph shall accrue interest at the same rate as judgments under the laws of the State of Texas from due date until paid Acceptance by LESSOR of royalties which are past due shall not act as a waiver or estoppel of LESSOR'S right to receive or recover any and all interest due under the provisions of this paragraph unless the written acceptance or acknowledgment by LESSOR to LESSEE expressly so provides LESSEE shall pay all reasonable attorney's fees incurred by LESSOR in connection with any lawsuit in which LESSOR is successful in recovering royalties or interest or in terminating this Lease due to LESSEE'S failure to pay royalties within the periods set forth above LESSOR'S royalty shall never bear, either directly or indirectly, any part of the costs or expenses of producing, gathering, dehydrating, compressing, transporting, manufacturing, processing, treating or marketing of the oil or gas from the land, nor any part of the costs of constructing, operating or depreciating any plant or other facilities or equipment for processing or treating oil or gas produced from the land 5 Shut -In Gas If LESSEE drills a well on land covered by this Lease or on land which the LESSOR has permitted to be pooled herewith, which well is capable of producing gas but 642660 2/SP3/29121/0103/011602 3 such well is not being produced, and this Lease is not being maintained otherwise as provided herein, this Lease shall not terminate, whether it being during or after the Primary Term (unless released by LESSEE) and it nevertheless shall be considered that oil and gas is being produced from the land covered by this Lease When, at the expiration of the Primary Term or any time or times thereafter, the Lease is continued in force in this matter, LESSEE shall pay or tender as royalty to the parties who at the time of such payment would be entitled to receive royalty hereunder if the well is producing, or deposit directly with LESSOR at its address shown herein, a sum equal to Twenty-five and No/100 Dollars ($25 00) for each gross acre of land subject to this Lease at the time such payment is made The first payment of such sum shall be on or before the first day of the calendar month at the expiration of ninety (90) days from the date the Lease is not otherwise maintained, and thereafter subsequent payments may be made at annual intervals LESSEE'S failure to pay or tender or properly or timely pay or tender such sum as royalty shall render LESSEE liable for the amount due and shall operate to terminate this Lease automatically 6. Limit of Shut -In Notwithstanding anything to the contrary in this Lease, it is expressly agreed and provided that this Lease cannot and shall not be extended beyond the Primary Term by reason of the shut-in well provisions of Paragraph 5 for any single period of more than two (2) consecutive years or more than three (3) years in the aggregate 7. Pooling Pooling for oil or gas is expressly denied without the written consent of LESSOR Further, LESSEE is denied the right to seek, or consent to, or participate in the forced pooling of any part of the land under the Texas Mineral Interest Pooling Act and any and all amendments thereto or any other pooling or unitization statutes of the State of Texas without LESSOR'S written consent which will not be unreasonably withheld 8 Termination a If, at the expiration of the Primary Tenn, LESSEE is not engaged in the actual drilling of a well on the land or if LESSEE has completed or abandoned a well on the land within thirty (30) days prior to expiration of the Primary Tenn and is not, at the expiration of ninety (90) days after the date or completion or abandonment of the well, engaged in the actual drilling of another well on the land, this Lease shall then terminate as to all of the land, save and except the following Each well producing oil or being reworked, and classified as an oil well under the rules and regulations of the Railroad Commission of Texas, together with forty (40) acres around each such well (an "Oil Unit") Each well producing gas (or capable of producing gas with all shut-in royalty having been paid thereon) or being reworked, and classified as a gas well under the rules and regulations of the Railroad Commission of Texas, together with the one hundred sixty (160) acres with the option to go to 40-acre spacing around each such well (a "Gas Unit") b Each Oil Unit or Gas Unit shall be in as near the form of a square as reasonably practicable considering the boundary of the land and the necessity of a legal location of the well on the unit Notwithstanding the foregoing, if the Railroad Commission of 642660 2/SP3/29121/0103/011602 4 Texas or other authority having jurisdiction, by rule or order prescribes a larger or a smaller number of acres for the purposes of securing the maximum allowable production, each unit shall be increased or decreased in size as necessary to conform to the number of acres prescribed by the rule or order, but if the rule or order provides for or permits optional sized tracts or spacing, the unit shall be the smallest tract permitted by the rule or order c If, at the expiration of the Primary Term, LESSEE is engaged in the actual drilling of a well on the land or if LESSEE has completed or abandoned a well on the land within thirty (30) days prior to expiration of the Primary Term and is, at the expiration of ninety (90) days after completion or abandonment of the well, engaged in the actual drilling of another well on the land, this Lease shall not terminate so long as LESSEE pursues the drilling of the well with reasonable diligence to completion or abandonment and so long as LESSEE commences the actual drilling of additional and successive wells on the land at intervals not exceeding ninety (90) days between completion of a well as a producer or dry hole and commencement of actual drilling of the next well on the land If and when LESSEE fails to commence the actual drilling of a well within the applicable interval (or within the extended time provided in subparagraph 9 d below, this Lease shall then terminate to all of the land, save and except the Oil Units and Gas Units provided in subparagraph 8 a above Upon expiration of the Primary Term or the cessation of the continuous drilling program set forth herein, whichever is later, this Lease shall also terminate as to all depths below each unit retained as to depths below a depth of one hundred feet (100') beneath the deepest producing horizon or zone for each unit d If LESSEE, in the conduct of actual drilling operations under this Lease after the expiration of the Primary Term, commences the actual drilling of any next succeeding well within less than the ninety (90) day time interval specified in subparagraph 8 c and thus speeds up the development of the land, LESSEE shall have credit in time for the accelerated development and may, in the conduct of subsequent actual drilling operations, take advantage of the credit in time on a cumulative basis and thus extend the time for the commencement of actual drilling of any subsequent well or wells required to be drilled under the provisions of this Lease in order to prevent termination of this Lease Within ten (10) days of the commencement of the actual drilling of each well on the land, LESSEE shall give LESSOR written notice of the date of commencement Within ten (10) days after the completion or abandonment of each well on the land, LESSEE shall give LESSOR written notice of the date of completion or abandonment and also of the time credit, if any claimed by LESSEE as a result of having commenced the actual drilling of the well within less than the required interval If LESSEE fails to timely so notify LESSOR in any of these respects, LESSEE shall not be entitled to any credit in time for accelerated development Nothing contained in this paragraph shall relieve LESSEE of any offset obligation arising by implication or under the terms of this Lease, but any well drilled by LESSEE to satisfy an offset obligation will entitle LESSEE to the privileges of this paragraph 9 Removal of Eguiument LESSEE shall have the right at any time during and for one hundred eighty (180) days after the expiration of this Lease to remove all property, casing and fixtures placed by LESSEE on said land, including the right to draw and remove all casing Thereafter, it shall be deemed abandoned to LESSOR If LESSEE fails to remove such property, 642660 2 /SP3/29121/0103/011602 5 casing and fixtures within such 180 day period, ownership of the same will vest in LESSOR, LESSOR'S successors and assigns or LESSOR, at its option, may require the removal of said equipment in addition to all other remedies to which LESSOR is entitled under law 10 Assignment. 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, rentals or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of LESSEE 11 Title LESSOR does not warrant or agree to defend the title of the lands covered hereby LESSEE takes this Lease without warranty of title either express or implied This Lease and the activities to be conducted thereunder are subject to approval of the Federal Aviation Administration If LESSOR owns an interest in the oil, gas and minerals leased hereby less than the entire fee simple estate, then the royalties, or other monies accruing from any part of the land to which this Lease covers less than such full interest shall be paid to LESSOR only in the proportion which LESSOR'S interest therein, if any, bears to the whole and undivided fee simple mineral estate therein It is the sole responsibility of LESSEE to determine the LESSOR's mineral interest The bonus payment paid for this Lease shall be deemed to be final if no title problems are submitted for resolution within ninety (90) days of the Effective Date 12 Force Maieure When drilling, production or other operations on said land or land pooled with such land, or any part thereof are prevented, delayed or interrupted by fire, storm, flood, war, rebellion, insurrection, sabotage, not, strike, or as a result of some law, order, rule, regulation or necessity of governmental authority, either State or Federal, the Lease shall nevertheless continue in full force and effect and be extended for the period such drilling, production and other operations are so prevented, delayed or interrupted LESSEE shall not be liable for breach of any express or implied covenants of this Lease when drilling, production or other operations are so prevented, delayed or interrupted, except that nothing in this paragraph 13 shall be construed to suspend the payment of delay rentals, shut-in royalty or any other amount otherwise required to maintain this Lease in effect 13 Designation of Gas Unit a Upon completion of the first well as a producer of oil and/or gas 1n paying quantities (whether the first or a subsequent well drilled), LESSEE shall designate an approximately sized drilling unit around said first producing well, all out of the above described property, by filing a written designation in the Deed Records of Denton County Texas and shall provide LESSOR with a copy of such unit designation b If a second well is completed as a producer of gas in paying quantities, LESSEE shall again designate an approximately sized drilling unit around said second producing well, all out of the above described property, by filing a written designation in the Deed Records of Denton County, Texas and shall provide LESSOR with a copy of such unit designation LESSEE shall designate all drilling units in a fair and reasonable manner so that the remaining acreage not included in the drilling units is capable of being drilled or pooled with other lands 642660 2 /SP3/29121/0103/011602 All designations of units as provided in this paragraph 14 shall be in accordance with and subject to the provisions of paragraph 9 above 14. Road Construction: If LESSEE completes a well as a producer, LESSEE agrees to construct a good and substantial road to said well at least twenty (20) feet in width, and with base material equivalent to Texas Highway Department No 1 flexible base material and being six (6) inches in depth and built for proper and natural drainage LESSEE agrees to enter into a Road Maintenance Agreement with the City of Denton for damage to the road as a result of LESSEE'S activities 15. FAA Rules and Reaulations: No drilling activity or any other activity shall be conducted on any portion of the above described land in contravention of any Federal Aviation Administration ("FAA') rule or regulation or which interferes with any future expansion plan for runways or taxiways LESSEE shall make inquiry with the proper officials of the FAA and obtain all necessary approvals, consents or waivers prior to the location of any drill site on the subject property to verify compliance with all applicable FAA rules or regulations LESSEE shall provide LESSOR with copies of all waivers or other documentation issued by the FAA indicating approval of well site locations or any other operations prior to the commencement of operations 16 Indemnifications and Insurance LESSEE shall provide or cause to be provided the insurance described below for each well drilled under the terms of this Lease, such insurance to continue until the well is abandoned and the site restored Such insurance shall provide that LESSOR shall be a co-insured, without cost, and that said insurance can not be canceled or terminated without thirty (30) days prior notice to LESSOR and ten (10) days notice to LESSOR for nonpayment of premiums a General Requirements Indemnification and Express Negligence Provisions LESSEE shall expressly release and discharge, all claims, demands, actions, judgments, and executions which it ever had, or now have or may have, or assigns may have, or claim to have, against the LESSOR, it agents, officers, servants, successors, assigns, sponsors, volunteers, or employees, created by, or ansing out of personal injuries, known or unknown, and injuries to property, real or personal, or in any way incidental to or in connection with the performance of the oil and gas drilling and production performed by the LESSEE under this lease and the LESSEE shall fully defend, protect, indemnify, and hold harmless the LESSOR, and/or its departments, agents, officers, servants, employees, successors, assigns, sponsors, or volunteers from and against each and every claim, demand, or cause of action and any and all liability, damages, obligations, judgments, losses, fines, penalties, costs, fees, and expenses incurred in defense of the LESSOR, and/or its departments, agents, officers, servants, or employees, including, without limitation, personal injuries and death in connection therewith which may be made or asserted by LESSEE, its agents, assigns, or any third parties on account of, ansing out of, or in any way incidental to or in connection with the performance of the oil and gas well drilling and production performed by the LESSEE under this lease and, the LESSEE agrees to indemnify and hold harmless the LESSOR, and/or its departments, and/or its officers, agents, servants, employees, successors, assigns, sponsors, or volunteers from any liabilities or damages suffered as a result of claims, demands, costs, or judgments against the LESSOR and/or, its departments, it's officers, agents, servants, or employees, 642660 2/SP3/29121/0103/011602 7 created by, or ansing out of the acts or omissions of the LESSOR occurring on the drill site or operation site in the course and scope of inspecting and permitting the gas wells INCLUDING, BUT NOT LIMITED TO, CLAIMS AND DAMAGES ARISING IN WHOLE OR IN PART FROM THE NEGLIGENCE OF THE LESSOR OCCURRING ON THE DRILL SITE OR OPERATION SITE IN THE COURSE AND SCOPE OF ITS DUTIES UNDER THIS LEASE IT IS UNDERSTOOD AND AGREED THAT THE INDEMNITY PROVIDED FOR IN THIS SECTION IS AN INDEMNITY EXTENDED BY THE LESSEE TO INDEMNIFY AND PROTECT THE LESSOR AND/OR ITS DEPARMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES FROM THE CONSEQUENCES OF THE NEGLIGENCE OF THE CITY OF DENTON, TEXAS AND/OR ITS DEPARTMENTS, AGENTS, OFFICERS, SERVANTS, OR EMPLOYEES, WHETHER THAT NEGLIGENCE IS THE SOLE OR CONTRIBUTING CAUSE OF THE RESULTANTANT INJURY, DEATH, AND/OR DAMAGE b All policies shall be endorsed to read "THIS POLICY WILL NOT BE CANCELLED OR NON -RENEWED WITHOUT 30 DAYS ADVANCED WRITTEN NOTICE TO THE OWNER AND THE CITY EXCEPT WHEN THIS POLICY IS BEING CANCELLED FOR NONPAYMENT OF PREMIUM, IN WHICH CASE 10 DAYS ADVANCE WRITTEN NOTICE IS REQUIRED" c Liability policies shall be written by carriers licensed to do business in Texas and with companies with A VIH or better rating in accordance with the current Best Key Rating Guide, or with non -admitted carriers that have a financial rating comparable to carvers licensed to do business in Texas approved by the City d Liability policies shall name as "Additional Insured" the city and its officials, agents, employees, and volunteers e Certificates of insurance must be presented to the City evidencing all coverages and endorsements required by this Section 35-508, and the acceptance of a certificate without the required limits and/or coverages shall not be deemed a waiver of these requirements f Claims made policies will not be accepted except for excess policies or unless otherwise provided by this Article g Required Insurance Coverages 1 Commercial General Liability Insurance Coverage should be a minimum Combined Single Limit of $1,000,000 per occurrence for Bodily Injury and Property Damage This coverage must include premises, operations, blowout or explosion, products, completed operations, blanket contractual liability, underground property damage, broad form property damage, independent contractors protective liability and personal injury 642660 2 /SP3/2912110103/011602 8 2 Environmental Impairment (or Seepage and Pollution) shall be either included in the coverage or written as separate coverage Such coverage shall not exclude damage to the lease site If Environmental Impairment (or Seepage and Pollution) Coverage is written on a "claims made" basis, the policy must provide that any retroactive date applicable precedes the effective date of the issuance of the permit Coverage shall apply to sudden and non -sudden pollution conditions resulting from the escape or release of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants 3 Automobile Liability Insurance Minimum Combined Single Limit of $500,000 per occurrence for Bodily Injury and Property Damage Such coverage shall include owned, non -owned, and hired vehicles 4 Worker's Compensation Insurance In addition to the minimum statutory requirements, coverage shall include Employer's Liability limits of at least $100,000 for each accident, $100,000 for each employee, and a $500,000 policy limit for occupational disease, and the insurer agrees to waive rights of subrogation against the city, its officials, agents, employees, and volunteers for any work performed for the city by the LESSEE 5 Excess (or Umbrella) Liability Insurance Minimum limit of $10,000,000 covering in excess of the preceding insurance policies 6 Control of Well Insurance a Minimum limit of $5,000,000 per occurrence b Policy shall cover the Cost of controlling a well that is out of control, Redrilling or Restoration expenses, Seepage and Pollution Damage Damage to Property in the LESSEE's Care, Custody, and Control with a sub -limit of $500,000 may be added 17 Offset Well Requirement. In the event a well or wells producing oil and gas in any quantities that should be brought in by LESSEE or any other LESSEE on adjacent lands and within 330 feet of the land or lands pooled, by permission of LESSOR, with such lands, LESSEE agrees to drill such offset wells as a reasonably prudent LESSEE would drill under the same or similar circumstances 18 Location of Drilling Activity, Pipelines and Equipment No drilling activity shall be conducted on and no pipelines, equipment or other structures shall be placed on or under any pavement, concrete or asphalt or any other improved surface area situated on the above described land The location of any pipelines installed by LESSEE shall be approved in advance by LESSOR and shall be situated along routes that least interfere with LESSOR's existing or future use of the surface in accordance with the Surface Use Agreement When required by LESSOR, LESSEE will bury all pipelines at a depth of six feet (6'), and the location of wells shall comply with Chapter 29, Fire Code, of the Code of Ordinances of the City of Denton, as amended, and all other applicable laws 642660 2 /SN3/29121/0103/011602 9 19. Construction of Fences- Should production be obtained, LESSEE shall promptly construct a good and substantial fence, equivalent to at least a six (6) foot chain link fence (man proof), enclosing the well and related equipment and thereafter maintain such fence in good condition during the life of the well and until such time as the surface is restored to its present condition LESSEE agrees to properly maintain the fenced area in good condition, including, without limitation, the mowing of grass in accordance with the Surface Use Agreement 20 Surface Damages- LESSEE agrees to pay for all actual damages caused by LESSEE's operations hereunder to fences, roads, personal property, underground utilities and services, buildings or other improvements on said land Within a reasonable time after LESSEE's need therefor has ceased, LESSEE shall remove the leasehold debris, fill all its and other excavations made by LESSEE on the above described land, and restore the surface of the land to its condition prior to the commencement of drilling operations insofar as may be reasonably practical 21. Compliance with Laws LESSEE shall comply with all applicable rules, regulations, ordinances, statutes and other laws in connection with any drilling, producing or other operations under the terms of this Lease, including, without limitation, the oil and gas well regulations of the City of Denton 22 Lease Assignment The assignment of this Lease by LESSEE, or any successor LESSEE, shall not relieve LESSEE, or any such successor, from its obligations hereunder LESSOR may, unless it agrees to the contrary, look to the LESSEE and/or any successor of LESSEE for performance of any one or more of such obligations 23.Water: LESSEE shall not use any water in, on, or under the above -described land, except in accordance with the Surface Use Agreement 24. Diligent Good Faith Operations Each well drilled under this Lease shall be drilled with reasonable diligence and in good faith and in a good and workmanlike manner in a bona fide attempt to product oil, gas and associated minerals therefrom 25. Captions and Headings- The captions and headings in this Lease are for convenience only and shall not modify, change, amend, alter, or affect the true meaning of any paragraph, sentence, clause, phrase, or words herein 26 Subordination and Stipulations Required by FAA. This Lease recognizes that the Denton Municipal Airport was acquired and developed with aid and/or grant of land from the United States Copies of such grants are available for review at the office of the City Manager in Denton These grants include a number of obligations and commitments to the general and flying public, to the State of Texas, and to the United States In addition to the above general obligations and commitments, this Lease is subject and subordinate to and is controlled by all the provisions, stipulations, covenants, and agreements in that certain indenture by and between the United States of America and the LESSOR and it is understood that the LESSEE agrees to abide by and enforce all of the provisions, stipulations, covenants, and agreements incorporated in the foregoing instrument the same as if set out in full herein This Lease is subject to approval by the FAA and shall be effective only as of the date of such approval The following agreements and understandings are specifically enumerated to comply with FAA stipulations 642660 2 /SP3/29121/0103/011602 10 a It is further especially agreed by the parties hereto that no structures or obstructions, temporary or otherwise, shall be erected which will be in violation of the Federal Aviation Regulations Part 77 (Criteria for Determining Obstractions to Air Navigation), unless otherwise approved in writing by the FAA b Without the prior specific approval of the FAA no surface operations shall be conducted upon any of the lands covered by this Lease closer than the distances set forth in the sub -paragraph above, or within the safety areas of said improvements, including ingress and egress of vehicular traffic c It is specifically understood and agreed that the LESSEE and its successors and assigns shall give to the City of Denton and the FAA, notice in writing of the location of any contemplated well and the route of ingress and egress to such well on the above - described land and that if neither the FAA nor City of Denton objects to said location within a period of thirty (30) days from the receipt of written notice thereof, the said LESSEE and its successors and assigns may proceed to drill the well at the location specified in said notice, provided same does not contravene other provisions of this Lease or the further restrictions and obligations imposed by the City of Denton d This written notice shall not relive the LESSEE from obligation for filing a Notice of Proposed Construction or Alteration, FAA Form 7460-1, required by Federal Aviation Regulations, Part 77, Subpart B e Also it is agreed, that in the event a well is drilled on the above -described land, then such drilling operations shall be prosecuted continuously, with due diligence, until same results in production or a dry hole All temporary structures used in such drilling operations shall be painted and lighted in such a manner as prescribed by the FAA, and further provided that no permanent structures of any kind used in the development, production or transportation of oil, gas and other minerals shall be placed on the above described land in such manner as to interfere with or introduce hazard to the operation of the aircraft f Further, it is agreed that in the event any drilling operations for oil, gas, or other minerals result in production, LESSEE at its own expense shall immediately remove all temporary structures and place all semi -permanent or permanent equipment in such manner as will not interfere with or introduce any hazard to the operation of aircraft In event such drilling operations result in a dry hole, then LESSEE shall at its own expense immediately remove all temporary structures used in such landing operation and level the area so that it may be safely used for landing or taxiing aircraft g, LESSEE shall not interfere with the access roads to the City of Denton Airport, and shall not interfere with any other person or agency having a lawful right to use the above -described land, or with any building or improvements of any kind thereon belonging to any other person or agency, nor with their right to enter thereon and remove said buildings or improvements therefrom 642660 2/SP3/29121/0103/011602 11 h During time of war or national emergency, LESSOR shall have the right to lease the landing area or any part thereof to the United States Government for military or naval use, and if such lease is executed with the United States Government, the provisions of this Lease insofar as they are inconsistent with the provisions of the Lease to the Government, shall be suspended 27 _Memorandum of Lease LESSOR and LESSEE agree that a memorandum of lease shall be filed of record in the Official Records of Denton County, Texas, evidencing this Lease and the provisions contained in such memorandum to the parties hereto, the land covered by the Lease, the term of the Lease and notice provisions informing the public of the existence of the Lease 28. Entire Agreement. This Lease states the entire contract between the parties, and no representation or promise, verbal or written, on behalf of either party shall be binding unless contained herein, and this Lease shall be binding upon each party executing the same, regardless of whether or not executed by all owners of the above described land or by all persons above named as "LESSOR", and, notwithstanding the inclusion above of other names as "LESSOR", this term as used in this Lease shall mean and refer only to such parties as execute this Lease and their successors in interest IN WITNESS WHEREOF, this instrument is executed on the date first above written ATTEST JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY BY�r6-1 �L (' i vvti° 642660 2 /SP3/29121/0103/011602 12 CORPORATION 642660 2/SP3/29121/0103/011602 13 STATE OF TEXAS COUNTY OF DENTON Before me the undersigned authority, on this day personally appeared Michael A Conduff, City Manager of the City of Denton, Texas, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he/she executed the instrument for the purposes and consideration therein expressed Given under my hand and seal of office this jj_ day of r4 t/ _, 2002 y CHRISTINE A DICK Notary Notary Rrdk; State of Texas OF h*� C©mm EExPies 9 2 2005 STATE OF TEXAS COUNTY OF DENTON § Notary Public Before me, the undersigned authority, on this day personally appeared C Noell Rather, PRESIDENT OF ENEXCO, INC, known to me to be the person and official whose name is subscribed to the foregoing instrument and acknowledged to me that he/she executed the instrument for the purpose and consideration therein expressed Given under my hand and seal of office this 1_1 day of , 2002 AE:E:j K06 Notary Public 642660 2 /SP3/29121/0303/011602 14 EXHIBIT C S \Our Documents\Contracts\02\Red1me Enexco Surface Use Agreement doc SURFACE USE AGREEMENT CITY OF DENTON AIRPORT This Agreement is made and entered into effective this 17th day of January, 2002, by and among ENEXCO, INC whose address is 3500 Oak Lawn Avenue, Suite 390, Dallas, Texas 75219 (Operator") and the CITY OF DENTON, TEXAS, a home rule municipal corporation, acting by and through its duly authorized City Manager ("City"), WHEREAS, Operator owns the right to explore the lands described as follows TRACT 1 The land described in condemnation proceedings identified by Cause No 3922 filed on November 30, 1943 between the City of Denton and R M Evers, et al and subsequently filed in Volume 1675, Page 546 of the Real Property Records of Denton County, Texas, containing 147 26 acres, 2 26 acres of which is in a public road, in the William Wilburn Survey, Abstract Number 1419 TRACT 2 The land described in that Warranty Deed dated December 23, 1943 between P T Underwood and wife Jimmie Underwood and the City of Denton recorded in Volume 304, Page 503 of the Real Property Records of Denton County, Texas, containing 74 94 acres, 175 acres of which is in a public road, in the Thomas Toby Survey, Abstract Number 1285 TRACT 3 The land described in that Warranty Deed dated January 18, 1944 between Mrs Ellen Pearl Corbin, a widow, Hugh C Corbin and wife, Sue Lou Corbin, John S Corbin, Alice Corbin Brown and husband W O Brown, Grace Corbin, a feme sole, Georgia Corbin, a feme sole, James E Corbin and wife, Johnnie Corbin, Mrs Gertie Corbin Hurst and husband, G E Hurst, and the City of Denton, recorded in Volume 305, Page 216 of the Real Property Records of Denton County, Texas, containing 33194 acres, 2 61 acres of which is in a public road, in the Wm Smith Survey, Abstract Number 1188, and the Wm Neill Survey, Abstract Number 970 Denton County, Texas ("the Lands") for oil and gas operations, and WHEREAS, Operator and City desire to enter into an agreement regarding Operator's use of the Lands for its proposed oil and gas operations thereon in connection with Operator's wells to be located at a surface location and drilled to a projected vertical depth pursuant to the Oil, Gas and Mineral Lease of the City of Denton Airport (the "Well") NOW, THEREFORE, in consideration of the premises and the covenants set forth below, Operator and City agree as follows 1 In connection with the Well, and pursuant to the terms and Provisions herein after contained, Operator shall have the right (a) to construct and use a drilling pad location and related drilling and circulation pits on the Land on which such Well is to be situated (the "Site") for the purposes of drilling for, equipping, operating and producing oil, gas and other minerals from the Well (including, but not limited to, the installation and maintenance of a tank battery, heater treater, separator, and other equipment on the drilling pad), and (b) to install flowlmes and pipelines to and from the Site, to install electric poles on the Site 2 Drilling Operations For purposes of this Agreement, the drilling pad shall be constructed in the approximate dimensions and configuration depicted on a gas well development plat as approved by the City No well shall be drilled within 500 feet of any structure on the land without the written consent of the City Manager or his designee During drilling operations, the perimeter of the drill site shall be fenced by Operator at its sole expense with a fence sufficient to turn livestock, thereafter, in the event of production, said fence shall be maintained around the perimeter of the well site and tank battery area actually utilized by Operator Operator shall use only the entrances and roadways for entering upon and leaving the land and will use only the routes in going upon, over or about the land as are designated by City in writing for Operator's use in accessing the drill site Operator shall access the Site directly from Airport Road, and that Operator shall construct roads to the Site as depicted on the gas well development plat approved by the City Operator shall maintain all roads, existing or new, used by Operator in good repair free of rocks and ruts to the reasonable satisfaction of City Annual maintenance must include, as a minimum, addition of at least two inches of caliche and motor grading Operator will construct diversion terraces as may be reasonably necessary to prevent soil erosion Use of roads shall be confined to lease operations and to the use of the City and Surface tenants Operator shall never obtain or assist anyone to obtain or have designated a public road across the land Operator may open new roads only upon written concurrence of City noted upon a survey plat of the road showing its location and a legally sufficient centerline description All new roads shall be straight and parallel to survey lines to the extent the terrain permits No interior gate or opening in the fence shall be constructed so as to access any other part of the Land from the Site or rectangular area described in this paragraph without City's consent All travel shall be confined to roads and no off -road travel is permitted unless written permission is obtained from the Airport Manager and the property restored to the same condition 3 Refineries prohibited Operator is prohibited from constructing an oil or gas refinery or a plant for cleaning up gas or removing 1-12S on the leased premised Page 2 without first obtaining a separate written lease agreement with City The location of separators, dehydrators and compressors shall not be considered as plants 4 Compensation An annual rental for a 40 x 40 well site (16,000 square feet) at $ 05 per square foot for any well sites located on the west side of the lands or at $ 08 per square foot for any well sites located on the east side of the lands shall be paid to the City as compensation for the use of the surface This annual rental shall be adjusted every two years according to the Consumer Price Index The annual rental payment shall be payable to the City of Denton prior to the start of construction of each well site and on each year anniversary thereafter until the well is abandoned and plugged 5 No water wells may be drilled on the property 6 Notification Operator shall notify City at least 3 days, exclusive of Saturdays, Sundays and legal holidays, prior to commencement of all exploration, drilling, highline or pipeline construction operations on the land, specifying the approximate date of commencement, and the nature and location of the operations No facilities required for any operation permitted under this lease shall be commenced, placed, erected or constructed until City and Operator have conferred and mutually selected the site or sites for location of the facilities, taking into consideration the use of the land for airport operations 7 Pipelines and Flowlines. Prior to constructing pipelines and flowlines on the Lands, Operator shall consult with City so that the pipelines and flowlines shall be located, insofar as reasonably practical, to cause minimum interference with City's surface operations and use of the land Pipelines and flowlines shall be limited to natural gas transported through such pipeline to natural gas produced under the terms of the lease from the leased premises Operator agrees that all flowlines and gas sales pipelines shall be constructed as near as practical to public right of ways and shall be buried to a depth as the City determines or as may be required under applicable laws, including FAA rules and regulations A plot plan showing proposed pipelines shall be filed with the Director of the Airport "As built" plans shall be filed with the Director of the Airport on completion Operator shall place pipelines and flowlines with the ingress easements to the well sites and shall obtain an easement from the City Compensation for the easement shall be $10/rod (16 feet) Operator shall remove pipelines or flowlines after the well is abandoned or shall make the pipelines and flowlines dormant as requested by the City 8 Abandonment of Wells At Operator's cost, Operator agrees to conduct a gammaray neutron log survey from the surface to the bottom of the surface casing of any well drilled on leased premises by Operator in order to assist City in determining whether water sands have been encountered to such depths Operator shall provide Page 3 City or City with a copy of such log and, without any warranty whatsoever, Operator's opinion as to whether such log indicates water bearing sands and if so, the location or depth thereof Prior to abandoning a well, Operator agrees to give City prior notice of such intended plugging and City shall have twenty (20) days after notice within which to elect to take over such well for completion as a water well If City elects to take over same, Operator shall plug such well to the depth designated by City and thereafter City shall own such well together with the obligation to plug the remaining, unplugged portion of such well when City abandons same City agrees to execute the appropriate forms required by the Railroad Commission of Texas and other regulatory authority in order to transfer operations and ownership of, as well as liability for, such well to City In the event City declines to take over such well, then Operator shall promptly plug same At each stage of Operator's operations, Operator will maintain the site of operations in a neat, orderly, safe condition, free of litter and free of all objects not reasonably necessary to the operation Upon abandonment of any site, operation or road, Operator will notify and confer with City, and except to the extent City waives, in writing, Operator's obligation to do so, the site or road will be cleaned, all mounds will be leveled, and all pits, pit liners will be removed at the appropriate time and all pits, ruts and other excavations (after being allowed to dry out) will be filled, leveled and smoothed, all caliche will be removed from the site or road will be seeded with grass of City's choice and otherwise returned, as nearly as practical to its natural state, all within a reasonable time 9 Penalties. In the event Operator fails or refuses to pay City for penalties, claims, surface use or damages, as required under this lease, within 30 days after same are due, then Operator shall be required to provide City with security in the form of cash in the sum of $10,000 00 payable to City which sum may thereafter be applied by City toward Operator's obligations for past unpaid, as well as future compensation for penalties, claims, surface usage and damages and on each occasion that City applies all or a part of said security deposit toward unpaid penalties, claims or compensation, Operator agrees to restore such security deposit to $10,000 00 If Operator fails to make such $10,000 00 security deposit and/or maintain same, within 20 days after notice from City to tender same, then this lease shall terminate City shall have a first lien against the leasehold interest of Operator therein to secure City under the terms of this lease and further this lease shall constitute a Security Agreement sufficient to satisfy the Uniform Commercial Code of Texas to establish a security interest in this leasehold estate for the benefit of City to secure them in the event of default by City Until such time as Operator breaches its obligation to timely perform under this lease, City agrees that all production and revenue attributable to the working interest hereunder shall be temporarily exempt from this lien Upon notice to City of Operator's breach of this or any other provision of this lease, which breach constitutes an accrued but unpaid claim owned by Operator to City, then said temporary exemption shall be lifted and this security interest and lien shall thereafter attach to all production and revenue attributable to the working interest under this lease Page 4 10 Preferential Right to Sell. As part of the consideration for this lease, Operator covenants and agrees that the owner of the surface estate shall have a first preferential right to sell City or its contractors or assignees, at the same price and terms Operator can obtain elsewhere, any water, sand, gravel or caliche or any one of them, which Operator or any of its successors, assigns, agents or independent contractors might need incidental to any exploration or development operations on leased premises 11 Place of Payment. All payments, compensation and damages which may be due and payable to City shall be payable to the City to the City Manager, 215 E McKinney, Denton, Texas 76201 Payment shall identify if the payment is for the bonus, the royalty, delay rental, shut in rental, or annual rental payment for the well site 12 Environmental. As used in this lease, the term "Hazardous Materials" means any substance defined or identified as a hazardous, extra hazardous or toxic substance, waste, or material under any applicable federal, state, or local statute or regulation "Remedial Work" is defined as any site investigation or monitoring, any cleanup, containment, remedial removal, or restoration work performed in response to any federal, state or local government authority or private attorney general action, or pursuant to any federal, state or local statute, rule regulation or other laws Operator agrees (1) to remove from the leased premises, if, as and when required by law, any Hazardous Materials placed or released thereon by Operator, (2) to perform remedial work where the need therefore arises in connection with Operator's operations or activities on the leased premises, and (3) to comply in all respects with all federal, state and local governmental laws and regulations governing operations by Operator and remedial work on or associated with the leased premises Such remedial work shall be performed by one or more contractors selected by Operator and approved in advance by City and under the supervision of a consulting engineer selected by Operator and approved in advance by City All costs and expenses of remedial work made necessary by Operator's operations shall be paid by Operator, including, without limitation, the charges of such contractors and/or the consulting engineer and City's reasonable attorneys' fees and costs incurred in connection with the monitoring or review of remedial work If Operator shall fall to timely commence or cause to be commenced, or fail to diligently prosecute to completion, such remedial work, City may, but shall not be required to, cause such remedial work to be performed Operator promises to notify City of any claim or other action by any governmental agency or other third party involving the actual or alleged existence of hazardous materials on the leased premises or on City's adjoining property and to provide City with copies of (1) any notice of any release of Hazardous Materials given to Operator pursuant to any law or regulation and (2) any report of and response to any such incident Operator agrees to indemnify, pay and protect, defend and save City harmless from all claims, liabilities, fees and expenses of any kind that anse from the actual or alleged presence or release any Hazardous Material in connection with Operator's operators on the leased premises This indemnification shall include costs in connection with any remedial work when performed by City or any third party in response to any federal, state or local governmental authority, laws or regulations, due and payable upon demand therefore by City Page 5 13 Notices. Operator agrees to designate in writing the name of the person or persons to be present from time to time on said premises as current operations are being conducted, with whom City may resolve any claim for use, injury and damage to airport operators surface area or improvements on said premises occasioned by or arising from Operator's operations or other activity on the said premises In regard to notice of surface use, the City affected by such operations shall be entitled to prior notice of such operations Either party hereto may from time to time designate in writing a different address or agent The following persons are designated as each parry's initial agent To City City Manager Attn Airport 215 E McKinney Denton, Texas 76201 To Operator C Noell Rather Ralph E Rather Enexco, Inc 3500 Oak Lawn, Suite 390, LB #15 Dallas, Texas 75219 14 Second/Tertiary Operations. Operator is denied the right and privilege of injecting any substances into the subsurface for secondary or tertiary recovery operations unless allowed under the gas well permit 15 Memorandum of Agreements. Operator and City agree to execute a Memorandum of this Agreement in the form attached as Exhibit "A" hereto, which may be recorded in the records of Denton County, Texas 16 Assignment. This Agreement shall remain in effect for so long as the oil and gas leases owned by Operator on the Lands are in force and effect, and be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns 17 Indemnification. Operator shall indemnify and hold harmless and defend City and City's officers, agents and employees from all suits, actions, claims, damages, personal injuries, accidental death, property damage, losses, and expense of any character whatsoever including attorney's fees brought for or on account of any injuries or damages received or sustained by any person or persons or property, on account of any negligent act of Operator, Operator's officers, agents and employees whether such negligent act was the sole proximate cause of the injury or damage or a proximate cause jointly and concurrently with Operator or Operator's employees, agents or subcontractors' negligence, in the execution, supervision and operations Page 6 growing out of or in any way connected with this Agreement and Operator will be required to pay any judgment, with costs, which may be obtained against City or any of their officers, agents or employees, including attomy's fees 18 Insurance Operator shall file evidence in the form of a certificate of insurance with the City Secretary for the City of Denton, acceptable to the City Attorney, that it has obtained liability insurance in accordance with the Oil and Gas Mineral Lease, City's Gas Well Ordinance and with the City of Denton as an additional insured and covering its operations on the Lands Operator shall also file evidence in the form of a certificate of insurance with the City Secretary for the City of Denton, acceptable to the City Attorney, that its workers' compensation and general liability coverage includes in its provisions a waiver of any rights of subrogation as against the City of Denton, Texas in accordance with the City's Oil and Gas Regulations 19 Operator shall follow FAA rules and regulations prior to the commencement of drilling operations under this agreement Operator shall file a aeronautical study request form (Form 7460) before commencing drilling operations and shall obtain all prior consents, approvals or waiver of FAA regulations Operator shall indemnify and hold City harmless for any FAA orders requiring Operator to cease operations 20 This agreement shall be construed under the laws of the State of Texas, without reference to conflict of law principles which would require the application of the law of another jurisdiction, and exclusive venue shall be in Denton County, Texas for any claims lawsuits or actions in connection with this Agreement 21 In the event of any conflict between the parties hereto such that either party brings or commences any legal action or proceeding related to this license, including but not limited to, any action pursuant to the provisions of the Texas Uniform Declaratory Judgments Act (Tex Civ Prac & Rem Code § 37 001, et seq , as amended), the parties hereto agree to waive any and all rights to recovery of attorneys fees to which the prevailing party might otherwise be entitled 22 This Agreement shall never be construed to constitute the parties hereto as partners or joint venturers, or to create a relationship of principal -agent, employer -employee, trustee beneficiary, an association for business or profit, or any other relationship, legal or equitable, among the parties hereto In all respects, each party shall be responsible for its own conduct in connection with the subject matter of this Agreement as though it were an independent contractor, free from all control and direction of the others 23 This Agreement may be executed in multiple counterparts, each of which when taken together shall constitute but one and the same instrument, but none of which shall be Page 7 effective until and unless executed by all parties named herein Additionally, tlus Agreement may also be executed in multiple originals, any one of which, when fully executed as herein provided, shall be effective for all purposes `When fully executed as herein provided, the terms and conditions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto, their heirs, successors and assigns 24 EXECUTED by each party hereto as of the date indicated beside its signature, to be effective for all purposes as of the Effective date City Michael A Cond ty Manager Date I- 1'1-ad CITY OF DENTON, TEXAS ATTEST Date t-- 1-1- o� APPROVED AS TO LEGAL FORM BY4eL HerProu , City Attorney Operator By Noel W-W ACKNOWLEDGMENTS STATE OF TEXAS § COUNTY OF DENTON § Before me, the undersigned authority, on this day personally appeared Michael A Conduff, CITY MANAGER OF THE CITY OF DENTON, TEXAS, known to me to be the person and official whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of said City, and for title purposes and consideration therein expressed, and in the capacity therein stated Notary Public, State of Texas STATE OF TEXAS § COUNTY OF DENTON § The foregoing instrument was acknowledged before me on 1- 1 i — 2002 by, on behalf of the corporation tyM"' Pcy CHRISTINE A DICK Notary Public, State of Texas Notary Public .a State of Texas +e„ ,,AV Expires 3 2 2008 Page 9 ACKNOWLEDGMENTS STATE OF TEXAS § COUNTY OF DENTON § Before me, the undersigned authority, on this day personally appeared C Noell Rather, PRESIDENT OF ENEXCO, INC, known to me to be the person and official whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of said Operator, and for title purposes and consideration therein expressed, and in the capacity therein stated Notary Public, State of Texas STATE OF TEXAS § COUNTY OF DENTON § The foregoing instrument was acknowledged before me on 1- 2002 by, on behalf of the corporation 1 CHRISTINE A^ DICK Notary PuWlc State or tc "Fore Comm UPH 3 ^ .... Notary Public, State of Texas Page 10 EXHIBIT "A" to Surface Use Agreement dated effective 1- 0 -c3Q , between and the CITY OF DENTON, TEXAS MEMORANDUM OF SURFACE USE AGREEMENT The Memorandum is being executed for the purpose of giving notice of the existence of that certain Surface Use Agreement dated effective of even date entered into by and between Enexco, Inc (as "Operator") and the CITY OF DENTON, TEXAS (as "City") regarding Operator's use of the lands owned by City located in Denton County, Texas, to wit (the "Land") for Operator's oil and gas operations on such lands Dated effective this t-1_ day of c'�a�bl-q 2002 ATTEST By Jennt r Walters, City Secretary APPROVED AS TO FORM By O �� Herb Prouty, City(/Attorney OPERATOR By L Noell Rather, CITY OF DENTON, TEXAS Page 11 MEMORANDUM OF OIL, GAS AND MINEAL LEASE AGREEMENT CITY OF DENTON AIRPORT The Memorandum is being executed for the purpose of giving notice of the existence of that Oil, Gas and Mineral Lease Agreement dated effective of this date entered into by and between, Enexco, Inc (as "Operator") and the CITY OF DENTON, TEXAS (regarding Operator's use of the lands owned by the City of Denton located in Denton County, Texas, to wit TRACT 1 The land described in condemnation proceedings identified by Cause No 3922 filed on November 30, 1943 between the City of Denton and R M Evers, et al and subsequently filed in Volume 1675, Page 546 of the Real Property Records of Denton County, Texas, containing 147 26 acres, 2 26 acres of which is in a public road, in the William Wilburn Survey, Abstract Number 1419 TRACT 2 The land described in that Warranty Deed dated December 23, 1943 between P T Underwood and wife Jimmie Underwood and the City of Denton recorded in Volume 304, Page 503 of the Real Property Records of Denton County, Texas, containing 74 94 acres, 1 75 acres of which is in a public road, in the Thomas Toby Survey, Abstract Number 1285 TRACT 3 The land described in that Warranty Deed dated January 18, 1944 between Mrs Ellen Pearl Corbin, a widow, Hugh C Corbin and wife, Sue Lou Corbin, John S Corbin, Alice Corbin Brown and husband W 0 Brown, Grace Corbin, a feme sole, Georgia Corbin, a feme sole, James E Corbin and wife, Johnnie Corbin, Mrs Gertie Corbin Hurst and husband, G E Hurst, and the City of Denton, recorded in Volume 305, Page 216 of the Real Property Records of Denton County, Texas, containing 331 94 acres, 2 61 acres of which is in a public road, in the Wm Smith Survey, Abstract Number 1188, and the Wm Neill Survey, Abstract Number 970 Denton County, Texas ("the Lands") for oil and gas operations Dated effective this date, January 17, 2002 OPERATOR Noell Rather, President Eneeco Inc CITY OF DENTON, TEXAS By �� ichael A Condu f,, City Manager ATTEST Jennifer Walters, City Secretary APPROVED AS TO FORM ��r tih C, ) tL� YN-Zv Herb Prouty; City Attorney ACCOUNT mGHECK DATE ;F 000300 DALLAS TFXAS75219 Airport Gas Royalty 1/17/02 ENEXCO, INC EXPENSE ACCOUNT 3500 OAK LAWN, STE 390, LB 15 DALLAS TX 75219-4349 FIRST MERCANTILE BAI 6071 SHERRY LANE DALLAS TX 75225 9663 32 2404/1110 $110,828 60 J 1 1 1 1 pay 1/17/02 One Hundred Ten Thousand Eight Hundred Twenty eight Dollars & Sixty Cents $110,828 60 A N TO THE ORDER CF CITY OF DENTON ; r` �___� i% > ---� Airport Gas Royalty AU i IZE� SIGNATURE u4000 30011' I: 4 140 2404 31: 2008 2 3 3u' October 26, 2004 ........... DAM A. HUGHES COMPANY Oil and Gas ) Division Order TO: DANA. HUGHES COMPANY „_.D)ONo,,, "_'0340'& P.O. Drawer 669 EnegNe dale of firm production Beeville, Texas 78104.0669 CITY OF DENTON — AIRPORT #2-H The undersigned and each of them, severally certifies that they are the legal owners of, and are entitled to payment for, according to the tlivision. of Interest hereinafter Indicated, the proceeds derived from the sale of oil and gas and other gaseous or liquid hydrocarbons produced and saved, from the following: Wells located on land which is more fully described in that certain Oil, Gas and Mineral Lease dated January 17, 2002, between The City of Denton, Denton, Texas, Lessor, and Enexco, Inc., as Lessee, a Memorandum of which is recorded in Volume 5010, Page 858, Real Property Records, Denton County, Texas in the proportions shown in the division of interest attached hereto as Exhibit "A". THIS AGREEMENT DOES NOTAMEND ANY LEASE OR OPERATING AGREEMENT BETWEEN THE INTEREST OWNERS AND THE LESSEE OR OPERATOR OR ANY OTHER CONTRACTS FOR THE PURCHASE OF OIL OR GAS. The following terms are a part of this division order and shall be binding upon the undersigned, their successors, legal representatives and assigns: The following provisions apply to each Interest owner ('owner") who executes this agreement. TERMS OF SALE: The undersigned will be paid in accordance with the division of Interests set out on Exhibit "A" attached hereto. The payor shall pay all parties at the price agreed to by the operator for oil and/or gas to be sold pursuant to this division order. Purchaser shall compute quantity and make corrections for gravity and temperature and make deductions for impurities. PAYMENT.From the effective date and in accordance with §91.402 of the Natural Resources Code of the State of Texas, payment is to be made monthly by payor's check, based on this division of Interest, not later than (I) sixty (60) days after the end of the calendar month oil production Is sold from the property listed above and/or III) ninety (90) days attar the end of the calendar month In which gas production Is sold from the property listed above, and less taxes required by law to be deducted and remitted by payor as purchaser. Payments of less than $100 may be accrued before disbursement until the total amount equals $100 or more, or until December 31 of each year, whichever occurs first. Payee agrees to refund to payor any amounts attributable to an interest or part of an Interest that payee does not own. INDEMNITY: The owner agrees to Indemnity and hold payor harmless from all liability resulting from payments made to the owner In accordance with such division of interest, including but not 11pri ted to attorney fees or Judgments In connection with any suit that affects the owner's interest to which payor Is made a party. DISPUTE; WITHHOLDING OF FUNDS: If a suit is filed that affects the Interest of the owner, written notice shall be given to payor by the owner together with a copy of the complaint or petition filed. In the event of a claim or dispute that affects title to the division of Interest credited herein, payor Is authorized to withhold payments accruing to such Interest, without Interest unless otherwise required by applicable statute, until the claim or dispute is settled. TERMINATION: Termination of 11.4 agreement Is effective on the first day of the month that begins after the 30th day after the date written notice of termination is received by either party. NOTICES: The owner agrees to notify payor in writing of any change in the division of interest, Including change of Interest contingent on payment of money or expiration of time. No change of interest Is binding on payor until the recorded copy of the Instrument of change or documents satisfactorily evidencing such change are fumished to payor at the time the change occurs. Any change of Interest shall be made effective on the first day of the month following receipt of such notice by payor. Any correspondence regarding this agreement shall be furnished to the addresses listed unless otherwise advised by either parry. In addition to the legal rights provided by the terms and provisions of this division order, an owner may have certain statutory rights under the laws of this state. IN WITNESS WHEREOF, this instrument is executed effective as hereinabove provided. WITNESSF — IN EST R 1. l / 2._S SOCIAL SECURITY OR FEDERAL I.D. NUMBER 1. 2. SOCIAL SECURITY OR FEDERAL I.D. NUMBER 1. 2. SOCIAL SECURITY OR FEDERAL IA. NUMBER 1. 2. SOCIAL SECURITY OR FEDERAL I.D. NUMBER (TWO WITNESSES ARE REQUIRED FOR EVERY SIGNATURE) FAILURE TO FURNISH YOUR SOCIAL SECURITYfrAX I.D. NUMBER WILL RESULT IN 31 PERCENT (31%) WITHHOLDING TAX IN AC- CORDANCE WITH FEDERAL LAW, AND ANY TAX WITHHELD WILL NOT BE REFUNDABLE BY PAYOR. THIS DIVISION ORDER COMPLIES WITH THETERMS OF SUBSECTION (C) OF SECTION 91.402 OFTHE NATURAL RESOURCES pODE OF THE STATE OF TEXAS AND PURSUANT TO SUBSECTION (E) OF SECTION 91.402, IF AN OWNER OF A PRODUCING PROPERTY REFUSES TO SIGN SUCH A DIVISION ORDER, THE PAYOR MAY WITHHOLD PAYMENT WITHOUT INTEREST t1NTIL SUCH DIVISION ORDER IS SIGNED. If your address is not shown herein or Is Incorrectly shown, please Indicate correct mailing address below: EXHIBIT "A" CITY OF DENTON — AIRPORT #2-H DIVISION ORDER NO.0340-02 Royalty Interest Owner Net Revenue Interest City of Denton .20000000 Michael A. Conduff, City Manager 215 East McKinney Denton, TX 76201 AMENDMENT TO SURFACE USE AGREEMENT CITY OF DENTON AIRPORT This Amendment to the Surface Use Agreement City of Denton Airport of January 17`n 2002 ("Amendment to the Agreement") is made and entered into effective this 30`n day of August, 2004 by and among the DAN A. HUGHES COMPANY, whose address is a P.O. Drawer 669, Beeville, Texas 78104-0669 (Operator") and the CITY OF DENTON, TEXAS, a home rule municipal corporation, acting by and through its duly authorized City Manager ("Surface Owner"); WHEREAS, Operator and Surface Owner desire to enter into an amendment to the above mentioned agreement regarding Operator's use of the Lands for its proposed oil and gas operations thereon in connection with Operator's gas well operations on the Airport Property. NOW, THEREFORE, in consideration of the premises and the covenants set forth below, Operator and Surface Owner agree to amend their agreement to add these additional provisions as follows: 1. An annual lease at the rate of $0.08000 cents per square foot for a tract of land totaling 35,629.94 square feet, which is $2850.40 payable annually to be used for a gas collection pipeline. Attachment A, a survey of the leased premise from Alliance Area Surveying, identifies the proposed tract of land. A survey showing the corrected 15-foot width of property lease will be provided no later than 30 days after the signing of this Surface Use Agreement Amendment. Such payment for land to be payable upon completion of construction and each year anniversary thereafter until gas pipeline removal. Operator shall remit the payments required in this paragraph payable to the City of Denton, the Surface Owner. 2. An annual payment of $10.00 per rod for a total of 87.81 rods (1404.95 feet), which is $878.10 for the right of way to lay a gas collection pipeline on Airport property. Attachment A, a survey of the leased premise from Alliance Area Surveying, identifies the proposed tract of land. A survey showing the corrected 15-foot width of property lease will be provided no later than 30 days after the signing of this Surface Use Agreement Amendment. Such payment for pipelines to be payable upon completion of construction and each year anniversary thereafter until removal. Operator shall remit the payments required in this paragraph payable to the City of Denton, the Surface Owner. 3. An annual lease at the rate of $0.08000 cents per square foot for a tract of land totaling 200' x 400' well site or 80,000 square feet, which is $6400.00 payable annually. Attachment B, a survey of the leased premise from Alliance Area Surveying, identifies the proposed tract of land. A survey showing the corrected dimensions of the property lease will be provided no later than 30 days after the signing of this Surface Use Agreement Amendment. Such payment for land to be payable upon signing of this Surface Use Agreement and each year anniversary thereafter until the well is abandoned and plugged. Operator shall remit the payments required in this paragraph payable to the City of Denton, the Surface Owner. 4. This amendment to the agreement shall be construed under the laws of the State of Texas, without reference to conflict of law principles which would require the application of the law of another jurisdiction, and exclusive venue shall be in Denton County, Texas for any claims lawsuits or actions in connection with this Agreement. 5. In the event of any conflict between the parties hereto such that either party brings or commences any legal action or proceeding related to this license, including but not limited to, any action pursuant to the provisions of the Texas Uniform Declaratory Judgments Act (Tex. Civ. Prac. & Rem. Code § 37.001, et seq., as amended), the parties hereto agree to waive any and all rights to recovery of attorneys fees to which the prevailing party might otherwise be entitled. 6. This amendment to the agreement shall never be construed to constitute the parties hereto as partners or joint venturers, or to create a relationship of principal -agent, employer -employee, trustee beneficiary, an association for business or profit, or any other relationship, legal or equitable, among the parties hereto. In all respects, each party shall be responsible for its own conduct in connection with the subject matter of this Agreement as though it were an independent contractor, free from all control and direction of the others. 7. This amendment to the agreement may be executed in multiple counterparts, each of which when taken together shall constitute but one and the same instrument, but none of which shall be effective until and unless executed by all parties named herein. Additionally, this Agreement may also be executed in multiple originals, any one of which, when fully executed as herein provided, shall be effective for all purposes. `When fully executed as herein provided, the terms and conditions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto, their heirs, successors and assigns. 8. EXECUTED by each party hereto as of the date indicated beside its signature, to be effective for all purposes as of the Effective date. TEST: fer alters, City Secretary Date: TO Herbert L. Pr,6uty, City Attorney Surface Owner: Jo ortut Assistant City Manager CI Y OF ENTON, TEXAS Operator: P.O. Drawer 669, Beeville, Texas 78104-0669 STATE OF TEXAS -BEE COUNTYOF B)J Before me, H)i M1Q2�iNt: A. 6uNa the undersigned notary public, on this day personally appeared N R. gg4h , the (iy�le;Z of �*6e6 Qie ✓ known to me; proved to me on the oath of ; or proved to me through his/her current {description of identification card or other document issued by the federal government or any state government that contains the photograph and signature of the acknowledging person to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed that instrument for the purposes and consideration therein expressed. Given under my hand and seal of office this 30th day of August, 2004. KAT""11,A YOU"G AIL f ' 4A NOT Y PUBLIC , 0 ' ti �ti MEMORANDUM OF SECOND AMENDMENT TO SURFACE USE AGREEMENT The Memorandum is being executed for the purpose of giving notice of the existence of that certain Surface Use Agreement dated effective of even date entered into by and between, whose address is (as "Operator") and the CITY OF DENTON, TEXAS (as "Surface Owner") regarding Operator's use of the lands owned by Surface Owner located in Denton County, Texas, to wit: (the "Land") for Operator's oil and gas operations on such lands. Dated effective this, August 30, 2004. Surface Owner: Jo Fortune; Assistant City Manager CITY OF DENTON, TEXAS ATTEST: Yej- Jerm Walter City Secretary APPROVED AS TO FORM: Z-a Herb Prouty, City Attorney GAS PIPELINE EASEMENT EXHIBIT DENTON MUNICIPAL AIRPORT 1.636 ACRES FIELD NOTES to all that certain tract of land situated in the WILLIAM NEIL SURVEY, Abstract No. 970, in the City of Denton, Denton County, Texas and being a part of Lot 1, Block 1, Southeast Airport Addition, an addition in the City of Denton according to the plat thereof recorded in Cabinet G, Page 295 of the Plat Records of Denton County, Texas, and a part of a tract of land now owned by the City of Denton Municipal Airport; the subject tract being more particularly described as follows: BEGINNING at the intersection of the South I:ne of said Lot 1 and a 25' building line as shown on said Plat, from which the Southeast corner of said Lot 1 bears North 88 degrees 43 minutes 03 seconds East at a distance of 25.01 feet; THENCE South 88 degrees 43 minutes 03 seconds West with the South line thereof a distance of 30.01 feet; THENCE North 00 degrees 06 minutes 03 seconds West parallel with and 30.00 feet West of said building line a distance of 1405.57 feet at the beginning of a tangent curve to the left having a radius of 215.00 feet, a chord bearing and distance of North 02 degrees 23 minutes 20 seconds West, 17.16 feet and a delta angle of 04 degrees 34 minutes 23 seconds; THENCE along said curve parallel with and 30.00 feet West of said building line an arc distance of 17.16 feet; THENCE North 89 degrees 39 minutes 14 seconds West parallel with and 30.00 feet South of a 80' access and utility easement as shown on sc:d Plat a distance of 438.14 feet to the East line of a 60' access, drainage and utility easement as shown on said Plat; THENCE North 00 degrees 20 minutes 46 seconds East with the East line thereof a distance of 516.42 feet to the Northwest comer of the herein described easement; THENCE South 89 degrees 39 minutes 14 seconds East a distance of 30.00 feet to the Northerly most Northeast corner of the herein described easement; THENCE South 00 degrees 20 minutes 45 seconds West a distance of 486.42 feet to the South line of said 80' Access and Utility Easement; THENCE South 89 degrees 39 minutes 14 seconds East with the South line thereof a distance of 434.06 feet to the intersection of said South line with sold building line at the beginning of a non —tangent curve to the right having a rad'ds of 245.00 feet, a chord bearing and distance of South 05 degrees 37 minutes 30 seconds East, 47.16 feet and a delta angle of 11 degrees 02 minutes 44 seconds; THENCE along said curve and sold building lane an are distance of 47.23 feet; THENCE South 00 degrees 06 minutes 03 seconds East with said building line a distance of 1404.95 feet to the PLACE OF BEGINNING and enclosing 1.536 acres of land, more or less. CERTIFICATION: I hereby certify that I have conducted an accurate on the ground survey of the promises depicted hereon and described in the legal description attached hereto and that the findings and results of said survey are true and correct to the best of my knowledge and belief and that the size, type and location of the permanent improvements are as shown, and that said survey correctly shows the location of all alleys, streets, rights —of —way, and easemeres of record of which the undersigned has been advised effecting the subject premises according to the descriptions of record, and that except as shown there are no visible encroachments,._ visible overlaps, visible conflicts or visible protrusions. �.t 1 J.E. THOMPSON II R.eX.S. No 4857 Date SURVEY NOT VALID I f_ CF C Pic srea�, S.E. TFIC\tPSON) o rA J GAS PIPELINE EASEMENT EXHIBIT DIENTON MUNICIPAL AIRPORT 1.636 ACRES S 89'39'14"€ 36.00' n W. tE\CI5No C910 N'05'\aA "NY a h DENTON MUNICIPAL a o AIRPORT O N N O O O O Z 5LACCESS k JlILIr� [A5E"Lhl S 89'39'14"E 434.06' 12 N 89'39'14"W 438.14 5 L=17.16' 5 R=215.00' jCH=NO2'23'20"W 17.16' DELTA=04'34'23" ' o I I E 1 I LQT 1, BLOCK 1 SOUTHEAST,AIRPORT ADDITION CABINET' G, PAGE 295 L=47.23' R=245'00' CH=S05637'30"E 47.16' DELTA=1 1'02'44" Q IQ I� �'Z HPKD\n �oRtg56 ' D A�SI�pCC �o I Io I w m ;o I A LnN U25 BVILDIND LINE h POE 1 "=200' I I - - - - - S 88'43'03"W 30.01' S SURVEY NOT VALID J c •.iF ; �� o L. P.O. BOX 507 ALL � � p�'` •� � FfG 9n\ y KRUM, TX 78249 940-482-6723 OFFICE A * UR tl 940-482-3680 FAX J.E. THOMPSON' 0 JOB NUM 114-B MAIN STREET DATE: \� t •' ,, , '��;/ e GAINESVILLE, TX 76240 DRAWN H '�� c !i \�; 940-665-9105 OFFICE .............. 0 w1`z cRN'0° �A 9 A�S�RA I S� titN W SMtC �o k18 A�S�RA � MC.1�0��gpNo� 97;�Y 1"=1000' to f �0 CT 1A01 g5 ARStKA SNoV':✓9 +0 40 ACRE LEASE I � � I �l]RVLY � � A�SZRPCT ro. 5gh I I 1 certify this plat to be true and correct to the boat P.O. BOX 507 of my knowledge. KRUM TX 76249 940-482-6723; OFFIG`E Dote 940--482-8680 FAX:;-': Operator. Dan A Hughes Company 114—B MAIN STMT Lease Name do Well Number: Airport "D" GAINESV=, TX 7624[ Elevation: 632 940-665-9105 OFFICE Nearest Town in County: t Mile West of Denton, Texas 840-865-9106 FAX �pC B.Ci[ NWsL SCOT-01-t8 OCNTON AIRPORT "c" NCLLHEAO RM J HARD T 13°R16rJb A$gCR� DENTON AIRPORT '0' WELLHEAD 1e0 fUR LIANCE AREA VEYING JET —31 -- -._ .. _......— 9nd I'd 1:LB9-ZBb A3110d 0IAH0 899:01 40 01 DENTON MUNICIPAL AIRPORT #G.U. #I.—H & CENTRAL FACILITY SITE LAYOUT I I LOT 1, BLOCK 1 I I SOUTHEAST AIRPORT ADDITION CABINET G. PAGE 295 Li LINE HEATERS PROPOSED r I WELL HEAD RESERVE PIT o l I N I GUY ANCHOR C".) \ w o TANK BATTERY — — — 6u' ROAD EASFMENT OHU 0HU — -- OHU .....— OHU — -� ..—.201 ME.— _ EVIDT71 G ,CF2AV d P.O. sox 507 +ALLIANCE KRUM, TX 76249 AREA 940-482-6723' OFFICERVEYING 940-482=3580 FAX:" JOB NUMBER:0208 114-B MAIN STREET DATE: 8-9- GAINESVIIlE, TX 76240 DRAWN BY: JHCI >+_i oo' 940-665-9105. OFFICE CHECKER BY-.!JET940-666 9106 FAX R.P.L.S. IJET fl I . CA TL89-281, A3110d QIAWa eTT:OT 40 LT Ond UNDERGROUND PIPELINE EASEMENT AGREEMENT THE STATE OF TEXAS COUNTY OF DENTON § This Underground Pipeline Easement Agreement (this Agreement') is entered into between the City of Denton, Texas, a home rule municipal corporation of Denton County, Texas ("GRANTOR'S and Stroud Energy, LTD. as ("GRANTEE'). This easement is granted to the GRANTEE pursuant to the authority granted to the City Manager under paragraph 1., section (b) of the Surface Use Agreement City of Denton Airport, entered into and effective the 17'b day of January, 2002, by and among ENEXCO, Inc. and the City of Denton, Assignment of Oil, Gas and Mineral Lease from Enexco, Inc., to Dan A. Hughes Company dated June 19, 2002, subsequent Amendments dated April 29, 2004, and August 30, 2004, and the Assignment of Gas Well Surface Use Agreement at Denton Municipal Airport to Stroud Energy, Ltd., dated July 15, 2005. . For and in consideration of a one-time payment of $13,595.29 (1,358.78 Rods x $10) for surface damages for the City of Denton Airport #3H and #4H pipeline and an annual payment of $9,152.14 (164,844 square feet x $.05552) for land taken out of production for the City of Denton Airport #3H and #4H pipeline, for a total initial payment of $22,747.43, and other good and valuable considerations are in hand paid, the receipt of which and sufficiency of which is hereby acknowledged, and in consideration of the covenants contained herein, GRANTOR and GRANTEE agree as follows: Subject to the tents of this Agreement, GRANTOR hereby grants to GRANTEE an easement (the "Easement" or `Basement Tracts") under and across that certain tract of land situated in the W. Wilburn Survey, Abstract Number 1419, Denton County, Texas, W. Neil Survey, Abstract Number 970, Denton County, Texas, I Hembrie Survey, Abstract Number 594, Denton County, Texas, and being a part of a tract of land owned by the City of Denton, commonly known as Denton Municipal Airport and being a part of Lot 1, Block 1 of the Southwest Airport Addition as recorded in Cabinet G, Page 295 of the Plat Records of Denton County, Texas, and being more particularly described in Exhibit A, and Illustrated in Exhibits B, C, and D, attached hereto and made a part hereof (the "Easement Tract'). This grant is made subject to all matters of record affecting the Easement Tracts. 2. The Easement shall only be used for the purpose of constructing, inspecting, maintaining, operating, repairing, and removing pipeline and appurtenant facilities for the gathering and transportation of natural gas across, under and upon the Easement Tracts. The appurtenant facilities may be at grade or above ground to the extent agreed to in advance by GRANTOR and the FAA, after GRANTOR receives construction drawings of such appurtenances. After completion of construction Grantee shall provide GRANTOR with Page 1 complete detailed "as -built" drawings of the pipeline and appurtenant facilities showing the exact location within the Easement Tract, depth, size, and construction methods of the pipeline and appurtenant facilities. GRANTOR reserves and retains the right to grant other rights and easements across, over or under the Easement Tracts to such other persons as GRANTOR deems proper, provided such other grants do not interfere with the use of the Easement by GRANTEE for the purpose set forth herein. 4. GRANTEE agrees and fully understands that the pipeline and appurtenant facilities located in the Easement Tracts are "at risk". Subject to GRANTOR and GRANTEE agreeing on a mutually acceptable location, GRANTEE shall arrange for the pipeline, appurtenant facilities, all activities, and improvements within the Easement Tracts to be adjusted within the Easement Tracts or relocated to facilitate any development or improvement projects, roadways or other utility crossings, at the request of GRANTOR and/or the FAA, within thirty (30) days of notification by GRANTOR and/or the FAA, and the cost associated with the adjustment or relocation of the pipelines, appurtenant facilities, all activities, and improvements shall be completely home by the GRANTEE. 5. GRANTEE shall have all of the rights and benefits necessary or convenient for the full enjoyment or use of the right herein granted, including, but without limiting the same to the right from time to time to cut, undergrowth and other obstructions on the Easement Tracts, that may injure, endanger or interfere with the use of said pipeline as long as these activities do not interfere with the operations of the Denton Municipal Airport, or any other GRANTOR operations on the land. GRANTEE shall also have the ability to remove any trees in the Easement Tracts and surrounding areas with the prior written approval of GRANTOR. The GRANTEE shall have the right to assign this grant in whole or in part with the written consent of GRANTOR, which consent shall not be unreasonably withheld. 6. This easement is granted upon the conditions that GRANTEE's Facilities to be constructed shall be maintained and operated by GRANTEE at no expense to GRANTOR and GRANTOR shall not be responsible for any costs of construction, reconstruction, operation, maintenance or removal of GRANTEE's Facilities. GRANTEE shall and does hereby agree to indemnify and hold harmless GRANTOR, its officers, employees, agents, and invitees from any and all damages, loss or liability of any kind whatsoever by reason of injury to property or third person occasioned by its use of the Easement Tracts or act of omission, neglect or wrongdoing of GRANTEE, its officers, agents, employees, invitees or other persons, with regard to the Facilities and maintenance of such improvements; and the GRANTEE shall, at its own cost and expense, defend and protect GRANTOR, its officers, employees, agents, and invitees against any and all such claims and demands. This indemnity is in addition to and does not limit, amend, or replace the indemnity by GRANTEE as Operator to GRANTOR as City in Section 17 "Indemnification" of the Surface Use Agreement between the parties referenced above. Page 2 8. GRANTEE shall diligently repair any damage to improvements on the Easement Tracts, or surrounding property, and shall restore the surface of the Easement Tracts and surrounding property from damage resulting from GRANTEE's use of the Easement Tract and Temporary Construction area. 9. GRANTEE shall, at its own cost and expense comply with all applicable laws, including but not limited to existing zoning ordinances, governmental rules and regulations enacted or promulgated by any governmental authority and shall promptly execute and fulfill all orders and requirements imposed by such governmental authorities for the correction, prevention and abatement of nuisances in or upon or connected with said premises because of GRANTEE's use thereof. 10. The GRANTEE agrees to bury all pipes at a minimum depth of 5 feet, however if the pipeline is underneath a water, sewer; or drainage pipe utility, the natural gas pipeline shall be buried at a minimum of 60 inches below the existing utility flow line. Stroud agrees to bury the pipeline at a minimum depth of 15 feet underneath the airport runway safety area located at the south end of the airport. 11. It is agreed that this grant will expire and all property rights granted hereunder shall revert to GRANTOR upon the expiration of the Surface Use Agreement City of Denton Airport, entered into January 17'b, 2002 between ENEXCO, Inc. and the City of Denton and any amcndments or extensions thereof, or Fifty (50) years from the date of execution hereof. The conveyance hereunder shall be automatically void and the easement granted shall be automatically terminated and forfeited, without the necessity of any notice, election or re-entry whatsoever. GRANTEE shall remove pipelines and return the property to its original condition at GRANTEE's sole cost and expense. The pipeline shall be removed prior to the expiration of the Easement. 12. The annual consideration due under this Easement shall be made to the GRANTOR on or before the anniversary date of the execution of the Easement grant herein. The payments shall be made without demand and if not received within Thirty (30) days of the anniversary date herein GRANTEE shall be liable for and pay interest, at an annual interest rate of 18%, until such time that the payment is received by the GRANTOR. If the payment is not made within thirty (30) days after the anniversary date described above, GRANTOR may give GRANTEE written notice by certified mail of the past due payment and if the payment, plus interest, is not received by the GRANTOR within thirty (30) days from receipt of such notice, then GRANTOR may terminate this agreement by written notice to GRANTEE. 13. It is agreed that this grant coven; all the agreements between the parties and that no representation or statements, verbal or written, have been made modifying, adding to, or changing the tetras of this Agreement. Save and except as amended hereby all of the terms and conditions of the Surface Use agreement City of Denton Airport, as amended, shall remain in full force and effect and Operator shall fully comply with the Surface Use Agreement. Page 3 TO HAVE AND TO HOLD unto GRANTEE, its successors and assigns, so long as the right and casement herein granted shall be used by, or useful to, GRANTEE for the purpose herein granted, with ingress to and egress from the premises for the purpose of constructing, inspecting, operating, maintaining, repairing, altering, replacing, changing the size of and removing the property of GRANTEE herein described. In TESTIMONY WHEREOF, the Parties herein have executed this Agreement this O t day of 2006. GRANTOR: CITY OF DE�N�T%O�N 2. By: Howard Martin, Interimucity Manager ATTEST: JENNIFER WALTER'S, CITY SECRETARY BY: A/ L APPROVED AS TO FORM: Edwin Snyder, City Denton, Texas ACCEPTED AND AGREED: STROUD jENERGY, LTD. By: -1� Name: Title: wr t4..t L& W� tV A0j"e7(Z- Page 4 ACKNOWLEDGEMENT THE STATE OF TEXAS § COUNTY OF DENTON § Howard Martin, Interim City Manager of the City of De ton, Texas, on behalf of such municipality, acknowledged this instrument before me on 2006. No Publi and for the tate of Texas ,.ee;:?.���:;,,, t JENNIFER K. WAITERS Notary Public, State of Texas My Commission Expires' / ! v ;•;fry: My Commission Expires December 19, 2006 THE STATE OF TEXAS § COUNTY OF DENTON § instrument before me on, Notary Public in and My Commission Expires: S o AFTER RECORDING RETURN TO: City of Denton Real Estate and Capital Support 601 East Hickory Street, Suite B Denton, Texas 76201 Page 5 on behalf of 1t' As Met certain haft 01 Mn! wooled n Me W. 1 1. LM SD . AOslract Nlwber 1412. Conlon CONWAY. Teas, W. NEL SIRVEY, Afstrod Member 970. Oaten County. Tara.. L HOME , Atal MA Mounter 524, Canto County, To.as. and Deng a part of a lnU d lab C.nd b7 the City of Oedon, conaronly boon C Crash M rJdpol Alrpom and b+n9 a pal of its 1. As 1, of Me Seutlaw.l AirpM Addition m recorded to Cebwd C. Pep,. 205 M Ni Plot Re area d Canton Gusty. Term, wind bong faces poftL ary de ewited as lala s, t3ECP6 M at a-patnt, On Me East side of Tom a ,Read. M form which a I/2 11 rod found fa the Northwest comer loom Borth 89 p9oee 44 Wnubf O9 9eeends Mc+t, 21AO law stt, DO UPwas 15 Watdas as Sacabs Ertl. 104.25 feet; THENCE Sadh 99 Deyreel 43 WMef O9 Secnd . e o etenca of 252.26 fast M a point; Dr -Me Soup, Go Oweems TO stieftee 51 lessen, I And. a oxa of M.00 fact to a -print thishmZ North M Dorm 43 Wrodef 09 Secom t. Met a I star d 22119 1.0 b a paMt TIdMCE Sauq M Owes. Coe Whence, 29 S. I fast per 0ef with the blast Ms d sold trod, o dhMnc, of 3257.19 feet M a paint THENCE South 39 Degrees 41 Wredas 24 b et, a isichat Of 14127 lam W a point; I thamm sap, OD Degreas to windes 36 Sea t, a 'Mann d 30.00 feet to a Point; THEME NUM 69 Clams 41 Nbslas 24 Satchel I Peak a Wants d 1411A fact b 4 Paint THENCE Smash 00 Dogmas Oro lWdes 0 S t po del aRh fed Nero gn of fob back. a distance d 1727.67 Ml to a "Nest THEMEW Sadh 80 Oegrcn 41 Wroln 29 Se t Ice wed e.td 30 hat Nwh lin lh al a South d held loft Mro a dae ce 1901.63 fact feet a pant; - fHENCE Soap, 00 Oa9ras. 13 N;rotas 10 Scant � .ith end 30fast East of a Wasl The d said Wat, a distance OF 629.57 fee W . pent THENCE Sau 99 Degras+ 14 Adrenal 19 Sena a n a Manes Col 1036A1 fast M a past; THENCE NOM 00 Degrees O8 Walas 42 Secon� 1 21, a a i5tanca of 544.01 feet to o Point; THENCE Nam 08 Degrees, 42 Minutes 42 Sac t e 5SLAROM d 148IM 1491 W 0 pent TrtfICC Smq DO pgrn+ De Wndes lee Sac r a soureest of 30.01 leer in a pant On the Swth I;n of hold Tat 1; 116rne SmM !!s 0+gre++ 4'1 Wh.Ne. 32 Awn a 4.1 -11 the Seel, Ina thaw,, a distance W r<31.35 feet M e Cant; TMEN gaup, 00 Oohas M Wnulel 42 Seem 1 est a distant. d 548.40 last to a print T Emm Noma 99 0.0vat 14 Minutes 19 Secant ust. a Stumps of 1096.53 rest to a paint THENCE NMh 00 Degree, 13 Irate. 10 Scree f mat vas that West She d said Most a detente of 929.311 feat M a pant THEta E Nerot 08 Csprasl 41 MiMes 29 Sh6CV Us wit this Sadlt Ise Of east tract a distance, of 1931.52 feel M a point; THENCE NUN 00 0" 05 Wrotes 29 Sec f ri. wM Me Tot she d said imcL a bstann W 5144.33 fast W Me POW OF lEGKMC and caawq 72f41 Wn. of WA Is lat. - nj= STATEMENT: 1 henna eaavue Me F.E.N and re, R.L. Nm far the DN at Denies. Denton, CO.4y. Toms, Commaewer Wml.r 490194, effective dare 3-30-0 and Mat mry.A 4filak 0 t This pep" is also" iMn'gp 2011e %* defiled as 'Hers d.tawt405091 _ms, to he wlsdds 500-year pan' Mean n Panel 355 F Of said map. This new Statenem net raw vamp, Chet Me property and Ice the ihtalpml thereon will t Ira If IN Ow dare W 00ed 44MOCS. n MU xwaam. 9rwtn Haade con all "war a.M Oared heights rtay d Oada9le noealm -hrd a W ntWa aw.ae Ms Flaked Stdantnl Hal rot Create faltsty an the part 9f the swrvsywr. CERM TO SIAOUD ENOROY. LID. 1 hereby caNly oat Mu —Y Ma foes Dan a aaeweat n-the'-yened +h^'4 of Me me as estimates seen all oaseraea M she total description attached hereto. tandated "a' Tian and espamt;wn an 8/11/05 and Met ill Nnmiras all nitrate of "to farce/ one MM and eereet b Me Teri d my, btlief aro last pat Sot. 4P+ om Mwlian d Maim. ad COparAM p.rrhwM hnpfa.anwb an as .InsMN are Mel sad w coy renews Met. locates at a0 ansow. •pods, ntantuned tiptoed-;a�aa/' and eosemmts d record, wenppW td he. a w Me d it van W he. them adh rw a faclfng the walect rrahlse,.ae4waate W an. ' descriptions Of r.asre, send Obt asaw m Mort a I nth 'o us Or apparent nMaian. conf6ets W annotation. Grew+: The Oland ter cGnl'. rgaeeW6m W: W 43 a ham the Me the ..ray, was t4.ped t. am". eery mlaspelbge Or acre afreo an the fully report. other ill t' Mt efpife 1 ! pact Iwwlnnod must except se purvey as Issued. MOM Tbo saws sheeen woa pefew W wilhowel 1 a behreso of Uh.Me A • o Or Title Border. EXHIBIT A `y j� pr�b T�S/1�7pE•/f f� 9f� * VY H.C. INGRAM, III' ham'° 5842 �:Q-j aft•. �.. YI� EASEMENT EXHIBIT BOX 118 I. T% 76 FAX H.C. [NGRAM, II[ 5842... - o, 1 N GC25 $ IN 89.44 21. u r — — 11 CLAA. PL ftluo - CD+RAl EAGEE FARMS, INC i JOHN PORTER AUTO SALES O-n., Addn..: P.O. BOX 876 SANGER, TX 76268-0878 Property Addy.ec 1011 COLE RD TOM 3O W i I DENTON { MUNICIPAL { .AIRPORT di 3 0'� ^�R ino tt` G UOOi �0 w� 4, �ti5 I -TT I l bon 1o05-TT E 21 houndom ;I :1e BENCHMARK E CIA - SURVEY M - BEARMG M25 IRE - 6KM ROD POU IRS - 1/2' IRON RD, CAP . PLASWC uP PCP FYNCF NFCP - WfCP WTCP . WOOD fCP 000 yCP PLAT OR OEM - PONd Or BEGI POG - POW OF CON ROW - RICNT-OF-wAT CE - 00NMUNICAT6A DE - DRADUCE EAA EE . ELECTRIC EASE UE - UTILITY EASDAI WE - WATERLINE Ey PUE - PUBLIC uTury BCM - BURIED CABLE DPW - BURIED PIMA ER - ELECTRIC RISE ET - ELMIRIC TRM SS - SANITARY SEW ST - STORM SEWER TR - TELEPHONE RM 0- LIGHT POLE (I - POWER POLE L - FBEMO� - WATER VALVE WATER METER Q - SEWER MMTNO ®- GAS METER O - CAS VALVE/TIE O- PROPANE TAM PROPERTY LIN' - - - - - ADACENT PL — -�- - — ABSTRACT/SUF DENTON, CRY OF O-mr Addn.r. N INICIPAL FRRLDWO 215 F. McIONNEY STREET DENTON. TX 76201-4229 P."dy Addnm DEMON MUNICIPAL AIRPORT EXHIBIT B EASEMENT EXHIBIT BOX 116 1. 7% 76249 4U—SM OFPICB 482—SM PAX 00 0 400 600 120D G m MO tl M N Wmc SCALE - Fm 1) sn$ - ----; LEGEND-:. , ex � 9 BENCHMARK Y CORONIRR) < 5 s MONUMENT CONTROUBABASIS g BEARm 'a�i in - Tmo�N mo RooROo� T .. �gi I as - PULsnc aP yo I` I FCP - FENCE CORNER POST gait a NTON YWFc(a� . �o FTC`PP A -�..-A .. OEM `+�� PDR : PLAT CALL POINT ORNNINO Poe - POINT a CCMwcwwN S W41'24'E ROW . RgNT-WAY-WY ORT CE - COIIRffeCAT N EASEME 143,03 ` DIE - DRAINAGE EASEMENT QQ ovla' —•Y. I 30.W i : EASEMENT ME - WATE%Nff EASEMENT N or V24'W PUE - PUBLIC ImUTY EASEMFJ 143.18' WN - BURRED CABLE MARKER -I i I RPM - BURNED PIPELINE NARKT to I ER . ELECTRIC RISER CD ET - EL ECTRNC TRANSFOMRNR SS - SANITARY SEWER ST . STORM SEWER 0 TR . TELEPHONE RISER id- POPPO En()) UTILITY RISER (UP) -�l- ARE HYDRAIIT - -. 94 - WATER VAL% C" 03 WATER METER 1� O n - SEWER R) QMNIIDIE SS%%M__ q g 5J ®. GAS METER 0- OAS VALVE/TEST STATE o- PROPANE TAM q PROPERTY UNE PL) C -- -••- MMOFNT PL qq 4. 6 EASEMENT LINE CENTERLINE Q' I i --.—�.��.•� FLOOD BOUNDARY / N mna 'QNF d I . Win£ i $ I. $ N y i This .a n of pipdi. Im bmRd os I. not u .o C dialam natural drahNage F jg� mama al0'�6 I 7.941. ANAM 8B'41'29'E 1981" F --- N 1'2 1991.59' I; `° = EASEMENT E)amr c cpO, t;A},O 3• f COL33?03AIRRO i H.C. INGRA94, III -11 q 5842 �:4- I boun P.O. BOX 118 JOB ' - , do 2 Oft IBM TX 78248 DATE: - 840--482-=S DMEZ A. S U R C IMAM 3 hn,rgA ti 940-482-WRO FAX IMWUTFW. Ict kR. 0 4 3 so N `6goo gig J D r �y V 0� b 109*M ALTt.20AD S 3.E19046 H MR I I y �1YN07i _ I C I— x w `z0 2 �✓rp:p$ �9 �1 00 <�a v. 1�y{iB Ha �g$� �X }oyF �yf ¢ A GGGi m�7 VG S'88 ��z�oaC aas �33 lii'I "aa��arraa�aoaaea ':�eaae��araaaatea a-na ���III �I:III