ecord. The royalties herein elsewhere specified, and subject to the provisions of Paragraph 11 hereof, shall be computed only on the proportionate part of theproduction from any pooled unit that is allocated to said land; and unless otherwise allocated by order of a Regulatory Body, the amount of production to be soallocated from each pooled unit shall be that proportion of such total production that the surface area of said land included in the unit bears to the total surfacearea of all lands included in such pooled unit. Drilling or reworking operations on or production of oil, gas or other minerals from the land included in suchpooled unit shall have the effect of continuing this lease in force and effect during or after the primary term as to all of said land (including any portion of saidland not included in said unit) as to all strata underlying said land, whether or not such operations be on or such production be from said land. Any unitformed by Lessee hereunder may be created either prior to, during or after the drilling of the well which is then or thereafter becomes the unit well. Separateunits may be created for oil and for gas or gas condensate, or for separate stratum or strata of oil or gas or gas condensate, even though the areas thereofoverlap, and the creation of a unit as to one mineral or strata or stratum shall not exhaust the right of Lessee (even as to the same well) to create different oradditional units for other minerals or for other strata or stratum of the same or other minerals. The failure of the leasehold title (in whole or in part) to any tractor interest therein included in a pooled unit shall not affect the validity of said unit as to the tracts or interest not subject to such failure but the unit maythereafter be revised as hereinafter provided. Lessee shall have the right and power to reduce and diminish the extent of any unit created under the terms of thisparagraph so as to eliminate from said unit any interest or lease to which title has failed or upon which there is or may be an adverse claim. Such revision ofthe unit shall be evidenced by an instrument in writing executed by Lessee, which shall describe the lands included in the unit as revised and shall be filed forrecord in the Conveyance Records of the Parish where the lands herein leased are situated. The revised declaration shall not be retroactive but shall be effectiveas of the date that it is filed for record. Any unit created by Lessee hereunder shall also be revised so as to conform with an order of a Regulatory Body issuedafter said unit was originally established; such revision shall be effective as of the effective date of such order without further declaration by Lessee, but suchrevision shall be limited to the stratum or strata covered by said order and shall not otherwise affect the unit originally created.7. Subject to the provisions of Paragraphs 6 (dealing with pooling and unitization) and 11 (dealing with warranty and proportionate reductionbased on ownership) the royalties to be paid by Lessee are: (a) On oil (which includes condensate and other liquid hydrocarbons when separated by leaseseparator units), one-eighth (1/8) of that produced and saved from said land and not used for fuel in conducting operations on said land or on land pooledtherewith (or with any part thereof), or in treating such liquids to make them marketable; (b) On gas produced from or attributable to said land and sold,including the gas remaining after the extraction of hydrocarbon products therefrom one-eighth (1/8) of the market value at the mouth of the well of the gas sosold, including casinghead gas or other gaseous substances. The price to be used in computing the market value at the mouth of the well shall be the pricereceived by Lessee under an arm's length gas sales contract prudently negotiated in the light of the facts and circumstances existing at the time ofconsummation of such contract; provided, however, should Lessee by virtue of any order by any regulatory body, state or federal, receive less than the priceprovided for in any gas sales contract entered into by Lessee, such lesser price shall be used in such computation; (c) With respect to gas used other than foroperations hereunder, including casinghead gas or other gaseous substances, royalty shall be one-eighth (1/8) of the market value at the mouth of the well ascomputed in subparagraph (b) above; provided if Lessee is not selling gas under arm's length contract as provided in subparagraph (b) above, the market valueof gas used other than for operations hereunder, including casinghead gas or other gaseous substances, shall be its fair value at the mouth of the well at thetime of production but not less than the average of the prices paid under comparable circumstances for gas of like kind and quality from the field from whichsuch gas is being produced, or if no gas is being sold from that field, the average of prices paid under comparable circumstances for gas of like kind andquality in the three nearest fields where sold; (d) On hydrocarbon products extracted and saved by Lessee from gas, casinghead gas or other gaseoussubstances produced from or attributable to said land by processing such gas through any plant or plants, whether owned or operated by Lessee or any affiliateof Lessee or by a party other than Lessee, one-eighth (1/8) of the net proceeds received by Lessee for such products, said net proceeds being the net amountreceived by Lessee after deducting the costs of processing such gas through said plant or plants; (e) For all operations hereunder (lease or unit operations),Lessee may use free of royalty all oil, gas or any component thereof and water from said land, except water from Lessor's wells, as well as gas, including thecomponents thereof, injected into a subsurface stratum or strata as hereinafter defined; (f) One Dollar ($1.00) for each ton of 2,240 pounds of sulphur, payablewhen marketed; and, (g) One-eighth (1/8) of the market value at the well or mine of all other minerals produced and saved or mined and marketed. Oilroyalties shall be delivered to Lessor free of expense at Lessor's option in tanks furnished by Lessor at the well or to Lessor's credit in any pipeline connectedtherewith. Lessee may from time to time purchase any royalty oil, paying therefor the market price prevailing for the field where produced on the day it is runto the pipeline or storage tanks, or if no such market price is established, the price for which Lessee sells its share of each oil less the costs of handling andtransportation to the point of sale. Lessee shall have the right to inject gas, water, brine or other fluids into a subsurface stratum or strata, and no royalties shallbe due or computed on any gas or component thereof produced by Lessee and injected into subsurface stratum or strata through a well or wells located eitheron said land or on a pooled unit containing all or part of said land.8. If, prior to or after the discovery of oil or gas on said land, a well producing oil or gas in paying quantities for thirty (30) consecutive daysshould be brought in on adjacent lands not owned by Lessor and not included in a pooled unit containing all or a portion of said land, Lessee shall drill suchoffset well to protect said land from drainage as and within the time that a reasonable and prudent operator would drill under the same or similarcircumstances, it being provided, however, that Lessee shall not be required to drill any such offset well unless the well on adjacent land is within 330' of anyline of said land nor shall such offset well be necessary when said land is being reasonably protected by a well on said land or on land pooled therewith (orwith any part thereof).9. The Lessee shall be responsible to Lessor for all damages to timber and growing crops of Lessor caused by Lessee's negligent operations.10. The rights of any party hereunder may be assigned in whole or in part, and all provisions hereof shall inure to the benefit of and bind thesuccessors and assigns (in whole or in part) of Lessor and Lessee, and regardless of any notice thereof, actual or constructive, any change of or division in theownership of said land or any interest therein or any change in the status or capacity of Lessor however accomplished will not operate to enlarge or diminishthe rights of Lessee, or the heirs, successors, assigns or sublessees of Lessee, herein; and no change of or division in the ownership of said land or any interesttherein whether by sale, assignment, sublease, inheritance, prescription or otherwise shall be binding on Lessee until one (1) month after Lessee shall havebeen furnished by registered U.S. Mail at Lessee's principal place of business with a certified copy of the recorded instrument(s) evidencing same or in theevent of a change in status or capacity of Lessor or any other owner of rights hereunder until Lessee shall have been furnished written evidence of any suchchange in status or capacity. The furnishing of such instruments or evidence shall not affect the validity of payments theretofore made in advance. In the eventof a transfer in whole or in part by Lessee of ownership interests in said land liability for the breach of any obligation hereunder shall vest exclusively upon thetransferee who commits such breach. A sublessee may, as to Lessor, exercise the rights and discharge the obligations of the Lessee hereunder without thejoinder of any sublessor. In the event of the death of any person entitled to payment hereunder, Lessee may pay or tender any payment hereunder to the creditof the deceased or the estate of the deceased until such time Lessee is furnished with proper evidence of the appointment and qualification of an executor oradministrator of the estate, or if there be none, until Lessee is furnished with evidence satisfactory to it as to the heirs or devisees of the deceased and that alldebts of the estate have been settled or paid. If at any time two or more persons be entitled to participate in any payment hereunder, Lessee may pay or tendersaid payment jointly to such persons or to their joint credit in the depository bank named in paragraph 5 above; or, at Lessee's election, the proportionate partof any such payment to which each participant is entitled may be paid or tendered to him separately or to his separate credit in said depository; and payment ortender to any participant of his portion of any such payment hereunder shall maintain this lease in full force and effect as to such participant. If six or moreparties become entitled to any payment hereunder, Lessee may withhold payment thereof, without interest, unless and until furnished with a recordableinstrument executed by all such parties designating an agent to receive payment for all.11. Lessor hereby warrants and agrees to defend the title to said land and agrees that Lessee, at its option, may discharge any tax, mortgage, orother lien upon said land and be subrogated thereto and have the right to apply to the repayment of Lessee any royalties accruing hereunder. Withoutimpairment of Lessee's rights under the warranty, it is agreed that if Lessor owns less than the entire undivided interest in all or any portion of said land ormineral rights relating thereto, whether or not this lease purports to cover the whole or a fractional interest, then any payment to be paid hereunder shall bereduced proportionately. Further, if Lessor's title should fail as to any part of said land, royalties or other payments, if any, shall not be applicable as to thatpart of said lands to which title has failed; or if the production from said land, or any part thereof, is subject to any royalty or interest in production other thanthose specifically reserved to Lessor herein, then such interests in production shall be deducted from the Lessor's royalty or other share of the royalty reservedherein. Whether or not such reductions are made, this lease shall immediately attach to and affect any and all rights, titles, and interests in said land, includingreversionary mineral rights, hereafter acquired by or inurring to the benefit of the Lessor or Lessor's successor in title. Should any interest in said land beclaimed adversely to Lessor, Lessee shall have the right to acquire such interest or a lease(s) thereon in order to protect its leasehold rights and shall notthereby be held to have disputed Lessor's title; and in the event said land, any part thereof, or an interest therein or in royalties payable hereunder are claimedby third parties, Lessee shall have the right to withhold without liability for interest thereon the payment of royalties or production therefrom or to deposit suchroyalties in the registry of the Court until final determination of Lessor's rights. When required by state, federal, or other law, Lessee may withhold taxes withrespect to royalty, and any other payments due hereunder and to remit the amounts withheld to the applicable taxing authority for the credit of Lessor.
12. In the event that Lessor at any time considers that Lessee has failed to comply with any condition, covenant or obligation, whether express orimplied, of this lease, Lessor shall so notify Lessee in writing of the facts relied upon as constituting such breach, whether active or passive, and Lessee shallhave two (2) months after receipt of such notice in which to take whatever action legally necessary to comply with the requirements hereof. Good faith shall bethe standard for determining whether there has been compliance with any such condition, covenant or obligation. The service of said notice and the lapse ofsaid two (2) months without Lessee meeting or attempting to meet the alleged breach shall be a condition precedent to any action, including but not limited toan action for damages, by Lessor for any cause hereunder. This lease shall not be subject to cancellation or forfeiture, either in whole or in part, for failure tocomply with any such condition, covenant or obligation except after final judicial ascertainment of such failure and Lessee has been given a period of two (2)months after such final judicial ascertainment to prevent such cancellation or forfeiture by complying with and discharging such condition, covenant orobligation as to which Lessee has been judicially determined to be in default.13. This lease may be signed in any number of counterparts, each of which shall be binding upon all who execute same, whether or not all partiesnamed in the caption hereof execute this lease. As used in this lease, the term "Lessor" shall include all parties who execute this lease, as Lessor, regardless ofwhether such party is named in said caption.14. It is agreed that whenever, as a result of any cause beyond Lessee's control (including but not limited to fire, flood, storm, or other Acts of God;law, order, rule or regulation of any governmental unit, subdivision, or agency; equipment malfunction or break-down; inability to secure men, material, ortransportation; war, civil disturbances, strikes, or differences with workmen; or any other cause, whether similar or dissimilar, beyond Lessee's control), Lesseeis delayed, hindered, interrupted or prevented from complying with any express or implied condition, covenant or obligation of this lease, Lessee shall not beliable for damages or forfeiture of this lease and Lessee's required compliance with such condition, covenant or obligation shall be suspended so long as suchcause exists. If at any time this lease is being maintained solely by the provisions of this paragraph, Lessee, at Lessee's election, may, from time to time so longas such cause exists, pay to Lessor a sum equal to the shut-in gas royalty payment provided in Paragraph 5 hereof, regardless of whether or not there is ashut-in well on this lease or on lands pooled therewith (or with any part thereof), any such payment being hereinafter sometimes referred to as a "ForceMajeure Payment." In the event Lessee elects to make a Force Majeure Payment or Payments provided for herein, such payment or payments shall be made inthe same manner, method, amount and for the same period or periods of time and shall be given the same effect as a shut-in gas royalty payment made undersaid Paragraph 5 hereof, the first payment being due within two (2) months of the date Lessee is delayed, hindered, interrupted or prevented from complyingwith any express or implied condition, covenant or obligation of this lease as set forth above.15. If Lessee shall in good faith and with reasonable diligence attempt to make any payment hereunder but shall fail to pay or to timely pay orincorrectly pay same or some portion thereof, this lease shall not terminate unless Lessee, within two (2) months after receipt of written notice of its error orfailure, shall fail to rectify same. Lessee may at any time or times release or surrender this lease or any portion thereof by delivering to Lessor or to said Bankor by filing for record a release or releases thereof and be released of all obligations hereunder thereafter accruing as to land so released or surrendered, and allpayments to Lessor provided for herein (except royalties on actual production) shall be reduced in the same proportion that the land covered hererby isreduced. Lessee and Lessee’s successors or assigns are hereby granted such rights-of-way or servitudes affecting any lands so surrendered or released orforfeited hereunder as are necessary and/or convenient for Lessee's operations on the lands retained hereunder or on lands pooled therewith (or with any partthereof).16. In the event of forfeiture of this lease for any cause, Lessee shall have the right to retain around each well then producing (or capable ofproducing but shut-in under Paragraph 5 hereof) oil, gas or other minerals, or being drilled or worked on the number of acres fixed and located by or inaccordance with the spacing or unit or proration allowable order of the Regulatory Body of the State of Louisiana or of the United States under which said wellis being drilled or produced or shut-in, or if said well has been or is being drilled on a pooled unit by Lessee as provided herein, then Lessee may retain all ofsaid land comprising the pooled unit; and if no spacing or proration allowable order has been issued or pooled unit established, then Lessee shall have the rightto retain forty (40) acres surrounding each oil well then producing or being drilled or worked on, and six hundred forty (640) acres surrounding each gas or gascondensate well then producing, or being drilled or worked on or shut-in under Paragraph 5 hereof, each of such tracts to be in as near a square form as ispracticable and the aggregate of all retained tracts being subject to all of the terms and provisions thereof in the event of any such termination that portion ofthis lease falling in each such retained tract shall, for all purposes hereof, be considered as having been reasonably developed.Lessee.17. All of the terms and provisions of this lease shall be binding upon the heirs, successors, sublessees, representatives, and assigns of Lessor andThe consideration paid by Lessee to Lessor is accepted as full and adequate consideration for all rights, options and privileges herein granted.IN WITNESS WHEREOF, this instrument is executed as of the date first above written.WITNESSES SIGN HERE__________________________________________________________________________________________________________LESSOR SIGN HERE______________________________________________________________________________________________________________Address_______________________________________________________City State Zip Code_______________________________________________________SSN:WITNESSES SIGN HERE__________________________________________________________________________________________________________LESSOR SIGN HERE_______________________________________________________
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