Document:

a50547757ex41.htm

Exhibit 4.1

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT.

 

THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. CENTRAL TIME ON JANUARY 29, 2018 (THE “EXPIRATION DATE”).

 

	K-[  ]	January 29, 2013

 

OPEXA THERAPEUTICS, INC.

 

SERIES K WARRANT TO PURCHASE SHARES

OF COMMON STOCK, PAR VALUE $0.01 PER SHARE

 

For VALUE RECEIVED, [           ] (“Warrantholder”) is entitled to purchase, subject to the provisions of this Series K Warrant (this “Warrant”), from Opexa Therapeutics, Inc., a Texas corporation (“Company”), at any time after the date hereof (the “Initial Exercise Date”) and not later than 5:00 P.M., Central time, on the Expiration Date (as defined above), at an exercise price per share equal to $1.21 ($1.21)1 (the exercise price in effect being herein called the “Warrant Price”), [                  ] ([  ]) shares2 (“Warrant Shares”) of the Company’s Common Stock, par value $0.01 per share (“Common Stock”).  The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein.

 

1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder.

 

2. Transfers. This Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration.  Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender hereof for transfer, properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee (who shall thereafter be the Warrantholder hereunder) and the surrendered Warrant shall be canceled by the Company.

 

_______________________

 

	1	 
The Warrant Price is the closing price of the Common Stock on the day of issuance of this Warrant (i.e., the day of receipt of necessary 66.7% consent to Waiver and Amendment by the July 2012 Secured Noteholders).

	 	 
	2	The number of Warrant Shares is the product of 187,500 multiplied by the quotient of the number of dollars currently outstanding on the July 2012 secured promissory note divided by $4,085,000  (e.g., a July 2012 Secured Promissory Note with outstanding balance of $500,000 will result in a Warrant for 22,950 shares of Common Stock). 

 

  

  

  

 

3. Exercise of Warrant.

 

(a) Subject to the provisions hereof, including Section 3(c), the Warrantholder may exercise this Warrant, in whole or in part, at any time after the Initial Exercise Date and prior to 5:00 p.m. Central Time on the Expiration Date upon (i) written notice, in the form attached hereto as APPENDIX A (the “Exercise Notice”), of the Warrantholder’s election to exercise this Warrant, and (ii) payment by cash, certified check or wire transfer of funds, or pursuant to a cashless exercise pursuant to Section 3(b) below, of the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder).  The Warrant Shares so purchased shall be deemed to be issued to the Warrantholder or the Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date on which the Warrant Price shall have been paid and the completed Exercise Notice shall have been delivered.  The Warrantholder shall not be required to deliver the original Warrant in order to effect an exercise hereunder.  Certificates for the Warrant Shares so purchased shall be delivered to the Warrantholder within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised.  The certificates so delivered shall be in such denominations as may be requested by the Warrantholder and shall be registered in the name of the Warrantholder or such other name as shall be designated by the Warrantholder, as specified in the Exercise Notice.  If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the Warrantholder a new Warrant representing the right to purchase the number of shares with respect to which this Warrant shall not then have been exercised.  As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in Houston, Texas are open for the general transaction of business.  The Warrantholder’s acceptance of this Warrant as well as each exercise hereof shall each constitute the affirmation by the Warrantholder that the representations and warranties contained in APPENDIX B attached hereto are true and correct in all material respects with respect to the Warrantholder as of the time of such acceptance and as of the time of each exercise.  The Warrantholder shall promptly physically surrender this Warrant to the Company in the event the Warrant is exercised.  The Warrantholder and the Company shall maintain records showing the amount exercised and the dates of such exercise.  The Warrantholder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provision of this paragraph, following exercise of a portion of the Warrant, the number of Warrant Shares of this Warrant may be less than the amount stated on the face hereof.

 

(b) Subject to the provisions hereof, the Warrantholder may effect one or more cashless exercises by surrendering Warrants to the Company and giving written notice that the Warrantholder wishes to effect a cashless exercise by surrendering some Warrants without exercise, upon which the Company shall issue, or cause to be issued, to the Warrantholder up to the number of Warrant Shares determined as follows:

 

  

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	 	X  =	 
Y x (A-B)/A

	 	 	 
	 	where:
	 	 	 
	 	X  =	 
the maximum number of Warrant Shares that may be issued to the Warrantholder;

	 	 	 
	 	Y  =	the number of Warrant Shares with respect to which the Warrant is being exercised;
	 	 	 
	 	A  =	 
the Market Price as of the Date of Exercise; and

	 	 	 
	 	B  =	 
the Exercise Price.

 

“Market Price” of a share of Common Stock on any date shall mean, (i) if the shares of Common Stock are listed on the NASDAQ Stock Market, the official closing price reported on that date; (ii) if the shares of Common Stock are no longer listed on the NASDAQ Stock Market and are listed on any other national securities exchange, the last sale price of the Common Stock reported by such exchange on that date; (iii) if the shares of Common Stock are not listed on any such exchange and the shares of Common Stock are traded in the over-the-counter market, the last price reported on such day by the OTC Bulletin Board; (iv) if the shares of Common Stock are not listed on any such exchange or quoted on the OTC Bulletin Board, then the last price quoted on such day in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); or (v) if none of clauses (i)-(iv) are applicable, then as determined in good faith by the Company’s Board of Directors (the “Board of Directors”).

 

“Date of Exercise” means the date on which the Company has received from Warrantholder the completed and executed Exercise Notice.

 

(c) Limitations on the Number of Shares Issuable.  Notwithstanding anything herein to the contrary, the Company shall not issue to the Warrantholder any Warrant Shares to the extent that, after giving effect to such issuance, the Warrantholder (together with any person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Warrantholder, as such terms are used in and construed under Rule 144 under the Securities Act and the rules and regulations promulgated thereunder - each an “Affiliate”) would (i) beneficially own shares of Common Stock in excess of 19.9% of the shares of Common Stock outstanding (immediately after giving effect to such issuance) or (ii) control in excess of 19.9% of the total voting power of the Company’s securities outstanding (immediately after giving effect to such issuance) that are entitled to vote on a matter being voted on by holders of Common Stock, unless and until the Company obtains shareholder approval permitting such issuances in accordance with applicable rules of the NASDAQ Stock Market; provided, however, that such limitations on issuance shall not apply to any exercise of this Warrant in connection with and subject to completion of the following if, upon completion, the Warrantholder and its Affiliates would not exceed the specified limits:  (i) any offering of securities by the Company or its shareholders (including, without limitation, the Warrantholder); and (ii) a bona fide third party tender offer for the Company securities.  For purposes of this Section 3(c), beneficial ownership shall (x) exclude such number of shares of Common Stock that would be issuable upon exercise or conversion of the unexercised or non-converted portion of any securities of the Company (including, without limitation, options, warrants and convertible securities such as convertible promissory notes) except for a limitation on conversion or exercise analogous to the limitation contained in the first sentence of this Section 3(c) and (y) otherwise be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934 (and the rules promulgated thereunder).  [Note:  If the limitation contained in the first sentence of this Section 3(c) applies to any exercise of this Warrant, then the Company shall nonetheless issue to the Warrantholder such securities as may be issued below the limitation.]  Upon the written request of the Warrantholder, the Company shall within two (2) business days confirm in writing to the Warrantholder the number of shares of Common Stock then outstanding.

 

  

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4. Company Call Right; Redemption. Notwithstanding any other provision contained in this Warrant to the contrary, if the shares of Common Stock trade on the Nasdaq Capital Market, or any other trading market on which the shares of Common Stock are then traded, with a per share closing price on the trading day of at least $10.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) for at least twenty (20) consecutive trading days, then the Company, upon thirty (30) days prior written notice (the “Notice Period”) given to the Warrantholders within thirty (30) days of the occurrence of the triggering event, may call the Warrants, in whole or in part, at a redemption price equal to $0.01 per share of Common Stock then purchasable pursuant to the Warrants called for redemption.  The Warrantholder shall have the right to exercise the Warrants prior to the end of the Notice Period.  As of the last day of the Notice Period, any Warrants timely and validly called for redemption by the Company shall terminate and permanently cease to be exercisable and the Warrantholders shall then be entitled only to receive the redemption price.

 

5. Compliance with Securities Laws. This Warrant may only be exercised by the Warrantholder in accordance with applicable securities laws.  The Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant, and a similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.

 

6. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid.  The Warrantholder shall be responsible for income taxes due under federal, state or other law, if any such tax is due.

 

7. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon surrender and cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company.

 

  

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8. Reservation of Common Stock. At any time when this Warrant is exercisable, the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 8, out of the authorized and unissued shares of Common Stock, at least a number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of this Warrant then outstanding.  The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company.

 

9. Adjustments.

 

(a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then (i) the Warrant Price in effect immediately prior to the date on which such change shall become effective shall be adjusted by multiplying such Warrant Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such change and the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such change and (ii) the number of Warrant Shares purchasable upon exercise of this Warrant shall be adjusted by multiplying the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to the date on which such change shall become effective by a fraction, the numerator of which is shall be the Warrant Price in effect immediately prior to the date on which such change shall become effective and the denominator of which shall be the Warrant Price in effect immediately after giving effect to such change, calculated in accordance with clause (i) above.  Such adjustments shall be made successively whenever any event listed above shall occur.

 

(b) If any capital reorganization, reclassification of the capital stock of the Company, consolidation or merger of the Company with another corporation in which the Company is not the survivor, or sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.  The Company shall not effect any such consolidation, merger, sale, transfer or other disposition unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Warrantholder, at the last address of the Warrantholder appearing on the books of the Company, such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Warrantholder may be entitled to purchase, and the other obligations under this Warrant.  The provisions of this paragraph (b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions.

 

  

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(c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 9(a), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the Market Price per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date.

 

(d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

 

(e) In the event that, as a result of an adjustment made pursuant to this Section 9, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.

 

10. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant.  If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 10, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price (determined in accordance with Section 3(b)) of such fractional share of Common Stock on the date of exercise.

 

11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder.

 

  

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12. Notices to Warrantholder.

 

(a) Upon the happening of any event requiring an adjustment of the Warrant Price, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, stating the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Failure to give such notice to the Warrantholder or any defect therein shall not affect the legality or validity of the subject adjustment.

 

(b) The Company hereby covenants to the Warrantholder that, from the date hereof and for so long as this Warrant remains not fully exercised, it shall give written notice promptly to the Warrantholder upon the happening of any of the following events: (i) the admission in writing by the Company of its insolvency; (ii) the commission of any voluntary act of bankruptcy by the Company; (iii) the execution by the Company of a general assignment for the benefit of creditors; (iv) the filing by or against the Company of any petition in bankruptcy or any petition for relief under the provisions of the federal bankruptcy act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of sixty (60) days or more; (v) the appointment of a receiver or trustee to take possession of the property or assets of the Company; (vi) any dissolution of the Company; (vii) the adoption by the Company of any plan of liquidation; (viii) the sale by the Company of all or substantially all of its assets; or (ix) the commencement against the Company of any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof.

 

13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is Continental Stock Transfer & Trust, 17 Battery Place, New York, New York 10004.  Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent.

 

14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given and received as hereinafter described (i) if given by personal delivery, then such notice shall be deemed received upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed received upon receipt of confirmation of complete transmittal, (iii) if given by certified mail return receipt requested, then such notice shall be deemed received upon the day such return receipt is signed, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier.  Copies of such notices shall also be transmitted by email.  All notices shall be addressed as follows:  if to the Warrantholder, at the address as follows, or at such other address as the Warrantholder may designate by ten days’ advance written notice to the Company:

 

  

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[                             ]

	 	 
[                             ]

	 	 
[                             ]

	 	 
Email:  [                        ]

 

if to the Company, at the address as follows, or at such other address as the Company may designate by ten days’ advance written notice to the Warrantholder:

 

	 	 
Opexa Therapeutics, Inc.

	 	 
2635 Technology Forest Blvd.

	 	 
The Woodlands, Texas 77381

	 	 
Attention: President

	 	 
Fax: (281) 872-8585

 

15. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and permitted assigns hereunder.

 

16. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of Texas, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Warrantholder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of Texas located in Harris County and the United States District Court for the Southern District of Texas for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Warrantholder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

17. No Rights as Shareholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a shareholder of the Company by virtue of its ownership of this Warrant.

 

18. Amendment; Waiver. Any term or provision of this Warrant may be amended or waived upon the written consent of the Company and the Warrantholder.

 

19. Remedies; Other Obligations; Breaches and Injunctive Relief. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Warrantholder right to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Warrantholder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the Warrantholder shall be entitled, in addition to all other available remedies, an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

  

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20. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof.

 

[signature page follows]

 

 

 

 

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first written above.

 

	 	 
OPEXA THERAPEUTICS, INC.

	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	Neil K. Warma
	 	Title:	President and Chief Executive Officer

 

 

 

  

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APPENDIX A

 

EXERCISE NOTICE

OPEXA THERAPEUTICS, INC.

The undersigned holder hereby exercises the right to purchase ____________ of the shares of Common Stock (“Warrant Shares”) of Opexa Therapeutics, Inc, a Texas corporation (the “Company”), evidenced by the attached Series K Warrant (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.  Form of Exercise Price.  The Holder intends that payment of the aggregate Warrant Price shall be made as:

	
  

	
_______

	
a “Cash Exercise” with respect to _________ Warrant Shares; and/or

	
  

	
_______

	
a “Cashless Exercise” with respect to _______ Warrant Shares.

2.  Payment of Warrant Price.  In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the aggregate Warrant Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

3.  Delivery of Warrant Shares.  The holder requests that the Company deliver the Warrant Shares in the name of the undersigned holder (or in the name of ______________________ in accordance with the terms of the Warrant) by physical delivery of a certificate to:

_______________________________

_______________________________

_______________________________

Date: ____________ __, 20____

 

 

________________________________________________________

    Name of Registered Holder

By:_____________________________________________________                                                                           

Printed Name:_____________________________________________                                                                                     

Title (if applicable):_________________________________________                                                                           

Entity Name (if applicable):___________________________________ 

 

  

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APPENDIX B

 

Representations and Warranties

 

The Warrantholder represents and warrants to the Company that:

 

	
●  

	
Purchase Entirely for Own Account.  The Warrant and the securities to be received by the Warrantholder pursuant to the Warrant (the “Securities”) is being/will be acquired for the Warrantholder’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and the Warrantholder has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act without prejudice, however, to the Warrantholder’s right at all times to sell or otherwise dispose of all or any part of the Securities in compliance with applicable federal and state securities laws.

 

	
●  

	
Investment Experience.  The Warrantholder acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of an investment in the Securities.

 

	
●  

	
Disclosure of Information.  The Warrantholder has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the Securities.

 

	
●  

	
Restricted Securities.  The Warrantholder understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.  The Warrantholder represents that it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.  The Warrantholder acknowledges that the Securities have not been registered under the Securities Act or registration or qualified under any applicable blue sky laws in reliance, in part, on the representations and warranties herein.

 

	
●  

	
Legends.  The Warrantholder understands that certificates evidencing the Securities may bear the following or any similar legend:

 

	
●  

	
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT.”

 

  

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●  

	
If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

 

	
●  

	
Accredited Investor.  The Warrantholder is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the Securities Act.

 

	
●  

	
No General Advertisement.  The Warrantholder did not learn of the investment in the Securities as a result of any public solicitation or advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television, radio or internet or presented at any seminar or other general advertisement.

 

	
●  

	
Brokers and Finders.  No person or entity will have any valid right, interest or claim against or upon the Company or the Warrantholder for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Warrantholder.

 

 

13Exhibit 10.1
                           OIL, GAS AND MINERAL LEASE

This Agreement executed and effective on this 20th day of October,  2011, by and
between

Wade Perkins, husband of Rachel B Perkins, whose address is 504 Elm St, Bustrap,
LA 71220

Maxwell Savage III, husband of Shirley P Savage,  whose address is 627 Woodlake,
Commorue, LA 71419

Charles R. Perkins,  husband of Doris A Perkins,  whose address is 487 Macarthur
Loop, Cotton Valley, LA 71018

as Lessors  (whether  one or more) and Lanza Land  Management,  LLC, a Louisiana
Liability  Company,  whose  mailing  address is Box 458,  Oil City,  LA 71061 as
Lessee.

WITNESSETH:

LESSOR in  consideration  of TEN DOLLARS  ($10.00)  AND OTHER GOOD AND  VALUABLE
CONSIDERATIONS of the royalties herein provided,  and of the agreement of Lessee
herein contained, hereby grants, leases and lets exclusively unto LESSEE for the
purposes  of  investigating,   prospecting,   drilling,   mining  and  exploring
(including  the exclusive  right to conduct  geophysical/seismic  operations and
other related  activities)  for and producing  oil, gas and all other  minerals,
laying pipe lines,  building drill sites,  access roads,  tanks, power stations,
telephone lines and all other structures thereon to produce, save, take care of,
treat,  transport and own said products and for dredging and maintaining canals,
constructing  roads and bridges,  and building houses for its employees,  and in
general, for all appliances,  structures,  equipment,  servitudes and privileges
which  may be  necessary,  useful or  convenient  to or in  connection  with any
operations  conducted by LESSEE thereon,  or on any lands pooled therewith,  the
following described land in Webster Parish, Louisiana, to wit:

Begin at the point  where the North  line of the  Porterville-Sikes  Ferry  Road
intersects  the  West  line of the West  Half of the  Southeast  Quarter  of the
Northeast Quarter (W/2 of SE/4 of NE/4), Section 36, Township 23 North, Range 11
West, thence run in an easterly  direction along the North line of said road 190
feet,  thence  run North 380 feet,  thence run West 285 feet to the West line of
said W/2 of SE/4,  thence run South 345 feet to the point of beginning,  Webster
Parish, Louisiana.

The above tracts comprising 3.00 acres, more or less, in the aggregate.

Lessee  hereby  promises to demolish  and remove  vacant  house  located on said
property.

This lease  shall also extend and apply to any  interest in the lands  described
herein  which  Lessor may  hereafter  acquire,  including,  but not  limited to,
outstanding mineral rights acquired by reversion, prescription or otherwise.

This lease also  covers and  includes  any other land owned by the Lessor in the
above mentioned  Section or Sections,  all property acquired by prescription and
all  accretion or alluvion  attaching to or forming a part of said land; as well
as  any  interest  in  any  streets,  alleys,  lanee,  roads,  streams,  bayous,
railroads, ditches, canals or other rights-of-way, public, private or abandoned,
adjoining or traversing the lands described herein,  whether or not specifically
described or not.  Whether or not and reduction in payment shall have previously
been made,  this lease,  without further  evidence  thereof,  shall  immediately
attach to and  effect  any and all  rights,  titles  and  interest  in the above
described land,  including reversion mineral rights,  hereinafter acquired by or
inuring to Lessor and Lessor's successors and assigns.

For the purposes hereof, the land described herein is estimated to comprise 3.00
acres, whether it actually comprises more or less.

     2. Subject to the other provisions  herein  contained,  this lease shall be
for a period of two (2) years from this date(called  "primary term") as (1) oil,
gas,  sulphur or other  minerals is being  produced from said land  hereunder of
from land pooled therewith; Or (2) it is maintained in force in any other manner
herein provided.
<PAGE>
     3. For the consideration  herein above recited,  this lease shall remain in
full force and effect during the primary term,  without any  additional  payment
and without  Lessee being required to conduct any operations of the land (either
before or after the discovery of minerals),  except to drill such wells as might
be necessary to protect the land from drainage, as hereinafter provided.

     4. The royalties  paid by Lessee are:  (a.) on oil, and other  hydrocarbons
which are  produced at the well in liquid form by ordinary  production  methods,
Eighteen and seventy-fifths (18.75%) (3/16) of that produced and saved from said
land,  same to be  delivered  at the wells or to the credit of the Lessor in the
pipeline  to which he wells may be  connected;  Lessors  interest in either case
will  not  bear  is  proportion  of any  expenses  for  treating  oil to make it
marketable  as crude;  Lessee may from time to time  purchase any royalty oil or
other liquid  hydrocarbons in its possession,  paying the market price therefore
prevailing for the field where produced on the date of the purchase; (b) on gas,
including  casing head gas, or other gaseous  substance  produced from said land
and sold or used off the  premises  or for the  extraction  of gasoline or other
products  therefrom the market value at the well of Eighteen and  seventy-fifths
(18.75%)  (3/16)  of the gas so sold or used,  provided  that on gas sold at the
wells the royalty shall be Eighteen and  seventy-fifths  (18.75%)  (3/16) of the
amount realized from such sale; such gas,  casinghead gas, residue gas or gas of
any  other  nature  or  description  whatsoever,  as may be  disposed  of for no
consideration to Lessee,  either through  unavoidable  waster or leakage,  or in
order to recover oil or other liquid hydrocarbons, or return to the ground shall
not be deemed to have been sold or used either on or off the premises within the
meaning  of this  paragraph  3  hereof;  (c) on all  other  minerals  mined  and
marketed, Eighteen and seventy-fifths (18.75%) (3/16) either in kind or value at
the well or mine, at Lessees election,  except that on sulphur the royalty shall
be one (1) dollar per ton.

     5. If Lessee  during or after the primary  term should drill a well capable
of  producing  gas or  gaseous  substance  in paying  quantities,  (or which all
although previously produced Lessee is unable to continue to produce) and should
Lessee be unable to operate  said well  because  of lake or market or  marketing
facilities or governmental  restrictions,  then Lessees rights may be maintained
beyond or after the primary  term  without  production  of minerals  for further
drilling  operations  by paying  Lessor as royalty  ONE AND NO/100  ($1.00/acre)
DOLLAR per acre per year,  the first  payment  being due, if said well should be
completed  or shut-in  after the  primary  term,  within  ninety (90) days after
completion of such well or cessation of production  and such payment will extend
Lessees rights from one year from date of such completion or cessation.  If such
a well should be completed  during the primary term, the first payment,  if made
by Lessee,  shall be due on or before the  expiration  date of the primary  term
herein fixed.  Thereafter  Lessees  rights may be continued from year to year by
making annual  payments in the amount stated on or before the end of the primary
term as the case may be; each of such  payments to extend to Lessees  rights for
one year. It is provided,  however,  that in no event shall Lessees rights be so
extended by annual  payments  herein fixed  without  drilling  operations or the
production  of oil,  gas or some  other  minerals  for more  than five (5) years
beyond the end of the primary term hereinabove fixed. The annual payments herein
provided for may be  deposited to Lessors  credit in the Pay Direct to Lessor at
Address  Above  which bank shall be and remain  Lessors  agent for such  purpose
regardless  of any change or changes of ownership of the land or mineral  rights
therein  or Lessee  may  directly  send said  annual  payments  to Lessor at the
address  shown  above,  or until Lessor  notifies  Lessee  otherwise.  It is the
responsibility of Lessor to inform Lessee of any change of ownership of land and
minerals  which would affect  payment of annual  payments as herein  provided to
Lessor;  if Lessor fails to notify  Lessee of said change and Lessee pays annual
payments to Lessor it is agreed that Lessor should  forward said payments to the
rightful  mineral  owner,  and Lessee is held harmless for the same,  and paying
Lessor  would be the same as paying  other  mineral  owners.  The  owners of the
royalty as of the date of such payment  shall be entitled  thereto in proportion
to their  ownership of said royalty.  The provisions of this paragraph  shall be
recurring at all times during the life of this lease.  Should any well producing
gas or gaseous  substances  be completed on a drilling  unit which  includes any
part of the lands herein  leased,  the  provisions of this  paragraph  should be
subject to all other  agreements  herein  contained  allowing the pooling of the
above described lands with other lands.

     6. If within ninety (90) days prior to the end of the primary term,  Lessee
should  complete or abandoned a dry hole or holes on the land described above or
on land pooled therewith,  or if production previously secured should cease from
any cause,  this lease  shall  continue in full force and effect for ninety (90)
days from such  completion or abandonment or cessation of production.  If at the
expirations of the primary term or at the expiration of the ninety (90) provided
for in the preceding sentence,  oil, gas, sulphur or other minerals is not being
produced  on said land or on land  pooled  therewith,  but  Lessee is engaged in
operations  for  drilling or  reworking  thereon,  or if  production  previously

                                       2
<PAGE>
secured  should cease from any cause after the  expiration  of the primary term,
this lease shall remain in full force and the fact so long as and  thereafter as
Lessee  either  (a) is  engaged in  operations  for  drilling  or  reworking  or
repairing  said wells  with no  cessation  between  operations  or between  such
cessation  of  production  and  additional  operations  of more than ninety (90)
consecutive  days; or (b) is producing oil, gas,  sulphur or other minerals from
said land hereunder or from land pooled therewith.  If sulphur be encountered on
said premises or on land pooled  therewith,  this lease shall  continue in force
and effect so long as Lessee is engaged with due diligence in  explorations  for
and/or  erecting a plant for sulphur  and  thereafter  subject to the  foregoing
provisions  here of so long as oil, gas,  sulphur or other  minerals is produced
from said lands hereunder or from lands pooled therewith.

     7.  Lessee  is  hereby  granted  the  right  as to all or part of the  land
described  herein  without  Lessors  joinder,  to  combine,  pool or utilize the
acreage  royalty  or mineral  interest  covered  by the  lease,  or any  portion
thereon, with any other land, lease or leases,  royalty or mineral interests and
or under any other  tracts of land in the  vicinity  thereon,  whether  owned by
Lessee or some other person, or corporation,  so as to create, but a combination
of such lands,  and leases,  one or more operating  units,  provided that no one
operating said unit shall,  in the case of gas,  including  condensate,  embrace
more than six hundred and forty (640)  acres,  and in the case of oil  including
casinghead  gas,  embrace  more than forty (40)  acres;  and  provided  further,
however,  that if any  spacing or other  rules and  regulations  of the state or
Federal Commission Agency or regulatory body having or claiming jurisdiction has
heretofore or shall at time here after prescribe a drilling or operating unit or
spacing rule in the case of gas, including condensate,  greater than six hundred
forty (640) acres,  or in the case of oil or  casinghead  gas greater than forty
(40)  acres,  then the unit or units  herein  contemplated  may  have,  or maybe
redesigned so as to have,  as the case may be, the same surface  content as, but
not more than, the unit or acreage in the spacing rules so prescribed.  However,
it is further specifically understood and agreed anything herein to the contrary
notwithstanding,  that the Lessee shall have the right to, and the benefit of in
acreage  tolerance of ten per cent in excess of any  drilling or operating  unit
authorized  herein.  The  commencement of a well, or the completion of a well to
production of either oil, gas,  casinghead gas,  condensate or other minerals on
any portion of the operation unit in which all or any part of the land described
herein is embraced,  or production of oil, gas, casinghead gas,  condensate,  or
other  minerals  therefrom  shall have the same  effect  under the terms of this
lease as if a well were commenced  completed for producing oil, gas,  casinghead
gas,  condensate or other minerals in paying  qualities on the land in braced by
this lease.  Lessee shall  execute in writing and file for record in the records
of the  Parish in which the lands  herein  leased  are  located,  an  instrument
identifying or be scrapping the pooled  acreage,  or an instrument  supplemental
thereon  redesignating same, as the case may be. Either prior to the securing of
production  from any unit created under the authority  hereinabove  granted,  or
after cessation of production  therefrom Lessee shall have the right to dissolve
the unit so created without lessors joiner or further  consent,  by executing in
writing  and placing of record in Parish or Parishes on which the land making up
such unit may be located,  an instrument  identifying  and resolving such units.
The provision  hereto shall be construed as a covenant running with the land and
shall  inure to the benefit of and are binding  upon the parties  hereto,  their
heirs, representatives, successors and assigns. In the event such operating unit
or units is/are created by Lessee, Lessor shall receive out of production of the
proceeds from the  production  from such  operating  unit or units or out of the
shut-in royalty  provided above,  subject to the provisions of Paragraph 8, such
portion of the royalty or the shut-in royalty  specified herein as the number of
acres  (mineral  acres) out of this lease placed in any such  operating  unit or
units bears to the total  number of acres  including in such  operating  unit or
units.

     8. If Lessor  owns a less  interest  in the above  described  land than the
entire and  undivided  fee simple  estate  therein,  then the  royalties  herein
provided shall be paid to Lessor only in the proportion  which Lessors  interest
bears to the whole undivided fee.

     9. Lessee shall have free use of oil, gas, casinghead gas, condensate, coal
and water from said land,  except water from Lessor  wells,  for all  operations
hereunder,  including repressuring,  pressure maintenance and recycling, and the
royalty shall be computed  after  deducting  any so used.  Lessee shall have the
right at any time  during or after the  expiration  of this  lease to remove all
property and fixtures placed by Lessee on said land, including the right to draw
and remove all casing.  When required by Lessor,  Lessee will bury all pipelines
below ordinary plow depth,  and no well shall be drilled within two hundred feet
of any residence or barn now on said land, without Lessors consent. In the event
a well or wells,  producing  oil,  gas,  casinghead  gas or condensate in paying
quantities should be brought in on adjacent lands not owned by Lessor and within
one  hundred  fifty feet of leased  premises,  Lessee may or may not (at Lessees
option) drill a well to offset same.

                                       3
<PAGE>
     10. The rights of either party  hereunder  may be assigned in whole or part
and the provisions hereof shall extend to the heirs, executors,  administrators,
successors  and  assigns,  but no change or division of  ownership  of the land,
rentals,  or  royalties,  however  accomplished  shall  operate to  enlarge  the
obligations or diminish the rights of Lessee. No such change for division in the
ownership of the land, rentals or royalties shall be binding upon Lessee for any
purpose until such person  acquiring an interest has furnished  Lessee,  Lessees
heirs or assigns,  at its principle  place of business,  or recorded copy of the
instrument  or  instrument,  constituting  his chain of title from the  original
Lessor.  In the event of an assignment of this lease as to a segregated  portion
of said  land,  or as to an  undivided  interest  therein,  the  rental  payable
hereunder shall be apportioned as between the several  leasehold  owners ratable
according to the surface area of each, or according to the undivided interest of
each,  and default and rental  payment by one shall not affect the rights of the
other leasehold owners hereunder. An assignment if this lease, in whole or part,
shall, to the extent of such  assignment,  relieved and discharge  Lessee of any
obligations  hereunder and if Lessee or assignee of parts or parts here on shall
fail or make default in the payment of the proportionate part of the rentals due
from such Lessee,  or assignee,  or fail to comply with any other  provisions of
the lease,  such default shall not affect this lease insofar as it covers a part
of said lands upon which  lessee or any assignee  thereof  shall make payment of
said rental.

     11. In the case of suit,  adverse  claim,  dispute  or  question  as to the
ownership of the rentals or royalties (or some part thereof)  payable under this
lease,  Lessee  shall not be held in  default  in  payment  of such  rentals  or
royalties  (or part  thereof in  dispute)  until such suit,  claim,  dispute for
question has been finally  disposed of, and Lessee,  shall have thirty (30) days
after being  furnished  with a certified  copy of the  instrument or instruments
disposing  said suit,  claim or  dispute,  or after being  furnished  with proof
sufficient,  in Lessees opinion, to settle such questions,  within which to make
payment.  Should the rights or  interests  of Lessee  hereunder  be  disputed by
Lessor,  or any other  person,  the time covered by the pendency of such dispute
shall not be counted against Lessee either as affecting the term of the lease or
for any other  purpose,  and Lessee may suspend all  payments  without  interest
until there's a final adjudication or other determination of such dispute.

     12. In case of  cancellation  or  termination of this lease from any cause,
Lessee shall have the right to retain, under the terms here of, around each well
producing,  being worked on, or drilling  hereunder,  the number of acres in the
form of allocated to each such wells under  spacing and  proration  rules by the
Commissioner  of  Conservation  of the state of Louisiana  or Federal  Authority
having  control of such  matters;  or, in the absence of such ruling  forty (40)
acres  around  each well in as near as square  form as  practicable,  and in the
event Lessor  considers that  operations  are not being  conducted in compliance
with this contract, Lessee shall be notified in writing of the facts relied upon
as  constituting a breach hereof and Lessee shall have sixty (60) days after the
receipt of such notice to comply with the obligations  imposed by virtue of this
instrument. Upon receipt of Lessors written notice to Lessee, if Lessee fails to
respond  to notice of breach or to comply  with said  notice,  all all rights to
said lease shall Ipso fact revert back to the Lessor, his heirs and assigns.

     13. When drilling, reworking, production or other operations are delayed or
interrupted  by force  majeure,  that is, by storm,  flood or other acts of God,
fire, war, rebellion,  insurrection,  riot, strikes, difference with workmen, or
failure of carriers to transport or furnish facilities for transportation, or as
a result of some law, order, rule,  regulation,  requisition or necessity of the
government,  Federal or State, or as a result of any cause whatsoever beyond the
control of Lessee,  the time of such delay or interruption  shall not be counted
against Lessee, anything in this lease to the contrary notwithstanding, but this
lease shall be extended  for a period of time equal to that during  which Lessee
is so prevented  from  conducting  such drilling or reworking  operations or, or
producing  oil,  gas,  casinghead  gas,  condensate  or other  minerals from the
premises;  provided that during any period that this lease is continued in force
after its primary term solely by force majeure as herein provided;  Lessee shall
pay to the owners of the  royalty  hereunder  the  shut-in  royalty  provided in
paragraph  5 hereof,  and in the  manner  therein  provided,  without  regard to
whether or not there is a  producing  well  shut-in,  located on said land or on
land with which the lease premises or any part thereof has been pooled.

     14. It is expressly  understood and agreed that the premises  leased herein
shall,  for all purposes of this lease,  be  considered  and treated as owned in
indivision by the Lessor and shall be developed  and operated as one lease,  and
there shall be no  obligation  on the part of Lessee to offset wells on separate
tracts into which the land covered by this lease may be now or hereafter divided
by sale, or otherwise,  or to furnish separate  measuring or receiving tanks and
all rentals, royalties and other payments accruing hereunder shall be treated as
an  entirety  and shall be divided  amount and paid to Lessor in the  proportion

                                       4
<PAGE>
that the  acreage  (mineral  rights)  owned by each bears to the  entire  leased
acreage.  Lessee  may at any  time or times  pay or  tender  all  sums  accruing
hereunder to the joint credit of Lessor.

     15.  Notwithstanding  the death of any party  Lessor,  or his  successor in
interest,  the payment or tender of all sums  accruing  hereunder  in the manner
provided above shall be binding on the heirs,  executors,  and administrators of
such person.

     16. Lessor hereby warrants title to said lands described  herein and agrees
to defend  title to said land,  and agrees  Lessee at its option  shall have the
right to redeem for Lessor,  by payment,  any mortgage,  taxes or other liens on
the above described lands, in the event of default of payment by Lessor,  and be
subrogated to the rights of the holder hereof.  In the case of payment by Lessee
of any such  mortgage,  taxes or other  liens owed by Lessor in  addition to the
rights of subrogation herein granted,  Lessee shall have the right to retain any
royalties which become due Lessor hereunder and to repay itself  therefrom,  and
the retention of such  royalties by Lessee shall have the same effect as if paid
to the Lessor in whose behalf payment of any mortgage,  taxes or other liens was
made. In the event the leased lands are encumbered by a mortgage,  then prior to
the  payment  of  any  royalties  due  hereunder,  Lessor  agrees  to  obtain  a
subordination of mortgage, at Lessor's expense, in a form acceptable to Lessee.

     17. Lessee shall pay for actual damages caused by its operations to growing
crops and timber on said land leased herein. Lessor specifically agrees that the
obligations  and  liabilities  of the Lessee and its  successors and assigns for
redemption,  restoration,  repair or maintenance of the surface or subsurface of
the leased  premises shall never exceed the fair market value  (determined as of
the  effective  date hereof) of the land  covered by this lease,  or the portion
thereof,  for which such  reclamation,  restoration,  repair or  maintenance  is
required.

     18. In the event that the Lessor,  during the  primary  term of this lease,
receives a bona fide  offer  which  Lessor is  willing to accept  from any party
offering to purchase from Lessor a lease  covering any or all of the  substances
covered  by this  lease  and  covering  all or a portion  of the land  described
herein,  with the lease becoming effective upon expiration of this lease, Lessor
hereby agrees to notify Lessee in writing of said offer  immediately,  including
in the notice the name and address of the offeror,  the price  offered,  and all
other  pertinent  terms and  conditions  of the offer.  Lessee,  for a period of
fifteen  days after  receipt of the notice,  shall have the prior and  preferred
right and option to purchase  the lease or part thereof or  interested  therein,
covered  by the  offer at the price and  according  to the terms and  conditions
specified in the offer.

     19.  This lease shall be binding  upon all who  execute it,  whether or not
named  in the  body  hereof  as  Lessor  and  without  regard  to  whether  this
instrument,  or any copy  thereof,  shall be executed by any other  Lessor named
above.

     20. For the same consideration recited above, Lessor hereby grants, assigns
and conveys to the Lessee,  its successors and assigns,  a perpetual  subsurface
well bore  easement  under and through the leased  premises for the placement of
well bores (along  routes  selected by the Lessee) from oil and or gas wells the
surface  locations  of which are  situated  on other  tracts of land not covered
hereby and which are not intended to develop the leased premises or lands pooled
therewith and from which Lessor shall have no right to royalty or other benefit.
Such  subsurface well bore  assignments  shall run with the land and survive any
termination of this lease.

     21.  DISCLAIMER OF  REPRESENTATIONS:  Lessor  acknowledges that oil and gas
lease  payments,  including  but not  limited to bonus and  royalty,  are market
sensitive and may vary depending on multiple  factors and that this Lease is the
product of good faith negotiations. Lessor understands that these lease payments
and terms are final and that Lessor  entered into this lease  without  duress or
undue  influence.  Lessor  recognizes  that  lease  values  could  go up or down
depending on market conditions.  Lessor  acknowledges that no representations or
assurances  were made in the negotiation of this lease that Lessor would get the
highest  price or  different  terms which Lessee has or may  negotiate  with any
other lessor/oil and gas owners.

IN WITNESS WHEREOF,  this instrument is executed  effective as of the date first
above written.

                                       5
<PAGE>
WITNESSES:

Sign:  /s/ Robert Mik                              /s/ Wade W. Perkins
       -----------------------------               -----------------------------
Print: Robert Mik                                  Wade W. Perkins

Sign:  /s/ Robert Mik                              /s/ Rachel B. Perkins
       -----------------------------               -----------------------------
Print: Robert Mik                                  Rachel B. Perkins

Sign:  /s/ Robert Mik                              /s/ Maxwell Savage III
       -----------------------------               -----------------------------
Print: Robert Mik                                  Maxwell Savage III

Sign:  /s/ Robert Mik                              /s/ Shirley P. Savage
       -----------------------------               -----------------------------
Print: Robert Mik                                  Shirley P. Savage

Sign:  /s/ Robert Mik                              /s/ Charles R. Perkins
       -----------------------------               -----------------------------
Print: Robert Mik                                  Charles R. Perkins

Sign:  /s/ Robert Mik                              /s/ Doris A. Perkins
       -----------------------------               -----------------------------
Print: Robert Mik                                  Doris A. Perkins

                                       6

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