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OPTIO N AGREEMENT

This  agreement  is dated  October 29th,  2012  is  made  by,  and  between  Black Star

231  Corp., here  after  referred  to  as  Black  Star,  and  Abby  Inc.,  hereafter  referred  to  as

Abby.  Black Star and Abby are herein collectively  referred to  as the  Parties.  The  parties

make the following  Recitals and Agreement.

RESITALS

Black  Star  has  identified  drilling  prospects  and  holds  oil  and  gas  leases on  the

prospects in  Richardson County,  Nebraska. The description  of the  prospect  land

is  included  in the  data  previously  provided  to  Abby. The  subject  two  well  drilling

program   on   the   prospect   acreage  is  known   as  the   two   well   "Rose   Dome

Program".

Abby   intends  to  participate   in  the   Rose  Dome  Program  by  purchasing  and

owning  working  interest  in  the  two  well  exploration  projects  to  drill for  oil/gas on

prospect  leases.

Black  Star  has  supplied  Abby with  maps,  reports  and  support  data for  the  Rose

Dome  Program and  held  teleconference  calls to  answer  questions  regarding  the

Rose  Dome  Program, and Abby  has confirmed  to  Black Star tha t they,  and  their

funding  partners  wish to  participate  to  a minimum  percentage of  75% of the  turn­

key  cost  of  the  two  well  program  and  own  75%  of  the  working  interest  in  the

program,  and 75% of the working  interest  revenues, if any,  resulting from the  two

initial  wells  in  the  Program. Abby  agrees tha t  the  information  provided  them  by

Black  Star  shall  remain  confidential.  Abby's  ownership  in  the  Program  will  be

under the terms  and conditions of the  program's  Participation Agreement.

The  parties  acknowledge  tha t  Abby  has  had  unavoidable  delays  owing  to  the

time required for their  investors to be contacted and for actual funding.

To secure Abby's optional  reservation of  75% working  interest  in the  Rose Dome

Program  until  funding   delays  are  concluded,  Black  Star  and  Abby  make  the

following  agreement.

AGREEMENT

All  of  the  terms,  conditions,  and  cash amounts  of  the  Rose  Dome  Program  are

contained   and   established   in   the   Participation   Agreement   and   Operating

Agreement.

The  Parties  agree tha t  for  and  in  consideration  of  a  nonrefundable  payment  of

$15,000  USD, Black Star will grant to  Abby  a futur e  option,  as described  below,

to  participate   in  the  two  well   Rose  Dome  Program.  Black  Star  will  hold  and

reserve  Abby's  75%  working  interest  in  and  to  the   Rose  Dome  Program  until

December  24th, 2012. This Option to  participate for  75% of the working  interest  in

the  two  well   Rose  Dome  Program  may  be  extended,  at  Abby's  option,  until

February  24th  2013 for  an  additional  non-refundable  payment  of  $80,000. In  the

event  Abby  elects  to  extend  the  option  period  until  February  24th  2013,  said

$80,000  non-refundable  payment  must  be  received  by  Black  Star  no  later  than

December  24th, 2012.

In the  event Abby elects to  exercise their  option  to  extend the  deadline date until

February  24th,  2013 as described above, Black Star will  then  use their  best effor t

to  extend the  primary  term  of the  oil and gas leases upon where the  Rose Dome

Program wells will  be drilled.

The option  granted  herein does not create an obligation for Abby to  participate  in

the  Rose  Dome  Program or  create any  other  obligation  to  Black Star as a  result

of  this  agreement,  except  any  obligations  stated  herein.  Funds described above

shall be wire  transferred  to the  account of  Black Star at the  UMB bank in  Kansas

City,  Missouri,  USA, contemporaneously  with  the  Parties  signing  this  "Option

Agreement".

Abby's  initial  $15,000  USD non-refundable  payment  shall  be  consideration  for

Black  Star granting  the  optional futur e  reservation to  participate  in  said Program

by signing the  program's  documents and depositing with  Black Star, funds  in the

amount  stated in the two well  Rose Dome Program's Participation Agreement, no

later  than   December  24th  2012.  The  Parties  both  agree  said  funds  are  non­

refundable   in   the   event   Abby   does  not   exercise  their   option   to   fund   and

participate for  75% of the  Rose Dome Program by the dates set fort h herein.

In the event Abby does exercise their  option to  participate  by funding  75% of the

Rose  Dome  Program by  December 24th,  2012, the  initial  $15,000  paid to  Black

Star  as  nonrefundable  consideration  shall  not  be  applied  to  reduce  Abby's firs t

call  cash contribution  for  their  75% of  the  Rose  Dome  Program's initial  firs t  call

turn-key  cost as described in the  Participation Agreement.

In  the   event  Abby  elects  to  extend  the   deadline  date  for   participation   until

February   24th,  2013,  as  described  above,  the  $80,000  consideration  paid  to

Black   Star   by   Abby,   shall   not   be   applied   to   reduce   any   of   Abby's  cash

contribution   requirements  to  participate  for  75%  in  the  two  well   Rose  Dome

Program.   The   cash   requirements   for   said   Program   are   described   in   the

Program's Participation Agreement.

Black  Star  and  Abby  agree tha t  five  of  Black  Star's oil/gas  leases which  adjoin

the  two  well  Rose  Dome  Program  leases,  as  described  in  the  two  well   Rose

Dome  Participation  Agreement  are  not  a  part  of  this  agreement.  Abby  may

secure  the   preferential  firs t  option  to   participate   in  the  five  adjoining  oil/gas

leases tha t  Black Star holds.  Participation in the five  oil/gas leases by Abby shall

be  on  the  same  terms  and  conditions  as  the  two  well   Rose  Dome  Program,

unless  a different  basis of  participation  is agreed  upon  by the  Parties. Abby may

elect  to  secure  an  option  on  the  five  leases  listed  below  by  paying  the  sums

below   on  or   before  the   dates   shown   below   and   returning   the   Participation

Agreements  for  each  lease  sign  by  a  duly  authorized  officer  of  Abby.  Attached

hereto,  as  Exhibits  one  through  five,  are  the  Participation  Agreements  for  the

subject  five  leases.

Assuming  Abby  elects to  secure their  option  to  participate  in  drilling  on  the  five

leases below, Abby will  return the futur e  proposed program documents  signed by

a duly  authorized  officer  of Abby,  and deposit the futur e  program's  funds for  their

proportionate   75%  of  the  working   interest  withi n  35  days  of  their  election  to

secure the  options  for  leases #1  through  #5  below.  For and in consideration  of  a

payment  to  Black Star of  $5,000  USD for  each lease listed  below,  Black Star will

grant  said futur e option to  participate  under the terms  herein and the  Participation

agreement  attached  hereto  as Exhibits.

THE  FIV E ADJOININ  G  LEASES

All  Rose  Dom e  and  Adjoinin g  Leases  are  in  Townshi p  1 North .   Rang e  14

East  in  Richardson   County.  Nebraska .

Lease #1,  a payment to  Black Star of $5,000  USD by  November 13/ 2012

Lease #1,  Stalder Cattle Company-Part of  SE/4 of the  NE/4  and the  E/2 of the

SE/4 of section 26, containing  87 acres m/l.

Lease #2,  a payment to  Black Star of $5,000  USD by November 20/ 2012

Lease #2,  R.J.  Stalder et al-N/2 and the  SE/4 section 25, and parts of the e/2 of

the  SW/4 and the  N/2 of the  NE/4 of section 26, and the  E/2, and the  S/2 of the

SW/4 of section 36, in all containing  1,057  acres m/l.

by  November 27/ 2012Lease #3,  a payment to  Black Star of $5,000 USD

Lease #3,  Stalder Cattle Company-SW/4 of section 35, containing  156 acres m/l.

Lease #4  a payment to  Black Star of $5,000  USD by December 4/ 2012

Lease #4,  Thompson-Parts of the  NW/4 of section  13, containing  117 acres m/l.

Lease #5,  a payment to  Black Star of $5,000  USD by  December 11/ 2012

Lease #5,  Phillips, SW/4 of section  13, containing  160 acres m/l.

When  any   of  the   development   wells   subject   to   this   Option  Agreement   are

proposed by  Black Star,  Black Star will  notif y Abby of the  proposed  development

program,   and  Abby   will   have   35   days  to   sign  the   development   program's

Participation  agreement  and forward  funding  to  Black Star.  Black Star will  use its

best  efforts  to  commence  drilling  wells  then  included  in  the  futur e  development

program withi n 45 days of their  receipt of the development  program's  documents,

being  signed  by  a  duly  authorized  officer  of  Abby,  and  Black  Star's  receipt  of

Abby's percentage share of the futur e development  programs  funds.

In  accordance with  Abby's  preferential  firs t  righ t to  participate  in futur e  wells  on

the   Program  oil   and   gas   leases,  Abby  may   also  propose  wells  on  leases

adjoining  the  leases on  which  the  two  well  Rose  Dome  Program  wells  will  be

drilled. In the  event Abby  proposes wells to  be drilled, and delivers to  Black Star

the  signed program documents and funds,  Black Star agrees to  obtain Nebraska

drilling  permits  and  commence  drilling  the  Abby  proposed  wells  as  soon  as  is

practical.  Any futur e  wells  proposed by  Abby  will  be  under  the  same terms  and

conditions   as   stated   in   the   two   well   Rose   Dome   Program's   Participation

Agreement.

Black  Star  acknowledges tha t Abby  is  a  publicly  traded  Company, and  as  such,

is  subject  to  exchange  regulation  and  restrictions  on  information   and  results

released  regarding  projects  which  Abby  is  an  interest  owner.  Black Star agrees

that  they   will   not   make  public   news  releases  regarding   results  of   activities

described  herein  withou t  Abby's writte n  authorization.  Abby  agrees  to  mention

Black Star as an interest  owner in said activities in their  public news  releases.

The  Parties agree tha t this  "Option Agreement"  represents the  entire  agreement

between the Parties.

This  agreement  shall  become  effective  upon  Black  Star's  receipt  of  the  funds

stated above, however this agreement shall become null and void and of no force

or  affect  if  said  signed documents  and funds  are  not  received by  Black Star no

later than  November 1st, 2012.

This   agreement   can   be   signed   by   each   of   the    Parties,   and   delivered

electronically withou t reduction in its  authority.

Abby,  Inc.

Black Star 231  Corp.

By

Thomas Forzani

PresidentROSE DOME PROJECT PARTICIPATION AGREEMENT

ROSE DOME PROJECT PARTICIPATION AGREEMENT

SEE EXHIBITS ATTACHED

EXHIBIT ADJOING LEASE 1

BLACK STAR 231 CORP.

DRILLING PROGRAM: ROSE DOME PROJECT

         

PARTICIPATION AGREEMENT

This agreement is made by and between Black Star 231 Corp., hereafter referred to as Operator, and the other party or parties who sign this agreement, hereafter referred to as Participant or Participants.

         

         

In consideration of the mutual promises and agreements made and to be performed by the parties as hereinafter stated, Operator and Participant agree as follows:

1. Drilling Program:  The objective of the program is the drilling, testing, and completion of two wells for oil and/or gas, with target formations ranging in depth to 3,800’. Within one hundred twenty (120) days after the date this agreement is accepted by Operator, Operator will commence drilling on valid oil and gas leases located within the program areas as described in the prospect description booklet provided Participant. The lease description attributable to each well in this drilling program is the minimum spacing unit for each of the two wells as determined by State of Nebraska well spacing regulations. The final drilling location and completion depth shall be at Operator’s sole discretion.

2.  Participation Units:  There are 4 equal units of participation in the drilling program.  Operator intends to retain 1 unit and 3 units are available for participation by other parties.  Each unit represents an undivided 25.0% working interest in and to the well(s) and the well spacing unit(s), subject to Operator’s carried interest hereinafter described.  Such working interest units shall be entitled to their proportionate share of the proceeds of working interest production from the well(s) drilled pursuant to the drilling program, and be subject to its proportionate burdens for payment of the lessor’s royalty and other obligations of lessee under the lease, as well as expenses of operating the wells after completion thereof.  The total working interest will have a net revenue interest (NRI) of not less than 80% of the 8/8 production from the well(s); and each unit of working interest will have a net revenue interest (NRI after payment of royalties and all other non-operating burdens payable out of production) of not less than 20% of the total 8/8 production from the well(s), subject to reduction at pay-out by reason of the Operator’s carried working interest as provided below.

3.  Payment:  Participant shall pay Operator for Participant’s share of the costs and expenses of drilling, testing, completing and equipping the well as follows:

4. First Call:  Acquisition, drilling and testing $138,650 per unit in this program.  Participant herewith tenders to Operator the first call sum of $138,650 for each unit subscribed to by Participant. Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of drilling and testing the well, and plugging and abandoning the well if, in the sole judgment of Operator, the well does not appear to be capable of production in commercial quantities.  Such costs include, but are not limited to, lease acquisition, title and legal work, land damage, permits, bonding, geological work, geophysical, remote sensing, company overhead, roads, pits, gravel, surveying, casing, logging, workover rig, acid fracture, swabbing and testing, and plugging and restoration if Operator deems the well a dry hole.

5.  Second Call:  Completion is $133,550 per unit, if both wells are completed for production.  If in the Operator’s judgment, both wells should be completed for production, Operator will notify Participant to remit the second call sum of $133,550 for each unit subscribed to by Participant, and Participant shall remit such payment in full to Operator within ten (10) banking days after such notice if given. For each well not completed for production in this drilling program the second call amount is reduced by $66,775 per unit of participation.  Well(s) shall be considered completed at the point in time when well(s) produce the first formation fluids through the tank battery.  Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of completing the well.  Such costs include, but are not limited to, completion rig, well head assembly, tree, meter run, gas separator, tank battery, excavation, lead lines, tubing and rods, down hole equipment, pumping unit, motor, control box, electrical service, winch truck and company overhead. If Participant fails or refuses to timely remit the second call payment as herein provided, then Operator shall be entitled to retain Participant’s first call payment as liquidated damages for Participant’s breach of this agreement, and Participant shall have no further right, title or interest under this agreement or in or to the program, lease or well covered herein. Subject well will be deemed completed at the point of first production through the tank battery.  

6.  Turnkey Price:  The payments made to Operator as provided above shall constitute full payment for Participant’s share of the costs and expenses of acquisition, drilling, testing, completing and equipping the well(s) through the meter if a gas well or through the stock tank if an oil well, or both if the well is dually completed for production of gas and oil.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, exceed the amounts paid by Participant, then Operator shall pay such excess without reimbursement from Participant.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, are less than the amounts paid by Participant, then Operator shall retain the difference without reimbursement to Participant.

7.  Equipment and Abandonment:  At such time as a well in this program ceases production, Operator will, at Operator’s expense, plug the well and restore the surface in accordance with statutory and regulatory requirements and the terms of the oil and gas lease.  All salvageable equipment and fixtures shall be and remain the property of Operator.

8. Assignments:  Within ten days after commencement of production, Operator shall execute, in recordable form, and deliver to Participant, or cause to be duly recorded for the benefit of Participant, an assignment of Participant’s proportionate undivided share of the working interest in the program.  Such assignment shall be subject to Operator’s carried interest as described below, and shall be made subject to the terms of the Operating agreement for this program. Participant shall not sell, encumber or assign such interest, in whole or in part, without prior notice thereof to, and approval of, Operator.

9. Carried Working Interest:  Operator reserves and retains a carried interest with respect to one-fourth (1/4) of each unit subscribed to and purchased by Participants, which carried interest shall cease to be carried and shall convert to a working interest vested in Operator as follows:

        A. At pay-out, Operator’s carried interest shall convert to and become a regular working interest.  At pay-out, each unit held by Participant will thereby be reduced by 1/4 and Participant or his or her heirs, successors or assigns will, if deemed necessary by Operator, execute and deliver to Operator or its successors or assigns an assignment of an undivided 1/4 of Participant’s working interest with respect of each unit owned by Participant in this program, free and clear of any liens, encumbrances or adverse claims.  After pay-out, each unit held by Participant will represent an undivided 18.75% working interest, with a net revenue interest of not less than 15% of the 8/8 production.  Should Participant fail or refuse to execute and deliver such assignment, then Operator shall be entitled to execute and record a Notice of Payout and the same shall have the same force and effect as an assignment executed and delivered by Participant pursuant hereto.

B. “Payout” means that point in time when the cumulative net proceeds received by Participant from the sale of production from the well(s) equals his or her total unit investment.  “Total unit investment” means the sum of the first call and second call payments made by Participant pursuant to paragraphs 3.A.and 3.B. above.  “Net proceeds” means Participant’s share of the gross proceeds of working interest production less Participant’s share of the expenses of operating the well after completion. Until pay-out, Operator shall have no interest in production nor liability or obligation for operating expenses, taxes or other obligations of lessee in respect to Participant’s unit(s) in the well(s) by virtue of the carried interest.

10. Operator:  Black Star 231 Corp. shall be the operator of the well(s) and lease interest, and shall conduct, direct and have full control of all development, drilling, completion, and subsequent operations.  It shall conduct such work in a good and workmanlike manner in accordance with standard practices in the industry, but shall have no liability for losses or damages except such as may result from gross negligence or willful misconduct.  Operator shall have the right to purchase, acquire and dispose of equipment and materials; to hire employees or independent contractors necessary for drilling and lease operations; and to contract for the drilling of the wells and other labor and services necessary for the drilling and completion thereof, including the right to enter into turnkey contracts.  Operator shall have authority to compromise, settle and pay any claim, which may be made by the landowner or adjoining landowner or others for damages resulting from lease operations.  It shall be the duty of Operator to conduct all operations in accordance with the lease terms and with applicable laws and regulations, and to make all necessary filings with, and obtain all necessary permits from, any regulatory agency having jurisdiction over lease operations.  Participant agrees to execute the “Operating Agreement” applicable to this program.

11. No Partnership: The liability of the parties shall be several, not joint or collective.  Each party shall be responsible only for its obligations, and shall be liable only for its proportionate share of the costs and expenses of drilling and operating the well.  It is not the intention of the parties to create, nor shall this Agreement be construed as creating a mining or other partnership or association, or to render the parties liable as partners.  If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all the provisions of Subchapter “K” of the Internal Revenue Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder.  In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

12.  Binding Effect: This Agreement shall bind, and inure to the benefit of, the parties hereto and their respective successors, assigns, heirs and legal representatives.  No agreement to modify or waive any of the provisions hereof shall be effective unless in writing and signed by both parties.

13. Participant’s Interest:  Participant hereby subscribes to and purchases _____ unit(s) pursuant to the terms herein set forth.

COUNTER PART SIGNATURE PAGE ATTACHED

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 1

COUNTERPART SIGNATURE PAGE

ROSE DOME PROJECT PARTICIPATION AGREEMENT

In witness whereof, the parties have executed this Participation Agreement effective the date same is accepted and signed by Operator.

OPERATOR:

Black Star 231 Corp.

Livestock Exchange Bldg.

1600 Genessee, Suite 814

Kansas City, Mo 64102

by: ____________________________

Date:_______________

        Jim Pryor, President

PARTICIPANT:

_______________________________

__________________________

   Signature

   Signature

  

_______________________________

   Printed Name

_______________________________

   Address

_______________________________

   Address

_______________________________

Date:______________

   Tax Identification Number

_______________________________

   Email Address

First Call payment of $138,650 X ____ units = $_____________ enclosed.

EXHIBIT FOR ADJOINING LEASE #2

BLACK STAR 231 CORP.

DRILLING PROGRAM: ROSE DOME PROJECT

         

PARTICIPATION AGREEMENT

This agreement is made by and between Black Star 231 Corp., hereafter referred to as Operator, and the other party or parties who sign this agreement, hereafter referred to as Participant or Participants.

         

         

In consideration of the mutual promises and agreements made and to be performed by the parties as hereinafter stated, Operator and Participant agree as follows:

1. Drilling Program:  The objective of the program is the drilling, testing, and completion of two wells for oil and/or gas, with target formations ranging in depth to 3,800’. Within one hundred twenty (120) days after the date this agreement is accepted by Operator, Operator will commence drilling on valid oil and gas leases located within the program areas as described in the prospect description booklet provided Participant. The lease description attributable to each well in this drilling program is the minimum spacing unit for each of the two wells as determined by State of Nebraska well spacing regulations. The final drilling location and completion depth shall be at Operator’s sole discretion.

2.  Participation Units:  There are 4 equal units of participation in the drilling program.  Each unit represents an undivided 25.0% working interest in and to the well(s) and the well spacing unit(s), subject to Operator’s carried interest hereinafter described.  Such working interest units shall be entitled to their proportionate share of the proceeds of working interest production from the well(s) drilled pursuant to the drilling program, and be subject to its proportionate burdens for payment of the lessor’s royalty and other obligations of lessee under the lease, as well as expenses of operating the wells after completion thereof.  The total working interest will have a net revenue interest (NRI) of not less than 80% of the 8/8 production from the well(s); and each unit of working interest will have a net revenue interest (NRI after payment of royalties and all other non-operating burdens payable out of production) of not less than 20% of the total 8/8 production from the well(s), subject to reduction at pay-out by reason of the Operator’s carried working interest as provided below.

3.  Payment:  Participant shall pay Operator for Participant’s share of the costs and expenses of drilling, testing, completing and equipping the well as follows:

4. First Call:  Acquisition, drilling and testing $138,650 per unit in this program.  Participant herewith tenders to Operator the first call sum of $138,650 for each unit subscribed to by Participant. Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of drilling and testing the well, and plugging and abandoning the well if, in the sole judgment of Operator, the well does not appear to be capable of production in commercial quantities.  Such costs include, but are not limited to, lease acquisition, title and legal work, land damage, permits, bonding, geological work, geophysical, remote sensing, company overhead, roads, pits, gravel, surveying, casing, logging, workover rig, acid fracture, swabbing and testing, and plugging and restoration if Operator deems the well a dry hole.

5.  Second Call:  Completion is $133,550 per unit, if both wells are completed for production.  If in the Operator’s judgment, both wells should be completed for production, Operator will notify Participant to remit the second call sum of $133,550 for each unit subscribed to by Participant, and Participant shall remit such payment in full to Operator within ten (10) banking days after such notice if given. For each well not completed for production in this drilling program the second call amount is reduced by $66,775 per unit of participation.  Well(s) shall be considered completed at the point in time when well(s) produce the first formation fluids through the tank battery.  Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of completing the well.  Such costs include, but are not limited to, completion rig, well head assembly, tree, meter run, gas separator, tank battery, excavation, lead lines, tubing and rods, down hole equipment, pumping unit, motor, control box, electrical service, winch truck and company overhead. If Participant fails or refuses to timely remit the second call payment as herein provided, then Operator shall be entitled to retain Participant’s first call payment as liquidated damages for Participant’s breach of this agreement, and Participant shall have no further right, title or interest under this agreement or in or to the program, lease or well covered herein. Subject well will be deemed completed at the point of first production through the tank battery.  

6.  Turnkey Price:  The payments made to Operator as provided above shall constitute full payment for Participant’s share of the costs and expenses of acquisition, drilling, testing, completing and equipping the well(s) through the meter if a gas well or through the stock tank if an oil well, or both if the well is dually completed for production of gas and oil.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, exceed the amounts paid by Participant, then Operator shall pay such excess without reimbursement from Participant.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, are less than the amounts paid by Participant, then Operator shall retain the difference without reimbursement to Participant.

7.  Equipment and Abandonment:  At such time as a well in this program ceases production, Operator will, at Operator’s expense, plug the well and restore the surface in accordance with statutory and regulatory requirements and the terms of the oil and gas lease.  All salvageable equipment and fixtures shall be and remain the property of Operator.

8. Assignments:  Within 30 days after commencement of production, Operator shall execute, in recordable form, and deliver to Participant, or cause to be duly recorded for the benefit of Participant, an assignment of Participant’s proportionate undivided share of the working interest in the program.  Such assignment shall be subject to Operator’s carried interest as described below, and shall be made subject to the terms of the Operating agreement for this program. Participant shall not sell, encumber or assign such interest, in whole or in part, without prior notice thereof to, and approval of, Operator.

9. Carried Working Interest:  Operator reserves and retains a carried interest with respect to one-fourth (1/4) of each unit subscribed to and purchased by Participants, which carried interest shall cease to be carried and shall convert to a working interest vested in Operator as follows:

        A. At pay-out, Operator’s carried interest shall convert to and become a regular working interest.  At pay-out, each unit held by Participant will thereby be reduced by 1/4 and Participant or his or her heirs, successors or assigns will, if deemed necessary by Operator, execute and deliver to Operator or its successors or assigns an assignment of an undivided 1/4 of Participant’s working interest with respect of each unit owned by Participant in this program, free and clear of any liens, encumbrances or adverse claims.  After pay-out, each unit held by Participant will represent an undivided 18.75% working interest, with a net revenue interest of not less than 15% of the 8/8 production.  Should Participant fail or refuse to execute and deliver such assignment, then Operator shall be entitled to execute and record a Notice of Payout and the same shall have the same force and effect as an assignment executed and delivered by Participant pursuant hereto.

B. “Payout” means that point in time when the cumulative net proceeds received by Participant from the sale of production from the well(s) equals his or her total unit investment.  “Total unit investment” means the sum of the first call and second call payments made by Participant pursuant to paragraphs 3.A.and 3.B. above.  “Net proceeds” means Participant’s share of the gross proceeds of working interest production less Participant’s share of the expenses of operating the well after completion. Until pay-out, Operator shall have no interest in production nor liability or obligation for operating expenses, taxes or other obligations of lessee in respect to Participant’s unit(s) in the well(s) by virtue of the carried interest.

10. Operator:  Black Star 231 Corp. shall be the operator of the well(s) and lease interest, and shall conduct, direct and have full control of all development, drilling, completion, and subsequent operations.  It shall conduct such work in a good and workmanlike manner in accordance with standard practices in the industry, but shall have no liability for losses or damages except such as may result from gross negligence or willful misconduct.  Operator shall have the right to purchase, acquire and dispose of equipment and materials; to hire employees or independent contractors necessary for drilling and lease operations; and to contract for the drilling of the wells and other labor and services necessary for the drilling and completion thereof, including the right to enter into turnkey contracts.  Operator shall have authority to compromise, settle and pay any claim, which may be made by the landowner or adjoining landowner or others for damages resulting from lease operations.  It shall be the duty of Operator to conduct all operations in accordance with the lease terms and with applicable laws and regulations, and to make all necessary filings with, and obtain all necessary permits from, any regulatory agency having jurisdiction over lease operations.  Participant agrees to execute the “Operating Agreement” applicable to this program.

11. No Partnership:The liability of the parties shall be several, not joint or collective.  Each party shall be responsible only for its obligations, and shall be liable only for its proportionate share of the costs and expenses of drilling and operating the well.  It is not the intention of the parties to create, nor shall this Agreement be construed as creating a mining or other partnership or association, or to render the parties liable as partners.  If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all the provisions of Subchapter “K” of the Internal Revenue Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder.  In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

12.  Binding Effect: This Agreement shall bind, and inure to the benefit of, the parties hereto and their respective successors, assigns, heirs and legal representatives.  No agreement to modify or waive any of the provisions hereof shall be effective unless in writing and signed by both parties.

13. Participant’s Interest:  Participant hereby subscribes to and purchases _____ unit(s) pursuant to the terms herein set forth.

COUNTER PART SIGNATURE PAGE ATTACHED

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 2

COUNTERPART SIGNATURE PAGE

ROSE DOME PROJECT PARTICIPATION AGREEMENT

In witness whereof, the parties have executed this Participation Agreement effective the date same is accepted and signed by Operator.

OPERATOR:

Black Star 231 Corp.

Livestock Exchange Bldg.

1600 Genessee, Suite 814

Kansas City, Mo 64102

by: ____________________________

Date:_______________

        Jim Pryor, President

PARTICIPANT:

_______________________________

____________________________

   Signature

   Signature

  

_______________________________

   Printed Name

_______________________________

   Address

_______________________________

   Address

_______________________________

Date:______________

   Tax Identification Number

_______________________________

   Email Address

First Call payment of $138,650 X ____ units = $_____________ enclosed.

EXHIBIT FOR ADJOINING LEASE #3

BLACK STAR 231 CORP.

DRILLING PROGRAM: ROSE DOME PROJECT

         

PARTICIPATION AGREEMENT

This agreement is made by and between Black Star 231 Corp., hereafter referred to as Operator, and the other party or parties who sign this agreement, hereafter referred to as Participant or Participants.

         

         

In consideration of the mutual promises and agreements made and to be performed by the parties as hereinafter stated, Operator and Participant agree as follows:

1. Drilling Program:  The objective of the program is the drilling, testing, and completion of two wells for oil and/or gas, with target formations ranging in depth to 3,800’. Within one hundred twenty (120) days after the date this agreement is accepted by Operator, Operator will commence drilling on valid oil and gas leases located within the program areas as described in the prospect description booklet provided Participant. The lease description attributable to each well in this drilling program is the minimum spacing unit for each of the two wells as determined by State of Nebraska well spacing regulations. The final drilling location and completion depth shall be at Operator’s sole discretion.

2.  Participation Units:  There are 4 equal units of participation in the drilling program.  Each unit represents an undivided 25.0% working interest in and to the well(s) and the well spacing unit(s), subject to Operator’s carried interest hereinafter described.  Such working interest units shall be entitled to their proportionate share of the proceeds of working interest production from the well(s) drilled pursuant to the drilling program, and be subject to its proportionate burdens for payment of the lessor’s royalty and other obligations of lessee under the lease, as well as expenses of operating the wells after completion thereof.  The total working interest will have a net revenue interest (NRI) of not less than 80% of the 8/8 production from the well(s); and each unit of working interest will have a net revenue interest (NRI after payment of royalties and all other non-operating burdens payable out of production) of not less than 20% of the total 8/8 production from the well(s), subject to reduction at pay-out by reason of the Operator’s carried working interest as provided below.

3.  Payment:  Participant shall pay Operator for Participant’s share of the costs and expenses of drilling, testing, completing and equipping the well as follows:

4. First Call:  Acquisition, drilling and testing $138,650 per unit in this program.  Participant herewith tenders to Operator the first call sum of $138,650 for each unit subscribed to by Participant. Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of drilling and testing the well, and plugging and abandoning the well if, in the sole judgment of Operator, the well does not appear to be capable of production in commercial quantities.  Such costs include, but are not limited to, lease acquisition, title and legal work, land damage, permits, bonding, geological work, geophysical, remote sensing, company overhead, roads, pits, gravel, surveying, casing, logging, workover rig, acid fracture, swabbing and testing, and plugging and restoration if Operator deems the well a dry hole.

5.  Second Call:  Completion is $133,550 per unit, if both wells are completed for production.  If in the Operator’s judgment, both wells should be completed for production, Operator will notify Participant to remit the second call sum of $133,550 for each unit subscribed to by Participant, and Participant shall remit such payment in full to Operator within ten (10) banking days after such notice if given. For each well not completed for production in this drilling program the second call amount is reduced by $66,775 per unit of participation.  Well(s) shall be considered completed at the point in time when well(s) produce the first formation fluids through the tank battery.  Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of completing the well.  Such costs include, but are not limited to, completion rig, well head assembly, tree, meter run, gas separator, tank battery, excavation, lead lines, tubing and rods, down hole equipment, pumping unit, motor, control box, electrical service, winch truck and company overhead. If Participant fails or refuses to timely remit the second call payment as herein provided, then Operator shall be entitled to retain Participant’s first call payment as liquidated damages for Participant’s breach of this agreement, and Participant shall have no further right, title or interest under this agreement or in or to the program, lease or well covered herein. Subject well will be deemed completed at the point of first production through the tank battery.  

6.  Turnkey Price:  The payments made to Operator as provided above shall constitute full payment for Participant’s share of the costs and expenses of acquisition, drilling, testing, completing and equipping the well(s) through the meter if a gas well or through the stock tank if an oil well, or both if the well is dually completed for production of gas and oil.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, exceed the amounts paid by Participant, then Operator shall pay such excess without reimbursement from Participant.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, are less than the amounts paid by Participant, then Operator shall retain the difference without reimbursement to Participant.

7.  Equipment and Abandonment:  At such time as a well in this program ceases production, Operator will, at Operator’s expense, plug the well and restore the surface in accordance with statutory and regulatory requirements and the terms of the oil and gas lease.  All salvageable equipment and fixtures shall be and remain the property of Operator.

8. Assignments:  Within 30 days after commencement of production, Operator shall execute, in recordable form, and deliver to Participant, or cause to be duly recorded for the benefit of Participant, an assignment of Participant’s proportionate undivided share of the working interest in the program.  Such assignment shall be subject to Operator’s carried interest as described below, and shall be made subject to the terms of the Operating agreement for this program. Participant shall not sell, encumber or assign such interest, in whole or in part, without prior notice thereof to, and approval of, Operator.

9. Carried Working Interest:  Operator reserves and retains a carried interest with respect to one-fourth (1/4) of each unit subscribed to and purchased by Participants, which carried interest shall cease to be carried and shall convert to a working interest vested in Operator as follows:

        A. At pay-out, Operator’s carried interest shall convert to and become a regular working interest.  At pay-out, each unit held by Participant will thereby be reduced by 1/4 and Participant or his or her heirs, successors or assigns will, if deemed necessary by Operator, execute and deliver to Operator or its successors or assigns an assignment of an undivided 1/4 of Participant’s working interest with respect of each unit owned by Participant in this program, free and clear of any liens, encumbrances or adverse claims.  After pay-out, each unit held by Participant will represent an undivided 18.75% working interest, with a net revenue interest of not less than 15% of the 8/8 production.  Should Participant fail or refuse to execute and deliver such assignment, then Operator shall be entitled to execute and record a Notice of Payout and the same shall have the same force and effect as an assignment executed and delivered by Participant pursuant hereto.

B. “Payout” means that point in time when the cumulative net proceeds received by Participant from the sale of production from the well(s) equals his or her total unit investment.  “Total unit investment” means the sum of the first call and second call payments made by Participant pursuant to paragraphs 3.A.and 3.B. above.  “Net proceeds” means Participant’s share of the gross proceeds of working interest production less Participant’s share of the expenses of operating the well after completion. Until pay-out, Operator shall have no interest in production nor liability or obligation for operating expenses, taxes or other obligations of lessee in respect to Participant’s unit(s) in the well(s) by virtue of the carried interest.

10. Operator:  Black Star 231 Corp. shall be the operator of the well(s) and lease interest, and shall conduct, direct and have full control of all development, drilling, completion, and subsequent operations.  It shall conduct such work in a good and workmanlike manner in accordance with standard practices in the industry, but shall have no liability for losses or damages except such as may result from gross negligence or willful misconduct.  Operator shall have the right to purchase, acquire and dispose of equipment and materials; to hire employees or independent contractors necessary for drilling and lease operations; and to contract for the drilling of the wells and other labor and services necessary for the drilling and completion thereof, including the right to enter into turnkey contracts.  Operator shall have authority to compromise, settle and pay any claim, which may be made by the landowner or adjoining landowner or others for damages resulting from lease operations.  It shall be the duty of Operator to conduct all operations in accordance with the lease terms and with applicable laws and regulations, and to make all necessary filings with, and obtain all necessary permits from, any regulatory agency having jurisdiction over lease operations.  Participant agrees to execute the “Operating Agreement” applicable to this program.

11. No Partnership:The liability of the parties shall be several, not joint or collective.  Each party shall be responsible only for its obligations, and shall be liable only for its proportionate share of the costs and expenses of drilling and operating the well.  It is not the intention of the parties to create, nor shall this Agreement be construed as creating a mining or other partnership or association, or to render the parties liable as partners.  If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all the provisions of Subchapter “K” of the Internal Revenue Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder.  In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

12.  Binding Effect: This Agreement shall bind, and inure to the benefit of, the parties hereto and their respective successors, assigns, heirs and legal representatives.  No agreement to modify or waive any of the provisions hereof shall be effective unless in writing and signed by both parties.

13. Participant’s Interest:  Participant hereby subscribes to and purchases _____ unit(s) pursuant to the terms herein set forth.

COUNTER PART SIGNATURE PAGE ATTACHED

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 3

COUNTERPART SIGNATURE PAGE

ROSE DOME PROJECT PARTICIPATION AGREEMENT

In witness whereof, the parties have executed this Participation Agreement effective the date same is accepted and signed by Operator.

OPERATOR:

Black Star 231 Corp.

Livestock Exchange Bldg.

1600 Genessee, Suite 814

Kansas City, Mo 64102

by: ____________________________

Date:_______________

        Jim Pryor, President

PARTICIPANT:

_______________________________

____________________________

   Signature

   Signature

  

_______________________________

   Printed Name

_______________________________

   Address

_______________________________

   Address

_______________________________

Date:______________

   Tax Identification Number

_______________________________

   Email Address

First Call payment of $138,650 X ____ units = $_____________ enclosed.

EXHIBIT FOR ADJOINING LEASE #4

BLACK STAR 231 CORP.

DRILLING PROGRAM: ROSE DOME PROJECT

         

PARTICIPATION AGREEMENT

This agreement is made by and between Black Star 231 Corp., hereafter referred to as Operator, and the other party or parties who sign this agreement, hereafter referred to as Participant or Participants.

         

         

In consideration of the mutual promises and agreements made and to be performed by the parties as hereinafter stated, Operator and Participant agree as follows:

1. Drilling Program:  The objective of the program is the drilling, testing, and completion of two wells for oil and/or gas, with target formations ranging in depth to 3,800’. Within one hundred twenty (120) days after the date this agreement is accepted by Operator, Operator will commence drilling on valid oil and gas leases located within the program areas as described in the prospect description booklet provided Participant. The lease description attributable to each well in this drilling program is the minimum spacing unit for each of the two wells as determined by State of Nebraska well spacing regulations. The final drilling location and completion depth shall be at Operator’s sole discretion.

2.  Participation Units:  There are 4 equal units of participation in the drilling program.  Each unit represents an undivided 25.0% working interest in and to the well(s) and the well spacing unit(s), subject to Operator’s carried interest hereinafter described.  Such working interest units shall be entitled to their proportionate share of the proceeds of working interest production from the well(s) drilled pursuant to the drilling program, and be subject to its proportionate burdens for payment of the lessor’s royalty and other obligations of lessee under the lease, as well as expenses of operating the wells after completion thereof.  The total working interest will have a net revenue interest (NRI) of not less than 80% of the 8/8 production from the well(s); and each unit of working interest will have a net revenue interest (NRI after payment of royalties and all other non-operating burdens payable out of production) of not less than 20% of the total 8/8 production from the well(s), subject to reduction at pay-out by reason of the Operator’s carried working interest as provided below.

3.  Payment:  Participant shall pay Operator for Participant’s share of the costs and expenses of drilling, testing, completing and equipping the well as follows:

4. First Call:  Acquisition, drilling and testing $138,650 per unit in this program.  Participant herewith tenders to Operator the first call sum of $138,650 for each unit subscribed to by Participant. Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of drilling and testing the well, and plugging and abandoning the well if, in the sole judgment of Operator, the well does not appear to be capable of production in commercial quantities.  Such costs include, but are not limited to, lease acquisition, title and legal work, land damage, permits, bonding, geological work, geophysical, remote sensing, company overhead, roads, pits, gravel, surveying, casing, logging, workover rig, acid fracture, swabbing and testing, and plugging and restoration if Operator deems the well a dry hole.

5.  Second Call:  Completion is $133,550 per unit, if both wells are completed for production.  If in the Operator’s judgment, both wells should be completed for production, Operator will notify Participant to remit the second call sum of $133,550 for each unit subscribed to by Participant, and Participant shall remit such payment in full to Operator within ten (10) banking days after such notice if given. For each well not completed for production in this drilling program the second call amount is reduced by $66,775 per unit of participation.  Well(s) shall be considered completed at the point in time when well(s) produce the first formation fluids through the tank battery.  Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of completing the well.  Such costs include, but are not limited to, completion rig, well head assembly, tree, meter run, gas separator, tank battery, excavation, lead lines, tubing and rods, down hole equipment, pumping unit, motor, control box, electrical service, winch truck and company overhead. If Participant fails or refuses to timely remit the second call payment as herein provided, then Operator shall be entitled to retain Participant’s first call payment as liquidated damages for Participant’s breach of this agreement, and Participant shall have no further right, title or interest under this agreement or in or to the program, lease or well covered herein. Subject well will be deemed completed at the point of first production through the tank battery.  

6.  Turnkey Price:  The payments made to Operator as provided above shall constitute full payment for Participant’s share of the costs and expenses of acquisition, drilling, testing, completing and equipping the well(s) through the meter if a gas well or through the stock tank if an oil well, or both if the well is dually completed for production of gas and oil.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, exceed the amounts paid by Participant, then Operator shall pay such excess without reimbursement from Participant.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, are less than the amounts paid by Participant, then Operator shall retain the difference without reimbursement to Participant.

7.  Equipment and Abandonment:  At such time as a well in this program ceases production, Operator will, at Operator’s expense, plug the well and restore the surface in accordance with statutory and regulatory requirements and the terms of the oil and gas lease.  All salvageable equipment and fixtures shall be and remain the property of Operator.

8. Assignments:  Within 30 days after commencement of production, Operator shall execute, in recordable form, and deliver to Participant, or cause to be duly recorded for the benefit of Participant, an assignment of Participant’s proportionate undivided share of the working interest in the program.  Such assignment shall be subject to Operator’s carried interest as described below, and shall be made subject to the terms of the Operating agreement for this program. Participant shall not sell, encumber or assign such interest, in whole or in part, without prior notice thereof to, and approval of, Operator.

9. Carried Working Interest:  Operator reserves and retains a carried interest with respect to one-fourth (1/4) of each unit subscribed to and purchased by Participants, which carried interest shall cease to be carried and shall convert to a working interest vested in Operator as follows:

        A. At pay-out, Operator’s carried interest shall convert to and become a regular working interest.  At pay-out, each unit held by Participant will thereby be reduced by 1/4 and Participant or his or her heirs, successors or assigns will, if deemed necessary by Operator, execute and deliver to Operator or its successors or assigns an assignment of an undivided 1/4 of Participant’s working interest with respect of each unit owned by Participant in this program, free and clear of any liens, encumbrances or adverse claims.  After pay-out, each unit held by Participant will represent an undivided 18.75% working interest, with a net revenue interest of not less than 15% of the 8/8 production.  Should Participant fail or refuse to execute and deliver such assignment, then Operator shall be entitled to execute and record a Notice of Payout and the same shall have the same force and effect as an assignment executed and delivered by Participant pursuant hereto.

B. “Payout” means that point in time when the cumulative net proceeds received by Participant from the sale of production from the well(s) equals his or her total unit investment.  “Total unit investment” means the sum of the first call and second call payments made by Participant pursuant to paragraphs 3.A.and 3.B. above.  “Net proceeds” means Participant’s share of the gross proceeds of working interest production less Participant’s share of the expenses of operating the well after completion. Until pay-out, Operator shall have no interest in production nor liability or obligation for operating expenses, taxes or other obligations of lessee in respect to Participant’s unit(s) in the well(s) by virtue of the carried interest.

10. Operator:  Black Star 231 Corp. shall be the operator of the well(s) and lease interest, and shall conduct, direct and have full control of all development, drilling, completion, and subsequent operations.  It shall conduct such work in a good and workmanlike manner in accordance with standard practices in the industry, but shall have no liability for losses or damages except such as may result from gross negligence or willful misconduct.  Operator shall have the right to purchase, acquire and dispose of equipment and materials; to hire employees or independent contractors necessary for drilling and lease operations; and to contract for the drilling of the wells and other labor and services necessary for the drilling and completion thereof, including the right to enter into turnkey contracts.  Operator shall have authority to compromise, settle and pay any claim, which may be made by the landowner or adjoining landowner or others for damages resulting from lease operations.  It shall be the duty of Operator to conduct all operations in accordance with the lease terms and with applicable laws and regulations, and to make all necessary filings with, and obtain all necessary permits from, any regulatory agency having jurisdiction over lease operations.  Participant agrees to execute the “Operating Agreement” applicable to this program.

11. No Partnership: The liability of the parties shall be several, not joint or collective.  Each party shall be responsible only for its obligations, and shall be liable only for its proportionate share of the costs and expenses of drilling and operating the well.  It is not the intention of the parties to create, nor shall this Agreement be construed as creating a mining or other partnership or association, or to render the parties liable as partners.  If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all the provisions of Subchapter “K” of the Internal Revenue Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder.  In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

12.  Binding Effect: This Agreement shall bind, and inure to the benefit of, the parties hereto and their respective successors, assigns, heirs and legal representatives.  No agreement to modify or waive any of the provisions hereof shall be effective unless in writing and signed by both parties.

13. Participant’s Interest:  Participant hereby subscribes to and purchases _____ unit(s) pursuant to the terms herein set forth.

COUNTER PART SIGNATURE PAGE ATTACHED

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 4

COUNTERPART SIGNATURE PAGE

ROSE DOME PROJECT PARTICIPATION AGREEMENT

In witness whereof, the parties have executed this Participation Agreement effective the date same is accepted and signed by Operator.

OPERATOR:

Black Star 231 Corp.

Livestock Exchange Bldg.

1600 Genessee, Suite 814

Kansas City, Mo 64102

by: ____________________________

Date:_______________

        Jim Pryor, President

PARTICIPANT:

_______________________________

____________________________

   Signature

   Signature

  

_______________________________

   Printed Name

_______________________________

   Address

_______________________________

   Address

_______________________________

Date:______________

   Tax Identification Number

_______________________________

   Email Address

First Call payment of $138,650 X ____ units = $_____________ enclosed.

EXHIBIT FOR ADJOINING LEASE #5

BLACK STAR 231 CORP.

DRILLING PROGRAM: ROSE DOME PROJECT

         

PARTICIPATION AGREEMENT

This agreement is made by and between Black Star 231 Corp., hereafter referred to as Operator, and the other party or parties who sign this agreement, hereafter referred to as Participant or Participants.

         

         

In consideration of the mutual promises and agreements made and to be performed by the parties as hereinafter stated, Operator and Participant agree as follows:

1. Drilling Program:  The objective of the program is the drilling, testing, and completion of two wells for oil and/or gas, with target formations ranging in depth to 3,800’. Within one hundred twenty (120) days after the date this agreement is accepted by Operator, Operator will commence drilling on valid oil and gas leases located within the program areas as described in the prospect description booklet provided Participant. The lease description attributable to each well in this drilling program is the minimum spacing unit for each of the two wells as determined by State of Nebraska well spacing regulations. The final drilling location and completion depth shall be at Operator’s sole discretion.

2.  Participation Units:  There are 4 equal units of participation in the drilling program.  Each unit represents an undivided 25.0% working interest in and to the well(s) and the well spacing unit(s), subject to Operator’s carried interest hereinafter described.  Such working interest units shall be entitled to their proportionate share of the proceeds of working interest production from the well(s) drilled pursuant to the drilling program, and be subject to its proportionate burdens for payment of the lessor’s royalty and other obligations of lessee under the lease, as well as expenses of operating the wells after completion thereof.  The total working interest will have a net revenue interest (NRI) of not less than 80% of the 8/8 production from the well(s); and each unit of working interest will have a net revenue interest (NRI after payment of royalties and all other non-operating burdens payable out of production) of not less than 20% of the total 8/8 production from the well(s), subject to reduction at pay-out by reason of the Operator’s carried working interest as provided below.

3.  Payment:  Participant shall pay Operator for Participant’s share of the costs and expenses of drilling, testing, completing and equipping the well as follows:

4. First Call:  Acquisition, drilling and testing $138,650 per unit in this program.  Participant herewith tenders to Operator the first call sum of $138,650 for each unit subscribed to by Participant. Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of drilling and testing the well, and plugging and abandoning the well if, in the sole judgment of Operator, the well does not appear to be capable of production in commercial quantities.  Such costs include, but are not limited to, lease acquisition, title and legal work, land damage, permits, bonding, geological work, geophysical, remote sensing, company overhead, roads, pits, gravel, surveying, casing, logging, workover rig, acid fracture, swabbing and testing, and plugging and restoration if Operator deems the well a dry hole.

5.  Second Call:  Completion is $133,550 per unit, if both wells are completed for production.  If in the Operator’s judgment, both wells should be completed for production, Operator will notify Participant to remit the second call sum of $133,550 for each unit subscribed to by Participant, and Participant shall remit such payment in full to Operator within ten (10) banking days after such notice if given. For each well not completed for production in this drilling program the second call amount is reduced by $66,775 per unit of participation.  Well(s) shall be considered completed at the point in time when well(s) produce the first formation fluids through the tank battery.  Such funds shall be deposited by Operator in a separate account specific to this drilling program and not commingled with Operator’s own funds or funds paid by others in respect to any other drilling program.  Such funds shall be held in trust by Operator for the benefit of the parties hereto, and shall be used by Operator for the costs and expenses of completing the well.  Such costs include, but are not limited to, completion rig, well head assembly, tree, meter run, gas separator, tank battery, excavation, lead lines, tubing and rods, down hole equipment, pumping unit, motor, control box, electrical service, winch truck and company overhead. If Participant fails or refuses to timely remit the second call payment as herein provided, then Operator shall be entitled to retain Participant’s first call payment as liquidated damages for Participant’s breach of this agreement, and Participant shall have no further right, title or interest under this agreement or in or to the program, lease or well covered herein. Subject well will be deemed completed at the point of first production through the tank battery.  

6.  Turnkey Price:  The payments made to Operator as provided above shall constitute full payment for Participant’s share of the costs and expenses of acquisition, drilling, testing, completing and equipping the well(s) through the meter if a gas well or through the stock tank if an oil well, or both if the well is dually completed for production of gas and oil.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, exceed the amounts paid by Participant, then Operator shall pay such excess without reimbursement from Participant.  If the actual costs and expenses incurred by Operator, in respect to Participant’s unit(s) of participation, are less than the amounts paid by Participant, then Operator shall retain the difference without reimbursement to Participant.

7.  Equipment and Abandonment:  At such time as a well in this program ceases production, Operator will, at Operator’s expense, plug the well and restore the surface in accordance with statutory and regulatory requirements and the terms of the oil and gas lease.  All salvageable equipment and fixtures shall be and remain the property of Operator.

8. Assignments:  Within 30 days after commencement of production, Operator shall execute, in recordable form, and deliver to Participant, or cause to be duly recorded for the benefit of Participant, an assignment of Participant’s proportionate undivided share of the working interest in the program.  Such assignment shall be subject to Operator’s carried interest as described below, and shall be made subject to the terms of the Operating agreement for this program. Participant shall not sell, encumber or assign such interest, in whole or in part, without prior notice thereof to, and approval of, Operator.

9. Carried Working Interest:  Operator reserves and retains a carried interest with respect to one-fourth (1/4) of each unit subscribed to and purchased by Participants, which carried interest shall cease to be carried and shall convert to a working interest vested in Operator as follows:

        A. At pay-out, Operator’s carried interest shall convert to and become a regular working interest.  At pay-out, each unit held by Participant will thereby be reduced by 1/4 and Participant or his or her heirs, successors or assigns will, if deemed necessary by Operator, execute and deliver to Operator or its successors or assigns an assignment of an undivided 1/4 of Participant’s working interest with respect of each unit owned by Participant in this program, free and clear of any liens, encumbrances or adverse claims.  After pay-out, each unit held by Participant will represent an undivided 18.75% working interest, with a net revenue interest of not less than 15% of the 8/8 production.  Should Participant fail or refuse to execute and deliver such assignment, then Operator shall be entitled to execute and record a Notice of Payout and the same shall have the same force and effect as an assignment executed and delivered by Participant pursuant hereto.

B. “Payout” means that point in time when the cumulative net proceeds received by Participant from the sale of production from the well(s) equals his or her total unit investment.  “Total unit investment” means the sum of the first call and second call payments made by Participant pursuant to paragraphs 3.A.and 3.B. above.  “Net proceeds” means Participant’s share of the gross proceeds of working interest production less Participant’s share of the expenses of operating the well after completion. Until pay-out, Operator shall have no interest in production nor liability or obligation for operating expenses, taxes or other obligations of lessee in respect to Participant’s unit(s) in the well(s) by virtue of the carried interest.

10. Operator:  Black Star 231 Corp. shall be the operator of the well(s) and lease interest, and shall conduct, direct and have full control of all development, drilling, completion, and subsequent operations.  It shall conduct such work in a good and workmanlike manner in accordance with standard practices in the industry, but shall have no liability for losses or damages except such as may result from gross negligence or willful misconduct.  Operator shall have the right to purchase, acquire and dispose of equipment and materials; to hire employees or independent contractors necessary for drilling and lease operations; and to contract for the drilling of the wells and other labor and services necessary for the drilling and completion thereof, including the right to enter into turnkey contracts.  Operator shall have authority to compromise, settle and pay any claim, which may be made by the landowner or adjoining landowner or others for damages resulting from lease operations.  It shall be the duty of Operator to conduct all operations in accordance with the lease terms and with applicable laws and regulations, and to make all necessary filings with, and obtain all necessary permits from, any regulatory agency having jurisdiction over lease operations.  Participant agrees to execute the “Operating Agreement” applicable to this program.

11. No Partnership: The liability of the parties shall be several, not joint or collective.  Each party shall be responsible only for its obligations, and shall be liable only for its proportionate share of the costs and expenses of drilling and operating the well.  It is not the intention of the parties to create, nor shall this Agreement be construed as creating a mining or other partnership or association, or to render the parties liable as partners.  If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded from the application of all the provisions of Subchapter “K” of the Internal Revenue Code, as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder.  In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

12.  Binding Effect: This Agreement shall bind, and inure to the benefit of, the parties hereto and their respective successors, assigns, heirs and legal representatives.  No agreement to modify or waive any of the provisions hereof shall be effective unless in writing and signed by both parties.

13. Participant’s Interest:  Participant hereby subscribes to and purchases _____ unit(s) pursuant to the terms herein set forth.

COUNTER PART SIGNATURE PAGE ATTACHED

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 5

COUNTERPART SIGNATURE PAGE

ROSE DOME PROJECT PARTICIPATION AGREEMENT

In witness whereof, the parties have executed this Participation Agreement effective the date same is accepted and signed by Operator.

OPERATOR:

Black Star 231 Corp.

Livestock Exchange Bldg.

1600 Genessee, Suite 814

Kansas City, Mo 64102

by: ____________________________

Date:_______________

        Jim Pryor, President

PARTICIPANT:

_______________________________

____________________________

   Signature

   Signature

  

_______________________________

   Printed Name

_______________________________

   Address

_______________________________

   Address

_______________________________

Date:______________

   Tax Identification Number

_______________________________

   Email Address

First Call payment of $138,650 X ____ units = $_____________ enclosed.

ROSE DOME PROJECT PARTICIPATION AGREEMENT

PAGE 6

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