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OIL AND NATURAL GAS MINERAL LEASE

(FOR OWNER OF

(i) MINERAL ESTATE OR(ii) MINERAL AND SURFACE ESTATE)

USERS GUIDE1. CHECK THE APPROPRIATE BOX

PAID UP LEASE* Yes [___] No [___]

2. INSERT EFFECTIVE DATE

THIS OIL AND NATURAL GAS MINERAL LEASE (hereinafter referred to as the ‘Lease’) is made this ________ day of _______________________, 20____, (the “Effective Date”) by and between:

3. INSERT LESSOR (LAND, MINERAL OR ROYATLY OWNER NAME AND ADDRESS)

_____________________________________________________________________________, having an address at ___________________________________________________, hereinafter collectively, if more than one person or entity, referred to as “Lessor”

4. INSERT LESSEE (OIL COMPANY NAME AND ADDRESS)

and __________________________________________________, having an address at ___________________________________________________, hereinafter collectively, if more than one person or entity, referred to as “Lessee”.

5. MODIFY DEFINITION OF LEASED HYDROCARBONS IF MINERALS OTHER THAN OIL, GAS, OR CONDENSATE ARE TO BE LEASED

x. “Leased Hydrocarbons” means those underground mineral hydrocarbons leased to the Lessee from the Lessor in accordance with the terms and conditions of this Lease and shall only include the Oil and Gas hydrocarbons and condensate whose molecules are predominately composed of hydrogen and carbon atoms, and naturally associated incidental by-product compounds naturally occurring therein inclusive of “oil”, “crude oil”, “condensate”, “methane”, “methane gas”, “shale gas”, and “natural gas”, “ethane”, “ethane gas”, “LPG”, “propane”, “butane”, “natural gas liquids” or “NGLs” and incidental or by-product sulfur, produced exclusively through a well bore, and by no other means (such as, but not limited to: surface or subsurface mining, open pit mining, excavation or other non-well bore exploration and production processes), and for the avoidance of doubt, Leased Hydrocarbons SHALL NO INCLUDE and not an exhaustive list: coalbed methane gas, lignite, coal, peat, uranium, oil sands, tar sands, bitumen, gravel, sand, water, copper, caliche, bentonite, sulfur (except as an incidental by-product of the production of the Leased Hydrocarbons), fresh water, helium, carbon dioxide, thorium or other fissionable material, and all ores including metallic ores, all of which are reserved to Lessor;

6. STRIKE OUT THIS CLAUSE IF NOT APPLICABLE OTHERWISE INSERT FORMATION NAME

(Strike through this clause if not applicable) Notwithstanding any term or condition to the contrary, this Lease shall include, Lessor’s or Lessor’s authorized representatives reservation of the right to explore, develop, produce and market Leased Hydrocarbons related to formations below the base of the __________ formation identified in the description of the Leased Premises together with the rights of ingress and egress to and from the Leased Premises or lands pooled or unitized therewith as may be reasonably necessary to conduct such operations, including without limitation, geophysical operations, the drilling of wells, and the construction and use of roads, canals, pipelines, tanks, water wells, disposal wells, injection wells, pits, electric and telephone lines, power stations and other facilities deemed necessary by Lessor to explore, discover, produce, store, treat, and transport Oil or Gas. This reservation of rights shall specifically include the right to penetrate and drill through the shallow formations otherwise contained in the Leased Premises to

ROYALTY OWNER 2013 – OIL AND NATURAL GAS MINERAL LEASE FORM (SHALE) – V. 4 (2013) OPTIONAL PAID UP PROVISIONS of 15

which this Lease is in effect and not otherwise terminated or expired. All of the rights retained by Lessor and the rights granted the Lessee herein shall be exercised in such manner that neither shall unduly interfere with the operations of the other upon the Leased Premises.

7. INSERT COUNTY/PARISH, STATE AND OTHER DESCRIPTION OF LEASED PROPERTY, INCLUDE NUMBER OF ACRES LEASED AND ANY FRACTION

3. LEASED PREMISES: The Leased Premises are located, all or part, in the County/Parish of ________________________________, in the State of __________________________, in the [district/township of __________________] and described as follows:

[Provide legal description of Leased Premises: metes and bounds; township; plat description; longitude/latitude; or other description customarily used in the locale of interest, or if only the rights to the mineral estate is owned by Lessor, such additional description of such subsurface mineral interest right that may be applicable.]

and described for the purposes of this Lease as containing ___________________ (acres), whether actually more or less –

8. STRIKE THROUGH RELEVEANT WORD IF MOTHER HUBBARD CLAUSE IS INCLUDED OR EXCLUDED (USUALLY LESSOR WANTS IT EXCLUDED)

[MOTHER HUBBARD CLAUSE: STRIKE THROUGH ONE OF THE FOLLOWING ELECTIONS THAT DOES NOT APPLY]… …

INCLUDING / EXCLUDING all contiguous or appurtenant lands owned by or in which Lessor has an interest, inclusive of, but not limited to, strips and gores, streets, easements, highways and alleyways adjacent thereto.

9. INSERT NUMBER OF MONTHS AND DATE OF BEGINNING AND END OF PRIMARY TERM. TYPICALLY A THREE YEAR TERM, FIVE MAXIMUM

4. LEASE PRIMARY TERM; This Lease shall remain in force for a period of (i) _________ months, beginning on the __________ day of ____________________, 20____ and ending on the ________ day of ____________________, 20__, such term period herein referred to as the “Primary Term”,

10. STRIKE THROUGH BELOW OPTION ONE OR TWO THAT DOES NOT APPLY. LESSOR TYPICALLY PREFERS OPTION TWO

TOP LEASE OPTIONS – (Select either Option, One or Two beloe, by striking through the Option that does not apply or striking through both options if neither apply.)

Option One (Pre-emption Right): If, at any time within the Primary Term of this Lease or any extension of such Primary Term as otherwise permitted by the terms of this Lease, Lessor receives any offer, acceptable to Lessor, to grant an additional oil and natural Gas mineral lease for Leased Hydrocarbons (hereinafter referred to as a ‘Top Lease’) covering all or part of the Leased Premises, Lessee shall have the continuing option, by matching on the same offered terms and conditions any such offer, to acquire such Top Lease. Any offer acceptable to Lessor must be in writing and must set forth the potential third party lessee’s name, bonus consideration and royalty consideration to be paid for such lease, and include a copy of the lease form to be utilized reflecting all pertinent, material and relevant terms and conditions of the Top Lease. Lessee shall have fifteen (15) days after receipt from Lessor of a complete copy of any such offer capable of acceptance by Lessor to advise Lessor in writing of its election to enter into an oil and natural Gas mineral lease with Lessor on equivalent terms and conditions of the offered Top Lease, however, in any event, Lessor is not obligated to enter into any Top Lease with a third party or Lessee. If Lessee fails to notify Lessor within the aforesaid fifteen (15) day of its election to meet any such bona fide offer, Lessor shall at any time thereafter, have the right to accept said offer. However, if after Lessee rejects or deemed to have rejected the offer, such third party offer is subsequently modified in such a way for the third party that materially improves the benefits and rights to be enjoyed by the potential third party lessee, and such beneficial material


modification is capable of acceptance by Lessor, as a condition precedent of Lessor accepting the modified offer, Lessor shall be obligated to reoffer the modified offer to Lessee in accordance with the same preceding process.

Option Two (Right of First Refusal): If, at any time within the Primary Term of this Lease or any extension of such Primary Term as otherwise permitted by the terms of this Lease, Lessor receives any offer, acceptable to Lessor, to grant an additional oil and natural Gas mineral lease for Leased Hydrocarbons (hereinafter referred to as a ‘Top Lease’) covering all or part of the Leased Premises, Lessee shall have the continuing right and option, upon written notice from Lessor to Lessee, for Lessee to be given the right to propose terms for a Top Lease, but Lessor shall not be obligated to disclose the terms of the proposed third party Top Lease offer. Any offer from Lessee acceptable to Lessor must be in writing and must set forth all relevant terms inclusive of bonus consideration and royalty consideration to be paid for such lease, and include a copy of the lease form to be utilized reflecting all pertinent, material and relevant terms and conditions of the Top Lease. Lessee shall have fifteen (15) days after receipt from Lessor notice for Lessee to submit a written Top Lease offer to Lessor, however, in any event, Lessor is not obligated to enter into any Top Lease with a third party lessee or Lessee, nor obligated to accept either Lessee’s or the third party lessee Top Lease offer. If Lessee fails to submit to Lessor within the aforesaid fifteen (15) day a Top Lease offer or make a Top Lease offer, Lessor shall at any time thereafter, have the right to accept or reject any offer, either from Lessee or the third party lessee.

11. INSERT DRILLING FORMATION OBJECTIVE THAT OIL COMPANY MUST DRILL TO (OR SIMILAR OBLIGAITION SUCH AS A DEPTH; FAILURE TO DO THIS MEANS THE OIL COMPANY CAN LIMIT ITS DRILLING TO LOW COST WELLS AND NOT PROPERLY TEST THE LEASE); INSERT A PERFORMANCE FAILURE FEE IF OIL COMPANY FAILS TO PERFORM (AMOUNT IS VARIABLE, $50,000 TO $2,000,000?, NEGOTIABLE)

5. PRIMARY TERM DRILLING OBLIGATION. Lessee is obligated to commence, or cause to be commenced, drilling operations, on a well (the “Test Well”) under the terms of this Lease during the Primary Term and on or before twenty four (24) months from the Effective Date of this Lease. The Test Well must be drilled in a good and workmanlike manner to a depth sufficient to adequately test for the presence of Leased Hydrocarbons in the ________________ formation. Failure by Lessee to drill the Test Well as required herein shall result in at Lessor’s exclusive option to either (i) demand that Lessee be obligated to pay to Lessor as liquidated damages the cash lump sum of $_____________ , which sum will be paid to Lessor within 15 days of receipt of written notice by Lessor or (ii) terminate this Lease. In any event, if Lessee does not commence any drilling operations during the Primary Term, this Lease shall automatically terminate at the end of the Primary Term, notwithstanding Lessor’s option right to be paid the above liquidated damages, which if such option is elected by Lessor, shall not be reimbursed to Lessee.

12. STRIKE THROUGH OPTION ONE OR TWO BELOW THAT DOES NOT APPLY; AND INSERT RELEVANT DATES AND TERMS (TYPICALLY LIMITED TO NO MORE THAN 2 YEARS MAXIMUM; LESSOR GENERALLY PREFERS OPTION TWO; IF OPTION ONE INSERT DOLLARS PER ACRE EXTENSION FEE; SHOULD BE NO LESS THAN ORIGINAL BONUS OR PAID UP FEE AND TYPICALLY SHOULD BE HIGHER).

6 LEASE EXTENSION TERM.

Lessee has the option right to extend the Primary Term for [strike through the below Option One or Two Clause that does not apply]:

Option One: An additional period of _______ months beginning on the _____day of _____________, 20___ (being one day after the end of the Primary Term) and ending on the ________ day of ______________, 20____, herein after referred to as the “Extension Term” subject to (i) Lessee paying Lessor, at any time within the Primary Term, proportionate to Lessor’s _______ percentage (____%) ownership in the Lease (which is deemed to be one hundred percent, 100%, unless otherwise specified), an “Extension Payment” equal in a lump sum cash amount to the compensation received by Lessor for this [Paid Up, if applicable] Lease, plus _______ Dollars ($__________) per acre and fraction thereof of the Leased Premises, and (ii) by commencing the drilling operations of an Exploration Test Well to test for the presence of Leased Hydrocarbons to a minimum depth of _________________ feet from the surface or test the __________ geologic formation), within the first three hundred and sixty five (365) days of the Extension Term on the Leased Premises or on lands unitized or pooled in a common production unit, with the Leased Premises.

Option Two: An additional period of _______ months beginning on the _____day of _____________, 20___ (being one day after the end of the Primary Term) and ending on the ________ day of ______________, 20____, herein after referred to as the “Extension Term” by timely exercising an option right of first refusal by offering in writing and to pay Lessor, at any time within the Primary Term, proportionate to Lessor’s _______ percentage (____%) ownership in the Lease (which is deemed to be one hundred percent,


100%, unless otherwise specified), an “Extension Payment” comprised of a lump sum cash bonus payment, new offered delay rental payment terms and new offered royalty terms plus offer to commit to commencement of drilling operations of at least one Exploration Test Well to test for the presence of Leased Hydrocarbons to a minimum depth of _________________ feet from the surface or test the __________ geologic formation), within the first three hundred and sixty five (365) days of the Extension Term on the Leased Premises or on lands unitized or pooled in a common production unit, with the Leased Premises. Within thirty (30) days of receipt of such written Extension Payment offer, Lessor shall either (i) accept such offer, (ii) reject the offer or (iii) lease (hereinafter referred to as the “Extension Lease”) all or any part of the Leased Premises to a lessee other than the Lessee.

13. INSERT SHUT IN ROYALTY FEE; $100 PER YEAR PER ACRE IS INSERTED, BUT IS NEGOTIABLE; ASSESS LOCAL PRACTICE; SHUT IN RIGHT IN ANY EVENT LIMITED TO TWO YEARS.

8 SHUT-IN WELLS AND SHUT-IN ROYALTY. (i) If at any time or from time to time there shall be any well or wells on any part or parts of the Leased Premises then in force and effect capable of producing Gas and/or condensate in Paying Quantities but from which Gas and/or condensate are not produced because of the lack of a market and/or pipeline system available to transport Gas and/or condensate to a market, provided Lessee continues to use best endeavors to establish or cause to be established such market and/or pipeline system, Lessee may at its option pay in cash to Lessor as a Shut In Royalty payment a sum equal to [$100.00] per year for each acre or fraction thereof of the Leased Premises included in the pooled or unitized unit on which each such well shall be situated or, if no pooled or unitized Gas unit designated shall have been made, then on the number of acres which Lessee would be entitled to retain around such Gas well under the Offset Obligations (as defined in Clause 9) of this Lease, in the event of partial termination. The first such yearly payment shall be made to Lessor within ninety (90) days after the well was shut-in and succeeding payments shall be made annually thereafter on or before the day of the month upon which such well was shut-in; such payments shall be made in the depository bank designated in writing by Lessor to Lessee provided unless otherwise directed by Lessor; and while such Shut In Royalty is paid as above provided, this Lease, insofar as it covers such Gas well and the acreage for which such payment is made, shall, subject to the other terms and provisions hereof, remain in force and effect as though such well were producing Gas and/or condensate in Paying Quantities, provided that the payment of Shut In Royalty payment for Gas as to one such unit shall have no effect upon the continuance of this Lease as to any other pool or unitized unit or units. It is expressly provided, however, that after the expiration of the Primary Term, Lessee shall not have the right to continue this Lease in force as to any Gas unit by payment of Shut In Royalty payment for any single period of more than the greater of one (1) year or two (2) year in the aggregate after the end of the Primary Term plus any applicable Extension Term.

14. INSERT MINIUMUM SHUT IN ROYALTY AND NORMAL ROYALTY PAYMENT; $300 PER ACRE IS ASSUMED BUT IS NEGOTIABLE; CHECK LOCAL PRACTICE; MAY WISH TO HAVE SUBSTANTIALLY HIGHER.

(iii) If during any year (commencing with the anniversary date of this Lease) while this Lease is in force, Leased Hydrocarbons shall be produced from any well on the Leased Premises, there has not been paid or accrued hereunder to Lessor at least the sum of [$300.00] per acre during that anniversary year for each acre and fraction thereof, subject to this Lease at the commencement of such year, by way of Shut In Royalty payment and/or Royalties paid or then accrued, Lessee shall, within thirty (30) days after the end of such Lease year, pay or tender to Lessor, as Minimum Annual Royalty, the difference between the amount per acre so paid or accrued during such Lease year for Shut In Royalty plus Royalty and said sum of [$300.00] per acre. The payment of Minimum Annual Royalty provided for in this section of the Lease shall not be in lieu of actual production of Leased Hydrocarbons in Paying Quantities and Lessee shall not be entitled to continue this Lease in force by payment of such Minimum Annual Royalty if, in fact, the actual production of Leased Hydrocarbons is not in Paying Quantities. It is provided, however, that nothing in this clause contained shall be construed as preventing or delaying the termination of this Lease under Lessee’s right to partially surrender all or any part of the Leased Premises, nor as impairing Lessee's continuing obligation to reasonably develop the Leased Premises after the discovery of Leased Hydrocarbons thereon in Paying Quantities, nor as in any manner impairing Lessee's continuing obligations to protect the Leased Premises from drainage by wells on adjoining or adjacent lands.

15. INSERT PROPORTIONATE PAYMENT OF LESSOR IF LESS THAN 100% (TYPICALLY IS 100%) UNLESS MINERALS ARE OWNED BY MORE THAN ONE PARTY AND IN THAT CASE INSERT APPROPRIATE INTEREST. BE SURE AND CALCULATE THE CORRECT PROPORTION. (INTEREST SHOULD BE BASED ON 100% OR WHAT IS CALLED 8/8THS INTEREST; EXAMPLE – A 25% INTEREST OF 100% IS 25%, A 25% OF 50% IS 12.5%)


10 PAYMENT TO LESSOR. It is a condition of this Lease that Lessee to pay Lessor, proportionate to Lessor’s _______ percentage (____%) ownership in the Lease (which is deemed to be one hundred percent, 100%, unless otherwise specified), as follows:

16. INSERT DELAY RENTAL AS APPROPRIATE (PAID UP FRONT AS A LUMP SUM FOR THE ENTIRE PRIMARY TERM, CALLED A PAID UP LEASE OR PAID YEARLY)

(A) DELAY RENTAL. To pay Lessor as Delay Rental at the rate of ________________ (insert “PAID UP LEASE” if a total lump sum cash Delay Rental is paid in advance for the full Primary Term) Dollars ($___________ or $0.00 if PAID UP LEASE) per acre per year payable annually on or before the anniversary date of each year in advance, beginning the ____________ day of ______________________, 20____, and continuing annually thereafter until the commencement of Royalty payments. Delay Rental paid for time beyond the commencement date of Royalty payment shall not be credited against the Royalty payment.

17. INSERT MAXIMUM PIPE DIAMETER LESSEE IS OBLIGATED TO INSTALL ON THE PROPERTY TO PROVIDE FEE GAS. (TYPICALLY NOT GREATER THAN 4 INCHES). CONFIRM AMOUNT OF FREE GAS DESIRED; 365,000 STANDARD CUBIC FEET PER YEAR AND 1000 STANDARD CUBIC FEET PER DAY (OR ABOUT ONE MILLION BTU OF ENERGY) ARE ASSUMED BUT CAN BE GREATER.

13 FREE NATURAL GAS. Upon Lessor’s or Lessor’s assignee written request for free Gas (herein the “Free Gas”) and its execution of a reasonably termed ‘Agreement for Delivery of Free Gas and Overburn Gas’, Lessee shall be obligated at Lessee’s expense to lay the necessary pipeline, meter, drip Gas collection vessel and pressure regulator (herein the “Free Gas Connection Requirement”) consistent with applicable governmental and industry natural gas codes, rules and regulations concerning health and safety related to the natural gas pipeline construction and operations (or in the absence of applicable codes, rules or regulations, what a reasonable and prudent operator would adopt as applicable), to a location designated by Lessor (herein the “Free Gas Access Point”), not to exceed [______] feet and four inches (4”) inside diameter, the excess pipeline length expense of which beyond the Free Gas Access Point or incremental expense of a pipeline inside diameter greater than four Inches (4”), may be funded by Lessor, at Lessor’s option, to any Lease producing Gas well (the “Free Gas Well”) or where Gas exits any Gas processing plant located on the Leased Premises and take up to [ three hundred sixty five thousand (365,000)] standard cubic feet of Gas per year, at a maximum daily consumption rate of (one thousand (1000) standard cubic feet per day (the “Free Gas Quantity”) free of cost to Lessor for use by

18. CHANGE DISTANCES TO WELL OPERATIONS IF DESIRED TO BE FURTHER THAN STATED (AS WRITTEN ALLOWS FOR WELL WITHIN 300 FEE OF A HOUSE)

14 FACILITIES. Lessee shall not drill a well within three hundred (300) feet of any structure located on the Leased Premises not owned or controlled by Lessee without Lessor’s prior written consent. Lessor shall not erect any building or structure, or plant any trees after this Lease is signed by Lessor, within two hundred (200) feet of a well drilled by Lessee or within twenty five (25) feet of a pipeline installed by Lessee, without Lessee’s prior written consent. Lessor shall not improve, modify, degrade or restrict roads and facilities built by Lessee without Lessee’s prior written consent.

19. INSERT NAME OF STATE LAWS THAT WILL GOVERN THE LEASE

The substantive law of the State of ______________, exclusive of any conflicts of laws principles that could require the application of any other law, shall govern this Lease for all purposes, including the resolution of disputes between or among Lessor and Lessee.

20. INSERT NAMES AND CONTACT DETAILS WHERE OFFICIAL NOTICES ARE TO BE SENT FOR BOTH LESSOR AND LESSEE

19 NOTICES. All notices and information required or permitted to be sent hereunder may be made as follows:

(a) To the Lessor:Lessor name:Attention:

Title:AddressCityState


Postal CodeTelephone No.Fax No.Email

(b) To the Lessee:Lessee name:Attention:

Title:AddressCityStatePostal CodeTelephone No.Fax No.Email

21. CLAUSE TYPICALLY STRUCK FROM LEASE BUT LEFT IN FOR CONSIDERATION AS IT IS IN FAVOR OF THE LESSOR

If any well required to be offset shall be completed within a distance of four hundred sixty seven (467) feet, if an Oil well, or six hundred sixty (660) feet, if a Gas well, of any outside boundary of the land of Lessor then covered by this Lease, the compensatory Royalty to which Lessor shall be entitled to is fifty percent (50%) of the Royalties otherwise due Lessor on Leased Hydrocarbons which would have been payable to Lessor under this Lease if that well had been drilled by Lessee on the Leased Premises, based upon what value Lessee could get for such production.

It is specifically understood that the right of Lessor to receive compensatory royalty shall not be effective until sixty (60) days after any such offset well begins producing in Paying Quantities and shall immediately terminate in the event such well ceases to produce in Paying Quantities. It is further specifically understood and agreed that Lessee shall, at the end of any such period of interruption or delay, begin the drilling of an offset well or wells which had not been drilled because of such period of interruption or delay and which Lessee is required to drill hereunder, and shall complete same in the manner as in this Lease required, provided that the Lessee shall not be required to drill an offset well for any well which has ceased to produce in Paying Quantities as provided in the above and foregoing sentence. From the date of the commencement of operations by the Lessee for the drilling of any such offset well or wells, the compensatory royalty herein provided to be paid on account of that particular well or those particular wells shall terminate, provided Lessee continues the drilling of and completes such offset well with reasonable diligence whether such well is brought in as a producing well or dry hole. Nothing herein, however, shall ever be construed as obligating Lessee to commence paying such compensatory royalty or to continue such payments after they are so commenced because of any well drilled by Lessee or others on adjoining land which under the provisions of this Lease Lessee is not at such time obligated to offset. The compensatory royalty paid hereunder shall be considered as royalty on production from the Leased Premises within the meaning of subclause (C) above.

22. INSERT NAME OF OPERATOR OF LEASE (LESSOR NEEDS TO KNOW WHO THE FINANCIALLY AND TECHNICALLY COMPETENT DAY TO DAY OPERATOR OF THE LEASE IS)

OPERATOR. Lessee shall obtain Lessor’s written approval prior to Lessee transferring operatorship of the Lease to any other person or entity. The Operator of this Lease is : _______________________________________________.

IN WITNESS WHEREOF, this Lease is entered into this the day and year first above written.

23. SIGNATURES OF LESSOR AND LESSEE

LESSOR: _______________________________________________


INDIVIDUAL(For use in all states)

LESSEE: _______________________________________________

Or.

24. WITNESSES IF NECESSARY

WITNESSESS: LESSORS:

______________________________ ______________________________

______________________________

______________________________ ____________________________

______________________________

25. FILL OUT RELEVANT NOTARY FORM

SAMPLE ACKNOWLEDGEMENT

STATE OF ) (GENERAL ACKNOWLEDGMENT)

County of )

On this day of , 20 , before me, the undersigned Notary Public in and for said county/parish and state, personally appeared known to me to be the person or persons whose names are subscribed to the foregoing instrument, and acknowledged that the same was executed and delivered as their free and voluntary act for the purposes therein set forth. In witness whereof I hereunto set my hand and official seal as of the date hereinabove stated.

My Commission Expires

Notary Public


26. INSERT RELEVANT TITLE INFORMATION FROM MAIN LEASE

ADDENDUM

Attached to, incorporated by reference and made a part of that certain Oil and Natural Gas Mineral Lease dated _______________________________, by and between

_____________________________________________________________ (Lessor)

And

_____________________________________________________________(Lessee)

Leased Premises (description): ____________________________________________________________

27. INSERT NON-PERFORMANCE FEE IF DIFFERENT FROM $1000 (THE HIGHER THE BETTER FOR LESSOR AND PROMOTES COMPLIANCE BY LESSEE)

Lessor’s duly authorized representatives and or any security watchman, shall have the right at all times to inspect vehicles entering the Leased Premises for the purpose of ascertaining that no prohibited articles are being brought onto the Leased Premises. If any such person or persons shall violate the provisions of this subsection, Lessee agrees to instruct such person or persons not to enter thereafter upon the Leased Premises and that, should they so enter, they shall then and thereafter be trespassers thereon and be subject to the penalties of the trespass laws of the State the Leased Premises are located. If any of the provisions of this subsection are violated, it is agreed that Lessee shall promptly pay in cash to the Lessor the sum of One Thousand and No/100 Dollars ($1,000.00) for each violation as advised by Lessor to Lessee, such sum being agreed to as liquidated damages because of the difficulty of ascertaining the actual damages and uncertainty thereof.

28. INSERT RELEVANT SURFACE EXTRA DAMAGE FEE IF DIFFERENT FROM $2,500 PER ACRE (HIGHER THE BETTER FOR LESSOR AND ENCOURAGES LESSEE TO MINIMIZE SURFACE DAMAGE)

Lessee agrees to pay Lessor the sum of Two Thousand Five Hundred and No/100 Dollars ($2,500.00) per acre per year for each acre, or any fraction thereof, of the Leased Premises utilized either temporarily, incidentally or throughout the operations of Lessee, for drill site, roads, including existing roads, and location of tank batteries and other surface equipment, and each acre of Lessor adjoining, or adjacent lands, which may be utilized, which payment shall cover the usual and ordinary damages occurring to such lands from the Lessees use thereof in drilling and producing operations conducted in a reasonable and prudent manner and which payment for drill site and roads shall be made to Lessor prior to the commencement of drilling and which payment for the location of tank batteries and other surface equipment shall be made to the Lessor prior to the commencement of production operations. The above payment shall not be deemed compensation for damage resulting to the Leased Premises from blowout, spillage of Oil, salt water or chemicals, or damages resulting from an unreasonable extraordinary or negligent use of the Leased Premises by Lessee, and Lessee agrees to pay the Lessor reasonable compensation for any such damage. Nor shall such payment be offset against any of Lessee’s surface restoration or abandonment obligations.

29. STRIKE THOURHG OPTION ONE OR TWO THAT DOES NOT APPLY; LESSOR TYPICALLY PREFERS OPTION 1

Option 1 (strike through if not applicable)Lessee agrees to dispose of all salt water, drilling mud, frac fluid and other wastes off of the Leased Premises and in accordance with the rules and regulations of relevant governmental or regulatory authorities.

Any salt water produced from wells drilled on this Lease shall not be disposed of on the Leased Premises unless it is injected into formations or depths below the deepest fresh water bearing formation under the Leased Premises. Lessee shall not use salt water pits of any type on the lands subject to this Lease, and shall dispose of all salt water, either off the Leased Premises or by injection into a formation under the Leased Premises which is suitable for receiving salt water, without the possibility of it escaping or migrating to the surface or escaping or migrating into a fresh water sand or formation. Lessee shall not dispose of salt water or other waste liquids on the Lease Premises which has been produced from lands not covered by this Lease.

Option 2 (strike through if not applicable) Lessee shall have the right to inject Gas, salt water, or brine, but not fresh water into subsurface strata only in connection with a well actually located on the Leased Premises or in connection with wells unitized with the Leased Premises.


Lessee agrees to promptly repair any leaks in tanks, pits, pipelines, engines or from other facilities of Lessee, and to clean up any leaks or spills on the Leased Premises as soon as possible but no later than five (5) days from receipt of notice by Lessor.

30. STRIKE THROUGH IF LEASE NOT IN PENNSYLVANIA

B SPECIAL TAX PROVISION.

IF THE LEASED PREMISES ARE LOCATED IN THE STATE OF PENNSYLVANIA, the following clause shall be a part of this Lease otherwise it shall be considered not part of the Lease. Lessee understands that the Leased Premises leased hereunder may be under and subject to the Pennsylvania Clean and Green program or the Pennsylvania Conservation Reserve Enhancement Program (CREP) program, and Lessee, its successors and assigns accepts responsibility for and agrees to pay and fund any and all roll-back real estate taxes and/or any and all additional assessments (and including, but not limited to, interest and penalties thereon) which are assessed on that portion of the Leased Premises affected as a result of Lessee’s operations hereunder. In the event there is a change in the Pennsylvania tax code that provides for ad valorem taxes, Lessee agrees to pay its proportional share being deemed to be eighty-five percent (85%) of any increase in ad valorem taxes attributable to, resulting, arising, or related, directly or indirectly, to this Lease or assessment of Oil and Gas due to production from the Leased Premises.

31. SELECT APPLICABLE ROYALTY, FIXED OR VARIABLE AND AGREE ROYALTY %; NOTE FOR VARIABLE OIL ROYALTY, DATED BRENT SPOT REFERENCE OIL PRICE MAY BE MORE RELEVANT THAN CITED WTI SPOT PRICE; OIL COMPANY MAY COMPLAIN VARIABLE ROYALTY IS TOO COMPLEX; YET OIL COMPANY’S REGULARLY ACCEPT VARIABLE ROYALTY AND PROFIT SHARING GOVERNMENT TAKES IN INTERNATIONAL LEASES SO THERE IS NO DIFFERENCE; VARIABLE ROYALTY IS TYPICALLY A BETTER DEAL FOR LESSOR

ROYALTY. Lessee to pay Lessor as Royalty, as follows (strike through the relevant Option One or Option Two for Clauses (A) and (B)(1) below that does not apply in this Lease):

OPTION ONE (FIXED ROYALTY)-

(A) OIL: Fixed Oil Royalty shall be [thirty-five percent (35%)] of that portion of produced Leased Hydrocarbons that is Oil, and produced from the Leased Premises, the same to be delivered, free of cost, to Lessor, or Lessor’s credit into the pipeline Sales Point, or other receptacle to which the Lessee may connect Lessee's wells; or, at Lessor's option, such Oil shall be sold by Lessee with Lessee's Oil, produced from Leased Premises, and at no less than the same price received by Lessee for Lessee's Oil, but not less than the market value price thereof prevailing in the area for Oil.

(B) GAS. : (1) On all Gas, including casinghead gas, produced from the Leased Premises and sold or used by Lessee for operations hereunder or for any other purpose, for which no Fixed Gas Royalty is otherwise specified herein, Lessor shall be paid, as Fixed Gas Royalty, [thirty percent (30%]) of the market value of all such Gas so sold or used.

OPTION TWO (VARIABLE ROYALTY)

(A) OIL: Variable Oil Royalty shall be determined on a calendar quarter basis from the below Table 1, of that portion of produced Leased Hydrocarbons that is Oil, and produced from the Leased Premises, the same to be delivered, free of cost, to Lessor, or Lessor’s credit into the pipeline Sales Point, or other receptacle to which the Lessee may connect Lessee's wells; or, at Lessor's option, such Oil shall be sold by Lessee with Lessee's Oil, produced from Leased Premises, and at no less than the same price received by Lessee for Lessee's Oil, but not less than the market value price thereof prevailing in the area for Oil.

Table 1Calendar Quarter Average Cushing, Oklahoma WTI Spot Crude Oil Price FOB, as determined

below ($ per Barrel) (Barrel contains 42 gallons)

Calendar Quarter Variable Oil Royalty

Less than $50.00 20%$50.01 to $75.00 25%$75.01 to $100.00 30%$100.01 to $125.00 35%


Greater than $125.00 40%

First Calendar Quarter Variable Oil Royalty Determination: Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) used to determine the adjusted sliding scale Variable Oil Royalty for calendar months January YYYY, February YYYY and March YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Oil Royalty is to be determined) shall be determined by calculating the average daily Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) for the immediate previous three calendar months of September YYYY-1, October YYYY-1 and November YYYY-1. The Cushing, Oklahoma WTI Spot Crude Oil Daily Price FOB (Dollars per Barrel) shall be determined as reported by the U.S. Energy Information Administration. The average Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Second Calendar Quarter Variable Oil Royalty Determination: Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) used to determine the adjusted sliding scale Variable Oil Royalty for calendar months April YYYY, May YYYY and June YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Oil Royalty is to be determined) shall be determined by calculating the average daily Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) for the immediate previous three calendar months of December YYYY-1, January YYYY and February YYYY. The Cushing, Oklahoma WTI Spot Crude Oil Daily Price FOB (Dollars per Barrel) shall be determined as reported by the U.S. Energy Information Administration. The average Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Third Calendar Quarter Variable Oil Royalty Determination: Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) used to determine the adjusted sliding scale Variable Oil Royalty for calendar months July YYYY, August YYYY and September YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Oil Royalty is to be determined) shall be determined by calculating the average daily Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) for the immediate previous three calendar months of March YYYY, April YYYY and May YYYY. The Cushing, Oklahoma WTI Spot Crude Oil Daily Price FOB (Dollars per Barrel) shall be determined as reported by the U.S. Energy Information Administration. The average Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Fourth Calendar Quarter Variable Oil Royalty Determination: Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) used to determine the adjusted sliding scale Variable Oil Royalty for calendar months October YYYY, November YYYY and December YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Oil Royalty rate is to be determined) shall be determined by calculating the average daily Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) for the immediate previous three calendar months of June YYYY, July YYYY and August YYYY. The Cushing, Oklahoma WTI Spot Crude Oil Daily Price FOB (Dollars per Barrel) shall be determined as reported by the U.S. Energy Information Administration. The average Cushing, Oklahoma WTI Spot Crude Oil Price FOB (Dollars per Barrel) shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Lessor and Lessee agree that should the U.S. Energy Information Administration, or Cushing, Oklahoma WTI Spot Crude Oil Price FOB cease to be available, the parties shall meet and mutually agree a comparable substitute for either that are no longer available.

(B) GAS. : (1) On all Gas, including casinghead gas and other gaseous (at standard conditions) Leased Hydrocarbon substances, produced from the Leased Premises and sold or used by Lessee for operations hereunder or for any other purpose, for which no Variable Gas Royalty is otherwise specified herein, Lessor shall be paid, a Variable Gas Royalty as determined from Table 2 below of the market value of all such Gas so sold or used.

Table 2Calendar Quarter Average Henry Hub Daily Spot

Natural Gas Price, as determined below

Calendar Quarter Variable Gas Royalty


($ per Million BTU)Less than $2.00 15%$2.01 to $2.50 20%$2.51 to $3.50 25%$3.51 to $5.50 30%

Greater than $5.50 36%

First Calendar Quarter Variable Gas Royalty Determination: Henry Hub daily spot natural gas price used to determine the adjusted sliding scale Variable Gas Royalty for calendar months January YYYY, February YYYY and March YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Gas Royalty is to be determined) shall be determined by calculating the average daily Henry Hub spot gas price (in dollars per MMBTU– on a net heating value basis where vaporization of water is deducted (million British Thermal Unit)) for the immediate previous three calendar months of September YYYY-1, October YYYY-1 and November YYYY-1. The Henry Hub daily spot gas price shall be determined as reported by the U.S. Energy Information Administration. The average Henry Hub spot price shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Second Calendar Quarter Variable Gas Royalty Determination: Henry Hub daily spot natural gas price used to determine the adjusted sliding scale Variable Gas Royalty for calendar months April YYYY, May YYYY and June YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Gas Royalty rate is to be determined) shall be determined by calculating the average daily Henry Hub spot gas price (in dollars per MMBTU – on a net heating value basis where vaporization of water is deducted (million British Thermal Unit)) for the immediate previous three calendar months of December YYYY-1, January YYYY and February YYYY. The Henry Hub daily spot gas price shall be determined as reported by the U.S. Energy Information Administration. The average Henry Hub spot price shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Third Calendar Quarter Variable Gas Royalty Determination: Henry Hub daily spot natural gas price used to determine the adjusted sliding scale Variable Gas Royalty for calendar months July YYYY, August YYYY and September YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Gas Royalty is to be determined) shall be determined by calculating the average daily Henry Hub spot gas price (in dollars per MMBTU– on a net heating value basis where vaporization of water is deducted (million British Thermal Unit)) for the immediate previous three calendar months of March YYYY, April YYYY and May YYYY. The Henry Hub daily spot gas price shall be determined as reported by the U.S. Energy Information Administration. The average Henry Hub spot price shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Fourth Calendar Quarter Variable Gas Royalty Determination: Henry Hub daily spot natural gas price used to determine the adjusted sliding scale Variable Gas Royalty for calendar months October YYYY, November YYYY and December YYYY (where YYYY is the calendar year in which Leased Hydrocarbons are produced and on which Variable Gas Royalty is to be determined) shall be determined by calculating the average daily Henry Hub spot gas price (in dollars per MMBTU– on a net heating value basis where vaporization of water is deducted (million British Thermal Unit)) for the immediate previous three calendar months of June YYYY, July YYYY and August YYYY. The Henry Hub daily spot gas price shall be determined as reported by the U.S. Energy Information Administration. The average Henry Hub spot price shall be determined by summing all of the reported daily spot prices in the calendar three month period and dividing that sum by the total number of days of reported daily spot prices in that three month calendar period.

Lessor and Lessee agree that should the U.S. Energy Information Administration or Henry Hub Gas Prices cease to be available, the parties shall meet and mutually agree a comparable substitute for either that are no longer available.

(B)(2) If Gas (which term "Gas" includes casinghead gas) produced from the Leased Premises is processed in a plant or plants owned in whole or in part by Lessee or by any partner, parent, subsidiary or Affiliate of Lessee, or in which Lessee or any partner, parent, subsidiary or Affiliate of Lessee owns any interest of any kind, directly or indirectly (and stock or equity ownership shall be considered as owning an interest in part), or as to which plant ownership Lessee is a partner, parent, subsidiary or Affiliate (all hereinafter for convenience referred to as "subsidiary or Affiliate of Lessee") for the recovery of Oil, Lessor shall have and be entitled to a (strike through either that does not apply) Fixed Oil Royalty/Variable Oil Royalty as determined in Clause G(A) above, of all such plant products, derived from or attributable to Gas produced from the Leased Premises, the same to be delivered free of all costs, at Lessor's election, either at the plant or plants or to the credit of Lessor into the pipeline to which the plant or plants may be connected; and, in addition thereto, Lessor shall be paid as (strike through either that does not apply) Fixed Gas Royalty/Variable


Gas Royalty as determined in Clause G(B)(1) above, of all Gas derived from or attributable to the Leased Premises, and sold or used, which Gas is understood to be the Gas at the outlet side of the plant or plants after the same has been processed for the extraction of Oil. It is provided and agreed that, as used in this Lease and for all purposes hereof, the term "plant" shall mean an absorption plant, extraction or recycling plant, or any other plant or plants, which primary purpose is separation of Leased Hydrocarbons into Gas, Oil and/or condensate.

(B)(3) Lessee agrees that all Gas, including casinghead gas produced from the Leased Premises and not either sold for a specified price per BTU (or equivalent heating value basis) or processed in a plant or plants for the removal of Oil as provided above, shall, before the same is sold or used for any purpose or transported from the Leased Premises, be passed through a low temperature extraction unit, or equivalent (herein sometimes called "LTX Unit"), provided, if the installation of an LTX Unit is not economically feasible, such Gas shall be passed through a separator system situated on the Leased Premises. Such LTX Unit or separator system, as the case may be, shall be designed and operated to effect the maximum economical recovery of Oil therefrom; and on all condensate, distillate, natural gasoline, kerosene, and all other Oil related hydrocarbons produced with Gas from the Leased Premises and saved by being condensed or absorbed from or separated from such Gas by means of such LTX Unit or separator system above mentioned, Lessor shall have and be entitled to (strike through either that does not apply) Fixed Oil Royalty/Variable Oil Royalty as determined in Clause G(A) above, of that so produced and saved, the same to be delivered free of costs, at Lessor's election, either at the well or to the credit of Lessor into the pipeline to which the well or wells may be connected; and in addition thereto, if Gas is not thereafter processed and if the same is sold or used, Lessor shall be paid as (strike through either that does not apply) Fixed Gas Royalty/Variable Gas Royalty as determined in Clause G(B)(1) above, of all such Gas sold or used; but if such Gas after having passed through such LTX Unit or separator system is thereafter processed, the Royalty provisions of subclauses B(2) or B(4) hereof, whichever shall be applicable, shall also apply to such Gas, and Royalties shall be paid to Lessor in accordance with such provisions. It is provided that the requirements concerning the LTX Unit or other separator or extraction system contemplated by this subclause shall be required only if a reasonable and prudent operator would utilize an LTX Unit or similar separator or extraction system under the same or similar circumstances as those encountered by Lessee in operating the Leased Premises.

(B) (4) If Lessee enters into a bona fide contract or arrangement with any person, firm, corporation, not an "Affiliate or subsidiary of Lessee" for the sale or delivery of Gas from the Leased Premises for processing in a plant or plants for the extraction, absorption, separation or recovery of Oil therefrom, Lessor shall have and be entitled to a (strike through either that does not apply) Fixed Oil Royalty/Variable Oil Royalty as determined in Clause G(A) above, derived from or attributable to Gas produced from the Leased Premises, the same to be delivered free of all costs, at Lessor's election, either at the plant or plants or to the credit of Lessor into the pipeline to which the plant or plants may be connected; and, in addition thereto, Lessor shall be paid as (strike through either that does not apply) Fixed Gas Royalty/Variable Gas Royalty as determined in Clause G(B)(1) above, of all Gas derived from or attributable to the Leased Premises, and sold or used, which Gas is understood to be the Gas at the outlet side of the plant or plants after the same has been processed for the extraction of Oil therefrom.

(B)(5) Lessor shall always have the right, upon reasonable written notice to Lessee, to take Lessor's Royalty share of the Gas or Oil in kind, in which event Lessor shall comply with all applicable laws, orders, rules and regulations of all other governmental authority having jurisdiction thereof and applicable thereto; and provided that such taking in kind operations shall be at Lessor's sole cost and expense.

32. CHANGE SULPHUR ROYALTY IF 25% NOT APPROPRIATE

(B)(7) Sulphur: This Lease is intended to cover only Leased Hydrocarbons as hereinabove defined, but if sulphur may be produced and processed into its elemental state, necessarily with and incidental to the production of Leased Hydrocarbons from the Leased Premises and in such event, this Lease shall cover such sulphur so produced, and on all such sulphur so produced under and by virtue of the terms of this Lease, Lessor shall have and be entitled to a Royalty of twenty-five percent (25%) of all of such sulphur so produced and saved, same to be delivered to Lessor as Royalty, free of all costs, or at Lessor's election, said twenty-five percent (25%) sulphur Royalty shall be sold by Lessee with Lessee's portion of such sulphur so produced and saved from the Leased Premises and at the same prices received for Lessee's portion of said sulphur, and promptly remitted to Lessor.

33. LESSOR SHOULD NOT WAIVE THE BELOW FINANCIAL AND PEROFRMANCE SECURITY COMFORT; LEASING COMPANIES NEED TO CONFIRM THEIR FINANCIAL AND TECHNICAL COMPETENCY TO PERFORM UNDER THE LEASE. MOST MAJOR OIL COMPANIES SIGN LEASES WITH ‘SHELL COMPANIES’ THAT HAVE LITTLE OR NO FINANCIAL CAPACITY, LEAVING LESSOR TO RELY ON THE GOOD FAITH OF THE OIL COMPANY PERFORMING VERSUS GOOD BUSINESS PRACTICE TO HAVE PROPER SECURITY IN PLACE THAT PERFORMANCE IS BACKED UP BY REAL FINANCIAL ASSETS.


O FINANCIAL AND PERFORMANCE SECURITY. As a condition of this Lease, Lessee (and any of its successor and assigns) shall:

(i) provide Lessor at Lessee’s expense with a copy of its audited financial statements, inclusive of its balance sheet, profit and loss statement, annual report, SEC 10-K or 8-F documentation or equivalent, and a certified written statement from Lessee’s Chief Financial Officer or other authorized officer or representative, asserting and describing of the intended funding from which the necessary financial resource(s) will be sourced and used to comply with the performance terms and conditions of the Lease, and update such information on an annual basis;

(ii) provide Lessor at Lessee’s expense with a certified written statement from Lessee’s senior technical management describing Lessee’s experience and qualifications to conduct those necessary technical and management operations associated with the Lease;

(iii) provide Lessor at Lessee’s expense with a certified written statement from Lessee’s senior technical management describing and summarizing Lessee’s past three year (and updated annually)a. health, safety and environmental record including Lost Time Injury Frequency statistics;b. copy of Lessee’s health, safety and environmental policies;c. concluded or pending government or private legal or regulatory actions brought against Lessee in regard to health,

safety, environmental, corporate governance (such as corruption claims), bodily injury or property damage claims or alleged or actual violation of relevant regulations associated with oil and gas exploration and production operations, health, safety or environmental compliance or activities;

As a condition of this Lease, upon Lessor’s written notice to Lessee, Lessor may at any time request Lessee to demonstrate and justify its financial capabilities to comply with the Lease, and in the absence of Lessee doing so, Lessor may request and Lessee shall provide at Lessee’s expense, an Irrevocable Bank Letter of Credit, ultimate unconditional Parent Company Guarantee, Bond, or other suitable security acceptable to Lessor.

As a condition of this Lease, Lessee shall post a performance bond with Lessor as the named beneficiary with a bona fide financial institution in the amount of $________________________, as security for Lessee’s performance during the Primary Term of this Lease.

34. SIMILAR TO FINANCIAL SECURITY, THE LESSOR SHOULD MAKE SURE THE LESSING COMPANY HAS REAL FINANCIAL VALUE SET ASIDE TO PROPERLY ABANDON THE LEASED PROPERTY AND RETURN IT TO ITS ORIGINAL CONDITION AFTER LEASE OPERATIONS STOP. MANY OIL COMPANIES GO BANKRUPT OR DON’T HAVE FINANCIAL CAPACITY TO RESTORE THE LAND ONCE THEY ABANDON THEIR OPERATIONS. DON’T WAIVE THIS VALUABLE RIGHT.

P ABANDONMENT SECURITY.

As a condition of this Lease, Lessee shall

(i) provide Lessor on an annual basis at Lessee’s expense a written report outlining its then updated incurred abandonment obligations under the Lease, its plan of abandonment and an estimate of the likely costs and schedule to complete such abandonment and obtain from Lessor or Lessor’s designated authorized agent, a written reply within thirty (30) days after Lessor’s receipt of such report of Lessor’s approval of the report’s content. Should Lessor not agree with Lessee’s report, it shall so notify Lessee of the content in which Lessor disagrees and a recommendation how to reasonably adjust the report to obtain Lessor’s approval. Should the parties continue to disagree, resolution of the disagreement shall be firstly by agreement, and failing that the parties can mutually agree to retain an independent expert (the expense of which to be shared equally between Lessee and Lessor) to settle the dispute and if an expert is selected, the parties agree to be bound by the experts determination after each party has had a reasonable opportunity to explain its position and such determination to be made within no later than ninety (90) days after Lessor disapproves Lessee’s report or in the absence of mutual agreement or using an expert, seek remedy in accordance with the dispute resolution process provided for by this Lease;

(ii) establish a Lessor approved trust bank account or other Lessor approved security vehicle (herein referred to as the “Abandonment Fund”), in a bona fide financial institution located in the County or Parish in which the Leased Premises are located, and regularly deposit in such Abandonment Fund trust, cash to be used to fund and pay for necessary and reasonable abandonment expenses as outlined in the annual abandonment report prepared by Lessee and approved by Lessor. Lessor shall approve the terms and conditions of the Abandonment Fund in regard to how and when funds are to be released. The amount and timing of cash to be deposited in the Abandonment Fund by Lessee shall as a minimum be as follows:


a. Any estimated or actual abandonment expense as cited in the approved annual abandonment report to be incurred within the immediate two (2) year period following receipt of the report by Lessor, shall be funded one hundred percent (100%) by Lessee with such cash deposit made into the Abandonment Fund within thirty (30) days after the abandonment report is approved by Lessor;

b. Any estimated or actual abandonment expense as cited in the approved annual abandonment report to be incurred after the immediate two (2) year period, but to be incurred within the subsequent two (2) year period, shall be funded sixty six percent (66%) by Lessee with such cash deposit made into the Abandonment Fund within thirty (30) days after the abandonment report is approved by Lessor;

c. Any estimated or actual abandonment expense as cited in the approved annual abandonment report to be incurred after the immediate four (4) year period, but to be incurred within the subsequent two (2) year period, shall be funded thirty three percent (33%) by Lessee with such cash deposit made into the Abandonment Fund within thirty (30) days after the abandonment report is approved by Lessor;

d. Any estimated or actual abandonment expense as cited in the approved annual abandonment report to be incurred after the immediate six (6) year period, but to be incurred within the subsequent four (4) year period, shall be funded ten percent (10%) by Lessee with such cash deposit made into the Abandonment Fund within thirty (30) days after the abandonment report is approved by Lessor;

e. Any estimated or actual abandonment expense as cited in the approved annual abandonment report to be incurred after the immediate ten (10) year period, but to be incurred thereafter, shall be funded five percent (5%) by Lessee with such cash deposit made into the Abandonment Fund within twenty (20) days after the abandonment report is approved by Lessor.

(iii) Any interest earned in the Abandonment Fund shall be used as a credit against the earliest abandonment expense deposit obligations;

(iv) Funds in the Abandonment Fund may only be expended against those expenses for which they were deposited. [By way of example, funds deposited for abandonment expenses associated with expenses estimated to be incurred in year 6, may not be used to fund abandonment expenses to be incurred in year 1.]

Regardless of the Abandonment Fund, Lessee shall remain liable for any and all abandonment obligations and expenses in accordance with the Lease. At the termination of the Lease and after all abandonment performance obligations are completed by Lessee in accordance with the Lease, if there are any funds remaining in the Abandonment Fund, they shall be refunded to Lessee along with any remaining interest and in this event Lessor shall promptly provide a fund release notice to the relevant financial institution.

35. AGREE APPROPRIATE NON-PERFORMANCE FINE ($100 PER INSTANCE AFTER 2 INRACTIONS IS LISTED) THE HIGHER THE BETTER FOR LESSOR AND THE HIGHER ENCOURAGED THE LESSEE TO PERFORM AS AGREED

Q LIQUIDATED DAMAGES. Subsequent to Lessor providing Lessee with two (2) written notices of violation for the same incident, Lessee covenants that it will promptly pay within thirty (30) days upon Lessor’s written demand and as liquidated damages, the lump sum cash amount of one hundred Dollars ($100.00) for each instance or occurrence of the following caused by Lessor or any of its agents, contractors, subcontractors or any other person that enters the Leased Premises at any time by invitation of Lessee:

(i) Fence gates left open and/or unlocked, if required to be closed and/or locked;(ii) Unauthorized deposit of domestic garbage or rubbish indiscriminately deposited on Leased Premises and not promptly

removed;(iii) Exceeding posted speed limits;(iv) Bringing on the Leased Premises unauthorized hunting, fishing or firearms equipment

36. LESSOR SHOULD ENSURE THE LESSEE OR OIL COMPANY HAS APPROPRATE INSURANCE TO ALSO PROVIDE GOOD BUSINESS PRACTICE SECURITY IN REGARD TO PERFORMANCE UNDER THE LEAST. DON’T WAIVE THIS VALUABLE RIGHT.

R INSURANCE

Lessee, at its expense, shall procure and maintain throughout the duration of this Lease the following minimum insurance from insurers authorized by the laws of the State the Leased Premises are located in any combination of primary and excess:

'Workers' Compensation Insurance' as prescribed by applicable laws and 'Employer's Liability Insurance' with ______________ limit per accident or occurrence;


'Commercial General Liability Insurance' with a ___ combined single limit for bodily injury and property damage per occurrence. This insurance specifically shall include contractual liability for the insured’s obligations under this Lease, products liability, completed operations and sudden and accidental pollution coverage; and

'Automobile Liability Insurance' with a ___ combined single limit for bodily injury and property damage including, without limitation, hired and non-owned liability.

Lessee, at its expense, shall procure and maintain 'Excess Liability Insurance' with a minimum limit of _______________________ per occurrence. Such insurance shall be maintained throughout the duration of this Lease and shall include contractual liability, products liability, completed operations and sudden and accidental pollution coverage.

35. LESSOR AND LESSEE SIGN ADDENDUM

LESSOR: _______________________________________________

LESSEE: _______________________________________________


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