RED CROWN ROYALTIES, LLC
STATE OF __________
COUNTY OF _________
OIL AND GAS LEASE
THIS AGREEMENT, made and entered into and effective December 1, 2004 between RED CROWN ROYALTIES, LLC, a Colorado
Limited Liability Company, whose mailing address is 1490 W. Canal Ct, Suite 3000 Littleton, CO 80120, hereinafter referred to as “Lessor,” and
Company, whose mailing address is Street, City, State Zip Code, hereinafter referred to as “Lessee”;
WITNESSETH, that the said Lessor for and in consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and of the covenants and agreements hereinafter contained on
the part of Lessee to be paid, kept and performed, has granted, demised, leased and let and, by these presents, hereby does grant, demise,
lease and let, unto Lessee, for the purpose of investigating, exploring, prospecting, and drilling for and producing oil and/or gas, laying pipelines
and building tanks, roads, power stations and other structures thereon necessary to produce, save, store and collect such products from the
land covered by this Oil and Gas Lease, the oil and gas mineral rights lying in and under the following described tract situated in County, State
to wit:
Township: ____, Range: ____, Section: ____
Encompassing _____, more or less, said lands above specified being hereinafter referred to as the “lease acreage,” subject to the following
provisions:
1. PRIMARY TERM: This lease shall remain in force for a primary term of three (3) years effective date hereof, and as long thereafter as oil
or gas shall be produced and saved in paying quantities from the lease acreage, or drilling or reworking operations are conducted thereon
without cessation of more than thirty (30) days.
2. RELEASE OF LEASE: At the end of the primary term, Lessee shall execute and record a release of this lease insofar as it covers any
part of the lease acreage not being extended past the primary term by the operative provision set forth in Paragraph 1. above.
3.
ROYALTIES: Royalties on oil and gas produced and saved hereunder shall be paid monthly to Lessor as follows:
(a)
For oil, the royalty shall be the greater of (i) three sixteenths (3/16) of the gross proceeds realized by Lessee from the sale thereof,
free of cost to the point of sale or (ii) three sixteenths (3/16) of the market value of the oil, free of cost through the lease tanks.
(b)
For gas, including casinghead gas, the royalty shall be the greater of (i) three sixteenths (3/16) of the gross proceeds realized by
Lessee from the sale thereof (including the sale of residue gas and extracted liquids), free of cost through the point of sale or (ii)
three sixteenths (3/16) of the market value of the gas (including extracted liquids), free of cost at the tailgate of the plant if the gas is
processed for the extraction of liquids and at the point of delivery into an interstate pipeline if the gas is not processed for the
extraction of liquids.
(c)
In no event will royalties hereunder be based on a value or price per unit of production that is less than the value or price per unit
upon which royalties would be due if this lease had been issued by the United States of America under the Minerals Land Leasing
Act.
(d)
Lessor reserves the right, but shall not have the obligation, to take its three sixteenths (3/16) royalty share of oil and/or gas in kind,
to be delivered to Lessor (i) into lease tanks in the case of oil, (ii) at the tailgate of the liquids extraction plant in the case of gas
processed for the extraction of liquids, and (iii) at the point of delivery into an interstate pipeline if the gas is processed for the
extraction of liquids.
(e)
The royalty set forth in this paragraph 3 is exclusive of, and not diminished by, any other burden of any nature that may be
associated with the minerals being leased hereunder.
4. DELAY RENTALS: In addition to the bonus, this lease shall have a delay rental of $______ equals a payment of $1.00 per acre per year
for the last two years of the primary term of the lease. These delay rentals shall be paid, in full, at the time the lease bonus is paid, and shall be
Red Crown Royalties, LLC
1490 W. Canal Ct, Suite 3000 Littleton, CO 80120
Phone: 303-794-9260, Fax: 303-794-9261
RED CROWN ROYALTIES, LLC
received by Lessor before the lease is issued. For purposes of calculation of rental payments, the acreage listed in this lease shall be
controlling.
5. POOLING: Lessee is hereby authorized to pool and combine the lease acreage with other leases and lands, or interests therein, so as to
form a consolidated unit, as prescribed by appropriate governmental authority, but, in the event said lease acreage shall be pooled and unitized
by Lessee with other leases and lands, or interests therein, so as to form a consolidated unit, a proportionate part of all production from said
consolidated unit, without regard to the location of the well or wells within said consolidated unit from which produced, equal to that
proportionate part thereof of which the aggregate number of surface acres in said lease acreage bears to the aggregate number of surface
acres in all of said consolidated unit, shall be treated as though produced in its entirety from said lease acreage; and the royalties hereinabove
specified shall be applicable to, and shall constitute a burden against, such proportionate part of said production from said consolidated unit. If
not spaced by the governmental authority having jurisdiction, said spacing unit shall be deemed to be 160 acres for gas and 40 acres for oil.
6. SHUT-IN PAYMENTS: While there is a well on this lease or on acreage pooled therewith, which well is capable of producing only gas,
gas condensate, or some combination of gas and gas condensate in paying quantities, but from which production is not being sold or used, this
lease shall be extended for a period of one year (1 year) from the date such well is shut-in, and the Lessee may tender or pay annually as
royalty the sum of One Dollar ($1.00) for each net mineral acre covered hereby, payment or tender of such royalty may be made by check or
draft of Lessee mailed or delivered to Lessor, with the first payment to be made on or before one year (1 year) from and after the date on which
such well is shut-in, and if such payments are so made, it shall be considered that gas, gas condensate, or a combination of gas and gas
condensate is being produced in paying quantities from such well under all the terms, conditions and limitation of this lease. In no event may
this lease be extended under the provisions of this paragraph 6. for more than twenty-four (24) months in any five year period.
7. LESSER INTEREST: If Lessor owns a lesser interest in the lease acreage than the entire and undivided oil and gas fee simple estate
therein, then, all royalties herein shall be paid Lessor only in the proportion which its interest bears to the whole and undivided oil and gas fee.
8. SURFACE RIGHTS: When requested by the surface owner, or by a lessee of the surface owner, Lessee shall bury its pipelines below
plow depth. No well shall be drilled nearer than two hundred (200) feet to the house or barn now on the lease acreage, without the written
consent of the surface owner. Lessee shall pay for damages to the surface of said land caused by its operations. Insofar as Lessor has the
right to grant such privilege, Lessee shall have the right at any time during the term of this lease and for six (6) months thereafter to remove all
machinery and fixtures placed on said lease acreage, including the right to draw and remove casing.
9. GEOLOGICAL REQUIREMENTS: FURNISHING SAMPLES, DATA, AND WELL INFORMATION. Unless other written arrangements
are made prior to reaching total depth, it is the responsibility of the LESSEE, at its own cost, to transport all sample logs, survey and furnish all
other information and data to LESSOR. The following geologic and well information requirements must be furnished to fulfill the contract
obligations of this Oil and Gas Lease:
(a)
Daily drilling reports faxed daily to (303) 794-9261.
(b)
One copy of the following reports and information mailed, faxed or couriered to Lessor at Lessor’s address on a timely basis.
Report/Form
1)
Permit application; plugging reports, and completions reports
2)
Compilation of daily drilling reports
3)
All Wireline Logs (Final Prints); Final Mudlog and Mudlogger’s Report (if applicable)
4)
Final drillstem, RFT, core analysis reports as prepared by the testing companies (no photocopies)
5)
Final reports of water analyses and/or hydrocarbon analyses
6)
Samples and cores
7)
Name and address of oil and gas sales purchasers together with date of first sales
Red Crown Royalties, LLC
1490 W. Canal Ct, Suite 3000 Littleton, CO 80120
Phone: 303-794-9260, Fax: 303-794-9261
RED CROWN ROYALTIES, LLC
(c) Lessee shall furnish Lessor the information and data described herein and shall otherwise comply with the provisions of, the
Geological Requirements set forth in this Oil and Gas Lease . Lessee shall furnish to Lessor authentic itemized monthly reports
of all production from or attributable to the lease acreage. Such reports shall be mailed to Lessor not later than the fifteenth (15th)
date of the month following that for which the reports are made. In recognition of the business necessity of Lessor receiving these
reports in a timely fashion, Lessee, by acceptance of this lease, agrees to pay as partial liquidated damages to Lessor, the sum of
Two Hundred Dollars ($200.00) for each month or portion thereof that Lessee fails to furnish these reports in a timely manner,
together with interest at the highest rate allowed by law plus all costs of collection, including attorneys’ fees. The foregoing
payment shall be in addition to any share of revenue attributable to any interest in the lease acreage owned by Lessor. In addition,
Lessor shall have the right to audit and review all information (including without limitation, all books, records, contracts,
correspondence, run tickets, evidence of sales and shipments, reports and analyses, and electronically stored information and
data) possessed by or available to Lessee which may be pertinent to the determination of the payment of royalty or other amounts
due under this lease, at the office where such information is maintained. Such information shall include that submitted to third
parties (including government entities) respecting production from the lease acreage or lands pooled therewith and relating to any
royalty or to any tax based upon the value of production. In conjunction with any audit Lessee shall, to the fullest extent
practicable, assemble and present the information so that it is complete.
10. INDEMNITY: Lessee shall defend, indemnify and save and hold harmless Lessor and Lessor’s members and managers, and their
respective shareholders, directors, members, managers, partners, officers, employees and agents (the “indemnified parties”) for, from and
against and shall promptly reimburse each indemnified party with respect to any and all claims, demands, suits, causes of action, losses,
damages, liabilities, fines and sanctions, punitive and exemplary damages, judgments, amounts paid in settlement, assessments, costs and
expenses (including, without limitation, attorneys’, consultants’ and experts’ fees and expenses, other expenses of litigation, and court costs) of
any kind or of any nature whatsoever that are asserted against, incurred or suffered by an indemnified party, which in any way arise from or are
attributable to (i) the breach of any covenant, agreement or undertaking of Lessee contained in this lease, (ii) any violation of any law, rule or
regulation by Lessee (including, without limitation, any law relating to the protection of the environment or public or worker health or safety), or
(iii) to the extent attributable to any operation, act or omission of Lessee, whether on or off the lease acreage: (A) any personal injury or
property damage, including, without limitation claims by surface owners, (B) the presence, release, threatened release, discharge or emission
into the environment of any hazardous, toxic or other substance (including, without limitation, any oil, gas or associated liquids) arising on,
beneath or above the lease acreage and/or emanating or migrating and/or threatening to emanate or migrate to or from the lease acreage to or
from another acreage, or (C) physical disturbance of the environment. For purposes of this paragraph 10 and the other provisions of this lease
(but expressly without creating any rights or claims in third persons other than the indemnified parties), and action or omission of any of
Lessee’s employees, agents, contractors, operators or invitees shall be deemed to be the act or omission of Lessee. Lessee shall cause any
insurance policies maintained by Lessee relating to Lessee’s interests under this lease or Lessee’s operations on the lease acreage to name
Lessor as an additional named insured and Lessee shall provide certificates describing such coverages to Lessor.
11. ASSIGNABILITY: Lessee shall not assign this lease or any interest therein without the specific written consent of Lessor. The covenants
hereof shall extend to the respective successors or assigns of Lessor and Lessee, but no change in the ownership of the land or assignment of
royalties shall be binding on Lessee until after Lessee has been furnished with a true copy thereof.
12. NO WARRANTY: This lease is executed and delivered by Lessor, and said lease is accepted by Lessee, without warranty of title or any
other matter, express or implied. This lease shall not cover or extend to any additional interests of any kind acquired by Lessor in the lease
acreage or any well located thereon after the date of this lease and such additional interests, if any, shall be deemed to be owned and held
separately by Lessor and shall not be deemed to have merged into the interests of Lessor covered by this lease.
13. EFFECT OF LEASE: The terms and provisions of this lease shall be binding upon, and shall inure to the benefit of, Lessor, and Lessee
and their respective heirs, successors and assigns.
14. TAXES: Lessee shall pay before the same become delinquent all taxes, assessments or other governmental charges whatsoever levied
upon or assessed or charged against any of Lessee’s rights hereunder or any equipment, facilities, plants, machinery, improvements or any
other real or personal property placed upon the lease acreage by Lessee. In addition, Lessor shall pay its royalty share, and Lessee shall pay
the balance, of all real property, ad valoren and other taxes assessed upon the oil and gas mineral estate or upon oil and gas upon in place in
the lease acreage, and all severance, production, net proceeds or other taxes or assessments based on or measured by production of oil or
gas from or attributable to the lease acreage.
15. COMPLIANCE WITH LAW; PLUGGING AND ABANDONMENT; RETENTION OF IMPLIED COVENANTS; INSPECTION: Lessee shall
comply with all laws, rules and regulations applicable to its operations and activities on or associated with the lease acreage or acreage pooled
therewith. Without limiting the generality of the foregoing, Lessee agrees to plug and abandon all wells and facilities and reclaim all well and
facility sites on the lease acreage in accordance with and when required by all applicable laws, rules and regulations, but no later than the
expiration, termination or surrender of this lease. Lessee shall pay or cause to be paid when due all costs and charges for work done by it or
caused to be done by it on the lease acreage. Notwithstanding any other provision of this lease or any express covenant made herein, Lessor
Red Crown Royalties, LLC
1490 W. Canal Ct, Suite 3000 Littleton, CO 80120
Phone: 303-794-9260, Fax: 303-794-9261
RED CROWN ROYALTIES, LLC
retains and shall be entitled to the benefit of and to enforce all of Lessee’s implied covenants, including without limitation, Lessee’s implied
covenant to explore, develop, operate prudently, protect from drainage and market production from the lease acreage. Lessor shall have the
right, at its sole risk and expense, to enter upon the lease acreage and to examine work done and in progress thereon and to inspect Lessee’s
equipment, works, tanks, facilities, pipelines and other improvements thereon.
16. LEASE RECORDING: Lessee, at its sole cost, shall furnish Lessor with a recorded copy of this Oil and Gas Lease after recording same
in the records of the county where the LEASE ACREAGE is situated.
IN WITNESSETH WHEREOF, this instrument is executed as of the day and year first above written.
RED CROWN ROYALTIES, LLC
________________________________________
By: Ronald E. Hornig, Manager
STATE OF COLORADO
COUNTY OF ARAPAHOE
The foregoing instrument was acknowledged before me this ________ day of ____________________________________ , 2004 by Ronald
E. Hornig,
as Manager on behalf of Red Crown Royalties, LLC, a Colorado limited liability company.
WITNESS my hand and official seal.
_________________________________________________________________
Red Crown Royalties, LLC
1490 W. Canal Ct, Suite 3000 Littleton, CO 80120
Phone: 303-794-9260, Fax: 303-794-9261