OCTOBER 2005 CROW TRIBAL LEGISLATURE

OCTOBER 2005 CROW TRIBAL LEGISLATURE

JOINT ACTION RESOLUTION NO. JAR 05-09

INTRODUCED BY CARL E. VENNE, CHAIRMAN

CROW TRIBAL EXECUTIVE BRANCH

JOINT ACTION RESOLUTION OF THE CROW TRIBAL LEGISLATURE AND

THE CROW TRIBAL EXECUTIVE BRANCH ENTITLED:

“FINAL APPROVAL OF THE OIL AND GAS LEASE BETWEEN THE CROW TRIBE

OF INDIANS AND GPE ENERGY INC.”

WHEREAS, the Chairman of the Executive Branch has authority and responsibility

pursuant fo the “enuinerated powers” in Article IV, Section 3(f) of the Constitution and Bylaws

of the Crow Tribe of Indians to “negotiate and approve or prevent any sale, disposition, lease or

encumbrance of Tribal lands, interests in lands or other Tribal assets, including buffalo,

minerals, gas and oil with final approval granted by the Legislative Branch,” and in Article IV

Section 3(k) to “negotiate and approve limited waivers of sovereign immunity when such a

waiver is necessary for business purposes in accordance with Article V, Section 2(f) of [the]

Constitution;” and

WHEREAS, GPE Energy Inc. has worked with PIC Production, Inc., on evaluating the

prospects for oil and gas production on an 1840-acre area of the Crow Reservation in which the

Tribe holds mineral rights, pursuant to certain Oil and Gas Mining Leases approved by the U.S.

Secretary of the Interior on March 6, 2000, which leases have now expired; and

WHEREAS, the Chairman of the Executive Branch, with the delegated assistance of

the Oil and Gas Committee headed by the Secretary of the Executive Branch, has negotiated a

new Oil'and Gas Lease Between the Crow Tribe of Indians and GPE Energy Inc. (the “Lease”),

for the exploration and production of oil and gas on approximately 1,840 acres within the Crow

Reservation, a copy of which is attached hereto and incorporated by reference; and

WHEREAS, the Legislative Branch has authority and responsibility pursuant to its

“powers and duties” in Article V, Section 2(d) of the Constitution “to grant final approval or

disapproval of items negotiated by the Executive Branch of Government pertinent to the sale,

disposition, lease or encumbrance of Tribal lands, interests in lands or mineral assets,” and in

Article V, Section 2(f) to “grant final approval or disapproval of limited waivers of sovereign

immunity by the Executive Branch when waivers are necessary for business purposes;” and

WHEREAS, at the time this Joint Action Resolution was submitted to the Legislature

in order to comply with Article V, Section 7 of the Constitution, the parties had reached

agreement on the substantive terms of the Lease, and were in the process of finalizing the legal

terms of the Lease, and the final Lease attached hereto has been submitted to and reviewed by

the Legislature; and

October 2005

JAR GPE Energy Lease

Page 1 of 3

WHEREAS, exploration for and development of Tribal oil and gas resources is in the

best interests of the Tribe and Tribal members, and the Lease provides for such exploration and

development on a fair, environmentally responsible, and commercially sound basis, and the

limited waiver of the Tribe’s sovereign immunity in the Lease is necessary for business

purposes; and

WHEREAS, after approval by the Legislature and Executive Branch of the Crow

Tribe, the Lease is subject to approval by the Secretary of the Interior or her designee, pursuant

to the Indian Mineral Development Act of 1982 (25 U.S.C. § 2101, ef seq.) and other

applicable Federal law;

NOW THEREFORE, BE IT RESOLVED BY THE LEGISLATURE AND THE

EXECUTIVE BRANCH OF THE CROW TRIBE:

Section 1. That the “Oil and Gas Lease Between the Crow Tribe of Indians and

GPE Energy Inc.”, including the limited waiver of sovereign immunity contained therein,

attached hereto and incorporated by this reference, is hereby granted final approval

pursuant to Article V, Sections 2(d) and 2(f) of the Constitution and Bylaws of the Crow

Tribe.

Section 2. That the Chairman of the Executive Branch is authorized to sign and

execute the above-referenced Lease on behalf of the Crow Tribe, and to take such further

actions as are necessary to implement and administer the Lease.

Section 3. That the final approval granted herein is effective on the date of

approval of this Resolution, and is subject only to such further approvals as are required

by Federal law.

CERTIFICATION

[hereby certify that this Joint Action Resolution granting final approval of the Oil and

Gas Lease between the Crow Tribe and GPE Energy Inc. was duly approved by the Crow

Tribal Legislature with a vote of 12. in favor,_2_ opposed, and 1_abstained and that a quorum

was present on this 12th day of October, 2005.

KW Oe

Speaker of the House _)

Crow Tribal Legislat

ATTEST:

cretary, Crow Tribal Legislature

October 2005

JAR GPE Energy Lease

Page 2 of 3

EXECUTIVE ACTION

Thereby

approve,

veto

this Joint Action Resolution granting final approval of the Oil and Gas Lease between the Crow

Tribe and GPE Energy Inc. pursuant to the authority vested in the Chairman of the Crow Tribe

by Article V, Section 8 and Article IV, Sections 3(f) and 3(k) of the Constitution and Bylaws of

the Crow Tribe of Indians on this Lt. day of Am , 2005.

Chairmamt, Executive Branch

Crow Tribe of Indians

October 2005

JAR GPE Energy Lease

Page 3 of 3

Fined Approval of the. Or) * Gas Lease.

bebweenthe Goastribe. 6 f Tradians and GPE Enevgy, \nc.

Bill or Resolution NumberJar 05.0q Introduced by: Fyecucki ye Date of vote (rt cher \2, 200 5

Representative

No Abstain

s

B. Cloud .

C. Goes Ahead

O. Costa

V. Crooked Arm

R. Iron

J. Stewart

E. Fighter

SAIN RIN IAIL A

L. Costa

L. Hogan Va

D. Old Elk Aan

K. Real Bird ae ee

E. Pease _ aan

S. Medicine Horse _-

L. Not Afraid

P. Real Bird

_ D. Wilson

J. Stone

Secretary of the House

W. Plain Feather

Speaker of the House

wa

aa oe a

Totals: | py a a

Results of Vote:

Not Pass Tabled Veto Override

Signature of Officer tS . Date: lol i oF

Legislative Branch

Pryor:

Arrow

Benjamin Cloud, HI

Oliver Costa

Carison Goes Ahead

Big Horn:

Valley of the Give

Away

Vincent Crooked Arm

Ralph Iron, Ir.

Willie Plainfeather,

Speaker of the House

Dunmore:

Black Lodge

Jared Stewart

Larry Costa

Ertis Fighter, Sr.

Reng:

Cen £

Lloyd Hogan, Jr.

Danie} Old Elk, Sr.

Kennard Real Bird

Lodge Grass:

Valley of the Chief

Eloise W. Pease

Scott Medicine Horse

Leroy Not Afraid

Wyola:

Mighty Few

Pius Real Bird

Dana Wilson

3.D. Stone,

Secretary of the House

Staff

Jackie Blacksmith,

Administrator

Freda J. Knows Gun,

Adm. Assistant/

Accounts Payable

Thomas .J. Half,

interpreter/Office Assistant

Nellie Moccasin,

Office Assistant

Kenny Pretty On Top

Maintenance/Custodian

Ronald Ameson, Esq.,

Attorney At Law

LEGISLATIVE BRANCH OF THE

CROW TRIBAL GOVERNMENT

P.O. Box 309 — MAKAWASHA Avenue

Crow Agency, Montana 59022

Phone: (406) 638-2023/2025/2238 Fax: (406) 638-2030

OFFICIAL CERTIFICATE OF DELIVERY

I, Jonathan D. Stone, Secretary of the Legislative Branch of the Crow Tribal

Government hereby this Transitional Action do deliver a True and Correct Official copy

Of the Final Approval for the following Bill:

JOINT ACTION RESOLUTION “FINAL APPROVAL OF THE OIL AND GAS

| LEASE BETWEEN THE CROW TRIBE OF INDIANS AND GPE ENERGY INC”

| Bill No. JAR0S-09 to

Position of: y ut enck

Patio ot — Oe e Branch. .

| Done and dated this_ J" day or_(er- _, 2005 @ld “35 _amifim)

(Lae d ele .

in the

for the

Secretary of the House

Legislative Branch of the

Crow Tribal Government

| Served by:

| Legislative Branch Staff

Delivered on this day of . 2005 @ a.m./p.m.

Ce: file

REVISED 9/26/05

Contract No.

Allotment No. :

OIL AND GAS LEASE

BETWEEN

THE CROW TRIBE. OF INDIANS

AND

GPE ENERGY INC.

TABLE OF CONTENTS

DEFINITIONS occu ieccccceeeseeseceeeeeeeeeseeeseeeteeesteaeeceeeenaeasenteneneneaeees 4

1.1. “Actual Drilling” ....... a 1

1.2 “Authorized Officer" . 4

1.3. “Effective Date" oo... cece eres ceeeeerseneetesnsees |

6 eR Cr (creer . 2

1.5. “Hazardous Materials” . 2

1.6 “Minimum Depth” .......... 2

1.7 (“OM Lee 2

1.8. "Paying Quantities" .................. we 2

1.9 "Radioactive Materials”... ic ccceeeeserereeeeeneeseesnenennereees 3

1.10 "Reclamation Activities" ............cccecssseesssnecneeeeneneesneeeteaneeeteeeenaes 3

1.11 "RESOPVATION ooo ccc cccccese cence cneeceeeeeaeeeneeeseteeeseeseesnesasaaesneennensnaeees 3

1.12 "Secretary" oo... csecsassaseesseessnsesesenesseesesceseeendenenes 3

1.13 "Tribal Minerals Department? 2... cece ce eeeeeeeeeseeteneneeeees 3

1.14 "Tribe" occ ccc cccccseceeseceeeeescesedsnaeeeeacecaeeeseedneesseneeseaneaneeaaee 3

LEASED: PREMISES. uuu.....ccccccccescesccecsececceseeceeeeeeeeenaeeseeenseesenaeesseneneaenaeens 3

2.1 — Lease of PreMise@S ............cccccecccseeceeeeeeeeeeeeeeereeeeseeesseseneenteeesneees 3

2.2 Limitation on Use of Leased Premises: Additional Purposes. ....... 4

2.3 -RESErVatiONS 0... csccecsnsceeececeeeeeeseeeteneesaeeseeeseeaeesseeesneenensnaes 4

2.3.1 Mineral Estate .... 4

2.3.2 Surface Estate 4

CONDITION OF LEASED PREMISES. ............cc:ccccesecssscecsseesersesneneneeseene 4

3.1. Examination of Leased Premises: No Warranties ...............006 4

3.2. Access to Leased Premises ..............c:ccecceseecseeceeeseeeseeeeeaeceaseenees 4

TERM oo cececccecscssssccccscusessscsceenseesseeceeeseneessecseeseaesdeeeeeesaeeensaetenetsanteeeeees 5

4.1. Term 5

4.2 Drilling At Expiration of The Term ........cccccecessessseseeseeeseeteeneenes 5

4.3. Temporary Cessation of Production... cesses serene eenenes 5

PAYMENTS TO LESSOR ou... ..ccccsccscsssesecescseeessesseeeeesetseneeaeeneeeaenaesneeenaiee 6

5.1. Annual Rental and Bonus ou... .cccecccececeeeeeeeeenceeeneeeaeeteareeaeeeaees 6

5.2 Royalty once cece ceeeeescsecesessneesseaesesenseeeesaesesesasesaseesessneeseegeees 6

5.3. Payments ........... eee . 7

5.4 Inspections and Audits .. 7

5.5 Administrative Fees .......... ccc ceeeceeeceeeeceeeeeeeneeeesseesenseatesneneeenas 7

WELLS oii ccccccsccsseesseecseeseseeeteeteeeeeeentereeee i 8

6.1. Obligation to File APD and Drill Wells ... aw «=8

6.2 Diligent Development .............. ee — 8

6.3. Development of Horizons ............... 9

6.4 — Drilling and Producing Restrictions 0.0.00... eee 9

10.

11.

12.

13.

14.

15.

16.

OPERATIONS. .........c:cceceseeeeeereerees coeeeeasesseseseeaanenetenseracass 9

Ti LOGS ieeeeceeecceeeeeeeessenteeseeseseeseeesescseseseseseeeeeensenersneenceseenentennenatenis 9

7.2 Prevention of Waste 20.0.0... ccc cece cece eesneneseseeeersesneneeaneeeeneseneeaees 10

7.3: Drainage .......... ww. = 10

7.4 Umit Operation oo... cc eeeescesesenetssenenseseeeeeentenenstereeeeeseaennnes 11

7.5 Water Well Conditioning ................... wee 11

7.6 Shut-In Gas Wells oo... cece ccc ecseceeeceeeceeeceneeseneesnensseeeneseaensaees 41

WATER USE AND FACILITIES. ...0.......cccccccccececeeeseeeeeeenneseeeeceeesestannneesaeeee 12

8.1 ~ Water Use 0... cece ereseeeees 12

8.2 _ Water Metering 12

PROPERTY BELONGING TO LESSE. ..........eeeeeeeeeesseeteesenteerneerensseaeas 13

ASSIGNMENT,SUBLEASE, OR TRANSFER ..........ccssceecceseesesseteeteeeee 13

INDEMNIFICATION AGREEMENT. ...........:...::cccceeeceseeeeneeneseeerensesseeeees 14

41.1 Indemnification .o..ccccc eee csceeecceseeceeeeeneeseneesaeereaeseassesaeegensareessseees 14

11.1.1 LOSSES ooocceeccccccccceceeseeeeteeeee reer ee ecdnesennsedacaueceseeesessseeasnseeasenes 14

11.1.2 Remedial Work .........ccccssecesseseeeeerteeerteenees wee 14

11.2. Defense or Prosecution of Claims ........0.... cee eee oe 1)

11.3 Payment of LOSSES oo... essceccceseeseeeeeseteeseeeseesseeeeesestenesenriees 16

11.4 Identification of Hazardous Materials .........00. eect eeeeeeeeeees 16

14.5 Hold Harmless: ...............ccccccccsessnnseeeeseseneneeeeesesseeeensecsenesmeenentesseaes 16

11.6 Survival of Section .o.......ccecceccesccccseeceeeneeeteaeterteneeteeeenasenaeerseesenes 17

NON-RESPONSIBILITY NOTICES. .........cccccseseeeeeeeeeeeeenereeeeeestenenneeeaes 17

BONDS AND INSURANCE

13.1 Performance Bonds ............cccccccsesssseceseeeeeeeeetonsnebenaeeeseesenseunneess 7

13.2 Cash in Lieu of Performance Bond ww «17

13.3 Public Liability Insurance ................ we 18

13.4. Fire and Damage Insurance... ccc eeeeeeseceerereneesteenseennensnerses 18

13.5 Workers' Compensation and Occupational Disease Insurance:

Applicable Law oo... sccsscscsscersssseseteseeeseesnenseenessereeensssasniees 18

13.6 Form and Copies of PolicieS ............cccccscnessesseneceesceeeeeseeneenerenees 18

13.7 Self-INSUPANCE ooo. cee ccc cc esse cece ceeeeeeseeceeeteeetcaeetieereseeeeserenenenaseaes 19

13.8 Periodic Review of Bonds and Insurance .............ccecccee eee 19

COMPANIES BONDING AND INSURING ......... cece eeceeceeceneeeeeeeeeeenteee 19

FORCE MAJEURE ouue..cccccccccscsesssccseestcsceseseensnenseesaceneecaeseesseessesessnerereanaes 19

LIENS. TAXES, ASSESSMENTS AND UTILITY CHARGES .................. 20

16.1 TAXCS ooicccccsccccsccccssscsssesseescseceseeeseescaeeeaeeenetsaeesceesansecaessaneenneatasess 20

ii

16.2 Lessee to Discharge Liens and Taxes Prior to Enforcement

OF Delinquency ............ccceecesseeseeecneeeeeeeeneeeeeneteeeeansentecenenseeenatoes 20

16.3 Lessor May Pay-Liens or Charges Payable to Lessee .. wv 20

16.4 Lessee's Right to Challenge or Defend... tener eeeees 21

917. SURRENDER iu... .cccceececcesececeeeceeeeeeceeeeeeetansesceeveeeseesesenasenevaeeranrerdeneeess 21

18. DISPUTES ooo .cccccccccsescscesececseseetseetecesetsesateerseesetesseseeeeeseeneesesiesaesnesansase 21

18.1 Arbitration oo... cece eenteeeeeee ae 24

18.1.1 Disputes Subject to Arbitration i... we 21

18.1.2 Initiation of Arbitration Selection of Arbitrators 0.00.0... 21

18.1.3 Arbitration Procedures ..........cecccceeeceseseeeeeteeeteeeteneestenatansnaees 22

18.2. Cancellation and Noncompliance ... .. 22

18.3. Recourse to Other Remedies .............0 vw. 22

18.4 Bankruptcy, Dissolution, or Receivership ..... a. 23

18.5 Expenses of Dispute Resolution oo... essences 23

919. ANTIQUITIES oo. ccccccscensecceeeeeeseeseneesaetesecoeseneaceseetteenenestesseeserseeneeeaee 23

20. TRIBAL JURISDICTION ........... ceseeeteeaaeaseneeeeaeeaeeaneaeeneeeneees vecteutuetieneeen 24

21. GOVERNING LAW: CHOICE OF LAW. ....00.. ct eer eeeeeeeeeeeeees 24

22. LIMITED WAIVER OF SOVEREIGN IMMUNITY ........0.000. eee 24

23. CONTESTS AFFECTING SOVEREIGNTY ouu....cccccssssssssseesssssssseteestessssees 25

24. NOTICES ooo. cccccccccesceseseeceeeseeeecsceneeeeeesesecearseeneesssenseeetsevaecasseseensasteneeeesas 25

25. TERMINATION OF FEDERAL TRUST ....00. eee eeeseeeeteteeteneenene 26

26. | LESSEE'S OBLIGATION TO THE UNITED STATES OF AMERICA ....... 26

27. DELIVERY OF PREMISES oun... cece ceteeceeeceeceeeeeteeeessesacenseneneeeneeeeee 27

28. RESTRICTION OF LEASE INTERESTS. ......0........ceesceeeeseseereeeeeeereeeeeeee 27

29. LEASE BINDING ou... ee eeececsceeeteeeeneeneeeetaeeaecasaesaetaesaenestetsetaeees 27

30. CONFIDENTIALITY. 0... cecccesececceececeecesesseseeseecncesseaeenesessesseenssesseaseaesas 27

31. DELAY OR OMISSION 00.0... ccc eeesseseceeeceesesceeesceeseecetecaeseseasaetensaccctecnees 27

32.

33.

35.

36.

ENTIRE AGREEMENT. .........ccccccccesccseseseeseeseasesdeceeeeeseseeesaeeesensesatacaceesas 28

34.1 Entire Agreement ...0.0... eee eee ww 28

34.2. No Amendment Except as Provided Herein 28

SEVERABILITY oio.e.sesccccesseceeceseseseeeesteeceeteaeseeacsseatacaeeensecavanesensnaesareeensas 29

SECRETARY'S APPROVAL 00.0... ceececeeesetsetecteceebeseesbeseesetaneantenineeaiae 29

CROW TRIBE OF INDIANS OF THE CROW INDIAN RESERVATION

U.S. DEPARTMENT OF THE INTERIOR

Bureau of Indian Affairs

Crow Agency, Montana 59022

Contract No. :

Allotment No. :

OIL AND GAS LEASE BETWEEN THE CROW TRIBE OF INDIANS

AND GPE ENERGY INC.

THIS LEASE is made and entered into in quintuplicate this day of :

2005, by and. between the Crow Tribe of the Crow Reservation, a sovereign government

and federally recognized Indian tribe, whose address is P.O. Box 159, Crow Agency,

Montana 59022 (hereinafter referred to as "Lessor"), and GPE Energy Inc., a Nevada

corporation, whose address is 9800 Mount Pyramid Court, Suite 400, Englewood,

‘Colorado . 80112, (hereinafter referred to as "Lessee"). This lease is entered into

pursuant to the Indian Mineral Development Act of 1982 (25 U.S.C. § 2101 et seq.), the

Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. § 1701 et. seg.), other

applicable federal laws. and regulations, including but not limited to 43 C.F.R. Part 3160,

Onshore Oil and Gas Operations: General, and 30 C.F.R. Part 200, Royalty

Management, and the laws of the Crow Indian Reservation, including all amendments to

all of the above.

1. DEFINITIONS

1.1 "Actual Drilling" means spudding in a well on the Leased Premises and

continuing diligent drilling practices to the Minimum Depth.

1.2 "Authorized Officer’ means any entity or individual authorized by the

Secretary to perform duties with respect to this Lease or the regulations applicable

hereto.

1.3 “Effective Date" means the first day of the month following the date of

approval of this Lease by the Secretary.

1.4 "Gas". means any fluid, either combustible or noncombustible,

hydrocarbon or nonhydrocarbon, which is extracted from a reservoir and which has

neither independent shape nor volume, but tends to expand indefinitely. It is a

substance that exists in a gaseous or rarified state under standard temperature and

pressure conditions. Gas does not include gaseous substances derived, produced, or

manufactured from coal, oil shale, tar sands, or hydrocarbons classified as synthetic

fuels. Gaseous substances produced or manufactured from coal (coalbed gas) means

gas composed primarily of methane and which is created as a byproduct of coal

formation and is stored in coal by (a) being absorbed onto the surface of the micropore

system of the coal or is present in the macropore system (or cleats) of the coal either as

a free gas-or dissolved in water. Any gas produced from a sandstone, limestone, shale,

or other-conventional gas formation shall be presumed not to be coalbed methane gas.

1.5 "Hazardous Materials" means any substance, material, or waste,

excluding Oil and Gas, now or hereafter determined by any federal, state, or tribal

governmental authority to pose an actual risk of injury to health, safety, or property and

including, but not limited to, any substance, material, or waste: (1) containing asbestos

or Radioactive Materials, but excluding any preexisting naturally occurring Radioactive

Materials: (ii) now or hereafter defined as a “hazardous waste, "hazardous material,”

"hazardous substance," "extremely hazardous waste;" or "restricted hazardous waste"

under any provision of applicable federal, state, or tribal late: (iii) now or hereafter

defined as "hazardous waste" pursuant to § 1004 of the Resource Conservation and

Recovery Act ("RCRA"), 42 U.S.C. § 6903: or (iv) now or hereafter defined as.a

"hazardous substance” pursuant to § 101 of the Comprehensive Environmental

Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et se q.

Hazardous Materials shall-not include materials used routinely in the development and

production of Oil and-Gas.

1.6 "Minimum Depth" means for (a) a wildcat, or step out well a depth

sufficient to test the Tensleep Formation; or (b) a development well a depth sufficient to

test the known producing formations. A wildcat or step out well shall mean a well

completed at a distance of not less than two (2) miles from existing or previous

production.

1.7 "Oil" means a mixture of hydrocarbons that existed in a liquid phase in

natural underground reservoirs and remains liquid at atmospheric pressure after

passing through surface separating facilities and is marketed or used as such.

Condensate recovered in lease separators or field facilities is considered to be oil. Oil

does not include liquid substances derived, produced, or manufactured from coal, oil

shale, tar sands, or other hydrocarbons classified as synthetic fuels.

1.8 "Paying Quantities" means a well producing, or capable of producing as

provided in Section 7.6, sufficient Oil and Gas to produce income in an amount

necessary to (a) operate and maintain the well, (b) maintain this Lease, (c) market the

product, and (d) result in a reasonable profit.

1.9 "Radioactive Materials" means any material which exhibits the

phenomenon of spontaneously emitting radiation resulting from changes in the nuclei of

atoms of the element.

1.10 "Reclamation Activities" shall mean those actions required under

applicable law to close each well or unit, including, but not limited to, plugging or

abandoning of wells, or those actions required to close Lessee's activities in and on the

entire leasehold in compliance with applicable laws and regulations, as the context

requires.

1.11 "Reservation" means those lands encompassed within the exterior

boundaries of the Crow Reservation, of Montana.

1.12 "Secretary" means the Secretary of the Interior of the United States of

America or-his duly authorized representative.

4.13 "Tribal Minerals Department" means the Minerals Department of the Tribe.

1.14 "Tribe" means the Crow Tribe of the Crow Reservation.

2. LEASED PREMISES

2.1 Lease of Premises

For and in consideration of the payments to Lessor herein provided and the

covenants of Lessee herein contained, Lessor hereby grants, leases, and lets

exclusively unto Lessee for the purposes of investigating, exploring, prospecting,

drilling, mining for, and producing Oil and Gas, including all associated hydrocarbons

produced in liquid or gaseous form, laying pipe lines, building roads, tanks, power

stations, telephone fines, and other structures thereon to produce, save, take care of,

treat, transport, market and own such products, and performing any required

Reclamation Activities, Lessor’s mineral interests on the following-described tracts of

land situated in the Reservation, and more particularly described as follows:

Township 3 South, Range 31East, M.P:M.

Tract No. MT 97-C —SE1/4, Sec. 22, SW1/4, Sec. 23

Tract No. MT 277-E — SE1/4, Sec. 27

Tract No. MT 278-C — N1/2, SW1/4, Sec. 27, SE1/4NE1/4,SE1/4, Sec.28

Tract No. MT 2029-B — E1/2NW 1/4, Sec. 34

Tract No. MT 2030-F — W1/2NW1/4, Sec. 34

Tract No. MT 3276-B —W1/2NE1/4, NW1/4, NW1/4SW1/4, Sec. 26

Tract No. MT3623) - W1/2NE1/4, S1/2NW 1/4, Sec. 23

TractNo. T 6002 -W41/2SE1/4, Sec. 23

containing 1,840 acres, more or less, (hereinafter referred to as "Leased Premises").

2.2 Limitation On Use Of Leased Premises: Additional Purposes

The Leased Premises shall not be used by Lessee for any purpose or purposes

other than those specified above, or specifically granted elsewhere in this Lease, and

Lessee agrees to use the Leased Premises only for these purposes. However, Lessee

may use the Leased Premises for any additional lawful purpose, including but not

limited to seismic work, injecting Gas, water, and other fluids and. air into subsurface

areas, when specifically authorized hereafter by written consent of Lessor and the

Secretary, which consent may be withheld, granted, or granted upon conditions, in the

reasonable discretion of Lessor and the Secretary.

2.3 Reservations

2.3.1 Mineral Estate

The Tribe expressly except from this agreement and reserve to

themselves, all minerals of every kind and character in, on, and under the Leased

Premises, other than the Oil and Gas as herein defined. However, the movement or use

of soils, sand, and rock by Lessee for the purpose of constructing and improving the

Leased Premises as required by this Lease shall be permitted and shall not be

construed as mining.

2.3.2 ‘Surface Estate

The Lessor reserves the right, subject to the superior right of Lessee to

use so much of the surface of the Leased Premises as is necessary for Lessee to

exercise the rights granted under this Lease, to lease, sell; or otherwise dispose of the

surface of the Leased Premises. Lessor may use said land and the surface thereof to

investigate, explore, prospect, drill, and mine for, and produce all such other minerals,

including but not limited to the right to construct, operate, and maintain works, buildings,

plants, waterways, roads, communication lines, pipelines, reservoirs, tanks, pumping

stations, wells, offices, utilities, and other structures necessary or convenient for

enjoyment of the rights excepted and reserved hereunder.

3. CONDITION OF LEASED PREMISES

3.1 Examination of Leased Premises: No Warranties

Lessee has examined and knows the Leased Premises. No warranties or

representations, express or implied, as to the title, condition or status of the Leased

Premises have been made by Lessor or any agent of Lessor prior to or at the time of

execution of this Lease. Lessee warrants that it has not relied on any warranty or

representation made by or for Lessor, but has relied solely upon Lessee's independent

investigation.

3.2 Access to Leased Premises

Lessor hereby grants to Lessee the non-exclusive right for continuous ingress

and egress by motor vehicles (including trucks) and on foot over the lands of Lessor

from any established highway or secondary road to the perimeter of the Leased

Premises as may be reasonably necessary to carry on the work authorized herein;

provided, that Lessor shall not be required to make any expenditure of money to

construct or maintain any such route. Such ingress and egress shall be by the least

damaging route to the Leased Premises and construction of permanent roadways shall

be subject to the prior approval of the Tribe. Lessee shall be responsible for repairing

any material damage done or caused to.be done to Lessor's land by Lessee in

exercising this right and Lessee shall bear the cost and expense of such repair.

4. TERM

44 Term

The term of this Lease shall be three (3) years ("Term"), beginning on the

Effective Date of this Lease, and shall continue so long thereafter as oil or gas is

produced in Paying Quantities from the Leased Premises, subject to the provisions of

Section 6.1, with a preferential right in Lessee to renew this Lease for a successive

period of three (3) years upon such reasonable terms and conditions as may be agreed

to by the Parties hereto and approved by the Secretary, unless otherwise provided by

law, upon the expiration of the Term. There must be production in Paying Quantities

of any Oil and. Gas at the expiration of the Term in order for this Lease to continue

beyond the Term. The environmental releases and indemnifications contained in

‘Section:11 of this Lease shall survive the expiration or termination of this Lease.

4.2 Drilling At Expiration Of The Term.

If at the expiration of the Term, Lessee is engaged in the Actual Drilling of a well

on the Leased Premises and there are no other wells on the Leased Premises, or on

lands pooled, unitized, or communitized therewith, which are producing in Paying

Quantities, this Lease shall not terminate so long as Lessee shall pursue the Actual

Drilling of such well with reasonable diligence to completion or abandonment. If such

well shall produce in Paying Quantities, the well shall be treated as a well producing in

Paying Quantities for purposes of this Lease continuing beyond the Term. If such well

shall not produce in Paying Quantities; this Lease shall terminate on abandonment

according to the Lease terms.

4.3 Temporary Cessation Of Production.

If at the end of the Term a well on the Leased Premises, or on lands pooled,

unitized, or communitized therewith, capable of producing in Paying Quantities,

temporarily has ceased to produce due to mechanical problems or because of

deepening, plugging back, or other operations and there are no other wells on the

Leased Premises, or on lands pooled, unitized, or communitized therewith, which are

producing in Paying Quantities, nevertheless such well shall be deemed to be a well on

the Leased Premises producing in Paying Quantities and this Lease will continue in

force.during all of the time or times this Lease may be held by production. If Lessee

does not commence. operations upon such well or commence drilling operations on a

new weil within ninety (90) days from cessation of production and, after commencing

operations within said period, if production in Paving Quantities has not resumed within

one hundred eighty (180) days from commencing operations, this Lease shall expire.

5. PAYMENTS TO LESSOR

Lessee covenants and agrees to pay to Lessor the following payments ("Lease

Payments") for use of the Leased Premises:

5.1 Annual Rental and Bonus

Lessee shall pay to Lessor, on or before the Effective Date and each anniversary

thereof, an Annual Rental of Five Dollars ($5.00) per acre per annum in advance during

the continuance hereof. The-total annual rental wiil be $9,200.00. for 1840 acres. The

Annual -Rental shall not be credited against Royalty, or prorated or refunded for any

reason whatsoever.

In addition, lessee shall pay to Lessor, on or before the Effective Date of this

lease, a bonus payment of Five Dollars ($5.00) per acre. The total bonus payment for

this lease is $9,200.00 for 1840 acres.

5.2 Royalty

in addition to the.Annual Rental, Lessee shall pay to Lessor a Royalty of Sixteen

and two-thirds percent (16 2/3%) of the value of all. Oil and Gas produced, sold, or

saved from the Leased Premises, save and except Oil and Gas used by Lessee for

development_and operational purposes on the Leased Premises which Oil and Gas

shall be royalty free. Lessor shall have the right to elect on thirty (30) days written notice

to take Lessor's royalty in kind. When paid in value, Royalties shall be due and

payable monthly on the last day of the calendar month following the calendar month in

which produced, sold, or saved.

"Value" may, in the discretion of the Secretary, be calculated on the basis of the

highest price paid (whether calculated on the basis of short-or actual volume) at the

time of production for the major portion of the Oil of the same gravity; and Gas, and/or

natural gasoline, and/or all other hydrocarbon substances produced, sold, and saved

from the area of the Crow Indian Reservation where the Leased Premises are situated,

and the actual volume of the marketable product less the content of foreign substances

as determined by the Authorized Officer. It is understood that in determining the value

for royalty purposes of products such as natural gasoline derived from treatment of Gas,

a reasonable allowance for the cost of manufacture shall be made and that such

allowances for the costs of manufacturing and transportation of such products shall be

no greater than two-thirds of the value of the marketable product.

When Royalty on Oil produced is paid in kind, such royalty Oil shall be delivered,

at such time as may be required by Lessor, in Lessee’s tanks on the premises where

produced as reasonably may be required by Lessor without cost to Lessor, unless

otherwise agreed to by the Parties. Lessee shall not be required to hold such royalty Oil

in storage longer than thirty (30) days after the end of the calendar month in which such

Oil is‘ produced. Lessee in no manner shall be responsible or held liable for loss or

’ destruction of such Oil in storage, unless the loss or destruction is. caused by Lessee's

negligence and/or willful misconduct. When Royalty on Gas produced is paid in kind,

such royalty Gas shall be delivered by Lessee to a mutually acceptable place in the

gathering line or pipeline to which the well is connected at no cost to Lessor.

5.3 Payments

All payments due hereunder shall be paid without prior written notice or demand on

or before their due date in accordance with applicable laws and regulations. Interest

shall be paid on all late payments from the due date to the date of payment, computed

on an annual rate three percentage points above the prime rate as set by the Citibank

N.A. of New York on the first day of the month in which demand is made by Lessor,

provided. that the prime rate for purposes of this subsection shail not be less than six

percent (6%) per annum. Lessee shall furnish to Lessor and the Secretary- monthly

statements in such form as may be prescribed by the Secretary, and furnish Lessor with

any hard copy printout if an automated data processing system is used. Monthly

statements shall be filed with Lessor within sixty (60) days.of the last day of the month

covered by the report.

5.4 inspections and Audits

Lessee agrees to allow Lessor and its agents or any authorized representative of the

Secretary, to enter, from time to time, upon and into all parts of the Leased Premises for

the purposes of inspection, and shail further agree to keep a full and correct account of

all operations and make reports thereof, as required by the regulations of the Secretary

governing operations on the Leased Premises. Lessee’s books and records pertaining

to the Leased Premises shall be open at all times for audits relating to the scope,

nature, and extent of compliance with this Lease or with applicable laws, regulations, or

orders by Lessor or such officers of the Secretary as shail be instructed in writing by the

Secretary or authorized by regulations to make such audit. Lessor and the Secretary

shall provide reasonable notice to Lessee of its intent to audit Lessee's books and

records. Lessee shall maintain its books and records and they shall be available for

audit for the maximum period required by applicable law or regulations. Duly authorized

representatives of the Tribal Minerals Department shall have the right to issue written

notices of probable violations of applicable federal and tribal laws and regulations.

5.5 Administrative Fee

Lessee shall pay to Lessor on or before the Effective Date of this Lease, a one

time administrative fee of $7,000.00. The administrative fee shall be a separate

payment made directly to the Lessor.

6. WELLS

6.1 Obligation To File APD. and Drill Wells.

Lessee will submit an application for a permit to drill (APD) the initial well within

120 days of approval of this lease. This lease shall terminate prior to the expiration of

the Term if Lessee does not commence or cause to be commenced Actual Drilling. of

the initial well on the Leased Premises within sixty (60) days of the APD approval dates

and diligently drill such wells to the Minimum Depth. Such well shall be compieted as a

well producing Oil and/or Gas in Paying Quantities or plugged or abandoned as a dry

hole. Completion of a well means completion of all "completion operations” that a

reasonable operator would use and employ in a good faith effort to obtain production. A

dry hole shall. mean a well dritled to the Minimum Depth which does not produce Oil &

Gas in Paying Quantities. In the event that the initial well is a success and additional

drilling is justified, the lessee will submit an application for a permit to drill the next well

- within ninety (90) days of release of the completion rig of the successful well. Each

successful well will earn the oil and gas rights to the contiguous 160 acre tract within the

Leased Premised to be designated by Lessee in which the successful well is located for

as long as oil and/or gas is produced from that well, with appropriate consideration for

periods of time when the well may not be producing during its commercial life for normal

operations events or Force Majeure. In the event an APD is not submitted in the 90 day

period described above, all unearned acreage will expire immediately without regard to

the remaining Primary Term.

If Lessee has timely commenced and conducted the drilling of a well to the

satisfaction of the provisions of this Lease and has otherwise complied with all

applicable provisions of this Lease but encounters impenetrable substances or

mechanical difficuities preventing Lessee from reaching the objective depth in said well,

Lessee shall have the right to abandon said well and drill a substitute well at a mutually

agreeable location. The substitute well shall be drilled in the same manner and under

the same conditions required for the well for which it is the substitute. Actual drilling ofa

substitute well will commence within ninety (90) days after the prior well is plugged and

abandoned. In the event a substitute well is commenced within such time and is drilled

and completed in the manner required herein with due diligence and in a good and

workmanlike manner, ‘said substitute well shall be regarded for purposes of this Lease,

as the well for which it is the substitute and all terms and conditions hereof shail apply to

said substitute well.

6.2 Diligent Development

Lessee shall exercise reasonable diligence, as a prudent operator, in drilling and

operating wells for Oil and Gas on the Leased Premises while such products can be

secured in Paying Quantities. At the election of Lessee, Lessee may drill and produce

wells necessary to diligently develop the Leased Premises: provided, that the right to

drill and produce such weils shall be subject to any system of well spacing or production

allotments authorized and approved under applicable law or regulations, approved by

the Secretary, and affecting the field or area in which the Leased Premises are situated.

6.3 Development Of Horizons

Lessee shall have three (3) years from the Effective Date to develop all horizons

on the Leased Premises. At the expiration of such three (3) year period, Lessee shall

have no right to and shall release those horizons below the then deepest horizon

producing in Paying Quantities.

If at the end of the three (3) years a well on the Leased Premises capable of

producing in Paying Quantities, temporarily has ceased to produce due to mechanical

problems or because of deepening, plugging back, or other operations and there. are no

other wells on the Leased Premises, or on lands pooled, unitized, or communitized

therewith, which are producing in Paying Quantities, nevertheless such well shall be

deemed to be a well on the Leased Premises producing in Paying Quantities and this

Lease will continue in force during allof the time or times this Lease may be held by

production; provided, that this Lease shall terminate if Lessee does not commence

operations upon such well or commence drilling operations on a new well within ninety

(90) days from cessation of production and, after commencing operations within said

period, if production in Paying Quantities has not resumed within one hundred eighty

(180) days from commencing operations.

6.4 Drilling And Producing Restrictions

Lessor and Lessee agrees that the Secretary may impose restrictions as to time

or times for drilling of wells and as to the production from any well or wells drilled when,

in his judgment, such action may be necessary or proper for the protection of the natural

resources of the Leased Premises and the interests of Lessor. In the exercise of his

judgment, the Secretary may take into consideration, among other things, federal and

tribal laws and regulations, and lawful agreements among operators regulating either

drilling or production. _In the event that the Secretary imposes any such time

restrictions, the periods of time for drilling wells as set forth in Section 6.1, and the

primary term of this lease, shall be extended for the period of such restriction.

7 OPERATIONS.

7.1 Logs

Lessee shal! maintain and provide to Lessor and the Secretary upon request a

complete set of all seismic data (geological and/or geophysical), any and all data

pertaining to core descriptions, lithology logs, electronic logging surveys, LIS digital

tapes; all final stack seismic data, and all information pertaining to test data of oil, gas,

and/or water (all such information set forth herein is collectively referred to herein as

"logs") which are developed by Lessee or at its direction in connection with Lessee's

activities on the Leased Premises. When requested by Lessor, Lessee shall show and

explain final interpretations to Lessor, but shall not be required to provide copies of such

interpretations to Lessor. All logs shall be made available to a designated representative

of Lessor for inspection, if Lessor so requests, not late: than forty-eight (48) hours after

having been run. Any copies of logs provided to Lessor or the Secretary shall be held

confidential and shail not be released or made available to any other Party until six

months after completion of each well, unless Lessee gives written permission to release

logs sooner.

7.2 Prevention Of Waste

Lessee shail exercise diligence in drilling and operating wells for Oil and Gas on

the Leased Premises while such products can be secured in Paying Quantities; carry on

all operations in a good and workmanlike manner in accordance with approved metheds

and practice, having due regard for the prevention of waste of Oil or Gas developed on

the Leased Premises, or of the entrance of water through wells drilled by Lessee into

the productive sands or Oil or Gas-bearing strata to the destruction or injury of the Oil or

Gas deposits, the preservation and conservation of the Leased Premises for future

productive operations, and to the health and safety of workmen and employees: Lessee

agrees to plug securely all wells before abandoning the same; to shut off effectually all

water from the Oil or Gas bearing strata; not drill any new well within 200 feet of any

then existing house or barn, on or near the Leased Premises without Lessor's written

consent; carry out at Lessee's expense all reasonable orders and requirements of the

Authorized Officer relative to prevention of waste, preservation of the Leased Premises,

and the health and: safety of workmen; bury all pipelines crossing tillable lands below

plow depth, as: determined by the Authorized Officer, unless other arrangements

therefore are made with the Authorized Officer; pay all damages to crops, buildings, and

other improvements on the premises occasioned by Lessee's operations; provided, that

Lessee shall not be held responsible for delays or casualties occasioned or caused by

force majeure.

Lessee must thoroughly clean all vehicles and equipment so that no noxious or

poisonous plants may be introduced or spread on Reservation lands. Should an

infestation of noxious or poisonous plants be found either on a temporary or permanent

base of operations or along access roads or trails used and/or constructed by Lessee.

Lessee shall be required; if responsible for the infestation, to provide control measures

a.. directed by the Authorized Officer or Lessor. The Secretary and Lessor shall bear

the burden of proof on the issue of Lessee's responsibility for the infestation.

7.3 Drainage

Lessee shall drill and produce all wells necessary to offset or protect the Leased

Premises from drainage, including from adjoining lands of Lessor which are under lease

to Lessee at a royalty rate less than that called for by this Lease or, in lieu thereof, to

compensate Lessor in full each month for the estimated loss of royalty through

drainage; provided that during the period of supervision by the Secretary the necessity

for offset wells shall be determined by the Authorized Officer after affording Lessor and

Lessee a reasonable opportunity to be heard on the issue and payment in lieu of drilling

and production shall be with the consent of and in an amount determined by, the

Secretary.

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74 Unit Operation

No agreement, nor amendment to any agreement, for the cooperative or unit

development ("pooling") for the field or area affecting the Leased Premises, or any pool

thereof, shall be valid or binding without the advance written consent of Lessor and the

Secretary. Notwithstanding any other provisions herein, upon the pooling of part of the

Leased Premises, this Lease shall be severed and. shall be considered as separate and

distinct leases for all horizons on (a) the pooled acreage and (b) the rest of the Leased

Premises; such severance shail result each time, and from time to time, whenever

pooling occurs; and the term of each resulting lease caused. by any such severance,

and all the rights and obligations of Lessee under each such lease, shall apply

separately to the acreage. attributable to the particular lease under the foregoing

severance, with every resulting lease being considered as separate and independent

from every other lease.

75 Water Well Conditioning

Within sixty (60) days of the filing of a notice of intent to abandon a well not

capable of producing in Paying Quantities, or on reasonable notice for other wells, the

Secretary and Lessor may require Lessee to condition any such well suitable for water

use by Lessor, provided the water produced is in excess of amounts needed for

Lessee's operations on the Leased Premises. The reasonable costs for conditioning the

well will be borne by Lessor. After.a well is conditioned as provided for herein, Lessee

shall be relieved from its plugging and abandonment responsibilities and any such well

shall thereafter be the sole responsibility of Lessor.

7.6 Shut-In Gas Wells

If a well capable of producing Gas or Gas and gas-condensate in Paying

Quantities located on the Leased Premises, or on lands pooled, unitized or

communitized therewith, is at any time shut-in due to market conditions or lack of any

available pipeline, so that no Gas or gas-condensate there from is sold or used off the

Leased Premises or for the manufacture of gasoline or other products, and this Lease is

not otherwise being maintained by another well producing Oi! and/or Gas from the

Leased Premises in Paying Quantities, this Lease shall nevertheless remain in full force

and effect and such shut-in well shall be deemed to be a well on the Leased Premises

producing Oi! and/or Gas in Paying Quantities so long as Lessee remits to Lessor those

shut-in royalty payments called for herein. Lessee, with due diligence as a prudent

operator, shall make reasonable efforts to open markets for production obtainable from

such shut-in well, but Lessee is under no obligation to market production except

pursuant to prudent terms and conditions which will economically benefit both Lessor

and Lessee. Lessee shall use due diligence to market Gas or Gas and gas condensate

capable of being produced from a shut-in weil but shall be under no obligation to market

such products under terms, conditions, or circumstances which, in Lessee’s reasonable

judgment, are unsatisfactory. If a well is shut-in for a continuous period in excess of

thirty (30) consecutive days, or during a calendar year for a cumulative period in excess

of ninety (90) days, Lessee shall pay or tender to Lessor, in addition to all other Lease

11

Payments, a shut-in royalty under the conditions and in the amounts hereafter specified,

which shut-in royalty shall be computed as follows:

A) As to each year of the first three years during which a well is shut-in on

one or more occasions for a continuous period in excess of the 30-day

period above stated, or for a cumulative period in excess of the 90-day

period above stated, Lessee shall pay or tender to Lessor within forty-five

(45) days after the next ensuing anniversary date of this Lease a total

amount equal to Five Dollars ($5) per acre;

B) As to each year after the first three years during which a well is shut-in on

one or more occasions for a continuous period in excess of the 30-day

period above stated, or for a cumulative period in excess of 90-day period

above stated, Lessee shall pay or tender to Lessor within forty-five (45)

days after the next ensuing anniversary date of this Lease of a total

amount equal to Ten Dollars ($10) per acre; and

C) All such shut-in payments shall be deemed Royalties under this Lease but

shall not be credited against future Royalties once production resumes.

No such shut-in Royalty payment shall limit or discharge Lessee from its

obligation to develop reasonably the Leased Premises, or serve to extend

any Term of this lease, except as provided herein.

8. WATER USE AND FACILITIES

8.1 Water Use

The Tribe shall provide and Lessee shall obtain a water permit for each water

well drilled or cil or gas well converted to a water source or injection well on the Leased

Premises. The water permit fee shall be One Hundred Seventy-five Dollars ($175) per

well drilled or converted. Water permits shall allow Lessee to use waiter of the Tribe

from the Leased Premises for all drilling related operations. Any water obtained off the

Leased Premises from the Tribe, except water that is produced in conjunction with Oil

and Gas from a hydrocarbon producing formation under lease to Lessee, shall be

purchased by Lessee from Lessor at a rate of five cents ($.05) per barrel. Nothing in this

section shall relieve: Lessee from compliance with federal and tribal laws and

regulations for water use.

8.2 Water Metering

To facilitate the accounting of water use, Lessee shall maintain accurate and

complete records of the sources and amounts of water used on the Leased Premises,

shall furnish such records to Lessor on request, and shall install metering or measuring

devices: capable of measuring produced and injected water from all welis on a monthly

basis, other than wells used solely for groundwater monitoring. Any such metering or

measuring devices shall be nonresettable and certified for accuracy on an annual basis

by an independent technician.

12

9. PROPERTY BELONGING TO LESSEE

If Lessor shali so elect in writing within ninety (90) days from the termination or

expiration of this Lease, Lessor may purchase any or all of the buildings, structures,

materials, tools; machinery, appliances, and. equipment, including casing in wells

("Equipment") placed in or upon the Leased Premises by Lessee and shall pay to

Lesser such sum as may be agreed to by the Parties. If the Parties cannot reach

agreement on a purchase price, a reasonable price shall be fixed by a board of three

appraisers, one of whom shall be chosen by Lessor, one by Lessee, and one by the two

so chosen. Pending such purchase, all Equipment shail remain in normal position. If

Lessor elects not to purchase all or a part of the Equipment, Lessee shall remove it

’ within a period of one hundred eighty (180) days following the earlier of the end of the

above-referenced.ninety (90) day period or actual written notice of Lessor's election not

to purchase. If Lessee does not remove the Equipment within the one hundred eighty

(180) day period, Lessor shall have the option to remove the Equipment at Lessee's

sole cost and risk, or to transfer ownership of the Equipment to Lessor at no cost to

Lessor.

10.. ASSIGNMENT, SUBLEASE, OR TRANSFER

Lessee shall not assign this Lease or any interest therein by an operating agreement or

otherwise, shall not sublet any portion of the Leased Premises, and shall not transfer

any interest therein, except with the approval of Lessor and the Secretary, which

approval shall not be unreasonably withheld. No sublease, assignmeni, or transfer shall

’ be valid or binding upon Lessor without Lessor’s written approval, and then only upon

the condition that the sublessee, assignee, or transferee shall agree in writing to be

bound by all provisions of this Lease, including but not limited to the release and

indemnification requirements. If this Lease is divided by the assignment, sublease, or

transfer of an entire interest in any part, including a stratigraphic horizon, each part shall

be considered a separate lease under all the terms and conditions of this original lease,

including any modifications or renewals approved in conjunction with the approval of

such assignment or transfer. Lessor's approval of one sublease, assignment, or transfer

shall not validate a subsequent sublease, assignment, or transfer, and the restrictions of

this Section shall apply to each sublease, assignment, or transfer hereunder and shall

be severally binding upon each and every sublessee, assignee, transferee, and each

and every corporate successor or other successor in interest of Lessee.

Thus Section shall not apply to a mortgage, security interest, or other encumbrance of

this Lease for purposes financing operations related to the Leased Premises. This

Section shall not apply to any assignment or transfer if the assignment or transfer is to

any person, firm, corporation, or other business entity which is owned or controlled by

Lessee, in whole or in part, nor by a subsidiary or affiliate of Lessee and which owns or

control Lessee, in whole or in part, and of which Lessee is a subsidiary or affiliate,

except that Lessee by written notice shall notify Lessor and the Secretary of such

13

assignment or transfer. The term "control" shall mean the direct or indirect power to

direct or cause the direction of the management and policies of Lessee, or its parent

corporation, whether through the ownership of voting securities, by contract, or

otherwise.

11. INDEMNIFICATION AGREEMENT

11.1. Indemnification

11.1.1 Losses

Lessee agrees to indemnify,. protect, release, and hold harmless Lessor

and the Secretary from and against ail losses, liabilities, damages, costs, investigations,

obligations, claims, penalties, causes of action, monitoring, costs, and expenses

(including but not limited to reasonable attorney fees, consultant fees and costs, expert

fees and costs, laboratory testing, remediation and settlement costs, and claims,

including, without limitation, third-party claims, whether for personal injury or real or

personal property damage or otherwise, or administrative and. informal

proceedings)("Losses"), incurred by Lessor and resulting or arising from Lessee's acts

or omissions in-connection with: (i) any breach of any representation, covenant, or

warranty made by Lessee in thus Lease or in any certificates or other instruments

delivered by or on behalf of Lessee pursuant thereto; (ii) any violation of the Worker

Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. and the

regulations thereunder (the "WARN Act’); (iii) the use, non-use, storage, release,

disposal, or generation by Lessee, or its agents, employees, contractors, or invitees, of

any Hazardous Material in, on, under, or about the Leased Premises; or (iv) any

accident, injury to, or death of persons, or loss of or damage to property occurring on or

about the Leased Premises or any portion thereof.

The: indemnification referred to above shall specificaily cover Losses

incurred. in connection with the investigation or monitoring of site conditions, any

cleanup, containment, remedial, removal, or restoration work required by applicable law

and performed by any federal, state, or tribal governmental agency or political

subdivision, or performed by any nongovernmental entity or person because of the

presence or suspected presence or release or threatened or suspected release of any

Hazardous Materials in or into the air, soil, groundwater, or surface water at, on, under,

or above the Leased Premises, and Losses arising from any claims of third parties for

loss or damage due to such presence or release of Hazardous Materials, resulting or

arising from Lessee's acts or omissions.

11.1.2 Remedial Work

if any investigation, testing; or monitoring of site conditions or any

cleanup, containment, restoration, removal, or other remedial work (collectively the

"Remedial Work") is required under any applicable law or regulation, by any judicial

order, or by any governmental entity, or is required to comply with any agreements of

Lessee affecting the Leased Premises, then Lessee is obligated to indemnify Lessor,

and Lessee shall either perform or cause to be performed the Remedial Work in

compliance with such law, regulation, order, agreement, or recommendation, or shall

promptly reimburse Lessor for the necessary cost of such Remedial Work. Ail costs and

expenses of such Remedial Work shall be paid either directly, or in the form of

reimbursement to Lessor, by Lessee including, without limitation, the charges of the

contractor(s) and/or the consulting engineer, and Lessor’s reasonable attorney and

paralegal fees and costs incurred in connection with monitoring or reviewing such

Remedial Work. If Lessee: shall fail to timely commence, or cause to be commenced, or

fail to diligently prosecute to completion, such Remedial Work, Lessor may cause such

Remedial Work to be performed, and_all costs and expenses thereof, or incurred in

connection therewith, shall be Losses within the meaning of 11.1.1 above. It is agreed

and understood that such indemnification shall not extend to losses incurred by Lessor

in connection with Section 11.1.1 (i) to (v) and resulting from Lessor's gross negligence

and/or willful misconduct.

11.2 Defense Or Prosecution Of Claims

If the facts giving rise to any indemnification provided for herein shall involve any

actual or threatened claim or demand by any person other than a Party hereto, Lessee

shall be entitled, upon its election, by written notice given to Lessor within fifteen (15)

days of receiving. notice of such claim or demand for, in the case of summary

proceedings, five (5) days after the date on which notice of the claim or demand is given

to Lessee (without prejudice to the right of Lessor to participate at its expense through

counsel of its own choosing)] to assume the defense or prosecution of such claim and

any litigation resulting therefrom at its expense and through counsel of its own

choosing; provided, however, that, if by reason of the claim of such third party, a lien,

attachment, garnishment, or execution is placed upon any of Lessor's property or

assets, Lessee, if it desires to exercise its right to defend or prosecute such claim or

litigation, shall furnish a satisfactory indemnity bond to obtain the prompt release of

such lien, attachment, garnishment, or execution; and provided further, that Lessor shall

control the defense of itself in any litigation instituted against it without prejudice to its

rights to be indemnified hereunder or to participate in such action, if not named as a

party.

If Lessee assumes the defense or prosecution of any such claim or litigation, it

shall take all steps necessary in the defense, prosecution, or settlement of such claim or

litigation and shall hold Lessor harmless from and against all losses caused by or

arising out of any settlement thereof or any judgment in connection therewith (other than

its expenses for participating in such defense, prosecution, or settlement). Lessee shail

not, in the defense or prosecution of such claim or litigation, except with the written

consent of Lessor, consent to the entry of any judgment or enter into any settlement that

does not include as an unconditional term thereof the giving to Lessor by the third party

of a release from all liability regarding such claim or litigation. Lessor shall cooperate in

the defense or prosecution of such claim or litigation. If Lessee fails to assume the

defense or prosecution of any such claim or litigation, Lessor may defend against or

prosecute such claim or litigation in such manner as it may deem appropriate and may

settle such claim or litigation, after giving written notice thereof to Lessee, on such terms

15

as Lessor may deem appropriate; and Lessee will promptly reimburse Lessor for the

"losses" incurred as a result of such settiement, together with the amount of all

reasonable legal and other expenses incurred by Lessor in connection with the defense,

prosecution, or settlement of such claim or litigation. If no settlement of such claim or

litigation is made, Lessee shall promptly reimburse Lessor for the amount of any

judgment rendered with respect to such claim or such litigation and for all reasonable

expenses, legal and other, incurred by Lessor in connection with any such judgment.

11.3 Payment Of Losses

Each Loss determined to be payable by Lessee under the terms hereof shall be

paid:to Lessor within thirty (30) days after the date on which Lessee is notified in-writing

of such amount. Each such notice shail contain an itemization of the damages,

expense, costs, and liabilities comprising the Loss, certified to be true and correct by

Lessor or its. legal representative.

11.4 Identification Of Hazardous Materials

if at any time-either Party shall become aware of, or have reasonable cause to

believe, that any Hazardous Materials have come to be located in, on; under, or about

the Leased Premises, the discovering Party shail, immediately upon discovering such

presence or suspected presence of Hazardous Materials, give written notice of that

condition ‘to the other Party. In addition, each Party shall immediately notify the other, in

writing, of. (i) any enforcement, cleanup, removai, or other governmental or regulatory

action instituted, completed, or threatened relating to any Hazardous Materials on the

Leased Premises: (ii) any claim made or threatened by: any person against either Patty

relating to damages, losses, or injury claimed to result from the presence or threat of

Hazardous Material on or to the Leased Premises; and (iii) any reports made to any

tribal, state, or federal environmental agency arising out of or in connection with any

Hazardous Materials on the Leased Premises, including but not limited to any

complaints, notices, warnings, or asserted violations in connection therewith, of which

the Party becomés: aware. Each Party shall also supply the other as promptly as

possible, and in any event within five (5) business days after receiving, such copies of

all claims, reports, complaints, notices, warnings, or asserted violations relating in any

way to the Leased Premises or use thereof.

The provisions of this Section 11.4 shall not apply to Hazardous Materials

brought onto the Leased Premises by Lessee or naturally occurring on the Leased

Premises, and uséd routinely in the development of Oil and Gas. Lessee shall report in

writing to the Lessor during December of each year a description of the Hazardous

Materials brought onto the Leased Premises by Lessee during the previous twelve

months. The report also shall describe the then current location and status of all

Hazardous Materials on the Leased Premises.

11.5 Hold Harmiess

Neither Lessor or the United States, nor their officers, agents, or employees shall

be liable for any loss, damage, death, or injury of any kind whatsoever to the person or

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property of Lessee, any sub lessees, or any other person whomsoever which may be

caused by Lessee's use of the Leased Premises or by any defect in any structure

Lessee may erect thereon, arising from any accident, fire, other casualty on the Leased

Premises, or other cause whatsoever, and Lessee hereby releases and agrees to hold

harmless Lessor, the United States and their officers, agents, and employees from such

liability, except to the extent such loss, damage, death, or injury results from the

negligence of the Lessor, the United States, or their officers, agents, or employees.

11.6 Survival Of Section

Ail provisions of Section 11 shall survive the expiration, or termination, of this

Lease.

12. . NON-RESPONSIBILITY NOTICES

Prior to the commencement of construction of each improvement on the Leased

Premises, any substantial repair or alteration thereto, or substantial work or iabor

thereon, Lessee shall post notices on Lessors and the Secretary's behalf stating that

Lessor and Secretary shall not be responsible for any accident, injury to, or death of

persons, or loss of or damage to property resulting from Lessee's activities. The

language and size of such notices will be approved by Lessor's attorneys. If such

notices are not approved within ten (10) business days of the receipt thereof, the

notices shall be deemed approved.

13. BONDS AND INSURANCE

13.1 Performance Bonds

In order to ensure the performance of any and all obligations of Lessee under

this Lease, and subject to any further requirements of federal law, Lessee shall post on

or before the Effective Date, a performance bond in an amount equal to Thirty Five

Thousand Dollars ($35,000.00), and, before a second well is drilled under this lease, the

bond shall be increased to Seventy Five Thousand Doliars ($75,000.00), which bond

shall be deposited with the Secretary and shall remain in force for the full term of this

Lease, unless sooner released in the discretion of the Lessor and the Secretary. This

bonding requirement may be fulfilled by Lessee complying with federal requirements for

public and Indian leases, provided that the minimum requirements of this Section are

met or exceeded. The amount of the bond may be adjusted during any Term of this

Lease. Should waiver of the bond be granted during any Term of this Lease by Lessor

and the Secretary, Lessor and the Secretary reserve the right to request that Lessee

furnish a bond at a later date if Lessor and the Secretary, in their reasonable discretion,

should themselves insecure, and Lessee hereby agrees to comply with such request.

13.2 Cash In Lieu Of Performance Bond

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In lieu of furnishing a performance bond, Lessee may deposit with the Secretary

cash, negotiable United States Treasury Bonds, other negotiable Treasury obligations,

time certificates of deposit, savings and loan association passbooks, or letters of credit

in an. amount acceptabie to Lessor, together with an appropriate power of attorney

appointing and empowering the Secretary, in the event of Lessee's default in any of the

provisions of this Lease, to pay from any such cash or equivalent, withdraw the funds

from any such savings and loan association account, dispose of any such bond, or

make demand upon any such letter of credit, and retain the proceeds derived there from

to apply to Lessor's darnages subject to Lessee's privilege of curing such default as

hereinafter provided. If United States Treasury Bonds are provided. Lessee agrees to

make up any deficiency in the value deposited that might occur due to a decrease in the

Value of the bonds. Interest on any such Treasury bonds or time certificates of deposit

in excess of damages provided for in this Lease shall be paid to Lessee.

13.3 Public Liability Insurance

At all times during any Term of this Lease, Lessee shall carry public liability

insurance in the primary amount of One Million Dollars ($1,000,000.00), per claim or

incident, with coverage for personal injury, bodily injury, including death and property

damage resulting for each incident.

13.4 Fire And Damage Insurance

Lessee shall not be required to carry vandalism, fire and damage insurance

covering the improvements placed on the Leased Premises by Lessee.

13.5 Workers' Compensation and Occupational Disease insurance: Applicable

Law

Lessee. agrees to carry such insurance covering all Lessee's employees working

in, on; or in connection with the Leased Premises as will fully comply with the provisions

of the statutes of the State of Montana covering workers’ compensation and occupation

disease as. such statutes are now in force or as they may be amended. Further, Lessee

agrees to comply with all the terms and provisions of all applicable laws of Lessor and

the United States, as now exist or as may be amended, pertaining to Social Security,

unemployment compensation; wages, hours, and conditions of labor; and to indemnify

and hold Lessor and the Secretary harmless from payment of any damages occasioned

by Lessee's failure to comply with such law.

13.6 Form And Copies Of Policies

Every insurance policy shall be written to protect Lessor, Lessee, and the

Secretary jointly and shali provide for sixty (60) days written notification to Lessor and

the Secretary prior to its cancellation for any reason including non-payment of

premiums. Lessor and Secretary shall be named as an additional insured and loss

payees on all insurance policies covering Lessee's activities on the Leased Premises,

excluding the policies under Section 13.5. A summary of every policy shall be furnished

Lessor and the Secretary on each anniversary of the Effective Date. Lessee shall pay

all premiums and other charges payable with respect to such insurance.

13.7 Self-Insurance

Lessee may satisfy the requirements of this Section through self-insurance

programs, provided that Lessee shall provide evidence of such self-insurance to Lessor

and the Secretary and Lessor and the Secretary shall approve such self-insurance

program, which approval shall not be unreasonably withheld.

13.8 Periodic Review of Bonds and Insurance

Lessor or the Secretary may make a periodic review, at not less than three (3)

year intervals, of all bonds and insurance policies and coverage amounts held under

this Lease. The review shall give consideration to the economic conditions at the time

and may result in adjustment of the types of bonds or insurance coverage or the

amounts of any coverage whenever in the discretion of Lessor and the Secretary any

such adjustment is necessary for the protection of Lessor or the Secretary.

14. _ COMPANIES BONDING AND INSURING

Every corporate surety bond provided by Lessee in compliance with this Lease shall be

furnished by a company holding a certificate of authority from the Secretary. of the

Treasury as an acceptable surety on federal bonds. Insurance policies shall be

furnished by such responsible companies as are rated A-plus or better in the current

edition of Best's Insurance Guide or equivalent rating system.

15. FORCE MAJEURE

If Lessee is prevented from drilling or conducting other operations for the purpose of

obtaining’ or restoring production or from producing Oil and/or Gas from the Leased

Premises. by fire, flood, storm, act of God, or any cause beyond Lessee's control

(including but not limited to governmental law, order, or regulation, governmental

inaction or delay, labor disputes, war, inability to secure labor, materials, equipment,

drilling rigs, or transportation, or inability to secure a market) then the performance of

any such operations shall be suspended during the period of such prevention; provided

that this provision shall not suspend nor delay the time for the payment of any payments

payable under the provisions of this Lease. If a period of Force Majeure is incurred,

Lessee shall promptly notify the Lessor, including a description of the circumstances

that prevent Lessor's performance, Lessor’s plans and efforts to remedy or mitigate the

Force Majeure, and an estimate of the expected duration of the period of nonperformance. Lessor shall also notify Lessee when a period of Force Majeure has

ended. Lessor shall diligently attempt to remedy, as soon as possible, any Force

Majeure and to mitigate its effects on the implementation of this Lease.

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16. LIENS, TAXES, ASSESSMENTS AND UTILITY CHARGES

16.1 Taxes

Lessee shall comply with all Tribal tax and reporting requirements, provided

however, that the Tribe shall not impose any tax on the production under this

Agreement which exceeds the rate of production taxes currently. imposed by

governmental authorities other than the Tribe, including the State of Montana. Lessee

will work with the Tribe to achieve the primacy of the Tribal production tax, and in the

event the production taxes imposed by governmental authorities other than the Tribe is

vacated by reason of the Tribe’s tax, the Tribe shall not impose any additional tax on

Lessee that is in excess of the otherwise applicable State production tax rate currently

in effect. Lessee shall refer to Lessor and to the Authorized Officer any demand by a

taxing authority for taxes on Lessor's royalty interest in accordance with Section 23.

From time to time, the Parties shall give due consideration to any proposal from the

other party regarding tax relief, restructuring, or other forms of incentives in order to.

obtain values from the premises, including increased production that is limited by dual

taxation by the State & Tribe upon presentation of proposed activities or structures that

may provide mutual benefits to Lessor and Lessee.

16.2 Lessee To Discharge Liens And Taxes Prior To Enforcement Or

Delinquency

Lessee shall pay before delinquent all applicable taxes, assessments, licenses,

fees, and other like charges levied during any Term of this Lease upon or against the

Leased Premises, any interest therein, and property thereon for which either Lessor or

Lessee, as a result of Lessee's action, may become liable. Upon written application,

Lessee shail furnish Lessor and the Secretary written evidence, duly certified; that any

and all applicable taxes required to be paid by Lessee have been paid, satisfied, or

otherwise discharged. Lessee shall not permit to be enforced against the Leased

Premises, or any part thereof, any liens arising from any work performed, materials

furnished, utility charges, or obligations incurred by Lessee. Lessee has the right to

contest any tribal, federal, state or county claim, asserted tax, or assessment against

the Leased Premises in any manner that will not result in enforcement of any lien

resulting therefrom, subject to applicable law. Lessor shail execute and file any

appropriate documents with reference to the applicability of state and local taxes to the

Leased Premises when requested by Lessee. In addition to the Lease Payments, taxes,

and other charges herein described, Lessee shall pay ali charges for water, sewage,

gas, electricity, telephone, and other utility services supplied to Lessee on the Leased

Premises.

16.3 Lessor. May Pay Liens Or Charges Payable to Lessee

Lessor shall have the option to pay any lien or charge payable by Lessee under

this Lease: or settle any action therefore, if Lessee, after written notice from Lessor or

the Secretary, fails to pay, post bond, or take other action to protect against

enforcement. All costs and other expenses incurred by Lessor in so doing shall be paid

to Lessor by Lessee upon demand with interest from the date of demand to the date of

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