Document:

PENTR2-2014.12.31-EX10.10

Exhibit 10.10

Amended and Restated Sub-advisory Agreement

between

American Realty Capital PECO II Advisors, LLC

and

Phillips Edison NTR II LLC

January 22, 2015

Table of Contents
Page

Article 1 – Definitions3
Article 2 - Appointment5
Article 3 - Duties of the Sub-advisor5
Article 4 - Authority and Certain Activities of Sub-advisor5
Article 5 – Assignment of Payments6
5.1 Acquisition Fees6
5.2 Asset Management Fee6
5.3 Disposition Fees6
5.4 Financing Fee6
5.6 Subordinated Incentive Fee7
Article 6 – Allocation of Expense Reimbursements7
6.1 Organization and Offering Expense Reimbursements7
6.2 All Other Expense Reimbursements8
Article 7 – Voting Agreements8
7.1 Election of Directors8
7.2 Other Voting of Shares8
7.3 Major Decisions8
Article 8 - Relationship Of Advisor And Company; Other Activities Of The Advisor9
8.1 Relationship9
8.2 Time Commitment10
8.3 Advisor and Sub-advisor Meetings10
8.4 Investment Opportunities and Allocation10
8.5 Prospectus Guidance11
Article 9 - The Phillips Edison and ARC Names11
Article 10 – Other Agreements12
10.1 Property Level Agreements12
10.2 Advisor, Advisory Agreement and Dealings with Company12
Article 11 – Certain Transfers12
11.1 Transfers12
11.2 Prohibited Transfers12
Article 12 – Representations, Warranties, and Agreements13
Article 13 - Term And Termination of the Agreement15
13.1 Term15
13.2 Termination15
13.3 Survival upon Termination16
13.4 Payments on Termination and Survival of Certain Rights and Obligations16
Article 14 - Assignment16
Article 15 - Indemnification And Limitation Of Liability16
Article 16 - Miscellaneous17
16.1 Notices17
16.2 Modification18
16.3 Severability18

1

16.4 Construction18
16.5 Entire Agreement18
16.6 Waiver18
16.7 Gender18
16.8 Titles Not to Affect Interpretation18
16.9 Counterparts18
                

2

Sub-advisory Agreement
This Amended and Restated Sub-advisory Agreement, dated as of January 22, 2015 (this “Agreement”), is between, American Realty Capital PECO II Advisors, LLC, a Delaware limited liability company (the “Advisor”) and Phillips Edison NTR II LLC, a Delaware limited liability company (the “Sub-advisor”).
W I T N E S S E T H
WHEREAS, Phillips Edison Grocery Center REIT II, Inc., a Maryland corporation (the “Company”) has appointed the Advisor as its advisor pursuant to the Advisory Agreement between the Company, Phillips Edison Grocery Center Operating Partnership II, L.P. (the “Partnership”) and the Advisor, dated as of the date of this Agreement (as the same may be amended, restated or otherwise modified from time to time in accordance with its terms, the “Advisory Agreement”);
WHEREAS, the parties entered into that certain Sub-advisory Agreement dated as of November 25, 2013;
WHEREAS, the parties have agreed to make certain amendments and desire to amend and restate such agreement;
WHEREAS, the Advisor desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Sub-advisor and to have the Sub-advisor undertake the duties and responsibilities hereinafter set forth, on behalf of the Advisor, and subject to the supervision of, the Board of Directors of the Company, all as provided herein; and
WHEREAS, the Sub-advisor is willing to undertake such duties and responsibilities, subject to the supervision of the Board of Directors of the Company, on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the Parties hereto agree as follows:
Article 1

Definitions
Capitalized and other terms that are defined in the Advisory Agreement but not otherwise defined in this Agreement have the respective meanings ascribed to such terms in the Advisory Agreement, a copy of which is attached hereto as Appendix A.  
The following defined terms used in this Agreement shall have the meanings specified below:
“Advisor” has the meaning set forth at the head of this Agreement.
“Advisory Agreement” has the meaning set forth in the recitals.
“Affiliate” has the meaning set forth in the Advisory Agreement.  For the avoidance of doubt, none of the Company, the Sub-advisor, any subsidiary of the Company, any subsidiary of the Sub-advisor and any other Person controlled by, controlling or under common control with Phillips Edison Limited Partnership shall be an Affiliate of the Advisor. Also for the avoidance of doubt, none of the Advisor, any subsidiary of the Advisor and any other Person controlled by, controlling or under common control with American Realty Capital shall be an Affiliate of the Sub-advisor.
“Agreement” has the meaning set forth in the preamble.
“Articles of Incorporation” has the meaning set forth in the Advisory Agreement. 
“Company” has the meaning set forth in the recitals hereto.
“Dealer Manager” means Realty Capital Securities, LLC, a Delaware limited liability company, in its capacity as dealer manager pursuant to the Dealer Manager Agreement.
“Dealer Manager Agreement” means that dealer manager agreement, dated as of even date herewith, between the Company and the Dealer Manager, providing for the distribution of the Shares.
“Disposition Fees” has the meaning set forth in the Advisory Agreement. 
“Effective Date” means the initial Effective Date (as defined in the Dealer Manager Agreement).
“Gross Proceeds” shall have the meaning set forth in the Advisory Agreement.
“Immediate Family Member” means, with respect to a Key Person:  (i) any of such Key Person’s parents and siblings, spouse and descendants and any of the spouses of such descendants (collectively, the “Individual Group”); (ii) any trust, the beneficiaries of which consist exclusively of one or more members of the Individual Group (collectively, the “Family Trusts”); and (iii) any entity which is controlled by, directly or indirectly, one or more members of the Individual Group and/or one or more of the Family Trusts.
“Key Person” means (i) with respect to the Advisor, each of William M. Kahane and Nicholas Schorsch and his heirs, legal representatives and executors, and (ii) with respect to the Sub-advisor, one of Michael C. Phillips or Jeffrey S. Edison and his heirs, legal representatives and executors.
“Offering Period” has the meaning set forth in the Dealer Manager Agreement.
“Partnership” has the meaning set forth in the recitals.
“Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of January 22, 2015, among the Company, PE Grocery Center OP GP II LLC and PE – ARC Special Limited Partner II LLC, as the same may be amended from time to time.
“Party” or “Parties” refer to the Advisor or the Sub-advisor or both, as the case may be.
“Permitted Investments” means all investments (other than Real Estate Assets and Real Estate Related Loans) in which the Company acquires an interest, either directly or indirectly, including through ownership interests in a joint venture or partnership, pursuant to its Articles of Incorporation, Bylaws and the investment objectives and policies adopted by the Board of Directors from time to time, other than short-term investments acquired for purposes of cash management.
“Primary Offering” shall have the meaning set forth in the Advisory Agreement.
“Primary Target Investments” means well-occupied, grocery-anchored neighborhood and community shopping centers each containing a maximum of 250,000 rentable square feet with a tenant-mix of retailers selling necessity-based goods and services in strong demographic markets throughout the United States.  For purposes of the foregoing, “well-occupied” means 80% or more of the rentable square feet at a property is occupied at the time of purchase.  For purposes of the foregoing, “occupied” means that a tenant is operating and open for business in its respective leased premises. 
“Prospectus” has the meaning set forth in the Advisory Agreement.
 “Reference Date” means the first date the Company breaks escrow on stockholder subscriptions in the Initial Public Offering.
“Sub-advisor” has the meaning set forth at the head of this Agreement.
“Subordinated Incentive Fee” shall have the meaning set forth in Section 8.7 of the Company’s Articles of Incorporation 
 “Subordinated Participation Interest” shall include any such interest as defined in the Advisory Agreement.
“Transfer Restriction Period” means, with respect to the Sub-advisor, the Offering Period plus six months, and with respect to the Advisor, the Offering Period plus six months.
Article 2

Appointment
The Advisor, pursuant to its authority to delegate all of its rights and powers to manage and control the business and affairs of the Company to the Sub-advisor pursuant to Section 3 of the Advisory Agreement, hereby appoints the Sub-advisor to serve as the Sub-advisor for the Company and to perform all of the duties set forth in Section 3 and Section 8 of the Advisory Agreement on behalf of the Advisor.  The Sub-advisor hereby accepts such appointment.  The Advisor delegates, and the Sub-advisor agrees to perform, all of the duties of the Advisor set forth in the Advisory Agreement, all on the terms and subject to the conditions set forth in this Agreement.  
Article 3

Duties of the Sub-advisor
Under the Advisory Agreement, the Advisor and Sub-advisor, as applicable, are responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets.  Consistent with Article 2 hereof, the Sub-advisor undertakes to use commercially reasonable efforts to present to the Company potential investment opportunities and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board and to perform the duties set forth in Section 3 of the Advisory Agreement, as necessary.  Subject to the limitations set forth in this Agreement and the Advisory Agreement, including Section 4 of the Advisory Agreement, consistent with the provisions of the Articles of Incorporation and Bylaws and the continuing and exclusive authority of the Board over the supervision of the Company, the Sub-advisor shall, either directly or by engaging an Affiliate or third party, perform the duties set forth in Section 3 and Section 8 of the Advisory Agreement (a copy of which is attached hereto as Appendix A), which duties are incorporated herein by reference as if fully set forth herein.
Article 4

Authority and Certain Activities of Sub-advisor
The Sub-advisor shall have the authority set forth in Section 4 of the Advisory Agreement, shall have the authority to establish and maintain bank accounts as set forth in Section 7 of the Advisory Agreement, shall maintain books, records and financial statements for the Company as set forth in Section 8 of the Advisory Agreement, and shall abide by the limitations of Section 9 of the Advisory Agreement, all of which (i.e., Sections 4 and 7 through 9 of the Advisory Agreement) are incorporated herein by reference as if fully set forth herein.
Article 5

Assignment of Payments
As compensation for the services provided pursuant to this Agreement, Advisor hereby assigns payments as follows: 
		
	5.1
	Acquisition Fees.  The Advisor hereby assigns its right to receive direct payment from the Company of (a) 77.5% of all Acquisition Fees payable pursuant to the Advisory Agreement with respect to any Investments acquired after January 21, 2015 for which a contract to acquire such Investment had been entered into by or on behalf of the Company or any affiliate of the Company as of January 21, 2015 and (b) 85.0% of all Acquisition Fees payable pursuant to the Advisory Agreement with respect to any other Investment acquired after January 21, 2015, in each case as permitted by section 11(a) of the Advisory Agreement.  The Advisor will submit an invoice to the Company, which the Sub-advisor shall prepare, following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee.  The portion of the Acquisition Fee payable to each of the Advisor and Sub-advisor then will be paid by the Company at the closing of the applicable transaction upon receipt of the invoice by the Company as provided in the applicable advisory agreement.  

		
	5.2
	Subordinated Participation Interests.  The Advisor hereby assigns its right to receive from the Partnership (a) 77.5% of all Subordinated Participation Interests payable pursuant to Section 11(h) of the Advisory Agreement in connection with services provided on or before January 22, 2015 and (b) 85.0% of all Subordinated Participation Interests payable pursuant to Section 11(h) of the Advisory Agreement in connection with services provided at any time after January 22, 2015. The Subordinated Participation Interests shall be allocated to the Sub-advisor and Advisor pursuant to Section 5.2 hereof, following each quarterly board approval of the allocation of the Subordinated Participation Interests to the Advisor and Sub-advisor.

		
	5.3
	Disposition Fees.  The Advisor hereby assigns its right to receive direct payment from the Company of 85.0% of all Disposition Fees payable pursuant to Section 11(c) of the Advisory Agreement; provided, however, that if the receipt by the Advisor of all or any part of a Disposition Fee for any particular transaction would violate applicable law, and if applicable law would permit payment thereof to the Sub-advisor, then the assignment shall be deemed to be for the Disposition Fee (or part thereof) associated with that particular transaction that would violate applicable law if received by the Advisor.  The portion of the Disposition Fee payable to each of the Advisor and the Sub-advisor shall be paid by the Company as provided in the Advisory Agreement.  

		
	5.4
	Financing Coordination Fee.  The Advisor hereby assigns its right to receive direct payment from the Company of (a) 77.5% of all Financing Coordination Fees payable to the Advisor pursuant to section 11(d) of the Advisory Agreement with respect to any Investments acquired after January 22, 2015 for which a contract to acquire such Investment had been entered into by or on behalf of the Company or any affiliate of the Company as of January 22, 2015 and (b) 85.0% of all Financing Coordination Fees payable to the Advisor pursuant to section 11(d) of the Advisory Agreement with respect to any other Investment acquired after January 22, 2015; provided, however, that if the receipt by the Advisor of a Financing Coordination Fee for any particular transaction would violate applicable law, and if applicable law would permit payment thereof to the Sub-advisor, then the assignment shall be deemed to be for the Financing Coordination Fee (or part thereof) associated with that particular transaction that would violate applicable law if received by the Advisor.

		
	5.5
	Expense Reimbursements.  Subject to Article 6 of this Agreement and Section 12 of the Advisory Agreement, the Advisor hereby assigns its right to receive direct payment from the Company of expense reimbursements the Sub-advisor incurs on behalf of the Company or in connection with the services the Sub-advisor provides to the Company pursuant to this Agreement.

		
	5.6
	Annual Subordinated Performance Fee. The Advisor hereby assigns its right to receive direct payment from the Company of 85.0% of any Annual Subordinated Performance Fee payable to the Advisor pursuant to section 11(e) of the Advisory Agreement; provided, however, that if the receipt by the Advisor of an Annual Subordinated Performance Fee, would violate applicable law, and if applicable law would permit payment thereof to the Sub-advisor, then the assignment shall be deemed to be for the Annual Subordinated Performance (or part thereof) that would violate applicable law if received by the Advisor.

Article 6

Allocation of Expense Reimbursements
		
	6.1
	Organization and Offering Expense Reimbursements.  The Organization and Offering Expense reimbursements to the Advisor permitted pursuant to Section 12(a)(i) of the Advisory Agreement  shall be allocated as follows: 0.5% of the Gross Proceeds raised in any Primary Offering advanced to the Advisor in connection with each sale of Shares under a Primary Offering; and 1.5% of the Gross Proceeds raised in any Primary Offering to the Sub-advisor.

		
	(A)
	Notwithstanding the foregoing, 0.5% of the Gross Proceeds raised in any Primary Offering, as such Gross Proceeds are received by the Company, shall be paid to the Advisor for Organization and Offering Expenses in advance and shall be limited to advancements for the following costs and expenses:  

		
	(1)
	Internal personnel costs and overhead allocations of the Advisor and its Affiliates for services relating to a Primary Offering (including, but not limited to, expense reimbursements for the cost of travel, lodging, meals and entertainment for employees of the Advisor and its Affiliates);

		
	(2)
	Payments made to third parties by the Advisor and its Affiliates for: (a) legal and accounting services provided to the Advisor and its Affiliates in connection with a Primary Offering; (b) the cost of bona fide training and education meetings and seminars (primarily the travel, meals, lodging, and entertainment costs of the registered representatives of broker-dealers); (c) the cost of training wholesalers and supervisors of the Dealer Manager in connection with a Primary Offering; (d) sponsorship fees and other costs related to retail seminars and conferences conducted by soliciting broker-dealers, due diligence conferences, and broker-dealer top producer events; (e) reimbursement to soliciting broker-dealers for technology costs associated with a Primary Offering, costs and expenses related to such technology costs, and costs and expenses associated with facilitation of the marketing of the Shares and the ownership of Shares by such broker-dealers’ customers; (f) any other retail or wholesaling costs associated with a Primary Offering; and (g) all other Organizational and Offering Expenses provided for in Section 12(a)(i) of the Advisory Agreement.

		
	(B)
	It is understood and agreed that the Company shall be under no obligation to reimburse the Advisor or Sub-advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses (excluding underwriting and brokerage discounts and commissions, but including third-party due diligence fees as set forth in detailed and itemized invoices) to exceed 2.0% of Gross Proceeds raised in any Primary Offering as of the termination of such Primary Offering. The Advisor’s 0.5% allocation for such Organization and Offering Expenses shall be paid to the Advisor as Gross Proceeds are raised in any Primary Offering and the Advisor shall not receive any more than such allocation during the course of any Primary Offering.  To the extent that Organization and Offering Expenses reimbursed by the Company exceed the above limit at the end of any Primary Offering, the Advisor and Sub-advisor shall reimburse the Company for such excess within 60 days; and, solely in the instance that Organization and Offering Expenses reimbursed by the Company exceed the above limit, the Sub-advisor shall review the invoices submitted to the Company that relate to the Organizational and Offering Expenses limited by this Section 6.1;

		
	(C)
	The Company shall not reimburse the Advisor or Sub-advisor for any Organization and Offering Expenses that the Conflicts Committee determines are not fair and commercially reasonable to the Company.

		
	6.2
	All Other Expense Reimbursements.  All other expense reimbursements permitted pursuant to Sections 12(a)(ii) through 12(a)(xiv) of the Advisory Agreement will be apportioned between the Advisor and Sub-advisor in proportion to the amount of such expense reimbursements due to each as of the date of the reimbursement. 

Article 7

Voting Agreements
		
	7.1
	Election of Directors.  The Advisor agrees, with respect to any Shares now or hereinafter owned by it, to vote such Shares in favor of the Sub-advisor’s nominees for the Board.  As of the date hereof, the Sub-advisor’s nominee is Jeffrey S. Edison.

		
	7.2
	Other Voting of Shares.  The Advisor and Sub-advisor each agrees that, with respect to any Shares now or hereinafter owned by it, neither will vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor; (ii) the removal of the Sub-advisor or any Affiliate of the Sub-advisor; (iii) any transaction between the Company and the Advisor or any of its Affiliates; or (iv) any transaction between the Company and the Sub-advisor or any of its Affiliates.  This voting restriction shall survive until such time that the Advisor is no longer serving as such. 

		
	7.3
	Major Decisions.

		
	(A)
	Subject to Section 7.3(D) with respect to the Company, all major decisions of the Company set forth below in clauses (A)(1) through (A)(5) (“Major Decisions”) shall be subject to the Company’s Articles of Incorporation and joint approval by the Advisor and Sub-advisor.  For the avoidance of doubt, Major Decisions specifically exclude any decisions regarding the day-to-day operations of the Company, the decision-making authority for which has been delegated to the Sub-advisor pursuant to this Agreement.  Major Decisions shall consist of the following:

		
	(1)
	Retention of investment banks for the Company;

		
	(2)
	Marketing methods for the Company’s sale of Shares;

		
	(3)
	Extending, initiating or terminating the Initial Public Offering or any subsequent Offering of the Shares;

		
	(4)
	Issuing press releases involving the major decisions of the Company or the Advisor or Sub-advisor or their Affiliates with respect to the business or operations of the Company; provided, that the Sub-advisor need not obtain consent to any press releases regarding acquisitions or dispositions of Properties, Loans or other Permitted Investments; and provided further, however, that notwithstanding the immediately preceding proviso, any mention of the Advisor or its Affiliates in such press releases regarding acquisitions or dispositions shall be pre-approved by the Advisor; and

		
	(5)
	Merging or otherwise engaging in any change of control transaction for the Company.

		
	(B)
	Notwithstanding anything in this Agreement to the contrary, if the Parties do not agree to any action constituting a Major Decision and that has been proposed by either Party, the Parties shall meet (in person or by phone) to discuss the issue in dispute in good faith over the five-business day period beginning with the delivery of notice of the proposed action to the other Party. If, after the expiration of the above-referenced five-business day period, the Parties still do not agree as to the proposed course of action regarding such Major Decision, representatives of both the Advisor and the Sub-advisor will be obligated to present each of their respective proposed courses of action regarding such Major Decision to the Board of Directors for review and approval within an additional five-business day period.  

		
	(C)
	Intentionally omitted

		
	(D)
	Notwithstanding the provisions of this Section 7.3 or any other provision in this Agreement to the contrary, in all events, including Major Decisions, the Company will be managed under the direction of the Board of Directors.

		
	(E)
	Notwithstanding anything in this Agreement to the contrary (but subject to Section 7.3(D)), the Sub-advisor shall have sole authority to act on behalf of the Company regarding the negotiation with the Advisor of proposed amendments to the Advisory Agreement, it being understood that any amendment of the Advisory Agreement must be approved by a majority of the members of the Conflicts Committee of the Board of Directors.

Article 8

Relationship of Sub-advisor and Advisor and their Affiliates; 
Other Activities of the Advisor and Sub-advisor
		
	8.1
	Relationship.  The Advisor and the Sub-advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Except as set forth in Section 8.4 hereof, nothing herein contained shall prevent the Advisor or Sub-advisor from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or Sub-advisor, respectively, or any of their Affiliates.  Nor shall this Agreement limit or restrict the right of any manager, director, officer, member, partner, employee or equityholder of the Advisor or Sub-advisor or their Affiliates to engage in or earn fees from any other business or to render services of any kind to any other Person.  The Sub-advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service.  Specifically, it is contemplated that the Company may enter into Joint Ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or other similar co-investment arrangements, the Advisor or the Sub-advisor may be engaged to provide advice and service to such Persons, in which case, the Advisor or the Sub-advisor, as applicable, will earn fees for rendering such advice and service.  Each of the Advisor and the Sub-advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or which would reasonably result in a conflict of interest between its obligations to the Company and its obligations to or its interest in any other Persons (it being understood and agreed that the conditions and circumstances referred to in the second paragraph of Section 8.4(A) hereof are deemed to have been disclosed to the Board for purposes of this Section 8.1).

		
	8.2
	Time Commitment.  The Sub-advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement.  Each Party acknowledges that the other Party and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

		
	8.3
	Advisor and Sub-advisor Meetings.  Representatives of the Parties shall meet on a quarterly basis (in person or by phone) to discuss and consult with one another regarding the Company and its assets and opportunities.  Additionally, the Advisor and the Sub-advisor shall cause their respective principals to meet (in person or by phone) with representatives of each other upon the request of either Party.  The Parties will provide each other information regarding the operations and acquisitions of the Company as reasonably requested by the other.  Each of the Advisor and the Sub-advisor shall have direct access to the books and records of the Company and of each attorney, accountant, servicer and other contracting party of the Company (notwithstanding the fact that such attorney represents either Party with respect to this Agreement). 

		
	8.4
	Investment Opportunities and Allocation.  

		
	(A)
	The Sub-advisor shall use commercially reasonable efforts to present investment opportunities to the Company that are consistent with the investment policies and objectives of the Company set forth in the “Investment Objectives and Criteria” section of the Prospectus.  

		
	(B)
	So long as the Sub-advisor is acting in its capacity as sub-advisor under this Agreement, the Sub-advisor will not (and will cause its Affiliates to not) (i) pursue any opportunity to acquire a Primary Target Investment from any third-party, or (ii) act as a finder’s agent for or otherwise source the opportunity to acquire a Primary Target Investment for a third party (each such opportunity in clause (i) or (ii) being a “First Offer Opportunity”) without first offering such First Offer Opportunity to the Company in writing (the “Offer Notice”).  The Offer Notice shall set forth the terms on which the seller is willing to sell such First Offer Opportunity together with any other material details customarily set forth in the acquisition materials for an asset similar to the asset that is the subject of the First Offer Opportunity.  The Company shall have 30 days from the date of its receipt of the Offer Notice to notify the Sub-advisor of the Company's decision as to whether or not to pursue such First Offer Opportunity.  If the Company fails to notify the Sub-advisor of its election within such 30-day period, then the Company shall be deemed to have rejected such First Offer Opportunity.  If the Company rejects (or is deemed to have rejected) such First Offer Opportunity, then the Sub-advisor and/or any of its Affiliates shall be free to pursue such First Offer Opportunity (on its own or with other third-party investors), or offer such First Offer Opportunity to a third-party, in each case, for a period of 180 days on terms and conditions (including price) that are not materially different from the terms and conditions set forth in the Offer Notice to the Company.  If, at the expiration of such 180-day period, such First Offer Opportunity is not the subject of a binding contract or letter of intent, then the provisions of this Section 8.4(B) shall once again apply to such First Offer Opportunity.  For the avoidance of doubt, this Section 8.4(B) shall only apply to the acquisition of a Primary Target Investment being sold by a party unaffiliated with the Sub-advisor and its Affiliates and shall not be interpreted or construed as applying to the sale or disposition of any Primary Target Investment by the Sub-advisor or any of its Affiliates.

		
	(C)
	Notwithstanding anything to the contrary in this Agreement, the right of first offer set forth in Section 8.4(B) shall not apply to: (i) the acquisition of any Primary Target Investment by an Affiliate of the Sub-advisor from another Affiliate of the Sub-advisor;  (ii) the offer of the opportunity to acquire a Primary Target Investment by an Affiliate of the Sub-advisor to Phillips Edison Grocery Center REIT I, Inc., except as contemplated in the Investment Allocation Agreement by and among the Company, the Sub-advisor and Phillips Edison Grocery Center REIT I, Inc. dated  as of November 25, 2013; (iii) the offer of the opportunity to acquire any net leased retail, distribution or other property consistent with the investment policies of PECO NNN Development LLC, PECO Net Lease Income Fund, LLC or any successor program sponsored directly or indirectly by Phillips Edison Limited Partnership or any of its Affiliates with the same or similar investment objectives; and (iv) the offer of the opportunity to acquire any value added or opportunistic retail centers, including power centers, lifestyle centers, enclosed malls, mixed-use centers, and enclosed malls, that contain a substantial retail component, consistent with the investment objectives of Phillips Edison Strategic Investment Fund II, LLC, Phillips Edison Strategic Investment Fund III, LP or any successor program sponsored directly or indirectly by Phillips Edison Limited Partnership or any of its Affiliates with the same or similar investment objectives. 

		
	(D)
	This Section 8.4 shall terminate and cease to be effective upon (i) any termination of this Agreement or (ii) the later of (y) termination of the Offering Period and (z) the date on which all equity raised during the Offering Period has been substantially invested or committed to investment.

		
	(E)
	The Company is a third-party beneficiary of the terms and conditions of this Section 8.4 and shall have the right to directly enforce such provisions against the Sub-advisor.

		
	(F)
	Except as provided in Section 8.4(B), none of the Sub-advisor nor any of its Affiliates shall be obligated generally to present any particular investment opportunity to the Company, whether contemplated in the “Investment Objectives and Criteria” section of the Prospectus or otherwise.  

		
	8.5
	Prospectus Guidance.  Sub-advisor has read and will abide by the Prospectus with respect to (i) the Company’s investment objectives, targeted assets, investment restrictions, targeted markets and borrowing policies set forth in the “Investment Objectives and Criteria” section of the Prospectus and (ii) the Company’s distribution policy set forth in the “Description of Securities – Distribution Policy and Distributions” section of the Prospectus, except to the extent otherwise directed by the Board.

Article 9

The Phillips Edison and ARC Names
The Parties acknowledge and reaffirm the rights and obligations set forth with respect to their proprietary interests in their respective names as set forth in Sections 17 and 18 of the Advisory Agreement, respectively.
Article 10

Other Agreements
		
	10.1
	Property Level Agreements.  The Parties agree to use their best efforts to cause the Company, subject to approval by the Company’s Board of Directors, to enter into a Master Property Management Agreement (as defined in the Advisory Agreement) with an Affiliate of the Sub-advisor consistent with the description of the same in the Prospectus.  Advisor shall have the right to review and comment upon such Master Property Management Agreement, and to approve such Master Property Management Agreement (such approval not to be unreasonably withheld), prior to submission to the Board.  Advisor agrees that it shall have no right in the fees generated pursuant to such Master Property Management Agreement.

		
	10.2
	Advisor, Advisory Agreement and Dealings with Company. 

		
	(G)
	Advisor agrees to inform and make Sub-advisor a party to all negotiations between Advisor and the Company regarding any proposed amendment of the Advisory Agreement.  No amendment to the Advisory Agreement will be agreed upon or permitted if such amendment would impact the rights or obligations of the Sub-advisor without the Sub-advisor’s consent and signature. 

		
	(H)
	Advisor agrees to allow Sub-advisor to present and recommend to the Company all investment opportunities recommended by Sub-advisor.

      10.3    Initial Capital Contribution. Sub-advisor acknowledges that it contributed an amount equal to 
                       $200,000 to the capital of the Company on July 1, 2013.  
Article 11

Certain Transfers
		
	11.1
	Transfers.  The Parties have selected one another based on the experience and personnel of each other and their Affiliates.  Accordingly, each Party agrees that it is mutually desirable to restrict changes in ownership of each Party.  Each Party agrees to amend, to the extent necessary, its governing documents to restrict transferability of any controlling interest in such Party by such Party’s Key Persons unless both Parties jointly agree as otherwise permitted by this Article 11.  Notwithstanding the foregoing, any transfer of an interest in either Party by any of such Party’s Key Persons, by any entity controlled by a Key Person of such Party or by any Immediate Family Member of a Key Person of such Party shall be permitted without any approval so long as (i) the transferee of such interest is an Immediate Family Member of a Key Person of such Party, and (ii) one or more of the Key Persons of such Party retain management and voting control over such interest held by such transferee at all times after the applicable transfer occurs.

		
	11.2
	Prohibited Transfers.  

		
	(A)
	Except for Permitted Transfers and other transfers made in accordance with, and as permitted by, this Agreement, neither Party (1) will allow any direct or indirect transfer of controlling interests therein by its applicable Key Persons, and (2) will directly or indirectly transfer any part of its direct or indirect ownership interest in the Company (if any), whether in each such case voluntarily or by foreclosure, assignment in lieu thereof or other enforcement of a pledge, hypothecation or collateral assignment without the prior approval of the other Party.  

		
	(B)
	“Permitted Transfer” (for which no approval by the other Party shall be required) means either of the following:

		
	(1)
	any transfer of all or any portion of the direct or indirect interest in the Company held by a Party (if any) to any Affiliate of such Party; provided, however, that in each such case the transferee executes an instrument agreeing to be bound by the provisions of this Agreement to the extent applicable to the transferor;

		
	(2)
	any transfer of all or any portion of the direct or indirect interest in a Party held, directly or indirectly, by such Party’s Key Persons or Immediate Family Members; provided, however, that either (a) either or both of such Party’s Key Persons remain involved with the material decision-making and actions of such Party for the applicable Transfer Restriction Period (for the sake of clarity, after the applicable Transfer Restriction Period, each Party is permitted to allow the effecting of a transfer of all or any portion of the direct or indirect interest in such Party without regard to the continued involvement of such Party’s Key Persons) or (b) in the case of the Advisor, the transfer occurs after the Offering Period and the applicable transferee agrees to cede any decision-making and governance authority relating to the Company (including making Major Decisions) to the Sub-advisor; and

		
	(3)
	any transfer of all or any portion of the direct or indirect interest in the Sub-advisor if, after such transfer, the Sub-advisor remains an Affiliate of the Sub-advisor’s Key Persons.  For the avoidance of doubt, the Sub-advisor will be considered to be an Affiliate of its Key Persons if one of Michael C. Phillips or Jeffrey S. Edison serves as an officer of an entity that directly or indirectly owns ten percent (10%) or more of the voting securities of the Sub-advisor.

Article 12

Representations, Warranties, and Agreements
		
	12.1
	The Advisor and the Sub-advisor each hereby represents and warrants to, and agrees with, the other as follows:

		
	(C)
	Such Party is duly formed and validly existing under the laws of the jurisdiction of its organization;

		
	(D)
	Such Party has full power and authority to enter into this Agreement and to conduct its business to the extent contemplated in this Agreement;

		
	(E)
	This Agreement has been duly authorized, executed and delivered by such Party and constitutes the valid and legally binding agreement of such Party, enforceable in accordance with its terms against such Party, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws relating to creditors’ rights generally, and by general equitable principles.

		
	(F)
	The execution and delivery of this Agreement by such Party and the performance of its duties and obligations hereunder do not result in a breach of any of the terms, conditions or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, credit agreement, note or other evidence of indebtedness, or any lease or other agreement, or any license, permit, franchise or certificate to which such Party is a party or by which it is bound or to which its properties are subject or require any authorization or approval under or pursuant to any of the foregoing, or violate any statute, regulation, law, order, writ, injunction, judgment or decree to which such Party is subject;

		
	(G)
	Such Party is not aware of any facts pertaining to such Party or its Affiliates that would cause such Party, or any of such Party’s Affiliates, to be unable to discharge timely the obligations of such Party or its Affiliates under this Agreement or the obligations of the Company under any agreement to which any of them is a party;

		
	(H)
	To the knowledge of such Party, no consent, approval or authorization of, or filing, registration or qualification with, any court or governmental authority on the part of such Party is required for the execution and delivery of this Agreement by such Party and the performance of its obligations and duties hereunder and such execution, delivery and performance shall not violate any other agreement to which such Party is bound;

		
	(I)
	Such Party recognizes that DLA Piper LLP (US) is representing and in the future may represent the Sub-advisor, its Affiliates and the Company with respect to matters in this Agreement and on other unrelated matters, and acknowledges that it has been notified of this representation and that it has been suggested that it retain independent counsel in reviewing this Agreement and the terms agreed to herein.  The Advisor hereby waives all conflicts of interest regarding DLA Piper with respect thereto and hereby waives all rights to disqualify DLA Piper from representing the Sub-advisor, its Affiliates, and the Company in any matter at any time;   

		
	(J)
	Such Party recognizes that Proskauer Rose LLP is representing and in the future may represent the Advisor, the Dealer Manager and their Affiliates with respect to matters in this Agreement and on other unrelated matters, and acknowledges that it has been notified of this representation and that it has been suggested that it retain independent counsel in reviewing this Agreement and the terms agreed to herein.  The Sub-advisor hereby waives all conflicts of interest regarding Proskauer Rose LLP with respect thereto and hereby waives all rights to disqualify Proskauer Rose LLP from representing the Advisor, the Dealer Manager and their Affiliates in any matter at any time, except that the Sub-Advisor does not waive conflicts and does not waive the right to disqualify Proskauer Rose LLP from representing the Advisor, the Dealer Manager and  their Affiliates in litigation against the Sub-Advisor, Phillips Edison Limited Partnership, their Affiliates or the Company; 

		
	(K)
	Except as specifically provided in this Agreement, such Party is not relying upon the other Party, the Company or their respective Affiliates or advisors, in connection with any of the matters referred to in this Agreement, including any projections, information, due diligence, representations or warranties (express or implied, oral or written), statements or other matters concerning the Company, the other Party, or otherwise, and each Party hereby confirms that it has conducted an independent investigation of the facts regarding the same (or has chosen not to do so at such Party’s peril); 

		
	(L)
	The Party is not acting as the representative or agent or in any other capacity, fiduciary or otherwise, on behalf of another Person in connection with the Company or the other matters referred to in this Agreement;

		
	(M)
	Such Party is aware that the other Party and/or Affiliates of such other Party now and in the future shall be, and in the past have been, engaged in businesses which are competitive with that of the Company.  Each of the Parties hereby acknowledges and agrees that the Parties’ obligations with respect to all future activities which are in competition with the Company are as set forth in Article 8 hereof;

		
	(N)
	Such Party is aware that compensation and reimbursements may be payable to Affiliates of the Parties by the Company, as addressed in this Agreement, the Advisory Agreement and the Dealer Manager Agreement;

		
	(O)
	No Party is required to cause the controlling persons of such Party to devote any specific portion of their time to Company business other than as necessary to fulfill such Parties’ obligations under this Agreement and the Advisory Agreement, as the case may be, and such controlling persons are expected to spend substantial amounts of their time on activities that are unrelated to the Company;

		
	(P)
	Such Party understands that the other Party is relying on the accuracy of the representations set forth in this Article 12 in entering into this Agreement;

		
	(Q)
	Such Party has not granted to any third party rights that would be inconsistent with the rights granted to the other Party by this Agreement; 

		
	(R)
	Such Party has all requisite licenses to do and perform all acts and receive all fees as contemplated by this Agreement and the Advisory Agreement; and 

		
	(S)
	None of its principals has been convicted of any felony, or convicted of any misdemeanor involving moral turpitude (including fraud), or entered a plea of nolo contendere in connection with any felony or any such misdemeanor.

		
	12.2
	The Sub-advisor hereby represents and warrants to, and agrees with, the Advisor as follows:

		
	(A)
	The staff and employees of the Sub-advisor and its Affiliates have the skills, knowledge of and expertise in property selection, acquisitions/development, financing, asset and property management, and dispositions as to perform their respective duties and obligations hereunder; and 

		
	(B)
	The Sub-advisor is sophisticated in real estate and securities transactions, has been granted access to such financial and other material information concerning the Company, the other Party and the other Party’s Affiliates, and their respective current and anticipated operations and such due diligence materials as it deems necessary or advisable, as it has requested or may require in connection with its investment (including an advance of expenses that may be reimbursed) in the Company, is able, either directly or through its agents and representatives, to evaluate such information and any due diligence materials provided or made available to it from time to time hereunder, and is able to bear the financial risk of loss presented by an investment in the Company, particularly in light of the risks that would be disclosed by a detailed analysis thereof (its access to which, to the full extent any Party has requested, hereby is confirmed by each Party); 

Article 13

Term And Termination of the Agreement
		
	13.1
	Term.  This Agreement shall have an initial term of one year from the date hereof and shall be renewed for an unlimited number of successive one-year terms upon renewal of the Advisory Agreement.  This Agreement shall be co-terminus with the Advisory Agreement.  

		
	13.2
	Termination.  Subject to the last sentence of Section 14.1:  

		
	(A)
	This Agreement may be terminated (1) by the Advisor upon 60 days’ prior written notice by the Advisor to the Sub-advisor with approval of a majority of the Conflicts Committee, or (2) by the Sub-advisor upon 60 days’ prior written notice by the Sub-advisor to the Advisor;  

		
	(B)
	This Agreement may be terminated by the Advisor, if the Sub-advisor materially breaches this Agreement; provided, however, that the Sub-advisor shall have 30 calendar days after the receipt of notice of such breach from the Advisor to cure such breach; 

		
	(C)
	This Agreement may be terminated by the Advisor, as a result of any fraud, criminal conduct, gross negligence or willful misconduct by Sub-advisor or any Affiliate thereof in any action or failure to act undertaken by such Person pertaining to or having a detrimental effect upon the ability of the Advisor or the Sub-advisor to perform their respective duties hereunder; provided, however, that the Sub-advisor does not cure any such act within 30 calendar days after the receipt of notice of such act (or at such later time as may be stated in the notice) from the Advisor; or

		
	(D)
	This Agreement may be terminated by either Party, if the other Party (1) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (2)  consents to the entry of an order for relief in an involuntary case under any such law, (3) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for the other Party or for any substantial part of its property, or (4) makes any general assignment for the benefit of creditors under applicable state law;

		
	(E)
	This Agreement may be terminated by either Party, if:  (1) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect has been commenced against the other Party, and such case has not been dismissed within 60 days after the commencement thereof; or (2) a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) has been appointed for the other Party or has taken possession of the other Party or any substantial part of its property, and such appointment has not been rescinded or such possession has not been relinquished within 60 days after the occurrence thereof; or

		
	(F)
	This Agreement may be terminated at any time within five years after the date hereof by the Advisor if both Michael C. Phillips and Jeffrey S. Edison cease to be actively involved in the management of the Sub-advisor.

		
	13.3
	Survival upon Termination.  Notwithstanding anything else that may be to the contrary herein, the expiration or earlier termination of this Agreement shall not relieve a party for liability for any breach occurring prior to such expiration or earlier termination.  The provisions of Articles 1, 5, 6, 9, 12, 13, 15, and 16 shall survive termination of this Agreement. 

		
	13.4
	Payments on Termination and Survival of Certain Rights and Obligations.  After termination of this Agreement, the Sub-advisor shall have the rights to payment and the responsibilities as set forth in Section 22 of the Advisory Agreement. 

Article 14

Assignment
This Agreement may be assigned by the Sub-advisor (a) to an Affiliate with the consent of the Advisor, such consent not to be unreasonably withheld or delayed, provided that such Affiliate remains at all times thereafter an Affiliate of Phillips Edison Limited Partnership or (b) in a manner meeting the conditions of Section 11.2(B)(2).  This Agreement shall not be assigned by the Advisor without the consent of the Sub-advisor, except in the case of (i) an assignment by the Advisor to the Company whereby the Sub-advisor becomes the advisor to the Company or (ii) an assignment by the Advisor meeting the conditions of Section 11.2(B)(2).
Article 15
Indemnification And Limitation Of Liability
The indemnification and limitation of liability provisions contained in the Advisory Agreement apply to both the Advisor and Sub-advisor.  Both Parties agree that neither will take any action inconsistent with such limitation of liability or indemnification provisions.
Articles 16
Miscellaneous
16.1    Notices.  Any notice, request, demand, approval, consent, waiver or other communication required or permitted to be given hereunder or to be served upon any of the Parties hereto (each a “Notice”) shall be in writing and shall be (a) delivered in person, (b) sent by facsimile transmission (with the original thereof also contemporaneously given by another method specified in this Section 0), (c) sent by a nationally-recognized overnight courier service, or (d) sent by certified or registered mail (postage prepaid, return receipt requested), to the address of such Party set forth herein. 
 
    To the Advisor: 
 
    American Realty Capital PECO II Advisors, LLC 
    405 Park Avenue 
    New York, New York 10022 
    Attention:  William M. Kahane
 
with a copy to (which shall not constitute Notice): 
 
Proskauer Rose LLP 
Eleven Times Square 
New York, New York 10036 
Attention: Peter M. Fass, Esq. 
         James P. Gerkis, Esq. 
Telephone:  (212) 969-3000 
Facsimile:  (212) 969-2900 
 
To the Sub-advisor: 
 
Phillips Edison NTR II LLC 
11501 Northlake Drive 
Cincinnati, OH 45249 
Attention: R. Mark Addy 
 
with a copy to (which shall not constitute Notice): 
 
DLA Piper LLP (US) 
4141 Parklake Drive, Suite 300 
Raleigh, North Carolina 27612 
Attention: Robert Bergdolt, Esq. 
Telephone: (919) 786-2002 
Facsimile: (919) 786-2202 
 
Either Party may at any time give Notice in writing to the other Party of a change in its address for the purposes of this Section 0.  Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).
16.2     Modification.  This Agreement shall not be amended, supplemented, changed, modified,     terminated or discharged, in whole or in part, except by an instrument in writing signed by both Parties hereto, or their respective successors or permitted assigns.  
16.3    Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
16.4    Construction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect, without regard to the principles of conflicts of laws thereof.
16.5    Entire Agreement.  This Agreement contains the entire agreement and understanding between the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.  In all events, nothing contained herein shall be read, construed, interpreted or applied in any manner that prevents or hinders the Company from     qualifying as a real estate investment trust under Section 856(c) of the Code.
16.6    Waiver.  Neither the failure nor any delay on the part of a Party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the Party asserted to have granted such waiver.
16.7    Gender.  Words used herein regardless of the number and gender specifically used, shall be     deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
16.8    Titles Not to Affect Interpretation.  The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
16.9    Counterparts.  This Agreement may be executed with counterpart signature pages or in any number of counterparts, each of which shall be deemed to be an original as against any Party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterpart signature pages or counterparts hereof, individually or taken together, shall bear the signatures of all of the Parties reflected hereon as the signatories. 

[The remainder of this page is intentionally left blank - Signature page follows.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date and year first above written.

	
			
	 
	 
	

	 
	 
	American Realty Capital PECO II Advisors, LLC

   By:   /s/ William M. Kahane         
         William M. Kahane, President

	 
	Phillips Edison NTR II LLC

   By:   /s/ R. Mark Addy            
         R. Mark Addy, President

Appendix A
Form of Advisory AgreementExhibit 10.1

AGREEMENT FOR SERVICES

This Agreement for Services ("Agreement") is entered into as of this 12th day of November, 2014 between PetroShare Corp., a Colorado corporation ("Company"), and Kingdom Resources, LLC, a Colorado limited liability ("Contractor"), each of whom is sometimes referred to as a "Party" and both of whom are sometimes collectively referred to as the "Parties." The purpose of this Agreement is to set forth the terms under which Contractor shall perform services for Company in acquiring oil and gas interests and the consideration that shall be given by Company to Contractor for performing those services.

ARTICLE I—CONTRACTOR SERVICES

Contractor shall pursue the acquisition of oil and gas leases and/or other oil and gas interests in the Contract Area defined on Exhibit A to this Agreement, including but not limited to gathering title and leasehold information, securing the acquisition of fee, leasehold and other interests in oil and gas rights, ordering necessary abstracts of title, promptly submitting all necessary documentation concerning any acquisition or lease of such mineral rights to Company, and performing or obtaining all other services needed to secure such leases or other acquisitions of oil and gas mineral rights within the Contract Area, pursuant to Company's guidance.

Contractor further agrees to use reasonable efforts to assist Company with surface use negotiations on land located within the Contract Area that Company intends to operate, which assistance shall include without limitation securing potential drill sites and access to water for drilling operations based on ordinary, reasonable and customary arm's length terms.

ARTICLE II—RELATIONSHIP OF PARTIES

The relationship of Contractor to Company throughout the term of this Agreement shall be that of an Independent Contractor only, and it is understood and agreed that nothing in this Agreement makes, or shall be construed to make, Contractor an employee, agent or representative of the Company. Therefore, this Agreement does not give Company any authority or right to direct or control Contractor's actions and Contractor is fully responsible for determining when and how the services being provided pursuant to this Agreement will be performed. Contractor is also responsible for furnishing all supplies, equipment, and materials necessary to provide the services set forth in this Agreement. All persons engaged by Contractor to assist it in providing such services shall be employees or subcontractors of Contractor.

ARTICLE III—SUBCONTRACTORS

If Contractor determines that subcontractors are necessary to assist it in performing the services set forth herein, it may engage such subcontractors at its sole cost and expense, subject to the reimbursement provisions set forth herein. Contractor shall obtain from any such subcontractor a written agreement containing, at a minimum, terms substantially similar to those set forth herein, other than those relating to compensation to Contractor, and shall furnish an executed copy of any such agreement to Company upon request. Notwithstanding its decision to engage one or more subcontractors to assist it in performing services hereunder, Contractor shall remain primarily liable to Company for all of Contractor's obligations hereunder.

 

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ARTICLE IV—STANDARD OF CARE

Contractor shall perform its services under this Agreement in accordance with the highest standards within the industry for the type of services provided herein, and shall comply with all applicable laws, regulations, orders and standards in providing services under this Agreement.

ARTICLE V—CONTRACTOR INSURANCE

Contractor shall be solely responsible for all of its own insurance and shall at all times maintain such types and amounts of insurance, including without limitation automobile, general liability and worker's compensation insurance, as my be reasonably be required by Company. Contractor shall furnish to Company proof of required insurance upon request.

ARTICLE VI—CONFIDENTIALITY

Because the services contemplated by this Agreement relate to information that is highly proprietary and of considerable value to Company, Contractor agrees to hold all work-related information, title information, areas of interest, maps, letters, memoranda, negotiations with companies or persons, and all other materials, plans and conversations concerning the services performed hereunder strictly confidential while this Agreement is in effect and for a period of two (2) years after termination hereof. Contractor shall obtain a like agreement from any subcontractors it retains to assist it in providing services under this Contract.

ARTICLE VII—PAYMENT AND AUDIT OF CONTRACTOR EXPENSES

Contractor agrees to pay all claims for labor, material, services and supplies furnished by Contractor and to take all reasonable precautions to ensure that no lawful lien or similar encumbrance is fixed upon any lease or other property of Company as a result of Contractor's negligence, willful misconduct, intentional act or misrepresentation. Company shall reimburse Contractor for such actual expenses it incurs with respect to any leases or other acquisitions approved and consummated under this Agreement, as set forth in Exhibit B hereto. Company shall have the right at any time within six (6) months after making any payment pursuant to this Article to audit any and all records, books and invoices related thereto, and this audit right shall survive the termination of this agreement.

ARTICLE VIII—PAYMENT OF ACQUISITION COSTS

Unless otherwise agreed by the Parties, all lease bonus or similar payments necessary to acquire fee, leasehold, royalty or other oil and gas interests under this Agreement shall be paid by means of Company sight drafts payable to the proper owner of the interest involved, by time drafts payable to such owners, or by such other method as may be agreed upon in writing by the Parties hereto. Any lease bonus or similar payments necessary to acquire fee, leasehold, royalty or other oil and gas interests under this Agreement advanced by Contractor shall be reimbursed as set forth in Exhibit C hereto.

 

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ARTICLE IX—ACQUISITION DOCUMENTS

Company agrees that the form of lease attached hereto as Exhibit C, the form of lease assignment attached hereto as Exhibit D, and the form of Access and Damage Settlement Agreement attached hereto as Exhibit E may be used to lease oil and gas mineral rights in the Contract Area, and that any lease obtained using those forms shall be acceptable to Company, subject to the other provisions of this Agreement, including without limitation those concerning the acceptability of title to the mineral rights identified in any such lease. Company shall have the right to approve in advance of execution the form and terms of any agreement concerning the acquisition of oil and gas mineral rights by Contractor in the Contract Area not in the forms attached hereto as Exhibits C, D and E, subject to the other provisions of this Agreement, including without limitation those concerning the acceptability of title to the mineral rights identified in any such lease.

ARTICLE X—COMPENSATION

Contractor shall be entitled to compensation for the acquisition of any lease or other oil and gas mineral rights in the Contract Area pursuant to the terms set forth in Exhibit B hereto.

ARTICLE XI—CONTRACTOR TAX INDEMNITY

Contractor agrees to indemnify and hold Company, its parent, subsidiaries, and affiliates harmless from payment of all federal, state and local taxes, as well as the preparation and submission of all reports, returns and monies which may be imposed or required under Unemployment Insurance, Social Security, Workmen's Compensation, Federal or State Income Tax Law and all other applicable laws, regulations and orders relative to any payments that Company makes to Contractor pursuant to this contract. If required by federal or state taxing laws, Company is authorized to withhold monies due to Contractor and remit same to such taxing authority.

ARTICLE XII—MUTUAL LIABILITY INDEMNITY

To the full extent permitted by applicable law, Contractor and Company shall indemnify, defend and hold each other, and their parents, subsidiaries, affiliates and all members, officers and employees thereof, harmless against all losses, expenses or judgments, including reasonable attorney's fees, arising out of or related to claims made by any third-parties as a result of actions taken by either of them in connection with the performance of this Agreement. This obligation shall survive the termination of this Agreement.

 

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ARTICLE XIII—CONTRACTOR ASSIGNMENT AND POST-TERMINATION

OBLIGATIONS

During the term of this Agreement and for a period of six (6) months after this Agreement terminates, Contractor shall not acquire directly or indirectly for itself or anyone other than Company any fee interest, leasehold, royalty or other interest in or options upon lands or mineral rights within the Contract Area, without first obtaining the Company's written consent, provided that if Company does not accept any lease obtained by Contractor within the Contract Area within five (5) business days of being offered such lease by Contractor, subject only to such standard conditions as acceptability of title to Company, then notwithstanding this provision Contractor shall have the right to offer that lease to other parties. If Contractor acquires any such interest in violation of this paragraph, upon Company's demand it shall assign such interest to Company on such form as Company may approve.

ARTICLE XIV—COMPANY POST-TERMINATION OBLIGATIONS

Following termination of this Agreement, whether upon the expiration of its Term or for cause, Company shall pay Contractor compensation, and shall reimburse Contractor for all lease acquisition expenses, as set forth in Exhibit B hereto, for all leases and other interests within the Contract Area that were identified to Company by Contractor prior to such termination and that are acquired by Company, either directly or indirectly, within six (6) months after the effective date of such termination.

ARTICLE XV—AUDIT OF CONTRACTOR

Company shall have the right to audit Contractor's books and records relating to services performed hereunder. To facilitate such audit, Contractor shall retain its books and records made in any calendar year during the term of Agreement, for a period of two (2) years from the end of such calendar year. This obligation survives termination of this Agreement. For the purpose of audit, Company and its authorized representatives or agents shall have the right to examine during business hours at Contractor's office and for a reasonable length of time all books, records, accounts, correspondence, instructions, specification, maps, receipts and memoranda insofar as they are pertinent to this Agreement.

ARTICLE XVI—AUDIT OF COMPANY

Contractor shall have the right to audit Company's books and records relating to any amounts payable to Contractor or that Contractor contends are payable pursuant to the terms of this Agreement. To facilitate such audit, Company shall retain its books and records made in any calendar year during the term of Agreement, for a period of two (2) years from the end of such calendar year. This obligation survives termination of this Agreement. For the purpose of audit, Contractor and its authorized representatives or agents shall have the right to examine during business hours at Company's office and for a reasonable length of time all books, records, accounts, correspondence, instructions, specification, maps, receipts and memoranda insofar as they are pertinent to this Agreement

 

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ARTICLE XVII—TERM AND TERMINATION

This Agreement shall commence on the Effective Date and shall expire on December 31, 2015, unless earlier terminated for cause pursuant to the terms hereof. Thereafter, the Parties may, each in its sole discretion, decide whether to renew this Agreement on the same or different terms. During the term of this Agreement it may be terminated for cause, consisting of actions by either Company or Contractor in material breach of this Agreement, provided that (a) written notice of any such alleged breach is provided by the non-breaching party to the breaching party pursuant to the notice provisions of this Agreement, which notice shall set forth the alleged material breach or breaches in sufficient detail to allow the breaching party to attempt to cure the alleged breach or breaches and (b) the non-breaching party fails to cure the breach or breaches within thirty (30) days of such notice or, in the case of a breach or breaches that cannot reasonably be cured within such thirty (30) day period, within a reasonable time for curing such breach or breaches.

ARTICLE XVIII—NOTICES

Unless otherwise provided herein, any notice given pursuant to the terms of this Agreement shall be in writing and shall be delivered by fax or email, with a copy in writing sent by regular mail, to the addresses set forth below, which addresses may be changed by notice sent to the addresses set forth below, with such changes to be effective only when actually received:

To Company:

PetroShare Corp.

7200 South Alton Way, Suite B220

Centennial, CO 80112

Attn: Stephen J. Foley

(303) 770-6885 (Facsimile) 

sfolev@PetroShareCorp.com

To Contractor:

Kingdom Resources LLC 

7501 Village Square Drive, Suite 205

Castle Pines, CO 80108 

(303) 600-9695 (Facsimile)

gene@equinoxland.com

With a copy to:

Peter C. Forbes, Esq.

Carver Schwarz McNab Kemper & Forbes, LLC

5

 

1600 Stout Street

Suite 1700

Denver, CO 80203

(303) 893-1829 (Facsimile)

pforbes@csmkf.com

ARTICLE XIX—ENTIRE AGREEMENT

All exhibits to this Agreement are expressly made a part of this Agreement, and the parties acknowledge and agreed that the written terms of this Agreement, including the Exhibits incorporated herein, constitute the complete agreement of the Parties with respect to the subject matter hereof, that any prior oral agreements or understandings between the Parties concerning the subject matter hereof are merged herein, and that no oral agreements or understandings between the Parties concerning the subject matter hereof, including any amendments hereto, shall be binding or enforceable unless agreed to in a writing signed by the Parties or their authorized representatives.

ARTICLE XX—AUTHORIZED SIGNATURES

The persons executing this Agreement below represent that they have been duly authorized to do so by the Party upon whose behalf they are executing this Agreement, and that this Agreement shall accordingly be binding on such Party

ARTICLE XXI—EFFECTIVE DATE

This Agreement may be executed in counterparts, and shall be effective as of the date first written above upon execution by both Parties.

ARTICLE XXII—GOVERNING LAW

This Agreement shall be interpreted according to the laws of the State of Colorado applicable to contracts made within, and to be performed within, the State of Colorado. Venue for any action between the Parties arising out of or relating to this Agreement shall lie exclusively in the District Court for the City and County of Denver.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

[Signatures on following page]

 

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PETROSHARE CORP

By:    /s/ Stephen J. Foley

Name:    Stephen J. Foley

Title:     CEO

KINGDOM RESOURCES LLC

By:    /s/ Gene Osborne

Name:    Gene Osborne

Title:      Manager

 

 

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EXHIBIT A

 

CONTRACT AREA

  

The project area subject to this Agreement shall be as follows:

Sections 1 through 36, All,

Township 1 South, Range 67 West, 6th PM

Adams County, Colorado

Any other areas as may be added to by mutual agreement by virtue of a revised Exhibit A.

EXHIBIT B

GUIDELINES FOR OIL & GAS LEASE AND MINERAL INTEREST ACQUISITIONS

It is the intent of these general guidelines to provide the basic terms and conditions which are acceptable to Company for acquisitions made hereunder. All obligations hereunder will be performed in good faith.

I.     LEASING OIL & GAS MINERAL INTERESTS

	
LESSEE OF RECORD:

	
Unless agreed otherwise, Contractor shall be the Lessee of record, as provided in the oil and gas lease form at Exhibit C.

 

	
INTEREST TO BE LEASED:

	
Within the Contract Area, any unleased fee minerals, including fee minerals owned by affiliates of Contractor.

 

	
MAXIMUM LEASE BONUS:

	
No less than $2,000 and no more than $3,000 per net acre to Landowner unless agreed to otherwise by the Parties. Contractor shall receive a payment equal to 10% of Landowner Bonus (the "Standard Contractor Fee"), provided that the total of the Landowner Bonus and the Standard Contractor Fee will not exceed $3,000 without Company's consent.

 

Example No. 1: Landowner Bonus is $2,500. Company pays $2,500 to Landowner as Landowner Bonus and $250 to Contractor as Standard Contractor Fee.

 

Example No. 2: Landowner Bonus is $2,900. Company pays $2,900 to Landowner as Landowner Bonus. Because total of Landowner Bonus and Standard Contractor Fee would exceed $3,000, Company would only pay $100 to Contractor as Contractor Fee unless Company agrees otherwise.

 

	
OIL & GAS LEASE TERMS:

	
3 year primary term with a minimum 2 year extension option at up to 75% of original lease bonus per net acre, or 5 + year primary lease term.

 

	
LANDOWNER ROYALTY ("LOR"):

	
Maximum of 18.75%, unless agreed to otherwise by the Parties.

 

 

1

 

	
NET REVENUE INTEREST ("NRI"):

	
Company shall own and/or retain no less than 79.00% NRI, proportionately reduced, except with respect to leases obtained from entities affiliated with Contractor, where Company shall own and/or retain no less than 80.00% NRI, proportionately reduced.

 

	
OVERRIDING ROYALTY INTEREST:

	
Company and Contractor agree as to the following overriding royalty interest ("ORRI") distribution, proportionately reduced:

 

Unaffiliated Leases-79.00% Company NRI

● Reign Energy Partners, LLC ("Reign"): 2.00% ORRI

 

● Contractor: ORRI equal to positive difference between existing burdens of record, including Reign ORRI, and 21.00%.

 

● Note: ORRI is subject to change if the Parties agree to an LOR greater than 18.75%, and could result in a net zero ORRI to Reign and/or Contractor.

Affiliated Leases-80.00% Company NRI

 

● Reign: 1.00% ORRI if LOR equals 18.75%; 2.00% ORRI if LOR is less than 18.75%.

 

● Contractor: ORRI equal to positive difference between existing burdens of record, including Reign ORRI, and 20.00%.

 

● Note: ORRI is subject to change if the Parties agree to an LOR greater than 18.75%, which could result in a net zero ORRI to Reign and/or Contractor.

 

	
ORRI DISTRIBUTION METHOD:

	
Scenario 1-Contractor is Lessee: Contractor acquires and submits oil and gas lease(s) acceptable to the Company for recording, which names Contractor as Lessee. Within ten (10) business days of a return receipt of recorded lease, Contractor shall assign all its right, title and interest in the subject lease(s) to Company in the form of Exhibit D, and reserve an ORRI into Contractor. Within a reasonable time thereafter, Contractor shall assign an ORRI in accordance with the distribution amounts agreed to herein.

 

2

	 	
Scenario 2-Company is Lessee: Contractor acquires and submits oil and gas lease(s) acceptable to the Company for recording, which name Company as Lessee. Within ten (10) business days of a return receipt of recorded lease, Company shall execute an Assignment of ORRI to Reign and Contractor in accordance with the distribution amounts agreed to herein.

 

	
NRI/ORRI EXAMPLES:

	
Example 1-15.00% LOR/Scenario 1-Unaffiliated: Contractor secures an oil and gas lease in the Contract Area in the name of Contractor from an unaffiliated entity, subject to a 15.00% LOR, and files it of record. Within ten (10) business days of return receipt of recorded lease, Contractor shall assign Company all right, title and interest in said lease, delivering a 79.00% NRI, and reserve an ORRI equal to the positive difference between existing lease burdens and 21.00%. Within a reasonable time thereafter, Contractor shall assign a 2.00% ORRI to Reign, and retain a 4.00% ORRI. All interests being proportionately reduced.

 

	 	
Example 2-18.75% LOR/Scenario 1-Unaffiliated:  Contractor secures an oil and gas lease in the Contract Area in the name of Contractor from an unaffiliated entity, subject to an 18.75% LOR, and files it of record. Within ten (10) business days of return receipt of recorded lease, Contractor shall assign Company all right, title and interest in said lease, delivering a 79.00% NRI, and reserve an ORRI equal to the positive difference between existing lease burdens and 21.00%. Within a reasonable time thereafter, Contractor shall assign a 2.00% ORRI to Reign, and retain a 0.25% ORRI. All interests being proportionately reduced.

 

	 	
Example 3-21.00% LOR/Scenario 1-Unaffiliated: Subject to prior agreement by the Parties, Contractor secures an oil and gas lease in the Contract Area in the name of Contractor from an unaffiliated party, subject to a 21.00% LOR, and files it of record. Within ten (10) business days of return receipt of recorded lease, Contractor shall assign Company all right, title and interest in said lease, delivering a 79.00% NRI, and reserve an

 

	
 

 

 

 

 

  

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ORRI equal to the positive difference between existing lease burdens and 21.00%. Under this scenario, there is no ORRI reserved or distributed. All interests being proportionately reduced.

 

	 	
Example 4-18.75% LOR/Scenario 1-Affiliated: Contractor secures an oil and gas lease in the Contract Area in the name of Contractor from an affiliated entity, subject to an 18.75% LOR, and files it of record. Within ten (10) business days of return receipt of recorded lease, Contractor shall assign Company all right, title and interest in said lease, delivering an 80.00% NRI, and reserve an ORRI equal to the positive difference between existing lease burdens and 20.00%. Within a reasonable time thereafter, Contractor shall assign a 1.00% ORRI to Reign, and retain a 0.25% ORRI. All interests being proportionately reduced.

 

 

II.        PURCHASING OIL & GAS MINERAL RIGHTS:

To be negotiated on a property by property basis, pursuant to subsequent parameters established by and between the Parties. If applicable, the above ORRI guidelines and understanding applies.

III.       PURCHASING OIL & GAS LEASEHOLD INTEREST:

To be negotiated on a property by property basis, pursuant to subsequent parameters established by and between the Parties. If applicable, the above ORRI guidelines and understanding applies.

IV.       COMPENSATION AND COST REIMBURSEMENT:

Company agrees to reimburse Contractor for actual documented land and title costs related to Company's leasing and mineral acquisition efforts within the Contract Area, based on customary industry standards which shall include, but not be limited to, subcontractor day rates and related costs, related attorney's fees, clerk and recorder fees, and as necessary, reasonable daily stipend for meals, mileage, and office supplies. Contractor shall undertake reasonable best efforts to control costs and work closely and transparently with Company towards that objective, relative to the task that Company has assigned to Contractor. Contractor shall submit an invoice for the costs related to the tasks assigned to Company on a bi-monthly basis, and Company agrees to make payment to Contractor within ten (10) days from receipt of said invoice.

Company and Contractor agree that the ORRI and Standard Contractor Fee, if any, as described herein are just and adequate compensation for Contractor's services, paid by Company in lieu of a Contractor day-rate.

 

 

4

Company further agrees to pay all landowner lease bonus payments, lease option or extension payments, surface use and access fees, and seismic costs associated with leasing or the acquisition of other mineral interests within the Contract Area pursuant to this Agreement.

Any costs incurred by Contractor that are unrelated to Company's leasing and mineral acquisition efforts in the Contract Area, specifically costs attributable to the drilling and completion of oil and gas wells that would typically and proportionately be passed through to the Company's working interest partners if Company were the operator of such wells shall not be billed by Contractor to Company. However, in the event Company is the operator of wells being drilled and completed on lands located in the Contract Area and such lands coincide with materials that Contractor has in its possession that are attributable to the drilling and completion of an oil and gas well, but which Contractor has not previously billed to Company, then Company shall have the option to obtain said materials by paying the cost incurred by Contractor to obtain such materials.

5

Producers 88-Paid Up

PetroShare Standard

(Colorado Rev. 9/2014)

EXHIBIT C - FORM OF PAID-UP

 OIL AND GAS LEASE

This Lease Agreement, made and entered into this __________ day of _______________, by and between ________________________________________ and PetroShare Corporation whose mailing address is  Corporate 25. 7200 S. Alton Way #8220, Centennial, Colorado, 80112 hereinafter called Lessee:

WITNESSETH:

1.     That Lessor, for and in consideration of Ten and More dollars ($10.00 & More) cash in hand paid, the receipt of which is hereby acknowledged, and the covenants and agreements hereinafter contained, has granted, demised, leased and let, and by these presents does grant, demise, lease and let exclusively unto the said Lessee, for the purpose of mining, exploring for (by geophysical and other methods), developing, producing, and marketing oil, gas and other substances covered hereby on the leased premises as hereinafter described, or lands pooled or unitized therewith, with rights of way and easements for ingress and egress from lands by Lessee, or its assignees, agents or permittees, as may be reasonably necessary to or associated with, but not limited to, the construction and maintenance of pipelines, telephone and electric lines, communication towers, tanks, ponds, pits, roadways, canals, water wells, disposal wells, injection wells, power stations, equipment, structures and other facilities deemed necessary by Lessee to produce, store, maintain, treat and transport said oil, gas, and other substances.

Being situated in the County of Adams State of Colorado, described as follows, to-wit:

See Exhibit A-Contract Area

and containing ______________acres, more or less.

In addition to the land described above, the term "leased premises" shall include to the same extent as if specifically described, lands riparian in nature; lands acquired or retained by avulsion, accretion, reliction or other natural causes that result in changes to any boundaries or centerline of any bodies of water, as commonly defined regardless of size, traversing or adjoining the above described lands; lands located in and under any road, easement or right-of-way traversing or adjoining the lands described above; any small strips or parcels of land adjacent or contiguous to the lands described above now owned or subsequently acquired, along with; any and all interests of Lessor now owned or subsequently acquired through other methods regardless of the mineral or gross acreage assumed or stated in this lease, and if Lessor owns or subsequently acquires more mineral acres than the amount upon which Lessors bonus payment was calculated, lessor shall notify Lessee and afford Lessee the opportunity to pay Lessor for the additional mineral acres at the same rate of the original bonus payment. In consideration of that additional bonus payment, Lessor agrees to execute at Lessee's request any additional or supplemental instrument required to cure and more accurately describe the leased premises. The term "oil" as used herein shall include and be defined as any liquid hydrocarbon substance that occurs naturally in the earth, including natural condensate recovered from gas without resort to manufacturing process. The term "gas" as used herein shall include and be defined as any substance which is produced in a natural state from the earth and maintains a gaseous or rarified state at ordinary temperature and pressure conditions, including but not limited to, helium, carbon dioxide, coal-bed methane, nitrogen, sulphur, casinghead gas and other commercial gases

2.      Subject to the other provisions herein contained, this lease shall remain in force for a primary term of 5 years from the date hereof, and for as long thereafter as oil, gas or other substances covered hereby are produced in paying quantities from said leased premises or lands pooled therewith, or drilling operations are continuously prosecuted. "Drilling Operations" as used herein shall include operations for both the drilling of a new well and such other operations conducted in efforts to establish, resume or re­establish production of oil and gas including, but not limited to, reworking, deepening or plugging back of a well or hole; such operations shall be considered "continuously prosecuted" if not more than one hundred twenty (120) days shall elapse between the completion and abandonment of one well or hole and the commencement of drilling operations on another well or hole; for a new well, drilling operations shall be deemed to have commenced when construction of the wellsite location or the road providing access to the wellsite location begins; for such other operations including but not limited to re-working, deepening, and plugging back of a well or hole, drilling operations shall be deemed to have commenced when Lessee has the requisite equipment in place at the wellsite.

3.      If at the expiration of the primary term of this lease, oil, gas or other substances covered hereby are not being produced in paying quantities from the leased premises or lands pooled therewith but drilling operations are being continuously prosecuted, and such efforts results in production of oil, gas or other substances therefrom, then this lease shall continue in force for so long thereafter as oil, gas, or other substances continue to be produced from the leased premises or lands pooled therewith

4.      This is a PAID-UP LEASE and all cash consideration first recited above have been paid to Lessor in advance to keep this lease in full force and effect throughout the primary term. In consideration of the payment, Lessor agrees that Lessee shall not be obligated, except as otherwise provided herein, to commence or continue any operations during the primary term or pay any annual

rentals. Lessee may at any time or times during or after the primary term surrender this lease as to all or any portion of the lands described above, and as to any strata or stratum, by delivering to Lessor or by filing of record a release or releases, and be relieved of all obligations thereafter accruing to the acreage surrendered.

 

5.      Lessee shall deliver to the credit of Lessor as royalty, free of cost but not applicable taxes, into the tanks or in the pipeline on the leased premises to which lessee may connect its wells the equal one-sixth (116th) part of all oil produced and saved from the leased premises, or Lessee may from time to time at its option purchase any royalty oil in its possession, paying the market price thereof prevailing for oil of like grade and gravity in the field where produced on the date of purchase. The Lessee shall pay Lessor, as royalty, on gas, including casinghead gas or other gaseous substances, produced from the leased premises and sold or used off the premises or used in the manufacture of gasoline or other products, the market value at the well of one-sixth (1/6th) of the gas sold or used, provided that on gas sold the royalty shall be one-sixth (116th) of the amount realized from such sale. The amount realized from the sale of gas shall be the price established by the gas sales contract entered into in good faith by lessee and a gas purchaser for such term and under such conditions as are customary in the industry. Price shall mean the net amount received by lessee after giving effect to applicable regulatory orders and after application of any applicable price adjustments specified in such contract or regulatory orders. In the event lessee compresses, treats, purifies or dehydrates such gas (whether on or off the leased premises) or transports gas off the leased premises, lessee in computing royalty hereunder may deduct from such price a reasonable charge for each of such functions performed; including associated fuel

 

6.     If at any time, either before or after the expiration of the primary term of this lease, there is one or more wells capable of producing oil, gas or other associated substances in paying quantities on lands covered by this lease, or on other lands with which lands covered by this lease are pooled or unitized therewith, but such well or wells are shut-in, whether before or after production thereof, and this lease is not being maintained otherwise as provided herein, this lease shall not terminate (unless released by Lessee) and it shall nevertheless be considered that oil, gas or other associated substances are being produced from lands covered by this lease during all times while the well is so shut-in. Lessee shall use reasonable diligence to market the oil or gas capable of being produced from such shut-in well, but shall be under no obligation to market the oil or gas under terms, conditions or circumstances which, in Lessee's judgment exercised in good faith, are unsatisfactory. When the lease is continued in force in this manner, Lessee shall pay or tender to the Lessor or Lessor's successors or assigns, an amount equal to $1.00 per year per net mineral acre covered by the lease. Such payments shall be made on or before the shut-in royalty payment date, as defined below, next occurring after the expiration of one hundred twenty (120) days from the date the well was shut-in, unless prior to such date oil or gas from the well is sold or used or the lease is otherwise maintained as provided herein. In like manner, on or before each succeeding shut-in royalty payment date while such well remains shut-in, lessee shall make payment of shut-in royalty in the same amount and manner. The term "shut-in royalty payment date" shall mean the anniversary date of this lease. Any shut-in royalty payment may be made by cash, draft or check, mailed or tendered at Lessor's address on or before the shut-in royalty date. Lessee's failure to pay or tender, or properly pay or tender, any such sum shall render Lessee liable for the amount due but it shall not operate to terminate the lease

 

7.     If Lessor owns less than the full mineral estate in all or any part of the leased premises, the royalties and shut-in royalties payable hereunder for any well or wells on any part of the leased premises or lands pooled therewith shall be reduced to the proportion that lessor's interest in such part of the leased premises bears to the full mineral estate in such part of the leased premises, calculated on a net acreage basis

 

8.     Lessee shall have the right to use, free of cost, gas, oil and water produced on said lands for Lessee's operation thereon, except water from wells and reservoirs of Lessor

 

9.      Lessee shall pay to lessor reasonable amounts for damages caused by its operations on said land

 

10.     When requested by Lessor, Lessee shall bury its pipelines which traverse cultivated lands below plow depth

 

11.     No well shall be drilled nearer than five hundred (500) feet to an occupied dwelling on said premises, without written consent of Lessor.

 

12.     Lessee shall have the right at any time (but not the obligation), to remove all improvements, machinery, and fixtures placed or erected by Lessee on said premises, including the right to pull and remove casings.

 

13.     The interest of either Lessor or Lessee hereunder may be assigned, devised or otherwise transferred in whole or in part, by area and/or by depth or zone, and the rights and obligations of the parties hereunder shall extend to their respective heirs, devisees, executors, administrators, successors and assigns. No change in Lessor's ownership shall have the effect of reducing the rights or enlarging the obligations of Lessee hereunder, and no change in ownership shall be binding on Lessee until one hundred twenty (120) days after Lessee has been furnished the original or certified or duly authenticated copies of the documents establishing such change of ownership to the satisfaction of Lessee or until Lessor has satisfied the notification requirements contained in Lessee's usual form of division order. In the event of the death of any person entitled to shut-in royalties hereunder, Lessee may pay or tender such shut-in royalties to the credit of decedent or decedents estate in the depository designated above. If at any time two or more persons are entitled to shut-in royalties hereunder, Lessee may pay or tender such shut-in royalties to such persons or to their credit in the depository, either jointly or separately in proportion to the interest which each owns. If Lessee transfers its interest hereunder in whole or in part Lessee shall be relieved of all obligations thereafter arising with respect to the transferred interest, and failure of the transferee to satisfy such obligations with respect to the transferred interest shall not affect the rights of Lessee with respect to any interest not so transferred. If Lessee transfers a full or undivided interest in all or any portion of the area covered by this lease, the obligation to pay or tender shut-in royalties hereunder shall be divided between Lessee and the transferee in proportion to the net acreage interest in this lease then held by each.

 

14.      Lessee, at its option, is hereby given the right and power at anytime and from time to time as a recurring right, either before or after production, as to all or any part of the lands described herein and as to any one or more of the formations hereunder, to pool or unitize the leasehold estate and the mineral estate covered by this lease with other land(s), lease or leases in the immediate vicinity for the production of oil and gas, or separately for the production of either, when in Lessee's judgment it is necessary or advisable to do so, and irrespective of whether authority similar to this exists with respect to such other land(s), lease, or leases. Likewise, units previously formed to include formations not producing oil or gas, may be reformed to exclude such non-producing formations. The forming or reforming of any unit shall be accomplished by Lessee executing and filing of record a declaration of such unitization or reformation, which declaration shall describe the unit. Any unit may include land upon which a well has theretofore been completed or upon which operations for drilling have therefore been commenced. Production, drilling or reworking operations or a well shut in for want of a market anywhere on a unit which includes all or a part of this lease shall be treated as if it were production, drilling or reworking operations or a well shut in for want of market under this lease. In lieu of the royalties elsewhere herein specified, including shut-in gas royalties, Lessor shall receive on production from the unit so pooled royalties only on the portion of such production allocated to this lease; such allocation shall be that proportion of the unit production that the total number of surface acres covered by this lease and included in the unit bears to the total number of surface acres in such unit. In addition to the foregoing, lessee shall have the right to unitize, pool, or combine all or any part of the above described lands as to one or more of the formations thereunder with other land(s) in the same general area by entering into a cooperative or unit plan of development or operation approved by any governmental authority and, from time to time, with like approval, to modify, change or terminate any such plan or agreement and, in such event, the terms, conditions, and provisions of this lease shall be deemed modified to conform to the terms, conditions, and provisions of such approved cooperative or unit plan of development or operation and, particularly, all drilling and development requirements of this lease, express or implied, shall be satisfied by compliance with the drilling and development requirements of such plan or agreement, and this lease shall not terminate or expire during the life of such plan or agreement. In the event that said above described lands or any part thereof, shall hereafter be operated under such cooperative or unit plan of development or operation whereby the production therefrom is allocated to different portions of the land covered by said plan, then the production allocated to any particular tract of land shall, for the purpose of computing the royalties to be paid hereunder to Lessor, be regarded as having been produced from the particular tract of land to which it is allocated and not to any other tract of land; and the royalty payments to be made hereunder to Lessor shall be based upon production only as so allocated

 

15.      In the event that Lessor, during the primary term of this lease, receives a bona fide offer which Lessor is willing to accept from any party offering to purchase from Lessor a lease covering any or all of the substances covered by this lease and covering all or a portion of the land described herein, with the lease becoming effective upon expiration of this lease, Lessor hereby agrees to notify Lessee in writing of said offer immediately, including in the notice the name and address of the offeror, the price offered and all other pertinent terms and conditions of the offer. Lessee, for a period of fifteen (15) days after receipt of the notice, shall have the prior and preferred right and option to purchase the lease or part thereof or interest therein, covered by the offer at the price and according to the terms and conditions specified in the offer.

 

16.      Lessee's obligations and covenants hereunder, whether express or implied, shall be subject to all federal and state, county or municipal laws, executive orders, rules and regulations and Lessee's obligations and covenants by Lessee hereunder, whether express or implied, shall be suspended at the time or from time to time as compliance with such obligations and covenants is prevented or hindered by or is in conflict with federal, state, county, or municipal laws, rules, regulations or executive orders asserted as official by or under public authority claiming jurisdiction, or Act of God, adverse field, weather, or market conditions, inability to obtain materials in the open market or transportation thereof, wars, strikes, lockouts, riots, or other conditions or circumstances not wholly controlled by Lessee, and this lease shall not be terminated in whole or in part, nor Lessee held liable in damages for failure to comply with any such obligations or covenants if compliance therewith is prevented or hindered by or is in conflict with any of the foregoing eventualities. The time during which Lessee shall be prevented from conducting drilling or reworking operations during the primary term of this lease, under the contingencies above stated, shall be added to the primary term of the lease.

 

17.      No litigation shall be initiated by Lessor with respect to any breach or default by Lessee hereunder, for a period of at leastninety days (90) days after Lessor has given Lessee written notice fully describing the breach or default, and then only if Lessee fails to remedy the breach or default, within such period. In the event the matter is litigated and there is a final judicial determination that a breach or default has occurred, this lease shall not be forfeited or canceled in whole or in part unless Lessee is given a reasonable time after said judicial determination to remedy the breach or default and Lessee fails to do so.

 

18.      Lessor hereby warrants and agrees to defend the title to the lands described above, and agrees that the lessee, at its option, shall have the right at any time to pay for Lessor, any mortgage, taxes or other liens existing, levied or assessed on or against the above described lands in the event of default of payment by Lessor and be subrogated to the rights of the holder thereof, and Lessor hereby agrees that any such payments made by Lessee for the Lessor may be deducted from any amounts of money which may become due the Lessor under the terms of this lease.

IN WITNESS WHEREOF, this lease is executed to be effective as of the date first written above, but upon execution shall be binding on the signatory and the signatory's heirs, devisees, executors, administrators, successors and assigns, whether or not this lease has been executed by all parties herein above named as Lessor.

____________________________________________        ____________________________________________

ACKNOWLEDGMENT

 

	
STATE OF

	
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COUNTY OF

	
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BE IT REMEMBERED, That on this                                      day of.    _________________,2014 , before me, a Notary Public in and for said

County and State, personally appeared

known to me to be the identical person(s) described in and who

executed the within and foregoing instrument and acknowledged to me that he/she/they executed the same as his/her/their free and voluntary act and deed for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official Seal the day and year first written above.

 

	
 

	
Notary Public

	
 

	
SEAL

	
 

Residing at  _________________________________________

	
 

	
 

	
 

My Commission Expires:  _______________________________

	
 

 

 

 

WHEN RECORDED, MAIL TO:

 

Kingdom Resources, LLC 

Address:

 

 

EXHIBIT D — FORM OF OIL AND GAS LEASE ASSIGNMENT

 

	
STATE OF COLORADO

	
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}  KNOW ALL MEN BY THESE PRESENTS:

	
 

	
COUNTY OF DOUGLAS

	
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THAT for the sum of Ten Dollars ($10.00) and other good and valuable consideration paid to it, the receipt and sufficiency of which are hereby acknowledged, KINGDOM RESOURCES, LLC, a Colorado limited liability company, whose address is 7501 Village Square Drive, Suite 205, Castle Pines, Colorado 80108 (hereinafter referred to as "Assignor") has GRANTED, SOLD, TRANSFERRED, ASSIGNED, and CONVEYED and by these presents does GRANT, SELL, TRANSFER, ASSIGN, and CONVEY unto PETROSHARE CORPORATION, a Colorado corporation, whose address is Corporate 25, 7200 S. Alton Way, #B220, Centennial, CO 80112 (hereinafter referred to as "Assignee"), all of Assignor's right, title and interest in and to the oil, gas, and mineral lease(s) set forth on Exhibit "A" attached hereto, insofar and only insofar as said lease(s) cover the lands described on Exhibit "A" (the "Leases"), all being located in Adams County, Colorado.

Reserving unto Assignor an overriding royalty interest in and to such leases to KINGDOM RESOURCES, LLC equal to the positive difference between existing lease burdens of record and _____ percent (__%) of all oil, gas and other hydrocarbons produced, saved and marketed from the Leases hereby assigned, and further reserving unto REIGN ENERGY PARTNERS, LLC an overriding royalty interest in and to such leases equal to the positive difference between existing lease burdens of record and __________ percent (___%) of all oil, gas and other hydrocarbons produced, saved and marketed from the Leases hereby assigned. The foregoing reserved overriding royalties and all other terms and conditions of this Assignment shall apply to any and all extensions, renewal and substitute leases obtained by Assignee, its successors or assigns, on the land described herein. If said Leases cover less than the full fee simple estate in the oil, gas and other hydrocarbons under any tract or tracts of the land assigned, with respect to that tract or tracts, the overriding royalty herein reserved by Assignor shall be proportionately reduced.

Assignor hereby warrants that the Leases conveyed herein shall be free and clear of any and all claims, liens, and encumbrances created by, through, or under Assignor, but not otherwise. Except for the special warranty of title set forth in the immediately preceding sentence, this Assignment of Oil and Gas Lease is made and delivered to Assignee without any warranty of title, express, implied or statutory.

The terms and provisions of this Assignment of Oil and Gas Lease shall be binding upon and inure to the benefit of the parties hereto together with their respective heirs, successors and assigns.

Executed and effective this _______ day of _________, 201__.

 

	
 

	
ASSIGNOR

 

KINGDOM RESOURCES, LLC

 

	
 

	
 

By:

	
 

	 	
 

Name:

	  
	
 

	
 

Title:

	
 

 

	
STATE OF 

	
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COUNTY OF

	
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The foregoing instrument was acknowledged before me on this _____day of, 2014, by ________________________________________________________, for Kingdom Resources, LLC, a Colorado limited liability company, on behalf of said entity.

 

 

	
(Seal)

 

		
	
 

	
Notary Public - State of Colorado

	
 

	
 

	
 

My Commission Expires:  _______________________________

	
 

 

 

Exhibit E — Form of Access and Damage Settlement Agreement

KNOW ALL MEN BY THESE PRESENTS THAT:

This Access and Damage Settlement Agreement made and entered into this ______ day of, _________2014, by and between ___________________________________________, hereinafter referred to as "Owners" and PetroShare Corporation, whose address is Corporate 25, 7200 S. Alton Way #B220, Centennial, Colorado 80112.

For and in consideration of the sum of Ten and more dollars and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, we, the undersigned each of lawful age, do hereby release acquit and forever discharge PetroShare Corporation, hereinafter referred to as "Operator", its employees, agents and contractors, from any and all losses, liabilities, claims, damages, demands and causes of action for any and all injuries and damage to the surface of the tract of land herein below described and to the appurtenances, improvements and vegetation on said tract of land owned by the undersigned, their respective employees and/or tenants, arising directly or indirectly in connection with the operations of Operator, its employees, agents and contractors, which include but is not limited to i) accessing, ii) building a drillsite, iii) drilling, completing and producing a well or wells, and iv) exercising other contractual, lease, or statutory rights of the Operator on the subject tract of land being more particularly described as follows, to wit:

A strip of land ("Access Road") in the_________ 1/4 of Section __________, Township 1 South, Range 67 West, 6th P.M., Adams County, Colorado and the tract of land for a Drillsite ("Drillsite") located in the NW1/4 of said Section __________, the Drillsite and Access Road to occupy approximately ___________ acres more or less.

The parties do hereby further agree as follows:

Operator shall pay the Sum of ___________ Thousand and No/100 Dollars ($_,000.00) per acre as surface damages to build the Access Road and Drillsite location, to drill a well(s) for the purposes of developing the minerals underlying the drilling and spacing unit comprised of Section(s) _________and ___________, Township 1 South, Range 67 West, or lands pooled therewith or adjacent thereto, and in the event the well(s) is completed as producer or in the effort thereof, then to use, install, construct and maintain gathering lines, transportation lines, and power lines as well as the ability to use, install, construct and maintain on the Drillsite equipment and facilities for production, storage, transportation and/or marketing of produced substances. Operator shall have the option to drill more than one well from the Drillsite and shall pay Owner the sum of  ___________ Thousand Five Hundred Dollars ($_,500.00) for each additional well drilled therefrom within Thirty (30) days of the date that Operator begins drilling operations on such well(s). Operator shall also have the option to expand the size of the Drillsite and Access Road by paying Owner the Sum of __________Thousand Dollars ($_,000.00) for each additional acreage, or fraction thereof, which shall not exceed ______________ (______) total acres for the Drillsite.

It is expressly agreed by the undersigned that if a well is not drilled on said Drillsite, or if the captioned premises are not entered for the purposes described herein in preparation for the drilling of a well, then and in that event, this Access and Damage Settlement Agreement shall be deemed null and void, the

 

 

payment in the amount described above for the surface damages is hereby waived and Operator shall not be required by this agreement to make such payment to the undersigned.

Access to the property shall be limited to Operator and its contractors, personnel and agents involved in the drilling and operation of such well(s) and shall not be open to the general public. Operator shall be responsible for the repair and maintenance of the Access Road and Drillsite constructed hereunder prior to termination of Operator's use. Operator shall leave all cattle guards installed, if any, permanently in place.

Operator shall comply with and be subject to all applicable hazardous materials laws and other applicable regulations or restrictions duly and validly adopted by the State of Colorado or any political subdivision thereof and agrees to indemnify and hold harmless Owner from and against any and all responsibility or liability for violation of the same by Operator's agents or employees, including responsibility for any hazardous waste spills that may be associated with Operator's use of the premises.

Upon the termination of Operator's activities on the Access Road and Drillsite, Operator agrees to restore the surface to its original condition (as nearly as practicable) including reseeding or at Owner's written request, Operator may leave the Access Road and/or Drillsite in place, as is, for Owner's use.

Operator shall indemnify and hold Owner, its officers, employees, agents, successors and assigns harmless from and against any and all liability, loss damage claims, demand actions, causes of actions, including court costs and attorney's fees which may result from property damage for personal injury to, or death to persons whomsoever, including any person using the Access Road and Drillsite when such personal injury, death loss, destruction, or damage arises because of the existence of any of the improvements or the construction, operation, maintenance, repair, removal reconstruction, or use of the roadway and Drillsite or any part thereof, except to the extent that such liability, loss damage, claims, demands actions, causes of actions, including court costs and attorney's fee arise out of the negligence, willful misconduct, or any act or omission of Owner, or its agents, employees, successors or assigns. This indemnity shall cease at such time as (i) Operator completes restoration of the Access Road or Drillsite or (ii) Owner elects in writing to have the Operator leave the Access Road and/or Drillsite in place.

The undersigned Owners, do hereby further agree that payment of the consideration as set forth above shall be full and complete payment, settlement, compromise and satisfaction of any and all of the above mentioned losses, liabilities, claims, damages demands and causes of action accrued or accruing to the undersigned, their respective employees and/or tenants arising directly or indirectly in connection with the above mentioned operations by Operator, its employees, agents and contractors and that such payment is in no way an admission of liability by Operator, its employees, agents or contractors.

Any notice or payment required or permitted to be given hereunder shall be deemed to be delivered when deposited in the U.S. Mail, postage prepaid, certified with return receipt requested, or registered mail, addressed to the party to which it is intended at the address set forth above for such part and that each party may rely on the last known address of the other party until notified by the other part, their successors or assigns.

This instrument may be executed in any number of counterparts and shall be binding upon all parties who have executed such a counterpart with the same force and effect as if all parties have signed the same document.

This Agreement shall inure to the benefit of the Owners and Operator as well as their Successors and Assignees.

 

 

  

Executed this ______ day of ____________, ________.

 

	
 

	
Name:

	
 

	
 

	
 

 

	
 

	
 

	

Signature

Owner

	
 

  

 

ACKNOWLEDGMENT

 

	
STATE OF

	
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COUNTY OF

	
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On this ______ day of __________, 2014, before me, a Notary Public, personally appeared ___________________________, known to me to be the persons described in and who executed the within instrument, and acknowledged to me that he executed the same as her free and voluntary act and deed for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed by Notarial seal the day and year first above written.

 

 

	
(S E A L )

 

		
	
 

	
NOTARY PUBLIC

	
 

	
 

	
 

My Commission Expires:  ____________________

	
 

 

PETROSHARE CORPORATION

by its representative, _____________________

_______________________________________

TITLE:    Duly Authorized Representative

 

 

	
STATE OF

	
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COUNTY OF

	
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Before me, the undersigned, a Notary Public in and for said county and state, on this _______ day of _______________, 2014, personally appeared ___________________________, the Duly Authorized Representative of PetroShare Corporation, and that said instrument was signed on behalf of said corporation and said instrument to be the free act and deed of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed by Notarial seal the day and year first above written.

 

	
(S E A L )

 

		
	
 

	
Notary Public

	
 

	
My Commission Expires:  _________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00241-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00241-of-00352.parquet"}]]