Exhibit 10.2
ASSIGNMENT OF PRODUCTION PAYMENT
| STATE OF OKLAHOMA | § | ||
| § | KNOW ALL MEN BY THESE PRESENTS: | ||
| COUNTY OF OKFUSKEE | § |
This Assignment of Production Payment (the“Assignment”), dated as of August 1, 2018 the (“Effective Date”), is by and amongN&B ENERGY, LLC, whose address is 4040 Broadway St., Suite 425 San Antonio, Texas 78209 (“Assignor”); andCE Operating, LLC, whose address is 4040 Broadway St., Suite 425 San Antonio, Texas 78209 (“CE Operating”) or CE Operating’s designee (collectively,“Assignee”). Assignor and Assignee are collectively the “Parties”.
NOW THEREFORE, in consideration of the mutual obligations contained herein, the Parties agree as follows:
Definitions. When used in this Assignment, the following terms shall have the meanings indicated below:
“Gross Proceeds” for each calendar month or portion thereof during the term of this Assignment means the amounts actually received during such period by Assignor or any successor or assignee of Assignor as revenues from the sale of Hydrocarbons (determined before calculating payments hereunder).
“Hydrocarbons”means all oil, gas, and other gaseous and liquid hydrocarbons or any combination of one or more of such substances in and under, and which may be produced, saved, and sold from, and which shall accrue and be attributable to, the Leases described on Exhibit “A”, and all unitization and pooling agreements and the units created thereby which cover or include such Leases or portions thereof.
“Leases” means those leases described on Exhibit “A”, attached hereto and incorporated herein for all purposes.
“Production Costs” are those costs, charges, and expenses incurred by Assignor subsequent to the Effective Date and prior to expiration of the term of this Assignment in connection with the Leases and listed on Exhibit “A”, expressly limited to:
(1)
costs and expenses incurred in drilling, deepening, side-tracking, plugging-back, coring, testing, logging, completing and equipping for production (including, the cost of wellhead facilities, storage tanks, separators, pumping equipment, flow lines, salt water disposal equipment, and other similar production facilities), all wells now or hereafter located on the lands covered by the Leases or on lands pooled or unitized therewith;
(2)
expenditures made and costs incurred in connection with the operation and maintenance of the Leases and the production and marketing of Hydrocarbons therefrom, such items of cost to include: (i) all costs of complying with legal requirements; (ii) all costs of lifting, producing, and handling Hydrocarbons from the Leases, including but not limited to all costs of labor, fuel, repairs, hauling, materials, supplies, utility charges, water and other costs incident thereto; (iii) costs of gathering, compressing, dehydrating, separating, treating, processing, disposing, transporting, and marketing Hydrocarbons produced from the Leases, including the cost of constructing and installing pipelines and other facilities necessary in connection therewith; (iv) all delay rentals, shut-in well payments, minimum royalties and other payments made in connection with the maintenance of the Leases; (v) the costs of all workover and other remedial well servicing operations; and (vi) the cost of all fluid injection, pressure maintenance, secondary recovery, recycling, and other enhanced recovery operations; and
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(3)
all insurance premiums to the extent insurance is maintained with respect to the Leases.
The term“Production Costs” shallnot include any administrative charges or any overhead charges paid, directly or indirectly, to the operator or operators of the Leases.
Conveyance.
Assignor, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, does hereby assign, transfer and convey unto Assignee this Production Payment in the amount(s) set forth below.
The Production Payment shall be twelve and five tenths (12.5%) percent of the Net Revenue (as defined below) attributable to and to the extent of any leasehold interest of Assignor in and to all production from the Leases, and in each case after deducting therefrom the following: (a) royalties reserved in said Lease(s); (b) all severance, production, excise, or other similar taxes measured by the Production Payment for that particular month, limited to the amount of or the value of such production; and (c) any third-party lender’s or investor’s recorded interest, including principal and interest, to the extent it encumbers the leasehold interests or extends into the Net Revenue. Any investments, loans or other contributions received by Assignor, any of its affiliates, from third parties for the purpose of drilling or operating costs which is not expended on direct drilling or operating costs, shall not be included in Production Costs as a deduction againstGross Proceeds from which the Production Payment is payable. The 12.5% share of Assignor’s net revenue interest out of which the Production Payment shall be made will not be burdened by administrative overhead costs.
The Production Payment shall be payable each month running from the Effective Date of this Assignment until Assignee has received Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00). Assignor shall also receive credit towards the Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) for the amounts received by Assignee or its designee for the proceeds of the three (3.0) percent overriding royalty interest it has on the same leases and wells listed on Exhibit “A” derived under that certain Assignment of Overriding Royalty Interest dated September 25 2018, from Assignor to Assignee, recorded as Document No. _________________________ in the Real Property Records of Okfuskee County, Oklahoma.
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Net Revenue Account. Assignor shall establish and maintain a Net Revenue account (“Net Revenue Account”) in accordance with consistently applied generally accepted accounting practices and the provisions of this Assignment, as follows:
(a)
The Net Revenue Account shall be credited with all Gross Proceeds;
(b)
The Net Revenue Account shall be debited for all Production Costs and taxes; and
(c)
The balance in the Net Revenue Account, shall be determined as of the end of each calendar month, and, if positive, shall be deemed“Net Revenue”for purposes of this Assignment.
Monthly Statement; Payment. On or before the last business day of the month following the close of each calendar month, (a) Assignor shall deliver to Assignee a statement showing, in reasonable detail, the balance of the Net Revenue Account as of the end of such calendar month, and (b) Assignor shall pay to Assignee an amount equal to 12.50% of the Net Revenue, if any, for such calendar month (the “Production Payment”). Assignee and its representatives shall have the right to audit the Net Revenue Account and records relating to the Net Revenue Account upon request, such request not to be made more than once annually, to be performed at the sole cost and expense of Assignee, except as provided below. Upon such a request, Assignor shall make available to Assignee or its designated representative all records of account and supporting documentation within thirty (30) days. Assignee may specify the time period for such audit, not to exceed twenty-four (24) months. In the event the Assignee finds any discrepancy of more than 5% in the amount of proceeds paid to Assignee and the amount of proceeds which were due to Assignee, the Assignor shall pay all of the costs and expenses of the audit. The Assignor shall promptly pay the amount of any deficiency in the proceeds paid to the Assignee hereunder which are discovered as a result of any audit, from the date originally due.
In accordance with Section 2.7(b) of that certain Asset Purchase Agreement dated July 10, 2018, between Assignor and Camber Energy, Inc., the parent company of Assignee (the “APA”), and provided the Closing (as defined in the APA) occurs and Assignee fails to pay any Unpaid Bills (as defined in the APA), Assignor may be entitled to pay such expenses and deduct the amount of such expenses from any sums payable to Assignee hereunder.
Sales Contracts. Assignor shall use commercially reasonable efforts to market or cause to be marketed all commercial quantities of Hydrocarbons. Assignor may enter into one or more Hydrocarbon processing, sales or exchange contracts (“Marketing Contracts”) under such terms as are acceptable to Assignor in its reasonable judgment; provided Assignor shall not enter into a Marketing Contract with an affiliate, whether wholly or partially owned, by Assignor unless such Marketing Contract is on substantially the same material terms and prices prevailing in the area in marketing contracts entered into by unaffiliated third parties in arm’s-length transactions.
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Assignee agrees to execute such documents as may be reasonably requested by Assignor or its permitted successors in interest, from time to time, including to evidence the unliquidated balance of the Production Payment or to evidence the termination of same upon the Production Payment having been paid in full.
Assignor reserves the right to pre-pay to Assignee the unpaid balance of the Production Payment at any time and, upon such payment, the Production Payment shall be in all things satisfied and terminated. A recordable release of the Production Payment shall be prepared to the reasonable satisfaction of Assignor, executed by Assignee, and held in escrow by an escrow officer appointed by Assignor and shall be filed of record within fourteen (14) days of the Production Payment’s termination.
Nothing contained herein shall be deemed to constitute or create a joint venture or partnership between the parties hereto.
Assignee may convey its rights under this Assignment and the Production Payment set forth herein to another party with written notice to Assignor.
TO HAVE AND TO HOLD the Production Payment assigned herein unto Assignee, its successors and assigns forever, subject to the terms and provisions hereof.
The parties agree to take all such further actions and to execute, acknowledge and deliver all such further documents that are reasonably necessary or useful in carrying out the purposes of this Assignment.
IN WITNESS WHEREOF, this Assignment is executed on the dates set forth below.
ASSIGNOR:
N&B ENERGY, LLC
| BY: | /s/ Richard N. Azar, II | ||
| Richard N. Azar, II, Manager | |||
ASSIGNEE:
CAMBER ENERGY, INC.
| BY: | /s/ Louis Schott | ||
| ITS: | Louis Schott, Interim Chief Executive Officer | ||
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| THE STATE OF TEXAS | § | ||
| § | |||
| COUNTY OF BEXAR | § |
This instrument was acknowledged before me on this 26th day of September, 2018, by Richard N. Azar, II, as Manager of N & B Energy, LLC, a Texas limited liability company, on behalf of said company.
 | /s/ Delia Sandoval | |
| Notary Public, in and for The State of Texas | ||
| THE STATE OF TEXAS | § | ||
| § | |||
| COUNTY OF BEXAR | § |
This instrument was acknowledged before me on this 26th day of September, 2018, by Louis Schott, as Interim Chief Executive Officer of Camber Energy, Inc., a Nevada corporation, on behalf of said corporation.
 | /s/ Delia Sandoval | |
| Notary Public, in and for The State of Texas | ||
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