Preview of our top selling Profit Participation and Net Profit Agreement
Cubic Energy - Form of Assignment of Net Profits Interest
Exhibit 10.6
FORM OF
ASSIGNMENT OF NET PROFITS INTEREST
THIS ASSIGNMENT OF NET PROFITS INTEREST ("Assignment") is dated and effective as of 7:00 a.m. Central Standard or Daylight Savings Time, as the case may be , 20 (the "Effective Date"), and is from CUBIC ENERGY, INC., a corporation formed under the laws of the State of Texas ("Assignor"), with principal offices at _______________________________________, to WELLS FARGO ENERGY CAPITAL, INC., a corporation formed under the laws of the State of Texas ("Assignee"), with principal offices at ---------------------------------------.
1.
GRANTING PROVISION
For and in consideration of One Hundred and No/100 Dollars ($100.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does, subject to the terms and provisions of this Assignment, hereby SELL, ASSIGN, TRANSFER and SET OVER to Assignee, as a net profits interest (the "Net Profits Interest"), an undivided five percent (5%) interest in and to the "Net Profits", as that term is defined in Section 3.2 hereinbelow, attributable to all of Assignor's right, title and interest in and to:
(a) the oil, gas, and mineral leases and the leasehold estates created
thereby and/or the lands covered thereby; the oil, gas and other
minerals (regardless of the manner of extraction) in, on and under the
lands; and all overriding royalty interests, net profits interests,
production payment interests and other payments out of or measured by
production in the lands; all as described more particularly on Exhibit
A attached hereto and made a part hereof for all purposes; and in any
lands pooled or unitized with any of the foregoing (collectively, the
"Leases", regardless of the actual character of any of the foregoing);
(b) all oil, gas, other hydrocarbons, including casinghead gas, other
liquid or gaseous substances produced in conjunction therewith or
1
derived or manufactured therefrom and any other minerals
(collectively, "Hydrocarbons") produced, mined, otherwise extracted,
saved, and marketed from or attributable to the Leases;
(c) any agreements extending the term of any of the Leases or any renewal
leases taken with respect to any of the Leases by Assignor or
Assignor's successors and assigns either while the relevant Lease or
Leases remain in force and effect or within six (6) months after the
lapse of the relevant Lease or Leases; and
(d) any and all other rights, titles, and interests in or with respect to
all voluntary or compulsory pooling and unitization agreements or
orders, farmout agreements, farmin agreements, operating agreements,
Hydrocarbon purchase and sale agreements, and all other contracts of
any kind whatsoever covering or affecting the production, extraction
or marketing of Hydrocarbons from or attributable to the Leases
(collectively, the "Property Agreements"),
such undivided interest in and to the preceding items (a), (b), (c), and (d) being referred to hereinafter as the "Subject Properties".
TO HAVE AND TO HOLD the Net Profits Interest, together with all rights and appurtenances thereto, unto Assignee and its successors and assigns forever, subject, however, to the further provisions of this Assignment.
This Assignment is made without warranty of title, either express or implied, except as to claims arising by, through or under Assignor, and is made with full transfer and subrogation of all rights and actions against all former owners of all or any part of the Subject Properties or any interest therein, and is made expressly subject to the following terms and provisions.
2.
GOVERNING DOCUMENTS
This Assignment is expressly made and accepted by Assignee subject to: (a) all applicable local, state, and federal statutes, ordinances, rules, and regulations; (b) the terms and provisions of the Leases; and (c) the Property Agreements, if any.
2
3.
CALCULATION, CHARACTERISTICS, AND DISBURSEMENT
OF NET PROFITS INTEREST
3.1 For purposes of calculating the Net Profits Interest, Assignor shall maintain an account for the Subject Properties (the "Net Profits Account") in accordance with the terms of this Assignment and good accounting practices that sets forth the charges and credits made thereto pursuant to this Assignment on a calendar month basis. Assignor shall furnish to Assignee, within thirty (30) days after the end of each calendar month, commencing with that calendar month in which the Effective Date falls, a report, in form and substance reasonably satisfactory to Assignee, that sets forth the charges and credits made to the Net Profits Account through the end of the relevant calendar month.
3.2 The term "Net Profits" shall mean an amount (not less than zero) determined for each calendar month, commencing with that in which the Effective Date falls, by (a) deducting the aggregate of any negative balance existing in the Net Profits Account at the first of such month, plus the total charges properly made thereto during such month, from (b) the total credits properly made thereto during such month. To the extent that the aggregate charges exceed aggregate credits at the end of any such month, such excess charges shall be carried forward to the succeeding month. All Payments made to Assignee on account of the Net Profits Interest shall be made entirely and exclusively out of the sums credited to the Net Profits Account pursuant to Section 3.3 hereof.
3.3 Each calendar month commencing with that in which the Effective Date falls, the Net Profits Account shall be credited with an amount equal to the sum of:
(a) the proceeds (or the market value of any proceeds not received in the
form of cash or cash equivalents) actually received during such
calendar month by Assignor from the sale or other disposition of all
Hydrocarbons produced from or attributable to the Subject Properties
after the Effective Date, after deducting therefrom those proceeds
attributable to all royalties, overriding royalties, production
payments, net profits interests, and other burdens upon, measured by,
or payable out of production from or attributable to the Subject
Properties that are outstanding in third parties and reflected of
record immediately prior to the Effective Date and that have not been
created in violation of the that certain Credit Agreement dated March
5, 2007 by and between Assignor and Assignee as amended from time to
time;
3
(b) monies received by Assignor attributable to any future contracts,
forward contracts, swap, cap or collar contracts, option contracts,
hedging contracts or other derivative contracts or similar agreements
covering oil and gas commodities or prices with respect to
Hydrocarbons produced from the Subject Properties;
(c) monies received by Assignor under any "take-or-pay" or similar
provision of any Property Agreement pertaining to the Subject
Properties;
(d) monies received by Assignor pursuant to any gas balancing agreement
pertaining to the Subject Properties;
(e) the proceeds from the sale or rental of fixtures and equipment used
with respect to the Subject Properties;
(f) monies received by Assignor pursuant to a farmout of all or a portion
of the Subject Properties;
(g) bottom hole contributions or payments made in connection with the
Subject Properties;
(h) amounts received by Assignor as an adjustment of any or leasehold
equipment upon the pooling or unitization of the Subject Properties;
(i) amounts received by Assignor as a result of an expense audit of all or
a portion of the Subject Properties;
(j) the proceeds of all insurance collected by or on behalf of Assignor on
account of its ownership of the Subject Properties as a consequence of
the loss of or damage to the Subject Properties, the personal property
or equipment located thereon or Hydrocarbons therefrom;
(k) amounts received by Assignor as a result of a refund of taxes
previously paid on the Subject Properties;
(l) the proceeds of all judgments and claims collected by Assignor as the
result of its ownership of the Subject Properties;
4
(m) rentals received by Assignor pursuant to subsurface Hydrocarbon
storage or other reservoir use arrangements concerning the Subject
Properties;
(n) any payments made to Assignor in connection with the drilling or
deferral of drilling of any on the Subject Properties;
(o) any payments received by Assignor for processing or transporting third
party Hydrocarbons;
(p) all delay rentals, shut-in payments, minimum royalties, and other
payments made to Assignor in connection with the maintenance of any
Hydrocarbon lease granted by Assignor and relating to the Subject
Properties; and
(q) any bonus or other consideration received by Assignor in connection
with the grant by Assignor of any Hydrocarbon lease relating to the
Subject Properties.
3.4 Each calendar month commencing with that in which the Effective Date falls, there shall be charged against the Net Profits Account an amount equal to the sum of the following items of cost and expense actually paid by Assignor during such calendar month from and after the Effective Date, insofar only as such items of cost and expense are attributable to the interest of Assignor in the Subject Properties, are properly allocable to the Subject Properties and the production and marketing of Hydrocarbons therefrom, have not previously been deducted in any remittance to Assignor and do not arise from or relate to gross negligence, willful misconduct or bad faith of Assignor:
(a) All costs and expenses incurred in drilling, deepening, sidetracking,
plugging-back, coring, testing, logging, completing and equipping for
production (including, without limitation, the cost of wellhead
facilities, storage tanks, separators, pumping equipment, flow lines,
salt water disposal equipment, and other similar production
facilities) of the Subject Properties;
(b) all costs and expenses incurred in the operation and maintenance of
the Subject Properties and the production and marketing of
Hydrocarbons therefrom, such items of cost to include, without
limitation: (i) all costs of complying with applicable local, state,
and federal statutes, ordinances, rules, and regulations; (ii) all
5
costs of lifting and producing Hydrocarbons from the Subject
Properties, including all costs of labor, fuel, equipment (rental and
purchase), repairs, hauling, materials, supplies, utility charges, and
other costs incident thereto; (iii) all costs of gathering,
compressing, dehydrating, separating, treating, processing,
transporting, and marketing Hydrocarbons produced from the Subject
Properties, including the costs of constructing and maintaining flow
lines and gathering lines necessary in connection with gathering,
processing and marketing production for the Subject Properties; (iv)
all direct and indirect overhead charges and operating charges paid,
pursuant to Property Agreements, to Fossil Operating, Inc. and any
non-affiliated third party operator or operators of the Subject
Properties or to others for services rendered in conducting operations
thereon (provided, however, it being explicitly agreed that there
shall not be charged against the Net Profits Account interest, fees,
costs or charges for borrowed funds), (v) all delay rentals, shut-in
payments, minimum royalties, and other payments made in connection
with the maintenance of the Leases; (vi) the costs of all workover and
other remedial servicing operations, to the extent not within the
scope of the costs and expenses addressed in (a) above; (vii) the cost
of all fluid injection, pressure maintenance, secondary recovery,
recycling, and other enhanced recovery operations; (viii) the costs of
plugging and abandonings now or hereafter located on the Subject
Properties that have once produced Hydrocarbons in paying quantities;
and (ix) amounts paid under gas balancing agreements, farm-in
agreements, bottom hole agreements and expense audits;
(c) monies paid by Assignor attributable to any future contracts, forward
contracts, swap, cap or collar contracts, option contracts, ...
View agreement details