Assignment of Net Profit Interest Agreement
Exhibit
10.4
This
Assignment of Net Profit Interest Agreement
(“Agreement”) is made and entered this 31st day of January, 2019 by
and between the individuals and entities (collectively,
“Investors”) listed on the signature page hereto, and
Bandolier Energy, LLC (“Bandolier”), 0000 Xxxxxxxx
Xxxxx, Xxxxx X, Xxxxxxxx, XX 00000.
WHEREAS,
Investors, Bandolier and Petro River Oil Corp (“Petro
River”) have entered into a Securities Purchase Agreement
dated as of January 9, 2019 (the “Purchase
Agreement”);
WHEREAS,
Bandolier owns oil & gas leases and leasehold (“Bandolier
Leasehold”) in Osage County, Oklahoma; and
WHEREAS,
pursuant to the Purchase Agreement, Petro River and Bandolier wish
to use the Investors’ funds to drill ten (10) new oil &
gas xxxxx (“Ten Xxxxx”) on the Bandolier Leasehold as
identified on Exhibit B hereto.
NOW
THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereby agree as
follows:
1)
Identity and Location of the Ten
Xxxxx: Bandolier currently owns an undivided 75% working
interest in and to 82,240 net mineral acres of oil & gas
leases, leasehold and/or concession options in Osage County,
Oklahoma. Bandolier has drilled fifteen oil & gas xxxxx on the
Bandolier Leasehold, and currently is producing from twelve of
these fifteen xxxxx. The proposed Ten Xxxxx will be drilled in
close proximity to Bandolier’s existing xxxxx and are listed
on Exhibit “B”, attached hereto and made a part hereof.
As each of the Ten Xxxxx are drilled, Bandolier will evaluate its
results before electing to complete that well, and will elect to
complete or plug said well in its sole discretion. Bandolier also
will monitor and evaluate the production results of each completed
well, and does reserve the right to change or modify the location
of some or all of the remaining Ten Xxxxx if early drilling and/or
completion results so warrant.
2)
Net Profit Interest.
a.
Bandolier hereby
agrees to assign and transfer to the Investors a 75% Net Profit
Interest (as defined below) in and to the Ten Xxxxx. Payments of
the Net Profit Interest shall be made to the Investors, pro rata,
on a quarterly basis following the full completion of the Ten Well
Program.
b.
Bandolier
owns an undivided 75% working interest in and to the leasehold on
which the Ten Xxxxx will be drilled. Bandolier will contribute the
net proceeds that accrue to 75% of said 75% working interest to the
Net Profit Interest. 25% of Bandolier’s working interest in
the Ten Xxxxx will not be attached or burdened by the Net Profit
Interest.
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This
means that Bandolier will distribute to the Investors 75% of the
proceeds that Bandolier receives to its leasehold interest (net of
royalties, overriding royalties and production taxes) from the sale
of oil, gas and other hydrocarbon substances, if any, which may be
produced, saved sold and marketed from the Ten Xxxxx. Bandolier
will deduct therefrom 75% of the Lease Operating Expenses charged
to Bandolier’s leasehold working interest in the Ten Xxxxx
plus any administrative and overhead expenses reasonably allocated
to the Ten Xxxxx. Such net payment to the Investors is referred to
as the “Net Profit Interest.”
c.
For all purposes
under this Agreement, “Lease Operating Expenses” shall
be defined to include all costs incurred to run, produce, maintain,
and repair a well and its equipment and leasehold from and after
its first day of production. These expenses shall include but not
be limited to the cost of all labor, supplies, equipment and
services required to keep the well producing, fuel and or
electricity, administrative and allocated overhead expenses, road
and location maintenance, and ultimately well plugging and site
restoration.
d.
Notwithstanding
anything to the contrary, the Net Profit Interest payable to any
Investor shall be proportionately reduced by any conversion of the
Series A Preferred Stock by such Investor.
3)
Record Title: Bandolier will
continue to hold record title as to its undivided 75% working
interest in and to the Ten Xxxxx.
4)
Option to Participate in the
Subsequent Drilling Program: If Bandolier elects to drill
more xxxxx on the Bandolier Leasehold after it completes the
drilling of the Ten Xxxxx, within 2 years of the date hereof, each
of the Investors will have the right to participate in and fund the
drilling and production of the next ten xxxxx drilled (the
“Subsequent Ten Well Program”) on the same terms and
conditions and at the same percentage of Net Profits ownership set
forth in the Purchase Agreement and this Agreement for the Ten
Xxxxx. As such, Investors in the Subsequent Ten Well Program will
pay 100% of Bandolier’s share of the cost to drill and
complete said xxxxx in order to earn a Net Profit Interest based
upon 75% of Bandolier’s working interest
therein.
Investors will need
to exercise its right to participate in the Subsequent Ten Well
Program within 30 days of receipt of written notice by Bandolier.
If only some of the Investors wish to participate in said
subsequent drilling program, the amount not funded by the
non-interested investor(s) will be offered to those investors who
do wish to fund and participate in the subsequent drilling program,
pro rata.
5)
Notices. Notices hereunder
shall be given in writing and delivered in person, via email, or by
Western Union or certified mail, return receipt requested, to the
addresses of the parties as set forth in Exhibit "A".
6)
Counterparts. This agreement
may be executed in one or more counterparts, each of which, when
properly executed, shall be deemed an original.
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7)
Investment Covenant. Each Investor: (i)
acknowledges that the interest purchased hereunder is being sold
without registration under the Securities Act of 1933, as amended,
nor under similar provisions of state law; (ii) represents and
warrants to Bandolier and the other investors that it is acquiring
such interest without a view to the distribution thereof; and (iii)
agrees not to transfer or attempt to transfer such interest without
registration under that act and any applicable state securities
laws, unless exemptions form such registration requirements are
available. The Investors recognize that the oil and gas business is
highly speculative and that Bandolier makes no guarantee or
representation to any Investor as to the possibility or the
probability of gain or against loss from the conduct of the Ten
Xxxxx. Bandolier has not made nor does it herewith make any
representation as to title to the leases subject to this Agreement.
Bandolier shall exercise diligence and prudence in approving title
to the leasehold as allowed by this Agreement, but shall assume no
liability for errors it may make in connection therewith, excluding
those errors caused by Bandolier's lack of diligence or prudence.
The Investors understand and agree that their liabilities hereunder
may be joint and several; provided, however, that the Investors
herewith agree to cross-indemnify and mutually hold harmless each
other with respect to any liability or loss an Investor may suffer
hereunder in excess of an Investor's proportionate share thereof,
it being the intent that liabilities of the venture shall be borne
by the Investors based on their respective shares of interest as
shown in Columns III of Exhibit "A". The references herein to
securities laws shall not be deemed an admission by any party that
an interest in Net Profit Interest or in the Agreement constitute a
security. This agreement supersedes all prior representations by
Bandolier to the Investors. The rights of the Investors in and to
the leases subject to the Agreement are specifically subject to the
terms of the leases, the Industry Agreement and all attachments
thereto.
8)
Assignability. An Investor may not assign
nor sub-divide its Net Profit Interest without the advance written
consent of Bandolier, which consent may not be unreasonably
withheld.
IN
WITNESS WHEREOF, this Assignment of Net Profit Interest Agreement
is executed the date indicated below by the parties
hereto.
Bandolier Energy,
LLC
By:_______________________
Name:
Xxxxxxx Xxxxxxx
Title:
Manager
INVESTOR SIGNATURE PAGE
__________________________
By:_______________________
Name
Title
Address:
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Exhibit B
List of
Ten Xxxxx to be Drilled
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Well Name
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Qtr
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Qtr
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Qtr
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Qtr
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Section
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Township
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Range
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County
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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Osage County, OK
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B-1
