Fill and Sign the Partially Convertible to a Working Interest at Payout Form

ASSIGNMENT OF OVERRIDING ROYALTY INTEREST (Partially Convertible to a Working Interest at Payout) State: County: Assignor: (Name and Address) Assignee: (Name and Address) Effective Date: Assignor, named above, is the owner of a working interest in an Oil, Gas, and Mineral Lease (the "Lease") on lands located in the county and state named above (the "L ands"). The Lease and Lands are described on Exhibit "A" to this Assignment. Assignor desires to assign to Assignee, named above, an overriding royalty interest in the Lease, partially convertibl e, at the option of Assignee, to a working interest at "Payout," as defined below. For adequate consideration, Assignor transfers, assigns and conveys to Assignee an overriding royalty interest in all oil, gas, and other minerals produced, saved and markete d from the Lease equal to ____% of 8/8 (the "Override"). At Payout, Assignee has the option, but not the obligation, to convert an undivided (Percentage or Fraction) of the Override to an undivided ____% working interest (the "Converted Working Interest"). For the purpose of this Assignment, Payout is defined as 7:00 a.m. on the first day of the month following the month in which Assignor has received, from Assignor's share of production (after payment of Lease royalties and all production, severance, ad valorem, excise and other pertinent taxes attributable to such production), 100% of all direct costs of equipment, mat erials, and labor (excluding any costs for overhead, office administration, insurance, amortization, or depreciation) incurred in connection with the drilling, testing, completing, equipping, a nd operating a well on the Lands, or any lands with which the Lands are pooled, attributable to the working interest owned by Assignor on the Effective Date of this Assignment. Payout, for the purpose of conversion of the Override, shall be computed on a well-by-well basis rather than on a Lease basis, if more than one well is drilled on the Lease. On a well-by-well basis, at Payout, Assignee has the option, but not the obligation, to convert the Override to the Converted Working Interest. The election by Assignee shall be accomplished, as to each well on which Payout occurs, by Assignee filing in the records of the county in which the Lands are located an instrument which declares Assignee's elect ion to convert the Override to the Converted Working Interest. The instrument shall designate the retained portion of the Override, the Converted Working Interest, the well name and locati on, and a description of the lands included in the drilling or proration unit for the well (be ing the portion of the Lands allocated to the well). Assignor shall be responsible for notifying Assignee when Payout occurs. This notification shall be a written statement delivered to Assignee by U. S. Mail, overni ght delivery, or facsimile setting forth the date on which Payout occurred. Assignor's notice of Payout shall be delivered to Assignee within a reasonable period of time after Payout. Upon completion of a well and monthly thereafter until Payout on the well, Assignor shall provide Assignee an itemized statement of all costs incurred by Assignor. Upon request by Assignee, Assignor shall promptly provide Assignee with copies of all invoices of costs listed in the itemized statements. At the end of each month, prior to the recovery of al l costs related to the well, Assignor shall provide Assignee a copy of all production reports related to the wel l, together with a statement of all income derived from production from the well. This Assignment of Override to Assignee is subject to the following: 1. The Override and Converted Working Interest are subject to the terms and provisions of the Lease, any assignments of the Lease, and any amendments, additions, or modifications t o the Lease. Assignor reserves the right to make any amendment, addition, or modification to t he Lease without Assignee's consent. 2. The Override shall be free and clear of all costs and expenses. It shall bear a ll taxes of every nature which are applicable to the Override including, but not limited to, product ion, severance, excise, gathering, transportation, or similar taxes. 3. The obligations required of Assignor in the Lease shall not be enlarged as a result of this Assignment. 4. The Override and Converted Working Interest shall be proportionately reduced in the event the Lease covers less than 100% of the mineral estate or Assignor's interest in the Lease is less than 100%. 5. Assignor reserves the right to pool Assignee's Override and Converted Working Interest without the consent of Assignee. 6. The Override and Converted Working Interest shall be applicable to the Lease, as long as it remains effective, and to any extensions or renewals obtained by Assignor or its successors or assigns. This Assignment is made by Assignor with special warranty of title, by, through, and under Assignor, but not otherwise. The terms and provisions of this Assignment shall be binding on and will inure to the benefit of Assignor and Assignee and their respective heirs, legal representatives, successors, and assigns. This Assignment is signed by Assignor and Assignee as of the date of acknowledgment of their signatures below, but is effective for all purposes as of the Effective Date stated above. Assignor Assignee [Exhibit "A": Description of the Lease and Lands]