ex10-5.htm

Exhibit 10.5

    


    ASSIGNMENT
      OF PRODUCTION PAYMENT

    


    


    THIS
      ASSIGNMENT OF PRODUCTION PAYMENT
      (the "Assignment"), dated this 9th day of November, 2007, is from South Marsh
      LLC, a Delaware limited liability company ("Assignor"), whose
      mailing address is 595 Howe Street, Suite 323, Vancouver, BC, Canada V6C 2T5,
      to
      Entek USA Inc., a Delaware corporation ("Assignee"), whose address is 5847
      San
      Felipe, Suite 3275, Houston, TX  77057.

    


    WHEREAS,
      pursuant to that Amended and
      Restated Participation Agreement, dated as of December 8, 2006, by and between
      Ridgelake Energy, Inc., a Louisiana corporation (“Ridgelake”), GulfX, LLC
      (“GulfX”), a Delaware limited liability company, and Assignor (as amended, the
“Participation Agreement”), Assignor has the right to earn interests in the Oil
      and Gas Leases described in Exhibit A attached hereto (the “Leases”), subject to
      the terms and conditions of the Participation Agreement; and

    


    WHEREAS,
      Assignor desires to grant to
      Assignee a production payment in and to production attributable to the interest,
      if any, which Assignor may earn or acquire in and to the Leases.

    


    NOW,
      THEREFORE, for good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      Assignor hereby ASSIGNS, TRANSFERS, GRANTS and
CONVEYS, effective as of 7:00 a.m., local time,
      on the date
      hereof (the "Effective Time"), unto Assignee, a production payment (the
“Production Payment”) equal to fifty percent (50%) of all oil, gas and other
      minerals which may be produced from (or otherwise attributable to) Assignor’s
      interest in and to the Leases (including any extensions or renewals thereof),
      whether now owned or acquired by Assignor within five (5) years after the date
      hereof, free of all exploration, development and operating costs but subject
      to
      (i) applicable taxes measured by production or value, including gross
      production, severance and other taxes, and (ii) all presently valid and
      subsisting royalties and other burdens on production which are of record and
      burden the Leases as of the date hereof (the “Net Proceeds”).

    


    The
      Production Payment shall terminate
      in full upon the receipt by Assignee, its successors and assigns, from the
      Production Payment, of the full sum of US$1,072,258.22, being the sum of
      US$193,280.66 (the “Discovery Share Amount”) plus US$878,987.56 (the “Sunk
      Costs”) (the Discovery Share Amount and the Sunk Costs being collectively
      referred to herein as the "Payment Amount").  The respective Sunk
      Costs attributable to each Lease are set out in Exhibit A attached
      hereto.   Net Proceeds received by Assignee attributable to a
      Lease shall be applied first to the Sunk Costs with respect to such Lease,
      and
      thereafter to the Discovery Share Amount.  At such time as the Net
      Proceeds paid to Assignee and applied toward the Discovery Share Amount are
      equal to the Discovery Share Amount, all further payments of Net Proceeds
      attributable to a Lease shall be applied to any remaining Sunk Costs with
      respect to such Lease until payments of Net Proceeds attributable to such Lease
      and applied to Sunk Costs for such Lease equal the Sunk Costs for such Lease
      as
      set out in Exhibit A.  At that time, the Production Payment shall
      automatically terminate as to such Lease only.  Upon termination of
      this Production
      Payment, in full or in part, Assignee shall, upon request, deliver to Assignor
      a
      release, executed and acknowledged by Assignee, evidencing such
      termination.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    TO
      HAVE AND TO HOLD
      the Production Payment herein assigned unto Assignee, its successors and
      assigns, until termination as herein provided; and Assignor hereby binds itself,
      its successors and assigns, to WARRANT and FOREVER
      DEFEND the Production Payment against every person whomsoever lawfully
      claiming or to claim the same or any part thereof by, through, or under
      Assignor, but not otherwise.  Assignor further gives and grants unto
      Assignee, insofar as it affects the Production Payment, full power and right
      of
      substitution and subrogation in and to all covenants and warranties by others
      given or made in respect of the Lease.

    


    Assignor
      will do, execute, acknowledge
      and deliver all and every such further acts and such other instruments as may
      be
      necessary or appropriate more fully to assure to Assignee, its successors and
      assigns, all of the properties, rights, titles, interests, estates, remedies,
      powers and privileges by this instrument transferred, assigned and conveyed
      or
      intended so to be.

    


    All
      of the terms, provisions, covenants
      and agreements herein contained shall extend to and be binding upon the parties
      hereto, their respective successors and assigns.

    


    IN
      WITNESS WHEREOF,
      Assignor has executed this Assignment before the undersigned witnesses on this
      9th day of November 2007.

    


    


    
      	
              Witnesses:

            	
              South
                Marsh LLC

            
	
               

               

               

               

               

               

              Printed
                Name: /s/ Zahra
                Ramji                                                           

               

               

              Printed
                Name: /s/ Peter
                Wilson                                                         

            	
               

              By:  Velocity
                Oil & Gas Inc., its sole member

               

               

              By: /s/
                Frank A.
                Jacobs                                                    

              Frank
                A. Jacobs

              President
                & CEO

            


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    CITY
      OF   Vancouver   

    


    PROVINCE
      OF BRITISH
      COLUMBIA                                                                                

     

    This
      instrument was acknowledged before
      me on this 9th day of November, 2007, by Frank A. Jacobs, as
      President & CEO of Velocity Oil & Gas Inc., a Nevada corporation, as
      sole member of South Marsh LLC, a Delaware limited liability company, on behalf
      of the limited liability company.

    


    
                                                                       
/s/
      Zahra
      Ramji

    Notary
      Public

    Province
      of British Columbia

    My
      Commission Expires:

    Does
      Not
      Expire

    


    


    (SEAL)

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    Exhibit
      A

     

    To
      Assignment of Production Payment, dated as of November __,
      2007,

    From
      South Marsh LLC, as Assignor, to Entek USA Inc., as Assignee

     

    


     

    LEASES

     

    


     

    
      	
              1.

            	
              OCS-G
                26190, being that certain Oil and Gas Lease of Submerged Lands Under
                the
                Outer Continental Shelf Lands Act dated June 1, 2004, by and between
                the
                United States as Lessor and Ridgelake Energy, Inc., as Lessee, covering
                all of Block 79, Viosca Knoll Area, OCS Official Protraction Diagram,
                NH
                16-07, and covering approximately 5,760 acres of submerged lands
                within
                the Outer Continental Shelf.

            


    

     

    
      	
               

            	
              Sunk
                Costs:  US $
                65,292.54

            


    

    


     

    
      	
              2.

            	
              OCS-G
                26560, being that certain Oil and Gas Lease of Submerged Lands Under
                the
                Outer Continental Shelf Lands Act dated October 1, 2004, by and between
                the United States as Lessor and Ridgelake Energy, Inc., as Lessee,
                covering all of Block A 307, High Island Area, East Addition, South
                Extension, OCS Leasing Map, Texas Map No. 7C, and covering approximately
                5,760 acres of submerged lands within the Outer Continental
                Shelf.

            


    

     

    Sunk
      Costs:  US $ 62,838.98

     

    
      	
              3.

            	
              OCS-G
                27078, being that certain Oil and Gas Lease of Submerged Lands Under
                the
                Outer Continental Shelf Lands Act dated May 1, 2005, by and between
                the
                United States as Lessor and Ridgelake Energy, Inc., as Lessee, covering
                all of Block 317, Vermilion Area, South Addition, OCS Leasing Map,
                Louisiana Map No. 3B, and covering approximately 5,000 acres of submerged
                lands within the Outer Continental
                Shelf.

            


    

     

    Sunk
      Costs:  US $ 127,478.91

     

    
      	
              4.

            	
              OCS-G
                27089, being that certain Oil and Gas Lease of Submerged Lands Under
                the
                Outer Continental Shelf Lands Act dated June 1, 2005, by and between
                the
                United States as Lessor and Ridgelake Energy, Inc., as Lessee, covering
                all of Block 138, South Marsh Island Area, South Addition, OCS Leasing
                Map
                No. 3C, and covering approximately 5,000 acres of submerged lands
                within
                the Outer Continental Shelf.

            


    

     

    Sunk
      Costs:  US $ 299,425.08

     

    5.           
       OCS-G 27091, being that certain Oil and Gas Lease of Submerged Lands Under
      the Outer Continental Shelf Lands Act dated July 1, 2005, by and between the
      United States as Lessor and Ridgelake Energy, Inc., as Lessee, covering all
      of
      Block 152, South Marsh Island Area, South Addition, OCS Leasing Map, Louisiana
      Map No. 3C, and covering approximately 2,500 acres of submerged lands within
      the
      Outer Continental Shelf.

     

    Sunk
      Costs:  US $ 323,952.05