Purchase and Sale Agreement dated January 11, 2019, by and between Manzano, LLC and Manzano Energy Partners, II, LLC, as seller and Pacific Energy Development Corp., as purchaser

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBITS

Exhibit A – Subject Interests

Exhibit B – Wells and Interests

Exhibit C – Personal Property

Exhibit D – Contracts

Exhibit E – Assignment and Bill of Sale

Schedule 5.21- Suspense Accounts

 

 

 

This Purchase and Sale Agreement (this “Agreement”) is made and entered into this 11th day of January, 2019, by and between MANZANO, LLC, a New Mexico limited liability company, and MANZANO ENERGY PARTNERS II, LLC, a Delaware limited liability company (collectively "Seller"); and PACIFIC ENERGY DEVELOPMENT CORPORATION, a Nevada corporation (“Buyer”). Buyer and Seller are collectively referred to herein as the “Parties”, and are sometimes referred to individually as a “Party.”

 

WHEREAS, Seller is willing to sell to Buyer, and Buyer is willing to purchase from Seller, the Assets (as hereinafter defined), all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual benefits derived and to be derived from this Agreement by each Party, Seller and Buyer hereby agree as follows:

 

(a)           the oil, gas and/or mineral leases, described or referred to in Exhibit A attached hereto, together with all amendments, supplements, renewals, extensions or ratifications thereof, all surface rights and estates, and all oil, gas and/or mineral leasehold interests in and to the lands described in Exhibit A attached hereto (the “Leases”), and any and all lands covered by the Leases (the “Lands”) and all Leases and Lands related to the Wells (defined below) (collectively, the “Subject Interests,” or singularly, a “Subject Interest”);

(b)           all reversionary, back-in, net profits, carried, convertible, non-consent, operating rights and other interests in, incident to or appurtenant to the Subject Interests or Wells;

(c)           (i) all rights to use and occupy the surface of and the subsurface depths under the Subject Interests, insofar only as such rights pertain to the Subject Interests; (ii) all rights in any pooled, communitized or unitized acreage by virtue of any Subject Interest being a part thereof, including all Hydrocarbons produced after the Effective Time attributable to the Subject Interests or any such pool or unit allocated to any such Subject Interest;

 

(d)           all wells located on the Lands or on lands with which the Subject Interests may have been pooled, communitized or unitized (whether producing, shut in or abandoned, and whether for production, injection or disposal), including, without limitation, the wells described in Exhibit B attached hereto (such wells, together with the behind pipe, proved developed nonproducing, proved undeveloped and unproved wells or well locations identified on Exhibit B being collectively called the “Wells”);

(e)           all easements, rights-of-way, surface leases, surface use agreements, surface fee or other surface or subsurface interests and estates related to or used or useful in connection with the Subject Interests, but insofar only as they pertain to the Subject Interests or the Wells (the “Easements”), including, without limitation, the Easements described or referred to in Exhibit A attached hereto;

(f)           all permits, licenses, franchises, registrations, certificates, exemptions, consents, approvals and other similar rights and privileges related to or used or useful in connection with the ownership or operation of the Subject Interests, the Wells or the Easements, but insofar only as they pertain to the Subject Interests or the Wells (the “Permits”);

(g)           all personal property, equipment, fixtures, inventory and improvements located on or used or useful in connection with the Subject Interests, the Wells or the Easements or with the production, treatment, gathering, transportation, compression, sale, or disposal of oil, gas or other hydrocarbons (collectively, “Hydrocarbons”), byproducts or waste produced therefrom or attributable thereto, including, without limitation, wellhead equipment, pumps, pumping units, Hydrocarbon measurement facilities, flowlines, gathering systems, piping, pipelines, compressors, tanks, buildings, treatment facilities, injection facilities, disposal facilities, compression facilities, and other materials, supplies, equipment, facilities and machinery, but only insofar as any of the foregoing pertain to the Subject Interests, the Easements or the Wells (collectively, the “Personal Property”) including, without limitation, the Personal Property described or referred to in Exhibit C attached hereto;

(h)           all contracts, agreements and other written agreements including, without limitation, all production sales contracts, term assignments, farmout agreements, operating agreements, service agreements, equipment leases, division orders, unit agreements, gas gathering and transportation agreements, water disposal agreements and other similar agreements, but only to the extent the same relate to the Subject Interests, the Wells, the Easements, the Permits, the Personal Property or the G&G Data (defined below) (collectively, the “Contracts”) including, without limitation, the Contracts described or referred to in Exhibit D attached hereto;

(i)           originals of all books, records, files, muniments of title, reports and similar documents and materials that relate to the foregoing interests and that are in the possession or control of, or maintained by, Seller, including, without limitation, all contract files, title files, title records, title opinions, abstracts, property ownership reports, well files, well logs, well tests, maps, engineering data and reports, health, environmental and safety information and records, regulatory records, accounting and financial records, production records, tax records and operational records, (the “Records”);

 

(j)           (i) all claims, rights and causes of action including, without limitation, causes of action for breach of warranty, against third parties, asserted and unasserted, known and unknown, but only to the extent such claims, rights and causes of action affect the value of any of the foregoing interests after the Effective Time, and where necessary to give effect to the assignment of such rights, claims and causes of action, Seller grants to the Buyer the right to be subrogated to such rights, claims and causes of action; and (ii) all claims, rights and causes of action including, without limitation, causes of action for breach of warranty, against third parties, asserted and unasserted, known and unknown, but only to the extent such claims, rights and causes of action affect the value of any of the foregoing interests before or on the Effective Time but only to the extent that they relate to Assumed Obligations for which Buyer is providing indemnity hereunder, and where necessary to give effect to the assignment of such rights, claims and causes of action, Seller grants to the Buyer the right to be subrogated to such rights, claims and causes of action;

(k)           all geological data (including, without limitation, raw data and interpretive data whether in written or electronic form), insofar only as it pertains to the Subject Interests, excluding, however, any such data that is subject to contractual restriction requiring the consent of any third party to its disclosure, for which Seller is unable to obtain such consent after making a reasonable effort to do so (the “G&G Data”);

(l)           all rights and benefits arising from or in connection with any wellhead gas imbalances or pipeline imbalances attributable to Hydrocarbons produced from the Wells as of the Effective Time; and

(m)           all Hydrocarbons relating to the Assets in storage or existing in stock tanks, pipelines and/or plants (including inventory).

SAVE AND EXCEPT THE EXCLUDED ASSETS, AS DESCRIBED IN SECTION 1.03, BELOW.

Section 1.03                                Excluded Assets. There is excepted and excluded from the Assets, except as otherwise limited below, all of Seller’s right, title and interest in and to the following (the “Excluded Assets”):

 

 

 

 

The term “Good and Defensible Title” shall mean such title that:

 

(a)           is free and clear of all liens, defects, obligations and encumbrances, except for Permitted Encumbrances;

(b)           with respect to the Wells, entitles Seller to receive not less than the net revenue interest, royalty interest, mineral interest and/or overriding royalty interest set forth in Exhibit A or Exhibit B, as applicable, in all hydrocarbons produced from the Well;

(c)           with respect to the Wells, obligates Seller to bear not more than the working interest set forth in Exhibit A or Exhibit B, as applicable, in the Assets without increase at any time during the productive life or abandonment thereof unless there is a corresponding proportionate increase in the applicable net revenue interest; and

(d)           with respect to the Wells, Seller’s interest in the Assets is readily deducible from the real property records of the county in which the Assets are located.

The term “Permitted Encumbrances” shall mean any of the following matters to the extent the same are valid and subsisting and affect the Assets:

(a)           the Leases and Contracts set forth in Exhibit A and Exhibit D, to the extent complete executed copies of the same (with all exhibits, schedules and attachments) are included in the Records and the same do not (i) operate to reduce the respective Net Revenue Interests of Seller, or Buyer from and after the Effective Time, below those set forth in Exhibit B, (ii) increase the respective Working Interests of Seller, or Buyer from and after the Effective Time, above those set forth in Exhibit B without a corresponding increase in the subject Net Revenue Interests, and (iii) delay or prevent timely drilling and development of the Subject Interests or receipt of proceeds of Hydrocarbon production therefrom, or materially interfere with, diminish or detract from the operation, development, ownership or value of the affected Asset;

 

 

(b)           any unfiled materialman’s, mechanics’, repairman’s, employees’, contractors’, operators’ liens or other similar liens or charges for liquidated amounts arising in the ordinary course of business where payment of such amounts is not delinquent, and (i) that Seller has agreed to retain or pay pursuant to the terms hereof, or (ii) for which Seller is responsible for paying or releasing at the Closing;

 

(c)           any current period liens for taxes and assessments affecting the Assets that are not yet due or delinquent, to the extent Seller has agreed to pay the same pursuant to the terms hereof or which are to be prorated pursuant to the terms hereof;

(d)           (i) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, hunting, lodging, canals, ditches, reservoirs or the like, and (ii) easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other similar rights-of-way on, over or in respect of property owned or leased by Seller or over which Seller owns rights-of-way, easements, permits or licenses, in each case to the extent that they do not materially interfere with, diminish or detract from the operation, development, ownership or value of the affected Asset;

(e)           all royalties, overriding royalties, net profits interests, carried interests, production payments, reversionary interests and other burdens on or deductions from the proceeds of production created or in existence as of the Effective Time, to the extent recorded and disclosed by Seller to Buyer, provided that such matters do not operate to reduce the respective Net Revenue Interests of Seller, or Buyer from and after the Effective Time, below those set forth in Exhibit B or increase the respective Working Interests of Seller, or Buyer from and after the Effective Time, above those set forth in Exhibit B without a corresponding increase in the subject Net Revenue Interests;

 

(f)           preferential rights to purchase or similar agreements with respect to which (i) written waivers or consents are obtained from the appropriate parties for the transactions contemplated hereby, or (ii) required written notices have been given for the transactions contemplated hereby to the holders of such rights and the appropriate period for asserting such rights has expired without an exercise of such rights;

(g)           required third party consents to assignments or similar agreements with respect to which written waivers or consents are obtained from the appropriate parties for the transactions contemplated hereby;

(h)           all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities (defined below) in connection with the sale or conveyance of oil and gas leases or interests therein that are customarily obtained subsequent to such sale or conveyance;

(i)           rights reserved to or vested in any Governmental Authority to control or regulate any of the Assets and the applicable laws, rules, and regulations of such Governmental Authorities; and

 

(k)           liens and encumbrances which are released at Closing pursuant to Section 10.07 hereof.

(a)           Buyer shall have the right to conduct or cause its environmental consultant (“Buyer’s Environmental Consultant”) to conduct an environmental review of the Assets prior to Closing (“Buyer’s Environmental Review”). The cost and expense of Buyer’s Environmental Review, if any, shall be borne solely by Buyer. Buyer shall (and shall cause Buyer’s Environmental Consultants to): (i) consult with Seller before conducting any work comprising Buyer’s Environmental Review, (ii) perform all such work in a safe and workmanlike manner and so as to not unreasonably interfere with Seller’s operations, and (iii) comply with all applicable laws, rules, and regulations. Seller will assist Buyer in obtaining any third-party consents that are required in order to perform any work comprising Buyer’s Environmental Review. Seller shall have the right to have a representative or representatives accompany Buyer and Buyer’s Environmental Consultant at all times during Buyer’s Environmental Review, and Buyer shall give Seller notice not less than 24 hours before any visits by Buyer or Buyer’s Environmental Consultant to the Assets.

 

(b)           Unless otherwise required by applicable law, Buyer shall (and shall cause Buyer’s Environmental Consultant to) treat confidentially any matters revealed by Buyer’s Environmental Review and any reports or data generated from such review (the “Environmental Information”), and unless required by law or applicable judicial process Buyer shall not (and shall cause Buyer’s Environmental Consultant to not) disclose any Environmental Information to any Governmental Authority or other third party (other than Buyer's officers, directors, attorneys, accountants, lenders, financial advisors and equity holders) without the prior written consent of Seller. Unless otherwise required by law, Buyer may use the Environmental Information only in connection with the transactions contemplated by this Agreement. If Buyer, Buyer’s Environmental Consultant, or any third party to whom Buyer has provided any Environmental Information become legally compelled to disclose any of the Environmental Information, Buyer shall provide Seller with prompt notice sufficiently prior to any such disclosure so as to allow Seller to file any protective order, or seek any other remedy, as it deems appropriate under the circumstances.

 

 

Seller represents and warrants to Buyer that:

 

 

   (a) No litigation, arbitration, investigation or other proceeding of any Governmental Authority or other party is pending or, to the knowledge of Seller, threatened against Seller affecting the Assets, nor, to the knowledge of Seller, are there any facts or circumstances existing which could reasonably be expected to give rise to any such litigation, arbitration, investigation or proceeding; and (b) Seller is not subject to any outstanding injunction, judgment, order, decree, settlement agreement, conciliation agreement, letter of commitment, deficiency letter or ruling affecting the Assets (other than routine oil and gas field regulatory orders applicable generally to the oil and gas industry). There is no litigation, proceeding or investigation pending or, to the knowledge of Seller, threatened against or affecting Seller that questions the validity or enforceability of this Agreement or the transactions contemplated hereby.

 

 

  Except as specifically identified in Exhibit A, all of the Leases are in full force and effect insofar as they cover the lands described on Exhibit A, as to those depths covered by such Leases, as specified in the exhibits attached to this Agreement, and Seller is not in default with respect to any of its material obligations under any of the Leases. Seller has not received, either verbally or in writing, any notice of default or breach under any of the Leases which default or breach has not been cured or remedied to the satisfaction of the applicable lessor. The actual net mineral acres owned by Seller in each Lease is at least the net mineral acres represented in Exhibit A for such Lease. The actual net mineral acres owned by Seller in each Lease has no greater royalty and other burdens on production (including overriding royalty interests) than as are of record as of the date of this Agreement.

 The following are true regarding oil and gas operations involving the Assets:

(a)           none of the Wells have been produced in excess of their allowable such that they are subject to being shut-in or to any overproduction penalty, and Seller has not received any payment for Hydrocarbon production from any Well which is subject to refund or recoupment out of future production;

(b)           there have been no changes proposed to reduce the production allowable for any Well;

(c)           Seller has complied with the provisions and requirements of all laws, rules, regulations and Permits applicable to the Assets and all of the Wells have been drilled and completed, operated, and produced in accordance with good oil and gas field practices and in compliance in all material respects with the applicable Leases and Contracts, and applicable laws, rules, regulations and Permits;

 

(e)           proceeds from the sale of Hydrocarbons produced from and attributable to the Assets are being received by Seller in a timely manner and are not being held in suspense for any reason;

 

(f)           no person has any call on, option to purchase, or similar rights with respect to Hydrocarbon production attributable to the Assets for a price less than the generally prevailing market price at the time of production;

 

(g)           all royalties, overriding royalties, compensatory royalties and other payments due from or in respect of Hydrocarbon production from the Assets, have been or will be, prior to the Closing Date, properly and correctly paid or provided for in all respects, except for those for which Seller has a legal right to suspend;

 

 

(h)           none of the Wells have a payout balance which will result in a reduction in Seller’s interest therein after payout occurs; and

 

(i)           all of the Wells that have been drilled and completed have been drilled and completed on lands currently covered by the Leases or on lands properly pooled or unitized therewith.

 

(a)           none of the Hydrocarbon Sales Agreements (defined below) will require as of or after the Closing Date, Buyer to sell or deliver Hydrocarbons for a price materially less than the generally prevailing market price that would have been, or would be, received pursuant to an arm’s-length contract for a term of one month with an unaffiliated third-party purchaser;

 

(b)           there have been no claims from any third party for any price reduction or increase or volume reduction or increase under any of the Hydrocarbon Sales Agreements, and Seller has not made any claims for any price reduction or increase or volume reduction or increase under any of the Hydrocarbon Sales Agreements;

 

(c)           to the knowledge of Seller, payments for Hydrocarbons sold pursuant to each Hydrocarbon Sales Agreement have been made (subject to adjustment in accordance with such Hydrocarbon Sales Agreements) in accordance with prices or price-setting mechanisms set forth in such Hydrocarbon Sales Agreements;

 

(d)           no purchaser under any Hydrocarbon Sales Agreement has notified Seller (or, to the knowledge of Seller, the operator of any Asset) of its intent to cancel, terminate, or renegotiate any Hydrocarbon Sales Agreement or has otherwise failed or refused to take and pay for Hydrocarbons in the quantities and at the price set out in any Hydrocarbon Sales Agreement, whether such failure or refusal was pursuant to any force majeure, market out, or similar provisions contained in such Hydrocarbon Sales Agreement or otherwise;

 

(e)           Seller is not obligated in any Hydrocarbon Sales Agreement by virtue of any prepayment, “take-or-pay” or similar provision, a production payment, or any other arrangements to deliver Hydrocarbons produced from an Asset at some future time without then and thereafter receiving full payment therefor;

 

(f)           the Hydrocarbon Sales Agreements are of the type generally found in the oil and gas industry, and do not, individually or in the aggregate, contain unusual or unduly burdensome provisions;

 

(g)           there are no Hydrocarbon Sales Agreements pertaining to the Assets that provide for a fixed price that cannot be cancelled at any time upon ninety (90) days (or less) prior notice;

 

 

(h)           the Assets are not subject to any Hydrocarbon Sales Agreements or gathering or transportation contracts which include provisions for hedging, price risk management or other similar financial arrangements or transactions which will affect or burden the Assets from and after the Closing; and

 

(i)           the Assets are not subject to any written agreements relating to the sale of crude oil.

 

For purposes of this Agreement, the term “Hydrocarbon Sales Agreement” means any sales, purchase or marketing Contract that is currently in effect and under which Seller is a seller of Hydrocarbons produced from the Assets (other than “spot” sales agreements entered into in the ordinary course of business with a term of three (3) months or less, terminable by Seller without penalty on 30 days' notice or less, and which provide for a price not less than the market price that would be received pursuant to an arms-length contract for the same term with an unaffiliated third party purchaser).

 

 

 

 

 

 

 

Section 5.21 Suspense Accounts. Schedule 5.21 sets forth a true and complete amount, as of January 1, 2019, of all third party proceeds of production from the Assets being held in suspense by Seller or any third party.

 

Buyer represents and warrants to Seller that:

 

 

 

(a)           operate the Assets in a good and workmanlike manner consistent with its past practices, and in material compliance with all applicable Leases, Contracts, laws, rules, regulations and Permits;

(b)           carry on its business with respect to the Assets in substantially the same manner as before execution of this Agreement;

(c)           use commercially reasonable efforts to maintain in full force and effect all Leases;

 

(d)           except to the extent necessary or advisable to avoid forfeiture or penalties, not enter into agreements to drill new wells or to rework, plug back, deepen, plug or abandon any Well, nor commence any drilling, reworking or completing or other operations on the Assets which requires expenditures exceeding $50,000 (net to Seller's interest) for each operation without providing a non-consent election to Buyer as would be applicable under the applicable operating agreement;

(e)           use commercially reasonable efforts to keep Buyer reasonably apprised of any drilling, re-drilling or completion operations proposed or conducted by Seller, or otherwise, with respect to the Assets;

(f)           not voluntarily abandon any of the Wells other than as required pursuant to the terms of a Lease or by applicable Law; provided that Seller shall notify Buyer prior to such abandonment;

(g)           maintain all Permits, bonds and guaranties affecting the Assets and will make all filings that Seller is required to make under applicable Law with respect to the Assets;

(h)           maintain the books of account and Records relating to the Assets in the usual and ordinary manner, in accordance with its usual accounting practices;

(i)           not, without the prior written consent of Buyer (which consent shall be in Buyer’s sole discretion), (i) enter into any agreement or arrangement transferring, selling or encumbering any of the Assets (other than in the ordinary course of business, consistent with past practices, and solely for ordinary course sales of production, inventory or salvage); (ii) grant any preferential or other right to purchase or agree to require the consent of any third party not otherwise required to consent to the transfer and assignment of the Assets to Buyer; and (iii) incur or agree to incur any contractual obligation or liability (absolute or contingent) with respect to the Assets exceeding $50,000 (net to Seller’s pre-Closing interest);

(j)           not, without the prior written consent of Buyer (which consent shall not be unreasonably withheld, delayed or conditioned), enter into any new sales contracts or supply contracts which cannot be cancelled upon ninety (90) days or less prior notice;

(k)           to the extent known to Seller, provide Buyer with written notice of any claims, actions, causes of action or suit, litigation or proceeding initiated against Seller or any third-party operator which affect any of the Assets;

(m)           promptly provide Buyer with copies of all AFE’s, drilling reports, notices, demands, regulatory filings and notices and division orders concerning the Assets;

 

 

(n)           not, without the prior written consent of Buyer, terminate, extend, or materially amend, violate, breach or default under, any Material Contract or Lease;

(o)           not waive, compromise or settle any material right or claim with respect to any of the Leases or Wells;

(p)           maintain insurance coverage on the Assets in the amounts and coverages and of the types presently in force;

(q)           not, without the prior written consent of Buyer, make any election (or fail to make an election the result of which is) to go non-consent or to not participate in any operation with respect to the Assets;

(r)           duly and timely file all tax returns relating to the Assets that are required to be filed prior to the Closing Date and will duly and timely pay all taxes or assessments relating to the Assets that become due and payable prior to the Closing Date;

(s)           notify Buyer if any Lease terminates promptly upon learning of such termination;

(t)           not enter into or amend any Affiliate Contract applicable to the Assets;

(u)           give Buyer the opportunity to discuss matters related to the Assets with such officers, accountants, consultants and counsel of Seller as Buyer deems reasonably necessary or appropriate for the purpose of familiarizing itself with the Assets;

(v)           cause its employees to furnish Buyer with such financial and operating data and other information with respect to the Assets as Buyer may from time to time reasonably request; and

(x)           not enter into an agreement with respect to any of the foregoing that it is not permitted to do under this Section 7.01.

 

 

Section 7.06 Revenues, Costs and Expenses.

 

 

(b)           Except as expressly provided otherwise in this Agreement, Seller shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production, and other proceeds) and shall remain responsible (by payment, through the adjustments to the Purchase Price under this Agreement or otherwise) for all Property Costs, in each case attributable to the Assets for the period of time prior to the Effective Time. Except as expressly provided otherwise in this Agreement, and subject to the occurrence of Closing, Buyer shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production, and other proceeds), and shall be responsible for (by payment, through the adjustments to the Purchase Price under this Agreement or otherwise) all Property Costs, in each case attributable to the Assets for the period of time commencing at the Effective Time.

(c)           After the Parties’ agreement upon the final Closing Statement, (i) if either Party receives monies belonging to the other Party, including proceeds of production, then such amount shall, within thirty (30) days after the end of the calendar month in which such amounts were received, be paid over to the proper Party, (ii) if either Party pays monies for Property Costs which are the obligation of the other Party, then such other Party shall, within thirty (30) days after the end of the calendar month in which the applicable invoice and proof of payment of such invoice were received, reimburse the Party which paid such Property Costs, (iii) if a Party receives an invoice of an expense or obligation which is owed by the other Party, such Party receiving the invoice shall promptly forward such invoice to the Party obligated to pay the same, and (iv) if an invoice or other evidence of an obligation is received by a Party, which is partially an obligation of both Seller and Buyer, then the Parties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee thereof.

 

Section 7.07 Seller's Knowledge.  If after the date of this Agreement, Seller obtains knowledge of any fact which results in any representation or warranty of Buyer contained herein being inaccurate in any respect, Seller will promptly provide Buyer with written notice thereof.

Section 7.08 Audit Rights.   Seller shall (i) cooperate with Buyer and shall cause to be prepared and delivered to Buyer the financial statements related to the operations of the Assets in such form and covering such periods as may be required by applicable securities laws to be filed by Buyer or its affiliates with the Securities and Exchange Commission as a result of or in connection with the transactions contemplated by this Agreement and (ii) make available to Buyer and its representatives prior to and following the Closing any and all existing information and documents in the possession of Seller that Buyer may reasonably require to comply with Buyer’s tax and financial reporting requirements and audits, including any filings with any Governmental Authority and filings that may be required by the Securities and Exchange Commission under the Securities Act of 1933 and/or the Securities Exchange Act of 1934. Without limiting the generality of the foregoing, Seller will use its commercially reasonable efforts after execution of this Agreement and following Closing to cooperate with the independent auditors chosen by Buyer (“Buyer’s Auditor”) in connection with their audit or review of any revenue and expense records pertaining to the Assets that Buyer or any of its affiliates requires to comply with their tax, financial and other reporting requirements. Buyer’s cooperation will include (i) full access to Seller’s employees and representatives who were responsible for preparing or maintaining the revenue and expense records and work papers and other supporting documents used in the preparation of such financial statements as may be required by Buyer’s Auditor to perform an audit or conduct a review in accordance with generally accepted auditing standards or to otherwise verify such financial statements; (ii) delivery of one or more customary representation letters from Seller to Buyer’s Auditor that are reasonably requested by Buyer to allow such auditors to complete an audit (or review of any financial statements), and to issue an opinion acceptable to Buyer’s Auditor with respect to an audit or review of those revenue and expense records required pursuant to this Section 7.08, and (iii) obtaining the consent of the independent auditor of Seller that conducted any audit of such financial statements to be named as an expert in any report filed by Buyer with the Securities and Exchange Commission. Buyer will reimburse Seller, within ten (10) Business Days after demand therefor, for any reasonable out-of-pocket and overhead costs incurred by Seller in complying with the provisions of this Section 7.08.

The obligations of Seller to consummate the transaction provided for in this Agreement are subject, at the option of Seller, to the fulfillment on or prior to the Closing Date of each of the following conditions:

 

 

The obligations of Buyer to consummate the transaction provided for in this Agreement are subject, at the option of Buyer, to the fulfillment on or prior to the Closing Date of each of the following conditions:

 

 

(a)           At the Closing, the Purchase Price shall be increased by the following amounts to the extent known:

(i)           the amount of all prepaid ad valorem, property or similar taxes and assessments based upon or measured by ownership of the Assets, insofar as such prepaid taxes are attributable to periods of time after the Effective Time;

 

(ii)           an amount equal to all Property Costs paid by Seller that are attributable to the Assets and attributable to the period of time from and after the Effective Time;

 

(iii)           unless collected by Seller prior to Closing, the value of all merchantable Hydrocarbons attributable to the Wells in storage as of the Effective Time above the sales connection or upstream of the applicable sales meter, such value to be the current market price as of the date of this Agreement or the price paid, less taxes and gravity adjustments deducted by the purchaser of such Hydrocarbons;

 

 

(v)           any other amount provided for in this Agreement or agreed upon by Buyer and Seller.

 

(b)           At the Closing, the Purchase Price shall be decreased by the following amounts to the extent known:

 

(i)           an amount equal to all unpaid ad valorem, property, production, severance and similar taxes and assessments based upon or measured by the ownership of the Assets that are attributable to periods of time prior to the Effective Time, which amounts shall, to the extent not actually assessed, be computed based on such taxes and assessments for the preceding tax year (such amount to be prorated for the period of Seller’s and Buyer’s ownership before and after the Effective Time);

 

(ii)           an amount equal to all revenues collected by Seller with respect to the Assets and attributable to Hydrocarbons produced after the Effective Time;

 

(iii)           an amount equal to all cash in, or attributable to, accounts in which third party proceeds of production from the Assets are being held in suspense by Seller (the “Suspense Accounts”), for which Buyer has assumed responsibility under Section 12.02;

 

(iv)           an amount equal to all Property Costs paid by the Buyer that are attributable to the Assets and attributable to the period of time prior to the Effective Time; and

 

(v)           any other amount provided for in this Agreement or agreed upon by Buyer and Seller.

 

(c)           The adjustments described in Sections 10.02(a) and (b) are hereinafter referred to as the “Purchase Price Adjustments.”

 

(a)           On or before two (2) months after the Closing Date, Seller shall prepare and deliver to Buyer a revised Closing Statement setting forth the actual Purchase Price Adjustments. To the extent reasonably required by Seller, Buyer shall assist in the preparation of the revised Closing Statement. Seller shall provide Buyer such data and information as Buyer may reasonably request supporting the amounts reflected on the revised Closing Statement in order to permit Buyer to perform or cause to be performed an audit. The revised Closing Statement shall become final and binding upon the parties on the sixtieth (60th) day following receipt thereof by Buyer (the “Final Settlement Date”).

 

 

(b)           If the amount of the Purchase Price as set forth on the Final Statement (defined below) exceeds the amount of the estimated Purchase Price paid at the Closing, then Buyer will pay to Seller the amount by which the Purchase Price as set forth on the Final Statement exceeds the amount of the estimated Purchase Price paid at the Closing within five (5) Business Days after the Final Settlement Date. If the amount of the Purchase Price as set forth on the Final Statement is less than the amount of the estimated Purchase Price paid at the Closing, then Seller will pay to Buyer the amount by which the Purchase Price as set forth on the Final Statement is less than the amount of the estimated Purchase Price paid at the Closing within five (5) Business Days after the Final Settlement Date.

 

(a)           the Assignment in sufficient counterparts for filing in each filing jurisdiction and such other instruments, including, without limitation, appropriate State and Federal assignments as may be reasonably necessary to convey the Assets to Buyer;

 

(b)           letters in lieu of transfer or division orders directing all purchasers of Hydrocarbon production from the Subject Interests to make payment of proceeds attributable to such production from and after the Effective Time to Buyer;

 

(c)           possession of the Assets;

 

(g)           a Request for Taxpayer Identification and Certification on Form W-9 certifying Seller’s federal employer identification number and a Certificate of Non-Foreign Status;

 

 

(g)           appropriate change of operator forms on those Assets operated by Seller or its affiliates;

 

(h)           any other documents provided for herein or necessary or desirable to effectuate the transactions contemplated hereby.

 

 

(a)           the Purchase Price, paid to Seller, as adjusted in accordance with this Agreement, by wire transfer to an account designated in writing by Seller;

 

(b)           the Assignment and any other documents provided for herein or necessary or desirable to effectuate the transactions contemplated hereby.

 

(a)           Seller shall make the Records available to be picked up by Buyer at the offices of Seller during normal business hours on the Closing Date and on any date thereafter. Seller shall have the right to retain copies of any of the Records and Seller shall have the rights granted under Section 14.03.

 

(b)           After the Closing Date, each Party, at the request of the other and without additional consideration, shall execute and deliver, or shall cause to be executed and delivered, from time to time such further instruments of conveyance and transfer and shall take such other action as the other Party may reasonably request to convey and deliver the Assets to Buyer and to accomplish the orderly transfer of the Assets to Buyer in the manner contemplated by this Agreement. After the Closing, the Parties will cooperate to have all proceeds received attributable to the Assets be paid to the proper Party hereunder and to have all expenditures to be made with respect to the Assets be made by the proper Party hereunder.

 

(a)           by mutual written consent of Seller and Buyer;

(b)           by Seller on the Closing Date if the conditions set forth in Article VIII have not been satisfied in all material respects by Buyer or waived by Seller in writing by the Closing Date;

 

 

(c)           by Buyer on the Closing Date if the conditions set forth in Article IX have not been satisfied in all material respects by Seller or waived by Buyer in writing by the Closing Date;

 

(d)           by Buyer on or before the Closing for any reason or no reason;

 

(e)           by Seller or Buyer if the Closing shall not have occurred on or before February 8, 2019;

 

(f)           by Seller or Buyer if any Governmental Authority shall have issued an order, judgment or decree or taken any other action challenging, delaying, restraining, enjoining, prohibiting or invalidating the consummation of any of the transactions contemplated herein;

 

 

 

 

 

 

 

 

 

Either Party may, by written notice so delivered to the other Party, change its address for notice purposes hereunder.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THIS ASSIGNMENT AND BILL OF SALE (this “Assignment”), effective as of 7:00 a.m. on February 1, 2019 (the “Effective Time”), is made by MANZANO, LLC, a New Mexico limited liability company, and MANZANO ENERGY PARTNERS II, LLC, a Delaware limited liability company (“Assignor”), to PACIFIC ENERGY DEVELOPMENT CORPORATION, a Nevada corporation (“Assignee”), whose address is 200 N. Loraine, Suite 1100, Midland, Texas 79701.

 

For Ten Dollars ($10.00) and other good and valuable consideration, the receipt, and sufficiency of which are hereby acknowledged, Assignor does hereby grant, bargain, sell, transfer, convey, set over, assign and deliver unto Assignee and its successors and assigns, effective for all purposes as of the Effective Time and subject to the matters set forth herein, the Assets. The term “Assets” shall mean, except for the Excluded Assets (defined below), all of Assignor’s right, title and interest, whether legal or equitable, in and to the following:

(a)           the oil, gas and/or mineral leases, described or referred to in Exhibit A attached hereto, together with all amendments, supplements, renewals, extensions or ratifications thereof, all surface rights and estates, and all oil, gas and/or mineral leasehold interests in and to the lands described in Exhibit A attached hereto (the “Leases”), and any and all lands covered by the Leases (the “Lands”) and all Leases and Lands related to the Wells (defined below) (collectively, the “Subject Interests,” or singularly, a “Subject Interest”);

(b)           all reversionary, back-in, net profits, carried, convertible, non-consent, operating rights and other interests in, incident to or appurtenant to the Subject Interests or Wells;

(c)           (i) all rights to use and occupy the surface of and the subsurface depths under the Subject Interests, insofar only as such rights pertain to the Subject Interests; (ii) all rights in any pooled, communitized or unitized acreage by virtue of any Subject Interest being a part thereof, including all Hydrocarbons produced after the Effective Time attributable to the Subject Interests or any such pool or unit allocated to any such Subject Interest;

(d)           all wells located on the Lands or on lands with which the Subject Interests may have been pooled, communitized or unitized (whether producing, shut in or abandoned, and whether for production, injection or disposal), including, without limitation, the wells described in Exhibit B attached hereto (such wells, together with the behind pipe, proved developed nonproducing, proved undeveloped and unproved wells or well locations identified on Exhibit B being collectively called the “Wells”);

(e)           all easements, rights-of-way, surface leases, surface use agreements, surface fee or other surface or subsurface interests and estates related to or used or useful in connection with the Subject Interests, but insofar only as they pertain to the Subject Interests or the Wells (the “Easements”), including, without limitation, the Easements described or referred to in Exhibit A attached hereto;

 

(f)           all permits, licenses, franchises, registrations, certificates, exemptions, consents, approvals and other similar rights and privileges related to or used or useful in connection with the ownership or operation of the Subject Interests, the Wells or the Easements, but insofar only as they pertain to the Subject Interests or the Wells (the “Permits”);

(g)           all personal property, equipment, fixtures, inventory and improvements located on or used or useful in connection with the Subject Interests, the Wells or the Easements or with the production, treatment, gathering, transportation, compression, sale, or disposal of oil, gas or other hydrocarbons (collectively, “Hydrocarbons”), byproducts or waste produced therefrom or attributable thereto, including, without limitation, wellhead equipment, pumps, pumping units, Hydrocarbon measurement facilities, flowlines, gathering systems, piping, pipelines, compressors, tanks, buildings, treatment facilities, injection facilities, disposal facilities, compression facilities, and other materials, supplies, equipment, facilities and machinery, but only insofar as any of the foregoing pertain to the Subject Interests, the Easements, or the Wells (collectively, the “Personal Property”), including, without limitation, the Personal Property described or referred to in Exhibit C attached hereto;

(h)           all contracts, agreements and other written agreements described in Exhibit C attached hereto, and all other contracts and agreements, including, without limitation, all production sales contracts, farmout agreements, operating agreements, service agreements, equipment leases, division orders, unit agreements, gas gathering and transportation agreements, water disposal agreements and other similar agreements, but only to the extent the same relate to the Subject Interests, the Wells, the Easements, the Permits, the Personal Property or the G&G Data (defined below) (collectively, the “Contracts”) including, without limitation, the Contracts described or referred to in Exhibit D attached hereto;

(i)           originals of all books, records, files, muniments of title, reports and similar documents and materials that relate to the foregoing interests and that are in the possession or control of, or maintained by, Assignor, including, without limitation, all contract files, title files, title records, title opinions, abstracts, property ownership reports, well files, well logs, well tests, maps, engineering data and reports, health, environmental and safety information and records, regulatory records, accounting and financial records, production records, tax records and operational records, provided that (i) if Assignor does not possess originals of the foregoing, Assignor shall provide copies of any of the foregoing, or (ii) if any of the foregoing pertain to properties not comprising the Subject Interests or the Wells, Assignor may provide copies of any of the foregoing (the “Records”);

(j)           (i) all claims, rights and causes of action including, without limitation, causes of action for breach of warranty, against third parties, asserted and unasserted, known and unknown, but only to the extent such claims, rights and causes of action affect the value of any of the foregoing interests after the Effective Time, and where necessary to give effect to the assignment of such rights, claims and causes of action, the Assignor grants to the Assignee the right to be subrogated to such rights, claims and causes of action; and (ii) all claims, rights and causes of action including, without limitation, causes of action for breach of warranty, against third parties, asserted and unasserted, known and unknown, but only to the extent such claims, rights and causes of action affect the value of any of the foregoing interests before or on the Effective Time but only to the extent that they relate to Assumed Obligations for which Assignee is providing indemnity hereunder, and where necessary to give effect to the assignment of such rights, claims and causes of action, Assignor grants to the Assignee the right to be subrogated to such rights, claims and causes of action;

 

(k)           all geological data (including, without limitation, raw data and interpretive data whether in written or electronic form), insofar only as it pertains to the Subject Interests, excluding, however, any such data that is subject to contractual restrictions requiring the consent of third parties to its disclosure, for which Assignor has been unable to obtain such consent after making reasonable efforts to do so (the “G&G Data”);

(l)           all rights and benefits arising from or in connection with any wellhead gas imbalances or pipeline imbalances attributable to Hydrocarbons produced from the Wells as of the Effective Time; and

(m)           all Hydrocarbons relating to the Assets in storage or existing in stock tanks, pipelines and/or plants (including inventory).

SAVE AND EXCEPT, there is excepted and excluded from the Assets, all of Assignor’s right, title and interest in and to the following (the “Excluded Assets”):

 

 

 

 

 

TO HAVE AND TO HOLD the Assets, together with all and singular the rights, privileges, contracts and appurtenances, in any way appertaining or belonging thereto, unto Assignee, its successors and assigns, forever, subject to the matters set forth herein.

 

Section 2.01 Special Warranty of Title. Assignor hereby agrees to warrant and forever defend Good and Defensible Title to the Assets unto Assignee, to the extent of the interests set forth on Exhibit B attached hereto, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Assignor, but not otherwise; subject, however, to the Permitted Encumbrances (as such term is defined in the Purchase and Sale Agreement described below) and the other matters set forth herein.

 

 

Section 2.02 Disclaimer. EXCEPT AS OTHERWISE SET FORTH IN THE PURCHASE AND SALE AGREEMENT OR THIS ASSIGNMENT, ASSIGNEE ACKNOWLEDGES THAT ASSIGNOR HAS NOT MADE, AND ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (b) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR, AND (c) THE ENVIRONMENTAL CONDITION OF THE ASSETS. EXCEPT FOR THE EXPRESS REPRESENTATIONS OF ASSIGNOR SET FORTH IN THE PURCHASE AND SALE AGREEMENT, ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, AND (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, IT BEING THE EXPRESS INTENTION OF ASSIGNEE AND ASSIGNOR THAT THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES INCLUDED IN THE ASSETS SHALL BE CONVEYED TO ASSIGNEE, AND ASSIGNEE SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND ASSIGNEE REPRESENTS TO ASSIGNOR THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS ASSIGNEE DEEMS APPROPRIATE. ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.

 

Section 2.03 Subrogation. Assignor assigns and grants to Assignee all rights, claims and causes of action under title or warranties of title given or made by Assignor’s predecessors in interest (other than affiliates of Assignor) with respect to the Subject Interests, and Assignee is specifically subrogated to all rights which Assignor may have against such predecessors in interest with respect to the Subject Interests, to the extent Assignor may legally transfer such rights and grant such subrogation.

 

 

 

Section 3.01 Construction. The captions in this Assignment are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Assignment. Assignor and Assignee acknowledge that they have participated jointly in the negotiation and drafting of this Assignment and as such they agree that if an ambiguity or question of intent or interpretation arises hereunder, this Assignment shall not be construed more strictly against one party than another on the grounds of authorship.

 

Section 3.02 No Third-Party Beneficiaries. Nothing in this Assignment shall provide any benefit to any third party or entitle any thirty party to any claim, cause of action, remedy or right of any kind, it being the intent of the parties hereto that this Assignment shall otherwise not be construed as a third-party beneficiary contract.

 

Section 3.03 Assignment. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

Section 3.04 Governing Law. This Assignment, other documents delivered pursuant hereto and the legal relations between the parties hereto shall be governed and construed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of laws that would result in the application of the laws of another jurisdiction.

 

Section 3.05 Counterpart Execution. This Assignment may be executed in any number of counterparts, and each counterpart hereof shall be effective as to each party that executes the same whether or not all of such parties execute the same counterpart. If counterparts of this Assignment are executed, the signature pages from various counterparts may be combined into one composite instrument for all purposes. All counterparts together shall constitute only one Assignment, but each counterpart shall be considered an original.

 

Section 3.06 Recording. To facilitate the recording or filing of this Assignment, the counterpart to be recorded in a given county may contain only that portion of the exhibits that describes Assets located in that county. In addition to filing this Assignment, the parties hereto shall execute and file with the appropriate authorities, whether federal, state or local, all forms or instruments required by applicable law to effectuate the conveyance contemplated hereby. Said instruments shall be deemed to contain all of the exceptions, reservations, rights, titles and privileges set forth herein as fully as though the same were set forth in each such instrument. The interests conveyed by such separate assignments are the same, and not in addition to the Assets conveyed herein.

 

Section 3.07 Purchase and Sale Agreement. This Assignment is made subject to all of the terms and conditions of that certain Purchase and Sale Agreement dated January 11, 2019, by and between Assignor and Assignee (the “Purchase and Sale Agreement”). Any capitalized term used but not defined in this Assignment shall have the meaning set forth in the Purchase and Sale Agreement. The terms and provisions of the Purchase and Sale Agreement are incorporated herein for all purposes. In the event of a conflict between the terms and provisions herein and the Purchase and Sale Agreement, the terms and provisions of the Purchase and Sale Agreement shall prevail.

 

 

 

 

IN WITNESS WHEREOF, this Assignment is executed by the parties on the dates of their respective acknowledgments below, but shall be effective for all purposes as of the Effective Time.

 

 

 

 

 

 

 

 

This instrument was acknowledged before me this 11th day of January, 2019, by Michael G. Hanagan for Manzano, LLC, on its own behalf and as Manager of Manzano Energy Partners II, LLC, a Delaware limited liability company, on behalf of said limited liability company.

 

 

 

 

 

 

 

This instrument was acknowledged before me this ________ day of __________________, 2019, by J. Douglas Schick, President of Pacific Energy Development Corporation, a _______________________, on behalf of said limited liability company.

 

 

 

Notary Public, State of _________________