EXHIBIT 10.22
 
 
 
PURCHASE AND SALE AGREEMENT

Dated August 23, 2011

among

PACIFIC ENERGY DEVELOPMENT CORP.

as Buyer

and

ESENJAY OIL & GAS, LTD.,

WINN EXPLORATION CO., INC.,

LACY PROPERTIES, LTD., and

CRAIN ENERGY, LTD.

as Sellers

 
 
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TABLE OF CONTENTS
 

ARTICLE 1 – Sale and Purchase; Purchase Price and Closing 1    
1.1
Sale and Purchase.
1
1.2
Purchase Price.
2
1.3
Closing.
2     ARTICLE 2 -- Review Period; Cure Period 4    
2.1
Review Period; Costs of Title Information and Environmental Due Diligence.
4
2.2
Additional Leases
4
2.3
PEDCO’s Determination of Approved Net Leasehold Acres.
4
2.4
Notice of Title Defects and Cure Period.
5     ARTICLE 3 – Determination of Purchase Price and Closing 5    
3.1
Determination of the Purchase Price for the Designated Interests.
5
3.2
Post-Closing Title Curative.
5
3.3
Pre-Closing Covenants
5     ARTICLE 4 – Reservation of Overriding Royalty Interests; After Payout
Interest 6    
4.1
Reservation of Overriding Royalty Interests.
6
4.2
Terms and Conditions of the Esenjay ORI.
6
4.3
After Project Payout Interest.
7
4.4
Evolution Carried Costs
7
4.5
Evolution ORI.
7     ARTICLE 5 --  Operational Provisions 7    
5.1
Operator
7
5.2
Operations and Cost Sharing.
7
5.3
Roads and Easements.
8
5.4
Ingress and Egress.
8
5.5
Non-Interference
8
5.6
Deep Rights
8
5.7
Right of First Offer
8
5.8
Carried Interest; Liquidated Damages; Initial Well
9
5.9
Indemnification
9     ARTICLE 6 – Representations 10    
6.1
Representations of PEDCO.
10
6.2
Representations of Each Seller.
10     ARTICLE 7 – Conditions Precedent 12    
7.1
Conditions Precedent to the Obligations of Sellers.
12
7.2
Conditions Precedent to the Obligations of PEDCO.
12     ARTICLE 8 – Seismic Data 13    
8.1
Seismic Licenses.
13     ARTICLE 9 -- Termination 13    
9.1
Termination.
13
9.2
Effect of Termination.
14

 
 
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ARTICLE 10 -- Miscellaneous 14    
10.1
Further Assurances.
14
10.2
Notices.
14
10.3
Incorporation of Appendices.
15
10.4
Entire Agreement.
15
10.5
Amendment; Waiver.
15
10.6
Announcements.
15
10.7
Confidentiality.
15
10.8
Force Majeure.
16
10.9
Binding Effect; Benefits.
16
10.1
Governing Law.
16
10.11
BINDING ARBITRATION.
16
10.12
Specific Performance.
17
10.13
Expenses.
17
10.14
Cost.
17
10.15
Severability.
17
10.16
Esenjay’s Representation of Sellers
17
10.17
Presumption Concerning Interpretation and Construction.
17
10.18
Survival.
18
10.19
Headings.
18
10.20
Timing
18
10.21
Counterparts; Facsimile and Electronic Signatures
18
10.22
Termination of Confidentiality Agreement
18

 
Appendix 1
Defined Terms
20
Appendix 2
Description of the Appendix 2 Leases
25
Appendix 3
Form of  Partial Assignment of Oil, Gas And Mineral Leases
26
Appendix 4
Form of Seismic Data License Agreement
32
Appendix 5
Certificate of Non-Foreign Status
41
Appendix 6
Form of Operating Agreement
45
Appendix 7
Description of Contracts or Agreements
46
Appendix 8
Acreage Plat with AMI Outline
47
Appendix 9
Schedule of Leases Requiring Consent to Assignment
48
Appendix 10
Mortgage, Deed of Trust, Assignment of As-extracted Collateral, Security
Agreement and Financing Statement
49

 
 
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PURCHASE AND SALE AGREEMENT
 
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated August 23, 2011, is
by and among Esenjay Oil & Gas, Ltd., a Texas limited partnership (“Esenjay”),
Winn Exploration Co., Inc., a Texas corporation (“Winn”), Lacy Properties, Ltd.,
a Texas limited partnership (“Lacy”), and Crain Energy, Ltd., a Texas limited
partnership (“Crain”; Esenjay, Winn, Lacy and Crain are referred to,
collectively, as “Sellers” and each a “Seller”), and Pacific Energy Development
Corp., a Nevada corporation (“PEDCO” or “Buyer”). Each Seller and PEDCO may be
referred to herein as a “Party” and, collectively, as the “Parties.”
 
R E C I T A L S
 
WHEREAS, Sellers own interests in oil and gas leases covering approximately
13,978.326 gross acres and approximately 7,067.377 net acres, which leases are
more particularly described in Appendix 2 attached hereto and incorporated by
reference herein (the “Appendix 2 Leases,” and the acreage covered by the
Appendix 2 Leases (the “Appendix 2 Acreage”) being the W/2 of Section 1, all of
Sections 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 18, 19, 20, 21, 22, 27, 28,
31, 32, 33 and 34, the NW/2 of Section 12, and the N/2 of Section 23, all in
T7N, R59W, 6th PM, Weld County, Colorado, and Sections 13, 23, 24, 26, 34 and
35, T7N, R60W, 6th PM, Weld County, Colorado INSOFAR AND ONLY INSOFAR as the
Appendix 2 Leases cover the Appendix 2 Acreage as to all depths from the surface
of the earth down to the stratigraphic equivalent of the base of the Greenhorn
Formation (the “Shallow Horizons”) being the “X Bentonite Marker” as encountered
at a depth of 6,493 feet MD on the electrical log, in the Esenjay Operating,
Inc.-Jess 23-10 Well (API #05-123-31643) located in Section 23, T7N, R59W, 6th
PM, Morgan County, Colorado. Sections 29 and 30, T7N, R59W and Sections 25 and
36, T7N, R60W, 6th PM, Weld County, Colorado, are SAVED AND EXCEPTED IN THEIR
ENTIRETY FROM THIS AGREEMENT AND RESERVED TO ESENJAY; and
 
WHEREAS, Sellers are in the process of acquiring additional oil and gas leases
covering lands within the AMI described in Appendix 8 (the “Additional Leases”;
the Appendix 2 Leases together with the Additional Leases are, collectively, the
“Subject Leases” and the Appendix 2 Acreage and the lands covered by any
Additional Leases are, collectively, the “Subject Acreage”); and
 
WHEREAS, the Parties hereto desire to enter into this Agreement to evidence the
terms and conditions upon which: (i) Sellers will sell to PEDCO and PEDCO will
purchase from Sellers an undivided Fifty Percent (50% of 8/8ths) interest in and
to the Subject Leases, insofar and only insofar as the Subject Leases cover and
affect the Shallow Horizons, and subject to the Esenjay ORI (the “Designated
Interests”); and (ii) Sellers and PEDCO may explore and develop the Subject
Acreage and the Subject Leases. All capitalized terms used but not otherwise
defined in the body of this Agreement shall have the meanings assigned to such
terms in Appendix 1.
 
A G R E E M E N T
 
Subject to the terms and provisions of this Agreement and in consideration of
the mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers and PEDCO agree as follows:
 
ARTICLE 1 – Sale and Purchase; Purchase Price and Closing
 
1.1 Sale and Purchase.
 
 Subject to the terms and conditions herein set forth, Sellers agree to sell,
assign and deliver to PEDCO and PEDCO agrees to purchase and acquire from
Sellers at Closing (defined in Section 1.3 below), but effective as of 7:00
a.m., Central Time, on the Effective Date:
 
 
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(a). the Designated Interests along with a copy of all records and data of
Sellers or any Affiliate of any Seller concerning the Subject Leases or the
Subject Acreage, including all technical data and interpretations made up until
the time of Closing (the “Records”); and
 
(b). the seismic data licenses referred to in Section 8.1 below.
 
1.2 Purchase Price.
 
 The purchase price (the “Purchase Price”) for the Designated Interests shall be
One Thousand One Hundred Fifty and No/100 Dollars ($1,150.00) for each Approved
Net Leasehold Acre (as defined in Section 2.3 below) covered by the Appendix 2
Leases, for a total consideration of Four Million Sixty-Three Thousand Seven
Hundred Forty-One and 78/100 Dollars ($4,063,741.78) (assuming 3,533.689
Approved Net Leasehold Acres). The Purchase Price for the seismic data referred
to in Section 8.1 below shall be One and No/100 Dollars ($1.00).
 
1.3 Closing.
 
 Closing shall be held on or before 10:00 a.m. local time in Corpus Christi,
Texas, Sixty (60) days from the execution date of this Agreement. The Parties
shall attend a closing in the offices of Esenjay (the “Closing”) at which the
Parties shall perform the following obligations:
 
(a). At Closing and thereafter, PEDCO shall perform all of the following:
 
1. Cash at Closing:  At Closing, PEDCO shall pay to each Seller such Seller’s
Proportionate Share of Two Million Thirty-One Thousand Eight Hundred Seventy and
89/100 Dollars ($2,031,870.89) (assuming 3,533.689 Approved Net Leasehold Acres,
which amount shall equal Fifty Percent (50%) of the Purchase Price), all subject
to adjustment in accordance with Section 3.1 below;
 
2. Equity:  Ten (10) days following the date that is twelve (12) months
following the Closing (the “Date of Determination”), Buyer shall issue to each
Seller such Seller’s Proportionate Share of preferred stock of Buyer (the
“Units”) collectively valued at One Million Dollars ($1,000,000) in satisfaction
of Eight Hundred Thousand Dollars ($800,000) of the Purchase Price, reflecting a
Twenty Percent (20%) discount from the purchase price to be paid by Buyer’s
investors participating in Buyer’s next financing round, anticipated to close on
or before the Closing. Buyer shall guarantee (the “Guarantee”) a “floor” value
of the Units of One Million Dollars ($1,000,000) (the “Floor Value”). On the
Date of Determination, the “Market Value” of the Units shall be calculated as
the thirty (30) day average closing sales price quoted for Buyer’s
publicly-traded securities as reported on Yahoo! Finance or other reliable
source on the Date of Determination (or such shorter period if Buyer’s
securities have been publicly-traded for less than thirty (30) days prior to the
Date of Determination). In the event: a) the Market Value is less than the Floor
Value as calculated on the Date of Determination; b) the Unit’s class of
securities held by the applicable Seller is not publicly-traded on the Date of
Determination; or c) as of the Date of Determination, the transfer restrictions,
rights, obligations and potential liabilities attributable to the Unit’s class
of securities as reflected in PEDCO’s Articles of Incorporation or other
instruments are unacceptable to any Seller as determined in such Seller’s sole
discretion, then, in any such event, within five (5) calendar days following the
Date of Determination, such Seller may irrevocably elect in writing to forego
issuance of the Units in exchange for payment by PEDCO to such Seller in cash in
an amount equal to such Seller’s Proportionate Share of One Million Dollars
($1,000,000). In the event any Seller elects to receive its Proportionate Share
of cash in lieu of Units, PEDCO will deliver payment by wire transfer of
immediately available funds to the account designated by such Seller within five
(5) days of receipt of such Seller’s election notice. Any Seller who acquires
Units pursuant to this section shall execute and deliver to PEDCO a mutually
acceptable subscription agreement governing the acquisition of such Units;
provided, however, that at the time of issuance of such Units, such issuance
shall be subject to compliance with applicable securities laws, such Seller
shall be an “accredited investor” as defined in Rule 501(a) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and such Seller shall make reasonable and standard investor
qualification representations in such mutually acceptable subscription
agreement. For the period from Closing through the later of the date of delivery
of the Units, or the date of payment following any Seller’s election to receive
cash in lieu of the Units as provided for herein, Sellers shall hold a lien on
all of PEDCO’s interest in the Subject Leases, together with all of PEDCO’s
rights in any equipment, intangibles, accounts, personal property and proceeds
attributable to the Subject Leases, in order to secure PEDCO’s performance of
its obligations as provided for in this section. At Closing, PEDCO will execute
and deliver to Esenjay a Mortgage, Deed of Trust, Assignment of As-extracted
Collateral, Security Agreement and Financing Statement evidencing Sellers’ lien
in the form attached hereto as Appendix 10, and Esenjay will be authorized to
file all appropriate UCC financing statements;
 
 
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3. Post-Closing Cash:  At Closing, Buyer shall pay to Counsel to Esenjay, to
hold in escrow for the benefit of Sellers for a period of forty-five (45) days
following Closing, Six Hundred Nine Thousand Five Hundred Sixty-One and 27/100
Dollars ($609,561.27) (assuming 3,533.689 Approved Net Leasehold Acres, which
amount shall equal Fifteen Percent (15%) of the Purchase Price) (the
“Post-Closing Cash”). The Post-Closing Cash will be held by Counsel to Esenjay
pursuant to a mutually acceptable escrow agreement in which Sellers shall hold
Counsel to Esenjay harmless from any claims or liabilities other than those
arising out of Counsel to Esenjay’s failure to deliver the Post-Closing Cash to
Sellers pursuant to this Agreement. At the expiration of such 45-day period,
Counsel to Esenjay shall promptly pay to each Seller such Seller’s Proportionate
Share of the Post-Closing Cash. Sellers hereby agree to indemnify, defend and
hold PEDCO harmless from and against all claims or losses arising out of or
relating to any failure of Counsel to Esenjay to promptly pay the Post-Closing
Cash to Sellers;
 
4. Cash Carry:  Buyer shall carry each Seller’s Proportionate Share of Six
Hundred Twenty-Two Thousand Three Hundred Nine and 62/100 Dollars
($622,309.62) (or the balance of the Purchase Price, assuming 3,533.689 Approved
Net Leasehold Acres in which Sellers, collectively, hold a Fifty Percent (50% of
8/8ths) undivided interest) of each Seller’s costs attributable to Operations
with respect to the Subject Leases (the “Cash Carry”) in the manner contemplated
in Section 5.8(a) below;
 
5. Esenjay License.  Buyer shall execute and deliver to Esenjay a seismic
license substantially in the form attached hereto as Appendix 4 covering
Esenjay’s proprietary seismic data referred to in Section 8.1; and
 
6. GPI License.  Buyer shall execute and deliver to Geophysical Pursuit, Inc. a
seismic license mutually acceptable to Buyer and Geophysical Pursuit, Inc. and
Buyer shall furnish an executed copy of such license to Esenjay.
 
(b). At Closing, each Seller or Esenjay, as applicable, shall perform the
following:
 
1. Sellers shall execute, acknowledge and deliver to PEDCO a Partial Assignment
of Oil, Gas And Mineral Leases in the form attached hereto as Appendix 3, which
assignment shall convey the Designated Interests to PEDCO (the “Assignment”);
 
2. Esenjay shall execute and deliver to PEDCO or to PEDCO’s designee, as
authorized pursuant to the terms of the Operating Agreement, a seismic license
substantially in the form attached hereto as Appendix 4 covering Esenjay’s
proprietary seismic data referred to in Section 8.1 and deliver to such entity
the licensed data;
 
3. Esenjay shall deliver to PEDCO or to PEDCO’s designee, as authorized pursuant
to the terms of the Operating Agreement, the licensed data covered by the
seismic license duly executed by Buyer and Geophysical Pursuit, Inc. upon
delivery of an executed copy thereof to Esenjay; and
 
4. Each Seller shall execute and deliver to PEDCO a Certificate of Non-Foreign
Status in the form attached hereto as Appendix 5.
 
(c). At Closing, PEDCO shall pay One Dollar ($1) to Esenjay for the seismic
licenses referred to in Section 1.3(b) above.
 
(d). At Closing, Esenjay shall deliver a copy of the Records to PEDCO.
 
(e). At Closing, pursuant to Section 5.1, Esenjay shall deliver to PEDCO
evidence reasonably satisfactory to PEDCO that the Operating Agreement, dated
December 1, 2008, by and between Esenjay Operating Inc. and the other parties
thereto has been amended to exclude the Subject Acreage as to the Shallow
Horizons.
 
 
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The payments PEDCO is required to make under this Section 1.3 shall be made by
wire transfer of immediately available funds to accounts designated by each
Seller in writing.
 
ARTICLE 2 – Review Period; Cure Period
 
2.1 Review Period; Costs of Title Information and Environmental Due Diligence.
 
 For a period ending at 5:00 p.m. local time in Corpus Christi, Texas, twenty
(20) days prior to the date of the Closing (the “Review Period”), PEDCO and its
representatives will have the right to review all land, legal, well and
regulatory files and information in any Seller’s possession that pertain to the
Subject Acreage and the Subject Leases. Each Seller shall provide PEDCO with
true and correct copies of all land, legal, title, well and regulatory
information in such Seller’s possession covering the Subject Acreage and the
Subject Leases, including copies of all of the Subject Leases and copies of all
title documentation, assignments, title opinions, abstracts of title, run-sheets
and other title information and environmental reports or assessments in such
Seller’s possession with respect to the Subject Acreage and the Subject Leases.
The costs of title run sheets, title opinions and environmental assessments
prepared for PEDCO will be the sole responsibility of PEDCO. PEDCO will provide
copies of all title run sheets, title opinions, title curative information and
environmental reports or assessments that PEDCO acquires to Esenjay during the
Review Period. Except as expressly provided in this Agreement, no Party makes
any representation as to the accuracy or reliability of any title information or
data furnished to any other Party hereunder. During the Review Period, Sellers
shall permit PEDCO and its representatives at reasonable times and at PEDCO’s
sole risk, cost and expense, to conduct reasonable inspections of the Subject
Leases and the Subject Acreage.
 
2.2 Additional Leases.  Sellers will have the right, but not the obligation, to
acquire one or more Additional Leases until expiration of the Review Period, and
if so acquired, such Additional Leases will be treated in the same manner as the
Appendix 2 Leases under this Agreement. During the Review Period, Esenjay will
notify PEDCO in writing if and when Additional Leases are acquired.  Esenjay’s
notice will include copies of any Additional Leases acquired, together with
copies of all title information obtained in connection with such acquisition.
 
2.3 PEDCO’s Determination of Approved Net Leasehold Acres.
 
 On or before the expiration of the Review Period, PEDCO shall determine, the
number of Net Leasehold Acres covered by each of the Appendix 2 Leases and the
Additional Leases that are acceptable to PEDCO in the good faith exercise of
reasonable discretion (the “Approved Net Leasehold Acres”). In its determination
of the Approved Net Leasehold Acres covered by an Appendix 2 Lease or any
Additional Lease, PEDCO will use the formula set forth in the definition of Net
Leasehold Acres in Appendix 1; provided, however, that PEDCO may exclude:
 
(a). any of the Subject Leases that a prudent person engaged in the business of
the ownership, development and operation of oil and gas properties with
knowledge of all the facts and their legal bearing would be unwilling to accept;
 
(b). any of the Subject Leases with respect to which PEDCO determines that there
are material environmental liabilities that are unacceptable to PEDCO in the
good faith exercise of reasonable discretion; and
 
(c). interests in oil, gas and other minerals covered by the Subject Leases and
leasehold working interests in the Subject Leases that PEDCO determines, in the
good faith exercise of reasonable discretion to be subject to any Title Defect
(defined in Appendix 1).
 
The Approved Net Leasehold Acres attributable to the Subject Leases excluded for
the reasons set forth in Section 2.3(a) and Section 2.3(b) above (the “Excluded
Leases”) will be zero unless the reasons for exclusion are removed during the
Cure Period to the satisfaction of PEDCO in the good faith exercise of
reasonable discretion. All Excluded Leases shall be excluded from the Assignment
from Sellers to PEDCO. PEDCO will acquire no rights in such Excluded Leases and
following Closing, Sellers will have no further obligations to PEDCO with
respect to such Excluded Leases under this Agreement.
 
 
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2.4 Notice of Title Defects and Cure Period.
 
 On or before the expiration of the Review Period, PEDCO shall give Esenjay
written notice identifying in reasonable detail all Title Defects that will be
taken into account in determining the Approved Net Leasehold Acres and
identifying any Excluded Leases and the reasons for such exclusion (the “Defect
Notice”). All matters which would otherwise qualify as Title Defects, or would
cause PEDCO to reduce the amount of Approved Net Leasehold Acres and which are
not reflected in a timely submitted Defect Notice will be deemed waived by PEDCO
as of the expiration of the Post-Closing Cure Period; provided, however, that
the foregoing shall not abrogate or limit Sellers’ indemnity and hold harmless
obligations under Section 5.9 or Sellers’ special warranty of title set forth in
the Assignment. On or before 5:00 p.m. local time in Corpus Christi, Texas,
three (3) days prior to the date of the Closing (the “Cure Period”), at Sellers’
sole cost and expense, Sellers will have the right to cure any Title Defects
referred to in the Defect Notice and to attempt to remediate or remove any facts
or circumstances that caused one or more of the Subject Leases to be Excluded
Leases. Prior to the expiration of the Cure Period, Esenjay will give PEDCO
notice of all Title Defects that Sellers believe they have cured and any change
in circumstances or additional facts that should be considered by PEDCO in
evaluating whether a lease should be an Excluded Lease. Esenjay will furnish
PEDCO with said notice, all title curative materials reflecting that the Title
Defects referred to in Esenjay’s notice do not exist or have been cured and
information as to the change in circumstances or additional facts that should be
considered by PEDCO in evaluating whether a lease should be an Excluded Lease.
In the event PEDCO and Esenjay cannot agree as to whether any Lease identified
in the Defect Notice for which Sellers believe they have cured any Title Defect
should be treated as an Excluded Lease, the Parties will submit the matter to
binding arbitration pursuant to Section 10.11.
 
ARTICLE 3 – Determination of Purchase Price and Closing
 
3.1 Determination of the Purchase Price for the Designated Interests.
 
At the expiration of the Cure Period, PEDCO shall evaluate the title curative
material, if any, submitted by Esenjay during the Cure Period and determine the
number of Approved Net Leasehold Acres included in each of the Subject Leases.
PEDCO shall promptly give Esenjay a written notice stating: (i) the number of
Approved Net Leasehold Acres covered by each of the Subject Leases; and (ii) the
Purchase Price, calculated in the manner described in Article 2 based on the
number of Approved Net Leasehold Acres. Said notice shall identify any of the
Subject Leases that are Excluded Leases.
 
3.2 Post-Closing Title Curative.
 
 From and after the date of Closing through December 31, 2011 (the “Post-Closing
Cure Period”), Sellers will have the continuing right, but not the obligation,
to cure any Title Defects or otherwise satisfy PEDCO with respect to any matters
reflected in the Defect Notice that were not cured or resolved as of the
Closing. In the event Sellers cure or resolve any matter reflected in the Defect
Notice to PEDCO’s reasonable satisfaction during the Post-Closing Cure Period, a
second closing will occur with respect to the additional Approved Net Leasehold
Acres resulting from Sellers’ efforts (the “Second Closing”). The Second Closing
will be conducted in the same manner as the Closing, and the Parties will have
the same rights, duties and obligations with respect to the additional Approved
Net Leasehold Acres. If any of the Parties acquires a new lease after the
expiration of the Review Period, other than leases obtained in response to the
Defect Notice, such lease shall be subject to the AMI provisions contained in
the Operating Agreement.
 
3.3 Pre-Closing Covenants.  From the date hereof to the date of the Closing,
except as provided herein, or as otherwise consented to in writing by PEDCO,
each Seller shall: (a) not sell, assign, transfer, dispose of or relinquish any
of the Subject Leases (other than relinquishments resulting from the expiration
of any of the Subject Leases which Seller does not have a right or option to
renew); (b) exercise all rights or options it has to renew or extend any of the
Subject Leases that are due to expire in 2011; (c) not incur any expenditures or
liabilities with respect to the Subject Leases in excess of Ten Thousand Dollars
($10,000), individually, or in excess of Twenty-Five Thousand Dollars ($25,000)
in the aggregate, or enter into any agreements committing to same, unless in
case of an emergency; (d) not enter into any material new contract burdening any
of the Subject Leases or any part thereof; and (e) promptly notify PEDCO upon
receipt of written notice of any claim, demand or notice by any third party,
governmental agency or court relating to the Subject Leases or the Subject
Acreage, or any part thereof.
 
 
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ARTICLE 4 – Reservation of Overriding Royalty Interests; After Payout Interest
 
4.1 Reservation of Overriding Royalty Interests.
 
 The Assignment shall include a reservation by Esenjay of an overriding royalty
interest in production from the leases assigned equal to the amount, if
positive, by which Twenty Percent (20%) of 8/8ths of such production exceeds the
aggregate of all landowner royalties, overriding royalties and other burdens
measured by or payable out of production that cover or affect the Subject Leases
as of the Closing, proportionately reduced, as more particularly described in
Section 4.2 below, to the interest in the Subject Leases assigned to PEDCO by
Esenjay (the “Esenjay ORI”).
 
4.2 Terms and Conditions of the Esenjay ORI.
 
 The Esenjay ORI shall be a covenant running with the each of the Subject Leases
and shall be subject to the following terms and provisions:
 
(a). The Esenjay ORI shall be inclusive of any overriding royalties or claims
for overriding royalties created prior to Closing (whether or not of record and
including but not limited to overriding royalty interests to which the prospect
generator or any other third party may be entitled).
 
(b). If Esenjay’s interest in any of the leases assigned to PEDCO by Esenjay
covers less than the entire and undivided estate in the oil, gas and minerals in
the lands covered thereby, the Esenjay ORI shall be payable in the proportion
which Esenjay’s fractional interest in the oil, gas and mineral estate covered
by such lease in such lands bears to the entire and undivided estate in the oil,
gas and other minerals in and under such lands. If Esenjay holds less than all
of the oil, gas and mineral leasehold estate created by the leases assigned to
PEDCO or if Esenjay conveys less than all of the oil, gas and mineral leasehold
estate created by such leases, the Esenjay ORI shall be payable in the
proportion which the fractional part of the oil, gas and mineral leasehold
estate conveyed to PEDCO by Esenjay bears to the entire and undivided oil, gas
and mineral leasehold estate in the lands covered by the leases assigned to
PEDCO by Esenjay.
 
(c). The Esenjay ORI shall be free and clear of all drilling, producing and
operating costs, but shall be charged with its proportionate part of all
production, severance, ad valorem and similar taxes applicable to said
production and any other taxes imposed under the laws of any state or other
political subdivision to which such interest in production is or may be subject.
At the election of PEDCO, production, gathering, or other taxes (state or
federal) levied against the Esenjay ORI may be paid by PEDCO and deducted from
the overriding royalty interests payable to Esenjay. PEDCO shall pay the Esenjay
ORI on the same basis as the landowner’s royalty under the applicable lease and
in accordance with applicable law.
 
(d). PEDCO shall have the right and authority to pool or unitize the Esenjay ORI
in the same manner and to the same extent that pooling or unitization is
authorized under the respective provisions of the leases assigned to PEDCO, as
the same may have heretofore or may hereafter be amended, with the same effect
as though the Esenjay ORI was a part of the lessors’ royalties in said leases.
In lieu of the overriding royalties above specified, Esenjay shall receive on
production from a unit so pooled only such portion of the overriding royalties
stipulated above as the number of acres covered by the lease or portion thereof
which is placed in any such unit bears to the total acreage so pooled in the
particular unit involved.
 
(e). The Esenjay ORI will apply to any renewals or extensions of the Subject
Leases acquired within six (6) months of the expiration of the applicable
Subject Lease, insofar as such renewal or extension covers any portion of the
Subject Acreage; provided, however, the Esenjay ORI applicable to any extension
or renewal of any of the Subject Leases shall be reduced to the extent that the
landowner’s royalty under such extension or renewal lease is greater than the
landowner’s royalty under the expiring lease for which such extension or renewal
lease is acquired.
 
 
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4.3 After Project Payout Interest.
 
The Assignment shall be made free and clear of the covenants, provisions, and
terms of that certain Exploration Agreement, dated effective September 1, 2007,
by and between Esenjay and Evolution Oil & Gas, LLC (“Evolution”), as amended by
First Amendment to Exploration Agreement DJ Basin 3D Seismic Program, dated
effective September 19, 2009, and Second Amendment to Exploration Agreement DJ
Basin 3D Seismic Program, dated effective April 12, 2011 (collectively, the
“Evolution Agreement”), insofar as the Evolution Agreement provides that
Evolution shall be entitled to an “after project payout” interest (the
“Evolution Reversionary Interest”). The Evolution Reversionary Interest will
reduce Esenjay’s working interests and net revenue interests in the leases
subject to the Evolution Agreement, and Esenjay hereby agrees to indemnify,
defend and hold PEDCO harmless from and against all claims or losses arising out
of or relating to the Evolution Reversionary Interest. The Evolution
Reversionary Interest shall not burden, reduce or otherwise alter or affect the
working interests or the net revenue interests assigned to PEDCO by Sellers.
PEDCO shall not be obligated to monitor or maintain information relating to the
payout status of the Evolution Reversionary Interest.
 
4.4 Evolution Carried Costs.  PEDCO’s interest in any additional leases acquired
within the AMI described in Appendix 8 shall be free and clear of and not
subject to any obligations Sellers may have to carry Evolution for costs
incurred within such AMI (the “Evolution Carried Costs”) under the terms of the
Evolution Agreement and Sellers hereby agree to indemnify, defend and hold PEDCO
harmless from and against all claims or losses arising out of or relating to the
Evolution Carried Costs.
 
4.5 Evolution ORI.  PEDCO’s interest in any additional leases acquired within
the AMI described in Appendix 8 will be subject to, and proportionately burdened
by, the overriding royalty interest (the “Evolution ORI”) in favor of Evolution
as provided for in the Evolution Agreement, proportionately reduced to the
extent that such lease covers less than the entire leasehold estate created by
such lease, and to the extent that such lease covers less than the entire oil
and gas mineral estate in and under the land covered by such lease.
 
ARTICLE 5 – Operational Provisions
 
5.1 Operator.  Operations, if any, on the Subject Acreage and lands pooled
therewith and the extent and duration thereof shall be solely within the
discretion and at the will of PEDCO or PEDCO’s designee, subject to the terms of
the Operating Agreement. PEDCO or PEDCO’s designee, as authorized pursuant to
the terms of the Operating Agreement, will be named the Operator of the Subject
Acreage and will operate in accordance with the Operating Agreement.
 
5.2 Operations and Cost Sharing.
 
 Except as modified in this Agreement, the Operating Agreement in the form
attached as Appendix 6 hereto (the “Operating Agreement”) shall govern all
operations on the lands and leases identified in Exhibit “A” to the Operating
Agreement (the “Contract Area”). PEDCO or PEDCO’s designee, as authorized
pursuant to the terms of the Operating Agreement, shall be named as the operator
in the Operating Agreement. As a condition to Closing, on or before the date of
the Closing, Esenjay shall cause that certain Operating Agreement, dated
December 1, 2008, by and between Esenjay Operating Inc. and the other parties
thereto, with respect to the Indian Peaks/DJ Basin Prospect, to be amended to
exclude the Subject Acreage as to the Shallow Horizons. The Operating Agreement
shall be deemed a separate agreement: (i) covering each COGCC drilling and
spacing unit, and (ii) covering all other portions of the Contract Area and the
Subject Acreage not included in a COGCC drilling and spacing unit until such
time as such portions of the Contract Area and the Subject Acreage are included
in a COGCC drilling and spacing unit. The Operating Agreement shall be binding
on the Parties when this Agreement is fully executed notwithstanding that
parties have not signed the Operating Agreement. In the event of a conflict
between this Agreement and the Operating Agreement, this Agreement shall
control.
 
 
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5.3 Roads and Easements.
 
 All roads constructed and easements obtained by any Seller or PEDCO in
connection with the Contract Area or the Subject Acreage may be used by Esenjay
or PEDCO in its operations on the Contract Area and the Subject Acreage in
accordance with the applicable agreements and applicable law.
 
5.4 Ingress and Egress.
 
 To the extent that it may lawfully do so, each Seller hereby grants to PEDCO
and PEDCO hereby grants to Esenjay the right of ingress and egress over, across
and under any portion of the Subject Acreage and the Contract Area and over,
across and under any other lands and/or leases owned by such Seller or PEDCO in
the vicinity of the Subject Acreage and the Contract Area in order for PEDCO and
Esenjay to have the right of ingress and egress to and from the Subject Acreage
and the Contract Area and to lay and maintain pipelines and other facilities to
treat, store, transport oil, gas and other minerals that may be produced from or
attributable to the Subject Acreage and the Contract Area.
 
5.5 Non-Interference.  Each Seller hereby agrees and covenants that, with
respect to rights in the Subject Acreage deeper than the Shallow Horizons (the
“Deep Rights”), such Seller will not grant any rights, title or interest to any
third party that unreasonably interfere with PEDCO’s ability to fully and
effectively drill, develop and commercialize the rights and interests in the
Subject Acreage acquired by PEDCO. Likewise, PEDCO hereby agrees and covenants
that, with respect to its rights in the Shallow Horizons of the Subject Acreage,
PEDCO will not grant any rights, title or interest to any third party that
unreasonably interfere with any Seller’s ability to fully and effectively drill,
develop and commercialize its interests in the Subject Acreage with respect to
the Deep Rights. In the event of an irreconcilable conflict between operations
of PEDCO or PEDCO’s designee, as authorized pursuant to the terms of the
Operating Agreement, with respect to the Shallow Horizons of the Subject Acreage
and operations of any Seller on its interests in the Subject Acreage with
respect to the Deep Rights, the operations of PEDCO or PEDCO’s designee, as
authorized pursuant to the terms of the Operating Agreement, will have priority.
 
5.6 Deep Rights.  If, during a period of three (3) years from the Effective
Date, any Seller (the “Deep Rights Seller”) desires to sell, assign, transfer or
otherwise dispose of any interest in the Subject Acreage with respect to the
Deep Rights, such Seller will deliver written notice thereof to PEDCO. On or
before fifteen (15) days after delivery of such notice by the Deep Rights
Seller, PEDCO shall have the right, but not the obligation, to elect by written
notice to the Deep Rights Seller to acquire such rights from the Deep Rights
Seller. Upon delivery of such election by PEDCO, the Deep Rights Seller and
PEDCO shall use their reasonable efforts in good faith to agree upon mutually
acceptable price and terms for such acquisition by PEDCO. If the Deep Rights
Seller and PEDCO are unable to agree upon such price and terms on or before
thirty (30) days after receipt of PEDCO’s election hereunder, for a period of
one hundred eighty (180) days following the expiration of such 30-day
negotiation period, the Deep Rights Seller shall have the right, but not the
obligation, to sell, assign, transfer or otherwise dispose of such interest to a
third party for a price equal to or greater than the price offered to PEDCO. If
the Deep Rights Seller fails to sell, assign, transfer or otherwise dispose of
such interest to a third party within said 180-day time period, this provision
shall apply again to any such sale, assignment, transfer or other disposition.
 
5.7 Right of First Offer.  If, during a period of three (3) years from the
Effective Date, any Seller (the “Transferring Seller”) desires to sell, assign,
transfer or otherwise dispose of any interest in the AMI described in Appendix
8, such Seller will deliver written notice thereof to PEDCO. On or before seven
(7) days after delivery of such notice by the Transferring Seller, PEDCO shall
have the right, but not the obligation, to elect by written notice to the
Transferring Seller to acquire such interest from the Transferring Seller. Upon
delivery of such election by PEDCO, the Transferring Seller and PEDCO shall use
their reasonable efforts in good faith to agree upon mutually acceptable price
and terms for such acquisition by PEDCO. If the Transferring Seller and PEDCO
are unable to agree upon such price and terms on or before seven (7) days after
receipt of PEDCO’s election hereunder, for a period of one hundred eighty (180)
days following the expiration of such 7-day negotiation period, the Transferring
Seller shall have the right, but not the obligation, to sell, assign, transfer
or otherwise dispose of such interest to a third party for a price equal to or
greater than the price offered to PEDCO. If the Transferring Seller fails to
sell, assign, transfer or otherwise dispose of such interest to a third party
within said 180-day time period, this provision shall apply again to any such
sale, assignment, transfer or other disposition.
 
 
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5.8 Carried Interest; Liquidated Damages; Initial Well.
 
(a). All of each Seller’s respective share of the costs (based on such Seller’s
working interest in the applicable oil and gas leases) of drilling, testing,
stimulating, completing, equipping and operating (collectively, “Operations”)
the first well drilled on the Subject Acreage pursuant to this Agreement (the
“Initial Well”) will be paid by PEDCO for each Seller’s account until such time
as such Seller’s respective share of such costs exceeds such Seller’s
Proportionate Share of the Cash Carry, as such amount may be adjusted in the
manner provided for herein. Thereafter, each Seller will bear its respective
share of the costs of Operations, subject to such Seller’s election rights under
the Operating Agreement. In the event the amount of the Cash Carry is not
reduced to zero as a result of Operations conducted on the Initial Well, any
remaining sum will be proportionately applied in satisfaction of each Seller’s
respective share of the costs of additional operations on the Contract Area (as
defined in the Operating Agreement) to the extent each Seller elects to
participate in such operations under the Operating Agreement.
 
(b). If PEDCO fails to commence operations for drilling such Initial Well on or
before twelve (12) months after the Effective Date (the “Commencement Period”),
PEDCO shall immediately pay to each Seller such Seller’s Proportionate Share of
the Cash Carry as liquidated damages. Notwithstanding anything to the contrary
herein, the Parties hereby agree to the liquidated damages set forth in this
Section 5.8(b) as the sole and exclusive remedy with respect to PEDCO’s failure
to timely commence operations for the drilling of the Initial Well. In the event
PEDCO fails to commence operations for drilling the Initial Well by the
expiration of the Commencement Period and pays the liquidated damages pursuant
to this Section 5.8(b), PEDCO shall no longer be obligated to carry each
Seller’s share of costs pursuant to Section 5.8(a). With respect to the
liquidated damages described in this Section 5.8(b), the Parties hereby
acknowledge and agree that, at the time this Agreement was entered into: (a) the
anticipated damages in the event a Party fails to perform hereunder were
difficult to ascertain; (b) the Parties mutually intended to liquidate such
damages in advance; (c) the amount of such liquidated damages is a reasonable
estimate of the potential actual damages such breach would cause; and (d) such
liquidated damages are not so disproportionate to any possible loss as to
constitute a penalty.
 
(c). Except with regard to operations for the Initial Well by PEDCO or PEDCO’s
designee, as authorized pursuant to the terms of the Operating Agreement, no
Party may propose a well until the earlier of the expiration of the Commencement
Period or completion or abandonment of the Initial Well. Pursuant to the terms
of the Operating Agreement, if PEDCO or PEDCO’s designee, as authorized pursuant
to the terms of the Operating Agreement, does not commence drilling operations
for the Initial Well within the Commencement Period, any Party may thereafter
give written notice to propose to drill the Initial Well and any operation
conducted pursuant to such proposal shall be deemed the Initial Well under the
terms of the Operating Agreement. This Section 5.8(c) shall not apply under
those circumstances where a well to which notice is directed is a well which is
required under the terms of a lease or farmout or a portion thereof, or
“Required Operations” as set out in Article XVI.E of the Operating Agreement.
 
(d). In the event, for any reason, a Party fails to participate in the drilling
of the Initial Well, or fails to pay its proportionate share of the costs of
such operation (subject, in the case of Sellers, to such proportionate share
being satisfied by PEDCO pursuant to the terms hereof), such Party will assign
to the Parties participating in the Initial Well in proportionate shares, all of
such non-participating Party’s right, title and interest in and to the Subject
Leases, together with any additional leases owned in whole or in part by such
Party within the AMI. Such assignment will be delivered by the non-participating
Party free and clear of any claims or burdens arising by, through or under such
Party, but not otherwise, other than those provided for in this Agreement.
Furthermore, in such event, the non-participating Party will have no further
rights under this Agreement or the Operating Agreement(s).
 
5.9 Indemnification.  Sellers shall indemnify, defend and hold harmless PEDCO
from and against any and all claims, demands, causes of action, suits,
judgments, orders, damages, awards, fines, penalties, charges, appeals,
settlements, losses, liabilities, costs and expenses (including court costs,
expert witness fees and reasonable attorneys’ fees) (collectively, “Claims”)
arising in connection with or related to the Subject Leases or the Subject
Acreage attributable to the period of time prior to the date of the Closing, or
any Claims that are attributable to a breach by any Seller of any of such
Seller’s representations, warranties or covenants hereunder. All of Sellers’
indemnities set forth in this Agreement, including those set forth in this
Section 5.9, shall survive the Closing for the applicable statute of limitations
period.
 
 
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ARTICLE 6 – Representations
 
6.1 Representations of PEDCO.
 
 PEDCO represents to each Seller as of the date hereof and as of the date of
Closing, unless a representation below is expressly made only as of the date of
Closing:
 
(a). PEDCO is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, and is duly qualified to carry
on its business in all jurisdictions in which it is conducting business.
 
(b). PEDCO has all requisite power and authority to carry on business as
presently conducted, to enter this Agreement, and to perform its obligations
under this Agreement. The consummation of the transactions contemplated hereby
will not violate, nor be in conflict with, any provision of PEDCO’s Articles of
Incorporation or other governing documents, or any agreement or instrument to
which PEDCO is a party or is bound, or any judgment, decree, order, statute,
rule or regulation applicable to PEDCO.
 
(c). The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite action on the part of PEDCO.
 
(d). PEDCO has incurred no obligation or liability, contingent or otherwise, for
brokers’ or finders’ fees with respect to the matters provided for in this
Agreement for which Sellers shall have any responsibility whatsoever; and any
such obligation or liability that might exist shall be the sole obligation of
PEDCO.
 
(e). PEDCO is not a foreign person within the meaning of Sections 1445 and 7701
of the Internal Revenue Code of 1986, as amended.
 
(f). As of the date of the Closing, PEDCO shall be authorized to do business in
and to own and operate oil and gas leases in the State of Colorado and in good
standing in the State of Colorado.
 
(g). From the date hereof until the date of the Closing, PEDCO has made
available to Esenjay PEDCO’s officers for any inquiries pertaining to matters
reasonably relevant to the transactions contemplated hereunder.
 
(h). As of the date of the Closing, PEDCO shall be an “accredited investor” as
defined in Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
 
6.2 Representations of Each Seller.
 
 Each Seller represents and warrants to PEDCO as of the date hereof and as of
the date of Closing, unless a representation below is expressly made only as of
the date of Closing:
 
(a). Seller is a Texas limited partnership or corporation duly formed, validly
existing and in good standing under the laws of the State of Texas, and is duly
qualified to carry on its business in all jurisdictions in which it is
conducting business.
 
 
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(b). Seller has all requisite power and authority to carry on business as
presently conducted, to enter this Agreement, and to perform its obligations
under this Agreement. The consummation of the transactions contemplated by this
Agreement will not violate, nor be in conflict with, any provision of Seller’s
formation or governing documents, or any agreement or instrument to which Seller
is a party or is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Seller.
 
(c). The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
requisite action on the part of Seller.
 
(d). Seller is not a foreign person within the meaning of Sections 1445 and 7701
of the Internal Revenue Code of 1986, as amended.
 
(e). Seller has incurred no obligation or liability, contingent or otherwise,
for brokers’ or finders’ fees with respect to the matters provided for in this
Agreement for which PEDCO shall have any responsibility whatsoever; and any such
obligation or liability that might exist shall be the sole obligation of Seller.
 
(f). To the best of its knowledge, Seller is in compliance with the terms of the
Subject Leases. Seller is in compliance with all permits relating to the Subject
Leases. All of said permits are valid and are in full force and effect. The
Subject Leases are valid, binding and enforceable in accordance with their terms
and are in full force and effect.
 
(g). To the best of its knowledge, Seller has Good and Defensible Title to its
interests in the Subject Leases.
 
(h). No agreement applicable to the Subject Leases (other than this Agreement)
contains express provisions that require the drilling of wells or other material
development operations in order to earn or to continue all or any portion of the
Subject Leases in force and effect.
 
(i). Seller has not entered into any agreement under which PEDCO will be
obligated, by virtue of a prepayment arrangement, a gas balancing agreement, a
production payment or any other agreement or dedication to deliver hydrocarbons
from the Subject Leases at some future time without then or thereafter receiving
full payment therefore, or to make payment at some future time for hydrocarbons
already produced and sold.
 
(j). All rentals and other payments due under the Subject Leases have been
properly and timely paid and all conditions necessary to keep the Subject Leases
in force and effect have been fully performed.
 
(k). Seller has not received any notice that any part of the Subject Acreage
must be remediated under the provisions of any environmental law and, to the
best of Seller’s knowledge, Seller has complied with all applicable laws
governing its ownership and operation of the Subject Leases.
 
(l). Seller has paid in full all taxes and assessments that have accrued and are
due against any part of the leasehold interests covered by this Agreement or
against Seller in respect to any of said leasehold interests by any local,
state, federal or other taxing authority.
 
(m). There are no contracts or agreements that cover, affect or burden the
Subject Leases other than the Operating Agreement, this Agreement, the Evolution
Agreement and any other contracts and agreements that are listed in Appendix 7.
 
 
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(n). None of the statements, representations or warranties made by Seller in
this Agreement contains any untrue statements of any fact or fails to disclose
any fact necessary to be disclosed in order to make the statements,
representations or warranties contained herein not misleading. Seller has no
knowledge of any matter that adversely affects (or may adversely affect) the
Subject Leases that has not been disclosed to PEDCO in writing.
 
(o). Seller is authorized to do business in the State of Colorado and is in good
standing in the State of Colorado.
 
(p). There are no consents to assignment or preferential rights to purchase with
respect to any of the Subject Leases, except as set forth in Appendix 9.
 
(q). None of the Subject Leases are subject to any tax partnership agreement
pursuant to Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue
Code.
 
(r). Seller is an “accredited investor” as defined in Rule 501(a) of Regulation
D promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended.
 
ARTICLE 7  – Conditions Precedent
 
7.1 Conditions Precedent to the Obligations of Sellers.
 
 The obligations of Sellers to be performed at Closing are subject to the
satisfaction by PEDCO or waiver by Sellers before or at Closing, of each of the
following conditions:
 
(a). Representations and Warranties. The representations and warranties by PEDCO
set forth in this Agreement shall be true and correct in all material respects
at and as of the date of Closing as though made at and as of Closing; and PEDCO
shall have performed and complied with, in all material respects, all covenants
and agreements required to be performed and satisfied by PEDCO at or prior to
Closing.
 
(b). No Litigation.  There shall be no suits, actions or other proceedings
pending or threatened to enjoin the consummation of any of the transactions
contemplated by this Agreement or seeking substantial damages against Sellers in
connection therewith.
 
(c). Approvals. All approvals required to be obtained for the assignment of the
Subject Leases to be conveyed by each Seller to PEDCO at Closing shall have been
obtained or waived or shall have expired without being exercised.
 
7.2 Conditions Precedent to the Obligations of PEDCO.
 
 The obligations of PEDCO to be performed at Closing are subject to the
satisfaction by each Seller or waiver by PEDCO before or at Closing, of each of
the following conditions:
 
(a). Representations and Warranties.  Except with respect to each Seller’s
representation in Section 6.2(g), which is governed by Article 2, the
representations and warranties by each Seller set forth in this Agreement shall
be true and correct in all material respects at and as of the date of Closing as
though made at and as of Closing; and each Seller shall have performed and
complied with, in all material respects, all covenants and agreements required
to be performed and satisfied by such Seller at or prior to Closing.
 
 
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(b). No Litigation.  There shall be no suits, actions or other proceedings
pending or threatened to enjoin the consummation of any of the transactions
contemplated by this Agreement or seeking substantial damages against PEDCO in
connection therewith.
 
(c). Approvals. All approvals required to be obtained for the assignment of the
Subject Leases to be conveyed by each Seller to PEDCO at Closing shall have been
obtained or waived or shall have expired without being exercised.
 
(d)  Casualty and Condemnation.  A substantial part of the Subject Leases or the
Subject Acreage: (i) shall not have been destroyed by a casualty loss; and (ii)
shall not have been taken in condemnation and no proceedings for the purpose of
condemnation shall be pending.
 
ARTICLE 8  – Seismic Data
 
8.1 Seismic Licenses.
 
 At Closing:
 
(a). Esenjay and PEDCO will execute and Esenjay will deliver to PEDCO a seismic
license in the form attached hereto as Appendix 4 covering Esenjay’s proprietary
3-D data covering a portion of the Subject Acreage; and
 
(b). PEDCO will execute and deliver to Geophysical Pursuit, Inc. a mutually
acceptable seismic license with Geophysical Pursuit, Inc. covering the 3-D
seismic data licensed by Esenjay from Geophysical Pursuit, Inc.
 
ARTICLE 9 – Termination
 
9.1 Termination.
 
 This Agreement may be terminated at any time before Closing as follows:
 
(a). By mutual written agreement of the Parties;
 
(b). By PEDCO, upon written notice to Esenjay at any time prior to Closing if
(i) any Seller has breached any representation, warranty, or covenant contained
in this Agreement, PEDCO has notified Esenjay of the breach, and the breach has
continued without cure for a period of three (3) business days after the notice
of the breach, (ii) PEDCO has given Esenjay notice pursuant to Section 3.1 that
the Purchase Price is reduced by more than Ten Percent (10%), or (iii) Closing
shall not have occurred on or before 10:00 a.m. local time in Corpus Christi,
Texas, sixty (60) days after the execution date of this Agreement, by reason of
the failure of any condition precedent under Section 7.2;
 
(c). By Sellers upon written notice to PEDCO from Esenjay at any time prior to
Closing if (i) PEDCO has breached any representation, warranty, or covenant
contained in this Agreement, Esenjay has notified PEDCO of the breach, and the
breach has continued without cure for a period of three (3) business days after
the notice of the breach, (ii) PEDCO has given Esenjay notice pursuant to
Section 3.1 that the Purchase Price is reduced by more than ten percent (10%),
or (iii) Closing shall not have occurred on or before 10:00 a.m. local time in
Corpus Christi, Texas, sixty (60) days from the execution date of this
Agreement, by reason of the failure of any condition precedent under Section
7.1.
 
 
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9.2 Effect of Termination.
 
 If this Agreement is terminated by PEDCO because any Seller: (i) breached any
representation, warranty, or covenant made by such Seller in this Agreement, and
failed to cure such breach within three (3) business days after PEDCO gave
notice of the breach; or (ii) failed to perform its obligations at Closing under
circumstances in which all conditions precedent to such Seller’s obligations set
forth in Article 7 have been satisfied, then PEDCO shall be entitled to all
rights or remedies that PEDCO has or may have under law or in equity for such
Seller’s breach or failure to perform under this Agreement. Likewise, if this
Agreement is terminated by Sellers because PEDCO: (i) breached any
representation, warranty, or covenant made by PEDCO in this Agreement, and
failed to cure such breach within three (3) business days after Esenjay gave
notice of the breach; or (ii) failed to perform its obligations at Closing under
circumstances in which all conditions precedent to PEDCO’s obligations set forth
in Article 7 have been satisfied, then Sellers shall be entitled to all rights
or remedies that Sellers have or may have under law or in equity for PEDCO’s
breach or failure to perform under this Agreement.
 
ARTICLE 10 – Miscellaneous
 
10.1 Further Assurances.
 
 Each Seller and PEDCO shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and take such other action
as may be necessary or advisable to carry out such Party’s obligations under
this Agreement and under any exhibit, appendix, document, certificate or other
instrument delivered pursuant hereto.
 
10.2 Notices.
 
 All notices and other communications that are required or that may be given
under the provisions of this Agreement shall be in writing addressed as set
forth below, and the same shall be deemed to have been given on the same day if
delivered upon the earliest of: (a) actual receipt by the Party to be notified;
(b) three (3) days after deposit with the United States Postal Service,
certified mail, postage prepaid, return receipt requested; (c) two (2) days
after deposit with Federal Express or other reputable overnight service) for
overnight delivery; (d) upon acknowledgment of receipt of telefax, email or
other electronic transmission. All such notices shall be addressed as follows:
 
If to Sellers:   
Esenjay Oil & Gas, Ltd.
500 N. Water Street, Suite 1100 South
Corpus Christi, Texas 78401
Attn.:  Ms. Linda D. Schibi, Vice President, Land
Tel. No.  (361) 883-7464
FAX No. (361) 883-3244
Email: Schibi@epc-cc.com

 

If to PEDCO:   
Pacific Energy Development Corp.
4125 Blackhawk Plaza Circle, Suite 201A
Danville, California 94506
Attn.:  Frank C. Ingriselli, President and Chief Executive Officer
With a copy to:  General Counsel
Tel. No.  (925) 984-2845
FAX No. (925) 403-0703
Email: ingriselli@pacificenergydevelopment.com

 
 
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From time to time Sellers or PEDCO may designate another address or facsimile
number or email address or telephone number for all purposes of this Agreement
by notifying the other Parties of such change in accordance with the provisions
hereof.
 
10.3 Incorporation of Appendices.
 
 The appendices attached hereto are incorporated in this Agreement and are made
a part of this Agreement.
 
10.4 Entire Agreement.
 
 This Agreement (including the appendices attached hereto) constitutes the
entire agreement among the Parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, written and oral.
 
10.5 Amendment; Waiver.  This Agreement may not be altered, or amended, nor any
rights hereunder waived, except by an instrument in writing executed by the
Party or Parties to be charged with such amendment or waiver.
 
10.6 Announcements.
 
 No Party shall issue any press release or make any public announcement relating
to the subject matter of this Agreement prior to Closing without the prior
written approval of PEDCO and Esenjay; provided, however, that any Party may
make any public disclosure that such disclosing Party believes in good faith is
required by applicable law, the rules of any recognized stock exchange on which
the securities of such Party are traded or any listing or trading agreement
concerning any Party’s publicly-traded securities (in which case the disclosing
Party shall use its commercially reasonable efforts in good faith to deliver to
the other Parties, pursuant to the notice provisions hereof, a copy of the
proposed disclosure, and give such other Parties an opportunity to comment on
the proposed disclosure, prior to such public disclosure).

10.7 Confidentiality.

 
(a). From and after the date of this Agreement and until Closing, each Party
shall treat all information exchanged and relating the transactions contemplated
hereby as confidential (the “Confidential Information”). Each Party shall take
reasonable precautions as may be necessary to prevent the disclosure of any
portion of the Confidential Information to any third party. Without the prior
written consent of the other Parties, no Party shall disclose any of the
Confidential Information, except to any of the following (on a confidential
basis): (1) members, partners, managers, officers, directors, employees,
attorneys, accountants, engineers and other agents or consultants engaged by
such Party; (2) any bona fide third party who in good faith is seeking to
purchase, acquire, invest, finance or otherwise participate with such Party in
an interest in any portion of the lands within the AMI described in Appendix 8,
or the wells, lands or leases therein, including any investors or potential
investors in PEDCO, subject to the terms of a written confidentiality agreement;
or (3) any parties to which such Party is required to disclose such information
by law or by the rules of any recognized stock exchange on which the securities
of such Party are traded. The Parties acknowledge that the breach of the terms
of this provision may cause irreparable harm for which monetary damages would be
inadequate and difficult to ascertain. Therefore, the Parties hereby agree that,
in the event of a breach or threatened breach hereof, the non-breaching Party or
Parties may seek an injunction, restraining order, specific performance, and
such other remedies and relief, in law or at equity, or any combination thereof,
which the non-breaching Party or Parties may deem in the sole discretion of such
Party or Parties as necessary or advisable. The filing of any particular cause
of action hereunder shall not be deemed an election of remedies.
 
 
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(b). For purposes of this Agreement, “Confidential Information” does not include
information that: (1) is already known to the receiving Party as of the date of
disclosure hereunder; (2) is already in possession of the public or becomes
available to the public other than through the breach of this Agreement by the
receiving Party or of any other person to whom Confidential Information is
distributed pursuant to this Agreement; (3) is required to be disclosed under
applicable law, stock exchange regulations, court order, or by a governmental
order, decree, regulation or rule (provided that the receiving Party shall make
all reasonable efforts to deliver prompt written notice to the disclosing Party
prior to such disclosure); (4) is acquired independently from a third party that
represents it has the right to disseminate such information at the time it is
acquired by the receiving Party; or (5) is developed by the receiving Party
independently of the Confidential Information received from the disclosing
Party.
 
10.8 Force Majeure.
 
 If PEDCO is rendered unable, wholly or in part, by force majeure to carry out
its obligations within the deadlines established under this Agreement, it will
give Esenjay prompt written notice of the force majeure event with reasonably
full particulars concerning it. The obligations or deadlines of PEDCO shall be
suspended during the continuation of the force majeure event. PEDCO shall use
all reasonable diligence to remove the force majeure as quickly as
possible.  The term “force majeure” as employed herein shall mean an act of God,
strike, lockout or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightening, fire, storm, flood, explosion, governmental
restraint including but not limited to a drilling moratorium or a moratorium on
hydraulic fracturing operations, governmental inaction,  restriction upon or
prohibition of surface rights, nonavailability of drilling equipment or other
equipment or personnel at reasonable commercial rates; and any other cause,
whether of the kind specifically enumerated or otherwise, which is not
reasonably within the control of PEDCO.
 
10.9 Binding Effect; Benefits.
 
 This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and assigns. Nothing expressed or implied in
this Agreement is intended to or shall be construed to give any person other
than the Parties or their respective successors or assigns any legal or
equitable right, remedy or claim under or in respect of this Agreement, it being
the intention of the Parties that this Agreement shall be for the sole and
exclusive benefit of the Parties and their respective successors and assigns and
for the benefit of no other person.
 
10.10 Governing Law.
 
 This Agreement and the transactions contemplated hereby shall be construed in
accordance with, and governed by, the laws of the State of  Colorado.
 
10.11 BINDING ARBITRATION.
 
 ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE EXISTENCE OF TITLE DEFECTS OR ENVIRONMENTAL LIABILITIES, THE BREACH,
TERMINATION, ENFORCEMENT, INTERPRETATION OR VALIDITY OF THIS AGREEMENT,
INCLUDING THE DETERMINATION OF THE SCOPE OR APPLICABILITY OF THIS AGREEMENT TO
ARBITRATE, SHALL BE DETERMINED BY ARBITRATION IN THE STATE OF COLORADO IN
ACCORDANCE WITH THE PREVAILING COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. THE HEARING SHALL BE COMMENCED WITHIN THIRTY (30) DAYS
AFTER THE SELECTION OF THE ARBITRATOR AND A WRITTEN DECISION SHALL BE RENDERED
BY THE ARBITRATOR WITHIN THIRTY (30) DAYS OF THE CONCLUSION OF THE HEARING.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, JUDGMENT ON THE AWARD MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION. THIS CLAUSE SHALL NOT PRECLUDE THE
PARTIES FROM SEEKING PROVISIONAL REMEDIES IN AID OF ARBITRATION FROM A COURT OF
APPROPRIATE JURISDICTION. THE ARBITRATOR SHALL NOT AWARD CONSEQUENTIAL OR
PUNITIVE DAMAGES TO ANY PARTY. THE COSTS AND EXPENSES OF THE ARBITRATION
PROCEEDING, INCLUDING THE FEES OF THE ARBITRATOR AND ALL COSTS AND EXPENSES,
INCLUDING LEGAL FEES AND WITNESS FEES, INCURRED BY THE PREVAILING PARTY OR
PARTIES, SHALL BE BORNE BY THE NON-PREVAILING PARTY OR PARTIES.
 
 
16

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10.12 Specific Performance.
 
 The Parties agree and acknowledge that money damages may not be an adequate
remedy for a breach of a provision of this Agreement by any Seller or PEDCO. As
such, any Seller or PEDCO, in their sole discretion, may apply to a court for
specific performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement by any Seller or PEDCO.
 
10.13 Expenses.
 
 Except as otherwise specifically provided in this Agreement, all fees, costs
and expenses incurred by PEDCO or any Seller in negotiating this Agreement or in
consummating the transactions contemplated by this Agreement shall be paid by
the Party incurring the same, including with limitation, legal and accounting
fees, costs and expenses.
 
10.14 Cost.
 
 If any legal action, arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with this Agreement, the prevailing Party or
Parties shall be entitled to recover reasonable attorney’s fees and other costs
incurred in such action, arbitration or other proceeding, in addition to other
relief to which such Party or Parties may be entitled.
 
10.15 Severability.
 
 Each section, subsection and lesser section of this Agreement constitutes a
separate and distinct undertaking, covenant or provision hereof. In the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable, such provision shall be deemed limited by construction in scope
and effect to the minimum extent necessary to render the same valid and
enforceable, and, in the event such a limiting construction is impossible, such
invalid or unenforceable provision shall be deemed severed from this Agreement,
but every other provision of this Agreement shall remain in full force and
effect.
 
10.16 Esenjay’s Representation of Sellers.  Winn, Lacy and Crain acknowledge
that Esenjay is acting as their representative in connection with this
Agreement. Esenjay’s representation of the other Sellers includes, but is not
limited to, the negotiation and drafting of this Agreement and documents to be
delivered at Closing. Winn, Lacy and Crain covenant and agree that each shall be
bound by all actions taken by Esenjay on each of their behalf under or in
connection with this Agreement and shall be deemed to have received notice for
all purposes under this Agreement upon Esenjay’s receipt of the same in
accordance with Section 10.2.
 
10.17 Presumption Concerning Interpretation and Construction.
 
 Notwithstanding the fact that preliminary drafts of this Agreement were
prepared by Esenjay, Esenjay and PEDCO and their respective counsel have had
opportunity to participate in the drafting of the final form of this Agreement,
and each Party hereto and their respective counsel have had opportunity to
review the final form of this Agreement. Accordingly, in the event of any
ambiguity in the provisions of this Agreement, there shall be no presumption in
favor of any Party hereto with respect to the interpretation or construction
thereof. The Parties will treat the words “include,” “includes” and “including”
as if followed by “without limitation.” Pronouns in masculine, feminine, and
neuter genders will be construed to include any other gender, and words in the
singular form will be construed to include the plural and vice versa, unless the
context otherwise requires.
 
 
17

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10.18 Survival.
 
 Except for each Seller’s representation in Section 6.2(g), which shall expire
upon Closing, and as otherwise specifically set forth herein, the
representations and warranties of the Parties hereto shall survive the execution
of this Agreement and the Closing for a period of two (2) years from the date of
the Closing; provided, however, that the foregoing shall not abrogate or limit
Sellers’ indemnity and hold harmless obligations under Section 5.9 or Sellers’
special warranty of title set forth in the Assignment.
 
10.19 Headings.
 
 The section and subsection headings used in this Agreement are inserted for
convenience only and shall be disregarded in construing this Agreement.
 
10.20 Timing. Time is of the essence hereof.
 
10.21 Counterparts; Facsimile and Electronic Signatures.  This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Furthermore, this Agreement
may be executed by the facsimile or electronic signature of any Party hereto, it
being agreed that the facsimile or electronic signature of any Party hereto
shall be deemed an original for all purposes.
 
10.22 Termination of Confidentiality Agreement.  Effective at Closing, the
Parties agree that certain Confidentiality/Non-Compete Agreement, dated April
13, 2011, by and between Esenjay, South Texas Reservoir Alliance, LLC and PEDCO,
will be deemed terminated and of no further force and effect.
 
[Signature page follows.]
 
 
18

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EXECUTED to be effective as of the Effective Date.
 

 BUYER:   SELLERS:                Pacific Energy Development Corp.   Esenjay Oil
& Gas, Ltd.                     By: Esenjay Petroleum Corporation,
Its General Partner
              By:
/s/ Frank C. Ingriselli 
  By:
/s/ Linda D. Schibi  
   
Frank C. Ingriselli
President and Chief Executive Officer
   
Linda D. Schibi
Vice President Land
 

 

 
 
 
By:
 
 
 
 
 
By:
 
 
By:
 
 
 
 
 
By:
 
 
By:
 
Winn Exploration Co., Inc.
 
/s/ Michael W. Calley 
Michael W. Calley
Vice President

Lacy Properties, Ltd.

Lacy Property Management, Inc.,
Its General Partner
 
/s/ Darren T. Groce 
Darren T. Groce
Interim President

Crain Energy, Ltd.
 
Crain Oil & Gas, LLC,
Its General Partner
 
/s/ Darren T. Groce 
Darren T. Groce
Interim President
         

 
 
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APPENDIX 1
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)

DEFINED TERMS
 
Unless such terms are otherwise defined herein, the following terms set forth
below shall have the meanings ascribed to them below.
 
Additional Leases has the meaning set forth in the second recital of this
Agreement.
 
Affiliate means, with respect to a Person, any other Person directly or
indirectly, Controlling, or under common Control with, the Person in question
and includes any subsidiary of such Person and any “affiliate” of such Person
within the meaning of Reg. §240.12b-2 promulgated under the Securities Exchange
Act of 1934, and with respect to a Person who is an individual, the ancestors
and descendants of such Person and members of such Person’s nuclear family and
trusts of which such Persons are beneficiaries.
 
Agreement has the meaning set forth in the first sentence of this Agreement.
 
AMI means area of mutual interest.
 
Appendix 2 Acreage has the meaning set forth in the first recital of this
Agreement.
 
Appendix 2 Leases has the meaning set forth in the first recital of this
Agreement.
 
Approved Net Leasehold Acres has the meaning set forth in Section 2.3.
 
Assignment has the meaning set forth in Section 1.3(b)1.
 
Buyer has the meaning set forth in the first sentence of this Agreement.
 
Cash Carry has the meaning set forth in Section 1.3(a)4.
 
Claims has the meaning set forth in Section 5.9.
 
Closing has the meaning set forth in Section 1.3.
 
COGCC means the Colorado Oil and Gas Conservation Commission.
 
Commencement Period has the meaning set forth in Section 5.8(b).
 
Defined Terms
Appendix 1 Page 1

--------------------------------------------------------------------------------

 
 
Contract Area has the meaning set forth in Section 5.1.
 
Control means the possession, directly or indirectly, through one or more
intermediaries, of the following: (a) in the case of a corporation, more than
fifty percent (50%) of the outstanding voting securities thereof; or (b) in the
case of any Person, the power or authority, through ownership of voting
securities, by contract or otherwise, to direct the management, activities or
policies of the Person.
 
Confidential Information has the meaning set forth in Section 10.6.
 
Counsel to Esenjay means Branscomb PC, 802 N. Carancahua, Suite 1900, Corpus
Christi, Texas 78401-0036, Attention: H. Scott Taylor.
 
Crain has the meaning set forth in the first sentence of this Agreement.
 
Cure Period has the meaning set forth in Section 2.4.
 
Date of Determination has the meaning set forth in Section 1.3(a)2.
 
Deep Rights has the meaning set forth in Section 5.4.
 
Deep Rights Seller has the meaning set forth in Section 5.5.
 
Defect Notice has the meaning set forth in Section 2.4.
 
Designated Interests has the meaning set forth in the third recital of this
Agreement.
 
Effective Date means Sixty (60) days from the execution date of this Agreement
 
Encumbrances means pledges, liens, mortgages, security interests, contract
obligations, options, claims, defects and encumbrances. Notwithstanding anything
to the contrary, for purposes of this Agreement, any of the Subject Leases with
an expiration date occurring during 2011 shall be deemed to be subject to an
Encumbrance hereunder.
 
Esenjay has the meaning set forth in the first sentence of this Agreement.
 
Esenjay ORI has the meaning set forth in Section 4.1.
 
Evolution has the meaning set forth in Section 4.3.
 
Evolution Agreement has the meaning set forth in Section 4.3.
 
 
Defined Terms
Appendix 1 Page 2

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Evolution ORI has the meaning set forth in Section 4.4.
 
Evolution Reversionary Interest has the meaning set forth in Section 4.3.
 
Excluded Leases has the meaning set forth in Section 2.3.
 
Floor Value has the meaning set forth in Section 1.3(a)2.
 
Force Majeure has the meaning set forth in Section 10.7.
 
Good and Defensible Title means, for each of the Subject Leases, such record
title that: (i) is free and clear of all Encumbrances, except Permitted
Encumbrances; (ii) entitles Sellers to receive not less than the net revenue
interest set forth in Appendix 2 in all hydrocarbons produced from the Subject
Leases described in Appendix 2 at any time during the productive life thereof
(after satisfaction of all royalties, overriding royalties, nonparticipating
royalties, net profits interests or other similar burdens on or measured by
production of hydrocarbons); and (iii) obligates Sellers to bear not more than
the working interest set forth in Appendix 2 in the Subject Leases described in
Appendix 2 at any time during the productive life or abandonment thereof.
 
Guarantee has the meaning set forth in Section 1.3(a)2.
 
Initial Well has the meaning set forth in Section 5.8.
 
Lacy has the meaning set forth in the first sentence of this Agreement.
 
Market Value has the meaning set forth in Section 1.3(a)2.
 
Net Leasehold Acres means, with respect to each of the Subject Leases: (i) the
number of gross acres covered by such Lease, times (ii) the percentage of the
oil, gas and other minerals covered by such Lease, times (iii) the percentage of
the estate of the lessee in said Lease (working interest) owned by Sellers.  For
example, the number of Net Leasehold Acres attributable to a Lease covering an
undivided one half interest in the oil, gas and other minerals rights in and
under a 100 acre tract of land in which Sellers own 90% of the estate of the
original lessee in such Lease would be 45 Net Leasehold Acres. The 45 Net
Leasehold Acres in this example is derived as follows:  (100 acres) times [50%
(the landowner’s interest in the oil, gas and other mineral rights)] times [90%
(Sellers’ ownership percentage of the estate of the original lessee)].
 
Operating Agreement has the meaning set forth in Section 5.1.
 
Operations has the meaning set forth in Section 5.8(a).
 
Party and Parties have the meanings set forth in the second sentence of this
Agreement.
 
PEDCO has the meaning set forth in the first sentence of this Agreement.
 
 
Defined Terms
Appendix 1 Page 3

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Permitted Encumbrances means and includes the following:
 
 
(i)
production burdens, including overriding royalties, as of record and in
existence as of the Effective Date that (a) do not reduce Sellers’ net revenue
interest in any of the Appendix 2 Leases below the amounts set forth in Appendix
2 or (b) increase the proportionate share of costs and expenses of leasehold
operations attributable to or to be borne by the working interest of Sellers’ in
any of the Appendix 2 Leases below the amounts set forth in Appendix 2, unless
there is a proportionate increase in Sellers’ applicable net revenue interest;

 
 
(ii)
the overriding royalties to be reserved by Esenjay as set forth in this
Agreement;

 
 
(iii)
Liens for taxes or assessments or governmental charges not yet delinquent;

 
 
(iv)
Easements, rights-of-way, servitudes, permits, surface leases and other rights
in respect of surface operations incidental to the ownership of the Subject
Leases provided that same do not materially interfere with the operation, value
or use of any of the Subject Leases;

 
 
(v)
All rights of consent required by any governmental authority (if any) in
connection with the change of ownership or control of an interest in any
federal, state or other lease if the same are customarily obtained after such
change of ownership or control by timely filings or other actions;

 
 
(vi)
rights of reassignment, to the extent any exist as of the date of this
Agreement, upon the surrender or expiration of any of the Subject Leases;

 
 
(vii)
all rights reserved to or vested in any governmental entity to control or
regulate operations on any of the Subject Leases and all applicable laws;

 
 
(viii)
all defects and irregularities of title that would not reasonably be expected to
result in claims that would materially and adversely affect Sellers’ title to,
or ownership, operations, or value of the Subject Leases, including, without
limitation (a) defects in the early chain of title consisting of the failure to
recite marital status or the omission of succession or heirship proceedings; (b)
defects or irregularities arising out of the lack of a survey; (c) defects or
irregularities arising out of or relating to the lack of powers of attorney from
corporations to execute and deliver documents on their behalf or lack of spousal
joinder; (d) defects of title which result from the failure to file assignments
or other documents in the state or federal records so long as such assignments
or other documents are properly recorded in the county records; and (e)
irregularities cured by possession under applicable statutes of limitation and
statutes relating to acquisitive (or liberative) prescription; and

 
 
(ix)
all other liens, charges, encumbrances, instruments, obligations, defects and
irregularities affecting the Subject Leases which, individually or in the
aggregate, do not: (a) interfere materially with the operation, value, or use of
any of the Subject Leases; or (b) do not prevent PEDCO from receiving the
proceeds of production from any wells to be drilled on the Subject Leases.

 
Person means an individual, corporation, partnership, limited liability company,
trust, unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
 
Post-Closing Cash has the meaning set forth in Section 1.3(a)3.
 
Post-Closing Cure Period has the meaning set forth in Section 3.2.
 
 
Defined Terms
Appendix 1 Page 4

--------------------------------------------------------------------------------

 
 
Proportionate Share means the following shares attributable to each respective
Seller: Esenjay, Sixty Percent (60%); Winn, Twenty-Five Percent (25%); Crain,
Eleven and Twenty-Five Hundredths Percent (11.25%); and Lacy, Three and
Seventy-Five Hundredths Percent (3.75%).
 
Purchase Price has the meaning set forth in Section 1.2.
 
Records has the meaning set forth in Section 1.1(a).
 
Review Period has the meaning set forth in Section 2.1.
 
Second Closing has the meaning set forth in Section 3.2.
 
Seller has the meaning set forth in the first sentence of this Agreement.
 
Shallow Horizons has the meaning set forth in the first recital of this
Agreement.
 
Subject Acreage has the meaning ascribed to such term in the second recital of
this Agreement.
 
Subject Leases has the meaning set forth in the second recital of this
Agreement.
 
Title Defect means any fact that renders Sellers’ title to any of the Subject
Leases less than Good and Defensible Title, including any Encumbrance (or any
claim of an Encumbrance) other than a Permitted Encumbrance.
 
Transferring Seller has the meaning set forth in Section 5.6.
 
Units has the meaning set forth in Section 1.3(a)2.
 
Winn has the meaning set forth in the first sentence of this Agreement.
 
 
Defined Terms
Appendix 1 Page 5

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APPENDIX 2
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
APPENDIX 2 LEASES

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

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APPENDIX 3
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
FORM OF PARTIAL ASSIGNMENT OF OIL, GAS AND MINERAL LEASES

PARTIAL ASSIGNMENT OF OIL, GAS AND MINERAL LEASES
 

STATE OF COLORADO §     § KNOW ALL MEN BY THESE PRESENTS: COUNTY OF WELD §  

 
THIS PARTIAL ASSIGNMENT OF OIL, GAS AND MINERAL LEASES (this “Assignment”),
dated _______________ ___, 2011 (the “Closing Date”), but effective as of 12:01
a.m. Central Clock Time on ___________, 2011 (the “Effective Date”) is from
ESENJAY OIL & GAS, LTD., a Texas limited partnership (“Esenjay”), 500 North
Water Street, Suite 1100 South, Corpus Christi, Texas 78401, WINN EXPLORATION
CO., INC., a Texas corporation (“Winn”), 800 North Shoreline Blvd., Suite 1900
North, Corpus Christi, Texas 78401, CRAIN ENERGY, LTD., a Texas limited
partnership (“Crain”), 222 East Tyler Street, Longview, Texas 75606, and LACY
PROPERTIES, LTD., a Texas limited partnership (“Lacy”), 222 East Tyler Street,
Longview, Texas 75606 (Esenjay, Winn, Crain and Lacy are, collectively,
“Assignors” and each an “Assignor”), to PACIFIC ENERGY DEVELOPMENT CORP., a
Nevada corporation (“Assignee”), 4125 Blackhawk Plaza Circle, Suite 201A,
Danville, California 94506. Terms used but not otherwise defined herein shall
have the meanings given to them in that certain Purchase and Sale Agreement (the
“Purchase Agreement”), dated August 23, 2011, by and among Assignors and
Assignee.

For a valuable consideration, and in consideration of the covenants and
agreements of Assignee herein contained, and upon and subject to the exceptions,
reservations, conditions and other provisions hereinafter set forth, Assignors
hereby sell, transfer, assign, and deliver to Assignee an undivided Fifty
Percent (50% of 8/8ths) interest in and to the leasehold estate and working
interest in and to the leases described in Exhibit “A” attached hereto (herein
referred to collectively as “said Leases” and severally as a “Lease”) INSOFAR
AND ONLY INSOFAR as said Leases cover and affect the lands described in Exhibit
“A” attached hereto to all depths from the surface of the earth down to the
stratigraphic equivalent of the base of the Greenhorn Formation being the “X
Bentonite Marker” as encountered at a depth of 6,493 feet measured depth on the
electrical log in the Esenjay Operating Inc.-Jess 23-10 Well (API #05-123-31643)
located in Section 23, T7N, R59W, 6th PM, Morgan County, Colorado (the “Assigned
Depths”). Said Leases are conveyed hereby free and clear of all burdens other
than Permitted Encumbrances, including the overriding royalty interests reserved
by Esenjay hereby and the terms of the Operating Agreement described below, and
shall entitle Assignee to the working interest set forth above without
suspension, reduction or termination so long as said Leases remain in force and
effect.

Esenjay hereby RESERVES and EXCEPTS from this Assignment overriding royalty
interests in said Leases (the “Esenjay ORI”) insofar as said Leases cover the
Assigned Depths, subject to the following terms and provisions, equal to amount,
if positive, by which Twenty Percent (20%) of 8/8ths of such production exceeds
the aggregate of all landowner royalties, overriding royalties and other burdens
measured by or payable out of production that cover or affect said Leases,
proportionately reduced, as more particularly described below, to the interest
in said Leases assigned to Assignee by Esenjay.
 
The Esenjay ORI shall be a covenant running with each of said Leases and shall
be subject to the following terms and provisions:

(a). The Esenjay ORI shall be inclusive of any overriding royalties or claims
for overriding royalties created prior to the Closing Date (whether or not of
record and including but not limited to overriding royalty interests to which
the prospect generator or any other third party may be entitled).
 
(b). If Esenjay’s interest in any of said Leases assigned to Assignee by Esenjay
covers less than the entire and undivided estate in the oil, gas and minerals in
the lands covered thereby, the Esenjay ORI shall be payable in the proportion
which Esenjay’s fractional interest in the oil, gas and mineral estate covered
by said Lease in such lands bears to the entire and undivided estate in the oil,
gas and other minerals in and under such lands. If Esenjay holds less than all
of the oil, gas and mineral leasehold estate created by said Leases assigned to
Assignee or if Esenjay conveys less than all of the oil, gas and mineral
leasehold estate created by said Leases, the Esenjay ORI shall be payable in the
proportion which the fractional part of the oil, gas and mineral leasehold
estate conveyed to Assignee by Esenjay bears to the entire and undivided oil,
gas and mineral leasehold estate in the lands covered by said Leases assigned to
Assignee by Esenjay.
 
 
 

--------------------------------------------------------------------------------

 
 
(c). The Esenjay ORI shall be free and clear of all drilling, producing and
operating costs, but shall be charged with its proportionate part of all
production, severance, ad valorem and similar taxes applicable to said
production and any other taxes imposed under the laws of any state or other
political subdivision to which such interest in production is or may be subject.
At the election of Assignee, production, gathering, or other taxes (state or
federal) levied against the Esenjay ORI may be paid by Assignee and deducted
from the overriding royalty interests payable to Esenjay. Assignee shall pay the
Esenjay ORI on the same basis as the landowner’s royalty under the applicable
lease and in accordance with applicable law.
 
(d). Assignee shall have the right and authority to pool or unitize the Esenjay
ORI in the same manner and to the same extent that pooling or unitization is
authorized under the respective provisions of said Leases assigned to Assignee,
as the same may have heretofore or may hereafter be amended, with the same
effect as though the Esenjay ORI was a part of the lessors’ royalties in said
Leases. In lieu of the overriding royalties above specified, Esenjay shall
receive on production from a unit so pooled only such portion of the overriding
royalties stipulated above as the number of acres covered by said Lease or
portion thereof which is placed in any such unit bears to the total acreage so
pooled in the particular unit involved.
 
(e). The Esenjay ORI will apply to any renewals or extensions of said Leases
acquired within six (6) months of the expiration of the applicable said Lease,
insofar as such renewal or extension covers any portion of the lands covered by
such Said Lease; provided, however, the Esenjay ORI applicable to any extension
or renewal of any of said Leases shall be reduced to the extent that the
landowner’s royalty under such extension or renewal lease is greater than the
landowner’s royalty under the expiring lease for which such extension or renewal
lease is acquired.
 
This Assignment is made subject to the covenants, provisions, and terms of the
Purchase Agreement, that certain Operating Agreement, dated ______________, 2011
(the “Operating Agreement”), naming Assignee or Assignee’s designee as Operator,
and each of said Leases.

Assignee shall bear its pro rata share of the royalties reserved in said Leases
insofar as they cover the Assigned Depths. The interests in said Leases conveyed
hereby are free and clear of the covenants, provisions, and terms of, and shall
not be subject to the provisions of, that certain Exploration Agreement, dated
effective September 1, 2007, by and between Esenjay and Evolution Oil & Gas, LLC
(“Evolution”), as amended by First Amendment to Exploration Agreement DJ Basin
3D Seismic Program, dated effective September 19, 2009, as amended by Second
Amendment to Exploration Agreement DJ Basin 3D Seismic Program, dated effective
April 12, 2011, (collectively, the “Evolution Agreement”), insofar as the
Evolution Agreement provides that Evolution shall be entitled to an “after
project payout” interest (the “Evolution Reversionary Interest”). The Evolution
Reversionary Interest will reduce Esenjay’s working interests and net revenues
interests in said Leases, and Esenjay will indemnify, defend and hold Assignee
harmless from and against all claims or losses arising out of the Evolution
Reversionary Interest. The Evolution Reversionary Interest shall not burden,
reduce or otherwise alter or affect the working interests or the net revenues
interests in said Leases conveyed to Assignee hereby. Assignee shall not be
obligated to monitor or maintain information relating to the payout status of
the Evolution Reversionary Interest.

TO HAVE AND TO HOLD, all and singular, the interests in said Leases conveyed
hereby together with all and singular the rights and appurtenances thereto in
any wise belonging unto Assignee and its successors in title and assigns
forever; and Assignor hereby binds itself and its successors and assigns to
warrant and forever defend, all and singular, said interests unto Assignee and
its successors and assigns against every person whomsoever lawfully claiming or
to claim the same or any part thereof, by through and under Assignor only, but
not otherwise. This Assignment is made with full substitution and subrogation of
Assignee in and to all covenants, indemnities, representations and warranties by
others heretofore given or made with respect to the interests in said Leases
conveyed hereby or any part thereof.

This instrument may be executed in any number of counterparts, with the same
force and effect as if all parties hereto had executed a single counterpart
hereof.

All of the terms, provisions, covenants and agreements herein contained shall
extend to and be binding upon the parties hereto, and their respective
successors in title and assigns, and all terms, provisions and reservations
contained in this Assignment shall be deemed covenants running with each of the
said Leases.
 
[Signature page follows.]
 
 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Assignors and Assignee have executed this Assignment to be
effective as of the Effective Date.
 

  ASSIGNORS:
 
Esenjay Oil & Gas, Ltd.

By: Esenjay Petroleum Corporation
   Its General Partner

By: ______________________________
   Linda D. Schibi
   Vice President Land

Winn Exploration Co., Inc.

By: ______________________________
   Michael W. Calley
   Vice President

Lacy Properties, Ltd.

By:  Lacy Property Management, Inc.
    Its General Partner

By: ______________________________
   Darren T. Groce
   Interim President

Crain Energy, Ltd.

By: Crain Oil & Gas, LLC
   Its General Partner

By: ______________________________
   Darren T. Groce
   Interim President

ASSIGNEE:

Pacific Energy Development Corp.

By: ______________________________
   Frank C. Ingriselli
   President and Chief Executive Officer

 
 
 

--------------------------------------------------------------------------------

 
 
Acknowledgments
 

STATE OF TEXAS   §     §   COUNTY OF NUECES §  

 
The foregoing instrument was acknowledged before me this ___ day of
_______________, 2011, by Linda D. Schibi, Vice President Land of Esenjay
Petroleum Corporation, a Texas corporation, on behalf of the corporation, acting
in its capacity as General Partner of Esenjay Oil & Gas, Ltd., a Texas limited
partnership.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

 

STATE OF TEXAS   §     §   COUNTY OF NUECES §  

The foregoing instrument was acknowledged before me this ___ day of
_______________, 2011, by Michael W. Calley, Vice President of Winn Exploration
Co., Inc., a Texas corporation, on behalf of the corporation.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

STATE OF TEXAS   §     §   COUNTY OF GREGG    §  

 
 
 

--------------------------------------------------------------------------------

 
 
The foregoing instrument was acknowledged before me this ___ day of
_______________, 2011, by Darren T. Groce, Interim President of Lacy Properties,
Ltd., a Texas limited partnership, on behalf of the corporation, acting in its
capacity as General Partner of Lacy Properties, Ltd., a Texas limited
partnership.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

                                                         

STATE OF TEXAS   §     §   COUNTY OF GREGG  §  

                         

The foregoing instrument was acknowledged before me this ___ day of
_______________, 2011, by Darren T. Groce, Interim President of Crain Energy,
Ltd., a Texas limited partnership, on behalf of the corporation, acting in its
capacity as General Partner of Crain Energy, Ltd., a Texas limited partnership.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

                                                            

STATE OF ____________ §     §   COUNTY OF ___________ §  

The foregoing instrument was acknowledged before me this ___ day of
_______________, 2011, by Frank C. Ingriselli, President and Chief Executive
Officer, of Pacific Energy Development Corp., a Nevada corporation, on behalf of
the corporation.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

 
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT “A”

Attached to and made a part of that certain
Partial Assignment Of Oil, Gas And Mineral Leases, dated __________, 2011,
from Esenjay Oil & Gas, Ltd., et al. as Assignors, to Pacific Energy Development
Corp., as Assignee
 
DESCRIPTION OF OIL AND GAS LEASES

 
 
 
 

--------------------------------------------------------------------------------

 

APPENDIX 4
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
FORM OF SEISMIC DATA LICENSE AGREEMENT – ESENJAY PROPRIETARY DATA

3D ONSHORE/OFFSHORE MASTER SEISMIC
DATA LICENSING AGREEMENT

This Agreement ("Agreement") is effective as of _______________, 2011 by and
between Esenjay Oil & Gas, Ltd., hereinafter referred to as “Licensor”, and
Condor Energy Technology Corp., a Nevada corporation, hereinafter referred to as
"Licensee."

Licensor agrees to acquire or has acquired and grants to Licensee a
non-exclusive, non-transferable license to use certain geophysical data
delineated in various Supplemental Agreements to this Agreement which may be
executed from time to time in the form attached hereto as Schedule "1" by either
Line Number, Program Name, Mileage or Square Mileage, Kilometer, Block, or 3D
Program Name, as well as all related support documentation (e.g., surveying
data, surveyor’s notes, driller’s notes and observer’s notes delivered to
Licensee with the geophysical data), and all tape, electronic and paper/physical
copies of all or any part of the geophysical data or related support
documentation, regardless of source.  Such geophysical data, referred to
collectively hereinafter as the "Data."  LICENSOR HEREBY REPRESENTS AND WARRANTS
THAT IT HAS THE EXCLUSIVE RIGHT AND AUTHORITY TO PROVIDE LICENSEE WITH THE DATA,
AND THAT IT WILL IN NO WAY BREACH ANY OBLIGATION IT HAS TO ANY OTHER PERSON OR
ENTITY BY PROVIDING THE DATA TO LICENSEE. LICENSOR AGREES TO DEFEND, INDEMNIFY
AND HOLD HARMLESS LICENSEE FROM AND AGAINST ALL CLAIMS, DAMAGES, LIABILITIES,
AND JUDGMENTS BASED UPON OR ARISING OUT OF ANY BREACH BY LICENSOR OF THE
FOREGOING REPRESENTATION AND WARRANTY.  This non-exclusive, non-transferable
license to use the Data is made subject to the terms and conditions provided
below.

I.
Licensee acknowledges that the Data includes trade secrets, copyright protected
confidential and proprietary information of Licensor, and that Licensor’s (and,
as applicable, Licensor’s co-owners’) title to and ownership rights in the Data
shall at all times remain vested in Licensor (and, as applicable, Licensor’s
co-owners).  The Data may not be directly or indirectly, by operation of law or
otherwise, transferred to, disclosed to, shown to, sold to, traded to, disposed
of, or otherwise made available to, any other person or entity other than
Licensee except as specifically provided below in Section III. Licensee agrees
to take any and all reasonable actions necessary to insure that its employees,
representatives or agents do not violate the terms and conditions of this
Agreement including, but not limited to, the limitations on access to the Data
provided below.  In the event this Agreement is violated, Licensor will be
entitled to all remedies available to it at law and in equity, including, but
not limited to, the specific remedies set forth herein, provided, however, that
Licensee shall not be liable for punitive, indirect, incidental or consequential
damages resulting from or arising out of this provision “I”.  Licensee
recognizes that Licensor, as owner or co-owner of the Data, may enter into
agreements with other parties to license the Data provided to Licensee, and that
Licensor is free to license, use, sell or in any other manner dispose of the
Data upon such terms and conditions as Licensor may elect

II.
LICENSEE AGREES THAT THIS LICENSE TRANSACTION IS MADE ON AN "AS IS, WHERE IS"
BASIS.  LICENSOR DOES NOT WARRANT THE ACCURACY OR QUALITY OF THE DATA, AND ANY
ACTIONS TAKEN OR EXPENDITURES MADE BY LICENSEE AS A RESULT OF EXAMINATION,
EVALUATION OR INTERPRETATION OF THE DATA SHALL BE AT THE SOLE RISK,
RESPONSIBILITY AND LIABILITY OF LICENSEE, WITHOUT ANY RECOURSE TO
LICENSOR.  EXCEPT AS EXPRESSLY PROVIDED HEREIN, LICENSEE FURTHER AGREES THAT
LICENSOR SHALL NOT BE LIABLE FOR ANY REPRESENTATIONS, CONDITIONS OR WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY CONDITION OR
WARRANTY OF MERCHANTABILITY, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
THAT THE DATA IS COMPLETE, WHOLLY ACCURATE, OR ERROR FREE.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, LICENSOR SHALL IN NO EVENT BE LIABLE
TO LICENSEE OR ANY THIRD PARTIES FOR PUNITIVE, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE USE
BY LICENSEE OR ANY THIRD PARTIES OF THE DATA.
 
 
 

--------------------------------------------------------------------------------

 

LICENSOR AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS LICENSEE FROM AND AGAINST
ALL CLAIMS, DAMAGES, LIABILITIES AND JUDGMENTS BASED UPON OR ARISING OUT OF
FIELD OPERATIONS CONDUCTED BY LICENSOR OR ITS SUB-CONTRACTORS DURING THE DATA
ACQUISITION PROCESS.

III.
Licensee agrees that this license is personal, that the Data shall be for
Licensee's internal use only, and that the Data shall not be directly or
indirectly, by operation of law or otherwise, transferred to, disclosed to,
shown to, sold to, traded to, disposed of, or otherwise made available to, any
person or entity other than Licensee, except under the following conditions:

A.  The Data may be made available, shown, or a copy provided, to any person or
entity solely for the purposes of reprocessing, analyzing, interpreting and/or
creating derivative products for Licensee, subject to the following: (1) such
person or entity is not itself engaged in the oil & gas exploration business;
(2) such person or entity acknowledges and agrees in writing, either generally
or specifically, that the Data is the confidential, proprietary property,
copyright and trade secret of Licensor and will not be transferred to, disclosed
to, described to, shown to or used to benefit any other person or entity;  (3)
such  person or entity agrees in writing to be bound by the terms and conditions
of this Agreement; and (4) the period of time during which the person or entity
has access to the Data is no longer than is reasonably necessary for it to
perform the work undertaken for Licensee.  All derivative products and
reprocessed Data will be owned by and will remain the property of Licensor and
shall be included in the definition of “Data” as that term is used in this
Agreement.  Licensee hereby grants to Licensor all right, title, and interest in
and to all derivative products and reprocessed Data and Licensor hereby grants
back Licensee a non-exclusive, non-transferable license to all derivative
products and reprocessed Data in accordance with the terms of this Agreement.
Provided, however, Licensee shall not be under an obligation to provide Licensor
with the original or copies of derivative Products.
 
B.  Such portions of the Data as are directly related, in the reasonable opinion
of Licensee, to a specific drilling prospect generated by Licensee or to a
leasehold interest which Licensee desires to offer for potential sale may be
shown by Licensee at Licensee’s facilities to any person or entity, but not
copied, separately analyzed or manipulated for or by such person or entity,
(“Prospective Purchaser”) in order to interest such person or entity to enter
into an agreement with Licensee to explore, operate, develop or buy all or a
portion of such drilling prospect or lease or for purposes of a “Change in
Control” as defined hereinbelow, but only if such person or entity acknowledges
and agrees in writing, either generally or specifically, that the Data is the
confidential, proprietary property, copyright and trade secret of Licensor and
will not be transferred to, disclosed to, described to, shown to or used to
benefit any other person or entity.  Licensor and Licensee intend that Licensee
may show the applicable portions of the Data to any person or entity for the
limited purpose described above only in connection with a specific drilling
prospect of limited area or in connection with the potential sale of a specific
leasehold interest or for the purposes of a Change of Control, but not to permit
such person or entity to make a regional interpretation of the Data or any
portion thereof, and only after such person or entity agrees in writing that the
Data is the confidential, proprietary property, copyright and trade secret of
Licensor and will not be disclosed to, described to, shown to or used to benefit
any other person or entity.

C. The Data may be made available, shown, or a copy provided to any Related
Entity, provided that such Related Entity shall have the same rights to use the
Data as Licensee; and further provided that such Related Entity shall be bound
by the terms of this Agreement to the same extent as Licensee. In the event that
a Related Entity ceases to exist or no longer meets the definition of Related
Entity under this Agreement, all rights of such entity to use the Data shall
immediately terminate and all copies of the Data shall immediately be destroyed
or returned to Licensee. Licensee shall promptly provide Licensor written notice
confirming the return and/or destruction as required by this subsection. For
purposes of this Agreement “Related Entity” means any entity in which Licensee
holds an ownership interest or any entity that holds an ownership interest in
Licensee.
 
 
 

--------------------------------------------------------------------------------

 

The intent of this Agreement is to allow the Data to be used solely by Licensee
for the purposes of analysis and interpretation in Licensee's search for
hydrocarbon reserves.  Licensee shall take all reasonable measures necessary to
safeguard the Data from unauthorized use or disclosure and, in any event,
Licensee shall provide at least the same degree of care and control of the Data
as Licensee exercises toward its own trade secret, proprietary, confidential and
copyright protected information.  Other than as set out herein, the Data shall
remain in the physical possession of Licensee and will not be made available to
any person or entity.  At no time, under any circumstances, shall Licensee
receive any fee from any person or entity for any use of the Data, nor shall the
Data  be displayed on the Internet or any other publicly accessible media for
any purpose, provided, however, the Data may be displayed to a Prospective
Purchaser or a secure Internet data base or site.  If this section of the
Agreement is breached, in addition to all other remedies available to Licensor
at law or in equity, Licensee shall pay to Licensor as liquidated damages, and
not as a penalty, an amount equal to 150% of the original license fees paid for
the Data (but not to exceed 100% of the total acquisition and processing costs
for the data), within three (3) business days of a written demand from
Licensor.  Upon such payment there shall be delivered to any other party who has
been given access to the Data an agreement similar in form and substance to this
Agreement for the affected Data.  Only upon full execution of that agreement
shall the other party have any rights of use in and to the Data.  Licensee
acknowledges, covenants and agrees that any breach of this Agreement by any
consultant, agent, employee, representative, or other advisor of Licensee, or by
any prospective venture participant or prospective purchaser, or any of their
respective consultants, agents, employees, representatives or other advisors,
shall be a breach of this Agreement by Licensee.
 
IV.
This Agreement, the Supplemental Agreements and the license to use the
referenced Data shall terminate ten (10) years from the execution date of this
Agreement, but may be extended by written mutual agreement of the parties.  The
license granted by this Agreement will, without notice, automatically terminate
upon the Licensee: ceasing to carry on its business; making an assignment for
the general benefit of its creditors; proposing any form of financial
reorganization because of insolvency with creditors; becoming subject to any
bankruptcy proceedings or any other proceedings or laws relating to its
insolvency; or if a receiver, receiver and manager, trustee, custodian or
similar agent is appointed or takes possession of all or substantially all of
the property or business of the Licensee.  Immediately upon termination of the
license granted by this Agreement, Licensee will return or cause to be returned
to, or will destroy or cause to be destroyed, the Data.

V.
Except as provided herein, Licensee may not sell, assign or otherwise transfer
this Agreement, the Data, or the license or any other rights or obligations
hereunder, in whole or in part, without the prior written approval of Licensor.
A Change of Control (as defined below) shall not constitute such a transfer.

A “Change of Control” shall mean each of (a) the sale of all or substantially
all of the stock or assets of Licensee (or its ultimate parent company), (b) any
merger, reorganization, combination, consolidation or amalgamation of Licensee
(or its ultimate parent company) with any other entity, and (c) the acquisition,
directly or indirectly, by any person or entity, or by any group of persons or
entities acting together, that are involved, directly or indirectly, in whole or
in part, in the business of exploring for or producing oil, gas or other
minerals, of the power to direct or cause the direction of the management and
policies of Licensee (or its ultimate parent company), whether through the
ownership of voting securities, by contract or otherwise, including, without
limitation, the direct or indirect acquisition of 50% or more of the outstanding
equity interests in Licensee (or its ultimate parent company). Notwithstanding
anything herein to the contrary, a “Change of Control” shall not include
transactions the primary purpose of which concern the fundraising activities of
Licensee, such as undertaking a public or private offering of securities that
results in changes in ownership of Licensee or changes to the composition of the
board of directors of Licensee. Licensee agrees to provide prompt written notice
to Licensor at the appropriate address listed hereinbelow, in the event of a
Change of Control or the entry by Licensee (or its ultimate parent company) into
a publicly discloseable agreement that will cause a Change of Control.  This
section shall apply even if Licensee continues to exist subsequent to the Change
of Control in essentially the same form in which it existed prior to the Change
in Control. Upon entry by Licensee into a publicly discloseable agreement that
will cause a Change of Control, Licensee may either terminate the license
granted under this Agreement and return the Data by the date of the Change of
Control, or may pay to Licensor a re-license fee in the amount of $15,000.00 per
square mile of Data covered by this Agreement.  In the event the Data is to be
returned, Licensee shall be required to execute a Verification of
Return/Destruction of Data form in the form attached as Exhibit A; however,
Licensee shall not be required to destroy, erase or return corporate documents
which contain Data derived from the Data, copies of such Data retained in
back-up computer records for the period such records are normally retained and
such copies required to be retained by law.  Except as provided for in this
section, a Change of Control will not result in the termination of this
Agreement or the charging of additional fees.  This Section is specifically
intended to supersede statutory provisions to the contrary, if any.
 
 
 

--------------------------------------------------------------------------------

 

VI.
Data licensed hereunder may be conveyed to a service company for reprocessing or
storage, provided a written confidentiality agreement is obtained from such
company prior to conveyance.  Licensee accepts full responsibility for insuring
that any Data conveyed hereunder remains confidential and is not made available
to any non-Licensee.  Any print or film of any version of the Data must contain
the following statement:

“This Data is trade secret, is owned by Esenjay Oil & Gas, Ltd., and is licensed
to (Licensee) under terms and conditions of a 2D & 3D Onshore/Offshore Master
Seismic Data Licensing Agreement which strictly limits the use of such
Data.  This Data shall be for Licensee's own internal use only, and shall not be
shown, sold, traded, disposed of, or otherwise made available to any party
except under certain specific conditions delineated in such licensing
agreement.  Any unauthorized use or possession of this Data by any party is
strictly prohibited.”

VII.
The terms of this Agreement shall be kept confidential by the parties hereto,
and shall not be disclosed to any other person or entity, except as may be
reasonably necessary to administer this Agreement (e.g., disclosure in
connection with permitted disclosures of the Data pursuant to Section III,
above), or as otherwise may be required by law.

 
VIII.
This Agreement shall be construed in accordance with the laws of the State of
Colorado, without giving effect to principles of conflicts of law.  The parties
agree that if, after the effective date of this Agreement, there are changes in
laws or regulations (including the imposition of new laws) or in the
interpretation or application of laws or regulations, which in the reasonable
opinion of Licensor adversely affect the benefits, rights or protections
afforded Licensor either pursuant to the terms of this Agreement or by operation
of law then, at Licensor’s sole request the parties shall enter into
negotiations and execute an amendment to this Agreement that places Licensor in
substantially the same position as before the change of law.
 
IX.
The rights and remedies granted in this Agreement to Licensor in the event of
default are cumulative and the exercise of any of those rights and remedies
shall be without prejudice to the enforcement of any other right or remedy
including, without limitation, injunctive relief, specific performance, and any
other right or remedy available at law or in equity or authorized by this
Agreement. Notwithstanding anything to the contrary contained herein, Licensee
shall in no event be liable to Licensor or any third party for punitive,
indirect, or consequential damages resulting from or arising out of this
Agreement.
 
The rights of each party hereto, whether granted by this Agreement or by law or
equity, may be exercised, from time to time, singularly or in combination, and
the waiver of one or more of such rights shall not be deemed to be a waiver of
such right in the future or any one or more of the other rights that the
exercising party may have.  Any right, and any breach of a term, provision or
condition of this Agreement by one party shall not be deemed to have been waived
by the other party unless the waiver is expressed in writing and signed by an
authorized representative of the waiving party.  The failure of either party to
insist upon the strict performance of any term, provision or condition of this
Agreement shall not be construed as a waiver or relinquishment in the future of
the same or any other term, provision or condition.
 
 
 

--------------------------------------------------------------------------------

 

The parties agree that any provision of this Agreement that is deemed to be or
becomes void, illegal, invalid or unenforceable shall be severable herefrom and
ineffective to the extent of such voidability, illegality, invalidity or
unenforceability, and shall not invalidate, affect or impair the remaining
provisions of this Agreement.  If and to the extent any court or governmental
authority of competent jurisdiction holds any provision of this Agreement to be
invalid or unenforceable, the parties will negotiate in good faith to equitably
adjust the provisions of this Agreement with a view toward effecting its
intended purposes; any such holding shall not affect the validity or
effectiveness of the other provisions of the Agreement, which will remain in
full force and effect.  No provision of this Agreement shall be construed to
constitute Licensor as the agent, servant, or employee of Licensee.  The
relationship of Licensor to Licensee shall be that of independent
contractor.  Licensee shall not have the right to control or direct the details
of the work performed by Licensor.  Licensor shall furnish at its own expense,
and risk, all labor, materials, equipment, tools, and transportation and other
items necessary in performance of the work covered herein.

X.
Licensor and Licensee agree that there are no understandings or agreements
relative to this Agreement that are not fully expressed herein or in the
Supplemental Agreements.  This Agreement including only any Supplemental
Agreements sets forth the entire agreement between the parties and supersedes
all prior agreements, prior data licenses, understandings, and communications
between the parties, whether oral or written.

XI.
All notices to be given pursuant to this Agreement shall be in writing and shall
be deemed to be sufficiently given if delivered by overnight courier, in which
case the notice shall be deemed to have been received on the next business day
after sending, or if delivered by hand to the representative named below, in
which case the notice shall be deemed to have been received on the date of
delivery, or if sent by certified mail, return receipt request, in which case
the notice shall be deemed to have been received on the date of receipt.  Until
written notice of change of address given pursuant to this Section, notices
shall be addressed as follows:

 
(a)
Licensor:

Esenjay Oil & Gas, Ltd.
500 N. Water Street
Suite 1100 South
Corpus Christi, Texas 78401-0236
Attention: Eric Gardner
Phone: (361) 883-7464
Fax: (361) 883-3244
 
gardner@epc-cc.com

 
(b)
Licensee:

Condor Energy Technology Corp.
c/o Pacific Energy Development Corp.
4125 Blackhawk Plaza Circle, Suite 201A
Danville, California 94506
Attention: Frank C. Ingriselli, President and Chief Executive Officer
Phone: (925) 984-2845
Fax: (925) 403-0703
ingriselli@pacificenergydevelopment.com
 
 
 

--------------------------------------------------------------------------------

 
 
XII.
Any delay or failure to perform under this Agreement arising from a force
majeure event as specified herein shall not be deemed to be a default and shall
not put an end to this Agreement, so that the same shall continue in suspense or
part performance until such event shall have ceased.  A force majeure event
means:  acts of God, earthquakes, fire, freezing, storm, tornados, floods,
hurricanes, or other actions of the elements, explosion, accident, malicious
mischief, sabotage, insurrections, riot, strikes, lockouts, boycotts, picketing,
labor disturbances, loss of power, public enemy, war (declared or undeclared),
rebellion, civil disturbance, compliance with any federal, state, or municipal
law, or with any regulation, order, rule (including, but not limited to,
priority, rationing or allocation orders or regulation) of governmental
agencies, or authorities or representatives of any government (foreign or
domestic); total or partial failure or loss or shortage of all or part of
transportation or other facilities ordinarily available to and used by a party
hereto in the performance of the obligations imposed by this Agreement, whether
such facilities are such party’s own or those of others; or any cause, whether
similar to or dissimilar from the causes herein enumerated, including without
limiting the generality of the foregoing, any breakdown, either total or
partial, of Licensor’s facilities for any cause whatsoever; provided, however,
that all such causes are beyond the reasonable control of the party claiming
force majeure and the settlement of strikes or lockouts shall be entirely within
the discretion of the party having the difficulty and that even though the
parties hereby agree that any force majeure shall be remedied as soon as
practicable, the settlement of strikes or lockouts by acceding to the demands of
the opposing party when such course is inadvisable in the discretion of the
party having difficulty shall not be required.

[Signature page follows.]
 
 
 

--------------------------------------------------------------------------------

 

ACCEPTED AND AGREED TO THIS ___ DAY OF ______, 2011.

LICENSOR:
 
Esenjay Oil & Gas, Ltd.
 
By:  Esenjay Petroleum Corporation,
Its: General Partner

By:___________________________
Eric Gardner
Vice President Exploration
 
 LICENSEE:
 
Condor Energy Technology Corp.

By:___________________________
Name:_________________________
Title:__________________________

 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit A
VERIFICATION OF RETURN/DESTRUCTION OF DATA

Licensee, as defined in the 2D & 3D Onshore/Offshore Master Seismic Data
Licensing Agreement (“Agreement”) effective as of   hereby represents, warrants
and verifies to Licensor, as defined in the Agreement, that all Data, as defined
in the Agreement (including any Data provided to any other person or entity in
accordance with the terms of the Agreement), has been returned to Licensor
[destroyed].  Specifically, as of the date of this Verification, all Data has
been completely removed from the computer systems, files, offices, warehouses,
or other locations within the possession, custody or control of Licensee.  In
addition, all references to the Data have been [returned/destroyed], by
permanently deleting or otherwise permanently eliminating them from all
computers, files, storage facilities, and any and all other paper, electronic,
digital or other forms of media within the possession, custody or control of
Licensee.

Licensee acknowledges and agrees that Licensor is relying on this Verification
of Return of Data as confirmation that Licensee is not retaining any Data in any
form and, further, as Licensee’s acknowledgment that retaining any Data would
entitle Licensor to liquidated damages as provided in the Agreement as well as
all other remedies available to Licensor at law or in equity.

Verified this   day of  , 2011.
 

 
By:___________________________________
Print Name: ____________________________
Company and Title: ________________________
 

 
 
 

--------------------------------------------------------------------------------

 
 
ONSHORE 3D
SCHEDULE "1"

Supplemental Agreement to a
2D & 3D Onshore/Offshore Master Seismic Licensing Agreement
between
Esenjay Oil & Gas, Ltd.
and
Condor Energy Technology Corp., a Nevada corporation

(f). _________________________
 
(g). Dated____________________
 
_______________, 2011

_______________________________ agrees to
license                                                                                                
square miles of 3-D geophysical data acquired by Licensor as delineated by area
and mileage and at rates as specified below, under terms and conditions of the
2D&3D Onshore/Offshore Master Seismic Data Licensing Agreement to which this
supplemental agreement is attached and made a part thereof.
 

Area  
Committed 
Mileage
             

 
Billing Address:                  _______________________
_______________________
_______________________

Attention: ____________________
 
 Delivery Address: SAME

ACCEPTED AND AGREED TO THIS __________DAY OF______________, 2011.

LICENSOR
   
ESENJAY OIL & GAS, LTD,
   
LICENSEE
 
CONDOR ENERGY TECHNOLOGY CORP.
 
By Esenjay Petroleum Corporation,
Its general partner
   
 
            By: ____________________________________     By:
____________________________________  

 
 
 

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APPENDIX 5
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
FORM OF CERTIFICATE OF NON-FOREIGN STATUS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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CERTIFICATION AS TO NON-FOREIGN STATUS

Under penalties of perjury, ____________________ (“Affiant”) hereby certifies
the following on behalf of [Seller]:

That [Seller] and Pacific Energy Development Corp. (“PEDCO”) entered into a
Purchase and Sale Agreement dated July ___, 2011 (the “Contract”), whereby
[Seller] agreed to convey certain oil and gas assets described therein (the
“Assets”) to PEDCO.

That [Seller] represents and warrants under penalties of perjury, pursuant to
the requirements of Section 1445 of the Internal Revenue Code of 1954, as
amended, (the “IRC”) and the regulations promulgated thereunder, that [Seller]
is not a foreign corporation, foreign partnership, foreign trust or foreign
estate as those terms are defined in the IRC and the regulations promulgated
thereunder.

That [Seller] does accordingly make and deliver this Certification for the
express purpose of inducing PEDCO to purchase the Assets in accordance with the
terms and conditions of the Contract, and [Seller] hereby represents that
[Seller] has read and understands Sections 1445 and 7701 of the IRC and the
regulations promulgated under these sections and declares that [Seller] is not a
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in the IRC and the regulations promulgated thereunder,
and PEDCO is not required to withhold any tax as a result of the sale by
[Seller] of the Assets to PEDCO.

That [Seller] understands and acknowledges that PEDCO is relying upon this
Certification in refraining from withholding ten percent (10%) of any amount to
be realized by [Seller].

[Seller]’s seven-digit United States Taxpayer Identification Number is
________________.

[Seller]’s address is:             _______________________________________
                                                
_______________________________________
                                                
_______________________________________
Attn.:  __________________________________
                                                

That [Seller] understands and acknowledges that the aforesaid representations
and warranties are made under penalties of perjury, and that, for good and
valuable consideration, the receipt of which is hereby acknowledged, [Seller]
hereby agrees to indemnify, defend and hold harmless PEDCO of, from and against
any and all loss, liability, costs, damages, claims or causes of action which
may hereafter arise or be incurred by PEDCO by reason of any failure of any
representation or warranty made herein to be true and correct in all respects,
including but not limited to any liability for failure to withhold any amount
required under Section 1445 of the IRC.

That [Seller] understands and acknowledges that this Certification may be
disclosed to the Internal Revenue Service by PEDCO and that any false statement
contained herein could be punished by fine, imprisonment, or both.

That Affiant hereby acknowledges that Affiant has examined this Certification
and, under penalties of perjury, declares that to the best of Affiant’s
knowledge and belief, it is true, correct and complete, and Affiant further
represents and declares that Affiant has the authority to sign this
Certification on behalf of [Seller].

[Signature page follows.]
 
 
 

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the Affiant has executed and made this Certification as to
Non-Foreign Status on behalf of [Seller] on this ______ day of _________, 2011.
 

  [SELLER]       By:___________________________
Name:_________________________
Title:__________________________

                                                     
 
 
 

--------------------------------------------------------------------------------

 
 
Acknowledgment
 

STATE OF ______________ §     §   COUNTY OF _____________ §  

 
This instrument was acknowledged before me on ____________, 2011, by
______________, ________________ of [Seller], a ________________, on behalf of
said ________________.
 

[Seal] _____________________________________________     Notary Public     My
commission expires: __________________________  

                                                            
 
 

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APPENDIX 6
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
FORM OF OPERATING AGREEMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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APPENDIX 7
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
DESCRIPTION OF CONTRACTS OR AGREEMENTS

Exploration Agreement DJ Basin 3D Seismic Program covering Adams, Arapahoe,
Denver, Elbert, Morgan and Weld Counties, Colorado dated effective September 1,
2007, by and between Esenjay Oil & Gas, Ltd. and Evolution Oil & Gas, LLC

First Amendment to Exploration Agreement DJ Basin 3D Seismic Program covering
Adams, Arapahoe, Denver, Elbert, Morgan and Weld Counties, Colorado dated
effective September 19, 2009, by and between Esenjay Oil & Gas, Ltd. and
Evolution Oil & Gas, LLC

Second Amendment to Exploration Agreement DJ Basin 3D Seismic Program covering
Adams, Arapahoe, Denver, Elbert, Morgan and Weld Counties Colorado dated
effective as of April 12, 2011 by and between Esenjay Oil & Gas, Ltd. and
Evolution Oil & Gas, LLC.

3D Seismic Acquisition and Exploration Agreement Indian Peaks 3-D Project
covering Morgan and Weld Counties, Colorado dated December 1, 2008, by and
between Esenjay Oil & Gas, Ltd. and Winn Exploration Co., Inc., Crain Energy,
Ltd., Lacy Properties, Ltd., RAVCO, Inc., Arentee Investments and Schibi Oil &
Gas Ltd.
 
 

 
 
 

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APPENDIX 8
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
ACREAGE PLAT WITH AMI OUTLINE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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APPENDIX 9
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
SCHEDULE OF LEASES REQUIRING CONSENT TO ASSIGNMENT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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APPENDIX 10
 
(Attached to and made a part of Purchase and Sale Agreement between Esenjay Oil
& Gas, Ltd., et al, and Pacific Energy Development Corp.)
 
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY
AGREEMENT AND FINANCING STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

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