Document:

pedo_ex1053.htm

EXHIBIT 10.53

 

EXECUTION VERSION

 

 

PACIFIC ENERGY TECHNOLOGY SERVICES, LLC

 

OPERATING AGREEMENT

 

by and between

 

PACIFIC ENERGY DEVELOPMENT CORP.

 

and

 

SOUTH TEXAS RESERVOIR ALLIANCE LLC

 

 

 

 

Dated as of October 4, 2012

 

 

 

 

 

  

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OPERATING AGREEMENT

 

This OPERATING AGREEMENT (“Agreement”) is entered into effective as of October 4, 2012 (the “Effective Date”) between and among PACIFIC ENERGY TECHNNOLOGY SERVICES, LLC, a limited liability company organized and existing under the laws of the State of Nevada, United States of America, and having its principal office at 4125 Blackhawk Plaza Circle, Suite 201, Danville, CA 94506, United States of America (“PETS” or the “Company”), PACIFIC ENERGY DEVELOPMENT CORP., a  company organized and existing under the laws of the State of Nevada, United States of America, and having its principal office at Suite 201, 4125 Blackhawk Plaza Circle, Suite 201A, Danville, California 94506, United States of America (“PEDCO”), and SOUTH TEXAS RESERVOIR ALLIANCE, LLC, a limited liability company organized and existing under the laws of the State of Delaware, and having its principal office at 1416 Campbell Road, Building B, Suite 204, Houston, Texas 77055 (“STXRA”). PEDCO and STXRA are referred to collectively as the “Parties” and individually as a “Party,” and unless the context otherwise requires, include their respective successors and permitted assigns.

 

RECITALS

 

WHEREAS, the Company was originally formed on September 21, 2012 through the filing of Articles of Organization in the office of the Secretary of State of the State of Nevada;

 

WHEREAS, PEDCO, along with its affiliated entities, is engaged in activities involving the development and operation of petroleum resources in the United States and Pacific Rim countries, with a particular focus on the People’s Republic of China, and has extensive strategic relationships with energy industry partners in the United States and abroad;

 

WHEREAS, STXRA is a consulting firm specializing in the delivery of petroleum resource acquisition services and practical engineering solutions to clients engaged in the acquisition, exploration and development of petroleum resources, with the STXRA team having hands-on experience in drilling and completing horizontal wells, including over 50 horizontal wells with lengths exceeding 4,000 ft. from 2010 to 2012, as well as experience in both slick water and hybrid multi-stage hydraulic fracturing technologies and in the operation of shale wells and fields;

 

WHEREAS PEDCO and STXRA plan for the Company to provide technical and operational services to PEDCO and its Affiliates, and other non-affiliated clients and customers within the United States and Pacific Rim countries, and to assist PEDCO’s parent company, PEDEVCO Corp, in the pursuit of interest in shale gas blocks in the People’s Republic of China (the “Business”);

 

WHEREAS, following the Effective Date, PEDCO and STXRA will be the only Members of the Company; and

 

WHEREAS, the Parties desire to enter into this Agreement to memorialize their agreements with respect to the governance, management and operation of the Company, and set out in writing their respective rights, restrictions and obligations as Members of the Company and with respect to Business projects involving the Company.

 

NOW THEREFORE, in consideration of the mutual promises set forth herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as set forth in this Agreement:

 

  

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Article 1

Definitions

 

Section 1.1Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

“Advisors” shall have the meaning set forth in Section 11.1.

 

“Affiliate” (including the terms “Affiliated” and “Affiliated with”) means, with respect to any Person, any other Person who or which, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such Person.  As used in the preceding sentence, the term “control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, directly or indirectly, through one or more intermediaries, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided however that in any event, any Person that owns directly or indirectly more than fifty percent (50%) of the ordinary voting interests in such other Person shall be deemed to control such other Person.

 

“Agreed Interest Rate” means interest compounded on an annual basis, at the rate per annum equal to the one (1) month term, London Interbank Offered Rate (LIBOR rate) for U.S. dollar deposits, as published by The Wall Street Journal, plus four (4.0) percentage points, as calculated and fixed as of the date the loan is made.  If the aforesaid rate is contrary to any applicable usury law, the rate of interest to be charged shall be the maximum rate permitted by such applicable law.

 

“Agreement” means this Operating Agreement of Pacific Energy Technology Services, LLC, as amended and in effect from time to time.

 

 “Articles of Organization” or “Articles” means the Articles of Organization of the Company, dated September 21, 2012, as amended or supplemented from time to time.

 

“Board” shall mean the board of Managers of the Company.

 

“Business Day” means any day other than a Saturday, a Sunday or other day on which commercial banks in New York, New York are authorized or required to close under applicable laws.

 

“Chairman of the Board” means the chairman of the Board of the Company.

 

 “Confidential Information” shall have the meaning set forth in Section 11.1.

 

“Dispute” shall have the meaning set forth in Section 16.1(a).

 

“Effective Date” shall have the meaning set forth in the introductory paragraph to this Agreement.

 

 “FCPA” shall have the meaning set forth in Section 17.13(a).

 

 “Governmental Authority” means each nation, state, department, region, county, municipality or other political subdivision, and any agency, authority, court, department, commission, board, bureau or instrumentality of any of them.

 

  

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“Governmental Approvals” means all clearances, permits, consents, licenses, approvals or any other authorization required by any Governmental Authority for the (i) development, finance, maintenance, operation or ownership of a Project, (ii) ownership of, or investment in, the Company, (iii) distribution or receipt of dividends, earnings or other moneys generated by a Project or the Company and (iv) transfer of any such dividends, earnings or moneys outside the United States.

 

“Independent Third Party” means any Person who, immediately prior to the contemplated transaction, does not own in excess of 10% of the Company’s Interests on a fully-diluted basis (a “10% Owner”), who is not a member of management of the Company, who is not controlling, controlled by or under common control with any such 10% Owner and who is not the spouse or descendent (by birth or adoption) of any such 10% Owner or a trust for the benefit of such 10% owner and/or other such persons.

 

 “Interest(s)” or “Membership Interest(s)” or “Unit(s)” mean a membership interest(s) of the Company, including Class A Units and any other class or series of units or interests issued by the Company.

 

“IPO” means the offering of Interests of the Company for subscription by the general public on any exchange.

 

“Manager(s)” shall mean a Manager of the Board of the Company elected by the Members in compliance with the terms of the Articles, this Agreement and Nevada Law.

 

“Members” means, collectively, PEDCO, STXRA, and any other holder of Units of the Company from time to time.

 

 “Nevada” means the State of Nevada, United States of America.

 

“Nevada Law” means all State of Nevada laws, statutes, orders, policies, licenses, permits, clearances, approvals, regulations, rules of and agreements with any State of Nevada governmental instrumentality and interpretations thereof having jurisdiction over the matter in question.

 

“Party” and “Parties” shall have the meaning set forth in the introductory paragraph to this Agreement.

 

“Person” means any individual, general or limited partnership, corporation, limited liability company, executor, administrator or estate, association, trustee or trust or other entity.

 

“PETS” and the “Company” shall have the meanings set forth in the introductory paragraph to this Agreement.

 

“Project” and “Projects” shall mean such petroleum resource due diligence, acquisition, joint venture, exploration, development, operation and service projects as undertaken by the Company.

 

“Sale of the Company” means the sale of the Company to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) Interests of the Company possessing the voting power to elect a majority of the Company’s Managers (whether by merger, consolidation or sale or transfer of the Company’s Interests) or (ii) all or substantially all of the Company’s assets as determined on a consolidated basis.

 

 “Senior Officer” means the chief executive officer, chief operating officer, president or any executive vice president of the Parties.

 

  

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“Transfer” means any sale, assignment, transfer or other disposition (whether voluntarily, involuntarily or by operation of law).

 

“Unitholder(s)” or “Member(s)” means any holder of Units of the Company.

 

“Unitholder Interest” means with respect to each Member, the interest of such Member in the Company derived by dividing the total number of Units registered in the name of such Member by the total outstanding Units, on an as-converted basis.

 

Article 2

Organizational Matters

 

Section 2.1Formation.

 

The Members hereby ratify and approve the Articles and approve this Agreement as the Company’s operating agreement.

 

Section 2.2Name.

 

The name of the Company shall be Pacific Energy Technology Services, LLC, as set forth in the Articles, and the business of the Company shall be conducted under such name or, subject to compliance with applicable law, any other name that the Managers deem appropriate.  The Managers shall file on the Company’s behalf all fictitious name certificates and similar filings that the Managers consider necessary or advisable.

 

Section 2.3Term.

 

The term of the Company commenced as of the date of the filing of the Articles and, unless sooner terminated under Section 12.1 or as otherwise provided by law, shall continue until the date specified in the Articles.

 

Section 2.4Office and Agent.

 

The Company shall continuously maintain a registered agent in the State of Nevada.  The registered agent shall be as stated in the Articles or as otherwise determined by the Managing Member.

 

Section 2.5Principal Place of Business; Other Offices. 

 

The principal place of business of the Company shall be 4125 Blackhawk Plaza Circle, Suite 201, Danville, CA 94506. The Managers may change the Company’s principal place of business and may establish on the Company’s behalf such additional places of business as they may determine.

 

Section 2.6Purpose and Business of the Company.

 

The purpose and business of the Company shall be to engage in any lawful act or activity for which a limited liability company may be formed under Nevada law, including to conduct the Business.

 

 

Article 3

Ownership Interests and Capital Contributions

 

Section 3.1Units and Classes of Units.

 

The ownership interests in the Company shall be reflected as Units of which there shall be one class, Class A Units, which shall be issued to the initial Members (the “Class A Members”).  The additional characteristics of the Class A Units shall be as described in this Agreement.  References in this Agreement to Units shall refer to Units regardless of class; and references to a “Unitholder” or “Unitholders” shall include any or all owners of Units.

 

  

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Section 3.2Capital Contributions; Issuance of Units.

 

Previously or concurrently with the effective date of this Agreement, the initial Members, also called the Class A Members, have each contributed to the Company the amount of cash, property or other consideration set forth opposite such Class A Member’s name on Exhibit A hereto.

 

Section 3.3No Return of Capital Contributions; No Interest.

 

Except as otherwise provided in this Agreement, no Member shall be entitled to demand or receive the return of all or any portion of such Member’s capital contribution or to be paid interest in respect of either its capital account or capital contribution.  No Member shall have any right to receive property other than cash.

 

Section 3.4Capital Accounts.

 

The Company shall maintain a separate Capital Account for each Unitholder according to the rules of Treasury Regulation Section 1.704-1(b)(2)(iv).  For this purpose, the Company may, upon the occurrence of the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company property.

 

Section 3.5No Obligation to Restore Deficits.

 

No Member or Unitholder shall have any liability or obligation to the Company, the Members or other Unitholders or any creditor of the Company to restore at any time any deficit balance in such Member’s or Unitholder’s Capital Account.

 

Section 3.6Units as Profits Interests.

 

The Class A Units issued to the initial Members, insofar as they differ in participation in profit from the relative capital contributed in exchange therefor, may be treated in part as “profits interests” under IRS Revenue Procedure 93-27 and IRS Revenue Procedure 2001-43 and the provisions of this Agreement shall be interpreted and applied consistently therewith.  Each Unitholder authorizes and directs the Company to elect to have the “Safe Harbor” described in the proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43 (the “Notice”) apply to any interest in the Company transferred to a service provider by the Company on or after the effective date of such Revenue Procedure in connection with services provided to the Company.  For purposes of making such Safe Harbor election, the Tax Matters Member (as defined below) is hereby designated as the “partner who has responsibility for federal income tax reporting” by the Company and, accordingly, execution of such Safe Harbor election by the Tax Matters Member constitutes execution of a “Safe Harbor Election” in accordance with Section 3.03(1) of the Notice.  The Company and each Unitholder hereby agree to comply with all requirements of the Safe Harbor described in the Notice, including, without limitation, the requirement that each Unitholder shall prepare and file all federal income tax returns reporting the income tax effects of each interest in the Company issued by the Company covered by the Safe Harbor in a manner consistent with the requirements of the Notice.

 

  

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Article 4

Members; Transfer Of Membership Interests

 

Section 4.1  Initial Members.

 

The Members (those who have signed this Agreement) are hereby admitted to the Company.

 

Section 4.2Limited Liability.

 

The Members shall have no personal liability or obligation under any judgment of a court, or in any other manner, for any debt, obligation or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise, solely by reason of their status as Members.

 

Section 4.3Transfer of Membership Interests.

 

A Member’s or Unitholder’s interest in the Company, including the Member’s economic interest, may not be transferred unless in accordance with the provisions of Article 5 below.  For purposes of this Section 4.3, a pledge of Units shall not be deemed a transfer.

 

Article 5

Restrictions on Transfers, Issuances, Repurchases or Other Changes in the Units

 

Section 5.1  General Restrictions.

 

No Transfer of Units of the Company by any Unitholder shall be permitted; provided however that any Unitholder may Transfer Units to one (1) or more of its Affiliates in accordance with Clause 5.5 of this Agreement shall be permitted.

 

Section 5.2  Attempted Transfers Void.

 

Except as provided in this Article 5, no Transfer or attempted Transfer of the Units of any Unitholder, whether by absolute or by collateral assignment or otherwise, whether by gift or for valuable consideration, and no matter how conditioned, shall in any manner be effective or binding upon the other Unitholders or the Company, unless made in full compliance with the terms hereof.

 

Section 5.3  After-Acquired Units.

 

Whenever any Unitholder who is a party to this Agreement acquires additional Units, such Units so acquired shall be subject to all of the terms and provisions of this Agreement.

 

Section 5.4  Deed of Adherence.

 

No transfer of Units by any selling Party to any third party shall be entered into the Company’s register of Unit transfers and all Parties shall procure that unless such third party has first entered into a deed of adherence with all parties hereto other than the selling Party pursuant to which such third party shall agree, inter alia, to be bound by all the restrictions of, and discharge all duties and obligations as set out in this Agreement as if it were an original party hereto.  Such deed of adherence shall be in such form at such other parties shall reasonably require.

 

  

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Section 5.5  Exempt Transfer.

 

 (a)           Notwithstanding anything to the contrary herein, the foregoing provisions of this Article 5 shall not apply to a Transfer by a Unitholder of all or part of its Units to an Affiliate, provided, however, that any such Transfer shall be in accordance with each of the following terms:

 

 (i)           Such Unitholder shall provide written notice of such Transfer to each other Unitholder;

 

 (ii)           The transferee to whom the Unitholder Transfers its Units shall execute and deliver to each other Unitholder and the Company a deed of adherence to this Agreement, in form and substance reasonably satisfactory to the Company, indicating such transferee’s agreement to be bound by the terms and conditions of this Agreement as a Party and a Unitholder hereunder in the same manner as the Transferring Unitholder and be entitled to the same right to the same extent and in the same manner as the Transferring Unitholder;

 

 (iii)           such Unitholder shall remain bound by its obligations under this Agreement; and

 

 (iv)           if any such transferee Affiliate shall cease to be an Affiliate of such Unitholder, any Units held by such transferee shall be promptly retransferred to such Unitholder or transferred to another of such Unitholder’s Affiliates.

 

 (b)           Notwithstanding anything to the contrary herein, the provisions of this Article 5 shall not apply to (i) the sale of Units pursuant to an IPO or (ii) any Transfer after the expiration of a customary lock up period of an IPO.

 

 

Article 6

Meetings of Unitholders

 

Section 6.1  General Meeting.

 

A General Meeting of the Unitholders of the Company (the “Annual General Meeting”) may be held once in every calendar year upon the written request of a Unitholder to the other Unitholder(s).

 

Section 6.2  Extraordinary Meetings.

 

Extraordinary meetings of the Unitholders of the Company shall be held upon the request of the Chairman, any PEDCO Manager, or any STXRA Manager (or as otherwise required pursuant to the provisions of applicable law) upon at least fourteen (14) days written notice (containing the agenda, date, time and place of the meeting) to all Unitholders of the Company; provided, however, that, subject to applicable law, such fourteen (14) day notice requirement may be waived by Unitholders of the Company having an aggregate Unitholder Interest of not less than seventy-five percent (75%) in a particular case.  Any notice period referred to above shall exclude both the day on which the notice is served or deemed to be served and the day for which the notice is given.

 

Section 6.3  Quorum.

 

The quorum for any meeting of the Unitholders of the Company shall be Unitholders of the Company whose aggregate Unitholder Interest is not less than seventy-five percent (75%) present personally or by duly appointed proxy, attorney or representative.  If within half an hour of the time appointed for the meeting no quorum is present, the meeting shall be adjourned to the same day one (1) week later at the same time and place or to such other day or time as the Chairman may designate upon at least five (5) days’ written notice to all of the Unitholders of the Company.  If at the adjourned meeting no quorum is present within half an hour from the time appointed for the meeting, Unitholders of the Company whose Unitholder Interest is not less than seventy-five percent (75%) present or represented at such meeting shall constitute a quorum; provided, however, that no action or decision shall be taken on any matter not specified in the agenda of the meeting when it was first called.

 

  

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Section 6.4  Unitholder Approval.

 

(a) All the Reserved Matters shall be subject to the approval of the Unitholders of the Company.

 

(b) Except as required by applicable law or otherwise provided in this Agreement, any action by the Unitholders of the Company at any General Meeting or extraordinary meeting shall require the approval of Unitholders of the Company having an aggregate Unitholder Interest of not less than seventy-five percent (75%) present and voting at a validly held meeting.

 

Section 6.5  Written Resolution.

 

Except as otherwise required by applicable law, a resolution in writing (circulated to all the Unitholders of the Company) approved and signed by all the Unitholders of the Company shall be valid and effectual as if it had been a resolution passed at a meeting of the Unitholders of the Company duly convened and held.

 

Section 6.6  Chairman.

 

The Chairman of the Board for the time being shall also preside as chairman at any General Meeting.  If the Chairman of the Board is absent at any General Meeting, a Manager shall act as the chairman.

 

 

Article 7

Company Management

 

Section 7.1  Board of Managers.

 

 (a)           The number of Managers holding office at any one time shall be three (3), unless otherwise agreed by all of the Unitholders. So long as the Company is not listed on any stock exchange, the Board shall be comprised of members nominated by the Unitholders whereby the number of nominated Managers by each Unitholder shall be as nearly as practicable in proportion to such Unitholder’s Unitholder Interest (for which purposes a Unitholder may aggregate the Unitholder Interests of some or all of its Affiliates provided those Affiliates do not also exercise their nomination rights) provided that any Manager nominated by a Unitholder shall have acceptable qualifications to serve on the Board and provided further that:

 

(i) As long as PEDCO and its Affiliates shall have an aggregate Unitholder Interest of at least fifty percent (50%), PEDCO may appoint two (2) Managers, and so long as PEDCO and its Affiliates shall have an aggregate Unitholder Interest of at least twenty-five percent (25%), PEDCO may appoint one (1) Manager (on a non-cumulative basis) (each, a  “PEDCO Manager”); and

 

(ii) So long as STXRA and its Affiliates shall have an aggregate Unitholder Interest of at least twenty-five percent (25%), STXRA may appoint one (1) Manager (the “STXRA Manager”).

 

  

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(b)           The Chairman of the Board shall be a PEDCO Manager, as designated by PEDCO. The Chairman shall chair all meetings of the Board.

 

(c)           In the event of the resignation, death, removal or disqualification of a Manager selected as set forth above, the appropriate designating Party or Parties shall promptly nominate a new Manager, and, after written notice of the nomination has been given by such designating Party or Parties to the other parties, each Unitholder shall vote its Units to elect such nominee to the Board, if and as required.

 

(d)           The appropriate designating Party or Parties may specify that the Manager elected by it shall be removed at any time and from time to time, with or without cause (subject to applicable Nevada Law, this Agreement, and the Articles), in such Party or Parties’ sole discretion.  After written notice to each of the Parties of the new nominee to replace a removed Manager, each Unitholder shall promptly vote its Units to remove the Manager in question and to replace such Manager with the nominee of the Party entitled to designate such Manager.

 

(e)           Appointment of Managers.  In the event of the appointment of a Manager nominated in accordance with this section, the Unitholders shall vote their Units to cause the appointment to the Board of the Manager so designated for appointment by the appropriate Unitholder.

 

(f)   Frequency of meetings; Notice.  Except as otherwise provided in this Agreement, the Board shall hold a regular meeting at least once each year at a location the Board shall determine.  The date, time and location of any such regular meeting shall be established by the Board and notified to each Manager in writing at least fourteen (14) days in advance.  Special meetings of the Board shall be held upon the request of the Chairman or any Manager upon at least two (2) Business Days’ written notice (containing the agenda, date, time and place of the meeting) to the Managers and shall be held at such time and place designated in such notice.

 

(g)   Quorum.  The quorum for any meeting of the Board shall be a majority of the Managers, each Manager present personally or by his alternate. If within half an hour of the time appointed for the meeting no quorum is present, the meeting shall be adjourned to the same day one (1) week later at the same time and place or to such other day or time as the Chairman may designate upon at least two (2) days’ written notice to all of the Managers (the “Adjourned Meeting”).  If at the Adjourned Meeting no quorum is present within half an hour from the time appointed for the meeting, any two (2) Managers present at such meeting shall constitute a quorum; provided, however, that no action or decision shall be taken on any matter not specified in the agenda of the meeting when it was first called.

 

(h)   Conference Meetings.  Meetings of the Managers held by means of a telephone conference which enables all persons participating in the meeting to hear each other at the same time and to communicate with each other shall be valid as if they were attended by all Managers in person.  Such participation by any Manager shall constitute presence in person at the meeting by such Manager.  All meetings of the Managers shall enable Managers to participate by means of telephone conference.

 

(i)  Board Approvals.

 

(i) Except as otherwise provided in, or delegated in accordance with, this Agreement or required by applicable law, all matters requiring the approval of the Board shall be subject to the approval of a majority of the Managers present and voting at a duly convened meeting.

 

(ii) Each Manager shall have one (1) vote and no Manager shall have a casting vote.

 

  

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(j)   Written Resolution.  The Board may take action by written resolution signed and approved by all of the Managers in lieu of holding a meeting.  Such written resolution may be signed in counterparts.

 

Section 7.2  Officers and Employees.

 

(a)           Both the PEDCO Managers and the STXRA Manager are entitled to nominate corporate officers of the Company, subject to approval by the Board.  Any officer so expressly designated shall have such authority and perform such duties as the Board may, from time to time, delegate to such officer.

 

(b)           Subject to the approval rights described herein, the business and affairs of the Company shall be managed exclusively under the direction of the Board, by or under the direction of one or more officers pursuant to expressly delegated authority from the Board.  The power to act for or to bind the Company shall be vested exclusively in such officers of the Company, subject to the Board’s authority to delegate powers and duties to officers, as set forth herein.  Subject to the foregoing, the officers shall have the power and authority to execute and deliver contracts, instruments, filings, notices, certificates, and other documents of whatsoever nature on behalf of the Company.  The officers of the Company shall have power and authority, as expressly delegated to them by the Board of Managers of the Company to cause the Company to hire employees, including officers appointed by the Board of Managers, as such officers deem necessary and to cause the Company to pay such employees as such officers deem fit, in their reasonable discretion.

 

Article 8

Allocation Of Profit, Loss And Distributions

 

Section 8.1Allocations.

 

Subject to Sections 8.4-8.7, Company profit shall first be allocated to the Unitholders, pro rata, in accordance with the prior allocation of Company loss and to the extent thereof; and thereafter such profit shall be allocated to the Unitholders, pro rata, in accordance with their ownership of Units.  For avoidance of doubt, profits allocable with respect to equity ownership in assets and/or Projects held by Members as contemplated with respect to Projects hereunder shall be allocated to Members in accordance with the ownership interests therein, and/or as otherwise agreed upon by the parties in writing.

 

Section 8.2  Company Loss.

 

Company loss shall be allocated to the Unitholders, pro rata, in accordance with their positive Capital Account balances and to the extent thereof; and thereafter such loss shall be allocated to the Unitholders, pro rata, in accordance with their ownership of Units.  For avoidance of doubt, losses allocable with respect to equity ownership in assets and/or Projects held by Members as contemplated with respect to Projects hereunder shall be allocated to Members in accordance with the ownership interests therein, and/or as otherwise agreed upon by the parties in writing.

 

Section 8.3Distributions.

 

Subject to any restrictions under applicable law, the Company may make distributions of money or property at least annually or at such other times and in such amounts as the Managers may determine.  Such distributions, other than liquidating distributions, shall be made to Unitholders, pro rata, in accordance with their ownership of Units.   Liquidating distributions shall be made to the Unitholders, pro rata, in accordance with their  positive capital account balances after all allocations of profit and loss are made.  For avoidance of doubt, distributions allocable with respect to equity ownership in assets and/or Projects held by Members as contemplated with respect to Projects hereunder shall be allocated to Members in accordance with the ownership interests therein, and/or as otherwise agreed upon by the parties in writing.

 

  

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Section 8.4Company Non-Recourse Deductions.

 

Any Company non-recourse deductions (as defined in Treasury Regulations Section 1.704-2(1)) for any taxable year or other period shall be specially allocated to the Members in accordance with their respective interests in profit.

 

Section 8.5  Member Non-recourse Deductions.

 

Member non-recourse deductions shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member non-recourse debt in accordance with Treasury Regulations Section 1.704-2.

 

Section 8.6  Minimum Gain.

 

Notwithstanding any other provision of this Article 8, if there is a net decrease in Company non-recourse debt or Member non-recourse debt, minimum gain shall be determined in accordance with the principles of Treasury Regulations Sections 1.704-2 and 1.704-2, and each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to the Member’s respective share of such net decrease during such year, determined pursuant to Treasury Regulations Sections 1.704-2.  The items to be so allocated shall be determined in accordance with Treasury Regulations Section 1.704-2.

 

Section 8.7Section 704 Allocations.

 

In the event that the fair market value of an item of Company property differs from its tax basis, allocations of depreciation and amortization, gain and loss with respect to such property will be made for tax purposes in a manner that takes account of the variation between the tax basis and the fair market value of such property in accordance with the Internal Revenue Code Section 704 and Treasury Regulations Section 1.704-1(4).

 

Article 9

Certain Additional Covenants

 

Section 9.1  Funding of the Company.

 

As a means to finance the operations of the Company without contributing to, changing or otherwise affecting the Unit capital of the Company, the Unitholders and the Board, via unanimous approval, respectively, may require some or all the Unitholders to provide intercompany loans to the Company from time to time in such amounts as unanimously agreed upon by the Unitholders (each, a “Cash Call”). The terms and conditions of each Cash Call and related intercompany loans must be unanimously approved by the Unitholders and the Board.  The Chairman shall propose the due dates for payment of Cash Calls and purposes of use of respective Cash Calls, including funding the Company’s operations and the general administrative expenses of the Company, and any such loans shall be documented using Board-approved promissory notes and shall accrue interest at the Agreed Interest Rate.

 

  

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Section 9.2  Projects.

 

From time to time the Company may consider pursuing Business opportunities that, if unanimously approved by the Board of Managers, shall become Projects subject to this Agreement.  The Company shall set forth the scope, terms, conditions, economics, obligations and other aspects of each Project in separate Schedules unanimously approved by the Board of Managers and attached to this Agreement under Exhibit B.  Nothing herein shall obligate any Member or Manager to present Business opportunities to the Company, or preclude any Member or Manager from independently pursuing any Business opportunities that have not been presented, or if presented, rejected, by the Board of Managers as a Project hereunder.

 

Section 9.3  Observance of Laws.

 

Each Unitholder and the Company shall comply with and shall cause its Affiliates to comply with all applicable Nevada Law or other applicable laws, rules, or regulations of any other jurisdiction that are or may be applicable to the Company’s business and the Unitholders’ and their Affiliates’ activities in connection with the Company or a Project.  Each of the Unitholders shall use reasonable efforts to obtain all regulatory approvals that are necessary for it to perform its obligations under this Agreement.  The Company shall use reasonable efforts to obtain all other Governmental Approvals necessary to effect each of the transactions contemplated herein.

 

Article 10

Representations, Warranties and Acknowledgments of the Unitholders

 

Section 10.1  Representations and Warranties of Unitholders.

 

Each Unitholder hereby represents and warrants to the Company and the other Unitholders as of the date hereof as follows:

 

(a)           If such Unitholder is an entity, such Unitholder is duly organized and validly existing in good standing under the laws of the jurisdiction of its creation and has all requisite power and authority, corporate or otherwise, to enter into and to perform its obligations hereunder and to carry out the terms hereof and the transactions contemplated hereby.

 

(b)           The execution, delivery and performance of this Agreement by such Unitholder have been duly authorized by all necessary action on the part of such Unitholder and do not require any approval or consent of any holder (or any trustee for any holder) of any indebtedness or other obligation of such Unitholder.

 

(c)           This Agreement has been duly executed and delivered on behalf of such Unitholder by an appropriate officer of such Unitholder and constitutes the legal, valid and binding obligation of such Unitholder, enforceable against it in accordance with its terms, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and by general principles of equity.

 

(d)           There is no legislation, action, suit, proceeding or investigation pending or, to the best of such Unitholder’s knowledge, threatened, before or by any court, administrative agency, environmental council, arbitrator or governmental authority, body or agency which could reasonably be expected to materially and adversely affect the performance by such Unitholder of its obligations hereunder or which questions the validity, binding effect or enforceability hereof, any action taken or to be taken by such  Unitholder pursuant hereto or any of the transactions contemplated hereby.

 

  

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(e)           The execution, delivery and performance by such Unitholder of this Agreement and the consummation of the transactions contemplated hereby and thereby, including the incurrence by such Unitholder of its financial obligations hereunder and thereunder, will not result in any violation of any term of its constituent documents, or its Articles, as the case may be, or any material contract or agreement applicable to it, or of any license, permit, franchise, judgment, writ, injunction or regulation, decree, order, charter, law, ordinance, rule or regulation applicable to it, including any loan agreements executed with the banks/other creditors, or any of its properties or to any obligations incurred by it or by which it or any of its properties or obligations are bound or affected, or of any determination or award of any arbitrator applicable to it, and will not conflict with, or cause a breach of, or default under, any such term or result in the creation of any lien upon any of its properties or assets.

 

(f)           All third party consents and approvals including banks/other creditors approval(s) required for the execution, delivery and performance if this Agreement have been obtained to the satisfaction of each other and no other consent, approval, order or authorization of, or registration, declaration or filing with, or giving of notice to, obtaining of any license or permit from, or taking of any other action with respect to, any central, state or local government or public body, authority or agency or banks/other creditors is required in connection with the valid authorization, execution, delivery and performance by such Unitholder of this Agreement or the consummation of any of the transactions contemplated hereby.

 

Section 10.2  Investment Intent.

 

Each Unitholder hereby represents and warrants to the Company and the other Unitholders that such Unitholder has acquired its Units for such Unitholder’s own account, for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part, and agrees that it will not Transfer, or offer to Transfer, all or any portion of its Units in any manner that would violate, or cause the Company to violate, this Agreement or any applicable securities laws.

 

Section 10.3  Unregistered Securities.

 

Each Unitholder hereby acknowledges that such Unitholder is aware that the Units (and the offering, issuance and sale thereof to such Unitholder) have not been listed with any stock exchanges under any applicable securities laws.  Each Unitholder further acknowledges that the Company will not, and has no obligation to, recognize any Transfer of all or any part of Units to any Person except in accordance with this Agreement.

 

Article 11

Confidentiality

 

Section 11.1  Obligation to Maintain Confidentiality.

 

With respect to each Unitholder and their respective Affiliates, except to the extent necessary for the exercise of its rights and remedies and the performance of its obligations under this Agreement, such Unitholder will not itself use or intentionally disclose (and will not permit the use or disclosure by any of its Affiliates or its advisors, counsel and public accountants (collectively, “Advisors”)) of, directly or indirectly, any the Company documents or this Agreement or information furnished thereunder (the “Confidential Information”), and will use all reasonable efforts to have all such Confidential Information kept confidential (consistent with its own practices) and not used in any way known to such Unitholder to be detrimental to any of the other Parties; provided, that (i) any such Unitholder, its Affiliates and its advisors may use, retain and disclose any such Confidential Information to its special counsel and public accountants or any Governmental Authority, including the U.S. Securities and Exchange Commission in such public filings as required under applicable law or advised by counsel to be disclosed therein, (ii) any such Unitholder, its Affiliates and its advisors may use, retain and disclose any such Confidential Information that has been publicly disclosed (other than by such Unitholder, its Affiliates or any of its advisors in breach of this Section) or has rightfully come into the possession of such Unitholder thereof or any of its Affiliates or advisors other than from another Unitholder or a Person acting on such other Unitholder’s behalf, (iii) to the extent that any such Unitholder, its Affiliates or its advisors may have received a subpoena or other written demand under color of legal right for such information, such Unitholder, its Affiliates or advisors may disclose such information, but such Unitholder will first, as soon as practicable upon receipt of such demand and unless otherwise prohibited by applicable Law, furnish a copy thereof to the other Parties and, if practicable so long as such Unitholder, its Affiliates or advisors will not be in violation of such subpoena or demand or likely to become liable to any penalty or sanctions thereunder, afford the other Parties reasonable opportunity, at such other Parties’ cost and expense, to obtain a protective order or other reasonably satisfactory assurance of confidential treatment for the information required to be disclosed, (iv) disclosures to lenders, potential lenders, investors, potential investors, strategic partners or acquirers, or potential strategic partners or acquirers, or other Persons providing financing to the Company, PEDCO or STXRA, if such Persons have agreed to abide by the terms of this Section, (v) any such Unitholder, its Affiliates and its advisors may disclose any such information, and make such filings, as may be required by this Agreement or applicable law, including, but not limited to, U.S. securities laws, and (vi) nothing in this Section will prevent any such Unitholder from using such information for its own internal purposes.  Notwithstanding anything herein to the contrary, a Unitholder may disclose information to its Affiliates and other advisors in accordance with this Agreement if such Persons have agreed to the terms of this Section.

 

  

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Section 11.2  Return of Confidential Information.

 

The receiving Unitholder shall immediately destroy or return all tangible and, to the extent practicable, intangible material in its possession or control embodying the disclosing Unitholder’s Confidential Information (in any form and including, without limitation, all summaries, copies and excerpts of Confidential Information) upon the earlier of (a) the completion or termination of the dealings between the Parties or (b) such time as the disclosing Unitholder may so request and shall not thereafter be retained in any form by receiving Unitholder, except that notwithstanding the above, one copy may be retained by receiving Unitholder to show compliance with the terms of this Agreement or for regulatory compliance purposes.

 

Section 11.3  Compliance with Securities Laws.

 

The Parties hereby acknowledge that they are aware of the U.S. securities laws that prohibit any person who has material non-public information about a company from purchasing or selling, directly or indirectly, any securities of such company (including entering into hedge transactions involving such securities), or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.  Each Party agrees that it will not use or permit any third party to use, and that it will use reasonable best efforts to assure that none of its representatives will use or permit to use, any Confidential Information in contravention of U.S. securities laws.

 

Section 11.4  Survival.

 

The restrictions contained in Sections 11.1 through 11.3 will survive the termination or expiration of this Agreement for a period of six (6) years from the date of such termination or expiration of this Agreement.

 

Article 12

Term and Termination

 

Section 12.1  Term.

 

This Agreement shall remain in full force and effect for so long as any of the Unitholders continue to own Units of the Company or as otherwise terminated earlier pursuant to Section 12.2.

 

Section 12.2  Termination.

 

This Agreement shall terminate

 

 (a)           upon the written agreement of the Unitholders;

 

 (b)           upon the dissolution and winding up of the Company pursuant to this Agreement;

 

  

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 (c)           upon the consummation of an IPO;

 

 (d)           upon a Sale of the Company; or

 

 (e)           with respect to any Unitholder, if such Unitholder and its Affiliates no longer own any Units.

 

Except as otherwise provided herein or as may be agreed by the Parties, no termination of this Agreement shall release any Unitholder from any liability to any other Unitholder which at the time of such termination has already accrued, nor affect in any way the survival of any right, duty or obligation of any Unitholder which is expressly stated elsewhere in this Agreement to survive the termination hereof.

 

Article 13

Accounting, Records, Reporting, Company Expenses

 

Section 13.1Books and Records; Fiscal Year.

 

The books and records of the Company shall be kept in accordance with the accounting method followed by the Company for federal income tax purposes.  The Company shall maintain at its registered office those books and records as required by law. The fiscal year of the Company shall be the calendar year.

 

Section 13.2Bank Accounts.

 

The Company shall maintain the funds of the Company in one or more separate bank accounts in the name of the Company.  The executive officers and Managers of the Company shall be authorized to draw funds out of any Company bank account.

 

Section 13.3Financial Information.

 

The Company shall cause to be filed all required reports and documents with any governmental agency.  The Company shall cause to be prepared information concerning the Company’s operations as soon as practicable after the end of the Company’s fiscal year. The Company shall send or cause to be sent to each Unitholder within ninety (90) days after the end of each taxable year state and federal schedules K-1 (such information as is necessary to complete the Unitholder’s federal and state income tax or information returns) and a copy of the Company’s federal, state, and local income tax or information returns for the year.

 

  

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Section 13.4Tax Matters Member.

 

Mr. Frank C. Ingriselli (the “Tax Matters Member”) shall be the initial Tax Matters Member as defined under the Internal Revenue Code and in any similar capacity under state or local law. Any successor to the Tax Matters Member shall be selected by the Managers. The Tax Matters Member agrees to promptly notify the other Members upon the receipt of any correspondence from any federal, state or local tax authorities relating to any examination of the Company’s affairs.  The Tax Matters Member shall manage all audits or other tax proceedings of the Company and shall keep the Members informed with respect to such proceedings.  The Tax Matters Member may retain, at the Company’s expense, such outside counsel, accountants and other professional consultants as the Tax Matters Member may deem necessary in the course of fulfilling his obligations as Tax Matters Member.

 

Section 13.5Company Expenses.

 

In addition to the expenses and costs of operating the Business, Company expenses shall also include professional fees in connection with the accounting and legal aspects of preparing, documenting and distributing the financial and tax information described in this Article 13, other costs directly connected with the foregoing, and the costs of preparation and filing of forms, returns and documents with governmental agencies, and the maintenance of proper books and records.   Notwithstanding the foregoing, all additional expenses and costs solely incurred by the Company due to the status of PEDCO’s parent company as a publicly-reporting entity shall be borne by PEDCO or PEDCO’s parent company, including, but not limited to, expenses and costs arising in connection with PEDCO’s parent company’s public-reporting and disclosure requirements, and all audit-related expenses and costs if, and to the extent, the Company’s financial records are audited by PEDCO’s parent company auditors.

 

Article 14

Dissolution And Winding Up

 

Section 14.1  Conditions of Dissolution.

 

The Company shall dissolve at such time or upon the occurrence of any of the following events:

 

	
(a)  

	
the sale or other disposition of all or substantially all the property and assets of Company;

 

	
(b)  

	
the determination of a majority in Interest of the Members at any time to dissolve the Company;

 

	
(c)  

	
the determination of the Managing Member that it is in the best interests of the Members to dissolve the Company; or

 

	
(d)  

	
the entry of a judgment of dissolution.

 

Section 14.2Winding Up.

 

Upon dissolution, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating or distributing its assets, and satisfying the claims of its creditors.  The Managing Members shall be responsible for overseeing the winding up of the Company.

 

  

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Section 14.3Liabilities Upon Dissolution, Notices and Filings.

 

After determining that all the known debts and liabilities of the Company in the process of winding up have been paid or adequately provided for, the remaining assets shall be distributed to the Members as provided in Article 8 and appropriate notices and filings shall be made by the Members.

 

Article 15

Indemnification; Liability Of Members

 

Section 15.1  Indemnification.

 

The Company shall indemnify the Members, including the Managers, to the full extent permissible under Nevada law.

 

Section 15.2  Limitation of Liability.

 

Except as otherwise provided herein or in any agreement entered into by such person and the Company and to the maximum extent permitted by Nevada law, no present or former Manager nor any such person’s affiliates, employees, agents or representatives shall be liable to the Company or to any Member for any act or omission performed or omitted by such person in his or her capacity as Manager,  provided that, except as otherwise provided herein, such limitation of liability shall not apply to the extent the act or omission was attributable to such person’s willful misconduct or knowing violation of law as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not subject to appeal or with respect to which the time for appeal has expired and no appeal has been perfected).  The Managers shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, and any act of or failure to act by a Manager in good faith reliance on such advice shall in no event subject a Manager or any of such person’s affiliates, employees, agents or representatives to liability to the Company or any Member.

 

Section 15.3Insurance.

 

The Company shall have the power to purchase and maintain insurance on behalf of the Members or any person who is or was an agent of the Company against any liability asserted against such person arising out of such person’s status as an agent, whether or not the Company would have the power to indemnify such person against such liability under law.

 

Article 16

Dispute Resolution

 

Section 16.1  Initial Procedure.

 

The Parties will attempt, in good faith, to resolve or cure all disputes and claims (including any claimed breaches of this Agreement) (each a “Dispute”)) through the Unitholders before initiating any legal action or attempting to enforce any rights or remedies under this Agreement (including termination), at law or in equity (regardless of whether this Article is referenced in the provision of this Agreement which is the basis for any such dispute).  If any Unitholder believes that a Dispute under this Agreement has arisen, such Unitholder will give written notice thereof to the other Parties which notice will describe in reasonable detail the basis and specifics of the Dispute.  Within five (5) days after delivery of such notice, the Unitholders will meet to discuss and attempt to resolve or cure such Dispute.  If the Unitholders are unable to resolve the Dispute within fifteen (15) days after delivery of such notice, the matter will be referred to a “Senior Officer” of each Unitholder for resolution or cure.  If such Senior Officers are unable to agree on an appropriate cure or resolution within ten (10) days after the matter has been referred to them, the Parties may refer such Dispute to mediation in accordance with Section 16.2.

 

  

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Section 16.2  Mediation.

 

If the Parties are unable to resolve a Dispute pursuant the procedures described in Clause 16.1, and if the continued failure to settle such disagreement is likely to have a material adverse impact on the Company, either Party may elect to submit the disagreement to mediation under the Commercial Mediation Rules of the American Arbitration Association. If either Party so elects, the other Party shall submit to mediation. The mediator shall not have authority to impose a settlement upon the Parties, but will attempt to help them reach a satisfactory resolution of the disagreement. The mediator shall end the mediation whenever, in his judgment, further efforts at mediation would not contribute to a resolution of the submitted disagreement.  If the Parties are unable to agree on an appropriate cure or resolution within thirty (30) days after the matter has been submitted to , the Parties may refer such Dispute to arbitration in accordance with Clause 16.3.

 

Section 17.3  Arbitration

 

Any Dispute relating to, this Agreement or the performance thereof, including but not limited to questions as to whether a matter is governed by this arbitration clause, shall be subject to arbitration if good faith negotiations among the parties do not resolve such claim, dispute or other matter the parties have not resolved such Dispute pursuant to Clause 16.1 and 16.2. Such arbitration shall proceed in accordance with the Commercial Arbitration Rules of the American Arbitration Association then pertaining (the “Rules”), insofar as such Rules are not inconsistent with the provisions expressly set forth in this Agreement, unless the parties mutually agree otherwise, and pursuant to the following procedures:

 

(a) Reasonable discovery shall be allowed in arbitration.

 

(b) All proceedings before the arbitrators shall be held in San Francisco, California. 

 

(c) The costs and fees of the arbitration, including attorneys’ fees, shall be allocated by the arbitrators.

 

(d) The award rendered by the arbitrators shall be final and judgment may be entered in accordance with applicable law and in any court having jurisdiction thereof.

 

(e) The existence and resolution of the arbitration shall be kept confidential by the Parties in the same manner as confidential information is required to be kept under this Agreement, and shall also be kept confidential by the arbitrators.

 

  

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Section 16.2  Continued Performance.

 

Pending final resolution of any Dispute, the Parties will continue to fulfill their respective obligations under this Agreement; provided that the applicable Unitholder may withhold any amount that is the subject of Dispute from any payment otherwise due under this Agreement during the pendency of any dispute resolution proceeding.  Upon resolution of the Dispute, the Unitholder owing such amount shall promptly pay to the relevant Unitholder any amount determined to be due, together with interest at the greater of the highest legally permitted rate or 10% per annum on the unpaid balance from the date the amount was originally owed until the date paid in full.

 

Article 17

Miscellaneous Provisions

 

Section 17.1  Equitable Relief.

 

The Parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement.

 

Section 17.2  Notices.

 

Any notice given under this Agreement will be in writing and delivered by personal service, or by certified or registered first class mail, or nationally recognized overnight courier, or by facsimile or email with a copy, in the case of facsimile or email, by first class mail, to the addresses specified below:

 

If to PEDCO:                                  Mr. Frank C. Ingriselli

4125 Blackhawk Plaza Circle

Suite 201

Danville, CA 94506

FAX:                 (925) 403-0703

Email:                 ingriselli@pacificenergydevelopment.com

 

If to STXRA:                                 Mr. Sean Fitzgerald

1416 Campbell Road

Building B, Suite 204

Houston, Texas 77055

 

 

Email:  Sean.Fitzgerald@STXRA.com

If to the Company:                       Mr. Frank C. Ingriselli

4125 Blackhawk Plaza Circle

Suite 201

Danville, CA 94506

FAX:                 (925) 403-0703

Email:                 ingriselli@pacificenergydevelopment.com

Any Unitholder may change the addresses provided above by notifying the other Parties in the manner provided above.  In the case of personal delivery, certified or registered first class mail, or nationally recognized overnight courier, such transmittal will be deemed to have been received by the recipient party on the date of such delivery.  In the case of delivery via facsimile or email, the transmittal shall be deemed to have been received on the day following the date of communication by facsimile or email.

 

  

20

  

 

Section 17.3  Governing Law and Venue.

 

(a)           This Agreement shall be governed by, and construed in accordance with, the Nevada Law without regard to conflicts of law principles.

 

(b)           With respect to any question, dispute, suit, action or proceedings arising out of or in connection with this Agreement (the “Proceedings”), each party irrevocably:

 

(i)            submits to the non-exclusive jurisdiction of the courts of the State of Nevada; and

 

(ii)            waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.

 

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

 

Section 17.4  Entire Agreement and Modifications.

 

This Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof, and all previous agreements, discussions, communications, and correspondence with respect to the subject matter, including the Original Agreement, are hereby superseded and terminated by the execution of this Agreement.  This Agreement may not be modified or amended except in writing signed on behalf of each Unitholder by its duly authorized representative. Any such modification or amendment shall form part of this Agreement and shall be read co-terminus with this Agreement. The Parties agree and acknowledge that this Agreement creates legal rights and obligations between them even though it contemplates their entry into additional agreements.

 

Section 17.5  No Waiver of Rights.

 

No right under this Agreement may be waived by a Unitholder, except pursuant to a writing signed by the Unitholder against which enforcement of the waiver is sought.  Without limitation, no failure or delay on the part of any Unitholder in exercising any of its rights under this Agreement, no partial exercise by any Unitholder of any of its rights under this Agreement, and no course of dealing among the Parties, will constitute a waiver of the rights of a Unitholder.

 

Section 17.6  Severability.

 

If at any time subsequent to the Effective Date, any provisions of this Agreement will be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision will be of no force and effect, but the illegality or unenforceability of such provision will have no effect upon and will not impair the enforceability of any other provision of this Agreement.

 

  

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Section 17.7  Attorneys’ Fees.

 

In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

 

Section 17.8  After- Acquired Units.

 

All of the provisions of this Agreement shall apply to all Units now owned or hereafter issued or transferred to a Unitholder in consequence of any additional issuance, purchase, exchange or reclassification of Units, corporate reorganization, or any other recapitalization, or consolidation, amalgamation, or merger of the Company, or Unit split, or Unit dividend, or which are acquired by a Unitholder of the Company in any other manner.

 

Section 17.9  Successors and Assigns.

 

Except as otherwise provided herein, all of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and permitted assigns of the Parties hereto. No Unitholder may assign any of its rights hereunder to any other person except in writing and in accordance with the provisions of applicable Nevada Law, the Articles, and this Agreement in all respects.

 

Section 17.10  Further Assurances.

 

From time to time, the Parties shall take all appropriate actions and execute and deliver, or cause to be executed and delivered, such documents, agreements or instruments which may be reasonably necessary or advisable to carry out any of the provisions of this Agreement.

 

Section 17.11  No Third-Party Beneficiaries.

 

This Agreement is solely for the benefit of the Unitholders and the Company, and their respective successors and permitted assigns, and this Agreement shall not otherwise be deemed to confer upon or give to any other third party any remedy, claim, liability, reimbursement, cause of action or other right.

 

Section 17.12  Fees and Expense.

 

Unless otherwise provided, each Party shall bear its own costs and expenses in connection with the negotiation and preparation of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 17.13  Illicit Payments.

 

 (a)           Each Unitholder represents and warrants that it and its employees (i) are familiar with the provisions and requirements of the United States Foreign Corrupt Practices Act (“FCPA”), including the record keeping requirements thereof, and (ii) recognize that full compliance with the letter and spirit of the FCPA is the corporate policy of the Company.  In all matters relating to this Agreement and all Projects, each Unitholder will conduct itself in full compliance with the FCPA and the anti-bribery laws of the U.S. or any other jurisdiction.  Consequently, each Unitholder specifically agrees as follows:

 

  

22

  

 

 (i)           In carrying out its responsibility under this Agreement, no Unitholder shall pay or agree to pay, directly or indirectly, any funds or anything of value to any public official for the purpose of influencing such official’s official acts or decisions.

 

 (ii)           Each Unitholder shall immediately notify the other Unitholders of any request that such Unitholder receives to take any action that might constitute a violation of the FCPA, or the anti-bribery laws of the U.S. or any other jurisdiction.

 

Section 17.14  Participation of All Parties.

 

This Agreement shall not be construed to have originated with any Unitholder, and the Parties have been fully represented by counsel in the drafting and negotiation of this Agreement.

 

Section 17.15  Conflict of Terms.

 

If the terms of this Agreement and the terms of the Articles shall conflict, the Unitholders shall endeavor to amend the Articles, so as to reflect the terms of this Agreement, so far as permitted by applicable law. In the event that any provision of this Agreement is found to be contrary to applicable law by any applicable court or governmental authority, such provision shall be modified to the extent necessary to comply with the statutory requirements while retaining as much as possible of the intent of the Parties.

 

Section 17.16  Force Majeure.

 

No Unitholder shall be liable for any delay, failure or non-performance of its obligations under this Agreement to the extent that such performance is prevented by adverse change in Nevada Law, acts of God, war, acts of terrorism, armed conflict, embargo, blockade, civil disturbance, strike, storm, typhoon or any other act or circumstance beyond such Unitholder’s reasonable control that was not reasonably foreseeable and that could not have been prevented with due diligence, provided that (i) written notice of the occurrence of such event shall be given to each of the other Unitholders without delay, (ii) the affected Unitholder shall use diligent efforts at all times to overcome the effects of the event and to resume full performance under this Agreement, and (iii) no such event shall excuse an obligation to make a payment of money, except that if such payment would be illegal, such obligation shall be deferred until payment becomes legally permissible, and the amount owning shall bear interest at the rate of six percent (6%) per annum.

 

Section 17.17  Amendment to the Articles.

 

The Company shall ensure that the Articles of the Company are suitably amended, if and as applicable, to ratify and adopt the provisions of this Agreement so that the Articles of the Company do not, at any time, conflict with the provisions of this Agreement.

 

  

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Section 17.18  Consequential and Indirect Damages.

 

EXCEPT FOR DAMAGES ARISING FROM A BREACH OF SECTION 11 (CONFIDENTIALITY) AND OTHERWISE NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NO UNITHOLDER OR ITS AFFILIATES, NOR ITS OR THEIR MANAGERS, MEMBERS, OFFICERS, MANAGERS, EMPLOYEES, AGENTS OR REPRESENTATIVES, WILL BE LIABLE TO ANY OTHER UNITHOLDERS, FOR CLAIMS OF PUNITIVE, SPECIAL, EXEMPLARY, TREBLE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING DAMAGES FOR LOSS OF PROFITS, LOSS OF USE OR REVENUE, OR LOSSES BY REASON OF COST OF CAPITAL, CONNECTED WITH OR RESULTING FROM ANY PERFORMANCE OR LACK OF PERFORMANCE UNDER THIS AGREEMENT, REGARDLESS OF WHETHER A CLAIM IS BASED ON CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, VIOLATION OF ANY APPLICABLE DECEPTIVE TRADE PRACTICES ACT OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE.

 

Section 17.19  Counterparts.

 

This Agreement may be executed in any number of counterparts (including by facsimile) and by the Parties in separate counterparts (including by facsimile), each of which shall be deemed an original, but all of which such counterparts shall together constitute but one and the same agreement.

 

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

  

24

  

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof.

 

	 	
MEMBERS:

	 
	 	 	 
	 	
PACIFIC ENERGY DEVELOPMENT CORP.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Frank C. Ingriselli  	 
	 	Name:	Frank C. Ingriselli	 
	 	Title:	President and CEO 	 

 

	 	SOUTH TEXAS RESERVOIR ALLIANCE LLC	 
	 	 	 	 
	
 

	
By: 

	/s/ Sean Fitzgerald  	 
	 	Name:	Sean Fitzgerald 	 
	 	Title:	Manager	 

 

	 	PACIFIC ENERGY TECHNOLOGY SERVICES, LLC	 
	 	 	 	 
	
 

	
By: 

	/s/ Frank C. Ingriselli  	 
	 	Name:	Frank C. Ingriselli 	 
	 	Title:	President and CEO	 
	 	 	 	 

 

  

25

  

 

EXHIBIT A

 

	
NAME

	
CONTRIBUTION

	
CLASS A INTERESTS

	
PERCENTAGE

	
Pacific Energy Development Corp.

	
$700.00

	
700,000

	
70.00%

	
South Texas Reservoir Alliance, LLC

	
$300.00

	
300,000

	
30.00%

	
Total

	
$1,000.00

	
1,000,000

	
100.00%

 

  

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EXHIBIT B

 

COMPANY PROJECTS

 

	
Project Name

	
Schedule

	  	  
	  	  
	  	  
	  	  
	  	  

 

 

27pedo_ex1054.htm

EXHIBIT 10.54

 

 

November 20, 2012

Via Electronic Mail

Esenjay Oil & Gas, Ltd. (Gardner@epc-cc.com; Schibi@epc-cc.com)

Winn Exploration Co., Inc. (MWCalley@WinnExCo.com; LWebster@winnexco.com)

Crain Energy, Ltd. (MTodd@rlacyinc.com; dgroce@rlacyinc.com)

Lacy Properties, Ltd. (MTodd@rlacyinc.com and dgroce@rlacyinc.com)

Re:           Closing Payment Extension Amendatory Letter Agreement

Purchase and Sale Agreement, dated August 23, 2011, as amended

PEDCO Niobrara Prospect

Weld County, Colorado

Ladies and Gentlemen:

 

Reference is hereby made to that certain Purchase and Sale Agreement (the “Purchase Agreement”), dated August 23, 2011, by and among Esenjay Oil & Gas, Ltd. (“Esenjay”), Winn Exploration Co., Inc. (“Winn”), Lacy Properties, Ltd. (“Lacy”), and Crain Energy, Ltd. (“Crain”), as Sellers, and PEDEVCO Corp (as successor-in-interest to Pacific Energy Development Corp.) (“PEDCO”), as Buyer. Esenjay, Winn, Lacy, Crain, and PEDCO are sometimes referred to herein collectively, as the “Parties” or individually, as a “Party.” This Closing Payment Extension Amendatory Letter Agreement (this “Amendment”) sets forth the terms and conditions of the agreement among the Parties with regard to the above-referenced matter. All capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.

 

Pursuant to Section 1.3(a)(2) of the Purchase Agreement, each of the Sellers have elected to receive their Proportionate Share of One Million Dollars ($1,000,000) (the “Cash Balance Due”).

 

The Sellers and the Buyer have agreed to defer the payment of the Cash Balance Due (the “Deferred Payment”) to February 18, 2013 (the “Cash Balance Due Date”).  In consideration for the Deferred Payment of the Cash Balance Due, Buyer has agreed to pay and issue to Sellers, and Sellers have agreed to accept (i) the Immediate Cash Payment set forth on the table below, to be wired by Buyer into each respective Seller’s account on Monday, November 26, 2012 (the “Immediate Cash Payment”), and (ii) the issuance of the number of shares of Buyer Series A Preferred Stock to each Seller as set forth on the table below (the “Equity Issuance”), with physical stock certificates to be issued and delivered to each Seller within ten (10) business days of the date this Amendment is fully executed by the Sellers.  Each Seller’s Immediate Cash Payment and Equity Issuance are as follows:

 

	
Seller

	 	
Immediate Cash Payment

	 	 	
Equity

Issuance

	 	 	
Deferred

Payment

	 
	
Esenjay Oil & Gas, Ltd.

	 	$	60,000.00	 	 	 	80,000	 	 	$	600,000.00	 
	
Winn Exploration Co., Inc.

	 	$	25,000.00	 	 	 	33,334	 	 	$	250,000.00	 
	
Crain Energy, Ltd.

	 	$	11,250.00	 	 	 	15,000	 	 	$	112,500.00	 
	
Lacy Properties, Ltd.

	 	$	3,750.00	 	 	 	5,000	 	 	$	37,500.00	 
	
TOTAL:

	 	$	100,000.00	 	 	 	133,334	 	 	$	1,000,000.00	 

 

  

  

  

 

Upon execution of this Amendment by each Seller, each Seller shall provide a completed subscription agreement in the form attached hereto as Exhibit A in connection with the issuance of each Seller’s respective Equity Issuance, which includes each Seller’s representation that it 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.

 

As amended hereby and to date, the Purchase Agreement, is in full force and effect, and valid and binding upon the Parties. In the event of a conflict between this Amendment and the Purchase Agreement, as amended, the terms and conditions of this Amendment shall control and govern the point in conflict. Notwithstanding anything to the contrary, failure of this Amendment to address a point in the Purchase Agreement, as amended, shall not be deemed to be a conflict.

 

Each Party hereby agrees that such Party shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments and take such other action as may be reasonably necessary or advisable to carry out such Party’s obligations under this Amendment. All of the exhibits referred to in this Amendment are hereby incorporated by reference as if set forth in their entirety herein. This Amendment shall be binding upon and inure to the benefit of the Parties, and their respective successors and assigns. This Amendment 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. This Amendment may be executed in counterparts, and each counterpart shall be deemed to be an original, but all of which shall be deemed to be one amendment. This Amendment may be executed by telefax or electronic signatures, and telefax and electronic signatures shall be valid and binding upon the Parties.

 

Please execute this letter in the space provided below indicating your agreement with the above amendments to the Purchase Agreement and return the executed letter to the undersigned by fax or email at your earliest convenience.

 

 

  

2

  

 

Should you have any questions, please do not hesitate to contact me. Thank you again for your prompt attention to this matter and your continued support of PEDCO.

 

	 	Sincerely,	 
	 	 	 
	 	
PEDEVCO CORP.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Frank C. Ingriselli 	 
	 	 	
Frank C. Ingriselli

President and Chief Executive Officer

	 
	 	 	 	 

 

	
ACCEPTED AND AGREED

this 20th day of November, 2012

	 
	 	 
	Esenjay Oil & Gas, Ltd.	 
	 	 	 
	
By: 

	Esenjay Petroleum Corporation,	 
	Its:	
Its General Partner

	 
	 	 	 
	By:	/s/ Linda D. Schibi   	 
	 	Linda D. Schibi	 
	 	Vice President Land	 
	 	 	 

 

	
Winn Exploration Co., Inc.

	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	By:	
/s/ Michael W. Calley  

	 	 	 	
 

	 
	 	
Name: Michael W. Calley 

	 	 	 	 	 
	 	
Title: Executive Vice President

	 	 	 	 	 

 

	
Lacy Properties, Ltd.

	 	 	
Crain Energy, Ltd.

	 
	 	 	 	 	 	 	 
	By:	
Lacy Property Management, Inc.

Its General Partner

	 	 	By:	
Crain Oil & Gas, LLC

Its General Partner

	 
	 	 	 	 	 	 	 
	By:	
/s/ Darren T. Groce 

	 	 	By:	
/s/ Darren T. Groce  

	 
	 	
Name: Darren T. Groce 

	 	 	 	
Name: Darren T. Groce

	 
	 	
Title: Interim President 

	 	 	 	
Title: Interim President 

	 

 

 

3

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