Attached files
EXHIBIT
10.16
PURCHASE AGREEMENT
This
Purchase Agreement (this “Agreement”), is made and
entered into this 14th day of November, 2017, by and between
MCCABE PETROLEUM
CORPORATION, a Texas corporation, with mailing address at
500 W. Texas Ave., Ste. 890, Midland, Texas 79701
(“MPC”) and TORCHLIGHT
ENERGY, INC., a Nevada corporation, with mailing address at
5700 W. Plano Pkwy, Ste. 3600, Plano, TX 75093 (“TEI”).
MPC and TEI are sometimes hereinafter referred to as the
“Parties”.
WHEREAS, MPC is the owner of certain oil
and gas leases in Ward County (the “Ward County
Leases”) and Winkler County (the “Winkler County
Leases”) (collectively the “Leases”), which are
more particularly described in Exhibit A, which is attached hereto
and incorporated herein for all purposes;
WHEREAS, MPC and TEI believe that if the
Ward County Leases and Winkler County Leases were packaged together
and sold, the Leases would receive a higher value for both together
as compared to each being sold separately;
WHEREAS, in anticipation of the
transactions contemplated by the MECO PSA (as defined below), MPC
and TEI desire that MPC sell beneficial ownership interest in the
Ward County Leases to TEI in exchange for $3.25MM in the form of a
promissory note (as further provided in this Agreement
below);
WHEREAS, MPC entered into a Purchase and
Sale Agreement dated November 9, 2017 (the “MECO PSA”)
with MECO IV, LLC (“MECO”) whereby MPC, on behalf of
TEI and itself, will sell the Leases to MECO at a closing
anticipated to occur on or before November 29, 2017;
WHEREAS, MPC and TEI desire that MPC pay
TEI a performance fee in consideration for its successful efforts
in obtaining an offer from MECO on behalf of MPC and TEI and
assisting in the negotiation of the MECO PSA;
WHEREAS, the Parties have entered into
this Agreement to memorialize the terms of their
agreement.
NOW, THEREFORE, in consideration of the
foregoing and the respective covenants and agreements contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, hereby covenant and agree as
follows:
1.
Closing. The
closing of the transactions contemplated by this Agreement (the
“Closing”) will take place at the MPC’s offices
or at such other place as agreed upon among the Parties as
practicable following fulfillment or waiver of the conditions
specified in Section 4 and Section 5 of this Agreement (the
“Closing Date”).
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Purchase Agreement
2.
MPC Sale to TEI of
Ward County Leases.
a.
Sale. Subject to the terms and
conditions of this Agreement, on or before the Closing Date, MPC
agrees to sell, assign and convey to TEI all of its beneficial
right, title and interest, in the Ward County Leases, any wells
located on the lands covered by the Ward County Leases, and all
other rights associated or incident to MPC’s ownership of the
Ward County Leases (the “Ward Assets”).
b.
Purchase Price. At Closing, TEI
agrees to pay MPC Three Million Two Hundred and Fifty Thousand
Dollars (the “Purchase Price”) for the Ward Assets in
the form of a promissory note as described below.
c.
Promissory Note. At Closing,
TEI shall issue to MPC a promissory note for the Purchase Price
memorialized by a loan agreement and note in substantial form as to
the agreements contained in Exhibit B; containing the following
material terms:
1.
The principal
amount of the loan shall be Three Million Two Hundred and Fifty
Thousand Dollars;
2.
Beginning January
1, 2018, TEI shall pay to MPC monthly installments of the accrued
interest of the principal amount;
3.
Interest shall
accrue on the principal amount at a rate of 5% per annum;
and
4.
On December 31,
2020, the entire principal balance, together with all accrued
interest, fees or otherwise, shall be due and payable;
d.
Beneficial Ownership. Unless
agreed to otherwise by the Parties in writing, the ownership that
TEI shall receive from 2(a) above shall be beneficial ownership
only. MPC shall retain record title ownership and shall act as
TEI’s agent in selling the Ward Assets as defined
herein.
e.
Assignment. At or before
Closing, MPC and TEI shall enter into an assignment, bill of sale
and conveyance, of the beneficial ownership in the Ward Assets (the
“Ward Assignment”) in substantial form as contained in
the form contained in Exhibit C, which is attached hereto and
incorporated herein for all purposes. The Parties agree that the
Ward Assignment shall not be filed in the Ward County public
records unless mutually agreed to in writing.
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Purchase Agreement
f.
Power of Attorney.
i.
Grant of Power of Attorney. At
or before Closing, TEI hereby grants MPC the right to sell
TEI’s beneficial ownership of the Ward Assets to MECO,
strictly pursuant to the MECO PSA, doing any and all actions it
might do if personally present including, but not limited to the
execution, modification and delivery of contracts, deeds, bill of
sale, closing statements, notices, certificates and all other
documents; the acceptance of the closing funds and the deposit of
those funds in TEI’s account as identified, which MPC shall
deem necessary, appropriate or expedient for the purpose of closing
the sale of the Ward Assets as described herein.
ii.
Effective Date and Termination.
This power of attorney shall become effective on the Closing Date
and shall expire on: (a) November 29, 2017; (b) revocation by TEI;
or (c) resignation of MPC, whichever event occurs
first.
iii.
Third Party Reliance. Every
instrument executed by MPC in relation to the Ward Assets shall be
conclusive evidence in favor of every person claiming any right,
title or interest under MPC in the Ward Assets, that at the time of
delivery of any such instrument, this Agreement (and any
amendments) was in full force and effect; that any such instrument
was executed in accordance with the terms and conditions of this
Agreement, and that MPC was duly authorized and empowered to
execute and deliver such instrument.
iv.
Recording of Agreement. This
Agreement shall not be placed on record in the county in which the
Leases is situated.
v.
Sales Proceeds. MPC shall pay
or direct any sales proceeds from the sale of the Ward Assets to
TEI. MPC shall not be liable for any sales proceeds until and
unless received.
3.
Performance
Fee. At Closing, the Parties agree to the following
terms:
a.
Performance Fee: As
compensation for marketing and selling the Winkler County Leases as
a package and receiving the consideration contemplated by the MECO
PSA, MPC agrees to pay or cause to be paid to TEI a performance fee
of Two Million Seven Hundred Eighty-One Thousand Five Hundred
Dollars ($2,781,500) (the “Performance
Fee”).
b.
MPC shall pay TEI
the Performance Fee upon MPC receiving the total amount
contemplated by the MECO PSA.
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Purchase Agreement
c.
MPC shall not be
liable for paying the Performance Fee unless and until MPC receives
such sales proceeds from MECO.
d.
TEI agrees that in
the event that the purchase price for the MECO transaction is
reduced pursuant to the MECO PSA, then the Performance Fee shall be
proportionately reduced by the same amount.
4.
Conditions to
Closing of MPC. Each obligation of MPC to be performed on
the Closing Date shall be subject to the satisfaction of each of
the conditions stated in this Section 4, except to the extent that
such satisfaction is waived by MPC in writing:
a.
TEI shall provide a
corporate resolution of its Board of Directors which approves the
transactions contemplated herein and authorizes the execution,
delivery and performance of this Agreement and the documents
referred to herein to which it is or is to be a party dated as of
the Closing Date.
b.
No action, suit or
proceeding by or before any court or any governmental or regulatory
authority shall have been commenced and no investigation by any
governmental or regulatory authority shall have been commenced
seeking to restrain, prevent or challenge the transactions
contemplated hereby or seeking judgments against TEI.
c.
The closing of the
contemplated transactions (the “Transactions”) with
MECO in the MECO PSA;
d.
The closing of the
transactions contemplated by the Agreement and Plan of
Reorganization dated of even date herewith by and among Warwink
Properties, LLC, a Texas limited liability, MPC, TEI, and
Torchlight Wolfbone Properties, Inc., a Texas
corporation.
5.
Conditions to Closing of TEI. Each
obligation of TEI to be performed on the Closing Date will be
subject to the satisfaction of each of the conditions stated in
this Section 5, except to the extent that such satisfaction is
waived by TEI in writing.
a.
MPC shall provide a
corporate resolution of its Board of Directors, which approves all
of the transactions contemplated herein and authorizes the
execution, delivery and performance of this Agreement and the
documents referred to herein to which it is or is to be a party
dated as of the Closing Date.
b.
No action, suit or
proceeding by or before any court or any governmental or regulatory
authority will have been commenced and no investigation by any
governmental or regulatory authority will have been commenced
seeking to restrain, prevent or challenge the transactions
contemplated hereby or seeking judgments against MPC.
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Purchase Agreement
c.
The closing of the
contemplated Transactions with MECO in the MECO PSA;
d.
The closing of the
transactions contemplated by the Agreement and Plan of
Reorganization dated of even date herewith by and among Warwink
Properties, LLC, a Texas limited liability, MPC, TEI, and
Torchlight Wolfbone Properties, Inc., a Texas
corporation.
6.
Miscellaneous.
a.
No Partnership or Joint
Venture. Nothing in this agreement is intended to create and
nothing herein or therein shall ever be construed as creating a
partnership, joint venture, mining partnership, association or
other relationship whereby any party hereto shall ever be held
liable for the acts or debts of another. The duties, obligations
and liabilities of each of the parties hereto set forth in this
agreement shall be several and not joint so that any party shall be
liable only for its proportionate share of the duties, obligations
and liabilities under the terms of this Agreement.
b.
Amendment; Waiver. Neither this
Agreement nor any provision hereof may be amended, modified or
supplemented unless in writing, executed by all the parties hereto.
Except as otherwise expressly provided herein, no waiver with
respect to this Agreement shall be enforceable unless in writing
and signed by the party against whom enforcement is sought. Except
as otherwise expressly provided herein, no failure to exercise,
delay in exercising, or single or partial exercise of any right,
power or remedy by any party, and no course of dealing between or
among any of the parties, shall constitute a waiver of, or shall
preclude any other or further exercise of, any right, power or
remedy.
c.
Notices. Any notices or other
communications required or permitted hereunder shall be
sufficiently given if in writing and delivered in Person or sent by
registered or certified mail (return receipt requested) or
nationally recognized overnight delivery service, postage pre-paid,
addressed as follows, or to such other address has such party may
notify to the other parties in writing:
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If to MPC
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Greg McCabe
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500 W. Texas, Suite 890
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Midland, Texas 79701
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with a copy to:
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Michael J. Dawson
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Dawson Parrish, PC
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309 W. 7th
St, Ste. 915
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Fort Worth, Texas 76102
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If to TEI
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Torchlight Energy, Inc.
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Attn: John Brda, President
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5700 W. Plano Parkway, Suite 3600
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Plano, Texas 75093
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with a copy to:
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Robert D. Axelrod
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Axelrod, Smith & Kirshbaum
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5300 Memorial Drive, Suite 1000
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Houston, Texas 77007
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Jared G. LeBlanc
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LeBlanc Law PC
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1111 North Loop West, Suite 705
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Houston, Texas 77008
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A
notice or communication will be effective (i) if delivered in
Person or by overnight courier, on the business day it is delivered
and (ii) if sent by registered or certified mail, three (3)
business days after dispatch.
Any
party may change its address by sending written notice to all
Parties to this Agreement.
d.
Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
e.
Assignments. This agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This agreement may not
be assigned by any party hereto except with the prior written
consent of the other party and any such assignment not consented to
shall be void and of no force or effect. All assignments,
conveyances or any other agreement by any party to this Agreement
or their respective successors and permitted assigns transferring
any right under this Agreement either express or implied must be
made in writing expressly making such transfer of rights
conditional and subject to this Agreement.
f.
Choice of Law. This Agreement
shall be governed by, and construed in accordance with, the laws of
the State of Texas without regard to principles of conflict of
laws. In any action between or among any of the parties, whether
arising out of this Agreement or otherwise, each of the parties
irrevocably consents to the exclusive jurisdiction and venue of the
federal and state district courts located in Midland County,
Texas.
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Purchase Agreement
g.
Execution. This Agreement may
be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event
that any signature is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
h.
Section Headings. The section
and subsection headings in this Agreement are used solely for
convenience of reference, do not constitute a part of this
Agreement, and shall not affect its interpretation.
i.
Further Assurances. Each party
covenants that at any time, and from time to time, whether before
or after the closing date, it will execute such additional
instruments and take such actions as may be reasonably be requested
by the other parties to confirm or perfect or otherwise to carry
out the intent and purposes of this Agreement.
j.
Attorney Review -
Construction.
In connection with the negotiation and drafting of this Agreement,
the parties represent and warrant to each other that they have had
the opportunity to be advised by attorneys of their own choice and,
therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or any
amendments hereto.
k.
Parties Bound. All the rights
and obligations arising under this Agreement will be binding on the
parties’ respective successors, heirs, and
assigns.
[SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]
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Purchase Agreement
IN
WITNESS WHEREOF, the undersigned have executed this Purchase
Agreement to become effective as of the date of
execution.
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MCCABE PETROLEUM CORPORATION
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By:
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/s/ Greg McCabe, Sr.
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Greg
McCabe, Sr., President
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TORCHLIGHT ENERGY, INC.
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By:
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/s/ John Brda
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John Brda, President
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Purchase Agreement
ACKNOWLEDGEMENTS
STATE
OF _________
COUNTY
OF _______
Before
me personally appeared John Brda, President of Torchlight Energy,
Inc., to me well known and known to me to be the person described
in and who executed the foregoing instrument, and acknowledged to
and before me that he executed said instrument for the purposes
therein expressed.
WITNESS
my hand and official seal in the State and County aforesaid, this
day of ________________________, 2017.
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____________________________________
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Notary Public
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(SEAL)
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State of _____________
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My Commission Expires: ______________
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Purchase Agreement
EXHBIT
A
LEASES
AND LANDS
WARD:
WINKLER:
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Purchase Agreement
EXHIBIT
B
NOTE
AND LOAN AGREEMENT
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Purchase Agreement
EXHIBIT
C
ASSIGNMENT,
BILL OF SALE AND CONVEYANCE OF
BENEFICIAL
OWNERSHIP
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Purchase Agreement