AMERICAN BATTERY TECHNOLOGY Co S-3, filed May 16, 2023
AMERICAN BATTERY TECHNOLOGY Co (ABAT)
Registration No. 333- __________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
| AMERICAN BATTERY TECHNOLOGY COMPANY |
| (Exact name of registrant as specified in its charter) |
| Nevada | 33-1227980 | |
(State or jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
100 Washington Street, Suite 100, Reno, NV 89503 |
| Tel: (775) 473-4744 |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
| Ryan Melsert |
| Chief Executive Officer |
| 100 Washington Street, Suite 100, |
| Reno, NV 89503 |
| Tel: (775) 473-4744 |
(Name, address, including zip code, and telephone number, including area code, of agent for service) |
With a copy to:
Amy Bowler
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, CO 80202
(303) 295-8000
From time to time after the effective date of this registration statement
(Approximate date of commencement of proposed sale to the public)
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following: ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I. D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer | |
| ☒ | Non-accelerated filer | ☒ | Smaller reporting company | |
| ☐ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 15, 2023
PROSPECTUS
AMERICAN BATTERY TECHNOLOGY COMPANY
11,000,000 Shares of Common Stock
This prospectus relates to the offer and sale from time to time by the selling stockholder named in this prospectus (the “Selling Stockholder”) of up to 11,000,000 shares of our common stock (the “Shares”) issued to the Selling Stockholder in connection with the Purchase Agreement (defined below). We are not selling any common stock under this prospectus and will not receive proceeds from the sale of the Shares by the Selling Stockholder pursuant to this prospectus; provided that the Selling Stockholder is required to deliver $1,500,000 of the net proceeds it receives from the sale of the Shares to fund an indemnity escrow to satisfy certain of its (or its affiliates’) indemnification obligations to us, including indemnification obligations under the Purchase Agreement.
We are registering the Shares for resale pursuant to the Selling Stockholder’s registration rights granted under the Second Amended and Restated Membership Interest Purchase Agreement, dated April 21, 2023, by and between LiNico Corporation, a Nevada corporation (“LiNico”) and the Company, as subsequently amended by that certain First Amendment to Second Amended and Restatement Membership Interest Purchase Agreement, dated May 11, 2023 (as amended, the “Purchase Agreement”), pursuant to which the Shares were issued.
The Shares may be sold by the Selling Stockholder to or through underwriters or dealers, directly to purchasers or through agents designated from time to time. For additional information regarding the methods of sale, you should refer to the section of this prospectus entitled “Plan of Distribution.”
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should carefully read this prospectus and any amendments or supplements, together with the additional information described under the heading “Where You Can Find More Information,” before you invest.
Our common stock is traded on the OTCQX marketplace maintained by OTC Markets Group, Inc. (“OTC Markets”), under the symbol “ABML.” On May 12, 2023, the last reported sale price of our common stock on OTC Markets was $0.759 per share.
Investing in our securities involves risks. You should carefully read and consider the risk factors included below, in any prospectus supplement, and in our periodic reports and other information filed with the Securities and Exchange Commission before investing in our securities. See “Risk Factors” beginning on page 7 of this prospectus for information on certain risks related to the purchase of our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 15, 2023.
TABLE OF CONTENTS
| Page | |
| PART I - INFORMATION REQUIRED IN PROSPECTUS | |
| About this Prospectus | 2 |
| Where You Can Find More Information | 3 |
| Incorporation by Reference | 4 |
| Cautionary Note Regarding Forward-Looking Statements | 5 |
| 6 | |
| Risk Factors | 7 |
| Use of Proceeds | 13 |
| Determination of Offering Price | 13 |
| Dilution | 13 |
| Description of Registrant’s Securities | 14 |
| Selling Stockholder | 15 |
| Plan of Distribution | 16 |
| Legal Matters | 17 |
| PART II - INFORMATION NOT REQUIRED IN PROSPECTUS | |
| Other Expenses of Issuance and Distribution | II-1 |
| Indemnification of Directors and Officers | II-1 |
| Exhibit Index | II-3 |
| Undertakings | II-4 |
| Signatures | II-6 |
| i |
This prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this process, the Selling Stockholder may, from time to time, sell the Shares described in this prospectus in one or more offerings or resales.
You should assume that the information appearing in this prospectus and any applicable prospectus supplement is accurate only as of the date on its respective cover, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither we nor any agent or the Selling Stockholder has authorized any person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus or any applicable prospectus supplement prepared by or on behalf of us or to which we have referred you. You should read this prospectus and any applicable prospectus supplement together with additional information described below under the heading “Where You Can Find More Information” before you decide to invest in our securities.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should carefully read this prospectus and any amendments or supplements, together with the additional information described under the heading “Where You Can Find More Information,” before you invest.
When we refer to “American Battery Technology Company,” “we,” “our,” “us” and the “Company” in this prospectus, we mean American Battery Technology Company and its consolidated subsidiaries, unless otherwise specified.
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus forms part of a registration statement on Form S-3 filed by us with the SEC under the Securities Act of 1933, as amended (the “Securities Act”). As permitted by the SEC, this prospectus does not contain all the information set forth in the registration statement filed with the SEC. This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. You should refer to the complete registration statement, including the exhibits thereto, that may be obtained as described below. Statements contained or incorporated by reference in this prospectus or any prospectus supplement about the contents of any contract or other document are not necessarily complete. If we have filed any contract or other document as an exhibit to the registration statement or any other document incorporated by reference in the registration statement of which this prospectus forms a part, you should read the exhibit for a more complete understanding of the document or matter involved. Each statement regarding a contract or other document is qualified in its entirety by reference to the actual document.
We are subject to the informational requirements of the Exchange Act of 1934, as amended (the “Exchange Act”), and we file annual, quarterly and other reports and other information with the SEC. Our SEC filings are available to the public from commercial retrieval services and at the website maintained by the SEC at www.sec.gov. The reports and other information filed by us with the SEC are also available at our website. The address of the Company’s website is americanbatterytechnology.com. Information contained on our website or that can be accessed through our website is not incorporated by reference into this prospectus.
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The SEC’s rules allow us to “incorporate by reference” information into this prospectus, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, and subsequent information that we file with the SEC will automatically update and supersede that information. Any statement contained in this prospectus or a previously filed document incorporated by reference will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or a subsequently filed document incorporated by reference modifies or replaces that statement.
We incorporate by reference the following documents in this prospectus, which you should review in connection with this prospectus, as well as each of the documents that we file with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, between the date of this prospectus and the termination of the offering of the securities described in this prospectus. We are not, however, incorporating by reference any documents or portions thereof, whether specifically listed below or filed in the future, that are not deemed “filed” with the SEC, including any information furnished pursuant to Item 2.02 or 7.01 of Form 8-K or related exhibits furnished pursuant to Item 9.01 of Form 8-K.
This prospectus and any accompanying prospectus supplement incorporate by reference the documents set forth below that have previously been filed with the SEC:
| ● | Our Annual Report on Form 10-K for the annual period ended June 30, 2022, filed with the SEC on September 12, 2022; | |
| ● | Our Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2022, December 31, 2022 and March 31, 2023, filed with the SEC on November 14, 2022, February 14, 2023 and May 15, 2023, respectively; | |
| ● | Our Current Reports on Form 8-K filed on the following dates: July 15, 2022, August 5, 2022, September 2, 2022, September 14, 2022, October 14, 2022, October 31, 2022, January 11, 2023, January 24, 2023, February 28, 2023, March 7, 2023, March 8, 2023, March 10, 2023, March 27, 2023, April 4, 2023, April 7, 2023 and April 27, 2023; and | |
| ● | The description of our capital stock in our Form 8-A filed with the SEC on October 17, 2013, and any amendment or report filed with the SEC for the purpose of updating the description. |
You may request a copy of any of the documents incorporated by reference in this prospectus, at no cost to you, by writing or telephoning us at the following address:
American Battery Technology Company
100 Washington Street, Suite 100
Reno, Nevada 89503
Tel: (775) 473-4744
Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this prospectus or any accompanying prospectus supplement.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains, in addition to historical information, certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would,” and similar expressions intended to identify forward-looking statements. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Such statements may include, but are not limited to, information related to: anticipated operating results; relationships with our customers; consumer demand; financial resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling, general and administrative expenses; interest expense; the ability to produce the liquidity or enter into agreements to acquire the capital necessary to continue our operations and take advantage of opportunities; and legal proceedings and claims.
You should read this prospectus and the documents we have filed as exhibits to the registration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from our expectations. You should not assume that the information contained in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front cover of such documents.
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American Battery Technology Company is a startup company in the lithium–ion battery industry that is working to increase the domestic US production of battery materials, such as lithium, nickel, cobalt, and manganese through its engagement in the exploration of new primary resources of battery metals, in the development and commercialization of new technologies for the extraction of these battery metals from primary resources, and in the commercialization of an internally developed integrated process for the recycling of lithium–ion batteries. Through this three–pronged approach the Company is working to both increase the domestic production of these battery materials, and to ensure spent batteries have their elemental battery metals returned to the domestic manufacturing supply chain in an economical, environmentally-friendly, closed–loop fashion.
To implement this business strategy, the Company is currently constructing its first integrated lithium–ion battery recycling facility, which will take in waste and end–of–life battery materials from the electric vehicle, stationary storage, and consumer electronics industries. The construction, commissioning, and operations of this facility are of the highest priority to the Company, and as such it has significantly increased the resources devoted to its execution including the further internal hiring of technical staff, expansion of laboratory facilities, and purchasing of equipment. The Company has been awarded a competitively bid grant from the US Advanced Battery Consortium to accelerate the development and demonstration of this pre–commercial scale integrated lithium–ion battery recycling facility. The Company has been notified that it has been selected for an additional grant award under the Bipartisan Infrastructure Law to validate, test, and deploy three disruptive advanced separation and processing technologies in its existing lithium-ion battery recycling Pilot Plant.
Additionally, the Company is accelerating the demonstration and commercialization of its internally developed low–cost and low–environmental impact processing train for the manufacturing of battery grade lithium hydroxide from Nevada–based sedimentary claystone resources. The Company has been awarded a grant cooperative agreement from the US Department of Energy’s Advanced Manufacturing Office through the Critical Materials Innovation program to support the construction and operation of a multi–ton per day integrated continuous demonstration system to support the scale–up and commercialization of these technologies. The Company has been notified that it has been selected for an additional grant award under the Bipartisan Infrastructure Law to design, construct, and commission a first-of-kind commercial manufacturing facility to produce battery-grade lithium hydroxide from this resource.
The Company’s corporate headquarters are in Reno, Nevada, USA. It is also constructing the ABTC Pilot Plant (“ABTC Pilot Plant” or “Pilot Plant”) for recycling lithium-ion batteries in Fernley, Nevada, USA, and its exploration office is located in Tonopah, Nevada, USA.
The Company was incorporated as Oroplata Resources, Inc. under the laws of the State of Nevada on October 6, 2011, for the purpose of acquiring rights to mineral properties with the eventual objective of being a producing mineral company. On August 8, 2016, the Company formed Lithortech Resources Inc. as a wholly owned subsidiary of the Company to serve as its operating subsidiary for lithium resource exploration and development. On June 29, 2018, the Company changed the name of Lithortech Resources to LithiumOre Corp. (“LithiumOre”); on May 3, 2019, the Company changed its name to American Battery Metals Corporation; and on August 12, 2021, the Company changed its name to American Battery Technology Company, which better aligns with the Company’s current business activities and future objectives. The Company has limited operating history and has not yet generated or realized revenues from its primary business activities.
Our mailing address and telephone number of our principal executive offices are:
American Battery Technology Company
100 Washington Street, Suite 100
Reno, Nevada 89503
Tel: (775) 473-4744
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An investment in our securities is subject to numerous risks, including the risk factors described below. You should carefully consider the risks, uncertainties and other factors described below, in addition to the other information set forth in this prospectus, before making an investment decision with regard to our securities. Any of these risks, uncertainties and other factors could materially and adversely affect our business, financial condition, results of operations, cash flows or prospects. In that case, the trading price of our Common Stock could decline, and you may lose all or part of your investment. See also “Cautionary Note Regarding Forward-Looking Statements.”
RISKS RELATING TO OUR COMPANY
Since we have a limited operating history and have not commenced revenue-producing operations, it is difficult for potential investors to evaluate our business.
Since formation, we have not commenced revenue-producing operations. To date, our operations have consisted of the prior exploratory activities, development and limited testing of our recycling process and the development of our business plan. Our limited operating history makes it difficult for potential investors to evaluate our technology or prospective operations. As an early-stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
We believe that we require a minimum of $4,000,000 of working capital over the next 12 months in order to fund our current operations, excluding the construction of our initial recycling facility near Reno, Nevada. We may need to raise capital over the next 12 months to satisfy such requirements, the receipt of which cannot be assured. We will also require capital in order to fully develop our recycling facilities. We intend to seek additional funds through various financing sources, including the private sale of our equity and debt securities, joint ventures with capital partners and project financing of our recycling facilities. In addition, we will consider alternatives to our current business plan that may enable to us to achieve revenue producing operations and meaningful commercial success with a smaller amount of capital. However, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations, in which case you may lose your entire investment.
Our independent auditors have expressed doubt regarding out liquidity and capital resources. If we do not continue as a going concern, investors will lose their entire investment.
The condensed consolidated financial statements included in the Company’s most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, were prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As of March 31, 2023, the Company had cash of $12.6 million, an accumulated deficit of $152.9 million, negative cash flow from operations, and limited business operations. The Company expects to begin its recycling operations in the quarter ended September 30, 2023. Without additional financing, the Company will be unable fund remaining capital expenditures to achieve operations and fund general and administrative expenses and working capital requirements for the next 12 months. These material uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The Company is evaluating financing its future requirements through a combination of debt, equity and/or asset sales. There is no assurance that the Company will be able to obtain such financing or obtain them on favorable terms. The condensed consolidated financial statements included in the Company’s most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption deemed to be inappropriate. These adjustments could be material. If we do not continue as a going concern, investors may lose their entire investment.
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We must effectively manage the growth of our operations, or our company will suffer.
Our ability to successfully implement our business plan requires an effective planning and management process. If funding is available, we may elect to increase the scope of our operations and acquire complementary businesses. Implementing our business plan will require significant additional funding and resources. If we grow our operations, we will need to hire additional employees and make significant capital investments. If we grow our operations, it will place a significant strain on our existing management and resources. Additionally, we will need to improve our financial and managerial controls and reporting systems and procedures, and we will need to expand, train and manage our workforce. Any failure to manage any of the foregoing areas efficiently and effectively would cause our business to suffer.
We may be unable to maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results.
Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. We do not currently have effective internal controls. If we fail to maintain an effective system of internal control over financial reporting, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with the Commission, reporting and other regulatory requirements. This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, cause our stock price to drop.
We have been and expect to be significantly dependent on consulting agreements for the development of our battery recycling facilities, which exposes us to the risk of reliance on the performance of third parties.
In developing our battery recycling technology, we rely to some extent on consulting agreements with third parties as the Company does not have the resources to employ all the necessary staff required for such activities. The failure to obtain and maintain such consulting agreements would substantially disrupt or delay our battery recycling activities. Any such loss would likely increase our expenses and materially harm our business, financial condition and results of operation.
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees would adversely impact our business prospects.
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. In addition, the loss of the services of certain key employees, including our Chief Executive Officer and our Chief Technology Officer, would adversely impact our business prospects. Our ability to compete in the highly competitive battery recycling technology business depends in large part upon our ability to attract highly qualified managerial, scientific, and engineering personnel. In order to induce valuable employees to remain with us, we intend to provide employees with stock grants that vest over time. The value to employees of stock grants that vest over time will be significantly affected by movements in our stock price that we will not be able to control and may at any time be insufficient to counteract more lucrative offers from other companies. Other technology companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize products would be limited.
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RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Battery recycling is a highly competitive and speculative business and we may not be successful in seeking available opportunities.
The process of battery recycling is a highly competitive and speculative business. In seeking available opportunities, we will compete with a number of other companies, including established, multi-national companies that have more experience and resources than we do. There also may be other small companies that are developing similar processes and are farther along than the Company. Because we may not have the financial and managerial resources to compete with other companies, we may not be successful in our efforts to develop technology which is commercially viable.
Our new business model has not been proven by us or anyone else.
We intend to engage in the business of lithium recycling through a proprietary recycling technology. While the production of lithium-ion recycling is an established business, to date most lithium-ion recycling has been produced by way of performing bulk high temperature calcinations or bulk acid dissolutions. We have developed a highly strategic recycling processing train that does not employ any high temperature operations or any bulk chemical treatments of the full battery. We have tested our recycling process on a small scale and to a limited degree; however, there can be no assurance that we will be able to produce battery metals in commercial quantities at a cost of production that will provide us with an adequate profit margin. The uniqueness of our process presents potential risks associated with the development of a business model that is untried and unproven.
While the testing of our recycling process has been successful to date, there can be no assurance that we will be able to replicate the process, along with all of the expected economic advantages, on a large commercial scale.
As of the date of this prospectus, we have built and operated our recycling process on a very small scale. While we believe that our development and testing to date has proven the concept of our recycling process, we have not undertaken the build-out or operation of a large-scale facility capable of recycling large commercial quantities. There can be no assurance that as we commence large scale manufacturing or operations that we will not incur unexpected costs or hurdles that might restrict the desired scale of our intended operations or negatively impact our projected gross profit margin.
Our intellectual property rights may not be adequate to protect our business.
We currently do not hold any patents for our products. Although we expect to file applications related to our technology, no assurances can be given that any patent will be issued on such patent applications or that, if such patents are issued, they will be sufficiently broad to adequately protect our technology. In addition, we cannot assure you that any patents that may be issued to us will not be challenged, invalidated, or circumvented. Even if we are issued patents, they may not stop a competitor from illegally using our patented processes and materials. In such event, we would incur substantial costs and expenses, including lost time of management in addressing and litigating, if necessary, such matters. Additionally, we rely upon a combination of trade secret laws and nondisclosure agreements with third parties and employees having access to confidential information or receiving unpatented proprietary know-how, trade secrets and technology to protect our proprietary rights and technology. These laws and agreements provide only limited protection. We can give no assurance that these measures will adequately protect us from misappropriation of proprietary information.
Our processes may infringe on the intellectual property rights of others, which could lead to costly disputes or disruptions.
The applied science industry is characterized by frequent allegations of intellectual property infringement. Though we do not expect to be subject to any of these allegations, any allegation of infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause suspension of operations or force us to enter into royalty, license, or other agreements rather than dispute the merits of such allegation. If patent holders or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to procure any required royalty or license agreements on acceptable terms or at all.
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Our business strategy includes entering into joint ventures and strategic alliances. Failure to successfully integrate such joint ventures or strategic alliances into our operations could adversely affect our business.
We propose to commercially exploit our recycling process, in part, by entering into joint ventures and strategic relationships with parties involved in the manufacture and recycling of lithium-ion products. Joint ventures and strategic alliances may involve significant other risks and uncertainties, including distraction of management’s attention away from normal business operations, insufficient revenue generation to offset liabilities assumed and expenses associated with the transaction, and unidentified issues not discovered in our due diligence process, such as product quality, technology issues and legal contingencies. In addition, we may be unable to effectively integrate any such programs and ventures into our operations. Our operating results could be adversely affected by any problems arising during or from any joint ventures or strategic alliances.
If we are unable to manage future expansion effectively, our business, operations and financial condition may suffer significantly, resulting in decreased productivity.
If our recycling process proves to be commercially valuable, it is likely that we will experience a rapid growth phase that could place a significant strain on our managerial, administrative, technical, operational and financial resources. Our organization, procedures and management may not be adequate to fully support the expansion of our operations or the efficient execution of our business strategy. If we are unable to manage future expansion effectively, our business, operations and financial condition may suffer significantly, resulting in decreased productivity.
The global economic conditions could negatively affect our prospects for growth and operating results.
Our prospects for growth and operating results will be directly affected by the general global economic conditions of the industries in which our suppliers, partners and customer groups operate. We believe that the market price of our principal product, recycled lithium- ion, is relatively volatile and reacts to general global economic conditions. A decline in the price of lithium-ion resulting from over supply or a global economic slowdown and the other global economic conditions could negatively affect our business. There can be no assurance that global economic conditions will not, at times, negatively impact our liquidity, growth prospects and results of operations.
Government regulation and environmental, health and safety concerns may adversely affect our business.
Our operations in the United States will be subject to the Federal, State and local environmental, health and safety laws applicable to the reclamation of lithium-ion batteries. Depending on how any particular operation is structured, our facilities will probably have to obtain environmental permits or approvals to operate, including those associated with air emissions, water discharges, and waste management and storage. We may face opposition from local residents or public interest groups to the installation and operation of our facilities. Failure to secure (or significant delays in securing) the necessary approvals could prevent us from pursuing some of our planned operations and adversely affect our business, financial results and growth prospects. In addition to permitting requirements, our operations are subject to environmental health, safety and transportation laws and regulations that govern the management of and exposure to hazardous materials such as the heavy metals and acids involved in battery reclamation. These include hazard communication and other occupational safety requirements for employees, which may mandate industrial hygiene monitoring of employees for potential exposure to hazardous materials. Failure to comply with these requirements could subject our business to significant penalties (civil or criminal) and other sanctions that could adversely affect our business.
The nature of our operations involves risks, including the potential for exposure to hazardous materials such as heavy metals, that could result in personal injury and property damage claims from third parties, including employees and neighbors, which claims could result in significant costs or other environmental liability. Our operations also pose a risk of releases of hazardous substances, such as heavy metals or acids, into the environment, which can result in liabilities for the removal or remediation of such hazardous substances from the properties at which they have been released, liabilities which can be imposed regardless of fault, and our business could be held liable for the entire cost of cleanup even if we were only partially responsible. Like any manufacturer, we are also subject to the possibility that we may receive notices of potential liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state statutes, which impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination, and for damages to natural resources. Liability under CERCLA is retroactive, and, under certain circumstances, liability for the entire cost of a cleanup can be imposed on any responsible party.
In the event we are unable to present and operate our recycling process and operations as safe and environmentally responsible, we may face opposition from local governments, residents or public interest groups to the installation and operation of our facilities.
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Control by management may limit your ability to influence the outcome of director elections and other transactions requiring stockholder approval.
As of May 12, 2023, our directors and executive officers beneficially own approximately 3.2% of our outstanding common stock. In addition to control exercised by their board seats and officer positions, such persons will have significant influence over corporate actions requiring stockholder approval, including the following actions:
| ● | to elect or defeat the election of our directors; | |
| ● | to amend or prevent amendment of our articles of incorporation or bylaws; | |
| ● | to effect or prevent a merger, sale of assets or other corporate transaction; and | |
| ● | to control the outcome of any other matter submitted to our stockholders for vote. |
Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
We expect to experience volatility in the price of our Common Stock, which could negatively affect stockholders’ investments.
The trading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.
The relative lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.
Our management team lacks significant public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our senior management has little experience in managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including the establishing and maintaining of internal controls over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Exchange Act, which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy, we could be subject to the imposition of fines and penalties and our management would have to divert resources from attending to our business plan.
Our Common Stock is categorized as “penny stock,” which may make it more difficult for investors to sell their shares of Common Stock due to suitability requirements.
Our Common Stock is categorized as “penny stock.” The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined therein) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per share, and is therefore considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability or willingness of brokers or dealers to buy or sell our Common Stock, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.
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Financial Industry Regulatory Authority, Inc. (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock, which could depress the price of our Common Stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.
The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights for or obligations to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.
Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and our stockholders.
We may issue additional shares of Common Stock or preferred stock in the future, which could cause significant dilution to all stockholders.
Our Articles of Incorporation authorize the issuance of up to 1,200,000,000 shares of Common Stock with a par value of $0.001 per share. As of May 12, 2023, we had 680,361,529 shares of Common Stock outstanding; however, we may issue additional shares of Common Stock in the future in connection with a financing or an acquisition. Such issuances may not require the approval of our stockholders. In addition, certain of our outstanding rights to purchase additional shares of Common Stock or securities convertible into our Common Stock are subject to some form of anti-dilution protection, which could result in the right to purchase significantly more shares of Common Stock being issued or a reduction in the purchase price for any such shares or both. Any issuance of additional shares of our Common Stock, or equity securities convertible into our Common Stock, including but not limited to, preferred stock, warrants and options, will dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock.
Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.
Certain provisions of the Nevada Revised Statutes have anti-takeover effects and may inhibit a non-negotiated merger or other business combination. These provisions are intended to encourage any person interested in acquiring us to negotiate with, and to obtain the approval of, our board of directors in connection with such a transaction. However, certain of these provisions may discourage a future acquisition of us, including an acquisition in which the stockholders might otherwise receive a premium for their shares. As a result, stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
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We are registering the Shares on behalf of the Selling Stockholder, to be offered and sold by the Selling Stockholder from time to time and we will not receive proceeds from the sale of the Shares from time to time by the Selling Stockholder; provided that the Selling Stockholder is required to deliver $1,500,000 of the net proceeds it receives from the sale of the Shares to fund an indemnity escrow to satisfy certain of its (or its affiliates’) indemnification obligations to us, including indemnification obligations under the Purchase Agreement.
We have agreed to pay all costs, expenses and fees relating to the registration of the Shares covered by this prospectus. These may include, without limitation, all registration and filing fees, fees and expenses of our counsel and accountants, and blue sky fees and expenses. The Selling Stockholder will pay any underwriting discounts and commissions and expenses incurred for brokerage, accounting, tax or legal services or any other expenses incurred in disposing of the Shares covered hereby.
DETERMINATION OF OFFERING PRICE
We cannot currently determine the price or prices at which the Shares may be sold by the Selling Stockholder under this prospectus as the price will be determined by the prevailing public market price for our common stock, by negotiations between the Selling Stockholder and the buyers of common shares in private transactions or as otherwise described in “Plan of Distribution.”
The Selling Stockholder is offering for sale shares of common stock of the Company that are currently outstanding.
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Description of Registrant’s Securities
The following description of our capital stock is not complete and may not contain all the information you should consider before investing in our capital stock. This description is summarized from, and qualified in its entirety by reference to, our Articles of Incorporation and Bylaws which have been publicly filed with the SEC. See “Where You Can Find More Information” and “Incorporation by Reference.”
Authorized and Outstanding Securities
The Company is authorized to issue two classes of shares, designated “Common Stock” and “Preferred Stock.” The total number of shares that the Company is authorized to issue is 1,225,000,000. The Company is authorized to issue 25,000,000 shares of Preferred Stock, of which the Company has designated 500,000 shares of Series A Preferred Stock with a $0.001 par value per share, 2,000,000 shares of Series B Preferred Stock with a $0.001 par value per share, and 2,000,000 shares of Series C Preferred Stock with a $0.001 par value per share. The number of shares of Common Stock which the Company is authorized to issue is 1,200,000,000 with a $0.001 par value per share. As of May 12, 2023, there were 0 shares of Series A Preferred Stock, 0 shares of Series B Preferred Stock, 0 shares of Series C Preferred Stock, and 680,361,529 shares of Common Stock issued and outstanding.
Common Stock
The holders of our Common Stock are entitled to one vote per share on all matters requiring a vote of the stockholders, including the election of directors. Holders of Common Stock do not have cumulative voting rights. Holders of Common Stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board in its discretion from funds legally available therefor, subject to preferences that may be applicable to preferred stock, if any, then outstanding. At present, we have no plans to issue dividends. See “Dividend Policy” for additional information. In the event of a liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock.
Preferred Stock
Our amended and restated articles of incorporation authorize shares of preferred stock and provide that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue shares of preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue shares of preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.
Anti-Takeover Effects of Nevada Law and Our Charter Documents
Certain provisions of Nevada law and our Articles of Incorporation and Bylaws could make more difficult the acquisition of us by means of a tender offer or otherwise, and the removal of incumbent officers and directors. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us.
Transfer Agent
The transfer agent for our Common Stock is Securities Transfer Corporation at 2901 N. Dallas Parkway, Suite 380, Plano, TX 75093. The transfer agent’s telephone number is (469) 633-0101.
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Pursuant to the Purchase Agreement, we agreed to acquire 100% of the ownership interests in Aqua Metals Transfer, LLC in exchange for a combination of cash and 11,000,000 shares of our common stock. We also agreed to prepare and file a registration statement, of which this prospectus is a part, with the SEC to register the resale of the Shares, which will be held by an affiliate of LiNico, Comstock Inc., a Nevada corporation (the “Selling Stockholder”).
The Selling Stockholder agreed to resell the Shares in accordance with the Purchase Agreement after this Registration Statement is declared effective, including that the Selling Stockholder may not sell more than 500,000 Shares per trading day or 20% of the daily trading volume, whichever is higher. The Selling Stockholder may transfer all or part of the Shares in an amount greater than 500,000 Shares to one or more broker-dealers or intermediaries in one or more transactions, so long as such broker-dealers or intermediaries collectively do not sell more than 500,000 Shares per trading day or 20% of the daily trading volume, whichever is higher.
Pursuant to the Purchase Agreement, LiNico has an obligation to indemnify us for certain matters and to fund an escrow account for purposes of such indemnification obligation. The Selling Stockholder is required to contribute $1,500,000 of the net proceeds it receives from its sale of Shares to fund indemnification obligations for indemnification claims, if any, made by the Company pursuant to Article VIII of the Purchase Agreement and Article VIII of that certain Asset Purchase Agreement dated March 1, 2023, between LiNico and the Company.
The table below sets forth information as of May 15, 2023, with respect to the Selling Stockholder for whom we are registering the Shares for sale to the public, the number of shares of common stock owned by the Selling Stockholder prior to this offering, the percentage of our common stock beneficially owned by the Selling Stockholder prior to this offering, the number of shares of our common stock owned by the Selling Stockholder upon completion of this offering, assuming all Shares are sold, and the percentage of our common stock beneficially owned by the Selling Stockholder after this offering, assuming all Shares are sold.
In the table below, the number of shares of common stock that may be offered pursuant to this prospectus is the number of shares of common stock issued pursuant to the Purchase Agreement. This prospectus also covers any additional shares of our common stock that may be issued by reason of a stock dividend, stock split or other similar transaction effected without our receiving any cash or other value, which results in an increase in the number of shares of our common stock outstanding.
The number of shares in the column “Shares Offered for Resale” represents all of the shares of common stock that the Selling Stockholder may offer under this prospectus. The Selling Stockholder may sell some, all or none of the Shares. The Selling Stockholder may sell or transfer all or a portion of the Shares pursuant to an available exemption from the registration requirements of the Securities Act. We do not know how long the Selling Stockholder will hold the Shares before selling them, and, other than the Purchase Agreement, we currently have no agreements, arrangements or other understandings with the Selling Stockholder regarding the sale of any of the Shares.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act. The percentage of shares beneficially owned prior to the offering is based on 680,361,529 shares of our common stock outstanding as of May 12, 2023.
| Shares Beneficially Owned Prior to Resale | Shares Offered | Shares Beneficially Owned After Resale | ||||||||||||||||||
| Selling Stockholder | Number | % | for Resale | Number | % | |||||||||||||||
| Comstock Inc.(1) | 11,000,000 | 1.6 | % | 11,000,000 | 0 | 0 | % | |||||||||||||
| (1) | The business address of Comstock Inc. is 117 American Flat Road, Virginia City, Nevada 89440. |
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We are registering the Shares to permit the resale of the Shares by the Selling Stockholder from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale of the Shares by the Selling Stockholder; provided that the Selling Stockholder is required to deliver $1,500,000 of the net proceeds it receives from the sale of the Shares to fund an indemnity escrow to satisfy certain of its (or its affiliates’) indemnification obligations to us, including indemnification obligations under the Purchase Agreement. We will bear all fees and expenses incident to our obligation to register the Shares.
The Selling Stockholder, which, as used herein, includes any of its pledgees, donees, transferees, assignees and successors, may from time to time offer and sell some or all of the Shares covered by this prospectus. To the extent required, this prospectus may be amended and supplemented from time to time to describe a specific plan of distribution.
The Selling Stockholder may offer the Shares from time to time, either in increments or in a single transaction. The Selling Stockholder may also decide not to sell all the Shares it is allowed to sell under this prospectus. The Selling Stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale.
The Selling Stockholder may, from time to time, sell any or all of its Shares on any stock exchange, market or trading facility on which the Shares are traded or quoted, in the over-the-counter market or in private transactions. These sales may be at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at fixed prices or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling the Shares:
| ● | ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers; |
| ● | block trades in which a broker-dealer will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | to cover short sales made after the date that this registration statement becomes effective; |
| ● | an agreement with broker-dealers to sell as agent for the Selling Stockholder a specified number of the Shares at a stipulated price per share or otherwise at the prevailing market price; |
| ● | through put or call options, including the writing of exchange-traded call options, or other hedging transactions related to common shares, including the issuance by the Selling Stockholder of derivative securities, whether the options or such other derivative securities are listed on an options exchange or otherwise; |
| ● | through the distribution of the Shares by the Selling Stockholder to its partners, members or stockholders; |
| ● | a combination of any such methods of sale; and |
| ● | any other method permitted pursuant to applicable law. |
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The Selling Stockholder may also sell the Shares under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440-1.
In connection with the sale of the Shares, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares in the course of hedging the positions they assume. The Selling Stockholder may also sell shares short and deliver Shares to close out its short positions, or loan or pledge the Shares to broker-dealers that in turn may sell these shares. The Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholder and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We are requesting that the Selling Stockholder inform us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Shares. We will pay certain fees and expenses incurred by us incident to the registration of the Shares.
Because the Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Securities Act, it may be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholder or any other person. We will make copies of this prospectus available to the Selling Stockholder and are informing the Selling Stockholder of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
Certain legal matters in connection with the securities will be passed upon for us by Holland & Hart LLP, Denver, Colorado.
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is an estimate of the expenses (all of which are to be paid by the registrant) that we may incur in connection with the securities being registered hereby.
| SEC registration fee | $ | 922.48 | ||
| Printing expenses | $ | 800 | ||
| Legal fees and expenses | $ | 15,000.00 | ||
| Auditor fees | $ |
6,500.00 | ||
| Miscellaneous | $ | 0 | ||
| Total | $ | 22,422.48 |
Item 15. Indemnification of Directors and Officers
Nevada Law
Section 78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:
(a) is not liable pursuant to Nevada Revised Statute 78.138, or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In addition, Section 78.7502 permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:
(b) is not liable pursuant to Nevada Revised Statute 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
Section 78.751 of the Nevada Revised Statutes provides that to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above (or in defense of any claim, issue or matter therein), the corporation is required to indemnify him against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.
Section 78.751 of the Nevada Revised Statutes also provides that (unless otherwise restricted by the articles of incorporation, the bylaws or an agreement made by the corporation) such indemnification may also include payment by the corporation of expenses incurred in defending a civil or criminal action or proceeding as they are incurred and in advance of the final disposition of such action or proceeding upon receipt of an undertaking by(or on behalf of) a director or officer to repay such payment if he shall be ultimately found not to be entitled to indemnification by the corporation. Indemnification may be provided even though the person to be indemnified is no longer a director, officer, employee or agent of the corporation or such other entities.
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Section 78.752 of the Nevada Revised Statutes allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.
Other financial arrangements made by the corporation pursuant to Section 78.752 may include the following:
(a) the creation of a trust fund;
(b) the establishment of a program of self-insurance;
(c) the securing of its obligations of indemnification by granting a security interest or other lien on any assets of the corporation; and
(d) the establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to Section 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses of indemnification ordered by a court.
Any discretionary indemnification pursuant to Section 78.7502 of the Nevada Revised Statutes, unless ordered by a court or advanced pursuant to an undertaking to repay the amount if it is determined by a court that the indemnified party is not entitled to be indemnified by the corporation, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances. The determination must be made by:
(a) the stockholders;
(b) the board of directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c) independent legal counsel in a written opinion if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders; or
(d) independent legal counsel in a written opinion if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained.
Subsection 7 of Section 78.138 of the Nevada Revised Statutes provides that, subject to certain very limited statutory exceptions or unless the articles of incorporation or an amendment thereto provide for greater individual liability, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
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Charter Provisions and Other Arrangements
Pursuant to the provisions of Nevada Revised Statutes, we have adopted the following indemnification provisions in our Articles of Incorporation for our directors and officers:
Officers and directors shall have no personal liability to the corporation of its stockholders for damages for breach of fiduciary duty as an officer or director. This provision does not eliminate or limit the liability of an officer or director for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or the payment of distributions in violation of the NRS 78.300.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
The following exhibits are included as part of this Registration Statement by reference:
| Exhibit | Description | Filed Herein | Incorporated Date |
By Form |
Reference Exhibit | |||||
| 3.1 | Articles of Incorporation, as amended | September 12, 2022 | 10-K | 3.1 | ||||||
| 3.2 | Bylaws | May 22, 2013 | S-1 | 3.2 | ||||||
| 5.1 | Opinion of Holland & Hart LLP | X | ||||||||
| 10.1 | Second Amended and Restated Membership Interest Purchase Agreement, dated as of April 21, 2023, by and between LiNico Corporation and American Battery Technology Company | X | ||||||||
| 10.2 | First Amendment to Second Amended and Restated Membership Interest Purchase Agreement, dated as of May 11, 2023, by and between LiNico Corporation and American Battery Technology Company | X | ||||||||
| 23.1 | Consent of Marcum LLP | X | ||||||||
| 23.2 | Consent of Holland & Hart LLP (included in Exhibit 5.1) | X | ||||||||
| 107 | Filing Fee Table | X |
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(a)The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be anew registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser:
(i) each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
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(5) That, for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by such undersigned Registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about such undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
| II-5 |
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Reno, State of Nevada, on May 15, 2023.
| AMERICAN BATTERY TECHNOLOGY COMPANY | ||
| a Nevada corporation | ||
| By: | /s/ Ryan Melsert | |
| Ryan Melsert | ||
| Chairman of the Board, Chief Executive Officer and Chief Technology Officer | ||
We, the undersigned officers and directors of American Battery Technology Company, hereby severally constitute and appoint Ryan Melsert, our true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, and in any and all capacities, to sign for us and in our names in the capacities indicated below any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.
| /s/ Ryan Melsert | Chairman of the Board, Chief Executive Officer and | |||
| Ryan Melsert | Chief Technology Officer (Principal Executive Officer) | May 15, 2023 | ||
| /s/ Elizabeth Lowery, by Power of Attorney | Director | |||
| Elizabeth Lowery | May 15, 2023 | |||
| /s/ Julie Blunden | Director | |||
| Julie Blunden | May 15, 2023 | |||
| /s/ Richard Fezell | Director | |||
| Richard Fezell | May 15, 2023 | |||
| /s/ Sherif Marakby | Director | |||
| Sherif Marakby | May 15, 2023 | |||
| /s/ Kimberly Eckert | Chief Financial Officer (Principal Accounting Officer and | |||
| Kimberly Eckert | Principal Financial Officer) | May 15, 2023 |
| II-6 |
Exhibit 5.1
May 15, 2023
American Battery Technology Company
100 Washington Street, Suite 100
Reno, Nevada 89503
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to American Battery Technology Company, a Nevada corporation (the “Company”), in connection with its Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “Commission”) on the date hereof (the “Registration Statement”), pursuant to the Securities Act of 1933, as amended (the “Securities Act”). Pursuant to the Registration Statement, the Company is registering for resale by Comstock Inc., a Nevada corporation (the “Selling Stockholder”) 11,000,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), issued pursuant to that certain Second Amended and Restated Membership Interest Purchase Agreement dated April 21, 2023 (as amended, the “Purchase Agreement”). This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act in connection with the Registration Statement, and no opinion is expressed or may be implied herein as to any matter pertaining to the contents of the Registration Statement other than as to the valid issuance of the Shares.
As the basis for the opinion hereinafter expressed, we have reviewed originals or copies of the following:
| A. | an executed copy of the Registration Statement; |
| B. | a copy of the Articles of Incorporation of the Company, as filed with the Secretary of State of the State of Nevada on October 6, 2011, as amended by the Certificate of Amendment, filed on April 29, 2019, the Certificate of Amendment, filed on October 29, 2019, and the Certificate of Amendment, filed on August 12, 2021, and certified as of a recent date. |
| C. | a copy of the Bylaws of the Company effective as of October 7, 2011, as amended by the Certificate of Amendment to Bylaws effective as of August 26, 2021; |
| D. | a copy of the unanimous written consent of the Board of Directors of the Company (the “Board”) effective as of May 12, 2023, which approved the issuance of the Shares to the Selling Stockholder pursuant to the Purchase Agreement; |
| Location | Mailing Address | Contact | ||
| 555 17th Street, Suite 3200 | P.O. Box 8749 | p: 303.295.8000 | f: 303.295.8261 | ||
| Denver, CO 80202-3921 | Denver, CO 80201-8749 | www.hollandhart.com |
Holland & Hart LLP Anchorage Aspen Billings Boise Boulder Cheyenne Denver Jackson Hole Las Vegas Reno Salt Lake City Santa Fe Washington, D.C.
May 15, 2023 Page 2 |
| E. | a copy of the unanimous written consent of the Board effective as of May 12, 2023, which approved the filing of the Registration Statement and the registration for issuance of the Shares; |
| F. | a copy of the Purchase Agreement and all amendments thereto; |
| G. | the certificate of existence with status in good standing covering the Company, issued by the Secretary of State of the State of Nevada as of a recent date (the “Good Standing Certificate”); and |
| H. | a certificate of an officer of the Company representing certain matters related to the subject matter hereof (the “Officer’s Certificate”). |
We have relied upon the foregoing and upon the Officer’s Certificate and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We have assumed for purposes of this opinion: (a) information contained in documents reviewed by us is true, complete and correct; (b) the genuineness and authenticity of all signatures on original documents; (c) the accuracy and completeness of all documents delivered to us and the authenticity of all documents submitted to us as originals; (d) the conformity to originals of all documents submitted to us as copies; (e) the accuracy, completeness and authenticity of certificates of public officials; (f) the legal capacity of all natural persons; and (g) the due authorization, execution and delivery of all documents by parties other than the Company.
This opinion is limited to matters governed by the laws of the State of Nevada. We express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction, or as to any matters of municipal law or the laws of any local agencies within any state.
Based on the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that the Shares, when issued in accordance with the terms of the Purchase Agreement, will be validly issued, fully paid and nonassessable.
We expressly disavow any obligation to advise you with respect to future changes in law or in our knowledge or as to any event or change of condition occurring subsequent to the date of this letter. This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Securities Act.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.
| Very truly yours, | |
| /s/ Holland & Hart LLP |
Exhibit 10.1
SECOND AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT
This SECOND AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of April 21, 2023, by and between LINICO CORPORATION, a Nevada corporation (“Seller”), and AMERICAN BATTERY TECHNOLOGY COMPANY, a Nevada corporation (“Purchaser”).
RECITALS
Seller and Purchaser (together, the “Parties” and each a “Party”) entered into that certain Membership Interest Purchase Agreement on March 1, 2023 (the “Original Purchase Agreement”), and that certain Amendment to Membership Interest Purchase Agreement on March 31, 2023 (the “Amendment”), as amended and restated pursuant to that certain Amended and Restated Membership Interest Purchase Agreement dated April 6, 2023 (the “First AR Agreement,” and, together with the Original Purchase Agreement and the Amendment, the “Purchase Agreement”).
The Parties desire to make certain changes to the Purchase Agreement and this Agreement is intended to incorporate those changes and otherwise amend, restate and supersede the Purchase Agreement in its entirety.
The Parties wish to modify or clarify the manner in which the Purchase Price is paid in the following manner: (a) a non-refundable and irrevocable delivery of a cash payment of $5,000,000 (the “First Deposit”), which was delivered on April 6, 2023; (b) a non-refundable and irrevocable delivery of a cash payment of $7,000,000 (the “Second Deposit”) on or prior to April 21, 2023; (c) a non-refundable and irrevocable delivery of a cash payment of $3,000,000 (the “Third Deposit”) on or prior to May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million); (d) a non-refundable and irrevocable delivery of 10,000,000 restricted common shares issued by Purchaser (the “Shares”), which was delivered on April 6, 2023, the net cash proceeds of which shall be applied toward (i.e., reduce) $6,600,000 of the Purchase Price, including a portion of which shall constitute the Escrowed Funds (as defined below). “Escrowed Funds” means $1,500,000 of the net cash proceeds from the sale of the Shares, after Seller has received $5,100,000 in net cash proceeds from the sale of the Common Shares.
The Parties agree that Purchaser’s performance of certain obligations must be performed in accordance with the following deadlines (the “Closing Deadlines”) or this Agreement is subject to termination under Section 7.01(a)(iv). The Closing Deadlines are (i) May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million) if the Third Deposit is not timely paid on or prior to May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million), (ii) May 31, 2023 if the June Extension Fee (as defined below) is not paid on or prior to May 31, 2023, or (iii) June 30, 2023 if and only if the Third Deposit is timely paid on or prior to May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million) and the June Extension Fee is timely paid on or prior to May 31, 2023, in consideration of Purchaser’s agreement to disburse the First Deposit on the date of the First AR Agreement to Seller or Comstock Inc., a Nevada corporation (“Comstock”), as directed by Seller, Purchaser’s agreement to disburse the Second Deposit to Comstock on or prior to April 21, 2023, Purchaser’s agreement to disburse the Third Deposit to Comstock on or prior to May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million), Seller’s agreement to accept the Shares as part of the Purchase Price, Seller’s agreement not to terminate the Purchase Agreement prior to the Closing Deadline (as it may be extended pursuant to this Agreement) and Seller’s agreement to cause Comstock to acquire the Premises (as defined below) by Purchasing the Target Membership (as defined below) in accordance with the Restructuring (as defined below) and, once all conditions to closing are satisfied, cause Comstock to convey the Target Membership to Purchaser.
The Parties also desire to provide for a Pre-Closing Lease (as defined below) of the Premises from Seller to Purchaser for the period between the date the Second Deposit is delivered to Seller and the Closing.
Subject to the foregoing and on the terms and conditions set forth below, Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller 100% of the membership interests in Aqua Metals Transfer, LLC, a Nevada limited liability company (the “Target”), to which Seller will cause a third party to convey certain assets, upon the terms and subject to the conditions of this Agreement.
Accordingly, the parties hereby agree that the Purchase Agreement is amended and restated in its entirety as follows:
Article I
Purchase and Sale of Acquired Assets
SECTION 1.01 Purchase and Sale. (a) On the terms and subject to the conditions of this Agreement, at the Closing (as defined in Section 2.01), Seller shall sell, assign, transfer, convey, and deliver to Purchaser, and Purchaser shall purchase from Seller, 100% of the outstanding limited-liability company membership interests in Target (the “Target Membership”) for (i) an aggregate purchase price of $21,000,000 (the “Purchase Price”), payable as set forth in Section 2.02, and (ii) the assumption of the Assumed Liabilities (as defined in Section 1.03(a)). On or immediately prior to the Closing, Seller shall cause the following transactions (collectively, the “Restructuring”) to occur: (i) Aqua Metals Reno Inc., a Delaware corporation (the “Current Owner”), shall form the Target as a wholly-owned subsidiary of the Current Owner; (ii) the Current Owner and Seller shall convey all of the rights, title, and interest in, to, and under the Acquired Assets (as defined in Section 1.02(a)) to the Target, as of the Closing; and (iii) the Current Owner shall assign, transfer, convey, and deliver to Comstock, and Comstock shall accept and acquire from the Current Owner, 100% of the Target Membership. The Restructuring, the purchase and sale of the Target Membership and the assumption of the Assumed Liabilities is referred to in this Agreement as the “Acquisition.”
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(b) Seller shall deliver the Escrowed Funds to SRS Acquiom (or such other party that is mutually acceptable to Purchaser and Seller, the “Indemnity Escrow Agent”), to be held in an escrow account (the “Escrow Account”) where said amount of the Escrowed Funds shall be available for indemnification claims made by Purchaser pursuant to Article VIII of this Agreement and Article VIII of that certain Asset Purchase Agreement dated March 1, 2023, between Seller and Purchaser. Seller will deliver the Escrowed Funds to the Indemnity Escrow Agent by delivering the net cash proceeds from the sale of Common Shares, but only after Seller has received net cash proceeds from the sale of Common Shares or such net cash proceeds equal to $5,100,000. The foregoing obligation of Seller will survive the Closing. The Escrowed Funds shall be held for a period not to exceed eighteen (18) months following the Closing, invested and distributed pursuant to the terms and conditions of the Escrow Agreement dated the date hereof (the “Escrow Agreement”) among Seller, Purchaser and the Indemnity Escrow Agent on the Closing. The Escrowed Funds (if any) deposited with Indemnity Escrow Agent, as provided in the Escrow Agreement, shall be credited towards the Purchase Price.
SECTION 1.02 Acquired Assets and Excluded Assets. (a) The term “Acquired Assets” means all the following assets of the Target as of the Closing:
(i) the real property located in Storey County, Nevada, described on Exhibit A hereto (the “Land”) and having an address of 2500 Peru Drive, McCarran, NV, together with all listed real property, leaseholds, and other interests in real property, in each case together with the Target’s right, title and interest in the building and improvements thereon and all other appurtenances thereto or fixtures located thereon, including without limitation water or water-related rights related to or appurtenant to the Land (the “Premises”), it being understood that Seller is currently only entitled to acquire the Premises pursuant to that certain Industrial Lease dated as of February 15, 2021 (the “Lease”), by and between Seller and the Current Owner (such right to acquire the Premises, the “Underlying Acquisition”), and it being understood that Seller intends to consummate the Restructuring in lieu of consummating the Underlying Acquisition;
(ii) furniture, furnishings, office and other supplies, vehicles, and other tangible personal property owned by Seller that are located on the Premises, including desks, tables, chairs, file cabinets, racks, cubicles and other storage devices and office supplies; and
(iii) all listed Permits (as defined in Section 3.09) of Seller.
(b) The term “Excluded Assets” means:
(i) all assets other than the Acquired Assets, including without limitation, all rights of Seller under this Agreement and the other agreements and instruments executed and delivered in connection with this Agreement (the “Ancillary Agreements”).
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SECTION 1.03 Assumption of Certain Liabilities. (a) Upon the terms and subject to the conditions of this Agreement, Purchaser shall assume, effective as of the Closing, and from and after the Closing Purchaser shall pay, perform, and discharge when due, all the liabilities, obligations, and commitments of Seller arising from or related to the Acquired Assets to the extent such liabilities, obligations, and commitments relate to the period from and after the Closing (the “Assumed Liabilities”).
(b) Notwithstanding, any other provision of this Agreement, Purchaser shall not assume any liabilities, obligations, and commitments of Seller other than those described in Section 1.03(a), each of which shall be retained and paid, performed and discharged when due by Seller (such retained liabilities, the “Excluded Liabilities”).
(c) Seller represents that through Purchaser’s acquisition of the Target Membership, Purchaser will acquire, indirectly, the Acquired Assets free and clear of all liabilities, obligations, and commitments of Seller, other than the Assumed Liabilities, and free and clear of all Liens (as defined in Section 3.06), other than Permitted Liens (as defined in Section 3.06).
Article II
The Closing
SECTION 2.01 Deposit; Shares; Access and Closing Date.
(a) The closing of the Acquisition (the “Closing’’) shall take place on or before the Closing Deadline, at the offices of Transaction Escrow Agent, or at such other place, time, and date as shall be mutually agreed between Seller and Purchaser. If the Closing occurs later than May 31, 2023, the Purchaser shall pay an additional non-refundable payment of $250,000 in cash (the “June Extension Fee”) to the Seller on or prior to May 31, 2023. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”
(b) Purchaser delivered the First Deposit to Comstock on April 6, 2023.
(c) Purchaser will deliver the Second Deposit to Comstock on or before April 21, 2023 and Purchaser will deliver the Third Deposit to Comstock on or before May 12, 2023 (or, if earlier, on the second day after Purchaser receives cash in excess of $5 million).
(d) Concurrently with execution of the First AR Agreement, Purchaser delivered to Seller an executed stock power (the “Stock Power”) conveying the Shares to Comstock.
(e) Purchaser will cause a registration statement on Form S-3 for the resale of the Shares by Comstock to be filed with the U.S. Securities and Exchange Commission (the “SEC”) as soon as contractually and lawfully permissible but no later than May 15, 2023.
(f) Prior to Closing, Seller will cause Comstock to acquire the Premises by purchasing the Target Membership in accordance with the Restructuring and, once all conditions to closing are satisfied, to cause Comstock to convey the Target Membership to Purchaser.
(g) As soon as reasonably practicable, Seller and Purchaser will enter into a lease of the Premises (the “Pre-Closing Lease”), the term of which will commence on the date the Second Deposit is delivered to Seller and terminate on the Closing. Rent thereunder will be $1 per month until the Closing Deadline and then $175,000 per month thereafter, payable on July 1st and the first day of each month thereafter. The Pre-Closing Lease will allow Purchaser and its contractors and agents to operate Purchaser’s business of recycling lithium-ion batteries as well as for purposes of storage and to effect environmental remediation of the Premises. All other terms will be commercially reasonable. Any out-of-pocket and documented remediation costs Purchaser expends during the term of the Pre-Closing Lease that would be subject to reimbursement from the funds held in the Escrow Account will be delivered to Purchaser from the Escrowed Funds.
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(h) Comstock will be entitled to receive all consideration payable to Seller under this Agreement. Payment to Comstock by Purchaser of the consideration described in this Agreement shall satisfy all amounts payable to Seller under this Agreement. Purchaser agrees to accept all directions from Corrado DeGasperis as to whether Seller or Comstock shall receive consideration payable.
(i) The Shares shall be deposited in a brokerage account identified in writing by Seller (or Comstock, as the case may be).
(j) Promptly after the registration statement on Form S-3 registering the Shares for resale without restriction is declared effective by the SEC (all shares of common stock of Purchaser that that may legally resold by Seller without restriction, “Common Shares”), Seller covenants and agrees to use reasonable best efforts to promptly sell the Common Shares, provided that Seller may not sell more than five hundred thousand (500,000) Common Shares per trading day or 20% of the daily trading volume, whichever is higher. Each of the Parties acknowledge and agree that Seller or Comstock may transfer all or part of the Common Shares in an amount greater than five hundred thousand (500,000) Shares to one or more broker-dealers or intermediaries in one or more transactions, so long as such broker-dealers or intermediaries collectively do not sell more than five hundred thousand (500,000) Common Shares per trading day. Seller covenants and agrees to provide (or cause Comstock to provide, if applicable) notice to Purchaser each time that Seller sells Common Shares of Purchaser and the net cash proceeds resulting from such sales until all Common Shares are sold. For the sake of clarity, net cash proceeds shall be the proceeds received by Seller (or Comstock, as the case may be) net of all commissions, discounts, transfer fees or taxes, or other costs directly related to such sale.
(k) If all of the Shares (or Common Shares for which the Shares have been exchanged) are sold and the aggregate net cash proceeds from such sales are less than $6,600,000 (such amount less than $6,600,000, the “Shortfall”), then Purchaser shall pay Seller (or Comstock, as the case may be), at Purchaser’s option: (a) cash equal to the Shortfall or (b) by issuance of additional Shares in a quantity reasonably estimated by Purchaser to yield an amount to Seller equal to the Shortfall. If Purchaser elects to issue additional Shares pursuant to subclause (b), above, and, after sale of those additional Shares (or Common Shares for which the Shares have been exchanged), a Shortfall remains after fifteen (15) days, Purchaser will either pay the remaining Shortfall in cash or continue to issue additional Shares in accordance with subclause (b), above, until no Shortfall remains.
(l) Upon the sale of Common Shares yielding net cash proceeds to Seller (or Comstock, as the case may be) of $5,100,000 (or a combination of such net cash proceeds and cash from Purchaser as contemplated by Section 2.01(k)), and upon Seller and Purchaser satisfying all conditions for Closing, Seller and Purchaser shall immediately notify the Transaction Escrow Agent of the same and shall cause the Closing to occur as soon as reasonably practicable thereafter.
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(m) Purchaser shall be permitted at any time prior to the Closing Deadline to prepay Comstock or Seller the remaining portion of the Purchase Price then not received by Comstock in order to expedite the occurrence of the Closing.
(n) The provisions of Sections 2.01(i) and (j) above will survive the Closing until Seller has received the full amount of the Purchase Price (subject to any adjustments set forth in this Agreement).
SECTION 2.02 Transactions To Be Effected at the Closing. At the Closing:
(a) Prior to or simultaneously with the Closing, Seller shall cause Target to acquire the Premises from the Current Owner pursuant to the Restructuring. If Seller acquires the Premises, it will promptly convey the Premises and the other Acquired Assets to Target. In connection with the Restructuring, on the Closing, Seller shall cause the Current Owner to deliver to First American Title Company of Nevada (“Transaction Escrow Agent”) such appropriately executed deeds (in recordable form), bills of sale, assignments, and other instruments of transfer relating to the transfer of the Acquired Assets to Target and the Current Owner shall execute and deliver an assignment of the Target Membership to Seller, in form and substance reasonably satisfactory to Purchaser and its counsel; and
(b)
SECTION 2.03 Risk of Loss. Until the Closing, any loss of or damage to the Acquired Assets from fire, casualty or any other occurrence not covered by insurance payable to Purchaser shall be the sole responsibility of Seller.
SECTION 2.04 Closing Costs. Each party will be responsible for the cost of such party’s legal, accounting, and other costs, other than as expressly set forth herein. Seller and Purchaser will share the costs of real property transfer taxes (if any). Purchaser will be responsible for the costs of the Transaction Escrow Agent and the Indemnity Escrow Agent. Seller will be responsible for the cost of an ALTA Standard Coverage policy of title insurance in the amount allocable to the real estate and recording and filing fees for all conveyance documents (e.g., a deed to Target), in an amount not to exceed $25,000 (with Purchaser paying any costs in excess of $25,000). If Purchaser desires an ALTA Extended Coverage policy of title insurance, Purchaser will be responsible for the difference in cost between such Extended Coverage policy and that of the Standard Coverage policy. Seller will be responsible for any and all liabilities, obligations, and expenses related to the Acquired Assets relating to a period prior to the Closing Date (other than any such items that constitute Assumed Liabilities), and Purchaser will be responsible for all such items relating to the period beginning on the Closing Date (other than any such items that constitute Excluded Liabilities). Real estate taxes and other taxes, charges, and assessments that cover a period including the Closing Date will be prorated and the Seller Amount will be adjusted to account for such prorations. Utility expenses will not be prorated and the parties will cooperate to cause all applicable utilities to be placed in Target’s name effective on the Closing date. All other closing costs will be paid in accordance with the custom and practice for real estate transactions taking place in northern Nevada.
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Article III
Representations and Warranties of Seller
Seller hereby represents and warrants to Purchaser as of the date of this Agreement as follows:
SECTION 3.01 Organization, Standing, and Power. Seller is duly incorporated, validly existing and in good standing under the laws of Nevada and has full corporate power and authority to perform its obligations under this Agreement and the Ancillary Agreements.
SECTION 3.02 Authority Execution and Delivery: Enforceability. Seller has full power and authority to execute this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution and delivery by Seller of each of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and the consummation by Seller of the Acquisition and the other transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. Seller has duly executed and delivered this Agreement and prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid, and binding obligation, enforceable against it in accordance with its terms.
SECTION 3.03 Formation and Ownership of Target. The Current Owner formed Target as a single-member, Nevada limited liability company. As of the Closing, after giving effect to the Restructuring, Seller will be the sole owner of Target. As of Closing, Target will have had no business activity of any kind other than the Restructuring.
SECTION 3.04 No Conflicts: Consents. None of (a) The execution and delivery by Seller of this Agreement; (b) the execution and delivery by Seller of each Ancillary Agreement to which it is, or is specified to be, a party; (c) consummation of the Acquisition and the other transactions contemplated hereby and thereby, nor (d) compliance by Seller with the terms hereof and thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the Acquired Assets under, any provision of (i) the certificate of incorporation or by-laws of Seller, (ii) any Contract to which Seller is a party or by which any of the Acquired Assets is bound or (iii) any judgment, order or decree (“Judgment”) or statute, law, ordinance, rule or regulation (“Applicable Law”) applicable to Seller or the Acquired Assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably be expected to a material adverse effect on (y) the Acquired Assets, or (z) the ability of Seller to consummate the Acquisition and the other transactions contemplated hereby (a “Seller Material Adverse Effect”). No consent, approval, license, permit, order, or authorization (“Consent”) of, or registration, declaration or filing with, any Federal, state, local, or foreign government or any court of competent jurisdiction, administrative agency or commission, or other governmental authority or instrumentality, domestic or foreign (a “Governmental Entity”) is required to be obtained or made by or with respect to Seller in connection with the execution, delivery, and performance of this Agreement or any Ancillary Agreement or the consummation of the Acquisition or the other transactions contemplated hereby and thereby, other than compliance with and filings under Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
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SECTION 3.05 Underlying Acquisition. Seller has performed all material obligations required to be performed by Seller under the Lease, and Seller is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the knowledge of Seller, the Current Owner is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. Seller has not received any notice, nor does it have any knowledge, of the intention of the Current Owner to terminate the Lease.
SECTION 3.06 [Intentionally omitted].
SECTION 3.07 Real Property. Seller has good and valid title to the leasehold interest presently owned in the Premises, and, at the Closing will convey or will cause to be conveyed to Purchaser, good and insurable fee title to the Premises, free and clear of all Liens, except (i) such as are set forth in Schedule 3.07, (ii) easements, covenants, rights-of-way and other similar restrictions of record, (iii) any conditions that may be shown by a current, accurate survey or physical inspection of the Premises made prior to Closing and (iv) (A) zoning, building and other similar restrictions and (B) unrecorded easements, covenants, rights-of-way, and other similar restrictions. None of the items set forth in clause (iv) above, individually or in the aggregate, materially impairs, or could reasonably be expected materially to impair, the continued use and operation of the Premises as presently conducted and do not constitute monetary encumbrances.
SECTION 3.08 [Intentionally omitted].
SECTION 3.09 Permits. Schedule 3.09 sets forth all material certificates, licenses, permits, authorizations and approvals, subject to the removal of proprietary information of the Seller and its partners (“Permits”) issued or granted to Seller by Governmental Entities that relate to the Premises. Except as set forth in Schedule 3.09, (i) all such Permits are validly held by Seller, and Seller has complied in all material respects with all terms and conditions thereof, (ii) during the past two years, Seller has not received notice of (nor does it have any knowledge of) any Proceedings relating to the revocation or modification of any such Permits, and (iii) none of such Permits will be subject to suspension, modification, revocation or nonrenewal as a result of the execution and delivery of this Agreement or the consummation of the Acquisition.
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SECTION 3.10 Environmental Matters. Seller has provided Purchaser with certain environmental reports relating to the Premises, which reports are identified in Schedule 3.10 (the “Environmental Reports”). Except as set forth in the Environmental Reports, Seller has not received any written communication from a Governmental Entity that alleges that any activity on the Premises is not in compliance in any material respect with any Environmental Law, (ii) Seller holds, and is in compliance with, all material Permits under the Environmental Laws (as defined below) required to conduct the activities conducted by Seller to date on the Premises and Seller’s activities on the Premises are in material compliance with all Environmental Laws, (iii) Seller has no knowledge of any environmental reports, audits, data, and other information, other than those set forth in Schedule 3.10, that disclose material environmental liabilities and (iv) Seller has not entered into or agreed to any court decree or order and are not subject to any Judgment relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Materials (as defined below) under any Environmental Law. Except as set forth in Schedule 3.10, there are no aboveground or underground storage tanks on or under the Premises and Seller has no knowledge that either has ever existed on the Premises. The term “Environmental Laws” means any and all Applicable Laws, Judgments and Permits issued, promulgated or entered into by any Governmental Entity, relating to the environment, preservation or reclamation of natural resources, or to the management, Release (as such term is defined below) or threatened Release of Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et see,. (“CERCLA”), the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq., the Clean Air Act of 1970, as amended, 42 U.S.C. §§ 7401 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ࡉ 6902-6992k, the Toxic Substances Control Act of 1976, 15 U.S.C. §§ 2601 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq; the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §§ 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq, in each case, as amended, and any similar or implementing state or local law, and all amendments or regulations promulgated thereunder. The term “Hazardous Materials” means all explosive or regulated radioactive materials or substances, hazardous or toxic substances, wastes or chemicals, petroleum (including crude oil or any fraction thereof) or petroleum distillates, asbestos or asbestos containing materials, and all other materials or chemicals regulated pursuant to any Environmental Law, including materials listed in 49 C.F.R. § 172.101 and materials defined as hazardous pursuant to Section 101(14) of CERCLA. The term “Release” means any spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, emanation, or migration of any Hazardous Materials in, into, onto, or through the environment (including ambient air, surface water, ground water, soils, land surface, subsurface strata, or workplace).
SECTION 3.11 Transformers. Seller has never installed or used any transformer on the Premises that contained polychlorinated biphenyls’ compounds, and to Seller’s knowledge, there are no and never have been any polychlorinated biphenyls’ compounds stored or used on the Premises.
SECTION 3.12 Asbestos. Seller has not installed or stored, and has no knowledge of the use, installation or storage, of asbestos, asbestos containing material, compounds or lead based paint on or at the Premises.
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SECTION 3.13 Mechanic’s Liens. No labor has been performed or material furnished for the Premises or any part thereof for which a mechanic’s or materialman’s lien or liens, or any other lien, can be claimed by any person or entity, for which Seller has not heretofore fully paid or will have paid by the Closing.
SECTION 3.14 Utilities. All water, sewer, electric and telephone facilities and all other utilities required for the use and operation of the Premises as conducted by Seller to date (“Seller’s Activities”) are installed at the Premises and duly connected and can be used in such manner without charge except the normal and usual nondiscriminatory utilities charges. The utilities presently connected to the Premises are adequate to service Seller’s Activities.
SECTION 3.15 Condition of Premises. Other than as set forth on Schedule 3.15, to Seller’s knowledge: (a) the Acquired Assets are in good working condition; and (b) the buildings and improvements included in the Premises were constructed in a good, workmanlike manner and in compliance with all applicable laws, rules and regulations of and with all applicable covenants, conditions, and restrictions and the building and improvements included in the Premises and all parts thereof are structurally safe and sound. Such building and improvements have been maintained to the date hereof and are in good condition except for ordinary wear and tear. All such wear and tear is patent and, Seller has no knowledge that there are any structural or latent defects in such building or improvements. Since December 1, 2022, Seller has conducted its business in the ordinary course, consistent with past practice, including without limitation, reasonably diligent maintenance of the Acquired Assets.
SECTION 3.16 Condemnation. Seller has received no notice and has no knowledge of: (a) any condemnation or zoning proceedings, (b) any plan, study, or effort, which would affect the use and operation of the Premises for its intended purpose.
SECTION 3.17 Zoning; CC&Rs. Seller has received no notice and has no knowledge that the Premises or Seller’s Activities thereon are in violation of any zoning laws or regulations or any covenants, conditions, or restrictions affecting the Premises.
SECTION 3.18 Judgments. To Seller’s knowledge, no judgment, order, injunction, decree, or ruling of any court or governmental authority exists by which Seller, the Premises or Seller’s Activities are bound, or to which any of them are subject, which in any manner affects ownership or operation of the Premises.
SECTION 3.19 Investigation Materials. Seller has provided Purchaser with originals or copies of any and all leases, records, maps, surveys, test reports, environmental assessments, engineering studies, repair records, warranties, and all other documents and materials in Seller’s possession or control relating to the Acquired Assets. Other than as previously disclosed to Buyer in writing through these documents or other written disclosure, and pursuant to Section 3.15, Seller has no knowledge of any material defects or flaws in the building, the equipment, or the other Acquired Assets.
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Article IV
Representations and Warranties of Purchaser
Purchaser hereby represents and warrants to Seller, as of the date of this Agreement, as follows:
SECTION 4.01 Organization. Standing and Power. Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority to perform its obligations under this Agreement and the Ancillary Agreements.
SECTION 4.02 Authority; Execution and Delivery; and Enforceability. Purchaser has full power and authority to execute this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the Acquisition and the other transactions contemplated hereby and thereby. The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and the consummation by Purchaser of the Acquisition and the other transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action. Purchaser has duly executed and delivered this Agreement and prior to the Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will after the Closing constitute, its legal, valid, and binding obligation, enforceable against it in accordance with its terms.
SECTION 4.03 No Conflicts; Consents. The execution and delivery by Purchaser of this Agreement do not, the execution and delivery by Purchaser of each Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the Acquisition and the other transactions contemplated hereby and thereby and compliance by Purchaser with the terms hereof and thereof will not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Purchaser or any of its subsidiaries under, any provision of (i) the certificate of incorporation or by-laws of the Purchaser or any of its subsidiaries, (ii) any Contract to which Purchaser or any of its subsidiaries is a party or by which any of their respective properties or assets is bound or (iii) any Judgment or Applicable Law applicable to Purchaser or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse on the ability of Purchaser to consummate the Acquisition and the other transactions contemplated hereby (a “Purchaser Material Adverse Effect”). No Consent of or registration, declaration or filing with any Governmental Entity is required to be obtained or made by or with respect to Purchaser or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or any Ancillary Agreement or the consummation of the Acquisition or the other transactions contemplated hereby and thereby, other than compliance with and filings under Section 13(a) of the Exchange Act.
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SECTION 4.04 Availability of Funds. Purchaser has cash available or has existing borrowing facilities that are sufficient to enable it to consummate the Acquisition.
SECTION 4.05 Securities Law Representations.
(a) Securities Act of 1933. The Purchaser understands that the Target Membership has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption therefrom and that the Target Membership must be held indefinitely, unless they are subsequently registered under the Securities Act or the Purchaser obtains an opinion of counsel, in form and substance satisfactory to the Target and its counsel, that such registration is not required. The Purchaser acknowledges that the Target has no obligation to register or qualify the Target Membership.
(b) Investment Purpose. The Purchaser is acquiring and will hold the Target Membership for investment for its account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(c) Securities Exchange Act of 1934. The Purchaser will not sell, transfer or otherwise dispose of the Target Membership in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder.
(d) Adequate Information. The Purchaser has been furnished with, and has had access to, such information as it considers necessary or appropriate for deciding whether to invest in the Target Membership, and the Purchaser has had an opportunity to ask questions and receive answers from the Seller regarding the terms and conditions of the issuance of the Target Membership. The Purchaser further represents that the Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risk of this investment.
(e) Risk of Loss. The Purchaser is aware that its investment in the Target is a speculative investment that has limited liquidity and is subject to the risk of complete loss. The Purchaser acknowledges that this Agreement can have material income tax consequences for the Purchaser, but neither Seller nor the Target has rendered any tax advice to Purchaser.
(f) Accredited Investor. The Purchaser qualifies as an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act.
(g) No “Bad Actor” Disqualification. The Purchaser represents and warrants that neither the Purchaser nor any person who controls the Purchaser is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act.
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Article V
Covenants
SECTION 5.01 Access to Information. Seller shall afford to Purchaser and its accountants, counsel, and other representatives reasonable access, upon reasonable notice during normal business hours during the period prior to the Closing, to all the personnel, properties, books, contracts, and records of Seller related to the Acquired Assets (other than the Excluded Assets), and during such period shall furnish promptly to Purchaser any information concerning the Acquired Assets as Purchaser may reasonably request; provided, however, that such access does not unreasonably disrupt the normal operations of Seller.
SECTION 5.02 Brokers or Finders. Each of Purchaser and Seller represent, as to itself and its affiliates, that no agent, broker, investment banker, or other firm or person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement.
SECTION 5.03 Post-Closing Cooperation. (a) Purchaser and Seller shall cooperate with each other, and shall cause their officers, employees, agents, and representatives to cooperate with each other, for a period of 180 days after the Closing to ensure the orderly transition of the Target Membership and, indirectly, the Acquired Assets from Seller to Purchaser and to minimize any disruption that might result from the transactions contemplated hereby. After the Closing, upon reasonable written notice, Purchaser and Seller shall furnish or cause to be furnished to each other and their employees, counsel, and representatives access, during normal business-hours, to such information and assistance relating to the Acquired Assets (to the extent within the control of such party) as is reasonably necessary.
(b) After the Closing, upon reasonable written notice, Purchaser and Seller shall furnish or cause to be furnished to each other, as promptly as practicable, such information and assistance (to the extent within the control of such party) relating to Target, the Target Membership and the Acquired Assets (including, access to books and records) as is reasonably necessary for the filing of all Tax returns, and making of any election related to Taxes, the preparation for any audit by any Taxing Authority, and the prosecution or defense of any claim, suit or proceeding related to any Tax return. Purchaser shall retain the books and records of Seller included in the Acquired Assets for a period of seven years after the Closing.
(c) Each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 5.03. Neither party shall be required by this Section 5.03 to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations.
SECTION 5.04 Publicity. No public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior consent of the other parties (which consent shall not be unreasonably withheld), except as such release or announcement may be required by law or the rules or regulations of any United States or foreign securities exchange, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance; provided, however, that each of Seller and Purchaser may make internal announcements to their respective employees that are consistent with the parties’ prior public disclosures regarding the transactions contemplated hereby after reasonable prior notice to and consultation with the other.
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SECTION 5.05 Bulk Transfer Laws. Purchaser hereby waives compliance by Seller with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Acquired Assets to Purchaser.
SECTION 5.06 Further Assurances. From time to time, as and when requested by any party, each party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions (at the expense of the requesting party), as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement, including, in the case of Seller , executing and delivering to Purchaser such assignments, deeds, bills of sale, consents, and other instruments as Purchaser or its counsel may reasonably request as necessary or desirable for such purpose.
SECTION 5.07 Purchase Price Allocation. On or prior to the Closing Date, Seller and Purchaser shall mutually agree on an allocation of the Purchase Price among the Acquired Assets according to the relative fair market values of such assets on the Closing Date. If Seller and Purchaser are unable to agree on such fair market values, Seller and Purchaser shall elect an independent appraisal firm to determine such values. The conclusions of such appraisal firm shall be conclusive and binding. The fees and expenses of such appraisal firm shall be shared equally by Seller and Purchaser.
Article VI
Conditions Precedent
SECTION 6.01 Conditions to Each Party’s Obligation. The obligation of Purchaser to purchase and pay for the Acquired Assets and the obligation of Seller to sell the Acquired Assets to Purchaser is subject to the satisfaction or waiver on or prior to the Closing of the following conditions:
(a) No Injunctions or Restraints. No Applicable Law or Injunction enacted, entered, promulgated, enforced, or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the Acquisition shall be in effect.
SECTION 6.02 Conditions to Obligation of Purchaser. The obligation of Purchaser to purchase and pay for the Acquired Assets is subject to the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Seller in this Agreement and the Ancillary Agreements that are qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the date hereof and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date), in each case except for breaches as to matters that, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect. Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect.
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(b) Performance of Obligations of Seller. Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Closing, and Purchaser shall have received a certificate signed by an authorized officer of Seller to such effect.
(c) Absence of Proceedings. There shall not be pending or threatened Proceeding, by any Governmental Entity or by any other person that has a reasonable likelihood of success, (i) challenging or seeking to restrain or prohibit the Acquisition or any other transaction contemplated by this Agreement or the Ancillary Agreements or seeking to obtain from Purchaser or any of its subsidiaries in connection with the Acquisition any damages that are material in relation to Purchaser and its subsidiaries taken as a whole, (ii) seeking to prohibit or limit the ownership or operation by Purchaser or any of its subsidiaries of any material portion of the business or assets of Purchaser or any of its subsidiaries, or to compel Purchaser or any of its subsidiaries to dispose of or hold separate any material portion of the business or assets of Purchaser or any of its subsidiaries, in each case as a result of the Acquisition or any of the other transactions contemplated by this Agreement, or (iii) seeking to impose limitations on ability of Purchaser to acquire or hold, or exercise full rights of ownership of, the Acquired Assets.
(d) Title Insurance and Survey. Purchaser or Target (at Purchaser’s option) shall have received at Purchaser’s option, either (i) an ALTA Owner’s Standard Coverage Title Insurance Policy; or (ii) an ALTA Extended Coverage Title Insurance Policy with respect to the Premises, issued by a nationally recognized title insurance company, insuring Purchaser in such amounts and together with such endorsements as Purchaser shall reasonably require (all such endorsements to be paid for by Purchaser unless otherwise agreed between the parties). Such title insurance policy shall insure fee simple title to the Premises, free and clear of all Liens and other matters other than those permitted by Section 3.07.
(e) Transfer Taxes. Seller (or the Current Owner) shall have prepared, executed and filed all returns, questionnaires, applications, or other documents regarding any real property transfer tax that is required to be filed by Seller prior to Closing.
(f) Consents. Purchaser shall have received written consents from all third parties necessary or appropriate to effect the Acquisition, other than such consents the absence of which, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect.
(g) Due Diligence. Purchaser shall have determined in its sole discretion that the Acquired Assets are suitable for Purchaser’s intended purpose.
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SECTION 6.03 Conditions to Obligation of Seller. The obligation of Seller to sell, assign, convey, and deliver the Acquired Assets is subject to the satisfaction (or waiver by Seller) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Purchaser made in this Agreement and the Ancillary Agreement qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the date hereof and as of the Closing Date as though made on the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date), in each case except for breaches as to matters that, individually or in the aggregate, could not reasonably be expected to have a Purchaser Material Adverse Effect. Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser. Purchaser shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser by the time of the Closing, and Seller shall have received a certificate signed by an authorized officer of Purchaser to such effect.
(c) Transfer Taxes. Purchaser shall have prepared, executed, and filed all returns, questionnaires, applications, or other documents regarding any real property transfer tax that is required to be filed by Purchaser prior to Closing.
(d) Absence of Proceedings. There shall not be pending or threatened any Proceeding by any Governmental Entity or by any other person that has a reasonable likelihood of success) challenging or seeking to restrain or prohibit the Acquisition or any other transaction contemplated by this Agreement or the Ancillary Agreements or seeking to obtain from Seller or any of its subsidiaries in connection with the Acquisition any damages that are material in relation to Seller and its subsidiaries taken as whole.
SECTION 6.04 Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article VI to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its reasonable best efforts to cause the Closing to occur.
SECTION 6.05 Effect of Certain Waivers of Closing Conditions. If prior to the Closing any party (the “waiving party”) has knowledge of any breach by any other party of any representation, warranty, or covenant contained in this Agreement or any Ancillary Agreement, and such other party acknowledges in writing that the effect of such breach is a failure of any condition to the waiving party’s obligations set forth in this Article VI and the waiving party proceeds with the Closing, the waiving party shall be deemed to have waived such breach and the waiving party and its successors, assigns, and affiliates shall not be entitled to be indemnified pursuant to Article VIII, to sue for damages or to assert any other right or remedy for any losses arising from any matters relating to such condition or breach, notwithstanding anything to the contrary contained herein or in any certificate delivered pursuant hereto.
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Article VII
Termination. Amendment and Waiver
SECTION 7.01 Termination. (a) Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Acquisition and the other transactions contemplated by this Agreement abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller and Purchaser;
(ii) by Seller if any of the conditions set forth in Sections 6.01 or 6.03 shall have become incapable of fulfillment, and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in Sections 6.01 or 6.02 shall have become incapable of fulfillment, and shall not have been waived by Purchaser; or
(iv) by Seller or Purchaser, if the Closing does not occur on or prior to the Closing Deadline;
provided, however, that the party seeking termination pursuant to clause (ii), (iii) or (iv) is not then in material breach of any of its representations, warranties, covenants, or agreements contained in this Agreement.
(b) In the event of termination by Seller or Purchaser pursuant to this Section 7.01, written notice thereof shall forthwith be given to the other and the transactions contemplated by this Agreement shall be terminated, without further action by any party. If the transactions contemplated by this Agreement are terminated as provided herein:
(i) Purchaser shall return all documents and other material received from Seller relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to Seller,
(ii) all confidential information received by Purchaser with respect to the business of Seller shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement, and
(iii) Seller shall retain the First Deposit, Second Deposit, Third Deposit and June Extension Fee, if applicable (each of which Purchaser acknowledges and agrees are non-refundable).
SECTION 7.02 Effect of Termination. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section 7.01, this Agreement shall become null and void and of no further force and effect. Nothing in this Section 7.02 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement.
SECTION 7.03 Amendments and Waivers. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing Purchaser, on the one hand, or Seller, on the other hand, may waive compliance by the other party with any term or provision of this Agreement that such other party was or is obligated to comply with or perform.
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Article VIII
Indemnification
SECTION 8.01 Indemnification by Seller. (a) From and after the Closing, Seller shall indemnify Purchaser and its affiliates and each of their respective officers, directors, employees, stockholders, agents, and representatives against, and hold them harmless from, any loss, liability, claim, damage, or expense (including reasonable legal fees and expenses) (“Losses”), as incurred (payable promptly upon written request), to the extent arising from:
(i) any breach as of the Closing Date of any representation or warranty of Seller that survives the Closing and is contained in this Agreement or in any Ancillary Agreement (it being agreed and acknowledged by the parties that for purposes of Purchaser’s right to indemnification pursuant to this Section 8.01 the representations and warranties of Seller shall be deemed not qualified by any references therein to materiality generally or to whether or not any breach results or may result in a Seller Material Adverse Effect);
(ii) actions necessary (as determined in Purchaser’s reasonable discretion) to protect the health and safety of Purchaser’s employees, agents, invitees and guests related to environmental conditions at the Premises existing as of the Closing, including without limitation any of the matters listed on Exhibit 8.01(a)(ii);
(iii) any breach of any covenant of Seller that survives the Closing and contained in this Agreement or in any Ancillary Agreement requiring performance after the Closing Date;
(iv) any Excluded Liability; and
(v) any fees, expenses or other payments incurred or owed by Seller to any brokers, financial advisors or comparable other persons retained or employed by it in connection with the transactions contemplated by this Agreement.
(b) Seller shall not be required to indemnify any person, and shall not have any liability under clauses (i), (ii) and (iii) of Section 8.01(a) in excess of the Escrowed Funds (it being understood that the funds held in the Escrow Account shall be the source of funding for any such indemnification claim), except that the limitation set forth in this Section 8.01(b) shall not apply to any claim for indemnification arising out of fraud or a breach of Section 3.01, 3.02, 3.03, 3.04 and 3.07 (collectively, the “Fundamental Representations”). The maximum aggregate liability for indemnification claims payable by Seller with respect to a breach of the Fundamental Representations shall be the Purchase Price.
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(c) Except as otherwise specifically provided in this Agreement or in any Ancillary Agreement, Purchaser acknowledges that its sole and exclusive remedy after the Closing with respect to any and all claims relating to this Agreement and the Ancillary Agreements, the Acquisition and the other transactions contemplated hereby and thereby, the Seller and its assets and liabilities (other than claims of, or causes of action arising from, fraud) shall be pursuant to the indemnification provisions set forth in this Article VIII. In furtherance of the foregoing, Purchaser hereby waives, from and after the Closing, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action (other than claims of, or causes of action arising from, fraud) for damages it may have against Seller arising under or based upon this Agreement, any Ancillary Agreement, any document or certificate delivered in connection herewith, any Applicable Law (including any relating to environmental matters), common law or otherwise (except pursuant to the indemnification provisions set forth in this Section 8.01).
SECTION 8.02 Indemnification by Purchaser. From and after the Closing, Purchaser shall indemnify Seller, its affiliates, and each of their respective officers, directors, employees, stockholders, agents, and representatives against, and agrees to hold them harmless from, any Loss, as incurred (payable promptly upon written request), for or on account of or arising from or in connection with or otherwise with respect to (i) any breach as of the Closing Date of any representation or warranty of Purchaser contained in this Agreement or in any Ancillary Agreement, (ii) any breach of any covenant of Purchaser contained in this Agreement or in any Ancillary Agreement, (iii) any Assumed Liability or (iv) any fees, expenses or other payments incurred or owed by Purchaser to any brokers, financial advisors or other comparable persons retained or employed by it in connection with the transactions contemplated by this Agreement or by any Ancillary Agreement.
SECTION 8.03 Calculation of Losses. The amount of any Loss for which indemnification is provided under this Article VIII shall be net of any amounts actually recovered or recoverable by the indemnified party under insurance policies with respect to such Loss and shall be (i) increased to take account of any net Tax cost incurred by the indemnified party arising from the receipt of indemnity payments hereunder (grossed up for such increase) and (ii) reduced to take account of any net Tax benefit realized by the indemnified party arising from the incurrence or payment of any such Loss. In computing the amount of any such Tax cost or Tax benefit, the indemnified party shall be deemed to recognize all other items of income, gain, loss deduction or credit before recognizing any item arising from the receipt of any indemnity payment hereunder or the incurrence or payment of any indemnified Loss.
SECTION 8.04 Termination of Indemnification. The obligations to indemnify and hold harmless any party, (i) pursuant to Section 8.01(a)(i) or 8.02(i), shall terminate when the applicable representation or warranty terminates pursuant to Section 8.06 and (ii) pursuant to the other clauses of Sections 8.01 and 8.02 shall survive the Closing indefinitely; provided, however, that such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the person to be indemnified shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) pursuant to Section 8.05 to the party to be providing the indemnification.
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SECTION 8.05 Procedures. (a) Third Party Claims. In order for a party (the “indemnified party”), to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim made by any person against the indemnified party (a “Third Party Claim”) such indemnified party must notify the indemnifying party in writing (and in reasonable detail) of the Third Party Claim within 10 business days after receipt by such indemnified party of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the indemnifying party shall have been actually prejudiced as a result of such failure and except that the indemnifying party shall not be liable for any expenses incurred during the period in which the indemnified party failed to give such notice). Thereafter, the indemnified party shall deliver to the indemnifying party, within five business days’ time after the indemnified party’s receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim.
(b) Assumption. If a Third Party Claim is made against an indemnified party, the indemnifying party shall be entitled to participate in the defense thereof and, if it so chooses, to assume the defense thereof with counsel selected by the indemnifying party; provided, however, that such counsel is not reasonably objected to by the indemnified party. Should the indemnifying party so elect to assume the defense of a Third Party Claim, the indemnifying party shall not be liable to the indemnified party for any legal expenses subsequently incurred by the indemnified party in connection with the defense thereof. If the indemnifying party assumes such defense, the indemnified party shall have the right to participate in the defense thereof and to employ counsel (not reasonably objected to by the indemnifying party)), at its own expense, separate from the counsel employed by the indemnifying party, it being understood that the indemnifying party shall control such defense. The indemnifying party shall be liable for the fees and expenses of counsel employed by the indemnified party for any period during which the indemnifying party has not assumed the defense thereof (other than during any period in which the indemnified party shall have failed to give notice of the Third Party Claim as provided above). If the indemnifying party chooses to defend or prosecute a Third Party Claim, all the indemnified parties shall cooperate in the defense or prosecution thereof. Such cooperation shall include the retention and (upon the indemnifying party’s request) the provision to the indemnifying party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Whether or not the indemnifying party assumes the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the indemnifying party’s prior written consent (which consent shall not be unreasonably withheld). If the indemnifying party assumes the defense of a Third Party Claim, the indemnified party shall agree to any settlement, compromise or discharge of a Third Party Claim that the indemnifying party may recommend and that by its terms obligates the indemnifying party to pay the full amount of the liability in connection with such Third Party Claim, which releases the indemnified party completely in connection with such Third Party Claim and that would not otherwise adversely affect the indemnified party. Notwithstanding the foregoing, the indemnifying party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the indemnified party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction, or other equitable relief or relief for other than money damages against the indemnified party that the indemnified party reasonably determines, after conferring with its outside counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the indemnifying party shall be entitled to assume the defense of the portion relating to money damages.
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(c) Other Claims. In the event any indemnified party should have a claim against any indemnifying party under Section 8.01 or 8.02 that does not involve a Third Party Claim being asserted against or sought to be collected from such indemnified party, the indemnified party shall deliver notice of such claim with reasonable promptness to the indemnifying party. Subject to Sections 8.04 and 8.06, the failure by any indemnified party so to notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to such indemnified party under Section 8.01 or 8.02, except to the extent that the indemnifying party demonstrates that it has been prejudiced by such failure. If the indemnifying party does not notify the indemnified party within 10 calendar days following its receipt of such notice that the indemnifying party disputes its liability to the indemnified party under Section 8.01 or 8.02, such claim specified by the indemnified party in such notice shall be conclusively deemed a liability of the indemnifying party under Section 8.01 or 8.02 and the indemnifying party shall pay the amount of such liability to the indemnified party on demand or in the case of any notice in which the amount of the claim (or any portion thereof) is estimated, on such later date when the amount of such claim (or such portion thereof) becomes finally determined.
(d) Mitigation. Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder, including by making commercially reasonably efforts to mitigate or resolve any such claim or liability; provided, however, that such party shall not be required to make such efforts if they would be detrimental in any material respect to such party. In the event that Purchaser or Seller shall fall to make such commercially reasonably efforts to mitigate or resolve any claim or liability, then (unless the proviso to the foregoing sentence shall be applicable) notwithstanding anything else to the contrary contained herein, the other party shall not be required to indemnify any person for any loss, liability, claim, damage or expense that could reasonably be expected to have been avoided if Purchaser or Seller, as the case may be, had made such efforts.
SECTION 8.06 Survival of Representations and Covenants. (a) The representations, warranties, covenants, and agreements contained in this Agreement and in any document delivered in connection herewith shall survive the Closing solely for purposes of this Article VIII as follows:
(i) the representations and warranties in Article III shall survive for eighteen (18) months following the Closing, except with respect to claims of fraud or intentional misrepresentation, which will survive for three (3) years following the date Purchaser either discovers or in the exercise of reasonable diligence, should have discovered, such fraud or intentional misrepresentations; and
(ii) the covenants in Article V shall survive for one (1) year following the Closing, unless another period of time is expressly provided in Article V.
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SECTION 8.07 No Additional Representations. Purchaser acknowledges that it and its representatives have had a full opportunity to meet with the officers and employees of Seller to discuss the Acquired Assets. Purchaser acknowledges that (i) none of Seller or any other person has made any representation or warranty, expressed or implied, as to the Acquired Assets, or the accuracy or completeness of any information regarding the Acquired Assets furnished or made available to Purchaser and its representatives, except as expressly set forth in this Agreement, the Ancillary Agreements or the Schedules, (ii) Purchaser has not relied on any representation or warranty from Seller or any other person in determining to enter into this Agreement, except as expressly set forth in this Agreement, the Ancillary Agreements and the Schedules and (iii) none of Seller or any other person shall have or be subject to any liability to Purchaser or any other person resulting from the distribution to Purchaser, or Purchaser’s use of, any such information, including and any information, documents or material made available to Purchaser in any “data rooms”, management presentations or in any other form in expectation of the transactions contemplated hereby. Purchaser acknowledges that, should the Closing occur, Purchaser shall acquire the Acquired Assets without any representation or warranty as to merchantability or fitness for any particular purpose, in an “as is” condition and on a “where is” basis, except as otherwise expressly set forth in this Agreement and the Ancillary Agreements.
Article IX
General Provisions
SECTION 9.01 Assignment. Other than as expressly set forth in this Article IX, this Agreement and the rights and obligations hereunder shall not be assignable or transferable by Purchaser or Seller (including by operation of law in connection with a merger or consolidation of Purchaser or Seller) without the prior written consent of the other party hereto. Any attempted assignment in violation of this Section 9.01 shall be void.
SECTION 9.02 No Third-Party Beneficiaries. Except as provided in Article VIII and this Article IX, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder.
SECTION 9.03 Attorney Fees. A party in breach of this Agreement shall, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement. The payment of such expenses is in addition to any other relief to which such other party may be entitled.
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SECTION 9.04 Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand, email or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when so delivered by hand or facsimile, upon written confirmation of receipt when so delivered by email, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service) received, as follows:
(i) if to Purchaser, Attention: with a copy to:
American Battery Technology Company
100 Washington Street, Suite 100
Reno, Nevada 89503
Attention: Bret Meich, General Counsel
Email: bmeich@batterymetals.com
with a copy (which shall not constitute notice) to:
Fennemore Craig, P.C.
7800 Rancharrah Parkway
Reno, Nevada 89511
Attention: Craig Etem
Email: cetem@fennemorelaw.com
(ii) if to Seller,
Linico Corporation
c/o Comstock Inc.
117 American Flat Road
Virginia City, Nevada 89440
Attention: Corrado DeGasperis, Executive Chairman & CEO
Email: degasperis@comstockinc.com
with a copy (which shall not constitute notice) to:
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202-5306
Attention: Clyde Tinnen
Email: ctinnen@foley.com
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SECTION 9.05 Interpretation; Exhibits and Schedules; Certain Definitions. (a) The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any matter set forth in any provision, subprovision, section, or subsection of any Schedule shall, unless the context otherwise manifestly requires, be deemed set forth for all purposes of the Schedules. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein, shall have the meaning as defined in this Agreement. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.
(b) For all purposes hereof:
“affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.
“including” means including, without limitation.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity, or other entity.
“subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such person.
SECTION 9.06 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. The reproduction of signatures by means of a photocopy or other electronic device (e.g., .PDF) shall be treated as though such reproductions are executed originals and each Party covenants and agrees to provide the other Party with a copy of this Agreement bearing original signatures upon request.
SECTION 9.07 Entire Agreement. This Agreement, the Ancillary Agreements and the Confidentiality Agreement, along with the Schedules and Exhibits thereto, contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein or in the Ancillary Agreements or the Confidentiality Agreement.
SECTION 9.08 Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.
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SECTION 9.09 Consent to Jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of federal or state courts in Washoe County, Nevada, for the purposes of any suit, action, or other proceeding arising out of this Agreement, any Ancillary Agreement or any transaction contemplated hereby or thereby. Each of Purchaser and Seller further agrees that service of any process, summons, notice, or document by U.S. registered mail to such party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in Nevada with respect to any matters to which it has submitted to jurisdiction in this Section 9.09. Each of Purchaser and Seller irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement or the transactions contemplated hereby and thereby federal or state courts in Washoe County, Nevada, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 9.10 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State.
SECTION 9.11 Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Agreement, any Ancillary Agreement or any transaction contemplated hereby or thereby. Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement and the Ancillary Agreements, as applicable, by, among other things, the mutual waivers and certifications in this Section 9.11.
SECTION 9.12 Assignment: Third Party Beneficiary. Seller acknowledges that Purchaser may assign its rights hereunder to Bow River Capital Real Estate Fund III, LP (“Bow River”), and that Bow River would then lease the Premises to Purchaser. Seller acknowledges and agrees that in such event, all of Seller’s representations, warranties, surviving obligations and indemnification obligations (subject to any limitations contained herein) would run to the benefit of Purchaser as a third-party beneficiary thereof.
SECTION 9.13 Specific Performance. Seller acknowledges that the transactions contemplated by this Agreement are unique and there is no adequate remedy at law if Seller should fail to perform any of its obligations hereunder in any material way. In addition to any other rights or remedies Buyer may have pursuant to this Agreement, Buyer shall have the right to obtain specific performance of the obligation of Seller hereunder.
[Signatures appear on following page]
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IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Agreement as of the date first written above.
| LINICO CORPORATION | ||
| /s/ Corrado De Gasperis | ||
| Name: | Corrado De Gasperis | |
| Title: | Executive Chairman and President | |
| AMERICAN BATTERY TECHNOLOGY COMPANY | ||
| /s/ Ryan Melsert | ||
| Name: | Ryan Melsert | |
| Title: | Chief Executive Officer | |
[Signature page to Second Amended & Restated Membership Interest Purchase Agreement]
Exhibit 10.2
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT
May 11, 2023
This FIRST amendment TO SECOND AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Amendment”) is entered into by and between LINICO CORPORATION, a Nevada corporation, and/or its affiliates or assignees (“Seller”), and AMERICAN BATTERY TECHNOLOGY COMPANY, a Nevada corporation, and/or its affiliates or assignees (“Purchaser”). Purchaser and Seller each may be hereinafter referred to as a “Party” and together as the “Parties.”
RECITALS
A. Reference is made to that certain SECOND AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of April 21, 2023 (the “Purchase Agreement”), by and between the Parties.
B. The Purchase Agreement provides for the purchase and sale of 100% of the outstanding limited-liability company membership interests (the “Target Membership”) of Aqua Metals Transfer, LLC, a Nevada limited liability company (the “Target”), owns certain property in McCarran, Nevada, commonly known as 2500 Peru Drive, and more specifically defined as the “Premises” in the Purchase Agreement.
C. Pursuant to the Purchase Agreement, Seller agreed to sell the Premises and Purchaser agreed to purchase the Premises, in exchange for the purchase price of $21,000,000 (the “Purchase Price”).
D. Pursuant to Section 2.01 of the Purchase Agreement, Purchaser agreed to deliver to Seller or Comstock Inc., a Nevada corporation (“Comstock”), a non-refundable and irrevocable cash payment of $3,000,000 (the “Third Deposit”) on or prior to May 12, 2023.
E. Pursuant to Section 2.01 of the Purchase Agreement, the closing (the “Closing”) of the acquisition of the Target Membership shall occur on or before May 31, 2023.
F. Pursuant to Section 2.01 of the Purchase Agreement, if the Closing occurs later than May 31, 2023, the Purchaser shall pay an additional non-refundable payment of $250,000 in cash (the “June Extension Fee”) to the Seller on or prior to May 31, 2023.
G. Pursuant to Section 7.01(a)(iv) of the Purchase Agreement, if the Closing does not occur prior to the Closing Deadline, Seller may terminate the Purchase Agreement.
H. The Parties wish to modify and clarify the manner in which the Third Deposit is paid (the “Modification”) and in consideration thereof, the Parties hereby agree to (i) an additional, non-refundable and irrevocable delivery of 1,000,000 restricted common shares issued by Purchaser to Seller (the “Modification Shares”) and (ii) the Purchaser’s payment of the June Extension Fee.
I. Purchaser intends to execute aa credit agreement, by and between American Battery Technology Company and Mercuria Investments US, Inc. (the “Metals Contract”).
In consideration of these recitals and the mutual covenants, representations, warranties and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1. The above recitals are hereby incorporated into this Amendment as if fully set forth herein.
2. Paragraph 2.01(c) of the Purchase Agreement is hereby amended by deleting it in its entirety and substituting in lieu thereof the following:
“Purchaser will deliver the Second Deposit to Comstock on or before April 21, 2023 and Purchaser will deliver $1,000,000 of the Third Deposit to Comstock on or before May 12, 2023, and the remaining $2,000,000 of the Third Deposit on the earlier of May 26, 2023 or within 48 hours of the receipt of funds from the closing of the Metals Contract.”
3. Purchaser shall deliver the Modification Shares to Comstock on the date of the signing of this Amendment, and the Modification Shares shall not amend Purchaser’s Shortfall obligations contemplated by Section 2.01(k) of the Purchase Agreement.
4. Purchaser shall deliver the June Extension Fee on the earlier of May 26, 2023 or within 48 hours of receipt of funds from the closing of the Metals Contract.
5. Purchaser represents, warrants, covenants and agrees that the Modification Shares being offered, issued and sold will be registered under the Securities Act of 1933, as amended, and freely transferable by Seller (or Comstock, as the case may be) without any restrictive legend or limitation on volume or manner of sale. The Shares shall be deposited with a transfer agent, as identified in writing by the Purchaser.
6. In order to accomplish Seller’s obligations set forth in the foregoing paragraph, and in connection with and pursuant to Section 2.01(e) of the Purchase Agreement, Purchaser will cause a registration statement on Form S-3 for the resale of the Modification Shares and the Shares (as defined in the Purchase Agreement) by Comstock to be filed with the U.S. Securities and Exchange Commission (the “SEC”) as soon as contractually and lawfully permissible but no later than May 15, 2023.
7. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute only one instrument. Counterpart signature pages may be delivered by fax or e-mail.
8. Except as amended herein, the Purchase Agreement is hereby ratified and shall remain in full force and effect.
| PURCHASER: | ||
| AMERICAN BATTERY TECHNOLOGY COMPANY | ||
| By: | /s/ Ryan Melsert | |
| Name: | Ryan Melsert | |
| Title: | Chief Executive Officer | |
| SELLER: | ||
| LINICO CORPORATION | ||
| By: | /s/ Corrado De Gasperis | |
| Name: | Corrado De Gasperis | |
| Title: | Executive Chairman and President | |
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in this Registration Statement of American Battery Technology Company on Form S-3 of our report dated September 12, 2022, with respect to our audits of the consolidated financial statements of American Battery Technology Company as of June 30, 2022 and 2021 and for the years ended June 30, 2022 and 2021 appearing in the Annual Report on Form 10-K of American Battery Technology Company for the year ended June 30, 2022.
/s/ Marcum llp
Marcum llp
Costa Mesa CA
May 15, 2023