Sky Quarry Inc 8-K, filed Dec 6, 2024
Sky Quarry Inc. (SKYQ)
About this 8-K
Sky Quarry Inc filed this 8-K on December 6, 2024.
Items reported
- Item 1.01: Entered into a material agreement
- Item 9.01: Financial statements and exhibits
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.0001 | SKYQ | Nasdaq Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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.
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Section 1 – Registrant’s Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
On December 2, 2024, we issued a secured promissory note in the principal amount of $1,200,000 (“Note”) to KF Business Ventures, LP (“KFBV”) a copy of which is attached hereto as Exhibit 99.1. The Note is convertible into shares of our common stock at a conversion price of $0.84 per share at any time after the issuance date of the Note. In connection with the issuance of the Note, we also issued a warrant to KFBV for the purchase of up to 1,200,000 warrants at an exercise price of $0.84 per share for a period of five years, a copy of which is attached hereto as Exhibit 99.2. The Note bears interest at a rate of 1.5% per month and matures on March 2, 2025. As security for the Note, our wholly-owned subsidiary, 2020 Resources LLC, entered into a security agreement with KFBV on December 2, 2024, a copy of which is attached hereto as Exhibit 99.3. On December 2, 2024, we also entered into an advisory agreement with KFBV (“Advisory Agreement”), a copy of which is attached hereto as Exhibit 99.4, pursuant to which KFBV will provide general business advisory services to us for a period of six months at a rate of $21,000 per month to be paid one-half in cash and one-half in the form of shares of our common stock.
The foregoing is only a summary of the Note, Warrant and Advisory Agreement, each of which is attached hereto as an exhibit to this Form 8-K.
Section 9 – Financial Statements and Exhibits.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Sky Quarry Inc. |
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Dated: December 6, 2024 | By: /s/David Sealock |
| Name:David Sealock |
| Title:Chief Executive Officer |
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SECURED PROMISSORY NOTE
$1,200,000.00 | December 2, 2024 |
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FOR VALUE RECEIVED, Sky Quarry Inc., a Delaware corporation, having a business address at 707 W. 700 S., Suite 101, Woods Cross, UT 84087 (the “Maker” or “Company”), hereby promises to pay to KF Business Ventures, LP, a California limited partnership, or order (“Payee”), having a business address of 1520 Tower Grove Drive, Beverly Hills, CA 90210, or at such other place as Payee may from time to time designate to Maker in writing, the principal sum of ONE MILLION TWO HUNDRED THOUSAND and NO/100 DOLLARS ($1,200,000.00) (the “Principal Sum”), in lawful money of the United States of America, together with interest at the Interest Rate (as defined below) compounding annually on said Principal Sum or so much thereof as shall be outstanding hereunder from time to time, to be computed from and after December 2, 2024. The Principal Sum of this note (“Note”) and all accrued interest hereunder shall be due and payable on the Maturity Date, defined below.
The “Interest Rate” shall be equal to one and one-half percent (1 ½%) per month. Unless otherwise specified herein, interest shall be paid upon maturity. Upon the occurrence of an Event of Default, the Interest Rate shall be increased to thirty percent (30%) per annum retroactive to December 2, 2024, until such time as the Event of Default has been cured.
The “Maturity Date” shall be March 2, 2025, however, the Company may prepay the Note at anytime without penalty, except that such prepayment must be accompanied by a payment of interest from the date of this Note until the Maturity Date at the Interest Rate.
This Note and the Principal Sum and any and all interest accrued and unpaid thereon shall be the obligation of Maker, and Payee shall be entitled to full recourse against Maker for performance and satisfaction of all obligations of Maker with respect hereto. In addition, the obligations of Maker in respect of this Note and the Principal Sum and any and all interest accrued and unpaid thereon shall be secured by the solar turbines described below.
The Principal Sum, plus accrued interest shall be repaid out of proceeds from funds raised by the Company in the form of debt, equity or a combination thereof, provided the Company raises a minimum of $4 million (“Securities Offering”). Proceeds received from the Securities Offering shall be used to repay any and all amounts outstanding under this Note in full. In the event that the Note is paid in full prior to the Maturity Date, the entire amount of interest that would have been due and payable to Payee through the Maturity Date shall be paid to Payee.
Conversion Rights. At any time on or after the date hereof, Payee may convert all or a portion of the outstanding principal and/or interest outstanding hereunder into shares of the Company’s common stock, par value $.0001 per share. The conversion price shall be equal to $0.83 per share (“Conversion Price”). In connection with any conversion of this Note, Payee shall complete the conversion notice attached hereto as Schedule A (“Conversion Notice”) and deliver the fully completed and executed Conversion Notice to the Company. Upon the Company’s receipt of the Conversion Notice, the Company shall direct its transfer agent to issue such number of shares converted pursuant to the Conversion Notice to Payee within five (5) business days of its receipt of the Conversion Notice. The Conversion Price shall be subject to adjustment in connection with any stock split effected by the Company. All shares of common stock issued upon conversion hereof shall bear the following restrictive legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THAT EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Security. The Company shall cause its wholly-owned subsidiary, 2020 Resources LLC, to pledge as security for the repayment of this Note the solar turbines (“Turbines”) described below, which are owned by 2020 Resources free and clear of any and all liens and encumbrances subject to and in accordance with a security agreement between the Company and 2020 Resources (the “Security Agreement”):
3.7 MW Solar Centaur 40 Natural Gas Turbine Power Generator #1
Model: GS1-CH-ID
Serial #: HG85093
3.7 MW Solar Centaur 40 Natural Gas Turbine Power Generator #1
Model: GS1-CH-ID
Serial #: HG85083
Notwithstanding anything to the contrary contained herein, the entire unpaid balance of the Principal Sum, together with all interest accrued and unpaid thereon and all other sums, if any, then due and payable by Maker to Payee hereunder, shall become due and payable, at Payee’s election and upon written notice to Maker of such election, if an Event of Default (as hereinafter defined) shall occur and be continuing under this Note.
The following shall constitute an “Event of Default”:
(i)Maker’s failure to pay all amounts due to Payee pursuant to the agreed upon allocation of the distribution of funds within two business days of Maker receiving funds from the Securities Offering in the minimum amount of $4 million;
(ii)Maker’s failure to pay all amounts due hereunder on the Maturity Date without regard to the success of the Securities Offering;
(iii)The commencement of any case, proceeding or other action relating to the bankruptcy or insolvency of Maker or Maker’s general inability to pay Maker’s debts as they become due; or
(iv)The occurrence of breach or default by 2020 Resources under the Security Agreement.
Maker, for itself and its successors and assigns, hereby waives presentment for payment, demand, notice of dishonor, protest, notice of protest and any other notice Maker may lawfully waive and any and all lack of
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diligence or delays in the collection or enforcement hereof, and waives and renounces all rights to the benefits of any statute of limitations and any moratorium, appraisal, exemption and homestead rights now provided or which may hereafter be provided by any federal or state statute, including, but not limited to, exemptions provided or allowed under the Bankruptcy Reform Act of 1978, as amended, both as to itself and as to all of its property, whether real or personal, against the enforcement and collection of the obligations evidenced by this Note and any and all extensions, renewals and modifications hereof.
No failure on the part of Payee to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.
The provisions of this Note shall be governed by and interpreted in accordance with the laws of the State of Utah applicable to agreements made and to be performed entirely within such State. The invalidity, illegality or unenforceability of any provision of this Note shall not affect or impair the validity, legality or enforceability of the remainder of this Note, and to this end, the provisions of this Note are declared to be severable. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder.
All notices required or permitted by this Note to be given to any party shall be in writing and shall be delivered personally, or sent by certified mail, return receipt requested, or by Federal Express or similar overnight service, prepaid recorded delivery, addressed as follows:
If to the Maker: to the address referenced above, and
If to Payee: to the address referenced above,
and shall be deemed to have been duly given when so delivered personally or, if mailed or sent by overnight courier, upon delivery; provided, that a refusal by a party to accept delivery shall be deemed to constitute receipt.
The provisions of this Note shall bind Maker and Maker’s successors and assigns and inure to the benefit of Payee and its successors and assigns.
This Note may not be changed, amended, modified or discharged orally, but only by an instrument signed by Maker and Payee, and may be waived only by an instrument in writing signed by the party waiving compliance.
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If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the 2nd day of December 2024.
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| SKY QUARRY INC. |
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| By: /s/ David Sealock |
| Name: David Sealock |
| Title: CEO |
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SCHEDULE A - NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by SKY QUARRY INC. (“Borrower”) on December 2, 2024 into shares of Common Stock of Borrower according to the conditions set forth in such Note, as of the date written below.
Date of Conversion:__________________
Conversion Price:_______
Number of Shares
To Be Delivered:_____________________
Signature:___________________________
Print Name:_________________________
Address:____________________________________________
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THIS WARRANT AND THE SECURITIES UNDERLYING THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.
Sky Quarry Inc.
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY that, for value received, KF Business Ventures, LP, a California limited partnership (the “Holder”) is entitled, subject to the terms and conditions set forth in this Common Stock Purchase Warrant (“Warrant”), to purchase from Sky Quarry Inc., a Delaware corporation (the “Company”) up to one million two hundred thousand (1,200,000) fully paid and nonassessable shares of the Company’s Common Stock (the “Warrant Securities”) at the initial exercise price of eighty-three cents ($0.83) per share, but subject to adjustment as provided in Section 3 below, (the “Exercise Price”).
This Warrant is being issued in connection with a Secured Promissory Note in the principal amount of $1,200,000, entered into by and between the Company and Holder dated of even date herewith (the “Note”).
1.Exercisability.
(A)This Warrant may be exercised at any time or from time to time beginning on date hereof (the “Trigger Date”) and ending on the date which is five (5) years after the Trigger Date. The Holder may exercise this Warrant by presentation and surrender hereof to the Company of a notice of election to purchase duly executed and accompanied by payment by the Exercise Price, which must be paid in cash.
2.Manner of Exercise. In case of the purchase of less than all the Warrant Securities, the Company shall cancel this Warrant upon the surrender hereof and shall execute and deliver a new warrant of like tenor for the balance of the Warrant Securities. Upon the exercise of this Warrant, the issuance of certificates for securities, properties or rights underlying this Warrant shall be made forthwith (and in any event within three (3) business days thereafter) without charge to the Holder including, without limitation, any tax that may be payable in respect of the issuance thereof: provided, however, that the Company shall not be required to pay any tax in respect of income or capital gain of the Holder.
If and to the extent this Warrant is exercised, in whole or in part, the Holder shall be entitled to receive a certificate or certificates representing the Warrant Securities so purchased, upon presentation and surrender to the Company of the form of election to purchase attached hereto duly executed, and accompanied by payment of the purchase price.
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3.Adjustment in Number of Shares and Exercise Price.
(A)Adjustment for Reclassifications. In case at any time or from time to time after the issue date the holders of the Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefore, other or additional stock or other securities or property (including cash) by way of stock split, spin-off, reclassification, combination of shares or similar corporate rearrangement (exclusive of any stock dividend of its or any subsidiary’s capital stock), then and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 1, shall be entitled to receive the amount of stock and other securities and property which such Holder would hold on the date of such exercise if on the issue date he had been the holder of record of the number of shares of Common Stock of the Company called for on the face of this Warrant and had thereafter, during the period from the issue date, to and including the date of such exercise, retained such shares and/or all other or additional stock and other securities and property receivable by him as aforesaid during such period, giving effect to all adjustments called for during such period. In the event of any such adjustment, the Exercise Price shall be adjusted proportionally.
(B)Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or any other corporation the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the issue date, or in case, after such date, the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities or property to which such Holder would be entitled had the Holder exercised this Warrant immediately prior thereto, all subject to further adjustment as provided herein; in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.
4.No Requirement to Exercise. Nothing contained in this Warrant shall be construed as requiring the Holder to exercise this Warrant prior to or in connection with the effectiveness of a registration statement.
5.No Stockholder Rights. Unless and until this Warrant is exercised, this Warrant shall not entitle the Holder hereof to any voting rights or other rights as a stockholder of the Company, or to any other rights whatsoever except the rights herein expressed, and, no dividends shall be payable or accrue in respect of this Warrant.
6.Exchange. This Warrant is exchangeable upon the surrender hereof by the Holder to the Company for new warrants of like tenor representing in the aggregate the right to purchase the number of Warrant Securities purchasable hereunder, each of such new warrants to represent the right to purchase such number of Warrant Securities as shall be designated by the Holder at the time of such surrender.
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Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it and reimbursement to the company of all reasonable expenses incidental thereto, and upon surrender and cancellation hereof, if mutilated, the Company will make and deliver a new warrant of like tenor and amount, in lieu hereof.
7.Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of securities upon the exercise of this Warrant, nor shall it be required to issue scrip or pay cash in lieu of fractional interests. All fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of securities, properties or rights receivable upon exercise of this Warrant.
8.Reservation of Securities. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock or other securities, solely for the purpose of issuance upon the exercise of this Warrant, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise hereof. The Company covenants and agrees that, upon exercise of this Warrant and payment of the Principal Value, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any stockholder.
9.Notices to Holder. If at any time prior to the expiration of this Warrant or its exercise, any of the following events shall occur:
(a)the Company shall take a record of the holders of any class of its securities for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of a class of its securities any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed
then, in any one or more said events, the Company shall give written notice of such event to the Holder at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholder entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be.
10.Transferability. This Warrant may not be transferred or assigned by the Holder without prior written approval by the Company.
11.Informational Requirements. The Company will transmit to the Holder such information, documents and reports as are generally distributed to stockholders of the Company concurrently with the distribution thereof to such stockholders.
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12.Notice. All notices required or permitted by this Warrant to be given to any party shall be in writing and shall be delivered personally, or sent by certified mail, return receipt requested, or by Federal Express or similar overnight service, prepaid recorded delivery, addressed as follows:
If to the Holder:
KF Business Ventures, LP
1520 Tower Grove Drive
Beverly Hills, CA 90210
If to Company:
Sky Quarry Inc.
707 W. 700 S., Suite 101
Woods Cross, UT 84087
and shall be deemed to have been duly given when so delivered personally or, if mailed or sent by overnight courier, upon delivery; provided, that a refusal by a party to accept delivery shall be deemed to constitute receipt.
13.Governing Law; Venue. This Warrant shall be governed by and construed under the laws of the State of Utah as applied to agreements among Utah residents, made and to be performed entirely within the State of Utah. The Parties agree that any action brought to enforce the terms of this Warrant will be brought in the appropriate federal or state court having jurisdiction in Salt Lake City, Utah, United States of America.
14.Successors. All the covenants and provisions of this Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective legal representatives, successors and assigns.
15.Attorneys’ Fees. In the event any holder hereof shall refer this Warrant to an attorney to enforce the terms hereof, the Company agrees to pay all the costs and expenses incurred in attempting or effecting collection hereunder, including reasonable attorney's fees, whether or not suit is instituted.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on December 2, 2024.
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Sky Quarry Inc., |
| KF Business Ventures, LP, | |||
a Delaware corporation |
| a California limited partnership | |||
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| By: | Kopple Financial, Inc., | |
| /s/ David Sealock |
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| its General Partner | |
By: | David Sealock |
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Its: | Chief Executive Officer |
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| /s/ Robert Kopple |
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| By: | Robert Kopple |
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| Its: | President |
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[FORM OF ELECTION TO PURCHASE]
Ladies and Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by Sky Quarry Inc. (the “Company”) pursuant to the Common Stock Purchase Warrant Agreement between the Company and KF Business Ventures, LP, dated December 2, 2024 (the “Warrant Agreement”) and to purchase thereunder ___________ (________) shares of Common Stock of the Company (the “Shares”) at a purchase price of $____ per share or an aggregate purchase price of _______________ Dollars ($_______) (the “Purchase Price”), subject to adjustment as set forth in the Warrant Agreement.
The certificate(s) or other instruments for such shares shall be issued in the name of the undersigned or as otherwise indicated below.
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SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of December 2, 2024 (this “Agreement”), is entered into by and between 2020 Resources LLC, a Delaware limited liability company (the “Company” or “Debtor”) and KF Business Ventures, LP, its endorsees, transferees and assigns (“Holder”).
WHEREAS, the Company’s parent company, Sky Quarry Inc. (“Sky”), has entered into a secured promissory note with Holder in the principal amount of $1,200,000 (the “Note”);
WHEREAS, pursuant to the Note, the Holder has agreed to extend the loan to Sky as evidenced by the Note; and
WHEREAS, in order to induce the Holder to extend the loan evidenced by the Note, the Company has agreed to execute and deliver to the Holder this Agreement and to grant to the Holder, a continuing, perfected first priority lien and security interest in the Collateral (defined below) of the Company, to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Note.
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1.Certain Definitions. Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”, “fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”) shall have the respective meanings given such terms in Article 9 of the UCC. In addition to those capitalized terms defined elsewhere in this Agreement and the Note, the following terms shall have the following meanings:
“Collateral” means the collateral in which the Holder is granted a security interest by this Agreement and which shall include the following personal property of the Debtor, whether presently owned or existing or hereafter acquired or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith:
3.7 MW Solar Centaur 40 Natural Gas Turbine Power Generator #1
Model: GS1-CH-ID
Serial #: HG85093
3.7 MW Solar Centaur 40 Natural Gas Turbine Power Generator #1
Model: GS1-CH-ID
Serial #: HG85083
Notwithstanding the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided, however, that to the extent permitted by applicable law, this Agreement shall create a valid
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security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.
“Default” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.
“Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and Hazardous Wastes and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.
“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.
“Hazardous Substance” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, or any other applicable Environmental Law and in the regulations adopted pursuant thereto.
“Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.
“Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.
“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially
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the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.
“Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, properties or prospects of the Company, (b) the Company’s ability to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, or the priority of any such Lien or (d) the practical realization of the benefits of Holder’s rights and remedies under this Agreement and the other Loan Documents.
“Necessary Endorsement” shall mean undated stock powers endorsed in blank or other proper instruments of assignment duly executed and such other instruments or documents as the Holder may reasonably request.
“Obligations” means all obligations of the Company to the Holder under or in respect of this Agreement, the Note, and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Holder as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time (all such agreements, documents, and instruments, including the Note and this Agreement, are referred to herein sometime collectively as the “Loan Documents”). Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) due and punctual payment and performance of this Agreement, the Note, and any of the other Loan Documents, including all principal, interest, collection costs, expenses and other amounts owing or payable from time to time under the Loan Documents; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtor from time to time under or in connection with this Agreement, the Note, or the other Loan Documents; (iii) the reimbursement of all reasonable costs incurred by the Holder to maintain, preserve, and enforce the Loan Documents, collect the Obligations, and maintain and preserve the Collateral, including without limitation, the Holder’s reasonable attorney’s fees, disbursements and legal expenses, and all expenditures by the Holder for taxes, insurance, and repairs to and maintenance of the Collateral, and (iv) all amounts (including but not limited to post-petition interest, fees, costs, expenses and charges) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Debtor. The above shall be equally applicable to any renewals, reinstatements, restatements, modifications, amendments, or extensions of any of the foregoing.
“Organizational Documents” means with respect to the Debtor, the documents by which the Debtor was organized (including, without limitation, its certificate of formation and all amendments and revisions thereto) and which relate to the internal governance of the Debtor (including, without limitation its operating agreement).
“Permitted Encumbrances” shall mean (i) Liens in favor of Holder for the benefit of Holder; (ii) Liens for taxes, assessments or other governmental charges not delinquent or being contested in good faith and by appropriate proceedings and with respect to which proper reserves have been taken by the Company; provided, that, the Lien shall have no effect on the priority of the Liens in favor of Holder or the value of the assets in which Holder has such a Lien and a stay of enforcement of any such Lien shall be in effect; (iii) deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance; (iv) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and
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other obligations of like nature arising in the ordinary course of business; (v) Liens arising by virtue of the rendition, entry or issuance against the Company or any subsidiary, or any property of the Company or any subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (A) is in existence for less than twenty (20) consecutive days after it first arises or is being properly contested and (B) is at all times junior in priority to any Liens in favor of Holder; (vi) mechanics’, workers’, materialmen’s or other like Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith by the Company; and (vii) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that any such lien shall not encumber any other property of the Company, without the Holder’s prior written consent.
“UCC” means the Uniform Commercial Code of the State of Utah and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.
2.Incorporation of Certain Representations, Warranties, Covenants and Agreements of the Debtor. In addition to the representations, warranties and covenants set forth in this Agreement, the representations, warranties and covenants set forth in the Notes are hereby incorporated herein by reference as though set forth herein at length.
(a)Security Interest in the Collateral. To secure the prompt payment and performance to the Holder of the Obligations, the Company hereby assigns, pledges and grants to Holder for its benefit a continuing security interest in and to and Lien on all of the Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located. The Company shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect the Holder’s security interest and shall cause its financial statements to reflect such security interest. The Company shall promptly provide the Holder with written notice of all commercial tort claims, such notice to contain the case title together with the applicable court and a brief description of the claim(s). Upon delivery of each such notice, the Company shall be deemed to hereby grant to the Holder a security interest in and to and Lien on such commercial tort claims and all proceeds thereof.
(b)Perfection of Security Interest. The Company shall take all action that the Holder may reasonably request, so as at all times to maintain the validity, perfection, enforceability and priority of the Holder’s security interest in and Lien on the Collateral or to enable the Holder to protect, exercise or enforce its rights hereunder and in the Collateral. By its signature hereto, the Company hereby authorizes the Holder to file against the Company one or more financing, continuation or amendment statements pursuant to the UCC in form and substance satisfactory to the Holder (which statements may have a description of collateral which is broader than that set forth herein). All charges, expenses and fees the Holder may incur in doing any of the foregoing, and any local taxes relating thereto, shall be added to the Obligations and be paid to the Holder for its benefit and for the ratable benefit of the Holder immediately upon demand.
(c)Disposition of Collateral. The Company will safeguard and protect all Collateral for the Holder’s general account and make no disposition thereof whether by sale, lease or otherwise.
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(d)Preservation of Collateral. Following the occurrence of a Default or Event of Default, in addition to the rights and remedies set forth in Section 8 hereof, the Holder: (a) may at any time take such steps as the Holder deems reasonably necessary to protect the Holder’s interests in and to preserve the Collateral. The Company shall cooperate fully with all of the Holder’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as the Holder may direct. All of the Holder’s reasonable expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be added to the Obligations and paid to the Holder for its benefit immediately upon demand.
(i)With respect to the Collateral, at the time the Collateral becomes subject to the Holder’s security interest and Lien: (A) the Company shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of their Collateral to the Holder; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (B) each document and agreement executed by the Company or delivered to the Holder in connection with this Agreement shall be true and correct in all respects; (C) all signatures and endorsements of the Company that appear on such documents and agreements shall be genuine and the Company shall have full capacity to execute same; and (D) the Company’s equipment and inventory shall be located at its chief executive office or other company location and shall not be removed from such location without the prior written consent of the Holder except with respect to the rental of equipment and sale of inventory in the ordinary course of business and equipment to the extent permitted in Section 4(c) hereof.
(f)Defense of the Holder’s Interests. Until (i) payment and performance in full of all of the Obligations and (ii) termination of this Agreement, the Holder’s interests in the Collateral shall continue in full force and effect. During such period the Company shall not without the Holder’s prior written consent, pledge, sell (except inventory in the ordinary course of business and equipment to the extent permitted in Section 4(c) hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral. The Company shall defend the Holder’s interests in the Collateral against any and all Persons whatsoever. At any time following demand by the Holder for payment of all Obligations, the Holder shall have the right to take possession of the Collateral in whatever physical form contained. If the Holder exercises this right to take possession of the Collateral, the Company shall, upon demand, assemble it in the best manner possible and make it available to the Holder at a place reasonably convenient to the Holder. In addition, with respect to all Collateral, the Holder shall be entitled to all of the rights and remedies set forth herein and further provided by the UCC or other applicable law. The Company shall, and the Holder may, at their option, upon the occurrence of a Default or an Event of Default and during the continuation thereof, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, inventory, documents or instruments in which the Holder holds a security interest and if they shall come into the Company’s possession, they, and each of them, shall be held by the Company in trust as the Holder’s trustee, and the Company will immediately deliver them to the Holder in their original form together with any Necessary Endorsement.
(g)Books and Records. The Company shall (i) keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (ii) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (iii) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful accounts, advances and investments and all other proper accruals (including by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business.
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(h)Compliance with Laws. The Company shall comply in all material respects with all applicable laws with respect to the Collateral or any part thereof or to the operation of the Company’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect. The Company may, however, contest or dispute any applicable laws in any reasonable manner, provided that any related Lien is inchoate or stayed and sufficient reserves are established to the reasonable satisfaction of the Holder to protect the Holder’s Lien on or security interest in the Collateral. The assets of the Company at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets of the Company so that such insurance shall remain in full force and effect.
(i)Payment of Taxes. The Company will pay, when due, all taxes, assessments and other charges lawfully levied or assessed upon the Company or any of the Collateral including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes. If any tax by any Governmental Authority is or may be imposed on or as a result of any transaction between the Company and the Holder which the Holder may be required to withhold or pay or if any taxes, assessments, or other charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in the opinion of the Holder, may possibly create a valid Lien on the Collateral, the Holder may without notice to the Company pay the taxes, assessments or other charges and the Company hereby indemnifies and holds the Holder harmless in respect thereof. The Holder will not pay any taxes, assessments or charges to the extent that the Company has properly contested those taxes, assessments or charges. The amount of any payment by the Holder under this Section 4(i) shall be added to the Obligations and secured by the Collateral and shall be paid to the Holder immediately upon demand for the benefit of the Holder contributing the funds to pay such taxes, assessments or other charges.
(j)Payment of Leasehold Obligations. The Company shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at the Holder’s request, will provide evidence of having done so.
(i)Nature of Accounts. Each of the accounts shall be a bona fide and valid account representing a bona fide indebtedness incurred by the account debtor therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of the Company, or work, labor or services theretofore rendered by the Company as of the date each account is created. Same shall be due and owing in accordance with the Company’s standard terms without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by the Company to the Holder.
(ii)Solvency of Account Debtors. Each account debtor, to the best of the Company’s knowledge, as of the date each account is created, is and will be solvent and able to pay all accounts on which the account debtor is obligated in full when due or with respect to such account debtors of the Company who are not solvent the Company has set up on its books and in its financial records bad debt reserves adequate to cover such accounts or had determined that such account debtor has insurance coverage in effect and/or is entitled to governmental health benefits that will pay the amount of each such invoice less the account debtor’s required deductible or co-payment and, as applicable, less any other customary and/or prescribed reductions.
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(iii)Location of the Company. The Company’s chief executive office is located as set forth in the Note. Until written notice is given to the Holder by the Company of any other office at which the Company keeps its records pertaining to accounts, all such records shall be kept at such executive office.
(iv)Collection of Accounts. Until the Company’s authority to do so is terminated by the Holder (which notice the Holder may give at any time following the occurrence of an Event of Default or a Default), the Company will, at the Company’s sole cost and expense, unless otherwise prohibited by applicable law, collect all amounts received on accounts.
(v)Notification of Assignment of Accounts. At any time following the occurrence of an Event of Default or a Default, the Holder shall, unless prohibited or restricted by applicable law, and in any event, subject to applicable law, have the right to send notice of the assignment of and the Holder’s security interest in and Lien on, the accounts to any and all account debtors and/or any third party payors who have responsibility for the payment of all or any portion of the accounts. Thereafter, subject to the aforesaid prohibitions and restrictions, and subject to applicable law, the Holder shall have the sole right to collect the accounts and take possession of the Collateral, or both. The Holder’s actual collection expenses, including, but not limited to, stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of or sums due to any collection personnel used for collection, shall be added to the Obligations, secured by the Collateral and payable upon demand to the Holder.
(vi)No Liability. The Holder shall not under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the accounts or any instrument received in payment thereof, or for any damage resulting therefrom. Following the occurrence of an Event of Default or Default the Holder may, subject to applicable law, without notice or consent from the Company, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or upon any terms any of the accounts or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof. The Holder is authorized and empowered to accept, following the occurrence of an Event of Default or Default, the return of the goods represented by any of the accounts, without notice to or consent by the Company, all without discharging or in any way affecting the Company’s liability hereunder.
(vii)Adjustments. The Company will not, without the Holder’s consent, compromise or adjust any material amount of the accounts (or extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the business of the Company.
(l)Maintenance of Equipment. All Company equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the equipment shall be maintained and preserved. The Company shall not use or operate the equipment in violation of any law, statute, ordinance, code, rule or regulation.
(m)Exculpation of Liability. Nothing herein contained shall be construed to constitute the Holder as the Company’s agent for any purpose whatsoever, nor shall the Holder be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof. The Holder shall not, whether by anything herein or in any assignment or otherwise, assume any of the Company’s obligations under any contract or agreement assigned to the Holder, and the Holder shall not be responsible in any way for the performance by the Company of any of the terms and conditions thereof.
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(n)Financing Statements. Except as respects the financing statements filed by the Holder, no financing statement covering any of the Collateral or any proceeds thereof is on file in any public office.
5.Certain Information as to the Company.
The Company shall, until satisfaction in full of the Obligations and the termination of this Agreement:
(a)Disclosure of Material Matters. Immediately upon learning thereof, report to the Holder all matters materially affecting the value, enforceability or collectibility of any portion of the Collateral, including claims without limitations, or disputes asserted by any account debtor, third party payors or other Obligors.
(b)Litigation. Promptly notify the Holder in writing of any claim, litigation, suit or administrative proceeding affecting the Company, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which could reasonably be expected to have a Material Adverse Effect.
(c)Material Occurrences. Promptly notify the Holder in writing upon the occurrence of (i) any Event of Default or Default; (ii) each and every default by the Company which might result in the acceleration of the maturity of any indebtedness, including the names and addresses of the holders of such indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such indebtedness; and (iii) any other development in the business or affairs of the Company which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action the Company proposes to take with respect thereto.
(d)Additional Information. Furnish the Holder with such additional information as Holder shall reasonably request in order to enable the Holder to determine whether the terms, covenants, provisions and conditions of this Agreement and the Notes have been complied with by the Company including, without the necessity of any request by the Holder, notice of the Company’s opening of any new office or place of business or the Company’s closing of any existing office or place of business.
(e)Notice of Suits, Adverse Events. Furnish the Holder with prompt written notice of (i) any lapse or other termination of any consent issued to the Company by any Governmental Authority or any other Person that is material to the operation of the Company’s business, (ii) any refusal by any Governmental Authority or any other Person to renew or extend any such consent; and (iii) copies of any periodic or special reports filed by the Company with any Governmental Authority or Person, if such reports indicate any material change in the business, operations, affairs or condition of the Company, or if copies thereof are requested by the Holder, and (iv) copies of any material notices and other communications from any Governmental Authority or Person which specifically relate to the Company.
(f)Additional Documents. Execute and deliver to the Holder, upon request, such documents and agreements as the Holder may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.
6.Defaults. The following events shall be “Events of Default”:
(a)The occurrence of an Event of Default (as defined in the Note) under the Note;
(b)The failure by the Company to observe or perform any of its obligations hereunder;
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(c)If any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by the Company, or a proceeding shall be commenced by the Company, or by any governmental authority having jurisdiction over the Company, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny that the Company has any liability or obligation purported to be created under this Agreement; or
(d)An uninsured material loss, theft, damage or destruction to any of the Collateral.
(a)Receipt of ProceedsUpon the occurrence of any Event of Default and at any time thereafter, the Debtor shall, subject to applicable law, upon receipt of any revenue, income, dividend, interest or other sums subject to the Holder’s Lien, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Holder and shall forthwith endorse and transfer any such sums or instruments, or both, to the Holder for application to the satisfaction of the Obligations.
(b)Receipt of Securities or other Property.If the Debtor shall become entitled to receive or shall receive any securities or other property, the Debtor agrees to (i) accept the same as the agent of the Holder; (ii) hold the same in trust on behalf of and for the benefit of the Holder; and (iii) deliver any and all certificates or instruments evidencing the same to Holder on or before the close of business on the fifth (5th) Business Day following the receipt thereof by the Debtor, in the exact form received together with the Necessary Endorsements, to be held by the Holder subject to the terms of this Agreement as Collateral.
8.Rights And Remedies After Default.
(i)Upon the occurrence of (A) an Event of Default pursuant to the Note, all Obligations shall be immediately due and payable; and (B) any of the other Events of Default and at any time thereafter (such default not having previously been cured), at the option of the Holder, shall be immediately due and payable and the Holder shall have the right to exercise all rights and remedies under this Agreement. Upon the occurrence of any Event of Default, the Holder shall have the right to exercise any and all rights and remedies provided for herein, under the other Loan Documents, under the UCC and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process. The Holder may enter any of the Company’s premises or other premises without legal process and without incurring liability to the Company therefor, and the Holder may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as the Holder may deem advisable and the Holder may require the Company to make the Collateral available to the Holder at a convenient place. With or without having the Collateral at the time or place of sale, the Holder may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as the Holder may elect. Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Holder shall give the Company reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to the Company at least ten (10) days prior to such sale or sales is reasonable notification. At any public sale the Holder may bid for and become the purchaser, and the Holder at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any
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equity of redemption and all such claims, rights and equities are hereby expressly waived and released by the Company.
(ii)Upon notice to the Company by the Holder, all rights of the Company to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of the Company to receive the dividends and interest which it would otherwise be authorized to receive and retain on the Collateral, shall cease. Upon such notice, the Holder shall have the right to receive any interest, cash dividends or other payments on such Collateral and the Holder may exercise all voting rights pertaining thereto. Without limiting the generality of the foregoing, the Holder shall have the right (but not the obligation) to exercise all rights with respect to such Collateral as if it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of such Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or the Company or any of its direct or indirect subsidiaries.
(iii)Upon the Holder’s written direction(s) to the Company, the Company shall take all steps necessary and/or appropriate, as determined by the Holder to market and sell all or any portion of the Company’s equity interests in any of the Company’s subsidiaries or affiliates. In that regard, and without limitation, the Company shall fully cooperate with the Holder and comply with the Holder’s instructions and directions. The Company hereby constitutes and appoints the Holder or the Holder’s designee as the Company’s attorney with the power to market and sell such equity interests and sign and deliver all documents necessary or appropriate, as determined by the Holder, in its sole discretion, to effect the marketing and sale of such equity interests if the Company fails to cooperate with the Holder and/or follow the Holder’s instructions or directions as aforesaid. All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment) or upon the Holder’s willful misconduct; this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid. In connection with the exercise of the foregoing remedies, including the sale of inventory, the Holder is granted a perpetual nonrevocable, royalty free, nonexclusive license and the Holder is granted permission to use all of the Company’s (a) trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks, licenses, franchises and other proprietary rights which are used or useful in connection with inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such inventory and (b) equipment for the purpose of completing the manufacture of unfinished goods. The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 8(e) hereof. Noncash proceeds will only be applied to the Obligations as they are converted into cash. If any deficiency shall arise, the Company shall remain liable to the Holder therefor.
(iv)To the extent that applicable law imposes duties on the Holder to exercise remedies in a commercially reasonable manner, the Company acknowledges and agrees that it is not commercially unreasonable for the Holder (A) to fail to incur expenses reasonably deemed significant by the Holder to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (B) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (C) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (D) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (E) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (F) to contact other Persons,
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whether or not in the same business as the Company, for expressions of interest in acquiring all or any portion of such Collateral, (G) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (H) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (I) to dispose of assets in wholesale rather than retail markets, (J) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (K) to purchase insurance or credit enhancements to insure the Holder against risks of loss, collection or disposition of Collateral or to provide to the Holder a guaranteed return from the collection or disposition of Collateral, or (L) to the extent deemed appropriate by the Holder, to obtain the services of brokers, investment bankers, consultants and other professionals to assist the Holder in the collection or disposition of any of the Collateral. The Company acknowledges that the purpose of this Section 8(a)(iv) is to provide non-exhaustive indications of what actions or omissions by the Holder would not be commercially unreasonable in the Holder’s exercise of remedies against the Collateral and that other actions or omissions by the Holder shall not be commercially unreasonable solely on account of not being indicated in this Section 8(a)(iv). Without limitation upon the foregoing, nothing contained in this Section 8(a)(iv) shall be construed to grant any rights to the Company or to impose any duties on the Holder that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 8(a)(iv).
(b)The Holder’s Discretion. The Holder shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies it may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of the Holder’s rights hereunder.
(c)Setoff. In addition to any other rights which the Holder may have under applicable law, upon the occurrence of an Event of Default hereunder, the Holder shall have a right, immediately and without notice of any kind, to apply the Company’s property held by the Holder to reduce the Obligations.
(d)Rights and Remedies not Exclusive. The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other rights or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.
(e)Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Holder on account of the Obligations or any other amounts outstanding under any of the other Loan Documents or in respect of the Collateral may, at the Holders discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Holder in connection with enforcing its rights under this Agreement and the other Loan Documents and any protective advances made by the Holder with respect to the Collateral under or pursuant to the terms of this Agreement;
SECOND, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Holder to the extent owing to the Holder pursuant to the terms of this Agreement (other than as set forth in clause “FIRST” above);
THIRD, to the payment of all of the Obligations consisting of accrued fees and interest;
FOURTH, to the payment of the outstanding principal amount of the Obligations;
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FIFTH, to all other Obligations and other obligations which shall have become due and payable under the other Loan Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FOURTH” above; and
SIXTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category.
(f)Waiver of Notice. The Company hereby waives notice of non-payment of any of the accounts, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.
(g)Delay. No delay or omission on the Holder’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.
9.Securities Law Provision. The Debtor recognizes that the Holder may be limited in its ability to effect a sale to the public of all or part of any Note by reason of certain prohibitions in the Securities Act of 1933, as amended, or the securities laws of other applicable jurisdictions (collectively, the “Securities Laws”), and may be compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Note for their own account, for investment and not with a view to the distribution or resale thereof. The Debtor shall cooperate with the Holder in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by the Holder) applicable to the sale of Note by Holder.
10.Costs and Expenses. The Debtor and Sky agree to pay all out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements, amendments and/or termination statements related thereto or any expenses of any searches required by the Holder. The Debtor and Sky shall also pay all other claims and charges which in the reasonable opinion of the Holder might prejudice, imperil or otherwise affect the Collateral or the Lien of the Holder. The Debtor and Sky will also, upon demand, pay to the Holder the amount of any and all expenses, including the reasonable fees and expenses of their counsel and the fees and expenses of any experts and agents, which the Holder may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the rights of the Holder under the Notes and the other Loan Documents. Until so paid, any fees payable hereunder shall be added to the principal amount of the Note, be secured by the Collateral and shall bear interest at the Default Rate.
11.Responsibility for Collateral. The Debtor assumes all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason. Without limiting the generality of the foregoing, (a) the Holder (i) has no duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has no obligation to clean-up or otherwise prepare the Collateral for sale, and (b) the Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by the Debtor thereunder. Holder has no obligation or liability under any such
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contract or agreement by reason of or arising out of this Agreement or the receipt by the Holder of any payment relating to any of the Collateral, nor shall the Holder be obligated in any manner to perform any of the obligations of the Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Holder in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Holder or to which any Holder may be entitled at any time or times.
12.Security Interest Absolute. All rights of the Holder and all obligations of the Debtor shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Notes or any agreement entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Notes or any other agreement entered into in connection with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other security, for all or any of the Obligations; (d) any action by the Holder to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to the Debtor, or a discharge of all or any part of the Liens granted hereby. Until the Obligations shall have been paid and performed in full, the rights of the Holder shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy. The Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral or any payment received by the Holder hereunder shall be deemed by final order of a court of competent jurisdiction to have been a avoidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Holder, then, in any such event, the Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof. The Debtor waives all rights to require the Holder to proceed against any other Person or to apply any Collateral which the Holder may hold at any time, or to marshal assets, or to pursue any other remedy. The Debtor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.
13.Term of Agreement. This Agreement and the Liens granted herein shall terminate on the date on which all payments under the Note have been indefeasibly paid in full in cash and all other Obligations have been paid or discharged; provided, however, that all indemnities of the Debtor contained in this Agreement shall survive and remain operative and in full force and effect regardless of the termination of this Agreement.
14.Notices. Any notice or request hereunder may be given to the Company, or to the Holder at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section. Any notice, request, demand, direction or other communication (for purposes of this Section 14 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”)) or facsimile transmission in accordance with this Section 14. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names below or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 14. Any Notice shall be effective:
(a)In the case of hand-delivery, when delivered;
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(b)If given by mail, four (4) days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;
(c)In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);
(d)In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;
(e)In the case of electronic transmission, when actually received;
(f)If given by any other means (including by overnight courier), when actually received.
1520 Tower Grove Drive
Beverly Hills, CA 90210
Fax:
Woods Cross, UT 84087
Email:dsealock@skyquarry.com
With a copy to:
Sky Quarry Inc.
707 W 700 S, Ste 101
Woods Cross, UT 84087
Attention: David Sealock
Facsimile:
Email:dsealock@skyquarry.com
15.Other Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the guarantee, endorsement or property of any other Person, then the Holder shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Holder’s rights and remedies hereunder or under any other Loan Document.
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(a)No course of dealing between the Debtor, on the one hand, and the Holder, on the other hand, nor any failure to exercise, nor any delay in exercising, on the part of the Holder, any right, power or privilege hereunder or under the Notes or any other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
(b)All of the rights and remedies of the Holder with respect to the Collateral, whether established hereby, by the Notes, by any other Loan Documents or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.
(c)This Agreement and the other Loan Documents (including the exhibits and schedules hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and is intended to supersede all prior negotiations, understandings and agreements with respect thereto. Except as specifically set forth in this Agreement, no provision of this Agreement may be modified or amended except by a written agreement specifically referring to this Agreement and signed by the parties hereto.
(d)In the event any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction for any reason, unless such provision is narrowed by judicial construction, this Agreement shall, as to such jurisdiction, be construed as if such invalid, prohibited or unenforceable provision had been more narrowly drawn so as not to be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any provision of this Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such invalidity, prohibition or unenforceability without invalidating the remaining portion of such provision or the other provisions of this Agreement and without affecting the validity or enforceability of such provision or the other provisions of this Agreement in any other jurisdiction.
(e)No waiver of any breach or default or any right under this Agreement shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent breach or default or right, whether of the same or similar nature or otherwise.
(f)This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and permitted assigns.
(g)Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.
(h)All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflicts of law thereof. The Debtor agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement, the Note and the other Loan Documents (whether brought against a party hereto or its respective affiliates, directors, officers, managers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of Utah in Salt Lake City. The Debtor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Utah in Salt Lake City for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
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not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
(i)This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
(j)The Debtor shall indemnify, reimburse and hold harmless the Holder and its partners, members, shareholders, managers, officers, directors, employees and agents (collectively, “Indemnities”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of the Indemnity as determined by a final, nonappealable decision of a court of competent jurisdiction. This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the Notes, or any other Loan Documents or any other agreement, instrument or other document executed or delivered in connection herewith or therewith and expressly includes attorneys’ fees and costs incurred in enforcing the Note and/or this Agreement.
(k)To the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent, approval or action of any partner or member, as applicable, of the Debtor, or any direct or indirect subsidiary of the Debtor or compliance with any provisions of any of the Organizational Documents, the Debtor hereby grants such consent and approval and waives any such noncompliance with the terms of said documents.
(l)The Company recognizes that, in the event the Company fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to the Holder; therefore, the Holder shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy.
(m)Neither the Holder, nor any agent or attorney for the Holder, shall be liable to the Company (or any affiliate of the Company) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any other Loan Document.
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(n)EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed on the day and year first above written.
| DEBTOR: | |
| 2020 RESOURCES LLC, a Delaware limited liability company | |
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| By: | /s/ David Sealock |
| Name: | David Sealock |
| Title: | CEO |
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| SKY QUARRY INC., sole Member of 2020 Resources LLC | |
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| By: | /s/ David Sealock |
| Name: | David Sealock |
| Title: | Title: CEO |
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| HOLDER: | |
| KF BUSINESS VENTURES, LP, | |
| A California Limited Partnership | |
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| By: | Kopple Financial Inc., |
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| Its General Partner |
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| By: | /s/ Robert Kopple |
| Name: | Name: Robert Kopple |
| Title: | Title: President |
[SIGNATURE PAGE TO SECURITY AGREEMENT]
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ADVISORY AGREEMENT
Advisory Agreement (this "Agreement"), made as of December 2, 2024, by and between Sky Quarry Inc., a Delaware corporation (“Company") having an address at 707 W. 700 S., Suite 101, Woods Cross, UT 84087, and KF Business Ventures, LP, a California limited partnership, having a business address of 1520 Tower Grove Drive, Beverly Hills, CA 90210 (the "Advisor").
Whereas, the Company wishes to engage the Advisor for the Engagement Period (defined below), and the Advisor is willing to provide its services to the Company for the period under the terms and conditions hereinafter provided.
Now, Therefore, Witnesseth, that for and in consideration of the premises and of the mutual promises and covenants herein contained, the parties hereto agree as follows:
1.Engagement
The Company agrees to and does hereby engage the Advisor, and the Advisor agrees to and does hereby accept engagement by the Company, to serve as a business Advisor to the Company and to provide the services set forth in Section 2 below for the period commencing on the date hereof and ending on the date that is six from the date hereof “Engagement Period”, subject to extension as set forth below. At least thirty days prior to the expiration of the Engagement Period, the Company and Advisor will mutually agree to extend or terminate the Agreement, except as otherwise set forth herein.
2.Services
The Advisor shall render to the Company the services described below, with respect to which the Advisor shall apply its best efforts and devote such time as shall be reasonably necessary to perform its duties hereunder and advance the interests of the Company. The Advisor shall report to the executive VP of the Company and to such persons as the executive VP shall direct. The Advisor shall provide the following services (the “Services”):
(i)General Business Advisory Services. Advisor shall provide general business advisory services to the Company; and
(ii)Other Services. Such other services reasonably requested by the Company that are within Advisor’s expertise, other than legal advice.
3.Compensation
For the services and duties to be rendered and performed by the Advisor during the Engagement Period and in consideration of the Advisor having entered into this Agreement, the Company agrees to pay to the Advisor an aggregate of $21,000 per month as follows:
(i)$10,500 per month to be paid in cash (“Cash Fee”); and
(ii)$10,500 per month to be paid in the form of shares (“Stock Fee”) of the Company’s common stock, par value $.0001 per share (“Shares”), all of which shall be fully earned upon issuance thereof.
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The Cash Fee shall be paid on the date hereof and on each thirty-day anniversary of the date of this Agreement. The Stock Fee shall be paid to Advisor on the date hereof and on each thirty-day anniversary of the date of this Agreement. The number of Shares to be issued to Advisor each month for the Stock Fee shall be determined by dividing $10,500 by the average closing price of the Company’s common stock for the five days prior to the date of this Agreement.
The Company shall reimburse Advisor for expenses incurred by the Advisor in connection with the performance of the Services, provided all such expenses are pre-approved in writing by the Company.
4.Regulation FD
By entering into this Agreement, Advisor acknowledges that the Company is a publicly-traded company, and that U.S. securities laws and other laws prohibit any person who has material, non-public information concerning a public company from purchasing or selling any of its securities, and from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. In connection with information shared pursuant to the terms of this Agreement, Advisor may come into possession of material non-public information of the Company. Advisor agrees to keep the confidential information of the Company in confidence as contemplated by Regulation FD promulgated by the SEC. In addition, Advisor acknowledges and agrees that some of the confidential information of the Company and other information discussed between the parties may be considered “material non-public information” for purposes of the federal securities laws, and that the Advisor and its representatives, affiliates and employees will abide by all securities laws relating to the handling of and acting upon material non-public information of or regarding the Company, which includes but is not limited to trading in the securities of the Company.
5. Assignment
This Agreement shall not be assigned by the Advisor without the express written consent of the Company.
6.Survival of Certain Agreements
The covenants and agreements set forth in Article 4, Article 7 and Article 9 shall survive the expiration of the Engagement Period and shall survive termination of this Agreement and remain in full force and effect regardless of the cause of such termination.
7.Notices
7.1All notices or permitted to be given hereunder shall be delivered by hand or recognized courier service to the party to whom such notice is required or permitted to be given hereunder. Any delivered to the address designated for such delivery by such party, notwithstanding the refusal of such party or other person to accept such delivery.
7.2Any notice to the Company or to any assignee of the Company shall be addressed as follows:
Sky Quarry Inc.
707 W. 700 S., Suite 101
Woods Cross, UT 84087
Attn: President
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7.3Any notice to the Advisor shall be addressed as follows:
KF Business Ventures, LP
1520 Tower Grove Drive
Beverly Hills, CA 90210
Attn: President
7.4Either party may change the address to which notice to it is to be addressed, by notice as provided herein.
8.Automatic Extension
In the event that the Company does not repay in full the note issued to Advisor on December 2, 2024 in the principal amount of $1.2 million (“Note”) on or before March 2, 2025 (the “Maturity Date”), the term of this Agreement shall be automatically extended for a six month period for each month or part thereof, after the Maturity Date, that the Note is not repaid in full.
9.Governing Law; Jurisdiction
This Agreement shall be governed by and construed in accordance with the laws of the State of Utah applicable to agreements made and to be fully performed therein, without regard to conflicts of law principles. The local, state and federal courts situated in Salt Lake City, Utah shall have the sole and exclusive jurisdiction over all disputes arising under this Agreement.
10.Interpretation
Whenever possible, each Article of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any Article is unenforceable or invalid under such law, such Article shall be ineffective only to the extent of such unenforceability or invalidity, and the remainder of such Article and the balance of this Agreement shall in such event continue to be binding and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
SKY QUARRY INC.
By: /s/ David Sealock
Name: David Sealock
Title: CEO
KF BUSINESS VENTURES, LP,
A California Limited Partnership
By: Kopple Financial Inc.,
Its General Partner
By: /s/ Robert Kopple
Name: Robert Kopple
Title: President
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