Vivakor, Inc 10-Q for FY2023 Q1
Vivakor, Inc. (VIVK)
About this 10-Q
Vivakor, Inc filed this 10-Q on July 28, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $15.54M
- Net loss
- $2.82M
- compared with a net loss of $726.04K a year earlier
- Diluted EPS
- -$0.14
- compared with -$0.04 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ACT OF 1934
For the Quarterly Period Ended
or
ACT OF 1934
For the Transition Period from _________ to _________
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other Jurisdiction |
(I.R.S. Employer |
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| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” a “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act:
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of July 20, 2023, there were shares of the registrant’s common stock outstanding.
VIVAKOR, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
TABLE OF CONTENTS
i
EXPLANATORY NOTE
On February 14, 2022, we effected a 1-for-30 reverse split of our authorized and outstanding shares of common stock (the “Reverse Stock Split”) via the filing of a certificate of change with the Nevada Secretary of State, which was filed simultaneously with the close of an underwritten public offering of our common stock and the commencement of the trading of our common stock on the Nasdaq Capital Market, LLC (see, Part II, Item 5 “Other Information”). As a result of the Reverse Stock Split, all authorized and outstanding common stock, preferred stock, and per share amounts in this Quarterly Report on Form 10-Q, including, but not limited to, the consolidated financial statements and footnotes included herein, have been adjusted to reflect the Reverse Stock Split for all periods presented.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIVAKOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | ||||||||
| 2023 | 2022 | ||||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | $ | |||||||
| Cash and cash equivalents attributed to variable interest entity | |||||||||
| Accounts receivable | |||||||||
| Accounts receivable- related party | |||||||||
| Prepaid expenses | |||||||||
| Marketable securities | |||||||||
| Inventories | |||||||||
| Other assets | |||||||||
| Total current assets | |||||||||
| Other investments | |||||||||
| Property and equipment, net | |||||||||
| Rights of use assets- operating leases | |||||||||
| License agreements, net | |||||||||
| Intellectual property, net | |||||||||
| Goodwill | |||||||||
| Total assets | $ | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||
| Accounts payable and accrued expenses- related parties | |||||||||
| Accrued compensation | |||||||||
| Operating lease liabilities, current | |||||||||
| Finance lease liabilities, current | |||||||||
| Loans and notes payable, current | |||||||||
| Loans and notes payable, current attributed to variable interest entity | |||||||||
| Loans and notes payable, current attributed to variable interest entity- related parties | |||||||||
| Long-term debt (working interest royalty programs), current | |||||||||
| Total current liabilities | |||||||||
| Operating lease liabilities, long term | |||||||||
| Finance lease liabilities, long term | |||||||||
| Loans and notes payable, long term | |||||||||
| Loans and notes payable, long term- related party | |||||||||
| Long-term debt (working interest royalty programs) | |||||||||
| Total liabilities | |||||||||
| Stockholders’ equity: | |||||||||
| Convertible preferred stock, $ par value; shares authorized, outstanding(1) | - | - | |||||||
| Common stock, $ par value; shares authorized; were issued and outstanding as March 31, 2023 and December 31, 2022, respectively(1) | |||||||||
| Additional paid-in capital | |||||||||
| Treasury stock, at cost | ( |
) | ( |
) | |||||
| Accumulated deficit | ( |
) | ( |
) | |||||
| Total Vivakor, Inc. stockholders’ equity | |||||||||
| Noncontrolling interest | |||||||||
| Total stockholders’ equity | |||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||
| (1) |
See accompanying notes to consolidated financial statements
1
VIVAKOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Product revenue - third parties | $ | $ | ||||||
| Product revenue - related party | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Amortization and depreciation | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other income (expense): | ||||||||
| Unrealized gain (loss) on marketable securities | ( |
) | ||||||
| Interest income | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Interest expense- related parties | ( |
) | ( |
) | ||||
| Other income | ||||||||
| Total other income (expense) | ( |
) | ||||||
| Loss before provision for income taxes | ( |
) | ( |
) | ||||
| Provision for income taxes | ( |
) | ( |
) | ||||
| Consolidated net loss | ( |
) | ( |
) | ||||
| Less: Net loss attributable to noncontrolling interests | ( |
) | ( |
) | ||||
| Net loss attributable to Vivakor, Inc. | $ | ( |
) | $ | ( |
) | ||
| Basic and diluted net loss per share(1) | $ | ) | $ | ) | ||||
| Basic weighted average common shares outstanding(1) | ||||||||
| (1) |
See accompanying notes to consolidated financial statements
2
VIVAKOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Series A Preferred Stock |
Common Stock | Additional Paid-in |
Treasury | Accumulated | Non-controlling | Total Stockholders’ Equity |
||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Interest | (Deficit) | ||||||||||||||||||||||||||||
| December 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Distributions to noncontrolling interest | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Issuance of noncontrolling interest for a reduction of debt | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| March 31, 2023 (unaudited) | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Series A Preferred Stock |
Common Stock | Additional Paid-in |
Treasury | Accumulated | Non-controlling | Total Stockholders’ Equity |
||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Interest | (Deficit) | ||||||||||||||||||||||||||||
| December 31, 2021(1) | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| Common Stock issued for a reduction of liabilities | - | |||||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock to Common Stock | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Common Stock issued for cash | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for fractional shares from reverse stock split | - | |||||||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Distributions by noncontrolling interest | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Issuance of noncontrolling interest for a reduction of debt | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| March 31, 2022 (unaudited) | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||||
| (1) |
See accompanying notes to consolidated financial statements
3
VIVAKOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDTED)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Consolidated net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Forgiveness of notes payable | ( |
) | ||||||
| Common stock options issued for services | ||||||||
| Stock-based compensation | ||||||||
| Unrealized (gain)/loss- marketable securities | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ( |
) | ||||||
| Inventory | ( |
) | ( |
) | ||||
| Other assets | ( |
) | ( |
) | ||||
| Right of use assets- finance leases | ||||||||
| Right of use assets- operating leases | ( |
) | ||||||
| Operating lease liabilities | ( |
) | ||||||
| Financing lease liabilities | ( |
) | ||||||
| Accounts payable and accrued expenses | ( |
) | ||||||
| Interest on notes receivable | ( |
) | ||||||
| Interest on notes payable | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from notes receivable | ||||||||
| Purchase of equipment | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from loans and notes payable | ||||||||
| Proceeds from loans and notes payable- related party | ||||||||
| Proceeds from sale of common stock | ||||||||
| Payment of notes payable | ( |
) | ( |
) | ||||
| Distributions to noncontrolling interest | ( |
) | ( |
) | ||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( |
) | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASHFLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Noncash transactions: | ||||||||
| Conversion of Series A, B, B-1, and C-1 Preferred Stock to Common Stock | $ | $ | ||||||
| Common stock issued for a reduction in liabilities | $ | $ | ||||||
| Noncontrolling interest issued for a reduction in liabilities | $ | $ | ||||||
| Capitalized interest on construction in process | $ | $ | ||||||
| Accounts payable on purchase of equipment | $ | $ | ||||||
See accompanying notes to consolidated financial statements
4
VIVAKOR, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
On February 14, 2022, we effected a
COVID-19
On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic had a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries issued policies intended to stop or slow the spread of the disease.
In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. Additionally, we continue to experience supply chain disruptions related to building our Remediation Processing Centers (“RPC”), completing certain refurbishment, and in relation to our other operations.
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2022. The unaudited condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three months ended March 31, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.
Long Lived Assets
The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. During the three months ended March 31, 2023, the operations were limited due to supply and personnel limitations. Subsequent to March 31, 2023, the Company entered into an agreement to move the Vernal plant to Kuwait to service the contract with DIC for a scaled up RPC, as the Vernal plant was not producing product toward the off-take agreement, which has further delayed scaled operations. The Company evaluated these events and determined that there is no trigger event, and therefore there was no impairment incurred during the three months ended March 31, 2023. There can be no assurance that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.
5
Intangible Assets and Goodwill:
We account for intangible assets and goodwill in accordance with ASC 350 “Intangibles-Goodwill and Other” (“ASC 350”). We assess our intangible assets in accordance with ASC 360 “Property, Plant, and Equipment” (“ASC 360”). Impairment testing is required when events occur that indicate an asset group may not be recoverable (“triggering events”). As detailed in ASC 360-10-35-21, the following are examples of such events or changes in circumstances (sometimes referred to as impairment indicators or triggers): (a) A significant decrease in the market price of a long-lived asset (asset group) (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition. (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group) (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group) (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The term more likely than not refers to a level of likelihood that is more than 50 percent. We performed an analysis and assessed no triggering event has occurred, and no impairment for the three months ended March 31, 2023.
Revenue Recognition
In August 2022, we acquired Silver Fuels Delhi, LLC and White Claw Colorado City, LLC, from which approximately
Related Party Revenues
We sell sale of crude oil or like products and provide storage services to related parties under long-term contracts. We acquired these contracts in our August 1, 2022 acquisition of Silver Fuels Delhi, LLC and White Claw Colorado City, LLC. These contracts were entered into in the normal course of our business. Our revenue from related parties for the three months ended March 31, 2023 was $
Major Customers and Concentration of Credit Risk
The Company has two major customers, which account for approximately
Advertising Expense
Advertising costs are expensed as incurred. The Company did
Basic net income (loss) per share is calculated by subtracting any preferred interest distributions from net income (loss), all divided by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method if their effect is dilutive. Potential dilutive instruments as of March 31, 2023 and December 31, 2022 include the following: convertible notes payable convertible into approximately shares of common stock, stock options granted to current or previous employees of shares of common stock, stock options granted to Board members or consultants of shares of common stock. The Company also has a warrant outstanding to purchase
6
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our critical accounting estimates relate to the following: Recoverability of current and noncurrent assets, revenue recognition, stock-based compensation, income taxes, effective interest rates related to long-term debt, marketable securities, cost basis investments, lease assets and liabilities, valuation of stock used to acquire assets, derivatives, and fair values of the intangible assets and goodwill related to business combinations.
While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from these estimates and assumptions.
Fair Value of Financial Instruments
The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the consolidated balance sheets for marketable securities are classified as Level 1 assets due to observable quoted prices for identical assets in active markets. The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their estimated fair market values based on the short-term maturity of these instruments. The recorded values of notes payable approximate their current fair values because of their nature, rates, and respective maturity dates or durations.
7
Note 2. Liquidity
We
have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2023, we had an
accumulated deficit of approximately
The Company has prepared the consolidated financial statements on a going concern basis. If the Company encounters unforeseen circumstances that place constraints on its capital resources, management will be required to take various measures to conserve liquidity. Management cannot provide any assurance that the Company will raise additional capital if needed.
Note 3. Accounts Receivable
Accounts receivable primarily relates to sales to trade accounts receivable of customers for crude oil and natural gas liquid products. Accounts receivable is presented as amounts due from customers less an estimated allowance for doubtful accounts. An allowance for doubtful accounts, if deemed necessary by management, is based on a review of all outstanding amounts by customer on a monthly basis. Management determines the allowance for doubtful accounts, if any, by identifying troubled accounts and by using historical experience applied to an aging of accounts, as well as the current and projected financial condition of the specific customer. As of March 31, 2023 and December 31, 2022
Note 4. Prepaid Expenses
As of March 31, 2023 and December 31, 2022, our prepaid expenses of $
Note 5. Marketable Securities
The Company owns shares of common stock of Scepter Holdings, Inc. (“Scepter”), ticker: BRZL, OTC Markets., for a diluted 17% equity holding in the company. The Company accounted for such securities based on the quoted price from the OTC Markets where the stock is traded which resulted in the Company recording an unrealized gain (loss) on marketable securities of $(
Note 6. Inventories
As of March 31, 2023 and December 31, 2022, inventories of $
8
Note 7. Property and Equipment
The following table sets forth the components of the Company’s property and equipment at March 31, 2023 and December 31, 2022:
| Schedule of property and equipment, net | ||||||||||||||||||||||||
| March 31, 2023 |
December 31, 2022 |
|||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Depreciation |
Net Book Value |
Gross Carrying Amount |
Accumulated Depreciation |
Net Book Value |
|||||||||||||||||||
| Office furniture | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Vehicles | ||||||||||||||||||||||||
| Equipment | ||||||||||||||||||||||||
| Property | ||||||||||||||||||||||||
| Finance lease- Right of use assets | ||||||||||||||||||||||||
| Construction in process: | ||||||||||||||||||||||||
| Wash Plant Facilities | ||||||||||||||||||||||||
| Cavitation device | ||||||||||||||||||||||||
| Remediation Processing Unit 1 | ||||||||||||||||||||||||
| Remediation Processing Unit 2 | ||||||||||||||||||||||||
| Remediation Processing Unit System A | ||||||||||||||||||||||||
| Remediation Processing Unit System B | ||||||||||||||||||||||||
| Total fixed assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
For the three months ended March 31, 2023 and 2022 depreciation expense was $
The operations surrounding our precious metals extraction services were temporarily suspended until recently, although due to these suspended activities and a shift in 2022 of the Company’s focus to the oil and gas industry, we have realized an impairment loss of $
As of December 31, 2022 we continued to pursue a test facility or third party reactor for our nano catalyst technology that facilitates chemical manufacturing, with a focus on the production of ammonia, which includes our bioreactor equipment. The Company received recent quotes for testing or building our own test facilities with new partners for this venture. After taking into consideration this new information, we noted that the newly requested capital expenditure to test and scale the business triggered an impairment loss of assets related to our ammonia synthesis assets, including our bioreactors. The impairment loss related to our bioreactors was $
9
Note 8. Intellectual Property, Net and Goodwill
The following table sets forth the components of the Company’s intellectual property at March 31, 2023 and December 31, 2022:
| Schedule of components of intellectual property | ||||||||||||||||||||||||
| March 31, 2023 |
December 31, 2022 |
|||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
|||||||||||||||||||
| Extraction Technology patents | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Extraction Technology | ||||||||||||||||||||||||
| Acquired crude oil contracts | ||||||||||||||||||||||||
| Total Intellectual property | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The changes in the carrying amount of goodwill are as follows:
| Schedule of goodwill | ||||
| Goodwill | ||||
| January 1, 2021 | $ | |||
| Acquisition | ||||
| December 31, 2022 | $ | |||
There were
On August 1, 2022, the Company closed a Membership Interest Purchase Agreement, (the “MIPA”), with Jorgan Development, LLC, and JBAH Holdings, LLC, as the equity holders of Silver Fuels Delhi, LLC, a Louisiana limited liability company (“SFD”) and White Claw Colorado City, LLC, a Texas limited liability company (“WCCC”) whereby, the Company acquired all of the issued and outstanding membership interests in each of SFD and WCCC making SFD and WCCC wholly owned subsidiaries of the Company. The purchase price for the Membership Interests is approximately $
Management hired a valuation expert who performed a valuation study to calculate the fair value of the acquired assets, assumed liabilities and goodwill. Based on the valuation study, the fair values of goodwill and the acquired contracts were $
10
Note 9. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
| Schedule of accounts payable and accrued expenses | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Office access deposits | ||||||||
| Unearned revenue | ||||||||
| Accrued interest (various notes and loans payable | ||||||||
| Accrued interest (working interest royalty programs) | ||||||||
| Accrued tax penalties and interest | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable- related parties | $ | $ | ||||||
| Accrued interest (notes payable)- related parties | ||||||||
| Accounts payable and accrued expenses- related parties | $ | $ | ||||||
| Accrued compensation | $ | $ | ||||||
As of March 31, 2023 and December 31, 2022, our accounts payable are primarily made up of trade payables for the purchase of for crude oil. Trade accounts payables in the amount of $
In March 2023, the Compensation Committee reviewed the Company’s 2022 results, including, but not limited to, the progress of the Company’s historic business and certain acquisitions completed by the Company during 2022, and approved discretionary bonuses, which have been accrued as of December 31, 2022, for the Chief Financial Officer, and an acquisition consultant, in the amounts of $
7
Note 10. Loans and Notes Payable
Loans and notes payable and their maturities consist of the following:
| Schedule of loans and notes payable | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Various promissory notes and convertible notes | $ | $ | ||||||
| Novus Capital Group LLC Note (a) | ||||||||
| Triple T Notes (b) | ||||||||
| National Buick GMC | ||||||||
| Blue Ridge Bank | ||||||||
| Small Business Administration | ||||||||
| Jorgan Development, LLC | ||||||||
| Various variable interest promissory notes (c) | ||||||||
| Total Notes Payable | $ | $ | ||||||
| Loans and notes payable, current | $ | $ | ||||||
| Loans and notes payable, current attributed to variable interest entity | ||||||||
| Loans and notes payable, long term | $ | $ | ||||||
March 31, 2023 | December 31, 2022 | |||||||
| Various variable interest promissory notes (c)- related parties | $ | $ | ||||||
| Loans and notes payable, current attributed to variable interest entity- related parties | ||||||||
| Loans and notes payable, long term- related parties | $ | $ | ||||||
| Schedule of maturities of loans and notes payable | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ |
| (a) |
| (b) | |
| (c) |
12
Note 11. Commitments and Contingencies
Finance Leases
We acquired Silver Fuels Delhi, LLC (SFD) and White Claw Colorado City, LLC (WCCC) in a business combination in August 2022, in which we acquired certain finance leases contracts and liabilities as described below:
On March 17, 2020, the SFD entered into two sale and leaseback transactions with Maxus Capital Group, LLC (“Maxus”). The first transaction involved the Company assigning twelve storage tanks and other equipment and the second transaction involved the Company assigning the remaining property at the oil gathering facility with the exception of land, to Maxus Future minimum lease payments for each of the next three years under the Maxus lease obligations is as follows: 2023 $
On December 28, 2021, the WCCC entered into a sale and leaseback transaction with Maxus, where WCCC assigned the crude oil, natural gas liquids, condensate, and liquid hydrocarbon receipt, throughput, processing, gathering, and delivery terminal, commonly known as the China Grove Station (the “China Grove Station”), located in Colorado City, Texas to Maxus. Future minimum lease payments for each of the next four years under the Maxus lease obligation are as follows: 2023 $
The following table reconciles the undiscounted cash flows for the finance leases as of March 31, 2023 to the finance lease liability recorded on the balance sheet:
| Schedule of financing lease liability | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease payments | ||||
| Add: carrying value of lease obligation at end of lease term | ||||
| Total finance lease obligations | $ | |||
| Finance lease liabilities, current | $ | |||
| Finance lease liabilities, long-term | $ | |||
| Weighted-average discount rate | % | |||
| Weighted-average remaining lease term (months) |
13
Operating Leases
Commencing
on September 15, 2019, the Company entered into a five-year lease with Jamboree Center 1 & 2 LLC covering approximately
6,961 square feet of office space in Irvine, CA. Under the terms of the lease agreement, we are required to make the following
monthly lease payments: Year 1 $
On February 1, 2022, the Company entered into a lease agreement for approximately 2,533 square feet of office and manufacturing space located in Las Vegas, Nevada. Commencing on March 1, 2022, the Company entered into a three-year lease with Speedway Commerce Center, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments: Year 1 $
On March 28, 2022, the Company entered into a lease agreement for approximately 1,469 square feet of office space located in Lehi, Utah. Commencing on April 1, 2022, the Company entered into a three-year lease with Victory Holdings, LLC. Under the terms of the lease agreement, we are required to make the following monthly lease payments:
On April 1, 2022, the Company entered into a lease agreement for approximately 2,000 square feet of office and warehouse space located in Houston, Texas. Commencing on April 1, 2022, the Company entered into a month-to-month lease with JVS Holdings, Inc. The lease may be terminated at any time or for any reason with a 30-day written notice to terminate. The lease requires a monthly lease payment of $
On December 16, 2022, our subsidiary, VivaVentures Remediation Corp. entered into a Land Lease Agreement (the “Land Lease”) with W&P Development Corporation, under which we agreed to lease approximately 3.5 acres of land in Houston, Texas. The Land Lease is for an initial term of 126 months and may be extended for an additional 120 months at our discretion.
The following table reconciles the undiscounted cash flows for the leases as of March 31, 2023 to the operating lease liability recorded on the balance sheet:
| Schedule of lessee operating lease liability | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total undiscounted lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease payments | $ | |||
| Operating lease liabilities, current | $ | |||
| Operating lease liabilities, long-term | $ | |||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % |
14
Employment Agreements
On October 28, 2022 we entered into an executive employment agreement with a new Chief Executive Officer, James Ballengee, which provides for annual compensation of $
Note 12. Long-term Debt
Due to delays in achieving scaled up operations (Note 1 Long Lived Assets) the effective interest rate of these agreements range from approximately 11% to 34% for the three months ended March 31, 2023 and for the year ended December 31, 2022.
Long-term debt consists of the following:
| Schedule of long-term debt | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Principal | $ | $ | ||||||
| Accrued interest | ||||||||
| Debt discount | ( |
) | ( |
) | ||||
| Total long term debt | $ | $ | ||||||
| Long term debt, current | $ | $ | ||||||
| Long term debt | $ | $ | ||||||
The following table sets forth the estimated payment schedule of long-term debt as of March 31, 2023:
| Schedule of long-term debt maturities | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total | $ |
15
Options
Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.
The Company has granted stock-based compensation to employees, including the issuance of employee stock options granted in June 2022 that were to vest over a period of two years, for which of these options were cancelled with the resignation without cause in October 2022 of our prior Chief Executive Officer. For the three months ended March 31, 2023 and 2022, employee stock-based compensation was none and $. On October 24, 2022, the previous Compensation Committee resolved to increase their compensation including the issuance of 100,000 stock options per independent board member, exercisable at $2.50 per share, vesting immediately. Non-statutory or independent Board of Director stock-based compensation was none and $ for the three months ended March 31, 2023 and 2022. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), a 45-day option to purchase up to an additional shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired.
There were no other options granted during the three months ended March 31, 2023 and 2022, respectively.
The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows:
| Schedule of warrant assumptions | |||
| December 31, 2021 through December 31, 2022 |
|||
| Risk-free interest rate | – % | ||
| Expected dividend yield | |||
| Expected life of warrants | - years | ||
| Expected volatility rate | - % |
The following table summarizes all stock option activity of the Company for the three months ended March 31, 2023 and 2022:
| Schedule of option activity | ||||||||||||
| Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (Years) |
||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||
| Granted | - | |||||||||||
| Exercised | - | |||||||||||
| Forfeited | ( |
) | - | |||||||||
| Outstanding, March 31, 2023 | $ | |||||||||||
| Outstanding, December 31, 2021 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited | ( |
) | ||||||||||
| Outstanding, March 31, 2022 | $ | |||||||||||
| Exercisable, December 31, 2022 | $ | |||||||||||
| Exercisable, March 31, 2023 | $ | |||||||||||
| Exercisable, December 31, 2021 | $ | |||||||||||
| Exercisable, March 31, 2022 | $ | |||||||||||
As of March 31, 2023 and 2022, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.
16
Warrants
As of March 31, 2023 and 2022, the Company had
Note 14. Income Tax
The Company calculates its quarterly tax provision pursuant to the guidelines in ASC 740 Income Taxes. ASC 740 requires companies to estimate the annual effective tax rate for current year ordinary income. In calculating the effective tax rate, permanent differences between financial reporting and taxable income are factored into the calculation, and temporary differences are not. The estimated annual effective tax rate represents the Company’s estimate of the tax provision in relation to the best estimate of pre-tax ordinary income or loss. The estimated annual effective tax rate is then applied to year-to-date ordinary income or loss to calculate the year-to-date interim tax provision.
The Company recorded a provision for income taxes of $
As of December 31, 2022, the Company had estimated federal and state net operating loss (NOL) carryforwards of approximately $
Note 15. Related Party Transactions
Viva Wealth Fund I, LLC (VWFI), which is managed by Wealth Space LLC, continued its private offering of up to $
On June 15, 2022, we entered into a Membership Interest Purchase Agreement (the “MIPA”), with Jorgan Development, LLC, (“Jorgan”) and JBAH Holdings, LLC, (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Silver Fuels Delhi, LLC (“SFD”) and White Claw Colorado City, LLC (“WCCC”) whereby, at closing, which occurred on August 1, 2022, we acquired all of the issued and outstanding membership interests in each of SFD and WCCC (the “Membership Interests”), making SFD and WCCC our wholly-owned subsidiaries. The purchase price for the Membership Interests was approximately $32.9 million paid for by us with a combination of shares of our common stock, amount equal to 19.99% of the number of issued and outstanding shares of our common stock immediately prior to issuance, and secured three-year promissory notes issued by us in favor of the Sellers (the “Notes”). As of March 31, 2023 we have accrued interest of approximately $
In the business combination of acquiring WCCC we also acquired WCCC’s Oil Storage Agreement with White Claw Crude, LLC (“WC Crude”), who shares a beneficiary, James Ballengee, with Jorgan and JBAH. Under this agreement, WC Crude has the right, subject to the payment of service and maintenance fees, to store volumes of crude oil and other liquid hydrocarbons at a certain crude oil terminal operated by WCCC. WC Crude is required to pay $150,000 per month even if the storage space is not used. The agreement expires on December 31, 2031. For the three months ended March 31, 2023 we have received tank storage revenue related to this contract of approximately $450,000.
17
In the business combination of acquiring SFD, we acquired an amended Crude Petroleum Supply Agreement with WC Crude (the “Supply Agreement”), under which WC Crude supplies volumes of Crude Petroleum to SFD, which provides for the delivery to SFD a minimum of 1,000 sourced barrels per day, and includes a guarantee that when SFD resells these barrels, if SFD does not make at least a $5.00 per barrel margin on the oil purchased from WC Crude, then WC Crude will pay to SFD the difference between the sales price and $5.00 per barrel. In the event that SFD makes more than $5.00 per barrel, SFD will pay WC Crude a profit-sharing payment in the amount equal to 10% of the excess price over $5.00 per barrel, which amount will be multiplied by the number of barrels associated with the sale. The Supply Agreement expires on December 31, 2031. For the three months ended March 31, 2023, we have made crude oil purchases from WC Crude of $
In the business combination of acquiring SFD and WCCC we also entered into a Shared Services Agreement with Endeavor Crude, LLC (“Endeavor”), who shares a beneficiary, James Ballengee (the Company’s CEO), with Jorgan and JBAH. Under this agreement, we have the right, but not the obligation to use Endeavor for consulting services. For the three months ended March 31, 2023, Endeavor rendered services in the amount of $74,644.
We have an existing note payable issued to Triple T, which is owned by Dr. Khalid Bin Jabor Al Thani, the 51% majority-owner of Vivakor Middle East LLC. The note is interest free, has no fixed maturity date and will be repaid from revenues generated by Vivakor Middle East LLC. As of March 31, 2023 the balance owed was $
Note 16. Subsequent Events
On July 25, 2023, a non-affiliated investor loaned
us $
On
July 1, 2023, we hired Leslie D. Patterson to be our Vice President, Operations & Construction. In this position, Mr. Patterson
is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment
Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $
On
June 26, 2023, our subsidiary VivaVentures Remediation Corp., entered into an
On June 20, 2023, we issued a 15% secured promissory note (the “Note”) due as described below, to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $
As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share (the “Option”). At any time there are amounts due to DIC under the Note, DIC may use the amounts to purchase some or all of the shares under the Option by using the outstanding amounts as payment of the exercise price under the Option. We also granted DIC a security interest in our Trial Remediation Processing Center that is currently on-site at the DIC facility in Kuwait. Additionally, we granted DIC a security interest in the RPC.
18
We will repay the amounts due under the Note from the operations of the RPC. Under the terms of the Services Agreement, we are entitled to $20 per ton of material processed through the RPC from DIC. In order to repay the amounts due under the Note, DIC will deduct $12 per ton of material processed from the amounts due to us until all amounts due under the Note have been repaid.
Following an event of default, as defined in the Note, we will be subject to a penalty of $5,000 per day. Any penalties incurred under the Note will be added to the Principal Amount due and owing under the Note.
On
May 25, 2023,
In May 2023, we entered into a Consulting Agreement with Trent Staggs, one of our former directors. Under the terms of the agreement, Mr. Staggs is assisting us with certain permitting and reporting services related to our RPC in Utah. The agreement is for a term of four months and we are paying Mr. Staggs a total of $
On
May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master
Agreement”) with Maxus Capital Group, LLC (“Maxus”), under which Maxus agreed to finance the build-out of our new facility
located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. Once the facility is built-out we plan
to put the RPC we lease from VWF at the location and perform oil remediation and wash plant cleaning services. We expect Maxus to fund
approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we
will lease the wash plant facility financed by Maxus under the WCCC lease supplement. We expect our lease payments to Maxus under the
supplement to be approximately $
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that reflect management’s current views with respect to future events and financial performance. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report. The forward-looking statements made in this report are based only on events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our” refer to Vivakor, Inc., its wholly owned and majority-owned active subsidiaries, or joint ventures (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated. Vivakor has the following wholly and majority-owned subsidiaries: Silver Fuels Delhi, LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, RPC Design and Manufacturing LLC (“RDM”), a Utah limited liability company, Vivaventures Remediation Corp., a Texas corporation, Vivaventures Management Company, Inc., a Nevada corporation, Vivasphere, Inc., a Nevada corporation, Vivaventures Oil Sands, Inc., a Utah corporation. We have a 99.95% ownership interest in Vivaventures Energy Group, Inc., a Nevada Corporation; the 0.05% minority interest in Vivaventures Energy Group, Inc. is held by a private investor unaffiliated with us. We also have an approximate 49% ownership interest in Vivakor Middle East Limited Liability Company, a Qatar limited liability company. Vivakor manages and consolidates RPC Design and Manufacturing LLC, which includes a noncontrolling interest investment from Vivaopportunity Fund, LLC, which is also managed by Vivaventures Management Company, Inc. Vivakor has common officers with and consolidates Viva Wealth Fund I, LLC.
20
Business Overview
Vivakor, Inc. is a socially responsible operator, acquirer and developer of technologies and assets in the oil and gas industry, as well as, related environmental solutions. Currently, our efforts are primarily focused on operating crude oil gathering, storage and transportation facilities, as well as contaminated soil remediation services.
One of our facilities sells crude oil in amounts up to 60,000 barrels per month under agreements with a large energy company. A different facility owns a 120,000 barrel crude oil storage tank near Colorado City, Texas. The storage tank is presently connected to the Lotus pipeline system and we plan to further connect the tank to major pipeline systems.
Our soil remediation services specialize in the remediation of soil and the extraction of hydrocarbons, such as oil, from properties contaminated by or laden with heavy crude oil and other hydrocarbon-based substances utilizing our Remediation Processing Centers (RPCs). Our patented process allows us to successfully recover the hydrocarbons which we believe could then be used to produce asphaltic cement and/or other petroleum-based products. We are currently focusing our soil remediation efforts on our project in Kuwait and our upcoming project in the Houston, Texas area.
Reclassifications
Certain reclassifications may have been made to prior years’ amounts to conform to the 2023 presentation.
COVID-19
On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak to be a global pandemic. In addition to the devastating effects on human life, the pandemic is having a negative ripple effect on the global economy, leading to disruptions and volatility in the global financial markets. Most U.S. states and many countries have issued policies intended to stop or slow the further spread of the disease.
In March 2020 we temporarily suspended operations in Kuwait and Utah due to COVID-19 government restrictions. Utah and Kuwait have since resumed site preparations for operations. We have experienced supply chain disruptions in building our Remediation Processing Centers (“RPC”) and completing certain refurbishment on our precious metal extraction machines. These suspensions have had a negative impact on our business and there can be no guaranty that we will not need to suspend operations again in the future as a result of the pandemic.
COVID-19 and the U.S. response to the pandemic are significantly affecting the economy. There are no comparable events that provide guidance as to the effect the COVID-19 pandemic may have in the long-term, and, as a result, the ultimate effect of the pandemic is highly uncertain and subject to change. We do not yet know the full extent of the effects on the economy, the markets we serve, our business, or our operations.
Recent Developments
DIC Note
In conjunction with our Services Agreement we signed with DIC on December 14, 2021, on June 20, 2023, we issued a 15% secured promissory note (the “Note”) due as described below, to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”), in the principal amount of up to $1,950,000 (the “Principal Amount”). We are using the proceeds of the Note to relocate, refurbish, and fully install our RPC currently located in Vernal, Utah to DIC’s location in Kuwait. The installation of this RPC in Kuwait will allow us to perform under the Services Agreement.
As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share (the “Option”). At any time there are amounts due to DIC under the Note, DIC may use the amounts to purchase some or all of the shares under the Option by using the outstanding amounts as payment of the exercise price under the Option. We also granted DIC a security interest in our Trial Remediation Processing Center that is currently on-site at the DIC facility in Kuwait. Additionally, we granted DIC a security interest in the RPC.
21
We will repay the amounts due under the Note from the operations of the RPC. Under the terms of the Services Agreement, we are entitled to $20 per ton of material processed through the RPC from DIC. In order to repay the amounts due under the Note, DIC will deduct $12 per ton of material processed from the amounts due to us until all amounts due under the Note have been repaid.
Following an event of default, as defined in the Note, we will be subject to a penalty of $5,000 per day. Any penalties incurred under the Note will be added to the Principal Amount due and owing under the Note.
VWF Lease
On June 26, 2023, our subsidiary VivaVentures Remediation Corp., entered into an RPC Equipment Lease Agreement with Viva Wealth Fund I, LLC (“VWF”), under which VivaVentures Remediation Corp. agreed to lease the Remediation Processing Center (“RPC”) owned by VWF. VWF previously raised approximately $13.7 million and used the funds to have our subsidiary, RPC Design and Manufacturing, LLC, build an RPC, which we are now leasing from VWF in exchange for 25% of the gross proceeds from the RPC’s oil extraction production services, with a minimum $400,000 annual payment beginning nine months after the RPC is fully-operational as defined in the RPC Equipment Lease Agreement.
Maxus Lease and Financing
On May 23, 2023, our subsidiary White Claw Colorado City, LLC (“WCCC”), supplemented an existing Master Agreement (the “Master Agreement”) with Maxus Capital Group, LLC (“Maxus”), under which Maxus agreed to finance the build-out of our new facility located on the land leased by our subsidiary, VivaVentures Remediation Corp., in Houston, Texas. Once the facility is built-out we plan to put the RPC we lease from VWF at the location and perform oil remediation and wash plant cleaning services. We expect Maxus to fund approximately $2.2 million to finance the build-out of the Houston location in the form of a finance lease for the wash plant, and we will lease the wash plant facility financed by Maxus under the WCCC lease supplement. We expect our lease payments to Maxus under the supplement to be approximately $57,962 per month over 4 years, with an early buyout option of approximately $685,000 or lease-end option to purchase the facilities for the fair market value.
Hiring Vice President, Operations and Construction
On July 1, 2023, we hired Leslie D. Patterson to be our Vice President, Operations & Construction. In this position, Mr. Patterson is in charge of managing the development and operations for our facilities. In connection with his hiring we signed an Executive Employment Agreement with Mr. Patterson. Under the terms of the Agreement, Mr. Patterson will receive $150,000 in annual salary, shares of our common stock equal to $25,000 annually, and a one-time bonus of shares of our common stock equal to $125,000, payable on the one year anniversary of his employment. Mr. Patterson is entitled to other bonuses and benefits on par with our general employment policies.
Consulting Agreements
On May 25, 2023, we entered into a Consulting Agreement with Matthew Nicosia, our former Chief Executive Officer, Under the terms of the agreement, Mr. Nicosia is assisting our current Chief Executive Officer regarding transitioning certain projects Mr. Nicosia was working on to our new Chief Executive Officer, primarily those operations related to our business in Kuwait and our attempt to sell some operations that we have impaired. The agreement is for an initial term of three-months and we are paying Mr. Nicosia a total of $25,000 in cash and $30,000 worth of our common stock.
In May 2023, we entered into a Consulting Agreement with Trent Staggs, one of our former directors. Under the terms of the agreement, Mr. Staggs is assisting us with certain permitting and reporting services related to our RPC in Utah. The agreement is for a term of four months and we are paying Mr. Staggs a total of $48,000 in cash under the terms of the agreement.
Convertible Promissory Note
On July 25, 2023, a non-affiliated investor loaned us $500,000 under the terms of a 10% Convertible Promissory Note dated July 6, 2023 (the “Investor Note”). Under the terms of the Investor Note, the loan is at a 10% per annum interest rate, matures two years from the date of issuance, and is convertible into shares of our common stock at $2.50 per share, unless such conversion would cause the investor to own more than 4.9% of our outstanding common stock.
22
Results of Operations for the Three Months ended March 31, 2023 and 2022
Revenue
For the three months ended March 31, 2023 and 2022 we realized revenues of $15,544,872 and none, respectively, representing an increase of $15,544,872 or 100%. The increase in revenue is primarily attributed to our oil and natural gas liquid sales which have been realized through the operations from SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.
Cost of Revenue
For the three months ended March 31, 2023, our cost of revenues consisted primarily of costs associated with selling oil and natural gas liquid through the operations from our newly acquired businesses in SFD and WCCC, which were acquired through our business combination which closed on August 1, 2022.
For the three months ended March 31, 2023 and 2022 costs of revenue were $14,031,714 and none, respectively, representing an increase of $14,031,714 or 100%. The increase in the cost of revenue is primarily attributed to the cost of goods sold for our oil and natural gas liquid products realized through the operations from our newly acquired businesses in SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.
Gross Profit and Gross Margin
For the three months ended March 31, 2023 and 2022 we realized gross profit of $1,513,158 and none, respectively, representing an increase of $1,513,158 or 100%. For the three months ended March 31, 2023, the gross profit increased in proportion to the revenue and costs of revenue related to the purchase and sale of our oil and natural gas liquid products.
Operating Expenses
For the three months ended March 31, 2023 and 2022, we realized operating expenses of $2,638,030 and $1,879,364, which represents an increase of $758,666, or 40.37%. The increase in operating expenses is attributed to the following:
For the three months ended March 31, 2023 and 2022, we realized amortization and depreciation expense of $784,520 and $375,218, which represents an increase of $409,302 or 109.08%. The increase in amortization and depreciation expense is primarily attributed to the amortization of our newly acquired contracts and depreciation from our newly acquired property, plant and equipment held by SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022.
New management and board of director compensation agreements were entered into in June 2022, October 2022, and January 2023. New compensation agreements were entered into as a result of previous executive management being significantly undercompensated prior to the underwritten public offering and uplist to Nasdaq in 2022. In order to retain management and the board of directors for the two then executives. In October 2022 our previous CEO resigned, and we entered into an employment agreement with our current CEO, where the CEO salary increased from $375,000 to $1,000,000 annually, but it is only payable in common stock of the Company. In March 2023, the Compensation Committee set the new compensation for new independent directors, which replaced recently resigned independent Board members, which included prorated annual cash payments of $50,000 ($60,000 if a committee chair), $50,000 paid in our Common Stock, and 50,000 shares of our Common Stock, which is to be granted immediately.
Interest expense
For the three months ended March 31, 2023 and 2022, we realized interest expense of $1,205,669 and $91,965, which represents an increase of $1,113,704, or 1,211.01%. The increase in interest expense is mainly attributable the $28,664,284 in notes payable issued as consideration for our newly acquired entities, SFD and WCCC, which were acquired through our business combination, which closed on August 1, 2022. The notes accrue interest of prime plus 3% on the outstanding balance of the notes.
23
Unrealized loss on marketable securities
For the three months ended March 31, 2023 and 2022, we reported an unrealized gain (loss) of $(495,826) and 1,239,566, which represents a decrease of $1,735,392, or 140.00%. Our marketable securities were considered to be traded on an active market and were accounted for at a fair value based on the quoted prices in the active markets resulting in aggregate unrealized gains or losses as noted above.
Cash flows
The following table sets forth the primary sources and uses of cash and cash equivalents for the three months ended March 31, 2023 and 2022 as presented below:
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (1,276,123 | ) | $ | (866,798 | ) | ||
| Net cash used in investing activities | (883,819 | ) | (196,298 | ) | ||||
| Net cash provided by financing activities | 1,677,068 | 6,416,601 | ||||||
Liquidity and Capital Resources
We have historically suffered net losses and cumulative negative cash flows from operations and, as of March 31, 2023 and December 31, 2022, we had an accumulated deficit of approximately $57.7 million and $55.2 million. As of March 31, 2023 and December 31, 2022, we had an working capital deficit of approximately $6.44 million and $3.77 million, respectively.
As of March 31, 2023 and December 31, 2022, we had cash and cash equivalents of $2,699,919 and $3,182,793, with $204,714 and $81,607 attributed to variable interest entities, respectively.
To date we have financed our operations primarily through debt financing, private equity offerings and our working interest agreements, although on February 14, 2022, the Company closed an underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share, for aggregate net proceeds of $6.2 million, after deducting underwriting discounts, commissions, and other offering expenses. The Company’s Common Stock began trading on the Nasdaq Capital Market under the symbol “VIVK”.
For the three months ended March 31, 2023 and 2022, our net cash used in operating activities was mainly comprised of net effect of the consolidated net loss of $2,817,167 and $726,035, our depreciation and amortization of $784,520 and $375,218, a decrease in accounts receivable of $1,191,512 and none, a decrease in accounts payable of $1,775,681 and none. For the three months ended March 31, 2023 and 2022, we were also able to issue stock for services of none and $427,500, and stock-based compensation employees of none and $111,528 in lieu of using cash. We also realized interest expense on loans and notes payable of $1,205,669 and $91,965, and an unrealized loss of $495,826 and unrealized gain of $1,239,566 on marketable securities as described above.
For the three months ended March 31, 2023 and 2022, our net cash used in investing activities was mainly attributed to our purchase of equipment of $883,819 and $206,298 related to the manufacturing of our RPCs and a wash plant facilities.
Our net cash provided by our financing activities was mainly attributed to the net effect of the following events:
For the three months ended March 31, 2023 and 2022, and we received proceeds of $2,333,797 and $427,496 related to the issuance of notes and other loans. We also received proceeds of $6,240,000 from our February 14, 2022 underwritten public offering of 1,600,000 shares of common stock. For the three months ended March 31, 2023 and 2022, we paid down notes payable by $367,727 and $114,945 and made distributions to Viva Wealth Fund I, LLC unit holders of $289,002 and $135,950.
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We have historically suffered net losses and cumulative negative cash flows from operations, and as of March 31, 2023, we had an accumulated deficit of approximately $57.7 million. As of March 31, 2023 and December 31, 2022, we had a working capital deficit of approximately $6.4 million and $3.7 million, respectively. As of March 31, 2023 we had cash of approximately $2.7 million. In addition, we have obligations to pay approximately $14.1 million (of which approximately $13.2 million can be satisfied through the issuance of our common stock under the terms of the debt and $410,200 is related to PPP loans that are anticipated to be forgiven with the remainder) of debt in cash within one year of the issuance of these financial statements. Our CEO has also committed to provide credit support through December 2024, as necessary, for an amount up to $8 million to provide the Company sufficient cash resources, if required, to execute its plans for the next twelve months. These conditions raise substantial doubt about the Company's ability to continue as a going concern. We believe the liquid assets and CEO commitment give it adequate working capital to finance our day-to-day operations for at least twelve months through July 2024.
Capitalized interest on construction in process was $237,978 and $488,014 for the three months ended March 31, 2023 and 2022. There are no further existing firm obligations; however, we anticipate further construction costs of approximately $1 million in connection with our construction of our washplant facilities; and construction for each Nanosponge costs approximately $200,000, and we intend to manufacture and add a Nanosponge to our current and future RPCs.
Our ability to continue to access capital could be affected adversely by various factors, including general market and other economic conditions, interest rates, the perception of our potential future earnings and cash distributions, any unwillingness on the part of lenders to make loans to us and any deterioration in the financial position of lenders that might make them unable to meet their obligations to us. If we cannot raise capital through public or private debt financings, equity offerings, or other means, our ability to grow our business may be negatively affected. In such case, we may need to suspend site and plant construction or further acquisitions until market conditions improve.
Contractual Obligations
Our contractual obligations as of March 31, 2023 for finance lease liabilities are for the sale and leaseback of certain land, property, plant, and equipment that were acquired in the closing of our business combination, which acquired SFD and WCCC on August 1, 2022, which leases end in 2025 and 2026. Finance lease obligations as of March 31, 2023 are as follows:
| 2023 | $ | 722,925 | ||
| 2024 | 963,900 | |||
| 2025 | 594,792 | |||
| 2026 | 471,756 | |||
| Total | $ | 2,753,373 |
Our contractual obligations as of March 31, 2023 for operating lease liabilities are for office and warehouse space, which leases end in 2024 and 2025, and a land lease which ends in 2042. Operating lease obligations as of March 31, 2023 are as follows:
| 2023 | $ | 373,924 | ||
| 2024 | 435,906 | |||
| 2025 | 162,545 | |||
| 2026 | 136,975 | |||
| 2027 | 153,089 | |||
| Thereafter | 2,872,048 | |||
| Total | $ | 4,134,487 |
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Interest Rate and Market Risk
Interest rate risk is the potential for reduced net interest income and other rate-sensitive income resulting from adverse changes in the level of interest rates. We do not have variable interest rate-sensitive income agreements. We do have financing arrangements that were issued on August 1, 2022 as consideration for the business combination and acquisition of SFD and WCCC, in which the three year notes have variable interest rates based on the prime rate, which exposes us to further interest expense if the prime rate increases. We believe that the LIBOR is being phased out globally and do not have any financings with variable interest rates based on the LIBOR.
Market Risk - Equity Investments
Market risk is the potential for loss arising from adverse changes in the fair value of fixed-income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. We own equity securities that are publicly traded. Because the fair value of these securities may fall below the cost at which we acquired them, we are exposed to the possibility of loss. Equity investments are approved, monitored, and evaluated by members of management.
Inflation
Prolonged periods of slow growth, significant inflationary pressures, volatility and disruption in financial markets, could lead to increased costs of doing business. Inflation generally will cause suppliers to increase their rates, and inflation may also increase employee salaries and benefits. In connection with such rate increases, we may or may not be able to increase our pricing to consumers. Inflation could cause both our investment and cost of revenue to increase, thereby lowering our return on investment and depressing our gross margins.
Off Balance Sheet Arrangements
None.
Critical Accounting Policies & Use of Estimates
There have been no material changes to our critical accounting policies and the use of estimates from these disclosures reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on May 25, 2023.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact there are resource constraints and management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, as of March 31, 2023, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:
| a) | We did not have enough personnel in our accounting and financial reporting functions. Due to insufficient personnel in our accounting department, we were not able to achieve adequate segregation of duties, and, as a result, we did not have adequate review controls surrounding: (i) our technical accounting matters in our financial reporting process, and (ii) the work of specialists involved in the estimation process. These control deficiencies, which are pervasive in nature, result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. |
Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Since our assessment as of March 31, 2023, we have continued to hire additional external accounting staff, whom are consultants with expertise in research and technical guidance, and we are working to retain additional qualified valuation experts that report on their internal controls. We believe that these additions may provide for the remediation of these material weaknesses in 2023.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Control Over Financial Reporting
As noted above, we continue to contract with additional external accounting staff in order to attempt to remediate our material weaknesses. Such changes include the addition of multiple reviewers of financial information before it is submitted for filing with the SEC. There were no other changes in our internal controls identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the three months ended March 31, 2023 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various legal actions that arise in the normal course of business. We intend to defend vigorously against any future claims and litigation. We are not currently involved in any material disputes and do not have any material litigation matters pending.
ITEM 1A. RISK FACTORS
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K and our other filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| Incorporated by Reference | Filed or Furnished | |||||||||
| Exhibit No. | Exhibit Description | Form | Date | Number | Herewith | |||||
| 4.1 | Promissory Note with Al Dali International for Gen. Trading & Cont. Co. dated June 20, 2023 | 8-K | 6/23/23 | 4.1 | ||||||
| 4.2 | Stock Option Agreement with Al Dali International for Gen. Trading & Cont. Co. dated June 20, 2023 | 8-K | 6/23/23 | 4.2 | ||||||
| 4.3 | Form of Convertible Promissory Note with Third Party Investor dated July 6, 2023 | X | ||||||||
| 10.1 | Executive Employment Agreement with Leslie D. Patterson | X | ||||||||
| 10.2 | Consulting Agreement with Matthew Nicosia | X | ||||||||
| 10.3 | Consulting Agreement with Trent Staggs | X | ||||||||
| 10.4 | Equipment Lease Agreement with Viva Wealth Fund, LLC dated June 26, 2023 | X | ||||||||
| 10.5 | Schedule No. 2 to Master Agreement between Maxus Capital Group, LLC and White Claw Colorado City, LLC dated May 23, 2023 | X | ||||||||
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
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These exhibits are being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VIVAKOR, INC. | ||
| By: | /s/ James Ballengee | |
| James Ballengee | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: | July 27, 2023 | |
| VIVAKOR, INC. | ||
| By: | /s/ Tyler Nelson | |
| Tyler Nelson | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date: | July 27, 2023 | |
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Exhibit 4.3
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
VIVAKOR, INC.
10% CONVERTIBLE PROMISSORY NOTE
| $500,000.00 | July 6, 2023 |
| Lehi, UT |
For value received, Vivakor, Inc., a Nevada corporation (the “Company”), promises to pay to RSF, LLC, a Louisiana limited liability company, or his assigns (the “Holder”) the principal sum of Five Hundred Thousand Dollars ($500,000). The principal hereof and any unpaid accrued interest thereon shall be due and payable on or before 5:00 p.m., Pacific Standard Time, on July 5, 2025 (the “Maturity Date”) (unless such payment date is accelerated as provided in Section 5 hereof). Payment of all amounts due hereunder shall be made at the address of the Holder provided for in Section 7 hereof. Interest shall accrue on the outstanding principal amount beginning on [Issue Date], 2023, at the rate of ten percent (10%) per annum, compounded annually based on a 365-day year and shall continue on the outstanding principal until paid in full. The Holder may elect to have the interest due hereunder to be either paid in cash monthly or have the interest accrue and be payable on the Maturity Date. Such election will be indicated on the signature page hereof. For investors that elect to accrue the interest due hereunder, the interest will be paid in cash or may be converted into shares of our common stock under the same terms as the principal amount on the Maturity Date.
1. PREPAYMENT. The Company may at any time, upon thirty (30) days written notice (each a “Prepayment Notice”), prepay all or any part of the principal balance of this Promissory Note, provided that concurrently with each such prepayment the Company shall pay accrued interest on the principal, if any, prepaid to the date of such prepayment. Any Prepayment Notice must contain the amount of principal and interest to be prepaid by the Company. The end of the thirty-day period following a Prepayment Notice shall be referred to as a “Prepayment Date.” In the event that the Company sends a Prepayment Notice to Holder, Holder may elect prior to the Prepayment Date to convert into common stock of the Company pursuant to Section 2 hereof, all or part of the amount of principal and interest to be repaid under the Prepayment Notice instead of receiving such prepayment.
2. CONVERSION. The Holder of this Promissory Note is entitled, at its option and subject to the other terms set forth herein, at any time beginning on the date hereof, and in whole or in part, to convert the outstanding principal amount of this Promissory Note, or any portion of the principal amount hereof, and any accrued interest, into shares of the common stock of the Company. Any amounts the Holder elects to convert will be converted into common stock at a rate of Two Dollars Fifty Cents ($2.50) per share. Any conversion shall be effectuated by giving a written notice (“Notice of Conversion”) to the Company on the date of conversion, stating therein the amount of principal and accrued interest due to Holder under this Promissory Note being converted, in form attached hereto as Exhibit A.
Notwithstanding the foregoing, the Holder may not convert any outstanding amounts due under this Promissory Note if at the time of such conversion the amount of common stock issued for the conversion, when added to other shares of Company common stock owned by the Holder or which can be acquired by Holder upon exercise or conversion of any other instrument, would cause the Holder to own more than four and nine-tenths percent (4.9%) of the Company’s outstanding common stock.
3. CONVERSION PRICE ADJUSTMENTS. In the event the Company should at any time after the date hereof do either of the following: i) fix a record date for the effectuation of a split or subdivision of the outstanding common stock of the Company, or ii) grant the holders of the Company’s common stock a dividend or other distribution payable in additional shares of common stock or other securities or rights convertible into additional shares of common stock without the payment of any consideration by such holder for the additional shares of common stock (a “Stock Adjustment”), then, as of the record date (or the date of the Stock Adjustment if no record date is fixed), the conversion price of this Promissory Note shall be appropriately adjusted so that the number of shares of common stock issuable upon conversion of this Promissory Note is adjusted in proportion to such change in the number of outstanding shares in order to insure such Stock Adjustment does not decrease the conversion value of this Promissory Note.
4. DEFAULT. The occurrence of any one of the following events shall constitute an Event of Default:
(a) The non-payment, when due, of any principal or interest pursuant to this Promissory Note;
(b) The material breach of any representation or warranty in this Promissory Note. In the event the Holder becomes aware of a breach of this Section 4(b), then provided such breach is capable of being cured by Company, the Holder shall notify the Company in writing of such breach and the Company shall have thirty (30) business days after notice to cure such breach;
(c) The breach of any covenant or undertaking, not otherwise provided for in this Section 4;
(d) The commencement by the Company of any voluntary proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, receivership, dissolution, or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or the adjudication of the Company as insolvent or bankrupt by a decree of a court of competent jurisdiction; or the petition or application by the Company for, acquiescence in, or consent by the Company to, the appointment of any receiver or trustee for the Company or for all or a substantial part of the property of the Company; or the assignment by the Company for the benefit of creditors; or the written admission of the Company of its inability to pay its debts as they mature; or
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(e) The commencement against the Company of any proceeding relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, adjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, provided, however, that the commencement of such a proceeding shall not constitute an Event of Default unless the Company consents to the same or admits in writing the material allegations of same, or said proceeding shall remain undismissed for 20 days; or the issuance of any order, judgment or decree for the appointment of a receiver or trustee for the Company or for all or a substantial part of the property of the Company, which order, judgment or decree remains undismissed for 20 days; or a warrant of attachment, execution, or similar process shall be issued against any substantial part of the property of the Company.
Upon the occurrence of any Default or Event of Default, the Holder, may, by written notice to the Company, declare all or any portion of the unpaid principal amount due to Holder, together with all accrued interest thereon, immediately due and payable, in which event it shall immediately be and become due and payable, provided that upon the occurrence of an Event of Default as set forth in paragraph (d) or paragraph (e) hereof, all or any portion of the unpaid principal amount due to Holder, together with all accrued interest thereon, shall immediately become due and payable without any such notice.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS BY HOLDER: The Holder hereby represents, warrants and agrees as follows:
a) Purchase for Own Account. Holder represents that it is acquiring this Promissory Note and the underlying shares of common stock on conversion (together, the “Securities”) solely for his/her own account and beneficial interest for investment and not for sale or with a view to distribution of the Securities or any part thereof, has no present intention of selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the same, and does not presently have reason to anticipate a change in such intention.
b) Ability to Bear Economic Risk. Holder acknowledges that an investment in this Securities involves a high degree of risk, and represents that he/she is able, without materially impairing his/her financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of his/her investment.
c) Access to Information. The Holder acknowledges that the Holder has been furnished with such financial and other information concerning the Company, the directors and officers of the Company, and the business and proposed business of the Company as the Holder considers necessary in connection with the Holder’s investment in the Securities. As a result, the Holder is thoroughly familiar with the proposed business, operations, properties and financial condition of the Company and has discussed with officers of the Company any questions the Holder may have had with respect thereto. The Holder understands:
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(i) The risks involved in this investment, including the speculative nature of the investment;
(ii) The financial hazards involved in this investment, including the risk of losing the Holder’s entire investment;
(iii) The lack of liquidity and restrictions on transfers of the Securities; (iv) The tax consequences of this investment; and
(v) The Company is a “reporting company” under the Securities Exchange Act of 1934, as amended, but is not current in its reporting obligations with the Securities and Exchange Commission.
The Holder has consulted with the Holder’s own legal, accounting, tax, investment and other advisers with respect to the tax treatment of an investment by the Holder in the Securities and the merits and risks of an investment in the Securities.
d) Securities Part of Private Placement. The Holder has been advised that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”), or qualified under the securities law of any state, on the ground, among others, that no distribution or public offering of the Securities is to be effected and the Securities will be issued by the Company in connection with a transaction that does not involve any public offering within the meaning of section 4(a)(2) of the Act and/or Regulation D as promulgated by the Securities and Exchange Commission under the Act, and under any applicable state blue sky authority. The Holder understands that the Company is relying in part on the Holder’s representations as set forth herein for purposes of claiming such exemptions and that the basis for such exemptions may not be present if, notwithstanding the Holder’s representations, the Holder has in mind merely acquiring the Securities for resale on the occurrence or nonoccurrence of some predetermined event. The Holder has no such intention.
e) Further Limitations on Disposition. Holder further acknowledges that the Securities are restricted securities under Rule 144 of the Act, and, therefore, if the Company, in its sole discretion, chooses to issue any certificates reflecting the ownership interest in the Securities, those certificates will contain a restrictive legend substantially similar to the following:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Without in any way limiting the representations set forth above, Holder further agrees not to make any disposition of all or any portion of the Securities unless and until:
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(i) There is then in effect a Registration Statement under the Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or
(ii) Holder shall have obtained the consent of the Company and notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration under the Act or any applicable state securities laws.
Notwithstanding the provisions of subparagraphs (i) and (ii) above, no such registration statement or opinion of counsel shall be necessary for a transfer by such Holder to a partner (or retired partner) of Holder, or transfers by gift, will or intestate succession to any spouse or lineal descendants or ancestors, if all transferees agree in writing to be subject to the terms hereof to the same extent as if they were Holders hereunder as long as the consent of the Company is obtained.
f) Sophisticated Investor Status. The Holder is a sophisticated investor.
g) Holder Authorization. The Holder, if not an individual, is empowered and duly authorized to enter into this Agreement under any governing document, partnership agreement, trust instrument, pension plan, charter, certificate of incorporation, bylaw provision or the like; this Agreement constitutes a valid and binding agreement of the Holder enforceable against the Holder in accordance with its terms; and the person signing this Agreement on behalf of the Holder is empowered and duly authorized to do so by the governing document or trust instrument, pension plan, charter, certificate of incorporation, bylaw provision, board of directors or stockholder resolution, or the like.
h) No Backup Withholding. The Social Security Number or taxpayer identification shown in this Agreement is correct, and the Holder is not subject to backup withholding because (i) the Holder has not been notified that he or she is subject to backup withholding as a result of a failure to report all interest and dividends or (ii) the Internal Revenue Service has notified the Holder that he or she is no longer subject to backup withholding.
6. TRANSFERABILITY. This Promissory Note shall not be transferred, pledged, hypothecated, or assigned by the Holder without the express written consent of the Company, which consent will not be unreasonably withheld.
7. NOTICES. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the Party to be notified, (b) when sent by confirmed email if sent during normal business hours of the recipient, if not, then on the next business day, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:
5
| If to the Company: | Vivakor, Inc. | |
| 4101 North Thanksgiving Way | ||
| Lehi, UT 84043 | ||
| Attn: James Ballengee, CEO | ||
| Email: jballengee@vivakor.com | ||
| with a copy to: | Law Offices of Craig V. Butler | |
| 300 Spectrum Center Drive, Ste 300 | ||
| Irvine, CA 92618 | ||
| Attn: Craig V. Butler, Esq. | ||
| Email: cbutler@craigbutlerlaw.com | ||
| If to Holder: | RSF, LLC | |
| Attn: Jason Kirk | ||
| 8658 Business Park, Suite 100 | ||
| Shreveport, LA 71105 | ||
| Email: jason.kirk@nationwidegroup.org |
or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other Party hereto.
8. GOVERNING LAW; VENUE. The terms of this Promissory Note shall be construed in accordance with the laws of the State of Utah, as applied to contracts entered into by Utah residents within the State of Utah, and to be performed entirely within the State of Utah. The parties agree that any action brought to enforce the terms of this Promissory Note will be brought in the appropriate federal or state court having jurisdiction over Utah County, Utah.
9. ATTORNEY’S FEES. In the event the Holder hereof shall refer this Promissory Note to an attorney to enforce the terms hereof, the Company agrees to pay all the costs and expenses incurred in attempting or effecting the enforcement of the Holder’s rights, including reasonable attorney’s fees, whether or not suit is instituted.
10. CONFORMITY WITH LAW. It is the intention of the Company and of the Holder to conform strictly to applicable usury and similar laws. Accordingly, notwithstanding anything to the contrary in this Promissory Note, it is agreed that the aggregate of all charges which constitute interest under applicable usury and similar laws that are contracted for, chargeable or receivable under or in respect of this Promissory Note, shall under no circumstances exceed the maximum amount of interest permitted by such laws, and any excess, whether occasioned by acceleration or maturity of this Promissory Note or otherwise, shall be canceled automatically, and if theretofore paid, shall be either refunded to the Company or credited on the principal amount of this Promissory Note.
11. MODIFICATION; WAIVER. No modification or waiver of any provision of this Promissory Note or consent to departure therefrom shall be effective unless in writing and approved by the Company and the Holder.
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IN WITNESS WHEREOF, Company has executed this Convertible Promissory Note as of the date first written above.
| “Company” | ||
| Vivakor, Inc., | ||
| a Nevada corporation | ||
| /s/ James Ballengee | ||
| By: | James Ballengee | |
| Its: | Chief Executive Officer | |
7
EXHIBIT A
NOTICE OF CONVERSION
The undersigned (the “Holder”) hereby elects to convert principal and/or interest due under that certain Convertible Promissory Note dated _________ __, 2023 issued by Vivakor, Inc., a Nevada corporation (the “Company”) to Holder, into shares of common stock (the “Common Stock”) of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.
| Conversion calculations: | |||
| Date to Effect Conversion: | |||
| Principal Amount of Note to be Converted: | $ | ||
| Accrued Interest to be Converted: | $ | ||
| Conversion Price: | $ | ||
| Number of shares of Common Stock to be issued: | |||
| Signature: | |||
| Name: | |||
| Address for Delivery of Common Stock Certificates: | |||
A-1
Exhibit 10.1
Execution Copy
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated effective June 2, 2023, is by and between Vivakor, Inc., a Nevada corporation (the “Company”), and LESLIE D. PATTERSON, an individual domiciled in Salt Lake County, Utah (the “Executive”). The Company and Executive may herein be referred to individually as a “Party” or collectively as the “Parties”.
WHEREAS, Executive is an accomplished oilfield construction and operations manager, with more than thirty years of experience managing major capital projects for Fortune 500 companies;
WHEREAS, Executive is currently the Managing Partner and CEO of Coyote Oilfield Services, LLC, a Texas limited liability company, an oilfield services provider;
WHEREAS, Executive possesses substantial knowledge, experience, and relationships in the midstream petroleum business in which the Company is currently engaged, having previously served as a construction and operations executive at public and private equity portfolio companies;
WHEREAS, Company desires to employ the Executive pursuant to the terms and conditions herein contained, and Executive desires to be employed by Company upon the terms and conditions herein contained;
NOW THEREFORE, in consideration of the mutual promises, covenants and obligations set forth herein, the Parties agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive hereby accepts such employment subject to the terms and conditions contained in this Agreement. The Executive is engaged as an employee of the Company and the Executive and the Company do not intend to create a joint venture, partnership or other relationship that might impose similar such fiduciary obligations on the Executive or the Company in the performance of this Agreement. In all respects not controlled by or set forth in this Agreement, the Executive’s employment shall be at-will according to the laws of the State of Texas.
2. Executive’s Duties. The Executive shall be employed on a full-time basis. Throughout the term of this Agreement, the Executive will use the Executive’s best efforts and due diligence to assist the Company in the objective of achieving the most profitable operation of the Company and the Company’s affiliated entities consistent with developing and maintaining a quality business operation.
(a) Specific Rights and Duties. During the term of this Agreement the Executive shall have the title of Vice President-Operations and Construction of the Company (and, if applicable, its subsidiaries). The Executive agrees to perform all of the services required to fully and faithfully execute the offices and positions to which the Executive is appointed and such other services as may be reasonably directed by the Chief Executive Officer and the Board of Directors of the Company in accordance with this Agreement. The Executive shall be expected to travel frequently and widely to perform Executive’s duties hereunder, and the specific place and location of the performance of Executive’s employment will vary.
(b) Modifications. The precise duties to be performed by the Executive may be extended or curtailed in the discretion of the Chief Executive Officer and the Board of Directors of the Company, as reflected in writing. However, except for termination for Cause (as hereinafter defined in this Agreement), the withdrawal of the designation of the Executive as Executive Vice President of the Company (or more senior title), or the assignment of the performance of duties incumbent on the foregoing offices to other persons without the prior written consent of the Executive shall constitute termination without Cause of the Executive by the Company.
(c) Employee Handbook. From time to time, the Company or its parent companies may issue policies and procedures applicable to employees and the Executive including an Employment Policies Manual or Employee Handbook. The Executive agrees to comply with such policies and procedures, except to the extent such policies are inconsistent with this Agreement. Such policies and procedures may be supplemented, modified, changed or adopted without notice in the sole discretion of the Company at any time. In the event of a conflict between such policies and procedures and this Agreement, this Agreement shall control unless compliance with this Agreement will violate any governmental law or regulation applicable to the Company or its affiliated entities. Any activity by the Executive that is expressly permitted by this Agreement is hereby deemed by the Company not to violate such policies and procedures.
3. Other Activities. The Executive shall not be restricted from maintaining or making investments, or engaging in other businesses, enterprises or civic, charitable or public service functions if such activities, investments, businesses or enterprises do not result in a violation of applicable state or federal law. The Executive has in the past conducted business activities individually, and directly and indirectly by, through, and under various entities owned or controlled by the Executive, in whole or in part, more particularly set forth on Exhibit “B” hereto (the “Executive Affiliates”). The Executive shall be permitted to continue to conduct such activities by, through, and under the Executive Affiliates. To the fullest extent permitted by applicable law, and notwithstanding any other provisions of this Agreement, or any other agreement, the Company covenants and agrees not to prosecute, file or maintain any action, controversy, dispute, or proceeding, and does hereby expressly eliminate, waive, disclaim and release, any and all fiduciary duties of the Executive that may arise pursuant to performance of its or their obligations or exercise of its or their rights pursuant to this Agreement, or that may arise pursuant to any other standard, to any party herein, including, without limitation, to the Company, its shareholders, and in the case of insolvency or the zone of insolvency, to creditors of any character or claim, INSOFAR AND ONLY INSOFAR as such actions or controversies may arise out of or relate to the Executive Affiliates or Executive’s control over or business dealings by, through, or under the Executive Affiliates. The Company further agrees that for the term of this Agreement, the Executive is expressly permitted and authorized to directly or indirectly own, manage, operate, join, control and/or participate in the ownership, management, operation or control of, or be connected as an officer, employee, partner or otherwise with any business engaged in business or operations that compete or relate to, directly or indirectly, the business of the Company, or any proposed business, products, services, or strategy of the Company, or any business activity substantially and materially related to the Company business INSOFAR AND ONLY INSOFAR as activities may arise out of or relate to the Executive Affiliates or Executive’s control over the Executive Affiliates. The legal doctrines of “corporate opportunity,” “business opportunity” and similar doctrines shall not be applied to any of Executive’s business dealings by, through, with, or under the Executive Affiliates.
4. Executive’s Compensation. The Company agrees to compensate the Executive as follows:
(a) Incentive Equity Grant. On the first annual anniversary of the Effective Date, unrestricted shares of the Company’s common stock equal to not less than One Hundred Twenty-Five Thousand and No/100s US Dollars ($125,000.00 USD), shall be paid to the Executive an incentive equity grant, and on the eighteen (18) month semi-annual anniversary of the Effective Date, unrestricted shares of the Company’s common stock equal to not less than One Hundred Twenty-Five Thousand and No/100s US Dollars ($125,000 USD), shall be paid to the Executive as a further incentive equity grant (collectively, the “Incentive Equity”). All of the Incentive Equity will be priced per share based on the volume-weighted average price for the preceding five (5) NASDAQ trading days prior to the Effective Date. All shares comprising the Incentive Equity shall be issued under the Company’s 2021 Equity and Incentive Plan or successor plan and otherwise in accordance with applicable law and the rules and regulations of The Nasdaq Capital Market, and, in the event that any such shares cannot be issued because compliance with such requirements has not been met, the obligation to issue such shares will be accrued until such time as such compliance requirements have been satisfied. Employee must be employed by the Company, or its successors and assigns, in good standing on the dates the Incentive Equity is due to be paid as a condition to earn and be owed such Incentive Equity.
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(b) Base Compensation. Annualized cash salary compensation equal to not less than One Hundred Fifty Thousand and No/100s US Dollars ($150,000.00 USD) shall be paid to the Executive in equal bi-weekly installments (the “Cash Base Compensation”), and annual equity compensation of shares of the Company’s common stock equal to not less than Twenty-Five Thousand and No/100s US Dollars ($25,000), which shall be paid to the Executive in equal quarterly installments, beginning on the Effective Date during the Term of this Agreement (the “Stock Base Compensation”, and together with the Cash Base Compensation, collectively, the “Base Compensation”). The Stock Base Compensation for each year of the term hereof will be priced per share based on the volume-weighted average price for the preceding five (5) NASDAQ trading days prior to the Effective Date or annual anniversary of this agreement, as applicable. All shares comprising the Stock Base Compensation must be issued under the Company’s 2021 Equity and Incentive Plan or successor plan and otherwise in accordance with applicable law and the rules and regulations of The Nasdaq Capital Market, and, in the event that any such shares cannot be issued because compliance with such requirements has not been met, the obligation to issue such shares will be accrued until such time as such compliance requirements have been satisfied. The Base Compensation may be further increased by the Company from time to time.
(c) Discretionary Bonus. The Executive shall be eligible for such bonuses in such amounts and at such times, annual or otherwise, as determined in the discretion of the Compensation Committee of the Board of Directors of the Company.
(d) Benefits. The Company agrees to extend to the Executive retirement benefits, deferred compensation, reimbursement of reasonable expenditures for dues, travel, meal, lodging, entertainment, customer development and retention, and any other benefits the Company provides to other executives or officers from time to time on the same terms as such benefits are provided to such individuals, as well as coverage under the Company’s medical, life and disability insurance plans, if any (the “Benefits”). If the Executive is accepted for coverage under such plans, the Company will provide such coverage on the same terms as is customarily provided by the Company to the plan participants as modified from time to time. The Company may condition any such benefits on the Executive paying any amounts which the Company requires other employees to pay with respect to such benefits. Executive will be entitled to business class airline travel and lodging on all domestic and international travel in performance of Executive’s duties hereunder either paid for or reimbursed by the Company when upgrades through other means are unavailable.
(e) Vacation. The Executive will be entitled to take paid time off and vacation in accordance with the Company’s general employment policies.
5. Term. This Agreement shall be for a term commencing on the Effective Date and terminating at the conclusion of the Executive’s employment by the Company, whether by resignation, termination without cause, termination for Cause, or death of the Executive.
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6. Termination. This Agreement may be terminated in accordance with the following terms and conditions:
(a) Termination without Cause. The Executive or the Company may terminate the Executive’s employment without Cause at any time by the service of written notice of termination to the Executive specifying an effective date of such termination not sooner than five (5) business days after the date of such notice (the “Termination Date”). In the event the Executive is terminated without Cause by the Company, the Executive shall be entitled to: (i) a lump sum payment of the then-current Base Compensation in an amount equal to one (1) calendar year’s pay; (ii) excepting participation in any retirement or deferred compensation plan maintained by the Company, continuation of the Benefits at the levels and upon the terms provided on the date of termination hereunder, for eighteen (18) months following termination of Executive’s employment; (iii) all accrued but unused paid time off, vacation days, personal days, and sick days (the “Termination Compensation”).
(b) Termination for Cause. The Company may terminate this Agreement for Cause. For purposes of this Agreement, “Cause” means: (i) the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of the Company subsidiaries (other than a failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board of Directors which specifically identifies the manner in which the Board of Directors believes that the Executive has not substantially performed the Executive’s duties; or (ii) the willful engaging by the Executive in illegal conduct, gross misconduct or a clearly established violation of the Company’s written policies and procedures, in each case which is materially and demonstrably injurious to the Company. For purposes of this provision, an act or failure to act, on the part of the Executive, will not be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based on authority given pursuant to a resolution duly adopted by the Board of Directors or based on the advice of counsel for the Company will be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. In the event this Agreement is terminated for Cause, the Company shall have only the obligation to pay (x) accrued but unpaid Base Compensation and (y) accrued but unpaid paid time off, including sick days, vacation days, and personal days, to the Executive after the effective date of such termination. This Agreement will not be deemed to have terminated for Cause unless a written determination specifying the reasons for such termination is made, approved by a majority of the independent and disinterested members of the Board of Directors of the Company and delivered to the Executive. Thereafter, the Executive will have the right for a period of thirty (30) days to request a Board of Directors meeting to be held at a mutually agreeable time and location to be attended by the members of the Board of Directors in person, at which meeting the Executive will have an opportunity to be heard. Failing such determination and opportunity for hearing, any termination of this Agreement will be deemed to have occurred without Cause.
(c) Termination for Diminution of Duties or Relocation. If the Executive resigns their Employment for (i) a material and adverse diminution of the Executive’s duties, responsibilities or authorities, or (ii) a reduction in the Base Compensation (a “Diminution”), then the Executive shall be entitled to the Termination Compensation. The Executive must deliver written notice of a Diminution to the Board of Directors of the Company and permit the Company thirty (30) days to cure such Diminution.
(d) Termination after Change in Control. If, during the term of this Agreement, (i) a party (other than the Company, its affiliates, the Executive, the Executive Affiliates, or James H. Ballengee and/or his affiliates) acquires forty percent (40%) or more of the outstanding voting equity interests in the Company or its parent company, (ii) the Company or its parent company sell all or substantially all of the Company’s assets, or (iii) the Board of Directors of the Company approve a resolution or plan for liquidation or dissolution of the Company (each, a “Change in Control”), then the Executive shall be entitled to the Termination Compensation.
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(e) Payment. The Termination Compensation under this paragraph shall be paid no later than ten (10) calendar days subsequent to termination of the Executive’s employment. All payments shall be made in either United States Dollars or shares of the Company’s common stock, in the form in which the Executive was receiving his Base Compensation at the time of termination, unless the parties shall otherwise mutually agree, less applicable governmental withholdings. Subsequent to a termination without Cause of the Executive’s employment, the receipt of a notice of Diminution of Duties by the Board of Directors, or a Change in Control, the Company shall be prohibited from terminating the Executive for Cause.
(f) Release. As a condition to receiving the Termination Compensation, the Company may require the Executive to execute a Release in the form attached hereto as Exhibit “A”. The Company shall be obligated to pay the Executive in accordance with the terms hereof only if the Executive returns an originally-executed copy of the Release to the Company’s designated representative.
7. Death of Executive. If the Executive dies during the term of this Agreement, the Company shall be obligated to pay the Executive’s designee or estate the Termination Compensation at the time of the Executive’s death in addition to any Benefits that may be due and owing to the Executive.
8. Right of First Refusal. Executive grants to Company an exclusive right of first refusal to purchase the Executive Affiliate(s), subject to the terms and provisions of this Section 8. If Executive receives a bona fide offer to purchase all or a material part of the assets or equity of one or more of the Executive Affiliates during the term of Executive’s employment, Executive shall notify the Company in writing of such offer, including its material terms and provisions (the “ROFR Notice”). Company shall, no later than one (1) calendar month after receipt of the ROFR Notice, notify Executive of its intent to purchase such interest at the price and upon the terms set forth in the ROFR Notice. A refusal or failure to timely respond to a ROFR Notice is deemed to be a refusal by Company to purchase the interest upon the terms stated in the ROFR Notice, and Executive shall be free to sell the Executive Affiliates upon the stated terms. If any such transaction set forth in a ROFR Notice fails to be consummated within three (3) calendar months of expiration of the ROFR Notice, the provisions of this Section 8 shall again apply to the disposition of all or a material part of the assets or equity or one or more of the Executive Affiliates.
9. Indemnification. In addition to any rights Executive may have under the Company’s charter, bylaws, or other governing documents, the Company agrees to indemnify Executive and hold Executive harmless, both during the Term and thereafter, against all costs, expenses (including, without limitation, fines, excise taxes and attorneys’ and accountants’ fees) and liabilities (other than settlements to which the Company does not consent, which consent shall not be unreasonably withheld) (collectively, “Losses”) reasonably incurred by Executive in connection with any claim, action, proceeding or investigation brought against or involving Executive with respect to, arising out of or in any way relating to Executive’s employment with the Company; provided, however, that the Company shall not be required to indemnify Executive for Losses incurred as a result of Executive’s intentional misconduct or gross negligence (other than matters where Executive acted in good faith and in a manner he reasonably believed to be in and not opposed to the Company’s best interests). Executive shall promptly notify the Company of any claim, action, proceeding or investigation under this paragraph and the Company shall be entitled to participate in the defense of any such claim, action, proceeding or investigation and, if it so chooses, to assume the defense with counsel selected by the Company; provided that Executive shall have the right to employ counsel to represent them (at the Company’s expense) if Company counsel would have a conflict of interest in representing both the Company and Executive. The Company shall not settle or compromise any claim, action, proceeding or investigation without Executive’s consent, which consent shall not be unreasonably withheld; provided, however, that such consent shall not be required if the settlement entails only the payment of money (and no admission of guilt or wrong doing by Executive) and the Company fully indemnifies Executive in connection therewith. The Company further agrees to advance any and all expenses (including, without limitation, the fees and expenses of counsel) reasonably incurred by Executive in connection with any such claim, action, proceeding or investigation. The Company, as soon as reasonably possible, will obtain and maintain a policy of directors’ and officers’ liability insurance covering Executive and, notwithstanding the expiration or earlier termination of this Agreement, the Company shall maintain a directors’ and officers’ liability insurance policy covering Executive for a period of time following such expiration or earlier termination equal to the statute of limitations for any claim that may be asserted against Executive for which coverage is available under such directors’ and officers’ liability insurance policy. The provisions of this paragraph shall survive the termination of this Agreement without limitation.
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10. Arbitration. Any dispute, controversy or claim arising out of or relating in any way to the employment of the Executive or this Agreement, including without limitation any dispute concerning the construction, validity, interpretation, enforceability or breach of Agreement, shall be exclusively resolved by confidential, binding arbitration upon a Party’s submission of the dispute to arbitration. The demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen, and in no event shall it be made more than two (2) years from when the aggrieved Party knew or should have known of the controversy, claim, dispute or breach.
(a) This agreement to arbitrate shall be specifically enforceable. A Party may apply to any court with jurisdiction for interim or conservatory relief, including without limitation a proceeding to compel arbitration.
(b) The arbitration shall be conducted by one (1) arbitrator to be selected by the Company. Any Party may initiate arbitration by serving notice upon the other Party and filing a demand for arbitration with the American Arbitration Association.
(c) Unless waived in writing by all parties to the arbitration, the arbitration shall be conducted in accordance with the then-existing Expedited Labor Arbitration Rules of the American Arbitration Association, and shall be held and conducted in Dallas County, Texas.
(d) Except as may be required by law, neither Party nor its representatives may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of the other Party.
(e) The arbitrator shall have no authority to award punitive, consequential, special, or indirect damages, or equitable relief. The arbitrator shall award interest from the time of the breach to the time of award at the rate equal to the prime rate of interest published in the most recent edition of The Wall Street Journal at the time of any award plus three percent (3%) (the “Adjusted Prime Rate”).
(f) The cost of the arbitration proceeding, as applicable (including, without limitation, reasonable attorneys’ fees and costs, expert fees, arbitrator fees, and related costs and expenses), shall be borne by the non-prevailing Party. The cost of any proceeding in court to confirm or to vacate any arbitration award shall be borne by the non-prevailing Party thereto. For purposes of this subsection, the “non-prevailing Party” is the Party obtaining the lesser monetary award, or in the absence of a monetary award between the Parties, the Party against whom the greater equitable relief is to be enforced.
(g) The arbitrator’s award or decision shall be final, binding, and non-appealable. The arbitrator’s award shall include pre- and post-judgment interest at the Adjusted Prime Rate. It is specifically understood and agreed that any Party may enforce any award rendered pursuant to the arbitration provisions hereof by bringing suit in a court of competent jurisdiction situated in Dallas County, Texas. IN RESPECT OF ANY ENFORCEMENT ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS AND WAIVES ALL OBJECTION TO THE CONTRARY TO THE SOLE AND EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT OF COMPETENT JURISDICTION LOCATED WITHIN DALLAS COUNTY, STATE OF TEXAS, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON HIM, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY FIRST CLASS REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, DIRECTED TO HIM AT THE ADDRESS SPECIFIED IN THIS AGREEMENT.
(h) Executive has read and understands this arbitration provision and has had the opportunity to seek independent legal counsel regarding the process and potential impact of binding arbitration.
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11. Miscellaneous. The Parties further agree as follows:
(a) Time. Time is of the essence with respect to this Agreement.
(b) Notices. Any notice, payment, demand or communication required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when delivered personally or by facsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the following address or to such other or additional addresses as any party might designate by written notice to the other party:
| To the Company: | Vivakor, Inc. | ||
| 4101 North Thanksgiving Way | |||
| Lehi, UT 84043 | |||
| Attn: James Ballengee, Chairman, President and CEO | |||
| With a copy, which shall not constitute service, to: | |||
| Jackson Walker LLP | |||
| 2323 Ross Ave., Ste. 600 | |||
| Dallas, TX 75201 | |||
| Attn: Pat Knapp | |||
| Email pknapp@jw.com | |||
| To the Executive: | Leslie D. Patterson | ||
| 14592 Chaumont Ct. | |||
| Draper, Utah 84020 | |||
| Cell (801) 428-7456 | |||
| Email lpatterson@coyotemidstream.com |
(c) Assignment. The Company may assign this Agreement in whole upon the written consent of Executive, which shall not be unreasonably denied or delayed. The Executive may not assign this Agreement in whole or in part.
(d) Governing Law. As previously set forth in Section 2(a), Executive shall be expected to travel frequently and widely to perform Executive’s duties hereunder, and the specific place and location of the performance of Executive’s employment will vary. Executive stipulates and agrees that a substantial and material portion of of Executive duties hereunder will be performed in the State of Texas, that Executive spend substantial and material time in the State of Texas, despite the fact that Executive’s domicile may be located outside Texas. Accordingly, Executive stipulates and agrees, and waives all claims and objections to the contrary, that this Agreement, and the terms of Executive’s employment, shall be governed and interpreted in accordance with the laws of the State of Texas, without regard to its rules regarding conflicts of laws.
(e) Construction. This Agreement is intended to be interpreted according to its plain meaning within the four corners of the document. Headings are used for reference only and are not intended to have any binding effect on the construction hereof.
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(f) Severance. If any provision of this Agreement or the application thereof is determined, to any extent, to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision, shall not be affected thereby, and each other term and provision of this Agreement shall remain valid and enforceable to the fullest extent permitted by law.
(g) Entire Agreement. This Agreement, together with increases to the Base Compensation and any other compensation owing to Executive as determined by the Board of Directors, constitute the complete Agreement of the Parties with respect to the subject matter contemplated herein. Each and every prior agreement, whether oral or written, concerning the Executive’s employment is hereby expressly superseded and replaced by this Agreement. This Agreement may not be modified except in a writing signed by both parties.
(h) Binding Effect. This Agreement shall be binding on the parties and their respective successors, legal representatives and permitted assigns. In the event of a merger, consolidation, combination, dissolution or liquidation of the Company, the performance of this Agreement will be assumed by any entity which succeeds to or is transferred the business of the Company as a result thereof.
[Signature page(s) follow.]
[The remainder of this page is intentionally blank.]
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COMPANY’S SIGNATURE PAGE
IN WITNESS WHEREOF, the duly authorized representative of the Company has executed and entered into this Agreement as of the Effective Date.
| COMPANY: | ||
| VIVAKOR, INC., a Nevada corporation | ||
| By: | /s/ James H. Ballengee | |
| Name: | James H. Ballengee | |
| Title: | Chairman, President & CEO | |
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EXECUTIVE’S SIGNATURE PAGE
IN WITNESS WHEREOF, the Executive has executed and entered into this Agreement as of the Effective Date.
| EXECUTIVE: | |
/s/ Leslie D. Patterson | |
| Leslie D. Patterson, individually | |
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EXHIBIT “A”
FORM OF
GENERAL RELEASE AND WAIVER
For and in consideration of the payments and benefits due to the undersigned under that certain Executive Employment Agreement dated July 1, 2023, executed by Vivakor, Inc. and Leslie D. Patterson (the “Employment Agreement”), and for other good and valuable consideration, the undersigned (the “Employee”) hereby agrees, for the Employee, the Employee’s spouse and child or children (if any), the Employee’s heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, to forever release, discharge and covenant not to sue Vivakor, Inc., any of its subsidiaries, or any of their affiliates (collectively, the “Company”), or any of their predecessors, successors, or assigns, and, with respect to such entities, their officers, directors, trustees, employees, agents, administrators, representatives, attorneys, insurers and fiduciaries, past, present and future (the “Released Parties”) from any and all claims relating to the Employee’s employment or other service relationship with the Released Parties, including but not limited to any claims arising out of, or related to the Employee’s compensation as an employee or other service provider of or to the Released Parties, or the Employee’s separation from employment with the Released Parties, in each case which the Employee now has or may have against the Released Parties, whether known or unknown to the Employee, by reason of facts which have occurred on or prior to the date that the Employee has signed this Release. Such released claims include, without limitation, any and all claims under federal, state or local laws pertaining to employment, including, without limitation, the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000e et. seq., the Fair Labor Standards Act, as amended, 29 U.S.C. Section 201 et. seq., the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et. seq., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et. seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et. seq., the Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et. seq., and any and all federal, state, foreign or local laws regarding employment discrimination or wage payment and/or federal, state, foreign or local laws of any type or description regarding employment.
The Employee has read this Release carefully, acknowledges that the Employee has been given at least forty-five (45) days to consider all of its terms and has been advised to consult with an attorney and any other advisors of the Employee’s choice prior to executing this Release, and the Employee fully understands that by signing below the Employee is voluntarily giving up rights which the Employee may have to sue or bring any other claims against the Released Parties, including rights and claims under the Age Discrimination in Employment Act. The Employee also understands that the Employee has a period of seven (7) days after signing this Release within which to revoke his or her agreement, and that neither the Company nor any other person is obligated to make the payments or provide the benefits under the Employment Agreement that are conditioned upon the execution and non-revocation of this Release until eight (8) days have passed since the Employee’s signing of this Release without the Employee’s signature having been revoked. Finally, the Employee has not been forced or pressured in any manner whatsoever to sign this Release, and the Employee agrees to all of its terms voluntarily.
Notwithstanding anything else herein to the contrary, this Release shall not: (i) affect any rights of the Employee to indemnification or liability insurance coverage the Employee may have under the by- laws (or similar governing documents) of any entity constituting the Company or applicable law, (ii) release any claim that cannot be released as a matter of applicable law, (iii) bar Employee’s right to file an administrative charge with the Equal Employment Opportunity Commission (EEOC) and/or to participate in an investigation by the EEOC, although this Release does bar Employee’s right to recover any personal relief if Employee or any person, organization, or entity asserts a charge on Employee’s behalf, including in a subsequent lawsuit or arbitration, (iv) release the Company’s legally binding obligations under the Employment Agreement, (v) claims to any benefit entitlements vested as the date of separation of Employee’s employment, or (vi) release any of the Employee’s rights as a holder of vested equity securities or options or other rights in respect thereof.
The Employee has not been forced or pressured in any manner whatsoever to sign this Release, and the Employee agrees to all of its terms voluntarily. This Release shall be governed by Texas law, without regard to its rules regarding conflicts of laws.
| EMPLOYEE: | |
| /s/ Leslie D. Patterson | |
| Leslie D. Patterson, individually |
Page A -1
EXHIBIT “B”
EXECUTIVE AFFILIATES
AS OF THE EFFECTIVE DATE
| 1. | Coyote Oilfield Services, LLC, a Texas limited liability company, D/B/A Coyote Midstream |
| 2. | GSD Enterprise, LLC, a Utah limited liability company |
| 3. | TUVAS, LLC, a Texas limited liability company |
| 4. | Bitchin Garlic Burger Bus, LLC, a Utah limited liability company |
Page B -1
Exhibit 10.2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the “Agreement”) is made and entered into effective the 1st day of May 25, 2023 by and between OCIFG Inc., a Nevada corporation (the “Consultant”), whose principal place of business 167 N 50 E Vineyard UT, 84059 and Vivakor, Inc. (VIVK) (the “Company”) whose principal place of business is 4101 North Thanksgiving Way, Lehi, UT 84043.
WHEREAS, Matthew Nicosia (“Nicosia”), one of the principals at Consultant, served as the Company’s Chief Executive Officer for approximately 11 years until his resignation in October 2022; and
WHEREAS, the Company desires Consultant’s assistance in transitioning to the Company’s new Chief Executive Officer certain specific projects on which Nicosia had been working; and
WHEREAS, Consultant is ready, willing and able to render such services to Company.
NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Consulting Services. The Company hereby retains the Consultant as an independent consultant to the Company and the Consultant hereby accepts and agrees to such retention. Company and Consultant agree that Consultant is being retained in order to assist the Company’s new Chief Executive Officer regarding these specific projects: (i) the operation and potential sale of the Company’s precious metals and related precious metals, extraction machines, (ii) the potential sale or spinoff of the Company’s nano iron business, (iii) the Company’s operations in Kuwait, (iv) managing the Valkor relationship at the Company’s operations in Utah, (v) subleasing the Utah office space, (vi) subleasing the Irvine, California office space, (vii) make introductions to various individuals and companies that are or may work with Vivakor (the “Services”). Consultant will not work on any fund raising or investor/public relations projects or work for the Company. Any work provided by Consultant to the Company, or compensation to be paid by the Company to Consultant, outside the scope of the Services and the compensation set forth herein will only be valid if it is the subject of a separate written agreement between the parties. |
In performing the Services, Consultant understands and agrees that Consultant is not an agent of the Company and has no authority to act or speak on behalf of the Company unless instructed to in writing by the Company’s Chief Executive Officer or Chief Financial Officer. Any written communications or documents produced by Consultant are to be produced directly to the Company’s Chief Executive Officer or Chief Financial Officer and may not be distributed by Consultant to any other parties without the express written consent of the Company’s Chief Executive Officer or Chief Financial Officer.
It is acknowledged and agreed by the Company that Consultant carries no professional licenses, and is not rendering legal advice or performing accounting services, nor acting as an investment advisor or brokerage/dealer within the meaning of the applicable state and federal securities laws. The services of Consultant shall not be exclusive nor shall Consultant be required to render any specific number of hours or assign specific personnel to the Company or its projects.
Best Efforts. Consultant shall devote such time and effort, as it deems commercially reasonable and adequate under the circumstances to the affairs of the Company to render the consulting services contemplated by this Agreement.
| 2. | Independent Contractor. Consultant agrees to perform its consulting duties hereto as an independent contractor. Nothing contained herein shall be considered as creating an employer-employee relationship between the parties to this Agreement. The Company shall not make social security, worker’s compensation or unemployment insurance payments on behalf of Consultant. The parties hereto acknowledge and agree that Consultant cannot guarantee the results or effectiveness of any of the services rendered or to be rendered by Consultant. Rather, Consultant shall conduct its operations and provide its services in a professional manner and in accordance with good industry practice. Consultant will use its best efforts and does not promise results. |
| 3. | Time, Place and Manner of Performance. The Consultant shall be available for advice and counsel to the officers and directors of the Company as such reasonable and convenient times and places as may be mutually agreed upon. Except as aforesaid, the time, place and manner of performance of the services hereunder, including the amount of time to be allocated by the Consultant to any specific service, shall be determined at the sole discretion of the Consultant. Consultant shall be allowed to use the Company’s offices as needed, with advance written notice to the Company’s CEO or CFO at least two business prior to Consultant’s arrival. The Company will pay for any parking fees associated with use of such offices. Consultant shall be permitted to use a Vivakor.com email extension during the engagement of this contract, but any emails sent from the email address will contain a footer clearly indicating the Consultant (or any of its personnel) is an independent consultant to Vivakor. |
| 4. | Term of Agreement. The term of this Agreement shall be for a term of three (3) months, commencing on the date of this Agreement (the “Term”). Term by be extended by mutual agreement of the Company and the Consultant. |
| 5. | Compensation, In providing the foregoing services, Consultant shall receive (i) $25,000 in cash and $10,000 in shares of the Company’s common stock for the first month of the Term, and (ii) $10,000 in shares of the Company’s common stock for the second and third months of the Term, with all amounts paid at the end of the month in which such services were rendered. All shares issued hereunder will be priced at the volume weighted average price (VWAP) for the five (5) trading days preceding the end of the month the stock is earned by Consultant. |
| 6. | Reimbursement of Expenses. Consultant shall be reimbursed for any reasonable travel expenses incurred but must have written pre-approval from the Company’s CEO before any such expense is incurred. Such expenses shall be paid no later than 5 days from submission of expense report to Company. |
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| 7. | Company’s Representations. The Company represents that it is currently in compliance with all applicable Securities and Exchange Commission reporting and accounting requirements and all applicable requirements of FINRA or any stock exchange. The Company further represents that it has not been and is not the subject of any enforcement proceeding or injunction by the Securities and Exchange Commission or any state securities agency. |
| 8. | REPRESENTATIONS,
WARRANTIES AND COVENANTS SEC Legal Compliance. Consultant hereby represents that it has in place policies and procedures relating to, and addressing, with the commercially reasonable intent to ensure compliance with, applicable securities laws, rules and regulations. Consultant further acknowledges that by the very nature of its relationship with the Company it will, from time to time, have knowledge of or access to material non-public information (as such term is defined by the Exchange Act) Consultant hereby agrees and covenants that: |
| 1. | Consultant will not make any purchases or sales in the stock of the Company while in possession of, or aware of, such information. |
| 2. | Consultant will utilize its commercially reasonable efforts to safeguard and prevent the dissemination of such information to third parties unless authorized in writing by the Company to do so as may be necessary in the performance of its Services under this Agreement. |
| 3. | The Company will not, in any way, utilize or otherwise include such information, in actual form or in substantive content, in its analysis for, preparation of or release of any Consultant literature or other communication(s) relating to the Company, including, but not limited to: Press Releases, letters to investors and telephone or other personal communication(s) with potential or current investors. |
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| 9. | Termination. |
| (a) | Consultant’s relationship with the Company hereunder may be terminated for any reason whatsoever, at any time, by either party, upon 10 days’ written prior notice. |
| (b) | This Agreement shall automatically terminate upon the dissolution, bankruptcy or insolvency of the Company or Consultant. |
| (c) | This Agreement may be terminated by either party upon giving written notice to the other party if the other party is in default hereunder and such default is not cured within fifteen (15) days of receipt of written notice of such default. |
| (d) | Consultant and Company shall have the right and discretion to terminate this Agreement immediately should the other party in performing their duties hereunder, violate any law, ordinance, permit or regulation of any governmental entity, except for violations which either singularly or in the aggregate do not have or will not have a material adverse effect on the operations of the Company. |
| (e) | In the event of any termination hereunder all funds paid to the Consultant through the date of termination shall be fully earned and non-refundable and the parties shall have no further responsibilities to each other except that the Company shall be responsible to make any and all payments if any, due to the Consultant through the date of the termination and the Consultant shall be responsible to comply with the provisions of Sections 10 and 11 hereof. |
| 10. | Work Product. It is agreed that all information and materials produced for the Company shall be the property of the Company, free and clear of all claims thereto by the Consultant, and the Consultant shall retain no claim of authorship therein. |
| 11. | Confidentiality. The Consultant recognizes and acknowledges that it has and will have access to certain confidential information of the Company and its affiliates that are valuable, special and unique assets and property of the Company and such affiliates. The Consultant will not, during the term of this Agreement, disclose, without the prior written consent or authorization of the Company, any of such information to any person, for any reason or purpose whatsoever. In this regard, the Company agrees that such authorization or consent to disclose may be conditioned upon the disclosure being made pursuant to a secrecy agreement, protective order, provision of statute, rule, regulation or procedure under which the confidentiality of the information is maintained in the hands of the person to whom the information is to be disclosed or in compliance with the terms of a judicial order or administrative process. |
| 12. | Conflict of Interest. The Consultant shall be free to perform services for other persons. The Consultant will notify the Company of its performance of consultant services for any other person, which could conflict with its obligations under the Agreement. Upon receiving such notice, the Company may terminate this Agreement or consent to the Consultant’s outside consulting activities; failure to terminate, this Agreement within seven (7) business days of receipt of written notice of conflict shall constitute the Company’s ongoing consent to the Consultant’s outside consulting services. |
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| 13. | Disclaimer of Responsibility for Act of the Company. In no event shall Consultant be required by this Agreement to represent or make management decisions for the Company. Consultant shall under no circumstances be liable for any expense incurred or loss suffered by the Company as a consequence of such decisions, made by the Company or any affiliates or subsidiaries of the Company. |
| 14. | Indemnification. |
(a) The Company shall protect, defend, indemnify and hold Consultant and its assigns and attorneys, accountants, employees, officers and director harmless from and against all losses, liabilities, damages, judgments, claims, counterclaims, demands, actions, proceedings, costs and expenses (including reasonable attorneys’ fees) of every kind and character resulting from, relating to or arising out of (a) the inaccuracy, non-fulfillment or breach of any representation, warranty, covenant or agreement made by the Company herein, or (b) negligent or willful misconduct, occurring during the term thereof with respect to any of the decisions made by the Company (c) a violation of state or federal securities laws.
(b) The Consultant shall protect, defend, indemnify and hold Company and its assigns and attorneys, accountants, employees, officers and director harmless from and against all losses, liabilities, damages, judgments, claims, counterclaims, demands, actions, proceedings, costs and expenses (including reasonable attorneys’ fees) of every kind and character resulting from, relating to or arising out of (a) the inaccuracy, non-fulfillment or breach of any representation, warranty, covenant or agreement made by the Consultant herein, or (b) negligent or willful misconduct, occurring during the term thereof with respect to any of the decisions made by the Consultant (c) a violation of state or federal securities laws.
| 15. | Notices. Any notices required or permitted to be given under this Agreement shall be sufficient if in writing and delivered or sent by registered or certified mail, e-mail, or by Federal Express or other recognized overnight courier to the principal office of each party. |
| 16. | Waiver of Breach. Any waiver by either party or a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by any party. |
| 17. | Assignment. This Agreement and the right and obligations of the Consultant hereunder shall not be assignable without the written consent of the Company. |
| 18. | Applicable Law. It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings hereunder be construed in accordance with and under and pursuant to the laws of the State of California and that in any action, special proceeding or other proceedings that may be brought arising out of, in connection with or by reason of this Agreement, the law of the State of California shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction on which any action or special proceeding may be instituted. |
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| 19. | Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any competent court, the Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. |
| 20. | Entire Agreement. This Agreement constitutes and embodies the entire understanding and agreement of the parties and supersedes and replaces all other or prior understandings, agreements and negotiations between the parties. |
| 21. | Waiver and Modification. Any waiver, alteration, or modification of any of the provisions of this Agreement shall be valid only if made in writing and signed by the parties hereto. Each party hereto, may waive any of its rights hereunder without affecting a waiver with respect to any subsequent occurrences or transactions hereof. |
| 22. | Binding Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the JAMS under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The arbitration shall be conducted in Orange County, California. |
| 23. | Counterparts and Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a party hereto shall constitute a valid and binding execution and delivery of this Agreement by such party. Such facsimile copies shall constitute enforceable original documents. |
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement, effective as of the date set forth above.
If you are in agreement with the foregoing, please execute and return one copy of this letter to the undersigned. Thank you. We look forward to working with you.
| CONSULTANT: | ||||
| OCIFG INC. | ||||
| /s/ Matt Nicosia | DATE: | May 25, 2023 | ||
| By: | Matt Nicosia | |||
| Its: | President | |||
| COMPANY: | ||||
| VIVAKOR, INC. | ||||
| By: | /s/ James Ballengee | DATE: | May 25, 2023 | |
| Title: | CEO | |||
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Exhibit 10.3
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the “Agreement”) is made and entered into effective the 3rd day of January, 2023 by and between Trent Staggs, an individual (the “Consultant”), whose principal place of business 2067 W Bamberger Drive, Riverton, UT 84065 and Vivakor, Inc. (VIVK) (the “Company”) whose principal place of business is 5220 Spring Valley, LL20 Dallas, Texas 75254.
WHEREAS, Consultant has broad-based experience with Vivakor’s Utah operations, permitting and reporting; and
WHEREAS the Company desires Consultant’s assistance in furthering the Company’s business in Vernal, Utah; and
WHEREAS, Consultant is ready, willing and able to render such services to Company.
NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
| 1. | Consulting Services. The Company hereby retains the Consultant as an independent consultant to the Company and the Consultant hereby accepts and agrees to such retention. Company and Consultant agree that Consultant is being retained in order to assist the Company with the ongoing operations, permitting and regulatory issues at the Vernal, Utah location (the “Services”). The Consultant will report directly to the Company’s CEO or CFO regarding the Services. |
In performing the Services, Consultant understands and agrees that Consultant is not an agent of the Company and has no authority to act or speak on behalf of the Company unless instructed to in writing by the Company’s Chief Executive Officer or Chief Financial Officer. Any written communications or documents produced by Consultant are to be produced directly to the Company’s Chief Executive Officer or Chief Financial Officer and may not be distributed by Consultant to any other parties without the express written consent of the Company’s Chief Executive Officer or Chief Financial Officer.
It is acknowledged and agreed by the Company that Consultant carries no professional licenses, and is not rendering legal advice or performing accounting services, nor acting as an investment advisor or brokerage/dealer within the meaning of the applicable state and federal securities laws. The services of Consultant shall not be Exclusive nor shall Consultant be required to render any specific number of hours or assign specific personnel to the Company or its projects.
Best Efforts. Consultant shall devote such time and effort, as it deems commercially reasonable and adequate under the circumstances to the affairs of the Company to render the consulting services contemplated by this Agreement.
| 2. | Independent Contractor. Consultant agrees to perform its consulting duties hereto as an independent contractor. Nothing contained herein shall be considered as creating an employer-employee relationship between the parties to this Agreement. The Company shall not make social security, worker’s compensation or unemployment insurance payments on behalf of Consultant. The parties hereto acknowledge and agree that Consultant cannot guarantee the results or effectiveness of any of the services rendered or to be rendered by Consultant. Rather, Consultant shall conduct its operations and provide its services in a professional manner and in accordance with good industry practice. Consultant will use its best efforts and does not promise results. |
| 3. | Time, Place and Manner of Performance. The Consultant shall be available for advice and counsel to the officers and directors of the Company as such reasonable and convenient times and places as may be mutually agreed upon. Except as aforesaid, the time, place and manner of performance of the services hereunder, including the amount of time to be allocated by the Consultant to any specific service, shall be determined at the sole discretion of the Consultant. Consultant shall be allowed to use the Company’s offices as needed, with advance written notice to the Company’s CEO or CFO at least two business prior to Consultant’s arrival. The Company will pay for any parking fees associated with use of such offices. Consultant shall be able to continue using it’s Vivakor.com email during the engagement of this contract, but any emails sent from the email address will contain a footer clearly indicating the Consultant (or any of its personnel) is an independent consultant to Vivakor. |
| 4. | Term of Agreement. The term of this Agreement shall be for an initial term of 6 months, commencing on the date of this Agreement, and may be renewed on a month-to-month under the same terms, subject to prior termination as hereinafter provided. |
| 5. | Compensation. In providing the foregoing services, Consultant shall receive Eight Thousand dollars ($8,000) per month paid at the end of the month of services rendered. Payments to be made on the last day of the month beginning January 31, 2023. |
| 6. | Reimbursement of Expenses. Consultant shall be reimbursed for any reasonable travel and entertainment expenses incurred but must have written pre-approval from the Company’s CEO before such expense is incurred. Such expenses shall be paid no later than 5 days from submission of expense report to Company. |
| 7. | Company’s Representations. The Company represents that it is in compliance with all applicable Securities and Exchange Commission reporting and accounting requirements and all applicable requirements of FINRA or any stock exchange. The Company further represents that it has not been and is not the subject of any enforcement proceeding or injunction by the Securities and Exchange Commission or any state securities agency. |
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| 8. | REPRESENTATIONS, WARRANTIES AND COVENANTS SEC Legal Compliance. Consultant hereby represents that it has in place policies and procedures relating to, and addressing, with the commercially reasonable intent to ensure compliance with, applicable securities laws, rules and regulations. Consultant further acknowledges that by the very nature of its relationship with the Company it will, from time to time, have knowledge of or access to material non-public information (as such term is defined by the Exchange Act) Consultant hereby agrees and covenants that: |
| 1. | Consultant will not make any purchases or sales in the stock of the Company while in possession of, or aware of, such information. |
| 2. | Consultant will utilize its commercially reasonable efforts to safeguard and prevent the dissemination of such information to third parties unless authorized in writing by the Company to do so as may be necessary in the performance of its Services under this Agreement. |
| 3. | The Company will not, in any way, utilize or otherwise include such information, in actual form or in substantive content, in its analysis for, preparation of or release of any Consultant literature or other communication(s) relating to the Company, including, but not limited to: Press Releases, letters to investors and telephone or other personal communication(s) with potential or current investors. |
| 8. | Termination. |
| (a) | This Agreement shall automatically terminate upon the dissolution, bankruptcy or insolvency of the Company or Consultant. |
| (b) | This Agreement may be terminated by either party upon giving written notice to the other party if the other party is in default hereunder and such default is not cured within fifteen (15) days of receipt of written notice of such default. The Company will be considered to be in default if payment to Consultant is more than 7 days late. |
| (c) | Consultant and Company shall have the right and discretion to terminate this Agreement immediately should the other party in performing their duties hereunder, violate any law, ordinance, permit or regulation of any governmental entity, except for violations which either singularly or in the aggregate do not have or will not have a material adverse effect on the operations of the Company. |
| (d) | In the event of any termination hereunder all funds paid to the Consultant through the date of termination shall be fully earned and non-refundable and the parties shall have no further responsibilities to each other except that the Company shall be responsible to make any and all payments if any, due to the Consultant through the date of the termination and the Consultant shall be responsible to comply with the provisions of section 10 hereof. |
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| 9. | Work Product. It is agreed that all information and materials produced for the Company shall be the property of the Company, free and clear of all claims thereto by the Consultant, and the Consultant shall retain no claim of authorship therein. |
| 10. | Confidentiality. The Consultant recognizes and acknowledges that it has and will have access to certain confidential information of the Company and its affiliates that are valuable, special and unique assets and property of the Company and such affiliates. The Consultant will not, during the term of this Agreement, disclose, without the prior written consent or authorization of the Company, any of such information to any person, for any reason or purpose whatsoever. In this regard, the Company agrees that such authorization or consent to disclose may be conditioned upon the disclosure being made pursuant to a secrecy agreement, protective order, provision of statute, rule, regulation or procedure under which the confidentiality of the information is maintained in the hands of the person to whom the information is to be disclosed or in compliance with the terms of a judicial order or administrative process. |
| 11. | Conflict of Interest. The Consultant shall be free to perform services for other persons. The Consultant will notify the Company of its performance of consultant services for any other person, which could conflict with its obligations under the Agreement. Upon receiving such notice, the Company may terminate this Agreement or consent to the Consultant’s outside consulting activities; failure to terminate, this Agreement within seven (7) business days of receipt of written notice of conflict shall constitute the Company’s ongoing consent to the Consultant’s outside consulting services. |
| 12. | Disclaimer of Responsibility for Act of the Company. In no event shall Consultant be required by this Agreement to represent or make management decisions for the Company. Consultant shall under no circumstances be liable for any expense incurred or loss suffered by the Company as a consequence of such decisions, made by the Company or any affiliates or subsidiaries of the Company. |
| 13. | Indemnification. |
(a) The Company shall protect, defend, indemnify and hold Consultant and its assigns and attorneys, accountants, employees, officers and director harmless from and against all losses, liabilities, damages, judgments, claims, counterclaims, demands, actions, proceedings, costs and expenses (including reasonable attorneys’ fees) of every kind and character resulting from, relating to or arising out of (a) the inaccuracy, non-fulfillment or breach of any representation, warranty, covenant or agreement made by the Company herein, or (b) negligent or willful misconduct, occurring during the term thereof with respect to any of the decisions made by the Company (c) a violation of state or federal securities laws.
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(b) The Consultant shall protect, defend, indemnify and hold Company and its assigns and attorneys, accountants, employees, officers and director harmless from and against all losses, liabilities, damages, judgments, claims, counterclaims, demands, actions, proceedings, costs and expenses (including reasonable attorneys’ fees) of every kind and character resulting from, relating to or arising out of (a) the inaccuracy, non-fulfillment or breach of any representation, warranty, covenant or agreement made by the Consultant herein, or (b) negligent or willful misconduct, occurring during the term thereof with respect to any of the decisions made by the Consultant (c) a violation of state or federal securities laws.
| 14. | Notices. Any notices required or permitted to be given under this Agreement shall be sufficient if in writing and delivered or sent by registered or certified mail, e-mail, or by Federal Express or other recognized overnight courier to the principal office of each party. |
| 15. | Waiver of Breach. Any waiver by either party or a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by any party. |
| 16. | Assignment. This Agreement and the right and obligations of the Consultant hereunder shall not be assignable without the written consent of the Company. |
| 17. | Applicable Law. It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings hereunder be construed in accordance with and under and pursuant to the laws of the State of California and that in any action, special proceeding or other proceedings that may be brought arising out of, in connection with or by reason of this Agreement, the law of the State of California shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction on which any action or special proceeding may be instituted. |
| 18. | Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any competent court, the Agreement shall be interpreted as if such invalid agreements or covenants were not contained herein. |
| 19. | Entire Agreement. This Agreement constitutes and embodies the entire understanding and agreement of the parties and supersedes and replaces all other or prior understandings, agreements and negotiations between the parties. |
| 20. | Waiver and Modification. Any waiver, alteration, or modification of any of the provisions of this Agreement shall be valid only if made in writing and signed by the parties hereto. Each party hereto, may waive any of its rights hereunder without affecting a waiver with respect to any subsequent occurrences or transactions hereof. |
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| 21. | Binding Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the JAMS under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The arbitration shall be conducted in Orange County, California. |
| 22. | Counterparts and Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a party hereto shall constitute a valid and binding execution and delivery of this Agreement by such party. Such facsimile copies shall constitute enforceable original documents. |
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement, effective as of the date set forth above.
If you are in agreement with the foregoing, please execute and return one copy of this letter to the undersigned. Thank you. We look forward to working with you.
CONSULTANT:
TRENT STAGGS
| /s/ Trent Staggs | DATE: | 1/3/2023 |
COMPANY:
VIVAKOR, INC.
| By: | /s/ James Ballengee | DATE: | 1/3/2023 | |
| Title: | CEO |
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Exhibit 10.4
FORM OF
RPC EQUIPMENT LEASE AGREEMENT
This RPC Equipment Lease Agreement (this “Agreement”) is entered into as of June 26, 2023 (the “Effective Date”) between Viva Wealth Fund I, LLC, a Nevada limited liability company (“Lessor” or the “Company”), and VivaVentures Remediation Corp., a Texas corporation, a wholly-owned subsidiary of Vivakor, Inc., a Nevada corporation (“Lessee”). Lessor and Lessee may sometimes be referred to herein, collectively, as the “Parties” or, individually, as a “Party”.
WHEREAS, prior to the Effective Date, the Lessor, initiated a Reg. D private placement offering (the “Offering”) to raise up to $27,000,000, with the net proceeds dedicated to pay for the manufacture and purchase of up to four Remediation Processing Centers (“RPCs” or “RPC Units” or “RPC Equipment”) and known as RPC4, RPC5, RPC6 and RPC7, utilizing proprietary patented technology, from Vivakor, Inc. (“Vivakor”), or its affiliate;
WHEREAS, the Company is utilizing RPC Design & Manufacturing, LLC (“RDM”), an affiliated company of Vivakor, to manufacture the RPCs;
WHEREAS, prior to the Effective Date, the Company and RPC Design agreed that RPC Design could manufacture one double-capacity RPC in lieu of two separate RPCs;
WHEREAS, the Offering has successfully raised approximately $13,730,000, the Minimum Offering Amount for an initial closing under the terms of the Offering to fund the purchase of a double- capacity RPC Unit for Houston, Texas;
WHEREAS, the Company has sent, or is sending, the net proceeds to RDM to complete the double- capacity RPC, and once completed such RPC Unit will be delivered to the Company, which will then be delivered to the Lessee, and once the Specifications are met, a Certificate of Completion and Acceptance will be delivered;
WHEREAS, upon the delivery of each RPC Unit and receipt of each Certificate of Completion and Acceptance, the terms and conditions of this RPC Equipment Lease Agreement shall become effective as to each individual RPC Unit; and
WHEREAS, Lessor now desires to lease to Lessee and Lessee desires to lease from Lessor the RPC Equipment listed in Schedule 1 pursuant to the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Definitions.
“Affiliate” means, with respect to any Person, any other Person controlling, controlled by or under common control with such first Person. For purposes of this definition, the term “control” (and correlative terms) means the right and power, directly or indirectly, to direct or cause the direction of the management and policies of a Person through ownership of voting securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in the first paragraph herein.
“Applicable Law” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other official act of or by any Governmental Authority.
“Bankruptcy Event” means, with respect to a Party, such Party (i) institutes or consents to the institution of any proceeding under any bankruptcy, insolvency, reorganization, winding up or similar Applicable Law relating to the composition or readjustment of debts, (ii) makes an assignment for the benefit of creditors (other than a collateral assignment) or (iii) applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or all or any material part of its property, or the same is appointed without the application or consent of such Party and such appointment continues undischarged or unstayed for 60 days.
“Business Day” means any day, other than a Saturday, Sunday or any holiday generally recognized by the banking institutions in the state where the Work Site is located when the same are not open for business.
“Certificate of Completion and Acceptance” shall have the meaning set forth in Section 6.
“Confidential Information” means this Agreement and any information or material furnished by or on behalf of Lessor, or learned by Lessee or its Representatives, in connection with this Agreement, including the Intellectual Property, whether furnished or learned before, on or after the Effective Date, and regardless of the manner or form in which it is furnished or learned; provided, however, that Confidential Information shall not include information which (i) is or becomes generally available to the public (other than as a result of a disclosure by Lessee or any of its Representatives in breach of this Agreement), (ii) was available to Lessee on a non-confidential basis prior to its disclosure by Lessor, or (iii) becomes available to Lessee on a non-confidential basis from a Person (other than Lessor); provided, that in the case of clauses (ii) and (iii), the source of such information was not known, after reasonable inquiry, by Lessee to be bound by a confidentiality agreement with or other legal obligation of confidentiality to Lessor or its Representatives with respect to such information. This Agreement shall be Confidential Information of Lessor.
“Default” shall have the meaning set forth in Section 8.
“Defaulting Party” shall have the meaning set forth in Section 8.
“Effective Date” shall have the meaning set forth in the first paragraph of this Agreement.
“Excusable Event” means any of the following events and any materially adverse effect caused by or attributable to any of the following events: (i) any change in Applicable Law after the Effective Date; (ii) any breach by Lessee of this Agreement or any negligence or willful misconduct of any Lessee Party; (iii) any required remediation or removal of a Lessee Hazardous Material caused by the acts or omissions of any Person (other than any Lessor Party); (iv) any act or omission of any Lessee’s personnel at the Work Site; (v) any Person’s interference with the performance of the Equipment Removal or the Maintenance at the Work Site (except to the extent caused by any Lessor Party or by any breach of this Agreement by any Lessor Party); (vi) any deficient conditions in the Work Site; (vii) loss of the Equipment arising after risk of loss has passed to Lessee in accordance with Section 5 (unless, in either case, caused by the acts or omissions of, or breach of this Agreement, including any warranty, by any Lessor Party) or (viii) any valid exercise by Lessor of any right to suspend its obligations under this Agreement.
“Force Majeure” means any event or occurrence beyond the reasonable control of the claiming Party that prevents in whole or in part the performance by such Party of any obligation under this Agreement, including, but not limited to, acts of God, strikes, lockouts or other industrial disturbances; acts of Governmental Authorities or the public enemy; wars, blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, explosions or other casualty, hurricanes, hurricane warnings, storms, floods, washouts and arrest and restraints of government (federal, state, local, civil or military) or of people.
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“Governmental Authority” means (i) any international, foreign, federal, state, county, district, provincial or municipal government or political subdivision thereof, (ii) any legislature or court or judicial body, (iii) any authority, agency, tribunal, commission, board or department connected to any such entities or institutions exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government or (iv) any arbitrator, in each case, to the extent having jurisdiction over the Equipment, the Equipment Removal, the Maintenance, the Work Site or either Party.
“Hazardous Materials” means (i) any substance that is listed, defined, designated or classified under any Applicable Law that is regulated (a) for the protection of the environment, (a) as a hazardous material, substance, constituent or waste, (b) as a toxic material, substance, constituent or waste, (c) as a radioactive material, substance, constituent or waste, (d) as a dangerous material, substance, constituent or waste, (e) as a pollutant, (f) as a contaminant or (g) as a special waste or (ii) any petroleum, petroleum product, radioactive matter, polychlorinated biphenyl, pesticide, asbestos or asbestos-containing material.
“Indemnified Party” shall have the meaning set forth in Section 10.
“Indemnifying Party” shall have the meaning set forth in Section 10.
“Intellectual Property” means any intellectual property right worldwide arising under statutory or common law, whether or not perfected, including any (i) patent, patent application or patent right, (ii) right associated with works of authorship, including any copyright, copyright application or copyright registration, (iii) right relating to the protection of any Trade Secret or trademark, (iv) other proprietary right relating to intangible property, (v) division, continuation, renewal, reissue or extension of the foregoing (as applicable) now existing or hereafter filed, issued or acquired, (vi) operating system, including software, (vii) processes, including for the manufacture of equipment and extraction of resources, (viii) goodwill associated with any of the foregoing and (ix) improvements associated with any of the foregoing.
“Intellectual Property Claim” means a Third-Party Claim for unauthorized disclosure or use of any Intellectual Property that is directly due to the Equipment provided by Lessor under this Agreement; provided, however, that Intellectual Property Claim shall not include (i) any Loss that results from Lessor following any written instruction or design prepared by Lessee, (ii) any use, incorporation or installation of any equipment not furnished or authorized by Lessor, (iii) any Person’s (other than any Lessor Party’s) modification or variation of any of the Equipment, (iv) any combination of the Equipment with any equipment or work provided or performed by any Person other than, or authorized by, any Lessor Party or (v) any operation of the Equipment not in accordance with the Lessor Equipment Instructions.
“Lease Term” shall have the meaning set forth in Section 2.2.
“Lease Termination Date” shall have the meaning set forth in Section 2.2.
“Lessee” shall have the meaning set forth in the first paragraph of this Agreement.
“Lessee Hazardous Materials” shall have the meaning set forth in Section 4.6.
“Lessee Party” means Lessee and its respective Representatives.
“Lessor” shall have the meaning set forth in the first paragraph of this Agreement.
“Lessor RPC Equipment Instructions” means the operation and maintenance manual for the Equipment, containing measures necessary to operate, maintain and shut down the RPC Equipment.
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“Lessor Hazardous Materials” shall have the meaning set forth in Section 3.5.
“Lessor Party” means Lessor and each of its Representatives.
“Loss” means any liability, damage, loss, cost, expense, claim, award or judgment (including third- party or intra-party claims, reasonable fees or expenses of attorneys, consultants, accountants or other agents or experts, and costs of investigation, monitoring or settlement).
“Maintenance” shall have the meaning set forth in Section 2.5.
“Oil Sale Reserve” shall have the meaning set forth in Section 2.3.2.
“Oil Sale Threshold” shall have the meaning set forth in Section 2.3.2.
“Original Value” means $11,800,000.
“Party” and “Parties” are defined in the first paragraph of this Agreement.
“Person” means any individual, corporation, limited liability company, company, partnership, joint venture, trust or enterprise, entity or unincorporated organization under a Governmental Authority.
“Rental Amount” shall have the meaning set forth in Section 2.3.2.
“Representatives” means, with respect to a Person, such Person’s, principals, directors, officers, employees, accountants, counsel, financial advisors and other advisors, subcontractors, agents, consultants and representatives, together with such Person’s Affiliates and such Affiliates’ principals, directors, officers, employees, accountants, counsel, financial advisors and other advisors, agents, consultants and representatives.
“RPC Equipment” means up to four single-capacity Vivakor Remediation Processing Centers or two double-capacity (“RPCs” or “RPC Units”), which are custom oil sand extraction machines manufactured by RDM in accordance with the Specifications.
“RPC Equipment Completion” means the Equipment operates according to the Specifications and is ready for operation by Lessee, memorialized by the finalized Certificate of Completion and Acceptance.
“RPC Equipment Completion Date” means the date of the finalized Certificate of Completion and Acceptance.
“RPC Equipment Removal” means Lessor’s loading and packaging of the Equipment at the Work Site and the removal of the Equipment from the Work Site.
“Specifications” means the “RPC Equipment Specifications” as set forth in Exhibit A.
“Tax” means any federal, state, local or foreign tax or other governmental charge, fee, levy or assessment of whatever kind or nature, including all federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, license, excise, franchise, employment, premium, recording, documentary, transfer, backup withholding, turnover, net asset, capital gains, value added, estimated, ad valorem, payroll and employee withholding, stamp, customs, occupation or similar taxes and any social charges or contributions together with any interest, additions or penalties with respect to the foregoing.
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“Third Party” means a Person that is not a Party or an Affiliate of (i) either Party or (ii) any Affiliate of a Party.
“Third-Party Claim” shall have the meaning set forth in Section 10.3.
“Trade Secrets” means trade secrets, as defined by Applicable Law, including confidential computer programs, software, know how, designs, processes, procedures, equipment, data, reports, product specifications, formulas, improvements, on-line terminal designs, software applications and specialized knowledge, whether or not protectable by patent, trademark, copyright, or other any other proprietary right relating to intangible property.
“Work Site” means Lessee’s site upon which the Equipment is to be operated and removed, as further described on Exhibit B.
“Work Site Sufficiency Conditions” means the Work Site is in a sufficient condition for Lessor to achieve RPC Equipment Completion and perform the Maintenance and the RPC Equipment Removal, as applicable, as reasonably determined by Lessor.
2. Lease.
2.1 Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the RPC Equipment listed in Schedule 1 pursuant to the terms set forth in this Agreement.
2.2 The lease term (the “Lease Term”) shall (i) commence on the RPC Equipment Completion Date for theRPC and (ii) conclude five years from the RPC Equipment Completion Date (the “Lease Termination Date”).
2.3 During the Lease Term, Lessee agrees to pay to Lessor:
2.3.1 A fixed annual rent payment in an amount equal to $400,000 for the RPC Unit leased with the capacity of 40 tons per hour (the “RPC Equipment Fixed Annual Payment”), with the first annual period commencing six months after the RPC Equipment Completion Date for the RPC Unit. These payments will be due quarterly. The first quarterly payment will be due 9 months from the RPC Completion date.
2.3.2 To the extent 25% of the gross proceeds from the RPC Equipment’s oil extraction production exceeds the RPC Equipment Fixed Annual Payment in any annual period, then a rent payment in an amount equal to 25% of the gross proceeds from the RPC Equipment’s oil extraction production (the “Rental Amount”) minus the RPC Equipment Fixed Annual Payment (the “Rental Amount”), paid quarterly. Lessor agrees that Lessee shall be entitled to hold oil extraction production of the Equipment in reserves (all such oil, the “Oil Sale Reserves”) and delay sale of the Oil Sale Reserves in the event oil prices decrease below $40 per barrel according to the West Texas Intermediate global benchmark (the “Oil Sale Threshold”). Lessee agrees that Lessee shall (i) hold the Oil Sale Reserves for future sale that shall apply to the Rental Amount, (ii) resume the sale of the Oil Sale Reserves upon the oil price equaling or exceeding the Oil Sale Threshold and (iii) on the Lease Termination Date, either (a) sell the Oil Sale Reserves or (b) deem the Oil Sale Reserves to be sold at a price equal to the West Texas Intermediate global benchmark, and in each case, pay the Rental Amount.
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2.4 On the Lease Termination Date, Lessee shall satisfy the Work Site Sufficiency Conditions and give Lessor access to the Work Site at such times that may be reasonably requested by Lessor for the RPC Equipment Removal from the Work Site. The cost of the RPC Equipment Removal shall be at Lessor’s expense. Lessee further agrees to promptly return the Lessor RPC Equipment Instructions and all plans, drawings, specifications, and all other information concerning the RPC Equipment transferred by Lessor to Lessee. Lessee shall also return, delete or destroy any electronic copies of the foregoing.
2.5 During the Lease Term, Lessor shall maintain the RPC Equipment to be (i) free from defects in workmanship and (ii) in conformance to the Specifications (“Maintenance”); provided, however, that Maintenance shall not include any defect, deficiency, loss or damage caused by any abuse, accident, negligence or willful misconduct by any Person (other than any Lessor Party), modification, repair or alteration to the RPC Equipment not authorized by Lessor, normal wear or tear or Force Majeure. If, during the Lease Term, the Equipment requires Maintenance, Lessee shall promptly provide written notice to Lessor. If such written notice is received by Lessor within the Lease Term and Maintenance is required, Lessor shall, at its option, either repair or replace any part of the Equipment that requires Maintenance within 60 calendar days, and, in the event Lessor does not perform such Maintenance within such 60-day period, this Agreement shall be suspended, and Lessee shall not be obligated to perform its obligations hereunder, until Lessor’s performance of such Maintenance. Lessee shall satisfy the Work Site Sufficiency Conditions and give Lessor access to the Work Site at such times that may be reasonably requested by Lessor for the Maintenance.
2.6 Lessor and Lessee hereby confirm their intent that the RPC Equipment remain and be deemed the property of Lessor and title thereto shall remain in Lessor. Lessee may move the RPC Equipment from the Work Site to a different Work Site with written notice to Lessor. Lessor shall have the right to inspect the RPC Equipment during regular business hours.
2.7 Lessee may alter and modify the RPC Equipment; provided, however, unless otherwise agreed upon by the Parties, Lessee (i) shall return the RPC Equipment as though no alteration or modification occurred upon any RPC Equipment Removal, (ii) agrees that such alteration and modification may void Maintenance for the RPC Equipment described herein and (iii) agrees that Lessee waives any right to any Intellectual Property associated with such alteration or modification.
2.8 Lessee may not, without Lessor’s prior written consent, sublease, assign, grant a security interest in, or otherwise transfer all or any part of its rights or obligations under this lease. Under no circumstances shall Lessee permit the RPC Equipment to become subject to any liens or other security interests, including, without limitation (i) liens for Taxes, fees, assessments or other governmental charges or levies, whether or not delinquent and (ii) liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons or entities. Lessee agrees to defend and indemnify Lessor from and against any and all such liens.
2.9 Lessor shall have no obligation to upgrade the RPC Equipment in the event Lessor makes improvements to equipment other than but similar to the RPC Equipment; provided, however Lessor and Lessee may mutually agree for Lessor to make such improvements to the RPC Equipment at the expense of Lessor (and Lessor will retain the ownership rights thereof) and for the Rental Amount to increase as a result of such improvements to the Equipment.
3. Lessor’s Obligations.
3.1 Lessor shall diligently work in order for the Equipment to operate in accordance with the specifications and perform the Maintenance and the RPC Equipment Removal in accordance with Applicable Law and in accordance with this Agreement.
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3.2 In each case as required by Applicable Law to be held by any Lessor Party, Lessor shall obtain and maintain all governmental approvals and permits for the Maintenance and the RPC Equipment Removal that are applicable to Lessor, and Lessee will provide such assistance as may be reasonably required for Lessor to obtain such governmental approvals and permits. In the event the permits are obtained, maintained and/or held by the Lessee then the Lessor will reimburse Lessee for such costs.
3.3 Lessor may subcontract any portion of its obligations under this Agreement. Lessor shall cause any subcontractor to comply with the terms of this Agreement and Lessor shall be responsible under this Agreement for any breach of the terms of this Agreement by any such subcontractor as if such breach was performed by Lessor.
3.4 Lessor shall use commercially reasonable efforts to cooperate with Lessee in the performance of the Maintenance and the RPC Equipment Removal, in each case, at the Work Site to minimize any interference with Lessee’s operations at the Work Site.
3.5 Lessor shall not cause any lien arising out of the Maintenance and the RPC Equipment Removal to attach to the Work Site; provided, however, that this subsection shall not limit Lessor’s ability to assert any lien thereon if Lessee does not pay any amount in connection with the Equipment when due in accordance with this Agreement.
3.6 Lessor shall be responsible for the handling, collection, removal, transportation and the disposal of any Hazardous Material brought onto the Work Site by any Lessor Party during the Maintenance and the RPC Equipment Removal (the “Lessor Hazardous Materials”); provided, however, that Lessor Hazardous Materials shall not include any existing Hazardous Material at the Work Site, any Hazardous Material generated by the Work Site or any Hazardous Material incorporated into the RPC Equipment after the RPC Equipment Completion Date by any Person (other than a Lessor Party).
3.7 Lessor shall deliver the Lessor RPC Equipment Instructions to Lessee on the RPC Equipment Completion Date.
3.8 Lessor shall maintain adequate insurance as set forth herein.
4. Lessee Obligations.
4.1 Lessee shall cause the Work Site Sufficiency Conditions to be completed and reasonably cooperate with Lessor in order for Lessor to achieve Equipment Completion and to perform the Maintenance and the RPC Equipment Removal.
4.2 Lessee shall provide Lessor with access to and use of the Work Site as reasonably necessary or advisable for Lessor to perform its obligations under this Agreement (including to achieve Equipment Completion, complete any Maintenance obligations and perform the RPC Equipment Removal). If, due to causes beyond the control of Lessee, Lessor’s access to the Work Site is impeded or delayed, then Lessor shall be entitled to a time extension and any resulting costs or damages to the extent such delayed or impeded access impacts the performance of the Maintenance and the RPC Equipment Removal or Lessor’s performance of this Agreement.
4.3 Lessee shall own (or lease, as applicable), operate and maintain the Work Site or any site that the RPC Equipment is operated in accordance with all Applicable Law, operate the RPC Equipment in accordance with Applicable Law and otherwise perform its obligations hereunder in accordance with Applicable Law. Lessee shall obtain and maintain all governmental approvals required for the ownership (or leasehold, as applicable), operation or maintenance of the Work Site or any site that the RPC Equipment is operated and the operation and performance of the RPC Equipment at the Work Site or any site that the RPC Equipment is operated.
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4.4 Lessee shall not infringe (whether directly, contributorily, by inducement or otherwise), misappropriate or violate any Intellectual Property right of Lessor.
4.5 Unless otherwise agreed upon by the Parties, Lessee shall not disclose any Intellectual Property of Lessor regarding the RPC Equipment; provided, however, Lessor hereby agrees that Lessee may disclose such information with Lessor’s written consent in accordance with the terms of this Agreement as is reasonably necessary to any Governmental Authority for purposes of demonstrating that the Equipment, the Maintenance and the Equipment Removal are in compliance with Applicable Laws, including any environmental laws, regulations and standards.
4.6 Lessee shall not materially interfere with Lessor’s performance of the Maintenance and the RPC Equipment Removal at the Work Site and shall otherwise cooperate with Lessor in the performance of the Maintenance and the RPC Equipment Removal. Lessee shall at all times be responsible for the acts and omissions of Lessee’s personnel as if they were the acts or omissions of Lessee.
4.7 Lessee shall be responsible for the handling, collection, removal, transportation and disposal of any Hazardous Material at, on or under or adjacent to the Work Site or any site that the Equipment is operated at any time, other than Lessor Hazardous Materials (“Lessee Hazardous Materials”). If Lessee releases any Lessee Hazardous Material, other than petroleum resources in the daily operations of Lessee, Lessee shall promptly notify Lessor in writing, and Lessee shall take any necessary remedial action to clean up and dispose of such Lessee Hazardous Material.
4.8 Lessee shall promptly notify Lessor of any emergency of which Lessee becomes aware that affects safety or integrity of any person or property from the Equipment, other than known risks. Lessee shall promptly provide Lessor with written notice of any event that could reasonably be expected to adversely affect the RPC Equipment in any material respect.
4.9 During the Lease Term, Lessee shall be solely responsible for the operation of the RPC Equipment except for the Maintenance.
4.10 Lessee shall pay and be responsible for any Tax in connection with, or incident to, the operation of the Equipment (other than income taxes or payroll taxes of Lessor). Lessee shall reimburse Lessor for any such Tax paid by Lessor upon receipt of a valid invoice for same, and shall indemnify Lessor for any Loss incurred by Lessor arising out of any action against Lessor to collect such Tax paid by Lessor on Lessee’s behalf.
4.11 Lessee shall maintain adequate insurance as set forth herein
5. Risk of Loss and Insurance.
5.1 Before the Equipment Completion Date, Lessor has care, custody and control of, and bears the risk of loss with respect to, the RPC Equipment; and Lessee assumes care, custody and control of, and bears the risk of loss with respect to, the RPC Equipment from and after the RPC Equipment Completion Date. Risk of loss of Lessee includes the present value of future rental payments to be paid to Lessor and, in the event of a total loss of the RPC Equipment, the Original Value. Lessee assumes responsibility for, and releases Lessor from, any defect or deficiency in, damage to, or loss of (i) the RPC Equipment arising on or after the RPC Equipment Completion Date and (ii) the Work Site or any other work site used for the operation of the RPC Equipment, unless, in either case, such defect, deficiency, damage or loss is caused by the breach of this Agreement, or the negligent acts or omissions of any Lessor Party occurring at the Work Site.
5.2 Each Party shall maintain the insurance set forth in, and as otherwise comply with, Exhibit C.
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6. Completion. Lessor shall deliver to Lessee a certificate substantially in the form of Exhibit D (the “Certificate of Completion and Acceptance”) when Lessor considers that Equipment Completion has occurred, which shall occur no sooner than when the RPC Equipment Specifications have been met for a minimum of seven (7) days. Upon receipt of the Certificate of Completion and Acceptance, Lessee shall promptly, but in no event later than 5 days from the date of receipt of the Certificate of Completion and Acceptance, either: (i) countersign and return the Certificate of Completion and Acceptance, indicating finalization of RPC Equipment Completion; or (ii) if RPC Equipment Completion has not occurred, issue Lessor a written notice stating why RPC Equipment Completion has not occurred. For clarity, RPC Equipment Completion shall not have occurred if the RPC Equipment fails to satisfy the RPC Specifications. If Lessee fails to countersign a Certificate of Completion and Acceptance or issue such notice within such 5-day period, RPC Equipment Completion shall be deemed to have finalized as of the date set forth in the Certificate of Completion and Acceptance. If Lessor timely receives a notice under Section 6 clause (ii) and RPC Equipment Completion has not occurred, Lessor shall promptly take the necessary steps to achieve RPC Equipment Completion (and the procedures set forth under this Section 6 shall be repeated until such time as RPC Equipment Completion has occurred).
7. Intellectual Property. Lessee shall return the Lessor RPC Equipment Instructions, and all copies thereof, to Lessor on the Lease Termination Date. Lessor hereby grants to Lessee a non-transferable, non- sublicensable, non-exclusive, limited license under the Intellectual Property of Lessor (which shall include any Intellectual Property Lessor has a license to that relates to the Equipment) only for the operation of the RPC Equipment in accordance with the Lessor RPC Equipment Instructions. The foregoing license shall cease upon the Lease Termination Date. Lessee acknowledges and agrees that as between Lessor and Lessee, any Intellectual Property contained within, accompanying, or arising from, the RPC Equipment, the Maintenance and the RPC Equipment Removal shall not be owned by Lessee (unless the owner of the Intellectual Property is the Lessee).
8. Default and Limitations on Liability.
8.1 A Party (the “Defaulting Party”) shall be in default under this Agreement (a “Default”) if (i) such Party fails to pay when due any amount required to be paid under this Agreement, and such failure is not cured within 5 days after written notice thereof has been delivered to such Party by the other Party, (ii) such Party breaches any representation, warranty, covenant or agreement set forth in this Agreement (that is not a Default under clause (i) and subject to any sole and exclusive remedy provided in this Agreement) and such breach is not cured within 30 days after written notice thereof has been delivered to such Party by the other Party; provided, however, that, except as otherwise provided for herein, in the case of such a breach of any covenant or agreement (other than a representation or warranty) that cannot be cured within such 30-day period with the exercise of reasonable due diligence, but is reasonably capable of being cured, such Party shall have an additional 30-day period to cure such breach for so long as such Party diligently pursues such cure, (iii) a Bankruptcy Event occurs with respect to such Party or (iv) with respect to Lessee, if during the Lease Term Lessee attempts to sell, assign, sublease, transfer, encumber, part with possession or sublet any item of the Equipment without Lessor’s prior written consent. During the continuation of a Default by the Defaulting Party, the other Party may terminate this Agreement upon the delivery of written notice thereof to the Defaulting Party, without prejudice to any remedy available hereunder, at law or in equity (but subject to any limitation on liability or sole and exclusive remedy under this Agreement). The termination of this Agreement shall not release or relieve any liability arising prior to, or as a result of, such termination (including any payment obligation hereunder), and the following provisions shall survive such termination: (i) Section 7, (ii) Sections 8-11 and 14-16, (iii) any limitation on liability, or sole and exclusive remedy limitation, under this Agreement and (iv) any other terms that by their nature are intended to survive termination. Upon the occurrence of any Default by Lessee, Lessor shall be entitled to (a) repossess the RPC Equipment through RPC Equipment Removal and Lessee shall permit the RPC Equipment Removal at Lessor’s request, (b) declare that all outstanding payments and all other charges due, under this Agreement are due and payable immediately, and that Lessor is entitled to such balance together with interest at the maximum rate per month permitted by Applicable Law from the date of notification to Lessor of such Default to the date of payment and (c) exercise any right pursuant to this Agreement and available in equity or Applicable Law. In the event of any RPC Equipment Removal, Lessee agrees to return the RPC Equipment to Lessor in the same condition as when delivered, ordinary wear and tear excepted, as contemplated for this type of RPC Equipment, subject to Lessor’s obligation to perform its Maintenance obligations, as set forth in this Agreement.
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8.2 EXCEPT AS OTHERWISE PROVIDED IN SECTION 8.1, THE REMEDIES STATED IN THIS AGREEMENT ARE THE SOLE AND EXCLUSIVE REMEDIES OF EACH PARTY FOR THE LIABILITIES OF THE OTHER PARTY ARISING IN CONNECTION WITH THE EQUIPMENT OR THIS AGREEMENT AND ANY CLAIMS ARISING IN CONNECTION WITH THE EQUIPMENT OR THIS AGREEMENT SHALL BE BASED IN CONTRACT ON THE TERMS OF THIS AGREEMENT, AND NOT IN TORT OR UNDER STATUTE, REGARDLESS OF CAUSE (INCLUDING ANY JOINT, CONTRIBUTORY OR SOLE NEGLIGENCE OF EITHER PARTY); PROVIDED, HOWEVER, THAT THIS SECTION 8.2 SHALL NOT LIMIT LESSOR’S ABILITY TO ASSERT ANY LIEN IF LESSEE DOES NOT PAY ANY AMOUNT WHEN DUE IN ACCORDANCE WITH THIS AGREEMENT.
8.3 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, (i) NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, PUNITIVE, CONSEQUENTIAL (OTHER THAN THE PROJECTED RENTAL PAYMENTS) OR EXEMPLARY DAMAGES, INCLUDING LOSS OF PROFIT, LOSS OF PRODUCTION, LOSS OF REVENUE OR USE, OR BUSINESS INTERRUPTION, REGARDLESS OF CAUSE (INCLUDING ANY JOINT, CONTRIBUTORY OR SOLE NEGLIGENCE OF SUCH PARTY) AND WHETHER ARISING IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE AND (ii) LESSOR’S LIABILITY FOR ANY AND ALL LOSSES INCURRED BY LESSEE ARISING OUT OF LESSOR’S PERFORMANCE OF ITS OBLIGATIONS HEREUNDER (WHETHER ARISING IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE) SHALL NOT EXCEED THE ORIGINAL VALUE.
8.4 Except with regard to a Party’s obligation to make any payment hereunder, each Party shall be excused from the performance of its obligations under this Agreement to the extent that such Party is unable to perform such obligations due to any Force Majeure or, in the case of Lessor, any Excusable Event, but only to the extent of such inability. If any Force Majeure renders either Party, or any Excusable Event renders Lessor, unable to perform its obligations under this Agreement, such Party shall give reasonable notice in writing after it has notice of such Force Majeure or Excusable Event, as applicable, to the other Party. In the case of a Party claiming any Force Majeure, such Party shall remedy the effects of such Force Majeure with reasonable dispatch; provided, however, that such Party shall not be required to use such reasonable dispatch to remedy any Force Majeure based upon any strike or lockout (the settlement of which shall be within the sole discretion of such Party).
8.5 Either Party may terminate this Agreement if the other Party has suspended its obligations hereunder for a continuous 60 or more days due to a Force Majeure and shall be entitled to recover costs incurred by such Party in performing its obligations hereunder.
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9. Independent Contractor. Lessor shall be an independent contractor and not be an employee, agent, servant or representative of Lessee. Lessee shall not direct or control performance of duties and tasks by Lessor hereunder, it being understood that Lessee is interested in the results obtained and shall administer this Agreement to obtain compliance with the provisions hereof by Lessor. No joint venture or agency relationship is created by this Agreement.
10. Indemnity.
10.1 LESSOR SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS EACH LESSEE PARTY FROM AND AGAINST ANY LOSS (i) FOR PERSONAL OR BODILY INJURY, SICKNESS, DISEASE OR DEATH OF ANY PERSON, OR DAMAGE, DESTRUCTION OR LOSS OF ANY PROPERTY (INCLUDING THE EQUIPMENT) TO THE EXTENT CAUSED BY THE GROSSLY NEGLIGENT ACTS OR OMISSIONS OF ANY LESSOR PARTY UNDER THIS AGREEMENT (UNLESS CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY LESSEE PARTY), (ii) THAT IS A FINE OR PENALTY IMPOSED BY ANY GOVERNMENTAL AUTHORITY FOR VIOLATION OF APPLICABLE LAW BY ANY LESSOR PARTY (UNLESS CAUSED BY A BREACH OF THIS AGREEMENT BY LESSEE OR THE WILLFUL MISCONDUCT OF ANY LESSEE PARTY), (iii) IN CONNECTION WITH LESSOR HAZARDOUS MATERIAL (INCLUDING THE DISCOVERY, EXISTENCE, RELEASE, REMEDIATION OR REMOVAL THEREOF OR EXPOSURE THERETO) (UNLESS CAUSED BY A BREACH OF THIS AGREEMENT BY LESSEE OR THE NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY LESSEE PARTY), (iv) IN CONNECTION WITH OR ARISING OUT OF ANY INTELLECTUAL PROPERTY CLAIM AND (v) ARISING OUT OF, OR IN CONNECTION WITH, ANY LESSOR PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
10.2 LESSEE SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS EACH LESSOR PARTY FROM AND AGAINST ANY LOSS (i) FOR PERSONAL OR BODILY INJURY, SICKNESS, DISEASE OR DEATH OF ANY PERSON, OR DAMAGE, DESTRUCTION OR LOSS OF ANY PROPERTY (INCLUDING THE EQUIPMENT) TO THE EXTENT CAUSED BY THE NEGLIGENT ACTS OR OMISSIONS OF ANY LESSEE PARTY UNDER THIS AGREEMENT (UNLESS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY LESSOR PARTY), (ii) THAT IS A FINE OR PENALTY IMPOSED BY ANY GOVERNMENTAL AUTHORITY FOR VIOLATION OF APPLICABLE LAW BY ANY LESSEE PARTY (UNLESS CAUSED BY A BREACH OF THIS AGREEMENT BY LESSOR OR THE WILLFUL MISCONDUCT OF ANY LESSOR PARTY), (iii) IN CONNECTION WITH ANY LESSEE HAZARDOUS MATERIAL (INCLUDING THE DISCOVERY, EXISTENCE, RELEASE, REMEDIATION OR REMOVAL THEREOF OR EXPOSURE THERETO) (UNLESS CAUSED BY A BREACH OF THIS AGREEMENT BY LESSOR OR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY LESSOR PARTY), (iv) IN CONNECTION WITH ANY USE OF ANY INTELLECTUAL PROPERTY OF LESSOR BY ANY LESSEE PARTY NOT PERMITTED IN THIS AGREEMENT AND (v) ARISING OUT OF, OR IN CONNECTION WITH ANY LESSEE PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
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10.3 Lessee or Lessor, as the case may be (the “Indemnified Party”), shall give the indemnifying Party (the “Indemnifying Party”), prompt written notice of any matter of which it has knowledge and which has given or could reasonably be expected to give rise to a claim under this Section 10; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its obligations under this Section 10 except to the extent the Indemnifying Party is materially prejudiced by such failure. If any Third Party shall notify an Indemnified Party in writing with respect to any matter that has given or could reasonably be expected to give rise to a claim under this Section 10 (a “Third-Party Claim”), the Indemnified Party shall promptly provide the Indemnifying Party with written notice thereof; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from its obligations under this Section 10 except to the extent the Indemnifying Party is materially prejudiced by such failure. Upon written notice to the Indemnified Party of a Third-Party Claim, the Indemnifying Party shall have the right to assume and control the defense (at its sole cost and expense) and settlement of such Third-Party Claim; provided, however, that the Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement with respect to such Third-Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned, or delayed) unless the judgment or proposed settlement (i) involves only the payment of money damages that will be completely paid by the Indemnifying Party, (ii) does not impose an injunction or other equitable relief upon the Indemnified Party, (iii) does not include a finding or admission of guilt or violation of Applicable Law and (iv) includes an unconditional release from all liability with respect to such Third-Party Claim by each claimant or plaintiff in favor of the Indemnified Party. If the Indemnifying Party is conducting the defense of any Third-Party Claim, the Indemnifying Party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Party, but the Indemnified Party, at its sole cost and expense, may retain separate counsel, and participate in the defense of such Third-Party Claim (it being understood that the Indemnifying Party will control such defense). If the Indemnifying Party has not assumed the defense of any Third-Party Claim within 20 Business Days after receipt of the applicable notice of such claim, the Indemnified Party may defend against such Third-Party Claim in any manner it may reasonably deem appropriate at the reasonable cost and expense of the Indemnifying Party, but the Indemnified Party shall not consent to the entry of any judgment or enter into any settlement or compromise with respect to such Third-Party Claim without the prior written consent of the Indemnifying Party (which consent will not be unreasonably withheld, conditioned or delayed).
10.4 With respect to any Intellectual Property Claim, if an injunction against Lessee’s use of the RPC Equipment or any part thereof results from such a claim (or, if Lessee reasonably believes such an injunction is likely), Lessor shall promptly, at its sole expense and in its sole discretion (and in addition to Lessor’s other obligations hereunder) either (i) use its commercially reasonable efforts to obtain for Lessee the right to continue using the RPC Equipment or (ii) replace or modify the Equipment so they become non-infringing but functionally equivalent (as determined by the Specifications).
10.5 If any Loss in this Section 10 is contingent upon or excused by the negligence or willful misconduct of a Party and such Party and the other Party are negligent or have willfully misconducted themselves with respect to such Loss, such Loss shall be allocated between the Parties in proportion to their respective degrees of negligence or willful misconduct, as applicable.
11. Confidentiality.
11.1 Unless otherwise agreed to in writing by Lessor and subject to Section 11.2 and Section 12, Lessee shall (i) keep any Confidential Information of Lessor strictly confidential and not disclose or reveal such Confidential Information to any Person (other than Lessee’s Representatives actively and directly participating in the matters contemplated by this Agreement or who need to know such Confidential Information in order to discharge Lessee’s duties to such party in connection with this Agreement or operate the RPC Equipment) and (ii) not use, and cause Lessee’s Representatives to not use, such Confidential Information for any purpose (other than in furtherance of the matters contemplated by this Agreement or as reasonably necessary for Lessee’s Representatives to discharge Lessee’s duties or enforce its rights in connection with this Agreement or to operate the RPC Equipment). Lessee shall cause its Representatives to comply with this Section 11 and shall be responsible for any violation of this Section 11 by its Representatives.
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11.2 If Lessee is required under Applicable Law to disclose any Confidential Information of Lessor, Lessee shall provide Lessor with prompt written notice of such requirement and Lessee may so disclose such Confidential Information, but Lessee shall use commercially reasonable efforts to ensure that such Confidential Information that is so disclosed shall be accorded confidential treatment and shall only disclose that portion of such Confidential Information that is legally required to be disclosed by Lessee. Lessee may disclose Confidential Information of Lessor (other than Intellectual Property) to any actual or proposed, direct or indirect, investor, lender or credit rating agency or an actual or potential transferee of Lessee’s rights under this Agreement (or any of their respective advisors).
11.3 Lessee acknowledges and agrees that Lessor owns the license to the Intellectual Property for the Equipment, the Maintenance and RPC Equipment Removal, and to protect such Intellectual Property, unless otherwise agreed to by the Parties or Lessee otherwise abstains from such rights, Lessee shall not (and shall cause the other Lessee Parties to not): (i) decompile, reverse engineer, disassemble, unbundle, or make verbal or media translations of any part of the Equipment or otherwise reduce any part of the Equipment to a human perceivable form, or permit any other Person or machine to do so, (ii) copy, modify, adapt, translate, encumber, rent, lease, license, sublicense, loan, sell, resell, distribute, time-share, or create any derivative works related to any part of the Equipment, the Maintenance and Equipment Removal or any Intellectual Property therein, (iii) provide to any Person any equipment comprising any part of the Equipment, the Maintenance and Equipment Removal or any documentation relating to any design thereof, unless as reasonably required for operation of the Equipment or in connection with the sale of Lessee or its assets or (iv) remove any proprietary legends or copyright notices that may be contained in or on any part of the Equipment or any documentation relating to any design thereof. Notwithstanding anything to the contrary in this Agreement, unless otherwise agreed to by the Parties, no Lessee Party shall (i) have any right to any Intellectual Property of Lessor, (ii) disclose any such Intellectual Property (except as expressly permitted by this Agreement) or (iii) use any such Intellectual Property in connection with any equipment or otherwise, without the prior written approval of Lessor.
11.4 Any breach of this Section 11 may result in irreparable injury to Lessor or its Affiliates for which a remedy at law may be inadequate. In addition to any relief at law which may be available for such breach, and regardless of any other provision contained in this Agreement, Lessor shall be entitled to seek injunctive and other equitable relief in connection with any actual or threatened breach of this Section 11 (without the requirement to post any bond or other security).
11.5 The provisions of this Section shall survive any termination of the Lease Term or this Agreement.
12. Public Announcements. Subject to this Section 12, neither Party shall make any public announcement regarding this Agreement without the other Party’s prior written consent; provided, however, that either Party may make any public announcement, without consent, if required by Applicable Law or stock exchange rules. Notwithstanding anything to the contrary in Section 11 or 12, (i) each Party may, without consent, reasonably refer to this Agreement, the RPC Equipment or the Work Site and reasonably include photographs thereof in any experience list or other promotional material and (ii) Lessor may disclose the terms of this Agreement, its related documents and other matters generated by it to potential investors, broker-dealers, financial advisors and due diligence officers in connection with any syndicated offering.
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13. Representations. Each Party represents and warrants to the other Party, as of the Effective Date, that (i) it is duly incorporated, organized or formed, as applicable, and existing and in good standing under its jurisdiction of incorporation, organization or formation, as applicable, and is duly qualified to do business under the laws of such jurisdiction and each other jurisdiction in which such qualification is required to perform its obligations under this Agreement, (ii) it has the full corporate, partnership or organizational, as applicable, power and authority to execute and deliver this Agreement and perform its obligations under this Agreement, (iii) this Agreement has been duly authorized, executed and delivered by it and is legally binding upon it (assuming that the other Party has duly executed and delivered this Agreement), enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity, (iv) no insolvency, liquidation or bankruptcy proceeding has been instituted by or against such Party and such Party has not received notice of any such proceeding being threatened and (v) no action, litigation, suit, proceeding or investigation related to this Agreement or to the transactions contemplated hereby before or by any Governmental Authority is pending or, to such Party’s knowledge, threatened in writing, against such Party that individually or in the aggregate could reasonably be expected to result in any materially adverse effect on its ability to perform its obligations under this Agreement.
14. Notice. All notices, requests, or communications provided for or permitted to be given under this Agreement shall be in writing and given by personal delivery, by certified or registered United States mail (postage prepaid, return receipt requested), by a nationally recognized overnight delivery service for next day delivery or transmitted via electronic mail to the addressee given for a Party as set forth below or such other addressee as such Party may specify by like notice to the other Party.
For Lessor:
Viva Wealth Fund I, LLC
2 Park Plaza Suite 800
Irvine CA 92614
For Lessee:
Viva Ventures Remediation
5220 Spring Valley, LL20
Dallas, Texas 75254
15. Miscellaneous. If any provision of this Agreement is partially or completely unenforceable pursuant to Applicable Law, such provision shall be deemed amended to the extent necessary to make it enforceable, if possible, and, if not possible, then such provision shall be deemed deleted. If any provision is so deleted or amended, then the remaining provisions hereof shall remain in full force and effect. There is no beneficiary to this Agreement (other than the Parties). Lessee shall not assign its rights or delegate its obligations under this Agreement without the prior written consent of Lessor. Any assignment or delegation of Lessee that is not in compliance with this Section 15 shall be void.
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This Agreement shall be binding upon, and inure to the benefit of, each Party and its successors and permitted assigns. In the performance of each part of this Agreement, time shall be of the essence. Each party hereto acknowledges and agrees that the periods of time set forth in this Agreement for the performance contemplated hereunder are reasonable. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT GIVING EFFECT TO CHOICE OF LAW PRINCIPLES THEREOF THAT REQUIRE THE APPLICATION OF ANOTHER JURISDICTION’S LAWS. EACH PARTY CONSENTS TO THE EXCLUSIVE PERSONAL JURISDICTION OF THE UNITED STATES FEDERAL OR STATE COURTS LOCATED IN SALT LAKE COUNTY, UTAH WITH RESPECT TO ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT; PROVIDED, HOWEVER, THAT ANY JUDGMENT FOR ANY SUCH DISPUTE, CONTROVERSY OR CLAIM MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY APPLICABLE LAW. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE, CONTROVERSY OR CLAIM BROUGHT IN ANY SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE, CONTROVERSY OR CLAIM IN ANY SUCH COURT. EACH PARTY HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT. This Agreement shall not be amended, waived or modified except in a written agreement executed by the Parties. The waiver by either Party of any breach of any provision of this Agreement shall not be construed as a waiver of any subsequent breach hereof. No failure on the part of either Party to exercise any power, right or remedy under this Agreement, and no delay on the part of either Party in exercising any power, right or remedy under this Agreement, shall operate as a waiver of such power, right or remedy. This Agreement supersedes all prior discussions, understandings, representations, warranties and agreements between the Parties, and contains the entire agreement of the Parties, with respect to the subject matter hereof. This Agreement may be executed in separate counterparts and delivered by electronic means, each of which when so executed shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
16. Interpretations. As used in this Agreement and except as expressly provided for, or unless the context clearly provides otherwise, in this Agreement, (i) the terms “herein”, “herewith”, “hereunder” and “hereof” are references to this Agreement, taken as a whole, (ii) the terms “include”, “includes” and “including” shall mean “including, without limitation”, (iii) any reference to any Exhibit, Section or clause shall be to an Exhibit, Section or clause of this Agreement, (iv) any reference to an agreement, instrument or other document shall be a reference to such agreement, instrument or other document as modified, amended, supplemented and restated, (v) any reference to a Person includes its successors and permitted assigns, (vi) the singular shall include the plural and the plural shall include the singular, and the masculine shall include the feminine and neuter, and vice versa, (vii) “day” means a calendar day, (viii) any use of “or”, “either” or “any” shall not be exclusive, (ix) any reference to any Applicable Law is a reference to the same as it may have been, or may from time to time be, amended, modified or reenacted, (x) words or abbreviations that are used in Exhibit A, but are otherwise not defined in this Agreement, and that have a customary meaning within the United States construction and oil and gas industry shall have such meaning for purposes of Exhibit A and (xi) all monetary amounts are expressed in U.S. Dollars (US$). The headings set forth in any Exhibit or Section are for convenience and shall be disregarded when interpreting this Agreement. If any provision of the body of the Agreement conflicts with any provision of any Exhibit, they body of the Agreement shall control.
17. Successors and Assigns. This agreement is binding upon, and inures to the benefit of, the parties and their respective successors and assigns.
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IN WITNESS WHEREOF, this Agreement has been executed as of the Effective Date.
| LESSOR: | ||
| VivaWealth Fund I, LLC, a Delaware limited liability company | ||
| By: | /s/ Tom Lee | |
| Name: | Tom Lee | |
| Title: | Manager | |
| LESSEE: | ||
| VivaVentures Remediation Corp., a Texas corporation | ||
| By: | /s/ James H Ballengee | |
| Name: | James H Ballengee | |
| Title: | CEO | |
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SCHEDULE 1
| RPC Unit | Single
or Double Capacity RPC* |
Date
of Completion and Acceptance |
Lessor’s Acknowledgement |
Lessee’s Acknowledgement |
| VWRPC1 | ||||
| VWRPC2 | ||||
| VWRPC3 | ||||
| VWRPC4 |
| * | If any RPC Unit is a double-capacity RPC then it will take the place of two RPC Units. |
SCHEDULE 1
EXHIBIT A
RPC EQUIPMENT SPECIFICATIONS
The Equipment that is a single-capacity RPC must be fully operational and be able to sustain production specifications of at least 20 tons of material processed per hour for 24 hours per day for a continuous 7 day period.
The Equipment that is a double-capacity RPC must be fully operational and be able to sustain production specifications of at least 40 tons of material processed per hour for 24 hours per day for a continuous 7 day period.
EXHIBIT A
EXHIBIT B
WORK SITE DESCRIPTION
Location to be determined by the Lessee.
EXHIBIT B
EXHIBIT C
INSURANCE
1. Lessee covenants and agrees that Lessee will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for, from and after the Equipment Completion Date and continuing until the Equipment is removed from the Work Site.
(a) Liability insurance in the Commercial General Liability form (including Broad Form Property Damage and Contractual Liabilities or reasonable equivalent thereto) covering the Equipment and Lessee’s use thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Work Site or any other location that Lessee operates the Equipment, such insurance to be written on an occurrence basis (not a claims made basis), to be in combined single limits amounts not less than $1,000,000 and to have general aggregate limits of not less than $2,000,000 for each policy year. The insurance coverage required under this Section 1(a) shall, in addition, extend to any liability of Lessee arising out of the indemnities provided for in Section 10 of the Agreement.
(b) Insurance covering the Equipment in an amount not less than 100% of its full replacement value.
(c) Workers Compensation and Employers Liability Policy covering Lessor’s employees, such insurance to be written in accordance with applicable State statutory coverage amounts.
(d) All policies of the insurance provided shall be issued in form reasonably acceptable to Lessor by insurance companies with a rating of not less than “A-” and financial size of not less than Class VIII, in the most current available “Best’s Insurance Reports”, and licensed to do business in the state in which the Work Site is located. Each and every such policy:
(i) shall name Lessor, and any other party reasonably designated by Lessor, as an additional insured. In addition, the coverage described in Section 1(b) above relating to the Equipment shall also name Lessor as “loss payee”;
(ii) shall be delivered to Lessor, in the form of an insurance certificate acceptable to Lessor as evidence of such policy, prior to the Equipment Completion Date and thereafter within 30 days prior to the expiration of each such policy, and, as often as any such policy shall expire or terminate. Renewal or additional policies shall be procured and maintained by Lessee in like manner and to like extent;
(iii) shall contain a provision that the insurer will give to Lessor and such other parties in interest at least 30 days’ notice in writing in advance of any material change, cancellation, termination or lapse, or the effective date of any reduction in the amounts of insurance; and
(iv) shall be written as a primary policy which does not contribute to and is not in excess of coverage which Lessor may carry.
(e) In the event that Lessee shall fail to carry and maintain the insurance coverages set forth in this Section 1, Lessor may upon 30 days’ notice to Lessee (unless such coverages will lapse in which event no such notice shall be necessary) procure such policies of insurance and Lessee shall promptly reimburse Lessor therefor.
EXHIBIT C
2. Lessor covenants and agrees that from and after the Effective Date and continuing until the Equipment Completion Date, Lessor will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for from and after the Effective Date and continuing until the Equipment Completion Date:
(a) Liability insurance in the Commercial General Liability form (including Broad Form Property Damage and Contractual Liabilities or reasonable equivalent thereto) covering the Equipment and Lessor’s handling thereof against claims for bodily injury or death, property damage and product liability, such insurance to be written on an occurrence basis (not a claims made basis), to be in combined single limits amounts of not less than $1,000,000 and to have general aggregate limits of not less than $2,000,000. The insurance coverage required under this Section 2(a) shall, in addition, extend to any liability of Lessor arising out of the indemnities provided for in Section 10 of the Agreement.
(b) Insurance covering the Equipment in an amount not less than 100% of its full replacement value.
(c) Workers Compensation and Employers Liability Policy covering Lessor’s employees, such insurance to be written in accordance with applicable State statutory coverage amounts.
(d) All policies of the insurance provided for shall be issued in form reasonably acceptable to Lessee by insurance companies with a rating of not less than “A-” and financial size of not less than Class VIII, in the most current available “Best’s Insurance Reports”, and licensed to do business in the state in which the Work Site is located. Each and every such policy:
(i) shall name Lessee, and any other party reasonably designated by Lessee, as an additional insured;
(ii) shall contain a provision that the insurer will give to Lessee and such other parties in interest at least 30 days’ notice in writing in advance of any material change, cancellation, termination or lapse, or the effective date of any reduction in the amounts of insurance; and
(iii) shall be written as a primary policy which does not contribute to and is not in excess of coverage which Lessee may carry.
(e) In the event that Lessor shall fail to carry and maintain the insurance coverages set forth in this Section 2, Lessee may upon 30 days’ notice to Lessor (unless such coverages will lapse in which event no such notice shall be necessary) procure such policies of insurance and Lessor shall promptly reimburse Lessee therefor.
Notwithstanding anything to the contrary contained in the Agreement, Lessor and Lessee hereby waive any rights each may have against the other on account of any loss or damage occasioned to Lessor or Lessee, as the case may be, their respective property, the Equipment, or to the other portions of the Work Site, arising from any risk covered by “Special Form” fire and extended coverage insurance of the type and amount required to be carried hereunder, provided that such waiver does not invalidate such policies or prohibit recovery thereunder. The parties hereto shall cause their respective insurance companies insuring the property of either Lessor or Lessee against any such loss, to waive any right of subrogation that such insurers may have against Lessor or Lessee, as the case may be.
EXHIBIT C
EXHIBIT D
CERTIFICATE OF COMPLETION
Viva Wealth Fund I, LLC, a Nevada limited liability company (“Lessor”) has delivered this Certificate of Completion to [____________], a [____________] (“Lessee”) as of [____________], 20[__], pursuant to the terms of Section 6 of the Equipment Lease Agreement between Lessor and Lessee, dated as of [____________], 20[__] (the “Agreement”).
Capitalized terms used, but not otherwise defined, herein have the meanings set forth in the Agreement.
Lessor and Lessee acknowledge and agree that Equipment Completion has occurred in accordance with the Agreement as of the date first written above.
| LESSOR: | ||
| VivaWeath Fund I, LLC, a Nevada limited liability company | ||
| By: | /s/ Tom Lee | |
| Name: | Tom Lee | |
| Title: | Manager | |
| LESSEE: | ||
| VivaVentures Remediation Corp., a Texas corporation | ||
| By: | ||
| Name: | James H Ballengee | |
| Title: | CEO | |
EXHIBIT D
Exhibit 10.5
Schedule No. 002, dated May 23, 2023
This Schedule hereby fully incorporates by reference that certain Master Agreement No. 1462 dated December 28, 2021 (the “Master Agreement”) between Maxus Capital Group, LLC, as Lessor, and White Claw Colorado City, LLC, as Lessee, and Jorgan Development, LLC, as Co-Lessee.
LESSEE AGREES TO LEASE THE DESCRIBED EQUIPMENT FROM LESSOR, AND LESSOR BY ACCEPTANCE OF THIS SCHEDULE AGREES TO LEASE THE EQUIPMENT TO LESSEE, ON THE TERMS AND CONDITIONS SET FORTH IN THIS SCHEDULE AND THE MASTER AGREEMENT, WHICH IS INCORPORATED HEREIN BY REFERENCE.
Equipment Description
The equipment is defined and described on the attached Exhibit A - Equipment Description (the “Equipment”).
| 1. | Base Monthly Rental: | $57,961.95 USD. The Base Monthly Rental shall be adjusted prior to the Base Term Commencement Date in accordance with changes in the 3-Year Interest Rates, as reported in the Federal Reserve Statistical Release H.15 under the heading “Treasury constant maturities, Nominal,” as of the business day preceding the date on which all of the Equipment is accepted for purposes of the Lease as evidenced by the Installation Certificate. If, for the business day preceding the date on which the Equipment is accepted, the interest rate on the aforementioned 3-Year Interest Rates is greater than 3.90% (the “Benchmark Rate”), the Base Monthly Rental will be adjusted as follows: for each one one-hundredth of one percent (.01%) variance, all rent amounts due pursuant to this paragraph will be increased (in accordance with the variance from the 3-Year Interest Rate) by $12.47 (the “Rental Adjustment Factor”). |
| 2. | Equipment Location: | 18511 Beaumont Highway, Houston, TX 77049 as further described in Exhibit A |
| 3. | Equipment Return Location: | To be determined by Lessor |
| 4. | Expected Delivery Date: | Unless and until Lessee has executed an Installation Certificate, Lessor may establish the actual delivery date by reference to the shipping records of the Supplier or the shipper or by other reliable means. |
| 5. | Base Term: | 48 months |
| 6. |
Lessee Address for Notices: (if different from Master Agreement) |
N/A |
| 7. | Value of Calculation for Stipulated Loss Value: | $2,223,055.30 USD |
| 8. | Special Terms: |
i.) Security Deposit to be held by Lessor in any of its accounts without the payment of interest, and to be applied by Lessor as set forth in Section 19 of the Master Agreement: $57,961.95
ii.) Prior to Acceptance: Prior to the receipt by Lessor of an executed Installation Certificate, including during a period of progress payments, Lessor may, in its sole discretion, cease funding the purchase of Equipment if Lessor determines in its commercially reasonable discretion that a material adverse change has occurred in Lessee’s financial condition or business, after which determination Lessee will immediately repay all amounts advanced by Lessor plus interest and charges due.
iii.) Lessor irrevocably consents, agrees to, and approves the execution and entering into by Lessee of that certain Equipment Sublease Agreement of even date herewith by and between Lessee, as Sublessor, and VivaVentures Remediation Corporation, as Sublessee (the “Sublease”) pursuant to Master Agreement Section 9(c). Furthermore, Lessor permits VivaVentures Remediation Corporation to obtain at their expense the insurance conforming with the Master Agreement pursuant to Section 15 thereof.
iv.) Lessee shall have the right to exercise an early buyout option with respect to the Equipment in accordance with the terms of this section. To exercise such right: (a) no Event of Default, or event or condition which, with the giving of notice or the passage of time or both, would constitute an Event of Default, shall have occurred under this Lease; and (b) Lessee shall have given Lessor prior written notice of its election to exercise such
Schedule Page 2 of 3
Maxus Lease No. 1462-002
option, which notice shall designate the respective early purchase option to be exercised and shall be given no more than 180 days, nor less than 120 days prior to the applicable EBO Date, as such term is hereafter defined. Upon such exercise, Lessee shall purchase all but not less than all of the Equipment covered by this Lease, effective as of the Base Monthly Rent due date which falls exactly on the third anniversary of the Base Term Commencement Date (the “EBO Date”), by paying Lessor, in immediately available funds, the sum of the amount listed below, plus all Base Monthly Rent, including the Base Monthly Rent amount due on such EBO Date, and all other amounts then due and payable under this Lease as of such EBO Date. Upon receipt of such sum, together with any applicable taxes then or thereafter due, Lessor shall execute and deliver to Lessee a bill of sale for the Equipment, without representation or warranty except that the Equipment shall be free and clear of any liens, claims or encumbrances created by or through Lessor:
Early Buyout Option Amount for 36 months: $684,525.35
v.) End of Base Term Options: Provided that no Event of Default or event or condition which, with the giving of notice or the lapse of time or both, would constitute an Event of Default has occurred, at the end of the Base Term of the Lease, Lessee may elect one of the following options: (1) purchase all, but not less than all, of the Equipment for its then fair market value; or (2) renew the Lease for a mutually agreeable term for the Equipment’s then fair market rental value; or (3) return the Equipment to a location within the continental United States to be designated by Lessor, together with a payment to Lessor of a refitting / restocking fee equal to fifteen percent (15%) of the Value of Calculation for Stipulated Loss Value. For purposes of this paragraph, and in lieu of any other definition thereof, “fair market value” means the value determined by Lessor in its reasonable discretion in accordance with its usual procedures, subject to an appraisal if reasonably requested by Lessee at the expense of Lessee with an appraiser selected by Lessor. If Lessee elects to exercise its purchase option, upon receipt of such purchase price, together with any applicable taxes then or thereafter due, Lessor shall execute and deliver to Lessee a bill of sale for the Equipment, without representation or warranty except that the Equipment is free and clear of any liens, claims or encumbrances created by or through Lessor. Lessee covenants that it will not enter into negotiations for future lease or financing transactions with Lessor’s Assignee without prior written consent of Lessor.
vi.) Financial Covenants:
(a) Fixed Charge Coverage Ratio: Lessee shall maintain a Fixed Charge Coverage Ratio of not less than 2.50 to 1.00, calculated and tested as of the last day of each fiscal quarter during the Base Term on a trailing twelve-month basis beginning with the fiscal year ending December 31, 2024. As used herein, “Fixed Charge Coverage Ratio” shall be defined as (1) the EBITDA of Lessee, being the sum of net income plus (+) interest expense, plus (+) federal, state and local income taxes, plus (+) depreciation and amortization, such sum to be divided by (2) the aggregate payment obligations of Lessee, being the principal payments on all long-term debt, plus (+) interest expense, plus (+) federal, state and local income taxes.
(b) Leverage Ratio: Lessee shall maintain a Debt to Tangible Net Worth Ratio of not more than 3.00 to 1.00, calculated and tested as of the last day of each fiscal quarter during the Base Term beginning with the fiscal year ending December 31, 2024.
“Leverage Ratio” shall be defined as follows: (1) Total Liabilities minus (-) Subordinated Debt, as defined below, divided by (2) Tangible Net Worth (total assets minus (-) intangible assets, which include patents and copyrights, minus (-) Total Liabilities plus (+) Subordinated Debt.
“Subordinated Debt” shall mean the present balance of liabilities owed by Lessee to its equity members, officers, and affiliated companies, as identified in a debt schedule provided by Lessee of the same date as the applicable fiscal quarter financial statements for which this Leverage Ratio is being calculated.
(c) Cash Flow Distribution: After the Base Term Commencement Date and continuously thereafter while any Rent payments are due and owing Lessor, any equitable distribution of cash by Lessee to its members is subject to the approval of Lessor, which approval shall not be unreasonably withheld or delayed.
vii.) Lessee will maintain with Lessor a Cash Reserve in an amount equal to a maximum of six Base Monthly Rental payments totaling $347,771.80 (the “Maximum Reserve). The first $100,000.00 will be funded as part of the Value of Calculation for Stipulated Loss Value. Commencing on the twenty-fourth (24th) day of the month immediately following the Base Term Commencement Date, or in the case of such day being a Saturday, Sunday, or New York banking holiday, then on the first succeeding regular banking day, and thereafter each month during the Base Term, Lessee shall pay Lessor by wire transfer to an account designated by Lessor, which account may change from time to time, a cash reserve payment equal to $20,647.65 (the “Reserve Payment”), monthly in arrears, during the first twelve (12) months of the Base Term until Lessor has received an additional amount equal to $247,771.80 USD. For the purpose of securing all of Lessee’s obligations under the Master Agreement and all Schedules, Lessee grants to Lessor a security interest in the Cash Reserve described herein. Any and all such Cash Reserve may be commingled by Lessor with other funds without any interest payable to Lessee. Upon an Event of Default by Lessee hereunder, Lessor
Schedule Page 3 of 3
Maxus Lease No. 1462-002
may, but shall not be obligated to, apply any such Cash Reserve to any obligation of Lessee under any Lease, in which event Lessee shall promptly restore the amount thereof on demand. Upon compliance by Lessee with all terms of each Schedule, and within thirty (30) days after the End of Term, Lessor shall return to Lessee the balance of any Cash Reserve. Lessee agrees that, in the event of Lessee’s bankruptcy, Lessor shall be entitled to set off and retain any amount of the Cash Reserve against any and all amounts due to Lessor from Lessee, whether such amounts are classified as “pre-petition” or “post-petition” liabilities and whether or not the same are entitled to priority.
viii.) If Lessor takes possession of the Equipment, whether in exercising a remedy under this Lease or as a result of Lessee’s election to return the Equipment to Lessor at End of Term, then Lessee hereby grants Lessor a non-exclusive right of restricted use and license, at no cost to Lessor, of Lessee’s intellectual property and other proprietary technology related to the Equipment, including, but not limited to, Lessee’s rights in the proprietary and confidential information of the Equipment’s manufacturer and vendor and the Assignment of Lease Agreements detailed in section “XI” of the attached Exhibit A - Equipment Description, solely (a) to allow Lessor to demonstrate the Equipment to prospective purchasers or lessees, and (b) to grant a one-time sub-license of said intellectual property to any actual purchaser or lessee of the Equipment on a “no-fee” basis.
THIS SCHEDULE (INCORPORATING THE MASTER AGREEMENT) CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE LESSOR AND LESSEE AS TO THE LEASE AND THE EQUIPMENT. IN THE EVENT OF A CONFLICT BETWEEN THE TERMS AND PROVISIONS OF THIS SCHEDULE AND THOSE OF THE MASTER AGREEMENT, THE TERMS AND PROVISIONS OF THIS SCHEDULE SHALL CONTROL AND PREVAIL.
| Lessee: | White Claw Colorado City, LLC | Lessor: | Maxus Capital Group, LLC | |
| By: | By: | |||
| Print Name: | James H. Ballengee | Anthony N. Granata | ||
| Title: | President & CEO | Vice President |
Notwithstanding anything contained in this Schedule, or any other writing to the contrary, Co-Lessee does hereby consent, agree, execute and enter into this Schedule solely, exclusively, and INSOFAR AND ONLY INSOFAR, for the purposes set forth in the Master Agreement:
| Co-Lessee: | Jorgan Development, LLC | |
| By: | ||
| Print Name: | James H. Ballengee | |
| Title: | Manager |
This is Counterpart No. ____ of 2 serially numbered counterparts. To the extent that this document constitutes chattel paper under the Uniform Commercial Code, no security interest in this document may be created through the transfer and possession of any counterpart other than Counterpart No. 1.
Maxus Capital Group, LLC
Schedule 1462-002
Exhibit A - Equipment Description
| I. | METAL BUILDING -(60’ X 130’) APPROX. 7,800 SF (POLE BARN STYLE): |
| ● | Metal R-Panel 26 ga. Construction on walls |
| ● | 24’ Eaves (Minimum Eave Height of 22’) |
| ● | 1.12 Pitch Roof with Solar Reflecting R-Panel |
| ● | Skirt Wall 15’ x 6’ |
| ● | Minimum (2) 3’x7’ Exit Doors with Push Bar Exit per County Requirements for Emergency EGRESS/INGRESS |
| ● | (6) Six Bays |
| ● | (4) Four Bay Doors, Height to be at least 20’ |
| ● | Highest Point on Metal Building Apex, 25’ |
| II. | PAD SITE-APPROX. 97,500 SF: |
| ● | Based on a Total Depth of 8” -12” with Crushed Concrete #57 Rock and #1 Rock |
| ● | Non-woven 6oz Geotextile Fabric |
| Ill. | CONCRETE SLAB - (100’ X 150’ X 8”) APPROX. 15,000 SF: |
| ● | Dirt work - Staking, Grading, and Elevations |
| ● | Form with 2x12 |
| ● | Bell Bottom Piers as Designated by Shop Drawings from Metal Building Fabricator |
| ● | Minimum of (10) Ten Piers |
| ● | Utilize Minimum 6 MIL Poly Plastic for Vapor Barrier |
| ● | Set Steel - 5/8” Rebar# 5 Grade 60 A min. of 16” O.C.E.W. in (2) Two Lifts for 8” Slab |
| ● | Concrete Mix will be Optimized for Environmental Conditions for Maximum Strength and Performance - 4000 PSI min. 1.5” Rock in Mix. |
| ● | Smooth Finish with Gas Power Trowel |
| ● | 6” Curb Around Perimeter |
| IV. | CONCRETE RETAINING WALLS: |
| ● | 8” x 3’ High, Approx. 70’ Long 3,000 PSI Concrete Walls |
| V. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| VI. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| VII. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM@ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 1O’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
Page 1 of 2
| VIII. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| IX. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| X. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Granter, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
The Equipment described above is made part of a Remediation Process Center (RPG) for the purpose of processing hydrocarbon E & P waste / tank bottoms. The RPG will process only accepted materials under the Texas Railroad Commission (TRRC) R-9 category as follows:
| ● | E & P Tank Bottoms |
| ● | Barge Crude Oil Bottoms |
| ● | Pipeline Crude Oil Tank Bottoms |
| ● | Refinery Crude Oil Tank Bottoms (Prior to refining) |
| ● | other R-9 RCRA Exempt Materials that Qualify |
| Premises: | 18511 Beaumont Highway, Houston, TX 77049 |
Additional security includes assignment of the following Lease Agreements:
| ► | RPG Equipment Lease Agreement made effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPG Equipment listed therein. |
| ► | Wash plant Equipment Lease Agreement made effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corp., as Sublessee, for the use of the wash plant facility listed therein. |
Page 2 of 2
Installation Certificate for Schedule No. 002, dated May 23, 2023
Incorporating by reference Master Agreement No. 1462 dated December 28, 2021 between Maxus Capital Group, LLC, as Lessor, and White Claw Colorado City, LLC, as Lessee, and Jorgan Development, LLC, as Co-Lessee.
Lessee hereby certifies (i) that the Items of Equipment described below have been delivered to the specified Equipment Location, and inspected by Lessee and have been found to be in good order as of the Installation Date, and (ii) that the quantity, description, and serial numbers as indicated below are true and correct.
Equipment Description
The equipment is defined and described on the attached Exhibit A - Equipment Description (the “Equipment”).
Installation Date: ______________
Equipment Location: 18511 Beaumont Highway, Houston, TX 77049 as further described in Exhibit A
Lessee hereby represents and warrants to Lessor that on the Installation Date:
| 1. | The representation and warranties of Lessee contained in the Master Agreement and the Schedule are true and correct in all material respects as though made as of the Installation Date. |
| 2. | No Event of Default as defined in the Master Agreement has occurred and is continuing as of the Installation Date. |
| 3. | There are in full force and effect such insurance policies with respect to the Equipment as are required pursuant to the Master Agreement. |
| Lessee: | White Claw Colorado City, LLC | |
| By: | ||
| Print Name: | James H. Ballengee | |
| Title: | President & CEO | |
| Co-Lessee: | Jorgan Development, LLC | |
| By: | ||
| Print Name: | James H. Ballengee | |
| Title: | Manager |
This is Counterpart No. ____ of 2 serially numbered counterparts. To the extent that this document constitutes chattel paper under the Uniform Commercial Code, no security interest in this document may be created through the transfer and possession of any counterpart other than Counterpart No. 1.
Maxus Capital Group, LLC
Schedule 1462-002
Exhibit A - Equipment Description
| I. | METAL BUILDING -(60’ X 130’) APPROX. 7,800 SF (POLE BARN STYLE): |
| ● | Metal R-Panel 26 ga. Construction on walls |
| ● | 24’ Eaves (Minimum Eave Height of 22’) |
| ● | 1.12 Pitch Roof with Solar Reflecting R-Panel |
| ● | Skirt Wall 15’ x 6’ |
| ● | Minimum (2) 3’x7’ Exit Doors with Push Bar Exit per County Requirements for Emergency EGRESS/INGRESS |
| ● | (6) Six Bays |
| ● | (4) Four Bay Doors, Height to be at least 20’ |
| ● | Highest Point on Metal Building Apex, 25’ |
| II. | PAD SITE-APPROX. 97,500 SF: |
| ● | Based on a Total Depth of 8” -12” with Crushed Concrete #57 Rock and #1 Rock |
| ● | Non-woven 6oz Geotextile Fabric |
| Ill. | CONCRETE SLAB - (100’ X 150’ X 8”) APPROX. 15,000 SF: |
| ● | Dirt work - Staking, Grading, and Elevations |
| ● | Form with 2x12 |
| ● | Bell Bottom Piers as Designated by Shop Drawings from Metal Building Fabricator |
| ● | Minimum of (10) Ten Piers |
| ● | Utilize Minimum 6 MIL Poly Plastic for Vapor Barrier |
| ● | Set Steel - 5/8” Rebar# 5 Grade 60 A min. of 16” O.C.E.W. in (2) Two Lifts for 8” Slab |
| ● | Concrete Mix will be Optimized for Environmental Conditions for Maximum Strength and Performance - 4000 PSI min. 1.5” Rock in Mix. |
| ● | Smooth Finish with Gas Power Trowel |
| ● | 6” Curb Around Perimeter |
| IV. | CONCRETE RETAINING WALLS: |
| ● | 8” x 3’ High, Approx. 70’ Long 3,000 PSI Concrete Walls |
| V. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| VI. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| VII. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM@ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 1O’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
Page 1 of 2
| VIII. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| IX. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| X. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Granter, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
The Equipment described above is made part of a Remediation Process Center (RPG) for the purpose of processing hydrocarbon E & P waste / tank bottoms. The RPG will process only accepted materials under the Texas Railroad Commission (TRRC) R-9 category as follows:
| ● | E & P Tank Bottoms |
| ● | Barge Crude Oil Bottoms |
| ● | Pipeline Crude Oil Tank Bottoms |
| ● | Refinery Crude Oil Tank Bottoms (Prior to refining) |
| ● | other R-9 RCRA Exempt Materials that Qualify |
| Premises: | 18511 Beaumont Highway, Houston, TX 77049 |
Additional security includes assignment of the following Lease Agreements:
| ► | RPG Equipment Lease Agreement made effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPG Equipment listed therein. |
| ► | Wash plant Equipment Lease Agreement made effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corp., as Sublessee, for the use of the wash plant facility listed therein. |
Page 2 of 2
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE YOUR SOCIAL SECURITY NUMBER AND/OR YOUR DRIVER LICENSE NUMBER FROM ANY INSTRUMENT THAT TRANSFERS INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS.
| STATE OF TEXAS | § |
| § | |
| COUNTY OF HARRIS | § |
ASSIGNMENT OF FIXTURES AND EQUIPMENT
KNOW ALL MEN BY THESE PRESENTS, that VIVAVENTURES REMEDIATION CORPORATION, a Texas corporation whose address for purposes of this instrument is 5151 Belt Line Road, Suite 715, Dallas, Texas 75254 ("Seller” and “Grantor”), for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, has ASSIGNED, TRANSFERRED, SOLD, and CONVEYED, and by these presents does hereby ASSIGN, TRANSFER, SELL and CONVEY unto MAXUS CAPITAL GROUP, LLC, a Delaware limited liability company whose address for purposes of this instrument is 959 West St. Clair Avenue, Suite 300, Cleveland, Ohio 44113 ("Buyer” and “Grantee”), its successors and assigns, all of Sublessor's leasehold interest in and to all of the equipment described and set forth on Exhibit A hereto (collectively, the "Equipment"):
TO HAVE AND TO HOLD all and singular the Equipment, together with all rights, titles, interests, estates, remedies, powers, privileges, hereditaments and appurtenances thereunto belonging or in any way appertaining to Sublessee and their heirs, successors, legal representatives and assigns forever SUBJECT TO all exceptions, liens, encumbrances, and conveyances of record.
[Signature page follows.]
[The remainder of this page is intentionally blank.]
EFFECTIVE on May 23, 2023
| GRANTOR: | ||
| VIVAVENTURES REMEDIATION CORPORATION, a Texas corporation | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | President & CEO | |
| Date: | ||
| STATE OF TEXAS | § |
| § | |
| COUNTY OF DALLAS | § |
This instrument was acknowledged before me on the _____ day of ____________, ______, by James H. Ballengee, as President & CEO of VivaVentures Remediation Corporation, a Texas corporation, on behalf of said corporation.
| Notary Public in and for the State of Texas | ||
| GRANTEE: | ||
| MAXUS CAPITAL GROUP, LLC, a Delaware limited liability company | ||
| By: | ||
| Name: | ||
| Title: | ||
| Date: | ||
| STATE OF ____________________ | § |
| § | |
| COUNTY OF __________________ | § |
This instrument was acknowledged before me on the _____ day of ____________, ______, by ______________________________, as ____________________ of Maxus Capital Group, LLC, a Delaware limited liability company, on behalf of said limited liability company.
| Notary Public in and for the State of | ||
EXHIBIT A
to the Assignment of Fixtures and Equipment
THE EQUIPMENT
| I. | METAL BUILDING - (60’ X 130’) APPROX. 7,800 SF (POLE BARN STYLE): |
| ● | Metal R-Panel 26 ga. Construction on walls |
| ● | 24’ Eaves (Minimum Eave Height of 22’) |
| ● | 1.12 Pitch Roof with Solar Reflecting R-Panel |
| ● | Skirt Wall 15’ x 6’ |
| ● | Minimum (2) 3’x7’ Exit Doors with Push Bar Exit per County Requirements for Emergency EGRESS/INGRESS |
| ● | (6) Six Bays |
| ● | (4) Four Bay Doors, Height to be at least 20’ |
| ● | Highest Point on Metal Building Apex, 25’ |
| II. | PAD SITE – APPROX. 97,500 SF: |
| ● | Based on a Total Depth of 8” – 12” with Crushed Concrete #57 Rock and #1 Rock |
| ● | Non-woven 6oz Geotextile Fabric |
| III. | CONCRETE SLAB - (100’ X 150’ X 8”) APPROX. 15,000 SF: |
| ● | Dirt work – Staking, Grading, and Elevations |
| ● | Form with 2x12 |
| ● | Bell Bottom Piers as Designated by Shop Drawings from Metal Building Fabricator |
| ● | Minimum of (10) Ten Piers |
| ● | Utilize Minimum 6 MIL Poly Plastic for Vapor Barrier |
| ● | Set Steel – 5/8” Rebar # 5 Grade 60 A min. of 16” O.C.E.W. in (2) Two Lifts for 8” Slab |
| ● | Concrete Mix will be Optimized for Environmental Conditions for Maximum Strength and Performance – 4000 PSI min. 1.5” Rock in Mix. |
| ● | Smooth Finish with Gas Power Trowel |
| ● | 6” Curb Around Perimeter |
| IV. | CONCRETE RETAINING WALLS: |
| ● | 8” x 3’ High, Approx. 70’ Long 3,000 PSI Concrete Walls |
| V. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| VI. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| VII. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM @ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 10’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
| VIII. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| IX. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| X. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Grantor, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
The Equipment described above is made part of a Remediation Process Center (RPC) for the purpose of processing hydrocarbon E & P waste / tank bottoms. The RPC will process only accepted materials under the Texas Railroad Commission (TRRC) R-9 category as follows:
| ● | E & P Tank Bottoms |
| ● | Barge Crude Oil Bottoms |
| ● | Pipeline Crude Oil Tank Bottoms |
| ● | Refinery Crude Oil Tank Bottoms (Prior to refining) |
| ● | Other R-9 RCRA Exempt Materials that Qualify |
| Premises: | 18511 Beaumont Highway, Houston, TX 77049 |
Additional security includes assignment of the following Lease Agreements:
| Ø | RPC Equipment Lease Agreement made effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPC Equipment listed therein. |
| Ø | Wash plant Equipment Lease Agreement made effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corp., as Sublessee, for the use of the wash plant facility listed therein. |
COLLATERAL ASSIGNMENT OF CONTRACTS
This COLLATERAL ASSIGNMENT OF CONTRACTS (this “Assignment”) is dated effective May 23, 2023 (the “Effective Date”) is by and between VivaVentures Remediation Corp., a Texas corporation (“Assignor”), Maxus Capital Group, LLC, a Delaware limited liability company (“Assignee”), and White Claw Colorado City, LLC, a Texas limited liability company and Jorgan Development, LLC, a Louisiana limited liability company (collectively “White Claw”). Assignor, Assignee, and White Claw may hereinafter be referred to individually as a “Party” or collectively as the “Parties.”
WHEREAS, Assignee has entered into a Lease Schedule 002 dated March 23, 2023 (“Equipment Schedule”) to that certain Master Agreement dated December 28, 2021 (“Master Agreement”), both by and between Assignee as Lessor, and White Claw Colorado City, LLC, as Lessee, and Jorgan Development, LLC as Co-Lessee, for the lease of equipment located at a Remediation Process Center at 18511 Beaumont Highway, Houston, Texas;
WHEREAS, an RPC Equipment Lease Agreement was entered into effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPC Equipment listed therein.;
WHEREAS, a wash plant Equipment Sublease Agreement was entered into effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corporation, as Sublessee, for the use of the wash plant facility listed therein.
NOW THEREFORE, in consideration of the mutual covenants, terms and provisions hereof, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Assignment and Assumption. Assignor does hereby BARGAIN, GRANT, ASSIGN, TRANSFER, CONVEY, SET OVER and DELIVER to Assignee a lien and security interest in and to all of Assignor’s right, title and interest in and to the Land Lease Agreement, the RPC Equipment Lease Agreement, and the Wash Plant Equipment Lease Agreement (the “Assigned Interests”). Assignee hereby ACCEPTS and ASSUMES the Assigned Interests, free and clear of all liens and encumbrances (including security interests) other than those created by this Assignment and restrictions imposed on sales of securities under applicable laws.
2. Master Agreement. White Claw and Assignee agree that this Assignment is delivered pursuant to the Master Agreement, is subject in all respects to the terms and conditions thereof, and that, notwithstanding anything contained herein to the contrary, this Assignment shall not be deemed to limit, enlarge, alter, extinguish, or otherwise modify the terms, conditions, or other provisions of the Master Agreement or any of the other documents executed in connection therewith (the “Transaction Documents”) or any obligations of Assignee or White Claw under the Master Agreement or the other Transaction Documents, all of which obligations shall survive the delivery of this Assignment in accordance with the terms of the Master Agreement or the other Transaction Documents, as the case may be. In the event of any inconsistencies or conflicts between the terms of this Assignment and the terms of the Master Agreement the Parties agree that the terms of the Master Agreement shall govern and control.
3. Binding Effect. This Assignment shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
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4. Assignment; Third-Party Beneficiaries. This Assignment shall not be assignable by any party hereto without the prior written consent of the other party hereto, and any attempt to assign this Assignment without such consent shall be void and of no effect, except that Assignee may by notice to Assignor assign its rights or delegate its obligations hereunder in whole or in part to any of its affiliates, provided that no such assignment shall relieve Assignor of its obligations hereunder. Nothing in this Assignment, expressed or implied, is intended or shall be construed to confer upon any person other than the Parties and their successors and assigns permitted by this Section 4 any right, remedy, or claim under or by reason of this Assignment.
5. Amendment; Waivers. No amendment, modification, or discharge of this Assignment, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge, or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. The failure of either Party to exercise any rights or privileges hereunder shall not be construed as a waiver of any such rights or privileges hereunder. The rights and remedies herein provided are cumulative and, except as otherwise expressly provided in this Assignment, none is exclusive of any other or of any rights or remedies that any party may otherwise have at law or in equity.
6. Law and Venue. This Assignment, and all claims and causes of action, whether in contract, tort, or otherwise, that may arise out of, be based upon, or relate to this Assignment in any way, manner, or means, shall be construed and enforced in accordance with and governed by the laws of the state set forth in the Master Agreement, without regard to its rules or principles regarding conflicts of laws. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE AND SUBMIT TO VENUE FOR ANY DISPUTE HEREUNDER IN THE COURT OF COMPETENT JURISDICTION AS FURTHER SET FORTH IN THE MASTER AGREEMENT.
7. Jury Trial. THE PARTIES HERETO IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS ASSIGNMENT.
8. Entire Agreement. This Assignment and the Master Agreement (and the agreements contemplated by the Master Agreement) constitute the entire agreement of the Parties with respect to the assignment of the Assigned Interests to Assignee, and supersede all other prior agreements and understandings, both written and oral, between the Parties with respect to such assignment.
9. Severability. Whenever possible, each provision or portion of any provision of this Assignment shall be interpreted in such manner as to be effective and valid under applicable law, but, if any provision or portion of any provision of this Assignment is held to be invalid, illegal, or unenforceable in any respect under any applicable law, such invalidity, illegality, or unenforceability shall not affect the validity, legality, or enforceability of any other provision or portion of any provision in such jurisdiction, and this Assignment shall be reformed, construed, and enforced in such jurisdiction in such manner as will effect as nearly as lawfully possible the purposes and intent of such invalid, illegal, or unenforceable provision.
10. Counterparts. This Assignment may be executed in multiple counterparts, including multiple signature pages, each of which shall be an original, with the same effect as if the signature hereto were upon the same instrument, whether by means of electronic, facsimile, physical delivery, or other method of transmission.
[Signature page follows]
Page 2 of 3
IN WITNESS WHEREOF, the Parties have executed and entered into this Assignment to be effective as of the Effective Date.
| ASSIGNOR: | ASSIGNEE: | |||
| VivaVentures Remediation Corp. | Maxus Capital Group, LLC | |||
| By: | By: | |||
| Name: | Name: | |||
| Title: | Title: | |||
| Date: | Date: | |||
| White Claw Colorado City, LLC | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | President & CEO | |
| Date: | ||
| Jorgan Development, LLC | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| Date: | ||
Page 3 of 3
EQUIPMENT SUBLEASE AGREEMENT
This EQUIPMENT SUBLEASE AGREEMENT (this “Sublease”) dated effective this May 23, 2023 (the “Effective Date”) by and between VIVAVENTURES REMEDIATION CORPORATION, a Texas corporation (“Sublessee”), and WHITE CLAW COLORADO CITY, LLC, a Texas limited liability company (“Sublessor”). Sublessor and Sublessee are sometimes hereinafter referred to individually as a “Party” or collectively as the “Parties”.
WHEREAS, Sublessor leases all the equipment set forth on Exhibit A hereto (the “Equipment”) pursuant to that certain Schedule No. 1462-002 dated May 23, 2023, by and between Maxus Capital Group, LLC, as Lessor, and Sublessor, as Lessee, attached as Exhibit B hereto (the “Maxus Schedule”); and
WHEREAS, Sublessor and Sublessee now desire to sublease to Sublessee all of the Equipment for the purpose of facilitating the development and operation of an oil and gas waste remediation processing center in the San Jacinto River & Rail Park in Harris County, Texas.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the Parties agree as follows:
1. Sublease. Sublessor hereby GRANTS, SUBLEASES, and SUBLETS unto Sublessee the Equipment for the term hereof, solely and exclusively for the purposes of leasing the Equipment pursuant to the Maxus Schedule, and SUBJECT AND SUBORDINATE TO all the terms and provisions of the Maxus Schedule.
2. Term. This Sublease shall be in force and effect for a period from the Effective Date until the termination of the Maxus Schedule in accordance with its terms. Upon termination of this Sublease, all right, title, interest, and possession in and to the Equipment shall revert immediately and automatically to Sublessor without further action, and Sublessee shall have no recourse against Sublessor for the same.
3. Consideration; Rental. As consideration and rental hereunder, Sublessee covenants and agrees to promptly pay, tender, and distribute to Sublessor the Base Rent as defined in the Maxus Schedule, and all other related charges set forth therein.
4. Custody and Control. As between Sublessor and Sublessee, Sublessor shall have exclusive possession, control, and use of the Equipment for the duration of this Sublease and subject to the terms of the Maxus Schedule.
5. Miscellaneous.
| (a) | Notices. Any notice required or permitted to be given under this Sublease shall be in writing, by email, hand delivery, commercial overnight courier or certified or registered U.S. Mail, postage prepaid and return receipt requested, to the address stated below for each Party, and shall be deemed duly given upon delivery. The Parties hereto may from time to time designate in writing such addresses expressly for the purpose of receipt of notice hereunder. |
| (b) | Relationship. In the performance of this Sublease, it is understood and agreed that the Parties for all purposes shall be considered independent contractors. |
| (c) | Assignment. Neither Party shall assign this Sublease, in whole or in part, without obtaining the other Party’s prior written consent. Except as set forth above, any such assignment, transfer, mortgage or sublease of this Sublease without the prior written consent of the other Party shall be null, void and of no effect. |
Page 1 of 6
| (d) | Entire Agreement. This Sublease constitute the entire and complete agreement of the Parties with respect to the subject matter contemplated herein. No amendments or modifications of any of the terms or provisions of this Sublease shall be binding on the other Party unless in writing and signed by both Parties. |
| (e) | Headings. All section, subsection and article headings and titles contained in this Agreement are for convenience only and shall not be construed to have any effect or meaning with regard to the construction of this Sublease. |
| (f) | Waiver. No waiver by any Party of any one or more defaults of the other Party in the performance of this Sublease shall operate or be construed as a waiver of any other or future default or defaults, whether of a like or different character. No failure or delay by a Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. |
| (g) | Severability. Any provision declared or rendered unlawful by a court or governmental agency of competent jurisdiction, or deemed unlawful as a result of a statutory change, shall not otherwise affect the validity of the remaining lawful obligations that arise under this Sublease. |
| (h) | Law and Venue. This Sublease shall be governed by, construed and performed pursuant to the laws of the State of Texas, without regard to its rules and principles regarding conflicts of law. The Parties hereby consent, agree and waive all objections to the contrary that the sole and exclusive venue for any dispute hereunder shall be in a court of competent jurisdiction located in Harris County, Texas. THE PARTIES KNOWINGLY AND IRREVOCABLY WAIVE, RELEASE AND RELINQUISH ANY AND ALL RIGHT TO DEMAND A TRIAL BY JURY IN ANY DISPUTE HEREUNDER. |
| (i) | Execution Method. This Sublease may be executed and delivered via authorized electronic means, including facsimile, email, and scan, it being the express intent of the Parties that such Sublease delivered by electronic methods shall have the same force and effect as if it was an original hard copy thereof. |
[The remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, this Sublease has been duly executed and entered into by the authorized representatives of the Parties on the dates set forth below, but to be effective as of the Effective Date.
| SUBLESSOR: | SUBLESSEE: | |||
| WHITE CLAW COLORADO CITY, LLC | VIVAVENTURES REMEDIATION CORPORATION | |||
| By: | By: | |||
| Name: | James H. Ballengee | Name: | ||
| Title: | President & CEO | Title: | ||
| Date: | Date: | |||
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EXHIBIT A
to the Equipment Sublease Agreement
THE EQUIPMENT
| I. | METAL BUILDING - (60’ X 130’) APPROX. 7,800 SF (POLE BARN STYLE): |
| ● | Metal R-Panel 26 ga. Construction on walls |
| ● | 24’ Eaves (Minimum Eave Height of 22’) |
| ● | 1.12 Pitch Roof with Solar Reflecting R-Panel |
| ● | Skirt Wall 15’ x 6’ |
| ● | Minimum (2) 3‘x7’ Exit Doors with Push Bar Exit per County Requirements for Emergency EGRESS/INGRESS |
| ● | (6) Six Bays |
| ● | (4) Four Bay Doors, Height to be at least 20’ |
| ● | Highest Point on Metal Building Apex, 25’ |
| II. | PAD SITE – APPROX. 97,500 SF: |
| ● | Based on a Total Depth of 8” – 12” with Crushed Concrete #57 Rock and #1 Rock |
| ● | Non-woven 6oz Geotextile Fabric |
| III. | CONCRETE SLAB - (100’ X 150’ X 8”) APPROX. 15,000 SF: |
| ● | Dirt work – Staking, Grading, and Elevations |
| ● | Form with 2x12 |
| ● | Bell Bottom Piers as Designated by Shop Drawings from Metal Building Fabricator |
| ● | Minimum of (10) Ten Piers |
| ● | Utilize Minimum 6 MIL Poly Plastic for Vapor Barrier |
| ● | Set Steel – 5/8” Rebar # 5 Grade 60 A min. of 16” O.C.E.W. in (2) Two Lifts for 8” Slab |
| ● | Concrete Mix will be Optimized for Environmental Conditions for Maximum Strength and Performance – 4000 PSI min. 1.5” Rock in Mix. |
| ● | Smooth Finish with Gas Power Trowel |
| ● | 6” Curb Around Perimeter |
| IV. | CONCRETE RETAINING WALLS: |
| ● | 8” x 3’ High, Approx. 70’ Long 3,000 PSI Concrete Walls |
| V. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| VI. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| VII. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM @ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 10’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
Page 4 of 6
| VIII. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| IX. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| X. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Grantor, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
The Equipment described above is made part of a Remediation Process Center (RPC) for the purpose of processing hydrocarbon E & P waste / tank bottoms. The RPC will process only accepted materials under the Texas Railroad Commission (TRRC) R-9 category as follows:
| ● | E & P Tank Bottoms |
| ● | Barge Crude Oil Bottoms |
| ● | Pipeline Crude Oil Tank Bottoms |
| ● | Refinery Crude Oil Tank Bottoms (Prior to refining) |
| ● | Other R-9 RCRA Exempt Materials that Qualify |
| Premises: | 18511 Beaumont Highway, Houston, TX 77049 |
Assignment of the following Lease Agreements:
| ● | RPC Equipment Lease Agreement made effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPC Equipment listed therein. |
| ● | Wash plant Equipment Lease Agreement made effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corp., as Sublessee, for the use of the wash plant facility listed therein. |
Page 5 of 6
EXHIBIT B
FORM OF MAXUS SCHEDULE
[See attached.]
Page 6 of 6
Landlord Waiver
Reference is hereby made to (a) that certain Land Lease Agreement dated effective December 15, 2022 (the “Park Lease”), by and between W & P Development Corporation, as landlord (“Landlord”), and VivaVentures Remediation Corporation, as tenant (“Tenant”), (b) that certain Equipment Sublease Agreement dated effective May 23, 2023, by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corporation, as Sublessee (the “Equipment Sublease”), and (c) that certain Schedule 1462-002 to Master Agreement No 1462, dated effective May 23, 2023, by and between Maxus Capital Group, LLC, as Lessor, White Claw Colorado City, LLC, as Lessee, and Jorgan Development, LLC, as Co-Lessee (the “Equipment Lease”). Intending to be legally bound hereby and in consideration of the Equipment Lease and the Equipment Sublease, of certain property described in Exhibit A attached hereto (together with any additions and substitutions thereto, the “Equipment”), the undersigned, for itself and on behalf of any of its successors in interest in and to the premises described in Exhibit B attached hereto (the “Premises”), Landlord, during the term of the Park Lease, does hereby agree as follows: (1) the Equipment may be placed on the Premises pursuant and subject to all the terms and provisions of the Park Lease; (2) the Equipment shall be considered personal and neither a fixture nor part of the Premises, regardless of its function or the manner in which it shall be attached or affixed thereto; (3) as against Maxus Capital Group, LLC (“Lessor”), Landlord does not and will not claim any interest in the Equipment by reason of its interest in the Premises; (4) Lessor or its agent may, during normal business hours, and, if applicable, prior to the expiration or earlier termination of the Park Lease, or within sixty (60) days thereafter, following receipt by Landlord of written notice of Lessor’s intended entry, enter upon the Premises to remove the Equipment from the Premises the extent that such removal is performed in a manner to minimize unreasonable interference with other tenants at the Park (as defined in the Park Lease) and is done with reasonable care without damage to the Premises or any improvements thereon, and in accordance with all laws, all property rules and regulations promulgated by Landlord from time to time, and in further compliance with the terms and provisions of this instrument. Lessor shall promptly restore and repair, at Lessor’s cost and expense, any physical damage to the Premises resulting from any action taken by Lessor or its agents and employees upon the Premises. Any removal of Equipment shall be done in a reasonable, discreet, quiet and orderly manner, so as not to disrupt any adjoining business on the Premises. No public auction or public sale shall be conducted at the Premises without the advance written consent of the Landlord. Landlord may condition its consent on the payment of fees or the delivery of indemnities, proof of insurance coverages, and other requirements as reasonably determined by Landlord. Notwithstanding the foregoing, the term “Equipment” shall not include property that: (i) has been constructed by Landlord; (ii) has been paid for out of tenant allowances under the Park Lease; or (iii) has been incorporated into structural components or building systems of the Premises, including, without limitation, plumbing, water, heating, ventilation and air conditioning systems, temperature control systems, alarm systems, sprinkler systems, or flooring or lighting fixtures.
This Landlord Waiver is given with reference to the Equipment Lease and the Equipment Sublease:
| W & P Development Corporation, | |||
| a Texas corporation | |||
| 13641 Dublin Court, Stafford, Texas 77477 | |||
| Attest (if corporation): | By: | (full signature) | |
| (Assistant Secretary) | Title | ||
| Date | |||
Corporate Seal
ACKNOWLEDGMENT
| State of Texas | |
| County of Harris |
I, the undersigned, a Notary Public in and for said County in said State, do hereby certify that the person signing the above Landlord Waiver whose name is Diron Blackburn with the title of President is known to me by such name and by such title with respect to W & P Development Corporation, a Texas corporation, and that, being informed by me of the contents of said Landlord Waiver, did acknowledge before me on this day that he, with full authority to so act, did execute the same voluntarily for and as the act of such owner and landlord.
| Notary Public | |
| My Commission Expires |
EXHIBIT A TO LANDLORD WAIVER
Maxus Capital Group, LLC
Schedule 1462-002
Equipment Description
| I. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| II. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| III. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM @ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 10’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
| IV. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| V. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| VI. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Grantor, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
EXHIBIT B TO LANDLORD WAIVER
Maxus Capital Group, LLC
Schedule 1462-002
Premises
That certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Grantor, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Premises”).
Mr. James Ballengee
White Claw Colorado City, LLC and
Jorgan Development, LLC
5151 Belt Line Road, Suite 715
Dallas, TX 75254
Re: Schedule 002 dated May 23, 2023, to the Master Agreement 1462 dated December 28, 2021, each by and between Maxus Capital Group, LLC (the “Lessor”) and White Claw Colorado City, LLC and Jorgan Development, LLC (Lessee and Co-Lessee) (the “Lessee”). Said Schedule, incorporating the terms of such Master Agreement, is referred to herein as the “Lease.”
Dear Mr. Ballengee:
This letter, when signed by Lessee below, will constitute Lessee’s authorization to the Lessor to pre-file a UCC financing statement against Lessee covering all of its rights in and to the equipment listed on the attached Exhibit A in the office of the Secretary of State of Texas and in such other offices as deemed necessary by Lessor. The Lessor agrees to terminate these filings promptly should the proposed Lease not fund for any reason. The Lessee and Lessor agree that a facsimile of this signed authorization letter may be relied upon by Lessor as an original.
| Maxus Capital Group, LLC | ||
| By: | Thomas A. Levitsky, Jr. | |
| Title: | Lease Administration | |
Acknowledged and Agreed To:
White Claw Colorado City, LLC and
Jorgan Development, LLC (Lessee and Co-Lessee)
| By: | ||
| Name: | ||
| Title: |
Maxus Capital Group, LLC
Schedule 1462-002
Exhibit A - Equipment Description
| I. | METAL BUILDING - (60’ X 130’) APPROX. 7,800 SF (POLE BARN STYLE): |
| ● | Metal R-Panel 26 ga. Construction on walls |
| ● | 24’ Eaves (Minimum Eave Height of 22’) |
| ● | 1.12 Pitch Roof with Solar Reflecting R-Panel |
| ● | Skirt Wall 15’ x 6’ |
| ● | Minimum (2) 3’x7’ Exit Doors with Push Bar Exit per County Requirements for Emergency EGRESS/INGRESS |
| ● | (6) Six Bays |
| ● | (4) Four Bay Doors, Height to be at least 20’ |
| ● | Highest Point on Metal Building Apex, 25’ |
| II. | PAD SITE – APPROX. 97,500 SF: |
| ● | Based on a Total Depth of 8” – 12” with Crushed Concrete #57 Rock and #1 Rock |
| ● | Non-woven 6oz Geotextile Fabric |
| III. | CONCRETE SLAB - (100’ X 150’ X 8”) APPROX. 15,000 SF: |
| ● | Dirt work – Staking, Grading, and Elevations |
| ● | Form with 2x12 |
| ● | Bell Bottom Piers as Designated by Shop Drawings from Metal Building Fabricator |
| ● | Minimum of (10) Ten Piers |
| ● | Utilize Minimum 6 MIL Poly Plastic for Vapor Barrier |
| ● | Set Steel – 5/8” Rebar # 5 Grade 60 A min. of 16” O.C.E.W. in (2) Two Lifts for 8” Slab |
| ● | Concrete Mix will be Optimized for Environmental Conditions for Maximum Strength and Performance – 4000 PSI min. 1.5” Rock in Mix. |
| ● | Smooth Finish with Gas Power Trowel |
| ● | 6” Curb Around Perimeter |
| IV. | CONCRETE RETAINING WALLS: |
| ● | 8” x 3’ High, Approx. 70’ Long 3,000 PSI Concrete Walls |
| V. | COMMERCIAL BOX GUTTERS: |
| ● | Gutters and Downspouts |
| VI. | DIRTY WATER WASH SYSTEM USED TO WASH OUT SLUDGE AND SOLIDS FROM TANKERS AND VACUUM BOXES: |
| ● | (1) One 15hp Fire Hose Rinse Pump to Rinse out Solids |
| ● | (2) Two 75hp Spinner Drive Pumps to Wash Out Solids in Vacuum Boxes and Tankers using a Spinner |
| ● | (1) One Main Control Panel for Dirty Water Wash Pumps |
| ● | (2) Two Remote Control Panels for Dirty Water Wash Pumps |
| ● | (2) Two Small Filter Hoppers for Solids Filtration During Dirty Water Circulation Suction Piping and Valves for Suction Side Piping of All (3) Three Dirty Water Pumps |
| VII. | SYSTEM TO WASH TANKERS AND BOXES AFTER UNLOADING: |
| ● | (2) Two 40hp Spinner Pumps |
| ● | (1) One Main Control Panel for Pumps |
| ● | (2) Two Remote Control Panels for Pumps |
| ● | (2) Two 3” Air Diaphragm Pumps (also used in Dirty Water Circulation) |
| ● | (2) Two Filter Baskets for 3” Air Diaphragm Pumps |
| ● | (2) Two 5 GPM @ 3,500 PSI Pressure Washers |
| ● | (1) One 1,500 Gallon Poly Tanks with Automatic Fill Valve to be Used as a Freshwater Rinse Vat |
| ● | (1) One 1,500 Gallon Stainless Steel Detergent Vat for Circulating Detergent to Clean Tanks and Boxes using the Spinner Pumps |
| ● | All Necessary Piping for the Wash System on bays 2 & 3 |
| ● | (2) Two Spinner Cone Assemblies with Gamma Jet 4 Spinners |
| ● | (1) One 10’ x 6’ Galvanized Work Platform Installed Between Bays 2 & 3 |
| VIII. | SUMP PUMPS: |
| ● | (1) One 3” Self-Priming Trash Pump with 10hp Motor (for Main Sump Pump) |
| ● | (1) One HOA NEMA 4x Control Box (for 3” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control) |
| ● | (1) One 2” Self-Priming Trash Pump with 5hp Motor (for Small Sump Pump on Bay 5 & 6) |
| ● | (1) One HOA NEMA 4x Control Box (for 2” Sump Pump) |
| ● | (1) One Class 1 Division 2 Float Switch with Rod and Ball (for Sump Pump Level Control |
| ● | Suction Piping for Both Pumps |
| IX. | FACILITY PIPING: |
| ● | (4) Four Fire Hose Pump Discharge Piping Drops |
| ● | (2) Two Sets of 75hp Pump Discharge Piping (3) Three Drops for Each Pump |
| ● | (2) Two Sets of 3” Air Diaphragm Pump Discharge Piping for Dirty Water Circulation (3) Three Drops per Pump Piped to Primary Oil / Sludge Separator |
| ● | 3” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | 2” Sump Pump Discharge Piping to Primary Oil / Sludge Separator |
| ● | Freshwater Piping |
| ● | Compressed Air Piping |
| X. | SOLIDS HANDLING TOOLS: |
| ● | (1) One Long Scraper to Pull Sludge out of Boxes |
| ● | (3) Three Large 5 yard Dumping Hoppers |
Together with all replacements, substitutions, replacement parts, additions, repairs, accessions & accessories incorporated therein and/or affixed thereto, INSOFAR AND ONLY INSOFAR as such items are non-permanent improvements located upon the surface of all that certain tract of 3.443 acres of land, more or less, situated in the John Dunman Survey, Abstract 231, Harris County, Texas, being out of Tract 3 as more particularly described in Exhibit A to that certain Special Warranty Deed dated January 27, 2012, from VNF, Inc., as Grantor, to W & P Development Corporation as Grantee, recorded as Instrument No. 20120039116, Official Public Records of Harris County, Texas (the “Equipment”).
The Equipment described above is made part of a Remediation Process Center (RPC) for the purpose of processing hydrocarbon E & P waste / tank bottoms. The RPC will process only accepted materials under the Texas Railroad Commission (TRRC) R-9 category as follows:
| ● | E & P Tank Bottoms |
| ● | Barge Crude Oil Bottoms |
| ● | Pipeline Crude Oil Tank Bottoms |
| ● | Refinery Crude Oil Tank Bottoms (Prior to refining) |
| ● | Other R-9 RCRA Exempt Materials that Qualify |
| Premises: | 18511 Beaumont Highway, Houston, TX 77049 |
Additional security includes assignment of the following Lease Agreements:
| Ø | RPC Equipment Lease Agreement made effective as of March 17, 2023 by and between Viva Wealth Fund I, LLC, as Lessor, and VivaVentures Remediation Corp., as Lessee, for the use of the RPC Equipment listed therein. |
| Ø | Wash plant Equipment Lease Agreement made effective as of May 23, 2023 by and between White Claw Colorado City, LLC, as Sublessor, and VivaVentures Remediation Corp., as Sublessee, for the use of the wash plant facility listed therein. |
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, James Ballengee, Chief Executive Officer of Vivakor, Inc. (the “Company”), certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2023;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| July 27, 2023 | /s/ James Ballengee |
James Ballengee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Tyler Nelson, Chief Financial Officer of Vivakor, Inc. (the “Company”), certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2023;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods represented in this report;
(4) The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
(5) The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
| July 27, 2023 | /s/ Tyler Nelson |
Tyler Nelson | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vivakor, Inc. (the “Company”) for the period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, James Ballengee, Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ James Ballengee | |
| James Ballengee | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| July 27, 2023 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Vivakor, Inc. (the “Company”) for the period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Tyler Nelson, Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Tyler Nelson | |
Tyler Nelson |
|
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) | |
| July 27, 2023 |