VIVK 8-K
Vivakor, Inc. (VIVK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K or this Report contains forward-looking statements. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding the plans and objectives of management for future operations.
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances, including the closing of the Membership Interest Purchase Agreement disclosed below, and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise, except as required by law.
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| ITEM 1.01 | ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. |
Executive Employment Agreement with COO
On October 1, 2024, Vivakor, Inc. (the “Company”) entered into an executive employment agreement with Russ Shelton (the “Shelton Agreement”) with respect to the Company’s appointment of Mr. Shelton as Executive Vice President and Chief Operating Officer of the Company. Pursuant to the Shelton Agreement, Mr. Shelton will receive (i) base salary compensation of $337,000 USD annually (the “Base Compensation”); (ii) an annual cash and equity incentive compensation of up to $808,000 based upon certain performance criteria as more particularly described therein. As an inducement to enter into the Shelton Agreement, Mr. Shelton shall receive a one-time signing grant of Company common stock equivalent in value to $150,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant, subject to an eighteen (18)-month lockup period, which shall be granted promptly after the Effective Date, as defined therein. Pursuant to the Shelton Agreement, Mr. Shelton’s employment is at-will under Texas law, except as modified therein. Mr. Shelton’s employment with Vivakor Administration, LLC, a subsidiary of the Company, began on October 1, 2024.
Item 1.01 of this Current Report on Form 8-K contains only a brief description of the material terms of the Shelton Agreement and does not purport to be a complete description of the rights and obligations of the parties to the Shelton Agreement, and such description is qualified in its entirety by reference to the full text of the Shelton Agreement, a copy of which is filed herewith as Exhibit 10.1.
| ITEM 2.01 | COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS. |
On October 1, 2024, the Company, Jorgan Development, LLC, a Louisiana limited liability company (“Jorgan”) and JBAH Holdings, LLC, a Texas limited liability company (“JBAH” and, together with Jorgan, the “Sellers”), as the equity holders of Endeavor Crude, LLC, a Texas limited liability company, Equipment Transport, LLC, a Pennsylvania limited liability company, Meridian Equipment Leasing, LLC, a Texas limited liability company, and Silver Fuels Processing, LLC, a Texas limited liability company (collectively, the “Endeavor Entities”) closed the transactions that were the subject of the previously-disclosed Membership Interest Purchase Agreement among them dated March 21, 2024, as amended (the “MIPA”) (the “Closing”). In accordance with the terms of the MIPA, at the Closing, the Company acquired all of the issued and outstanding membership interests in each of the Endeavor Entities (the “Membership Interests”), making them wholly-owned subsidiaries of the Company.
The Endeavor Entities own and operate a combined fleet of more than 500 commercial tractors and trailers for the hauling of crude oil and produced water. On a daily basis, the trucking fleet hauls approximately 60,000 barrels of crude oil, tank bottoms, and petroleum wastes, and approximately 30,000 barrels of produced water. In addition, the Endeavor Entities own and operate a crude oil shuttle pipeline and exclusive connected blending and processing facility in Blaine County, Oklahoma.
The purchase price for the Membership Interests is $120 million (the “Purchase Price”), subject to post-closing adjustments, including assumed debt and an earn-out adjustment, payable by the Company in a combination of Company common stock, $0.001 par value per share (“Common Stock”) and Company Series A Preferred Stock $0.001 par value per share (“Preferred Stock”). The Preferred Stock will have the terms set forth in the Form of Series A Preferred Stock Certificate of Designations filed herewith as Exhibit 3.1 and incorporated by reference herein, including, but not limited to, liquidation preference over the Common Stock, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears in shares of Common Stock (so long as such issuances of Common Stock would not result in the Sellers beneficially owning great than 49.99% of the issued and outstanding Common Stock), and the Company having the right to convert the Preferred Stock at any time using the stated value of $1,000 per share of Preferred Stock and the conversion price of one dollar ($1) per share of Common Stock. The Sellers are beneficially owned by James Ballengee, the Company’s chairman, chief executive officer and principal shareholder.
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As a result of the Closing, the Company will issue to the Sellers, (i) a number of shares of Common Stock equal to an undivided nineteen and ninety-nine hundredths percent (19.99%) of all of the Company’s issued and outstanding Common Stock immediately prior to Closing, or a lesser percentage, if such issuance would result, when taking into consideration the percentage of Common Stock owned by Sellers prior to such issuance, in Sellers owning in excess of 49.99% of the Common Stock issued and outstanding on a post-Closing basis, with such shares of Common Stock valued at $1.00 per share (the “Common Stock Consideration”), and (ii) a number of shares of Preferred Stock equal to the Purchase Price, less the value of the Common Stock Consideration (the “Preferred Stock Consideration”). Sellers will enter into 18-month lock-up agreements, in the form filed herewith as Exhibit 10.1 and incorporated by reference herein, at Closing, with regard to the Common Stock Consideration and any Common Stock they receive during the lock-up period in connection with conversions of Preferred Stock or the payment of dividends on the Preferred Stock.
The MIPA, including the exhibits thereto and related agreements, filed with the Company’s Form 8-K filed with the Commission on March 25, 2024 (the “Execution 8-K”) as Exhibits 2.1. 3.1, 10.1, 10.2, 10.3, and 10.4 are incorporated herein by reference. The disclosure above does not purport to be a complete statement of the terms of the MIPA, or the transactions contemplated thereby, or the exhibits and related documents, and is qualified in their entirety by reference to the Execution 8-K and the full text of the Exhibits filed therewith.
Item 2.01 of this Current Report on Form 8-K contains only a brief description of the material terms of the MIPA and does not purport to be a complete description of the rights and obligations of the parties to the MIPA, and such description is qualified in its entirety by reference to the full text of the MIPA, a copy of which is filed herewith as Exhibit 2.1.
| ITEM 3.02 | UNREGISTERED SALES OF EQUITY SECURITIES. |
On October 1, 2024, the Company consummated the transactions under the MIPA including the issuance of the Common Stock and Series A Convertible Preferred Stock comprising the Purchase Price pursuant to the MIPA. The disclosure in Item 2.01 is incorporated herein by reference. The issuances of the foregoing securities will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act promulgated thereunder as the Sellers are controlled by one of executive officers who is an accredited investor and familiar with the Company’s operations.
Pursuant to the Shelton Agreement, Mr. Shelton will receive a one-time grant of Company common stock equivalent in value to $150,000, which are priced per share based on the volume-weighted average price for the preceding five (5) trading days prior to the day of such grant, subject to an eighteen (18)-month lockup period, which shall be granted promptly after the Effective Date, as defined therein. The issuance of the foregoing securities will be exempt from registration pursuant to Section 4(a)(2) of the Securities Act promulgated thereunder as Mr. Shelton is one of our executive officers and is a sophisticated investor and familiar with the Company’s operations.
| ITEM 5.02 | DEPARTURE OF DIRECTORS OR CERTAIN OFFICER; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS. |
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.02.
Russ Shelton, 48, Executive Vice President & Chief Operating Officer
Mr. Russ Shelton is a seasoned operations executive with more than three decades of management experience with midstream trucking, terminaling, and marketing companies, including for several of the business units being acquired in the Company’s purchase of the Endeavor Entities. Mr. Shelton was most recently the Chief Operating Officer for Endeavor Crude, LLC, and prior to that served as its Vice President of Transportation since 2023. Prior to Endeavor Crude, he worked as Director of Operations for Senergy Petroleum from 2021-23, and prior to that worked as Director of Transportation for Pilot Travel Centers LLC from 2018-21.
The Board believes that Mr. Shelton’s experience in management and operations and his extensive knowledge in the midstream petroleum industry make him ideally qualified to help lead the Company towards continued growth and success.
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Family Relationships
Mr. Shelton does not have a family relationship with any of the current officers or directors of the Company.
Related Party Transactions
In connection with the Shelton Agreement, Mr. Shelton and Ballengee Holdings, LLC, an affiliate of James H. Ballengee, the Company’s Chairman, President, and CEO, have entered into a side letter agreement (the “Shelton Side Letter”) promising Mr. Shelton (i) certain additional Base Compensation equal to the difference between Mr. Shelton’s current salary and $375,000 by January 1, 2025, should the Company not increase Mr. Shelton’s Base Compensation, as defined in the Shelton Agreement, to such level, and (ii) a one-time special cash bonus of $100,000.00 USD upon completion of an equity capital raise, as more particularly set forth therein. A copy of the Shelton Side Letter is attached hereto as Exhibit 10.3.
| ITEM 7.01 | REGULATION FD DISCLOSURE |
On October 7, 2024, the Company issued a press release announcing the Company’s closing of the transactions contemplated by the MIPA. A copy of the press release is furnished with this Current Report as Exhibit 99.1.
The information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under such section, nor shall it be deemed incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
| (a) | Financial Statements of Businesses Acquired. |
The Company intends to file the financial statements of the Endeavor Entities required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.
| (b) | Pro Forma Financial Information. |
The Company intends to file the pro forma financial information required by Item 9.01(b) as part of an amendment to this Current Report on Form 8-K not later than 71 calendar days after the date this Current Report on Form 8-K is required to be filed.
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| (d) | Exhibits |
In reviewing the agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K, please remember that they are included to provide investors with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
| ● | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
| ● | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
| ● | may apply standards of materiality in a way that is different from what may be viewed as material to other investors; and |
| ● | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Current Report on Form 8-K and in the Company’s periodic and other filings which are available without charge through the SEC’s website at http://www.sec.gov.
| * | Management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| VIVAKOR, INC. | |||
| Dated: October 7, 2024 | By: | /s/ James H. Ballengee | |
| Name: | James H. Ballengee | ||
| Title: | Chairman, President & CEO | ||
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Exhibit 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
JORGAN DEVELOPMENT, LLC and
JBAH HOLDINGS, LLC,
as Sellers
and
VIVAKOR, INC.
as Purchaser
March 21, 2024
TABLE OF CONTENTS
| Article I. DEFINITIONS | 1 | |||
| Article II. PURCHASE AND SALE OF INTERESTS | 12 | |||
| Section 2.1 | Purchased and Sale of Interests | 12 | ||
| Article III. PURCHASE PRICE; CLOSING | 13 | |||
| Section 3.1 | Purchase Price | 13 | ||
| Section 3.2 | Earn-Out Adjustment to Purchase Price | 13 | ||
| Section 3.3 | Working Capital; Purchase Price Adjustment | 14 | ||
| Section 3.4 | Closing | 16 | ||
| Section 3.5 | Deliveries of Sellers at Closing | 16 | ||
| Section 3.6 | Deliveries of Purchaser at Closing | 17 | ||
| Section 3.7 | Withholding | 18 | ||
| Article IV. REPRESENTATIONS AND WARRANTIES OF SELLERS | 18 | |||
| Section 4.1 | Organization and Qualification of the Companies | 18 | ||
| Section 4.2 | Capitalization of Companies | 19 | ||
| Section 4.3 | Capacity; Enforceability | 19 | ||
| Section 4.4 | No Conflict | 19 | ||
| Section 4.5 | Sufficiency and Condition of Assets; Possession | 20 | ||
| Section 4.6 | Litigation and Proceedings | 20 | ||
| Section 4.7 | Employees, Independent Contractors and Consultants | 20 | ||
| Section 4.8 | Accounts Receivable | 21 | ||
| Section 4.9 | Taxes | 21 | ||
| Section 4.10 | Governmental Authorities; Consents | 22 | ||
| Section 4.11 | Insurance | 22 | ||
| Section 4.12 | Material Contracts | 23 | ||
| Section 4.13 | Absence of Certain Changes or Events | 23 | ||
| Section 4.14 | Financial Statements | 25 | ||
| Section 4.15 | Real Property | 25 | ||
| Section 4.16 | Environmental | 27 | ||
| Section 4.17 | Legal Compliance | 27 | ||
| Section 4.18 | Indebtedness | 27 | ||
| Section 4.19 | COVID-19; CARES Act | 27 | ||
| Section 4.20 | Intellectual Property | 29 | ||
| Section 4.21 | Licenses | 30 | ||
| Section 4.22 | Brokers’ Fees | 30 | ||
| Section 4.23 | Disclosure | 30 | ||
| Section 4.24 | Additional Representations of the Sellers | 30 | ||
| Section 4.25 | Subsidiaries of the Companies | 31 | ||
| Article V. REPRESENTATIONS AND WARRANTIES OF PURCHASER | 32 | |||
| Section 5.1 | Organization | 32 | ||
| Section 5.2 | Due Authorization | 32 | ||
| Section 5.3 | No Conflict | 33 | ||
| Section 5.4 | Governmental Authorities; Consents | 33 | ||
| Section 5.5 | Brokers | 33 | ||
| Section 5.6 | Purchaser Stock Consideration | 33 | ||
| Section 5.7 | Litigation and Proceedings | 34 | ||
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| Article VI. COVENANTS | 34 | |||
| Section 6.1 | Exchange of Other Payments and Information | 34 | ||
| Section 6.2 | Prorations | 34 | ||
| Section 6.3 | Regulatory Filings | 34 | ||
| Section 6.4 | Further Assurances | 35 | ||
| Section 6.5 | HSR Act | 35 | ||
| Section 6.6 | Public Announcements; Confidentiality | 36 | ||
| Section 6.7 | Registration Statement | 37 | ||
| Section 6.8 | Affiliate Arrangements | 38 | ||
| Section 6.9 | Commitment Regarding Company Indemnification Provisions | 39 | ||
| Section 6.10 | Approval of Dividends; Terms of Purchaser Preferred Stock | 39 | ||
| Article VII. TAX MATTERS | 39 | |||
| Section 7.1 | Transfer Taxes | 39 | ||
| Section 7.2 | Property Taxes | 39 | ||
| Section 7.3 | Cooperation on Tax Matters | 40 | ||
| Section 7.4 | Tax Returns | 40 | ||
| Article VIII. SURVIVAL; INDEMNIFICATION | 40 | |||
| Section 8.1 | Survival | 40 | ||
| Section 8.2 | Indemnification by Sellers | 41 | ||
| Section 8.3 | Indemnification by Purchaser | 42 | ||
| Section 8.4 | Indemnification Procedures | 42 | ||
| Section 8.5 | Omega | 45 | ||
| Section 8.6 | Exclusive Remedy | 45 | ||
| Section 8.7 | Tax Treatment of Indemnity Payments | 46 | ||
| Article IX. SETTLEMENT OF DISPUTED MATTERS | 46 | |||
| Section 9.1 | Attorneys’ Fees With Respect to Litigation | 46 | ||
| Section 9.2 | Governing Law; Jurisdiction and Venue | 46 | ||
| Article X. TERMINATION | 46 | |||
| Section 10.1 | Termination by Mutual Consent | 46 | ||
| Section 10.2 | Termination by Either Sellers or the Purchaser | 47 | ||
| Section 10.3 | Termination by the Purchaser | 47 | ||
| Section 10.4 | Termination by the Sellers | 47 | ||
| Section 10.5 | Effect of Termination | 47 | ||
| Article XI. MISCELLANEOUS | 48 | |||
| Section 11.1 | Waiver | 48 | ||
| Section 11.2 | Notices | 48 | ||
| Section 11.3 | Assignment | 49 | ||
| Section 11.4 | Rights of Third Parties | 49 | ||
| Section 11.5 | Reliance | 49 | ||
| Section 11.6 | Expenses | 49 | ||
| Section 11.7 | Captions; Counterparts | 49 | ||
| Section 11.8 | Entire Agreement | 49 | ||
| Section 11.9 | Severability | 49 | ||
| Section 11.10 | Amendments | 49 | ||
| Section 11.11 | Currency | 49 | ||
| Section 11.12 | Reliance on Counsel | 49 | ||
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Exhibits
| Exhibit A – Form of Lockup Agreement |
| Exhibit B – Net Working Capital Sample Calculation |
| Exhibit C – Form of Master Netting Agreement |
| Exhibit D – Form of Certificate of Designation |
Schedules
| Schedule I – Membership Units of the Companies |
| Schedule II – Purchase Price and Purchaser Stock Allocation |
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of March 21, 2024 (the “Execution Date”) by and among JORGAN DEVELOPMENT, LLC, a Louisiana limited liability company (“Jorgan”) and JBAH HOLDINGS, LLC, a Texas limited liability company (“JBAH” and, together with Jorgan, the “Sellers”, and individually, each a “Seller”), as the equity holders of ENDEAVOR CRUDE, LLC f/k/a Meridian Transport, LLC, a Texas limited liability company (“Endeavor”), EQUIPMENT TRANSPORT, LLC, a Pennsylvania limited liability company (“ET”), MERIDIAN EQUIPMENT LEASING, LLC, a Texas limited liability company (“MEL”), and SILVER FUELS PROCESSING, LLC, a Texas limited liability company (“SFP” and, together with Endeavor, ET, and MEL, the “Companies”, and individually, each a “Company”), and VIVAKOR, INC., a Nevada corporation (“Purchaser”). Sellers and Purchaser may each be referred to herein as a “Party”, or collectively, as the “Parties.”
RECITALS
WHEREAS, Jorgan owns ninety-nine percent (99%) and JBAH owns one percent (1%) of all of the issued and outstanding limited liability company membership interests in and to Endeavor, ET, MEL, and SFP, respectively (the “Membership Interests”), as set forth on Schedule I;
WHEREAS, Sellers desire to sell, transfer and assign to Purchaser, and Purchaser desires to purchase and accept from Sellers, all of the Membership Interests pursuant to the terms set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Article I.
DEFINITIONS
As used herein, the following terms shall have the following meanings:
“Accounts Receivable” means the accounts receivable of the Companies resulting from goods sold and/or services provided by the Companies prior to the Closing Date.
“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Actual Earnings” has the meaning set forth in Section 3.2(a).
“Affiliate” means, with respect to any specified Person, any Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person, through one or more intermediaries or otherwise, and its and their respective stockholders, partners, directors, officers, members, managers and employees, and with respect to a particular individual: (i) each other member of such individual’s family who resides with such individual and (ii) any Person that is controlled by one or more members of such individual’s family.
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“Agreement” has the meaning specified in the preamble to this Agreement.
“Amended Form P-5” means an amended Form P-5 (Organization Report) and Form P-5O (Organization Report; Officer Listing) filed by Purchaser with the Railroad Commission of Texas on behalf of Endeavor, ET, and SFP, which shall evidence the change of mailing address, resident agent, officers, owners, and other information of Endeavor, ET, and SFP from Sellers to Purchaser.
“Antitrust Authorities” means the Antitrust Division of the United States Department of Justice, the United States Federal Trade Commission or the antitrust or competition law authorities of any other jurisdiction.
“Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition.
“Assets” means all of the material assets owned by the Companies, including all of each Company’s right, title, and interest in and to equipment, fixtures, real property, and other related tangible personal property material to the efficient operation of each Company, including, without limitation, the Station Assets.
“Assignment of Membership Interests” has the meaning specified in Section 3.5(b).
“Basket Amount” has the meaning specified in Section 8.2(b).
“Business” means, as applicable, (a) with respect to Endeavor, the provision of for-hire motor carrier and freight brokerage services for crude oil and related oilfield commodities used or produced in connection with the production of Hydrocarbons, (b) with respect to ET, the provision of for-hire motor carrier and freight brokerage services for crude oil, Produced Water, and related oilfield commodities used or produced in connection with the production of Hydrocarbons (c) with respect to MEL, the purchase, sale, leasing, repair, and maintenance of the Trucking Assets as a licensed dealership, or (d) with respect to SFP, the operation, maintenance, and repair of truck receipt and pipeline injection stations for the receipt, gathering, transportation, processing, treatment, blending, storage, and delivery of Hydrocarbons.
“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Nevada are authorized or obligated to close.
“Cap” has the meaning specified in Section 8.2(b).
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) and applicable rules, regulations, and guidance thereunder, in each case as amended from time to time.
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“CARES Forgivable Uses” means uses of proceeds of a PPP Loan that are eligible for forgiveness under Section 1106 of the CARES Act.
“Closing” means the closing of the transactions contemplated by Article III.
“Closing Date” means the date on which the Closing actually occurs.
“Certificate of Designation” means a Certificate of Designation for the Series A Preferred Stock of Vivakor in the form and content set forth on Exhibit D hereto.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” and “Companies” has the meaning specified in the preamble to this Agreement.
“Company Accounting Practices” means the accounting methods, policies, practices and procedures, including classification and estimation methodology (but taking into account all available information as of the time of preparation of the Financial Statements or calculations) used by the Company in the preparation of the Financial Statements for the year ended December 31, 2023.
“Company Consents” has the meaning specified in Section 3.5(h).
“Covered Subsidiary” means a wholly-owned subsidiary of a Company, whether a corporation, limited liability company, or other Person.
“COVID-19” means the presence, transmission, threat or fear of severe acute respiratory syndrome coronavirus (SARS-CoV-2) also known as the novel coronavirus, and the disease caused thereby, COVID-19, or any evolution thereof, and/or any mandatory or advisory restriction issued, or action ordered or threatened by any Governmental Authority.
“Current Assets” has the meaning specified in Section 3.3(a)(i).
“Current Liabilities” has the meaning specified in Section 3.3(a)(i).
“Damages” has the meaning specified in Section 8.2(a).
“Defensible Title” means such record title to real property, such right, title, and interest evidenced by an instrument or instruments filed of record in accordance with the conveyance and recording laws of the applicable jurisdiction to the extent necessary to prevail against competing claims of bona fide purchasers for value without notice, free and clear of all defects and liens, except for Permitted Encumbrances.
“Disclosure Schedule” has the meaning specified in Article IV.
“Disputed Matters” has the meaning specified in Section 8.4(b).
“DMV” has the meaning specified in Section 6.3(c).
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“DOT” has the meaning specified in Section 6.3(b).
“Earn-Out Payments” has the meaning set forth in Section 3.2(c).
“Earn-Out Statement” has the meaning set forth in Section 3.2(c).
“Earnings Target” has the meaning set forth in Section 3.2(a).
“EBITDA” means earnings before interest, taxes, depreciation and amortization, and shall be calculated as net income (calculated in the same manner as calculated on Purchaser’s audited financial statements) plus interest, tax, depreciation, and amortization expenses minus deficiency payments payble by White Claw Crude to Endeavor.
“EmployeeCo” means ET EmployeeCo, LLC f/k/a PWS EmployeeCo, LLC, a Delaware limited liability company.
“Employees” means the employees of the Company and/or EmployeeCo, as applicable, pursuant to the Fair Labor Standards Act of 1938, as amended; provided, however, that the term “Employee” specifically and expressly excludes any and all Persons defined as an “Employee” for purposes of 49 C.F.R. § 383.5 (2024).
“Endeavor” has the meaning specified in the preamble to this Agreement.
“Environmental Laws” means any law, common law, ordinance, regulation or binding policy of any Governmental Authority, as well as any order, decree, permit, judgment or injunction issued, promulgated, approved or entered thereunder, relating to the environment, health and safety, Hazardous Materials (including the use, handling, transportation, production, disposal, discharge or storage thereof), industrial hygiene, the environmental conditions on, under or about any real property owned, leased or operated at any time by the Companies, including soil, groundwater, and indoor and ambient air conditions or the reporting or remediation of environmental contamination. Environmental Laws include the Clean Air Act, the Federal Water Pollution Control Act, the Oil Pollution Act, the Occupational Safety and Health Act, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control Act, the Hazardous Materials Transportation Act, state and local counterparts, in each case as amended, and any other federal, state and local law whose purpose is to conserve or protect employee safety and health, human health in respect to exposure to Hazardous Materials, the environment, wildlife or natural resources.
“ET” means Equipment Transport, LLC, a Pennsylvania limited liability company.
“Execution Date” has the meaning set forth in the preamble to this Agreement.
“Fairness Opinion” means the opinion of a reputable financial advisor to the Purchaser which concludes that the Purchase Price is fair to the stockholders of Purchaser.
“Final Closing Statement” has the meaning specified in Section 3.3(c).
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“Final Deficit” has the meaning specified in Section 3.3(d).
“Final Determination Date” has the meaning specified in Section 3.3(d).
“Final Surplus” has the meaning specified in Section 3.3(d).
“FMCSA” has the meaning specified in Section 6.3(b).
“Fundamental Representations” has the meaning specified in Section 8.1(a).
“General Release” has the meaning specified in Section 3.5(d).
“Governmental Approvals” has the meaning specified in Section 3.6(e).
“Governmental Authority” means any domestic or foreign national, state, multi state or municipal or other local government, any subdivision, agency, commission or authority thereof, exercising any executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, or any quasi-governmental or private body that is government owned or established to perform such functions. For clarity, Governmental Authority does not include any government owned oil companies or refineries unless specifically indicated.
“Governmental Order” means any order, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Hazardous Materials” means and includes petroleum and refined petroleum products, asbestos, polychlorinated biphenyls, and any other substance defined, designated or classified as a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under, or for which liability or standards of care are imposed by, any Environmental Law.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Hydrocarbon(s)” means oil, gas and other hydrocarbons produced or processed in association therewith, or any combination thereof, and any minerals produced in association therewith, including all crude oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous or liquid hydrocarbons (including ethane, propane, iso-butane, normal butane and natural gasoline) of any type or composition.
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“Indebtedness” means (without duplication and to the extent not included in Selling Expenses) the sum of the following items, as of immediately prior to the Closing: (i) the principal amount of any indebtedness of either Company for borrowed money outstanding, together with all prepayment premiums or penalties and other amounts with respect to such indebtedness becoming due as a result of the transactions contemplated by this Agreement, (ii) any unpaid interest owing on the indebtedness described in clause (i) above, (iii) obligations of each Company in respect of capitalized leases and obligations for the deferred purchase price of goods or services (including any liabilities associated with past acquisitions, but not including any trade payables or accruals incurred in the Ordinary Course of Business), (iv) obligations in respect of banker’s acceptances or letters of credit issued or created for the account or benefit of each Company (including any letters of credit supporting any bonds), (v) all indebtedness or obligations of the types referred to in the preceding clauses (i) through (iv) of any other Person secured by any claim on any assets of each Company, even though each Company has not assumed or otherwise become liable for the payment thereof, but excluding customer deposits and interest payable thereon in the Ordinary Course of Business, (vi) guarantees of obligations of the type described in clauses (i) through (v) above of any other Person, (vii) any payment obligation in respect of interest under any existing interest rate swap or hedge Material Contract entered into by each Company, and any costs associated with termination of any such arrangement, (viii) any amounts payable to current or former owners of each Company, (ix) unpaid management fees, if any, (x) any unfunded vested benefits under any employee benefit plan, and (xi) all interest, prepayment penalties, premiums, fees and expenses payable with respect to any of the foregoing.
“Indemnified Party” has the meaning specified in Section 8.4(a).
“Indemnifying Party” has the meaning specified in Section 8.4(a).
“Independent Accountant” means James, Hardy & Haley or in the event of a conflict with James, Hardy & Haley another independent public accounting firm selected in Purchaser’s reasonable discretion which has no prior relationship with either of the Sellers or Purchaser.
“Intellectual Property” means all intellectual property and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all: (i) trademarks, service marks, trade names, brand names, logos, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications and renewals for, any of the foregoing; (ii) e mail addresses, internet domain names, whether or not trademarked, registered in any top-level domain by any authorized private registrar or Governmental Authority, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, and URLs; (iii) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights, author, performer, moral and neighboring rights, and all registrations, applications for registration and renewals of such copyrights; (iv) inventions, discoveries, trade secrets, business and technical information and know how, databases, data collections and other confidential and proprietary information and all rights therein; (v) patents (including all reissues, divisionals, provisionals, continuations and continuations in part, re-examinations, renewals, substitutions and extensions thereof), patent applications, and other patent rights and any other Governmental Authority issued indicia of invention ownership (including inventor’s certificates, petty patents and patent utility models); (vi) software and firmware, including data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other related specifications and documentation; (vii) semiconductor chips and mask works; (viii) royalties, fees, income, payments and other proceeds now or hereafter due or payable with respect to any and all of the foregoing; and (ix) all rights to any Actions of any nature available to or being pursued by the Companies to the extent related to the foregoing, whether accruing before, on or after the date hereof, including all rights to and claims for damages, restitution and injunctive relief for infringement, dilution, misappropriation, violation, misuse, breach or default, with the right but no obligation to sue for such legal and equitable relief, and to collect, or otherwise recover, any such damages.
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“Interest” means, with respect to any Person: (a) capital stock, membership interests, partnership interests, other equity interests, rights to profits or revenue, and any other similar interest of such Person; (b) any security or other interest convertible into or exchangeable or exercisable for any of the foregoing; or (c) any rights (contingent or otherwise) to acquire any of the foregoing.
“Interim Financial Statements” has the meaning specified in Section 4.14(a).
“JBAH” has the meaning specified in the preamble to this Agreement.
“Jorgan” has the meaning specified in the preamble to this Agreement.
“Knowledge of Purchaser” means the actual and constructive knowledge after reasonable inquiry of the officers and directors of Purchaser.
“Knowledge of Sellers” means the actual and constructive knowledge after reasonable inquiry of the managers, members and beneficial owners of the Sellers.
“Law” or “Laws” means any federal, state, local, municipal or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, judgment, decree, proclamation, treaty, rule, regulation, ruling or requirement issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
“Leased Real Property” has the meaning specified in Section 4.15(b).
“Licenses” means all of the licenses, permits, certificates, exemptions, franchises and other authorizations from any Governmental Authority or other third party necessary or proper for the use, occupancy or operation of the Business as conducted as of the Closing Date.
“Lien” means any claim, lien, pledge, option, right of first refusal, easement, security interest, deed of trust, mortgage, right of way, encroachment, restrictive covenant or other encumbrance, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent or conditional sale agreement or other title retention agreement or lease in the nature thereof.
“Lockup Agreement” means an agreement substantially and materially in the form and content set forth on Exhibit A.
“Long-term Debt Consents” has the meaning set forth in Section 3.5(h).
“Master Netting Agreement” means that certain First Amended and Restated Master Netting Agreement substantially and materially in the form and content set forth on Exhibit C.
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“Material Adverse Effect” means any effect, change, event, occurrence, statement of facts or development that (i) is, or is reasonably likely to be, individually or in the aggregate, materially adverse with respect to the Assets, Business, financial condition, results of operations or prospects of the Companies or the right or ability of Sellers to consummate any of the transactions contemplated hereby, or (ii) prevents or would reasonably be expected to prevent Sellers from consummating the transaction on a timely basis; provided, however, that no such occurrence, condition, change, development, event or effect shall be required to persist for any length of time in order to constitute a Material Adverse Effect; provided, further, however, in no event shall any of the following constitute a Material Adverse Effect: any occurrence, condition, change, development, event or effect directly or indirectly resulting from (a) any change in economic conditions generally, including any change in markets for, or prices of, Hydrocarbons, or other commodities or supplies; (b) any change in political conditions, including any acts of war, sabotage or terrorist activities; (c) any change affecting any of the Hydrocarbon transportation, distribution, storage, processing or sales industries, generally (other than any change or development that materially disproportionately affects any Company or its Business (as compared to other substantially similar companies)); (d) any change in the financial, banking, credit, securities or capital markets (including any suspension of trading in, or limitation on prices for, securities on any stock exchange or any changes in interest rates) or any change in the general national or regional economic or financial conditions; (e) any proposed or actual change in any Laws (including Environmental Laws) or GAAP; (f) any change caused by the pending sale of the Membership Interests to Purchaser, including changes due to the credit rating of Purchaser or their Affiliates; (g) any actions to be taken pursuant to or in accordance with this Agreement, or taken at the request of or with the consent of Purchaser; (h) the announcement or pendency of the transaction; and (i) any failure by the Companies to meet internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period commencing on the Execution Date and terminating at the Closing.
“Material Contract” has the meaning specified in Section 4.12(a).
“MEL” has the meaning specified in the preamble to this Agreement.
“Membership Interests” has the meaning specified in the Recitals.
“Net Working Capital” has the meaning specified in Section 3.3(a)(i).
“Notice of Claim” has the meaning specified in Section 8.4(a).
“Omega” means CPE Gathering Midcon, LLC, a Delaware limited liability company.
“Omega Assets” means all of assets owned by Omega, if any, including Omega’s right, title, and interest in and to equipment, fixtures, real property, and other related tangible personal property material.
“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).
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“Organizational Documents” means with respect to any Person, the articles of incorporation, certificate of incorporation, certificate of formation, certificate of limited partnership, bylaws, limited liability company agreement, operating agreement, partnership agreement, stockholders’ agreement and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of such Person, including any amendments and other modifications thereto.
“Party” and “Parties” have the meanings specified in the preamble to this Agreement.
“Permitted Liens” means (i) any Liens set forth on Schedule 4.5(a) of the Disclosure Schedules, (ii) any Liens created by the Transaction Documents, (iii) any warehouseman’s, materialman’s, or other similar liens imposed on the Companies or their assets by operation of law, (iv) any lien for taxes or assessments that are not yet due or delinquent or which are being contested in and through appropriate proceedings, (v) any statutory or other lien arising in the Ordinary Course of Business and by operation of law with respect to a liability that is not yet due or delinquent or which is being contested by Endeavor, ET, MEL, or SFP in good faith in and through appropriate proceedings, and (vi) any lien released on or prior to the date hereof without liability or obligation attaching to the Companies.
“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, limited liability company, or government or other entity.
“Personnel” has the meaning specified in Section 4.13(c).
“PPP Loan” means a loan incurred by a Person under 15 U.S.C. 636(a)(36) (as added to the Small Business Act (15 U.S. Code Chapter 14A – Aid to Small Business) by Section 1102 of the CARES Act).
“Property Taxes” means all real property, personal property, ad valorem and any other similar Taxes.
“Proposed Closing Statement” has the meaning specified in Section 3.3(b).
“Prorated Items” has the meaning specified in Section 6.2.
“Public Announcement Restrictions” has the meaning specified in Section 6.6(a).
“Purchaser Earn-Out Payment” has the meaning set forth in Section 3.2(b).
“Purchase Price” has the meaning specified in Section 3.1.
“Purchaser” has the meaning specified in the preamble to this Agreement.
“Purchaser Claim” has the meaning specified in Section 8.2(a).
“Purchaser Common Stock” means the common shares of Purchaser.
“Purchaser Common Stock Consideration” has the meaning specified in Section 3.1(a).
“Purchaser Consents” has the meaning specified in Section 3.6(g).
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“Purchaser Indemnified Parties” has the meaning specified in Section 8.2(a).
“Purchaser Preferred Stock” means the Series A Preferred Shares of Purchaser.
“Purchaser Preferred Stock Consideration” has the meaning specified in Section 3.1(b).
“Purchaser Stock Consideration” means, collectively, the Purchaser Common Stock Consideration and the Purchaser Preferred Stock Consideration.
“Real Property Leases” has the meaning specified in Section 4.15(b).
“Reference Date” has the meaning specified in Section 4.19(a).
“Release” means any active or passive releasing, disposing, discharging, injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping, dispersal, migration, transporting, placing and the like, including without limitation, the movement of any materials through, into or upon, any land, soil, surface water, ground water or air, or otherwise entering into the environment.
“Review Period” has the meaning specified in Section 3.3(c).
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” has the meaning specified in the preamble to this Agreement.
“Seller Claim” has the meaning specified in Section 8.3(a).
“Seller Earn-Out Payment” has the meaning set forth in Section 3.2(a).
“Seller Indemnified Parties” has the meaning specified in Section 8.3(a).
“Selling Expenses” means all (a) unpaid costs, fees and expenses of outside professionals incurred by either Seller and/or the Companies relating to the process of selling the Interests of the Companies whether incurred in connection with this Agreement or otherwise, including all legal, accounting, consulting, tax and investment banking fees and expenses, and (b) severance obligations, monetary paid time off obligations, retention bonuses, “stay” bonuses, change in control bonuses, sale bonuses and similar payments and bonuses owed by each Company, in whole or in part, prior to or as a result of the transactions contemplated by this Agreement (including the employer portion of any payroll, employment, unemployment and similar Taxes relating thereto), in each case, whether accrued or unaccrued as of the Closing Date.
“Seller Retained Claims” means any (a) accrued or unaccrued claims for Employee Retention Credit funds from the U.S. Treasury attributable or relating to the Companies and arising prior to the Execution Date, and (b) premium refunds, distributions, credits, or other sums of money attributable or relating to insurance policies of the Companies and arising prior to the Execution Date.
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“SFP” has the meaning specified in the preamble to this Agreement.
“Shared Services Agreement” means that certain Shared Services Agreement by and between Endeavor, Silver Fuels Delhi LLC, a Louisiana limited liability company, White Claw Colorado City, LLC, a Texas limited liability company, and Purchaser, dated August 1, 2022.
“Station Assets” means all those certain contracts, fixtures, equipment, removable equipment, and associated onsite personal property listed on Schedule 1.1-SA.
“Straddle Period” has the meaning specified in Section 7.2.
“Target Working Capital” has the meaning specified in Section 3.3(a)(ii).
“Tax” or “Taxes” means (i) any and all federal, state, local, and foreign taxes, charges, fees, levies, assessments, duties or other amounts payable to any Governmental Authority, including: income, franchise, profits, margin, gross receipts, minimum, alternative minimum, estimated, ad valorem, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, disability, employment, social security, workers compensation, unemployment compensation, utility, severance, excise, stamp, windfall profits, transfer, environmental, escheat or unclaimed property, occupation, premium, registration, and gains taxes, customs, duties, imposts, charges, levies, or other similar assessments of any kind whatsoever, whether disputed or not, together with any interest, penalties, and additions imposed with respect thereto and any interest in respect of such penalties or additions; (ii) any liability for the payment of any item described in clause (i) as a result of being a member of an affiliated, consolidated, combined, unitary, or aggregate group for any period, including pursuant to Treasury Regulations Section 1.1502 6 or any analogous or similar state, local, or foreign Law; (iii) any liability for the payment of any item described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any Person or as a result of any obligations under any agreements or arrangements with any Person with respect to such item; or (iv) any successor or transferee liability for the payment of any item described in clause (i), (ii) or (iii) of any Person, including by reason of being a party to any merger, consolidation, conversion, or otherwise.
“Tax Period” means any period prescribed by any Governmental Authority for which a Tax Return is required to be filed or a Tax is required to be paid.
“Tax Return” means any return, document, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Termination Date” has the meaning specified in Section 10.2.
“Third Party Claim” has the meaning specified in Section 8.4(c).
“Third Party Notice” has the meaning specified in Section 8.4(c).
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“Transaction Documents” means this Agreement, the Lockup Agreement, the Master Netting Agreement, the General Release, and any other agreement, instrument, notice or other document contemplated hereby or thereby and/or which is made subject to the terms and provisions of any of the foregoing.
“Transfer Taxes” means any sales, use, excise, transfer, recordation, stamp, conveyance, value added, or similar Taxes arising out of, in connection with, or attributable to the transactions contemplated by this Agreement.
“Treasury Regulations” means the Treasury regulations promulgated under the Code.
“Trucking Assets” means all those certain commercial tractors, commercial trailers, and associated rigging, gauging, and metering equipment listed on Schedule 1.1-TA.
“Unrestricted Common Stock” means Purchaser Common Stock that is (a) not subject to any lock-up agreement, (b) either registered for resale or saleable when issued pursuant to an exemption from the registration requirements of the Securities Act, and (c) listed on the Purchaser’s principal trading market. Without in any way limiting the foregoing, for purposes of clause (b) above, Purchaser Common Stock shall not be deemed to be saleable when issued if it is subject to any resale volume restrictions under Rule 144 of the Securities Act that make impractical the immediate sale of the Purchaser Common Stock being issued at that time.
“W.C. Disputed Matters” has the meaning specified in Section 3.3(c).
“White Claw Crude” has the meaning specified in the Master Netting Agreement.
“Working Capital Deficit” has the meaning specified in Section 3.3(a)(ii).
“Working Capital Surplus” has the meaning specified in Section 3.3(a)(ii).
“2022 Financial Statements” has the meaning specified in Section 4.14(a).
“2023 Financial Statements” has the meaning specified in Section 4.14(a)
Article II.
PURCHASE AND SALE OF INTERESTS
Section 2.1 Purchased and Sale of Interests. At the Closing, and upon the terms set forth in this Agreement, Sellers shall sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall purchase and accept from Sellers, the Interests, free and clear of all Liens, except for Permitted Liens. Sellers shall retain in all respects, and Purchaser shall not acquire, the Seller Retained Claims.
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Article III.
PURCHASE PRICE; CLOSING
Section 3.1 Purchase Price. Purchaser shall pay or issue, as applicable, or shall cause any of its Affiliates to pay or issue, as applicable, to the Sellers for the Membership Interests an aggregate of One Hundred Twenty Million and No/100s U.S. Dollars ($120,000,000.00 USD) (the “Purchase Price”). The Purchase Price shall be tendered and paid as follows, subject to the adjustment, if any, pursuant to Section 3.3 and/or Article VIII:
(a) A number of shares of Purchaser Common Stock equal to an undivided nineteen and ninety-nine hundredths percent (19.99%) of all of the issued and outstanding Purchaser Common Stock immediately prior to the Closing, or lesser percentage, if such issuance would result, when taking into consideration the percentage of Purchaser Common Stock owned by Sellers prior to such issuance, in Sellers owning in excess of 49.99% of the Purchaser Common Stock issued and outstanding on a post-Closing basis, valued at $1.00 per share (the “Purchaser Common Stock Consideration”), in the aggregate, shall be issued to Sellers and shall be distributed to each Seller as set forth on Schedule II, and registered in accordance with the provisions of Section 6.7; and
(b) A number of shares of Purchaser Preferred Stock equal to (A) the Purchase Price, less (B) the value of the Purchaser Common Stock Consideration (the “Purchaser Preferred Stock Consideration”), shall be issued to Sellers and shall be distributed to each Seller as set forth on Schedule II.
Section 3.2 Earn-Out Adjustment to Purchase Price. In addition to the consideration set forth in Section 3.2, the Purchase Price be adjusted as follows:
(a) If the EBITDA of the Companies for Purchaser’s 2024 fiscal year (the “Actual Earnings”) is equal to or exceeds Twelve Million and No/100s U.S. Dollars ($12,000,000.00 USD) (the “Earnings Target”), the positive difference between the Actual Earnings less the Earnings Target shall be multiplied by ten (10) and the product thereof remitted to Sellers (the “Seller Earn-Out Payment”), up to a maximum not to exceed Forty-Nine Million and No/100s U.S. Dollars ($49,000,000.00 USD). The Seller Earn-Out Payment shall be payable to Sellers in Purchaser Preferred Stock no later than March 31, 2025, and shall be issued and distributed to each Seller as set forth on Schedule II.
(b) If the Actual Earnings are less than the Earnings Target, the positive difference between the Earnings Target less the Actual Earnings shall be multiplied by ten (10) and the product thereof remitted to Purchaser (the “Purchaser Earn-Out Payment”), up to a maximum not to exceed Forty-Nine Million and No/100s U.S. Dollars ($49,000,000.00). The Purchaser Earn-Out Payment shall be treated and accounted for as an immediate and automatic reduction in the Purchaser Common Stock Consideration, and each Seller shall thereafter promptly transfer to Purchaser an amount of Purchaser Common Stock equal to the Purchaser Earn-Out Payment valued at the volume-weighted average price for the Purchaser Common Stock on the Nasdaq during the five (5) trading days immediately preceding the determination of the Purchaser Earn-Out Payment.
(c) No later than ninety (90) days after the end of the Companies’ 2024 fiscal year, Purchaser shall prepare and deliver, or shall cause to be prepared and delivered, to Sellers, a statement of the Actual Earnings (the “Earn-Out Statement”), which sets forth Purchaser’s good faith calculation of the Seller Earn-Out Payment or the Purchaser Earn-Out Payment, as the case may be (the “Earn-Out Payments”), along with copies of any supporting materials relating thereto or reasonably requested by Sellers. The Earn-Out Statement shall be reviewed and adjusted in accordance the procedures and methodologies set forth in Section 3.3(c) and Section 3.3(d), mutatis mutandis. The Earn-Out Payments shall be treated as an adjustment to the Purchase Price for tax purposes.
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Section 3.3 Working Capital; Purchase Price Adjustment.
(a) Working Capital Adjustment.
(i) Definition of “Net Working Capital”. For purposes of this Section 3.3, the term “Net Working Capital” means (a) the aggregate amount of the total current assets of each Company, save and except for (I) “Security Deposits” as defined in and pursuant to the Maxus Schedules (as defined in the Disclosure Schedules) totaling $436,585.00 USD in the aggregate as of the Execution Date, and (II) “Reserve Payments” as defined in and pursuant to the Maxus Schedules totaling $336,952.33 USD in the aggregate as of the Execution Date, but specifically excluding (b) the Seller Retained Claims (collectively, the “Current Assets”), less (b) the current liabilities of each Company (the “Current Liabilities”), both determined as of the close of business of the Companies on the Closing Date and in each case as determined in accordance with United States generally accepted accounting principles (“GAAP”) in its preparation of the financial information provided to Sellers pursuant to Article III and excluding cash and all balances either due to or from the Sellers. A sample of such Net Working Capital calculation is set forth on Exhibit B.
(ii) Definitions of “Working Capital Deficit” and “Working Capital Surplus”. The Parties acknowledge that the Purchase Price being paid to Sellers is based on the assumption that the Net Working Capital of the Companies in the aggregate and as of Closing shall be equal to One Hundred Fifty Thousand and No/100s United States Dollars ($150,000.00 USD) (the “Target Working Capital”). The Parties agree that (A) if the Net Working Capital is less than the Target Working Capital, then the difference between the Target Working Capital and the Net Working Capital shall constitute the “Working Capital Deficit”; and (B) if the Net Working Capital is greater than the Target Working Capital, then the difference between the Net Working Capital and the Target Working Capital shall constitute the “Working Capital Surplus”.
(b) Closing Date Balance Sheet. Within sixty (60) days after the Closing Date, Sellers shall prepare and deliver, or shall cause to be prepared and delivered, to Purchaser, a closing statement of each Company as of the Closing Date (the “Proposed Closing Statement”), which sets forth Sellers’ good faith calculation of the Net Working Capital as of the Closing Date, along with copies of any working papers, trial balances, and similar materials relating to the Proposed Closing Statement prepared by Sellers. The Proposed Closing Statement shall be prepared in accordance with GAAP and should include the methods for calculating the Current Assets and Current Liabilities set forth therein as determined by Sellers.
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(c) Examination of Proposed Closing Statement. Purchaser shall have thirty (30) days following their receipt of the Proposed Closing Statement (the “Review Period”) to review the Proposed Closing Statement to confirm the accuracy of the Proposed Closing Statement and Sellers’ calculation of the Net Working Capital set forth therein. From and after the date of Purchaser’s receipt of the Proposed Closing Statement until the determination of the Final Closing Statement, Sellers shall provide Purchaser and its representatives access, not unreasonably interfering with the operations of Sellers, during normal business hours, to the relevant books and records of Sellers, the personnel of, and work papers prepared by, Sellers and/or their accountants to the extent reasonably necessary for Purchaser to substantiate Sellers’ calculation of the Net Working Capital set forth in the Proposed Closing Statement. If Purchaser fails to give Sellers written notice of any disputed amounts prior to the expiration of the Review Period, then the Proposed Closing Statement shall become the Final Closing Statement for purposes hereof on the date that such Review Period expires. If Purchaser gives Sellers written notice of any calculations set forth in the Proposed Closing Statement that Purchaser disputes in good faith on or before the expiration of the Review Period (the “W.C. Disputed Matters”), then Purchaser and Sellers shall attempt in good faith to agree on any adjustments that should be made to the Proposed Closing Statement. If the Parties reach a written agreement with respect to the W.C. Disputed Matters, the Proposed Closing Statement as modified to reflect such written agreement shall become the Final Closing Statement for purposes hereof. If Purchaser and Sellers are unable to resolve any W.C. Disputed Matters which Purchaser timely disputed during the Review Period, Purchaser and Sellers will engage the Independent Accountant to resolve, exclusively, any such W.C. Disputed Matters. The Independent Accountant shall make its determination regarding any W.C. Disputed Matters by calculating such amounts in a manner consistent with the definitions of the components of Net Working Capital included in this Agreement. If the W.C. Disputed Matters are submitted to the Independent Accountant for resolution, Sellers and Purchaser shall each furnish or cause to be furnished to the Independent Accountant such work papers and other documents and information relating to the W.C. Disputed Matters as the Independent Accountant may reasonably request and are available to the Parties and their respective agents and shall be afforded the opportunity to present to the Independent Accountant any material relating to the W.C. Disputed Matters and to discuss the W.C. Disputed Matters with the Independent Accountant. The decision of the Independent Accountant with respect to the W.C. Disputed Matters shall be provided in writing and, if possible, be made within thirty (30) days after the engagement of the Independent Accountant. The Independent Accountant’s decisions shall be final and binding on the Parties. The Proposed Closing Statement shall be revised, if necessary, to reflect the final determination of the components thereof made by the Independent Accountant (the final form of the Proposed Closing Statement, including any revisions which are made thereto pursuant to this Section 3.3(c), is referred to herein as the “Final Closing Statement”).
(d) Final Adjustment. Upon final determination of the Final Closing Statement in accordance with this Section 3.3, if such Final Closing Statement reflects (a) a Working Capital Deficit, then the Purchase Price shall be decreased by an amount equal to the Working Capital Deficit (the amount of such shortfall, if any, is hereinafter referred to as the “Final Deficit”); or (b) a Working Capital Surplus, then the Purchase Price shall be increased by an amount equal to the Working Capital Surplus (the amount of such excess, if any, is hereinafter referred to as the “Final Surplus”). The amount of any Final Deficit shall be payable, by Sellers to Purchaser within three (3) days of either the date of the final determination of the Final Closing Statement in accordance with this Section 3.3 (the “Final Determination Date”). The amount of any Final Surplus shall be payable by Purchaser to Sellers within three (3) Business Days of either the date of the Final Determination Date. The fees and expenses of the Independent Accountant shall be allocated to and paid by Purchaser and Sellers based upon the percentage that the portion of the contested amount not awarded bears to the amount actually contested, as determined by the Independent Accountant. By way of illustration, if Purchaser claims that there is a Working Capital Deficit of one hundred thousand dollars ($100,000), the Sellers claim that there is a Working Capital Surplus of twenty-five thousand dollars ($25,000) and the Independent Accountant determines that there is Final Deficit of twenty-five thousand dollars ($25,000), then the costs and expenses of the Independent Accountant will be allocated forty percent (40%) to Sellers ($50,000 / $125,000) and sixty percent (60%) to Purchaser ($75,000 / $125,000).
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Section 3.4 Closing. Notwithstanding any provision in either Company’s Organizational Documents to the contrary, the Parties acknowledge and agree that the Closing will take place as soon as practicable after the Execution Date remotely by the exchange of counterpart signature pages via facsimile, electronic mail or portable document format. The Closing shall be effective as of 12:01 am (New York time) on the Closing Date. The Parties shall use their best efforts to close within ninety (90) days after the Execution Date. In the event, however, that despite best efforts, after passage of such ninety (90) days (a) Purchaser fails to obtain all Nasdaq and any other required regulatory approvals related to this Agreement and the other Transaction Documents, or (b) Purchaser fails to obtain a Fairness Opinion, and it is impractical or unlikely to consummate the Closing under circumstances involving the grant of additional time to close, the Closing will not occur and the Parties shall have no further obligations to one another other than obligations which survive the termination of this Agreement.
Section 3.5 Deliveries of Sellers at Closing. At or prior to Closing (or, to the extent specifically set forth below, subsequent to Closing), Sellers shall deliver or cause to be delivered to Purchaser:
(a) Counterparts to this Agreement duly executed by each Seller;
(b) Counterparts of an assignment of Membership Interests (“Assignment of Membership Interests”), as well as a transfer ledger or similar records of each Company;
(c) Counterparts to the Lockup Agreement duly executed by each Seller;
(d) Counterparts to the Master Netting Agreement by and among each of the Sellers and the Purchaser;
(e) A termination of the Shared Services Agreement effective as of the Closing;
(f) All of the books and records of each Company and other Organizational Documents;
(g) Resignation letters of all of each Company’s officers, directors and managers;
(h) Fully executed copies of all consents required under any contract or agreement of any of the Companies or EmployeeCo in connection with the transactions contemplated by this Agreement (the “Company Consents”), including, but not limited to, the consents set forth as Item Nos. 1-2 on Schedule 4.4 (the “Long-term Debt Consents”), the consent of the members of each Company in accordance with its Organizational Documents, and the consent of the auditor for each Company to the use of the Financial Statements and Interim Financial Statements in future filings by the Purchaser with the SEC;
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(i) A certificate of a manager of each Company, in form and substance reasonably satisfactory to Purchaser, attaching copies of the (i) Certificate of Formation of each Company certified by the Secretary of State of Pennsylvania or the Secretary of State of Texas, as applicable, (ii) the operating agreement of each Company, (iii) joint resolutions of the members and manager(s) of each Company authorizing and approving the execution and delivery of this Agreement, the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and certifying that each of the documents attached pursuant to clauses (i)-(iii) are true and complete;
(j) A certificate of good standing and status of each Company and each Covered Subsidiary from the Secretary of State of Pennsylvania or the Secretary of State of Texas, as applicable, dated within ten (10) days of the Closing Date, certifying that each Company and each Covered Subsidiary is in good standing in its jurisdiction;
(k) A Tax clearance certificate with respect to each Company dated not more than ten (10) days prior to the Closing Date from each state in the United States in which Sellers file Tax Returns or is otherwise subject to Tax, to the extent required by such states; and
(l) Such other documents or instruments as Purchaser may reasonably request.
Section 3.6 Deliveries of Purchaser at Closing. At Closing, Purchaser shall deliver, or cause to be delivered, to Sellers or the Persons designated below, as applicable:
(a) Written evidence that Purchaser has instructed its transfer agent to issue the Purchaser Common Stock Consideration and the Purchaser Preferred Stock Consideration to Sellers pursuant to Section 3.1, with such restrictive legends thereon as Purchaser may reasonably require;
(b) A counterpart to this Agreement, duly executed by an authorized officer of Purchaser;
(c) A counterpart to the Master Netting Agreement;
(d) A termination of the Shared Services Agreement effective as of the Closing;
(e) Delivery of (or delivery of other evidence reasonably satisfactory to Sellers of) all governmental approvals, including approval under the HSR Act (the “Governmental Approvals”), consents, notices and other items in accordance with Article VI;
(f) A Fairness Opinion concluding that the Purchase Price to be paid by Purchaser is fair to the stockholders of Purchaser;
(g) Fully executed copies of all consents required under any contract or agreement of Purchaser in connection with the transactions contemplated by this Agreement (the “Purchaser Consents”), and
(h) Such other documents or instruments as Sellers may reasonably require.
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Section 3.7 Withholding. Purchaser shall be entitled to deduct and withhold from any amounts payable hereunder the amounts required to be deducted and withheld under the Code, or any provision of any applicable Tax Law. To the extent that amounts are so deducted and withheld, such deducted and withheld amounts will be treated for all purposes of this Agreement as having been paid to such Person in respect of which such deduction and withholding was made.
Article IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
All representations and warranties are made subject to the exceptions noted in the schedules delivered concurrently herewith and identified by the Parties as the “Disclosure Schedule”. No specific representation or warranty will limit the generality or applicability of a more general representation or warranty. Each Schedule of the Disclosure Schedule will be numbered to correspond to the paragraph of the section to which it relates. For purposes of this Article IV, the representations and warranties of the Sellers herein and in the Disclosure Schedules with respect to a Company or the Companies shall not apply to any Covered Subsidiary of a Company unless expressly stated that they apply. Sellers, severally and not jointly, hereby make the following representations and warranties to Purchaser:
Section 4.1 Organization and Qualification of the Companies.
(a) Endeavor is a limited liability company duly formed and validly existing under the laws of the State of Texas. ET is a limited liability company duly formed and validly existing under the laws of the State of Pennsylvania. MEL is a limited liability company duly formed and validly existing under the laws of the State of Texas. SFP is a limited liability company duly formed and validly existing under the laws of the State of Texas. Each Company has the requisite power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the business as currently conducted by the Companies. Each Company is duly qualified to do business and is in good standing in all jurisdictions where the nature of the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified can be cured without material expense and will not render any Material Contract of the Companies unenforceable. Schedule 4.1(a) sets forth a list of (i) all jurisdictions in which the Companies are authorized to transact business, and (ii) all managers and officers of the Companies.
(b) True and complete copies of the Organizational Documents of each Company and all equity records of each Company have been delivered or otherwise made available to Purchaser. All of the books and records of each Company and Organizational Documents have been maintained in the Ordinary Course of Business and fairly reflect, in all material respects, all transfers of the Membership Interests and material agreements governing the same. The Companies are not in violation, in any material respect, of their Organizational Documents.
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Section 4.2 Capitalization of Companies.
(a) At Closing, (i) Endeavor will have one thousand (1,000) Membership Interests issued and outstanding, of which (A) nine hundred and ninety (990) units shall be owned by Jorgan and (B) ten (10) units shall be owned by JBAH, (ii) MEL will have one thousand (1,000) Membership Interests issued and outstanding, of which (C) nine hundred and ninety (990) shall be owned by Jorgan and (D) ten (10) shall be owned by JBAH, (iii) SFP will have one thousand (1,000) Membership Interests issued and outstanding, of which (E) nine hundred and ninety (990) shall be owned by Jorgan and (F) ten (10) shall be owned by JBAH, and (iv) ET will have one thousand (1,000) Membership Interests issued and outstanding, of which (G) nine hundred and ninety (990) shall be owned by Jorgan and (H) ten (10) shall be owned by JBAH. All of the Membership Interests have been duly authorized, are validly issued, fully paid and non-assessable, and Sellers are the record owners of all Membership Interests, as set forth on Schedule 4.2(a) of the Disclosure Schedules, free and clear of all encumbrances save and except for Permitted Liens and those liens and encumbrances set forth on Schedule 4.2(a). The Membership Interests constitute all of the issued and outstanding Membership Interests in each of the Companies on a fully diluted basis. Upon the consummation of the transactions contemplated herein, Purchaser will acquire good and valid legal and beneficial title to all of the issued and outstanding Membership Interests, free and clear of all encumbrances, other than Permitted Liens.
(b) There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Membership Interests or obligating either Seller or the Companies to issue or sell any Membership interests of, or any other interest in, the Companies. Except as set forth on Schedule Section 4.2(b) of the Disclosure Schedules, there are no outstanding (i) equity appreciation, phantom equity, profit participation or similar rights with respect to the Companies or (ii) voting trusts, proxies, member agreements or other agreements or understandings related to the voting or transfer of any outstanding Membership Interests.
Section 4.3 Capacity; Enforceability. Each Seller has all necessary power and authority, and the full legal capacity, to enter into and deliver this Agreement and the other Transaction Documents to which such Seller is a party, to carry out such Seller’s obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement and each Transaction Document to which either Seller is a party has been duly authorized, executed and delivered by such Seller and constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms and conditions, except as the enforceability may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors’ rights generally; or (ii) general principles of equity.
Section 4.4 No Conflict. The execution, delivery and performance by each Seller of this Agreement and each Transaction Document to which each Seller is a party, and the consummation by each Seller of the transactions contemplated hereby and thereby does not and will not, with or without the giving of notice or the lapse of time, or both, (a) violate any provision of any Law or Governmental Order to which either Sellers or the Companies are subject, (b) violate any provision of the Organizational Documents of the Companies, or (c) except as set forth on Schedule 4.4, violate or result in a breach of or constitute a default (or an event which might, with the passage of time or the giving of notice, or both, constitute a default), or require the consent of any third party, under any Material Contract or Permit to which either Sellers or the Companies are a party or by which either Sellers or the Companies may be bound or affected, or result in or permit the termination or amendment of any provision of any such Material Contract or Permit. Except in connection with the HSR Act or as set forth on Schedule 4.4, no consent, approval, or authorization of, or exemption by, or filing with, any Governmental Authority or other Person is required to be obtained or made by either Sellers or the Companies in connection with the execution, delivery, and performance by Sellers of this Agreement or any Transaction Documents to which either Seller is a party, or the taking by either Seller or the Companies of any other action contemplated hereby or thereby.
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Section 4.5 Sufficiency and Condition of Assets; Possession.
(a) Except as set forth on Schedule 4.5(a), each Company owns or has a good and marketable title to, or leasehold interest in, or other right to use all of its respective Assets, free and clear of all Liens (excluding the Permitted Liens set forth on Schedule 4.5(a) of the Disclosure Schedules). Except for the Trucking Assets and the Omega Assets, the Assets are in working condition (normal wear, tear, repair and maintenance excepted), and to the Knowledge of Sellers are free from any defects outside the Ordinary Course of Business. The Assets include all of the Assets used in the operation of each Company’s Business, as applicable, as currently conducted and as currently contemplated to be conducted. Except for the limitations applicable to the Trucking Assets set forth on Schedule 4.5(a), the Assets are adequate to conduct each Company’s Business, as applicable, as it is presently being conducted and will be adequate to enable Purchaser to continue to conduct each Company’s Business, as applicable, as it is presently being conducted.
(b) The Companies are in full possession of the Assets, as applicable.
Section 4.6 Litigation and Proceedings. Save and except for the matters disclosed on Schedule 4.6 of the Disclosure Schedules, neither the Companies nor Sellers have received service of process, and to the Knowledge of Sellers, there are no pending Actions or Actions threatened in writing before or by any Governmental Authority against the Companies; there is no unsatisfied judgment, order or decree or any open injunction binding upon the Companies; and to the Knowledge of Sellers, no event has occurred and no condition exists on the basis of which any litigation, proceeding or investigation would reasonably be expected to result, including any litigation, proceeding or investigation which would be expected to materially affect the performance of this Agreement or the Transaction Documents.
Section 4.7 Employees, Independent Contractors and Consultants.
(a) Except as otherwise set forth on Schedule 4.7(a), at Closing, Purchaser will have no payment or other obligations to Employees, independent contractors or consultants of the Companies for monetary obligations for periods prior to Closing. Prior to Closing, Sellers have operated each Company’s Business in compliance with all applicable employment and labor laws.
(b) Schedule 4.7(b) sets forth a list of all Employees, independent contractors and consultants who, as of the Execution Date, provide work or services relating to any Company’s Business or EmployeeCo’s business, and for each such Employee, independent contractor and consultant, to the extent applicable, the following information: (i) first and last name; (ii) title, (iii) employment classification under the Fair Labor Standards Act of 1938, as amended, (iv) compensation rate; (v) state of domicile; (vi) employer, (vii) supervisor, (viii) start date of employment or engagement, and (viii) accrued but unused paid time off.
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Section 4.8 Accounts Receivable. The Accounts Receivable reflected on the Financial Statements and Interim Financial Statements and the Accounts Receivable arising after the date thereof (a) have arisen from bona fide transactions entered into by the Companies involving the sale of goods actually delivered or services actually rendered in the Ordinary Course of Business and have been billed or will be billed; (b) constitute only valid, undisputed claims of the Companies not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the Ordinary Course of Business consistent with past practice; and (c) are collectible in full within sixty (60) days after billing.
Section 4.9 Taxes. With respect to each Company:
(a) All Tax Returns required to be filed that encompass or relate in any manner to the Assets or the Company have been timely filed, and all such Tax Returns are true, correct and complete in all material respects. All Taxes (whether or not shown on any Tax Return) relating to the Assets or the Business that are due and payable have been timely paid.
(b) No Tax deficiency has been proposed or assessed against the Company, and the Company has not executed any waiver of any statute of limitations on the assessment or collection of any Tax or agreed to any extension of time with respect to a Tax assessment or deficiency. Except for Taxes not yet due and payable, (i) there are no Liens for unpaid Taxes on the Assets, and (ii) no claim for unpaid Taxes has been made by any Governmental Authority that could give rise to any such Lien.
(c) All Taxes that the Company is or was required to withhold or collect (for employees, independent contributors, consultants, note holders, members and other Persons) have been duly withheld or collected and, to the extent required, have been timely paid to the appropriate Governmental Authority.
(d) The Company has not been, and the Company is not currently the subject of, and there are no pending or threatened in writing, disputes, claims, actions, examinations, audits, investigations, litigations, or other proceedings against the Company with respect to Taxes. The Company has not received notice of any issue or question currently pending by any Governmental Authority in connection with the Company’s Tax Returns. No written claim has ever been made by a Governmental Authority in a jurisdiction in which the Company does not currently file Tax Returns that the Company is or may be subject to taxation by that jurisdiction.
(e) None of the Company’s Assets consist of any stock, partnership interest, limited liability company interest, legal or beneficial interest, or any other equity interest in or of any Person, and none of the Assets are subject to any Tax partnership agreement or provisions requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.
(f) The Company does not have: (i) an obligation to make a payment that is not deductible under Section 280G of the Code; (ii) an obligation to make a payment to any Person under any Tax allocation agreement, Tax sharing agreement, Tax indemnity obligation or similar written or unwritten agreement, arrangement, understanding, or practice with respect to Taxes; (iii) an obligation under any record retention, transfer pricing, closing or other agreement or arrangement with any Governmental Authority that will survive the Closing or impose any liability on Purchaser after the Closing; (iv) an obligation under any agreement, contract, arrangement or plan to indemnify, gross up, or otherwise compensate any Person, in whole or in part, for any excise Tax under Section 4999 of the Code that is imposed on such Person or any other Person; or (v) an obligation to pay the Taxes of any Person as a transferee or successor, by contract or otherwise, including an obligation under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Law).
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(g) Sellers understand that Sellers (and not Purchaser) shall be responsible for Sellers’ own Tax liability that may arise as a result of Sellers’ investment in the Purchaser Stock Consideration or the transactions contemplated by this Agreement.
Section 4.10 Governmental Authorities; Consents. Except as set forth on Schedule 4.10, no consent, approval, authorization, license, order or permit of, or declaration, filing or registration with, or notification to, any Governmental Authority, or any other Person, is required to be made or obtained by the Company or any of its Affiliates in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby.
Section 4.11 Insurance.
(a) Each Company maintains insurance with respect to its properties and the Business against loss or damages of the kinds customarily insured against by companies engaged in the same or similar businesses as each Company, in such amounts that are commercially reasonable and customarily carried under similar circumstances by such other companies.
(b) Schedule 4.11(b) contains a list and a description of all policies of property, fire and casualty, product liability, professional liability, general liability, workers’ compensation, bonding arrangements and other forms of insurance held or implemented by the Companies. True, correct and complete copies of such insurance policies and arrangements have been made available to Purchaser as requested.
(c) All such policies listed on Schedule 4.11(b) are in full force and effect. The Companies are not in default of, have paid all premiums due, and have otherwise performed all obligations, under each policy listed on Schedule 4.11(b). The Companies have not received (i) any written notice of cancellation or modification of any policy listed on Schedule 4.11(b) or written refusal of coverage thereunder, (ii) any written notice that any issuer of such policy has filed for protection under applicable bankruptcy laws or is otherwise in the process of liquidating or has been liquidated, (iii) any other written notice that such policies are no longer in full force or effect or that the issuer of any such policy is no longer willing or able to perform its obligations thereunder or has made any reservation of right or similar exception in respect of any claim thereunder, and (iv) the Companies have not been refused any insurance, nor have any of their respective coverages been limited by any insurance carrier to which it has applied for insurance or with which has carried insurance.
(d) Except as described on Schedule 4.11(d), (i) the Companies have not made any material claims against any of the insurance policies and arrangements of the Companies in effect at the time of Closing, and (ii) to the Knowledge of Sellers, no other party has made or threatened to make a material claim against any of the insurance policies and arrangements of the Companies in effect at the time of Closing.
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Section 4.12 Material Contracts.
(a) Schedule 4.12(a) sets forth a list of the following contracts and agreements to which any Company is a party as of the Closing Date (other than the Master Netting Agreement) (the “Material Contracts”):
(i) except for pipeline connection agreements and station access agreements, any contract or agreement for the receipt, storage, blending, transportation, or delivery of greater than ten thousand barrels per day (10,000bpd) of Hydrocarbons in connection with the Business;
(ii) any contract or agreement that results in annual gross revenue or gross expenditures in excess of one million six hundred thousand dollars ($1,600,000);
(iii) any contract or agreement for lease of fixtures or equipment involving aggregate payments in excess of one million six hundred thousand dollars ($1,600,000) in any calendar year that are not terminable without penalty within sixty (60) days;
(iv) any contract or agreement for lease of personal property, fixtures, or equipment involving aggregate payments in excess of one million six hundred thousand dollars ($1,600,000) in any calendar year that is not terminable without penalty within sixty (60) days; and
(v) any contract or agreement under which the consequences of a default or termination would reasonably be likely to have a Material Adverse Effect.
(b) Except with respect to Material Contracts that expire prior to the Closing Date in accordance with their terms, each of the Material Contracts is in full force and effect and constitutes a legal, valid and binding obligation of the applicable Company and, to the Knowledge of Sellers, the other party thereto, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium and other similar Laws relating to or affecting the rights of creditors generally, and general equitable principles. Neither the Companies nor, to the Knowledge of Sellers, any other party to any Material Contract, is in breach or default in any material respect under any Material Contract, and there are no litigation, actions or proceedings pending nor, to the Knowledge of Sellers, threatened in writing under or relating to any Material Contract. None of the Material Contracts has been cancelled, terminated, amended or modified (except for change orders and similar modifications made available to Purchaser or occurring after the Closing Date in the Ordinary Course of Business promptly provided to Purchaser following execution thereof) and neither Sellers nor the Companies have provided or received any notice of any intention to cancel, terminate, amend or modify any Material Contract.
Section 4.13 Absence of Certain Changes or Events. Since December 31, 2022 except as disclosed on Schedule 4.13, the Companies have been carried on in the Ordinary Course of Business, and there has not been any:
(a) Material Adverse Effect;
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(b) Issuance, purchase, redemption, merger, or consolidation involving any of the Membership Interests, or grant or issuance of any option, warrant or other right to purchase or acquire any such equity securities;
(c) Increase in the compensation payable or to become payable by either Company to any of its officers, employees, directors, members, consultants or agents (collectively, “Personnel”) other than in the Ordinary Course of Business consistent with past practices, but only to the extent duly and accurately reflected in the Financial Statements;
(d) Bonus, incentive compensation, service award or other like benefit granted, made or accrued or agreed to be granted, made or accrued, contingently or otherwise, for or to the credit of any of the Personnel other than in the Ordinary Course of Business consistent with past practices, but only to the extent duly and accurately reflected in the Financial Statements;
(e) Payments to any pension, retirement, profit-sharing, bonus or similar plan, except in the Ordinary Course of Business;
(f) Payment or other distribution to any employee or member, except compensation paid in the Ordinary Course of Business;
(g) Change in relations between either Company, and any unions or workers councils of the employees or members of either Company that adversely affects either Company;
(h) Sale, assignment or transfer of any Assets of any Company other than in the Ordinary Course of Business;
(i) Amendment, cancellation or termination of any Material Contract other than Material Contracts in the Ordinary Course of Business or Material Contracts where the aggregate payments in one (1) year do not exceed one million six hundred thousand dollars ($1,600,000);
(j) Failure to operate the Companies in the Ordinary Course of Business, to use reasonable efforts to preserve the Company intact, to keep available the services of the necessary Personnel consistent with past practices, and to preserve the goodwill of its suppliers, customers and others having business relations the Companies;
(k) Change in accounting methods or practices by either Company;
(l) Revaluation by any Company of its Assets, including without limitation, writing off notes or Accounts Receivable other than in the Ordinary Course of Business consistent with past practice, but only to the extent duly and accurately reflected in the Financial Statements;
(m) Single capital expenditure in excess of one million six hundred thousand dollars ($1,600,000), or capital expenditures in the aggregate in excess of five million dollars ($5,000,000);
(n) Damage, destruction or loss (whether or not covered by insurance) adversely affecting the properties or business of the Companies in an amount exceeding one million one million dollars ($1,000,000); or
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(o) New contract or agreement entered into outside the Ordinary Course of Business or with any partner, interest holder, member, officer, director or other Affiliate of the Companies or Sellers;
(p) Declaration, payment, setting aside for payment of any distribution (whether in equity or property) with respect to any interests of either Company;
(q) Waiver or release of any material right or claim of any Company or incurred any modification, amendments or terminations of any Material Contract, which are in the aggregate materially adverse to the Companies or the Business; and
(r) Material Contracts to do any of the foregoing.
Section 4.14 Financial Statements.
(a) Schedule 4.14(a) sets forth true and complete copies of the (i) balance sheets of each Company, other than ET, as of December 31, 2022 and the related audited statements of income and cash flows for the calendar years then ended (the “2022 Financial Statements”). Prior to the Closing, Sellers shall provide Purchaser with audited balance sheets of each Company, as of December 31, 2023 and audited statements of income and cash flows of each Company for the calendar year ended December 31, 2023 (the “2023 Financial Statements”).
(b) The 2022 Financial Statements present fairly and the 2023 Financial Statements will present fairly, in all material respects, the financial position, results of operations and cash flows of each Company as of the dates and for the time periods indicated and have been or will have been prepared in accordance with the Company Accounting Practices consistently applied throughout the periods indicated and reviewed by the management of each Company. The 2022 Financial Statements and 2023 Financial Statements were derived or will be derived from the books and records of each Company, which are and will be accurate and complete and there are no material inaccuracies or discrepancies of any kind contained or reflected therein.
(c) No Company has or will have any obligation, liability or Indebtedness (whether known or unknown and whether absolute, contingent or otherwise) except those that: (a) are or will be fully accrued or reserved against in the 2022 Financial Statements and 2023 Financial Statements, regardless of whether such obligation, liability or Indebtedness is required by GAAP to be included in the 2022 Financial Statements and 2023 Financial Statements, as applicable; (b) were incurred or will be incurred since the most recent balance sheet included in the 2022 Financial Statements and 2023 Financial Statements, as applicable, in the Ordinary Course of Business and consistent with past practices and are of the same type and category as shown in the 2022 Financial Statements and 2023 Financial Statements, as applicable; (c) are obligations or will be under Material Contracts, excluding liability for breaches thereof; or (d) with regard to the 2022 Financial Statements,are expressly set forth in this Agreement or Schedule 4.14(c).
Section 4.15 Real Property.
(a) Schedule 4.15(a) of the Disclosure Schedules sets forth the address or legal descriptions of all real property interests held in fee simple absolute (collectively, the “Owned Real Property”) vested in each Company. Except as set forth on Schedule 4.15(a) of the Disclosure Schedules, the Companies have good and marketable fee simple absolute title to each parcel of Owned Real Property, free and clear of all Liens, save and except for Permitted Liens.
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(b) Schedule 4.15(b) sets forth a true and complete list and description of all real property leased, licensed to or otherwise used or occupied (but not owned) by each Company and Omega (collectively, the “Leased Real Property”), including certain material facts related thereto. A true and correct copy (or if oral, then a written description thereof) of the lease, license or occupancy agreement, and any amendments thereto, with respect to the Leased Real Property (collectively, the “Real Property Leases”) has been delivered to Purchaser, and no changes have been made to any Real Property Leases since the date of delivery. All of the Leased Real Property is used or occupied by the Companies pursuant to each respective Real Property Lease. Each Real Property Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect. There are no existing defaults by the Companies or, to the Knowledge of Sellers, the lessor under any of the Real Property Leases, and to the Knowledge of Sellers, no event has occurred which (with notice, lapse of time or both) could reasonably be expected to constitute a breach or default under any of the Real Property Leases by any Person or give any Person the right to terminate, accelerate or modify any Real Property Lease. Except as set forth on Schedule 4.15(b), no consent is required from the lessor under any of the Real Property Leases in connection with the transactions contemplated by this Agreement and the Transaction Documents, which has not been obtained and provided to Purchaser and the Companies have not leased or sublet as lessor or sublessor, and no Person (other than the Companies) is in possession of, any of the Leased Real Property.
(c) To the Knowledge of Sellers, all improvements located on, and the use presently being made of, the Leased Real Property comply with all applicable zoning and building codes, ordinances and regulations and all applicable fire, environmental, occupational safety and health standards and similar standards established by applicable Law, and the same use thereof by Purchaser following Closing, in the same manner as conducted by the Companies prior to Closing, will not result in any violation of any such code, ordinance, regulation or standard. The present use and operation of the Leased Real Property does not constitute a non-conforming use and is not subject to a variance. There is no proposed, pending or threatened change in any such code, ordinance, regulation or standard which would materially adversely affect the Companies.
(d) To the Knowledge of Sellers, there is not currently pending or contemplated reassessment of any parcel included in the Leased Real Property that could result in a change in the rent, additional rent or other sums and charges payable by the Companies under any agreement relating to the Leased Real Property.
(e) To the Knowledge of Sellers, there is no pending condemnation, expropriation, eminent domain or similar proceeding affecting all or any portion of the Leased Real Property. Neither the Companies nor Sellers have received any written notice or oral notice of any such proceeding and, to the Knowledge of Sellers, no such proceeding is contemplated.
(f) To the Knowledge of Sellers, there are no material defects in, mechanical failure of, or damage to, the Leased Real Property. To the Knowledge of Sellers, the mechanical, electrical and HVAC systems serving the Leased Real Property are in good working condition.
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(g) All utilities (including water, sewer or septic, gas, electricity, trash removal and telephone service) are available to the Leased Real Property in sufficient quantities and quality to adequately serve the Leased Real Property in connection with the operation of the Business conducted therefrom as such operations are currently conducted thereon.
Section 4.16 Environmental.
(a) Except as set forth on Schedule 4.16(a) of the Disclosure Schedules, the Companies are presently and have been at all times in material compliance with all Environmental Laws applicable to the Leased Real Property, formerly owned, leased or operated locations, or its Business. Neither the Companies nor Sellers have received any written notice, report, or other communication regarding any violation, alleged violation, or potential liability under any Environmental Laws, and, to the Knowledge of Sellers, there are no facts or circumstances that could reasonably be expected to give rise to any such violation of or potential liability under any Environmental Laws.
(b) There are no writs, injunctions, decrees, orders or judgments outstanding, or any actions, suits, claims, proceedings, demands, notices of violation, deficiency notices, investigations, or the like pending or, to the Knowledge of Sellers, threatened, relating to compliance with or liability under any Environmental Law affecting the Companies.
(c) There has been no impermissible Release of, or exposure of any Person to, Hazardous Materials by the Companies or, to the Knowledge of Sellers, by any other Person, at the Leased Real Property, any real property owned, leased or operated by the Companies, or elsewhere that requires reporting, investigation, assessment, cleanup, remediation or any other type of response action pursuant to any Environmental Law or that could be the basis for any liability of any kind pursuant to any Environmental Law.
Section 4.17 Legal Compliance. Except with respect to (i) matters set forth on Schedule 4.17, (ii) compliance with Environmental Laws (as to which certain representations and warranties are made pursuant to Section 4.16), (iii) compliance with employment Laws (as to which certain representations and warranties are made pursuant to Section 4.16), and (iv) compliance with Laws concerning Taxes (as to which certain representations and warranties are made pursuant to Section 4.9), Sellers (with respect to the Business) and the Companies are now, and at all times since their respective inception have been, in compliance with all Laws or Governmental Orders with respect to its operation of the Companies, the Business and the Assets.
Section 4.18 Indebtedness. Schedule 4.18 sets forth a true and complete list of the individual components (indicating the amount and the Person to whom such Indebtedness is owed) of all the Indebtedness of the Companies and the Indebtedness of the Companies to be paid off prior to Closing.
Section 4.19 COVID-19; CARES Act.
(a) Since January 1, 2022 (“Reference Date”), except as set forth on Schedule 4.19(a), the Companies have not, as a result of COVID-19 or otherwise:
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(i) Closed or idled, in each case whether in whole or part, any facility on any real property, or adopted plans to take any such action;
(ii) Agreed to defer or modify payment terms with respect to any accounts receivable, or received any request to take such actions from any third-party, written off any accounts receivable or increased any reserves for uncollectible accounts;
(iii) Deferred payment of, or modified payment terms with respect to, any accounts payable or Indebtedness, or requested any such deferment or modification from any third-party;
(iv) Laid-off, furloughed, terminated or changed compensation or benefits of, whether on a temporary or permanent basis, any employees, any independent contractors or consultants, or adopted plans to take any such action;
(v) Made any claim under any insurance policy or experienced any event or circumstance to which a claim may be made under any insurance policy;
(vi) Temporarily shut down or ordered a reduction in force;
(vii) Suffered a material disruption in its supply chains; or
(viii) Entered into any Material Contract to do any of the foregoing or undertaken any action or omission that would result in any of the foregoing.
(b) No Company has applied for, incurred, received or guaranteed any relief, assistance or Indebtedness pursuant to any relief or similar program administered by any Governmental Authority or other Person in connection with COVID-19, including the CARES Act (including, but not limited to, any PPP Loans).
(c) Schedule 4.19(c) identifies all actions taken by the Companies outside the Ordinary Course of Business since the Reference Date with respect to Taxes, including any delay or reduction in the payment or the deposit of any Taxes, any delay in the filing of any Tax Return, Tax election or other Tax-related filing (including pursuant to IRS Notice 2020-18, IRS Notice 2020-23 or any similar or related guidance for federal, state or local Tax purposes), any material Tax election, any amendment to any Tax Return, any consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment, any claim for refund, any utilization of any Tax credits, Tax benefits or other Tax incentives under the Families First Coronavirus Response Act, the CARES Act or any other similar or related federal, state or local Laws, and any other similar actions relating to Taxes or Tax Returns. Except as set forth in Schedule 4.19(c), since the Reference Date, the Companies have not taken any actions with respect to Taxes outside the Ordinary Course of Business. Schedule 4.19(c) identifies the amount (if any) of each Company’s portion of Social Security Taxes the deposit and payment of which has been deferred pursuant to Section 2302 of the CARES Act. Schedule 4.19(c) also identifies the amount of any payroll or other Taxes that would otherwise have been payable to a Governmental Authority but has been withheld or retained by either Company on the basis that such Company is eligible for and is claiming an Employee Retention Credit under Section 2301 of the CARES Act, and such Company was entitled to withhold or retain such amounts pursuant to Section 2301 of the CARES Act and has complied with all conditions to eligibility and other requirements relating thereto. The Companies have not taken any action with regard to the Employee Retention Credit under Section 2301 of the CARES Act.
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(d) Except as set forth in Schedule 4.19(d), since the Reference Date, the Companies have not made any claims to landlords of the Companies with respect to rent, reduction in leased space, or other relief under any leases of the Companies for Leased Real Property, including those relating to claims of breach of quiet enjoyment, interruption of service, impossibility of performance, frustration of purpose, force majeure, or otherwise.
Section 4.20 Intellectual Property.
(a) Schedule 4.20(a) sets forth a true, correct and complete list of all the Intellectual Property owned (in whole or part), held or created by, or licensed to or used by the Companies. The Companies own and possess, free and clear of all Liens, all right, title and interest in or have a valid and enforceable written license or rights to use, all Intellectual Property used by each Company in the operation of the Business as presently conducted. Except as set forth on Schedule 4.20(a), no loss or expiration of any of the Intellectual Property is pending or, to the Knowledge of Sellers, threatened. The Companies own and possess all right, title and interest in and to all Intellectual Property created or developed by or on behalf of, or otherwise under the direction or supervision of, either Company’s employees or independent contractors, relating to the Business.
(b) To the Knowledge of Sellers, the Companies have not infringed or misappropriated, and the operation of the Business as currently conducted does not infringe or misappropriate, any Intellectual Property rights of other Persons. The Companies have not received any written notice regarding any of the foregoing (including any demand or offer to license any Intellectual Property rights from any other Person). To the Knowledge of Sellers, no third party has infringed or misappropriated any of the Intellectual Property of the Companies. The transactions contemplated by this Agreement shall not impair the right, title or interest of the Companies in and to the Intellectual Property of the Companies and all of the Intellectual Property of the Companies shall be owned or available for use by the Companies immediately after the Closing on terms and conditions identical to those under which the Companies owned or used the Intellectual Property of the Companies immediately prior to the Closing. The Companies have taken commercially reasonable efforts to protect the Intellectual Property of the Companies from infringement, misappropriation, and unauthorized disclosure.
(c) Neither the Companies nor either Seller have received any notice of any, actual or alleged breaches of security (including theft and unauthorized use, access, collection, processing, storage, disposal, destruction, transfer, disclosure, interruption or modification by any Person) of (i) the systems, hardware, software, network, or equipment of either Company (or the Seller to the extent used in the Business), including all information stored or contained therein or transmitted thereby, or (ii) any data in the possession or control of the Companies or either Seller about or from an individual that is protected by or subject to any data protection, privacy or security Laws, including protected health information.
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(d) The Companies have complied at all times with all relevant requirements of any applicable data protection Law, each Company’s own data protection principles, requests from data subjects for access to data held by the Companies and any Law relating to the registration of data users. The Companies have not received any notification from a Governmental Authority regarding noncompliance or violation of any data protection principles or Law. No Person has claimed any compensation from the Companies for the loss of or unauthorized disclosure or transfer of personal data and no facts or circumstances exist that might give rise to such a claim. The Companies have not undergone any audit or regulatory inquiry from any Governmental Authority with respect to privacy and/or data security of personally identifiable information and, to the Knowledge of Sellers, the Companies are not subject to any current inquiry from any Governmental Authority (including complaints from any individuals provided to such Governmental Authority) regarding same. The Companies have taken reasonable commercial steps to preserve the availability, security and integrity of the information systems and the data and information stored on the information systems owned or exclusively controlled by each Company. Each Company has maintained, and continue to maintain, safeguards, security measures and procedures to protect against the unauthorized access, destruction, loss, or alteration of customer data or information (including any personally identifiable information) in each Company’s possession or control.
Section 4.21 Licenses. The Companies possess and have maintained all Licenses are required to permit either Company to own, operate, use and maintain the Assets in the manner in which they are now operated and maintained and to conduct the Business as presently conducted.
Section 4.22 Brokers’ Fees. Except as set forth on Schedule Section 4.22, no Person has acted directly or indirectly as a broker, finder or financial advisor for Sellers or the Companies in connection with the negotiations relating to the transactions contemplated by this Agreement for which Purchaser will become obligated to pay a fee or commission.
Section 4.23 Disclosure. This Agreement, the Schedules and Exhibits hereto, and all other documents and written information furnished by Sellers and the Companies to Purchaser pursuant hereto or in connection herewith, are true, complete and correct, and do not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements made herein and therein not misleading. There are no facts or circumstances relating to the Companies, the Assets or the Business which adversely affect or might reasonably be expected to adversely affect the Companies, the Assets, the Business (including the prospects or operations thereof), or the ability of the Companies to perform this Agreement or any of its obligations hereunder.
Section 4.24 Additional Representations of the Sellers. Each Seller makes the following representations and warranties to the Purchaser which are set forth in this Section 4.24. No specific representation or warranty will limit the generality or applicability of a more general representation or warranty.
(a) Compliance with Duties. Each Seller has not taken any act or omitted to take any act, or permitted any act or omission to occur, which will cause a breach of his duties as a member, director or officer of either Company.
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(b) Purchase Entirely for Own Account. This Agreement is made with Sellers in reliance upon each Sellers’ representations to Purchaser, which by each Sellers’ execution of this Agreement, such Seller hereby confirms, that the Purchaser Stock Consideration that will be issued to such Seller will be acquired for investment for such Seller’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Seller does not have a present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, each Seller represents that such Seller does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to the Purchaser Stock Consideration.
(c) Receipt of Information. Each Seller believes that such Seller has received all the information such Seller considers necessary or appropriate for deciding whether to invest in the Purchaser Stock Consideration. Each Seller further represents that such Seller has had an opportunity to ask questions and receive answers from Purchaser regarding the terms and conditions of the offering of the Purchaser Stock Consideration and the business, properties, prospects, and financial condition of Purchaser and its subsidiaries and to obtain additional information (to the extent the Purchaser and its subsidiaries possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to Sellers or to which Sellers had access. The foregoing, however, does not limit or modify the representations and warranties of Purchaser in Article V or the rights of Sellers to rely thereon.
(d) Investment Experience. Each Seller acknowledges that it is financially sophisticated, able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Purchaser Stock Consideration.
(e) Accredited Seller Status. Each Seller is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act.
(f) Purchaser Stock Consideration. The Parties have agreed that the fair market value of the aggregate Purchaser Common Stock Consideration shall be $1.00 per share and that the fair market value of the aggregate Purchaser Preferred Stock Consideration shall be the Purchase Price less the fair market value of the aggregate Purchaser Common Stock Consideration.
Section 4.25 Subsidiaries of the Companies.
(a) The Covered Subsidiaries, which comprise all of the subsidiaries of the Companies, are wholly-owned subsidiaries of each respective Company as set forth on Schedule 4.25(a), and are duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has all requisite power and authority to conduct their business as it is now being conducted, except for those licenses, authorizations, permits, consents, and approvals the absence of which would not be material. Each Covered Subsidiary is duly qualified to do business as a foreign entity and is in good standing (to the extent applicable) under the Laws of each state or other jurisdiction in which the nature of the activities conducted by it makes such qualification or licensing necessary, except in those jurisdictions where failure to be so qualified or licensed would not constitute a Material Adverse Effect. Each Covered Subsidiary and its respective jurisdiction of organization and qualification is identified on Schedule 4.25(a). Except as set forth in Schedule 4.25(a), the Companies and the Covered Subsidiaries do not, directly or indirectly, own any Interest in any other Person.
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(b) Except for Omega, all Interests of the Covered Subsidiaries are owned by each respective Company, directly or indirectly, free and clear of all Liens other than Liens that will be released at or before Closing, Liens arising under the Organizational Documents of each Covered Subsidiary, or applicable securities Laws. Except for Omega, no Covered Subsidiary has granted to any Person any agreement or option, or any right or privilege capable of becoming an agreement or option, for the purchase, subscription, allotment, or issue of any unissued interests, units, or other securities (including convertible securities or warrants) of a Covered Subsidiary. Except for Omega, all Interests in the Covered Subsidiaries have been duly authorized and validly issued and were not issued in violation of, or (except for Omega) subject to, any preemptive rights or preferential rights of subscription or purchase of any other Person.
(c) Except for Omega, none of the Interests in the Covered Subsidiaries are subject to any voting trust, member or partnership agreement, or voting or other agreement, right, instrument, or understanding with respect to any purchase, sale, issuance, transfer, repurchase, redemption, or voting of any Interests in a Covered Subsidiary, other than the Organizational Documents thereof. There are no outstanding contractual obligations to repurchase, redeem, or otherwise acquire any Interests. The Interests constitute all of the Interests in each Covered Subsidiary.
Article V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
All representations and warranties are made subject to the exceptions noted in the Disclosure Schedules delivered concurrently herewith. No specific representation or warranty will limit the generality or applicability of a more general representation or warranty. Each Disclosure Schedule will be numbered to correspond to the paragraph of the section to which it relates. Purchaser hereby represent and warrant to Sellers as follows:
Section 5.1 Organization. Purchaser is a corporation, duly organized and validly existing under the laws of the State of Nevada. Purchaser has the requisite corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted by Purchaser.
Section 5.2 Due Authorization. Purchaser has all requisite power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder. The execution and delivery by Purchaser of this Agreement and the other Transaction Documents and the performance of its obligations hereunder and thereunder have been duly and validly authorized by Purchaser, and no other action on the part of Purchaser is necessary. This Agreement and the Transaction Documents have been duly and validly executed and delivered by Purchaser and are, or will be, a legal, valid and binding obligation of Purchaser, enforceable against Purchaser, in accordance with its terms, except as the enforceability may be limited by (i) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in effect which affect the enforcement of creditors’ rights generally; or (ii) general principles of equity.
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Section 5.3 No Conflict. Except for the HSR Act, the execution and delivery of this Agreement and the other Transaction Documents by Purchaser and the consummation of the transactions contemplated hereby and thereby do not and will not violate any provision of, or result in the breach of any applicable Law, rule or regulation of any Governmental Authority, the articles of organization, articles of incorporation, operating agreement, bylaws or other organizational documents of Purchaser, or any agreement, indenture or other instrument to which Purchaser are party or by which Purchaser may be bound, or of any order, judgment or decree applicable to Purchaser, or terminate or result in the termination of any such agreement, indenture or instrument, or result in the creation of any Lien upon any of the properties or assets of Purchaser or constitute an event which, after notice or lapse of time or both, would result in any such violation, breach, acceleration, termination or creation of a Lien or result in a violation or revocation of any required license, permit or approval from any Governmental Authority or other Person, except to the extent that the occurrence of any of the foregoing would not have a Material Adverse Effect on the ability of Purchaser to enter into and perform its respective obligations under this Agreement or any other Transaction Document.
Section 5.4 Governmental Authorities; Consents. Assuming the truth and completeness of the representations and warranties of the Companies and each Seller contained in this Agreement, to the Knowledge of Purchaser, and except for the HSR Act and those obligations set forth in Section 6.3, no material consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority is required on the part of Purchaser with respect to Purchaser’s execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. No material consent, approval or authorization of, or designation, declaration or filing with, any other third party is required on the part of Purchaser with respect to Purchaser’s execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby other than the Purchaser Consents set forth on Schedule 5.4. Schedule 5.4 does not take into account required future Nasdaq approval, post-Closing, of the issuance of Purchaser Common Stock underlying the Purchaser Preferred Stock and other issuances of Purchaser Common Stock related to the Purchaser Preferred Stock.
Section 5.5 Brokers. Except as set forth in Schedule 5.5, no Person has acted directly or indirectly as a broker, finder or financial advisor for Purchaser in connection with the negotiations relating to the transactions contemplated by this Agreement for which Sellers will become obligated to pay a fee or commission.
Section 5.6 Purchaser Stock Consideration. The Purchaser Stock Consideration, when issued, sold, and delivered in accordance with the terms of this Agreement for the consideration contemplated by this Agreement, will be duly authorized and validly issued, fully paid and nonassessable, and will be free of preemptive rights and all mortgages, pledges, security interests, liens, charges, claims, restrictions, or other encumbrances of any nature and restrictions imposed by or through Purchaser other than restrictions as set forth in the governing documents of Purchaser and the Lockup Agreement.
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Section 5.7 Litigation and Proceedings. Except as set forth in Schedule 5.7, Purchaser has not received service of process, and to the Knowledge of Purchaser, there are no pending or threatened Actions before or by any Governmental Authority that would prevent or materially affect the transactions contemplated by this Agreement and the Transaction Documents; there is no unsatisfied judgment, order or decree or any open injunction binding upon Purchaser that would have an material effect upon the transactions contemplated by this Agreement and the Transaction Documents; and to the Knowledge of Purchaser, no event has occurred and no condition exists on the basis of which any litigation, proceeding or investigation would reasonably be expected to result that would materially affect the performance of this Agreement or the Transaction Documents.
Article VI.
COVENANTS
Section 6.1 Exchange of Other Payments and Information. Following the Closing, (a) Sellers will promptly, and in any event, not later than three (3) Business Days following receipt, forward to Purchaser any payments received by Sellers with respect to any of the Assets, including, but not limited to Accounts Receivable, or the operation of the Business after the Closing, and any checks, drafts or other instruments payable to Sellers will, when so delivered, bear all endorsements required to effectuate the transfer of the same to Purchaser and (b) Sellers will promptly forward to Purchaser any mail or other communications received by Sellers relating to the Companies.
Section 6.2 Prorations. Sellers and Purchaser shall prorate the Prorated Items as of the Closing Date, on the basis of the actual number of days each party had possession or use during the calendar year or, where the billing is for a lesser period, during such period, except for those Prorated Items where it is possible to prorate by actual usage. Sellers and Purchaser shall cooperate with respect to such prorations and reimburse each other on a reasonable basis to accomplish the prorations provided for herein. For purposes of this Agreement, “Prorated Items” shall mean all periodic charges, including, but not limited to, prepaid lease payments, property taxes and utility payments, applicable to periods both before and after the Closing with respect to the Business normally prorated in connection with similar transactions.
Section 6.3 Regulatory Filings.
(a) Purchaser shall file the Amended Form P-5 with the Railroad Commission of Texas not later than five (5) Business Days following the Closing Date and shall use commercially reasonable efforts to cause the Railroad Commission of Texas to recognize, accept, or approve such Amended Forms P-5 or otherwise recognize Purchaser as the controlling entity of Endeavor, ET, and SFP as soon as reasonably practicable. Notwithstanding anything contained herein to the contrary, Purchaser shall indemnify, defend, and hold harmless Sellers and Sellers’ Affiliates from and against any and all claims, fines, fees, penalties, and damages incurred as a result of a failure to timely file, submit and seek approval of the Amended Form P-5.
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(b) Purchaser shall file all required filings for operation of the Business with the U.S. Department of Transportation (“DOT”) and the Federal Motor Carrier Safety Administration (“FMCSA”) on behalf of Endeavor and ET not later than five (5) Business Days following the Closing Date and shall use commercially reasonable efforts to cause the DOT and the FMCSA to recognize, accept, or approve such filings as soon as reasonably practicable. Notwithstanding anything contained herein to the contrary, Purchaser shall indemnify, defend, and hold harmless Sellers and Sellers’ Affiliates from and against any and all claims, fines, fees, penalties, and damages incurred as a result of a failure to timely file, submit, and seek approval of any required filing.
(c) Purchaser shall file all required filings for operation of the Business with the Texas Department of Motor Vehicles (“DMV”) on behalf of MEL not later than five (5) Business Days following the Closing Date and shall use commercially reasonable efforts to cause the DMV to recognize, accept, or approve such filings as soon as reasonably practicable. Notwithstanding anything contained herein to the contrary, Purchaser shall indemnify, defend, and hold harmless Sellers and Sellers’ Affiliates from and against any and all claims, fines, fees, penalties, and damages incurred as a result of a failure to timely file, submit, and seek approval of any required filing.
(d) Purchaser shall file all required filings for operation of the Business with the State of Oklahoma on behalf of Omega not later than five (5) Business Days following the Closing Date and shall use commercially reasonable efforts to cause the State of Oklahoma to recognize, accept, or approve such filings as soon as reasonably practicable. Notwithstanding anything contained herein to the contrary, Purchaser shall indemnify, defend, and hold harmless Seller and Seller’s Affiliates from and against any and all claims, fines, fees, penalties, and damages incurred as a result of a failure to timely file, submit, and seek approval of any required filing.
Section 6.4 Further Assurances. From and after the Closing, the Parties shall take, or cause to be taken, such acts and execute such documents and instruments as may be reasonably required to effectuate the transactions contemplated hereby. From and after the Closing, each Seller shall cooperate with Purchaser, and shall use their reasonable best efforts to assist, in the transfer to Purchaser of the goodwill and reputation associated with the Business and of the Business’ relationships, including relationships with suppliers, customers, and employees.
Section 6.5 HSR Act.
(a) As soon as practicable, but in any event within five (5) Business Days after the date of execution of this Agreement, Parties shall file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder, and in each case, shall request early termination of the waiting period with respect to the transactions contemplated herein. The Parties shall consult with each other as to the appropriate time for filing such notifications and shall agree upon the timing of such filings, and to respond promptly to any requests for additional information made by either of such agencies. Purchaser and Sellers shall jointly and equally pay all filing fees under the HSR Act, and shall bear their own costs for the preparation of any filing. The Parties shall use commercially reasonable efforts to cause any waiting period under the HSR Act with respect to the transactions contemplated herein to expire or terminate at the earliest possible time. The Purchaser will not withdraw its initial filing under the HSR Act or any other Antitrust Law, as the case may be and refile it unless Seller has consented in advance to such withdrawal and refiling.
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(b) Purchaser shall cooperate in good faith with the Antitrust Authorities and as promptly as possible, use good faith efforts to complete lawfully the transactions contemplated by this Agreement as soon as practicable (but in any event prior to the date set forth in Section 9.1(d)) the actions necessary or advisable to avoid, prevent, eliminate or remove the actual or threatened commencement of any Proceeding by or on behalf of any Antitrust Authority or the issuance of any Governmental Order that would delay, enjoin, prevent, restrain or otherwise prohibit the consummation of the transactions contemplated by this Agreement. Without limiting anything contained in this (b), Purchaser agrees, in connection with the matters covered by this (b), to commence and/or defend against litigation in order to seek to prevent an issuance of a Governmental Order that would prohibit the consummation of the transactions contemplated by this Agreement. Notwithstanding anything to the contrary provided herein, neither Purchaser nor any of its Affiliates shall be required, in connection with the matters covered by this (b), to (i) pay any material amounts (excluding legal fees and expenses that would be incurred in connection with the performance of the covenant of Purchaser in the immediately preceding sentence), (ii) hold separate (including by trust or otherwise) or divest any of its or its Affiliates’ businesses, product lines or assets, or any of the properties or assets of Purchaser or its Affiliates, (iii) agree to any material limitation on the operation or conduct of the Company Business, or (iv) waive any of the conditions to this Agreement set forth in Section 3.4.
Section 6.6 Public Announcements; Confidentiality.
(a) No Party (or any of its Affiliates) shall make any press release or other public announcement regarding the existence of this Agreement, the contents hereof, or the transactions contemplated hereby without the prior written consent of the other Party (collectively, the “Public Announcement Restrictions”). The Public Announcement Restrictions shall not restrict disclosures to the extent (i) necessary for a Party to perform this Agreement (including disclosures to Governmental Authorities, or as reasonably necessary to provide notices, seek waivers, amendments or consents), (ii) required (upon advice of counsel) by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the Party or its respective Affiliates, (iii) made to Representatives, or (iv) that such Party has given the other Party a reasonable opportunity to review such disclosure prior to its release and no objection is raised. In the case of the disclosures described under subsections (i) and (ii) of this Section 6.5(a), each Party shall use its reasonable efforts to consult with the other Party regarding the contents of any such release or announcement prior to making such release or announcement.
(b) The Parties shall treat as confidential all information and data (i) relating to the existence of this Agreement, including the Exhibits hereto, the contents hereof or thereof, or the transactions contemplated hereby and thereby, or (ii) that is or was (at any point) subject to restrictions on disclosure (including, for the avoidance of doubt, any information made available to Purchaser by or on behalf of Sellers or their Representatives prior to Closing) strictly confidential, except (A) for disclosures to Representatives of the Parties (in which event, the disclosing Party will be responsible for making sure that the Representatives keep such information and data confidential), (B) as required to perform this Agreement, (C) to the extent expressly contemplated by this Agreement (including in connection with the resolution of disputes hereunder), (D) for disclosures that are required (upon advice of counsel) by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the Parties or their respective Affiliates, (E) for disclosures to Governmental Authorities as required by Law, (F) information which the non-disclosing party knew or to which the non-disclosing party had access prior to disclosure, provided that the source of such information is not known by the non-disclosing to be bound by a confidentiality obligation to the disclosing party, or (G) as to any information or data that is or becomes available to the public other than through the act or omission of such Party or its Representatives in violation of this Section 6.5(b); provided, that, prior to making any disclosures permitted under subsection (A) above, the Party disclosing such information shall obtain an undertaking of confidentiality from the Person receiving such information.
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(c) Each Seller hereby acknowledges that it is aware that the federal and state securities laws prohibit any person who has material, non-public information about a company from purchasing or selling securities of such a company or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. Nothing herein shall preclude disclosure of the confidential information or trading thereon after public disclosure of the confidential information is made by the Purchaser.
Section 6.7 Registration Statement.
(a) No later than forty-five (45) days following the Closing Date, the Purchaser shall use its reasonable best efforts to prepare and file or cause to be prepared and filed with the SEC, a registration statement on Form S-1 or any other available form (the “Registration Statement”) for an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act or any successor thereto registering the resale from time to time by Sellers of all of the shares of Purchaser Common Stock comprising the Purchaser Common Stock Consideration and, subject to compliance with Nasdaq and other applicable rules and restrictions, additional shares of Purchaser Common Stock which may be utilized by the Purchaser to make payments in accordance with the terms of the Purchaser Preferred Stock; provided, however, that any such payment that would cause Sellers to own more than 49.99% of the Purchaser Common Stock or not be in compliance with Nasdaq Listing Rule 5635(d) shall be deferred until such time that such ownership limitation will not be exceeded and Nasdaq Listing Rule 5635(d) has been complied with.. Purchaser shall use its reasonable best efforts to cause the Registration Statement to be declared effective by the SEC as soon as possible after filing (the date on which the Registration Statement becomes effective, the “Effectiveness Date”). During the period beginning on the Effectiveness Date and for a period of at least one (1) year following the Effectiveness Date, Purchaser shall use its reasonable best efforts to keep the Registration Statement continuously effective and to be supplemented and amended to the extent necessary to ensure that such Registration Statement is available or, if not available, to ensure that another registration statement meeting the requirements of this Section 6.7(a) is available, under the Securities Act at all times until all of the Purchaser Stock Consideration has been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement. The Registration Statement filed with the SEC pursuant to this Section 6.7(a) shall contain a prospectus in such form as to permit each Seller to sell such Seller’s pro rata portion of the shares of Purchaser Common Stock comprising the Purchaser Common Stock Consideration pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the SEC then in effect) at any time beginning on the Effectiveness Date, and shall provide that the Purchaser Stock Consideration may be sold pursuant to any method or combination of methods legally available to, and requested by, Sellers.
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(b) Notwithstanding Section 6.7(a) above, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, Purchaser shall furnish to Sellers and their legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as Sellers or their legal counsel may reasonably request in order to facilitate the disposition of the shares of Purchaser Common Stock comprising the Purchaser Common Stock Consideration and provide each Seller the opportunity to object to any information pertaining to such Seller and its plan of distribution that is contained therein and make the corrections reasonably requested by such Seller with respect to such information prior to filing such Registration Statement or such other registration statement or supplement or amendment thereto; provided, however, each Seller shall provide such objections and/or corrections within five (5) days of receipt of such Registration Statement and the forty-five (45)-day period in the first sentence of Section 6.7(a) shall be tolled for each day beyond five (5) days after receipt of such Registration Statement that any Seller has not provided such objections and/or corrections.
(c) Purchaser shall also prepare and file a supplemental listing application with Nasdaq to list the shares of Purchaser Common Stock comprising the Purchaser Common Stock Consideration covered by the Registration Statement and shall use reasonable best efforts to have such shares of Purchaser Common Stock approved for listing on Nasdaq by the date of effectiveness of the Registration Statement, subject only to official notice of issuance.
(d) When effective, Purchaser covenants and agrees that the Registration Statement (including the documents incorporated therein by reference) will comply as to form in all material respects with all applicable requirements of the Securities Act and the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any prospectuses contained in such Registration Statement, in light of the circumstances under which a statement is made).
(e) Purchaser shall notify Sellers in writing of the effectiveness of the Registration Statement as soon as practicable, and in any event within one (1) Business Day after the Effectiveness Date, and shall furnish to them, without charge, such number of copies of the Registration Statement (including any amendments, supplements and exhibits), the prospectus contained therein (including each preliminary prospectus and all related amendments and supplements) and any documents incorporated by reference in the Registration Statement or such other documents as Sellers may reasonably request in order to facilitate the sale of the shares of Purchaser Common Stock comprising the Purchaser Common Stock Consideration in the manner described in the Registration Statement.
Section 6.8 Affiliate Arrangements. Except for obligations specified in Schedule 6.8, and those set forth in the Master Netting Agreement, which will continue after the Closing in accordance with their terms as in effect on the date of this Agreement, all agreements and arrangements between and among the Companies, on the one hand, and the Sellers and their Affiliates, on the other hand, all liabilities and obligations of the Companies, on the one hand, and Sellers and their Affiliates, on the other hand, will automatically terminate in their entirety effective as of the Closing without any further actions by the Parties and thereby be deemed voided, cancelled and discharged in their entirety. Without limiting the generality of the foregoing, all intercompany accounts among the Companies, on the one hand, and the Sellers and their Affiliates, on the other hand, that then remain outstanding will be terminated, voided, cancelled and discharged, except to the extent any such accounts would be taken into account in connection with the determination of Net Working Capital.
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Section 6.9 Commitment Regarding Company Indemnification Provisions. Purchaser covenants and agrees that during the period that commences on the Closing Date and ends on the sixth (6th) anniversary of the Closing Date, Purchaser shall not cause any amendment, modification, waiver or termination of any provision of the Organizational Documents of the Companies setting forth exculpation from liability or rights to indemnification for officers, directors, managers or members of the Companies, the effect of which would be to affect adversely the rights of any person serving as an officer, director, manager or member of the Companies, existing as of the date of this Agreement under such provisions; provided, however, that the foregoing restriction shall not apply to any such amendment, modification, waiver or termination to the extent required to cause such provisions (or any portion thereof) to comply with applicable Law.
Section 6.10 Approval of Dividends; Terms of Purchaser Preferred Stock. The Purchaser Preferred Stock shall have the terms set forth in the Certificate of Designation, including, but not limited to, the payment of a cumulative six percent (6%) annual dividend per share payable quarterly in arrears and conversion rights following the first anniversary of their issuance at a price of one dollar ($1) per share of Purchaser Common Stock.
Article VII.
TAX MATTERS
Section 7.1 Transfer Taxes. Any and all Transfer Taxes shall be borne by Sellers. Sellers will, at their own expense, file all necessary Tax Returns and other documentation with respect to Transfer Taxes. Purchaser agrees to use commercially reasonable efforts and to cooperate with Seller to minimize any Transfer Taxes.
Section 7.2 Property Taxes. With respect to any Property Taxes, including payments in lieu of Property Taxes, assessed on any of the Assets for a Tax Period that begins on or before and ends after the Closing Date (such period, a “Straddle Period”), the liability for such Property Taxes shall be prorated on a daily basis between Purchaser and Sellers, as of the Closing Date, with Sellers being liable for the portion of such Property Taxes equal to the product of (i) the amount of such Property Taxes for the entirety of the Straddle Period, multiplied by (ii) a fraction, the numerator of which is the number of days in the Straddle Period ending on and including the Closing Date and the denominator of which is the total number of days in the Straddle Period, and with Purchaser being liable for the remainder of such Property Taxes. To the extent that Sellers, from and after the Closing, receive any bill, assessment or other notice of any such Property Taxes due for any Straddle Period, Sellers shall promptly forward a copy of such bill, assessment, or other notice to Purchaser.
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Section 7.3 Cooperation on Tax Matters. Purchaser and Sellers shall, and shall cause their Affiliates to, cooperate fully, as and to the extent reasonably requested by any other Party, in connection with the filing of Tax Returns, financial reporting matters, and any audit, litigation or other proceeding with respect to Taxes, in each case, relating to the Assets or the Business. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information reasonably relevant to any such Tax Return or audit, litigation, or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Sellers agree to, and agree to cause their Affiliates to, retain all books and records in their possession with respect to Tax matters relating to the Assets or the Business for any Tax Period beginning on or before the Closing Date until the expiration of the statute of limitations of the Tax Periods to which such Tax Returns and other documents relate (and, to the extent notified by Purchaser, any extensions thereof).
Section 7.4 Tax Returns. Sellers shall prepare and file any Tax Return in respect of the Companies for any period that includes a pre-Closing Tax Period and shall have the sole right to control all proceedings with respect to such Tax Returns, and Sellers shall be responsible for any Taxes relating to the Companies for any pre-Closing Tax Period. Purchaser shall prepare and file all Tax Returns in respect of the Companies for any post-Closing Tax Period and shall have the sole right to control all proceedings with respect to such Tax Returns, and Purchaser shall be responsible for any Taxes relating to the Companies for any post-Closing Tax Period.
Article VIII.
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival.
(a) The representations and warranties, of Sellers contained in Article IV of this Agreement shall survive for a period of twelve (12) months following the Closing, except for (i) the representations and warranties contained in Section 4.1 (Organization and Qualification of the Companies), Section 4.2 (Capitalization of Companies), Section 4.2(a) (Capacity; Enforceability), Section 4.6 (Litigation and Proceedings) and Section 4.9 (Taxes) (the “Fundamental Representations”), which will survive until the expiration of the applicable statute of limitations. All covenants and agreements of the Sellers contained herein shall survive the Closing indefinitely or for the period explicitly specified herein as shall claims involving fraud, willful misconduct or intentional misrepresentation on the part of Sellers. Notwithstanding the foregoing, any claims against Sellers asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from a Purchaser Indemnified Party to Sellers prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved.
(b) The representations and warranties, of Purchaser contained in Article V of this Agreement shall survive until Closing. All covenants and agreements of the Purchaser contained herein shall survive the Closing indefinitely or for the period explicitly specified herein as shall claims involving fraud, willful misconduct or intentional misrepresentation on the part of Purchaser. Notwithstanding the foregoing, any claims against Purchaser asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from a Seller Indemnified Party to the Purchaser prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved.
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Section 8.2 Indemnification by Sellers.
(a) Subject to the provisions and limitations of this Article VIII, from and after the Closing Date, each Seller, severally and not jointly, shall indemnify and hold harmless Purchaser and its Affiliates (the “Purchaser Indemnified Parties”) from and against any and all claims, liabilities, damages, losses, demands, obligations, deficiencies, costs, and expenses of any nature whatsoever, including, without limitation, reasonable attorneys’ fees, accountants’ fees, and all costs of investigation, and other expenses of defending any actions or claims, amounts of judgment and amounts paid in settlement, whether or not involving a Third Party Claim (collectively referred to as the “Damages”), suffered by Purchaser Indemnified Parties resulting from or arising out of (i) any inaccuracy or breach of any of the representations or warranties made by either Seller in this Agreement or in any Transaction Document executed in connection herewith, (ii) any breach or nonfulfillment of any covenants or agreements made by either Seller in this Agreement or in any Transaction Document executed in connection herewith, (iii) any Taxes owed by either Seller and any Taxes owed by either Company for or relating to the period prior to the Closing, (iv) any Indebtedness or Selling Expenses not fully paid by either Seller on the Closing Date or not taken as a reduction to the Purchase Price at the Closing, save and except for Indebtedness disclosed on the Disclosure Schedules, (v) any fraud or willful misconduct or intentional misrepresentations or omissions by either Seller (each claim made by the Purchaser Indemnified Parties pursuant to this Section 8.2(a) shall be a “Purchaser Claim”).
(b) Except as set forth in the last sentence of this Section 8.2(b), Sellers shall not have liability for indemnification pursuant to clause (i) of Section 8.2(a) for any individual Purchaser Claim under clause (i) of Section 8.2(a) for which indemnification is provided hereunder unless the amount of all Purchaser Claims arising under clause (i) of Section 8.2(a) exceeds fifty thousand dollars ($50,000) in the aggregate (“Basket Amount”). Once the amount of all Purchaser Claims arising under clause (i) of Section 8.2(a) exceed the Basket Amount in the aggregate, Sellers shall be severally and not jointly responsible for the full amount of Purchaser Claims with respect to clause (i) of Section 8.2(a) including the Basket Amount. The Basket Amount shall not be applicable to any Purchaser Claim for breach of Section 4.8 (Accounts Receivable). Notwithstanding the foregoing, the maximum aggregate liability of Sellers for Purchaser Claims under clause (i) of Section 8.2(a), other than Fundamental Representations, and Section 4.8 (Accounts Receivable), shall not exceed, in the aggregate, an amount equal to twenty percent (20%) of the Purchase Price (“Cap”). Furthermore, the maximum aggregate liability of Sellers for Purchaser Claims under Section 8.2(a) shall not exceed, in the aggregate, an amount equal to the Purchase Price. The limitations set forth in this Section 8.2(b) shall not apply to any Purchaser Claim related to clauses Section 8.2(a)(iii) through Section 8.2(a)(v).
(c) For purposes of determining under Article IV the inaccuracy or breach of any representation or warranty herein or in any instrument or document delivered hereunder and the amount of any Damages that are indemnifiable hereunder, each such representation and warranty shall be read without regard and without giving effect to any materiality or Material Adverse Effect or similar qualification contained therein (as if such standard or qualification were deleted from such representation or warranty).
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(d) The Purchaser Indemnified Parties shall not be entitled to assert any Purchaser Claim for indemnification pursuant to this Section 8.2 for Purchaser Claims for indemnification with time restrictions under Section 8.1(a) after the dates provided in Section 8.1(a); provided, however, that if on or prior to such date a Notice of Claim (as defined below) shall have been provided pursuant to Section 8.4 hereof for such indemnification, the Purchaser Indemnified Parties shall continue to have the right to be indemnified with respect to such indemnification claim until such claim for indemnification has been satisfied or otherwise resolved as provided in this Article VIII.
(e) All claims for indemnification by Purchaser Indemnified Parties shall be net of any insurance proceeds actually received as a result of the matter for which indemnification is claimed.
(f) Once Damages are agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this Article VIII, the Indemnifying Party shall satisfy its obligations within thirty (30) days of such agreement or final, non-appealable adjudication by paying the amount of Damages by wire transfer of immediately available funds to an account designated by such Purchaser Indemnified Party.
Section 8.3 Indemnification by Purchaser.
(a) Subject to the provisions of this Article VIII, from and after the Closing Date, Purchaser shall indemnify and hold harmless Sellers, and their respective Affiliates (the “Seller Indemnified Parties”) from and against any and all Damages suffered by Seller Indemnified Parties resulting from or arising out of (i) any breach or nonfulfillment of any covenants or agreements made by Purchaser herein or any document executed in connection herewith, notwithstanding when any such breach or nonfulfillment may occur, or (ii) any fraud or willful misconduct or intentional misrepresentations or omissions by Purchaser (a claim made by the Seller Indemnified Parties pursuant to this Section 8.3(a) shall be a “Seller Claim”).
(b) None of the Seller Indemnified Parties shall be entitled to assert any claim for indemnification pursuant to Section 8.3 after the dates provided in Section 8.1(b); provided, however, that if on or prior to such date a Notice of Claim shall have been given pursuant to Section 8.4 hereof for such indemnification, the Seller Indemnified Parties shall continue to have the right to be indemnified with respect to such indemnification claim until such claim for indemnification has been satisfied or otherwise resolved as provided in this Article VIII.
(c) All claims for indemnification by the Seller Indemnified Parties shall be net of any insurance proceeds actually received as a result of the matter for which indemnification is claimed.
Section 8.4 Indemnification Procedures.
(a) Upon obtaining knowledge of any claim or demand which has given rise to a claim for indemnification under Section 8.2 or Section 8.3, the Purchaser Indemnified Parties or the Seller Indemnified Parties (each, an “Indemnified Party”) shall give written notice (“Notice of Claim”) of such claim or demand to the applicable indemnifying party (each, an “Indemnifying Party”). In each case, such Notice of Claim shall specify in reasonable detail such information as the Indemnified Parties may have with respect to such indemnification claim (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same); provided, however, that, subject to the limitations set forth in Section 8.1, Section 8.2 and Section 8.3, respectively, no failure or delay by the party giving the Notice of Claim shall reduce or otherwise affect the obligation of the Indemnifying Party unless and to the extent the Indemnifying Party is thereby prejudiced.
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(b) Within thirty (30) Business Days of receiving a Notice of Claim, the Indemnifying Party may object to such indemnification claim, stating in reasonable detail the bases for such objection. Any objection to a Notice of Claim must be signed by one or more representatives of the Indemnifying Party or its counsel and shall set forth in reasonable detail the items as to which disagreement exists (the “Disputed Matters”). If an objection is delivered, the Indemnified Party and the Indemnifying Party shall negotiate in good faith to resolve in writing any Disputed Matters. If they are unable to reach an agreement with respect to the Disputed Matters within a period of thirty (30) Business Days after the receipt of an objection, then any Disputed Matters as to which written agreement has not been reached shall be resolved in accordance with the procedures described in Article IX.
(c) If any lawsuit or other action is filed or instituted against any of the Indemnified Parties with respect to a matter subject to indemnity hereunder (a “Third Party Claim”), notice thereof (a “Third Party Notice”) shall be given to the Indemnifying Party as promptly as practicable (and in any event within fifteen (15) days after the service of the citation or summons). Subject to the limitations set forth in Section 8.1, Section 8.2 and Section 8.3, respectively, the failure of the Indemnified Parties to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent the Indemnifying Party has actually been prejudiced as a result. After receipt of a Third Party Notice, if the Indemnifying Party provides evidence reasonably satisfactory to the Indemnified Party that it has the ability to pay the amounts claimed in the Third Party Claim and that the Third Party Claim relates to a matter for which indemnification is proper under this Agreement, the Indemnifying Party shall be entitled, if it so elects, (i) to take control of the defense and investigation of such Third Party Claim, (ii) to employ and engage attorneys of its own choice to handle and defend the Third Party Claim (the selection of such attorneys to be subject to approval of the Indemnified Party, such approval not to be unreasonably withheld, conditioned or delayed), at the Indemnifying Party’s cost, risk and expense, and (iii) to compromise or settle such Third Party Claim; provided, however, that such Third Party Claim shall not be compromised or settled without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. The Indemnified Party shall, and shall cause its Affiliates to, cooperate in all reasonable respects with the Indemnifying Party and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom for which the Indemnifying Party has assumed the defense; and the Indemnified Party may, at the Indemnified Party’s own cost, participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The Parties shall also cooperate with each other in any notifications to insurers. If the Indemnifying Party fails to assume the defense of such claim within thirty (30) days after receipt of the Third Party Notice (or within such
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shorter period of time as may be necessary to prudently defend such claim), the Indemnified Party against which such claim has been asserted will (upon delivering notice to such effect to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such claim and the Indemnifying Party shall have the right to participate therein at the Indemnifying Party’s cost; provided, however, that such claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed. In the event the Indemnified Party assumes the defense of the claim, the Indemnified Party will keep the Indemnifying Party informed (including, as necessary, updates from counsel) of the progress of any such defense, compromise or settlement, when and as reasonably requested by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume control of such defense (unless otherwise agreed to in writing by the Indemnified Party) and shall pay the fees and expenses of counsel retained by the Indemnified Party to the extent such underlying claim is indemnifiable under this Article VIII if (1) the claim for indemnification relates to or arises in connection with any criminal or quasi criminal proceeding, action, indictment, allegation or investigation; (2) the claim seeks an injunction or equitable or other non-monetary relief against the Indemnified Party; (3) the Indemnified Party reasonably believes that there exists or could arise a conflict of interest that, under applicable principles of legal ethics, could prohibit a single lawyer or law firm from representing both the Indemnified Party and the Indemnifying Party in such claim or action, and such conflict has not been timely waived upon petition by the Indemnified Party; (4) the Indemnifying Party failed or is failing to vigorously prosecute or defend such claim; or (5) the Indemnified Party reasonably believes that the Damage relating to the claim would exceed the maximum amount that such Indemnified Party would then be entitled to recover under the applicable provisions of Article VIII.
(d) If the indemnification claim is made pursuant to Section 8.2, the total amount of such matured claims shall be paid in accordance with Section 8.2, subject to the limitation set forth in Section 8.2; likewise, if the indemnification claim is made pursuant to Section 8.3, the total amount of such matured claims shall be paid in accordance with Section 8.3, subject to the limitations set forth in Section 8.3.
(e) The Indemnifying Party shall be subrogated to the rights of the Indemnified Party in respect of any insurance (other than self-insurance or insurance coverage provided by any captive insurance company that is an Affiliate of any Party) relating to claims made hereunder, as the case may be, to the extent of any indemnification payments made hereunder, and the Indemnified Party shall provide all reasonably requested assistance to the Indemnifying Party in respect of such subrogation, including executing any instrument reasonably necessary to evidence such subrogation rights.
(f) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NO PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE UNDER THIS Article VIII OR OTHERWISE UNDER THIS AGREEMENT FOR EXEMPLARY OR PUNITIVE DAMAGES, WHETHER IN TORT (INCLUDING NEGLIGENCE OR GROSS NEGLIGENCE), STRICT LIABILITY, BY CONTRACT OR STATUTE, EXCEPT TO THE EXTENT ANY INDEMNIFIED PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD PARTY IN CONNECTION WITH A FINALLY ADJUDICATED THIRD-PARTY CLAIM, IN WHICH CASE SUCH DAMAGES SHALL BE RECOVERABLE (TO THE EXTENT RECOVERABLE UNDER THIS Article VIII) WITHOUT GIVING EFFECT TO THIS Section 8.4(f).
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(g) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY, AND THE PARTIES HEREBY AGREE, THAT NO SELLER NOR ANY OF THEIR AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART THEREOF, EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY SELLERS IN Article IV (IN EACH INSTANCE AS QUALIFIED BY THE RELEVANT SCHEDULES, IF ANY) AND PURCHASER IN Article V. IN PARTICULAR, AND WITHOUT IN ANY WAY LIMITING THE FOREGOING, NEITHER SELLER, NOR ANY OF THEIR AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES, MAKES ANY REPRESENTATION OR WARRANTY REGARDING ANY (X) THE CONDITION, VALUE, QUALITY, CHARACTER, USE, OR FITNESS OF THE TRUCKING ASSETS OR THE OMEGA ASSETS, (Y) ENVIRONMENTAL LAWS, ENVIRONMENTAL CLAIMS, HAZARDOUS MATERIALS OR ENVIRONMENTAL MATTERS EXCEPT AS EXPRESSLY MADE BY SELLERS IN Section 4.16.
(h) EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY SELLER IN Article IV (IN EACH INSTANCE AS QUALIFIED BY THE RELEVANT SCHEDULES, IF ANY), THE ASSETS ARE OWNED, LEASED, AND OPERATED BY THE COMPANIES (AS THE CASE MAY BE) “AS IS, WHERE IS, WITH ALL FAULTS,” AND SELLERS AND THEIR AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES EXPRESSLY DISCLAIM ALL REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS.
Section 8.5 Omega. Should Purchaser or Omega expend or incur, within one (1) calendar year of the Closing Date, Damages greater than Five Hundred Thousand and No/100s U.S. Dollars ($500,000.00 USD) arising from or relating to (a) any material violation or material non-compliance with Environmental Laws relating to the Omega Assets, (b) any material defect, cloud upon, or lack of Defensible Title in and to the real property comprising all or a portion of the Omega Assets, (c) bringing the Omega Assets into full operational capacity and functionality and the commencement of operations related thereto without a subsequent cessation of operations for more than one hundred (180) consecutive days, or (d) any Third Party Claim(s) brought against Purchaser or Omega, then Sellers shall be required to reimburse Purchasers for all such Damages in excess of $500,000.00 USD up to a maximum of Thirty Million and No/100s U.S. Dollars ($30,000,000.00 USD) (the “Omega Damages Reimbursement”). The Omega Damages Reimbursement shall be paid by Sellers in Purchaser Preferred Stock. Notwithstanding anything contained hereto the contrary, the remedies offered by this Section 8.6 shall be the sole and exclusive remedy of the Parties with respect to the Omega Assets.
Section 8.6 Exclusive Remedy. The rights of the Indemnified Parties under this Article VIII shall be the exclusive remedy of such Indemnified Parties with respect to claims resulting from any breach by the Indemnifying Parties of any representation, warranty, covenant or agreement contained in this Agreement; provided, however, that this Section 8.6 is not intended in any way to limit or restrict the right of any party to separately seek equitable remedies, including injunctive relief or to pursue a claim for fraud or other non-waivable rights of action.
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Section 8.7 Tax Treatment of Indemnity Payments. All amounts paid with respect to indemnity claims under this Agreement shall be treated by the parties hereto for all Tax purposes as adjustments to the Purchase Price, unless otherwise required by Law.
Article IX.
SETTLEMENT OF DISPUTED MATTERS
Section 9.1 Attorneys’ Fees With Respect to Litigation. If Sellers, on the one hand, or Purchaser, on the other hand, initiate any Action against the other, involving this Agreement or any Transaction Document executed in connection hereto, the prevailing party (as determined by the applicable court) in such Action shall be entitled to receive reimbursement from the other party for all reasonable attorneys’ fees, experts’ fees, and other costs and expenses incurred by the prevailing party in respect of that proceeding, including any and all appeals thereof, and such reimbursement shall be included in judgment or final order issued in such proceeding.
Section 9.2 Governing Law; Jurisdiction and Venue.
(a) This Agreement and any dispute arising hereunder shall be governed by and construed in accordance with the Laws of the State of Nevada, excluding its conflicts of law provisions or rule that would cause the application of Laws of any jurisdiction other than those of the State of Nevada.
(b) Each Party hereto hereby irrevocably submits to the exclusive jurisdiction of the federal courts of the located in Clark County, State of Nevada, for the purposes of any action arising out of this Agreement or the subject matter hereof brought by any Party under this Agreement.
(c) To the extent permitted by applicable Law, each Party hereby waives and agrees not to assert, by way of motion, as a defense or otherwise, in any action under this Agreement, any claim (A) that it is not personally subject to the jurisdiction of the above named courts, (B) that such action is brought in an inconvenient forum, (C) that it is immune from any legal process with respect to itself or its property, (D) that the venue of the suit, action or proceeding is improper, or (E) that this Agreement or the subject matter hereof may not be enforced in or by such courts.
(d) The Parties agree that mailing of process or other papers in connection with any such Action or proceeding in the manner provided in Section 11.2 or in such other manner as may be permitted by applicable Law, shall be valid and sufficient service thereof.
Article X.
TERMINATION
Section 10.1 Termination by Mutual Consent. This Agreement may be terminated at any time before Closing mutual written consent of Sellers and Purchaser.
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Section 10.2 Termination by Either Sellers or the Purchaser. This Agreement may be mutually terminated, and the transactions herein contemplated abandoned, by the Parties at any time before Closing. The date of termination of this Agreement shall be the “Termination Date”.
Section 10.3 Termination by the Purchaser.
(a) This Agreement may be terminated, and the transactions herein contemplated abandoned, by Purchaser at any time on or before the later of (i) sixty (60) days from the Execution Date or (ii) ten (10) Business Days following Seller’s delivery to Purchaser of the 2023 Financial Statements, for any reason as a result of Purchaser’s ongoing due diligence review of the Companies and the Covered Subsidiaries, including, but not limited to, the 2023 Financial Statements, when made available, or items included in the Disclosure Schedule.
(b) This Agreement may be terminated, and the transactions herein contemplated abandoned, by Purchaser at any time prior to Closing if Sellers materially breach any of their representations, warranties, covenants or agreements contained in this Agreement, if such breach would give rise to the failure to satisfy the Closing conditions applicable to Sellers and such breach cannot be cured, or, if curable, has not been cured by the Sellers within the fifteen (15) days after Sellers’ receipt of written notice of such breach from the Purchaser, provided that Purchaser shall not have the right to terminate this Agreement pursuant to this Section 10.3(b), if Purchaser is then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement that would result in the conditions precedent to Closing applicable to Purchaser not being satisfied.
Section 10.4 Termination by the Sellers. This Agreement may be terminated, and the transactions herein contemplated abandoned, by Sellers at any time prior to Closing if Purchaser breaches any of its representations, warranties, covenants or agreements contained in this Agreement, if such breach would give rise to the failure to satisfy the Closing conditions applicable to Purchaser and such breach cannot be cured, or, if curable, has not been cured by the Purchaser within fifteen (15) days after Purchaser’s receipt of written notice of such breach from the Sellers, provided that the Sellers shall not have the right to terminate this Agreement pursuant to the Section 10.4, if Sellers are then in breach of any of their representations, warranties, covenants or agreements contained in this Agreement that would result in the conditions precedent to Closing applicable to Sellers not being satisfied.
Section 10.5 Effect of Termination. If this Agreement is validly terminated pursuant to this Article X, except as set forth in this Section 10.5, it shall, to the fullest extent permitted by applicable Law, become void and of no further force and effect, with no liability (except as provided in Section 11.6) on the part of any Party (or any stockholder, Affiliates or representative of such Party), except that, if such termination results from (a) fraud or (b) the willful and material (i) failure of any Party to perform its covenants, obligations or agreements contained in this Agreement or (ii) breach by any Party of its representations or warranties contained in this Agreement, then such Party shall be liable for any Damages incurred or suffered by the other Party as a result of such failure or breach. The provisions of Section 6.6 (Public Announcements; Confidentiality), this Section 10.5 (Effect of Termination), Section 11.6 Expenses) and Article XI (Miscellaneous) shall survive any valid termination of this Agreement.
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Article XI.
MISCELLANEOUS
Section 11.1 Waiver. At any time prior to the Closing Date, any Party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (b) waive any inaccuracies in the representations and warranties of the other Parties contained herein or in any document delivered pursuant hereto, and (c) waive compliance by the other Parties with any of the agreements or conditions contained herein. Any such waiver shall be valid only if set forth in an instrument in writing signed by the Party or Parties to be bound thereby, and such extension, waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. No delay on the part of any Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof.
Section 11.2 Notices. Except as otherwise expressly permitted herein, all notices, request, instruction or other document required or permitted to be given hereunder shall be in writing and shall be deemed effective when personally delivered with signed receipt, when received by facsimile, e-mail or other electronic means with electronic confirmation of delivery, when delivered by overnight courier with signed receipt or when delivered by United States certified mail, postage prepaid and return receipt requested. Unless changed by written notice given by either Party to the other pursuant hereto, such notices shall be given to the Parties at the following addresses:
If to Sellers or the Companies (prior to Closing):
Jorgan Development, LLC; JBAH Holdings, LLC
5220 Spring Valley Road, Suite 415
Dallas, Texas 75254
Attn: James Ballengee
Email: [email protected]
If to Purchaser or the Companies after Closing:
Vivakor, Inc.
5220 Spring Valley Road, Suite 415
Dallas, Texas 75254
Attn: Tyler Nelson
Email: [email protected]
| With a copy to: | Lucosky Brookman LLP |
101 Wood Avenue South, 5th Floor
Iselin, New Jersey 08830
Attn: Joseph Lucosky; Scott Linsky
Email: [email protected]; [email protected]
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Section 11.3 Assignment. No Party hereto shall assign this Agreement or any part hereof without the prior written consent of the other Party; provided, however, that Purchaser may assign its rights hereunder to any Affiliate but shall remain liable for all of Purchaser’s obligations hereunder. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective permitted successors and assigns.
Section 11.4 Rights of Third Parties. Except as provided in Section 11.3 and this Section 11.4, nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the Parties, any right or remedies under or by reason of this Agreement.
Section 11.5 Reliance. Each of the Parties to this Agreement shall be deemed to have relied upon the accuracy of the written representations and warranties made to it in or pursuant to this Agreement, notwithstanding any investigations conducted by or on its behalf or notice, knowledge or belief to the contrary.
Section 11.6 Expenses. Each Party shall bear its own expenses incurred in connection with this Agreement and the transactions herein contemplated whether or not such transactions shall be consummated, including, without limitation, all broker’s fees and fees of its legal counsel, financial advisers and accountants.
Section 11.7 Captions; Counterparts. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. This Agreement may be executed in two or more counterparts (including by means of facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 11.8 Entire Agreement. This Agreement and the Transaction Documents constitute the entire agreement among the Parties and supersedes any other agreements, whether written or oral, that may have been made or entered into by or among any of the Parties hereto or any of their respective Affiliates relating to the transactions contemplated hereby and thereby. No representations, warranties, covenants, understandings, agreements, oral or otherwise, relating to the transactions contemplated by this Agreement exist between the Parties except as expressly set forth in this Agreement.
Section 11.9 Severability. If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person of circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, the Parties request that the court reform such provision in a manner sufficient to cause such provision to be enforceable.
Section 11.10 Amendments. This terms and provisions of this Agreement may be amended only by a written instrument signed by all Parties.
Section 11.11 Currency. All monetary amounts referenced and contemplated by this Agreement and the Transaction Documents shall be due and owing in the lawful currency of the United States of America.
Section 11.12 Reliance on Counsel. Each Party agrees that it has been represented by independent counsel of its choice during the negotiation and execution of this Agreement, and that it has executed the same upon the advice of such independent counsel. Each Party and its counsel cooperated in the drafting and preparation of this Agreement and the documents referred to herein, and any and all drafts relating thereto shall be deemed the work product of the Parties and may not be construed against any Party by reason of its preparation. Therefore, the Parties waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.
(Signature Page Follows)
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as of the Execution Date.
| PURCHASER: | ||
| VIVAKOR, INC., | ||
| a Nevada corporation | ||
| By: | ||
| Name: | Tyler Nelson | |
| Title: | Chief Financial Officer | |
[Signature Page to Membership Interest Purchase Agreement]
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| THE SELLERS: | ||
| JORGAN DEVELOPMENT, LLC, | ||
| a Louisiana limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| JBAH HOLDINGS, LLC, | ||
| a Texas limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
[Signature Page to Membership Interest Purchase Agreement]
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SCHEDULE I
Membership Units of the CompanIEs
| Companies | Member | Units | Percentage Ownership |
| Endeavor | Jorgan | 990 | 99% |
| Endeavor | JBAH | 10 | 1% |
| ET | Jorgan | 990 | 99% |
| ET | JBAH | 10 | 1% |
| MEL | Jorgan | 990 | 99% |
| MEL | JBAH | 10 | 1% |
| SFP | Jorgan | 990 | 99% |
| SFP | JBAH | 10 | 1% |
Schedule I-1
SCHEDULE II
PURCHASE PRICE AND PURCHASER STOCK ALLOCATION
| Seller | Purchaser Stock Consideration |
| Jorgan | 99% |
| JBAH | 1% |
| Total | 100% |
Schedule II-1
EXHIBIT A
Form of LockUp Agreement
(See attached)
Exhibit A-1
Exhibit B
NET WORKING CAPITAL SAMPLE CALCULATION
(See attached)
Exhibit B-1
Exhibit C
FORM OF MASTER NETTING AGREEMENT
(See attached)
Exhibit C-1
Exhibit D
FORM OF CERTIFICATE OF DESIGNATION
(See attached)
Exhibit D-1
Exhibit 3.1
Execution Version
Vivakor, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT TO NRS 78.1955
The undersigned, James Ballengee, does hereby certify that:
| 1. | He is the Chief Executive Officer of Vivakor, Inc., a Nevada corporation (the “Company”). |
| 2. | The Company is authorized to issue 15,000,000 shares of preferred stock, none of which have been issued. |
| 3. | The following resolutions were duly adopted by the board of directors of the Company (the “Board of Directors”): |
WHEREAS, the certificate of incorporation of the Company provides for a class of its authorized stock known as preferred stock, consisting of 15,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;
WHEREAS, the Company’s Board of Directors previously authorized five (5) series of preferred stock entitled Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-1 Preferred Stock (the “Prior Preferred Stock”);
WHEREAS, all outstanding shares of the Prior Preferred Stock were converted into shares of the Company’s common stock, and on September 20, 2024, the Company filed a Certificate of Withdrawal with the State of Nevada Secretary of State to eliminate from the Company’s Articles of Incorporation all matters related to each series of Prior Preferred Stock such that the Prior Preferred Stock does not exist and is of no force or effect, and therefore returning all shares that were designated as Prior Preferred Stock to the status of authorized but unissued shares of preferred stock of the Company;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, up to 150,000 shares of the preferred stock which the Company has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
I. DESIGNATION AND AMOUNT; DIVIDENDS
A. Designation. The designation of said series of preferred stock shall be Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred”).
B. Number of Shares. The number of shares of Series A Preferred authorized shall be One Hundred Fifty Thousand (150,000) shares. Each share of Series A Preferred shall have a stated value equal to $1,000 (as may be adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series A Stated Value”).
C. Certain Definitions. In addition to terms defined elsewhere in this Certificate of Designations, Preferences, Rights and Limitations, the following terms have the following meanings:
“Common Stock” means the Company’s common stock, par value $0.001 per share.
“Deemed Liquidation Event” shall mean (i) a merger or consolidation in which (x) the Company is a constituent party or (y) a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the share capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (a) the surviving or resulting corporation; or (b) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (ii) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all of the assets of the Company and its subsidiaries taken as a whole or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company; provided, however, that the Company’s transaction with Empire Diversified Energy, Inc., contemplated to occur in 2024, will not be a Deemed Liquidation Event.
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“Holder” shall mean a holder of record of the Series A Preferred.
“Membership Interest Purchase Agreement” shall mean that certain Membership Interest Purchase Agreement dated as of March 21, 2024, by and among the Company, Jorgan Development, LLC, a Louisiana limited liability company, and JBAH Holdings, LLC, a Texas limited liability company, for the purchase and sale Endeavor Crude, LLC f/k/a Meridian Transport, LLC, a Texas limited liability company, et al.
“Original Issue Date” shall mean the date of the first issuance of any shares of the Series A Preferred regardless of the number of transfers of any particular shares of Series A Preferred and regardless of the number of certificates which may be issued to evidence such Series A Preferred.
“Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents, including the issuance of all of the Underlying Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.
“Transaction Documents” means this Certificate of Designation, the Membership Interest Purchase Agreement and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Membership Interest Purchase Agreement.
“Underlying Shares” means the shares of Common Stock issued and issuable pursuant to the Transaction Documents, including upon conversion of the Series A Preferred and issued and issuable in lieu of the cash payment of dividends thereon in accordance with the terms of this Certificate of Designation.
D. Dividends.
(i) Quarterly Dividends. The Holders of shares of the Series A Preferred shall be entitled to receive dividends out of any assets legally available, to the extent permitted by Nevada law, at an annual rate equal to six percent (6%) of the Series A Stated Value of such shares of Series A Preferred, calculated on the basis of a 360 day year, consisting of twelve 30-day months, and shall accrue from the date of issuance of such shares of Series A Preferred, payable quarterly in the Common Stock, as the Company shall determine in its sole discretion, with the first such payment due on October 31, 2024; provided, however, that the Company shall not pay any dividends in Common Stock if it would cause the Holders to be directly or indirectly vested with forty-nine and 99/100 hundredths percent (49.99%) or more of all of the issued and outstanding Common Stock of the Company or without compliance with applicable sections of Nasdaq Listing Rule 5635. Any unpaid dividends shall accrue at the same rate. To the extent not paid on the last day of April, July, October and January of each calendar year, all dividends on any share of Series A Preferred shall accumulate whether or not declared by the Board and shall remain accumulated dividends until paid pursuant hereto. All accrued and unpaid dividends shall be paid upon a Liquidation Event pursuant to Section II, conversion pursuant to Section IIIA. - D or redemption pursuant to Section III.C. The Holders of the Series A Preferred may convert any such unpaid dividends into common stock of the Company, at the Conversion Price (defined below), and otherwise in accordance with the terms and conditions hereof.
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(ii) Junior Stock Dividends. All accrued and accumulated dividends on the shares of Series A Preferred shall be paid prior and in preference to any dividend on any Junior Stock (as defined herein). The Company shall not declare or pay any cash dividends on, or make any other distributions with respect to or redeem, purchase or otherwise acquire for consideration, any shares of Junior Stock unless and until all accrued and unpaid dividends on the Series A Preferred Stock have been paid in full. In all events, Junior Stock dividends shall be subject to the restrictions set forth in Section II.A. below.
(iii) Partial Dividend Payments. Except as otherwise provided herein, if at any time the Company pays less than the total amount of dividends then accrued and accumulated with respect to the Series A Preferred, such payment shall be distributed pro rata among the Holders thereof based upon the aggregate accrued and accumulated but unpaid dividends on the shares of Series A Preferred held by each such Holder.
II. LIQUIDATION PREFERENCE
A. Preferential Payments to Holders of Series A Preferred. In the event of any liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event, either voluntary or involuntary, the Holders of record of shares of Series A Preferred shall be entitled to receive, immediately prior and in preference to any distribution to the holders of the Company’s other equity securities (including the Company’s Common Stock and any Junior Stock), a liquidation preference equal to the Series A Stated Value per share plus all accrued and accumulated but unpaid dividends, whether or not declared (the amount payable pursuant to this sentence is hereinafter referred to as the “Liquidation Preference Amount”). The payment of any Liquidation Preference Amount must be paid in like consideration, and in pro rata percentages, of what the Company receives in the liquidation event. As an example, if the Company receives $1,500,000 in cash and $500,000 in equity in a liquidation event, the payment of any Liquidation Preference Amount must be paid to the Holders in 75% cash and 25% in equity and then the holders of Junior Stock shall have the right to receive the same form of pro rata consideration as the Holders on a pro rata basis. If upon the occurrence of such event (a “Liquidation Event”) the assets and funds thus distributed among the Holders shall be insufficient to permit the payment to such Holders of the full Liquidation Preference Amounts due to the Holders of the Series A Preferred, then the entire assets and funds of the Company legally available for distribution shall be distributed among the Holders, pro rata, based on the Liquidation Preference Amounts to which such Holders are entitled and the Company shall not make or agree to make any payments to holders of any Junior Stock.
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B. Notice of Liquidation Event. In the event of any Liquidation Event, the Company shall, within ten (10) days of the date the Board approves such action, or no later than twenty (20) days of any shareholders’ meeting called to approve such action, or within twenty (20) days of the commencement of any involuntary proceeding, whichever is earlier, give each Holder of shares of Series A Preferred written notice of the proposed action. Such written notice shall describe the material terms and conditions of such proposed action, including a description of the stock, cash and property to be received by the Holders of shares of Series A Preferred upon consummation of the proposed action and the date of delivery thereof. If any material change in the facts set forth in the initial notice shall occur, the Company shall promptly give written notice to each Holder of such material change.
C. Other Distributions. Upon the completion of the distribution required by this Section, if assets remain in this Company, they shall be distributed to holders of Parity Securities (unless holders of Parity Securities have received distributions pursuant to this section) and Junior Stock in accordance with the Certificate of Incorporation, as amended.
III. CONVERSION
A. Forced Conversion. Subject to Section III.C, the Company shall have the right, subject to the conversion limitations set forth below, at any time after the Original Issue Date, and without payment of additional consideration, to convert the aggregate Series A Stated Value of such shares, as well as accrued and accumulated but unpaid declared dividends on the Series A Preferred (collectively the “Conversion Amount”) into fully paid and non-assessable shares of Common Stock of the Company (“Conversion Shares”). The “Conversion Price” of the Series A Preferred shall be $1.00 per share of Common Stock, subject to adjustment and except as otherwise set forth below. No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall round up to the nearest whole share. In connection with any conversion, the Holder shall surrender the certificate or certificates therefor, duly endorsed, to the principal office of the Company, after receiving written notice from the Company at least five (5) days prior to the date the Company desires to effect the conversion that the Company elects to convert the same, the number of shares of Series A Preferred to be converted and a calculation of the Conversion Price (with an advance copy of the certificate(s) and the notice by facsimile)(the “Conversion Notice”); provided, however, that the Company shall not be obligated to issue certificates evidencing shares of Common Stock issuable upon such conversion unless such shares of Series A Preferred are delivered to the Company as provided above, or the Holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement reasonably satisfactory to the Company and its transfer agent to indemnify the Company from any loss incurred by it in connection with such certificates. Notice of conversion may be given by the Company at any time during the day up to 5:00 p.m. New York City time and such conversion shall be deemed to have been made five (5) days after the notice of conversion is sent by the Company to the Holder(s) and the shares of Common Stock issuable upon conversion of the specified shares of Series A Preferred shall be deemed to be outstanding of record as of such date. Within three (3) business days after the conversion date in the notice of conversion, the Company shall instruct the transfer agent to issue shares of its Common Stock and to forward the same to the Holder, or upon the election of the Holder, the Company shall transmitted the shares of Common Stock to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the shares to or resale of the shares by the Holder or (B) the shares are eligible for resale by the Holders without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery to the Holder. All shares of Common Stock issued hereunder by the Company shall be duly and validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof. The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred pursuant to this Section III. The Holders do not have the right to force the conversion of the Series A Preferred Stock into common stock.
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In case of conversion under this Section III of only a part of the shares of Series A Preferred represented by a certificate surrendered to the Company, the Company shall issue and deliver a new certificate for the number of shares of Series A Preferred which have not been converted, upon receipt of the original certificate or certificates representing shares of Series A Preferred so converted. Until such time as the certificate or certificates representing shares of Series A Preferred which have been converted are surrendered to the Company and a certificate or certificates representing the Common Stock into which such shares of Series A Preferred have been converted have been issued and delivered, the certificate or certificates representing the shares of Series A Preferred Stock which have been converted shall represent the shares of Common Stock into which such shares of Series A Preferred have been converted.
B. Adjustments. The Conversion Price shall be subject to adjustment from time to time as follows:
(i) Consolidation, Merger, Sale, Lease or Conveyance. In case of any consolidation or merger of the Company with or into another Company where the Company is not the surviving entity, or in case of any sale, lease or conveyance to another Company of all or substantially all the assets of the Company, each share of the Series A Preferred shall after the date of such consolidation, merger, sale, lease or conveyance be convertible into, in lieu of the number of shares of Common Stock which the Holders would otherwise have been entitled to receive, the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable (at the time of such consolidation, merger, sale, lease or conveyance) upon conversion of such share of the Series A Preferred would have been entitled upon such consolidation, merger, sale, lease or conveyance; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Holder of the shares of the Series A Preferred shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the conversion of the shares of the Series A Preferred. Notwithstanding the foregoing, if upon the occurrence of a Liquidation Event the Holder of shares of Series A Preferred receives the entire Liquidation Preference Amount either in cash or in shares of Common Stock pursuant to Section II above, the Conversion Price shall not be adjusted as a result of such Liquidation Event; provided that, the Conversion Price will continue to be subject to adjustment with respect to any subsequent events described in this Section III.B(i).
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(ii) Stock Dividends, Subdivisions, Reclassification, or Combinations. If the Company shall (1) declare a dividend or make a distribution on its Common Stock in shares of its Common Stock, (2) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (3) combine or reclassify the outstanding Common Stock into a smaller number of shares, then in any such case, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination, or reclassification shall be proportionately adjusted so that the Holder of any shares of the Series A Preferred surrendered for conversion after such date shall be entitled to receive the number of shares of Common Stock that such Holder would have owned or been entitled to receive had such Series A Preferred been converted immediately prior to such date on terms in effect as of such time. Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur. If the Company shall subdivide (by stock split, by payment of a stock dividend or otherwise) the outstanding shares of Series A Preferred, into a greater number of shares of Series A Preferred, the Conversion Price of the Series A Preferred in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Series A Preferred shall be combined (by reclassification or otherwise) into a lesser number of shares of Series A Preferred, the Conversion Price of the Series A Preferred in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.
C. Conversion Limitations. In no event shall the Holder, or any future Holder, be entitled to convert any portion of the Series A Preferred without compliance with applicable sections of Nasdaq Listing Rule 5635. Additionally, in no event shall the Holder, or any future Holder, be entitled to convert any portion of the Series A Preferred in excess of that portion of the Series A Preferred upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Series A Preferred or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion of exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of the Series A Preferred with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 49.99% of the issued and outstanding shares of Common Stock of the Company. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 49.99% of the Common Stock of the Company. The restriction described in this paragraph may be waived, in whole or in part, upon sixty-one (61) days’ prior notice from the Holder to the Company to increase such percentage; provided, however, that such waiver will not be effective to the extent that it results in (i) such Holder beneficially owning more than 19.99% of the outstanding shares of Common Stock of the Company or (ii) in the mutually exclusive alternative, specifically with respect to James Ballengee, together with affiliates of James Ballengee, beneficially owning more than 49.99% of the outstanding shares of Common Stock of the Company.
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D. Issuance Limitations. Further to the conversion limitations set forth in Section III C. above, if the Company has not obtained Shareholder Approval in accordance with Nasdaq Listing Rule 5635(d), then the Company may not issue, upon conversion of the Series A Preferred or payments in kind of dividends on the Series A Preferred Stock, a number of shares of Common Stock which, when aggregated with any shares of Common Stock issued on or after the Original Issue Date and prior to such Conversion Date or dividend issuance date in connection with any conversion of or dividend payment in Common Stock on Series A Preferred issued pursuant to the Membership Interest Purchase Agreement would exceed the 20% limitation of Nasdaq Listing Rule 5635(d) (subject to adjustment for forward and reverse stock splits, recapitalizations and the like) (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) the original Stated Value of such Holder’s Series A Preferred by (y) the aggregate Stated Value of all Series A Preferred issued on the Original Issue Date to all Holders.
IV. RANK
All shares of the Series A Preferred shall rank (i) senior to the Company’s Common Stock and any other class or series of capital stock of the Company hereafter created, the terms of which shall specifically provide that such class or series shall rank junior to the Series A Preferred (each of the securities in clause (i) collectively referred to as “Junior Stock”) and (ii) pari passu with any class or series of capital stock of the Company hereafter created and specifically ranking, by its terms, on par with the Series A Preferred (“Parity Securities”), in each case as to dividend distributions or distributions of assets upon liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event, whether voluntary or involuntary.
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V. VOTING RIGHTS
The Holders will not have any voting rights with respect to matters submitted to a vote of holders of Common Stock (whether at a meeting of shareholders or by written consent).
VI. MISCELLANEOUS
A. Status of Redeemed Stock. In case any shares of Series A Preferred shall be redeemed or otherwise repurchased or reacquired, the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and shall no longer be designated as Series A Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably satisfactory to the Company, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the Company shall execute and deliver new Preferred Stock Certificates.
C. Waiver. Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any right of the Holders granted hereunder may be waived as to all shares of Series A Preferred (and the Holders thereof) upon the unanimous written consent of the Holders.
D. Notices. Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this Section.
If to the Company:
Vivakor, Inc.
5220 Spring Valley Road, Suite 500
Dallas, TX 75254
Attention: Patrick Knapp, General Counsel
If to the Holders, to the address listed in the Company’s books and records.
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E. Amendment and Waiver. Notwithstanding any provision in the Certificate of Designation to the contrary, no provision contained in this Certificate of Designation may be amended, modified or waived except by an instrument in writing executed by the Company and all of the Holders of the shares of Series A Preferred then outstanding. Without limiting the generality of the foregoing, no amendment, modification or waiver of the terms or relative priorities of the Series A Preferred may be accomplished by the merger, consolidation or other transaction of the Company with another corporation or entity unless the Company has obtained the prior written consent of the Holders of 75% of the outstanding shares of Series A Preferred at such time, in accordance with Section V.B. hereof.”
| VIVAKOR, INC. | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Chairman, President & CEO | |
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Exhibit 10.1
Execution Copy
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated effective October 1, 2024 (the “Effective Date”), is by and between Vivakor ADMINISTRATION, LLC, a Texas limited liability company (the “Company”), and RUSS M. SHELTON, an individual domiciled in Collin County, Texas (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 transportation executive whose career has principally focused on truck transportation of midstream liquids such as crude oil, refined products, and oilfield produced water;
WHEREAS, Executive possesses substantial knowledge, experience, skills, and relationships in the midstream petroleum industry in which the Company is currently engaged, having previously served as an executive for large private equity portfolio companies and publicly-traded midstream providers;
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 shall employ the Executive and the Executive shall accept such employment subject to the terms and conditions contained in this Agreement upon the Effective Date. From and after the Effective Date, the Executive shall be 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 by the Company 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. From the Effective Date and the term of this Agreement, the Executive shall have the title of Executive Vice President and Chief Operating Officer of the Company (and, if applicable, its affiliates and subsidiaries). In addition, the Executive shall be appointed as an officer of Vivakor, Inc., a Nevada corporation (“Vivakor”), in accordance with the rules of the U.S. Securities and Exchange Commission and those of The Nasdaq Capital Market. 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’s principal place of employment will be in Dallas County, Texas.
(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. Executive’s Compensation. The Company agrees to compensate the Executive as follows:
(a) Incentive Cash and Equity Signing Bonus. Promptly after the Effective Date, restricted shares of Vivakor’s common stock equal to One Hundred Fifty Thousand and No/100s U.S. Dollars ($150,000.00), as defined below, shall be paid to the Executive as an incentive cash and equity grant to enter into this Agreement (the “Signing Bonus”). All of the Signing Bonus unrestricted common stock will be priced per share based on the volume-weighted average price for the preceding five (5) NASDAQ trading days prior to the day of such grant. All shares comprising the Signing Bonus shall be issued under Vivakor’s 2023 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. As a condition to receiving the Signing Bonus, the Executive must execute and enter into a lock-up agreement substantially and materially in the form and content set forth on Exhibit “B” hereto.
(b) Base Compensation. Annualized cash salary compensation equal to not less than Three Hundred Thirty-seven Thousand and No/100s U.S. Dollars ($337,000.00 USD) shall be paid to the Executive in equal bi-weekly installments (the “Base Compensation”). The Base Compensation may be further increased by the Company from time to time.
(c) Annual Incentive Compensation.
(i) On an annual basis, the Company shall provide revenue and profitability guidance for Vivakor (and its subsidiaries and affiliates, if applicable), identifying Vivakor performance targets expressed as earnings before interest, taxes, depreciation, and amortization (“EBITDA”). At the conclusion of each fiscal year, the Company shall determine Vivakor’s incremental progress towards achieving such EBITDA, to be expressed as a percentage (the “EBITDA Goal Attainment”). The EBITDA Goal Attainment utilized in calculating incentive compensation under this subsection (c) shall be greater than or equal to the corresponding EBITDA Goal Attainment percentages set forth on Exhibit “C”. For example, if the EBITDA Goal Attainment is calculated to be 95%, the EBITDA Goal Attainment percentage set forth on Exhibit “C” utilized in calculating incentive compensation hereunder would be 90%.
(ii) The Executive shall be eligible for an annual cash incentive bonus (the “Cash Incentive Bonus”) equal to the then-current Base Compensation multiplied by the Cash Bonus Multiplier corresponding to the EBITDA Goal Attainment set forth on Exhibit “C” hereto (such Exhibit “C”, the “Incentive Compensation Matrix”), for a total annual Cash Incentive Bonus. The Cash Incentive Bonus shall be paid to the Executive no later than the last business day of March of the year succeeding the year for which the Cash Incentive Bonus is calculated, less applicable governmental withholdings.
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(iii) The Executive shall be eligible for an annual equity incentive bonus (the “Equity Incentive Bonus”) equal to the then-current Base Compensation multiplied by the Equity Bonus Multiplier corresponding to the EBITDA Goal Attainment set forth on the Incentive Compensation Matrix, for a total annual Equity Incentive Bonus. The Equity Incentive Bonus shall be granted to Executive no later than the last business day of March of the year succeeding the year for which the Equity Incentive Bonus is calculated, less applicable governmental withholdings, and shall be remitted in restricted shares of Vivakor’s common stock priced per share based on the volume-weighted average price for the preceding five (5) NASDAQ trading days prior to the grant date. All shares comprising an Equity Incentive Bonus shall be issued under Vivakor’s 2023 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. As a condition to receiving each Equity Incentive Bonus, unless and until the adoption, filing, and implementation of non-qualified deferred compensation plan awarding equity incentive compensation to a select group of management or highly-compensated employees of the Vivakor and/or the Company (and, if applicable, its affiliates and subsidiaries) which may set forth vesting schedules, forfeiture provisions, and other requirements (a “Top Hat Plan”), the Executive must execute and enter into a lock-up agreement substantially and materially in the form and content set forth on Exhibit “B” hereto at the time of such award.
(iv) The Executive shall be eligible for such additional 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 Vivakor.
(v) For purposes of calculating the amounts due and owing Executive under Sections 3(c)(ii) and 3(c)(iii) for the first partial calendar year of this Agreement only, the Parties stipulate and agree that (A) all such incentive compensation shall be pro-rated for calendar year 2024, and (B) Vivakor’s current year EBITDA guidance for 2024 is stipulated and deemed to be $18,600,000. Furthermore, Vivakor shall have the right to adjust EBITDA guidance for purposes of calculating the EBITDA guidance for 2024 in connection with any mergers, acquisitions, or business combination transactions agreed and entered into subsequent to the Effective Date hereof.
(vi) Notwithstanding anything contained in this Agreement to the contrary, the Incentive Compensation Matrix may be modified, amended, and replaced by the Company and/or Vivakor, in its sole discretion, at any time or from time to time, upon (A) the adoption, filing, and implementation of a Top Hat Plan, and (B) specific written reference and notice to Executive that the Incentive Compensation Matrix set forth in this Agreement is being modified, amended, and replaced by such plan.
(d) Benefits. The Company agrees to extend to the Executive retirement benefits, deferred compensation, travel, tolls, 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.
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(e) Retirement Plan Contributions. Notwithstanding anything contained herein to the contrary, in lieu of any cash compensation set forth in Sections 3(b) and 3(c), on annual basis Executive may elect, in their sole and absolute discretion, for Company to contribute to Executive’s retirement plan maintained by the Company such amount of cash compensation as directed by Executive, up to the maximum total annual combined contribution limit of employer and employees to retirement plans set forth by the Internal Revenue Service, and to deduct the same from Executive’s Base Compensation or Cash Incentive Bonus, as directed. Such amount shall be remitted as an employer contribution to Executive’s retirement plan maintained by the Company. Such retirement plan contributions shall be deducted by Company on a pre-tax basis, as applicable, from Executive’s cash compensation set forth in Sections 3(b) and 3(c).
(f) Vacation. The Executive will be entitled to take paid time off, sick leave, and vacation in accordance with the Company’s general employment policies.
4. 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.
5. 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) the then-current Base Compensation in an amount equal to eighteen (18) calendar months’ 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) calendar months’ following termination of Executive’s employment; (iii) all accrued but unused paid time off, vacation days, personal days, and sick days, and (iv) the cost of outplacement services (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 and cured within thirty (30) days; 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.
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(c) Termination for Diminution of Duties. If the Executive resigns their Employment for (i) a material and adverse diminution of the Executive’s duties, responsibilities or authorities, (ii) a reduction in the Base Compensation, (iii) a relocation of the Executive’s principal place of employment more than fifty (50) miles outside the Dallas-Fort Worth metropolitan area (each, 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, or James H. Ballengee and/or his affiliates) acquires fifty percent (50%) or more of the outstanding voting equity interests in the Company or its parent company, (ii) the Company or its parent company sells 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”), and the Executive is terminated within one (1) calendar year of the consummation of such Change in Control, then the Executive shall be entitled to the Termination Compensation.
(e) Payment. The Termination Compensation under this Section 5 shall be paid in equal installments in equal bi-weekly installments for the period of time such Termination Compensation is calculated. All payments shall be made in U.S. Dollars, in the form and manner 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 materially and substantially in the form and content attached hereto as Exhibit “A” at the time of the termination of Executive’s employment. 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 such release to the Company’s designated representative.
6. 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.
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7. Indemnification. In addition to any rights Executive may have under the Company’s and Vivakor’s charters, 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 or as an officer of Vivakor; 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 and Vivakor 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, Vivakor, and Executive. The Company and Vivakor 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.
8. Arbitration. Any dispute, controversy or claim arising out of or relating in any way to the employment of the Executive or this Agreement, or Executive’s service as an officer of Vivakor, including without limitation any dispute concerning the construction, validity, interpretation, enforceability or breach of Agreement, shall be solely and 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 Executive. 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.
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(e) No later than thirty (30) days after the selection of an arbitrator, each Party shall prepare and deliver to both the arbitrator and other Party its last, best offer for fully and finally resolving the dispute and a memorandum in support thereof. The Parties shall also provide the arbitrator with a copy of this Agreement. Each Party may submit to the arbitrator (with a copy to the other Party) a rebuttal to the other Party’s support memorandum and will at such time have the opportunity to amend its last such offer based on any new information contained in the other Party’s support memorandum. Within forty-five (45) days after the arbitrator’s appointment, the arbitrator will select from the two (2) proposals provided by the Parties the proposal such arbitrator believes is most consistent with the intent of the Parties when this Agreement was entered into; provided, however, the arbitrator may not alter the terms of this Agreement nor the proposals of either Party.
(f) Notwithstanding the foregoing, 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 payment of the 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%).
(g) 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 whose proposal was not selected by the arbitrator for award.
(h) The arbitrator’s award or decision shall be final, binding, and non-appealable. 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.
(i) 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.
9. 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 Administration, LLC | |
|
5220 Spring Valley Rd., Ste. 500 Dallas, TX 75254 Attn: Legal Email [email protected] |
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| To the Executive: |
Russ Shelton 15171 Wintergrass Road Frisco, Texas 75035 Cell (945) 249-8621 Email [email protected] |
(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. The Parties stipulate and agree, and waive 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.
(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 representatives of the Company and Vivakor have executed and entered into this Agreement as of the Effective Date.
| COMPANY: | ||
| VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Chairman, President & CEO | |
| VIVAKOR: | ||
| VIVAKOR, INC., a Nevada corporation | ||
| By: | ||
| 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: | |
| Russ M. Shelton, 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 October 1, 2024, executed by and between Vivakor Administration, LLC, as Company, and Russ M. Shelton, as Employee (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 Administration, LLC, any of its parents, members, 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.
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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: | |
| [EXHIBIT ONLY—DO NOT EXECUTE] | |
| Russ M. Shelton, individually |
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EXHIBIT “B”
FORM OF
LOCK-UP AGREEMENT
This LOCK-UP AGREEMENT (this “Lock-Up Agreement”) is made and entered into as of [●], by and between Vivakor, Inc., a Nevada corporation (the “Company”) and the undersigned holder of shares of the Company’s common stock (the “Holder” and, together with the Company, the “Parties”). For all purposes of this Agreement, “Holder” includes any affiliate or controlling person of Holder, and any other agent, representative or other person with whom Holder is acting in concert.
WHEREAS, the Parties have entered into that certain Executive Employment Agreement (the “Employment Agreement”), dated October 1, 2024, by and between the Company and the Holder, pursuant to which, and subject to the terms and conditions set forth therein, the Company will employ the Holder as an officer of the Company;
WHEREAS, pursuant to the Employment Agreement, the Holder has received [●] shares of the Company’s common stock, par value $0.001 per share (the “Lock-Up Securities”);
WHEREAS, as a condition and inducement to the willingness of the Company to consummate the transactions contemplated by the Employment Agreement, the Holder has agreed to certain transfer restrictions with respect to the Lock-Up Securities held by the Holder immediately following the granting and award thereof (the “Granting Date”).
NOW THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the Holder and the Company hereby agree as follows:
1. Lock-Up Period. The Holder agrees that, from the Granting Date until a date that is eighteen (18) calendar months from the date thereof (such period, the “Lock-Up Period”), the Holder shall be subject to the lock-up restrictions set forth in Section 0 below.
2. Lock-Up Restriction.
(a) Lock-Up. During the Lock-Up Period, the Holder will not offer, sell, contract to sell, or otherwise transfer (or enter into any transaction which is designed to, or might reasonably be expected to, result in the sale, transfer or disposition, whether by actual or effective economic sale or disposition due to cash settlement or otherwise) by the Holder or any affiliate of the Holder or any person in privity with the Holder or any affiliate of the Holder), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the U.S. Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, with respect to the Lock-Up Securities, unless such transaction is a Permitted Disposition (as defined below).
(b) Permitted Disposition. A “Permitted Disposition” shall include the following: (i) transfers of Lock-Up Securities to a trust or affiliated entity for the benefit of the undersigned or as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member of the undersigned (for purposes of this Lock-Up Agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than the second degree or consanguinity or affinity); (ii) transfers of Lock-Up Securities to a charitable organization or educational institution; (iii) transfers of the Lock-Up Securities by the Holder upon the prior written consent of the Company; provided that in the case of any transfer pursuant to the foregoing clauses (i) - (iii), (A) any such transfer shall not involve a disposition for value, (B) each transferee shall sign and deliver to the Company a lock-up agreement substantially in the form of this Lock-Up Agreement and (C) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made, or (iv) a pledge or hypothecation of the Lock-Up Securities as collateral for indebtedness.
Page B-1
(c) Stop Orders. The Holder further acknowledges and agrees that the Company is authorized to, and the Company agrees to, place “stop orders” on its books to prevent any transfer of any Lock-Up Securities of the Company held by the Holder in violation of this Lock-Up Agreement. The Company agrees not to allow any transaction to occur that is inconsistent with this Lock-Up Agreement.
3. Miscellaneous.
(a) At any time, and from time to time, after the signing of this Lock-Up Agreement, the Holder will execute such additional instruments and take such action as may be reasonably requested by the Company to carry out the intent and purposes of this Lock-Up Agreement.
(b) This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either Party against the other concerning the transactions contemplated by this Lock-Up Agreement shall be brought only in the state courts of Nevada or in the federal courts located in the State of Nevada. The Parties hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based on forum non conveniens. The Parties hereto and to any other agreements referred to herein or delivered in connection herewith agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Lock-Up Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
(c) Any and all notices or other communications given under this Lock-Up Agreement shall be in writing and shall be deemed to have been duly given on (i) the date of delivery, if delivered in person to the addressee, (ii) the next business day if sent by overnight courier, or (iii) three (3) days after email, read receipt requested, to the party entitled to receive same, at his or its address or email address set forth below:
If to the Company:
Vivakor, Inc.
5220 Spring Valley Rd., Ste. 500
Dallas, TX 75254
Attn: Pat Knapp
Email: [email protected]
If to the Holder:
Russ Shelton
[●]
(d) The restrictions on transfer described in this Lock-Up Agreement are in addition to and cumulative with any other restrictions on transfer otherwise agreed to by the Holder or to which the Holder is subject to by applicable law.
Page B-2
(e) This Lock-Up Agreement shall not be assigned in whole or in part, without the prior written consent of the other Party. Except as otherwise provided herein, this Lock-Up Agreement shall be binding upon Holder, its legal representatives, and permitted successors and assigns.
(f) This Lock-Up Agreement may be executed and delivered in two or more counterparts (including by means of electronic mail), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(g) The Company agrees not to take any action or allow any act to be taken which would be inconsistent with this Lock-Up Agreement.
(h) The terms and provisions of this Lock-Up Agreement may only be amended by a written instrument signed by the Company and the Holder.
[Signature page follows; the remainder of this page is intentionally blank.]
Page B-3
IN WITNESS WHEREOF, the Parties hereto and/or their duly authorized representatives have executed and entered this Lock-Up Agreement as of the date first above written.
| COMPANY: | ||
| VIVAKOR, INC., a Nevada corporation | ||
| By: | [EXHIBIT ONLY—DO NOT EXECUTE] | |
| Name: | [●] | |
| Title: | [●] | |
| HOLDER: | ||
| [EXHIBIT ONLY—DO NOT EXECUTE] | ||
| [●] | ||
Page B-4
EXHIBIT “C”
INCENTIVE COMPENSATION MATRIX
| Incentive Compensation Matrix | |||||
| EBITDA Goal Attainment | 80% | 90% | 100% | 110% | 120% |
| Cash Bonus Multiplier | 10% | 75% | 100% | 110% | 120% |
| Cash Incentive Bonus | $33,700 | $252,500 | $337,000 | $370,700 | $404,400 |
| Equity Bonus Multiplier | 10% | 75% | 100% | 110% | 120% |
| Equity Incentive Bonus | $33,700 | $252,500 | $337,000 | $370,700 | $404,400 |
| Total Incentive Compensation | $67,400 | $337,000 | $674,000 | $741,400 | $808,000 |
Page C-1
Exhibit 10.2
|
Ballengee Holdings, LLC
|
James Ballengee Manager
5220 Spring Valley Road, Ste. 520 Dallas, Texas 75254
(p) (318) 469-3084 |
October 7, 2024
Russ Shelton
Delivered via email to [email protected]
| Re: | Side Letter for Additional Compensation |
Dear Russ:
Reference is hereby made to that certain Executive Employment Agreement dated October 1, 2024, by and between Vivakor Administration, LLC, as Company, and Russ Shelton, as Executive (the “Employment Agreement”). Capitalized terms used but not defined in this letter shall have the meanings set forth in the Employment Agreement.
On or after January 1, 2025, Ballengee Holdings, LLC (“BH”) covenants and agrees to compensate you in an amount equal to the positive difference between Three Hundred Seventy-five Thousand and No/100s U.S. Dollars ($375,000.00 USD) annually less your then-current Base Compensation, paid in equal bi-weekly installments and less applicable governmental withholdings, upon the failure of Company to increase the Base Compensation to $375,000.00 on or before January 1, 2025.
Furthermore, BH covenants and agree to compensate you in an amount equal to One Hundred Thousand and No/100s U.S. Dollars ($100,000.00 USD) in a one-time lump sum cash special bonus payment (the “Special Bonus”) no later than five (5) business days subsequent Vivakor, Inc.’s successful raising and funding of no less than $5,000,000.00 USD in cash proceeds from the sale and issuance of equity securities on or before December 31, 2024. The Special Bonus shall not accrue or be due and owing if such equity capital raise is unsuccessful or raises less than $5,000,000.00 USD in cash proceeds on or before December 1, 2024.
Any breach or default of the Employment Agreement by Executive shall constitute a material breach and default of this letter agreement. The obligations contained in this letter agreement shall be for a term concurrent with that of the Employment Agreement, are entirely and wholly conditional upon Executive’s continued employment with the Company pursuant to and consistent with the Employment Agreement, and any termination of the Employment Agreement pursuant to Section 5(b) thereof shall render this letter agreement null and void ab initio. This letter agreement constitutes the complete and entire agreement of the parties hereto, and may only be amended or modified in writing. This letter agreement shall be governed by the laws of the State of Texas, without regard to its rules or principles regarding conflicts of law. If any provision of this letter agreement is determined, to any extent, to be invalid or unenforceable, the entirety of this letter agreement shall be rendered null, void, and unenforceable ab initio. This letter agreement may not be assigned by Executive in whole or in part.
[Continued on next page.]
[The remainder of this page is intentionally blank.]
Russ Shelton
Page 2 of 2
Do not hesitate to contact me should you have any further questions or concerns.
| BALLENGEE HOLDINGS, LLC | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
Agreed, acknowledged, accepted, and entered into by the undersigned on the date first set forth above.
| EXECUTIVE: | ||
| RUSS SHELTON | ||
| By: | ||
Exhibit 10.3
Execution Version
LOCK-UP AGREEMENT
This LOCK-UP AGREEMENT (this “Lock-Up Agreement”) is made and entered into as of October 1, 2024, by and between Vivakor, Inc. (the “Company”) and the undersigned holder of shares of the Company’s common stock (the “Holder” and, together with the Company, the “Parties”). For all purposes of this Agreement, “Holder” includes any affiliate or controlling person of Holder, and any other agent, representative or other person with whom Holder is acting in concert.
W I T N E S S E T H:
WHEREAS, the Parties have entered into that certain Membership Interest Purchase Agreement (the “Purchase Agreement”), dated as of March 21, 2024, by and between the Company, the Holder and JBAH Holdings, LLC, a Texas limited liability company, pursuant to which, and subject to the terms and conditions set forth therein, the Company will purchase all of the issued and outstanding membership interests of Endeavor Crude, LLC, a Texas limited liability company, Meridian Equipment Leasing, LLC, a Texas limited liability company, Silver Fuels Processing, LLC, a Texas limited liability company, and Equipment Transport, LLC, a Pennsylvania limed liability company.
WHEREAS, pursuant to the Purchase Agreement, the Holder received shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) and may receive additional shares of Common Stock upon the conversion of shares of the Company’s Series A Preferred Stock, par value $0.001 per share (the “Preferred Stock”), or upon the payment of dividends on the Preferred Stock in the form of Common Stock (the “Lock-Up Securities”);
WHEREAS, as a condition and inducement to the willingness of the Company to consummate the transactions contemplated by the Purchase Agreement, the Holder has agreed to certain transfer restrictions with respect to the Lock-Up Securities held by the Holder immediately following the Closing Date (as defined in the Purchase Agreement).
NOW THEREFORE, for good and valuable consideration, the sufficiency and receipt of which consideration is hereby acknowledged, the Holder and the Company hereby agree as follows:
1. Lock-Up Period. The Holder agrees that, from the Closing Date until the date that is eighteen (18) calendar months from the date thereof (such period, the “Lock-Up Period”), the Holder shall be subject to the lock-up restrictions set forth in Section 2 below.
2. Lock-Up Restriction.
(a) Lock-Up. During the Lock-Up Period, the Holder will not offer, sell, contract to sell, or otherwise transfer of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the sale, transfer or disposition (whether by actual or effective economic sale or disposition due to cash settlement or otherwise) by the Holder or any affiliate of the Holder or any person in privity with the Holder or any affiliate of the Holder), directly or indirectly, including the filing (or participation in the filing) of a registration statement with the U.S. Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, with respect to the Lock-Up Securities, unless such transaction is a Permitted Disposition (as defined below).
A “Permitted Disposition” shall include the following: (a) transfers of Lock-Up Securities to a trust for the benefit of the undersigned or as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member of the undersigned (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (b) transfers of Lock-Up Securities to a charity or educational institution; (c) transfers of the Lock-Up Securities by the Holder upon the prior written consent of the Company; provided that in the case of any transfer pursuant to the foregoing clauses (a) - (c), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Company a lock-up agreement substantially in the form of this Lock-Up Agreement and (iii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made, or (d) a pledge or hypothecation of the Lock-Up Securities as collateral for indebtedness.
(b) Stop Orders. The Holder further acknowledges and agrees that the Company is authorized to, and the Company agrees to, place “stop orders” on its books to prevent any transfer of any Lock-Up Securities of the Company held by the Holder in violation of this Lock-Up Agreement. The Company agrees not to allow any transaction to occur that is inconsistent with this Lock-Up Agreement.
3. Miscellaneous.
(a) At any time, and from time to time, after the signing of this Lock-Up Agreement, the Holder will execute such additional instruments and take such action as may be reasonably requested by the Company to carry out the intent and purposes of this Lock-Up Agreement.
(b) This Lock-Up Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either Party against the other concerning the transactions contemplated by this Lock-Up Agreement shall be brought only in the state courts of Nevada or in the federal courts located in the State of Nevada. The Parties hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based on forum non conveniens. The Parties hereto and to any other agreements referred to herein or delivered in connection herewith agree to submit to the in personam jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Lock-Up Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
2
(c) Any and all notices or other communications given under this Lock-Up Agreement shall be in writing and shall be deemed to have been duly given on (i) the date of delivery, if delivered in person to the addressee, (ii) the next business day if sent by overnight courier, or (iii) three (3) days after mailing, if mailed within the continental United States, postage prepaid, by certified or registered mail, return receipt requested, to the party entitled to receive same, at his or its address set forth below:
If to the Company:
Vivakor, Inc.
5220 Spring Valley Road, Suite 500
Dallas, Texas 75254
Attn: Pat Knapp
Email: [email protected]
With a copy to (which shall not constitute notice):
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Iselin, New Jersey 08830
Attn: Joseph Lucosky; Scott Linsky
Email: [email protected]; [email protected]
If to the Holder:
JBAH Holdings, LLC
5220 Spring Valley Road, Suite 520
Dallas, Texas 75254
Attn: James Ballengee
Email: [email protected]
(d) The restrictions on transfer described in this Lock-Up Agreement are in addition to and cumulative with any other restrictions on transfer otherwise agreed to by the Holder or to which the Holder is subject to by applicable law.
(e) This Lock-Up Agreement shall not be assigned in whole or in part, without the prior written consent of the other Party. Except as otherwise provided herein, this Lock-Up Agreement shall be binding upon Holder, its legal representatives, and permitted successors and assigns.
(f) This Lock-Up Agreement may be executed and delivered in two or more counterparts (including by means of facsimile or electronic mail), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(g) The Company agrees not to take any action or allow any act to be taken which would be inconsistent with this Lock-Up Agreement.
(h) The terms and provisions of this Lock-Up Agreement may only be amended by a written instrument signed by the Company and the Holder.
[-signature page follows-]
3
IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties hereto have executed this Lock-Up Agreement as of the date first above written.
| HOLDER: | ||
|
Jorgan Development, LLC | ||
| By: | ||
|
Name: |
James H. Ballengee | |
| Title: | Manager | |
| COMPANY: | ||
| VIVAKOR, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature Page to the Lock-Up Agreement]
4
Exhibit 10.4
Execution Version
FIRST AMENDED AND RESTATED
MASTER NETTING AGREEMENT
This FIRST AMENDED AND RESTATED MASTER NETTING AGREEMENT (this “Agreement”) dated effective as of October 1, 2024 (the “Effective Date”), is by and between JORGAN DEVELOPMENT, LLC, a Louisiana limited liability company (“Jorgan”), JBAH Holdings, LLC, a Texas limited liability company (“JBAH”), SILVER FUELS DELHI, LLC, a Louisiana limited liability company (“SFD”), WHITE CLAW COLORADO CITY, LLC, a Texas limited liability company (“WCCC”), ENDEAVOR CRUDE, LLC, a Texas limited liability company (“Endeavor”), MERIDIAN EQUIPMENT LEASING, LLC, a Texas limited liability company (“MEL”), SILVER FUELS PROCESSING, LLC, a Texas limited liability company (“SFP”), WHITE CLAW CRUDE, LLC, a Texas limited liability company (“WCC”), CPE GATHERING MIDCON, LLC, a Delaware limited liability company (“Omega”), and VIVAKOR, INC., a Nevada corporation (“Vivakor”). Each and every of the foregoing parties are hereby referred to individually as a “Party” or collectively as the “Parties”.
WHEREAS, on June 15, 2022, Jorgan, JBAH, and Vivakor entered into a Membership Interest Purchase Agreement whereby Vivakor agreed to purchase all of the issued and outstanding limited liability company membership interest in and to SFD and WCCC (the “Prior Transaction”);
WHEREAS, in connection with the closing of the Prior Transaction, Jorgan, JBAH, Vivakor, Endeavor, SFD, WCCC, and WCC executed and entered into that certain Master Netting Agreement dated August 1, 2022, by and between themselves (the “Prior Agreement”);
WHEREAS, as of March 21, 2024, Jorgan, JBAH, and Vivakor have entered into that certain Membership Interest Purchase Agreement (the “MIPA”) hereto, contemplating the purchase and sale of Endeavor, MEL, SFP, and Equipment Transport, LLC, a Pennsylvania limited liability company;
WHEREAS, the MIPA contemplates the execution and entering of this Agreement to amend and restate the Prior Agreement;
WHEREAS, in connection with the Prior Transaction and the closing of the MIPA, the Parties will be party to all those certain obligations owing to one another pursuant to the agreements set forth on Exhibit “A” hereto, as such may be amended, modified, restated, ratified, revived, and each and every extension, renewal, or modification of each and every such contract (each individually, a “Contract”, or collectively, “Contracts”), and wish to enter into this Agreement to update and ratify certain net-out obligations and procedures for the same pursuant to the Prior Agreement; and
NOW, THEREFORE, for the mutual promises and undertakings contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:
1. Definitions. The following terms shall, when used herein, have the meaning set forth below:
“Agreement” has the meaning set forth in the recitals.
“Affiliate(s)” means, with respect to any Party, any other party directly or indirectly controlling, controlled by or under common control with such Party.
“Aggregate Amount(s) Owed Buyer Group” has the meaning set forth in Section 3.
“Aggregate Amount(s) Owed Seller Group” has the meaning set forth in Section 3.
“Buyer Group” means Vivakor, SFD, WCCC, Endeavor, MEL, SFP, and Omega.
“Change in Control” means (i) the acquisition by a third party or group of third parties of the beneficial ownership of a majority of then-outstanding voting securities or equity of a Party, provided that such third party or group of third parties are not (A) Affiliates of such Party nor (B) beneficial owners of a majority of then-outstanding voting securities or equity of such Party as of the Effective Date of this Agreement, (ii) the execution of a definitive agreement for, or the consummation of, a reorganization, merger, consolidation, sale or other disposition of all or a substantial portion of the assets of a Party, (iii) the approval by a Party’s management or beneficial owners of a complete liquidation or dissolution of such Party, or (iv) a merger or transfer or all or substantially all a Party’s assets to another entity and at the time of such merger or consolidation the merging, surviving, resulting or transferee entity fails to assume all obligations and covenants of this Agreement satisfactory to the Party which is not the subject of the merger or transfer, provided, however, that Vivakor’s transaction with Empire Diversified Energy, Inc., contemplated to occur in 2024, will not be deemed to constitute a Change in Control.
“Contract(s)” has the meaning set forth in the recitals.
“Defaulting Party” has the meaning set forth in Section 9.
“Early Termination Date” has the meaning set forth in Section 10.
“Endeavor” has the meaning set forth in the recitals.
“Event of Default” has the meaning set forth in Section 9.
“Final Judgment” has the meaning set forth in Section 7.
“Group(s)” means Seller Group and/or Buyer Group, individually or collectively, as context requires.
“JBAH” has the meaning set forth in the recitals.
“Jorgan” has the meaning set forth in the recitals.
“MEL” has the meaning set forth in the recitals.
“MIPA” has the meaning set forth in the recitals.
“Net Settlement Amount” has the meaning set forth in Section 3.
“Non-Defaulting Group” has the meaning set forth in Section 10.
“Notes” means (i) that certain Secured Promissory Note dated August 1, 2022, made to the order of Jorgan by Vivakor, in the original principal amount of $28,377,641, and (ii) Secured Promissory Note dated August 1, 2022, made to the order of JBAH by Vivakor, in the original principal amount of $286,643.
“Omega” has the meaning set forth in the recitals.
“Party” or “Parties” has the meaning set forth in the recitals.
“Payment Date” has the meaning set forth in Section 6.
“Prior Agreement” has the meaning set forth in the recitals.
“Prior Transaction” has the meaning set forth in the recitals.
“Seller Group” means Jorgan, JBAH and WCC.
“SFD” has the meaning set forth in the recitals.
“SFP” has the meaning set forth in the recitals.
Page 2 of 9
“Vivakor” has the meaning set forth in the recitals.
“WCC” has the meaning set forth in the recitals.
“WCCC” has the meaning set forth in the recitals.
2. This Agreement supplements the payment and invoicing provisions of all Contracts between the Parties and their Affiliates. It is understood and agreed by the Parties that the Contracts shall be and hereby are subject to the terms of this Agreement. Except as specifically set forth herein, nothing within this Agreement shall be construed to amend, modify, or cancel any part of all of any Contract presently in effect between the Parties or their Affiliates. All other terms and conditions of said Contracts shall remain unchanged, in effect, and enforceable in accordance with their terms and provisions. In the event of any inconsistency between the terms of this Agreement and the terms of any Contract with respect to the payment or invoicing matters while this Agreement is in force and effect, the terms of this Agreement shall prevail.
3. All amounts owed to Seller Group by Buyer Group as a result of all Contracts during a given calendar month (the “Aggregate Amount(s) Owed Seller Group”) shall be netted against all amounts owed to Buyer Group by Seller Group as a result of all Contracts during the same calendar month (the “Aggregate Amount(s) Owed Buyer Group”), and the resulting net amount (the “Net Settlement Amount”) shall be payable either from Seller Group to Buyer Group (if the Aggregate Amount Owed Buyer Group exceeds the Aggregate Amount Owed Seller Group) or from Buyer Group to Seller Group (if the Aggregate Amount Owed Seller Group exceeds the Aggregate Amount Owed Buyer Group). Each month the Groups shall consult at least one (1) business day before Payment Date (as defined below) as to the total amount due each other for deliveries made pursuant to the Contracts in the preceding month, which deliveries shall be priced in accordance with the applicable Contracts. Each Group shall continue to invoice the other Group as applicable.
4. The Parties to each Contract shall attempt to reconcile any disputes as to any items contained on an invoice in a mutually agreeable manner. A Party may not refuse to participate in such process because of a disputed invoice. If any invoice is disputed (so long it is disputed in good faith and fair dealing), the invoiced Party may require that only the undisputed amount be agreed upon as the amount due in the process described in Section 2, pending resolution of the dispute, and otherwise proceed with the net-out process set forth herein.
5. The net difference between the total amounts agreed to in Sections 2 through 4 above shall be the amount payable to the Group delivering the greater amount by the Group delivering the lesser amount.
6. The Net Settlement Amount shall be paid by the owing Group to the other Group by wire transfer on or before the 20th day of the month succeeding the invoiced month (“Payment Date”). If the 20th day of the month falls on a Saturday or Friday federal banking holiday, payment will be made on the preceding banking day, or if the 20th day of the month falls on a Sunday or Monday federal banking holiday, payment will be made on the next succeeding banking day. Each Party agrees that for the Payment Date to be effective as to the other Party, each Party must have in its possession all invoices as applicable (involving the transaction month) from the other Party not later than two (2) business days before the Payment Date.
7. Notwithstanding the provisions of Sections 3 through 6 hereof, specifically with respect to Vivakor obtaining a final, non-appealable judgment obtained in a court of competent jurisdiction awarding money damages to Vivakor for a breach or default pursuant to the MIPA against either Jorgan or JBAH, as the case may be (a “Final Judgment”), then in that event and only in that event, the amount of such Final Judgment shall be deducted from and netted against the outstanding principal indebtedness owed to Jorgan or JBAH pursuant to the Notes, respectively, as the case may be. This obligation shall survive the termination of this Agreement in accordance with the survival provisions of the MIPA.
8. Term. This Agreement is effective on the Effective Date and shall continue in effect until the earlier to occur of (a) termination of this Agreement pursuant to Section 11 hereof, or (b) the termination of all the Contracts pursuant to their terms and provision, or (c) termination by mutual agreement of the Parties; provided, however, that any such termination shall not cancel the netting arrangement provided for herein with respect to obligations or transactions which arise prior to the termination date, unless otherwise agreed to in writing by the Parties; provided further, that such termination of this Agreement shall not affect the continuing validity or enforcement of obligations owed under the Contracts.
Page 3 of 9
9. Events of Default. Notwithstanding any other provision of this Agreement or any provision of any Contract, the occurrence at any time of any of the following events constitutes an event of default (an “Event of Default”) with respect to such Party (a “Defaulting Party”):
| (a) | A material breach or material default by any Party of any provision of this Agreement that is not cured within 10 business days of the breaching Party’s receipt of a notice of default; |
| (b) | A breach or default by any Party under any Contract pursuant to that Contract’s terms and provisions Agreement that is not cured in accordance with such Contract’s terms and provisions; |
| (c) | A Change in Control occurs with respect to a Party other than as a result of the transactions contemplated by the MIPA on the Closing Date, as such term is defined in the MIPA Further, a Change of Control of Vivakor shall not be deemed to have taken place under circumstances where another Party to this Agreement, including the beneficial owners of such Party, acquires beneficial ownership of a majority of then-outstanding voting securities or equity of Vivakor. |
10. Remedies. Upon the occurrence of an Event of Default, the non-defaulting Group hereto (the “Non-Defaulting Group”) may, in its sole discretion and by written notice to the Defaulting Party and its Group, designate a date on which to terminate this Agreement and promptly settle all outstanding amounts due pursuant to the Contracts (the “Early Termination Date”). To the extent that, in the commercially reasonable discretion of the Non-Defaulting Group, certain Contracts may not be not promptly settled without material disruption of cash flow(s) to one or more Parties of either Group, such Contracts shall be settled in accordance with their terms apart from this Agreement. On or as soon as reasonably practicable after the Early Termination Date, the Non-Defaulting Group shall provide a close-out statement to the Defaulting Party and its Group (a) showing in reasonable detail its calculations for the final settlement pursuant to this Agreement, (b) showing in reasonable detail all Aggregate Amounts Owed Seller Group and all Aggregate Amounts Owed Buyer Group that intend to remain outstanding as of the Early Termination Date to be settled outside of this Agreement, and (c) specifying any Net Settlement Amount(s) in connection with the Early Termination Date.
11. Remedies Not Exclusive. The Parties’ rights pursuant to this Agreement are in addition to, and not in limitation of, any other rights and remedies that they may have (whether by operation of law, in equity, pursuant to agreement, or otherwise) and without prejudice and in addition to any right of set-off, recoupment, combination of accounts, lien, security interest, pledge, or other right to which they are entitled. The Parties may enforce any of their remedies under this Agreement successively or concurrently at their option. No failure on the part of any Party to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by a Party of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power.
12. Limitation of Liability. In no event shall any Party be liable under this Agreement (on the basis of breach of contract, indemnity, warranty or tort or otherwise) for any indirect, special, consequential, exemplary or punitive damages resulting from or arising out of this Agreement, including, without limitation, loss of production, business interruption, loss of profit, loss of revenue, loss of contract or loss of goodwill howsoever caused.
13. Counterparts. The Agreement may be executed in one or more counterparts, in any format, whether hardcopy or electronic, each of which shall be considered an original.
14. Assignment. The rights and obligations of the parties to this Agreement are not assignable in whole or in part, other than, in the case of Vivakor, to Affiliates of Vivakor, without the prior written consent of the other Group to this Agreement, which shall not be unreasonably withheld, conditioned or delayed. This Agreement shall inure to the benefit of and be binding on and enforceable against the successors and permitted assigns of each Party hereto.
Page 4 of 9
15. Amendment; Severability. None of the provisions of this Agreement may be modified, amended or waived except in a writing signed by the Parties. If any of the provisions of this Agreement is found to be illegal or unenforceable, it is deemed to be omitted, but only to the extent of such unenforceability, and the remaining provisions of this Agreement shall remain in full force and effect.
16. Prior Agreement. This Agreement amends, modifies, and supersedes the Prior Agreement in its entirety as of the Effective Date hereof.
17. Governing Law. This Agreement shall be construed in accordance with, and governed by the laws of the State of Nevada, without respect to its rules or principles regarding conflicts of law. Each Party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any proceedings relating to or arising out of this Agreement.
18. Notice. Any written notice in respect of this Agreement may be given by any reasonable means, including, without limitation, by facsimile, hand delivery, courier, or certified United States mail (return receipt requested) and shall be effective upon receipt by the Party to which such notice is addressed. Each Group’s respective addresses for notice are set forth in the MIPA.
[Signature page(s) to follow.]
[The remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, the Seller Group and Buyer Group have executed this Agreement as of the Effective Date set forth above.
| SELLER GROUP: | ||
| JORGAN DEVELOPMENT, LLC, | ||
| a Louisiana limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| JBAH HOLDINGS, LLC, | ||
| a Texas limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| WHITE CLAW CRUDE, LLC, | ||
| a Texas limited liability company | ||
| By: JORGAN DEVELOPMENT, LLC, | ||
| a Louisiana limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| BALLENGEE HOLDINGS, LLC, | ||
| a Texas limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| HORIZON TRUCK & TRAILER, LLC, | ||
| a Texas limited liability company | ||
| By: JORGAN DEVELOPMENT, LLC, | ||
| a Louisiana limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
Page 6 of 9
| BUYER GROUP: | ||
| VIVAKOR, INC., | ||
| a Nevada limited liability company | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| SILVER FUELS DELHI, LLC, | ||
| a Louisiana limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| WHITE CLAW COLORADO CITY, LLC, | ||
| a Texas limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| SILVER FUELS PROCESSING, LLC, | ||
| a Texas limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
Page 7 of 9
| ENDEAVOR CRUDE, LLC, | ||
| a Texas limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| MERIDIAN EQUIPMENT LEASING, LLC, | ||
| a Texas limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| CPE GATHERING MIDCON, LLC, | ||
| a Delaware limited liability company | ||
| By: VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company, | ||
| its Manager | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
| VIVAKOR ADMINISTRATION, LLC, | ||
| a Texas limited liability company | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
Page 8 of 9
EXHIBIT A
TO MASTER NETTING AGREEMENT
THE CONTRACTS
| 1. | Membership Interest Purchase Agreement dated June 15, 2022, by and between Jorgan, JBAH, and Vivakor. |
| 2. | Secured Promissory Note dated August 1, 2022, made to the order of Jorgan by Vivakor, in the original principal amount of $28,377,641. |
| 3. | Secured Promissory Note dated August 1, 2022, made to the order of JBAH by Vivakor, in the original principal amount of $286,643. |
| 4. | Pledge Agreement dated August 1, 2022, by and between Jorgan, as Secured Party, and Vivakor, as Debtor. |
| 5. | Pledge Agreement dated August 1, 2022, by and between JBAH, as Secured Party, and Vivakor, as Debtor. |
| 6. | Crude Petroleum Supply Agreement dated January 1, 2021, by and between WCC and SFD, as amended. |
| 7. | Oil Storage Agreement dated January 1, 2021, by and between WCC, as Shipper, and WCCC, as Operator, as amended. |
| 8. | Membership Interest Purchase Agreement dated as of March 21, 2024, by and between Jorgan, JBAH, and Vivakor. |
| 9. | Trucking Transportation Agreement dated effective January 1, 2023, by and between Endeavor Crude, LLC, as Carrier, and White Claw Crude, LLC, as Customer, as amended. |
| 10. | Station Throughput Agreement dated effective July 1, 2023, by and between CPE Gathering Midcon, LLC, as Operators (sic), and White Claw Crude, LLC, as Shipper. |
| 11. | Station Throughput Agreement dated effective January 1, 2023, by and between Silver Fuels Processing, LLC, et al., as Operators, and White Claw Crude, LLC, as Shipper. |
| 12. | Commercial Net Lease—White Claw Elmendorf Yard dated February 21, 2024, by and between White Claw Crude, LLC, as Landlord, and Meridian Equipment Leasing, LLC, as Tenant. |
| 13. | Commercial Net Lease—Waskom Carrizo Springs Yard dated February 21, 2024, by and between Waskom Enterprises, LLC, as Landlord, and Meridian Equipment Leasing, LLC, as Tenant. |
| 14. | Transition Services Agreement dated September 12, 2024, by and between Vivakor Administration, LLC, as Service Recipient, and Ballengee Holdings, LLC, a Service Provider. |
| 15. | Repair and Maintenance Subscription Plan Agreement dated September 12, 2024, by and between Horizon Truck & Trailer, LLC, as Provider, and Meridian Equipment Leasing, LLC, as Subscriber. |
| 16. | All cash dividends and/or cash distributions of any Series A Preferred Shares of Vivakor. |
Page 9 of 9
Exhibit 10.5
Execution Copy
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this “Agreement”) is dated effective October 1, 2024 (the “Effective Date”) is by and between BALLENGEE HOLDINGS, LLC, a Texas limited liability company (“Service Provider”), and VIVAKOR ADMINISTRATION, LLC, a Texas limited liability company whose address (“Service Recipient”). Grantor and Grantee may hereinafter be referred to individually as a “Party” or collectively as the “Parties”.
WHEREAS, the Parties are affiliates of entities that recently consummated the transactions contemplated by that certain Membership Interest Purchase Agreement dated March 21, 2024, by and between Jorgan Development, LLC and JBAH Holdings, LLC, as Sellers, and Vivakor, Inc., as Purchaser, as amended (the “MIPA”);
WHEREAS, in order to better facilitate the transactions contemplated by the MIPA and ensure a smooth transition of certain operations, the Parties have agreed to execute and enter into this Agreement;
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. Services. During the Term of this Agreement, subject to the conditions set forth herein, Service Provider shall provide accounting, audit, compliance, crude oil marketing, invoicing support, inventory accounting, contract management, and consulting-related services to Service Recipient reasonably requested by Service Recipient in connection with Service Recipient’s crude oil marketing business and other historical midstream oil & gas business units (the “Services”), which have been indirectly acquired from Service Provider by Service Recipient pursuant to the Transaction. The Services shall be performed in a commercially reasonable manner, in accordance with its respective past practices and standards for the provision of such Services, by employees of Service Provider or its affiliates.
2. Term and Termination. This Agreement shall be in force and effect until the provision of thirty (30) days advance written notice of termination by one Party hereunder to the other Party (the “Term”).
3. Cost of Services and Reimbursement.
| (a) | Service Recipient shall reimburse Service Provider for all direct and/or allocated costs and expenses incurred by such Service Provider in connection with the provision of the Services; |
| (b) | Service Recipient shall reimburse the Service Provider for all direct and/or allocated costs and expenses incurred by such Service Provider in connection with the provision of the Services, in each case, including: |
| (i) | the portion of the salaries, wages, bonuses or commissions (including payroll and withholding taxes associated therewith) of employees of the Service Provider allocated in good faith by Service Provider in proportion to the amount of such employee’s working time devoted to the provision of Services to such Party and on the basis of the reasonable allocation methodologies of Service Provider as in effect from time to time; |
| (ii) | the portion of any costs of employee benefits relating to employees of the Service Provider, including 401(k), pension, bonuses and health insurance benefits, allocated in good faith by Service Provider in proportion to the amount of such employee’s working time devoted to the provision of Services to Service Recipient, as applicable, and on the basis of the reasonable allocation methodologies of Service Provider as in effect from time to time; |
| (iii) | any expenses incurred or payments made by the Service Provider for shared facilities and services, including lease payments for corporate offices and insurance coverage with respect to the business of the Parties; |
| (iv) | all sales, use, employment, excise, value added or similar taxes, if any, that may be applicable from time to time with respect to the Services; and |
| (v) | the costs and expenses incurred to obtain and maintain contracts, licenses, properties, goods and other assets of the Company or any Service Recipient that is used for the performance of Services on behalf of such Party. |
| (c) | Service Provider shall invoice Service Recipient for the above-identified costs and expenses on a monthly basis. Undisputed amounts shall be due and payable on a net thirty (30) day basis from receipt of such invoice. |
4. Books and Records. Service Provider shall keep and maintain books and records relating to the Services and reasonable supporting documentation of all charges and expenses incurred in connection with the operation of Energy’s crude oil marketing business (collectively, the “Books and Records”). Service Provider will maintain and retain Books and Records in accordance with its respective past practices and standards for the provision of such Services. The Books and Records shall be made available upon request during the Term of this Agreement and for a period of one (1) calendar year thereafter.
5. Limitations on Liability; Authority. In the absence of gross negligence or willful misconduct, neither Party shall be liable to the other Party for any losses, damages or adverse consequences of any nature whatsoever arising out of such Party’s performance or failure to perform the services contemplated under this Agreement. In no event shall either Party be liable to the other Party for indirect, special, consequential, including without limitation business interruption, or incidental damages, including without limitation loss of profits or damage to or loss or use of any crude oil. Employees of Service Provider or its affiliates shall have no authority to bind Service Recipient, or any of their affiliates, to any obligation in performance of the Services.
6. Confidentiality. Each Party shall keep confidential all Confidential Information that the other Party has disclosed or may hereafter disclose directly or indirectly to it as a result of or in the course of performance of this Agreement. Such Party shall use such Confidential Information only as necessary to perform this Agreement, and shall not disclose to third parties, duplicate or use in any other manner any part of such Confidential Information without the prior written consent of the other Party, except to the extent that either Party can show that such information: (a) is generally available to and known by the public through no fault of such Party, any of its Affiliates or their respective agents or representatives; or (b) is lawfully acquired by such Party, any of its Affiliates or their respective agents or representatives, from sources that are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If either Party or any of their respective Affiliates are compelled to disclose any information by judicial or administrative process or by other requirements of Applicable Law, including in connection with litigation, such Party shall promptly notify the other Party in writing and shall disclose only that portion of such information that such Party is advised by its counsel in writing is legally required to be disclosed, provided that such Party will use commercially reasonable efforts to obtain an appropriate protective order or other reasonable assurances that confidential treatment will be accorded such Confidential Information. For purposes of this Agreement, “Confidential Information” means all information, financials, credit information, scheduling information, customer lists, prices, instructions, procedures, standards, contract rates, specifications, volumes, and identities of third parties which one Party has disclosed or may hereafter disclose directly or indirectly to it as a result of or in the course of performance of this Agreement.
Page 2 of 5
7. Common Interest. Service Provider and Service Recipient acknowledge that they are acting and working together in a common interest to facilitate the transactions contemplated by the MIPA. Accordingly, Service Provider and Service Recipient acknowledge that certain information may be exchanged that constitutes privileged and confidential attorney-client communications and/or privileged and confidential attorney-client work product. Service Provider and Service Recipient acknowledge and agree that all such communications by and between Service Provider and Service Recipient, on the one hand, and their attorneys, on the other, with relation to Service Recipient’s going concern crude oil marketing business, constitute confidential communications for the purpose of the rendition of professional legal services to either Service Provider and/or Service Recipient, are intended not to be disclosed to third parties, are protected by attorney-client or attorney-work product privilege, and are deemed by the Parties to be Confidential Information hereunder.
8. Miscellaneous.
| (a) | Notices. Any notice, invoice or other communication required or desired to be given to either Party hereunder shall be in writing and sent by United States mail, postage prepaid, or sent by facsimile transmission, addressed as follows, except that either Party may change its address by giving written notice to the other party: |
|
Vivakor Administration, LLC: Attn: Pat Knapp 5220 Spring Valley Rd., Ste. 500 Dallas, TX 75254 email [email protected] |
Ballengee Holdings, LLC Attn: James Ballengee 5220 Spring Valley Rd., Ste. 415 Dallas, TX 75254 email [email protected] |
| (b) | Relationship. In the performance of this Agreement, neither Party shall be under the other Party’s direction or control as to the persons engaged by that Party to assist in said performance, or as to the means and methods employed by such Party in accomplishing said performance. All employees, agents or other representatives engaged by one Party in connection with the performance of this Agreement will be of that Party’s own selection, for that Party’s own account and own expense. The terms of the employee relationships of each party, including hours, wages and/or salaries shall be under that Party’s exclusive control and direction at all times. It is further understood and agreed that the Parties for all purposes shall be considered independent contractors and fully and exclusively liable for the payment of any and all taxes now or hereafter imposed by any governmental authority which are measured by wages, salaries, commissions or otherwise paid to persons in its employ. |
| (c) | Assignment. Neither Party may assign this assign, mortgage or encumber this Agreement or sublet or delegate its rights in and to this Agreement. Any assignment, transfer, delegation, mortgage or sublease of this Agreement without the prior written consent of the other Party shall be null, void and of no effect. |
| (d) | Entire Agreement. This Agreement constitutes 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 Agreement shall be binding on the other Party unless in writing and signed by both Parties. |
Page 3 of 5
| (e) | Counterparts. This Agreement, and any amendments and modifications hereto, may be executed and delivered in multiple counterparts, including multiple signature pages, each of which shall be deemed an original. For purposes of this Agreement, a “writing” includes electronic, facsimile and postal communication. |
| (f) | 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 Agreement. |
| (g) | Waiver. No waiver by any Party of any one or more defaults of the other Party in the performance of this Agreement shall operate or be construed as a waiver of any other or future default or defaults, whether of a like or different character. |
| (h) | 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 Agreement. |
| (i) | Law and Venue. This Agreement 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 that venue for any dispute hereunder shall be in a court of competent jurisdiction located in DALLAS COUNTY, TEXAS. |
| (j) | Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY HERETO MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH REGARD TO THE SERVICES CONTEMPLATED IN THIS AGREEMENT. |
[Signature page follows.]
[The remainder of this page is intentionally blank.]
Page 4 of 5
IN WITNESS WHEREOF, the Parties have executed and entered into this Agreement to be effective as of the Effective Date.
| SERVICE RECIPIENT: | SERVICE PROVIDER: | |||
| VIVAKOR ADMINISTRATION, LLC, a Texas limited liability company |
BALLENGEE HOLDINGS, LLC, a Texas limited liability company | |||
| By: | By: | |||
| Name: | Pat Knapp | Name: | James H. Ballengee | |
| Title: | EVP, General Counsel, & Secretary | Title: | Manager | |
Page 5 of 5
Exhibit 10.6
Execution Version
HORIZON TRUCK & TRAILER, LLC
REPAIR & MAINTENANCE SUBSCRIPTION PLAN
This Repair and Maintenance Subscription Plan, including all attached schedules hereto (collectively, this “Agreement”) is entered into as of October 1, 2024 by and between HORIZON TRUCK & TRAILER, LLC, a Texas limited liability company with its principal place of business at 5220 Spring Valley Road, Suite 520, Dallas, Texas 75254, or their designated agents or affiliates (“Provider”), and the Subscriber who signs Schedule A hereto (“Subscriber”), being a natural person or entity having its principal place of business as set forth below the Subscriber’s signature block of this Agreement. Provider and Subscriber may be referred to herein individually as a “Party” or collectively as the “Parties”. Provider and Subscriber agree as follows:
1. PREAMBLE. Provider does hereby agree to maintain and repair, or cause to be maintained and repaired, as set forth in Section 2, the vehicle(s) and equipment owned or leased by the Subscriber and described on Schedule A (“Covered Vehicles”) attached hereto and made a part hereof, subject to the terms and provision of this Agreement.
2. SERVICES AND PARTS PROVIDED. Provider hereby covenants and agrees to repair and maintain the Covered Vehicles as follows, subject to the terms and provisions of this Agreement:
2(a). Tires. Shall have sound casings capable of carrying its rated load capacity. Steer axle tires are to be original, matched tread, with 8/32 inch remaining tread depth on all tires. Rear axle to be original, matched tread with 8/32 inch remaining tread depth;
2(b). Body. Shall have no dented or punctured panels (including fuel tanks) and no other damage that costs more than two hundred fifty dollars ($250) to repair. All bodies that have been damaged, rusted or abused must be repaired to original condition, less normal wear and tear. There will be no sheet metal damage including paint and rust on cab, bumper, grill, fuel tanks and attachments to the cab including sleeper boxes, airings, and cab extenders. Frame, crossmembers, springs, axles, axle housings and wheels will be free from cracks, breaks or bends. When included, lift gates will be operable and refrigeration equipment must operate to original designed temperature capacity;
2(c). Interiors (Tractor Only). Shall be clean, shall have no tears, odors, burns, damage to seats, seat backs, dashes, headliners, door panels or carpeting, original radio and other original equipment to be in place. Gauges and all other operative parts and accessories shall be in working order;
2(d). Engines (Tractor Only). Shall be mechanically sound, carry manufacturer’s recommended oil pressure, have no excessive blow by, no water and/or oil leakage, and have no cracked heads or blocks. Transmission and differentials shall have no seal leakage (including wheel seals - steer and drive axles), shall be operable as originally provided to customer, shall have no excessive gear noise. Lessee will furnish electronic engine ECM codes upon request;
2(e). Drive Train Components (Tractor Only). Equipment will be “ROADWORTHY”, capable of operating as originally designed; this specifically includes, but is not limited to, engines, transmissions, axles and allied equipment (i.e. heater/AC system);
2(f). Glass (Tractor Only). Windshield shall not be pitted, chipped or cracked that would fail DOT inspection. Windows and mirrors shall not be broken or cracked, including bulls-eyes or fractures, and all window operating mechanisms shall be operable;
2(g). Electrical. Batteries, starters, alternators, etc. shall be operable. Charging system will be operating and batteries will start Equipment under its own power with no dead cells or cracked cases. Lights and wiring shall be operable with no broken sealed beams, lenses, etc. Heaters and air conditioning systems shall be operable;
2(h). Factory Equipment & In Service Equipment. Factory-installed equipment and any equipment installed in Equipment prior to operations shall be intact and operable. Includes fifth wheel, mudflaps, airfoils, safety equipment, chain boxes, etc.;
2(i). Chrome & Bright Metal Trim. Bumpers, grab handles, wheel hub caps, grills, etc. originally on unit at time of roadworthiness shall be free from damage and scrapes;
2(j). Brakes. Shoes shall have a minimum of 25% wear left; and
2(k). DOT Standards. The Covered Vehicles shall pass a complete U.S. Department of Transportation (“DOT”) annual inspection.
2(l). Scheduled Maintenance. Subscriber covenants and agrees that it shall timely deliver the Covered Vehicles for the following scheduled maintenance, and Provider shall provide or cause to be provided such scheduled maintenance, as required by the following Preventive Maintenance Schedule (unless differently provided in Schedule A):
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
| REQUIRED MAINTENANCE ITEM | TRACTOR | TRAILER | |||
| Daily | Monthly | Every | Daily | Every | |
| Inspect & Repair Oil Level | X | ||||
| Inspect & Repair Radiator Fan/Hub/Fluid Level | X | ||||
| Inspect & Repair Water Pump/Hose/Belt | X | ||||
| Inspect & Repair Steering Fluid/Hose/Belt/Linkage | X | ||||
| Inspect & Repair Air Compressor/Hose/Belt | X | ||||
| Inspect & Repair Alternator/Belt | X | ||||
| Inspect & Repair/Replace/Secure Fire Extinguisher | X | ||||
| Inspect & Repair Emergency Triangles/Extra Fuses | X | ||||
| Inspect & Repair Clutch/Clutch Travel | X | ||||
| Inspect & Repair Gauges | X | ||||
| Inspect & Repair Engine Operating Temperature | X | ||||
| Inspect & Repair Oil Pressure | X | ||||
| Inspect & Repair Ampmeter/Voltmeter | X | ||||
| Inspect & Repair Steering Play | X | ||||
| Inspect & Repair Wipers/Washers | X | ||||
| Inspect & Repair Air Filter Indicator/Air Filter | X | ||||
| Inspect & Repair Horn | X | ||||
| Inspect & Repair Heater/Defroster | X | ||||
| Inspect & Repair Turn Signals/Flasher | X | X | |||
| Inspect & Repair Brake Lights | X | X | |||
| Inspect & Repair License Plate Light | X | X | |||
| Inspect & Repair ABS System/Indicator Light | X | X | |||
| Inspect & Repair Exhaust System | X | ||||
| Inspect & Repair Headlights/High & Low Beam | X | ||||
| Inspect & Repair/Replace/Inflate Tires | X | X | |||
| Inspect & Repair Wheel Seals | X | X | |||
| Inspect & Repair Rims/Lug Nuts | X | X | |||
| Inspect & Repair Slack Adjusters | X | X | |||
| Inspect & Repair Brake pads and Drums | X | X | |||
| Inspect & Repair Brake Chamber | X | X | |||
| Inspect & Repair Brake Hoses and Air Lines | X | X | |||
| Inspect & Repair Springs/Mounts | X | X | |||
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
2
| REQUIRED MAINTENANCE ITEM | TRACTOR | TRAILER | |||
| Daily | Monthly | Every | Daily | Every | |
| Inspect & Repair Suspension System Air Lines/Bags | X | X | |||
| Inspect & Repair Shock Absorbers | X | X | |||
| Inspect & Repair Reflectors/Reflective Tape | X | X | |||
| Inspect & Repair Mud Flaps/Brackets | X | X | |||
| Inspect & Repair Windows/Mirrors/Brackets | X | X | |||
| Inspect & Repair Drive Shaft/Transmission | X | ||||
| Inspect & Repair Coupling System Mounting Bolts | X | X | |||
| Inspect & Repair Coupling System Safety Latch/Locking Jaw | X | ||||
| Inspect & Repair Coupling System Platform/Frame | X | ||||
| Inspect & Repair Coupling System Release Arm | X | ||||
| Inspect & Repair Coupling System Kingpin/Apron Gap | X | X | |||
| Inspect & Repair Air Line/Electric Connection to Trailer | X | ||||
| Inspect & Repair Catwalk/Frame/Centrifuge Mount | X | ||||
| Inspect & Repair Air Tanks/Mount/Drain Water | X | ||||
| Inspect & Repair Batteries/Cover | X | ||||
| Inspect & Repair DEF/Fuel Tanks/Caps | X | ||||
| Inspect & Repair Loading/Unloading Hoses/Connections | X | ||||
| Inspect & Repair Centrifuge | X | ||||
| Inspect & Update Permit Book/Required Stickers | X | ||||
| Lubricate all lube points | X | Month | |||
| Lubricate 5th Wheel | X | ||||
| Test AntiFreeze to -40 Degrees | 25,000 miles | ||||
| Clean Air Filter | 25,000 miles | ||||
| Change Air Filter | 50,000 miles | ||||
| Replace Coolant Filter | 25,000 miles | ||||
| Replace Fuel Filters | 25,000 miles | ||||
| Inspect & Repair Wheel Bearings | 25,000 miles | ||||
| Change Oil/Oil Filter | 15,000 miles | ||||
| Inspect and Repair Gear Oil | 25,000 miles | ||||
| Inspect & Document NALCO Level PPM | 25,000 miles | ||||
| Drain and Replace Steering Fluid/Filter | Year | ||||
| Change Air Dryer Cartridge | 360,000 miles | ||||
| DOT Annual Inspection | 180 days | ||||
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
3
3. SUBSCRIBER’S OBLIGATIONS. Subscriber hereby covenants and agrees, in accordance with the terms and provisions of this Agreement:
3(a). All services to be furnished hereunder shall, except as otherwise specifically provided for herein, be performed at Provider’s designated maintenance facilities and Subscriber agrees to return each Covered Vehicle to any said maintenance facility for a minimum of eight (8) hours per week or at such other intervals as the parties may determine for service, inspection, adjustments and repairs.
3(b). Subscriber agrees that it will not neglect Covered Vehicles and will ensure that its drivers will not operate any Covered Vehicles in such manner as to cause undue vehicle wear and tear, including, but not limited to operating any vehicle on any tire which does not contain sufficient air pressure to prevent damage to the sidewalls thereof or any improper driving practice. Subscriber understands and agrees that failure to abide by the foregoing may result in additional charges for maintenance and repair hereunder. Provider is not and shall not be responsible for costs and expenses associated with repair, maintenance, services and goods provided at facilities not approved or designated in advance by Provider.
3(c). Subscriber agrees to pay Provider for any additional charges it may incur for failure to operate pursuant to paragraph 3(b), no later than thirty (30) calendar days after such services are invoiced by Provider.
3(d). Subscriber will furnish and/or assign Provider all manufacturers’ warranties applicable to Subscriber’s Covered Vehicles and diligently assist in obtaining the benefits of such warranties as shall be requested by Provider.
3(e). Mileage shall be determined from odometer and/or hub odometer readings. If the odometer and/or hub odometer fails to function, the mileage for the period in which the failure existed shall be determined by (in Provider’s sole judgment) the best available method (e.g., trip records or average miles per gallon record for a prior period). Odometer and/or hub odometer failure shall be promptly reported by Subscriber in writing to Provider.
3(f). Subscriber herein expressly grants permission to Provider to drive and/or road test any and all vehicles hereunder as Provider deems necessary from time to time.
3(g). Indemnification. Subscriber shall indemnify and hold Provider harmless from and against (i) any and all claims, causes of action, suits, fines, fees, PENALTIES, losses, damages, LIABILITIES OR EXPENSES (including reasonable attorneys’ fees) ARISING OUT OF death or injury to persons or loss or damage to property arising out of the ownership, use or operation of said vehicles, (ii) any and all claims, causes of action, suits, fines, fees, PENALTIES, losses, damages, LIABILITIES OR EXPENSES (including reasonable attorneys’ fees) arising OUT OF or as a result of any violation by Subscriber of the terms of this Agreement, and (iii) any and all claims, causes of action, suits, fines, fees, PENALTIES, losses, damages, LIABILITIES OR EXPENSES (including reasonable attorneys’ fees) arising out of Subscriber’s negligence, gross negligence or willful misconduct in the care, custody, ownership and operation of the equipment.
4. TERMS AND CONDITIONS OF SUBSCRIPTION PLAN.
4(a). Subscriber hereby authorizes Provider to furnish or install on the vehicle new, renewed or refurbished replacement parts which Provider deems necessary for the proper maintenance and operation of the vehicle(s). Provider shall have the right to remove any part deemed necessary or advisable to maintain the good repair and condition of the vehicle. Provider shall have custody, title to and the right to retain and dispose of any part removed for any purpose. Provider shall not be obligated to repair or replace the detachable accessory equipment, such as, but not limited to, flares, fire extinguishers or tarpaulins.
4(b). Charges may be adjusted or increased semi-annually by up to five percent (5%) on January 1 and July 1 of each calendar year, respectively, and rounded to the nearest whole cent. Each mileage charge shall be rounded to the nearest mill or one-tenth cent.
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
4
4(c). Notwithstanding anything contained herein to the contrary, Provider’s maintenance and service obligations shall not extend to any maintenance, repair, loss or damage arising out of or related to (i) collision or upset involving the Covered Vehicle regardless of cause or fault, (ii) operation of the vehicle in a reckless or abusive manner, (iii) operation of the vehicle in violation of state or federal law, (iv) operation of the vehicle in excess of manufacturer’s rated gross weight, (v) theft or destruction by fire of a Covered Vehicle, or (iv) Subscriber’s negligence, gross negligence or willful misconduct. Subscriber agrees to promptly effectuate repairs arising out of any of the above conditions subject to the terms and provisions of this paragraph.
4(d). It is expressly understood and agreed that Provider shall not be liable to Subscriber for the loss, damage or disappearance of cargo or any other property belonging to Subscriber or in its custody left in or upon Covered Vehicle at any time or place, including, but not limited to, cargo or property located at any garage operated by Provider. Subscriber shall further indemnify and hold Provider harmless with respect to claims by third persons for such cargo or property.
4(e). Subscriber acknowledges and agrees that the Covered Vehicles is subject to wear and tear and may spend indeterminate periods of time in the shop; indeterminate periods of time out of service; may not be salvageable; or may not be economic to repair. Under such circumstances, in the sole judgment of Provider, Provider may provide substitute equipment to Subscriber on a short-term basis. Such substitute equipment shall be substantially similar in character and roadworthiness to the Covered Vehicles.
5. PRICING AND INVOICING.
5(a). Provider shall invoice Subscriber no later than the tenth (10th) day of the month following the month in which Services were provided hereunder in an amount equal to $100,000.00 per month, to be billed as a monthly retainer creditable against charges incurred pursuant to Section 5(b) below. Retainer payments an all undisputed charges hereunder shall be due and payable no later than the twentieth (20th) day of the month. Notwithstanding the foregoing, on a quarterly basis, the Parties shall review and true-up invoicing for overages and/or shortages in billing based on the rates set forth in Section 5(b) below debited against all retained amounts, with such adjustments to be reflected on the next-in-time invoice hereunder.
5(b). For the goods and services provided in this Agreement, Subscriber shall pay, and hereby authorizes Provider the sum of:
5(b)(1). $115 per hour for labor; and
5(b)(2). All parts shall be sold to be Subscriber on “cost plus ten percent (10%)” basis.
5(c). For purposes of this paragraph, “miles” shall be calculated as miles driven measured in accordance with Section 3(e) hereof.
6. TERM AND TERMINATION.
6(a). The term of this Agreement shall become effective with respect to each vehicle on the later of the dates set forth on Schedule A attached hereto for such vehicle, and shall continue with respect to each said Covered Vehicle until as contemplated below.
6(b). lf a Covered Vehicle is destroyed or so damaged that it cannot, in Provider’s opinion, economically be placed in good working order, this Agreement shall terminate with respect to such vehicle, and the resulting loss shall be borne as provided elsewhere in this Agreement.
6(c). Provider may, at its option and upon prior written notice to Subscriber, terminate this Agreement if:
6(c)(1). Subscriber fails or refuses to deliver said Covered Vehicles to Provider in accordance with the provision of, and for the purposes set forth in paragraph 2 hereof;
6(c)(2). Subscriber fails or refuses to pay any charges when due or promptly perform any other obligation imposed upon it hereunder;
6(c)(3). Provider provides thirty (30) days notice of termination of this Agreement to Subscriber.
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
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7. MISCELLANEOUS.
7(a). Force Majeure. With application solely to this Agreement, and except for payment due hereunder, either Party hereto shall be relieved from liability for failure to perform hereunder for the duration and to the extent such failure is occasioned by war, riots, insurrections, fire, explosions, sabotage, strikes and other labor or industrial disturbances, acts of God or the elements, governmental laws, regulations, or requests, disruption or breakdown of supply lines, highways, bridges, or other methods of supply for goods delivered hereunder, or by any other cause, whether similar or not, reasonably beyond the control of such Party. Failure to perform due to events of force majeure shall not extend the term of this Agreement except to the extent necessary to comply with the provisions of this Section. The Party claiming a force majeure situation (the “Claiming Party”) shall take commercially reasonable steps to ameliorate the cause of such force majeure event and enable it to resume performance during the term of this Agreement. Notwithstanding anything to the contrary contained in this Section, an event of force majeure shall be deemed not to occur under any or all of the following circumstances: (i) to the extent the event constituting force majeure was intentionally initiated or intentionally acquiesced to by the Claiming Party for purposes of allowing that Party to claim force majeure; or (ii) if the inability was caused by a Party’s lack of funds.
7(b). Warranties. Notwithstanding anything contained IN THIS AGREEMENT to the contrary, PROVIDER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH RELATION TO THE GOODS AND SERVICES PROVIDED HEREUNDER, AND EXPRESSLY DISLCAIMS THE SAME. IN NO EVENT SHALL PROVIDER BE LIABLE TO SUBSCRIBER FOR INCIDENTAL, CONSEQUENTIAL, OR OTHER DAMAGES, INCLUDING, BUT NOT LIMITED TO ATTORNEY’S FEES, EXPENSES OR DAMAGES FOR DELAYS, LOSS OF CARGO, DEATH OR INJURY TO PERSONS, OR DAMAGE OR DESTRUCTION TO PROPERTY.
7(c). Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas, without regard for its rules or provisions regarding conflicts of laws. Venue for any dispute hereunder shall be in a court of competent jurisdiction situated in Dallas County, Texas. The parties hereby knowingly and irrevocably waive all right to demand a trial by jury in any dispute arising out of or relating to this Agreement.
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
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The authorized representatives of the Parties hereby execute and enter into this Agreement as of the date first set forth above.
| PROVIDER: | ||
|
HORIZON TRUCK & TRAILER, LLC, a Texas limited liability company | ||
|
By: JORGAN DEVELOPMENT, LLC, a Louisiana limited liability company, its Manager | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| SUBSCRIBER: | ||
|
MERIDIAN EQUIPMENT LEASING, LLC, a Texas limited liability company |
||
|
By: VIVAKOR ADMINISTRATION, LLC, a Texas limited liability company, its Manager |
||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel & Secretary | |
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
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SCHEDULE A - VEHICLES
REPAIR & MAINTENANCE SUBSCRIPTION PLAN
Dated October 1, 2024, between Horizon Truck & Trailer, LLC (“Provider”)
and Meridian Equipment Leasing, LLC (“Subscriber”)
The vehicles covered by this Agreement shall include all commercial tractors & trailers owned, leased, or controlled by Subscriber.
| Repair & Maintenance Subscription Plan | Rev. 09/09/2024 |
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Exhibit 10.7
Execution Version
ASSIGNMENT OF MEMBERSHIP INTEREST
This ASSIGNMENT OF MEMBER INTEREST (this “Assignment”) dated effective October 1, 2024 (the “Effective Date”) is by and between JORGAN DEVELOPMENT, LLC, a Louisiana limited liability company, and JBAH HOLDINGS, LLC, a Texas limited liability company (“Assignors”), and VIVAKOR, INC., a Nevada corporation (“Assignee”). Assignors and Assignee may be referred to herein individually as a “Party” and collectively as the “Parties”.
WHEREAS, Assignors are collectively vested with all of the right, title and interest in and to all of the issued and outstanding limited liability company member interest in and to (a) ENDEAVOR CRUDE, LLC, a Texas limited liability company, (b) MERIDIAN EQUIPMENT LEASING, LLC, a Texas limited liability company, (c) EQUIPMENT TRANSPORT, LLC, a Pennsylvania limited liability company, and (d) SILVER FUELS PROCESSING, LLC, a Texas limited liability company (collectively, the “Companies”);
WHEREAS, Assignors and Assignee have executed and entered into that certain Membership Interest Purchase Agreement dated March 21, 2024, contemplating the purchase and sale of the Companies, among other matters (the “MIPA”);
WHEREAS, pursuant to and in accordance with the MIPA, Assignors desire to assign to Assignee, and Assignee desires to accept and assume, all of the issued and outstanding limited liability company membership interest in and to the Companies (the “Membership Interest”);
NOW, THEREFORE, in consideration of the premises and the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Assignment and Assumption of the Membership Interests. Assignors do hereby BARGAIN, SELL, ASSIGN, TRANSFER, CONVEY, SET OVER and DELIVER to Assignee all of Assignors’ right, title and interest in and to the Membership Interest. Assignee hereby ACCEPTS and ASSUMES the Membership Interest, and all rights, benefits, duties and obligations thereof, free and clear of all liens and encumbrances other than restrictions imposed on sales of securities under applicable laws.
2. MIPA. Notwithstanding anything contained herein to the contrary, this Assignment is made and delivered expressly SUBJECT TO all of the terms, provisions and conditions contained in the MIPA for all purposes. In the event of a conflict or inconsistency between the terms of this Assignment and the MIPA, the terms of the MIPA shall control.
3. Binding Effect. This Assignment shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, successors and permitted assigns.
4. Assignment; Third-Party Beneficiaries. This Assignment shall not be assignable by either Party without the prior written consent of the other Party and any attempt to assign this Assignment without such consent shall be void and of no effect. Nothing in this Assignment, expressed or implied, is intended or shall be construed to confer upon any person other than the parties hereto and their successors and assigns permitted by this Section 5 any right, remedy or claim under or by reason of this Assignment.
5. Amendment; Waivers, etc. 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 hereto 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. Governing Law. 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 or the Member Interest 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 MIPA. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS ASSIGNMENT.
7. Entire Agreement. This Assignment and the MIPA (and the agreements contemplated by the MIPA) constitute the entire agreement of the Parties to this Assignment with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof.
8. 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.
9. 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 to Follow]
Page 2 of 3
IN WITNESS WHEREOF, the duly-authorized representatives of the Parties have executed and entered into this Assignment to be effective as of the Effective Date.
| ASSIGNORS: | ||
|
JORGAN DEVELOPMENT, LLC, a Louisiana limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
|
JBAH HOLDINGS, LLC, a Texas limited liability company | ||
| By: | ||
| Name: | James H. Ballengee | |
| Title: | Manager | |
| ASSIGNEE: | ||
| VIVAKOR, INC., a Nevada corporation | ||
| By: | ||
| Name: | Pat Knapp | |
| Title: | EVP, General Counsel, & Secretary | |
Page 3 of 3
Exhibit 99.1
VIVAKOR CLOSES $120 MILLION ACQUISITION OF ENDEAVOR ENTITIES
DALLAS, TX / ACCESSWIRE / October 7, 2024 / Vivakor, Inc. (NASDAQ:VIVK) (“Vivakor” or the “Company”), an integrated provider of energy transportation, storage, reuse, and remediation services, is pleased to announce that all closing processes have been completed and, effective October 1, 2024, it closed its previously announced acquisition of Endeavor Crude, LLC, Meridian Equipment Leasing, LLC, Equipment Transport, LLC, and Silver Fuels Processing, LLC, and their subsidiaries (collectively, the “Endeavor Entities”).
James Ballengee, Chairman, President, & CEO, commented, “The closing of the Endeavor Entities was a significant undertaking, with multiple business lines, spanning over six months in the making, culminating in Vivakor now owning one of the largest combined fleets of oilfield services in the continental United States. The integration and consolidation of existing operations creates immediate value within our financial framework, by delivering sustainable accretion to earnings that will result in increased shareholder value over time. We couldn’t be more excited about this acquisition.”
About Vivakor, Inc.
Vivakor, Inc. (NASDAQ:VIVK), is an integrated provider of energy transportation, storage, reuse, and remediation services. Vivakor’s corporate mission is to develop, acquire, accumulate, and operate assets, properties, and technologies in the energy sector. Its multi-state suite of facilities provide crude oil gathering, storage, transportation, reuse, and remediation services under long-term contracts.
Vivakor’s oilfield waste remediation facilities, currently under construction, will facilitate the recovery, reuse, and disposal of petroleum byproducts and oilfield waste products.
For more information, please visit our website: http://vivakor.com
Cautionary Statement Regarding Forward-Looking Statements
This news release may contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results anticipated in these forward-looking statements. Forward-looking statements may be identified but not limited by the use of the words “anticipates,” “expects,” “intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” or “continue” and variations or similar expressions. Our actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including, but not limited to, the expected transaction and ownership structure, the valuation of the transaction, the likelihood and ability of the parties to successfully and timely consummate planned acquisitions, the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect Vivakor or the expected benefits of the such transaction, our ability to maintain the listing of our securities on The Nasdaq Capital Market, the parties failure to realize the anticipated benefits of pending transactions, disruption and volatility in the global currency, capital, and credit markets, changes in federal, local and foreign governmental regulation, changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks, our ability to successfully develop products, rapid change in our markets, changes in demand for our future products, and general economic conditions.
These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in Vivakor’s filings with the U.S. Securities and Exchange Commission, which factors may be incorporated herein by reference. Actual results, performance or achievements may differ materially, and potentially adversely, from any projections and forward-looking statements and the assumptions on which those forward-looking statements are based. There can be no assurance that the data contained herein is reflective of future performance to any degree. You are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance as projected financial information and other information are based on estimates and assumptions that are inherently subject to various significant risks, uncertainties and other factors, many of which are beyond our control. All information set forth herein speaks only as of the date hereof in the case of information about Vivakor and the Endeavor Entities or the date of such information in the case of information from persons other than Vivakor and the Endeavor Entities, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication. Forecasts and estimates regarding the Endeavor Entities industries and markets are based on sources we believe to be reliable; however, there can be no assurance these forecasts and estimates will prove accurate in whole or in part.
| Investor Contact: | |
| Phone: (949) 281-2606 | |
| [email protected] | |
| SOURCE: Vivakor, Inc. |