Item
1.01 Entry into a Material Definitive Agreement.
Membership
Interest Purchase Agreement
On
December 27, 2022, HNR Acquisition Corp, a Delaware corporation (the “Company”), entered into a membership interest
purchase agreement (the “MIPA”) with CIC Pogo LP, a Delaware limited partnership (“CIC”), DenCo
Resources, LLC, a Texas limited liability company (“DenCo”), Pogo Resources Management, LLC, a Texas limited liability
company (“Pogo Management”), 4400 Holdings, LLC, a Texas limited liability company (“4400” and,
together with CIC, DenCo and Pogo Management, collectively, “Seller” and each a “Seller”), and,
solely with respect to Section 7.20 of the MIPA, HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”).
The
Purchase
Pursuant
to the MIPA, and subject to the terms, provisions, and conditions set forth therein, at the closing of the transactions contemplated
by the MIPA (the “Closing”), Seller will sell, assign, and convey to the Company, and the Company will purchase and accept
from Seller, effective as of the Effective Time, one hundred percent (100%) of the outstanding membership interests (the “Target
Interests”) of Pogo Resources, LLC, a Texas limited liability company (the “Target”). As used herein, the
“Effective Time” means 12:01 a.m. on the first day of the calendar month that is four (4) months prior to the calendar
month of the Closing Date.
The
purchase price (the “Base Purchase Price”) for the Target Interests will be (a) cash in the amount of $100,000,000
in immediately available funds (the “Cash Consideration”); provided, that up to $15,000,000 of the Cash Consideration
may be payable through a promissory note to Seller (the “Seller Promissory Note”) and (b) 2,000,000 shares of the
Company’s common stock, par value $0.0001 (“SPAC Common Stock”), valued at $10.00 per share (the “Share
Consideration”); provided, that, at Closing, 500,000 shares of Share Consideration (the “Escrowed Share Consideration”)
will be placed in escrow for the benefit of the Company. The Base Purchase Price is subject to adjustment in accordance with the MIPA.
Conditions
to Closing
The
obligation of Seller to consummate the transactions contemplated by the MIPA are subject, at the option of Seller, to the satisfaction
on or prior to Closing of certain conditions, including: (i) the accuracy of certain representations and warranties of the Company, except
for such breaches, if any, as would not have a material adverse effect; (ii) the performance and observance of all covenants and agreements
to be performed or performed by the Company, except for such covenants and agreements for which the nonperformance or nonobservance does
not or would not be reasonably expected to have a material adverse effect; (iii) no proceeding by a third party (including any governmental
body) seeking to restrain, enjoin, or otherwise prohibit the consummation of the transactions contemplated by the MIPA will be pending
before any governmental body or have resulted in an injunction, order, or award that grants such relief; (iv) execution and delivery
of certain agreements, including the registration rights agreement and the board observer agreement, by the Company; (v) the aggregate
amount of all valid title defects asserted by the Company do not exceed an amount equal to 20% of the Base Purchase Price; (vi) the Company
will be ready, willing, and able to pay the Cash Consideration to Seller (with at least $85,000,000 payable in cash and no more than
$15,000,000 subject to payment through the terms of the Seller Promissory Note) and issue the Share Consideration to Seller; (vii) the
Share Consideration will have been approved for listing on the NYSE American, Nasdaq or another nationally recognized securities exchange
listing mutually agreed by the Parties, subject only to official notice of issuance thereof; (viii) any waiting period applicable to
the transactions contemplated by the MIPA under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the “HSR Act”) will have been terminated or have expired; and (ix) the transactions contemplated
by the MIPA will have been approved by the Company’s stockholders at a special meeting.
The
obligations of the Company to consummate the transactions contemplated by the MIPA are subject, at the option of the Company, to the
satisfaction on or prior to Closing of certain conditions, including: (i) the accuracy of certain representations and warranties of Seller,
except for such breaches, if any, as would not have a material adverse effect; (ii) the performance and observance of all covenants and
agreements to be performed or performed by Seller in all material aspects; (iii) no proceeding by a third party (including any governmental
body) seeking to restrain, enjoin, or otherwise prohibit the consummation of the transactions contemplated by the MIPA will be pending
before any governmental body or have resulted in an injunction, order, or award that grants such relief, with certain exceptions; (iv)
execution and delivery of certain transaction documents and financial statements by Seller; (v) any waiting period applicable to the
transactions contemplated by the MIPA under the HSR Act will have been terminated or shall have expired; (vi) the transactions contemplated
by the MIPA will have been approved by the Company’s stockholders at a special meeting; (vii) the Minimum Cash Amount plus the
principal amount of the Seller Promissory Note will equal a total amount of $100,000,000; (viii) the Company will not have redeemed shares
of SPAC Common Stock in an amount that would cause the Company to have less than $5,000,001 of net tangible assets; (ix) No material
adverse effect will have occurred between the date of the MIPA and the date of closing (the “Closing Date”) with respect
to the Target; (x) the aggregate amount of all valid title defects will not exceed an amount equal to 20% of the Base Purchase Price;
and (xi) the Company’s common stock will have listed, and will have been approved for continued listing, on the NYSE American,
Nasdaq or another nationally recognized securities exchange mutually agreed by the Parties.
Representations,
Warranties and Covenants
The
MIPA contains customary representations, warranties and covenants of the Company, Target and Seller.
Termination
The
MIPA may be terminated (i) at any time prior to Closing by the mutual prior written consent of Seller and the Company; (ii) by Seller
or the Company if Closing has not occurred on or before March 31, 2023 (the “Outside Date”); provided, that
if the proxy statement is in definitive form and has been mailed to the Company’s stockholders of record prior to March 31, 2023
and a special meeting of the Company’s stockholders is scheduled to be held on or prior to April 15, 2023, then the Outside Date
will be extended to April 30, 2023; (iii) by the Company, if all conditions to Seller’s obligation to proceed with Closing have
been satisfied or waived by the Company but Seller has refused to close; (iv) by Seller or the Company if, after the final adjournment
of the special meeting of the Company’s stockholders at which a vote of the Company’s stockholders has been taken in accordance
with the MIPA, the Company’s stockholder approval has not been obtained; (v) by Seller, if (1) the Closing has not occurred on
or before February 14, 2023 and Sponsor has not effected the extension of time allowed for the SPAC (the “SPAC Extension”)
to consummate a purchase; (2) the Company has not obtained aggregate binding commitments of at least $60,000,000.00 in the form of debt,
equity or other additional sources of capital from reputable lenders or financing providers, and in a form reasonably satisfactory to
Seller and presented copies of such commitments to Seller on or before December 31, 2022; or (3) the Company delivers a notice with respect
to the determination that the minimum cash amount will not be satisfied; (vi) by the Company, on or prior to the date that Sponsor or
the Company effects the SPAC Extension, if the Target or Seller does not deliver the financial statements required for the proxy statement
on or prior to February 7, 2023; (vii) by either party if a breach of any representation or warranty or failure to perform any covenant
or agreement on the part of the other party set forth in the MIPA will have occurred that would cause any of the conditions to closing
to not to be satisfied, and is incapable of being cured by the Outside Date or, if curable, is not cured by the breaching party within
thirty (30) days of receipt by the breaching party of written notice of such breach or failure (or, if the Outside Date is less than
thirty (30) days from the date of receipt of such notice, by the Outside Date); by Seller, if all conditions to the Company’s obligation
to proceed with Closing have been satisfied or waived by Seller (other than those conditions that, by their nature, are to be satisfied
at Closing) but the Company has refused to close.
If
the MIPA is validly terminated, the transactions contemplated therein will become void and of no further force or effect without any
further action of or liability to indemnitees (absent fraud, or any willful and material breach of the MIPA by a party hereto), and following
such termination, Seller will be free immediately to enjoy all rights of ownership of the Target Interests and to sell, transfer, encumber,
or otherwise dispose of the Target Interests to any Person without any restriction under this Agreement.
The
foregoing description of the MIPA is qualified in its entirety by reference to the full text of the MIPA, a copy of which is included
as Exhibit 2.1 to this Current Report on Form 8-K, and incorporated herein by reference.
Certain
Related Agreements
SPAC
Stockholder Support Agreement
Concurrently
with the execution of the MIPA, the Company entered into a SPAC Stockholder Support Agreement with certain of
the holders of the Company’s common stock and warrants (each, a “SPAC Stockholder”), pursuant to which, among
other things, (i) each SPAC Stockholder agrees not to, exercise redemption rights or otherwise elect to redeem, tender or submit for
redemption any securities pursuant to or in connection with the transactions contemplated by the MIPA, and waives any redemption rights;
(ii) agrees unconditionally and irrevocably to vote in favor of the transactions contemplated by the MIPA at a special meeting of the
Company’s stockholders and in favor of any other proposals set forth in the proxy statement filed by the Company with the Securities
and Exchange Commission (the “SEC”) relating to the transactions contemplated by the MIPA, and against any transaction,
proposal, agreement or action made in competition or inconsistent with the transactions or matters contemplated by the MIPA.
The
foregoing description of the SPAC Stockholder Support Agreement is qualified in its entirety by reference to the full text of the SPAC
Stockholder Support Agreement, a copy of which is included as Exhibit 10.1 to this 8-K, and incorporated herein by reference.
Promissory
Note
To
the extent the minimum cash amount is less than $100,000,000, the Seller may issue a promissory note to, and payable by the Company,
in an amount equal to the lesser of (i) the difference between $100,000,000 and the minimum cash amount and (ii) $15,000,000, providing
for a maturity date that will be six (6) months from the Closing Date, bearing an interest rate equal to the greater of 12% per annum
and the highest interest rate applicable to the Company financing, and with no penalty for prepayment; provided, that if the Promissory
Note is not repaid in full on or prior to its stated maturity date, the Company will owe interest equal to the lesser of 18% per annum
and the highest amount permissible under law, compounded monthly.
Until
the obligations under the Promissory Note are repaid in full, the Company (1) shall conduct the business of Pogo and its Subsidiaries
in the ordinary course, consistent with past practice during the nine (9) months prior to the closing the transactions contemplated by
the MIPA; (2) will not (i) transfer, sell, hypothecate, encumber, dispose of any material assets of Target or its subsidiaries unless,
following such transfer or sale of assets the proceeds received by the Company or Target are used to repay 100% of the obligations owed
under the Promissory Note or (ii) acquire any material assets outside of the ordinary course of business; (3) use any proceeds the Company,
Target or any of their respective subsidiaries raised in connection with the issuance of any equity or debt securities to repay (whether
full or in part) the accrued and outstanding obligations under the Promissory Note.
The
foregoing description of the Promissory Note is qualified in its entirety by reference to the full text of the form of promissory note,
a form of which is included as Exhibit 10.2 to this 8-K, and incorporated herein by reference.
Registration
Rights Agreement
At
Closing, the Company and the Seller will enter into a Registration Rights Agreement (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide Seller with certain registration rights with respect to the Share Consideration,
as defined in the MIPA, including filing with the SEC an initial Registration Statement on Form S-1 covering the resale by the Seller
of the Share Consideration so as to permit their resale under Rule 415 under the Securities Act, no later than thirty (30) days following
the Closing, use its commercially reasonable efforts to have the initial Registration Statement declared effective by the SEC as soon
as reasonably practicable following the filing thereof with the SEC and use commercially reasonable efforts to convert the Form S-1 (and
any subsequent Registration Statement) to a shelf registration statement on Form S-3 as promptly as practicable after the Company is
eligible to use a Form S-3 Shelf.
In
certain circumstances, the Seller can demand the Company’s assistance with underwritten offerings, and the Seller will be entitled
to certain piggyback registration rights.
The
foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of
Registration Rights Agreement, a form of which is included as Exhibit 10.3 to this 8-K, and incorporated herein by
reference.
