HNRA HNR Acquisition Corp

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): August 28, 2023

 

HNR ACQUISITION CORP

(Exact name of registrant as specified in its charter)

 

Delaware		001-41278		85-4359124
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

3730 Kirby Drive, Suite 1200

Houston, Texas 77098

(Address of principal executive offices, including zip code)

 

(713) 834-1145

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:		Trading symbol		Name of each exchange on which registered
Common stock, par value $0.0001 per share		HNRA		NYSE American
Redeemable warrants, exercisable for three quarters of one share of common stock at an exercise price of $11.50 per share		HNRAW		NYSE American

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

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. ☐

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Amended and Restated MIPA

 

As previously disclosed, on December 27, 2022, HNR Acquisition Corp, a Delaware corporation (the “Company”), entered into a Membership Interest Purchase Agreement (the “Prior 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 Prior MIPA, HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”).

 

On August 28, 2023, the Company, HNRA Upstream, LLC, a newly formed Delaware limited liability company which is managed by, and is a subsidiary of, the Company (“OpCo”), and HNRA Partner, Inc., a newly formed Delaware corporation and wholly owned subsidiary of OpCo (“SPAC Subsidiary”, and together with the Company and OpCo, “Buyer” and each a “Buyer”), entered into an Amended and Restated Membership Interest Purchase Agreement (the “A&R MIPA”) with Seller, and, solely with respect to Section 6.20 of the A&R MIPA, the Sponsor, which amended and restated the Prior MIPA in its entirety. As described more fully below, the post-purchase Company will be organized in an “Up-C” structure and the only direct assets of the Company will consist of equity interests in OpCo.

 

All capitalized terms set forth below which are not defined shall have the meanings set forth in the A&R MIPA.

 

The Purchase

 

Pursuant to the A&R MIPA, and subject to the terms, provisions, and conditions set forth therein, at the closing of the transactions contemplated by the A&R MIPA (the “Closing”),  (i) (A) the Company will contribute to OpCo (1) all of its assets (excluding its interests in OpCo and the aggregate amount of cash required to satisfy any exercise by stockholders of their redemption rights) and (2) 2,000,000 newly issued shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), of the Company (such shares, the “Seller Class B Shares”) for purposes of delivery to Seller, and (B) in exchange therefor, OpCo will issue to the Company a number of Class A common units (the “OpCo Class A Units”) of OpCo equal to the number of total shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), of the Company issued and outstanding immediately after the Closing (taking into account and following the exercise of redemption rights) (such transactions, the “SPAC Contribution”), (ii) immediately following the SPAC Contribution, OpCo will contribute $900,000 to SPAC Subsidiary in exchange for 100% of the outstanding common stock of SPAC Subsidiary (the “SPAC Subsidiary Contribution”), and (iii) immediately following the SPAC Subsidiary Contribution, Seller shall sell, contribute, assign, and convey to (A) OpCo, and OpCo shall acquire and accept from Seller, ninety-nine percent (99.0%) of the outstanding membership interests of Pogo Resources, LLC, a Texas limited liability company (“Pogo” or the “Target”), and (B) SPAC Subsidiary, and SPAC Subsidiary shall purchase and accept from Seller, one percent (1.0%) of the outstanding membership interest of Target (together with the ninety-nine (99.0%) interest, the “Target Interests”), in each case, in exchange for (x) $900,000 of the Cash Consideration (as defined below) in the case of SPAC Subsidiary and (y) the remainder of the Aggregate Consideration (as defined below) in the case of OpCo.

 

The “Aggregate Consideration” for the Target Interests will be (a), cash in the amount of $63,000,000 in immediately available funds (the “Cash Consideration”), (b) 2,000,000 Class B common units of OpCo (“OpCo Class B Units”) valued at $10.00 per unit (the “Common Unit Consideration”), which will be equal to and exchangeable into 2,000,000 shares of Class A Common Stock issuable upon exercise of the OpCo Exchange Right (as defined below), as reflected in the amended and restated limited liability company agreement of OpCo that will be effective at Closing (the “A&R OpCo LLC Agreement”) and (c) and the Seller Class B Shares; provided, that (i) a portion of the Cash Consideration not to exceed $15,000,000 may be payable through a promissory note to Seller (the “Seller Promissory Note”) to the extent the amount available for payment of the Cash Consideration at Closing (the “Minimum Cash Amount”) is less than $63,000,000 and (ii) a portion of the Cash Consideration not to exceed $20,000,000 may be payable through the issuance of up to 2,000,000 preferred units (the “OpCo Preferred Units” and together with the Opco Class A Units and the OpCo Class B Units, the “OpCo Units”) of OpCo (the “Preferred Unit Consideration”, and, together with the Common Unit Consideration, the “Unit Consideration”), to the extent the Minimum Cash Amount is less than $48,000,000. At Closing, 500,000 OpCo Class B Units (the “Escrowed Unit Consideration”) shall be placed in escrow with the an escrow agent for the benefit of Buyer pursuant to the Escrow Agreement and the indemnity provisions therein. The Aggregate Consideration is subject to adjustment in accordance with the A&R MIPA.

 

 

Conditions to Closing

 

The obligation of Seller to consummate the transactions contemplated by the A&R 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 A&R 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, SPAC Stockholder Support Agreement, Escrow Agreement, Board Designation Agreement, the Backstop Agreement, and the Option Agreement by the Company or its affiliates; (v) the Company will be ready, willing, and able to pay the Cash Consideration to Seller (with at least $33,000,000 payable in cash and no more than $15,000,000 subject to payment through the terms of the Seller Promissory Note and no more than $20,000,000 subject to payment through the OpCo Preferred Units) and issue the Unit Consideration and Class B Common Stock to Seller; (vi) the shares of Class A Common Stock (including shares issuable upon the exercise of the OpCo Exchange Right) 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; (vii) any waiting period applicable to the transactions contemplated by the A&R 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 (viii) the transactions contemplated by the A&R 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 A&R 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 A&R 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 A&R MIPA under the HSR Act will have been terminated or shall have expired; (vi) the transactions contemplated by the A&R MIPA will have been approved by the Company’s stockholders at a special meeting; (vii) the Company will not have redeemed shares of Class A Common Stock in an amount that would cause the Company to have less than $5,000,001 of net tangible assets; (viii) no material adverse effect will have occurred between the date of the A&R MIPA and the date of closing (the “Closing Date”) with respect to the Target; (ix) the shares of Class A Common Stock (including shares issuable upon the exercise of the OpCo Exchange Right) 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; and (x) Seller will have caused the assignment of all equity interests in Pogo Operating Inc., a subsidiary of Target, so that Pogo Operating Inc. is not a part of the purchase by the Company.

 

 

Representations, Warranties and Covenants

 

The A&R MIPA contains customary representations, warranties and covenants of Buyer, Target and Seller.

 

Termination

 

The A&R MIPA may be terminated (i) at any time prior to Closing by the mutual prior written consent of Seller and Buyer; (ii) by Seller or Buyer if Closing has not occurred on or before October 30, 2023 (the “Outside Date”); (iii) by Buyer, if all conditions to Seller’s obligation to proceed with Closing have been satisfied or waived by Buyer but Seller has refused to close; (iv) by Seller or Buyer 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 A&R MIPA, the Company’s stockholder approval has not been obtained; (v) by Seller, if the Closing has not occurred on or before November 15, 2023 and Sponsor has not effected the extension of time allowed for the SPAC to consummate a purchase; (vi) 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 A&R 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); or (vii) by Seller, if all conditions to Buyer’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 Buyer has refused to close.

 

If the A&R 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 A&R 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 A&R MIPA.

 

The foregoing description of the A&R MIPA is qualified in its entirety by reference to the full text of the A&R 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

 

Seller Promissory Note

 

In connection with the A&R MIPA and the Debt Commitment Letter, the parties agreed to amend the form of Seller Promissory Note that will be entered into at Closing. To the extent the minimum cash amount is less than $63,000,000, OpCo will issue to Seller the Seller Promissory Note in an amount equal to the lesser of (i) the difference between $63,000,000 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’s financing, and with no penalty for prepayment; provided, that if the Seller Promissory Note is not repaid in full on or prior to its stated maturity date, the Company will owe interest from and after default equal to the lesser of 18% per annum and the highest amount permissible under law, compounded monthly. The Seller Promissory Note will be subordinated to the Credit Facility.

 

Until the obligations under the Seller Promissory Note are repaid in full, OpCo (1) shall conduct the business of Target 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 A&R MIPA; (2) will not (i) transfer, sell, hypothecate, encumber, dispose of any material assets of Target or its subsidiaries except for sales of inventory in the ordinary course of business and market-based trade terms, the creation of liens securing the Credit Facility, or other transactions consented to by Seller, or (ii) acquire any material assets outside of the ordinary course of business; (3) will not (i) use any net proceeds of OpCo, 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 Seller Promissory Note, (ii) incur any indebtedness for borrowed money, or allow the Company, SPAC Subsidiary, Target, or any of their subsidiaries to incur any indebtedness for borrowed money, that is senior to the Seller Promissory Note (other than the Credit Facility), or (iii) materially amend or restate the Credit Facility to allow for additional borrowings thereunder.

 

The foregoing description of the Seller Promissory Note is qualified in its entirety by the terms of the form of Seller Promissory Note, a copy of which is included as Exhibit 10.1 to this Current Report on Form 8-K, and incorporated herein by reference.

 

 

Option Agreement

 

In connection with the A&R MIPA, OpCo and Seller agreed to cause the execution of an Option Agreement (the “Option Agreement”) by and between the Company and Pogo Royalty, LLC, a Texas limited liability company (“Pogo Royalty”), an affiliate of Seller. Pogo Royalty owns certain overriding royalty interests in certain oil and gas assets owned by Pogo Resources, LLC (the “ORR Interest”). Pursuant to the Option Agreement, Pogo Royalty will grant an irrevocable and exclusive option to the Company to purchase the ORR Interest for the Option Price (defined below) at any time prior to the date that is twelve (12) months following the effective date of the Option Agreement. The option will not be exercisable while the Seller Promissory Note is outstanding.

 

The purchase price for the ORR Interest upon exercise of the option shall be (i) (1) $30,000,000 the (“Base Option Price”), plus (2) an additional amount equal to interest on the Base Option Price of twelve percent (12%), compounded monthly, from the effective date of the Option Agreement through the date of acquisition of the ORR Interest, minus (ii) any amounts received by Pogo Royalty in respect of the ORR Interest from the month of production in which the effective date of the Option Agreement occurs through the date of the exercise of the option (such aggregate purchase price, the “Option Price”).

 

The Option Agreement and the option will immediately terminate upon the earlier of (a) Pogo Royalty’s transfer or assignment of all of the ORR Interest in accordance with the Option Agreement and (b) the date that is twelve (12) months following the effective date of the Option Agreement.

 

The foregoing description of the Option Agreement is qualified in its entirety by the terms of the form of Option Agreement, a copy of which is included as Exhibit 10.2 to this Current Report on Form 8-K, and incorporated herein by reference.

 

Second A&R Charter

 

In connection with the Closing, the Company will, subject to stockholder approval, file with the State of Delaware a second amended and restated certificate of incorporation (the “Second A&R Charter”) to create two classes of common stock of the Company, one class designated as Class A Common Stock and one class designated as Class B Common Stock.

 

The current shares of common stock of the Company will be reclassified as Class A Common Stock. Each share of Class B Common Stock has no economic rights but entitles its holder to one vote on all matters to be voted on by stockholders generally. Holders of shares of Class A Common Stock and shares of Class B Common Stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or by the Second A&R Charter. We do not intend to list any shares of Class B Common Stock on any exchange.

 

The foregoing description of the Second A&R Charter is qualified in its entirety by the terms of the form of Second A&R Charter, a copy of which is included as Exhibit 3.1 to this Current Report on Form 8-K, and incorporated herein by reference.

 

A&R OpCo LLC Agreement

 

Following the Closing, the Company will operate its business through OpCo. On the Closing Date, the Company, OpCo, and Seller will enter into A&R OpCo LLC Agreement which will provide for the terms of OpCo. Pursuant to the A&R OpCo LLC Agreement, each OpCo unitholder (excluding the Company) will, subject to certain timing procedures and other conditions set forth therein, have the right (the “OpCo Exchange Right”) to exchange all or a portion of its OpCo Class B OpCo Units for, at OpCo’s election, (i) shares of Class A Common Stock at an exchange ratio of one share of Class A Common Stock for each OpCo Class B Unit exchanged, subject to conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions, or (ii) an equivalent amount of cash. OpCo will determine whether to pay cash in lieu of the issuance of shares of Class A Common Stock based on facts in existence at the time of the decision, which we expect would include the relative value of the Class A Common Stock (including trading prices for the Class A Common Stock at the time), the cash purchase price, the availability of other sources of liquidity (such as an issuance of stock) to acquire the OpCo Class B Units and alternative uses for such cash. Additionally, the holders of OpCo Class B Units will be required to exchange all of their OpCo Class B Units (a “Mandatory Exchange”) upon the occurrence of the following: (i) upon the direction of the Company with the consent of at least fifty percent (50%) of the holders of OpCo Class B Units; or (ii) upon the Mandatory Conversion Trigger Date. In connection with any exchange of OpCo Class B Units  pursuant to the OpCo Exchange Right or acquisition of OpCo Class B Units pursuant to a Mandatory Exchange, a corresponding number of shares of Class B Common Stock held by the relevant OpCo unitholder will be cancelled.

 

 

The Preferred Units will be automatically converted into OpCo Class B Units on the two-year anniversary of the issuance date of such Preferred Units (the “Mandatory Conversion Trigger Date”) at a rate determined by dividing (i) the $20.00 per unit (the “Stated Conversion Value”), by (ii) the Market Price of the Class A Common Stock, plus accrued and unpaid dividends through the date of conversion, if any (the “Conversion Price”). The “Market Price” means the simple average of the daily VWAP of the Class A Common Stock during the five (5) trading days prior to the date of conversion.  

 

The foregoing description of the A&R OpCo LLC Agreement is qualified in its entirety by the terms of the form of A&R OpCo LLC Agreement, a copy of which is included as Exhibit 10.3 to this Current Report on Form 8-K, and incorporated herein by reference.

 

Director Nomination and Board Observer Agreement

 

In connection with the A&R MIPA, at the Closing, the Company will enter into director nomination and board observer agreement (the “Board Designation Agreement”) with the Seller. Pursuant to the Board Designation Agreement, the Seller will have the right, at any time Seller owns capital stock of the Company, to appoint two board observers to attend all meetings of the Board of Directors of the Company (the “Board”). In addition, after the time of the conversion of the Preferred Units owned by Seller, Seller will have the right to nominate a certain number of members of the Board as further provided in the Board Designation Agreement.

 

The foregoing description of the Board Designation Agreement is qualified in its entirety by the terms of the form of Board Designation Agreement, a copy of which is included as Exhibit 10.4 to this Current Report on Form 8-K, and incorporated herein by reference.

 

Backstop Agreement

 

The Company has agreed to, at Closing, enter into and cause certain of its founders (the “Founders”) to enter into a backstop agreement (the “Backstop Agreement”) with Seller whereby the Seller will have the right (“Put Right”) to cause the Founders to purchase Seller’s Preferred Units at a purchase price per unit equal to $10.00 per unit plus the product of (i) the number of days elapsed since the effective date of the Backstop Agreement and (ii) $10.00 divided by 730. Seller’s right to exercise the Put Right will survive for six (6) months following the date the Trust Shares (as defined below) are not restricted from transfer under the Letter Agreement.

 

As security that the Founders will be able to purchase the Preferred Units upon exercise of the Put Right, the Founders will agree to place 1,500,000 shares of Class A Common Stock into trust (the “Trust Shares”), which the Founders can sell or borrow against to meet their obligations upon exercise of the Put Right with the prior consent of Seller. The Company is not obligated to purchase the Preferred Units from Seller under the Backstop Agreement. Until the Backstop Agreement is terminated, Seller will not be permitted to engage in any transaction which is designed to sell short the Class A Common Stock of the Company or any other publicly traded securities of the Company.

 

The foregoing description of the Backstop Agreement is qualified in its entirety by the terms of the form of Backstop Agreement, a copy of which is included as Exhibit 10.5 to this Current Report on Form 8-K, and incorporated herein by reference.

 

 

Registration Rights Agreement

 

In connection with the A&R MIPA, the parties agreed to amend the form of Registration Rights Agreement (the “Registration Rights Agreement”) that will be entered into at Closing. Pursuant to the Registration Rights Agreement, the Company has agreed to provide Seller with certain registration rights with respect to the shares of Class A Common Stock issuable upon exercise of the OpCo Exchange Right, including filing with the SEC an initial Registration Statement on Form S-1 covering the resale by the Seller of the shares of Class A Common Stock issuable upon exercise of the OpCo Exchange Right 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 the terms of the form of Registration Rights Agreement, a copy of which is included as Exhibit 10.6 to this Current Report on Form 8-K, and incorporated herein by reference.

 

Debt Commitment Letter

 

On August 28, 2023, the Company entered into a commitment letter (the “Debt Commitment Letter”) with First International Bank & Trust (“FIBT” or “Lender”), pursuant to which FIBT has agreed to provide the Company with a senior secured term loan in the amount of $28,000,000 (the “Credit Facility”) to (a) fund a portion of the purchase price, (b) partially fund a debt service reserve account funded with $3,000,000 at the Closing Date and an additional $2,000,000 to be deposited within 60 days following the Closing Date, (c) cash secure outstanding letters of credit issued by Pogo’s existing lender, (d) pay fees and expenses in connection with the purchase and the closing of the Credit Facility and (e) other general corporate purposes. The Credit Facility will be provided on the Closing Date subject to a number of specified conditions set forth in the Debt Commitment Letter. The obligations of FIBT to provide the Credit Facility will terminate on October 30, 2023 if the Closing Date has not occurred by such date. The definitive documentation for the Credit Facility has not been finalized and, accordingly, the actual terms of the Credit Facility may differ from those described in this Current Report on Form 8-K.

 

The foregoing description of the Debt Commitment Letter is qualified in its entirety by reference to the full text of the Debt Commitment Letter, a copy of which is included as Exhibit 10.7 to this Current Report on 8-K, and incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K with respect to the A&R MIPA and the transactions contemplated hereby is incorporated by reference herein. The Unit Consideration to be issued to Seller will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

  

Item 7.01 Regulation FD Disclosure.

 

On August 30, 2023, the Company issued a press release announcing the execution of A&R MIPA. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filings.

 

 

Important Information about the Purchase and Where to Find It

 

In connection with the purchase contemplated by the A&R MIPA, the Company intends to file with the SEC a proxy statement. The Company will mail a definitive proxy statement and other relevant documents to its stockholders at such time as it is filed (the “Proxy Statement”). This communication is not a substitute for the Proxy Statement or any other document that the Company will send to its stockholders in connection with the purchase. Investors and security holders of the Company are advised to read, when available, the Proxy Statement in connection with the Company’s solicitation of proxies for its special meeting of stockholders to be held to approve the purchase (and related matters) because the Proxy Statement will contain important information about the purchase and the parties to the purchase.  The Proxy Statement will be mailed to stockholders of the Company as of a record date to be established for voting on the purchase. Stockholders will also be able to obtain copies of the Proxy Statement, without charge, once available, at the SEC’s website at www.sec.gov or by directing a request to: HNR Acquisition Corp, Attention: David M. Smith, Chief Legal Officer and Secretary, 3730 Kirby Drive, Suite 1200, Houston, TX 77098. 

 

Participants in the Solicitation

 

The Company, Seller, Target and their respective directors, executive officers, other members of management, and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of the Company’s stockholders in connection with the purchase. Investors and security holders may obtain more detailed information regarding the names and interests in the purchase of the Company’s directors and officers in the Company’s filings with the SEC, including the Proxy Statement to be filed with the SEC by the Company, and such information and names of Target’s directors and executive officers will also be in the Proxy Statement to be filed with the SEC by the Company.

 

Forward-Looking Statements

 

This Current Report on Form 8-K contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding the benefits of the transactions contemplated by the purchase, the anticipated timing of the purchase and the products offered by the Company and the markets in which it operates Forward-looking statements may be identified by the use of words such as “forecast,” “intend,” “seek,” “target,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements are based on Seller’s and the Company’s management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Except as otherwise required by applicable law, the Seller and the Company disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date hereof. Seller and the Company caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Seller and the Company. These risks include, but are not limited to, general economic, financial, legal, political and business conditions and changes in domestic and foreign markets; the inability of the parties to successfully or timely consummate the proposed transactions contemplated by the A&R MIPA or to satisfy the closing conditions, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the Target; the risk that the approval of the stockholders of the Company is not obtained; the failure to realize the anticipated benefits of the proposed purchase, including as a result of a delay in its consummation; the amount of redemption requests made by the Company’s stockholders; and the occurrence of events that may give rise to a right of one or both of Seller and the Company to terminate the A&R MIPA. You should carefully consider the risks and uncertainties described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, the registration statement on Form S-1 related to the Company’s initial public offering, the Proxy Statement discussed above and other documents filed by the Company from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

 

Disclaimer

 

This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy any securities or the solicitation of any vote in any jurisdiction pursuant to the purchase or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.

 

  

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

The following exhibits are being filed herewith:

 

Exhibit Number		Description
2.1*		Amended and Restated Membership Interest Purchase Agreement, dated as of August 28, 2023, by and among Buyer, Seller, and Sponsor
3.1		Form of Second Amended and Restated Certificate of Incorporation
10.1		Form of Seller Promissory Note by and between Buyer and Seller
10.2		Form of Option Agreement by and between OpCo and Pogo Royalty
10.3		Form of Amended and Restated Limited Liability Company Agreement of OpCo
10.4		Form of Director Nomination and Board Observer Agreement by and between the Company and Seller
10.5		Form of Backstop Agreement by and among the Company, OpCo, Seller, and certain Founders
10.6		Form of Registration Rights Agreement by and between the Company and Seller
10.7		Debt Commitment Letter, dated as of August 28, 2023, by and between the Company and FIBT
99.1		Press release of HNR Acquisition Corp, dated August 30, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*

Certain exhibits and schedules to this Exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K. The Company’s agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.

 

 

SIGNATURE

 

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.

 

August 30, 2023	HNR Acquisition Corp
	By:	/s/ Donald H. Goree
	Name:	Donald H. Goree
	Title:	Chief Executive Officer

 

 

9

 

Exhibit 2.1

 

CONFIDENTIAL

 

 

 

 

AMENDED AND RESTATED

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

BY AND AMONG

 

CIC POGO LP,

 

DENCO RESOURCES, LLC,

 

4400 HOLDINGS, LLC,

 

POGO RESOURCES MANAGEMENT, LLC,

 

HNR ACQUISITION CORP,

 

HNRA PARTNER, INC.,

 

HNRA UPSTREAM LLC,

 

AND

 

HNRAC SPONSORS LLC (solely with respect to Section 6.20)

 

AUGUST 28, 2023

 

 

 

 

 

Table of Contents

 

			Page
Article I Definitions; Construction			2
	Section 1.1	Definitions	2
	Section 1.2	Construction	15
Article II Combination Transactions			15
	Section 2.1	Contribution, Purchase and Sale	15
	Section 2.2	Aggregate Consideration	16
	Section 2.3	Approximate Hydrocarbon Proceeds Amount	16
Article III Certain Acknowledgements			16
	Section 3.1	Inspection	16
	Section 3.2	NORM	16
	Section 3.3	Limitations	17
	Section 3.4	Exclusive Remedies	18
Article IV Representations and Warranties of Seller			18
	Section 4.1	Disclaimers	18
	Section 4.2	Organization and Qualification	19
	Section 4.3	Power	20
	Section 4.4	Authorization and Enforceability	20
	Section 4.5	Capitalization	20
	Section 4.6	No Conflicts	21
	Section 4.7	Liability for Brokers’ Fees	21
	Section 4.8	Bankruptcy	21
	Section 4.9	No Litigation	21
	Section 4.10	Compliance with Law	21
	Section 4.11	Taxes	21
	Section 4.12	Contracts	23
	Section 4.13	Enforceability of Material Contracts	23
	Section 4.14	Environmental Matters	24
	Section 4.15	Imbalances	24
	Section 4.16	Capital Commitments	24
	Section 4.17	Financial Statements	24
	Section 4.18	Reserved	25
	Section 4.19	Undisclosed Liabilities	25

 

 

	Section 4.20	Employees	25
	Section 4.21	Bank Accounts	25
	Section 4.22	Officers	25
	Section 4.23	Investment Intent	25
	Section 4.24	Special Warranty	25
Article V Representation and Warranties of Buyer			25
	Section 5.1	Organization and Qualification	25
	Section 5.2	Power	26
	Section 5.3	Authorization and Enforceability	26
	Section 5.4	Capitalization and Valid Issuance	26
	Section 5.5	No Conflicts	27
	Section 5.6	Liability for Brokers’ Fees	27
	Section 5.7	Bankruptcy	27
	Section 5.8	Consents	27
	Section 5.9	No Litigation	27
	Section 5.10	Financing	27
	Section 5.11	Funding	28
	Section 5.12	SEC Documents.	28
	Section 5.13	Certain Contracts and Arrangements	29
	Section 5.14	Board Approval; Vote Required	29
	Section 5.15	OpCo Approval	29
	Section 5.16	SPAC Subsidiary Approval	29
	Section 5.17	Listing	29
	Section 5.18	No Prior Operations of OpCo	30
	Section 5.19	Trust Account	30
	Section 5.20	Employees	30
	Section 5.21	Absence of Certain Changes or Events	30
	Section 5.22	Information Supplied	30
	Section 5.23	Letter Agreement	30
	Section 5.24	Independent Investigation	30
	Section 5.25	Investment Intent	31
Article VI Covenants of the Parties			31
	Section 6.1	Access	31
	Section 6.2	Government Reviews	31
	Section 6.3	Notification of Breaches	31

 

 

	Section 6.4	Operation of the Company’s Business	32
	Section 6.5	Operation of the Buyer’s Business	33
	Section 6.6	Indemnity Regarding Access	34
	Section 6.7	Post-Closing Preferential Rights	34
	Section 6.8	Further Assurances	35
	Section 6.9	Amendment to Schedules	35
	Section 6.10	Personnel Indemnity	35
	Section 6.11	Insurance	36
	Section 6.12	Liability for Employee Matters	36
	Section 6.13	Tax Matters	36
	Section 6.14	Public Announcements	40
	Section 6.15	The Proxy Statement and the Special Meeting	40
	Section 6.16	Trust Account	42
	Section 6.17	Cooperation on Financial Statements	42
	Section 6.18	Listing	43
	Section 6.19	The “Pogo” Name	43
	Section 6.20	Board Observer	43
Article VII Conditions to Closing			43
	Section 7.1	Conditions to Obligation of Seller to Close	43
	Section 7.2	Conditions to Obligation of Buyer to Close	44
Article VIII Closing			45
	Section 8.1	Closing	45
	Section 8.2	Obligations of Seller at Closing	45
	Section 8.3	Obligations of Buyer at Closing	46
	Section 8.4	Books and Records	47
Article IX Termination			47
	Section 9.1	Termination	47
	Section 9.2	Effect of Termination	48
Article X Survival and Indemnification			48
	Section 10.1	Limitations on Representations and Warranties	48
	Section 10.2	Indemnification	49
	Section 10.3	Indemnification Actions	50
	Section 10.4	Limitation on Actions	51
Article XI Miscellaneous			53
	Section 11.1	Counterparts	53

 

 

	Section 11.2	Notices	53
	Section 11.3	Expenses	54
	Section 11.4	Law; Venue	54
	Section 11.5	Jurisdiction; Waiver of Jury Trial	54
	Section 11.6	Amendment; Waivers	55
	Section 11.7	Assignment	55
	Section 11.8	Entire Agreement	55
	Section 11.9	No Third Party Beneficiaries	55
	Section 11.10	Invalid Provisions	55
	Section 11.11	Construction	55
	Section 11.12	Limitation on Damages	56
	Section 11.13	No Recourse	56
	Section 11.14	Relationship of Seller; Seller’s Representative	56
	Section 11.15	Certain Waivers	57

 

 

AMENDED AND RESTATED MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Amended and Restated Membership Interest Purchase Agreement (this “Agreement”), dated as of August 28, 2023 (the “Execution Date”), is made by and among 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”), HNR Acquisition Corp, a Delaware corporation (“HNRA” or the “SPAC”), HNRA PARTNER, INC., a Delaware corporation, (“SPAC Subsidiary”), HNRA UPSTREAM, LLC, a Delaware limited liability company (“OpCo”, and together with HNRA, SPAC Subsidiary and “Buyer” and each a “Buyer”) and, solely with respect to ‎Section 6.20, HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”). Seller and Buyer may hereafter be referred to each as a “Party” and together as the “Parties.”

 

RECITALS:

 

WHEREAS, Seller owns one hundred percent (100%) of the outstanding membership interests (the “Target Interests”) of Pogo Resources, LLC, a Texas limited liability company (the “Company”);

 

WHEREAS, Seller desires to sell, and Buyer desires to purchase, all of Seller’s right, title and interest in and to the Target Interests for the consideration and on the terms in this Agreement;

 

WHEREAS, on December 27, 2022 (the “Original Execution Date”), the Parties entered into that certain Membership Interest Purchase Agreement (the “Prior MIPA”) pursuant to which Seller agreed to sell to SPAC, and SPAC agreed to purchase from the Seller, one hundred percent (100%) of the outstanding membership interests (the “Target Interests”) of the Company;

 

WHEREAS, the Parties wish to amend and restate the Prior MIPA in its entirety, to reflect the terms and conditions set forth in this Agreement.

 

WHEREAS, the boards of directors or managers, as applicable of Buyer and the Company have each (a) determined that this Agreement and the Transactions are in the best interests of their respective companies, including on behalf of (i) OpCo in SPAC’s capacity as the sole member of OpCo and (ii) SPAC Subsidiary in OpCo’s capacity the sole shareholder, and (b) approved this Agreement and the Transactions, including on behalf of OpCo in SPAC’s capacity as the sole member of OpCo, upon the terms and subject to the conditions set forth herein;

 

WHEREAS, the board of directors of SPAC has unanimously (a) determined that this Agreement and the Transactions are advisable, fair to, and in the best interests of, SPAC and its stockholders (the “SPAC Stockholders”), (b) adopted a resolution approving this Agreement and declaring its advisability and approving this Agreement and the other Transactions, and (c) recommended the approval and adoption of this Agreement and the other Transactions to its stockholders, including that the SPAC Stockholders not accept the Redemption Offer;

 

WHEREAS, SPAC, the Sponsor, certain holders of SPAC Common Stock and SPAC Warrants (the “SPAC Anchor Investors”), Seller and the Company previously entered into, concurrently with the execution and delivery of the Prior MIPA, that certain SPAC Transaction Support Agreement (the “SPAC Stockholder Support Agreement”), pursuant to which the Sponsor, SPAC and the SPAC Anchor Investors have agreed to take certain actions to support the Transactions;

 

WHEREAS, at Closing, SPAC and each Seller will enter into a registration rights agreement in the form attached hereto as Exhibit RRA (the “Registration Rights Agreement”);

 

 

WHEREAS, at Closing, each Buyer and each Seller will enter into an option agreement in the form attached hereto as Exhibit C (the “Option Agreement”);

 

WHEREAS, at Closing, each Buyer and each Seller will enter into an escrow agreement in a form to be mutually agreed by the Parties (the “Escrow Agreement”); and

 

WHEREAS, as a condition to the consummation of the transactions contemplated hereby and in accordance with the terms hereof, SPAC shall provide an opportunity to its stockholders to have their offering shares redeemed for the consideration, and on the terms and subject to the conditions and limitations, set forth in this Agreement and SPAC’s Organizational Documents in conjunction with obtaining the SPAC Stockholder Approval (collectively with the other transactions, authorization and approvals set forth in the Proxy Statement, the “Redemption Offer”);

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, representations, warranties, covenants, conditions, and agreements set forth herein, and for other good and valuable consideration, the mutual receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Article I
Definitions; Construction

 

Section 1.1 Definitions. The terms defined below shall have the meaning set forth therein for all purposes under this Agreement.

 

“Actual Knowledge” has the meaning set forth in ‎Section 4.1(c).

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly, Controlling, Controlled by, or under common Control with, such Person, through one or more intermediaries or otherwise.

 

“Aggregate Consideration” means, collectively, the Cash Consideration, Common Unit Consideration, Promissory Note and Preferred Unit Consideration.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Allocated Value” means, with respect to a Property, the portion of the Aggregate Consideration allocated by Buyer to such Property as set forth in Exhibit A.

 

“Allocation” has the meaning set forth in ‎Section 6.13(g)(ii).

 

“Approximate Hydrocarbon Proceeds Amount” has the meaning set forth in ‎Section 2.3.

 

“Assets” means all of the assets owned by the Company.

 

“Asset Taxes” means ad valorem, property, excise, severance, production, sales, real estate, use, personal property and similar Taxes (including any interest, fine, penalty or additions to tax imposed by Governmental Bodies in connection with such taxes) based upon the operation or ownership of the Assets, the production of Hydrocarbons or the receipt of proceeds therefrom, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.

 

“Backstop Agreement” has the meaning set forth in ‎Section 8.3(i).

 

“Board Designation Agreement” has the meaning set forth in ‎Section 8.3(h).

 

 

“Books and Records” has the meaning set forth in ‎Section 8.4.

 

“Business Day” means a day other than a day on which banks in the State of New York or Dallas, Texas are authorized or obligated to be closed.

 

“Buyer” has the meaning set forth in the preamble to this Agreement.

 

“Buyer Contracts” has the meaning set forth in ‎Section 5.13.

 

“Buyer Indemnitees” means, individually and in any combination, each Buyer and their Affiliates and any of their joint venturers, partners, co-owners, co-lessors, or co-lessees, and the respective officers, directors, agents, servants, employees, contractors, subcontractors, licensees, and invitees of any tier of each, as well as the heirs, representatives, successors, or assigns of any of the foregoing.

 

“Cash Consideration” has the meaning set forth in ‎Section 2.2.

 

“Cash Facility” means one or more debt or equity (including a private investment in a public entity transaction, or “PIPE”) financing arrangements from third parties, institutional banks and/or investors to be utilized by Buyer for use as (i) working capital, or (ii) an additional source of capital to fund the Cash Consideration.

 

“Change in Recommendation” has the meaning set forth in ‎Section 6.15(c).

 

“Claim Notice” has the meaning set forth in ‎Section 10.3(b).

 

“Closing” has the meaning set forth in ‎Section 8.1.

 

“Closing Date” has the meaning set forth in ‎Section 8.1.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

 

“Combination Transaction” has the meaning set forth in ‎Section 2.1(c).

 

“Common Unit Consideration” has the meaning set forth in ‎Section 2.2.

 

“Company” has the meaning set forth in the Recitals.

 

“Company Group” means, collectively, the Company and each of its Subsidiaries.

 

“Company Operated Properties” means any Property that is operated by Company Group.

 

“Competing Transaction” has the meaning set forth in ‎Section 6.15(c).

 

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated September 12, 2022, by and between the Company and SPAC.

 

“Contracts” means all contracts, agreements, and instruments by which the Properties are bound, or to which the Properties are subject, but in each case only to the extent applicable to the Properties, including operating agreements, unitization, pooling, and communitization agreements, declarations and orders, pre-pooling agreements, joint venture agreements, farmin and farmout agreements, exploration agreements, area of mutual interest agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons and processing agreements, but excluding master service agreements and the instruments constituting the Leases and Surface Rights.

 

 

“Control” and its correlative terms, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Creditors’ Rights” has the meaning set forth in ‎Section 4.4.

 

“Debt Commitment Letter” has the meaning set forth in ‎Section 5.10.

 

“Debt Financing” has the meaning set forth in ‎Section 5.10.

 

“Debt Financing Commitments” has the meaning set forth in ‎Section 5.10.

 

“Debt Financing Sources” means First International Bank & Trust, a North Dakota banking institution.

 

“Defensible Title” means, with respect to the each of the Properties, title of the Company or any of its Subsidiaries, as applicable that, as of the Closing Date, is deducible of public record, is free and clear of liens and encumbrances, and, subject to and except for Permitted Encumbrances, meets the following conditions:

 

(1) causes the Company Group to hold a Working Interest that is not greater than that set forth in Exhibit A for the Property, except to the extent that any excess Working Interest is accompanied by a proportionate increase in Net Revenue Interest;

 

(2) entitles the Company Group to not less than the corresponding Net Revenue Interest as set forth in Exhibit A for the Property; and

 

(3) causes the Property to be in full force and effect and as of the Effective Time (which, in the case of an oil, gas, and/or mineral lease, means that the lease shall not have terminated in full or in part).

 

“Employee Benefit Plan” of any Person means any “employee benefit plan” (within the meaning of Section 3(3) of ERISA, regardless of whether such plan is subject to ERISA), and any written personnel policy, equity option, restricted equity, equity purchase plan, other equity or equity-based compensation plan or arrangement, phantom equity or appreciation rights plan or arrangement, collective bargaining agreement, bonus plan or arrangement, incentive award plan or arrangement, vacation or holiday pay policy, retention or severance pay plan, policy or agreement, deferred compensation agreement or arrangement, change in control, hospitalization or other medical, dental, vision, accident, disability, life or other insurance, executive compensation or supplemental income arrangement, consulting agreement, employment agreement and any other plan, agreement, arrangement, program, practice or understanding.

 

“Environmental Laws” means any and all applicable Laws pertaining to prevention of pollution or protection of the environment (including (a) any natural resource restoration and natural resource damages or (b) the presence, generation, use, storage, treatment, disposal or release of Hazardous Materials into the indoor or outdoor environment or the arrangement of any such activities) or to human health or safety to the extent such human health or safety relates to exposure to Hazardous Materials, in effect as of the Execution Date.

 

 

“Environmental Liabilities” means any and Losses incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment, or similar act (including settlements) by any Governmental Body to the extent arising out of any violation of, or remedial obligation under, any Environmental Law which is attributable to the ownership or operation of the Assets, or (ii) pursuant to any claim or cause of action by a Governmental Body or other Person for personal injury, property damage, damage to natural resources (including to soil, air, surface water, or groundwater), remediation, or remediation costs, in each case to the extent arising out of any violation of, or any remediation obligation under, any Environmental Law and attributable to the ownership or operation of the Assets.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“Escrow Agent” means Continental Stock Transfer & Trust Company, LLC.

 

“Escrow Agreement” has the meaning set forth in the Recitals.

 

“Escrowed Unit Consideration” has the meaning set forth in ‎Section 2.2.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Execution Date” has the meaning set forth in the Recitals.

 

“Financial Statements” has the meaning set forth in ‎Section 4.17.

 

“Fraud” means, with respect to any Seller or the Company Group, any actual and intentional fraud and misrepresentation with respect to the making of the representations and warranties Seller and/or the Company Group set forth in Article V; provided, that such actual and intentional fraud and misrepresentation of each Seller and/or Company Group shall only be deemed to exist if Kirk Pogoloff had Actual Knowledge (as opposed to imputed or constructive knowledge) that the representations and warranties made by any Seller and/or Company Group were actually inaccurate or otherwise breached when made, with the express intention that Buyer rely thereon to Buyer’s detriment. For the avoidance of doubt, “Fraud” does not include any claim for equitable fraud, promissory fraud, unfair dealings fraud, constructive fraud, or any torts based on negligence or recklessness.

 

“GAAP” means generally accepted accounting principles in the United States of America.

 

“Governmental Body” means any court, governmental, regulatory or administrative agency or commission or other governmental authority or instrumentality, domestic or foreign.

 

“Hazardous Materials” means any (a) chemical, product, substance, waste, pollutant or contaminant, including those that are defined or listed as hazardous or toxic or that are otherwise regulated under any applicable Law; (b) asbestos containing materials, whether in a friable or non-friable condition, lead-containing material, polychlorinated biphenyls, NORM or radon; and (c) Hydrocarbons.

 

“Hedge Contracts” any forward, futures, swap, collar, put, call, floor, cap, option or other similar contract (excluding, for the avoidance of doubt, any physically settled contract, including index, fixed price or physical basis transactions) to which the Company is a party that is intended to benefit from or reduce or eliminate the risk of fluctuations in the price of commodities, including any Hydrocarbons or other commodities, currencies, interest rates and indices, and any financial transmission rights and auction revenue rights.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

 

“Hydrocarbons” means crude oil, natural gas, condensate, drip gas and natural gas liquids, coalbed gas, ethane, propane, iso-butane, nor-butane, gasoline, scrubber liquids and other liquids or gaseous hydrocarbons or other substances (including minerals or gases) or any combination thereof, produced or associated therewith.

 

“Imbalances” means any over-production, under-production, over-delivery, under-delivery or similar imbalance of Hydrocarbons produced from or allocated to a Property, regardless of whether such imbalance arises at the platform, wellhead, pipeline, gathering system, transportation system, processing plant or other location.

 

“Income Taxes” means any U.S. federal, state or local or foreign income Tax or Tax based on profits (including any capital gains and net worth Taxes), net profits, margin, or similar measure.

 

“Indemnified Party” has the meaning set forth in ‎Section 10.3(a).

 

“Indemnifying Party” has the meaning set forth in ‎Section 10.3(a).

 

“Indemnified Personnel” has the meaning set forth in ‎Section 6.10.

 

“Intended Tax Treatment” has the meaning set forth in ‎Section 6.13(g)(i).

 

“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; and (c) any right (contingent or otherwise) to acquire any of the foregoing.

 

“Intervening Event” has the meaning set forth in ‎Section 6.15(c)

 

“Intervening Event Notice” has the meaning set forth in ‎Section 6.15(c).

 

“IRS” means the United States Internal Revenue Service.

 

“Lands” means all rights and interests in the lands and depths covered by the Leases or Units.

 

“Law” means any law, rule, regulation, ordinance, code, judgment, decree, order, treaty, convention, governmental directive or other legally enforceable requirement, U.S. or non-U.S., of any Governmental Body, including common law.

 

“Leases” means all (i) oil and gas leases, (ii) subleases and other leasehold interests, (iii) operating rights interests, (iv) equitable or beneficial titles to working interests under Contracts, (v) overriding royalty interests, and (vi) other properties and interests, in each case to the extent described or identified in Exhibit A, insofar as they cover and include the lands and depths described or referenced in Exhibit A or lands and depths covered by the Units, together with any and all other right, title, and interest in and to the leasehold estates created thereby, in all cases subject to the limitations and restrictions set forth in Exhibit A and terms, conditions, covenants, and obligations set forth therein or in the instruments from which they are derived.

 

“Letter Agreement” has the meaning set forth in ‎Section 5.23.

 

“Loss” means all losses, costs, liabilities, obligations, expenses, Taxes, fines, penalties, interest, payments, charges, indebtedness for borrowed money, expenditures, claims, awards, settlements, judgments, damages, reasonable and documented out-of-pocket attorneys’ fees and reasonable and documented out-of-pocket expenses of investigating, defending and prosecuting litigation, including liabilities, costs, losses and damages for personal injury, illness or death or property damage, loss or destruction.

 

 

“Material Adverse Effect” means, when used with respect to any Person, any occurrence, condition, change, event or effect that (a) has had, is or is reasonably likely to result in, a material adverse effect on the financial condition, assets, business or results of operations of such Person and its Subsidiaries, taken as a whole, or (b) prevents or materially delays or impairs the ability of such Person (and its Affiliates, if applicable) to consummate the transactions contemplated by this Agreement; provided, however, that in no event shall any of the following constitute a Material Adverse Effect pursuant to clause (a): (i) any occurrence, condition, change, event or effect resulting from or relating to (A) changes in general economic or financial market conditions or (B) the coronavirus (COVID-19) pandemic or the related responses of Governmental Bodies with respect thereto; (ii) any occurrence, condition, change (including changes in applicable Law), event or effect that affects the oil and gas exploration and production industry generally (including changes in commodity prices, general market prices and regulatory changes affecting such industry generally); (iii) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any natural disasters and acts of terrorism (but not any such event resulting in any damage or destruction to or loss of such Person’s physical properties to the extent such change or effect would otherwise constitute a Material Adverse Effect); (iv) any failure to meet internal estimates, projections or forecasts (it being understood that the underlying cause of any such failure, not otherwise excluded by the exceptions set forth in this definition, may be taken into consideration in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur); (v) any occurrence, condition, change, event or effect resulting from or relating to the announcement or pendency of the transactions contemplated by this Agreement; (vi) any change in GAAP, or in the interpretation thereof, as imposed upon such Person or their respective businesses or any change in applicable Law, or in the interpretation thereof; (vii) natural declines in well performance; and (viii) any reclassification or recalculation of reserves in the ordinary course of business.

 

“Material Contracts” has the meaning set forth in ‎Section 4.12.

 

“Minimum Cash Amount” means an amount equal to the sum of all amounts in or from (a) the Trust Account (after giving effect to the exercise of the redemption rights and the payments related thereto), (b) the Cash Facility, and (c) any other readily available funds held by Buyer or its Affiliates, in each case, that are available for payment of the Cash Consideration at Closing.

 

“Net Revenue Interest” means, with respect to any Property, the interest in and to all Hydrocarbons produced, saved, and sold from or allocated thereto after satisfaction of all burdens.

 

“Non-Recourse Party” has the meaning set forth in ‎Section 11.13.

 

“Notice Period” has the meaning set forth in ‎Section 6.15(c).

 

“NORM” means naturally occurring radioactive material.

 

“NYSE American” has the meaning set forth in ‎Section 5.12(c).

 

“OpCo A&R LLC Agreement” is defined in ‎Section 8.3(g).

 

“OpCo Class A Units” means the common units of OpCo, on and after the Closing (after giving effect to the OpCo A&R LLC Agreement).

 

“OpCo Class B Units” means the units of OpCo, on and after the Closing (after giving effect to the OpCo A&R LLC Agreement).

 

 

“OpCo Holder Redemption Right” means, following the Closing, the right of a holder of OpCo Class B Units to cause OpCo to redeem one or more of such OpCo Class B Units for shares of SPAC Class A Common Stock on a one-for-one basis (subject to adjustment in certain cases), as set forth in the OpCo A&R LLC Agreement, the Second A&R SPAC Certificate of Incorporation.

 

“OpCo Interests” means 100% of the issued and outstanding limited liability company interests of OpCo as of immediately prior to Closing (before giving effect to the OpCo A&R LLC Agreement).

 

“OpCo Preferred Units” means the preferred units of OpCo, on and after the Closing (after giving effect to the OpCo A&R LLC Agreement).

 

“Option Agreement” has the meaning set forth in the Recitals.

 

“Organizational Documents” means (a) with respect to a corporation, the charter, articles or certificate of incorporation, as applicable, and bylaws thereof, (b) with respect to a limited liability company, the certificate of formation or organization, as applicable, and the operating or limited liability company agreement thereof, (c) with respect to a partnership, the certificate of formation and the partnership agreement thereof, and (d) with respect to any other Person, the organizational, constituent or governing documents or instruments of such Person.

 

“Original Execution Date” has the meaning set forth in the Recitals.

 

“Outside Date” has the meaning set forth in ‎Section 9.1(b).

 

“Parties” has the meaning set forth in the preamble to this Agreement.

 

“Permitted Encumbrances” means:

 

(1) with respect to a Property, burdens, to the extent their net cumulative effect does not reduce the Company Group’s Net Revenue Interest below the corresponding Net Revenue Interest in Exhibit A;

 

(2) the terms, provisions, and legal effect of all Leases (including “Pugh” clauses or similar severance provisions that cause or have caused portions of Leases to be terminated), assignments and conveyances in the chain of title to the Leases, Surface Rights, and Contracts to the extent that they do not, individually or in the aggregate: (i) reduce the Company’s Net Revenue Interest below that shown in Exhibit A or increase the Company Group’s Working Interest above that shown in Exhibit A without a corresponding increase in the Net Revenue Interest, or (ii) materially interfere with the ownership and operation of the Properties as currently owned and operated;

 

(3) with respect to a Property, any matter to the extent that it affects, pertains to, or relates to any depth, horizon, stratum, or formation other than the Subject Formation for such Property;

 

(4) any matter set forth, identified, or referenced in Exhibit A;

 

(5) Third Party consent requirements and preferential rights to purchase involving the Properties;

 

 

(6) all rights to consent, required notices to, filings with, or other actions by Governmental Bodies in connection with the change in control of ownership of the Properties if they are not required prior to thereto or are of a type customarily obtained after closing;

 

(7) any easements, rights-of-way, servitudes, permits, surface leases, and other rights relating to surface use in, on, under, upon, or across the Properties or otherwise affecting the Properties, including, without limitation, those for streets, alleys, highways, pipelines, telephone lines, power lines, railways, wind turbines, pipelines, stock tanks, water wells, injection wells, canals, ditches, reservoirs, grazing, hunting, and lodging, to the extent they do not materially interfere with the operation of the Properties;

 

(8) materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s, and other similar or inchoate liens or charges arising under Leases, Surface Rights, Contracts, or Law for amounts not yet delinquent (including any amounts being withheld as provided by Law), or if delinquent, being contested in good faith by appropriate actions;

 

(9) any lien, security interest, or encumbrance affecting the Properties that is discharged by Seller;

 

(10) liens for Taxes or assessments not yet due and delinquent;

 

(11) any and all mortgages, outstanding deeds of trust, liens, or other encumbrances that are to be released at Closing;

 

(12) any encumbrance on or affecting a Property which is expressly assumed, bonded, or paid by Buyer at or prior to Closing or which is discharged by Seller at or prior to Closing;

 

(13) rights of reassignment normally arising upon final intention to abandon or release all or any part of the Properties;

 

(14) Any Imbalances and any calls on Hydrocarbon production under existing Contracts as described and set forth in Schedule 4.15;

 

(15) rights reserved to or vested in any Governmental Body to control or regulate any of the Properties in any manner, and all generally applicable laws, including rules and orders relating to pooling, spacing, density, proration, development of the Properties, and zoning and planning ordinances and regulations of any municipality or political subdivision;

 

(16) any prior breaches of maintenance of uniform interest provisions in an operating agreement or similar agreement if waived by the parties having the right to enforce such provision or if the violation of such provision would not by its terms unwind or void the sale of the affected Properties hereunder;

 

 

(17) restrictions or limitations (including drilling and operating limitations) imposed on the Properties by reason of the rights of cotenants, surface, or subsurface owners, or operators in a common property (including the rights of gravel, coal, timber, utility owners, licensees, and/or lessees);

 

(18) any liens, charges, encumbrances, defects, irregularities, or other matters in the ordinary course of business consisting of minor defects and irregularities in title or other restrictions (whether created by, arising out of, or relating to Leases, Surface Rights, Contracts, or otherwise) that are of a nature customarily accepted by prudent purchasers of properties for the production of Hydrocarbons and do not, individually or in the aggregate, reduce the Company’s Net Revenue Interest below that shown in Exhibit A or increase the Company Group’s Working Interest above that shown in Exhibit A without a corresponding increase in Net Revenue Interest, in each case as to the applicable Subject Formation for a Property;

 

(19) any liens, charges, encumbrances, defects, irregularities, or other matters which affect a Property from which Hydrocarbons have been and are being produced (or to which production of Hydrocarbons is allocable) for the last three (3) years and for which no claim related to title has been made in writing by any Person during such three (3) year period;

 

(20) the failure of an assignment or conveyance in the chain of title to a portion of the Properties to specifically describe such portion of the Properties where the assignment or conveyance contains blanket granting language that encompasses such portion of the Properties;

 

(21) any lien, security interest, or encumbrance granted by the lessor or affecting the lessor’s interest in a Lease;

 

(22) defects based on or relating to: (i) a lack of information in Seller’s or the Company Group’s files or references to a document if such document is not in Seller’s or the Company Group’s files; (ii) lack of corporate or other authorization or agency, unless Buyer provides affirmative evidence that the action was not authorized and results in another Person’s superior claim of title to the relevant Property; (iii) the failure to recite marital status in a document, or omissions of successions of heirship or estate Proceedings, unless Buyer provides affirmative evidence that such failure or omission could reasonably be expected to result in another Person’s superior claim of title to the relevant Property; (iv) a missing link in the chain of title, unless such missing link is affirmatively shown to exist after a review of the available public and county or parish records and the records of the Company Group, by an abstract of title, title opinion, or landman’s title chain; (v) lack of survey, unless a survey is expressly required by applicable Law;

 

(23) the absence of a recorded vesting instrument relating to non-consent, carried, before-payout, or after-payout interests or the failure to hold record title to any Leases earned or purchased by the Company Group pursuant to the terms of any farmout, earnout, participation agreement, or other Contract, in each case where the applicable counterparty has not yet delivered the corresponding assignment but is otherwise required to do so;

 

 

(24) defects based upon (i) the failure to record any federal or state Leases or rights-of-way included in the Properties or any assignments of interests in such Leases or rights-of-way in any applicable records, unless such failure resulted in a Third Party having a superior claim of title, (ii) the failure to hold record title under state or federal Leases where the Company Group holds operating rights thereunder; and (iii) any title discrepancy between state or federal and county records, it being understood that the omission of a Property in an assignment or transfer recorded in the county records shall not be a Title Defect where the assignment or transfer is evidenced by an instrument filed in state or federal records, and vice versa;

 

(25) matters disclosed in this Agreement, including in any Schedule, Appendix, or Exhibit; and

 

(26) defects or issues that have been cured by applicable Laws of limitation or prescription or applicable marketable title Law.

 

“Person” means any individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, Governmental Body, association or unincorporated organization or any other form of business or professional entity.

 

“Pre-Closing Date Tax Period” has the meaning set forth in ‎Section 6.13(a)(1).

 

“Preferred Unit Consideration” has the meaning set forth in ‎Section 2.2.

 

“Prior MIPA” has the meaning set forth in the Recitals.

 

“Proceeding” means any suit, proceeding or governmental investigation.

 

“Promissory Note” means a promissory note issued by OpCo and payable to Seller in an amount equal to the lesser of (i) the difference between $63,000,000 and the Minimum Cash Amount and (ii) $15,000,000 in the form attached hereto as Exhibit B 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 Cash Facilities, 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, SPAC shall owe interest from and after default equal to the lesser of 18% per annum and the highest amount permissible under Law, compounded monthly. For the avoidance of doubt, the Promissory Note shall be subordinated to the Cash Facilities.

 

“Properties” means all right, title, interest, estate, privileges, and obligations, real or personal, recorded or unrecorded, movable or immovable, tangible or intangible, of Company Group in and to the Leases, Lands, Wells, and Units, and “Property” means all such right, title, interest, estate, privileges, and obligations with respect to any single unit of the Leases, Lands, Wells, or Units.

 

“Prospectus” has the meaning set forth in ‎Section 6.16.

 

“Proxy Financial Statements” has the meaning set forth in ‎Section 6.17.

 

“Proxy Statement” has the meaning set forth in ‎Section 6.15(a).

 

“Redemption Offer” has the meaning set forth in the Recitals.

 

“Registration Rights Agreement” has the meaning set forth in the Recitals.

 

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Seller” has the meaning set forth in the preamble to this Agreement.

 

“Seller OpCo Class B Units” means 2,000,000 OpCo Class B Units issuable to the Seller at Closing.

 

“Seller Class B Shares” has the meaning set forth in ‎Section 2.1.

 

“Seller Indemnitees” means, individually and in any combination, Seller and its Affiliates and any of their joint venturers, partners, co-owners, co-lessors, or co-lessees, and the respective officers, directors, agents, servants, employees, contractors, subcontractors, licensees, and invitees of any tier of each, as well as the heirs, representatives, successors, or assigns of any of the foregoing.

 

“SPAC” has the meaning set forth in the preamble.

 

“SPAC Anchor Investors” has the meaning set forth in the preamble.

 

“SPAC Board” has the meaning set forth in ‎Section 5.14.

 

“SPAC Board Recommendation” has the meaning set forth in ‎Section 6.15(c).

 

“SPAC Class A Common Stock” means shares of Class A common stock of the SPAC, par value $0.0001 per share, as described in the Second A&R SPAC Certificate of Incorporation.

 

“SPAC Class B Common Stock” means shares of Class B common stock of the SPAC, par value $0.0001 per share, as described in the Second A&R SPAC Certificate of Incorporation.

 

“SPAC Common Stock” means shares of common stock of the SPAC, par value $0.0001 per share.

 

“SPAC Contribution” has the meaning set forth in ‎Section 2.1(a).

 

“SPAC Extension” has the meaning set forth in ‎Section 9.1(e).

 

“SPAC SEC Documents” has the meaning set forth in ‎Section 5.12(a).

 

“SPAC Redemption Right” means, following the Closing, the right of a holder of OpCo Class A Units to cause OpCo to redeem one or more of such OpCo Class A Units for shares of SPAC Class A Common Stock on a one-for-one basis (subject to adjustment in certain cases), as set forth in the OpCo A&R LLC Agreement and the Second A&R SPAC Certificate of Incorporation.

 

“SPAC Stockholders” has the meaning set forth in the preamble.

 

“SPAC Stockholder Approval” has the meaning set forth in ‎Section 5.14.

 

“SPAC Stockholder Support Agreement” has the meaning set forth in the preamble.

 

“SPAC Subsidiary Contribution” has the meaning set forth in ‎Section 2.1(b).

 

“Special Meeting” has the meaning set forth in ‎Section 6.15(b).

 

“Specified Liabilities” has the meaning set forth in ‎Section 10.2(a).

 

“Special Warranty” has the meaning set forth in ‎Section 4.24.

 

 

“Sponsor” has the meaning set forth in the preamble.

 

“Straddle Period” means any taxable period beginning on or before and ending after the Closing Date.

 

“Subject Formation” means, with respect to a Property, any formation or formations from which the Property is producing Hydrocarbons as of the Original Execution Date.

 

“Subsidiary” of any Person shall mean (a) any corporation more than 50% of whose shares of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation is owned by such Person directly or indirectly through one or more subsidiaries of such Person and (b) any partnership, association, joint venture, or other entity in which such Person directly or indirectly through one or more subsidiaries of such Person has more than a 50% equity interest.

 

“Superior Offer” has the meaning set forth in ‎Section 6.15(c).

 

“Super 8-K Financial Statements” has the meaning set forth in ‎Section 6.17.

 

“Surface Rights” means all permits, licenses, allowances, water rights, registrations, consents, orders, approvals, variances, authorizations, servitudes, easements, rights-of-way, surface leases, other surface interests, and surface rights, to the extent appurtenant to or used primarily in connection with the ownership and operation of the Properties or the production, gathering, treatment, processing, storing, sale, or disposal of Hydrocarbons or produced water from the Properties.

 

“Tail Insurance” has the meaning set forth in ‎Section 6.10(b).

 

“Target Interests” has the meaning set forth in the Recitals.

 

“Tax Returns” means any return, report, statement, information return, claim for refund or other document filed or required to be filed with any Governmental Body in connection with the determination, assessment, collection or administration of any Taxes or the administration of any Laws relating to any Taxes, including any schedule or attachment thereto, any related or supporting information and any amendment thereof.

 

“Taxable Sale Component” has the meaning set forth in ‎Section 6.13(g)(i).

 

“Taxes” means all federal, state, local and foreign income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), windfall profits, customs, duties or other taxes of any kind whatsoever, together with all interest, penalties and additions to tax, imposed by any Governmental Body.

 

“Termination Date” has the meaning set forth in ‎Section 10.1.

 

“Second A&R SPAC Certificate of Incorporation” has the meaning set forth in ‎Section 8.3(f).

 

“Third Party” means any Person other than a Party or an Affiliate of a Party.

 

“Third Party Claim” means any claim for indemnification based upon a claim by a Third Party against an Indemnified Party

 

“Transaction Documents” means each other agreement to be executed and delivered in connection with this Agreement, including the Escrow Agreement, the Registration Rights Agreement, the SPAC Stockholder Support Agreement, the Board Designation Agreement, the Backstop Agreement and the Option Agreement.

 

 

“Transaction Expenses” means (a) all out-of-pocket fees, costs and expenses (including all fees, costs and expenses of outside counsel, accountants, investment bankers, experts and consultants to a Party and its Affiliates and all fees, costs and expenses in connection with newly issued equity or debt financing in connection with the Transactions) incurred by Company or Seller or on its behalf in connection with or related to the authorization, preparation, review, negotiation, execution and performance of this Agreement and the other Transaction Documents and consummation of the Transactions, the Proxy Statement/Prospectus, and the solicitation of the SPAC Stockholders, SPAC Rights Holders and Company Shareholders and the preparation of any required filings or notices under applicable Governmental Authorities as required by applicable Law, (b) all bonuses, change-of-control, success, retention or similar payments which vest or become payable to any current or former employees, directors, officers or other service providers of the Company or any Seller as a result of the Transactions (including amounts subject to the satisfaction of an additional condition (e.g., remaining employed for a specified period following the Closing), and the employer share of any payroll, social security, unemployment or other Taxes with respect thereto, (c) any accrued or payable transaction, management, monitoring or similar fees payable to any Affiliate of the Company, (d) the aggregate amount of severance due and payable in connection with any termination of employment prior to the Closing Date of any employee of the Company that is outstanding as of the Closing Date, (e) origination fees, broker or finder fees or commissions, consulting fees payable concerning or related to the Transactions or Credit Facility and (f) the premiums, commissions and other fees paid or payable in connection with obtaining the Tail Insurance.

 

“Transactions” means all of the transactions contemplated by this Agreement, including, without limitation, the Combination Transaction, and the issuance of the Unit Consideration, the OpCo Class A Units and the SPAC Class B Common Shares.

 

“Transfer Taxes” has the meaning set forth in ‎Section 6.13(a)(3).

 

“Trust Account” has the meaning given to such term in the Trust Agreement.

 

“Trust Agreement” means the Investment Management Trust Agreement, dated effective February 10, 2022, between SPAC and the Trustee.

 

“Trustee” means Continental Stock Transfer & Trust Company, a New York corporation.

 

“Underwriters” has the meaning set forth in ‎Section 6.16.

 

“Unit Consideration” has the meaning set forth in ‎Section 2.2.

 

“Units” means all rights, interests, and obligations in, under, or derived from all communitization, unitization, and pooling agreements, declarations, and orders in effect with respect to any of the Leases.

 

“Wells” means all oil, gas, water, monitoring, carbon dioxide, and injection wells located on the Lands, whether producing, operating, plugged, abandoned, shut-in, or temporarily abandoned, including, without limitation, those set forth in Exhibit A.

 

“Working Interest” means, with respect to any Property, the interest that is burdened with or subject to the obligation to bear or pay costs and expenses of maintenance, development, and operations on or in connection therewith.

 

 

Section 1.2 Construction.

 

(a) All Article, Section, Subsection, Schedule, Appendix, and Exhibit headings and references used in this Agreement are to Articles, Sections, Subsections, Schedules, Appendices, and Exhibits to this Agreement unless otherwise specified. The Exhibits, Appendices, and Schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes. The Table of Contents and Article and Section headings in this Agreement are inserted for convenience of reference only and shall in any way affect the meaning or interpretation of this Agreement. Unless the context requires otherwise: (i) all words used in this Agreement in the singular number shall extend to and include the plural, and all words in the plural number shall extend to and include the singular; (ii) words importing the masculine gender shall include the feminine and neutral genders and vice versa; (iii) the words “includes” or “including” require inclusion without limitation; (iv) the words “hereof,” “hereby,” “herein,” “hereunder,” and similar terms refer to this Agreement as a whole and not any particular Section or Article in which such words appear; (v) reference to a Person includes such Person’s successors and permitted assigns; (vi) reference to a Law encompass any amendment thereof or any successor thereto, together with any rules and regulations promulgated thereunder; and (vii) references to dollars and the symbol “$” mean United States Dollars. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified, and whenever an action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

 

(b) Each of the Parties has had substantial input into the drafting and preparation of this Agreement and has had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions.

 

Article II
Combination Transactions

 

Section 2.1 Contribution, Purchase and Sale. Upon and subject to the terms, provisions, and conditions set forth in this Agreement, at Closing:

 

(a) (i) SPAC shall contribute to OpCo (A) all of its assets (excluding the payments owed after giving effect to the exercise of redemption rights), including, for the avoidance of doubt, the Minimum Cash Amount, and (B) a number of newly issued shares of SPAC Class B Common Stock equal to the number of Seller Opco Class B Units (such shares, the “Seller Class B Shares”) and (ii) in exchange therefor, OpCo shall issue to SPAC a number of OpCo Class A Units, which shall equal the number of shares of SPAC Class A Common Stock issued and outstanding immediately after the Closing of the Transactions (taking into account and following the exercise of redemption rights) (such transactions, the “SPAC Contribution”);

 

(b) Immediately following the SPAC Contribution, OpCo shall contribute $900,000 of the Aggregate Consideration to SPAC Subsidiary in exchange for 100% of the outstanding common stock of SPAC Subsidiary (the “SPAC Subsidiary Contribution”); and

 

(c) Immediately following the SPAC Subsidiary Contribution, Seller shall sell, contribute, assign, and convey to (i) OpCo, and OpCo shall acquire and accept from Seller, 99.0% of the Target Interests and (ii) SPAC Subsidiary, and SPAC Subsidiary shall purchase and accept from Seller, 1.0% of the Target Interests (such transactions, together with the SPAC Contribution, the “Combination Transaction”), in each case, in exchange for (A) $900,000 of the Cash Consideration in the case of SPAC Subsidiary and (B) the remainder of the Aggregate Consideration in the case of OpCo.

 

 

Section 2.2 Aggregate Consideration. The aggregate consideration for the Target Interests shall be (a), cash in the amount of $63,000,000 in immediately available funds (the “Cash Consideration”), (b) 2,000,000 units of OpCo Class B Units valued at $10.00 per unit (the “Common Unit Consideration”), which shall be equal to 2,000,000 shares of SPAC Class A Common Stock issuable upon exercise of the OpCo Holder Redemption Right, as reflected in the A&R OpCo LLC Agreement and (c) and the Seller Class B Shares; provided, that (i) a portion of the Cash Consideration not to exceed $15,000,000 may be payable through the Promissory Note to Seller to the extent the Minimum Cash Amount is less than $63,000,000 and (ii) a portion of the Cash Consideration not to exceed $20,000,000 may be payable through the issuance of up to 2,000,000 units of OpCo Preferred Units (the “Preferred Unit Consideration”, and, together with the Common Unit Consideration, the “Unit Consideration”), to the extent the Minimum Cash Amount is less than $48,000,000. At Closing, 500,000 shares of Common Unit Consideration (the “Escrowed Unit Consideration”) shall be placed in escrow with the Escrow Agent for the benefit of Buyer pursuant to the Escrow Agreement and the indemnity provisions herein. The Unit Consideration and Escrowed Unit Consideration shall be proportionately adjusted to reflect any stock split, combination of shares, stock dividend, reorganization, recapitalization or other similar event affecting the SPAC Common Stock, the OpCo Class B Units, the Seller Class B Shares or the OpCo Preferred Units occurring after the date of this Agreement and prior to the Closing so as to provide Seller the same economic effect as contemplated by this Agreement prior to such change.

 

Section 2.3 Approximate Hydrocarbon Proceeds Amount. The Parties acknowledge and agree that (a) $6,000,000 is approximately the amount value of the production of Hydrocarbons from or attributable to the Properties and all other income, proceeds, receipts, and credits earned with respect to the Target Interests, net of all burdens, costs, expenses, royalty interests and expenses of production of Hydrocarbons, with respect to the period that is four (4) months prior to and through the Closing (the “Approximate Hydrocarbon Proceeds Amount”), (b) Seller shall be entitled to the value of such Hydrocarbon Proceeds, and (c) the Aggregate Consideration and the condition set forth in Section 7.1(e) requiring that the Minimum Cash Amount equal at least $33,000,000 take into account Seller receiving the benefit of the Approximate Hydrocarbon Proceeds Amount. Without limitation of the foregoing, from the Execution Date through the Closing, the Company shall use reasonable efforts to maintain normalized levels of working capital (i.e., current assets minus current liabilities, calculated in accordance with the prior practice of the Company), consistent with past practice and to provide for, as of the Closing Date, a positive working capital balance of at least $2,000,000; provided, that the maintenance of such level of working capital shall in no event result in a reduction of the Approximate Hydrocarbon Proceeds Amount, the Aggregate Consideration or otherwise impact the aggregate amount of proceeds received by Seller in connection with the transactions contemplated by this Agreement.

 

Article III
Certain Acknowledgements

 

Section 3.1 Inspection. It is understood and agreed by the Buyer that Buyer has had the opportunity to examine the Properties and perform all desired inspections and diligence relating to the Properties, including their condition and their compliance with Environmental Laws. The Aggregate Consideration reflects the value of the Properties in their “as-is” condition.

 

Section 3.2 NORM. Buyer acknowledges the following:

 

(a) The Properties have been used for exploration, development, production, processing and/or gathering of Hydrocarbons and there may be Hydrocarbons, produced water, wastes, or other materials located upon, in, and under the Properties or associated with the Properties.

 

 

(b) Equipment and sites located upon, used in connection with, associated with, or included in the Properties may contain asbestos, Hazardous Materials, or NORM.

 

(c) NORM may affix or attach itself to the inside of Wells, materials, and equipment as scale, or in other forms.

 

(d) The Wells, materials, and equipment located upon, used in connection with, associated with, or included in the Properties may contain NORM and other wastes or Hazardous Materials.

 

(e) NORM containing material and other wastes or Hazardous Materials may have come in contact with the soil of or associated with the Properties.

 

(f) Special procedures may be required for the remediation, removal, transportation, or disposal of soil, wastes, asbestos, Hazardous Materials, and NORM from the Properties.

 

NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, EXCEPT AS SET FORTH IN ‎SECTION 4.14, SELLER DOES NOT MAKE, SELLER EXPRESSLY DISCLAIMS, AND BUYER HEREBY WAIVES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRESENCE OR ABSENCE OF ASBESTOS OR NORM IN OR ON THE PROPERTIES IN QUANTITIES TYPICAL FOR OILFIELD OPERATIONS IN THE AREAS WHERE THE PROPERTIES ARE LOCATED. BUYER SHALL HAVE INSPECTED AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED ITS RIGHT TO INSPECT THE PROPERTIES FOR ALL PURPOSES, AND SHALL BE DEEMED TO HAVE SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING CONDITIONS SPECIFICALLY RELATING TO THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS, OTHER MAN-MADE FIBERS, AND NORM. BUYER IS RELYING SOLELY UPON THE TERMS OF THIS AGREEMENT AND ITS OWN INSPECTION OF THE PROPERTIES.

 

Section 3.3 Limitations. Without limitation of Buyer’s rights under ‎Section 10.2 with respect to any of the representations or warranties set forth in Article V, Buyer shall be deemed to have waived and released, and covenants that it shall waive and release, any and all claims for Losses related to conditions in, on, or under the Properties that cause the Property or the Company Group to be in violation of Environmental Laws and other defects or damages related to Environmental Liabilities or the environmental condition of the Assets. Except as expressly provided in ‎Section 10.2, Buyer (on behalf of itself, each of the other Buyer Indemnitees, and their respective insurers and successors in interest) hereby releases and discharges and agrees to indemnify, defend, and hold harmless Seller Indemnitees from and against any and all Environmental Liabilities and any and all Losses with respect to any matter or circumstance relating to Environmental Laws, the release of materials into the environment, or protection of the environment or health, EVEN IF SUCH ENVIRONMENTAL LIABILITIES OR LOSSES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT), STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR OTHER LEGAL FAULT OF SELLER INDEMNITEES EXCEPT FOR FRAUD, FOR WHICH SELLER SHALL REMAIN LIABLE. Except as set forth in ‎Article IV, Buyer acknowledges that Seller has not made and will not make any representation or warranty regarding any matter or circumstance relating to Environmental Laws, the release of materials into the environment, or protection of the environment or health, and that nothing in this Agreement or otherwise shall be construed as such a representation or warranty. Notwithstanding anything to the contrary, this Article III shall not limit Buyer’s rights to seek and obtain indemnification for Losses on the terms set forth in ‎Article X.

 

 

Section 3.4 Exclusive Remedies. EXCEPT AS PROVIDED IN THE SPECIAL WARRANTY OR IN THE CASE OF ACTUAL FRAUD, FOR WHICH SELLER SHALL REMAIN LIABLE, BUYER, ON BEHALF OF THEMSELVES AND THE OTHER BUYER INDEMNITEES, RELEASES, REMISES, AND FOREVER DISCHARGES SELLER INDEMNITEES FROM ANY AND ALL LOSSES WHICH BUYER OR ANY BUYER INDEMNITEE MIGHT NOW OR SUBSEQUENTLY HAVE BASED ON, RELATING TO, OR ARISING OUT OF ANY TITLE DEFECT OR ANY DEFECT, IRREGULARITY, LIEN, ENCUMBRANCE, COVENANT, OBLIGATION, OR OTHER ISSUE, MATTER, OR DEFICIENCY AFFECTING TITLE TO ANY PROPERTY.

 

Article IV
Representations and Warranties of Seller

 

Section 4.1 Disclaimers.

 

(a) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS ‎Article IV (INCLUDING IN THE REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN), IN THE CERTIFICATES OF SELLER TO BE DELIVERED AT CLOSING, OR IN THE SPECIAL WARRANTY, WITH RESPECT TO THE PROPERTIES AND THE TRANSACTIONS CONTEMPLATED HEREBY: (i) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, STATUTORY, EXPRESS, OR IMPLIED, AND (ii) BUYER HAS NOT RELIED UPON AND SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT, OR INFORMATION MADE OR COMMUNICATED, ORALLY OR IN WRITING, TO ANY PERSON (INCLUDING ANY OPINION, INFORMATION, PROJECTION, OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY EMPLOYEE, AGENT, OFFICER, DIRECTOR, MEMBER, MANAGER, EQUITY OWNER, CONSULTANT, REPRESENTATIVE, OR ADVISOR OF SELLER, THE COMPANY, OR ANY OF THEIR AFFILIATES).

 

(b) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS ‎Article IV (INCLUDING IN THE REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN), IN THE CERTIFICATES OF SELLER TO BE DELIVERED AT CLOSING, OR IN THE SPECIAL WARRANTY, SELLER EXPRESSLY DISCLAIMS AND BUYER ACKNOWLEDGES AND AGREES THAT IT HAS NOT RELIED UPON ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS, OR IMPLIED, AS TO (i) TITLE TO ANY OF THE PROPERTIES, (ii) THE CONTENTS, CHARACTER, OR NATURE OF ANY DESCRIPTIVE MEMORANDUM OR ANY REPORT OF ANY ENGINEER OR CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION RELATING TO THE PROPERTIES, (iii) THE QUANTITY, QUALITY, OR RECOVERABILITY OF HYDROCARBONS OR OTHER SUBSTANCES IN OR FROM THE PROPERTIES, (iv) ANY ESTIMATES OF THE VALUE OF THE PROPERTIES OR FUTURE REVENUES GENERATED BY THE PROPERTIES, (v) THE PRODUCTION OF HYDROCARBONS OR OTHER SUBSTANCES FROM THE PROPERTIES, (vi) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, OPERATION, OR PROJECT, (vii) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN, OR MARKETABILITY OF THE PROPERTIES, (viii) THE CONTENT, CHARACTER, OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS, OR STATEMENTS PREPARED BY THIRD PARTIES, (ix) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT, TRADEMARK, TRADE DRESS, TRADE SECRET, OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT, (x) THE CALCULATION OF, OR LIABILITY WITH RESPECT TO, ANY TAXES OF THE COMPANY OR THE BUYER OR RELATING TO THE ASSETS, OR THE CORRECTNESS OR PRESENCE OF ANY TAX POSITIONS OR TAX ATTRIBUTES OF THE COMPANY OR RELATING TO THE ASSETS, IN EACH CASE FOR PERIODS OR STRADDLE PERIODS BEGINNING AT OR AFTER THE CLOSING DATE OR (xi) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO BUYER OR ANY PERSON IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO; AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS, OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT. IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT BUYER, IN PURCHASING THE TARGET INTERESTS, SHALL BE DEEMED TO BE OBTAINING ALL PROPERTY AND EQUIPMENT OWNED BY THE COMPANY IN THEIR PRESENT STATUS, CONDITION, AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.

 

 

(c) Any representation that is made “to the knowledge of Seller,” “to Seller’s knowledge,” or with other similar qualifier is limited to matters within the Actual Knowledge of Kirk Pogoloff, President and Chief Executive Officer of the Company, without any duty of inquiry. “Actual Knowledge” for purposes of this Agreement means information actually personally known.

 

(d) Inclusion of a matter on a Schedule to a representation or warranty which addresses matters having a Material Adverse Effect shall not be deemed an indication that such matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule to this Agreement for purposes of information only. Matters disclosed in each Schedule shall qualify the representation and warranty in which such Schedule is referenced and any other representation and warranty to which the matters disclosed reasonably relate. The fact that any item of information is disclosed in a Schedule to this Agreement shall not constitute an admission that such item is material, that such item has had or would have a Material Adverse Effect, or that the disclosure is required under the terms of this Agreement.

 

(e) Subject to the foregoing provisions of this ‎Section 4.1 and the other terms and conditions of this Agreement, each Seller represents and warrants to Buyer, as of the Original Execution Date and the Closing Date, the matters set out in Sections ‎4.2 through ‎Section 4.23.

 

Section 4.2 Organization and Qualification. Such Seller, if an entity, is duly organized, validly existing, and in good standing under the laws of the State of Texas and has the power and authority to conduct its business as it is currently being conducted and to own the Target Interests. The Company and each member of the Company Group is duly organized, validly existing, and in good standing under the laws of the State of Texas, has the power to conduct its business as it is currently being conducted, and is duly qualified to do business or own the Properties as a foreign limited liability company or corporation where the Properties are located to the extent required by Law, except where the failure to so qualify would not have a Material Adverse Effect.

 

 

Section 4.3 Power. Such Seller has the requisite power to enter into and perform this Agreement and each other Transaction Document to be executed by Seller in connection with the transactions contemplated hereby and to consummate the transactions contemplated hereby.

 

Section 4.4 Authorization and Enforceability. The execution, delivery, and performance of this Agreement and each other Transaction Document to be executed by such Seller in connection with the transactions contemplated hereby, and the performance of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary company action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all other Transaction Documents required hereunder to be executed and delivered by Seller at Closing will be duly executed and delivered by Seller) and this Agreement constitutes, and at Closing such documents will constitute, the valid and binding obligations of Seller, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity regardless of whether such enforceability is considered in a Proceeding in equity or at Law (collectively, “Creditors’ Rights”).

 

Section 4.5 Capitalization.

 

(a) The authorized membership interests of the Company consist solely of the Target Interests. All outstanding membership interests of the Company are duly authorized and validly issued. Except for the Target Interests, there are no outstanding (i) membership interests or other voting securities of the Company, (ii) securities of the Company or any other Person convertible into or exchangeable or exercisable for membership interests or other voting securities of, or any other interest in, the Company, and (iii) subscriptions, options, warrants, calls, rights (including preemptive rights), equity appreciation, phantom equity, profit participation, redemption rights, commitments, understandings, or agreements to which the Company is a party or by which it is bound obligating the Company to issue, grant, transfer, convey, assign, deliver, sell, purchase, redeem, or acquire membership interests or other voting securities of, or any other interest in, the Company (or securities convertible into or exchangeable or exercisable for membership interests or other voting securities of, or any other interest in, the Company) or obligating the Company to grant, extend, or enter into any such subscription, option, warrant, call, right, commitment, understanding, or agreement. The Target Interests were issues in compliance with applicable Law.

 

(b) No membership interests of the Company have been reserved for issuance or issued in violation of, and none are subject to, any preemptive rights, purchase or call options, drag-along rights, tag-along rights, subscription rights, rights of first refusal, or other similar rights except as set forth in the Organizational Documents of the Company. At Closing, there will be no member agreement, irrevocable proxies, voting trust, or other agreement or understanding relating to the voting of any membership interests of the Company. There are, and there will be as of Closing, no outstanding stock appreciation, phantom stock, profit participation or similar rights which are obligations of the Company. There are no bonds, debentures, notes, or other indebtedness of the Company having the right to vote or consent (or convertible into, or exchangeable for, securities having the right to vote or consent) on any matters on which holders of membership interests of the Company may vote.

 

(c) Except as set forth on Schedule 4.5(c), the Company does not own any securities or interests in, or have any investments in, any Person, and the Company does not have any Subsidiaries. There are no obligations, contingent or otherwise, of the Company to provide funds to, make any investment in (in the form of a loan, capital contribution, or otherwise), or provide any guarantee with respect to the obligations of, any Person.

 

 

Section 4.6 No Conflicts. The execution, delivery, and performance of this Agreement and the transactions contemplated by this Agreement, will not (i) violate any provision of the Organizational Documents of the Company or any of its Subsidiaries, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance, or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any promissory note, bond, mortgage, indenture, loan, or similar financing instrument to which the Company is a party, (iii) violate any judgment, order, ruling, or decree applicable to the Company as a party in interest, or (iv) violate any Law applicable to the Company, except any matters described in clauses (ii), (iii), or (iv) above which would not have, individually or in the aggregate, a Material Adverse Effect, and in all cases assuming the receipt of all applicable consents required in connection with the consummation of the transactions contemplated by this Agreement.

 

Section 4.7 Liability for Brokers’ Fees. Except as provided by ‎Section 5.6, no broker, investment banker or other Person is entitled to any brokerage fees, finder’s fees, agent’s commissions, or other similar forms of compensation in connection with this Agreement or any agreement or the transactions contemplated hereby.

 

Section 4.8 Bankruptcy. There are no bankruptcy, reorganization, or receivership Proceedings pending, being contemplated by, or, to Seller’s knowledge, threatened in writing against Seller or the Company.

 

Section 4.9 No Litigation. Except as disclosed on Schedule 4.9, there are no Proceedings pending against any member of the Company Group for which the Company has received written notice from any Governmental Body or arbitrator or, to Seller’s knowledge, threatened in writing against the Company Group or the Properties, in respect of which there is a reasonable possibility of a determination adverse to the Company and which, if determined adversely, would be or would reasonably be expected to have a Material Adverse Effect.

 

Section 4.10 Compliance with Law. Except as set forth in Schedule 4.10, to the knowledge of Seller:

 

(a) all filings and notices relating to the Properties, or the ownership or operation thereof, required to be made by the Company Group with all applicable state and federal agencies have been made by or on behalf of the Company Group;

 

(b) Each Member of the Company Group and the operation of the Properties are in compliance with all Laws (other than Environmental Laws, which are addressed in Article III), except for such violations as are not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect; and

 

(c) The Company Group holds all Governmental Body permits necessary for the operation of its business as currently conducted, other than those for which the failure to hold is not, individually or in the aggregate, reasonably expected to have a Material Adverse Effect.

 

Section 4.11 Taxes. Except as set forth in Schedule 4.11:

 

(a) All Asset Taxes, and all Taxes imposed on or with respect to the Company Group, that have become due and owing have been timely paid. All Tax withholding and deposit requirements imposed by applicable Tax law with respect to any of the Assets or on or with respect to the Company Group (including with respect to amounts owing to any employee, creditor or third party) have been satisfied in all respects.

 

 

(b) All Tax Returns required to be filed with respect to Asset Taxes, and all Tax Returns required to be filed by or with respect to the Company Group, have been timely filed and such Tax Returns are true, correct and complete in all respects.

 

(c) There is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Asset Taxes or any Taxes imposed on or with respect to the Company Group.

 

(d) There are no administrative or judicial Tax proceedings by any Governmental Body ongoing, pending or threatened in writing with respect to, relating to, or in connection with, any Asset Taxes or Taxes of the Company Group.

 

(e) No written claim has been made by Governmental Body in a jurisdiction where Tax Returns with respect to the Assets of the Company Group are not filed that the Assets or any member of the Company Group is or may be subject to taxation by that jurisdiction, and to the Knowledge of Seller, no such claim has been threatened.

 

(f) There is no Tax deficiency outstanding, proposed, or assessed against a member of the Company Group or with respect to the Assets.

 

(g) Neither any Seller nor any member of the Company Group has entered into or requested or is bound by (i) any closing agreement under applicable Tax law with respect to Asset Taxes or Taxes of the Company Group, (ii) any private letter ruling, technical advice memorandum or similar ruling or memorandum with any Governmental Body with respect to Asset Taxes or Taxes of the Company Group or (iii) any contract or other agreement or arrangement with any Governmental Body with respect to Asset Taxes or Taxes of the Company Group, in each case that requires any Person to take, or refrain from taking, any material action after the Closing Date.

 

(h) There are no liens for Taxes on the Assets, except for Taxes not yet delinquent.

 

(i) To the knowledge of Seller, none of the Assets is subject to any Tax partnership agreement or otherwise treated or required to be treated as a partnership, or as held in an arrangement requiring a partnership income Tax Return to be filed, under Section 761 of the Code or the Treasury Regulations thereunder, other than a partnership income Tax Return required to be filed by the Company.

 

(j) The Company is, and has since its inception been, properly treated as a partnership for federal Tax purposes within the meaning of Treasury Regulations Sections 301.7701-2 and 301.7701-3. Each member of the Company Group (other than the Company) is, and has since its inception been, properly treated as a disregarded entity for federal Tax purposes within the meaning of Treasury Regulations Sections 301.7701-2 and 301.7701-3.

 

(k) None of (i) the goodwill, (ii) going concern value, or (iii) other intangible Assets that would not be amortizable prior to the enactment of Section 197 of the Code was held by any related person (within the meaning of Section 197(f)(9)(C) of the Code) to the Company Group on or before August 10, 1993 or could constitute anti-churning property under Section 197(f)(9)(A) of the Code.

 

 

(l) No member of the Company Group has participated in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2). No member of the Company Group is a party to or bound by any Tax sharing, allocation, indemnification or similar agreement (excluding for this purpose any contract or agreement entered into in the ordinary course of business, the primary subject matter of which does not relate to Taxes). No member of the Company Group is liable for Taxes of any other Person as a result of successor liability, transferee liability, joint or several liability (including pursuant to Treasury Regulations Section 1.1502-6 or any corresponding, similar or analogous provision of state, local, or non U.S. Laws) or contractual liability (other than any contract or agreement entered into in the ordinary course of business, the primary purpose of which does not relate to Taxes).

 

Notwithstanding anything in this Agreement to the contrary, the representations and warranties contained in this ‎Section 4.11 are the only representations and warranties of Seller with respect to Taxes.

 

Section 4.12 Contracts. Schedule 4.12 sets forth the Contracts to which the Company Group is a party or is bound that (i) is material to the business of the Company Group or to the ownership or operation of the Properties, (ii) will be binding upon the Company Group after the Closing Date, (iii) is not terminable, cancellable, or revocable without a penalty upon less than ninety (90) days’ notice, and (iv) is of the type described as follows (“Material Contracts”):

 

(a) any Contract for the sale, exchange, or other disposition of Hydrocarbons produced from or attributable to the Properties having a term of not less than one year;

 

(b) any Contract evidencing an obligation with respect to indebtedness for borrowed money for which the Company will be responsible after Closing (including any lien associated therewith);

 

(c) any Contract (other than confidentiality or similar agreements entered into in the ordinary course of business) that prohibits or materially restricts the Company Group from competing in any jurisdiction, in any business, or with any Person;

 

(d) any Contract (other than the Leases) that can reasonably be expected to result in aggregate payments by the Company Group of more than $500,000, net to the Company’s interest, during any fiscal year;

 

(e) any joint-operating agreement, exploration participation agreement, joint-development agreement, area-of-mutual-interest agreement, dedication agreements, farmout agreement, joint-venture agreement; partnership agreement, or similar Contract;

 

(f) any seismic or data-licensing agreements;

 

(g) any Contract that would require a member of the Company Group to drill additional wells or conduct other additional material development;

 

(h) any Contract relating to the acquisition or disposition of any of the Properties;

 

(i) any indemnification obligation; and

 

(j) any Hedge Contracts.

 

Section 4.13 Enforceability of Material Contracts. Each of the Material Contracts is valid, binding, and enforceable against the Company and, to the knowledge of Seller, each other party thereto, in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar Law now or hereinafter in effect relating to Creditors’ Rights generally, general equitable principles, and considerations of public policy. With respect to each Material Contract, there are no defaults or breaches by a member of the Company Group or, to Seller’s knowledge, any other party, that would result in a termination thereof.

 

 

Section 4.14 Environmental Matters. Except as disclosed in Schedule 4.14, (i) there are no Proceedings pending, or to the knowledge of Seller or the Company Group, threatened in writing, before any Governmental Body with respect to the Properties alleging material violations of, or material liabilities under, Environmental Laws, or claiming remediation obligations, (ii) neither Seller nor the Company Group has received any notice from any Governmental Body of any alleged or actual material violation or non-compliance with, or material liability under, any Environmental Law or of material non-compliance with the terms or conditions of any environmental permits, arising from, based upon, associated with, or related to the Properties or the ownership or operation thereof by Seller or the Company Group, and (iii) neither Seller nor the Company Group has received written notice from any Person of any release or disposal of any Hazardous Materials concerning the Properties that would reasonably be expected to materially interfere or prevent compliance by Seller or the Company Group, in all material respects, with any Environmental Laws or the terms of any license or permit issued pursuant thereto. This ‎Section 4.14 constitutes Seller’s sole representation and/or warranty regarding the environmental condition of the Assets or the compliance with, or violation of, Environmental Laws regarding the Assets by Seller or the Company.

 

Section 4.15 Imbalances. Schedule 4.15 sets forth all of the Company Group’s Imbalances and as of the Closing Date arising with respect to the Properties.

 

Section 4.16 Capital Commitments. Except as set forth on Schedule 4.16, there is no individual outstanding authority for expenditure for any incomplete operation which is binding on the Properties and for which Seller reasonably anticipates that the amount chargeable to the Company after the date hereof will exceed $200,000.

 

Section 4.17 Financial Statements. Schedule 4.17 sets forth the following financial statements of the Company Group: (i) the reviewed but unaudited consolidated statements of assets, liabilities and members’ capital on an income tax basis, as of December 31, 2020, (ii) the audited consolidated statements of assets, liabilities and members’ capital, on an income tax basis, as of December 31, 2021, the audited consolidated statements of revenues and expenses, on an income tax basis, for the year ended December 31, 2021, the audited consolidated statements of cash flows, on an income tax basis, for the year ended December 31, 2021, and (iii) the unaudited balance sheet, on an income tax basis, as of September 30, 2022, statements of operations, on an income tax basis, for the nine-month period ended September 30, 2022, and statements of cash flows, on an income tax basis, for the nine (9) months ended September 30, 2022 (collectively, the “Financial Statements”). The Financial Statements have been prepared on an income tax accrual basis, applied on a consistent basis throughout the period involved, except for the absence of footnotes and that such balance sheet and statements of operations for the period ended September 30, 2022 are subject to normal recurring year-end adjustments. The Financial Statements are based on the Books and Records of the Company and fairly present, in all material respects, the financial condition and the results of operations, and cash flows of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with a basis of accounting the entity uses for federal income tax purposes. Schedule 4.17 also sets forth certain unaudited pro forma financial statements of the Company Group as of December 31, 2021 that reflect certain expected adjustments necessary to revise the Financial Statements as of December 31, 2021 from a tax basis to GAAP (the “Adjusted Financial Statements”). The Adjusted Financial Statements reflect certain expected adjustments to restate as GAAP basis the Financial Statements as of December 31, 2021, as such adjustments have been presented through the date of this Agreement to Marcum LLP, the Company’s present auditor, for such purposes. The Adjusted Financial Statements are unaudited and subject to review and audit by Marcum LLP. Neither the Company nor, to the Company’s knowledge, any director, officer, employee, auditor, accountant or representative of the Company has received any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company Group that the Company Group has engaged in questionable accounting or auditing practices and (ii) there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, the board of directors of the Company or any committee thereof other than in the ordinary course with the accounting or auditing firms engaged on behalf of the Company Group.

 

 

Section 4.18 Reserved.

 

Section 4.19 Undisclosed Liabilities. The Company Group does not have any indebtedness, obligations, or other liabilities, whether accrued, absolute, or contingent, of any nature, except those that (i) are accrued or reserved against in the Financial Statements or reflected in the notes thereto, (ii) were incurred in the ordinary course of business since the respective dates of the Financial Statements, (iii) have been or shall be discharged or paid in full prior to the Closing Date, or (iv) would not individually or in the aggregate, have a Material Adverse Effect.

 

Section 4.20 Employees. Schedule 4.20 sets forth a list of all employees of the Company Group as of the Original Execution Date, along with, for each employee who will be retained by the Company Group following the Closing, information on each employee’s job title, whether the employee is full-time or part-time and exempt or non-exempt (for purposes of overtime classification), and applicable salary and incentive compensation.

 

Section 4.21 Bank Accounts. Schedule 4.21 lists all bank accounts, safety deposit boxes, and lockboxes (designating each signatory with respect thereto) of the Company Group.

 

Section 4.22 Officers. Schedule 4.22 lists all officers of the Company and each of its Subsidiaries and all Persons holding any power of attorney on behalf of the Company Group that will remain in effect following the Closing Date unless released prior thereto or requested by Buyer to be released at Closing.

 

Section 4.23 Investment Intent. Each Seller is acquiring the Unit Consideration and the SPAC Class B Common Stock for its own account, for investment, and not with the intent to make or to offer or resell in connection with a distribution in violation of the Securities Act (and the rules and regulations promulgated thereunder) or a distribution in violation of any other applicable securities Laws.

 

Section 4.24 Special Warranty. As of the Closing, title to the Properties shall be held by Company Group free and clear of any lawful claims of Third Parties arising by, through, or under Seller or any member of the Company Group, but not otherwise, that cause title to the Properties to fail to qualify as Defensible Title (the “Special Warranty”); provided, however, that the Special Warranty shall not cover or include claims made by, through or under Seller or any member of the Company Group that arise from or relate to any act, omission, event, or circumstance occurring on or after the Closing Date.

 

Article V
Representation and Warranties of Buyer

 

Subject to the other terms and conditions of this Agreement, each Buyer represents and warrants to Seller, as of the Execution Date, the matters set out in ‎Section 5.1 through ‎Section 5.25.

 

Section 5.1 Organization and Qualification. Each Buyer is duly organized, validly existing, and in good standing under the laws of the State of Delaware.

 

 

Section 5.2 Power. Each Buyer has the requisite company power to enter into and perform this Agreement and each other Transaction Document to be executed by such Buyer in connection with the transactions contemplated hereby and to consummate the transactions contemplated hereby and thereby.

 

Section 5.3 Authorization and Enforceability. The execution, delivery, and performance of this Agreement and each other Transaction Document to be executed by such Buyer in connection with the transactions contemplated hereby, and the performance of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary company action on the part of each Buyer. This Agreement has been duly executed and delivered by each Buyer (and all other Transaction Documents required hereunder to be executed and delivered by such Buyer at Closing will be duly executed and delivered by such Buyer) and this Agreement constitutes, and at Closing such documents will constitute, the valid and binding obligations of each Buyer, enforceable in accordance with their terms subject, as to enforceability, to Creditors’ Rights.

 

Section 5.4 Capitalization and Valid Issuance.

 

(a) As of the date of this Agreement, the total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which SPAC is authorized to issue is 101,000,000 shares, consisting of (i) 100,000,000 shares of SPAC Common Stock and (ii) 1,000,000 shares of preferred stock. As of the date of this Agreement, all outstanding shares of SPAC Common Stock have been duly authorized and validly issued in accordance with the Organizational Documents of SPAC and are fully paid and nonassessable.

 

(b) As of the Closing Date, (i) the total number of shares of SPAC Class A Common Stock which SPAC is authorized to issue will be 100,000,000 shares, and (ii) the total number of shares of SPAC Class B Common Stock which SPAC is authorized to issue will be 20,000,000 shares. As of the Closing Date, all outstanding shares of SPAC Class A Common Stock and SPAC Class B Common Stock have been duly authorized and validly issued in accordance with the Organizational Documents of SPAC and are fully paid and nonassessable.

 

(c) As of the Closing Date, (i) the total number of units of OpCo Class A Units which OpCo is authorized to issue is 100,000,000 units, (ii) the total number of units of OpCo Class B Units which OpCo is authorized to issue is 20,000,000 units, and (iii) the total number of units of OpCo Preferred Units which OpCo is authorized to issue is 2,000,000 units.

 

(d) Except for OpCo and SPAC Subsidiary, SPAC does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or business association or other person.

 

(e) SPAC owns the OpCo Interests. The OpCo Interests have been duly authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive rights, and are held by SPAC free and clear of all Liens, other than transfer restrictions under applicable securities Laws and OpCo’s Organizational Documents.

 

(f) The OpCo Class B Units and the OpCo Preferred Units contemplated hereunder will be duly authorized by OpCo pursuant to its Organizational Documents, the A&R OpCo LLC Agreement and, when issued and delivered by OpCo to Seller against payment therefor in accordance with the terms of this Agreement and the terms of the OpCo Class B Units and the OpCo Preferred Units, will be validly issued, fully paid and non-assessable and will be free of preemptive rights or any mortgage, claim, encumbrance, pledge, lien (statutory or otherwise), security agreement, conditional sale or trust receipt or a lease, consignment or bailment, preference or priority, assessment, deed of trust, charge, easement, servitude or other encumbrance (collectively, “Liens”) and restrictions on transfer, other than (i) restrictions on transfer under the A&R OpCo LLC Agreement, this Agreement and under applicable state and federal securities laws and (ii) such Liens as are created by Seller or its affiliates.

 

 

Section 5.5 No Conflicts. The execution, delivery, and performance of this Agreement and the transactions contemplated by this Agreement, including the issuance of the OpCo Class A Units, the OpCo Class B Units and the OpCo Preferred Units, will not (i) violate any provision of the Organizational Documents of each Buyer, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any Lien, or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of Contract to which each Buyer is a party, (iii) violate any judgment, order, ruling, or decree applicable to each Buyer, or (iv) violate any Law applicable to each Buyer.

 

Section 5.6 Liability for Brokers’ Fees. No broker, investment banker or other Person is entitled to any brokerage fees, finder’s fees, agent’s commissions, or other similar forms of compensation from Seller in connection with this Agreement or any agreement or the transactions contemplated hereby except for Anderson King who is entitled to a success fee from Seller. Alexandria VMA Capital, LLC and Dante Caravaggio are entitled to a referral fee as a form of compensation from Buyer in connection with this Agreement. Seller and each Buyer shall be obligated for their own broker or investment banker fees. Anderson King, Alexandria VMA Capital, LLC and Dante Caravaggio shall not be considered or deemed third-party beneficiaries of this Agreement for any purpose.

 

Section 5.7 Bankruptcy. There are no bankruptcy, reorganization, or receivership Proceedings pending, being contemplated by, or, to each Buyer’s knowledge, threatened in writing against any Buyer.

 

Section 5.8 Consents. No consent, approval, or authorization of any Person is required for or in connection with the execution of this Agreement by each Buyer or the consummation of the transactions contemplated hereby.

 

Section 5.9 No Litigation. There are no Proceedings pending against each Buyer or, to each Buyer’s knowledge, threatened in writing against such Buyer, which could reasonably be expected to have the effect of restricting, delaying, or prohibiting such Buyer’s ability to perform its obligations under this Agreement or the consummation of the transactions contemplated under this Agreement.

 

Section 5.10 Financing. Buyer has delivered to Sellers true and complete copies of (i) a debt commitment letter, dated the date hereof (including (i) all exhibits, schedules, and annexes thereto and as amended from time to time after the date hereof, the “Debt Commitment Letter” and the commitments under the Debt Commitment Letter, the “Debt Financing Commitments), addressed to Buyer, pursuant to which the Debt Financing Sources party thereto have committed to lend to Buyer, on the terms and subject to the conditions set forth therein, the amounts set forth therein (the “Debt Financing”). As of the date hereof, the Debt Commitment Letter is in full force and effect and has not been withdrawn or rescinded in any respect. As of the date hereof, there are no side letters or other written agreements to which Buyer is a party related to the funding or investing, as applicable, of the Debt Financing that impose additional conditions or expand any existing conditions to the receipt of the Debt Financing or the aggregate amount thereof to be funded on the Closing Date other than as expressly set forth in the Debt Financing Commitment. Buyer has fully paid, or caused to be fully paid, any and all commitment fees or other fees required by the Debt Financing Commitment to be paid on or prior to the date of this Agreement. As of the date hereof, the Debt Financing Commitment are the legal, valid, binding and enforceable obligations of Buyer, as the case may be, and each of the other parties thereto, in each case, as limited by the availability of specific performance and other equitable remedies or applicable equitable principles (whether considered in a proceeding at law or in equity). As of the date hereof and assuming the satisfaction of the conditions set forth in ‎Article VII, no event has occurred that, with or without notice, lapse of time or both, would reasonably be expected to constitute a material default or breach on the part of Buyer or, to the Knowledge of Buyer, any other party under, or a basis for termination by any party thereto of, any of the Debt Financing Commitments that would reasonably be expected to prevent, materially delay or materially impede the Closing. As of the date hereof and assuming the satisfaction of the conditions set forth in ‎Article VII, Buyer reasonably believes that it will be able to satisfy on a timely basis each of the conditions precedent to the funding of the Debt Financing to be satisfied by and within the control of Buyer contained in the Debt Commitment Letter.

 

 

Section 5.11 Funding. Buyer will have sufficient cash, available lines of credit, or other sources of immediately available funds to enable it to pay the Cash Consideration to Seller at Closing.

 

Section 5.12 SEC Documents.

 

(a) SPAC has made available to Seller (via the EDGAR system) a true and complete copy of each form, report, statement, schedule, prospectus, proxy, registration statement and other document filed by SPAC with the SEC since its initial registration of the SPAC’s units (the “SPAC SEC Documents”). Each of the SPAC SEC Documents has been timely filed and, as of their respective dates, each of the SPAC SEC Documents, as amended, complied as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act or any other applicable Law, as the case may be, in each case, to the extent applicable to such SPAC SEC Documents, and none of the SPAC SEC Documents contained, when filed or, if amended, as of the date of such amendment with respect to those disclosures that are amended, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. SPAC has timely filed each report, statement, schedule, prospectus, and registration statement that SPAC was required to file with the SEC since its inception. SPAC has made available (including via the EDGAR system) to Seller all material correspondence between the SEC on the one hand, and SPAC or any of its subsidiaries, on the other hand, since the initial registration of the SPAC’s units. There are no material outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the SPAC SEC Documents. None of the SPAC SEC Documents is the subject of ongoing SEC review or outstanding SEC comment and neither the SEC nor any other Governmental Body is conducting any investigation or review of any SPAC SEC Document.

 

(b) The financial statements of SPAC included in the SPAC SEC Documents complied, and in the case of financial statements filed following the Execution Date will comply, as to form in all material respects with Regulation S-X of the SEC, were prepared in all material respects in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present, and in the case of financial statements filed following the Execution Date will fairly present, in all material respects in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal year-end audit adjustments) the financial position of SPAC as of their respective dates and the results of operations and the cash flows of SPAC for the periods presented therein.

 

(c) SPAC makes and keeps books, records and accounts and has devised and maintains a system of internal controls, in each case, as required pursuant to Section 13(b)(2) under the Exchange Act. SPAC has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and the applicable listing standards of the NYSE American LLC (“NYSE American”). Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by SPAC in the reports that it files under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to its management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.

 

 

Section 5.13 Certain Contracts and Arrangements. The lists of exhibits contained in the SPAC SEC Documents sets forth a true and complete list, as of the date of this Agreement, of (a) each agreement to which each Buyer is a party (other than this Agreement) that is of a type that would be required to be included as an exhibit to a registration statement on Form S-1 pursuant to Items 601(b)(2), (4), (9) or (10) of Regulation S-K of the SEC if such a registration statement was filed by such Buyer on the date of this Agreement; (b) any non-competition agreement that purports to limit the manner in which, or the localities in which, all or any material portion of each Buyer’s business on a consolidated basis is conducted; (c) any contract that is related to the governance or operation of any joint venture, partnership or similar arrangement, other than such contract solely between or among any of such Buyer and its subsidiaries and (d) any contract that includes any Affiliate of each Buyer (other than a subsidiary of such Buyer) as a counterparty (collectively, the “Buyer Contracts”). No Buyer is in breach or default under any Buyer Contract nor, to such Buyer’s knowledge as of the date of this Agreement, is any other party to any such Buyer Contract in breach or default thereunder.

 

Section 5.14 Board Approval; Vote Required. The board of directors of SPAC (the “SPAC Board”) has declared the advisability of the transactions contemplated by this Agreement in accordance with applicable Law and as required by SPAC’s Organizational Documents and has determined to recommend that holders of SPAC Common Stock vote in favor of the transactions contemplated by this Agreement and not accept the Redemption Offer.  The affirmative vote of the holders of a majority of the shares of SPAC Common Stock that are voted at the Special Meeting with respect to the approval and adoption of this Agreement and the transactions contemplated hereby is the only vote of holders of any class or series of SPAC’s capital stock necessary to approve the transactions contemplated by this Agreement (the vote of the holders of SPAC’s capital stock referred to above in this ‎Section 5.14, the “SPAC Stockholder Approval”).

 

Section 5.15 OpCo Approval. SPAC, in its capacity as the sole member of OpCo, by resolutions duly adopted by written consent and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Transactions are fair to and in the best interests of OpCo and (ii) approved this Agreement and the Transactions. The only vote of the holders of any class or series of equity interests of OpCo necessary to approve this Agreement and the Transactions is the consent of the sole member of OpCo.

 

Section 5.16 SPAC Subsidiary Approval. SPAC, in its capacity as the sole member of OpCo, which is the sole shareholder of SPAC Subsidiary, by resolutions duly adopted by written consent and not subsequently rescinded or modified in any way, has duly (i) determined that this Agreement and the Transactions are fair to and in the best interests of SPAC Subsidiary and (ii) approved this Agreement and the Transactions. The only vote of the holders of any class or series of equity interests of SPAC Subsidiary necessary to approve this Agreement and the Transactions is the consent of OpCo.

 

Section 5.17 Listing. The issued and outstanding shares of SPAC Common Stock are registered pursuant to Section 12(b) of the Exchange Act and, as of the date of this Agreement, are listed for trading on the NYSE American under the symbol “HNRA”. There is no proceeding pending or, to SPAC’s knowledge, threatened against SPAC by the NYSE American or the SEC with respect to any intention by such entity to deregister the SPAC Common Stock or prohibit or terminate the listing of SPAC Common Stock on the NYSE American. SPAC has taken no action that is designed to terminate the registration of SPAC Common Stock under the Exchange Act. As of the Closing and prior to the Closing, the SPAC Common Stock shall be listed for trading on the NYSE American. Immediately prior to the Closing, the SPAC Class A Common Stock issuable upon the exercise of the OpCo Holder Redemption Right shall be approved for listing on the NYSE American, subject to official notice of issuance thereof.

 

 

Section 5.18 No Prior Operations of OpCo. OpCo was formed solely for the purpose of engaging in the Transactions and has not engaged in any business activities or conducted any operations or incurred any obligation or liability, other than as contemplated by this Agreement or in furtherance or anticipation of the Transactions.

 

Section 5.19 Trust Account. As of August 14, 2023, SPAC had approximately $48,433,053 in the Trust Account and held in trust by the Trustee pursuant to the Trust Agreement.

 

Section 5.20 Employees. Other than any officers as described in the SPAC SEC Documents, SPAC and OpCo do not have (and have never had) any employees on their payroll, and have not retained any contractors, other than consultants and advisors in the ordinary course of business that are independent contractors. Other than reimbursement of any out-of-pocket expenses incurred by SPAC’s officers and directors in connection with activities on SPAC’s behalf in an aggregate amount not in excess of the amount of cash held by SPAC outside of the Trust Account, SPAC has no unsatisfied material liability with respect to any officer or director. SPAC and OpCo have never and do not currently maintain, sponsor, or contribute to or have any liability (contingent or otherwise) with respect to any Employee Benefit Plan.

 

Section 5.21 Absence of Certain Changes or Events.

 

(a) Since December 31, 2021, there has not been any event, change, effect or development that, individually or in the aggregate, had a Material Adverse Effect on any Buyer.

 

(b) From December 31, 2021, each Buyer and its subsidiaries have conducted their business in the ordinary course of business in all material respects.

 

Section 5.22 Information Supplied. None of the information supplied or to be supplied by Buyer or its representatives for inclusion or incorporation by reference in the Proxy Statement to be sent to the stockholders of SPAC relating to the SPAC Stockholder Approval, will, at the date mailed to the stockholders of SPAC or at the time of the meeting of such stockholders to be held in connection with the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act.

 

Section 5.23 Letter Agreement. That certain letter agreement, dated as of February 10, 2022, by and among SPAC and each insider a party thereto including, without limitation, HNRAC Sponsors LLC is in full force and effect on the Execution Date, and will be in full force and effect as of the Closing Date.

 

Section 5.24 Independent Investigation. Buyer is experienced and knowledgeable in the oil-and-gas business and aware of the risks of that business. Buyer acknowledges and affirms that (a) in making the decision to enter into this Agreement, it has completed and relied solely upon its own independent investigation, verification, analysis, and evaluation of the Properties and of the Company as a business, (b) by Closing, it will have made all such reviews and inspections of the Properties and of the Company as it has deemed necessary or appropriate in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, and (c) except for the express representations, warranties, covenants, and remedies provided in this Agreement, it is acquiring the Properties and the Target Interests on an as-is, where-is basis with all faults, and has not relied upon any other representations, warranties, covenants, or statements of Seller in entering into this Agreement.

 

 

Section 5.25 Investment Intent. Buyer is acquiring the Target Interests for its own account, for investment, and not with the intent to make or to offer or resell in connection with a distribution in violation of the Securities Act (and the rules and regulations promulgated thereunder) or a distribution in violation of any other applicable securities Laws.

 

Article VI
Covenants of the Parties

 

Section 6.1 Access. Beginning on the Execution Date and continuing until the Closing Date, Seller will give Buyer and its representatives access to the records of the Company Group in Seller’s possession or control as requested by Buyer, including the right to make copies thereof at Buyer’s expense, for the sole purpose of conducting an investigation of the Target Interests. To the extent access to such records is granted at the offices of Seller or any member of the Company Group, such access by Buyer and its representatives shall be limited to normal business hours, and any weekends and after hours requested by Buyer that can be reasonably accommodated, and Buyer’s and its representatives’ investigation shall be conducted in a manner that minimizes interference with the business operations of Seller and the Company Group; provided that the foregoing shall not limit Buyer’s additional diligence rights under Article III. All information obtained by and access granted to Buyer and its agents, employees, and representatives under this ‎Section 6.1 shall be subject to the terms of ‎Section 6.6 and the terms of the Confidentiality Agreement.

 

Section 6.2 Government Reviews. Each Party shall in a timely manner (i) make all required filings, if any (including filings required under the HSR Act which shall be filed no later than ten (10) days after the execution of the Agreement), with and prepare applications to and conduct negotiations with each Governmental Body as to which such filings, applications, or negotiations are necessary or appropriate for such Party to consummate the transactions contemplated hereby as soon as practicable, and (ii) provide such information as the other Party may reasonably request to make such filings, prepare such applications, and conduct such negotiations. Each Party shall cooperate with and use all commercially reasonable efforts to assist the other with respect to such filings, applications, and negotiations. Buyer shall bear the cost of all filing or application fees payable to any Governmental Body with respect to the transactions contemplated by this Agreement.

 

Section 6.3 Notification of Breaches.

 

(a) Until Closing:

 

(1) Buyer shall notify Seller promptly after Buyer obtains Actual Knowledge that any representation or warranty of Seller contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Seller prior to or on the Closing Date has not been so performed or observed in any material respect; and

 

(2) Seller shall notify Buyer promptly after Seller obtains Actual Knowledge that any representation or warranty of Buyer contained in this Agreement is untrue in any material respect or will be untrue in any material respect as of the Closing Date or that any covenant or agreement to be performed or observed by Buyer prior to or on the Closing Date has not been so performed or observed in any material respect.

 

 

(b) If at any time after the Original Execution Date and prior to the Closing Date, Buyer determines in good faith that the Minimum Cash Amount condition set forth in ‎Section 7.1(e) will not be satisfied (i.e., Buyer will not be able to raise Cash Facilities in an amount sufficient to fund, at Closing at least $33,000,000), Buyer shall promptly notify Seller in writing of such determination.

 

Section 6.4 Operation of the Company’s Business.

 

(a) Except for operations that are necessary to prevent forfeiture of any Property, and except as set forth on Schedule 6.4, as expressly contemplated by the other provisions of this Agreement or as otherwise consented to in writing by Buyer, which consent shall not be unreasonably withheld, conditioned, or delayed, until Closing, Seller:

 

(1) will cause the Company Operated Properties to be operated in the ordinary course of business consistent with recent past practices;

 

(2) will not permit the Company Group to commit to any single field operation reasonably anticipated by Seller to require future capital expenditures by the owner of the Properties in excess of $400,000 or make any capital expenditures for any single field operation related to the Properties in excess of $400,000, in each case net to the Company Group’s interest;

 

(3) will not permit any member of the Company Group to terminate, materially amend, execute, or extend any Material Contracts;

 

(4) will cause the Company Group to maintain their current insurance coverage on the Properties, if any, presently furnished by unaffiliated Third Parties in the amounts and of the types presently in force;

 

(5) will cause the Company Group to use commercially reasonable efforts to maintain in full force and effect all Leases currently held by production in paying quantities, provided that the foregoing shall not require Seller to cause the Company Group to undertake any drilling, reworking, recompletion, or other operations to restore production of a Well that ceases production in paying quantities;

 

(6) will cause the Company Group to maintain all material existing federal, state, and local governmental licenses, permits, franchises, orders, exemptions, variances, waivers, authorizations, certificates, consents, rights, privileges, and applications therefor necessary for the Company’s ownership or operation of the Company Operated Properties as currently owned and operated;

 

(7) will not permit the Company Group to transfer, farmout, sell, hypothecate, encumber, or otherwise dispose of any Properties or property except for sales and dispositions of Hydrocarbon production and surplus, inventoried, damaged, or obsolete equipment made in the ordinary course of business consistent with recent past practices;

 

 

(8) will not cause or permit the Company Group to make any changes in any method of accounting or accounting practice or policy other than as required by applicable Law or GAAP that become effective after the Execution Date; or

 

(9) will not cause or permit the Company Group to modify, extend or enter into new Hedge Contracts;

 

(10) will not permit the Company Group to commit to do any act prohibited by the foregoing clauses (1) through (9).

 

(b) With respect to any action restricted by this ‎Section 6.4, Buyer’s approval shall be considered granted within five (5) days of Seller’s notice to Buyer requesting such consent unless Buyer notifies Seller to the contrary in writing during that period. Notwithstanding the foregoing, in the event of an emergency or a serious risk to life, property, or the environment, Seller may cause the Company Group to take or consent to such action as a prudent operator or non-operator, as the case may be, would take and without obtaining Buyer’s prior consent; provided Seller shall notify Buyer of such action promptly thereafter. However, except for emergency action that must be taken in the face of serious risk to life, property, or the environment, Seller has no obligation to cause the Company Group to undertake any actions with respect to the Properties that are not required in the course of the normal operation of the Properties consistent with recent past practices.

 

(c) Notwithstanding anything to the contrary in this Agreement, Seller shall have no liability to Buyer for the incorrect payment by the Company Group of delay rentals, royalties, overriding royalties, shut-in payments, or similar payments made during the period between the date hereof and the Closing Date or for failure by the Company Group to make such payments through mistake or oversight (including due to Seller’s negligence or other fault), except to the extent such incorrect payment is inconsistent with past practices.

 

(d) Buyer acknowledges that the Company Group may own fractional undivided interests in certain of the Properties and Buyer agrees that the acts or omissions of the other working interest owners, partners, or any operator who is not an Affiliate of Seller shall not constitute a violation of the provisions of this ‎Section 6.4, nor shall any action required by a vote of working interest owners or partners constitute such a violation so long as Seller has caused the Company Group to vote its interest in a manner consistent with the provisions of this ‎Section 6.4.

 

Section 6.5 Operation of the Buyer’s Business.

 

(a) Except as expressly contemplated by the other provisions of this Agreement or as otherwise consented to in writing by Seller, which consent shall not be unreasonably withheld, conditioned, or delayed, until Closing, Buyer:

 

(1) agrees to operate the Buyer’s business in the ordinary course of business consistent with recent past practices; and

 

 

(2) unless required by the SEC, NYSE American or applicable Law, shall not (i) amend or propose to amend (A) the Organizational Documents of SPAC or (B) the Trust Agreement or any other agreement related to the Trust Account, (ii) offer, issue, sell, grant or deliver, or authorize or propose to offer, issue, sell, grant or deliver any Interest in SPAC or any of its subsidiaries, other than issuances of equity or debt securities in connection with (A) a Cash Facility, (B) the exercise of the SPAC’s outstanding warrants as of the Execution Date, or (C) issuances of equity or debt necessary to fund working capital, or other amounts required to be paid into the Trust Account to extend the period the SPAC can enter into an initial business combination, (iii) (A) effect a split, combine or reclassify any Interests in SPAC or any of its subsidiaries, (B) declare, set aside or pay any dividends on, or make any other distribution in respect of, any outstanding Interests in SPAC or any of its subsidiaries, (C) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any Interests in SPAC or any of its subsidiaries, other than in connection with the Redemption Offer or (D) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Buyer or any of its subsidiaries, (iv) create, incur, guarantee or assume any indebtedness for borrowed money or otherwise become liable or responsible for the obligations of any other Person, in each case, other than in connection with (A) a Cash Facility or (B) issuances of equity or debt necessary to fund working capital, or other amounts required to be paid into the Trust Account to extend the period the SPAC can enter into an initial business combination, (v) (A) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any other Person or division of a business organization, (B) form any joint venture or similar arrangement or exercise any rights under any existing joint venture or similar agreement or (C) make any loans, advances or capital contributions to, or investments in, any Person or (vi) agree or commit to do any of the foregoing.

 

(b) With respect to any action restricted by this ‎Section 6.5, Seller’s approval shall be considered granted within five (5) days of Buyer’s notice to Seller requesting such consent unless Seller notifies Buyer to the contrary in writing during that period.

 

Section 6.6 Indemnity Regarding Access. Buyer, on behalf of itself and Buyer Indemnitees, hereby releases and agrees to indemnify, defend, and hold harmless Seller Indemnitees and the other owners of interests in the Leases, Lands, Units, and Wells from and against any and all Losses, including claims, liabilities, losses, costs, and expenses attributable to personal injuries, illness, death, or property damage, arising out of or relating to any and all access by Buyer Indemnitees to the offices of the Company Group, the Properties, and the records of the Company Group (or other related information), and arising out of or relating to any related activities of Buyer Indemnitees prior to Closing, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT), STRICT LIABILITY, OR OTHER LEGAL FAULT OF ANY SELLER INDEMNITEE OR OTHER PERSON INDEMNIFIED UNDER THIS ‎Section 6.6, EXCLUDING, HOWEVER, ANY LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY.

 

Section 6.7 Post-Closing Preferential Rights. Should a Third Party fail to exercise its preferential right to purchase as to any portion of the Properties prior to Closing but the time for exercise or waiver has not then yet expired, subject to the remaining provisions of this ‎Section 6.7, such Properties shall not be assigned to a Seller-designated Affiliate but shall remain vested in the Company, and such preferential right to purchase shall be a Permitted Encumbrance hereunder. In such event, if one or more of the holders of any such preferential right to purchase, after Closing, asserts its preferential purchase right, Buyer shall satisfy or cause to be satisfied all such preferential purchaser right obligations to such holders and shall indemnify and hold harmless Seller Indemnitees from and against any and all Losses in connection therewith, and Buyer or its Affiliates shall be entitled to receive all proceeds received from such holders in connection with such preferential rights to purchase.

 

 

 

Section 6.8 Further Assurances. After Closing, Seller and Buyer each agree to take such further actions and to execute, acknowledge, and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any other Transaction Document delivered pursuant to this Agreement.

 

Section 6.9 Amendment to Schedules. Seller agrees that, with respect to the representations and warranties of Seller contained in this Agreement, Seller will have the continuing right until the Closing Date to provide Buyer with amendments to the Schedules referenced in connection with Seller’s representations and warranties contained in this Agreement. However, for all purposes of this Agreement, including for purposes of determining whether the conditions set forth in ‎Section 7.2 have been fulfilled, the Schedules to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Original Execution Date and shall be deemed to exclude all information contained in any addition, supplement, or amendment thereto. Notwithstanding the foregoing, if Buyer elects to consummate Closing, Buyer shall be deemed to have waived any claims or rights related to any matter set forth in any such amendments to the Schedules pursuant to this ‎Section 6.9 to the extent such matter gave rise to a right of Buyer to terminate this Agreement under ‎Section 9.1(f).

 

Section 6.10 Personnel Indemnity.

 

(a) Each Person that prior to Closing served as a director or officer of any member of the Company Group (collectively, with such person’s heirs, executors, or administrators, the “Indemnified Personnel”) is entitled to indemnification, expense reimbursement, and exculpation to the extent provided for in the Organizational Documents of the Company in effect as of the Execution Date, and no amendment or modification thereto shall affect in an adverse manner any Indemnified Personnel’s rights, or the Company’s obligations, as applicable, with respect to Losses arising from facts or events that occurred on or before Closing without such person’s consent for a period of six years after Closing.

 

(b) On or before the Closing, the Company may purchase tail coverage, at Buyer’s expense, to extend to the Company’s existing directors’ and officers’ insurance in effect immediately prior to the Closing for a period of three (3) years following the Closing Date; provided, however, in the event tail coverage can be obtained for an additional three (3) years for a total of six (6) years for an additional premium cost of $50,000 or less, Buyer shall purchase a total of six (6) years of Tail Insurance (such tail policy, “Tail Insurance”). Buyer shall cause the Company to maintain in effect such Tail Insurance after the Closing Date. The obligations of Buyer and the Company under this ‎Section 6.10 shall not be terminated or modified in such a manner as to adversely affect any person to whom this ‎Section 6.10 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this ‎Section 6.10 applies shall be third-party beneficiaries of this ‎Section 6.10, each of whom may enforce the provisions of this ‎Section 6.10).

 

(c) Buyer agrees that for a period of six years after the Closing, all rights to indemnification and exculpation from liability for acts or omissions occurring at or prior to the Closing Date and rights to advancement of expenses relating thereto now existing in favor of any Indemnified Personnel shall not be amended, repealed or otherwise modified in any manner that is adverse to any Indemnified Personnel, unless such affected Indemnified Personnel consents thereto in writing. In the event that any member of the Company Group or any of its respective successors or assigns consolidates or merges with any other Person and is not the continuing or surviving entity of such consolidation or merger, or otherwise transfers all or substantially all of its properties and assets to any Person, the Buyer and the Company shall ensure that such Person assumes the obligations set forth in this Section.

 

 

Section 6.11 Insurance.

 

(a) Other than as set forth in ‎Section 6.10, Buyer shall be solely responsible for obtaining and maintaining, or causing the Company to obtain and maintain, in its sole discretion, insurance related to the business of the Company and the Properties for events or occurrences from and after Closing. Buyer acknowledges that all insurance arrangements maintained by Seller and its Affiliates (other than the Company) for the benefit of the Company, if any, will only be terminated as of Closing in the sole discretion of Buyer and, if cancelled, further Losses may not be covered under any such insurance arrangements; provided that to the extent permitted under the terms of the insurance policies in force prior to Closing, Seller shall use commercially reasonable efforts to assign, transfer, and set over to Buyer or subrogate Buyer to all of Seller’s right, title and interest (if any) in any insurance claims with respect to matters arising after the Closing Date and which remain outstanding as of Closing and any insurance claims that may have arisen prior to the Closing Date for which Buyer has assumed any liability, obligation, responsibility or for which Buyer indemnified Seller. Insurance policies maintained by the Company or otherwise maintained by Seller and its Affiliates (other than Company), expiration dates and annual premiums are set forth and described in Schedule 6.11.

 

Section 6.12 Liability for Employee Matters. Buyer shall be solely responsible for obligations and liabilities related to employment matters arising from and after the Closing Date.

 

Section 6.13 Tax Matters.

 

(a) Tax Allocation.

 

(1) Seller shall be allocated all Asset Taxes for any taxable period or portion thereof ending on or prior to the Closing Date, including the portion of any Straddle Period ending on or prior to the Closing Date (a “Pre-Closing Date Tax Period”), and Buyer shall be allocated all Asset Taxes for any Tax Period other than a Pre-Closing Date Tax Period (including the portion of any Straddle Period beginning after the Closing Date). For purposes of determining the Tax allocations described in the preceding sentence, (i) Asset Taxes that are attributable to severance or production (other than such Asset Taxes described in clause (iii)) shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (ii) Asset Taxes that are based upon or related to sales or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause (i) or (iii)) shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (iii) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall be allocated between the Pre-Closing Date Tax Period and the portion of such Straddle Period beginning after the Closing Date by prorating each such Asset Tax based on the number of days in the applicable Straddle Period that occur in the Pre-Closing Date Tax Period, on the one hand, and the number of days in such Straddle Period that occur after the Closing Date, on the other hand.

 

(2) Except as provided in ‎Section 6.13(a)(1) with respect to Asset Taxes, Seller shall be allocated all Taxes of the Company for any Pre-Closing Date Tax Period, and Buyer shall be allocated all Taxes of the Company for any Tax period other than a Pre-Closing Date Tax Period (including the portion of any Straddle Period beginning after the Closing Date). For purposes of determining the Tax allocations described in the preceding sentence, any Taxes (other than Asset Taxes) imposed on the Company shall be allocated using a “closing of the books” methodology as of the Closing Date.

 

 

(3) Buyer shall be solely responsible for the timely payment of and shall bear all sales, use, documentary stamp, gross receipts, registration, transfer, conveyance, excise, recording, license, stock transfer stamps, and other similar Taxes and fees arising out of or in connection with or attributable to the transactions consummated under this Agreement (collectively, “Transfer Taxes”). Buyer shall or shall cause the Company to file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes as required by applicable Law and, if required by applicable Law, Seller will join in the execution of any such Tax Returns or other documentation. For the avoidance of doubt, Transfer Taxes shall exclude any Income Taxes that become due and owing by the Company or Sellers as a result of the transactions consummated under this Agreement.

 

(b) Tax Returns.

 

(1) Seller shall or shall cause the Company to (i) prepare and timely file, or cause to be prepared and timely filed, all Tax Returns required to be filed by the Company that are required to be filed on or before the Closing Date, and (ii) timely pay or cause to be paid all Taxes due with respect to such Tax Returns. Any such Tax Return prepared and filed or caused to be prepared and filed shall be prepared in accordance with past practice (to the extent permitted by applicable Law).

 

(2) Buyer shall or shall cause the Company to (i) prepare and timely file, or cause to be prepared and timely filed, all Tax Returns required to be filed by the Company that are required to be filed after the Closing Date and (ii) timely pay or cause to be paid all Taxes due with respect to such Tax Returns. Each such Tax Return shall be prepared in accordance with past practice (to the extent permitted by applicable Law).

 

(c) Tax Audits.

 

(1) Each of Buyer, on the one hand, and Seller, on the other hand, shall notify Seller or Buyer, as the case may be, in writing within five (5) days of receipt by the first Party of written notice of any pending or threatened audits, adjustments, claims, examinations, assessments, or other proceedings which relate to Asset Taxes or Taxes of the Company for any Pre-Closing Date Tax Period (each, a “Tax Audit”). If such Tax Audit only relates to any Asset Taxes or Taxes of the Company for any Tax period ending on or prior to the Closing Date, Seller shall, at its expense, control the defense and settlement of such Tax Audit; provided that Seller shall (i) keep Buyer reasonably informed of the progress of such Tax Audit, (ii) permit Buyer (and Buyer’s counsel) to reasonably participate in such Tax Audit, including in meetings with the applicable Governmental Body, and (iii) not enter into any settlement of, or otherwise compromise or concede any portion of, any such Tax Audit without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned, or delayed). Buyer shall control any other Tax Audit not controlled by Seller; provided that Buyer and its Affiliates shall (x) keep Seller reasonably informed of the progress of such Tax Audit, (y) permit Seller (and Seller’s counsel) to reasonably participate in such Tax Audit, including in meetings with the applicable Governmental Body, and (z) not settle or enter into any compromise or concession with respect to any such Tax Audit without Seller’s consent (which consent shall not be unreasonably withheld, conditioned, or delayed).

 

 

(2) With respect to any taxable year for which the Company did not elect the application of Section 6221(b) of the Code (and any corresponding, similar or analogous provision of state, local or non-U.S. Law), upon written request from Buyer, the Sellers will make, or cause to be made, an election under Section 6226 of the Code (and any corresponding, similar or analogous provision of state, local or non-U.S. Law) with respect to the Company for any Pre-Closing Date Tax Period.

 

(d) Limitation on Actions Impacting Pre-Closing Date Tax Periods. Except as required under applicable Tax law, without the prior written consent of Seller (which shall not be unreasonably conditioned, withheld or delayed), Buyer shall not (i) extend or waive the applicable statute of limitations with respect to Asset Taxes or Taxes of the Company for a Pre-Closing Date Tax Period; (ii) file any ruling or request with any taxing authority with respect to Asset Taxes or Taxes of the Company for a Pre-Closing Date Tax Period; (iii) enter into any voluntary disclosure with any taxing authority with respect to Asset Taxes or Taxes of the Company for a Pre-Closing Date Tax Period; (iv) amend any Tax Return with respect to Asset Taxes or Taxes of the Company for a Pre-Closing Date Tax Period or (v) make, change or revoke any Tax election that relates Asset Taxes or Taxes of the Company for a Pre-Closing Date Tax Period, in each case, if such action would reasonably be expected to result in additional Taxes for which Seller is responsible under this Agreement.

 

(e) Tax Refunds. Seller shall be entitled to any and all refunds of Asset Taxes and Taxes of the Company allocated to Seller pursuant to ‎Section 6.13(a), and Buyer shall be entitled to any and all refunds of Asset Taxes and Taxes of the Company allocated to Buyer pursuant to ‎Section 6.13(a); provided, however, that neither Party shall be entitled to any refund of Asset Taxes or Taxes of the Company allocated to it pursuant to ‎Section 6.13(a) if such Party did not pay or otherwise economically bear such Taxes. If a Party or its Affiliates receives a refund of Taxes to which the other Party is entitled pursuant to this Agreement, such recipient Party shall forward to the entitled Party the amount of such refund within fifteen (15) days after such refund is received, net of any Taxes and reasonable costs or expenses incurred by such recipient Party in procuring such refund.

 

(f) Cooperation. Buyer and Seller shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of any Tax Returns described in ‎Section 6.13(b) and any Tax Audit.

 

(g) Tax Treatment and Allocation.

 

(i) For U.S. federal income tax purposes (and applicable state and local Tax purposes), the Parties agree to treat the transactions described in this Agreement as follows (clauses (A)-(C) collectively, the “Intended Tax Treatment”):

 

(A) The SPAC Contribution shall be treated as a contribution of property to OpCo (a newly formed partnership that is not a continuation of Company) under Section 721(a) of the Code;

 

 

(B) The purchase of 1% of the Target Interests by SPAC Subsidiary which is described in Section 2.1(c)(i) shall be treated as a taxable sale of a partnership interest;

 

(C) The acquisition of 99% of the Target Interests by OpCo which is described Section 2.1(c)(ii) shall be treated (I) in part, as a nontaxable contribution of such Target Interests by Seller to OpCo pursuant to Section 721(a) of the Code in exchange for the Unit Consideration, and (II) in part, as a taxable sale of such Target Interests by Seller to OpCo (the portion described in this clause (II), together with the purchase described in Section 6.13(g)(i)(B) above, the “Taxable Sale Component”) in a transaction governed by Sections 707(a)(2)(B) and 1001 of the Code; provided, however, that, notwithstanding anything to the contrary in this Section 6.13(g)(i), (x) any payment of the Cash Consideration by OpCo to Seller (1) allocable to the proceeds of the Debt Financing shall be treated as a nontaxable debt-financed distribution in accordance with Section 731(a) of the Code and Treasury Regulations Section 1.707-5(b) to the extent that the Cash Consideration received by Seller does not exceed its allocable share of the Debt Financing, as determined in accordance with Section 752 of the Code and the Treasury Regulations promulgated thereunder, and (2) shall be treated as a reimbursement of the preformation capital expenditures of Seller within the meaning of, and to the maximum extent permissible under, Treasury Regulations Section 1.707-4(d), (y) the proceeds of the Debt Financing shall be allocated to any distribution of the Cash Consideration by OpCo to Seller in accordance with Treasury Regulations Section 1.163-8T and (z) each of the Seller Class B Shares and the right to request redemption of OpCo Units contemplated by the OpCo A&R LLC Agreement shall be treated as having a fair market value equal to zero dollars ($0) at the time of the Combination Transaction (and if any value is ascribed to such shares or redemption right, the receipt thereof shall be treated as a reimbursement of the preformation capital expenditures of Seller within the meaning of, and to the maximum extent permissible under, Treasury Regulations Section 1.707-4(d)).

 

Each Party agrees (x) it shall, and shall cause each of its Affiliates, to report, act, and file all Tax Returns in all respects and for all purposes consistent with the Intended Tax Treatment, and (y) it will not, and will not permit any of its Affiliates to, take any position for Tax purposes (whether on any Tax Return, in any Tax Audit or otherwise) that is inconsistent with the Intended Tax Treatment, unless required to do so by a “determination” within the meaning of Section 1313(a) of the Code (or any corresponding or similar provision of applicable state or local Tax Law).

 

(ii) The parties shall cooperate in causing an election to be made under Section 743(b) of the Code with respect to acquisition of the Target Interests. Buyer shall prepare an allocation of the portion of the Cash Consideration and other amounts treated for U.S. federal income tax purposes as taxable consideration received pursuant to the Taxable Sale Component (as determined for U.S. federal Income Tax purposes) among the assets of the Company in accordance with Section 755 of the Code and the Treasury regulations promulgated thereunder and, to the extent permitted by applicable Law, in a manner consistent with the Allocated Values (the “Allocation”) no later than sixty (60) days after the Closing Date. Seller shall notify Buyer in writing within fifteen (15) days of receipt of the Allocation of any comments or objections to the Allocation. If Seller does not deliver any written notice of objection to the Allocation within such fifteen (15) day period, Seller shall be deemed to have agreed to the Allocation, and the Allocation shall be final, conclusive, and binding on the Parties. If Seller timely delivers a written notice of objection, the Parties will negotiate in good faith for a period of twenty (20) days to resolve such dispute. If, during such period, the Parties resolve their differences in writing as to any disputed amount, such resolution shall be deemed final and binding with respect to such amount for the purpose of determining that component of the Allocation. To the extent the Parties reach or are deemed to reach agreement on components of the Allocation pursuant to the foregoing provisions of this ‎Section 6.13(g)(ii), the Parties shall, and shall cause their Affiliates to, report consistently with the agreed components of the Allocation in all Tax Returns, and no Party shall take any Tax position (including in any Tax Return and in any Tax examination, audit, claim or similar Proceeding) that is inconsistent with the agreed components of the Allocation, in each case, unless required to do so by a final determination as defined in Section 1313 of the Code (or any similar provision of applicable state, local, or foreign law) or with the other Party’s prior written consent; provided, however, that no Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise, or settle any Tax examination, audit, claim or similar Proceedings in connection with the agreed Allocation. To the extent the Parties do not and are not deemed to reach agreement on a component of the Allocation pursuant to this ‎Section 6.13(g)(ii), each Party shall be entitled to adopt their own position regarding such unagreed component of the Allocation, provided that such position shall, to the extent permitted by applicable Law, be consistent with the Allocated Values.

 

 

(h) Covenant to Maintain Tax Classification. From the Closing Date through December 31, 2024, Buyer shall cause the Company to continue to be classified and treated as a partnership for U.S. federal income tax purposes.

 

Section 6.14 Public Announcements. The Parties will not, and will cause their respective representatives not to, issue any other public announcements or make other public disclosures regarding this Agreement (including with respect to the execution of this Agreement) or the transactions contemplated hereby, without the prior written approval of Seller, in the case of a public announcement by Buyer or its representatives, or Buyer, in the case of a public announcement by Seller; provided, however, that a Party or its representatives may issue a public announcement or other public disclosures required by applicable Law (including the Proxy Statement and any offering or other documents prepared in connection with a Cash Facility); provided that such Party uses reasonable best efforts to afford the other Party an opportunity to first review the content of the proposed disclosure and provide reasonable comment regarding same; provided, further, that no provision of this Agreement shall be deemed to restrict in any manner (a) any Party’s ability to communicate with its employees and financial and legal advisors in connection with the transactions contemplated hereby or the fact that the such Party has entered into this Agreement or (b) any Party’s ability to communicate with its equity-holders and other investors (including future investors) the fact that such Party has entered into this Agreement.

 

Section 6.15 The Proxy Statement and the Special Meeting.

 

(a) SPAC previously prepared and filed with the SEC a proxy statement with respect to the transactions contemplated hereby (as amended or supplemented from time to time, the “Proxy Statement”) in preliminary form. Unless the SPAC Board has made a Change in Recommendation in accordance with the provisions of this Agreement, the SPAC Board Recommendation shall be included in the Proxy Statement. SPAC shall provide copies of the proposed final form of Proxy Statement to Seller such that Seller and its representatives are afforded a reasonable amount of time prior to the dissemination or filing thereof to review such materials and comment thereon prior to such dissemination or filing, and SPAC shall consider in good faith any comments of such Persons and shall make SPAC’s representatives available to discuss such comments with such Persons. SPAC shall provide Seller with copies of any written comments and inform Seller of the material terms of any oral comments that SPAC receives from the SEC or its staff with respect to the Proxy Statement promptly after the receipt of such comments and Seller and SPAC shall prepare any proposed written or material oral responses to such comments and SPAC shall give Seller a reasonable opportunity under the circumstances to review and comment on any final form of proposed written or material oral responses to such comments and SPAC shall reasonably consider such comments in good faith. SPAC will cause the Proxy Statement to be transmitted to the holders of SPAC Common Stock as promptly as practicable following the date on which the SEC confirms it has no further comments on the Proxy Statement.

 

 

(b) SPAC will take, in accordance with applicable Law, NYSE American rules, the rules of any other applicable stock exchange and the Organizational Documents of SPAC, all action necessary to call, hold and convene a special meeting of holders of SPAC Common Stock (including any adjournment or postponement, the “Special Meeting”) to consider and vote upon the transactions contemplated hereby, as promptly as reasonably practicable after the filing of the Proxy Statement in definitive form with the SEC. Subject to any adjournment in accordance with this ‎Section 6.15, SPAC will convene and hold the Special Meeting not later than ten (10) Business Days following the mailing of the Proxy Statement to the holders of SPAC Common Stock. Once the Special Meeting to consider and vote upon the matters has been called and noticed, SPAC will not postpone or adjourn the Special Meeting without the consent of Seller, which consent will not be unreasonably withheld, conditioned or delayed, other than (i) for the absence of a quorum, (ii) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure that SPAC has determined in good faith, after consultation with its outside legal advisors, is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated to and reviewed by the holders of SPAC Common Stock prior to the Special Meeting or (iii) an adjournment or postponement of up to ten (10) Business Days to solicit additional proxies from holders of SPAC Common Stock. Subject to ‎Section 6.15(c), SPAC will take all reasonable lawful action to solicit SPAC Stockholder Approval. SPAC shall not terminate or withdraw the Redemption Offer, other than in connection with the valid termination of this Agreement or with the prior written consent of Seller.

 

(c) The SPAC Board will recommend that the holders of SPAC Common Stock approve the transactions contemplated hereby and not accept the Redemption Offer (the “SPAC Board Recommendation”). Notwithstanding the foregoing, at any time prior to obtaining the SPAC Stockholder Approval at the Special Meeting, the SPAC Board may withdraw, modify or qualify in any manner the SPAC Board Recommendation (any such action a “Change in Recommendation”) only (i) in response to an Intervening Event and (ii) if the SPAC Board shall have concluded in good faith, after consultation with its outside legal advisors and financial advisors, that the failure to take such action in response to such Intervening Event would be inconsistent with the SPAC Board’s fiduciary duties under applicable Law; provided, however, that the SPAC Board shall not be entitled to exercise its rights to make such a Change in Recommendation pursuant to this sentence unless (A) SPAC has provided to Seller three Business Days’ (a “Notice Period”) prior written notice advising Seller that the SPAC Board intends to take such action and specifying the reasons therefor in reasonable detail (including the facts and circumstances relating to such Intervening Event (an “Intervening Event Notice”) (it being understood that such Intervening Event Notice shall not in itself be deemed a Change in Recommendation and that any material change to the facts or circumstances relating to such Intervening Event shall require a new Intervening Event Notice)), (B) during such Notice Period, if requested by Seller, SPAC shall, and shall make available and direct its applicable representatives to, discuss and negotiate in good faith with Seller any proposed modifications to the terms and conditions of this Agreement and (C) following such Notice Period, the SPAC Board, after taking into account any modifications to the terms of this Agreement and the transactions to which Seller would agree, concludes in good faith and after consultation with its outside legal advisors and financial advisors, that the failure to take such action in response to such Intervening Event is necessary to comply with its duties under the Organizational Documents of SPAC or is reasonably likely to be inconsistent with its fiduciary duties under applicable Law. For the avoidance of doubt, unless this Agreement is terminated in accordance with its terms, any Change in Recommendation will not (I) change the approval of this Agreement or any other approval of the SPAC Board or (II) relieve SPAC of any of its obligations under this Agreement, including its obligation to hold the Special Meeting.

 

 

“Intervening Event” means a material event, change, effect, development (including, without limitation, a Superior Offer), condition or occurrence that affects the business, financial condition or continuing results of operations of the Company that is not known and is not reasonably foreseeable by the SPAC Board as of the Original Execution Date and does not relate to Seller or its Affiliates.

 

“Superior Offer” means any bona fide written Competing Transaction that the SPAC Board shall have determined in good faith (after consultation with its independent financial advisor of nationally recognized reputation and its outside legal counsel) (a) is reasonably likely to be consummated in accordance with its terms, taking into account all legal, regulatory and financing aspects of the proposal, by the Person making the proposal and (b) if consummated, would be materially more favorable from a financial point of view to the holders of SPAC Common Stock than the Transactions.

 

“Competing Transaction” means any (a) purchase of all or a substantial portion of the assets or equity of any person or (b) merger or business combination between SPAC, on the one hand, and any other person, on the other hand.

 

Section 6.16 Trust Account. Upon satisfaction or waiver of the conditions set forth in ‎Article VII, and provision of notice thereof by SPAC to the Trustee in accordance with the terms of the Trust Agreement, (a) in accordance with and pursuant to the Trust Agreement, at the Closing, SPAC shall cause the documents, opinions, and notices required to be delivered to the Trustee pursuant to the Trust Agreement to be so delivered and shall use its best efforts to cause the Trustee to, and the Trustee shall thereupon be obligated to (i) pay as and when due all amounts payable to stockholders of SPAC, and (ii) immediately thereafter, pay all remaining amounts then available in the Trust Account in accordance with this Agreement and the Trust Agreement, and (b) thereafter, the Trust Account shall terminate, except as otherwise provided therein, pursuant to the terms and provisions of the Trust Agreement. Reference is made to SPAC’s final prospectus, dated February 11, 2022 (the “Prospectus”). Company understands that SPAC has established the Trust Account, in an approximate amount of $48,433,053 as of August 14, 2023, for the benefit of the SPAC Stockholders and the underwriters of SPAC’s initial public offering (the “Underwriters”) and that, except for certain exceptions described in the Prospectus, SPAC may disburse monies from the Trust Account only: (i) to the SPAC Stockholders in the event of the conversion of their shares or the liquidation of SPAC; or (ii) to SPAC and its Underwriters and/or marketing agent(s) after consummation of a business combination, as described in the Prospectus. For and in consideration of SPAC agreeing to enter into this Agreement, Seller hereby agrees that it does not have any right, title, interest or claim of any kind in or to any monies in the Trust Account (the “Claim”) and notwithstanding anything in this Agreement to the contrary, Company hereby waives any Claim it may have in the future as a result of, or arising out of, this Agreement and will not seek recourse against the Trust Account for any reason whatsoever.

 

Section 6.17 Cooperation on Financial Statements. Seller shall coordinate in good faith with the Company’s auditors to prepare and deliver to Buyer the audited and unaudited financial statements of the Company as may be required for the Proxy Statement (the “Proxy Financial Statements”) and the filing of the Form 8-K (the “Super 8-K Financial Statements”) in connection with the Closing. Any financial statements of the Company Group provided by Seller or the Company Group and filed following the Execution Date in the Proxy Statement and such Form 8-K will (a) comply, as to form in all material respects with Regulation S-X of the SEC, (b) will be prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC), and (c) will fairly present, in all material respects, the financial condition and the results of operations, changes in shareholders’ equity and cash flows of the Company Group as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP.

 

 

Section 6.18 Listing. SPAC shall use its reasonable best efforts to cause all shares of the SPAC Class A Common Stock issuable upon the exercise of the OpCo Holder Redemption Right to be approved for listing on the NYSE American, subject to official notice of issuance, prior to the Closing Date.

 

Section 6.19 The “Pogo” Name. Except as expressly provided in this ‎Section 6.19, from and after Closing, Seller shall be vested with all rights to the Retained Names, and Buyer shall not (and shall cause its Affiliates not to) use the Retained Names. Buyer shall promptly (and in no event later than one hundred twenty (120) days after the Closing Date): (i) make all necessary filings and take all other necessary actions to discontinue any further references by the Buyer or its Affiliates to the Retained Names; and (ii) change signage and stationery and otherwise discontinue use of the Retained Names; provided, however, that Buyer may use the Retained Names in connection with an announcement made pursuant to ‎Section 6.14 and otherwise to the limited extent necessary to comply with applicable Law. As used herein, the “Retained Names” means “Pogo” and any reasonable derivations, integrations, or variations thereof.

 

Section 6.20 Board Observer. Until the later of (i) the date that the Seller Representative no longer holds any SPAC Class A Common Shares or SPAC Class B Common Shares (ii) the repayment and termination of the Promissory Note in accordance with its terms, Seller Representative shall have the right to appoint two representatives to serve as non-voting observers at all meetings of the Board of Directors of SPAC. In addition, following the conversion of the OpCo Preferred Units, Seller Representative shall have the right to nominate a certain number of directors to the SPAC Board as provided in the form of Board Designation Agreement attached hereto as Exhibit F. In furtherance of the foregoing, at Closing, Seller Representative and SPAC shall execute and deliver the Board Designation Agreement.

 

Section 6.21 Issuance of SPAC Class B Common Stock. SPAC agrees to issue additional shares of Class B Common Stock to Seller, and its permitted transferees, upon conversion of the OpCo Preferred Units into Class B Units pursuant to the terms of the OpCo A&R LLC Agreement equivalent to the number of Class B Units issued to Seller upon such conversion. In the event SPAC does not have a sufficient number of shares of Class B Common Stock authorized for issuance of the additional Class B Common Stock in accordance with the preceding sentence, the SPAC Board shall approve, and recommend that the stockholders of SPAC approve at the next annual meeting of stockholders following such conversion, an increase in the number of authorized shares of Class B Common Stock sufficient for full conversion of the OpCo Preferred Units.

 

Article VII
Conditions to Closing

 

Section 7.1 Conditions to Obligation of Seller to Close. The obligation of Seller to consummate the transactions contemplated by this Agreement are subject, at the option of Seller, to the satisfaction on or prior to Closing of each of the following conditions:

 

(a) Representations. The representations and warranties of Buyer set forth in ‎Article V shall be true and correct as of the Original Execution Date and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date, which shall be true and correct on and as of such specified date), except for such breaches, if any, as would not have a Material Adverse Effect.

 

(b) Performance. Buyer shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date except such covenants and agreements for which the nonperformance or noncompliance does not or would not be reasonably expected to have a Material Adverse Effect.

 

 

(c) Pending Litigation. No Proceeding by a Third Party (including any Governmental Body) seeking to restrain, enjoin, or otherwise prohibit the consummation of the transactions contemplated by this Agreement shall be pending before any Governmental Body or have resulted in an injunction, order, or award that grants such relief.

 

(d) Deliveries. Buyer shall have delivered to Seller duly executed counterparts of the Transaction Documents to be delivered by Buyer under ‎Section 8.3.

 

(e) Payment; Minimum Cash Amount. Buyer shall be ready, willing, and able to pay the Cash Consideration to Seller (with at least $33,000,000 payable in cash) and no more than $15,000,000 subject to payment through the terms of the Seller Promissory Note and no more than $20,000,000 subject to payment through the OpCo Preferred Units) and issue the Unit Consideration and the SPAC Class B Common Stock to Seller.

 

(f) Listing. The shares of SPAC Class A Common Stock (including shares issuable upon the exercise of the OpCo Holder Redemption Right) shall 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.

 

(g) Regulatory Approval. If applicable, any waiting period applicable to the transactions contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.

 

(h) Stockholder Approval. The transactions contemplated by this Agreement shall have been approved by the SPAC Stockholder Approval at the Special Meeting.

 

Section 7.2 Conditions to Obligation of Buyer to Close. The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject, at the option of Buyer, to the satisfaction on or prior to Closing of each of the following conditions:

 

(a) Representations. The representations and warranties of Seller set forth in ‎Article IV shall be true and correct as of the Original Execution Date and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date, which shall be true and correct on and as of such specified date), except for such breaches, if any, as would not have a Material Adverse Effect.

 

(b) Performance. Seller shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date in all material respects.

 

(c) Pending Litigation. No Proceeding by a Third Party (including any Governmental Body) seeking to restrain, enjoin, or otherwise prohibit the consummation of the transactions contemplated by this Agreement shall be pending before any Governmental Body or have resulted in an injunction, order, or award that grants such relief, and except for any such Proceedings brought by holders of preferential purchase rights seeking to enforce such rights with respect to Properties with aggregate Allocated Values of less than twenty percent (20%) of the Aggregate Consideration.

 

 

(d) Deliveries. Seller (i) shall be ready, willing, and able to deliver to Buyer duly executed counterparts of the Transaction Documents to be delivered by Seller under ‎Section 8.2 and (ii) shall have delivered the Super 8-K Financial Statements to Buyer.

 

(e) Regulatory Approval. If applicable, any waiting period applicable to the transactions contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.

 

(f) Stockholder Approval. The transactions contemplated by this Agreement shall have been approved by the SPAC Stockholder Approval at the Special Meeting.

 

(g) Net Tangible Assets. SPAC shall not have redeemed shares of SPAC Common Stock in the Redemption in an amount that would cause SPAC to have less than $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act).

 

(h) Material Adverse Effect. No Material Adverse Effect shall have occurred between the date of this Agreement and the Closing Date with respect to the Company.

 

(i) Listing. SPAC Class A Common Stock (including shares issuable upon the exercise of the OpCo Holder Redemption Right) shall have listed, and shall have been approved for continued listing, on the NYSE American, Nasdaq or another nationally recognized securities exchange mutually agreed by the Parties.

 

(j) Pogo Operating, Inc. Seller shall have caused the assignment of all equity interests of Pogo Operating Inc. so that Pogo Operating Inc. is no longer a member of the Company Group.

 

Article VIII
Closing

 

Section 8.1 Closing. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall, unless otherwise agreed to in writing by Seller and Buyer, take place at the offices of Baker Botts L.L.P. at 2001 Ross Ave. Suite 900, Dallas TX 75201, at 10:00 a.m. Central Time, on date that is two Business Days following the satisfaction or waiver of the conditions in ‎Article VII prior to Closing (other than any such conditions which by their nature cannot be satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable Law) waived in accordance with this Agreement on the Closing Date), subject to the rights of the Parties under ‎Article IX. The date on which Closing occurs is herein referred to as the “Closing Date.”

 

Section 8.2 Obligations of Seller at Closing. At Closing, Seller shall deliver or cause to be delivered to Buyer the following:

 

(a) an executed counterpart of an assignment of all record and beneficial ownership of the Target Interests;

 

(b) releases and terminations of any liens, other than Permitted Encumbrances, burdening the Properties, including a payoff and termination of existing indebtedness with Pegasus Bank;

 

(c) releases and terminations of any liens burdening the Properties, including a payoff and termination of existing indebtedness with Pegasus Bank;

 

 

(d) a certificate duly executed by an authorized officer of each Seller, dated as of Closing, certifying on behalf thereof in his or her capacity as officer that the conditions set forth in ‎Section 7.2(a), ‎Section 7.2(b) and ‎Section 7.2(c) have been satisfied;

 

(e) resignations of each of the individuals serving as officers, as may be requested by Buyer, or manager of the Company;

 

(f) an executed counterpart of the Registration Rights Agreement and Escrow Agreement;

 

(g) an executed counterpart of the Option Agreement;

 

(h) evidence of the termination of the Contract Hedges at the cost of Seller;

 

(i) an IRS Form W-9 duly executed by each Seller;

 

(j) an executed counterpart of the Board Designation Agreement; and

 

(k) all other documents required to be delivered by Seller on or prior to the Closing Date under this Agreement.

 

Section 8.3 Obligations of Buyer at Closing. At Closing, Buyer shall deliver or cause to be delivered to Seller the following:

 

(a) an executed original of the Promissory Note to Seller;

 

(b) an executed counterpart of the assignment described in ‎Section 8.2(a);

 

(c) an executed counterpart of the Registration Rights Agreement and Escrow Agreement;

 

(d) an executed counterpart of the Option Agreement;

 

(e) a wire transfer of the Cash Consideration in same-day funds;

 

(f) evidence of the filing with, and acceptance by, the Office of the Secretary of State of the State of Delaware of the second amended and restated certificate of incorporation of SPAC, substantially in the form attached hereto as Exhibit D (the “Second A&R SPAC Certificate of Incorporation”), to reflect, among other things, the issuance of the SPAC Class Common Stock and the SPAC Class B Common Stock, with such rights and powers as granted therein;

 

(g) the amended and restated limited liability company agreement of OpCo substantially in the form attached as Exhibit E hereto (the “OpCo A&R LLC Agreement”), duly executed by SPAC, which shall include the OpCo Holder Redemption Right;

 

(h) the board designation agreement substantially in the form attached as Exhibit F hereto (the “Board Designation Agreement”), by and between SPAC and the Sellers;

 

(i) the backstop agreement substantially in the form attached as Exhibit G hereto (the “Backstop Agreement”), by and among SPAC, OpCo, the Founders (as defined in the Backstop Agreement), and the Sellers;

 

 

(j) evidence of the issuance of the Unit Consideration to Seller or the Escrow Agent, as applicable;

 

(k) evidence of the issuance of the SPAC Class B Common Stock to Seller;

 

(l) a certificate duly executed by an authorized officer of such Buyer, dated as of Closing, certifying on behalf of Buyer in his or her capacity as officer that the conditions set forth in ‎Section 7.1(a), ‎Section 7.1(b), and ‎Section 7.1(c) have been satisfied;

 

(m) all other documents required to be delivered by Buyer on or prior to the Closing Date under this Agreement.

 

Section 8.4 Books and Records. Within fifteen (15) Business Days after Closing, Seller shall deliver to Buyer, at Seller’s sole expense, the books and records of the Company (including the books, records, documents, instruments, accounts, correspondence, writings, title documents, reports, and opinions, and other papers and electronic files relating to the business of the Company and the Properties) (“Books and Records”) that are in the possession of Seller and its Affiliates (for the voidance of doubt, excluding those in the possession of the Company). Notwithstanding the foregoing, Seller shall be entitled to retain copies of such Books and Records and Buyer shall grant Seller access at all reasonable time to such Books and Records relating to the period prior to the Closing Date (including the right to make copies and take extracts thereof) to the extent reasonably necessary to prepare Seller’s financial statements and Tax reports, to implement the provisions of this Agreement, to investigate, defend, or pursue any claims arising under this Agreement, and for any other purpose relating to Seller’s rights or obligations under this Agreement.

 

Article IX
Termination

 

Section 9.1 Termination. Subject to ‎Section 9.2, this Agreement may be terminated:

 

(a) at any time prior to Closing by the mutual prior written consent of Seller and Buyer;

 

(b) by Seller or Buyer if Closing has not occurred on or before October 30, 2023 (the “Outside Date”);

 

(c) by Buyer if all conditions to Seller’s obligation to proceed with Closing set forth in ‎Section 7.1 have been satisfied or waived by Buyer (other than those conditions that, by their nature, are to be satisfied at Closing) but Seller has refused to close;

 

(d) by Seller or Buyer if, after the final adjournment of the Special Meeting at which a vote of SPAC’s stockholders has been taken in accordance with this Agreement, the SPAC Stockholder Approval has not been obtained;

 

(e) by Seller if the Closing has not occurred on or before November 15, 2023 and Sponsor has not effected the extension of time allowed for the SPAC to consummate a business combination (the “SPAC Extension”);

 

(f) 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 this Agreement shall have occurred that (A) would cause any of the conditions set forth in ‎Section 7.1 (if Seller is the breaching party) or ‎Section 7.2 (if Buyer is the breaching party) to not to be satisfied, and (B) 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); or

 

 

(g) by Seller if all conditions to Buyer’s obligation to proceed with Closing set forth in ‎Section 7.2 have been satisfied or waived by Seller (other than those conditions that, by their nature, are to be satisfied at Closing) but Buyer has refused to close;

 

provided, however, that termination under clauses (b), (c), (d), (e), (f), or (g) shall not be effective until the Party electing to terminate has delivered written notice to the other Party of its election to so terminate. Notwithstanding the foregoing, no Party shall be entitled to terminate under clauses (b), (c), (f), or (g) if Closing has failed to occur because such Party negligently or willfully failed to perform or observe in any materials respect its covenants or agreements hereunder or is then in a continuing, uncured material breach under this Agreement.

 

Section 9.2 Effect of Termination. If this Agreement is validly terminated pursuant to ‎Section 9.1, except as set forth in this ‎Section 9.2, this Agreement shall become void and of no further force or effect (except for the Confidentiality Agreement, the provisions of ‎Article I, Sections ‎4.7, ‎5.7, and ‎Section 6.6, this ‎Section 9.2, ‎Article X, and ‎Article XI, and all disclaimers herein, all of which shall survive such termination and continue in full force and effect in accordance with their respective terms), and the transactions contemplated hereby shall be abandoned without any further action of or liability to Seller Indemnitees or Buyer Indemnitees (absent Fraud, or any willful and material breach of this Agreement by a party hereto), and following such termination, Seller shall 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.

 

Article X
Survival and Indemnification

 

Section 10.1 Limitations on Representations and Warranties. The representations and warranties of Seller contained in Sections ‎4.2, ‎4.3, ‎4.4, and ‎4.5, (the “Seller Fundamental Representations”) and the representations and warranties of Buyer contained in Sections ‎5.2, ‎5.3, and ‎5.5 shall survive Closing until the expiration of the applicable statute of limitations. The representations and warranties contained in ‎Section 4.11 shall survive until the expiration of the applicable statute of limitations (taking into account waivers or extensions thereof) with respect to the underlying Tax claim plus 60 days. The representations and warranties in ‎Section 4.14 and the Special Warranty shall survive until the one-year anniversary of the Closing Date. All other representations and warranties contained in this Agreement shall survive for a period of 12 months from and after the Closing Date. The covenants and other agreements of the Parties set forth in this Agreement to be performed on or before Closing shall survive the Closing Date until the one-year anniversary of the Closing Date, and each other covenant and agreement of the Parties shall survive Closing until 90 days after the expiration date expressly set forth for such covenant or agreement as provided herein, or in the absence of such an express expiration date, the covenant or agreement will survive until 90 days after such covenant or agreement is fully performed in accordance with its terms and expire thereafter. The affirmations of representations, warranties, covenants, and agreements contained in any certificates delivered by the Parties at Closing shall survive Closing as to each representation, warranty, covenant, and agreement so affirmed for the same period of time that the specific representation, warranty, covenant, or agreement survives Closing pursuant to this ‎Section 10.1, and shall expire thereafter. A representation, warranty, covenant, or agreement shall terminate and be of no further force and effect after the respective date of its expiration (the “Termination Date”), after which time no claim may be asserted thereunder by any Person, provided that there shall be no termination of any bona fide claim properly asserted pursuant to this Agreement with respect to such a representation, warranty, covenant, or agreement prior to its Termination Date.

 

 

Section 10.2 Indemnification.

 

(a) Indemnification by Seller. Subject to the limitations set forth in this ‎Article X, each Seller shall, severally and not jointly, indemnify and hold harmless Buyer Indemnitees from and against any and all Losses imposed upon or incurred by any Buyer Indemnitee as a result of or in connection with any of the following:

 

(1) any breach of a representation or warranty made by Seller in ‎Article IV;

 

(2) any breach of, or default in the performance by Seller of, any covenant, agreement, or obligation to be performed by Seller pursuant to this Agreement;

 

(3) any Losses to the extent they are attributable to, arise out of, or in connection with or are based upon the following (the “Specified Liabilities”): (i) any personal injury or death resulting from or attributable to ownership or operation of the Properties by Seller or the Company prior to the Closing Date; (ii) monetary fines or penalties of Governmental Bodies arising from violations of Law by Seller or the Company directly involving the ownership or operation of the Assets that occurred prior to the Closing Date; and (iii) the disposal or transportation of any Hazardous Materials generated from the Properties and taken by (or on behalf of) Seller or the Company from the Properties to any location not located on the Lands to the extent occurring during the period of ownership of the Properties by Seller or the Company.

 

(b) Indemnification by Buyer. Subject to the limitations set forth in this ‎Article X, Buyer shall indemnify and hold harmless Seller Indemnitees from and against any and all Losses imposed upon or incurred by any Buyer Indemnitee as a result of or in connection with any of the following:

 

(1) any breach of a representation or warranty made by Buyer in ‎Article V; and

 

(2) any breach of, or default in the performance by Buyer of, any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement.

 

(c) Notwithstanding anything to the contrary contained in this Agreement, except (x) for remedies that cannot be waived as a matter of Law and injunctive and provisional relief (including specific performance), (y) for the resolution of the payments contemplated in Section 9.5 and (z) in the case of Fraud, if Closing occurs, indemnification pursuant to the provisions of this ‎Article X shall be the sole and exclusive remedy of the Parties with respect to any matters arising under or relating to this Agreement, the Transaction Documents, the transactions contemplated by this Agreement, the Target Interests, or the Properties, and the only legal action that may be asserted by any Party with respect to any matter that is the subject of this ‎Article X shall be a contract action to enforce or to recover Losses for the breach of this ‎Article X. Without limiting the generality of the preceding sentence, no legal action sounding in tort or strict liability may be maintained by any Party, except in the case of Fraud.

 

 

(d) Notwithstanding any other provision of this Agreement or in a Transaction Document to the contrary, any claim for indemnity to which a Seller Indemnitee or Buyer Indemnitee is entitled must be asserted by and through Seller or Buyer, as applicable. The amount of any Losses for which an Indemnified Party is entitled to under this ‎Article X shall be reduced by the amount of insurance proceeds or other recoveries from Third Parties that are actually realized by the Indemnified Party or its Affiliates with respect to such Losses (net of any reasonable collection costs). Upon the request of the Indemnifying Party, the Indemnified Party shall provide the Indemnifying Party with information sufficient to allow the Indemnifying Party to calculate the amount of the indemnity payment in accordance with this Agreement. An Indemnified Party shall take all reasonable steps to mitigate Losses for which it is seeking indemnification and shall use commercially reasonable efforts to avoid costs or expenses associated with such Losses and, if such costs and expenses cannot be avoided, to minimize the amount thereof.

 

Section 10.3 Indemnification Actions. All claims for indemnification under this ‎Article X shall be asserted and resolved as follows:

 

(a) For purposes of this ‎Article X, the term “Indemnifying Party” shall mean the Party having an obligation to indemnify another Person or Persons with respect to any particular Losses pursuant to this ‎Article X, and the term “Indemnified Party” shall mean the Person or Persons having the right to be indemnified with respect to such Losses by another Party pursuant to this ‎Article X.

 

(b) To make a claim for indemnification under this ‎Article X, an Indemnified Party shall notify the Indemnifying Party of its claim under this ‎Section 10.3, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has Actual Knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant, or agreement, the Claim Notice shall specify the representation, warranty, covenant, or agreement which was inaccurate or breached.

 

(c) In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its liability to defend the Indemnified Party against such Third Party Claim. The Indemnified Party is authorized, prior to and during such period, to file any motion, answer, or other pleading that it deems necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party, all costs of which shall be included as Losses in respect of such claim for indemnification. The failure to provide notice to the Indemnified Party shall be deemed to be a denial of liability, except as may be provided in a subsequent notice from the Indemnifying Party to the Indemnified Party.

 

(d) If the Indemnifying Party expressly admits its liability for the claim of indemnification, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Party Claim. The Indemnifying Party shall have full control of such defense and all related Proceedings; provided that the Indemnifying Party shall have no right to settle or compromise such Proceeding without the written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) except as contemplated herein. If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate, at the sole cost of the Indemnifying Party, in contesting any Third Party Claim which the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, at its sole cost without any right of reimbursement, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this ‎Section 10.3(d). Irrespective of whether the Indemnified Party elects to participate in contesting a Third Party Claim subject to this ‎Section 10.3(d), the Indemnifying Party at its sole cost and expense shall provide to the Indemnified Party the following information with respect to the Third Party Claim: (i) all filings made by any party; (ii) all written communications exchanged between any parties to the extent available to the Indemnifying Party and not subject to a restriction on disclosure to the Indemnified Party or potential waiver of attorney-client privilege in favor of the Indemnifying Party or the Indemnified Party; and (iii) all orders, opinions, rulings, or motions. The Indemnifying Party shall deliver the foregoing items to the Indemnified Party promptly after they become available to the Indemnifying Party. An Indemnifying Party shall not, without the written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned, or delayed), (i) settle any Third Party Claim or consent to the entry of any judgment with respect thereto unless such settlement includes a written release of the Indemnified Party from all liability in respect of such Third Party Claim and the only consideration in such settlement is the payment of money damages (or similar consideration) that is fully indemnifiable by the Indemnifying Party or obligations that would be the sole responsibility of the Indemnifying Party, or (ii) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (after given effect to the receipt of any amounts that are indemnifiable by the Indemnifying Party).

 

 

(e) If the Indemnifying Party does not expressly admit its liability for the claim of indemnification, admits its liability but fails to diligently prosecute or settle a Third Party Claim, or if such Third Party Claim involves criminal charges or equitable remedies as its primary remedy, then the Indemnified Party (not the Indemnifying Party) shall have the right to defend against such Third Party Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing. If the Indemnifying Party admits its liability thereafter, the Indemnifying Party may assume the defense of such Third Party Claim at any time prior to settlement or final determination thereof (unless the Indemnifying Party is not able to assume such defense for any of the other reasons stated in the foregoing sentence). If the Indemnifying Party has not yet admitted its liability for a Third Party Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed payment or settlement, whether whole or partial, and the Indemnifying Party shall have the option for ten (10) days following receipt of such notice to admit in writing its liability for the Third Party Claim or portion thereof. If the Indemnifying Party admits its liability, the Indemnified Party shall not settle or compromise such Third Party Claim without the written consent of the Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed). If the Indemnifying Party fails to respond and admit in writing its liability during such ten (10) day period, the Indemnifying Party will be deemed to have denied liability (in which case the Indemnifying Party shall have no right to consent over such settlement or compromise).

 

(f) In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to (i) cure or remedy the Losses complained of, (ii) admit its liability for such Losses, or (iii) dispute the claim for such Losses. If the Indemnifying Party does not notify the Indemnified Party within such period that it has cured or remedied the Losses or that it disputes the claim for such Losses, the Indemnifying Party shall be deemed to have disputed the claim for such Losses.

 

Section 10.4 Limitation on Actions.

 

(a) The Parties’ indemnity obligations hereunder with respect to a representation, warranty, covenant, or agreement shall continue as to such representation, warranty, covenant, or agreement only until the applicable Termination Date , except in each case as to matters for which a Claim Notice has been delivered to the Indemnifying Party on or before the Termination Date. The indemnity obligations with respect to the Specified Liabilities shall survive Closing until the one-year anniversary of the Closing Date.

 

 

(b) Notwithstanding anything to the contrary contained elsewhere in this Agreement:

 

(1) Seller shall not have any liability under this ‎Article X for any individual Loss that does not exceed $250,000;

 

(2) Subject to ‎Section 10.4(b)(1), Seller shall not have any liability under this ‎Article X unless and until the aggregate amount of the liability for all Losses for which Claim Notices are timely delivered by Buyer and for which Buyer is eligible for indemnity under ‎Section 10.4(b)(1) exceeds a deductible amount equal to 3% of the Aggregate Consideration, after which point Buyer (or Buyer Indemnitees) shall be entitled to claim Losses only in excess of that amount;

 

(3) In no event shall any Sellers aggregate liability to Buyer and Buyer Indemnitees under ‎Section 10.2(a)(2) exceed the value of the Escrowed Unit Consideration, except in the case of breaches of the Seller Fundamental Representations or in the case of actual Fraud; and

 

(4) In no event shall Sellers’ aggregate liability arising out of the indemnification obligations under ‎Article X exceed the Aggregate Consideration, and Buyer waives and releases and shall have no recourse against Seller pursuant to ‎Article X or under or by reason of this Agreement or the transactions contemplated hereunder in excess of the Aggregate Consideration.

 

(c) Notwithstanding anything else to the contrary contained elsewhere in this Agreement, Seller’s aggregate liability to Buyer for a breach of the Special Warranty with respect to any Property shall not exceed the Allocated Value of such Property.

 

(d) Notwithstanding anything to the contrary in this Agreement, solely for purposes of determining the amount of Losses that are the subject matter of an indemnification or reimbursement claim hereunder with respect to such representations and warranties (and not for purposes of determining whether there is any breach), such representations and warranties shall be read without regard and without giving effect to the terms “material” or “Material Adverse Effect” or similar terms, phrases or qualifiers contained in such representation or warranty.

 

(e) TO THE FULLEST EXTENT PERMITTED BY LAW, A PARTY SHALL BE ENTITLED TO THE LIMITATIONS ON LIABILITY HEREUNDER, IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE APPLICABLE LOSS IS THE RESULT OF (IN WHOLE OR IN PART) THE GROSS, SOLE, ACTIVE, PASSIVE, CONCURRENT, OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OTHER FAULT OR THE VIOLATION OF LAW, IN EACH CASE, OF OR BY SUCH PARTY. No Buyer Indemnitees or Seller Indemnitees shall be entitled to recover any Losses under any provision of this ‎Article X to the extent Buyer or Seller, respectively, are compensated for such Losses under ‎Article II or such Buyer Indemnitee or Seller Indemnitee, respectively, has received payment for such Losses under any provision of this Agreement.

 

(f) In no event may Buyer or any of its Affiliates initiate a Proceeding alleging or asserting that any Seller or any other Person is liable for Fraud in connection with this Agreement or any of the acts or transactions contemplated hereunder unless such alleged Fraud (i) specifically relates to a matter with respect to which Seller remains responsible for Fraud by the express terms of this agreement, or (ii) does not relate to any representation, warranty, statement, or information made or communicated, orally or in writing, with respect to which Buyer has disclaimed reliance. Further, no Seller shall have any liability for Fraud of another Seller or Person unless such Seller committed or participated in the Fraud of such other Seller or Person.

 

 

Article XI
Miscellaneous

 

Section 11.1 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart signature page by facsimile or electronic transmittal (including in .pdf format) is as effective as executing and delivering this Agreement in the presence of other Parties to this Agreement.

 

Section 11.2 Notices. All notices which are required or may be given pursuant to this Agreement shall be sufficient in all respects if given in writing and delivered personally, by facsimile, by email or by registered or certified mail, postage prepaid, as follows:

 

If to Seller Representative:

 

CIC Pogo LP

Oak Lawn Hall at Old Parkland

3879 Maple Avenue

Suite 400

Dallas, TX 75219

Attention: Chris Cowan

ccowan@cicpartners.com

 

with copies (which shall not constitute notice) to:

 

Pogo Resources, LLC
4809 Cole Avenue, Suite 200
Dallas, Texas 75205
Attention: Kirk Pogoloff
Email: kirk@pogoresources.com

 

with copies (which shall not constitute notice) to:

 

Hamilton Squibb & Shores, LLP
8150 N. Central Expy.,

Suite 1150
Dallas, Texas 75206
Attention: Clifton A. Squibb
Email: csquibb@hamiltonsquibb.com

 

and

 

Baker Botts L.L.P.
2001 Ross Ave. Suite 900
Dallas, Texas 75201
Attention: Jon Platt
Email: jonplatt@bakerbotts.com

 

 

If to Buyer:

 

HNR Acquisition Corp
3730 Kirby Drive, Suite 1200

Houston, Texas 77098
Attention: Donald W. Orr, President
Email: donald.orr@hnra-nyse.com

 

with a copy to (which shall not constitute notice):

 

Pryor Cashman LLP

7 Times Square

New York, New York 10036

Attention Matthew Ogurick

Email: mogurick@pryorcashman.com

 

HNR Acquisition Corp

3730 Kirby Drive, Suite 1200

Houston, Texas 77098
Attention: David M. Smith, General Counsel
Email: dmsmith@hnra-nyse.com

 

Either Party may change its address for notice by notice to the other in the manner set forth above. All notices shall be deemed to have been duly given (i) when physically delivered in person to the Party to which such notice is addressed, (ii) when transmitted to the Party to which such notice is addressed by confirmed facsimile transmission or email transmission, or (iii) at the time of receipt by the Party to which such notice is addressed.

 

Section 11.3 Expenses. Except as otherwise provided in this Agreement, all Transaction Expenses incurred by Seller in connection with or related to the authorization, preparation, or execution of this Agreement, the Transaction Documents, and the Exhibits and Schedules hereto and thereto, and all other matters related to Closing, including all fees and expenses of counsel, accountants, and financial advisors, shall be borne solely and entirely by Seller, and all such Transaction Expenses incurred by Buyer shall be borne solely and entirely by Buyer. At Closing, Seller shall cause to be paid all outstanding Transaction Expenses attributable to Seller or the Company out of the Cash Consideration, and, for the avoidance of doubt, in no event shall any Transaction Expenses attributable to Buyer or its Affiliates reduce the Minimum Cash Amount or any amounts payable to Seller at Closing.

 

Section 11.4 Law; Venue. This Agreement and any claims, actions or Proceedings arising from this Agreement, whether in contract, tort, or otherwise shall be governed by, and construed in accordance with the Laws of the State of Texas without giving effect to any choice or conflict of Law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the Laws of any other jurisdiction.

 

Section 11.5 Jurisdiction; Waiver of Jury Trial(a). EACH PARTY CONSENTS TO PERSONAL JURISDICTION IN ANY ACTION BROUGHT IN THE UNITED STATES FEDERAL COURTS LOCATED WITHIN DALLAS COUNTY, TEXAS, OR TO PERSONAL JURISDICTION IN ANY ACTION, BROUGHT IN THE STATE COURTS LOCATED IN DALLAS COUNTY, TEXAS, WITH RESPECT TO ANY DISPUTE, CLAIM, OR CONTROVERSY ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS AGREEMENT, AND EACH OF THE PARTIES AGREES THAT ANY ACTION INSTITUTED BY IT AGAINST THE OTHER WITH RESPECT TO ANY SUCH DISPUTE, CONTROVERSY, OR CLAIM (EXCEPT A DISPUTE, CONTROVERSY, OR CLAIM REFERRED TO AN ARBITRATOR OR EXPERT IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT) WILL BE INSTITUTED EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, OR IN THE STATE COURTS LOCATED IN DALLAS COUNTY, TEXAS. IN ADDITION, EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION IN THE RESPECTIVE JURISDICTIONS REFERENCED IN THIS SECTION. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

 

Section 11.6 Amendment; Waivers. No amendment, modification, or discharge of this Agreement, and no waiver under this Agreement, 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 waiver by either of the Parties of a breach of or a default under any of the provisions of this Agreement, or to exercise any right or privilege under this Agreement, shall not be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights, or privileges under this Agreement.

 

Section 11.7 Assignment. No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party, and any assignment or delegation made without such consent shall be void and of no effect. This Agreement shall inure to the benefit of, and be binding on and enforceable by and against, the Parties and their respective successors and permitted assigns.

 

Section 11.8 Entire Agreement. This Agreement and the other Transaction Documents to be executed hereunder and the Exhibits and Schedules attached hereto, together with the Confidentiality Agreement, constitute the entire agreement between the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the Parties pertaining to the subject matter hereof. In the event of a conflict between the Confidentiality Agreement and this Agreement, the terms and provisions of this Agreement shall prevail to the extent of the conflict.

 

Section 11.9 No Third Party Beneficiaries. Nothing in this Agreement shall entitle any Person other than the Parties to any claims, cause of action, remedy, or right of any kind, except the rights expressly provided to the Buyer Indemnitees and the Seller Indemnitees.

 

Section 11.10 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future Laws effective during the term hereof, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, but the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement.

 

Section 11.11 Construction. Each of the Parties has had substantial input into the drafting and preparation of this Agreement and has had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions.

 

 

Section 11.12 Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, NONE OF SELLER INDEMNITEES OR BUYER INDEMNITEES SHALL BE ENTITLED TO PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS, REVENUE, OR PRODUCTION) IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND EACH OF THE PARTIES, FOR ITSELF AND ON BEHALF SELLER INDEMNITEES OR BUYER INDEMNITEES, AS APPLICABLE, HEREBY EXPRESSLY WAIVES ANY RIGHT TO PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS, REVENUE, OR PRODUCTION) IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT TO THE EXTENT AN INDEMNIFIED PARTY IS REQUIRED TO PAY PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS, REVENUE, OR PRODUCTION) TO A THIRD PARTY THAT IS NOT AN INDEMNIFIED PARTY.

 

Section 11.13 No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement or any other Transaction Document, Buyer, on behalf of Buyer Indemnitees, covenants, agrees, and acknowledges that no Person other than Seller has any obligation hereunder and that neither Buyer nor any other Buyer Indemnitee has any right of recovery under this Agreement or any other Transaction Document against, and no personal liability under this Agreement or any Transaction Document shall attach to, any of Seller’s former, current, or future equity holders, controlling Persons, directors, officers, employees, general or limited partners, members, managers, Affiliates, or agents, or any former, current or future equity holder, controlling person, director, officer, employee, general or limited partner, member, manager, Affiliate, or agent of any of the foregoing (each of the foregoing, a “Non-Recourse Party”), whether by or through attempted piercing of the corporate, limited partnership or limited liability company veil, by or through a claim by or on behalf of Buyer against any Non-Recourse Party, by the enforcement of any assessment or by any legal or equitable Proceeding, or by virtue of any applicable Law, whether in contract, tort, or otherwise.

 

Section 11.14 Relationship of Seller; Seller’s Representative. Each Seller hereby irrevocably constitutes and appoints CIC as its true and lawful agent and attorney-in-fact with full power of substitution to do any and all things and execute any and all documents which may be necessary, convenient or appropriate to facilitate the consummation of the transactions contemplated hereby and the exercise of all rights and the performance of all obligations hereunder, including: (i) receiving payments under or pursuant to this Agreement and disbursements thereof to each Seller, as contemplated by this Agreement, and setting aside portions of such payments reasonably determined by Sellers’ Representative to be necessary or appropriate as a reserve to make payments required under this Agreement or to fund out-of-pocket expenses (including the fees and expenses of counsel) incurred in connection with the performance of its duties under this Agreement; (ii) receiving and forwarding of notices and communications pursuant to this Agreement and accepting service of process; (iii) giving or agreeing to, on behalf of all the Sellers or any Sellers, any and all consents, waivers and amendments deemed by the Sellers’ Representative, in its reasonable and good faith discretion, to be necessary or appropriate under this Agreement and the execution or delivery of any documents that may be necessary or appropriate in connection therewith; (iv) with respect to any indemnification claims, title defect processes and all other matters arising under this Agreement, (A) disputing or refraining from disputing, on behalf of any Seller relative to any amounts to be received by any Seller under this Agreement or any agreements contemplated hereby, or any claim made by Buyer under this Agreement, (B) negotiating and compromising, on behalf of each Seller, any dispute, controversy or dispute that may arise under, and exercise or refrain from exercising any rights or remedies available under, this Agreement, and (C) executing, on behalf of each Seller, any settlement agreement, release or other document with respect to such dispute or remedy, except in each case with respect to a dispute between any Seller on the one hand and the Sellers’ Representative on the other hand; and (v) performing those actions or exercising those powers otherwise specifically provided to the Sellers’ Representative pursuant to the terms of this Agreement; provided, however, that, in each case, the Sellers’ Representative shall not take any action adverse to any Seller unless such action is also taken proportionately with respect to all the Sellers. Notices and communications to or from the Sellers’ Representative shall constitute Notice to or from each of the Sellers. Any decision, act, consent or instruction of the Sellers’ Representative (acting in its capacity as the Sellers’ Representative) shall constitute a decision of all Sellers and shall be final, binding and conclusive upon each Seller, and Buyer may rely upon any such decision, act, consent or instruction. Each Seller hereby agrees that: (i) in all matters in which action by the Sellers’ Representative is required or permitted, the Sellers’ Representative is authorized to act on behalf of such Seller, notwithstanding any dispute or disagreement among the Sellers, and Buyer shall be entitled to rely on any and all action taken by the Sellers’ Representative under this Agreement without any liability to, or obligation to inquire of, any Seller, notwithstanding any knowledge on the part of Buyer of any such dispute or disagreement; and (ii) the appointment of the Sellers’ Representative is coupled with an interest and shall be irrevocable by each Seller in any manner or for any reason. Each Seller hereby agrees to indemnify, defend, and hold harmless and release Sellers’ Representative from any and all Damages (known or unknown, actual or contingent, or existing or arising hereinafter) incurred or claimed against Sellers’ Representative in connection with its actions (and any inactions) taken or refrained to be taken by Sellers’ Representative in its capacity as agent of such Seller, regardless of fault of Sellers’ Representative.

 

 

Section 11.15 Certain Waivers. Buyer and the Company agree, on their own behalf and on behalf of their respective Affiliates, that, following the Closing, Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP may serve as counsel to any Seller and its Affiliates in connection with any matters related to this Agreement and the transactions contemplated hereby, including any dispute arising out of or relating to this Agreement and the transactions contemplated hereby, notwithstanding any representation by Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP of Company Group prior to the Closing Date. Buyer, on behalf of itself and its Affiliates (including Company Group after the Closing) hereby (a) consents to each of Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP representation of any Seller or its Affiliates in connection with any matters related to this Agreement and the transactions contemplated hereby (the “Subject Representation”), (b) waives any claim it has or may have that Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP has a conflict of interest or is otherwise prohibited from engaging in such Subject Representation based on its representation of Company Group prior to the Closing and (c) agrees that, in the event that a dispute arises between Buyer, Company Group or any of their respective Affiliates, on the one hand, and any Seller and/or its Affiliates, on the other hand, none of Buyer, Company Group or any of their respective Affiliates will object to Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP representing any Seller and/or its Affiliates in such dispute due to the interests of any Seller and its Affiliates being directly adverse to Buyer, Company Group or any of their respective Affiliates or due to Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP having represented Company Group in a matter substantially related to such dispute. Buyer further agrees that, as to all communications among Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP, Company Group, any Seller or their respective Affiliates and representatives prior to the Closing that relate in any way to the Subject Representation, the attorney-client privilege belongs, to the extent such privilege exists, to Seller and its Affiliates and may be controlled by any Seller and each of its Affiliates and will not, with respect to such privileged communications, pass to or be claimed by Buyer, Company Group, or any of their respective Affiliates. To the extent that Buyer, Company Group, or any of their respective Affiliates has or maintains any ownership of the privilege with respect to these communications, they agree, except as may be required by applicable Law, not to waive or to attempt to waive the privilege without the express written approval of the applicable Seller. Notwithstanding the foregoing, in the event that a dispute arises between Buyer, any member of Company Group and a Third Party (other than a Seller and its Affiliates) or any Governmental Body after the Closing, any member of Company Group may assert the attorney-client privilege against such Third Party to prevent disclosure of confidential communications by or with Baker Botts L.L.P. and/or Hamilton Squibb & Shores, LLP.

 

[Execution Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates indicated below, effective as of the Execution Date.

 

SELLER:

 

CIC:

 

CIC Pogo LP

 

/s/ Fouad Bashour			Date:
By:	Fouad Bashour, Manager

 

 

SELLER (Continued):

 

DenCo:

 

DenCo Resources, LLC

 

/s/ John L. Denman, Jr.,			Date:
By:	John L. Denman, Jr., President

 

 

SELLER (Continued):

 

4400:

 

4400 Holdings, LLC

 

/s/ Kirk Pogoloff			Date:
By:	Kirk Pogoloff, Manager

 

 

SELLER (Continued):

 

Pogo Management:

 

Pogo Resources Management, LLC

 

/s/ Kirk Pogoloff			Date:
By:	Kirk Pogoloff, Manager

 

 

BUYER:

 

HNR Acquisition Corp

 

/s/ Donald W. Orr			Date:
By:	Donald W. Orr, President

 

HNRA PARTNER, INC.

 

/s/ Mitchell B. Trotter			Date:
By:	Mitchell B. Trotter, President

 

HNRA UPSTREAM, LLC

 

/s/ Mitchell B. Trotter			Date:
By:	Mitchell B. Trotter, President

 

 

SPONSOR:

 

HNRAC SPONSORS LLC

 

/s/ Donald W. Orr			Date:
By:	Donald W. Orr, Manager

 

 

Amended and Restated Membership Interest Purchase Agreement
Page 6

Exhibit 3.1

 

SECOND AMENDED AND RESTATED

 

CERTIFICATE OF INCORPORATION

 

of

 

hnr ACQUISITION CORP

 

(a Delaware Corporation)

 

HNR Acquisition Corp, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

 

1. That the name of this corporation is HNR Acquisition Corp and that this corporation was originally incorporated pursuant to the General Corporation Law of the State of Delaware, as amended from time to time (the “General Corporation Law”), on December 9, 2020 under the name HNR Acquisition Corp, the first amended and restated certificate of incorporation was filed on February 10, 2022, and an amendment to the first amended and restated certificate of incorporation was filed on May 11, 2023 (as amended, the “Previous Certificate”).

 

2. This Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), which both restates and amends the provisions of the Previous Certificate, was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

3. This Certificate of Incorporation shall become effective on the date of filing with the Secretary of State of Delaware (the “Effective Date”).

 

4. The text of the Previous Certificate is hereby restated and amended in its entirety to read as follows:

 

Article I
NAME

 

The name of the Corporation is [HNR Acquisition Corp].

 

Article II
REGISTERED AGENT

 

The address of the Corporation’s registered office in the State of Delaware is 8 The Green, Suite A, Dover, County of Kent, State of Delaware, 19901, and the name of the Corporation’s registered agent at such address is A Registered Agent Inc.

 

Article III
PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

Article IV
STOCK

 

Section 4.1 Authorized Stock. The total number of shares of all classes of stock that the Corporation shall have authority to issue is 121,000,000 shares, consisting of: (i) 120,000,000 shares of common stock, divided into (a) 100,000,000 shares of Class A common stock, with the par value of $0.0001 per share (the “Class A Common Stock”), and (b) 20,000,000 shares of Class B common stock, with the par value of $0.0001 per share (the “Class B Common Stock” and, together with Class A Common Stock, the “Common Stock”); and (ii) 1,000,000 shares of preferred stock, with the par value of $0.0001 per share (the “Preferred Stock”).

 

 

Section 4.2 No Class Vote on Changes in Authorized Number of Shares of Stock. Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, the number of authorized shares of any class of the Common Stock or the Preferred Stock may be increased or decreased, in each case by the affirmative vote of the holders of a majority of the total voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, and no vote of the holders of any class of the Common Stock or the Preferred Stock voting separately as a class will be required therefor. Notwithstanding the immediately preceding sentence, the number of authorized shares of any particular class may not be decreased below the number of shares of such class then outstanding, plus, in the case of Class A Common Stock, the number of shares of Class A Common Stock issuable in connection with (x) the exchange of all outstanding Class B LLC Units (together with the surrender for cancellation of all outstanding shares of Class B Common Stock), pursuant to the OpCo LLC Agreement and (y) the exercise of outstanding options, warrants, exchange rights, conversion rights or similar rights for Class A Common Stock.

 

Section 4.3 Common Stock.

 

(a)

Voting Rights.

 

(i)

Each holder of Common Stock will be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote, except that, to the fullest extent permitted by law and subject to Section 4.3(a)(ii), holders of shares of each class of Common Stock, as such, will have no voting power with respect to, and will not be entitled to vote on, any amendment to this Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of any outstanding Preferred Stock if the holders of such Preferred Stock are entitled to vote as a separate class thereon under this Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or under the General Corporation Law.

 

(ii)

(1) The holders of the outstanding shares of Class A Common Stock shall be entitled to vote separately upon any amendment to this Certificate of Incorporation (including by merger, consolidation, reorganization or similar event) that would alter or change the powers, preferences or special rights of the Class A Common Stock in a manner that is disproportionately adverse as compared to the Class B Common Stock and (2) the holders of the outstanding shares of Class B Common Stock shall be entitled to vote separately upon any amendment to this Certificate of Incorporation (including by merger, consolidation, reorganization or similar event) that would alter or change the powers, preferences or special rights of the Class B Common Stock in a manner that is disproportionately adverse as compared to the Class A Common Stock.

 

(iii)

Except as otherwise required in this Certificate of Incorporation or by applicable law, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with the holders of Preferred Stock).

 

(b)

Dividends; Stock Splits or Combinations.

 

(i)

Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference senior to or the right to participate with the Class A Common Stock with respect to the payment of dividends, such dividends and other distributions of cash, stock or property may be declared and paid on the Class A Common Stock out of the assets of the Corporation that are by law available therefor, at the times and in the amounts as the Board of Directors of the Corporation (the “Board”) in its discretion may determine.

 

 

(ii)

Except as provided in Section 4.3(b)(iii) with respect to a Stock Adjustment (as defined below), dividends of cash or property may not be declared or paid on shares of Class B Common Stock.

 

(iii)

In no event will any stock dividend, stock split, reverse stock split, combination of stock, reclassification or recapitalization be declared or made on any class of Common Stock (each, a “Stock Adjustment”) unless (a) a corresponding Stock Adjustment for all other classes of Common Stock not so adjusted at the time outstanding is made in the same proportion and the same manner and (b) the Stock Adjustment has been reflected in the same economically equivalent manner with respect to all Class B LLC Units and OpCo Preferred Units. Stock dividends with respect to each class of Common Stock may only be paid with shares of stock of the same class of Common Stock.

 

(c)

Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential and other amounts, if any, to which the holders of Preferred Stock are entitled, if any, the holders of all outstanding shares of Class A Common Stock will be entitled to receive, pari passu, an amount per share equal to the par value thereof, and thereafter the holders of all outstanding shares of Class A Common Stock will be entitled to receive the remaining assets of the Corporation available for distribution ratably in proportion to the number of shares of Class A Common Stock. Without limiting the rights of the holders of Class B Common Stock to exchange their shares of Class B LLC Units (together with the surrender for cancellation of a corresponding number of shares of Class B Common Stock) for shares of Class A Common Stock in accordance with the OpCo LLC Agreement, the holders of shares of Class B Common Stock, as such, will not be entitled to receive, with respect to such shares, any assets of the Corporation in excess of the par value thereof, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

 

Section 4.4 Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series of any number of shares, provided that the aggregate number of shares issued and not retired of any and all such series shall not exceed the total number of shares of Preferred Stock hereinabove authorized, and with such powers, including voting powers, if any, and the designations, preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the designation and issue of such shares of Preferred Stock from time to time adopted by the Board pursuant to authority so to do which is hereby expressly vested in the Board. The powers, including voting powers, if any, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

 

Section 4.5 Class B Common Stock.

 

(a)

Retirement of Class B Common Stock. No holder of Class B Common Stock may transfer shares of Class B Common Stock to any Person unless such holder transfers a corresponding number of Class B LLC Units to the same Person in accordance with the provisions governing transfers of Class B LLC Units in the OpCo LLC Agreement. If any outstanding share of Class B Common Stock ceases to be held by a holder of a corresponding Class B LLC Unit, such share shall automatically and without further action on the part of the Corporation or any holder of Class B Common Stock be transferred to the Corporation for no consideration and retired.

 

 

(b)

Reservation of Shares of Class A Common Stock. The Corporation will at all times reserve and keep available out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of the issuance in connection with the exchange of Class B LLC Units pursuant to the OpCo LLC Agreement, the number of shares of Class A Common Stock that are issuable upon exchange of all outstanding Class B LLC Units, pursuant to the OpCo LLC Agreement. The Corporation covenants that all the shares of Class A Common Stock that are issued upon the exchange of such Class B LLC Units will, upon issuance, be validly issued, fully paid and non-assessable.

 

(c)

Taxes. The issuance of shares of Class A Common Stock upon the exercise by holders of Class B LLC Units of their right under the OpCo LLC Agreement to exchange Class B LLC Units for shares of Class A Common Stock will be made without charge to such holders for any transfer taxes, stamp taxes or duties or other similar tax in respect of the issuance; provided, however, that if any such shares of Class A Common Stock are to be issued in a name other than that of the then record holder of the Class B LLC Units being exchanged (or The Depository Trust Company or its nominee for the account of a participant of The Depository Trust Company that will hold the shares for the account of such holder), then such holder and/or the Person in whose name such shares are to be delivered shall pay to the Corporation the amount of any tax that may be payable in respect of any transfer involved in the issuance or shall establish to the reasonable satisfaction of the Corporation that the tax has been paid or is not payable.

 

(d)

Preemptive Rights. To the extent Class B LLC Units are issued pursuant to the OpCo LLC Agreement to anyone other than the Corporation or a wholly owned subsidiary of the Corporation, an equivalent number of shares of Class B Common Stock (subject to adjustment as set forth herein) shall be issued at par to the same Person to whom such Class B LLC Units are issued.

 

Article V
BOARD OF DIRECTORS

 

Section 5.1 Number of Directors.

 

(a)

The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. Unless and except to the extent that the Amended and Restated Bylaws of the Corporation (as such Bylaws may be amended from time to time, the “Bylaws”) shall so require, the election of the directors of the Corporation (the “Directors”) need not be by written ballot. Except as otherwise provided for or fixed pursuant to the provisions of Section 4.4 of this Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock to elect additional Directors, the total number of Directors constituting the entire Board shall, (a) as of the date of this Certificate of Incorporation, be five (5) and (b) thereafter, shall be fixed exclusively by one or more resolutions adopted from time to time by the Board.

 

(b)

Subject to Section 5.1(d), the Directors shall be divided into two classes designated Class I and Class II. Class I shall initially consist of two (2) Directors and Class II shall initially consist of three (3) Directors. The initial Class I Directors shall serve for a term expiring at the first annual meeting of stockholders following the Effective Date and the initial Class II Directors shall serve for a term expiring at the second annual meeting of stockholders following the Effective Date. At each succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following the Effective Date, each of the successors elected to replace the class of Directors whose term expires at that annual meeting shall be elected for a two-year term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.1(d), if the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director.

 

 

	(c)	A Director shall hold office until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Directors need not be stockholders.
	(d)	During any period when the holders of any series of Preferred Stock have the right to elect additional Directors as provided for or fixed pursuant to the provisions of Section 4.4 (“Preferred Stock Directors”), upon the commencement, and for the duration, of the period during which such right continues: (i) the then-total authorized number of Directors shall automatically be increased by such specified number of Preferred Stock Directors, and the holders of the related Preferred Stock shall be entitled to elect the Preferred Stock Directors pursuant to the provisions of the Board’s designation for the series of Preferred Stock and (ii) each such Preferred Stock Director shall serve until such Preferred Stock Director’s successor shall have been duly elected and qualified, or until such Preferred Stock Director’s right to hold such office terminates pursuant to such provisions, whichever occurs earlier, subject to his or her earlier death, disqualification, resignation or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect Preferred Stock Directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such Preferred Stock Directors elected by the holders of such Preferred Stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such Preferred Stock Directors, shall forthwith terminate and the total and authorized number of Directors shall be reduced accordingly.

 

Section 5.2 Vacancies and Newly Created Directorships. Subject to any limitations imposed by applicable law and the rights of the holders of any one or more series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of Directors or any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board, and not by the stockholders. Any Director so chosen shall hold office until his or her successor shall be duly elected and qualified or until such Director’s earlier death, disqualification, resignation or removal. No decrease in the number of Directors shall shorten the term of any Director then in office.

 

Section 5.3 Resignations and Removal of Directors.

 

(a)

Any Director may resign at any time upon notice given in writing or by electronic transmission to the Board, the Chairman of the Board or the Secretary of the Corporation. Such resignation shall take effect upon delivery, unless the resignation specifies a later effective date or time or an effective date or time determined upon the happening of an event or events. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

(b)

Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect Directors, the Board or any individual Director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of voting stock of the Corporation entitled to vote at an election of Directors; provided, however, that in each case, whenever the holders of any class or series are entitled to elect one or more Directors pursuant to this Certificate of Incorporation (including any Preferred Stock Directors), with respect to the removal without cause of a Director or Directors so elected, the vote of the holders of the outstanding shares of that class or series and not the vote of the outstanding shares as a whole shall apply.

 

Article VI
STOCKHOLDER ACTION

 

Section 6.1 Action by Written Consent. Except as may be otherwise provided for or fixed pursuant to this Amended and Restated Certificate (including any Preferred Stock designation) relating to the rights of the holders of any outstanding series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected by (i) a duly called annual or special meeting of such stockholders or (ii) by the written consent of the stockholders.

 

 

Section 6.2 Meetings of Stockholders.

 

(a)

An annual meeting of stockholders for the election of Directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting shall be held at such place, on such date, and at such time as the Board shall determine.

 

(b)

Subject to any special rights of the holders of any series of Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the chairperson of the Board, the chief executive officer of the Corporation, or at the direction of the Board pursuant to a written resolution adopted by a majority of the total number of Directors that the Corporation would have if there were no vacancies. Any business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

 

(c)

Advance notice of stockholder nominations for the election of Directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

 

Section 6.3 No Cumulative Voting. There shall be no cumulative voting in the election of Directors.

 

Article VII
LIABILITY OF DIRECTORS AND OFFICERS

 

Section 7.1 No Personal Liability. No Director or officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director or officer, as applicable, except to the extent such an exemption from liability or limitation thereof is not permitted under the General Corporation Law as presently in effect or as the same may hereafter be amended. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any Director or officer of the Corporation for or with respect to any acts or omissions of such Director or officer occurring prior to such amendment or repeal.

 

Section 7.2 Right to Indemnification.

 

(a)

To the fullest extent permitted by applicable law, the Corporation shall have the power to provide indemnification of (and advancement of expenses to) Directors, officers, employees and agents of the Corporation (and any other persons to which applicable law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such Directors, officers, employees, agents or other persons, vote of stockholders or disinterested directors or otherwise in excess of the indemnification and advancement otherwise permitted by such applicable law. Any amendment, repeal or modification of this Section 9.2 shall only be prospective and shall not affect the rights or protections or increase the liability of any Director under this Section 7.2(a) in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

 

(b)

This Section 7.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.

 

(c)

The Corporation shall maintain Directors’ and officers’ liability insurance coverage, on terms reasonably satisfactory to the Board, to the fullest extent permitted by law covering, among other things, violations of federal or state securities laws. The Corporation will pay all premiums due thereon and will not make any material alteration to the terms thereof, or the coverage provided by, such insurance policy without the prior written consent of the Board.

 

 

Section 7.3 Amendment or Repeal. Any amendment, repeal or elimination of this Article VII, or the adoption of any provision of the Corporation’s certificate of incorporation inconsistent with this Article VII, shall not affect its application with respect to an act or omission by a Director or officer occurring before such amendment, adoption, repeal or elimination.

 

Article VIII
AMENDMENT

 

Section 8.1 Amendment of Certificate of Incorporation. Subject to Sections 4.3 and 4.4, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the General Corporation Law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, Directors or any other Persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended, are granted and held subject to this reservation. Notwithstanding anything to the contrary contained in this Certificate of Incorporation, and notwithstanding that a lesser percentage may be permitted from time to time by applicable law, no provision of Section 5.2, Section 5.3, Section 6.1, Section 6.2, Article VII, Section 8.2, Article IX or Article XI may be altered, amended or repealed in any respect, nor may any provision or by-law inconsistent therewith be adopted, unless in addition to any other vote required by this Certificate of Incorporation or otherwise required by law, such alteration, amendment, repeal or adoption is approved by, in addition to any other vote otherwise required by law, the affirmative vote of at least a majority of the total voting power of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, at a meeting of the stockholders called for that purpose.

 

Section 8.2 Amendment of Bylaws. In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, alter, amend or repeal the Bylaws. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board shall require the approval of a majority of the authorized number of Directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class.

 

Article IX
FORUM FOR ADJUDICATION OF DISPUTES

 

Section 9.1 Forum. Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any current or former Director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (iii) any action asserting a claim against the Corporation or any Director, officer, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Certificate of Incorporation or the Bylaws (as either may be amended, restated, modified, supplemented or waived from time to time), (iv) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws of the Corporation (as either may be amended, restated, modified, supplemented or waived from time to time), (v) any action asserting a claim against the Corporation or any Director, officer, employee or agent of the Corporation that is governed by the internal affairs doctrine or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law and (b) the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. Notwithstanding the foregoing, this Article IX shall not apply to claims seeking to enforce any liability or duty created by the Securities Exchange Act of 1934 or any other claim for which the U.S. federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article IX.

 

 

Section 9.2 Enforceability. If any provision of this Article IX shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of this Article IX (including, without limitation, each portion of any sentence of this Article IX containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable), and the application of such provision to other persons or entities or circumstances shall not in any way be affected or impaired thereby.

 

Article X
SEVERABILITY

 

If any provision or provisions of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its Directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.

 

Article XI
CORPORATE OPPORTUNITY

 

Section 11.1 Corporate Opportunities.

 

(a)

In recognition and anticipation that (i) certain Directors, principals, officers, employees and/or other representatives of CIC Pogo LP (“CIC”) and its Affiliates may serve as Directors, officers, employees or agents of the Corporation, (ii) CIC and its Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) members of the Board who are not employees of the Corporation (the “Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article XI are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of CIC, the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Corporation and its Directors, officers and stockholders in connection therewith.

 

 

	(b)	None of (i) CIC or any of its Affiliates or (ii) any Non-Employee Director or his or her Affiliates (the Persons identified in (i) and (ii) above being referred to, collectively, as “Identified Persons” and, individually, as an “Identified Person”) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted by law, the Corporation hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity that may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section 11.1(c) of this Article XI. Subject to Section 11.1(c) of this Article XI, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity that may be a corporate opportunity for itself, herself or himself and the Corporation or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, Director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.
	(c)	Notwithstanding the foregoing provisions of this Article XI, the Corporation does not renounce its interest in any corporate opportunity offered to any Non-Employee Director if such opportunity is expressly offered to such Non-Employee Director solely in his or her capacity as a Director or officer of the Corporation, and the provisions of Section 11.1(b) of this Article XI shall not apply to any such corporate opportunity.

 

(d)

In addition to and notwithstanding the foregoing provisions of this Article XI, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Corporation if it is a business opportunity that (i) the Corporation is neither financially or legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line of the Corporation’s business or is of no practical advantage to the Corporation or (iii) is one in which the Corporation has no interest or reasonable expectancy.

 

Section 11.2 Amendments. Neither the alteration, amendment, addition to or repeal of this Article XI, nor the adoption of any provision of this Certificate of Incorporation (including any certificate of designation) inconsistent with this Article XI, shall eliminate or reduce the effect of this Article XI in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article XI, would accrue or arise, prior to such alteration, amendment, addition, repeal or adoption. This Article XI shall not limit any protections or defenses available to, or indemnification or advancement rights of, any Director or officer of the Corporation under this Certificate, the Bylaws or applicable law.

 

 

Article XII
DEFINITIONS

 

As used in this Certificate of Incorporation, unless the context otherwise requires or as set forth in another Article or Section of this Certificate of Incorporation, the term:

 

(a)

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person, provided that (i) neither the Corporation nor any of its subsidiaries will be deemed an Affiliate of any stockholder of the Corporation or any of such stockholders’ Affiliates unless and during such time that such stockholder holds a majority of the total voting power of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, and (ii) no stockholder of the Corporation will be deemed an Affiliate of any other stockholder of the Corporation, in each case, solely by reason of any investment in the Corporation (including any representatives of such stockholder serving on the Board).

 

(b)

“Class B LLC Unit” means a unit of HNRA Upstream, LLC designated as a Class B Unit pursuant to the OpCo LLC Agreement.

 

	(c)	“OpCo Preferred Unit” means a Class A Convertible Preferred Unit of HNRA Upstream, LLC pursuant to the OpCo LLC Agreement.
	(c)	“control” (including the terms “controlling” and “controlled”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of such subject Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

 

(d)

“OpCo” means HNRA Upstream, LLC, a Delaware limited liability company, or any successor thereto.

 

(e)

“OpCo LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of HNRA Upstream, LLC dated as of [__], 2023, as the same may be amended, restated, supplemented and/or otherwise modified, from time to time.

 

(f)

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity.

 

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Incorporation has been duly executed by a duly authorized officer of the Corporation on this [__] day of [___], 2023.

 

	By:
	Name:
	Title:

 

Exhibit 10.1

 

PROMISSORY NOTE

 

HNRA Upstream, LLC

[●]%

Promissory Note

 

THIS PROMISSORY NOTE AND ANY SECURITIES ISSUABLE RELATED TO THIS PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

 

This unsecured, subordinated note (the “Note”) is being delivered pursuant to that certain Amended and Restated Membership Interest Purchase Agreement dated as of August 28, 2023 (the “Purchase Agreement”), by and among CIC Pogo LP, a Delaware limited partnership (“CIC”), DenCo Resources, LLC, a Texas limited liability company (“DenCo”), 4400 Holdings, LLC, a Texas limited liability company (“4400”), Pogo Resources Management, LLC, a Texas limited liability company (“Pogo Management”, and together with CIC, DenCo and 4400, collectively the, “Holder”), HNR Acquisition Corp., a Delaware corporation (the “Company”), HNRA Partner, Inc., a Delaware corporation (“Partner”), and HNRA Upstream, LLC, a Delaware limited liability company (“Obligor”), and, solely for purposes of Section 6.20 thereof, HNRAC Sponsors LLC, a Delaware limited liability company, pursuant to which the Obligor and Partner have agreed to acquire 100% of the outstanding equity interests of Pogo Resources, LLC, a Texas limited liability company (“Pogo”). All capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement.

 

FOR VALUE RECEIVED, Obligor hereby promises to pay to the Holder, an amount equal to $___________¹ (the “Principal”) on or before _______________, 2024² (the “Maturity Date”), together with accrued interest thereon at an interest rate equal to [●]%³ per annum (“Interest”).

 

1. Payment Terms.

 

(a) Payment. Payment of the Principal and any accrued Interest (including Default Interest, as such term is defined herein (if any)) shall be made on the Maturity Date by certified or bank cashier’s check payable to the Holder, or by bank wire transfer, in immediately available funds, to the account so specified, in lawful money of the United States of America. If the Maturity Date occurs on a date that is not a Business Day then the Principal or Interest (including Default Interest, if applicable) then due shall be paid on the next succeeding Business Day. “Business Day” shall mean any day other than Saturday, Sunday or any day upon which banks in Dallas, Texas are authorized or required to be closed.

 

1	Principal amount to be the lesser of (i) the difference between $63,000,000 and the Minimum Cash Amount and (ii) $15,000,000.

2	Maturity Date to be six (6) months from Closing Date (as defined in the Purchase Agreement).

3	Interest rate to be greater of 12% per annum and the highest interest rate applicable to the Cash Facilities (as defined in the Purchase Agreement).

 

 

(b) Prepayment. Obligor may prepay this Note at any time, without premium or penalty, in whole or in part, with accrued Interest to the date of such payment on the amount prepaid.

 

(c) Interest. Interest shall be paid to the Holder in cash, on or prior to the Maturity Date. Any Default Interest shall be paid to the Holder in cash promptly.

 

2. Default and Remedies.

 

(a) If any of the following events or conditions (each an “Event of Default”) shall occur and be continuing:

 

(i) Obligor shall fail to pay the Principal and any Interest due (or any lesser amount due) on the Maturity Date;

 

(ii) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of Obligor, or of a substantial part of the property or assets of Obligor, under Title 11 of the United States Code, as now constituted or hereafter amended, or any successor to or replacement of such statute, or any other federal or state bankruptcy, insolvency, receivership or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Obligor or for a substantial part of the properties or assets of Obligor or (C) the winding-up, liquidation or dissolution of Obligor; and such proceeding or petition shall continue undismissed for 90 days or an order or decree approving or ordering any of the foregoing shall be entered;

 

(iii) Obligor (A) voluntarily commences any proceeding or files any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any successor to or replacement of such statute, or any other federal or state bankruptcy, insolvency, receivership or similar law, (B) consents to, or fails to contest in a timely and appropriate manner, the commencement against of any proceeding or the filing of any petition described in clause (A) above, (C) applies for or consents to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Obligor or for a substantial part of the properties or assets of Obligor, (D) files an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) makes a general assignment for the benefit of creditors, (F) becomes unable, admits in writing its inability or fails generally to pay its debts as they become due or (G) takes any action for the purpose of effecting any of the foregoing;

 

(iv) Obligor shall fail to materially comply with any material covenant or obligation set forth in this Note, including the covenants set forth in Section 4 hereof; or

 

 

(v) Any Event of Default under and as defined in the [Term Loan Agreement, dated on or about the date hereof (the “Senior Loan Agreement”), among First International Bank & Trust, as Lender, the Company, as Borrower, and the other parties thereto]⁴;

 

; then, (x) in the case of an Event of Default specified in clause (a)(i), (a)(iv) or (a)(v) above, the Holder may, at any time during the continuance of such Event of Default, by written notice to Obligor, declare the entire outstanding Principal, together with all accrued and unpaid Interest, to be due and payable and (y) in the case of an Event of Default specified in clauses (a)(ii) or (a)(iii) above, the entire outstanding Principal, together with all accrued and unpaid Interest, shall automatically forthwith become due and payable without presentment, protest or notice of any kind, all of which are hereby expressly waived by Obligor.

 

(b) Subject to the other terms of this Note, if an Event of Default occurs and is continuing, the Holder may pursue any available remedy to collect the payment of the Principal or Interest or to enforce the performance of any provision of this Note. If an Event of Default occurs and is continuing, the Holder may proceed to protect and enforce its rights by any action at law, suit in equity or other appropriate proceeding. In the case of a default in the payment of the Principal or Interest, and in addition to any Default Interest that shall accrue and become payable, Obligor will pay to the Holder such further amount as shall be sufficient to cover the costs and expenses of collection, including, without limitation, reasonable attorneys’ fees, expenses and disbursements.

 

(c) Default Interest. If an Event of Default occurs, at the option of the Holder, all outstanding amounts of the Principal and Interest shall thereafter bear interest at the lesser of (i) 18% per annum and (ii) the highest amount permissible under applicable Law (“Default Interest”) per annum and compounded monthly; provided, that such Default Interest shall apply retroactive to the date of this Note for all amounts outstanding.

 

3. Representations and Warranties.

 

Each of the Company and Obligor hereby represents and warrants to the Holder that on and as of the date hereof:

 

(a) Each of the Company and Obligor is duly organized, validly existing and in good standing under the laws of the State of Delaware;

 

(b) Each of the Company and Obligor is duly authorized to execute and deliver this Note and to perform their respective obligations under this Note. The execution and delivery of this Note, and the performance by each of the Company and Obligor of their respective obligations hereunder, (i) have been duly authorized by all necessary corporate or limited liability company action on the part of each of the Company and Obligor, (ii) do not conflict with or violate any provisions of either the Company’s Organizational Documents or Obligor’s Organizational Documents, (iii) do not violate or cause a default under any applicable Law; and (iv) do not result in a violation of, or a default under, or give rise to a right for any third-party to terminate any Material Contract to which either the Company or Obligor is party or by which either the Company’s or Obligor’s assets are bound, including the Senior Loan Agreement, except in the case of clauses (iii) and (iv) as would not reasonably be expected to have a material adverse effect on the business, property, operations or financial condition of either the Company or Obligor, or of either the Company’s or Obligor’s Subsidiaries, taken as a whole, or the validity or enforceability of this Note or the rights and remedies of the Holder hereunder (including the right of timely repayment of all Principal and Interest) (a “Material Adverse Effect”);

 

⁴ Note to Draft: To be confirmed upon finalization of FIBT documentation.

 

 

(c) this Note is a legal, valid and binding obligation of the Company and Obligor, enforceable against the Company and Obligor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws relating to or affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or law);

 

(d) except for such filings or other actions that have been made or taken on or prior to the date hereof and such filings or other actions the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect, no consent, approval, authorization or other action by, or filing with or notification to, any Person or any Governmental Body on the part of the Company or Obligor is required in connection with the execution, delivery and performance by the Company or Obligor of this Note;

 

(e) there is no Proceeding pending or, to the knowledge of the Company or Obligor, threatened in writing against the Company or Obligor, which, if determined adversely, would reasonably be expected to have a Material Adverse Effect; and

 

(f) there is no judgment, order, ruling, or decree outstanding against the Company or Obligor that would reasonably be expected to have a Material Adverse Effect.

 

4. Certain Covenants.

 

(a) Until the obligations under this Note are repaid in full (including all Principal, Interest and Default Interest (if any)), Obligor 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 of the transactions contemplated by the Purchase Agreement (including by maintaining levels of compensation to employees that are no more than such expenses and costs incurred by Pogo and its Subsidiaries for compensation to employees during the nine (9) months prior to the closing of the transactions contemplated by the Purchase Agreement), except that the Company or Obligor may pay its executives that compensation which has been approved by the Company’s compensation committee, with the advice of an independent compensation consultant, not to exceed $700,000 annually (which, for the avoidance of doubt, shall exclude compensation payable as deferred compensation after full satisfaction of this Note).

 

(b) Without limiting the foregoing, unless otherwise consented to in writing by each Holder, so long as the obligations under this Note are outstanding, Obligor shall not (i) transfer, sell, hypothecate, encumber, or dispose of any material assets of Pogo or its Subsidiaries except for (x) sales of inventory (including hydrocarbons produced) in the ordinary course of business on ordinary and market-based trade terms, (y) the creation of liens securing the Senior Debt (as defined below) or (z) other transactions consented to in writing by Holder, or (ii) acquire any material assets outside of the ordinary course of business.

 

 

(c) Until the obligations under this Note are repaid in full (including all Principal, Interest and Default Interest (if any)), (i) any net proceeds raised by Obligor, Pogo or any of their Subsidiaries in connection with the issuance of any equity or debt securities shall be used to repay (whether in full or in part) the accrued and outstanding obligations under this Note, and (ii) none of the Company, Obligor, SPAC Subsidiary, Pogo or any of their respective Subsidiaries shall incur additional indebtedness for borrowed money that is senior (in right or structurally (other than the indebtedness and other obligations under the Senior Loan Agreement)) or materially amend or restate the Senior Loan Agreement to allow for additional borrowings thereunder.

 

5. Subordination. Anything in this Note to the contrary notwithstanding, the Principal and any Interest, including Default Interest (collectively the “Subordinated Debt”), shall be subordinate and junior to all obligations (collectively the “Senior Debt”) owing to the lender (the “Senior Lender”) under the Debt Financing. Payment of this Note is subject to that certain Subordination Agreement of even date herewith between Holder, Obligor and Senior Lender. Unless permitted under the Subordination Agreement, Holder shall not accept nor receive any direct or indirect payment of or on account of the Subordinated Debt. Holder and Obligor hereby designate the Senior Lender as a third-party beneficiary of this Section 5. The subordination contained in this Section 5 shall be binding upon any transferee or nominee of Holder and any such transferee, by its acceptance of this Note shall be deemed to agree to the subordination and covenants and other agreements contained in this Section 5.

 

6. Notices.

 

All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent to:

 

If to Obligor to:

 

HNRA Upstream, LLC

3730 Kirby Drive, Suite 1200

Houston, Texas 77098

Attention: CFO

Email: mbtrotter@comcast.net

 

with a copy to (not constituting notice):

 

David M. Smith, General Counsel

HNR Acquisition Corp.

10142 Holly Chase Dr.

Houston, Texas 77042

Email: dmsmith@HNRA-NYSE.com

 

If to the Holder to:

 

3879 Maple Avenue

Suite 400

Dallas, TX 75219

 

 

7. Governing Law; Jurisdiction.

 

This Note shall be construed and enforced in accordance with the laws of the State of Texas, without regard to its conflicts of laws rules. Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the courts of the State of Texas and of the United States federal courts located within Dallas County, Texas, and any appellate court of such courts, in any action or proceeding arising out of or relating to this Note, or for recognition or enforcement of any judgment, and Obligor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Texas court (or, to the extent permitted by law, in such federal court). Obligor agrees that a final, unappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Note shall affect any right that the Holder may otherwise have to bring any action or proceeding relating to this Note against Obligor or its properties in the courts of any jurisdiction.

 

8. Waiver of Presentment.

 

Except as otherwise expressly provided in this Note, Obligor waives presentment for payment, demand, notice of nonpayment, diligence, notice of acceptance, notice of dishonor, demand for payment, protest of any dishonor, notice of protest, and protest of this Note and all other notices of any kind in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note.

 

9. Severability.

 

In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, Obligor and the Holder shall negotiate in good faith with a view to the substitution therefor of a suitable and equitable solution in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid provision, provided, that the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by Law.

 

10. Amendments.

 

This Note may not be changed, amended or modified except by agreement in writing signed by Obligor and the Holder.

 

11. Entire Agreement.

 

This Note, together with the Purchase Agreement and the other documents and agreements delivered at the closing pursuant to the express provisions of the Purchase Agreement, constitute the full and entire understanding and agreement of Obligor and the Holder hereto in respect of its subject matter, and supersedes all prior agreements, understandings (oral and written) and negotiations between or among Obligor or the Holder with regard to such subject matter.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, Obligor has caused this Note to be signed on its behalf, in its limited liability company name, by its duly authorized officer as an instrument under seal, as of [●], 2023.

 

HNRA Upstream, LLC
By:
	[_______________, President]
HNR Acquisition Corp (solely with respect to Sections 3 and 4)
By:
	Donald W. Orr, President

 

 

7

Exhibit 10.2

 

OPTION AGREEMENT

 

THIS OPTION AGREEMENT (this “Agreement”) is made as of this [•], 2023 (the “Effective Date”), by and between POGO ROYALTY, LLC, a Texas limited liability company, with offices at 4809 Cole Avenue, Suite 200, Dallas, Texas 75205 (“Pogo Royalty”), HNRA UPSTREAM, LLC a Delaware limited liability company with offices at 3730 Kirby Drive, Suite 1200 Houston, Texas 77098 (“HNRA Upstream”), and, solely with respect to Section 1.2, HNR ACQUISITION CORP, a Delaware corporation with offices at 3730 Kirby Drive, Suite 1200 Houston, Texas 77098 (“SPAC”). Pogo Royalty and HNRA Upstream may hereafter be referred to each as a “Party” and together as “Parties”. Capitalized terms shall have the meanings set forth on Exhibit A.

 

WHEREAS, Pogo Royalty owns certain overriding royalty interests in certain oil and gas assets owned by Pogo Resources, LLC (the “ORR Interest”) in oil, gas, and mineral leases covering lands in Eddy County, New Mexico as identified and described in that certain Conveyance of Overriding Royalty Interest from Pogo Resources, LLC and LH Operating, LLC to Pogo Royalty, LLC dated effective July 1, 2023, which assigned an undivided royalty interest equal in amount to ten percent (10%) of Pogo Resources, LLC’s and LH Operating, LLC’s interest all oil, gas and minerals in, under and produced from each lease described therein;

 

WHEREAS, SPAC and HNRA Upstream, SPAC’s wholly-owned subsidiary, have entered into that certain Amended and Restated Membership Interest Purchase Agreement (the “MIPA”), dated as of August 28, 2023, pursuant to which HNRA Upstream and its subsidiary Affiliate have agreed to acquire 100% of the membership interests of Pogo Resources, LLC;

 

WHEREAS, in connection with the closing of the transactions contemplated by the MIPA, Pogo Royalty desires to grant to HNRA Upstream, and HNRA Upstream desires to accept from Pogo Royalty, an option to purchase the ORR Interest pursuant to the terms and conditions of this Agreement.

 

NOW THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, Pogo Royalty and HNRA Upstream, intending to be legally bound, hereby agree as follows:

 

Article I
GRANT OF OPTION

 

Section 1.1 The Option; Expiration Date. Pogo Royalty hereby grants HNRA Upstream an irrevocable and exclusive option (the “Option”) to purchase, in one or more series of related transactions, all (but not less than all unless otherwise agreed) of the ORR Interest from Pogo Royalty for the Option Price (as defined below) at any time prior to the date that is twelve (12) months following the Effective Date (the “Expiration Date”) by giving Pogo Royalty written notice thereof from time to time (a “Option Notice”). Notwithstanding anything to the contrary contained herein, HNRA Upstream shall not have the right to exercise the Option at any time prior to the date that the Promissory Note (as defined in the MIPA) has been paid in full and satisfied. At no time prior to the Expiration Date shall Pogo Royalty convey, transfer, sell, or otherwise dispose of all or any portion of the ORR Interest to an unaffiliated third-party without the prior written consent of HNRA Upstream.

 

 

Section 1.2 Option Consideration. Upon execution of this Agreement, and as consideration for Pogo Royalty granting the Option, SPAC shall issue to Pogo Royalty 10,000 shares of SPAC Class a Common Stock (as defined in the MIPA), valued at $10.00 per share (the “Option Consideration”) for the purchase of the Option.

 

Section 1.3 Option Price. The purchase price for the ORR Interest upon exercise of the Option shall be (i) the product of (1) $30,000,000 and (2) the percentage of the ORR Interest for which the Option is being exercised at such time (with (1) and (2) together, the “Base Option Price”), plus (ii) an additional amount equal to interest on the Base Option Price of twelve percent (12%) per annum, compounded monthly, from the Effective Date through the date of acquisition of the ORR Interest so acquired, minus (iii) any amounts received by or attributable to Pogo Royalty in respect of the ORR Interest acquired from the month of production in which the Effective Date occurs through the date of the exercise of the Option (such aggregate purchase price in any one instance, the “Option Price”).

 

Section 1.4 Option Closing. The Option Notice shall include HNRA Upstream’s good faith determination of the Option Price, and Pogo Royalty shall have fifteen (15) business days to review the proposed Option Price and notify HNRA Upstream of any good faith objections to HNRA Upstream’s calculation. Pogo Royalty and HNRA Upstream shall work together in good faith to resolve any disputes with respect to the calculation of the Option Price. The consummation of the acquisition of the ORR Interest upon exercise of the Option shall occur within five (5) Days following Pogo Royalty’s acceptance of the Option Price.

 

Section 1.5 Exercise Date Deliverables. At the consummation of such purchase (the “Closing”), Pogo Royalty shall execute, acknowledge and deliver to HNRA Upstream (or its designee) such instruments as HNRA Upstream reasonably requests evidencing that the ORR Interest has been assigned to HNRA Upstream. Following the Closing, Pogo Royalty shall promptly remit to HNRA Upstream any and all amounts received by Pogo Royalty that are attributable to the ORR Interest after the date of the exercise of the Option.

 

Article II
Representations and Warranties

 

Section 2.1 Each Party represents to the other that:

 

(A) it is duly formed and validly existing under the laws of its jurisdiction of formation;

 

(B) it has the legal right and full power and authority to execute and deliver, and to exercise its rights and perform its obligations under, this Agreement;

 

(C) all corporate or company action required by it validly and duly to authorize the execution and delivery of, and to exercise its rights and perform its obligations under, this Agreement has been duly taken; and

 

(D) it is duly formed and validly existing under the laws of its jurisdiction of formation.

 

Section 2.2 Except as expressly provided in this Agreement or as required by law, no Party makes any warranties or guarantees to the other, either express or implied, with respect to the MIPA or any other subject matter not expressly set forth in this this Agreement, and, to the extent permitted by law, each Party disclaims and waives any implied warranties or warranties imposed by law.

 

 

Article III
TERMINATION

 

Section 3.1 Termination. This Agreement and the Option shall immediately terminate and be of no further force or effect upon the earlier of (a) Pogo Royalty’s transfer or assignment of all of the ORR Interest in accordance with this Agreement and (b) the date that is twelve (12) months following the Effective Date. Notwithstanding anything to the contrary contained herein, unless otherwise agreed by the Parties, (i) the rights of HNRA Upstream contained herein are personal to HNRA Upstream and may not be assigned or conveyed to any third-party, whether by merger, change of control, operation of law or otherwise, without the consent of Pogo Royalty and (ii) any assignment or transfer of any or all of the ORR Interest by Pogo Royalty after the Expiration Date shall be free and clear of this Agreement and this Agreement shall not be binding on any successor or assign of the ORR Interest assigned in accordance with this Agreement.

 

Article IV
MISCALLANEOUS

 

Section 4.1 Further Assurances. Subject to the terms and conditions of this Agreement, each Party shall (at its own cost and expense) at any time and from time to time, upon reasonable request, (i) do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged and delivered, all such further acts, transfers or assignments as may be reasonably required to consummate the transactions in accordance with the terms hereof and (ii) take such other actions as may be reasonably required in order to carry out the intent of this Agreement; provided that in no event shall any Party be required to take any action which in the opinion of its counsel, is unlawful or would or could constitute a violation of any applicable law or require the approval of any Governmental Authority.

 

Section 4.2 Entire Agreement; Amendments. This Agreement supersedes all prior discussions and agreements between the Parties with respect to the subject matter hereof and contains the sole and entire agreement between the Parties hereto with respect to the subject matter hereof. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each Party.

 

Section 4.3 Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by either Party, whether by merger, change of control, operation of law or otherwise without the prior written consent of the other Party; provided, however, that no consent shall be required in the event an assignee is an Affiliate of the assignor. This Agreement is binding upon, inures to the benefit of and is enforceable by the Parties and their respective successors and permitted assigns.

 

Section 4.4 Governing Law; Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (EXCEPT THAT, WITH RESPECT TO ISSUES RELATED TO REAL PROPERTY FOR ASSETS LOCATED IN A SPECIFIC STATE, THE LAWS OF SUCH STATE SHALL GOVERN), WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS LOCATED IN DALLAS, TEXAS AND APPROPRIATE APPELLATE COURTS THEREFROM FOR THE RESOLUTION OF ANY DISPUTE, CONTROVERSY, OR CLAIM ARISING OUT OF OR IN RELATION TO THIS AGREEMENT, AND EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL ACTIONS, SUITS, AND PROCEEDINGS IN RESPECT OF SUCH DISPUTE, CONTROVERSY, OR CLAIM MAY BE HEARD AND DETERMINED IN SUCH COURTS. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 

Section 4.5 Injunctive Relief. Each Party acknowledges and agrees that the other Party would suffer irreparable harm if the first Party failed to comply with its obligations arising pursuant to Article I. Accordingly, each Party hereby consents to and agrees that, in the event of a breach or threatened breach of Article I by the breaching Party, the injured Party shall have the right to exercise any and all rights by appropriate action either by law or in equity, including specific performance and other injunctive relief. The breaching Party further agrees that the injured Party shall not request that the injured Party post, nor shall the injured Party be obligated to post, a bond in connection with any equitable relief authorized pursuant to this Section 4.5.

 

Section 4.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Any facsimile or electronically transmitted copies hereof or signature hereon shall, for all purposes, be deemed originals.

 

Section 4.7 No Partnership. Nothing contained in this Agreement shall be construed to create an association, joint venture, trust or partnership covenant, obligation or liability on or with regard to any one or more of the parties to this Agreement.

 

Section 4.8 Interpretation. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. The Parties agree that the terms and provisions of this Agreement embody their mutual intent and that such terms and conditions are not to be construed more liberally in favor, nor more strictly against, either Party.

 

Section 4.9 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any Party under this Agreement will not be materially and adversely affected thereby, such provision will be fully severable, this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

 

Section 4.10 Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to Pogo Royalty or HNRA Upstream, shall be sent to such Person’s address as set forth in the first paragraph of this Agreement. Each notice hereunder shall be in writing and may be personally served or sent United States certified or registered mail or courier service and shall be deemed delivered on the date of receipt. Either Party may specify its proper address or any other post office address within the continental limits of the United States by giving notice to the other Party, in the manner provided in this Section 4.10, at least ten (10) Days prior to the effective date of such change of address.

 

 

Section 4.11 Waiver. The failure of Pogo Royalty or HNRA Upstream to insist upon strict performance of any provision hereof shall not constitute a waiver of or estoppel against asserting the right to require such performance in the future, nor shall a waiver or estoppel in any one instance constitute a waiver or estoppel with respect to a later breach of a similar nature or otherwise.

 

Section 4.12 Headings. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

 

Section 4.13 Entire Agreement. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG POGO ROYALTY AND HNRA UPSTREAM AND SUPERSEDES IN THEIR ENTIRETY ANY PRIOR WRITTEN OR ORAL AGREEMENT BETWEEN POGO ROYALTY AND HNRA UPSTREAM AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF POGO ROYALTY AND HNRA UPSTREAM. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG POGO ROYALTY AND HNRA UPSTREAM.

 

[Remainder of page intentionally blank]

 

 

IN WITNESS WHEREOF, this Agreement shall be effective for all purposes as of the Effective Date.

 

	POGO ROYALTY:
	POGO ROYALTY, LLC
	By:
	Name:
	Title:
	HNRA UPSTREAM:
	HNR UPSTREAM, LLC
	By:
	Name:
	Title:
	SPAC, SOLELY FOR THE PURPOSES OF SECTION 1.2:
	HNRA ACQUISITION CORP
	By:
	Name:
	Title:

 

Signature Page to Option Agreement

 

 

Exhibit A

Definitions

 

As used herein, the following terms shall have the meaning given to them below:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly, Controlling, Controlled by, or under common Control with, such Person, through one or more intermediaries or otherwise.

 

“Agreement” has the meaning given to it in the preamble to this Agreement

 

“Base Option Price” has the meaning given to it in Section 1.3 to this Agreement

 

“Control” and its correlative terms, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Day” means each period of twenty-four (24) consecutive hours beginning and ending at 7:00 A.M., Mountain Time. The reference date for any Day shall be the calendar date upon which the twenty- four (24) hour period commences.

 

“Effective Date” has the meaning given to it in the preamble to this Agreement

 

“Expiration Date” has the meaning given to it in ‎Section 1.1 to this Agreement

 

“FIBT” means First International Bank & Trust, a North Dakota state banking institution.

 

“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government.

 

“HNRA Upstream” has the meaning given to it in the preamble to this Agreement

 

“MIPA” has the meaning given to it in the recitals to this Agreement

 

“Option” has the meaning given to it in ‎Section 1.1 to this Agreement

 

“Option Consideration” has the meaning given to it in ‎Section 1.2 to this Agreement

 

“Option Notice” has the meaning given to it in ‎Section 1.1 to this Agreement

 

“Option Price” has the meaning given to it in ‎Section 1.3 to this Agreement

 

“ORR Interest” has the meaning given to it in the recitals to this Agreement

 

“Party” and “Parties” has the meaning given to it in the preamble to this Agreement

 

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

 

“Pogo Royalty” has the meaning given to it in the preamble to this Agreement

 

“SPAC” has the meaning given to it in the preamble to this Agreement

 

 

Exhibit 10.3

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

HNRA UPSTREAM, LLC

 

A Delaware limited liability company

 

dated as of [__]

 

THE LIMITED LIABILITY COMPANY INTERESTS IN HNRA UPSTREAM, LLC HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAWS OF ANY STATE, OR ANY OTHER APPLICABLE SECURITIES LAWS, AND HAVE BEEN OR ARE BEING ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE SECURITIES LAWS OF ANY STATE AND ANY OTHER APPLICABLE SECURITIES LAWS; (II) THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT; AND (III) ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BETWEEN THE COMPANY AND THE APPLICABLE MEMBER. THE LIMITED LIABILITY COMPANY INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS, THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, AND ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BY THE COMPANY AND THE APPLICABLE MEMBER. THEREFORE, PURCHASERS AND OTHER TRANSFEREES OF SUCH LIMITED LIABILITY COMPANY INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT OR ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.

 

 

TABLE OF CONTENTS

 

				Page
Article I GENERAL PROVISIONS				1
Section 1.1		Formation		1
Section 1.2		Name		1
Section 1.3		Principal Place of Business; Other Places of Business		1
Section 1.4		Designated Agent for Service of Process		1
Section 1.5		Term		1
Section 1.6		No State Law Partnership		2
Section 1.7		Business Purpose		2
Section 1.8		Powers		2
Section 1.9		Certificates; Filings		2
Section 1.10		Representations and Warranties by the Members		2
Article II UNITS; CAPITAL CONTRIBUTIONS				3
Section 2.1		Units		3
Section 2.2		Capital Contributions of the Members; No Deficit Restoration Obligation		4
Section 2.3		No Interest; No Return		4
Section 2.4		Issuances of Additional Units		4
Section 2.5		Additional Funds and Additional Capital Contributions		5
Article III DISTRIBUTIONS				6
Section 3.1		Distributions Generally		6
Section 3.2		Tax Distributions		6
Section 3.3		Distributions in Kind		7
Section 3.4		Distributions to Reflect Additional Units		7
Section 3.5		Other Distribution Rules		7
Article IV Management and Operations				8
Section 4.1		Management.		8
Section 4.2		Tax Actions		10
Section 4.3		Compensation and Reimbursement of Manager		10
Section 4.4		Outside Activities		11
Section 4.5		Transactions with Affiliates		11
Section 4.6		Limitation on Liability		12
Section 4.7		Indemnification		12
Article V BOOKS AND RECORDS				13
Section 5.1		Books and Records		13
Section 5.2		Financial Accounts		13
Section 5.3		Inspection; Confidentiality		13
Section 5.4		Information to Be Provided by Manager to Members		13
Article VI TAX MATTERS, ACCOUNTING, AND REPORTING				13
Section 6.1		Tax Matters		13
Section 6.2		Accounting and Fiscal Year		13

 

 

Article VII UNIT TRANSFERS AND MEMBER WITHDRAWALS				14
Section 7.1		Transfer Generally Prohibited		14
Section 7.2		Conditions Generally Applicable to All Transfers		14
Section 7.3		Substituted Members		15
Section 7.4		Withdrawal		16
Section 7.5		Restrictions on Termination Transactions		16
Section 7.6		Incapacity		17
Section 7.7		Legend		17
Article VIII ADMISSION OF ADDITIONAL MEMBERS				17
Section 8.1		Admission of Additional Members		17
Section 8.2		Limit on Number of Members		17
Article IX DISSOLUTION, LIQUIDATION AND TERMINATION				18
Section 9.1		Dissolution Generally		18
Section 9.2		Events Causing Dissolution		18
Section 9.3		Distribution upon Dissolution		18
Section 9.4		Rights of Members		19
Section 9.5		Termination		19
Article X PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; MEETINGS				19
Section 10.1		Actions and Consents of Members		19
Section 10.2		Procedures for Meetings and Actions of the Members		19
Article XI EXCHANGE RIGHTS				20
Section 11.1		Elective and Mandatory Exchanges		20
Section 11.2		Additional Terms Applying to Exchanges		21
Section 11.3		Exchange Consideration; Settlement		22
Section 11.4		Adjustment		22
Section 11.5		Class A Common Stock to Be Issued in Connection with an Exchange		23
Section 11.6		Tax Treatment		23
Section 11.7		Contribution by Manager		23
Section 11.8		Apportionment of Distributions		23
Section 11.9		Right of Manager to Acquire Exchangeable Units		23
Article XII				24
Section 12.1		Distributions		24
Section 12.2		Mandatory Conversion		24
Section 12.3		Mandatory Conversion Notice		24
Section 12.4		Fractional Shares		24
Section 12.5		Registration		24
Section 12.6		Adjustment		24
Section 12.7		Voting		25

 

 

Article XIII MISCELLANEOUS				26
Section 13.1		Conclusive Nature of Determinations		26
Section 13.2		Company Counsel		26
Section 13.3		Appointment of Manager as Attorney-in-Fact		26
Section 13.4		Entire Agreement		27
Section 13.5		Further Assurances		27
Section 13.6		Notices		27
Section 13.7		Governing Law		27
Section 13.8		Jurisdiction and Venue		28
Section 13.9		Equitable Remedies		28
Section 13.10		Construction		28
Section 13.11		Counterparts		28
Section 13.12		Third-Party Beneficiaries		28
Section 13.13		Binding Effect		28
Section 13.14		Severability		28
Section 13.15		Survival		28
Section 13.16		Effect on Other Obligations of Members or the Company		29
Section 13.17		Confidentiality		29
Article XIV DEFINED TERMS				29
Section 14.1		Definitions		29
Section 14.2		Interpretation		36

 

 

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF HNRA UPSTREAM, LLC

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of HNRA Upstream, LLC, a Delaware limited liability company (the “Company”), dated as of [__], is entered into by and among the Members that are party hereto, HNR Acquisition Corp., a Delaware corporation (the “Manager”), and each other Person as may become a Member from time to time, pursuant to the provisions of this Agreement.

 

WHEREAS, the Company was formed as a limited liability company pursuant to the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101, et seq. (as it may be amended from time to time, and any successor to such statute, the “Act”), under the name “HNRA UPSTREAM, LLC” by the filing of a Certificate of Formation (together with any amendments, the “Certificate of Formation”) of the Company in the office of the Secretary of State of the State of Delaware on August 9, 2023;

 

WHEREAS, immediately prior to the adoption of this Agreement, the Company was governed by the Limited Liability Company Agreement, dated August 9, 2023 (the “Initial Operating Agreement”); and

 

WHEREAS, in connection with the Amended and Restated MIPA, by and among 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”), the Manager, HNRA Partner, Inc., a Delaware corporation, (“SPAC Subsidiary”) and the Company (and together with the Manager and SPAC Subsidiary, “Buyer”) and, solely with respect to Section 6.20 thereof, HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”) (as further amended or modified in whole or in part from time to time in accordance with such agreement, the “Purchase Agreement”), the Initial Operating Agreement is amended and restated in its entirety by this Agreement, with this Agreement superseding and replacing the Initial Operating Agreement in its entirety.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be legally bound, agree as follows:

 

Article I
GENERAL PROVISIONS

 

Section 1.1 Formation. The Company has been formed as a Delaware limited liability company by the filing of the Certificate of Formation, pursuant to the Act on August 9, 2023.

 

Section 1.2 Name. The name of the Company is “HNRA Upstream, LLC.” The Company may also conduct business at the same time under one or more fictitious names if the Manager determines that such is in the best interests of the Company. The Company may change its name, from time to time, in accordance with Law.

 

Section 1.3 Principal Place of Business; Other Places of Business. The principal business office of the Company shall be in Houston, Texas or such other location as may be designated by the Manager from time to time. The Company may maintain offices and places of business at such other place or places within or outside the State of Delaware as the Manager deems advisable.

 

Section 1.4 Designated Agent for Service of Process. So long as required by the Act, the Company shall continuously maintain a registered office and a designated and duly qualified agent for service of process on the Company in the State of Delaware. The address of the registered office of the Company in the State of Delaware shall be as set forth in the Certificate of Formation. The Company’s registered agent for service of process at such address shall also be as set forth in the Certificate of Formation.

 

Section 1.5 Term. The term of the Company shall be perpetual unless and until the Company is dissolved in accordance with the Act or this Agreement. Notwithstanding the dissolution of the Company, the existence of the Company shall continue until its termination pursuant to this Agreement or as otherwise provided in the Act.

 

 

Section 1.6 No State Law Partnership. The Members intend that the Company shall not be a partnership (including a limited partnership) or joint venture, and that no Member shall be an agent, partner or joint venturer of any other Member, for any purposes other than for U.S. federal, and applicable state and local, income tax purposes, and this Agreement shall not be construed to suggest otherwise. Neither the Company nor any Member shall take action inconsistent with the express intent of the parties hereto as set forth in this Section 1.6. Other than in respect of the Company, nothing contained in this Agreement shall be construed as creating a corporation, association, joint stock company, business trust, or organized group of Persons, whether incorporated or not, among or involving any Member or its Affiliates, and nothing in this Agreement shall be construed as creating or requiring any continuing relationship or commitment as between such parties other than as specifically set forth in this Agreement.

 

Section 1.7 Business Purpose. The purpose of the Company is to carry on any and all lawful businesses and activities permitted from time to time under the Act. On the terms and subject to the conditions of this Agreement, the Company is authorized to enter into, make and perform all contracts and other undertakings, and engage in all other activities and transactions as the Manager may deem necessary, advisable or convenient for carrying out the purposes of the Company.

 

Section 1.8 Powers. Subject to the limitations set forth in this Agreement, the Company will possess and may exercise all of the powers and privileges granted to it by the Act, any other Law, or this Agreement, together with all powers incidental thereto, so far as such powers are necessary or convenient to the conduct, promotion or attainment of the purposes of the Company set forth in ‎Section 1.7.

 

Section 1.9 Certificates; Filings. The Certificate of Formation was previously filed on behalf of the Company in the office of the Secretary of State of the State of Delaware as required by the Act. The Manager shall take any and all other actions reasonably necessary to maintain the status of the Company under the Laws of the State of Delaware or any other state in which the Company shall do business. If requested by the Manager, the Members shall promptly execute all certificates and other documents consistent with the terms of this Agreement necessary for the Manager to accomplish all filing, recording, publishing, and other acts as may be appropriate to comply with all requirements for (a) the formation and operation of a limited liability company under the Laws of the State of Delaware, (b) if the Manager deems it advisable, the operation of the Company as a limited liability company, in all jurisdictions in which the Company proposes to operate, and (c) all other filings required (or determined by the Manager to be necessary or appropriate) to be made by the Company.

 

Section 1.10 Representations and Warranties by the Members.

 

(a) Individual-Member-Specific Representations. Each Member (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) that is an individual represents and warrants to, and covenants with, each other Member that (i) the execution of this Agreement and the consummation of the transactions contemplated by this Agreement to be performed by such Member will not result in a breach or violation of, or a default under, any material agreement by which such Member or any of such Member’s property is bound, or any statute, regulation, order or other Law to which such Member is subject and (ii) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms, except (A) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (B) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought.

 

(b) Non-Individual-Member-Specific Representations. Each Member (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) that is not an individual represents and warrants to, and covenants with, each other Member that (i) the execution of this Agreement and all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including that of its general partner(s), managing member(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s) (as the case may be) as required, (ii) the execution of this Agreement and consummation of such transactions will not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws (as the case may be), any material agreement by which such Member or any of such Member’s properties or any of its partners, members, beneficiaries, trustees or stockholders (as the case may be) is or are bound, or any statute, regulation, order or other Law to which such Member or any of its partners, members, trustees, beneficiaries or stockholders (as the case may be) is or are subject, and (iii) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms, except (A) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (B) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought.

 

 

(c) Securities Laws. Each Member (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or Substituted Member) represents and warrants that it has acquired and continues to hold its interest in the Company for its own account for investment purposes only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, and not with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Member further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Company in what it understands to be a speculative and illiquid investment.

 

(d) Survival of Representations and Warranties. The representations and warranties contained in Sections ‎1.10(a), ‎1.10(b), and ‎1.10(c) shall survive the execution and delivery of this Agreement by each Member (and, in the case of an Additional Member or a Substituted Member, the admission of such Additional Member or Substituted Member as a Member in the Company), and the dissolution, liquidation, and termination of the Company.

 

(e) No Representations as to Performance. Each Member (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or Substituted Member) hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Company or the Manager have been made by the Company or any Member or any employee or representative or Affiliate of the Company or any Member, and that projections and any other information, including financial and descriptive information and documentation, that may have been in any manner submitted to such Member shall not constitute any representation or warranty of any kind or nature, express or implied.

 

(f) Modification of Representations and Warranties. The Manager may permit the modification of any of the representations and warranties contained in Sections 1.10(a), 1.10(b), and ‎1.10(c), as applicable, to any Member (including any Additional Member or Substituted Member or any transferee of either); provided, that such representations and warranties, as modified, shall be set forth in either (i) a Unit Designation applicable to the Units held by such Member or (ii) a separate writing addressed to the Company.

 

Article II
UNITS; CAPITAL CONTRIBUTIONS

 

Section 2.1 Units.

 

(a) Generally. The interests of the Members in the Company are divided into, and represented by, the Units, each having the rights and obligations specified in this Agreement.

 

(b) Classes. The Units are initially divided into:

 

(i) “Class A Units,” which are issuable solely to the Manager and such other persons as the Manager shall determine;

 

(ii) “Class B Units,” which are issuable to the Members as set forth on the Register and as otherwise provided in this Agreement;

 

(iii) “Class A Convertible Preferred Units,” which are issuable to the Members as set forth on the Register and as otherwise provided in this Agreement; and

 

 

(iv) Other Classes of Units. The Company may issue additional Units or create additional classes, series, subclasses, or sub-series of Units in accordance with this Agreement.

 

Section 2.2 Capital Contributions of the Members; No Deficit Restoration Obligation.

 

(a) Capital Contributions. The Members made, shall be treated as having made, or have agreed to make, Capital Contributions to the Company and were issued the Units indicated on the Register. Except as provided by Law or in this Agreement, the Members shall have no obligation or, except as otherwise provided in this Agreement or with the prior written consent of the Manager, right to make any other Capital Contributions or any loans to the Company.

 

(b) No Deficit Restoration Obligation. No Member shall have an obligation to make any contribution to the capital of the Company as the result of a deficit balance in its Capital Account, and any such deficit shall not be considered a Debt owed to the Company or to any other Person for any purpose whatsoever.

 

Section 2.3 No Interest; No Return. No Member shall be entitled to interest on its Capital Contribution or on such Member’s Capital Account balance. Except as provided by this Agreement, any Unit Designation, or by Law, no Member shall have any right to demand or receive a withdrawal or the return of its Capital Contribution from the Company. Except to the extent provided in this Agreement or in any Unit Designation, no Member shall have priority over any other Member as to distributions or the return of Capital Contributions.

 

Section 2.4 Issuances of Additional Units. Subject to Section 2.5 and the rights of any Member set forth in a Unit Designation:

 

(a) General. The Company may issue additional Units for any Company purpose at any time or from time to time to the Members (including, subject to ‎Section 2.4(b), the Manager) or any other Person and may admit any such Person as an Additional Member for such consideration and on such terms and conditions as shall be established by the Company. Any additional Units may be issued in one or more classes or one or more series of any of such classes with such designations, preferences, conversion or other rights, voting powers, restrictions, rights to distributions, qualifications and terms and conditions of redemption (including rights that may be senior or otherwise entitled to preference over existing Units) as shall be determined by the Company and set forth in a written document attached to and made an exhibit to this Agreement, which exhibit shall be an amendment to this Agreement and shall be incorporated into this Agreement by reference (each, a “Unit Designation”). Upon the issuance of any additional Unit, the Manager shall amend the Register and the books and records of the Company as appropriate to reflect such issuance. Except to the extent specifically set forth in any Unit Designation, a Unit of any class or series other than a Common Unit shall not entitle the holder thereof to vote on, or consent to, any matter.

 

(b) Issuances to the Manager. No additional Units shall be issued to the Manager unless at least one of the following conditions is satisfied:

 

(i) The additional Units are issued to all Members holding Common Units in proportion to their respective Percentage Interests in the Common Units;

 

(ii) There is a recapitalization of the Capital Stock of the Manager, including any stock split, stock dividend, reclassification or similar transaction;

 

(iii) The additional Units are issued upon the conversion, redemption or exchange of Debt, Units or other securities issued by the Company and held by the Manager; or

 

(iv) The additional Units are issued in accordance with the express terms of Section 2.5(g) or any of the other provisions of this Article II (other than Section 2.4(a)).

 

(c) Issuances of Class B Units. No additional Class B Units shall be issued except in the event of a recapitalization of the Capital Stock of the Manager, including any stock split, stock dividend, reclassification or similar transaction.

 

(d) Issuances of Class A Convertible Preferred Units. No additional Class A Convertible Preferred Units (the “Class A Preferred Units”) shall be issued.

 

 

(e) No Preemptive Rights. Except as expressly provided in this Agreement or in any Unit Designation, no Person shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Unit.

 

Section 2.5 Additional Funds and Additional Capital Contributions.

 

(a) General. The Company may, at any time and from time to time, determine that it requires additional funds (“Additional Funds”) for the acquisition or development of additional Assets, for the redemption of Units, or for such other purposes as the Company may determine. Additional Funds may be obtained by the Company in any manner provided in, and in accordance with, the terms of this ‎Section 2.5 without the approval of any Member or any other Person.

 

(b) Additional Capital Contributions. The Company may obtain any Additional Funds by accepting Capital Contributions from any Members or other Persons. In connection with any such Capital Contribution, the Company is hereby authorized from time to time to issue additional Units (as set forth in ‎Section 2.4(a) but subject to Section 2.4(b), (c) and (d)) in consideration for such Capital Contribution.

 

(c) Loans by Third Parties. The Company may obtain any Additional Funds by incurring Debt payable to any Person upon such terms as the Company determines appropriate, including making such Debt convertible, redeemable, or exchangeable for Units; provided, however, that the Company shall not incur any such Debt if any Member would be personally liable for the repayment of all or any portion of such Debt unless that Member otherwise agrees in writing.

 

(d) Issuance of Securities by the Manager.

 

(i) Unless otherwise agreed to by the Members, after the completion of the SPAC Transaction, except in the case of a Liquidity Offering for purposes of a Cash Settlement and subject to Section 2.5(d)(ii) and Article XI, the Manager shall not issue any additional Capital Stock or New Securities unless the Manager contributes the net proceeds received from the issuance of such additional Capital Stock or New Securities (as the case may be), and from the exercise of the rights contained in any such additional Capital Stock or New Securities to the Company in exchange for (i) in the case of an issuance of Class A Common Stock, Class A Units, or (ii) in the case of an issuance of Preferred Stock or New Securities, Equivalent Units. If at any time any Preferred Stock or New Securities are issued that are convertible into or exercisable for Class A Common Stock or another security of the Manager, then upon any such conversion or exercise, the corresponding Equivalent Unit shall be similarly converted or exercised, as applicable, and an equal number of Class A Units or other Equivalent Units shall be issued to the Manager. It is the intent of the parties that the Manager will always own Units equivalent in number and rights to its outstanding Capital Stock, except as provided pursuant to Section 11.4, and the parties hereby acknowledge that the Manager may make reasonable adjustments to its own capitalization, subject to applicable Law and the terms of any such outstanding Capital Stock, in order to effect such parity.

 

(ii) New Securities that are derivative securities issued under any Incentive Compensation Plan of the Manager shall not require issuance of Equivalent Units by the Company until such time as such derivative securities are exercised for Capital Stock of the Manager.

 

(e) Reimbursement of Issuance Expenses. If the Manager issues additional Capital Stock or New Securities and contributes the net proceeds (after deduction of any underwriters’ discounts and commissions) received from such issuance to the Company pursuant to ‎Section 2.5(d), the Company shall reimburse or assume (on an after-tax basis) the Manager’s expenses associated with such issuance.

 

(f) Repurchase or Redemption of Capital Stock. If any shares of Capital Stock, or New Securities are repurchased, redeemed or otherwise retired (whether by exercise of a put or call, automatically or by means of another arrangement) by the Manager, then the Manager shall cause the Company, immediately before such repurchase, redemption or retirement of such Capital Stock or New Securities, to redeem, repurchase or otherwise retire a corresponding number of Class A Units, Class B Units, or Equivalent Units held by the Manager, upon the same terms and for the same consideration as the Capital Stock or New Securities to be repurchased, redeemed, or retired.

 

 

(g) Reinvestment of Excess Cash. Notwithstanding anything to the contrary in this Agreement, if the Manager (i) receives Tax Distributions in an amount in excess of the amount necessary to enable the Manager to meet or pay its U.S. federal, state and local Tax obligations and any other operating expenses or (ii) holds any other excess cash amount, the Manager may, in its sole discretion, (A) distribute such excess cash amount to its shareholders or (B) contribute such excess cash amount to the Company in exchange for a number of Class A Units, and in the case of clause (B), the Manager may distribute to the holders of Class A Common Stock an amount of shares of Class A Common Stock corresponding to the Class A Units issued by the Company and with substantially the same rights to dividends and distributions (including distributions upon liquidation) and other economic rights as those of such Class A Units of the Company that were issued to the Manager.

 

Article III
DISTRIBUTIONS

 

Section 3.1 Distributions Generally.

 

(a) Except as otherwise provided in this Article III and Article XII and subject to the terms of any Unit Designation, the Company shall distribute an amount of Available Cash if, when, and as determined by the Manager to the Members pro rata in proportion to the number of Class A Units owned by each of them.

 

Section 3.2 Tax Distributions.

 

(a) Generally. If the amount distributed to a Member pursuant to Section 3.1, in respect of a Fiscal Year is less than that Member’s Assumed Tax Liability in respect of such Fiscal Year, the Company shall distribute an amount of Available Cash to the Members, pro rata in accordance with the number of Common Units owned (subject to any Unit Designation), such that each Member receives distributions of Available Cash in respect of each Fiscal Year in an amount at least equal to the Member’s Assumed Tax Liability for such Fiscal Year (each such distribution, a “Tax Distribution”); provided that notwithstanding any distributions pursuant to Section 3.1 or any other provision of this Agreement, the amounts required to be distributed as Tax Distributions under this Section 3.2(a) shall be an amount such that the Manager receives at least an amount equal to the Manager Tax-Related Liabilities with respect to such Fiscal Year. Except as provided in Section 3.2(d) and subject to any Unit Designation, all Tax Distributions shall be made pro rata in accordance with Units.

 

(b) Calculation of Assumed Tax Liability. For purposes of calculating the amount of each Member’s Tax Distributions under ‎Section 3.2(a), a Member’s “Assumed Tax Liability” means an amount equal to the product of:

 

(i) the sum of (A) the net taxable income and gain allocated to that Member in respect of its Common Units from the Company for U.S. federal income tax purposes in the Fiscal Year and (B) to the extent (x) determined by the Company in its sole discretion and (y) attributable to the Company, the amount the Member is required to include in income by reason of Code Sections 707(c) (but not including guaranteed payments for services within the meaning of Code Sections 707(c)), 951(a), and 951A(a); multiplied by

 

(ii) unless otherwise determined by the Company, the combined effective U.S. federal, state, and local rate of tax applicable to the Manager for the Fiscal Year (such tax rate, the “Assumed Tax Rate”).

 

The calculation required by this Section 3.2(b) shall be made by taking into account (w) the character of the income or gain, (x) any allocations under Code Section 704(c), (y) any special basis adjustments resulting from any election under Section 754 of the Code, including adjustments under Code Sections 732, 734(b) or 743(b), and (z) any limitations on the use of deductions or credits allocable with respect to the Fiscal Year. In addition, the Company shall adjust a Member’s Assumed Tax Liability to the extent the Company reasonably determines is necessary or appropriate as a result of any differences between U.S. federal income tax law and the tax laws of other jurisdictions in which the Company has a taxable presence. The Company shall calculate the amount of any increase described in the preceding sentence by applying the principles of Section 3.2(b)(i) and (ii) replacing the words “U.S. federal” with a reference to the applicable jurisdiction.

 

 

(c) Timing of Tax Distributions. If reasonably practicable, the Company shall make distributions of the estimated Tax Distributions in respect of a Fiscal Year on a quarterly basis to facilitate the payment of quarterly estimated income taxes, taking into account amounts previously distributed by reason of this ‎Section 3.2; provided that, if necessary for the Manager to timely satisfy any Manager Tax-Related Liabilities, the Company shall make Tax Distributions on a more frequent basis. Not later than sixty (60) Business Days after the end of the Fiscal Year, the Company shall make a final Tax Distribution in an amount sufficient to fulfill the Company’s obligations under ‎Section 3.2(a).

 

(d) Impact of Insufficient Available Cash. If the amount of estimated or final Tax Distributions to be made exceeds the amount of the Available Cash, the Tax Distribution to which each Member is entitled pursuant to Section 3.2(a) shall be reduced in accordance with the provisions of this ‎Section 3.2(d) (the amount of such reduction with respect to each Member, such Member’s “Tax Distribution Shortfall Amount”), and Available Cash shall be distributed in the following order of priority:

 

(i)  First, to the Manager in an amount equal to the full amount of its Tax Distribution; and

 

(ii) Second, to the Members other than the Manager pro rata in accordance with their Units (subject to any Unit Designation) in an aggregate amount such that each such Member has received distributions pursuant to this Section 3.2(d)(ii) that is not less than its Assumed Tax Liability.

 

Any Tax Distribution Shortfall Amounts will be carried forward to subsequent Fiscal Years, and distributions will be made to resolve such amounts, in accordance with the foregoing order of priority when and to the extent that the Company has sufficient Available Cash (for the avoidance of doubt, taking into account any cash required to make Tax Distributions in respect of subsequent Fiscal Years). Any outstanding Tax Distribution Shortfall Amounts must be resolved prior to making (or must be taken into account in making) any distribution under ‎Section 3.1 or ‎Section 9.3(a).

 

(e) No Tax Distributions on Liquidation. No Tax Distributions shall be made in connection with a Liquidating Event or the liquidation of a Member’s Units in the Company.

 

Section 3.3 Distributions in Kind. No Member may demand to receive property other than cash as provided in this Agreement. The Company may make a distribution in kind of Assets to the Members, and if a distribution is made both in cash and in kind, such distribution shall be made so that, to the fullest extent practical, the percentage of the cash and any other Assets distributed to each Member entitled to such distribution is identical.

 

Section 3.4 Distributions to Reflect Additional Units. If the Company issues additional Units pursuant to the provisions of ‎Article II, subject to the provisions of any Unit Designation, the Manager is authorized to make such revisions to this ‎Article III and to ‎Annex C as it determines are reasonably necessary or desirable to reflect the issuance of such additional Units, including making preferential distributions to certain classes of Units.

 

Section 3.5 Other Distribution Rules.

 

(a) Transfers. From and after the Transfer of a Unit, for purposes of determining the rights to distributions (including Tax Distributions) under this Agreement, distributions (including Tax Distributions) made to the transferor Member, along with any withholding or deduction in respect of any such distribution, shall be treated as having been made to the transferee unless otherwise determined by the Company.

 

(b) Record Date for Distributions. The Company may designate a Record Date for purposes of calculating and giving effect to distributions. All distributions shall be made to the holders of record as of the applicable Record Date.

 

(c) Over-Distributions. If the amount of any distribution to a Member under the Agreement exceeds the amount to which the Member in entitled (e.g., by reason of an accounting error), the Member shall, upon written notice of the over-distribution delivered to the Member within one year of the over-distribution, promptly return the amount of such over-distribution to the Company.

 

 

(d) Reimbursements of Preformation Capital Expenditures. To the extent a distribution (or deemed distribution resulting from a reduction in a Member’s share of Company liabilities for federal tax purposes) otherwise would be treated as proceeds in a sale under Code Section 707(a)(2)(B), the Members intend such actual or deemed distribution to reimburse preformation capital expenditures under Treas. Reg. § 1.707-4(d) to the maximum extent permitted by Law.

 

(e) Limitation on Distributions. Notwithstanding any provision of this Agreement to the contrary, the Company shall not make a distribution to any Member to the extent such distribution would violate the Act or other Law or would result in the Company or any of its Subsidiaries being in default under any material agreement.

 

Article IV
Management and Operations

 

Section 4.1 Management.

 

(a) Authority of Manager.

 

(i) Except as otherwise provided in this Agreement, the Manager shall have full, exclusive, and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to do or cause to be done any and all acts, at the expense of the Company, as the Manager deems necessary or appropriate to accomplish the purposes and direct the affairs of the Company. Without limiting the generality of the preceding sentence and subject to Section 4.1, the Manager may cause the Company, without the consent or approval of any other Member, to enter into any of the following in one or a series of related transactions: (i) any merger, (ii) any acquisition, (iii) any consolidation, (iv) any sale, lease or other transfer or conveyance of Assets, (v) any recapitalization or reorganization of outstanding securities, (vi) any merger, sale, lease, spin-off, exchange, transfer or other disposition of a Subsidiary, division or other business, (vii) any issuance of Debt or equity securities (subject to any limitations expressly provided for in this Agreement), or (viii) any incurrence of Debt.

 

(ii) The Manager shall have the exclusive power and authority to bind the Company and shall be an agent of the Company’s business. The actions of the Manager taken in such capacity and in accordance with this Agreement shall bind the Company. Except to the extent expressly delegated in writing by the Manager, no Member or Person other than the Manager shall be an agent for the Company or have any right, power or authority to transact any business in the name of the Company or act for or on behalf of or to bind the Company.

 

(iii) Subject to the rights of any Member set forth in Section 4.1(f), any determinations to be made by the Company pursuant to this Agreement shall be made by the Manager, and such determinations shall be final, conclusive and binding upon the Company and every Member.

 

(iv) The Manager shall constitute a “manager” (as that term is defined in the Act) of the Company.

 

(v) The Manager may not be removed by the Members, with or without cause, except with the consent of the Manager.

 

(b) Appointment of Officers. The Manager may, from time to time, appoint such officers and establish such management and/or advisory boards or committees of the Company as the Manager deems necessary or advisable, each of which shall have such powers, authority, and responsibilities as are delegated in writing by the Manager from time to time. Each such officer and/or board or committee member shall serve at the pleasure of the Manager. The initial Officers of the Company are set forth on ‎Annex D attached to this Agreement.

 

(c) No Participation by Members. Except as otherwise expressly provided in this Agreement or required by any non-waivable provision of the Act or other Law and subject to ‎Section 4.1, no Member (acting in such capacity) shall (x) have any right to vote on or consent to any other matter, act, decision or document involving the Company or its business or any other matter, or (y) take part in the day-to-day management, or the operation or control, of the business and affairs of the Company. No Member, as such, shall have the power to bind the Company.

 

 

(d) Bankruptcy. Only the Manager may commence a voluntary case on behalf of, or an involuntary case against, the Company under a chapter of Title 11 U.S.C. by the filing of a “petition” (as defined in 11 U.S.C. 101(42)) with the United States Bankruptcy Court. Any such petition filed by any other Member, to the fullest extent permitted by Law, shall be deemed an unauthorized and bad faith filing, and all parties to this Agreement shall use their best efforts to cause such petition to be dismissed.

 

(e) Amendment of Agreement. All amendments to this Agreement must be approved by the Manager. Subject to the rights of any Member set forth in a Unit Designation and ‎‎Section 4.1(f) and ‎‎Section 4.1(g), the Manager shall have the power, without the consent or approval of any Member, to amend this Agreement as may be required to facilitate or implement any of the following purposes:

 

(i) to add to the obligations of the Manager or surrender any right or power granted to the Manager or any Affiliate of the Manager for the benefit of the Members;

 

(ii) to reflect a change that is of an inconsequential nature or does not adversely affect the Members in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with Law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with Law or with the provisions of this Agreement;

 

(iii) to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency, or in federal or state Law;

 

(iv) to reflect the admission, substitution, or withdrawal of Members, the Transfer of any Units, the issuance of additional Units, or the termination of the Company in accordance with this Agreement, and to amend the Register in connection with such admission, substitution, withdrawal, or Transfer;

 

(v) to set forth or amend the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any additional Units issued pursuant to Article II;

 

(vi) if the Company is the Surviving Company in any Termination Transaction, to modify Section 10.1 or any related definitions to provide the holders of interests in the Surviving Company rights that are consistent with Section 7.5(b)(iii); and

 

(vii) to reflect any other modification to this Agreement as is reasonably necessary or appropriate for the business or operations of the Company or the Manager and that does not violate a Unit Designation, ‎‎Section 4.1(f), or Section 4.1(g).

 

(f) Certain Amendments and Actions Requiring Member Consent.

 

(i) Notwithstanding anything in Section 4.1(e) or Article X to the contrary, this Agreement shall not be amended, and no action may be taken by the Manager or the Company without the consent of any Member holding Common Units or Class A Preferred Units that would be adversely affected by such amendment or action. Without limiting the generality of the preceding sentence, for purposes of this Section 4.1(f)(i), the Members holding Common Units or Class A Preferred Units will be deemed to be adversely affected by an amendment or action that would (A) adversely alter the rights of any Member to receive the distributions to which such Member is entitled pursuant to Article III or Section 9.3(a)(iv), (B) convert the Company into a corporation or cause the Company to be classified as a corporation for U.S. federal income tax purposes (other than in connection with a Termination Transaction), or (C) amend this Section 4.1(f)(i). Notwithstanding the provisions of the preceding two sentences of this Section 4.1(f)(i), but subject to Section 4.1(f)(ii), the consent of any Member holding Common Units or Class A Preferred Units that would be adversely affected by an amendment or action shall not be required for any such amendment or action that affects all Members holding the same class or series of Units on a uniform or pro rata basis if such amendment or action is approved by a Majority-in-Interest of the Members of such class or series. If some, but not all, of the Members consent to such an amendment or action, the Company may, in its discretion, make such amendment or action effective only as to the Members that consented to it, to the extent it is practicable to do so.

 

 

(ii) This Agreement shall not be amended, and no action may be taken by the Manager without the consent of any Member holding Common Units or Class A Preferred Units that would be adversely affected by such amendment or action if such amendment or action would (A) modify the limited liability of a Member or increase the obligation of a Member to make a Capital Contribution to the Company or (B) amend this Section 4.1(f)(ii).

 

(g) Implementation of Amendments. Upon obtaining any Consent required under this Section 4.1 or otherwise required by this Agreement, and without further action or execution by any other Person, including any Member, (i) any amendment to this Agreement may be implemented and reflected in a writing executed solely by the Manager, and (ii) the Members shall be deemed a party to and bound by that amendment of this Agreement.

 

Section 4.2 Tax Actions. All tax-related actions, decisions, or determinations (or failure to take any available tax-related action, decision, or determination) by or with respect to the Company or any Subsidiary of the Company not expressly reserved for the Members shall be made, taken, or determined by the Manager; provided, however, any action, decision, or determination that could reasonably be expected to have a material consequence to any Seller that is disproportionately adverse to them as compared to the Manager shall not be taken without the prior written consent of the Company Unitholder Representative (such consent not to be unreasonably withheld, conditioned or delayed).

 

Section 4.3 Compensation and Reimbursement of Manager.

 

(a) General. The Manager shall not receive any fees from the Company for its services in administering the Company, except as otherwise provided in this Agreement.

 

(b) Reimbursement of Manager. The Company shall be liable for, and shall reimburse the Manager on an after-tax basis at such intervals as the Manager may determine, all:

 

(i) overhead, administrative expenses, insurance and reasonable legal, accounting and other professional fees and expenses of the Manager;

 

(ii) expenses of the Manager incidental to being a public reporting company;

 

(iii) reasonable fees and expenses related to the SPAC Transactions or any subsequent public offering of equity securities of the Manager (without duplicating any provisions of Section 2.5(e)) or private placement of equity securities of the Manager (including any reasonable fees and expenses related to the registration for resale of any such securities), whether or not consummated;

 

(iv) franchise and similar taxes of the Manager and other fees and expenses in connection with the maintenance of the existence of the Manager;

 

(v) customary compensation and benefits payable by the Manager, and indemnities provided by the Manager on behalf of, the officers, directors, and employees of the Manager; and

 

(vi) reasonable expenses paid by the Manager on behalf of the Company; provided, however, that the amount of any reimbursement shall be reduced by any interest earned by the Manager with respect to bank accounts or other instruments or accounts held by it on behalf of the Company as permitted pursuant to Section 4.4. Such reimbursements shall be in addition to any reimbursement of the Manager as a result of indemnification pursuant to Section 4.7.

 

 

Section 4.4 Outside Activities.

 

(a) Limitation on Outside Activities of Manager. The Manager shall not directly or indirectly enter into or conduct any business, other than in connection with (i) the ownership, acquisition, and disposition of Units, (ii) maintaining its legal existence (including the ability to incur and pay, as applicable, fees, costs, expenses and taxes relating to that maintenance), (iii) the management of the business of the Company and its Subsidiaries, (iv) its operation as a reporting company with a class (or classes) of securities registered under the Exchange Act, (v) the offering, sale, syndication, private placement, or public offering of stock, bonds, securities, or other interests of the Manager, (vi) the financing or refinancing of any type related to the Company or its Assets or activities, (vii) receiving and paying dividends and distributions or making contributions to the capital of its Subsidiaries, (viii) filing tax reports and tax returns and paying taxes and other customary obligations in the ordinary course (and contesting any taxes), (ix) participating in tax, accounting, and other administrative matters with respect to its Subsidiaries and providing administrative and advisory services (including treasury and insurance services, including maintaining directors’ and officers’ insurance on its behalf and on behalf of its Subsidiaries) to its Subsidiaries, (x) holding any cash or property (but not operating any property), (xi) indemnifying officers, directors, members of management, managers, employees, consultants, or independent contractors of the Manager, the Company or their respective Subsidiaries, (xii) entering into any Termination Transaction or similar transaction in accordance with this Agreement, (xiii) preparing reports to governmental authorities and to its shareholders, (xiv) holding director and shareholder meetings, preparing organizational records, and other organizational activities required to maintain its separate organizational structure, (xv) complying with applicable Law, (xvi) engaging in activities relating to any management equity plan, stock option plan or any other management or employee benefit plan of the Manager, the Company or their respective Subsidiaries, and (xvii) engaging in activities that are incidental to clauses (i) through (xvi). The provisions of this ‎Section 4.4 shall restrict only the Manager and its Subsidiaries (other than the Company and its Subsidiaries) and shall not restrict the other Members or any Affiliate of the other Members (other than the Manager).

 

(b) Outside Activities of Members.

 

(i) Subject to (x) Article XI of the Third Amended and Restated Certificate of Incorporation of the Manager, (y) any agreements entered into pursuant to Section 4.5, and (z) any other agreements (including any employment agreement) entered into by a Member or any of its Affiliates with the Manager, the Company or a Subsidiary, any Member (but, with respect to the Manager, subject to Section 4.4(a)), or any officer, director, employee, agent, trustee, Affiliate, member or stockholder of any Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company, including business interests and activities that are in direct or indirect competition with the Company or that are enhanced by the activities of the Company, and, in any such case, need not (A) first offer the Company or any of its Subsidiaries an opportunity to participate in such business interests or activities or (B) account to the Company or any of its Subsidiaries with respect to such business interests or activities.

 

(ii) None of the Members, the Company or any other Person shall have any rights by virtue of this Agreement or the relationship established hereby in any business ventures of any other Member or Person. Subject to any other agreements entered into by a Member or its Affiliates with the Manager, the Company or a Subsidiary, no Member (other than the Manager) or any such other Person shall have any obligation pursuant to this Agreement to offer any interest in any such business ventures to the Company, any Member, or any such other Person.

 

Section 4.5 Transactions with Affiliates. Subject to the provisions of ‎Section 4.1(f) and ‎Section 4.4, the Company may enter into any transaction or arrangement with the Manager or Subsidiaries of the Company or other Persons in which the Company has an equity investment on terms and conditions determined by the Manager. Without limiting the foregoing, but subject to ‎Section 4.4, (a) the Company may (i) lend funds to, or borrow funds from, the Manager or to Subsidiaries of the Company or other Persons in which the Company has an equity investment and (ii) transfer Assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which the Company or any of its Subsidiaries is or thereby becomes a participant, and (b) the Manager may (i) propose and adopt on behalf of the employee benefit plans funded by the Company for the benefit of employees of the Manager, the Company, Subsidiaries of the Company or any Affiliate of any of them in respect of services performed, directly or indirectly, to or for the benefit of the Manager, the Company or any of the Company’s Subsidiaries and (ii) sell, transfer or convey any property to the Company, directly or indirectly.

 

 

Section 4.6 Limitation on Liability.

 

(a) General. To the fullest extent permitted by Law, no Indemnitee, in such capacity, shall be liable to the Company, any Member or any of their respective Affiliates, for any losses sustained or liabilities incurred as a result of any act or omission of such Person if (i) either (A) the Indemnitee, at the time of such act or omission, determined in good faith that its, his or her course of conduct was in, or not opposed to, the best interests of the Company or (B) in the case of omission by the Indemnitee, the Indemnitee did not intend its, his or her inaction to be harmful or opposed to the best interests of the Company and (ii) the act or omission did not constitute fraud or intentional misconduct by the Indemnitee.

 

(b) Action in Good Faith. An Indemnitee acting under this Agreement shall not be liable to the Company for its, his, or her good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand, restrict, or eliminate the duties and liabilities of such Persons otherwise existing at Law or in equity, are agreed by the Members to replace fully and completely such other duties and liabilities of such Persons. Whenever the Manager or the Company is permitted or required to make a decision or take an action under this Agreement (i) in making such decisions, such Person shall be entitled to take into account its own interests as well as the interests of the Members as a whole or (ii) in its “good faith” or under another expressed standard, such Person shall act under such express standard and shall not be subject to any other or different standards.

 

(c) Outside Counsel. The Manager may consult with legal counsel, accountants and financial or other advisors, and any act or omission suffered or taken by the Manager on behalf of the Company or in furtherance of the interests of the Company in good faith in reliance upon and in accordance with the advice of such counsel, accountants or financial or other advisors will be full justification for any such act or omission, and the Manager will be fully protected in so acting or omitting to act so long as such counsel or accountants or financial or other advisors were selected with reasonable care.

 

(d) Duties of Members. Other than obligations of Members explicitly set forth in this Agreement, no Member (other than the Manager in its capacity as a manager), including any Member who may be deemed to be a controlling Member under applicable Law (other than the Manager in its capacity as a manager), shall owe any duty (of loyalty, care or otherwise) to the Company or to any other Member solely by reason of being a Member. With respect to each matter requiring approval of a Majority-in-Interest of the Members, each Member having voting rights may grant or withhold such Member’s vote under this Agreement, in such Member’s sole judgment, as directed or otherwise determined by such Member, without regard to the interests of any other Member or of the Company, and no Member shall have any duty to represent or act in the best interests of the Company or any other Member.

 

Section 4.7 Indemnification.

 

(a) General. The Company shall indemnify and hold harmless each Indemnitee (and such Person’s heirs, successors, assigns, executors or administrators) to the full extent permitted by Law and to the same extent and in the same manner provided by the provisions of Article VIII of the Amended and Restated Bylaws of the Manager applicable to officers and directors as if such provisions were set forth herein, mutatis mutandis, and applied to each such Indemnitee.

 

(b) Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section 4.7 shall not be exclusive of any other right that any Person may have or hereafter acquire under any law, agreement, vote of stockholders or disinterested directors, provisions of a certificate of incorporation or bylaws, or otherwise.

 

(c) Nature of Rights. The rights conferred upon Indemnitees in this ‎Section 4.7 shall be contract rights and shall continue as to an Indemnitee who has ceased to be the Manager, an Affiliate of the Manager, the Tax Representative, the Designated Individual, or an officer or director of the Manager, the Company, or their respective Affiliates. Any amendment, alteration or repeal of this ‎Section 4.7 or of Article VI of the Amended and Restated Bylaws of the Manager that would adversely affect any right of an Indemnitee or its successors shall apply prospectively only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place before such amendment, alteration or repeal.

 

 

Article V

BOOKS AND RECORDS

 

Section 5.1 Books and Records.

 

(a) General. The Company shall maintain in its principal business office, or any other place as may be determined by the Company, the books and records of the Company.

 

(b) Specific Records. In particular, the Company shall maintain:

 

(i) A register containing the name, address, and number and class of Units (including Equivalent Units) of each Member, and such other information as the Manager may deem necessary or desirable and attached to this Agreement as Annex (A) (as may be amended or updated from time to time, the “Register”). The Manager shall from time to time update the Register as necessary to ensure the Register is accurate, including as a result of any sales, exchanges, or other Transfers, or any redemptions, issuances, or similar events involving Units. Except as required by Law, no Member shall be entitled to receive a copy of the Register or of the information set forth in the Register relating to any Member other than itself.

 

(ii) A copy of the Certificate of Formation and this Agreement and all amendments thereto.

 

Section 5.2 Financial Accounts. At all times during the continuance of the Company, the Company shall prepare and maintain separate books of account for the Company for financial reporting purposes, on an accrual basis, in accordance with United States generally accepted accounting principles, consistently applied.

 

Section 5.3 Inspection; Confidentiality. The Manager may keep confidential from the Members (or any of them) for such period of time as the Manager determines to be reasonable, any information (a) that the Manager believes to be in the nature of trade secrets, (b) the disclosure of which the Manager in good faith believes is not in the best interests of the Company or the Manager, or (c) that the Company or the Manager is required by Law, agreement, or customary commercial practice to keep confidential. Subject to the provisions of the previous sentence, the Members (personally or through an authorized representative) may, for purposes reasonably related to their respective interests in the Company, examine and copy (at their own cost and expense) the books and records of the Company at all reasonable business hours upon reasonable prior notice.

 

Section 5.4 Information to Be Provided by Manager to Members. The Company shall deliver (or otherwise make accessible) to each Member a copy of any information mailed or delivered electronically to all of the common stockholders of the Manager as soon as practicable after such mailing or electronic delivery.

 

Article VI
TAX MATTERS, ACCOUNTING, AND REPORTING

 

Section 6.1 Tax Matters.

 

(a) Tax Returns. The Company shall cause to be prepared and timely filed (taking into account available extensions) all federal, state, and local, and non-U.S. tax returns of the Company for each year for which such returns are required to be filed and shall determine the appropriate treatment of each tax item of the Company and make all other determinations with respect to such tax returns.

 

(b) Other Tax-Related Matters. Each of the provisions of ‎Annex C, which address various tax-related matters, is incorporated into and shall constitute a part of this Agreement.

 

Section 6.2 Accounting and Fiscal Year. Unless otherwise determined by the Company or required by Code Section 706, the fiscal year of the Company (the “Fiscal Year”) shall be the calendar year ending December 31st, or, in the case of the last Fiscal Year of the Company, the fraction thereof ending on the date on which the winding up of the Company is completed.

 

 

Article VII

 

UNIT TRANSFERS AND MEMBER WITHDRAWALS

 

Section 7.1 Transfer Generally Prohibited. No Units shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this ‎Article VII and ‎Article X. Any Transfer or purported Transfer of a Unit not made in accordance with this ‎Article VII or ‎Article X shall be null and void ab initio. Units shall not be subject to the claims of any creditor, spouse for alimony or support, or legal process and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

 

Section 7.2 Conditions Generally Applicable to All Transfers. All Transfers are subject to the satisfaction of the following conditions:

 

(a) Transfers by Members Other than the Manager of Class A Units, Class B Units or Other Classes of Units.

 

(i) Consent of Manager. No Member other than the Manager shall Transfer any portion of its Class A Units, Class B Units or other Classes of Units to any transferee without the prior written consent of the Manager unless the Transfer is a Related-Party Transfer.

 

(ii) Assumption of Obligations; No Relief from Obligations. Any transferee of all or a portion of a Unit (whether or not admitted as a Substituted Member) shall take subject to and assume, by operation of Law or express agreement, all of the obligations of the transferor Member under this Agreement with respect to such Transferred Unit. No Transfer (other than pursuant to a statutory merger or consolidation pursuant to which all obligations and liabilities of the transferor Member are assumed by a successor corporation by operation of Law) shall relieve the transferor Member of its obligations under this Agreement without the approval of the Manager.

 

(iii) No Rights as Member. No transferee, whether by a voluntary Transfer, by operation of Law or otherwise, shall have any rights under this Agreement unless admitted as a Substituted Member.

 

(b) Transfer by Members other than the Manager of Class A Preferred Units.

 

(i) Transfer of the Class A Preferred Units. No Member shall Transfer any portion of its Class A Preferred Units to any transferee within ninety (90) days from the date hereof; thereafter, a Member may Transfer all or any portion of its Class A Preferred Units; provided, that the aggregate number of holders of Class A Preferred Units shall at no time exceed ten (10) Persons.

 

(ii) Assumption of Obligations; No Relief from Obligations. Any transferee of all or a portion of a Unit (whether or not admitted as a Substituted Member) shall take subject to and assume, by operation of Law or express agreement, all of the obligations of the transferor Member under this Agreement with respect to such Transferred Unit.

 

(iii) No Rights as Member. No transferee, whether by a voluntary Transfer, by operation of Law or otherwise, shall have any rights under this Agreement unless admitted as a Substituted Member.

 

(c) Transfers by the Manager.

 

(i) Consent of Members. The Manager may not Transfer any of its Units without the consent of a Majority-in-Interest of the Members, except in connection with a Termination Transaction or to a wholly owned subsidiary in accordance with ‎Section 7.2(b)(ii).

 

(ii) Transfer to Subsidiary. Subject to compliance with the other provisions of this ‎Article VII, the Manager may Transfer all of its Units at any time to any Person that is, at the time of such Transfer, a direct or indirect wholly owned Subsidiary of the Manager without the consent of any Member and may designate the transferee to become the new Manager for all purposes of this Agreement.

 

 

(d) Withholding with Respect to a Transfer of Units. A Member making a Transfer permitted by this Agreement shall comply with Section 4.10(b) of ‎Annex C.

 

(e) Other Restrictions on Transfer. In addition to any other restrictions on Transfer in this Agreement, no Member may Transfer a Unit (including by way of acquisition of Units by the Manager or any other acquisition of Units by the Company) if the Manager determines:

 

(i) such Transfer (A) would result in the Company having more than 100 partners, within the meaning of Treasury Regulations Section 1.7704-1(h)(1)(ii) (determined taking into account the rules of Treasury Regulations Section 1.7704-1(h)(3)), or (B) would create an undue risk that the Company be treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code or a successor provision or otherwise classified as an association taxable as a corporation for U.S. federal, state, or local income tax purposes; provided, that a Transfer by a Member shall not be prohibited under Section 7.2(d)(i)(B) if the Member obtains a tax opinion on which the Manager and the Company can rely from nationally recognized tax counsel that the Transfer will not result in the Company being treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code or a successor provision or otherwise classified as an association taxable as a corporation for U.S. federal, state, or local income tax purposes;

 

(ii) that the Transfer would be to any Person or entity that lacks the legal right, power or capacity to own a Unit;

 

(iii) that the Transfer would be in violation of Law;

 

(iv) that the Transfer would be of any fractional or component portion of a Unit or rights to distributions, separate and apart from all other components of a Unit;

 

(v) that the Transfer would create a material risk that the Company would become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA Section 3(14)) or a “disqualified Person” (as defined in Code section 4975(c));

 

(vi) that the Transfer would create a material risk that any portion of the Assets would constitute assets of any employee benefit plan pursuant to Department of Labor Reg. § 2510.2-101;

 

(vii) that the Transfer would require the registration of such Unit pursuant to any applicable federal or state securities Laws;

 

(viii) that such Transfer would create a material risk that the Company would become a reporting company under the Exchange Act; or

 

(ix) that the Transfer would subject the Company to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended.

 

Section 7.3 Substituted Members.

 

(a) Admission as Member. A transferee of Units of a Member, other than a Related-Party Transferee or a transferee of Class A Preferred Units transferred as permitted by Section 7.2(b), may be admitted as a Substituted Member only with the consent of the Company. A Related-Party Transferee and any transferee of Class A Preferred Units shall be admitted as a Substituted Member without the consent of the Company, subject to compliance with ‎Section 7.3(b). A transferee who has been admitted as a Substituted Member in accordance with this ‎Article VII shall have all the rights and powers and be subject to all the restrictions and liabilities of a Member under this Agreement.

 

(b) Documents to Be Provided by Transferee. No transferee shall be admitted as a Substituted Member until and unless it furnishes to the Manager (i) evidence of acceptance, in form and substance satisfactory to the Manager, of all the terms, conditions and applicable obligations of this Agreement, (ii) a counterpart signature page to this Agreement executed by such transferee and (iii) such other documents and instruments as the Manager may require to effect such transferee’s admission as a Substituted Member, including a certification from the transferee or an opinion of counsel reasonably acceptable to the Company in respect of any of the restrictions on transfer set forth in Section 7.2(d) (which certification or opinion may be waived, in whole or in part, in the sole discretion of the Company).

 

 

(c) Amendment of Books and Records. In connection with, and as evidence of, the admission of a Substituted Member, the Manager or Company shall amend the Register and the books and records of the Company to reflect the name, address and number of Units of such Substituted Member and to eliminate or adjust, if necessary, the name, address and number of Units of the predecessor of such Substituted Member.

 

Section 7.4 Withdrawal.

 

(a) Permissible Withdrawals. Subject to any Unit Designation, no Member may withdraw from the Company other than:

 

(i) as a result of a Transfer of all of such Member’s Units in accordance with this Article VII or Article X with respect to which the transferee becomes a Substituted Member;

 

(ii) pursuant to an acquisition by the Manager or Subsidiary of the Manager of all of its Units; or

 

(iii) with the prior written consent of the Company.

 

(b) Consequences of Withdrawal. Any Member who Transfers all of its Units in a Transfer (i) permitted pursuant to this ‎Article VII where such transferee was admitted as a Substituted Member or (ii) to the Manager, whether or not pursuant to ‎Section 10.1, shall cease to be a Member but shall continue to have the obligations of a former Member that are expressly set forth in this Agreement.

 

Section 7.5 Restrictions on Termination Transactions.

 

(a) General. Except as provided in ‎Section 7.5(b), neither the Company nor the Manager shall engage in, or cause or permit, a Termination Transaction.

 

(b) Consent. The Company or Manager may engage in, cause, or permit a Termination Transaction only if at least one of the following conditions is satisfied:

 

(i) A Majority-in-Interest of the Members give Consent;

 

(ii) In connection with any such Termination Transaction, each holder of Common Units (other than the Manager and its wholly owned Subsidiaries) will receive, or will have the right to elect to receive, for each Common Unit an amount of cash, securities or other property equal to the greatest amount of cash, securities or other property that the holder of Common Units would have received had it exercised its right to Exchange pursuant to Article X and received Class A Common Stock in exchange for its Common Units immediately before such Termination Transaction; or

 

(iii) All of the following conditions are met: (1) substantially all of the Assets directly or indirectly owned by the Company before the announcement of the Termination Transaction are, immediately after the Termination Transaction, owned directly or indirectly by the Company or another limited partnership or limited liability company that is the survivor of a merger, consolidation or combination of assets with the Company (in each case, the “Surviving Company”); (2) the Surviving Company is classified as a partnership for U.S. federal income tax purposes and each of its Subsidiaries has the same classification for U.S. federal, state, and local tax purposes immediately after the Termination Transaction that each Subsidiary had immediately before the Termination Transaction; (3) the rights of such Members with respect to the Surviving Company are at least as favorable as those of Members holding Units immediately before the consummation of such Termination Transaction (except to the extent that any such rights are consistent with clause (4) of this Section 7.5(b)(iii)) and as those applicable to any other limited partners or non-managing members of the Surviving Company; and (4) such rights include the right to cause their interests in the Surviving Company to be redeemed at any time or times for cash in an amount equal to the Fair Market Value of such interest at the time of redemption, as determined at least once every calendar quarter by an independent appraisal firm of recognized national standing retained by the Surviving Company.

 

 

Section 7.6 Incapacity. If a Member is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator, or receiver of such Member’s estate (a “Member Representative”) shall have the same rights as the Incapacitated Member possessed to Transfer its Units. The Incapacity of a Member, in and of itself, shall not dissolve or terminate the Company. Unless a Member or Member Representative informs the Company in writing of the Member’s Incapacity, the Company shall have the right to assume each Member is not Incapacitated. The Company shall have no obligation to determine whether or not a Member is Incapacitated.

 

Section 7.7 Legend. Each certificate representing a Unit, if any, will be stamped or otherwise imprinted with a legend in substantially the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

 

THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

 

THE TRANSFER AND VOTING OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF HNRA UPSTREAM, LLC DATED AS OF [__], AMONG THE MEMBERS LISTED THEREIN, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED FROM TIME TO TIME, AND NO TRANSFER OF THESE SECURITIES WILL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER OF SUCH SECURITIES.”

 

Article VIII
ADMISSION OF ADDITIONAL MEMBERS

 

Section 8.1 Admission of Additional Members.

 

(a) Requirements for Admission. A Person (other than a then-existing Member) who makes a Capital Contribution to the Company in exchange for Units and in accordance with this Agreement shall be admitted to the Company as an Additional Member only upon furnishing to the Manager (i) evidence of acceptance, in form and substance satisfactory to the Manager, of all of the terms and conditions of this Agreement, including the power of attorney granted in ‎Section 11.1, (ii) a counterpart signature page to this Agreement executed by such Person, and (iii) such other documents or instruments as may be required by the Manager in order to effect such Person’s admission as an Additional Member. In connection with, and as evidence of, the admission of an Additional Member, the Manager shall amend the Register and the books and records of the Company to reflect the name, address, number and type of Units of such Additional Member.

 

(b) Consent of Company Required. Notwithstanding anything to the contrary in this ‎Section 8.1, no Person shall be admitted as an Additional Member without the consent of the Company. The admission of any Person as an Additional Member shall become effective on the date determined by the Company (but in no case earlier than the satisfaction of all the conditions set forth in ‎Section 8.1(a)).

 

Section 8.2 Limit on Number of Members. Unless otherwise permitted by the Manager, no Person shall be admitted to the Company after the date of this Agreement as an Additional Member if the effect of such admission would be to cause the Company to have a number of Members (including as Members for this purpose those Persons indirectly owning an interest in the Company through another partnership, a limited liability company, a subchapter S corporation or a grantor trust) that would cause the Company to become a reporting company under the Exchange Act.

 

 

Article IX

DISSOLUTION, LIQUIDATION AND TERMINATION

 

Section 9.1 Dissolution Generally.

 

(a) Dissolution Only in Accordance with This Agreement. The Company shall not be dissolved by the substitution of Members or the admission of Additional Members in accordance with the terms of this Agreement. The Company may be dissolved, liquidated and terminated only pursuant to the provisions of this ‎Article IX, and the Members hereby irrevocably waive any and all other rights they may have to cause a dissolution of the Company or a sale or partition of any or all of the Company’s Assets.

 

(b) Termination of Members. The death, retirement, resignation, expulsion, Bankruptcy, insolvency or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company shall not in and of itself cause dissolution of the Company.

 

Section 9.2 Events Causing Dissolution.

 

(a) Actions by Members. No Member shall take any action to dissolve, terminate or liquidate the Company, or require apportionment, appraisal or partition of the Company or any of its Assets, or file a bill for an accounting, except as specifically provided in this Agreement, and each Member, to the fullest extent permitted by Law, waives any rights to take any such actions under Law, including any right to petition a court for judicial dissolution under Section 18-802 of the Act.

 

(b) Liquidating Events. The Company shall dissolve and commence winding up and liquidating its affairs upon the occurrence of any of the following events (each, a “Liquidating Event”):

 

(i) an election to dissolve the Company made by the Manager, with the Consent of a Majority-in-Interest of the Members;

 

(ii) the sale or other disposition of all or substantially all Assets; or

 

(iii) any other event that results in a mandatory dissolution under the Act.

 

Section 9.3 Distribution upon Dissolution.

 

(a) Order of Distributions. Upon the dissolution of the Company pursuant to ‎Section 9.2, the Manager (or, in the event that the Manager has dissolved, become Bankrupt or ceased to operate, any Person elected by a Majority-in-Interest of the Members (the Manager or such other Person, the “Liquidator”)) shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company’s Assets and liabilities, and the Company’s Assets shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the Manager, include shares of stock in the Manager) shall be applied and distributed in the following order:

 

(i) first, to the satisfaction of all of the Company’s Debts and liabilities to creditors, including Members who are creditors (other than with respect to liabilities owed to Members in satisfaction of liabilities for previously declared distributions), whether by payment or the making of reasonable provision for payment thereof;

 

(ii) second, to the satisfaction of all of the Company’s liabilities to the Members in satisfaction of liabilities for previously declared distributions, whether by payment or the making of reasonable provision for payment thereof;

 

(iii) third, to the holders of Class A Preferred Units then outstanding in an amount equal to the greater of (A) the Liquidation Preference per unit and (B) the amount such holder of Class A Preferred Units would have been entitled to receive had such holder’s Class A Preferred Units converted to Class A Common Stock pursuant to ‎Section 12.2; and

 

(iv) the balance, if any, to the Members, in accordance with Section 3.1.

 

 

(b) Discretion of Liquidator and Manager.

 

(i) Notwithstanding the provisions of Section 9.3(a) that require liquidation of the Assets, but subject to the order of priorities set forth therein, if before or upon dissolution of the Company, the Liquidator determines that an immediate sale of part or all of the Company’s Assets would be impractical or would cause undue loss to the Members, the Liquidator may, in its sole discretion, defer for a reasonable time the liquidation of any Assets except those necessary to satisfy liabilities of the Company (including to those Members as creditors) and/or distribute to the Members, in lieu of cash, as tenants-in-common and in accordance with the provisions of Section 9.3(a), undivided interests in such Company Assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and any agreements governing the operation of such properties at such time. The Liquidator shall determine the Fair Market Value of any property distributed in kind using such reasonable method of valuation as it may adopt.

 

(ii) In the sole discretion of the Manager, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article IX may be:

 

(A) Distributed to a trust established for the benefit of the Manager and the Members for the purpose of liquidating Company Assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Manager arising out of or in connection with the Company and/or Company activities. The assets of any such trust shall be distributed to the Members, from time to time, in the reasonable discretion of the Manager, in the same proportions and amounts as would otherwise have been distributed to the Members pursuant to this Agreement; or

 

(B) Withheld or escrowed to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided, that such withheld or escrowed amounts shall be distributed to the Members in the manner and order of priority set forth in Section 9.3(a) as soon as practicable.

 

Section 9.4 Rights of Members. Except as otherwise provided in this Agreement and subject to the rights of any Member set forth in a Unit Designation, (a) each Member shall look solely to the Assets for the return of its Capital Contribution, (b) no Member shall have the right or power to demand or receive property other than cash from the Company, and (c) no Member shall have priority over any other Member as to the return of its Capital Contributions or distributions.

 

Section 9.5 Termination. The Company shall terminate when all of the Assets, after payment of or due provision for all Debts, liabilities, and obligations of the Company, have been distributed to the Members in the manner provided for in this ‎Article IX and the Certificate of Formation shall have been cancelled in the manner required by the Act.

 

Article X
PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; MEETINGS

 

Section 10.1 Actions and Consents of Members. The actions requiring Consent of any Member pursuant to this Agreement or otherwise pursuant to Law are subject to the procedures set forth in this ‎Article X.

 

Section 10.2 Procedures for Meetings and Actions of the Members.

 

(a) Time; Quorum; Consent. Meetings of the Members may be called only by the Manager and shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Members entitled to act at the meeting not less than two (2) days nor more than ninety (90) days before the date of such meeting. Members may vote in Person or by proxy at such meeting. Unless approval by a different number or proportion of the Members is required by this Agreement or any Unit Designation, the affirmative vote of a Majority-in-Interest of the Members shall be sufficient to approve such proposal at a meeting of the Members. Whenever the Consent of any Members is permitted or required under this Agreement, such Consent may be given at a meeting of Members or in accordance with the procedure prescribed in ‎Section 10.2(b).

 

 

(b) Written Consents. Any action requiring the Consent of any Member or a group of Members pursuant to this Agreement or that is required or permitted to be taken at a meeting of the Members may be taken without a meeting if a Consent in writing or by electronic transmission and filed with the Manager setting forth the action so taken or consented to is given by Members whose affirmative vote would be sufficient to approve such action or provide such Consent at a meeting of the Members. Such Consent may be in one or several instruments and shall have the same force and effect as the affirmative vote of such Members at a meeting of the Members. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. For purposes of obtaining a Consent in writing or by electronic transmission, the Manager may require a response within a reasonable specified time, and failure to respond in such time period shall constitute a Consent that is consistent with the Manager’s recommendation with respect to the proposal.

 

(c) Proxy. Each Member entitled to act at a meeting of Members may authorize any Person or Persons to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Each proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Member executing it, such revocation to be effective upon the Company’s receipt of written notice of such revocation from the Member executing such proxy, unless such proxy states that it is irrevocable and is coupled with an interest.

 

(d) Record Date for Meetings and Other Purposes.

 

(i) The Manager may set, in advance, a Record Date (x) for the purpose of determining the identities of the Members entitled to Consent to any action or entitled to receive notice of or vote at any meeting of the Members or (y) to make a determination of Members for any other proper purpose. Any such date shall not be before the close of business on the day the Record Date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of the Members, not less than two (2) days, before the date on which the meeting is to be held.

 

(ii) If no Record Date is set, the Record Date for the determination of Members entitled to notice of or vote at a meeting of the Members shall be at the close of business on the day on which the notice of the meeting is sent, and the Record Date for any other determination of Members shall be the effective date of such Member action, distribution or other event. When a determination of the Members entitled to vote at any meeting of the Members has been made as provided in this Section 10.2(d)(ii), such determination shall apply to any adjournment thereof.

 

(e) Conduct of Meetings. Each meeting of Members shall be conducted by the Manager or such other Person as the Manager may appoint pursuant to such rules for the conduct of the meeting as the Manager or such other Person deems appropriate.

 

(f) Waivers. Any time period for notice with respect to meetings or consents of the Members may be waived by a Member as to such Member.

 

Article XI
EXCHANGE RIGHTS

 

Section 11.1 Elective and Mandatory Exchanges.

 

(a) Elective Exchanges. Subject to the Policy Regarding Exchanges set forth in Annex E, as amended from time to time by the Company (the “Policy Regarding Exchanges”), an Exchangeable Unit Member shall have the right, from time to time, to surrender Exchangeable Units, along with an equal number of shares of Class B Common Stock (in each case, free and clear of all liens, encumbrances, rights of first refusal and similar restrictions, except for those arising under this Agreement), to the Company and to thereby cause the Company to deliver to such Exchangeable Unit Member (or its designee) the Exchange Consideration as set forth in ‎Section 11.3 (an “Elective Exchange”).

 

 

(b) Mandatory Exchange Events. Class B Units are subject to Mandatory Exchange, in the following circumstances: (i) at the discretion of the Manager with the consent of Members whose Class B Units represent fifty percent (50%) of the Class B Units of all Members in the aggregate; or (ii) automatically, without the consent of any Members of the Company, upon the one-year anniversary of the Mandatory Conversion Trigger Date. Upon a Mandatory Exchange, all Members will be required to exchange all Exchangeable Units then held by the Members.

 

(c) Mandatory Exchange Notices and Dates. Upon the occurrence of the circumstances set out in ‎Section 11.1(b), a mandatory exchange of a Member’s Exchangeable Units and an equal number of shares of Class B Common Stock (a “Mandatory Exchange”) shall be initiated by the Manager by delivering to each Member holding Exchangeable Units a written notice pursuant to the notice provisions in ‎Section 13.6 (a “Mandatory Exchange Notice”). A Mandatory Exchange Notice will specify the basis for the Mandatory Exchange, the Exchangeable Units of the Company to which the Mandatory Exchange applies, the Exchange Consideration and the effective date of such Mandatory Exchange (the “Mandatory Exchange Date”), which shall be no earlier than ten (10) Business Days after delivery of the Mandatory Exchange Notice. The Member receiving the Mandatory Exchange Notice shall use its reasonable best efforts to deliver the Certificates, as applicable, representing the applicable Exchangeable Units and corresponding shares of Class B Common Stock (free and clear of all liens, encumbrances, rights of first refusal and similar restrictions, except for those arising under this Agreement) no later than one (1) Business Day before the Mandatory Exchange Date. Upon the Mandatory Exchange Date, the Manager will effect the Mandatory Exchange.

 

Section 11.2 Additional Terms Applying to Exchanges.

 

(a) Rights of Exchangeable Unit Member. On an Exchange Date, all rights of the Exchangeable Unit Member as a holder of the Exchangeable Units and, if the applicable Exchangeable Units are Class B Units, shares of Class B Common Stock held by the holder of the Class B Units that are subject to the Exchange, shall cease, and, unless the Company or Manager, as applicable, has elected Cash Settlement as to all Exchangeable Units tendered, the Manager shall use commercially reasonable efforts to cause the transfer agent or registrar of the Manager to update the stock register of the Manager such that such Exchangeable Unit Member (or its designee) becomes the record holder of the shares of Class A Common Stock to be received by the Exchangeable Unit Member in respect of such Exchange.

 

(b) Expenses. Except as otherwise agreed by the Company, the Manager and an Exchangeable Unit Member, the Company, the Manager, and each Exchangeable Unit Member shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated. Notwithstanding the foregoing sentence, the Manager (or the Company, at the Manager’s direction) shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, however, that if any shares of Class A Common Stock are to be delivered pursuant to an Elective Exchange in a name other than that of the Exchangeable Unit Member that requested the Exchange (or The Depository Trust Company or its nominee for the account of a participant of The Depository Trust Company that will hold the shares for the account of such Exchangeable Unit Member) or the Cash Settlement is to be paid to a Person other than the Exchangeable Unit Member that requested the Exchange, then such Exchangeable Unit Member or the Person in whose name such shares are to be delivered or to whom the Cash Settlement is to be paid shall pay to the Manager (or the Company, at the Manager’s direction) the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Manager that such tax has been paid or is not payable.

 

(c) Concurrent Delivery of Class B Common Stock. No Exchange of Class B Units may be made without a concurrent delivery of an equal number of shares of Class B Common Stock. Any shares of Class B Common Stock surrendered in an Exchange shall automatically be deemed retired without any action on the part of any Person, including the Manager. Any such retired shares of Class B Common Stock shall no longer be outstanding, all rights with respect to such shares shall automatically cease and terminate, and such shares shall return to the status of authorized but unissued shares of the Manager.

 

 

Section 11.3 Exchange Consideration; Settlement.

 

(a) Generally. The Manager (in the case of a Mandatory Exchange) or the Company (in the case of an Elective Exchange) shall have the right, in its sole discretion, to elect the form of Exchange Consideration with respect to any Exchange. On an Exchange Date, provided the Exchangeable Unit Member has satisfied its obligations under the Policy Regarding Exchanges and not validly retracted such proposed Exchange, the Manager or the Company, as applicable, shall deliver or cause to be delivered the Exchange Consideration to such Exchangeable Unit Member (or its designee), at the address set forth on the applicable Exchange Notice. If the Manager or the Company, as applicable, elects a Cash Settlement, the Manager shall only be obligated to contribute to the Company (or, if the Manager elects to settle directly pursuant to ‎Section 11.9, settle directly for an amount equal to) an amount in respect of such Cash Settlement equal to the net proceeds (after deduction of any underwriters’ discounts and commissions, if applicable) from the sale by the Manager of a number of shares of Class A Common Stock equal to the number of Exchangeable Units being Exchanged for such Cash Settlement. Except as otherwise required by Law, the Manager shall, for U.S. federal income tax purposes, be treated as paying an appropriate portion of the selling expenses described in the previous sentence as agent for and on behalf of the Exchangeable Unit Member. Except as otherwise determined by the Manager or the Company, as applicable, if (i) the Company or the Manager determines that some or all of the Exchange Consideration with respect to an Exchange will be Class A Common Stock and (ii) such Exchange would, but for this ‎Section 11.3(a), result in the Exchangeable Unit Member’s receipt of a fractional share of Class A Common Stock, then the number of shares of Class A Common Stock to be received by the Exchangeable Unit Member shall be rounded down to the nearest whole number of shares and the amount of the reduction shall be paid as a Cash Settlement.

 

(b) Restriction on Cash Settlement of Class B Units. Except in connection with a payment in respect of a fractional share (as described in the final sentence of Section 11.3(a)), the Manager or the Company, as applicable, may elect Cash Settlement with respect to an Exchange of Exchangeable Units that are Class B Units only to the extent the Cash Settlement is funded by the proceeds (net of underwriting discounts and commissions) of a Liquidity Offering with respect to that Exchange.

 

(c) Notice of Intended Exchange Consideration. At least two (2) Business Days before the Exchange Date, the Manager or the Company, as applicable, shall give written notice to the other (with a copy to the Exchangeable Unit Member) of its intended Exchange Consideration. If the Manager or the Company does not timely deliver such written notice, the Manager or the Company shall be deemed to have elected to settle the Exchange with shares of Class A Common Stock.

 

(d) Settlement through Depository Trust Company. To the extent the Class A Common Stock is settled through the facilities of The Depository Trust Company, the Manager or the Company will, upon the written instruction of an Exchangeable Unit Member, deliver the shares of Class A Common Stock deliverable to such Exchangeable Unit Member through the facilities of The Depository Trust Company to the account of the participant of The Depository Trust Company designated by such Exchangeable Unit Member in the Exchange Notice.

 

(e) Obligations of Manager and Company. Upon any Exchange, the Manager or the Company, as applicable, shall take such actions as (A) may be required to ensure that such Exchangeable Unit Member receives the shares of Class A Common Stock and/or the Cash Settlement that such Exchangeable Unit Member is entitled to receive in connection with such Exchange pursuant to ‎Section 11.3(a), and (B) may be reasonably within its control that would cause such Exchange to be treated as a direct exchange between the Manager and the Member for U.S. federal and applicable state and local income tax purposes.

 

Section 11.4 Adjustment. To the extent not reflected in an adjustment to the Exchange Rate, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock is converted or changed or exchanged into or for another security, securities or other property, then, upon any subsequent Exchange, an Exchangeable Unit Member shall be entitled to receive the amount of such security, securities or other property that such Exchangeable Unit Member would have received if such Exchange had occurred immediately before the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock is converted or changed or exchanged into or for another security, securities or other property, this ‎Section 11.4 shall continue to be applicable, mutatis mutandis, with respect to such security or other property.

 

 

Section 11.5 Class A Common Stock to Be Issued in Connection with an Exchange.

 

(a) Class A Common Stock Reserve. The Manager shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, such number of shares of Class A Common Stock as shall be deliverable under this Agreement upon all such Exchanges; provided, however, that the Manager may satisfy its obligations in respect of any such Exchange or conversion by delivery of unencumbered purchased shares of Class A Common Stock (which may or may not be held in the treasury of the Manager or any subsidiary thereof). The preceding sentence shall not affect the Manager’s right, where applicable, to elect a Cash Settlement (for the avoidance of doubt the Manager cannot force a Cash Settlement to the extent there are not enough authorized or legally available Class A Common Stock).

 

(b) Rule 16(b) Exemption. The Manager has taken and will take all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the Manager (including derivative securities with respect thereto) and any securities that may be deemed to be equity securities or derivative securities of the Manager for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the Manager (including directors-by-deputization) who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Manager upon the registration of any class of equity security of the Manager pursuant to Section 12 of the Exchange Act.

 

(c) Validity of Class A Common Stock. The Manager covenants that all shares of Class A Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the Manager or any right of first refusal or other right in favor of any Person.

 

Section 11.6 Tax Treatment. Unless otherwise agreed to in writing by the Exchangeable Unit Member and the Manager, it is intended that, for U.S. federal and applicable state and local income tax purposes, each Exchange be treated as direct exchange between the Manager and the Exchangeable Unit Member that is a taxable transaction to the Exchangeable Unit Member. All applicable parties shall treat each Exchange consistently with the intended treatment for all U.S. federal and applicable state and local tax purposes unless otherwise required by a “determination” within the meaning of Code Section 1313(a) or a change in Law.

 

Section 11.7 Contribution by Manager. Except as otherwise provided in Section 11.9, on the Exchange Date (i) the Manager shall contribute to the Company the shares of Class A Common Stock and/or Cash Settlement that the Manager has elected to deliver and that the Exchangeable Unit Member is entitled to receive in the applicable Exchange and (ii) the Company shall issue to the Manager a number of Class A Units equal to the number of Exchangeable Units (and corresponding number of shares of Class B Common Stock) surrendered by the Exchangeable Unit Member.

 

Section 11.8 Apportionment of Distributions. Distributions with a Record Date on or before the Exchange Date shall be made to the Exchangeable Unit Member.

 

Section 11.9 Right of Manager to Acquire Exchangeable Units. With respect to Class B Units surrendered in an Elective Exchange or subject to a Mandatory Exchange, the Manager shall have the right but not the obligation to have the Manager (in lieu of the Company) acquire Exchangeable Units and, if the applicable Exchangeable Units are Class B Units, an equal number of shares of Class B Common Stock held by the holder of those Class B Units, directly from an Exchangeable Unit Member for the elected Exchange Consideration. If the Manager acquires Exchangeable Units as described in the preceding sentence, those Exchangeable Units shall be automatically recapitalized into the same number of Class A Units as the Exchangeable Units. The applicable provisions of this Article XI shall apply to any such direct exchange, mutatis mutandis.

 

 

Article XII

CLASS A PREFERRED UNITS

 

Section 12.1 Distributions. Notwithstanding anything herein to the contrary, the Company shall not effect any distributions on Units of any class or series of Units if any such distribution shall be used to pay dividends to the Manager’s stockholders without the prior written consent of the Series A Preferred Units, voting as a class, which written consent shall not be unreasonably withheld, conditioned, or delayed.

 

Section 12.2 Mandatory Conversion . Each Class A Preferred Unit that is outstanding on (i) the date that is the second year anniversary of the date of Original Issue Date or (ii) the date that is immediately prior to the consummation of a Change of Control will be converted into Class B Common Units at the Conversion Ratio (the “Mandatory Conversion Trigger Date”). The “Conversion Ratio” means, for each Class A Preferred Unit, the quotient of (i) the Stated Conversion Value and (ii) the Market Price, plus declared and unpaid distributions per Class A Preferred Unit through the date the conversion occurs pursuant to Section 12.1, if any (the “Conversion Price”). The “Stated Conversion Value” of the Class A Preferred Units shall be $20.00 per unit. The “Market Price” shall mean the average of the daily VWAP of the Class A Common Stock during the five (5) Trading Days prior to the Mandatory Conversion Trigger Date. The “VWAP” means, for any Trading Day, the per share daily volume weighted average price of the Class A Common Stock for such Trading Day on the New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTCQB, the OTCBB or the NYSE Euronext, whichever is at the time the principal trading exchange or market for the Common Stock (the “Principal Market”) from 9:30 a.m. Eastern Time through 4:00 p.m. Eastern Time (the “Measurement Period”) or, if such price is not available, “VWAP” shall mean the market value per share of Class A Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm reasonably acceptable to the holders of a majority of the Class A Preferred Units. A “Trading Day” means any days during the course of which the Principal Market on which the Class A Common Stock is listed or admitted to trading is open for the exchange of securities.

 

Section 12.3 Mandatory Conversion Notice. The Company will provide notice to holders of Class A Preferred Units within five days of the occurrence of the Mandatory Conversion Trigger Date (provided, however that failure of the Company to timely give such notice does not void the mandatory conversion). The holders of Class A Preferred Units will be deemed a Class B Common Unit holder of record as of Mandatory Conversion Trigger Date.

 

Section 12.4 Fractional Shares. No fractional Class B Common Unit or scrip shall be issued upon conversion of the Class A Preferred Units. If more than one Class A Preferred Unit shall be surrendered for conversion at any one time by the same holder, the number of full Class B Common Units issuable upon conversion thereof shall be computed on the basis of the aggregate number of Class A Preferred Units so surrendered. Instead of any fractional Class B Common Unit which would otherwise be issuable upon conversion of any Class A Preferred Units, the Manager shall make an adjustment in respect of such fractional interest by rounding the fractional unit up to the next whole Class B Common Unit.

 

Section 12.5 Registration. If any Class B Common Units to be reserved for the purpose of conversion of Class A Preferred Units require registration or listing with, or approval of, any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise, including registration under the Securities Act, and appropriate state securities laws, before such shares may be validly issued or delivered upon conversion, the Manager shall, at its sole cost and expense, in good faith and as expeditiously as possible endeavor to secure such registration, listing or approval, as the case may be.

 

Section 12.6 Adjustment. If, after the Original Issuance Date, the Manager (i) makes a distribution on its Class B Common Units in securities (including Class B Common Units), (ii) subdivides or splits its outstanding Class B Common Units into a greater number of Class B Common Units, (iii) combines or reclassifies its Class B Common Units into a smaller number of Class B Common Units or (iv) issues by reclassification of its Class B Common Units any securities (including any reclassification in connection with a merger, consolidation or business combination in which the Manager is the surviving person), then the Conversion Price in effect at the time of the record date for such distribution or of the effective date of such subdivision, split, combination, or reclassification shall be proportionately adjusted so that the conversion of the Class A Preferred Units after such time shall entitle the holder to receive the aggregate number of Class B Common Units that such holder would have been entitled to receive if the Class A Preferred Units had been converted into Class B Common Units immediately prior to such record date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Manager is the surviving person, the Manager and the Company shall provide effective provisions to ensure that the provisions in this Agreement relating to the Class A Preferred Units shall not be abridged or amended and that the Class A Preferred Units shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Class A Preferred Units had immediately prior to such transaction or event. An adjustment made pursuant to this Section 12.7 shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which the Manager or the Company is the surviving person) or split. Such adjustment shall be made successively whenever any event described above shall occur. The Manager and the Company, as the case may be, agrees that it will act in good faith to make any adjustment(s) required by this Section 12.7 equitably and in such a manner as to afford the holders of Class A Preferred Units the benefits of the provisions hereof, and will not intentionally take any action to deprive such holders of the express benefit hereof. Upon any adjustment to the Conversion Price pursuant to this Section 12.7, the Company promptly shall deliver to each holder of Class A Preferred Units a certificate signed by an appropriate officer of the Company, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment.

 

 

Section 12.7 Voting. In addition to any vote required by the Act, other applicable law or this Agreement, for so long as any of the Class A Preferred Units shall remain outstanding, neither the Manager nor the Company shall, either directly or indirectly by amendment, merger, consolidation or otherwise, take any of the following actions, including whether by merger, consolidation or otherwise, without (in addition to any other vote required the Act, other applicable law or this Agreement) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Class A Preferred Units, consenting or voting as a single class, by relative liquidation value, to:

 

(a) authorize or create, or increase the authorized amount of, or issue any class or series of Senior Units or Parity Units or reclassify or amend the provisions of any existing class of securities of the Company into Senior Units or Parity Units;

 

(b) authorize, create or issue any stock or debt instrument or other obligation that is convertible or exchangeable into Senior Units or Parity Units (or that is accompanied by options or warrants to purchase such Senior Units or Parity Units);

 

(c) amend, alter or repeal any provision of this Agreement in a manner that adversely affects the rights, preferences, privileges or powers of the Class A Preferred Units;

 

(d) declare or pay any distributions in cash or property with respect to its Common Units (other than distributions of cash or property paid on the Class A Preferred Units); or

 

(e) redeem, repurchase, recapitalize or acquire the Common Units or other Junior Units.

 

If the Company or the Manager shall propose to take any action enumerated above in clauses (a) through (e) of this Section 12.8 then, and in each such case, the Company or the Manager shall give notice of such proposed action to each holder of record of Class A Preferred Units as of the date of such notice at the address of said holder shown in the books and records of the Company. Such notice shall specify, inter alia (x) the proposed effective date of such action; (y) the date on which a record is to be taken for the purposes of such action, if applicable; and (z) the other material terms of such action. Such notice shall be given at least ten calendar days prior to the applicable date or effective date specified above. If at any time the Company or the Manager shall cancel any of the proposed actions for which notice has been given under this Section 12.8 prior to the consummation thereof, the Company or the Manager shall give prompt notice of such cancellation to each holder of record of the Class A Preferred Units as of the date of such notice at the address of said holder shown in the books and records of the Company. For the avoidance of doubt, if a holder of record of Class A Preferred Units does not respond to the aforementioned notice, such non-response shall in no way be deemed to constitute the written consent or affirmative vote of such holder regarding any of the aforementioned actions in this Section 12.8 or described within such notice.

 

 

Article XIII

MISCELLANEOUS

 

Section 13.1 Conclusive Nature of Determinations. All determinations, interpretations, calculations, adjustments and other actions of the Manager, the Company, the Board of Directors (or a committee to which the Board of Directors has delegated such authority), or a designee of any of the foregoing that are within such Person’s authority under this Agreement shall be binding and conclusive on a Member absent manifest error. In connection with any such determination, interpretation, calculation, adjustment, or other action, the Manager, the Company, the Board of Directors (or a committee to which the Board of Directors has delegated such authority), or the designee of any of the foregoing shall be entitled to resolve any ambiguity with respect to the manner in which such determination, interpretation, calculation, adjustment or other action is to be made or taken, and shall be entitled to interpret the provisions of this Agreement in such a manner as such Person determines to be fair and equitable, and such resolution or interpretation shall be binding and conclusive on a Member absent manifest error.

 

Section 13.2 Company Counsel. THE COMPANY, THE MANAGER AND AFFILIATED ENTITIES MAY BE REPRESENTED BY THE SAME COUNSEL. THE ATTORNEYS, ACCOUNTANTS AND OTHER EXPERTS WHO PERFORM SERVICES FOR THE COMPANY MAY ALSO PERFORM SERVICES FOR THE MANAGER AND AFFILIATES THEREOF. THE MANAGER MAY, WITHOUT THE CONSENT OF THE MEMBERS, EXECUTE ON BEHALF OF THE COMPANY ANY CONSENT TO THE REPRESENTATION OF THE COMPANY THAT COUNSEL MAY REQUEST PURSUANT TO THE NEW YORK RULES OF PROFESSIONAL CONDUCT OR SIMILAR RULES IN ANY OTHER JURISDICTION. THE COMPANY HAS INITIALLY SELECTED PRYOR CASHMAN LLP (“COMPANY COUNSEL”) AS LEGAL COUNSEL TO THE COMPANY. EACH MEMBER ACKNOWLEDGES THAT COMPANY COUNSEL DOES NOT REPRESENT ANY MEMBER IN ITS CAPACITY AS SUCH IN THE ABSENCE OF A CLEAR AND EXPLICIT WRITTEN AGREEMENT TO SUCH EFFECT BETWEEN SUCH MEMBER AND COMPANY COUNSEL (AND THEN ONLY TO THE EXTENT SPECIALLY SET FORTH IN SUCH AGREEMENT), AND THAT IN THE ABSENCE OF ANY SUCH AGREEMENT COMPANY COUNSEL SHALL OWE NO DUTIES TO ANY MEMBER. EACH MEMBER FURTHER ACKNOWLEDGES THAT, WHETHER OR NOT COMPANY COUNSEL HAS IN THE PAST REPRESENTED OR IS CURRENTLY REPRESENTING SUCH MEMBER WITH RESPECT TO OTHER MATTERS, UNLESS OTHERWISE EXPRESSLY AGREED BY COMPANY COUNSEL, COMPANY COUNSEL HAS NOT REPRESENTED THE INTERESTS OF ANY MEMBER IN THE PREPARATION AND/OR NEGOTIATION OF THIS AGREEMENT.

 

Section 13.3 Appointment of Manager as Attorney-in-Fact.

 

(a) Execution of Documents. Each Member, including each Additional Member and Substituted Member that is a Member, irrevocably makes, constitutes and appoints the Manager, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to carry out the provisions of this Agreement, including:

 

(i) All certificates and other instruments (including counterparts of this Agreement), and all amendments thereto, that the Manager deems appropriate to form, qualify, continue or otherwise operate the Company as a limited liability company (or other entity in which the Members will have limited liability comparable to that provided in the Act) in the jurisdictions in which the Company may conduct business or in which such formation, qualification or continuation is, in the opinion of the Manager, necessary or desirable to protect the limited liability of the Members.

 

(ii) All amendments to this Agreement adopted in accordance with the terms of this Agreement, and all instruments that the Manager deems appropriate in accordance with the terms of this Agreement.

 

(iii) All conveyances of Company Assets and other instruments that the Manager reasonably deems necessary in order to complete a dissolution and termination of the Company pursuant to this Agreement.

 

 

(b) Power and Interest. The appointment by all Members of the Manager as attorney-in-fact shall be deemed to be a power coupled with an interest in recognition of the fact that each of the Members under this Agreement will be relying upon the power of the Manager to act as contemplated by this Agreement in any filing and other action by it on behalf of the Company, shall survive the Incapacity of any Person hereby giving such power and the Transfer of all or any portion of such Person’s Units, and shall not be affected by the subsequent Incapacity of the Person.

 

Section 13.4 Entire Agreement. This Agreement, together with the Registration Rights Agreement, and the certificate of incorporation of the Manager, in each case, as amended, supplemented or restated in accordance with its terms, and the other documents contemplated hereby and thereby, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersede any and all prior or contemporaneous agreements or understandings between the parties to this Agreement pertaining to the subject matter hereof, including the Initial Operating Agreement.

 

Section 13.5 Further Assurances. Each of the parties to this Agreement does hereby covenant and agree on behalf of itself, its successors, and its assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish, and deliver such other instruments, documents and statements, and to take such other action as may be required by Law or reasonably necessary to effectively carry out the intent and purposes of this Agreement.

 

Section 13.6 Notices. Any notice, consent, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be (a) delivered personally to the Person or an officer of the Person to whom the same is directed, (b) sent by facsimile, overnight mail or registered or certified mail, return receipt requested, postage prepaid, or (c) (except with respect to notice to the Company or the Manager) sent by email, with electronic, written or oral confirmation of receipt, in each case addressed as follows:

 

	(i)	if to the Company or the Manager:
		c/o
		HNR Acquisition Corp.
		3730 Kirby Drive, Suite 1200
		Houston, Texas 77098
		Attention:Donald W. Orr, President
		Email:donald.orr@hnra-nyse.com
		with copies (which shall not constitute notice) to:
		Pryor Cashman LLP
		7 Times Square
		New York, New York 10036
		Attention Matthew Ogurick
			Email: mogurick@pryorcashman.com

 

or to such other address as the Company may from time to time specify by notice to the Members

 

(ii)

if to any Member, to:

 

the address, email, or facsimile number of such Member set forth in the records of the Company.

 

Any such notice shall be deemed to be delivered, given and received for all purposes as of: (A) the date so delivered, if delivered personally, (B) upon receipt, if sent by facsimile or email, or (C) on the date of receipt or refusal indicated on the return receipt, if sent by registered or certified mail, return receipt requested, postage and charges prepaid and properly addressed.

 

Section 13.7 Governing Law. This Agreement, including its existence, validity, construction, and operating effect, and the rights of each of the parties to this Agreement, shall be governed by and construed in accordance with the Laws of the State of Delaware without regard to otherwise governing principles of conflicts of Law.

 

 

Section 13.8 Jurisdiction and Venue. The parties to this Agreement agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Chancery Court, or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court (the “Selected Courts”), and each of the parties hereby irrevocably consents to the jurisdiction of the Selected Courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any Selected Court. Without limiting the foregoing, each party agrees that service of process on such party in the manner provided for notice in ‎Section 13.6 shall be deemed effective service of process on such party.

 

Section 13.9 Equitable Remedies. The parties to this Agreement agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions and other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any of the Selected Courts, this being in addition to any other remedy to which they are entitled at Law or in equity. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties to this Agreement. Each party further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at Law would be adequate.

 

Section 13.10 Construction. This Agreement shall be construed as if all parties to this Agreement prepared this Agreement.

 

Section 13.11 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall for all purposes be deemed an original, and all such counterparts shall together constitute but one and the same agreement.

 

Section 13.12 Third-Party Beneficiaries. Except as provided in ‎Section 4.7, nothing in this Agreement, express or implied, is intended or shall be construed to give any Person other than the parties to this Agreement (or their respective legal representatives, successors, heirs and distributees) any legal or equitable right, remedy or claim under or in respect of any agreement or provision contained herein, it being the intention of the parties to this Agreement that this Agreement is for the sole and exclusive benefit of such parties (or such legal representatives, successors, heirs and distributees) and for the benefit of no other Person.

 

Section 13.13 Binding Effect. Except as otherwise expressly provided herein, all of the terms and provisions of this Agreement shall be binding on, shall inure to the benefit of and shall be enforceable by the Members, their heirs, executors, administrators, successors and all other Persons hereafter holding, having or receiving an interest in the Company, whether as Substituted Members or otherwise.

 

Section 13.14 Severability. If any provision of this Agreement as applied to any party or any circumstance shall be adjudged by a court to be void, unenforceable or inoperative as a matter of Law, then the same shall in no way affect any other provision in this Agreement, the application of such provision in any other circumstance or with respect to any other party, or the validity or enforceability of the Agreement as a whole.

 

Section 13.15 Survival. The provisions of Section 4.6 (Limitation on Liability), ‎Section 4.7 (Indemnification), ‎Section 13.1 (Conclusive Nature of Determinations), ‎Section 13.3 (Appointment of Manager as Attorney-in-Fact), ‎Section 13.4 (Entire Agreement), ‎Section 13.5 (Further Assurances), ‎Section 13.6 (Notices), ‎Section 13.7 (Governing Law), ‎Section 13.8 (Jurisdiction and Venue), ‎Section 4.8 (Survival of Obligations) of ‎Annex C, and this ‎Section 13.15 (Survival) (and any other provisions of this Agreement necessary for the effectiveness of the enumerated sections) shall survive the termination of the Company and/or the termination of this Agreement.

 

 

Section 13.16 Effect on Other Obligations of Members or the Company. Nothing in this Agreement shall modify, amend, terminate or supersede any obligations or rights of any Member or the Company under any agreement between or among Member(s) and/or the Company (other than the Initial Operating Agreement) that is in effect as of the date hereof.

 

Section 13.17 Confidentiality. Each Member recognizes and acknowledges that it has and may in the future receive certain confidential and proprietary information and trade secrets of the Company (including its predecessors), including confidential information of the Company (and its predecessors) regarding identifiable, specific and discrete business opportunities being pursued by the Company (the “Confidential Information”). Except as otherwise consented to by the Manager in writing, each Member (other than the Manager), on behalf of itself (and, to the extent that such Member would be responsible for the acts of the following Persons under principles of agency Law, its managers, directors, officers, shareholders, partners, members, employees, representatives and agents) agrees that, during the term of this Agreement, whether directly or indirectly through an Affiliate or otherwise, it (a) will use the same degree of care as it uses to protect its own confidential information to keep confidential any Confidential Information furnished to such Member; (b) will not intentionally use any of the Confidential Information for any purpose other than monitoring its investment in the Company; and (c) will not disclose such Confidential Information to any third party for any reason or purpose whatsoever, except that each Member may disclose such information (i) to authorized directors, officers, employees, representatives and agents of the Company or the Manager and as otherwise may be proper in the course of performing such Member’s obligations or enforcing its rights under this Agreement and the agreements expressly contemplated hereby; (ii) to such Member’s (or any of its Affiliates’) Affiliates, auditors, accountants, attorneys or other agents who are informed of the Member’s obligations hereunder; (iii) to any bona fide prospective purchaser of the equity or assets of such Member or its Affiliates or the Units held by such Member, or prospective merger partner of such Member or its Affiliates, provided that such purchaser or merger partner agrees to be bound by the provisions of this Section 13.17 or other confidentiality agreement approved by the Manager; or (iv) as is required to be disclosed by any Law, by any governmental authority or stock exchange or by any listing or trading agreement concerning a Member or its Affiliates; provided that the Member required to make such disclosure pursuant to clause (iv) above shall provide to the Company prompt notice of such disclosure to enable the Company to seek an appropriate protective order or confidential treatment. It is acknowledged and agreed that a Member’s review of Confidential Information will inevitably enhance its knowledge and understanding of the Company’s industry in a way that cannot be separated from its other knowledge, and it shall not be a violation of Section 13.17(b) if such Member’s overall knowledge and understanding are used for purposes other than monitoring its investment in the Company. For purposes of this Section 13.17, the term “Confidential Information” shall not include any information which (x) such Person learns from a source other than the Company or the Manager, or any of their respective representatives, employees, agents or other service providers, and in each case who is not bound by a confidentiality obligation, (y) is disclosed in a prospectus, in other documents or in any other manner for dissemination to the public (in each case, not in violation of this Section 13.17), or (z) is independently developed by the disclosing Member without violating any requirement hereunder. Nothing in this Section 13.17 shall in any way limit or otherwise modify any confidentiality covenants entered into by any Member pursuant to any other agreement entered into with the Company or the Manager.

 

Article XIV
DEFINED TERMS

 

Section 14.1 Definitions. Unless otherwise indicated to the contrary, the following definitions shall be applied to the terms used in this Agreement:

 

“Act” is defined in the recitals to this Agreement.

 

“Additional Funds” is defined in ‎Section 2.5(a).

 

“Additional Member” means a Person who is admitted to the Company as a Member pursuant to the Act and ‎Section 8.1, who is shown as such on the books and records of the Company, and who has not ceased to be a Member pursuant to the Act and this Agreement.

 

“Affiliate” means, with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person;

 

 

provided, however, that (i) none of the Members or their parent companies or Affiliates shall be deemed to be an Affiliate of any other Member or its parent company or Affiliates and (ii) none of the Members or their parent companies or Affiliates shall be deemed to be an Affiliate of the Company or any of its Affiliates. With respect to any Person who is an individual, “Affiliate” shall also include, without limitation, any Family Member of such Person.

 

“Asset Value” is defined in Annex C.

 

“Assets” means any assets and property of the Company.

 

“Assumed Tax Liability” is defined in ‎Section 3.2(b).

 

“Assumed Tax Rate” is defined in ‎Section 3.2(b)(ii).

 

“Available Cash” means, after taking into account amounts determined by the Manager to be reasonably necessary or advisable to be retained by the Company to meet actual or anticipated, direct or indirect, expenses, capital investments, working capital needs or liabilities (actual, contingent or otherwise) of the Company, including the payment of any Imputed Underpayment or for the operation of the business of the Company, or to create reasonable reserves for any of the foregoing, cash (in United States dollars) of the Company that the Manager determines is available for distribution to the Members.

 

“Bankruptcy” means, with respect to any Person, the occurrence of any event specified in Section 18-304 of the Act with respect to such Person, and the term “Bankrupt” has a correlative meaning.

 

“Board of Directors” means the Board of Directors of the Manager.

 

“Purchase Agreement” is defined in the recitals of this Agreement.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to close.

 

“Capital Account” is defined in ‎Annex C.

 

“Capital Contribution” means, with respect to any Member, the aggregate amount of money and the initial Asset Value of property (other than money) in such form as may be permitted by the Act that the Member contributes (or is treated as contributing) to the Company.

 

“Capital Stock” means a share of any class or series of stock of the Manager now or hereafter authorized.

 

“Cash Settlement” means immediately available funds in U.S. dollars in an amount equal to the product of (x) the number of shares of Class A Common Stock that would otherwise be delivered to a Member in an Exchange, multiplied by (y) the price per share of Class A Common Stock. For purposes of the preceding sentence, in an Exchange of Class B Units, the price per share of Class A Common Stock shall only be determined by a private sale or underwritten offering (including a “bought” deal or “overnight” public offering) undertaken by the Manager in connection with or anticipation of the Exchange (a “Liquidity Offering”). For purposes of this definition, the price per share of Class A Common Stock shall be determined net of any underwriting discounts and commissions and shall be subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. For purposes of determining Cash Settlement to be paid in settlement of a fractional share of Class A Common Stock, the price per share of Class A Common Stock shall be determined as the VWAP, in each case subject to appropriate and equitable adjustment for any stock splits, reverse splits, stock dividends or similar events affecting the Class A Common Stock. If, at the time of determination, the Class A Common Stock no longer trades on a Principal Market, then the price per share of Class A Common Stock shall be determined in good faith by a committee of the Board of Directors composed of a majority of the directors of the Manager that do not have an interest in the Exchangeable Units.

 

“Certificate of Formation” is defined in the recitals of this Agreement.

 

“Certificates” means (A) if certificated, any certificates representing Exchangeable Units, (B) if certificated, any stock certificates representing the shares of Class B Common Stock required to be surrendered in connection with an Exchange of Class B Units, and (C) such other information, documents or instruments as either the Manager (or the Manager’s transfer agent) or the Company may reasonably require in connection with an Exchange. If any certificate or other document referenced in the immediately preceding sentence is alleged to be lost, stolen or destroyed, the Exchangeable Unit Member shall cooperate with and respond to the reasonable requests of the Manager (or the Manager’s transfer agent) and the Company and, if required by the Manager or the Company, furnish an affidavit of loss and/or an indemnity against any claim that may be made against the Manager or the Company on account of the alleged loss, theft or destruction of such certificate or other document.

 

 

“Change of Control” means, as of any date of determination, in one transaction or a series of related transactions, the Transfer of Units (or any beneficial interest therein) of the Company representing more than fifty (50) percent of the outstanding Common Units as of such date of determination.

 

“Class A Common Stock” means the Class A common stock of the Manager, $0.0001 par value per share.

 

“Class A Convertible Preferred Units” is defined in Section 2.1(b)(iii).

 

“Class A Preferred Units” is defined in Section 2.4(d).

 

“Class A Unit” is defined in ‎Section 2.1(b)(i).

 

“Class B Common Stock” means a non-economic voting share in the Manager, with each share having non-economic rights equivalent to one share of Class A Common Stock.

 

“Class B Unit” is defined in ‎Section 2.1(b)(ii).

 

“Code” means the Internal Revenue Code of 1986, as amended. All references in this Agreement to sections of the Code shall include any corresponding provision or provisions of succeeding Law.

 

“Common Stock” means the Class A Common Stock or the Class B Common Stock (and shall not include any additional series or class of the Manager’s common stock created after the date of this Agreement).

 

“Common Unit” means a Class A Unit, a Class B Unit, and any other Unit designated as a Common Unit by the Company.

 

“Company” is defined in the preamble to this Agreement.

 

“Company Counsel” is defined in ‎Section 11.2.

 

“Consent” means the consent to, approval of, or vote in favor of a proposed action by a Member given in accordance with ‎Article X.

 

“control,” including the terms “controlled by” and “under common control with,” means with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the Board of Directors or similar body governing the affairs of such Person.

 

“Conversion Price” is defined in Section 12.2.

 

“Conversion Ratio” is defined in Section 12.2.

 

“de minimis” shall mean an amount small enough as to make not accounting for it commercially reasonable or accounting for it administratively impractical, in each case as determined by the Manager.

 

“Debt” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; and (iii) obligations of such Person as lessee under capital leases.

 

 

“Designated Individual” is defined in Annex C.

 

“Elective Exchange” is defined in ‎Section 11.1(a).

 

“Elective Exchange Date” means the effective date of an Elective Exchange.

 

“Elective Exchange Notice” is defined in Annex (B).

 

“Equivalent Units” means Units with preferences, conversion and other rights (other than voting rights), restrictions, limitations as to dividends and other distributions, qualifications, terms and conditions of redemption (the “Terms”) that are (a) relative to the Common Units and the other classes and series of Units that correspond to classes and series of Capital Stock, and (b) substantially the same as (or corresponding to) the Terms that any new Capital Stock or New Securities have relative to the Common Stock and other classes and series of Capital Stock or New Securities. The foregoing shall not apply to matters such as voting for members of the Board of Directors that are not applicable to the Company. In comparing the economic rights of any Preferred Stock with the economic rights of any Units, the effect of taxes may be taken into account.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Exchange” means any Elective Exchange or Mandatory Exchange.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.

 

“Exchange Consideration” shall mean, in the case of any Exchange, (x) the number of shares of Class A Common Stock that is equal to the product of the number of Exchangeable Units surrendered in the Exchange multiplied by the Exchange Rate (the “Stock Consideration”), (y) the Cash Settlement, plus, in the case of an Exchange of Class B Units under either subclause (x) or (y), an amount that is equal to $0.0001 multiplied by the number of shares of Class B Common Stock included in the Exchange, or (z) a combination of the Stock Consideration and the Cash Settlement.

 

“Exchange Date” means an Elective Exchange Date or Mandatory Exchange Date.

 

“Exchange Rate” means, in respect of any Exchange, subject to ‎Section 11.4, a ratio, expressed as a fraction, the numerator of which shall be the number of shares of Class A Common Stock outstanding immediately before the Exchange and the denominator of which shall be the number of Class A Units owned by the Manager immediately before the Exchange. On the date of this Agreement, the Exchange Rate shall be 1.

 

“Exchangeable Unit” means each Class B Unit and any other Unit designated as an Exchangeable Unit by the Company.

 

“Exchangeable Unit Member” means (i) each Member, other than the Manager and any of its wholly owned Subsidiaries, that holds an Exchangeable Unit or (ii) each holder of an interest in a Member that holds an Exchangeable Unit pursuant to ‎Article X.

 

“Fair Market Value” of Units or other property, means the cash price that a third party would pay to acquire all of such Units (computed on a fully diluted basis after giving effect to the exercise of any and all outstanding conversion rights, exchange rights, warrants and options) or other property, as the case may be, in an arm’s-length transaction. Unless otherwise determined by the Company, the following assumptions will be made when determining the Fair Market Value of Units:

 

(a) that the Company was being sold in a manner reasonably designed to solicit all possible participants and permit all interested Persons an opportunity to participate and achieve the best value reasonably available to the Members at the time; and

 

 

(b) that all existing circumstances are taken into account, including the terms and conditions of all agreements (including this Agreement) to which the Company is then a party or by which it is otherwise benefited or affected, determined.

 

“Family Members” means, as to a Person that is an individual, such Person’s spouse, ancestors (whether by blood or by adoption), descendants (whether by blood or by adoption), brothers and sisters (whether by blood or by adoption) and inter vivos or testamentary trusts of which only such Person and his spouse, ancestors (whether by blood or by adoption), descendants (whether by blood or by adoption), brothers and sisters (whether by blood or adoption) are beneficiaries.

 

“Fiscal Year” is defined in ‎Section 6.2.

 

“Incapacity” or “Incapacitated” means, (i) as to any Member who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Member incompetent to manage his or her Person or his or her estate; (ii) as to any Member that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any Member that is a partnership, the dissolution and commencement of the winding up of the partnership; (iv) as to any Member that is an estate, the distribution by the fiduciary of the estate’s entire interest in the Company; (v) as to any trustee of a trust that is a Member, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Member, the Bankruptcy of such Member.

 

“Incentive Compensation Plan” means any plan, agreement or other arrangement that provides for the grant or issuance of equity or equity-based awards and that is now in effect or is hereafter adopted by the Company or the Manager for the benefit of any of their respective employees or other service providers (including directors, advisers and consultants), or the employees or other services providers (including directors, advisers and consultants) of any of their respective Affiliates or Subsidiaries.

 

“Indemnitee” means the Manager, each Affiliate of the Manager, the Tax Representative, the Designated Individual and each officer or director of the Manager, the Company or their respective Affiliates, in all cases in such capacity.

 

“Initial Operating Agreement” is defined in the recitals of this Agreement.

 

“IRS” means the United States Internal Revenue Service, or, if applicable, a state or local taxing agency.

 

“Law” means any applicable statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or order of any governmental authority. The term “Lawful” has a correlative meaning.

 

“Liquidating Event” is defined in ‎Section 9.2(b).

 

“Liquidation Preference” shall mean, with respect to the Class A Preferred Unit, (i) during the period from the original issue date of the Class A Preferred Units (the “Original Issuance Date”) to the first anniversary of the Original Issue Date, $10.00 per unit, (ii) during the period from the first anniversary of the Original Issue Date to the second anniversary of the Original Issuance Date, $15.00 per unit and (iii) thereafter, $20.00 per unit, in each case subject to appropriate adjustment in the event of any equity distribution, unit split, combination or other similar recapitalization with respect to the applicable Class A Preferred Units..

 

“Liquidator” is defined in ‎Section 9.3(a).

 

“Liquidity Offering” is defined in the definition of Cash Settlement.

 

“Majority-in-Interest of the Members” means Members (excluding the Manager in its capacity as a Member) entitled to vote on or consent to any matter holding more than fifty percent (50%) of all outstanding Common Units held by all Members (excluding the Manager in its capacity as a Member) entitled to vote on or consent to such matter.

 

“Manager” is defined in the preamble to this Agreement.

 

 

“Manager Tax-Related Liabilities” means any U.S. federal, state and local and non-U.S. tax obligations (including any Imputed Underpayment Share for which the Manager is liable hereunder) owed by the Manager (other than any obligations to remit any withholdings withheld from payments to third parties).

 

“Mandatory Conversion Trigger Date” is defined in Section 12.2.

 

“Mandatory Exchange” is defined in ‎Section 11.1(c).

 

“Mandatory Exchange Date” is defined in ‎Section 11.1(c).

 

“Mandatory Exchange Notice” is defined in ‎Section 11.1(c).

 

“Market Price” is defined in Section 12.2.

 

“Measurement Period” is defined in Section 12.2.

 

“Member” means any Person named as a member of the Company on the Register of this Agreement (as amended from time to time) and any Person admitted as an Additional Member of the Company or a Substituted Member of the Company, in each case, in such Person’s capacity as a member of the Company, until such time as such Person has ceased to be a Member.

 

“Member Representative” is defined in ‎Section 7.6.

 

“New Securities” means any equity security as defined in Rule 3a11-1 under the Securities Exchange Act of 1934, as amended, excluding grants under the Incentive Compensation Plans, including (i) rights, options, warrants, or convertible or exchangeable securities that entitle the holder thereof to subscribe for or purchase, convert such securities into, or exchange such securities for, Common Stock or Preferred Stock and (ii) any Debt issued by the Manager that provides any of the rights described in clause (i).

 

“Original Issuance Date” is defined in the definition of Liquidation Preference.

 

“Percentage Interest” means, with respect to each Member, as to any class or series of relevant Units, the fraction, expressed as a percentage, the numerator of which is the aggregate number of Units of such class or series held by such Member and the denominator of which is the total number of Units of such class or series held by all Members, in each case determined as of the date of determination. If not otherwise specified, “Percentage Interest” shall be deemed to refer to Common Units.

 

“Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, joint venture, syndicate, person, trust, association, organization or other entity, including any governmental authority, and including any successor, by merger or otherwise, of any of the foregoing.

 

“Policy Regarding Exchanges” is defined in ‎Section 11.1(a).

 

“Principal Market” is defined in Section 12.2.

 

“Preferred Stock” means shares of preferred stock of the Manager now or hereafter authorized or reclassified that has dividend rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the Common Stock.

 

“Record Date” means the record date established by the Company for the purpose of determining the Members entitled to notice of or vote at any meeting of Members or to consent to any matter, or to receive any distribution or the allotment of any other rights, or in order to make a determination of Members for any other proper purpose, which, in the case of a record date fixed for the determination of Members entitled to receive any distribution, shall (unless otherwise determined by the Company) generally be the same as the record date established by the Manager for a distribution to the Members of its Capital Stock of some or all of its portion of such distribution.

 

“Register” is defined in ‎Section 5.1(b)(i).

 

 

“Registration Rights Agreement” means the Registration Rights Agreement, effective on or about the date hereof, among the Manager and the other Persons party thereto, as the same may be amended, modified, supplemented or restated from time to time.

 

“Regulations” means the income tax regulations, including temporary regulations and, to the extent taxpayers are permitted to rely on them, proposed regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). References to “Treas. Reg. §” are to the sections of the Regulations.

 

“Related-Party Transfer” means a Transfer by a Member of all or part of its Units to any Related-Party Transferee.

 

“Related-Party Transferee” means, with respect to a Member, (i) any Family Member of that Member, (ii) any direct or indirect member or equityholder of that Member or any Affiliate of that Member, (iii) any Family Member of any direct or indirect member or equityholder described in (ii), or (iv) the Manager or any Subsidiary of the Manager.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Selected Courts” is defined in ‎Section 11.7.

 

“SPAC Transactions” means the series of transactions effectuated pursuant to the Purchase Agreement.

 

“Stated Conversion Value” is defined in Section 12.2.

 

“Subsidiary” means, with respect to any Person, any corporation or other entity if a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

 

“Substituted Member” means a Person who is admitted as a Member to the Company pursuant to ‎Section 7.3.

 

“Surviving Company” is defined in Section 7.5(b)(iii).

 

“Tax Distribution” is defined in ‎Section 3.2(a).

 

“Tax Distribution Shortfall Amount” is defined in Section 3.2(d).

 

“Termination Transaction” means any direct or indirect Transfer of all or any portion of the Manager’s Units in connection with, or the other occurrence of, (a) a merger, consolidation or other combination involving the Manager, on the one hand, and any other Person, on the other, (b) a sale, lease, exchange or other transfer of all or substantially all of the assets of the Manager not in the ordinary course of its business, whether in a single transaction or a series of related transactions, (c) a reclassification, recapitalization or change of the outstanding Class A Common Stock (other than a change in par value, or from par value to no par value, or as a result of a stock split or reverse stock split, stock dividend or similar subdivision), (d) the adoption of any plan of liquidation or dissolution of the Manager, or (e) a Transfer of all or any portion of the Manager’s Units (other than to a wholly owned Affiliate).

 

“Terms” is defined in the definition of “Equivalent Units.”

 

“Trading Day” is defined in Section 12.2.

 

“Transfer” means, in respect of any Units, property or other assets, any sale, assignment, hypothecation, lien, encumbrance, transfer, distribution or other disposition thereof or of a participation therein, or other conveyance of legal or beneficial interest therein, including rights to vote and receive dividends or other income with respect thereto, or any short position in a security or any other action or position otherwise reducing risk related to ownership through hedging or other derivative instruments, whether voluntarily or by operation of Law, or any agreement or commitment to do any of the foregoing. An Exchange shall not constitute a Transfer under this Agreement.

 

 

“Unit” means a fractional share of the limited liability company interest in the Company, which may be a Class A Unit, Class B Unit or Class A Preferred Unit and shall be deemed to include any equity security received in connection with any recapitalization, merger, consolidation, or other reorganization, or by way of any distribution in respect of Units, in any such case, after the date of this Agreement.

 

“Unit Designation” is defined in Section 2.4(a).

 

“VWAP” is defined in Section 12.2.

 

Section 14.2 Interpretation. In this Agreement and in the exhibits to this Agreement, except to the extent that the context otherwise requires:

 

(a) the headings are for convenience of reference only and shall not affect the interpretation of this Agreement;

 

(b) defined terms include the plural as well as the singular and vice versa;

 

(c) words importing gender include all genders;

 

(d) a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been or may from time to time be amended, extended, re-enacted or consolidated and all statutory instruments or orders made under it;

 

(e) any reference to a “day” or “Business Day” means the whole of such day, being the period of 24 hours running from midnight to midnight;

 

(f) references to Articles, Sections, subsections, clauses and Exhibits are references to Articles, Sections, subsections, clauses and Exhibits to this Agreement;

 

(g) the words “including” and “include” and other words of similar import shall be deemed to be followed by the phrase “without limitation”; and

 

(h) unless otherwise specified, references to any party to this Agreement or any other document or agreement shall include its successors and permitted assigns.

 

[Remainder of page intentionally left blank.]

 

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.

 

MANAGER:	HNRA ACQUISITION CORP.
	By:
	Name:
	Title:

 

MEMBERS:
CIC POGO LP			DENCO RESOURCES LLC
By:			By:
Name:	Fouad Bashour		Name:	John L. Denman Jr.
Title:	Manager		Title:	President
4400 HOLDINGS, LLC			POGO RESOURCES MANAGEMENT, LLC
By:			By:
Name:	Kirk Pogoloff		Name:	Kirk Pogoloff
Title:	Manager		Title:	Manager
HNRA ACQUISITION CORP.
By:
Name:	Donald W. Orr
Title:	President

 

[Signature Page to Amended and Restated Limited Liability Company Agreement of HNRA Upstream, LLC]

 

 

Annex A: INITIAL UNITS

 

Member			Class A Units
HNR Acquisition Corp..			[__]

 

Member			Class B Units
CIC Pogo LP			[__]
DenCo Resources, LLC			[__]
Pogo Resources Management, LLC			[__]
4400 Holdings, LLC			[__]

 

Member			Class A Preferred Units
CIC Pogo LP			[__]
DenCo Resources, LLC			[__]
Pogo Resources Management, LLC			[__]
4400 Holdings, LLC			[__]

 

 

Annex B: FORM OF ELECTIVE EXCHANGE NOTICE

ELECTIVE EXCHANGE NOTICE

 

[SPAC ADDRESS]

[SELLER ADDRESS]

 

This elective exchange notice (“Elective Exchange Notice”) is delivered by the undersigned Exchangeable Unit Member pursuant to Section 11.1 of the Amended and Restated Limited Liability Company Agreement of HNRA Upstream, LLC, dated as of [__], 2023 (the “LLC Agreement”), by and among HNR Acquisition Corp., a Delaware corporation (the “Manager”) and the members that are party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the LLC Agreement.

 

The undersigned hereby transfers the number of Class B Units plus shares of Class B Common Stock set forth below (together, the “Paired Interests”) in exchange for the Stock Consideration to be issued in its name as set forth below, or the Cash Settlement, as applicable, as set forth in the LLC Agreement.

 

Legal Name of Holder:

Address:

Number of Class B Units:

Number of Class B Common Stock:

Brokerage Account Details: __

 

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Elective Exchange Notice and to perform the undersigned’s obligations hereunder; (ii) this Elective Exchange Notice has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the Paired Interests subject to this Elective Exchange Notice are being transferred to the Manager or the Company, as applicable, free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Paired Interests subject to this Elective Exchange Notice is required to be obtained by the undersigned for the transfer of such Paired Interests to the Manager or the Company, as applicable.

 

The undersigned hereby irrevocably constitutes and appoints any officer of the Manager or of the Company as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Manager or the Company, as applicable, the Paired Interests subject to this Elective Exchange Notice and to deliver to the undersigned the Stock Consideration or Cash Settlement, as applicable, to be delivered in exchange therefor.

 

 

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Elective Exchange Notice to be executed and delivered by the undersigned or by its duly authorized attorney.

 

			Name:
Dated:

 

 

Annex C: TAX MATTERS

 

Article I
Definitions

 

“Asset Value” means, with respect to any Asset, the adjusted basis of such Asset for U.S. federal income tax purposes; provided, however, that:

 

(i) the initial Asset Value of any Asset (other than cash) contributed or deemed contributed by a Member to the Company shall be the gross Fair Market Value of such Asset as determined by the Company;

 

(ii) the Asset Values of all Assets shall be adjusted to equal their respective gross Fair Market Values as determined by the Company as of the following times: (A) the acquisition of an additional interest in the Company by any new or existing Member, in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; (C) the liquidation of the Company within the meaning of Treas. Reg. § 1.704-1(b)(2)(ii)(g); (D) the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to the benefit of the Company by an existing Member acting in a Member capacity or by a new Member acting in a Member capacity or in anticipation of becoming a Member; (E) the Conversion of any Class A Preferred Units into Class B Common Units in accordance with principles similar to those set forth under Treas. Reg. § 1.704 1(b)(2)(iv)(s); or (F) any other instance in which such adjustment is permitted under Treas. Reg. § 1.704-1(b)(2)(iv); provided, however, that any adjustment pursuant to clause (A), (B), (D), or (E) above shall be made only if the Company determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

 

(iii) the Asset Value of any Asset distributed to any Member shall be the gross Fair Market Value of such Asset on the date of distribution, as determined by the Company;

 

(iv) the Asset Values of all Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such Assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(m); provided, however, that Asset Values shall not be adjusted pursuant to this paragraph (iv) to the extent that the Company determines that an adjustment pursuant to paragraph (ii) of this definition of Asset Value is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (iv); and

 

(v) if the Asset Value of an Asset has been determined or adjusted to paragraph (i), (ii), (iv), or (v) of this definition of Asset Value, then such Asset Value shall thereafter be adjusted by the Depreciation or Simulated Depletion taken into account with respect to such Asset for purposes of computing Net Profits and Net Losses.

 

“Audit” is defined in Section 4.4(a) of this Annex C.

 

“Company Minimum Gain” has the meaning set forth as “partnership minimum gain” in Treas. Reg. § 1.704-2(b)(2) and is computed in accordance with Treas. Reg. § 1.704-2(d).

 

“Company Unitholder Representative” means [__].

 

“Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction (other than depletion or Simulated Depletion) allowable for U.S. federal income tax purposes with respect to an Asset for such Fiscal Year or other period; provided, however, that if the Asset Value of an Asset differs from its adjusted basis for U.S. federal income tax purposes at the beginning of such Fiscal Year or other period, Depreciation shall be determined in accordance with Treas. Reg. § 1.704-1(b)(2)(iv)(g)(3), or Treas. Reg. § 1.704-3(d)(2), as appropriate.

 

“Designated Individual” is defined in Section 4.3(a)(ii) of this Annex C.

 

 

“Imputed Underpayment” is defined in Section 4.4(d) of this Annex C.

 

“Imputed Underpayment Share” is defined in Section 4.4(e)(i) of this Annex C.

 

“Member Nonrecourse Debt” has the meaning given to the term “partner nonrecourse debt” in Treas. Reg. § 1.704-2(b)(4).

 

“Member Nonrecourse Debt Minimum Gain” means, with respect to each Member Nonrecourse Debt, an amount equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treas. Reg. § 1.704-2(i)(3).

 

“Member Nonrecourse Deductions” has the meaning given to the term “partner nonrecourse deduction” in Treas. Reg. §§ 1.704-2(i)(l) and 1.704-2(i)(2).

 

“Net Profits” and “Net Losses” mean, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such Fiscal Year or other period, determined in accordance with Code Section 703(a) and, where appropriate (but including in taxable income or loss, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1)), with the following adjustments:

 

(i) any income of the Company exempt from U.S. federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be added to such taxable income or loss;

 

(ii) any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as expenditures described in Code Section 705(a)(2)(B) pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition shall be subtracted from such taxable income or loss;

 

(iii) in the event the Asset Value of any Asset of the Company is adjusted in accordance with paragraph (ii), paragraph (iii), or paragraph (v) of the definition of “Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such Asset for purposes of computing Net Profits or Net Losses;

 

(iv) gain or loss resulting from any disposition of any Asset with respect to which gain or loss is recognized for U.S. federal income tax purposes shall be computed by reference to the Asset Value of the Asset disposed of, notwithstanding that the adjusted tax basis of such Asset differs from its Asset Value;

 

(v) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;

 

(vi) to the extent an adjustment to the adjusted tax basis of any Asset pursuant to Code Section 734(b) is required pursuant to Treas. Reg. § 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the Asset) or loss (if the adjustment decreases the basis of the Asset) from the disposition of the Asset and shall be taken into account for purposes of computing Net Profits and Net Losses;

 

(vii) notwithstanding any other provision of this definition of Net Profits and Net Losses, any items that are specially allocated pursuant to Section 3.2 and Section 3.3 of this Annex C shall not be taken into account in computing Net Profits or Net Losses, but shall be determined by applying rules analogous to those set forth in paragraphs (i) through (vi) above; and

 

(viii) where appropriate, references to Net Profits and Net Losses shall refer to specific items of income, gain, loss, deduction, and credit comprising or otherwise comprising Net Profits or Net Losses.

 

“Nonrecourse Deductions” has the meaning set forth in Treas. Reg. § 1.704-2(b)(1).

 

 

“Nonrecourse Liability” has the meaning set forth in Treas. Reg. § 1.752-1(a)(2).

 

“Push Out Election” means the election under Code Section 6226 (or any similar provision of state or local law) to “push out” an adjustment to the Members or former Members, including filing IRS Form 8988 (Election for Alternative to Payment of the Imputed Underpayment), or any successor or similar form, and taking any other action necessary to give effect to such election.

 

“Revised Partnership Audit Provisions” means Code Sections 6221 through 6241, as in effect for taxable years of the Company beginning after December 31, 2017, together with any subsequent amendments thereto, Treasury Regulations promulgated thereunder, and published administrative interpretations thereof, and any comparable provisions of state or local tax law.

 

“Seller” has the meaning set forth in the recitals.

 

“Specified Audit” is defined in ‎Section 4.4(b) of this Annex C.

 

“Tax Representative” means, as applicable, and including the Designated Individual as the context requires, (a) the Member or other Person (including the Company) designated as the “partnership representative” of the Company under Code Section 6223, and/or (b) the Member or other Person serving in a similar capacity under any similar provisions of state, local or non-U.S. Laws, in each case, acting solely at the direction of the Company to the maximum extent permitted under Law.

 

Article II
Member’s Capital Accounts.

 

The Company or the Manager shall establish and maintain a capital account for each Member in accordance with Treas. Reg. § 1.704-1(b)(2)(iv) (each, a “Capital Account”). The Company shall maintain Capital Account subaccounts for Class A Preferred Units that are separate from those maintained for Common Units, and may maintain Capital Account subaccounts for other different classes of Units, and any provisions of this Agreement pertaining to Capital Account maintenance shall apply, mutatis mutandis, to those subaccounts.

 

Article III
Allocations

 

Section 3.1 Allocations to Capital Accounts Generally. Each Fiscal Year or other relevant period, after adjusting each Member’s Capital Account for all contributions and distributions with respect to such Fiscal Year and after giving effect to the allocations under Section 3.2 of this Annex C for the Fiscal Year or period, Net Profits and Net Losses shall be allocated among the Members in a manner such that, after such allocations have been made, each Member’s Capital Account balance with respect to its Common Units (which may be a positive, negative, or zero balance) will equal (proportionately) (a) the amount that would be distributed to each such Member in respect of its Common Units, determined as if the Company were to (i) sell all of its Assets for their Asset Values, (ii) satisfy all of its liabilities in accordance with their terms with the proceeds from such sale (limited, with respect to Nonrecourse Liabilities, to the Asset Values of the Assets securing such liabilities), and (iii) distribute the remaining proceeds pursuant Section 3.1 of this Agreement, minus (b) the sum of (x) such Member’s share of the Company Minimum Gain and Member Nonrecourse Debt Minimum Gain and (y) the amount, if any (without duplication of any amount included under clause (x)), that such Member is obligated (or is deemed for U.S. tax purposes to be obligated) to contribute, in its capacity as a Member, to the capital of the Company as of the last day of such Fiscal Year.

 

Section 3.2 Priority Allocations to Capital Accounts.

 

(a) Minimum Gain Chargeback, Qualified Income Offset, and Stop Loss Provisions. Each of (i) the “minimum gain chargeback” provision of Treas. Reg. § 1.704-2(f), (ii) the “chargeback of partner nonrecourse debt minimum gain” provision of Treas. Reg. § 1.704-2(i)(4), (iii) the “qualified income offset” provision of Treas. Reg. § 1.704-1(b)(2)(ii)(d)(3), and (iv) the requirement in the flush language immediately following Treas. Reg. § 1.704-1(b)(2)(ii)(d)(3) that an allocation “not cause or increase a deficit balance” in a Member’s Capital Account is hereby incorporated by reference as a part of this Agreement. The Company shall make such allocations as are necessary to comply with those provisions and shall make any determinations with respect to such allocations (to the extent consistent with clauses (i) – (iv) of the preceding sentence).

 

 

(b) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or other relevant period shall be allocated to the Members in proportion to the number of Common Units owned by each of them, unless otherwise determined by the Company.

 

(c) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal Year or other relevant period shall be specially allocated to the Member who bears the economic risk of loss (within the meaning of Treas. Reg. § 1.752-2) with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treas. Reg. § 1.704-2(i)(l).

 

(d) Special Basis Adjustments. To the extent an adjustment to the adjusted tax basis of any Asset under Code Section 734(b) or Code Section 743(b) is required, pursuant to Treas. Reg. §§ 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the Asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Treas. Reg. § 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Treas. Reg. § 1.704-1(b)(2)(iv)(m)(4) applies.

 

(e) Ameliorative Allocations. Any allocations made (as well as anticipated reversing or offsetting regulatory allocations to be made) pursuant to Section 3.2(a) – (d) of this Annex C shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Member pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Member pursuant to the provisions of this Agreement if those allocations had not occurred.

 

(f) Depletion, Gain and Loss on Depletable Properties. The Simulated Basis in each oil and gas property owned by the Company shall be allocated among the Members in proportion to the number of Common Units owned by each such Member. Simulated Depletion with respect to each separate oil and gas property shall be allocated to the Members in proportion to their respective shares of the Simulated Basis in the related property. Any Simulated Gain shall be allocated to the Members and shall increase their respective Capital Accounts in the same manner as an equal amount of gain would have been allocated pursuant to Section 3.1 and Section 3.2(g)(ii). Any Simulated Loss shall be allocated to the Members in the same percentages as the Simulated Basis of the property sold was allocated up to an amount equal to each Member’s share of the Company’s Simulated Basis in such property at the time of such sale.

 

(g) Notwithstanding anything to the contrary contained in this Agreement, (i) no allocation of Net Profit, Net Losses or otherwise shall be made in respect of any Class A Preferred Units, except as follows:

 

(i) Any gains resulting from adjustments to Asset Value, and items of income or gain realized on and after a Liquidating Event occurs shall be specially allocated to holders of Class A Preferred Units (in proportion to the number of Class A Preferred Units owned by each of them) until the Capital Account balances attributable to the Class A Preferred Units equals the Liquidation Preference of the Class A Preferred Units.

 

(ii) Once the Capital Account balances of all Common Units have been reduced to zero, (A) any further Net Losses shall be allocated to the holders of Preferred Units (in proportion to the number of Class A Preferred Units owned by each of them) and (B) and Net Profits subsequently realized shall be allocated to holders of Class A Preferred Units (in proportion to the number of Class A Preferred Units owned by each of them) until the cumulative amount so allocated equals the cumulative amount of Net Losses allocated to the holders of Class A Preferred Units pursuant to clause (A).

 

(iii) In the event the Asset Value of any Asset is adjusted pursuant to paragraph (ii), clause (E), of the definition of Asset Value, any Net Profit or Net Losses resulting from such adjustment shall, in accordance with principles similar to those set forth in Treas. Reg. § 1.704 1(b)(2)(iv)(s) or in any other manner reasonably determined by the Company, be allocated among the Members (including the Members who hold the Class A Preferred Units giving rise to such adjustment) such that the Capital Account balance relating to each Class B Common Unit (including any Class A Preferred Units that have been converted into Class B Common Units) is equal in amount (or as close to equal in amount as possible) immediately after making such allocation; provided that, if the foregoing allocations are insufficient to cause the Capital Account balance relating to each Class B Common Unit to be so equal in amount, then the Company shall cause a “capital account reallocation” in accordance with principles similar to those set forth in Treas. Reg. § 1.704 1(b)(2)(iv)(s)(3) to cause the Capital Account balance relating to each Class B Common Unit to be so equal in amount.

 

 

Section 3.3 Tax Allocation Rules.

 

(a) In General. Except as otherwise provided in this Section 3.3 of this Annex C, for income tax purposes under the Code and the Regulations, each Company item of income, gain, loss, deduction, and credit as determined for tax purposes shall be allocated among the Members in the same manner as its correlative item of income, gain, loss, deduction, and credit (as calculated in accordance with the definitions of “Net Profits” and “Net Loss”) is allocated pursuant to Section 3.1 and Section 3.2 of this Annex C.

 

(b) The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code) shall, in accordance with Section 613A(c)(7)(D) of the Internal Revenue Code, be computed for federal income tax purposes separately by the Members rather than the Company. Except as provided in Section 3.3(d), for purposes of such computation, the adjusted tax basis of each oil and gas property shall be allocated among the Members in proportion to the number of Common Units owned by each Member. Each Member, with the assistance of the Tax Representative, shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Company. Upon the request of the Tax Representative, each Member shall advise the Tax Representative of its adjusted tax basis in each separate oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Tax Representative may rely on such information and, if it is not provided by the Member, may make such reasonable assumptions as it shall determine with respect thereto

 

(c) Except as provided in Section 3.3(d), for the purposes of the separate computation of gain or loss by each Member on a disposition of each separate oil and gas property (as defined in Section 614 of the Internal Revenue Code), the Company’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Internal Revenue Code) from such disposition shall be allocated for federal income tax purposes among the Members as follows:

 

(i) first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Members in the same proportion as the depletable basis of such property was allocated to the Members pursuant to Section 3.3(b) (without regard to any special allocation of basis under Section 3.3(d)); and

 

(ii) second, the remainder of such amount realized, if any, to the Members so that, to the maximum extent possible, the amount realized that is allocated to each Member under this Section 3.3(c)(ii) will equal such Member’s share of the Simulated Gain recognized by the Company from such Transfer.

 

(d) Section 704(c) Allocations. Notwithstanding the provisions of Section 3.3(a) of this Annex C to the contrary, in accordance with Code Section 704(c)(1)(A) (and the principles of those provisions) and Treas. Reg. § 1.704-3, Company items of income, gain, loss, deduction, and credit with respect to any property contributed to the capital of the Company, or after Company property has been revalued under Treas. Reg. § 1.704-1(b)(2)(iv)(f) or (s), shall, solely for U.S. federal, state and local tax purposes, be allocated among the Members so as to take into account any variation between the adjusted basis of such Company property to the Company for U.S. federal income tax purposes and its value as so determined at the time of the contribution or revaluation of Company property. The Company shall use the “traditional method” with respect to any property contributed to the Company in connection with the SPAC Transactions. With respect to property contributed or Section 704(c) amounts arising from revaluations made after the SPAC Transactions, the Company may use any method permitted under Treas. Reg. § 1.704-3.

 

 

Allocations pursuant to ‎Section 3.3(a) and this Section 3.3(b) of this Annex C are solely for U.S. federal, state, and local tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of profit, loss, or other items, pursuant to any provision of this Agreement.

 

(e) Corrective Allocations. If, pursuant to Section 3.2(g), the Company causes a “capital account reallocation” in accordance with principles similar to those set forth in Treas. Reg. § 1.704-1(b)(2)(iv)(s)(3), the Company shall make corrective allocations in accordance with principles similar to those set forth in Treas. Reg. § 1.704-1(b)(4)(x).

 

(f) Allocations in Respect of Varying Interests. If any Member’s interest in the Company varies (within the meaning of Code Section 706(d)) within a Fiscal Year, whether by reason of a Transfer of a Unit, redemption of a Unit by the Company, or otherwise, Net Profits and Net Losses for that Fiscal Year will be allocated so as to take into account such varying interests in accordance with Code Section 706(d) using the daily proration method and/or such other permissible method, methods, or conventions selected by the Company.

 

(g) Timing and Amount of Allocations of Net Profits and Net Loss. Net Profits and Net Losses of the Company shall be determined and allocated with respect to each Fiscal Year as of the end of each such year, or at such other time or times determined by the Company.

 

(h) Modification of Allocations. The allocations set forth in Section 3.1 and ‎Section 3.2 of this Annex C are intended to comply with certain requirements of the Regulations. The Company shall be authorized to make, in its reasonable discretion, appropriate modifications to the allocations of Net Profits and Net Losses pursuant to this Agreement in order to comply with Code Section 704 or applicable Regulations. Notwithstanding any provision of this Agreement to the contrary, if the Company reasonably determines an allocation other than the allocations that would otherwise be made pursuant to this Agreement would more appropriately reflect the Members’ interests in the Company, the Company may in its discretion make appropriate adjustments to such allocations.

 

(i) Allocation of Liabilities under Code Section 752. Notwithstanding anything in this Agreement to the contrary, no Member will take, or permit any Affiliate to take, any action that would change the allocation of liabilities for purposes of Code Section 752 without the consent of the Company.

 

(j) Adjustment for Non-Compensatory Options. If the Company issues Units or other securities that are treated as “non-compensatory options”, as defined in Treasury Regulations Section 1.721-2, the Manager shall make such adjustments to the Asset Value of the Company’s Assets, allocation of Net Profits and Net Losses, Capital Accounts and allocations of items for income tax purposes as it reasonably determines may be necessary to comply with the provisions of Treasury Regulations Section 1.721-2 and Treasury Regulations Section 1.704-1(b)(2)(iv)(s) or any successor provisions relating thereto and to properly reflect the economic sharing arrangement associated with the non-compensatory options.

 

Article IV
Certain Tax Matters

 

Section 4.1 Provision of Information.

 

(a) Information to Be Provided by Company to Members. No later than thirty (30) days after the filing by the Company of the Company’s federal tax return (IRS Form 1065), the Company shall provide to each Member a copy of Schedule K-1 of IRS Form 1065 reporting that Member’s allocable share of items of income, gain, loss, deduction, or credit for such Fiscal Year, and such additional information as is required to be provided on Schedule K-1 or as such Member may reasonably request for tax purposes, each as determined by the Company. The Member hereby consents to receive each Schedule K-1 in respect of the Member’s ownership interest in the Company through electronic delivery.

 

(b) Information to Be Provided by Members to Company.

 

(i) Notice of Audit or Tax Examination. Each Member shall notify the Company within five (5) Business Days after receipt of any notice regarding an audit or tax examination of the Company and upon any request for material information related to the Company by U.S. federal, state, local, or other tax authorities.

 

 

(ii) Other Relevant Tax Information. Each Member shall provide to the Company upon reasonable request tax basis information about Assets contributed by it to the Company and such other tax information as reasonably requested by the Company and necessary for it to prepare its financial reports or any tax returns and such other information and/or tax forms as the Company reasonably requests.

 

(c) No Right to Member Tax Returns. Notwithstanding anything to the contrary in this Agreement or any right to information under the Act, with respect to the financial statements or tax returns of a Member or its Affiliates (excluding, for this purpose, Manager and the Company), none of the Company, the other Members, such other Member’s Affiliates or any of their respective representatives, will be entitled to review such financial statements or tax returns for any purpose, including in connection with any proceeding or other dispute (whether involving the Company, between the Members, or involving any other Persons).

 

Section 4.2 Tax Elections. The Company shall have in effect (and shall cause each Subsidiary that is classified as a partnership for U.S. federal income tax purposes to have in effect) an election pursuant to Code Section 754 (and any similar provisions of applicable U.S. state or local law) for the Company for the Fiscal Year that includes the date of the SPAC Transactions and each Fiscal Year in which a sale or exchange (whether partial or complete) occurs. The Company shall determine whether to make any other available election pursuant to the Code or Regulations that is not otherwise expressly provided for or prohibited in this Agreement, and, unless otherwise provided for by this Agreement, the Members hereby consent to all such elections.

 

Section 4.3 Tax Representative.

 

(a) Appointment and Replacement of Tax Representative.

 

(i) Tax Representative. The Manager shall act as the Tax Representative, but the Manager may designate another Person to act as the Tax Representative and may remove, replace, or revoke the designation of that Person, or require that Person to resign. For any jurisdiction with respect to which the Manager cannot serve as the Tax Representative, however, the Manager may designate another Person to act as the Tax Representative.

 

(ii) Designated Individual. If the Tax Representative is not an individual, the Manager shall appoint a “designated individual” for each taxable year (as described in Treas. Reg. § 301.6223-1(b)(3)(ii)) (a “Designated Individual”).

 

(iii) Approval by Members. Each Member agrees to execute, certify, acknowledge, deliver, swear to, file, and record at the appropriate public offices such documents as may be deemed necessary or appropriate to evidence the appointments described in Section 4.3(a)(i) and Section 4.3(a)(ii) of this Annex C, including statements required to be filed with the tax returns of the Company in order to effect the designation of the Tax Representative or Designated Individual (and any successor).

 

(b) Authority of the Tax Representative; Delegation of Authority. The Tax Representative shall have all of the rights, duties, powers, and obligations provided for under the Code, Regulations, or other applicable guidance; provided that, if a Person other than the Manager is the Tax Representative, such Person shall in all cases act solely at the direction of the Manager; provided further that, if the Tax Representative appoints a Designated Individual, such Designated Individual shall in all cases act solely at the direction of the Tax Representative.

 

(c) Costs and Indemnification of Tax Representative and Designated Individual. Without duplication of the provisions of Section 4.3(b) of this Annex C, the Company shall pay, or to the extent the Tax Representative or Designated Individual pays, indemnify and reimburse, to the fullest extent permitted by Law, the Tax Representative or Designated Individual for all costs and expenses, including legal and accounting fees (as such fees are incurred) and any claims incurred in connection with any tax audit or judicial review proceeding with respect to the tax liability of the Company.

 

 

Section 4.4 Tax Audits.

 

(a) Subject to this Section 4.4, the Tax Representative shall have the sole authority to act on behalf of the Company in connection with, make all relevant decisions regarding application of, and to exercise the rights and powers provided for in the Revised Partnership Audit Provisions, including making any elections under the Revised Partnership Audit Provisions or any decisions to settle, compromise, challenge, litigate or otherwise alter the defense of any action, audit or examination before the IRS or any other tax authority (each, an “Audit”), and to expend Company funds for professional services and other expenses reasonably incurred in connection therewith.

 

(b) Without limiting the foregoing, the Tax Representative shall give prompt written notice to the Company Unitholder Representative of the commencement of any Audit of the Company or any of its Subsidiaries the resolution of which would reasonably be expected to have a disproportionate (compared to the Manager) and adverse effect on the Sellers (a “Specified Audit”). The Tax Representative shall (i) keep the Company Unitholder Representative reasonably informed of the material developments and status of any such Specified Audit, (ii) permit the Company Unitholder Representative (or its designee) to participate (including using separate counsel), in each case at the Sellers’ sole cost and expense, in any such Specified Audit, and (iii) promptly notify the Company Unitholder Representative of receipt of a notice of a final partnership adjustment (or equivalent under applicable Laws) or a final decision of a court or IRS Independent Office of Appeals panel (or equivalent body under applicable Laws) with respect to such Specified Audit. The Tax Representative shall promptly provide the Company Unitholder Representative with copies of all material correspondence between the Tax Representative or the Company (as applicable) and any governmental entity in connection with such Specified Audit and shall give the Company Unitholder Representative a reasonable opportunity to review and comment on any material correspondence, submission (including settlement or compromise offers) or filing in connection with any such Specified Audit. Additionally, the Tax Representative shall not settle, compromise or abandon any Specified Audit in a manner that would reasonably be expected to have a disproportionate (compared to the Manager) and material adverse effect on the Sellers without the Company Unitholder Representative’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). The Tax Representative shall obtain the prior written consent of the Company Unitholder Representative (which consent shall not be unreasonably withheld, delayed or conditioned) before (i) making a Push Out Election or (ii) taking any other material action under the Revised Partnership Audit Provisions that, in each case, would reasonably be expected to have a material effect on the Sellers that is disproportionately adverse to them as compared to the Manager; provided, however, the Tax Representative may cause the Company to make a Push Out Election in its sole discretion (without the prior written consent of the Company Unitholder Representative) to the extent not making such Push Out Election would reasonably be expected to have a material effect on the Manager that is disproportionately adverse to it as compared to the Sellers.

 

(c) The Company, the Tax Representative, the Company Unitholder Representative and the Members expressly agree to be bound by the terms of Section 6.13(g) of the Purchase Agreement. Notwithstanding anything to the contrary contained in this Agreement, in the event of any conflict between Section 6.13(g) of the Purchase Agreement and this Agreement, Section 6.13(g) of the Purchase Agreement shall control.

 

(d) Determinations with Respect to Elections. Subject to the provisions of this Annex C (including Section 4.4(b) thereof), the Tax Representative shall have the sole authority to determine whether to cause the Company to make a Push Out Election with respect to any adjustment that could result in an imputed underpayment (within the meaning of Code Section 6225) (an “Imputed Underpayment”).

 

(e) Responsibility for Payment of Tax; Former Members.

 

(i) Imputed Underpayment Share. To the extent the Company is liable for any Imputed Underpayment, the Company shall determine the liability of the Members for a share of such Imputed Underpayment, taking into account the Members’ Units and the status and actions of the Members (including those described in Code Section 6225(c)) (such share, an “Imputed Underpayment Share”).

 

(ii) Payment of Imputed Underpayment Share. The Company may (A) require a Member who is liable for an Imputed Underpayment Share to pay the amount of its Imputed Underpayment Share to the Company within ten (10) Business Days after the date on which the Company notifies the Member (and in the manner required by the notice) and/or (B) reduce future distributions to the Member, such that the amount determined under clauses (A) and (B) equals the Member’s Imputed Underpayment Share; provided, however, that no Member shall have an obligation to make any contribution to the capital of the Company with respect to any Imputed Underpayment. If a Member fails to pay any amount that it is required to pay the Company in respect of an Imputed Underpayment Share within such ten (10) Business Day period, that amount shall be treated as a loan to the Member, bearing interest at ten (10) percent annually (which interest shall increase the Member’s Imputed Underpayment Share). Such loan shall be repayable upon demand by the Company. If the Member fails to repay the loan upon demand, the full balance of the loan shall be immediately due (including accrued but unpaid interest) and the Company shall have the right to collect the balance in any manner it determines, including by reducing future distributions to that Member; provided, however, that no Member may have any Imputed Underpayment Share treated as a loan to the extent it would violate Section 402 of the Sarbanes-Oxley Act of 2002. Any Member not permitted to treat its Imputed Underpayment Share as a loan due to the provisions of the previous sentence shall pay any Imputed Underpayment Share within ten (10) Business Days after the date of the notice referred to in the first sentence of this Section 4.4(e)(ii) of this Annex C.

 

 

Section 4.5 No Independent Actions or Inconsistent Positions. Except as required by Law or previously authorized in writing by the Company (which authorization may be withheld in the sole discretion of the Company), no Member shall (i) independently act with respect to tax matters (including, but not limited to, audits, litigation and controversies) affecting or arising from the Company, or (ii) treat any Company item inconsistently on such Member’s income tax return with the treatment of the item on the Company’s tax return and/or the Schedule K-1 (or other written information statement) provided to such Member. Solely to the extent required by Law, this Section 4.5 of this Annex C shall not apply with respect to any “special enforcement matter” described in Code Section 6241(11).

 

Section 4.6 United States Person. Except as permitted by the Company, each Member represents and covenants that, for U.S. federal income tax purposes, it is and will at all times remain a “United States Person,” within the meaning of Code Section 7701, or is a disregarded entity the assets of which are treated as owned by a United States Person under Treas. Reg. §§ 301.7701-1, 301.7701-2, and 301.7701-3.

 

Section 4.7 State, Local, and Non-U.S. Tax Law. The provisions of this Agreement with respect to U.S. federal income tax shall apply, mutatis mutandis, with respect to any similar provisions of state, local, or non-U.S. tax law as determined by the Company.

 

Section 4.8 Survival of Obligations. For purposes of this Article IV of this Annex C, the term “Member” shall include a former Member unless otherwise determined by the Company. The rights and obligations of each Member and former Member under this Article IV of this Annex C shall survive the Transfer by such Member of its Units (or withdrawal by a Member or redemption of a Member’s Units) and the dissolution of the Company until ninety (90) days after the applicable statute of limitations. Section 4.3 (Tax Representative), Section 4.4 (Tax Audits), and this Section 4.8 (Survival of Obligations) of this Annex C shall not be amended without the prior written consent of any Member or former Member that would be disproportionately and adversely impacted by such amendment.

 

Section 4.9 Tax Classification. The parties intend that the Company shall be classified as a partnership for United States federal, state, and local tax purposes. The parties intend that the Subsidiaries of the Company currently classified either as disregarded entities or as partnerships for United States federal, state, and local tax purposes as of the date of this Agreement shall remain classified either as disregarded entities or as partnerships for United States federal, state, and local tax purposes. No Person shall take any action inconsistent with such classifications.

 

Section 4.10 Withholding.

 

(a) Withholding Generally. Each Member acknowledges and agrees that the Company may be required by Law to deduct and withhold taxes or to fulfill other similar obligations of such Member on any amount paid, distributed, disbursed, or allocated by the Company to that Member, including upon liquidation, and any transferee of a Member’s interest or a Substituted Member shall, by reason of such Transfer or substitution, acknowledge, and agree to any such withholding by the Company, including withholding to discharge obligations of the Company with respect to prior distributions, allocations, or an Imputed Underpayment Share (to the extent not otherwise borne by the transferor Member pursuant to Section 4.4 of this Annex C). Taxes withheld by third parties from payments to the Company in respect of the Company shall be treated as an expense of the Company, unless such withholding is attributable to a specific Member, in which case, amounts so withheld shall be allocated to such Member and the Company may deduct and withhold such amounts from the Member. All amounts withheld pursuant to this Section 4.10 of this Annex C and timely paid over to the appropriate governmental authority shall, except as otherwise determined by the Company pursuant to Section 4.4(e)(ii) of this Annex C, be treated as amounts distributed to such Person pursuant to the provision of this Agreement that would have applied if such amount had actually been distributed.

 

 

(b) Additional Provisions with Respect to a Transfer of Units. A Member transferring Units permitted by this Agreement shall, unless otherwise determined by the Company, (i) deliver to the Company, between ten (10) days and thirty (30) days before the Transfer, an affidavit of non-foreign status with respect to such transferor Member that satisfies the requirements of Code Section 1446(f)(2) or other documentation establishing a valid exemption from withholding pursuant to Code Section 1446(f) (including IRS Form W-9) or (ii) ensure that, contemporaneously with the Transfer, the transferee of such interest properly withholds and remits to the IRS the amount of tax required to be withheld upon the Transfer by Code Section 1446(f) (and promptly provide evidence to the Company of such withholding and remittance). Upon reasonable request of a transferor Member, the Company shall provide such Member a certificate described Treasury Regulations Section 1.1446(f)-2(b)(3)(ii) or (4)(i), if the Company reasonably determines that it can make such certifications.

 

(c) Additional Provisions with Respect to an Exchange of Units.

 

(i) Withholding of Cash or Class A Common Stock Permitted. If the Company or the Manager shall be required to withhold any amounts by reason of any federal, state, local, or non-U.S. tax Laws in respect of any Exchange, the Company, or the Manager, as the case may be, shall be entitled to take such action as it deems appropriate in order to ensure compliance with such withholding requirements, including, at its option, withholding cash from the Cash Settlement or shares of Class A Common Stock with a Fair Market Value equal to the amount of any taxes that the Company or the Manager, as the case may be, may be required to withhold with respect to such Exchange. To the extent that amounts are (or property is) so withheld and paid over to the appropriate taxing authority, such withheld amounts (or property) shall be treated for all purposes of this Agreement as having been paid (or delivered) to the applicable Member.

 

(ii) Notice of Withholding. If the Company or the Manager determines that any amounts by reason of any federal, state, local, or non-U.S. tax laws or regulations are required to be withheld in respect of any Exchange, the Company or the Manager, as the case may be, shall use commercially reasonable efforts to promptly notify the Exchangeable Unit Member and shall consider in good faith any positions or alternative arrangements that such Member raises (reasonably in advance of the date on which the Company or the Manager believes withholding is required) as to why withholding is not required or that may avoid the need for such withholding, provided, that neither the Company nor the Manager is required to incur additional costs as a result of such obligation, and this Section 4.10(c)(ii) of this Annex C shall not in any manner limit the authority of the Company or the Manager to withhold taxes with respect to an Exchangeable Unit Member pursuant to Section 4.10(c)(i) of this Annex C.

 

 

Annex D: SCHEDULE OF OFFICERS

 

Name

Title

 

 

 

Annex E: POLICY REGARDING EXCHANGES

 

Effective as of [__], 2023

 

This Policy Regarding Exchanges (the “Policy”) of HNRA Upstream, LLC (the “Company”) sets forth certain rules applicable to the exchange of Exchangeable Units for shares of Class A Common Stock of HNR Acquisition Corp. (the “Common Stock”) and/or cash, at the option of the Manager (each, an “Exchange”), pursuant to the Company’s Amended and Restated Limited Liability Company Agreement (the “Agreement”). Capitalized terms that are not defined in this Policy have the meanings given to them in the Agreement. This Policy is made pursuant to, and supplements the provisions of, Article XI of the Agreement.

 

Article I
EXCHANGE DATES; PROVISIONS REGARDING EXCHANGEABLE AMOUNT

 

Section 1.1 Quarterly Exchange Date. There shall be one (1) date per quarter of each Fiscal Year on which an Elective Exchange may occur (each, a “Quarterly Exchange Date”) for a holder of Exchangeable Units (each holder, an “Exchanging Holder”). The Quarterly Exchange Date for Exchanging Holders that are required to file reports pursuant to Section 16(a) of the Exchange Act may be different than the Quarterly Exchange Date for Exchanging Holders that are not required to file reports pursuant to Section 16(a) of the Exchange Act. The Company shall use commercially reasonable efforts to notify the applicable Exchanging Holders at least forty-five (45) days before a relevant Quarterly Exchange Date (such notice, a “Quarterly Exchange Date Notice”).

 

Section 1.2 Minimum Exchangeable Amount. The Company may set a minimum number or dollar value of Exchangeable Units that may be exchanged by Exchanging Holders on a Quarterly Exchange Date, which minimum amount shall be the same for all holders of Exchangeable Units (the “Minimum Exchangeable Amount”) and shall include the applicable Minimum Exchangeable Amount in the applicable Quarterly Exchange Date Notice. If an Exchanging Holder delivers an Elective Exchange Notice pursuant to Section 3.1 requesting to exchange all of its Exchangeable Units, the number or dollar value, as applicable, of the Exchanging Holder’s Exchangeable Units shall be deemed to satisfy the Minimum Exchangeable Amount requirement.

 

Section 1.3 Maximum Exchangeable Amount. The Company may set a maximum aggregate number or dollar value of Exchangeable Units that may be exchanged by the Exchanging Holders on a Quarterly Exchange Date (the “Maximum Exchangeable Amount”) and shall include the applicable Maximum Exchangeable Amount in the applicable Quarterly Exchange Date Notice. If the aggregate number or dollar value of Exchangeable Units that the Exchanging Holders propose to exchange on the Quarterly Exchange Date (as set forth on the Elective Exchange Notices) exceeds the Maximum Exchangeable Amount, then the number or dollar value of Exchangeable Units that each Exchanging Holder specified in its Elective Exchange Notice shall be reduced by the same percentage by which the aggregate number or dollar value of Exchangeable Units of all Exchanging Holders is reduced so that the aggregate number or dollar value of Exchangeable Units does not exceed the Maximum Exchangeable Amount.

 

Article II
ADDITIONAL RIGHTS TO EXCHANGE

 

Section 2.1 Rights to Exchange.

 

(a) Right to Exchange Before Certain Transactions. If the Company or the Manager consolidates, merges, combines or consummates any other transaction in which shares of Class A Common Stock are exchanged for or converted into other stock or securities, or the right to receive cash and/or any other property, no other provisions of this Policy shall limit the right of any Exchangeable Unit Member to effect an Elective Exchange in order to receive Class A Common Stock in advance of consummation of any such consolidation, merger, combination or other such transaction unless in connection with any such consolidation, merger, combination or other transaction each Class B Unit shall be entitled to be exchanged for or converted into the stock, cash, securities or other property that such holder of a Class B Unit would have received had it exercised its right to Exchange pursuant to this Policy and received Class A Common Stock in exchange for its Class B Units immediately before such consolidation, merger, combination or other transaction (subject to any differences in the kind and amount of stock or securities, cash and/or any other property as are intended (as determined by the Company in good faith) to maintain the relative voting power of each share of Class B Common Stock relative to each share of Class A Common Stock in effect before such transaction). This Article II shall not apply to any action or transaction (including any consolidation, merger, or combination) approved by a Majority-in-Interest of the Members.

 

 

(b) Right to Exchange Before a Termination Transaction. Upon the occurrence of a Termination Transaction, no other provisions of this Policy shall limit the right of any Exchangeable Unit Member to effect an Elective Exchange in order to receive Class A Common Stock in advance of consummation of any such Termination Transaction.

 

Article III
ELECTIVE EXCHANGE NOTICE

 

Section 3.1 Timing of Elective Exchange Notice.

 

(a) Elective Exchange Notice. Each holder that elects to Exchange some or all of its Exchangeable Units must deliver notice of an election in respect of the Exchangeable Units to be exchanged (an “Elective Exchange Notice”) to the Company, in a method determined by the Company at least thirty (30) days before the relevant Quarterly Exchange Date. The Company shall provide to each Exchangeable Unit Holder the form of Elective Exchange Notice and the means for delivery of that Elective Exchange Notice.

 

(b) Acceptance of Elective Exchange Notice. After the Elective Exchange Notice has been delivered to the Company, and unless the Company or Manager, as applicable, has refused to honor the request in full pursuant to Section 1.2 (Minimum Exchangeable Amount), Section 1.3 (Maximum Exchangeable Amount), Section 3.1(c) (Cancellation of Quarterly Exchange Window), Section 3.2(c) (Post-Retraction Limitation on Exchange), or Article IV (Other Restrictions), the Company or Manager, as applicable, will effect the Elective Exchange on the applicable Quarterly Exchange Date in accordance with this Policy.

 

(c) Cancellation of Quarterly Exchange Date. The Company may at any time, in its sole discretion, cancel a Quarterly Exchange Date for any or no reason. If the Company cancels a Quarterly Exchange Date, then no holder of Exchangeable Units shall be permitted to Exchange those Exchangeable Units on the cancelled Quarterly Exchange Date.

 

Section 3.2 Retraction of Elective Exchange Notice.

 

(a) Ability to Retract; Retraction Deadline. If, at any time between the close of business on the date of delivery of an Elective Exchange Notice and the close of trading on the date that is two (2) Business Days before the applicable effective date of such Elective Exchange (the “Elective Exchange Date”), the reported closing trading price of a share of the Common Stock on the principal United States securities exchange or automated or electronic quotation system on which the Common Stock trades decreases by five (5) percent or more, so long as the Manager or the Company, as applicable, has not elected a Cash Settlement, an Exchanging Holder may retract or amend its Elective Exchange Notice by delivering a notice to the Company in a manner determined by the Company not later than the Retraction Deadline (a “Retraction Notice” and the Exchangeable Units that were the subject of the Retraction Notice, the “Retracted Units”) not later than the close of trading on the date that is two (2) Business Days before the applicable Elective Exchange Date (the “Retraction Deadline”) pursuant to Section 3.2(b). The Company shall have no obligation to notify the Exchanging Holders of any decrease in the Common Stock trading price.

 

(b) Retraction Notice. An Exchanging Holder wishing to retract must retract at least fifty percent (50%) of its Exchangeable Units that were the subject of the retracted Elective Exchange Notice. If the revised Elective Exchange Notice does not satisfy the Minimum Exchangeable Amount, the Exchanging Holder will be deemed to retract the full amount of Exchangeable Units that were the subject of the retracted Elective Exchange Notice. An Exchanging Holder’s delivery of a Retraction Notice shall be irrevocable and shall terminate all of the Exchanging Holder’s, Company’s, and Manager’s rights and obligations with respect to the Retracted Units, and all actions taken to effect the Elective Exchange contemplated by that retracted Elective Exchange Notice shall be deemed rescinded and void with respect to the Retracted Units. Subject to the applicable Minimum Exchangeable Amount and Maximum Exchangeable Amount, if any, if a Retraction Notice does not retract all of the Exchangeable Units that were the subject of an Elective Exchange Notice, the Exchangeable Units that are not Retracted Units will be exchanged on the relevant Quarterly Exchange Date.

 

 

(c) Post-Retraction Limitation on Exchange. If an Exchanging Holder delivers a Retraction Notice for a Quarterly Exchange Date pursuant to Section 3.2(b), the retracting Exchanging Holder shall not be entitled to participate in the Exchange on the Quarterly Exchange Date for which the Retraction Notice was delivered with respect to the Retracted Units.

 

Article IV
OTHER RESTRICTIONS

 

Notwithstanding any provision of this Policy to the contrary (including the provisions of Article II), the Company may prohibit an Exchange by one or more holders of Exchangeable Units under any of the following conditions and determinations made by the Company based on the advice of counsel (which may be external or internal counsel):

 

(a) If an Exchange is (or is reasonably likely to be) prohibited under applicable law, regulation, or agreement to which the Company or an affiliate is a party or could reasonably be expected to result in a bona fide lawsuit against the Company or its affiliates; or

 

(b) If there is a material risk that the Company would be a “publicly traded partnership” under section 7704 of the Code as a result of an Exchange.

 

Article V
EXEMPTIONS FROM AND MODIFICATIONS TO POLICY

 

The Company may, in its discretion and based on the advice of counsel (which may be external or internal counsel), consider and grant requests from holders of Exchangeable Units, including for (i) additional Exchange Dates, (ii) Exchanges of less than the Minimum Exchangeable Amount, (iii) Exchanges in excess of the Maximum Exchangeable Amount, (iv) an Exchange to be subject to one or more contingencies relating to the Company or the Manager, or (v) any other matter with respect to Exchanges (to the extent permitted by the Agreement and applicable Law). A holder of Exchangeable Units may request an exemption from this Policy by submitting a written request to the Company and following the delivery requirements set forth in Article III as if the written request were an Elective Exchange Notice.

 

Article VI
MISCELLANEOUS

 

Section 6.1 Continuing Application of Company’s Policies and Securities Laws. Nothing in this Policy shall affect, and each holder of Exchangeable Units shall remain subject to, the Company’s Policies, including those addressing insider trading and any other Company policies regarding trading or the holding of investments. All holders of Exchangeable Units shall comply with all applicable securities laws and rules.

 

Section 6.2 Independent Nature of Rights and Obligations. Nothing in this Policy or in any other agreement or document or any action taken by any holder of Exchangeable Units shall be deemed to cause the holders of Exchangeable Units to have formed a partnership, association, joint venture, or any other kind of entity or create a presumption that the holders of Exchangeable Units are in any way acting in concert as a group.

 

Section 6.3 Mandatory Exchanges. This Policy shall not apply to any Exchange of Exchangeable Units pursuant to a Mandatory Exchange, as described in, and pursuant to, the Agreement.

 

Section 6.4 Notice Delivery Deadlines on Non-Business Days. If the date on or before which the Company or an Exchanging Holder is required to deliver a notice pursuant to this Policy is not a Business Day, then that notice will be deemed to be timely delivered on that date if that notice is received on the Business Day immediately following that date.

 

Section 6.5 Notifications Under This Policy. The Company will be deemed to have satisfied any notification requirement in this Policy by making available such notification on any system accessible by Exchanging Holders.

 

Section 6.6 Modification of Policy. The Company may modify this Policy at any time without notice. The Company will deliver or make available a copy of the revised Policy to the holders of Exchangeable Units at least forty-five (45) days before the next Quarterly Exchange Date.

 

* * *

 

 

E-3

Exhibit 10.4

 

EXHIBIT F

 

FORM OF DIRECTOR NOMINATION AND BOARD OBSERVER AGREEMENT

 

THIS DIRECTOR NOMINATION AND BOARD OBSERVER AGREEMENT (this “Agreement”) is made and entered into as of [●], 2023, by and between HNR Acquisition Corp, a Delaware corporation (the “Company”), and CIC Pogo LP, a Delaware limited partnership (“CIC” or “Seller”). Capitalized terms used but not otherwise defined in this Agreement have the respective meanings given to them in the MIPA (as defined below).

 

WHEREAS, the Company and certain of its affiliates have consummated the purchase and the other transactions (collectively, the “Transactions”) contemplated by the Amended and Restated Membership Interest Purchase Agreement, dated as of August 28, 2023 (the “MIPA”), by and among Seller, 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”), the Company, HNRA Partner, Inc., a Delaware corporation, (“SPAC Subsidiary”), HNRA Upstream, LLC, a Delaware limited liability company (“OpCo”, and together with the Company and SPAC Subsidiary, collectively “Buyer” and each a “Buyer”) and, solely with respect to Section 6.20 thereof, HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”);

 

WHEREAS, OpCo has entered into the A&R OpCo LLC Agreement, pursuant to which it will issue OpCo Preferred Units, which are convertible into OpCo Class B Units, which are redeemable for shares of SPAC Class A Common Stock;

 

WHEREAS, Seller and the Company desire that, upon the Closing Date, Seller will appoint the Board Observers (as defined below) during the Board Observer Period (as defined below) to attend, in a non-voting observer capacity, meetings of the Board of the Company; and

 

WHEREAS, Seller desires that, upon the conversion of the OpCo Preferred Units owned by Seller at the time of conversion into OpCo Class B Units (the “Effective Time”), it will have representation on the Board of the Company; and

 

WHEREAS, in furtherance of the foregoing, Seller desires to have certain director nomination rights with respect to the Company, and the Company desires to provide Seller, on behalf of Seller, with such rights, in each case, on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficient of which are hereby acknowledged, each of the parties to this Agreement agrees as follows:

 

Article I

 

NOMINATION AND OBSERVER RIGHTS

 

Section 1.1. Board Nomination and Observer Rights.

 

(a) From the Closing Date until the later of (i) the date that Seller no longer holds any SPAC Class A Common Shares or SPAC Class B Common Shares and (ii) the repayment of the Promissory Note in accordance with its terms (the “Board Observer Period”), at every meeting of the board of directors of the Company (the “Board”), Seller has the right to appoint two board observers (the “Board Observers”) to attend, in a non-voting observer capacity, all meetings of the Board. The Board Observers shall advise and consult with members of the Board on pertinent matters and have the right to be heard at any meetings of the Board, but in no event shall the Board Observers: (i) be deemed to be a member of the Board, (ii) have the right to vote on any matter under consideration by the Board or otherwise have any power to cause the Company to take, or not to take, any action, (iii) have, or be deemed to have, or otherwise be subject to, any fiduciary duties to the Company or its stockholders applicable to the directors of the Company or (iv) have or possess any authority to bind the Company or any of its affiliates. For the avoidance of doubt, the Board Observers’ presence shall not be necessary to establish a quorum or count towards a quorum at any meeting of the Board. The Company shall reimburse the Board Observers for reasonably out-of-pocket expenses incurred in connection with the Board Observers’ attendance at Board meetings to the same extent such reimbursement is provided to any members of the Board.

  

 

(b) From the Effective Time until the termination of this Agreement in accordance with Section 2.1, at every meeting of the Board, or a committee thereof, or action by written consent, at or by which directors of the Company are appointed by the Board or are nominated to stand for election and elected by stockholders of the Company, Seller shall have the right to appoint or nominate for election to the Board, as applicable, such number of individuals as provided for by ‎Section 1.1(b)(i) through ‎Section 1.1(b)(ix), to serve as an independent director (in accordance with the NYSE American rules) of the Company (each such individual appointed or nominated by Seller for election to the Board pursuant to this Section ‎1.1(a), a “Nominee”).

 

(i) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for ninety percent (90%) or more, of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to one-hundred percent (100%) of the total number of directors.

 

(ii) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for eighty percent (80%) or more, but less than ninety (90%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to eighty percent (80%) of the total number of directors.

 

(iii) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for seventy percent (70%) or more, but less than eighty (80%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to seventy percent (70%) of the total number of directors.

 

(iv) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for sixty percent (60%) or more, but less than seventy (70%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to sixty percent (60%) of the total number of directors.

 

(v) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for fifty percent (50%) or more, but less than sixty (60%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to fifty percent (50%) of the total number of directors.

 

(vi) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for forty percent (40%) or more, but less than fifty (50%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to forty percent (40%) of the total number of directors.

 

(vii) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for thirty percent (30%) or more, but less than forty (40%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to thirty percent (30%) of the total number of directors.

 

(viii) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for twenty percent (20%) or more, but less than thirty (30%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to twenty percent (20%) of the total number of directors.

 

(ix) So long as Seller beneficially owns, in the aggregate, OpCo Class B Units which may be redeemed for ten percent (10%) or more, but less than twenty (20%), of the outstanding SPAC Class A Common Stock, Seller shall have the right to appoint or nominate, as applicable, up to ten percent (10%) of the total number of directors.

 

 

(c) The Company shall take all necessary actions within its control, including but not limited to calling a meeting of the Board or executing an action by unanimous written consent of the Board, such that, as of the Effective Time, the Nominees shall be elected by the Company’s stockholders or appointed to the Board as of the Effective Time (or as soon as practicable thereafter) as a director of the Company.

 

(d) From and after the Effective Time, the Company shall take all actions necessary (including, without limitation, calling special meetings of the Board and the stockholders of the Company and recommending, supporting and soliciting proxies) to ensure that: (i) each Nominee is included in the Board’s slate of nominees to the stockholders of the Company for the election of directors of the Company and recommended by the Board at any meeting of stockholders called for the purpose of electing directors of the Company; and (ii) each Nominee, if up for election, is included in the proxy statement prepared by management of the Company in connection with the Company’s solicitation of proxies or consents in favor of the foregoing for every meeting of the stockholders of the Company called with respect to the election of members of the Board, and at every adjournment or postponement thereof, and on every action or approval by written resolution of the stockholders of the Company or the Board with respect to the election of directors of the Company.

 

(e) If a Nominee ceases to serve for any reason, Seller shall be entitled to designate or nominate such person’s successor in accordance with this Agreement and the Board shall promptly fill the vacancy with such successor Nominee.

 

(f) The Company shall indemnify each Nominee on the same basis as all other members of the Board and pursuant to an indemnity agreement with terms that are no less favorable to such Nominee than the indemnity agreements entered into between the Company and its other non-employee directors.

 

(g) Each Nominee shall be entitled to compensation (including equity awards) that is consistent with the compensation received by other non-employee directors of the Company. In addition, the Company shall pay the reasonable, documented, out-of-pocket expenses incurred by such Nominee in connection with his or her services provided to or on behalf of the Company and its Subsidiaries, including attending Board and committee meetings or events attended on behalf of the Company or at the Company’s request.

 

(h) Notwithstanding the provisions of this Section 1.1, Seller shall not be entitled to designate a Person as a nominee to the Board upon a written determination by the Board or relevant committee thereof that the Person would not be qualified under any applicable law, rule or regulation to serve as a director of the Company. In such an event, Seller shall be entitled to select a Person as a replacement Nominee and the Company shall take all necessary actions within its control to cause that Person to be nominated as a Nominee, including, without limitation, taking such necessary actions to cause that Person to be nominated as a Nominee at the same meeting (or, if permitted, pursuant to the same action by written consent of the stockholders) as the initial Person was to be nominated.

 

Section 1.2. Board Materials. During the Board Observer Period, for so long as the Board Observers serve as a non-voting observers, each Board Observer shall be provided copies of all notices, minutes, consents, and other written materials that are provided to its directors (“Board Materials”) at substantially the same time and in substantially the same manner as such materials are delivered to the Company’s directors in their roles as members of the Board.

 

Section 1.3. Exclusions. Notwithstanding anything herein to the contrary, the Company may exclude the Board Observers from access to any Board Materials, meeting, or portion thereof if the Board concludes, acting in good faith, that (i) such exclusion is reasonably necessary to preserve the attorney-client or work product privilege between the Company and its counsel (provided, however, that any such exclusion shall only apply to such portion of such material or meeting which would be required to preserve such privilege); (ii) such Board Materials or discussion relates to the Company’s or its affiliates’ relationship, contractual or otherwise, with Seller or its affiliates or any actual or potential transactions between or involving the Company or its affiliates and Seller or its affiliates; or (iii) such exclusion is necessary to avoid a conflict of interest or disclosure that is restricted by any agreement to which the Company or any of its affiliates is a party or otherwise bound.

 

 

Section 1.4. Confidentiality. To the extent that any information obtained by the Board Observers from the Company (or any director, officer, employee, or agent thereof) is Confidential Information (as defined below), Seller shall, and shall cause the Board Observers to, treat any such Confidential Information as confidential in accordance with the terms and conditions set out in this Section 1.4. As used in this Agreement, “Confidential Information” means any and all information or data concerning the Company or its affiliates, whether in verbal, visual, written, electronic, or other form, which is disclosed to the Board Observers, in their role as Board Observers, by the Company or any director, officer, employee, or agent of the Company (including all Board Material that is non-public information), together with all information discerned from, based on, or relating to any of the foregoing which may be prepared or created by the Observer, Seller, or any of its affiliates, or any of their respective directors, officers, employees, agents, or advisors (each, a “Representative”). Seller shall, and shall cause the Board Observers to (a) retain all Confidential Information in strict confidence; (b) not release or disclose Confidential Information in any manner to any other person (other than disclosures to Seller, its affiliates, or to any of its or their Representatives who (i) have a need to know such information; and (ii) are informed of its confidential nature); and (c) use the Confidential Information solely in connection with Seller’s and the Board Observers’ rights hereunder, and not for any other purpose; provided, however, that the foregoing shall not apply to the extent Seller, its affiliates, any of its or their Representatives, or the Board Observers are compelled to disclose Confidential Information by judicial or administrative process, pursuant to the advice of its counsel, or by requirements of law; provided, further, however, that, if legally permissible, prior written notice of such disclosure shall be given to the Company so that the Company may take action, at its expense, to prevent such disclosure and any such disclosure is limited only to that portion of the Confidential Information which such person is compelled to disclose.

 

Article II

MISCELLANEOUS

 

Section 2.1. Termination. This Agreement shall terminate automatically and become void and of no further force or effect, without any notice or other action by any Person, as of the date that is the later of (i) the date that Seller no longer holds any SPAC Class A Common Shares or SPAC Class B Common Shares and (ii) the repayment of the Promissory Note in accordance with its terms.

 

Section 2.2. Notices. All notices, requests and other communications to the Company hereunder shall be in writing (including electronic transmission) and shall be given in accordance with the provisions of the MIPA. All notices, requests and other communications to Seller hereunder shall be in writing (including electronic transmission) to the following address and shall be given in accordance with the provisions of the MIPA:

 

If to Seller, to:

 

CIC Pogo LP

Oak Lawn Hall at Old Parkland

3879 Maple Avenue

Suite 400

Dallas, TX 75219

Attention: Chris Cowan

ccowan@cicpartners.com

 

with a copy to (which shall not constitute notice):

 

Baker Botts L.L.P.

2001 Ross Ave. Suite 900

Dallas, Texas 75201

Attention: Jon Platt

Email: jon.platt@bakerbotts.com

 

Section 2.3. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in a mutually acceptable manner in order that the Transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.

 

 

Section 2.4. Assignment. No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party, and any assignment or delegation made without such consent shall be void and of no effect. This Agreement shall inure to the benefit of, and be binding on and enforceable by and against, the parties and their respective successors and permitted assigns.

 

Section 2.5. No Third Party Beneficiaries. Nothing in this Agreement shall entitle any Person other than the parties to any claims, cause of action, remedy, or right of any kind.

 

Section 2.6. Entire Agreement. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties pertaining to the subject matter hereof.

 

Section 2.7. Governing Law. This Agreement and any claims, actions or Proceedings arising from this Agreement, whether in contract, tort, or otherwise shall be governed by, and construed in accordance with the Laws of the State of Delaware without giving effect to any choice or conflict of Law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any other jurisdiction.

 

Section 2.8. Jurisdiction; WAIVER OF TRIAL BY JURY. Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby may be brought in federal and state courts located in the State of Delaware, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party hereto to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against the other party hereto in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 2.8. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.

 

Section 2.9. Specific Performance. The parties hereto acknowledge that the rights of each party hereto to consummate the transactions contemplated hereby are unique and recognize and affirm that in the event of a breach of this Agreement by any party hereto, money damages may be inadequate and such non-breaching party may have no adequate remedy at law. Accordingly, the parties hereto agree that such non-breaching party shall have the right to enforce its rights and the other party’s obligations hereunder by an action or actions for specific performance and/or injunctive relief (without posting of bond or other security), including any order, injunction or decree sought by such non-breaching party to cause the other party to perform its/their respective agreements and covenants contained in this Agreement and to cure breaches of this Agreement, without the necessity of proving actual harm and/or damages or posting a bond or other security therefore. Each party hereto further agrees that the only permitted objection that it may raise in response to any action for any such equitable relief is that it contests the existence of a breach or threatened breach of this Agreement.

 

Section 2.10. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or e-mail shall be as effective as delivery of a manually executed counterpart of the Agreement.

 

 

Section 2.11. Amendment; Waivers. No amendment, modification, or discharge of this Agreement, and no waiver under this Agreement, 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 waiver by either of the parties of a breach of or a default under any of the provisions of this Agreement, or to exercise any right or privilege under this Agreement, shall not be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights, or privileges under this Agreement.

 

Section 2.12. Rights Cumulative. Except as otherwise expressly limited by this Agreement, all rights and remedies of each of the parties hereto under this Agreement will be cumulative, and the exercise of one or more rights or remedies will not preclude the exercise of any other right or remedy available under this Agreement or law.

 

Section 2.13. Further Assurances. Each of the parties hereto shall execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purpose of this Agreement.

 

Section 2.14. Enforcement. Each of the parties hereto covenants and agrees that the disinterested members of the Board have the right to enforce, waive or take any other action with respect to this Agreement on behalf of the Company.

 

Section 2.15. Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

[Signature Page Follows.]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as a deed as of the date first written above.

 

	HNRA ACQUISITION CORP.
	By:
	Name:
	Title:
	CIC Pogo LP
	By:
	Name:	Fouad Bashour
	Title:	Manager

 

[Signature Page to Director Nomination Agreement]

 

 

7

Exhibit 10.5

 

BACKSTOP AGREEMENT

 

This Backstop Agreement (the “Agreement”) is made as of [________], 2023 (the “Execution Date”) by and among 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”), HNR Acquisition Corp., a Delaware corporation (the “Company” or the “SPAC”), HNRA Upstream, LLC, a Delaware limited liability company (“OpCo”), and the persons listed as Founders on the signature pages hereto (individually, each a “Founder” and, collectively, the “Founders”). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 8 hereof.

 

WHEREAS, Seller, the Company, OpCo and HNRAC Sponsors LLC, a Delaware limited liability company (“Sponsor”), solely with respect to Section 6.20 thereof, entered into that certain Amended and Restated Membership Interest Purchase Agreement, dated as of August 28, 2023 (as amended from time to time, the “MIPA”), pursuant to which, OpCo agreed to acquire and accept from Seller, and Seller agreed to contribute, assign and convey to OpCo, all of Seller’s right title and interest to 99.0% of the outstanding membership interests of Pogo Resources, LLC, a Texas limited liability company (“Pogo”);

 

WHEREAS, pursuant to the MIPA, OpCo will amend and restate its limited liability company agreement (the “A&R LLC Agreement”) whereby OpCo will authorize the issuance of 2,000,000 units as the Class A Convertible Preferred Units (the “Class A Preferred Units”);

 

WHEREAS, as part of the Aggregate Consideration (as defined in the MIPA) to be paid to the Seller by OpCo pursuant to the MIPA, OpCo has agreed to issue up to 2,000,000 Class A Preferred Units to the Seller (such number of shares of Class A Preferred Units actually issued to Seller, the “Seller Units”) concurrent with the closing of the transactions contemplated by the MIPA (such date, the “Effective Date”);

 

WHEREAS, upon issuance of the Class A Preferred Units to Seller, the Founders have agreed to place into trust certain shares of the Company’s Class A common stock, par value $0.0001 per share (the “SPAC Class A Common Stock”), held by the Founders and to purchase certain Seller Units from Seller pursuant to the terms and conditions of this Agreement; and

 

WHEREAS, prior to the Effective Date, the Founders will have given binding instructions to place 1,500,000 shares of SPAC Class A Common Stock as reflected on Exhibit A (the “Trust Shares”) into trust once all Trust Shares are not restricted by transfer (the “Lockup Expiration Date”) pursuant to Section 3 of that certain letter agreement, by and between the SPAC and the Sponsor, dated February 10, 2022 (the “Letter Agreement”), and to be governed by a trust agreement, in a form mutually agreed to by the parties, by and among the Founders and a trustee or broker, mutually agreeable between the parties (the “Trust Agreement”) whereby the Founders will agree not to sell or borrow against the Trust Shares, except for purposes of financing the purchase of the Seller Units as governed by this Agreement and the Trust Agreement until the termination of this Agreement or with the prior written consent of Seller.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

Section 1. Trust Account. On the Lockup Expiration Date, the Founders agree to place the Trust Shares into a trust account pursuant to the terms of the Trust Agreement.

 

Section 2. Grant of Put Option.

 

(a) Right to Sell. Subject to the terms and conditions of this Agreement, at any time on or after the Lockup Expiration Date up to the and until the date this Agreement is terminated in accordance with Section 8 herein, Seller shall have the right (the “Put Right”), but not the obligation, to cause the Founders to, jointly and severally, purchase Seller Units at the Put Purchase Price (as defined below) as indicated in the Put Exercise Notice (as defined below), subject to the Put Maximum (as defined below). The Put Right may only be exercised by Seller up to two (2) times prior to the termination of this Agreement.

 

 

(b) Procedures. If Seller desires to sell any of the Seller Units pursuant to Section 2(a), Seller shall deliver to the Founders a written notice (the “Put Exercise Notice”) exercising the Put Right and specifying the number of Seller Units to be sold up to the Put Maximum (the “Put Units”) by Seller to the Founders and the closing date, which shall take place no less than 30 days following receipt by Founder of the Put Exercise Notice (each a “Put Right Closing Date”). By delivering the Put Exercise Notice, Seller will represent to the Founders that (A) Seller has full right, title, and interest in and to the Put Units, (B) Seller has all the necessary power and authority and has taken all necessary action to sell such Put Units as contemplated by this Section 2 and (C) the Put Units are free and clear of any and all mortgages, pledges, security interests, options, rights of first offer, encumbrances, or other restrictions or limitations of any nature whatsoever other than those arising as a result of or under the terms of this Agreement or the A&R LLC Agreement.

 

(c) Consummation of Sale. The Founders will pay the Put Purchase Price in full for the Put Units by wire transfer of immediately available funds to the account(s) of Seller as designated by Seller on the Put Right Closing Date.

 

(d) Cooperation. The Founders and Seller shall each take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 2, including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate; provided, that such documents shall not impose any liability on the Seller.

 

(e) Closing. At the closing of any sale and purchase pursuant to this Section 2, Seller shall deliver to the Founders a certificate or certificates representing the Put Units to be sold (if any) or by such other transfer as contemplated by the A&R LLC Agreement, accompanied by limited liability company unit powers and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Put Purchase Price.

 

Section 3. Put Purchase Price. In the event Seller exercises the Put Right hereunder, the purchase price per unit at which the Founders shall be required to purchase the Put Units (the “Put Purchase Price”), shall be equal to the Original Liquidation Preference plus the product of (i) the number of days elapsed since the Effective Date and (ii) the Original Liquidation Preference divided by 730. The “Original Liquidation Preference” shall be $10.00 per Seller Unit.

 

Section 4. Representations and Warranties of the Company. As a material inducement to the Founders to enter into this Agreement and purchase the Put Units, the Company and OpCo hereby represents and warrants that:

 

(a) Organization and Corporate Power. The Company and OpCo is, respectively, a corporation and a limited liability company, each of which is duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. Each of the Company and OpCo has all requisite power and authority and all material licenses, permits and authorizations necessary to own and operate its properties and to carry on its business as now conducted and presently proposed to be conducted, and all requisite power and authority to carry out the transactions contemplated by this Agreement.

 

(b) Capital Stock. All of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued. All of the issued and outstanding units of OpCo have been duly and validly authorized and issued. All Class A Preferred Units to be purchased by the Founders from Seller pursuant to Section 2 have been duly authorized, and are validly issued, fully paid and nonassessable.

 

(c) Authorization; No Breach; Compliance with Laws. The execution, delivery and performance of this Agreement and any other agreement contemplated hereby to which either the Company or OpCo is a party have been duly authorized by either the Company or OpCo, as applicable. The execution, delivery and performance of this Agreement by either the Company or OpCo and the consummation of the transactions contemplated hereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which either the Company or OpCo is a party or by which either the Company or OpCo is bound or to which any of the property or assets of the Company or OpCo is subject, (ii) result in any violation of the provisions of the charter, by-laws or equivalent organizational documents of the Company or OpCo or (iii) result in any violation of any statute, including, without limitation, the Delaware General Corporation Law or the Delaware Limited Liability Company Act, or any order, rule or regulation of any court or governmental agency or body having jurisdiction over either the Company or OpCo any of their properties or assets. No consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by either the Company or OpCo and the consummation of the transactions contemplated hereby.

 

 

(d) Broker’s Fees. There is no investment banker, broker, finder or other intermediary or advisor that has been retained by or is authorized to act on behalf of either the Company or OpCo, or any of their Affiliates who might be entitled to any fee, commission or reimbursement of expenses as a result of consummation of the transactions contemplated hereby.

 

Section 5. Representations and Warranties of the Founders. As a material inducement to the Company and the Seller to enter into this Agreement, the Founders hereby, jointly and severally, represent and warrant that:

 

(a) Authorization; No Breach. The execution of this Agreement by the Founders and the consummation by the Founders of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Founder is a party or by which such Founder is bound or to which any of its property or assets is subject, nor will such actions result in any violation of the provisions of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over such Founder or its property or assets in each case in a manner that would adversely impact the Founders’ ability to purchase the Put Units hereunder; and, except for such consents, approvals, authorizations, registrations or qualifications as may be required under applicable federal and state securities laws in connection with the purchase of the Put Units, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Founders and the consummation by the Founders of the transactions contemplated hereby in each case in a manner that would adversely impact the Founders’ ability to purchase the Put Units and perform its obligations hereunder.

 

(b) Share Ownership. Each Founder has full right, title, and interest in and to the shares of SPAC Class A Common Stock as reflected on Exhibit A, and such shares of SPAC Class A Common Stock are free and clear of any and all mortgages, pledges, security interests, options, rights of first offer, encumbrances, or other restrictions or limitations of any nature whatsoever other than those arising as a result of or under the terms of this Agreement and the Letter Agreement.

 

(c) Broker’s Fees. There is no investment banker, broker, finder or other intermediary or advisor that has been retained by or is authorized to act on behalf of the Founders who might be entitled to any fee, commission or reimbursement of expenses from either the Company or any of its Affiliates as a result of consummation of the transactions contemplated hereby.

 

Section 6. Sales to Company or Sales to Founders, individually. From time to time, upon mutual agreement between the Company and Seller, the Company may purchase Seller Units from Seller, and the Seller may sell Seller Units to the Company, at the Put Purchase Price in accordance with the terms of this Agreement, without giving effect to the Put Maximum. From time to time, upon mutual agreement between the Seller and any individual Founder or group of Founders, such Founder(s) may purchase Seller Units from Seller, and the Seller may sell Seller Units to such Founder(s), at the Put Purchase Price in accordance with the terms of this Agreement, without giving effect to the Put Maximum. If the parties agree to purchase Seller Units pursuant to this Section 6 within the first 30 days following the original issuance date of the Class A Preferred Units, the purchase price for any amount of Seller Units in excess of $10,000,000 will be at the Original Liquidation Preference.

 

Section 7. No Short Selling. Until this Agreement is terminated, Seller will not engage in any transaction which is designed to sell short the SPAC Class A Common Stock of the Company or any other publicly traded securities of the Company. In addition, Seller represents that as of the date of this Agreement it does not have any existing short position in the SPAC Class A Common Stock, nor has Seller executed any derivative instruments with any third party, which in either case is designed to dispose of the SPAC Class A Common Stock.

 

Section 8. Termination. This Agreement shall automatically be terminated on earlier of: (i) the date that is 6 months following the Lockup Expiration Date and, (ii) if the Put Right is exercised by Seller, the last possible Put Right Closing Date. In addition, this Agreement may be terminated at any time prior to such date by mutual written consent of the Company, Seller, and the Founders.

 

 

Section 9. Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative of the foregoing.

 

“Person” means an individual, a partnership, a corporation, a limited liability company, association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

 

“Put Maximum” means, (i) at the time of the first Put Exercise Notice, the number of Seller Units with a Put Purchase Price equal to the amount that equals the (a) simple average of the daily VWAP of the SPAC Class A Common Stock during the five (5) Trading Days prior to the date of the Put Exercise Notice, multiplied by (b) the Trust Shares, multiplied by (c) 0.50; and (ii) at the time of the second Put Exercise Notice, the number of Seller Units with a Put Purchase Price equal to the amount that equals the greater of (a) the (A) Put Maximum at the time of the first Put Exercise Notice, minus (B) the total Put Purchase Price paid by the Founders at the time of the first Put Right Closing Date, and (b) the (A) simple average of the daily VWAP of the SPAC Class A Common Stock during the five (5) Trading Days prior to the date of the second Put Exercise Notice, multiplied by (B) the Trust Shares, multiplied by (C) 0.50, minus (D) the total Put Purchase Price paid by the Founders at the time of the first Put Right Closing Date.

 

“Trading Day” means any days during the course of which the Principal Market on which the SPAC Class A Common Stock is listed or admitted to trading is open for the exchange of securities.

 

“VWAP” means, for any Trading Day, the per share daily volume weighted average price of the Common Stock for such Trading Day on the New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTCQB, the OTCBB or the NYSE Euronext, whichever is at the time the principal trading exchange or market for the Common Stock (the “Principal Market”) from 9:30 a.m. Eastern Time through 4:00 p.m. Eastern Time, or, if such price is not available, “VWAP” shall mean the market value per share of SPAC Class A Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm reasonably acceptable to the Sellers.

 

Section 10. Miscellaneous.

 

(a) Successors and Assigns. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any party, including, without limitation, by nature of sale of the Seller Units to a third-party, without the prior written consent of the other parties hereto, which such consent shall not be unreasonably withheld, conditioned, or delayed. For the avoidance of doubt, the Put Right does not transfer with the sale, transfer or change of ownership of any Class A Preferred Unit without the express approval of the Company.

 

(b) Survival of Representations and Warranties. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

(c) No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit, or remedy of any nature whatsoever, under or by reason of this Agreement.

 

 

(d) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

(e) Construction. Whenever the context requires, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter. All references to Sections and Paragraphs refer to sections and paragraphs of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than limitation.

 

(f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the parties hereto.  No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.

 

(g) Counterparts; Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. This Agreement may be executed by facsimile signature.

 

(h) Governing Law. This Agreement will be governed in all respects by the laws of the State of Delaware, without regard to the principles of conflicts of law of such state.

 

(i) Notices. All notices which are required or may be given pursuant to this Agreement shall be sufficient in all respects if given in writing and delivered personally, by facsimile, by email or by registered or certified mail, postage prepaid, as follows or at such other address as any party may notify the other party of from time to time:

 

If to Seller:

 

CIC Pogo LP

Oak Lawn Hall at Old Parkland

3879 Maple Avenue

Suite 400

Dallas, TX 75219

Attention: Chris Cowan

Email: ccowan@cicpartners.com

 

with copies (which shall not constitute notice) to:

 

Baker Botts L.L.P.

2001 Ross Ave. Suite 900

Dallas, Texas 75201

Attention: Jon Platt

Email: jonplatt@bakerbotts.com

 

 

If to the Company or OpCo:

 

HNR Acquisition Corp

3730 Kirby Drive, Suite 1200

Houston, Texas 77098

Attention: Donald W. Orr, President

Email: donald.orr@hnra-nyse.com

 

with copies (which shall not constitute notice) to:

 

Pryor Cashman LLP

7 Times Square

New York, New York 10036

Attention Matthew Ogurick

Email: mogurick@pryorcashman.com

 

HNR Acquisition Corp

10142 Holly Chase Drive

Houston, Texas 77042

Attention: David M. Smith, General Counsel

Email: dmsmith@hnra-nyse.com

 

If to a Founder, at the addresses reflected in Exhibit A

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Backstop Agreement on the date first written above.

 

	SELLER:
	CIC:
	CIC POGO LP
	By:
	Name:	Fouad Bashour
	Title:	Manager
	DenCo:
	DENCO RESOURCES, LLC
	By:
	Name:	John L. Denman, Jr.
	Title:	President
	4400:
	4400 HOLDINGS, LLC
	By:
	Name:	Kirk Pogoloff
	Title:	Manager
	Pogo Management:
	POGO RESOURCES MANAGEMENT, LLC
	By:
	Name:	Kirk Pogoloff
	Title:	Manager

 

Signature Page to

Backstop Agreement

 

 

	COMPANY:
	HNR ACQUISITION CORP
	By:
	Name:
	Title:
	OPCO
	HNRA UPSTREAM, LLC
	By:
	Name:
	Title:

 

Signature Page to

Backstop Agreement

 

 

	FOUNDERS:1
	[NAME OF FOUNDER IF ENTITY]
	By:
	Name:
	Title:
	[NAME OF FOUNDER IF INDIVIDUAL]

 

1

HNRA to provide founder signatories prior to execution

 

Signature Page to

Backstop Agreement

 

 

EXHIBIT A

 

Share Ownership²

 

Name		Notice Address		Number of Trust Shares

 

2

To be provided by HNRA prior to execution

 

 

 

Exhibit 10.6

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of ___, 2023¹, is by and among CIC Pogo LP, a Delaware limited partnership (“CIC”), DenCo Resources, LLC, a Texas limited liability company (“DenCo”), 4400 Holdings, LLC, a Texas limited liability company (“4400”), Pogo Resources Management, LLC (each, a “Holder” and collectively, the “Holders”), and HNR Acquisition Corp., a Delaware corporation (the “Company”).

 

RECITALS

 

A. The parties desire that, upon the terms and subject to the conditions and limitations set forth herein, the Company may issue to the Holders, (a) 2,000,000 Class B Units of HNRA Upstream, LLC (“OpCo”) (the “OpCo Class B Units”), which shall be equal to 2,000,000 shares of Class A common stock of the Company, par value $0.0001 per share (the “Class A Shares”) issuable upon exercise of the OpCo Holder Redemption Right (as defined in the Purchase Agreement) and (b) 2,000,000 shares of Class B common stock of the Company, par value $0.0001 per share (together with the Class A Shares, the “Common Stock”), pursuant to the Amended and Restated Membership Interest Purchase Agreement dated August 28, 2023 (the “Purchase Agreement”), subject to any proportional adjustment to reflect any stock split, combination of shares, stock dividend, reorganization, recapitalization or other similar event affecting the Common Stock occurring after the date of the Purchase Agreement and prior to the Closing so as to provide the Holders the same economic effect as contemplated by the Purchase Agreement prior to such change.

 

B. Pursuant to the terms of, and in consideration for the Holders entering into, the Purchase Agreement, and to induce the Holders to execute and deliver the Purchase Agreement, the Company has agreed to provide the Holders with certain registration rights with respect to the Registrable Securities (as defined herein) as set forth herein;

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the Company and the Holders hereby agree as follows:

 

1. Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

(a) “Agreement” shall have the meaning assigned to such term in the preamble of this Agreement.

 

(b) “Allowable Grace Period” shall have the meaning assigned to such term in Section 3(o).

 

1 NTD:

This agreement will be signed on the closing date.

 

 

(c) “Blue Sky Filing” shall have the meaning assigned to such term in Section 6(a).

 

(d) “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in New York, New York are authorized or required by law to remain closed.

 

(e) “CIC” shall have the meaning assigned to such term in the preamble of this Agreement.

 

(f) “Claims” shall have the meaning assigned to such term in Section 6(a).

 

(g) “Class A Shares” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(h) “Commission” means the U.S. Securities and Exchange Commission or any successor entity.

 

(i) “Common Stock” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(j) “Company” shall have the meaning assigned to such term in the preamble of this Agreement.

 

(k) “DenCo” shall have the meaning assigned to such term in the preamble of this Agreement.

 

(l) “DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Holder’s or its designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program, or any similar program hereafter adopted by DTC performing substantially the same function.

 

(m) “Effective Date” means the date that the applicable Registration Statement has been declared effective by the Commission.

 

(n) “Holder” shall have the meaning assigned to such term in the preamble to this Agreement.

 

(o) “Holder Party” shall have the meaning assigned to such term in Section 6(a).

 

(p) “Indemnified Damages” shall have the meaning assigned to such term in Section 6(a).

 

(q) “Initial Registration Statement” shall have the meaning assigned to such term in Section 2(a).

 

 

(r) “Maximum Number of Securities” shall have the meaning assigned to such term in Section 2(f).

 

(s) “New Registration Statement” shall have the meaning assigned to such term in Section 2(b).

 

(t) “OpCo” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(u) “OpCo Class A Units” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(v) “OpCo Class B Units” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(w) “Participating Holder” shall have the meaning assigned to such term in Section 2(e).

 

(x) “Person” means any person or entity, whether a natural person, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority.

 

(y) “Piggyback Registration” shall have the meaning assigned to such term in Section 2(h)(i).

 

(z) “Prospectus” means the prospectus in the form included in the Registration Statement at the applicable Effective Date of the Registration Statement, as supplemented from time to time by any Prospectus Supplement, including the documents incorporated by reference therein.

 

 

(aa) “Prospectus Supplement” means any prospectus supplement to the Prospectus filed with the Commission from time to time pursuant to Rule 424(b) under the Securities Act, including the documents incorporated by reference therein.

 

(bb) “Purchase Agreement” shall have the meaning assigned to such term in the recitals to this Agreement.

 

(cc) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the Securities Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the Commission.

 

(dd) “Registrable Securities” means the shares of Class A Shares issuable upon the exercise of the OpCo Holder Redemption Right, as such term is defined in the Purchase Agreement.

 

(ee) “Registration Statement” means a registration statement or registration statements of the Company filed under the Securities Act covering the resale by the Holders of Registrable Securities, as such registration statement or registration statements may be amended and supplemented from time to time, including all documents filed as part thereof or incorporated by reference therein.

 

(ff) “Registration Period” shall have the meaning assigned to such term in Section 3(a).

 

(gg) “Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the Commission that may at any time permit the Holders to sell securities of the Company to the public without registration.

 

(hh) “Rule 415” means Rule 415 promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the Commission providing for offering securities on a delayed or continuous basis.

 

(ii) “Staff” shall have the meaning assigned to such term in Section 2(b).

 

(jj) “Trading Day” means any days during the course of which the New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTCQB, the OTCBB or the NYSE Euronext, whichever is at the time the principal trading exchange or market for the Common Stock is open for the exchange of securities.

 

(kk) “Underwritten Offering” means a registration effected by preparing and filing a registration statement, Prospectus or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.in which securities of the Company are sold to an underwriter in a firm commitment underwriting for distribution to the public.

 

(ll) “Underwritten Shelf Takedown” shall have the meaning assigned to such term in Section 2(e).

 

(mm) “Violations” shall have the meaning assigned to such term in Section 6(a).

 

 

2. Registration, Demand Rights and Piggyback Rights.

 

(a) Mandatory Registration. The Company shall, no later than thirty (30) days following the Closing as defined in the Purchase Agreement, file with the Commission an initial Registration Statement on Form S-1 (or any successor form) covering the resale by the Holders of all of the Registrable Securities so as to permit the resale of such Registrable Securities by the Holders under Rule 415 under the Securities Act (the “Initial Registration Statement”). The Company shall use its commercially reasonable efforts to have the Initial Registration Statement declared effective by the Commission as soon as reasonably practicable following the filing thereof with the Commission. The Company shall 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.

 

(b) Sufficient Number of Shares Registered. If at any time all Registrable Securities are not covered by the Initial Registration Statement filed pursuant to Section 2(a), the Company shall use its commercially reasonable efforts to file with the Commission one or more additional Registration Statements so as to cover all of the Registrable Securities not covered by such initial Registration Statement, in each case, as soon as practicable (taking into account any position of the staff of the Commission (“Staff”) with respect to the date on which the Staff will permit such additional Registration Statement(s) to be filed with the Commission and the rules and regulations of the Commission) (each such additional Registration Statement, a “New Registration Statement”). The Company shall use its commercially reasonable efforts to cause each such New Registration Statement to become effective as soon as reasonably practicable following the filing thereof with the Commission. Any such New Registration Statement shall be on Form S-3 to the extent that the Company is eligible to use such form at the time of filing. Otherwise, such New Registration Statement shall be on another appropriate form.

 

(c) Offering. If the Staff or the Commission seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Holders on a delayed or continuous basis under Rule 415, or if after the filing of any Registration Statement pursuant to Section 2(a) or Section 2(b), the Company is otherwise required by the Staff or the Commission to reduce the number of Registrable Securities included in such Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such Registration Statement (after consultation with the Holders and their legal counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the Commission shall so permit such Registration Statement to become effective and be used as aforesaid. Notwithstanding anything in this Agreement to the contrary, if after giving effect to the actions referred to in the immediately preceding sentence, the Staff or the Commission does not permit such Registration Statement to become effective and be used for resales by the Holders on a delayed or continuous basis under Rule 415, the Company shall not request acceleration of the Effective Date of such Registration Statement, the Company shall promptly (but in no event later than 48 hours) request the withdrawal of such Registration Statement pursuant to Rule 477 under the Securities Act. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall use its commercially reasonable efforts to file one or more New Registration Statements with the Commission in accordance with Section 2(b) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the Prospectuses contained therein are available for use by the Holders.

 

(d) Any Registrable Security shall cease to be a “Registrable Security” at the earliest of the following: (i) when a Registration Statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective Registration Statement; and (ii) when such Registrable Security is held by the Company or one of its Subsidiaries (as defined in the Purchase Agreement).

 

(e) Requests of Underwritten Shelf Takedowns. At any time and from time to time and when an effective Registration Statement is on file with the Commission, the Holders (the “Participating Holders”) may request to sell all or any portion of their Registrable Securities in an Underwritten Offering that is registered pursuant to such Registration Statement (each, an “Underwritten Shelf Takedown”); provided that the Company shall be obligated to effect an Underwritten Shelf Takedown only if such offering shall include Registrable Securities proposed to be sold by a Participating Holder with a total offering price reasonably expected to exceed, in the aggregate, $5 million. All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf Takedown. The Participating Holders shall have the right to select the managing underwriter or underwriters for such offering. The Participating Holders may demand not more than two (2) Underwritten Shelf Takedowns, pursuant to this Section 2(e), in any twelve (12) month period.

 

 

(f) Reduction of Underwritten Offering. If the managing underwriter or underwriters in an Underwritten Shelf Takedown advises the Company and the Participating Holders in writing that the dollar amount or number of Registrable Securities that such Participating Holders desire to sell, taken together with all other Common Stock or other equity securities, if any, that the Company desires to sell and all other Common Stock or other equity securities, if any, that have been requested to be sold in such Underwritten Offering pursuant to separate written contractual piggy-back registration rights held by any other stockholders, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, before including any Common Stock or other equity securities proposed to be sold by the Company or by other holders of Common Stock or other equity securities, (A) first, the Registrable Securities of the Participating Holders that can be sold without exceeding the Maximum Number of Securities, (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), Common Stock or other equity securities for the account of other Persons that the Company is obligated to register pursuant to separate written contractual arrangements with such Persons, which can be sold without exceeding the Maximum Number of Securities.

 

(g) Withdrawal. Prior to the filing of the applicable “red herring” Prospectus or Prospectus Supplement used for marketing such Underwritten Shelf Takedown, the Participating Holders shall have the right to withdraw from such Underwritten Shelf Takedown for any or no reason whatsoever upon written notification to the Company and the underwriter or underwriters (if any) of their intention to withdraw from such Underwritten Shelf Takedown. If withdrawn, a demand for an Underwritten Shelf Takedown will not constitute a demand for an Underwritten Shelf Takedown by the Holder for purposes of Section 2(e). Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Shelf Takedown prior to its withdrawal under this Section 2(g).

 

(h) Piggyback Registration.

 

(i) If, at any time after the date of this Agreement, the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2 hereof), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written notice of such proposed filing to the Holder as soon as practicable but not less than fourteen (14) days before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, in such offering, and (B) offer to the Holders the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such registration, a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing underwriter or underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holder pursuant to this Section 2(h) to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Piggyback Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. The Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this Section 2(h) shall enter into an underwriting agreement in customary form with the underwriter(s) selected for such Underwritten Offering by the Company.

 

(ii) If the managing underwriter or underwriters in an underwritten registration that is to be a Piggyback Registration, in good faith, advises the Company and the Holders in writing that the dollar amount or number of shares of Common Stock that the Company desires to sell, taken together with (i) the shares of Common Stock, if any, as to which registration has been demanded pursuant to separate written contractual arrangements with Persons other than the Holders hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2(h) hereof, and (iii) the shares of Common Stock, if any, as to which registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:

 

(A) If the registration is undertaken for the Company’s account, the Company shall include in any such registration (x) first, Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (y) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (x), the Registrable Securities of the Holders exercising their rights to register their Registrable Securities pursuant to this Section 2(h) hereof which can be sold without exceeding the Maximum Number of Securities; and (z) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (x) and (y), Common Stock, if any, as to which registration has been requested pursuant to written contractual piggyback registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities; and

 

 

(B) If the registration is pursuant to a request by Persons other than the Holders, then the Company shall include in any such registration (w) first, Common Stock or other equity securities, if any, of such requesting Persons, other than the Holder, which can be sold without exceeding the Maximum Number of Securities; (x) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (w), the Registrable Securities of the Holder exercising his rights to register his Registrable Securities pursuant to this Section 2(h) which can be sold without exceeding the Maximum Number of Securities; (y) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (w) and (x), Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (z) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (w), (x) and (y), Common Stock or other equity securities for the account of other Persons that the Company is obligated to register pursuant to separate written contractual arrangements with such Persons, which can be sold without exceeding the Maximum Number of Securities.

 

(C) The Holders shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the underwriter or underwriters (if any) of their intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal.

 

(D) For purposes of clarity, any Piggyback Registration effected pursuant to this Section 2(h) hereof shall not be counted as an Underwritten Shelf Takedown under Section 2(e) hereof.

 

3. Related Obligations.

 

The Company shall use its commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, during the term of this Agreement, the Company shall have the following obligations:

 

(a) The Company shall promptly prepare and file with the Commission the Initial Registration Statement pursuant to Section 2(a) hereof and one or more New Registration Statements pursuant to Section 2(b) hereof with respect to the Registrable Securities, and the Company shall use its commercially reasonable efforts to cause each such Registration Statement to become effective as soon as practicable after such filing. Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the Prospectus contained therein available for use) pursuant to Rule 415 for resales by the Holders on a continuous basis at all times until the earlier of (i) the date on which the Holders shall have sold all of the Registrable Securities covered by such Registration Statement or (ii) the date on which all such Registrable Securities cease to be “Registrable Securities” (the “Registration Period”). Notwithstanding anything to the contrary contained in this Agreement (but subject to the provisions of Section 3(o) hereof), the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the Prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement shall not contain any 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 (in the case of Prospectuses, in the light of the circumstances in which they were made) not misleading. The Company shall submit to the Commission, as soon as reasonably practicable after the date that the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be), a request for acceleration of effectiveness of such Registration Statement to a time and date as soon as reasonably practicable in accordance with Rule 461 under the Securities Act.

 

(b) Subject to Section 3(o) of this Agreement, the Company shall use its commercially reasonable efforts to prepare and file with the Commission such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the Prospectus used in connection with each such Registration Statement, which Prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep each such Registration Statement effective (and the Prospectus contained therein current and available for use) at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Holders. Without limiting the generality of the foregoing, the Company covenants and agrees that at or before 8:30 a.m. (New York City time) on the second Business Day immediately following the Effective Date of the Initial Registration Statement and any New Registration Statement (or any post-effective amendment thereto), the Company shall file with the Commission in accordance with Rule 424(b) under the Securities Act the final Prospectus to be used in connection with sales pursuant to such Registration Statement (or post-effective amendment thereto). The Company consents to the use of the Prospectus (including, without limitation, any supplement thereto) included in each Registration Statement in accordance with the provisions of the Securities Act and with the securities or “Blue Sky” laws of the jurisdictions in which the Registrable Securities may be sold by the Holders, in connection with the resale of the Registrable Securities and for such period of time thereafter as such Prospectus (including, without limitation, any supplement thereto) (or in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required by the Securities Act to be delivered in connection with resales of Registrable Securities.

 

 

(c) The Company shall (A) permit legal counsel for the Holders an opportunity to review and comment upon (i) each Registration Statement at least five (5) Business Days prior to its filing with the Commission and (ii) all amendments and supplements to each Registration Statement (including, without limitation, the Prospectus contained therein) (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports or Prospectus Supplements the contents of which is limited to that set forth in such reports) within a reasonable number of days prior to their filing with the Commission, and (B) shall reasonably consider any comments of the Holders and their legal counsel on any such Registration Statement or amendment or supplement thereto or to any Prospectus contained therein. The Company shall promptly furnish to the Holders and their counsel, without charge, (i) electronic copies of any correspondence from the Commission or the Staff to the Company or its representatives relating to each Registration Statement (which correspondence shall be redacted to exclude any material, non- public information regarding the Company or any of its Subsidiaries), (ii) after the same is prepared and filed with the Commission, one (1) electronic copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by the Holders, and all exhibits and (iii) upon the effectiveness of each Registration Statement, one (1) electronic copy of the Prospectus included in such Registration Statement and all amendments and supplements thereto; provided, however, the Company shall not be required to furnish any document (other than the Prospectus, which may be provided in .PDF format) to the Holders and their legal counsel to the extent such document is available on EDGAR).

 

(d) Without limiting any obligation of the Company under the Purchase Agreement, the Company shall promptly furnish to the Holders, without charge, (i) after the same is prepared and filed with the Commission, at least one (1) electronic copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by the Holders, all exhibits thereto, (ii) upon the effectiveness of each Registration Statement, one (1) electronic copy of the Prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Holders may reasonably request from time to time) and (iii) such other documents, including, without limitation, copies of any final Prospectus and any Prospectus Supplement thereto, as the Holders may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Holders; provided, however, the Company shall not be required to furnish any document (other than the Prospectus, which may be provided in .PDF format) to the Holders to the extent such document is available on EDGAR).

 

(e) The Company shall take such action as is reasonably necessary to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Holders of the Registrable Securities covered by a Registration Statement under such other securities or “Blue Sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Holders and their legal counsel of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “Blue Sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

(f) The Company shall notify the Holders and their legal counsel in writing of the happening of any event, as promptly as reasonably practicable after becoming aware of such event, as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (of such supplement or amendment to the Holders and their legal counsel (or such other number of copies as such legal counsel or the Holders may reasonably request). The Company shall also promptly notify Holders and their legal counsel in writing (i) when a Prospectus or any Prospectus Supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Holders and their legal counsel by facsimile or e-mail on the same day of such effectiveness), and when the Company receives written notice from the Commission that a Registration Statement or any post-effective amendment will be reviewed by the Commission, (ii) of any request by the Commission for amendments or supplements to a Registration Statement or related Prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate and (iv) of the receipt of any request by the Commission or any other federal or state governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any related Prospectus. The Company shall respond as promptly as reasonably practicable to any comments received from the Commission with respect to a Registration Statement or any amendment thereto. Nothing in this Section 3(f) shall limit any obligation of the Company under the Purchase Agreement.

 

 

(g) The Company shall (i) use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement or the use of any Prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible time and (ii) notify the Holders and their legal counsel of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding.

 

(h) The Company shall hold in confidence and not make any disclosure of information concerning the Holders provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the Securities Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non- appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document (as defined in the Purchase Agreement). The Company agrees that it shall, upon learning that disclosure of such information concerning the Holders is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Holders and allow the Holders, at the Holders’ expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

(i) Without limiting any obligation of the Company under the Purchase Agreement, the Company shall use its commercially reasonable efforts to cause all of the Registrable Securities covered by each Registration Statement to be listed on the NYSE American or such other national stock exchange as applicable. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(i).

 

(j) The Company shall cooperate with the Holders and, to the extent applicable, facilitate the timely preparation and delivery of Registrable Securities, as DWAC Shares if requested by a Holder, to be offered pursuant to a Registration Statement and enable such DWAC Shares to be in such denominations or amounts (as the case may be) as the Holders may reasonably request from time to time. Holders hereby agrees that it shall cooperate with the Company, its counsel and transfer agent in connection with any issuances of DWAC Shares, and hereby represents, warrants and covenants to the Company that that it will resell such DWAC Shares only pursuant to the Registration Statement in which such DWAC Shares are included, in a manner described under the caption “Plan of Distribution” in such Registration Statement, and in a manner in compliance with all applicable U.S. federal and state securities laws, rules and regulations, including, without limitation, any applicable prospectus delivery requirements of the Securities Act. At the time such DWAC shares are offered and sold pursuant to the Registration Statement, such DWAC Shares shall be free from all restrictive legends may be transmitted by the transfer agent to the Holders by crediting an account at DTC as directed in writing by the Holders.

 

(k) Upon the written request of the Holders, the Company shall as soon as reasonably practicable after receipt of notice from the Holders and subject to Section 3(o) hereof, (i) incorporate in a Prospectus Supplement or post-effective amendment such information as the Holders reasonably request to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such Prospectus Supplement or post-effective amendment after being notified of the matters to be incorporated in such Prospectus Supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement or Prospectus contained therein if reasonably requested by the Holders.

 

(l) The Company shall make generally available to its security holders (which may be satisfied by making such information available on EDGAR) as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of each Registration Statement.

 

(m) The Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission in connection with any registration hereunder.

 

 

(n) Within one (1) Business Day after each Registration Statement which covers Registrable Securities is declared effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Holders) confirmation that such Registration Statement has been declared effective by the Commission.

 

(o) Notwithstanding anything to the contrary contained herein (but subject to the last sentence of this Section 3(o)), at any time after the Effective Date of a particular Registration Statement, the Company may, upon written notice to Holders, suspend Holders’ use of any prospectus that is a part of any Registration Statement (in which event the Holders shall discontinue sales of the Registrable Securities pursuant to such Registration Statement contemplated by this Agreement, but shall settle any previously made sales of Registrable Securities) if the Company (x) is pursuing an acquisition, merger, tender offer, reorganization, disposition or other similar transaction and the Company determines in good faith that (A) the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in such Registration Statement or other registration statement or (B) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause any Registration Statement (or such filings) to be used by Holders or to promptly amend or supplement any Registration Statement contemplated by this Agreement on a post effective basis, as applicable, or (y) has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company, would materially adversely affect the Company (each, an “Allowable Grace Period”); provided, however, that in no event shall the Holders be suspended from selling Registrable Securities pursuant to any Registration Statement for a period that exceeds 45 consecutive Trading Days or an aggregate of 90 days in any 365-day period. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice, but in any event within one (1) Business Day of such disclosure or termination, to the Holders and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement (including as set forth in the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable). Notwithstanding anything to the contrary contained in this Section 3(o), the Company shall cause its transfer agent to deliver DWAC Shares to a transferee of the Holders in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which (i) the Company has made a sale to Holders and (ii) the Holders have entered into a contract for sale, and delivered a copy of the Prospectus included as part of the particular Registration Statement to the extent applicable, in each case prior to the Holders’ receipt of the notice of an Allowable Grace Period and for which the Holders have not yet settled.

 

4. Obligations of the Holders.

 

(a) At least five (5) Business Days prior to the first anticipated filing date of each Registration Statement (or such shorter period to which the parties agree), the Company shall notify the Holders in writing of the information the Company requires from the Holders with respect to such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of the Holders that the Holders shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

(b) The Holders, by their acceptance of Registrable Securities, agree to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless the Holders have notified the Company in writing of the Holders’ election to exclude all of the Holders’ Registrable Securities from such Registration Statement.

 

 

(c) The Holders agree that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(o) or the first sentence of Section 3(f), the Holders shall immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Holders’ receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(o) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to deliver DWAC Shares to a transferee of the Holders in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which the Holders have entered into a contract for sale prior to the Holders’ receipt of a notice from the Company of the happening of any event of the kind described in Section 3(o) or the first sentence of Section 3(f) and for which the Holders have not yet settled.

 

(d) The Holders covenant and agree that they shall comply with the prospectus delivery and other requirements of the Securities Act as applicable to them in connection with sales of Registrable Securities pursuant to a Registration Statement.

 

5. Expenses of Registration.

 

All expenses of the Company, other than sales or brokerage commissions and fees and disbursements of counsel for, and other expenses of, the Holders, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company (“Registration Expenses”). Notwithstanding the foregoing, in an Underwritten Offering, reasonable fees and expenses of one (1) legal counsel selected by the Participating Holders shall be paid by the Company.

 

6. Indemnification.

 

(a) In the event any Registrable Securities are included in any Registration Statement under this Agreement, to the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Holders, each of its directors, officers, shareholders, members, partners, employees, agents, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) and each Person, if any, who controls the Holders within the meaning of the Securities Act or the Exchange Act and each of the directors, officers, shareholders, members, partners, employees, agents, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, a “Holder Party” and collectively, the “Holders Parties”), against any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees, costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) reasonably incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the Commission, whether pending or threatened, whether or not a Holder Party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “Blue Sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented) or in any Prospectus Supplement or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading (the matters in the foregoing clauses (i) and (ii) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Holders Parties, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by a Holder Party arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Holder Party for such Holder Party expressly for use in connection with the preparation of such Registration Statement, Prospectus or Prospectus Supplement or any such amendment thereof or supplement thereto; (ii) shall not be available to the Holders to the extent such Claim is based on a failure of the Holders to deliver or to cause to be delivered the Prospectus (as amended or supplemented) made available by the Company (to the extent applicable), including, without limitation, a corrected Prospectus, if such Prospectus (as amended or supplemented) or corrected Prospectus was timely made available by the Company pursuant to Section 3(d) and then only if, and to the extent that, following the receipt of the corrected Prospectus no grounds for such Claim would have existed; and (iii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Party and shall survive the transfer of any of the Registrable Securities by the Holders pursuant to Section 9.

 

 

(b) In connection with any Registration Statement in which a Holder is participating, such Holder agrees to severally and not jointly, indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each, an “Company Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information relating to the Holders furnished to the Company by the Holders expressly for use in connection with such Registration Statement, the Prospectus included therein or any Prospectus Supplement thereto; and, subject to Section 6(c) and the below provisos in this Section 6(b), the Holders shall reimburse a Company Party any legal or other expenses reasonably incurred by such Company Party in connection with investigating or defending any such Claim; provided, however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Holders, which consent shall not be unreasonably withheld or delayed; and provided, further that the Holders shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Holders as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement, Prospectus or Prospectus Supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Party and shall survive the transfer of any of the Registrable Securities by the Holders pursuant to Section 9.

 

(c) Promptly after receipt by an Holder Party or Company Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Holder Party or Company Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Holder Party or the Company Party (as the case may be); provided, however, an Holder Party or Company Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Holder Party or Company Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Holder Party or Company Party (as the case may be) and the indemnifying party, and such Holder Party or such Company Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Holder Party or such Company Party and the indemnifying party (in which case, if such Holder Party or such Company Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof on behalf of the indemnified party and such counsel shall be at the expense of the indemnifying party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for all Holders Parties or Company Parties (as the case may be). The Company Party or Holder Party (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Company Party or Holder Party (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Company Party or Holder Party (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Company Party or Holder Party (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Company Party or Holder Party (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Company Party. For the avoidance of doubt, the immediately preceding sentence shall apply to Sections 6(a) and 6(b) hereof. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Company Party or Holder Party (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Holder Party or Company Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.

 

(d) No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable Securities who is not guilty of fraudulent misrepresentation.

 

 

(e) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred; provided that any Person receiving any payment pursuant to this Section 6 shall promptly reimburse the Person making such payment for the amount of such payment to the extent a court of competent jurisdiction determines that such Person receiving such payment was not entitled to such payment.

 

(f) The indemnity and contribution provisions contained herein shall be in addition to (i) any cause of action or similar right of the Company or Holder Party against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

7. Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, the Holders shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by the Holders from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that the Holders have otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

8. Reports Under the Exchange Act.

 

With a view to making available to the Holders the benefits of Rule 144, the Company agrees to:

 

(a) use its commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b) use its commercially reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit any of the Company’s obligations under the Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144;

 

(c) furnish to the Holders, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting, submission and posting requirements of Rule 144 and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the Commission if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Holders to sell such securities pursuant to Rule 144 without registration; and

 

(d) take such additional action as is reasonably requested by the Holders to enable the Holders to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s transfer agent as may be reasonably requested from time to time by the Holders and otherwise fully cooperate with Holders and Holders’s broker to effect such sale of securities pursuant to Rule 144.

 

9. Assignment of Registration Rights.

 

The Company shall not assign this Agreement or any of their respective rights or obligations hereunder. The Holders may assign this Agreement and their respective rights and obligations hereunder without the prior consent of the Company; provided, if the Holders assign such rights, then it will promptly notify the Company of such assignment.

 

 

10. Amendment or Waiver.

 

No provision of this Agreement may be amended or waived by the parties from and after the date that is one Trading Day immediately preceding the date of filing of the Initial Registration Statement with the Commission. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

11. Miscellaneous.

 

(a) Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

 

(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement shall be given in accordance with Section 11.2 of the Purchase Agreement.

 

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. The Company and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that either party shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by the other party and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which either party may be entitled by law or equity.

 

(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the federal courts sitting in Delaware, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(e) The Transaction Documents set forth the entire agreement and understanding of the parties solely with respect to the subject matter thereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, solely with respect to such matters. There are no promises, undertakings, representations or warranties by either party relative to subject matter hereof not expressly set forth in the Transaction Documents. Notwithstanding anything in this Agreement to the contrary and without implication that the contrary would otherwise be true, nothing contained in this Agreement shall limit, modify or affect in any manner whatsoever (i) the Conditions to Closing contained in Article VII of the Purchase Agreement or (ii) any of the Company’s obligations under the Purchase Agreement.

 

 

(f) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors. This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto, their respective successors and the Persons referred to in Sections 6 and 7 hereof.

 

(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

(h) This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or signature delivered by e-mail in a “.pdf” format data file, including any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.

 

(i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(j) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

 

 

IN WITNESS WHEREOF, Holders and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	COMPANY:
	HNR Acquisition Corp.
	By:
	Name:	Donald W. Orr
	Title:	President
	HOLDER:
	CIC Pogo, LP
	By:
	Name:	Fouad Bashour
	Title:	Manager
	DenCo Resources, LLC
	By:
	Name:	John L. Denman, Jr.
	Title:	President
	4400 Holdings, LLC
	By:
	Name:	Kirk Pogoloff
	Title:	Manager
	Pogo Resources Management, LLC
	By:
	Name:	Kirk Pogoloff
	Title:	Manager

 

[Signature Page]

 

 

16

Exhibit 10.7

 

Execution Version

 

FIRST INTERNATIONAL BANK & TRUST

 

CONFIDENTIAL

 

August 28, 2023

 

HNR Acquisition Corp.

3730 Kirby, S-1200

Houston, Texas 77098

 

Attention: Mr. Mitch Trotter

 

Re:     Commitment Letter $28,000,000 Senior Secured Term Facility

 

Gentlemen:

 

You have advised First International Bank & Trust, a North Dakota banking institution (“FIBT” or “Lender”) that HNR Acquisition Corp., a Delaware corporation (“Borrower” or “you”) seek financing in the form of a senior secured term loan in the amount of TWENTY EIGHT MILLION DOLLARS ($28,000,000) (the “Credit Facility”) to (a) fund a portion of a the purchase price for the proposed acquisition (the “Acquisition”) of all the outstanding equity in Pogo Resources, LLC, a Texas limited liability company and its subsidiaries (the “Target Company”) (which may be completed through HNR OpCo and OpCo Sub (each, as defined in the Term Sheet) so long as after giving effect to the Acquisition, HNR OpCo and OpCo Sub directly or indirectly hold 100% of the equity interests in the Target Company), pursuant to the terms and conditions of that certain Membership Interest Purchase Agreement dated December 27, 2022, between Borrower, as buyer, and CIC Pogo LP, a Delaware limited partnership, DenCo Resources, LLC, a Texas limited liability company, Pogo Resources Management, LLC, a Texas limited liability company, and 4400 Holdings, LLC, a Texas limited liability company, as sellers (collectively, the “Sellers”), as amended and restated by that Amended and Restated Membership Interest Purchase Agreement dated August 28, 2023, between Borrower, as buyer, and Sellers (as so amended and restated, the “Acquisition Agreement”), (b) partially fund the Debt Service Reserve Account (as defined in the Term Sheet, hereinafter defined), (c) cash secure outstanding letters of credit issued by Target Company’s existing lender, (d) pay fees and expenses in connection with the Transactions (as defined below) and (e) other general corporate purposes. Upon the terms and subject to the conditions set forth herein, FIBT is pleased to advise you of its commitment to provide to Borrower on the Closing Date $28,000,000 (the “Commitment”) as more fully described in the Summary of Proposed Terms and Conditions attached hereto as Annex A (the “Term Sheet”), the Conditions Annex attached hereto as Annex B (the “Conditions Annex”) and description of the documents to be executed evidencing the Credit Facility attached hereto as Annex C (the “Loan Documents Annex”). This letter, including the Term Sheet, the Conditions Annex and the Loan Documents Annex, is hereinafter referred to as this “Commitment Letter.” This Commitment Letter describes the general terms and conditions for the Credit Facility to be evidenced by the Loan Documents and supersedes the terms and conditions set forth in those two certain Potential RBL Loan Letters dated April 14, 2023, and July 6, 2023, each from FIBT to Borrower (the “Potential Loan Letters”).

 

As used herein, the term “Credit Agreement” refers to a loan agreement with Lender evidencing the Credit Facility to be entered into between FIBT and Borrower and such related loan documents including, without limitation, the instruments listed on the Loan Documents Annex (together with the Credit Agreement, the “Loan Documents”). The term “Transactions” means, collectively, the Acquisition, the closing of the Credit Agreement, the fundings and other extensions of credit under the Credit Agreement on the Closing Date (as defined below) and the payment of fees and expenses in connection with each of the foregoing. The date on which the Acquisition is consummated with the proceeds of the funding pursuant to the Credit Agreement is referred to as the “Closing Date.” To the extent not defined in this Commitment Letter, capitalized terms shall have the meanings set forth in the Term Sheet.

 

 

1. Conditions to Commitment (Closing Conditions Provisions).

 

(a) The provisions of this Section 1 are referred to herein and in the Term Sheet as the “Closing Conditions Provisions.”

 

(b) The Commitment and undertakings of FIBT hereunder are subject solely to the satisfaction of each of the conditions precedent set forth in this Section 1 and in the Conditions Annex and upon satisfaction (or waiver by Lender) of such conditions, the funding of the Commitment shall occur under the Credit Agreement; it being understood that there are no conditions (implied or otherwise) to the obligation of Lender hereunder to fund the Commitment on the Closing Date under the Credit Agreement, other than the following:

 

(i) satisfaction of the conditions set forth in the Conditions Annex;

 

(ii) the payment in full of all fees, expenses and other amounts payable hereunder;

 

(iii) closing of the Credit Facility on or prior to 5:00 p.m. (Central Time) on October 30, 2023 (the “Commitment Termination Date”).

 

(c) Notwithstanding anything to the contrary in this Commitment Letter (including each of the Annexes attached hereto), the only representations and warranties the accuracy of which shall be a condition to the effectiveness of the Credit Agreement and the availability of the Commitment, in each case, on the Closing Date shall be (i) such of the representations and warranties relating to the Target Company and its “Assets” as defined in the Acquisition Agreement that are material to the interests of the Lender but only to the extent that Borrower has the right to terminate its obligations under the Acquisition Agreement as a result of a breach of such representations and warranties in the Acquisition Agreement (to such extent, the “Specified Acquisition Agreement Representations”) and (ii) the Specified Representations (as defined below).

 

(d) The terms of the Credit Agreement and the other Loan Documents shall be in a form such that they do not impair the availability of the Commitment or the effectiveness of the Credit Agreement, in each case, on the Closing Date, if the conditions expressly set forth in the foregoing clauses (b) and (c) and this clause (d) (which, for the avoidance of doubt, includes the Conditions Annex) are satisfied. It is agreed as a condition to availability of the Commitment on the Closing Date that:

 

(i) (A) security interests and liens in Filing Collateral and Equity Interest Collateral in favor of Lender shall have been created and perfected, (B) security interests and liens shall have been created, by execution and delivery of mortgage counterparts for recording in the applicable counties, on the Oil and Gas Properties of the Target Company, and (C) Borrower shall use commercially reasonable efforts to make arrangements for the recordation of such mortgage liens substantially contemporaneously with consummation of the transactions under the Acquisition Agreement, and

 

(ii) creation and perfection of liens in favor of Lender on collateral other than that described in the preceding clause (i) shall not constitute a condition precedent to the availability of the Commitment on the Closing Date, but instead shall be required to be accomplished after the Closing Date pursuant to arrangements and timing to be mutually agreed by Lender and Borrower acting reasonably.

 

 

“Filing Collateral” means property or assets, including intangible property and equity interests, with respect to which a security interest may be perfected by filing a financing statement in the central filing office of a State of the United States or the District of Columbia under the Uniform Commercial Code. “Equity Interest Collateral” means capital stock or other equity interests with respect to which a security interest may be perfected by delivery of a stock or other certificate and related stock powers. “Oil and Gas Properties” has the meaning set forth in the Term Sheet

 

(e) For purposes hereof: “Specified Representations” means the representations and warranties of Loan Parties relating to corporate or other organizational existence, Borrower authority (as to delivery, execution and performance of the Credit Agreement and other Loan Documents required to be delivered on the Closing Date), binding effect of the Loan Documents on Loan Parties, solvency as of the Closing Date (after giving effect to the Transactions) of Borrower and Loan Parties, on a consolidated basis, no conflicts of the Loan Documents with charter or other organizational documents of Loan Parties, the Investment Company Act, Federal Reserve margin regulations, use of loan proceeds not violating OFAC, use of loan proceeds not violating the Federal Corrupt Practices Act, the Patriot Act, use of proceeds, and, subject to clause (d) above, the creation, validity and perfection of security interests.

 

2. Information. You represent, warrant and covenant that (i) all written information (other than the Projections, as defined below, other forward-looking information and information of a general economic or industry specific nature) concerning Borrower, its subsidiaries, the Target Company and the Transactions that has been or will be made available to FIBT by you, or any of your representatives, subsidiaries or affiliates (or on your or their behalf) (the “Information”) is, and in the case of Information made available after the date hereof, will be when furnished, correct in all material respects and does not, and in the case of Information made available after the date hereof, will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not materially misleading and (ii) all financial projections concerning Borrower, its subsidiaries and the Target Company, that have been or will be made available to FIBT by you, or any of your representatives, subsidiaries or affiliates (or on your or their behalf) (the “Projections”) have been or will be prepared in good faith based upon assumptions believed by you to be reasonable at the time made available to FIBT by you, it being understood that the Projections are as to future events and are not to be viewed as facts, the Projections are subject to significant uncertainties, many of which are beyond your control and that actual results may vary materially from the Projections. You agree that if, at any time prior to the Closing Date, you become aware that any of the representations and warranties contained in the preceding sentence would be incorrect in any material respect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement the Information and the Projections so that such representations are correct in all material respects under those circumstances. We will be entitled to use and rely upon, without responsibility to verify independently, the Information and the Projections. You acknowledge that, in furtherance of the purpose of this Commitment Letter, FIBT may share with any of its respective affiliates (it being understood that such affiliates will be subject to the confidentiality agreements between you and us), and such affiliates may share with FIBT, any information related to the Target Company (including, without limitation, in each case, information relating to creditworthiness) and the transactions contemplated hereby.

 

3. Indemnification. You agree to indemnify and hold harmless FIBT and each of its affiliates, directors, officers, employees, partners, representatives, advisors and agents and each of their respective heirs, successors and assigns (each, an “Indemnified Party”) from and against any and all actions, suits, losses, claims, damages and liabilities of any kind or nature and reasonable and documented or invoiced out-of-pocket expenses (including legal expenses), joint or several, to which such Indemnified Party may become subject or that may be incurred or asserted or awarded against such Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (any of the foregoing, a “Proceeding”) (i) any matters contemplated by this Commitment Letter, the Transactions or any related transaction (including, without limitation, the execution and delivery of this Commitment Letter and the Credit Agreement) or (ii) the use or the contemplated use of the proceeds of the Credit Facility, and will reimburse each Indemnified Party for all reasonable and documented or invoiced out-of-pocket expenses (including reasonable fees, expenses and charges) of counsel for all such Indemnified Parties and other reasonable and documented or invoiced out-of-pocket fees and expenses incurred in connection with investigating or defending any of the foregoing promptly following written demand therefor as they are incurred in connection with any of the foregoing; provided that no Indemnified Party will have any right to indemnification for any of the foregoing to the extent resulting from the bad faith, gross negligence or willful misconduct of such Indemnified Party as determined by a court of competent jurisdiction in a final non-appealable judgment. In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by you, your equity holders or creditors or an Indemnified Party, whether or not an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. You also agree that no Indemnified Party will have any liability (whether direct or indirect, in contract or tort, or otherwise) to you or your affiliates or to your or their respective equityholders, creditors, affiliates, directors, officers, employees, partners, representatives, advisors or agents arising out of, related to or in connection with any aspect of the transactions contemplated hereby, except to the extent such liability is determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from Indemnified Party’s own bad faith, gross negligence or willful misconduct. FIBT will only have liability to you (as opposed to any other person). No Indemnified Party will be liable to you, your affiliates or any other person and you shall not be liable to any Indemnified Party or its affiliates for any indirect, consequential or punitive damages that may be alleged as a result of this Commitment Letter, the Credit Agreement or any other element of the Transactions. You shall not, without the prior written consent of each Indemnified Party affected thereby, settle any threatened or pending claim or action that would give rise to the right of any Indemnified Party to claim indemnification hereunder unless such settlement (a) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnified Party and (b) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of such Indemnified Party. You shall not be liable for any settlement for any Proceeding effected without your consent (which consent shall not be unreasonably withheld, conditioned or delayed), but if settled with your written consent or if there is a final and non-appealable judgment by a court of competent jurisdiction for the plaintiff in any such Proceeding, you agree to indemnify and hold harmless each Indemnified Party from and against any and all losses, claims, damages, liabilities and expenses by reason of such settlement or judgment in accordance with the other provisions of this Section 3.

 

 

4. Expenses. In connection with this Commitment Letter you shall remit to FIBT a non-refundable work fee in the amount of $100,000 (the “Work Fee”) which shall be in addition to the $50,000 previously paid to FIBT under the Potential Loan Letters. The Work Fee shall be applied against expenses incurred by FIBT in negotiation and documentation of this Commitment Letter and the Loan Documents and does not represent a limitation on such fees and expenses as they may be reasonably incurred by FIBT. You shall reimburse FIBT, from time to time on demand for all reasonable and documented or invoiced out-of-pocket costs and expenses (including, without limitation, reasonable legal fees and expenses and due diligence expenses) of FIBT and all reasonable costs incurred in connection with the execution of this Commitment Letter and the preparation, review, negotiation, execution, delivery and enforcement of this Commitment Letter, the Credit Agreement and any Loan Documents required to be delivered in connection therewith.

 

5. Confidentiality.

 

(a) This Commitment Letter and the existence and contents hereof shall be confidential and may not be disclosed, directly or indirectly, by you in whole or in part to any person without our prior written consent, except for (i) the disclosure hereof or thereof on a confidential basis to your affiliates and your and their directors, officers, employees, accountants, attorneys and other professional advisors on a confidential basis for the purpose of evaluating, negotiating or entering into the Transactions or (ii) as otherwise required by law (in which case, you agree, to the extent permitted by law, to inform us promptly in advance thereof).

 

FIBT and its affiliates will use all confidential information provided to it or such affiliates by or on behalf of you hereunder or in connection with the Acquisition and the related transactions solely for the purpose of providing the services which are the subject of this Commitment Letter and otherwise in connection with the Transactions and shall treat confidentially all such information and shall not publish, disclose or otherwise divulge such information; provided that nothing herein shall prevent FIBT and its affiliates from disclosing any such information to its directors, officers, employees, accountants, attorneys and other professional advisors on a confidential basis for the purpose of evaluating, negotiating or entering into the Transactions or (ii) as otherwise required by law (in which case, we agree, to the extent permitted by law, to inform you promptly in advance thereof). FIBT’s obligations under this paragraph shall terminate automatically and be superseded by the confidentiality provisions in the Credit Agreement upon the initial funding thereunder. This paragraph shall automatically terminate on the second anniversary hereof.

 

Prior to the Closing Date, Borrower shall provide FIBT an opportunity to review and approve (such approval not to be unreasonably withheld or delayed) any public announcement or public filing made by you or your representatives relating to the Commitment or to FIBT in connection therewith, before any such announcement or filing is made; provided that Borrower may make any public filing required by law without the review or approval of FIBT.

 

(b) FIBT hereby notifies you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT Act”), it is required to obtain, verify and record information that identifies you and any additional Loan Parties, which information includes your and their respective names, addresses, tax identification numbers and other information that will allow FIBT to identify you and such other parties in accordance with the PATRIOT Act.

 

6. Other Services.

 

(a) Nothing contained herein shall limit or preclude FIBT or any of their affiliates from carrying on any business with, providing banking or other financial services to, or from participating in any capacity, including as an equity investor, in any party whatsoever, including, without limitation, any competitor, supplier or customer of you, the Sellers, or any of your or its respective affiliates, or any other party that may have interests different than or adverse to such parties.

 

(b) You acknowledge that FIBT and its affiliates (i) may be providing debt financing, equity capital or other services (including financial advisory services) to other entities or persons with which you, the Sellers, or your or their respective affiliates may have conflicting interests regarding the Transactions and otherwise, (ii) may act, without violation of its contractual obligations to you, as it deems appropriate with respect to such other entities or persons, and (iii) have no obligation in connection with the Transactions to use, or to furnish to you, the Sellers, or your or its respective affiliates or subsidiaries, confidential information obtained from other entities or persons.

 

 

(c) In connection with all aspects of the Transactions, you acknowledge and agree that: (i) the Credit Facility and any related arranging or other services contemplated in this Commitment Letter constitute an arm’s-length commercial transaction between you and your affiliates, on the one hand, and FIBT, on the other hand, and you are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the Transactions, (ii) in connection with the process leading to the Transactions, FIBT is and has been acting solely as a principal and not as a financial advisor, agent or fiduciary, for you or any of your affiliates, equityholders, directors, officers, employees, creditors or any other party, (iii) no Commitment Party or any affiliate thereof has assumed or will assume an advisory, agency or fiduciary responsibility in your or your affiliates’ favor with respect to any of the Transactions or the process leading thereto (irrespective of whether FIBT or any of its affiliates has advised or is currently advising you or your affiliates on other matters) and FIBT has no obligation to you or your affiliates with respect to the Transactions except those obligations expressly set forth in the Commitment Documents, (iv) FIBT and its respective affiliates may be engaged in a broad range of transactions that involve interests that differ from yours and those of your affiliates and we shall have any obligation to disclose any of such interests, and (v) we have not provided any legal, accounting, regulatory or tax advice with respect to any of the Transactions and you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate. You hereby waive and release, to the fullest extent permitted by law, any claims that you may have against FIBT and its affiliates with respect to any breach or alleged breach of agency or fiduciary duty.

 

7. Acceptance/Expiration of Commitments.

 

(a) This Commitment Letter and the Commitment of FIBT set forth herein shall automatically terminate at 5:00 p.m. Central Time on August 31, 2023 (the “Acceptance Deadline”), without further action or notice unless signed counterparts of this Commitment Letter shall have been delivered to FIBT via electronic mail by such time to the attention of Mitchell Cook, Market President-Twin Cities, 3600 Minnesota Drive, Suite 70, Edina, MN 55435 mcook@FIBT.com.

 

(b) In the event this Commitment Letter is accepted by you as provided in the prior paragraph, the Commitment of FIBT set forth herein will automatically terminate without further action or notice upon the earliest to occur of (i) closing of the Acquisition, (ii) termination of the Acquisition Agreement in accordance with its terms or as determined by a court of competent jurisdiction, and (iii) the Commitment Termination Date if the closing of the Acquisition shall not have occurred by such time.

 

8. Survival. The sections of this Commitment Letter relating to Indemnification, Expenses, Confidentiality, Other Services, Survival and Governing Law shall survive any termination or expiration of this Commitment Letter or the Commitment of FIBT set forth herein (regardless of whether the Credit Agreement is executed and delivered).

 

9. Governing Law. SUBJECT TO THE NEXT PARAGRAPH, THIS COMMITMENT LETTER AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED THERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH DAKOTA, WITHOUT REFERENCE TO ANY OTHER CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS COMMITMENT LETTER. The parties hereto hereby agree that any suit or proceeding arising in respect of this Commitment Letter or any of the matters contemplated hereby will be tried exclusively in the U.S. District Court of the District of North Dakota or the state court of North Dakota sitting in Cass County, North Dakota and any appellate court from any thereof, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. The parties hereto hereby agree that service of any process, summons, notice or document by registered mail addressed to you or each of FIBT will be effective service of process against such party for any action or proceeding relating to any such dispute. The parties hereto irrevocably and unconditionally waive any objection to venue of any such action or proceeding brought in any such court and any claim that any such action or proceeding has been brought in an inconvenient forum. A final judgment in any such action or proceeding may be enforced in any other courts with jurisdiction over you or each of FIBT.

 

 

Notwithstanding the governing law provisions of this Commitment Letter set forth in the first sentence of the preceding paragraph, it is understood and agreed that, as between us, (a) interpretation of the definition of “Material Adverse Effect” (and whether or not a “Material Adverse Effect”), (b) the determination of the accuracy of any Specified Acquisition Agreement Representations and whether as a result of any inaccuracy thereof you have a right to terminate your obligations under the Acquisition Agreement and (c) the determination of whether the Acquisition has closed in accordance with the terms of the Acquisition Agreement and claims or disputes arising out of such determination or any aspect of such determination, in each case, shall be governed by, and construed and interpreted in accordance with, the governing laws specified in the Acquisition Agreement.

 

10. Miscellaneous. This Commitment Letter embodies the entire agreement among FIBT and you and your affiliates with respect to the specific matters set forth above and supersede all prior agreements and understandings relating to the subject matter hereof, including without limitation the Potential Loan Letters. No person has been authorized by any of FIBT to make any oral or written statements inconsistent with this Commitment Letter or the Fee Letter. This Commitment Letter and the Fee Letter shall not be assignable by any party hereto or thereto without the prior written consent of the other parties hereto or thereto, and any purported assignment without such consent shall be void. This Commitment Letter is not intended to benefit or create any rights in favor of any person other than the parties hereto and, with respect to indemnification, each Indemnified Party. This Commitment Letter may be executed in separate counterparts and delivery of an executed signature page of this Commitment Letter and the Fee Letter by facsimile or electronic mail or other electronic execution shall be effective as delivery of manually executed counterpart hereof. This Commitment Letter may only be amended, modified or superseded by an agreement in writing signed by each party hereto.

 

[Signature Pages Follow]

 

 

If you are in agreement with the foregoing, please indicate acceptance of the terms hereof by signing the enclosed counterpart of this Commitment Letter and returning it to FIBT by no later than the Acceptance Deadline.

 

	Sincerely,
	FIRST INTERNATIONAL BANK & TRUST, a North Dakota banking association
	By:
		Mitchell Cook
		Market President, Twin Cities

 

HNR Acquisition Corp Commitment Letter

 

 

Agreed to and accepted as of the date first
above written:
HNR ACQUISITION CORP.,
a Delaware corporation
By:
Name:
Title:

 

HNR Acquisition Corp. Commitment Letter

 

 

ANNEX A

 

[Term Sheet to be attached.]

 

 

Execution Version

 

HNR Acquisition Corp.

$28,000,000 Senior Secured Term Credit Facility

 

 

LENDER:		First International Bank & Trust, a North Dakota banking institution.
BORROWER:		HNR Acquisition Corp., a Delaware corporation.
GUARANTORS:		All current and future subsidiaries of Borrower, including (i) HNRA Upstream, LLC, a Delaware limited liability company (“HNRA OpCo”)1, (ii) HNRA Partner, Inc., a Delaware corporation (“OpCo Sub”), (iii) Pogo Resources, LLC, and (iv) LH Operating, LLC. Guarantors and Borrower are collectively, “Loan Parties.”
FACILITY:		A $28,000,000 senior secured term credit facility (the “Senior Credit Facility”), provided that, (i) the total amount available under the Senior Credit Facility shall not exceed fifty percent (50%) of the adjusted purchase price of the Acquisition (as defined below) and (ii) during the term of the loan, the total outstanding principal amount shall not exceed fifty percent (50%) of the “Collateral Value” of the Oil and Gas Properties (as defined below).
PURPOSE:		The Senior Credit Facility will be used to (a) fund a portion of the purchase price for the acquisition (the “Acquisition”) of all the outstanding equity in Pogo Resources, LLC, a Texas limited liability company and its subsidiaries (the “Target Company”) (which may be completed through HNRA OpCo and OpCo Sub so long as after giving effect to the Acquisition, HNRA OpCo and OpCo Sub directly or indirectly hold 100% of the equity interests in the Target Company), pursuant to the terms and conditions of that certain Membership Interest Purchase Agreement dated December 27, 2022, between Borrower, as buyer, and CIC Pogo LP, a Delaware limited partnership, DenCo Resources, LLC, a Texas limited liability company, Pogo Resources Management, LLC, a Texas limited liability company, and 4400 Holdings, LLC, a Texas limited liability company, as sellers (collectively, the “Sellers”), as amended and restated by that Amended and Restated Membership Interest Purchase Agreement dated August 28, 2023, between Borrower, as buyer, and Sellers (as so amended and restated, the “Acquisition Agreement”), (b) partially fund the Debt Service Reserve Account (hereinafter defined), (c) cash secure outstanding letters of credit, (d) pay fees and expenses in connection with the Transactions (as defined below) and (e) for other general corporate purposes.

 

1

HNRA OpCo will be a majority-owned subsidiary of Borrower, with 2,000,000 of its Class B Units and up to 2,000,000 of its Preferred Units (which are convertible into Class B Units) held by the Sellers.

 

 

HNR ACQUISITION CORP.

 

MATURITY:		Three years from Closing Date.
SCHEDULED PAYMENTS:		Principal and interest shall be due monthly, each payment in an amount equal to $669,325.89 commencing thirty (30) days following the closing date, to be applied first to accrued interest and then to outstanding principal, except that the final payment due at the earlier of Maturity or the acceleration of the loan shall be in the amount equal to all outstanding principal, accrued interest and fees.
CASH SWEEP PAYMENT:		In addition to monthly principal and interest amortization installments, upon the first anniversary following Closing Date, Borrower shall make a one-time payment of principal in an amount equal to the amount up to $5,000,000 that Excess Cash Flow exceeds the Debt Service Coverage Ratio (defined below) of 1.35x as of such first anniversary.
		“Excess Cash Flow” means, as of such date measured, an amount calculated as follows: Loan Parties’ Net Cash Flow for such period less (a) the amount of cash set aside to pay amounts then due and owing in the ordinary course of Loan Parties’ business to unaffiliated third parties (based upon supporting information reasonably satisfactory to Lender), less (b) total payments of principal, interest and fees on the Note and such amounts permitted under the Credit Agreement to be paid on the Sellers’ Note[s] paid by Borrower during such period, less (c) general and administrative costs allowed under the Credit Agreement to be paid in such period under this Agreement, in each case of the foregoing, all calculated for Borrower and its consolidated subsidiaries in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
		“Net Cash Flow” means at any time, (a) the net cash flow from operating activities for such period calculated in accordance with GAAP, plus (b) the net cash gains or losses, as applicable, under any hedging obligations during such period, plus (c) any Net Cash Proceeds (to be defined in the Credit Agreement and to include customary reinvestment rights) during such period, plus (d) any other cash or cash equivalents received by or on behalf of Loan Parties during such period but excluding (i) any cash or cash equivalents received by or on behalf of Borrower from (x) equity contributions made to it or (y) issuances of equity interests of Borrower and (ii) any cash or cash equivalents held in the Debt Service Reserve Account.
INTEREST RATES:		6.5% plus the “Prime Rate” publicly announced by Lender on the Closing Date (the “Interest Rate”). The Interest Rate will be fixed as of the Closing Date and shall remain constant throughout the term of the Senior Credit Facility (subject to the application of the Default Rate as described below). Interest will be payable monthly as it accrues. All interest and fees will be computed on the basis of actual days elapsed in a 360-day year.
		For so long as Borrower is in default under the Debt Service Coverage Ratio, the Default Rate shall be the Interest Rate plus 4%, and for all other times that any other default is outstanding, the Default Rate shall be the Interest Rate plus 2%. In addition, if a payment (other than any payment due on the maturity date) is more than 10 days past due, Borrower shall pay a late fee equal to the greater of (i) 2% of the amount past due or (ii) $100.

 

 

HNR ACQUISITION CORP.

 

COLLATERAL VALUE AND MANDATORY PAYMENTS:		The Loan shall be subject to periodic determinations from time to time of the Collateral, including discounted projected net future cash flow of the anticipated production from reserves attributable to the Oil and Gas Properties projected by Lender in its sole discretion to be brought onto production prior to the Maturity Date (the “Collateral Value”). The Collateral Value shall be redetermined at least as often as semiannually, commencing February 1, 2024 (a “Scheduled Collateral Valuation”); provided that Borrower shall not be required to obtain new reports on reserves more frequently than once per year. In the event the total outstanding balance of the Senior Credit Facility at the time when the Collateral Value is redetermined is greater than fifty percent (50%) of the newly established Collateral Value (such amount a “Collateral Value Deficiency”), Borrower will, within 30 days after notice from Lender of the new Collateral Value repay the Collateral Value Deficiency which shall be applied to principal in inverse order of maturity.
SECURITY:		The Senior Credit Facility shall be secured by a first priority mortgage and security interest on substantially all assets of Loan Parties including, without limitation, (i) all oil and gas properties, interests, wells, production therefrom and associated assets owned by Loan Parties (collectively, “Oil and Gas Properties”), (ii) 100% of the equity interests owned by Borrower and the other Loan Parties in their Subsidiaries, and (iii) all other personal property including deposit accounts, accounts receivable, inventory, hedge contracts, other contract rights and general intangibles (collectively, the “Collateral”); provided, however, the Collateral shall expressly exclude that certain Option Agreement, dated as of August 28, 2023, by and between Pogo Royalty, LLC, a Texas limited liability company, and HNRA OpCo, and solely with respect to Section 7.12 therein, Borrower (the “Option Agreement”) and any rights acquired by HNRA OpCo or any of its affiliates upon the exercise of the Option (as defined in the Option Agreement), including without limitation, the ORR Interest (as defined in the Option Agreement) (the “Acquired Rights”). HNRA OpCo shall have the right to assign the Option Agreement and/or any Acquired Rights to any affiliate, including Borrower or a newly created subsidiary of Borrower (the “ORRI Subsidiary”). There shall be at most one direct ORRI Subsidiary (the “Holdco ORRI Subsidiary”) and one additional ORRI Subsidiary that is a wholly-owned subsidiary of the Holdco ORRI Subsidiary. Each ORRI Subsidiary shall be an entity that is bankruptcy remote from Borrower. In no event will any ORRI Subsidiary be required to become a Loan Party, guaranty the Senior Credit Facilities, or pledge any of its assets as security therefor and Borrower’s equity interest in the Holdco ORRI Subsidiary shall be expressly excluded from the Collateral.
		Subject to usual and customary provisions related to ‘unrestricted subsidiaries’ including representations and covenants by Borrower limiting distributions, indebtedness, guarantees, etc. the ORRI Subsidiaries will not be subject to the representation and warranties, affirmative or negative covenant or event of default provisions of the Loan Documents and the results of operations and indebtedness of the ORRI Subsidiaries will not be taken into account for purposes of determining compliance with the Debt Service Coverage Ratio or any other financial ratio or covenants contained in the Loan Documents.
		In the event that Borrower or any of its affiliates exercises the Option pursuant to the terms of the Option Agreement, Borrower or its applicable affiliate shall grant Lender a right of first offer to propose the financing terms in connection with the consummation of the acquisition of the ORR Interest.
		The Collateral shall also secure obligations of Loan Parties under hedge contracts with Approved Counterparties (as defined below), on a pari passu basis with the obligations under the Senior Credit Facility.

 

 

HNR ACQUISITION CORP.

 

FEES:		a. Borrower shall pay Lender on the Closing Date an origination fee equal to 1.5% of the Senior Credit Facility amount.
		b. Borrower shall reimburse Lender for all reasonable costs (including cost of Bank’s Mineral Land Services Department) in determining Collateral Value and inspections.
CONDITIONS TO FUNDING:		Funding will be subject to the conditions set forth in the Commitment Letter from Lender to Borrower, of even date herewith, including the Conditions Annex attached as Annex B thereto.
REPRESENTATIONS AND WARRANTIES:		Limited to the following: no defaults; organization, existence and power; governmental authorization; no conflicts or consents; Loan Documents valid, binding and enforceable; financial statements; Loan Documents not violating laws or existing agreements or requiring governmental, regulatory or other approvals; full disclosure; compliance with ERISA, environmental and other laws and regulations; names and places of business; subsidiaries; government regulation; solvency; taxes; title to properties, intellectual property; regulation U; leases and contracts; performance of obligations; marketing arrangements; payment for future production; operation of properties; ad valorem and severance taxes; insurance; sanctions; beneficial ownership; and bank accounts. Funds raised through sale of equity of Borrower to be deposited into the “Capital Deposit Account” pledged to Lender. Customary representations pertaining to consummation of the Acquisition on the Closing Date (including receipt of approvals required by organizational documents and applicable law), will be added. Each of the foregoing representations and warranties shall be subject to customary qualifications and limitations to be agreed.
		The representations and warranties shall be made by Borrower on the Closing Date before and after giving effect to the Acquisition; provided that the only representations and warranties the accuracy of which shall be a condition to funding on the Closing Date shall be the Specified Acquisition Agreement Representations and the Specified Representations (as such terms are defined in the Closing Conditions Provisions).

 

 

HNR ACQUISITION CORP.

 

FINANCIAL COVENANTS:		Financial terms and calculations will be in accordance with generally accepted accounting principles.
		Borrower shall not permit its Debt Service Coverage Ratio to be less than 1.35 to 1 as of the end of any fiscal year, commencing with the fiscal year ending December 31, 2023.
		“Debt Service Coverage Ratio” means, measured annually, the ratio of Borrower’s and its consolidated subsidiaries’ EBITDAX for such fiscal year just ended divided by the aggregate principal, interest and fees due and owing by Borrower under this Agreement during such fiscal year just ended.
		“EBITDAX” means, for any period, the sum of Consolidated Net Income for such period plus (a) the following expenses or charges to the extent deducted from Consolidated Net Income in such period: (i) interest, (ii) taxes, (iii) depreciation, (iv) depletion, (v) amortization, (vi) non-cash losses under FASB ASC 815 as a result of changes in the fair market value of derivatives, (vii) hedge modifications, (viii) exploration expenses, (ix) non-cash equity compensation, and (x) non-cash expenses, minus (b) to the extent included in Consolidated Net Income in such period, all non-cash gains.
		“Consolidated Net Income” means with respect to Borrower and its consolidated subsidiaries, for any period, the aggregate of the net income (or loss) of Borrower and its consolidated subsidiaries after allowances for taxes for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which Borrower or any consolidated subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of Borrower and its consolidated subsidiaries in accordance with GAAP) except to the extent of the amount of dividends or distributions actually paid in such period by such other Person to Borrower or to a consolidated subsidiary, as the case may be; (b) the net income (but not loss) of any consolidated subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or the loan by that consolidated subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or governmental requirement applicable to such consolidated subsidiary, or is otherwise restricted or prohibited in each case determined in accordance with GAAP; (c) the net income (or loss) of any person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary gains or losses, including gains or losses attributable to property sales not in the ordinary course of business; and (e) the cumulative effect of a change in accounting principles and any gains or losses attributable to write ups or write downs of assets.

 

 

HNR ACQUISITION CORP.

 

Hedging:

Loan Parties will, collectively, enter and maintain hedge volumes of the following percentages of proved producing reserves for each calendar month during the years indicated below:

 

	Year	Volumes
	1	60%
	2	50%
	3	40%

 

		Any hedge provider must be a counterparty that meets the criteria set forth in the Credit Agreement (“Approved Counterparty”). If, and for so long as, the hedge provider is an Approved Counterparty, any hedge obligation shall be secured on a pari passu basis with the Senior Credit Facility.
NEGATIVE COVENANTS:		Limited to the following (subject to customary baskets and carve outs to be agreed): restrictions on indebtedness including unsecured subordinated indebtedness owing to Sellers; liens; hedges; mergers; dispositions; distributions (other than distributions to a Loan Party, tax distributions and any redemptions to be made at closing); investments; transactions with affiliates; negative pledges; prohibited restrictions; ERISA; conduct of business; organizational documents; material contracts; gas imbalances; take or pay and other prepayments; ECP guarantors; sale leaseback; and accounts. Restrictions on repayment of Sellers’ subordinated indebtedness to permit payment with proceeds deposited in the Capital Deposit Account at any time, subject to compliance with monthly debt service coverage test (with Borrower having the right to cure any non-compliance with the debt service coverage test through an equity contribution).

 

 

HNR ACQUISITION CORP.

 

affirmative Covenants:		In addition to reporting requirements below, Loan Parties shall maintain a debt service reserve account funded with $3,000,000 at Closing Date and an additional $2,000,000 to be deposited within 60 days following the Closing Date (the “Debt Service Reserve Account”). Lender may, in its discretion, disburse amounts held in the Debt Service Reserve Account from time to time for the payment of the monthly principal and interest payments described under “Scheduled Payments” above. Additional affirmative covenants limited to the following (subject to customary baskets and carve outs to be agreed): providing requested information and inspection of Collateral; notice of material events and change of address; maintaining Oil and Gas Properties, maintaining existence; trade payables; insurance; compliance with law; environmental compliance and reviews; subsidiary guarantees; further assurances; production payments; perfection of liens; performance of leases, contracts and obligations; and operating and depository accounts to be pledged to and maintained with Lender.
Reporting requirements:		Usual and customary for this type of transaction, including:

 

		1)	Borrower’s and its consolidated subsidiaries’ annual federal income tax filings and consolidated financial statements, with an unqualified opinion from a recognized independent accounting firm, together with calculations confirming compliance with all financial covenants, not later than 120 days after the end of each fiscal year (subject, in the case of tax filings, to any applicable extensions).
		2)	Borrower’s and its consolidated subsidiaries’ quarterly consolidated balance sheets and consolidated statements of income and cash flow, in accordance with GAAP, together with calculations confirming compliance with all financial covenants, reviewed by certified by recognized independent accounting firm, not later than 50 days after the end of each fiscal quarter, with the absence of footnotes.
		3)	Monthly unaudited and unreviewed consolidating and consolidating balance sheets and statements of income, in accordance with GAAP, for Borrower and its consolidated subsidiaries not later than 45 days after each month’s end.
		4)	Compliance certificate confirming compliance with all financial covenants, certified by a senior financial officer, accompanying delivery of the annual, quarterly and monthly financial statements.
		5)	Monthly hedging contract report.
		6)	In connection with each semi-annual Scheduled Collateral Valuation, Borrower will provide such information as requested by Lender, including a certificate by a responsible officer regarding (i) gas imbalances, (ii) Oil and Gas dispositions, (iii) new marketing agreements, and (iv) a schedule of Oil and Gas Properties showing percentage covered under mortgage.
		7)	Monthly production reports, including volumes, revenue, and lease operating expenses attributable to the Oil and Gas Properties no later than 45 days after month end.
		8)	Purchasers of production.
		9)	Information regarding changes as to Loan Parties.
		10)	Copies of public filings.
		11)	Casualty events.
		12)	Environmental matters.
		13)	Other information reasonably requested by any Lender.

 

 

HNR ACQUISITION CORP.

 

EVENTS OF DEFAULT:		Limited to the following, subject to thresholds and grace period to be agreed: failure to make payments when due under any of the Loan Documents; breach of any covenant continuing beyond cure period; breach of any representation or warranty; default under any other material debt; adverse ERISA event; bankruptcy or insolvency event; unpaid judgment; invalidity of any of the Loan Documents and material adverse change.
ASSIGNMENTS AND PARTICIPATIONS:		Lender may grant assignments or participations in all or any portion of its loans or commitments under the Senior Credit Facility; provided that no assignment shall be made to any competitor of the Loan Parties.
WAIVER OF JURY TRIAL; SUBMISSION TO  JURISDICTION:		Lender and Loan Parties waive right to jury trial with respect to any claim, action, suit or proceeding arising out of or contemplated by the Loan Documents. The parties agree to the exclusive jurisdiction of the courts of the state of North Dakota sitting in Cass County and of the U.S. District Court of the District of North Dakota, and any appellate court from any thereof, provided that the foregoing shall not impair any right that Lender or any Lender may otherwise have to bring an action relating to the Credit Agreement or any other Loan Document against a Loan Party or its properties in any other jurisdiction.
EXPENSES AND INDEMNIFICATION:		Borrower will pay the expenses (including legal fees) of Lender in connection with any remedies, restructure or work-out following an Event of Default, and will indemnify Lender, and its directors, officers and employees against all claims asserted and losses, liabilities and expenses incurred in connection with the Senior Credit Facility.
GOVERNING LAW:		State of North Dakota.

 

 

ANNEX B

 

$28,000,000

SENIOR SECURED TERM FACILITY

 

CONDITIONS ANNEX

 

Capitalized terms not otherwise defined herein have the same meanings as specified therefor in the Commitment Letter to which this Annex is attached.

 

Closing and the making of the extensions of credit under the Senior Secured Term Facility will be subject to the satisfaction of the following conditions precedent subject, in each case, to the Closing Conditions Provisions:

 

(a) (i) The Credit Agreement reflecting, and consistent with, the terms and conditions set forth in the Commitment and the other Loan Documents shall be prepared by counsel to Lender and shall be reasonably satisfactory to Lender and Borrower, and shall have been executed and delivered, as applicable by Loan Parties and other signatories party thereto; (ii) Lender will have received customary legal opinions as to the Credit Agreement, Loan Parties and the Loan Documents (including, without limitation, customary opinions of local counsel) as acceptable to Lender; customary resolutions and other evidence of authority and incumbency, customary officers’ certificates (including, without limitation, a certification that the conditions precedent have been met), good standing certificates, in each case with respect to Loan Parties and a solvency certificate for Loan Parties, in each case on a consolidated basis after giving effect to the Transactions; (iii) the Debt Service Reserve Account shall be funded in the amount of $3,000,000 (which may be funded from the proceeds of the Loan at closing); (iv) the subordination of any obligations for borrowed money owed by Loan Parties to the Sellers shall have been executed and delivered to Lender; and (v) payment of existing indebtedness owed (other than trade payables incurred in the ordinary course of business), and release of outstanding liens and security interest granted, by the Target Company to its lender (except for outstanding letters of credit issued by such lender which shall be cash secured at Closing).

 

(b) Lender will have received a complete copy of the Acquisition Agreement and all exhibits and schedules thereto. The Acquisition will have been consummated (or shall be consummated substantially simultaneously with the funding of the Loan under the Credit Agreement) on the Closing Date in accordance with the terms and conditions of the Approved Form of Acquisition Agreement, without giving effect to any modification, amendment, waiver (including, for the avoidance of doubt, exercise by Borrower of its option under Section 10.1(c) of the Acquisition Agreement not to require satisfaction of a condition precedent that is material to the Lender), supplement, addition or consent that is materially adverse to the Lender (as reasonably determined by Lender) unless approved by Lender (such approval not to be unreasonably withheld, delayed or conditioned). As used in this paragraph, “Approved Form of Acquisition Agreement” means the Membership Interest Purchase Agreement dated December 27, 2022, between Borrower, as buyer, and Sellers, as amended and restated by that Amended and Restated Membership Interest Purchase Agreement dated August 28, 2023, between Borrower, as buyer, and Sellers, received by Lender’s counsel by email on August 28, 2023.

 

(c) Lender shall have received reasonably satisfactory evidence of Loan Parties’ title to the Collateral, environmental condition of Loan Parties’ assets, governmental permits, bonding, insurance and any outstanding material claims.

 

(d) No Material Adverse Effect (as defined in the Acquisition Agreement) shall have occurred since the date of the Commitment Letter.

 

(e) Lender shall have received, at least three business days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act that is requested by Lender in writing at least ten business days prior to the Closing Date.

 

(f) The Specified Acquisition Agreement Representations and the Specified Representations shall be true and correct in all material respects (provided that such representations shall be true and correct in all respects to the extent already qualified by materiality) except in the case of any Specified Acquisition Agreement Representation or Specified Representation which expressly relates to a given date or period, such representation shall be true and correct in all material respects (subject to the foregoing proviso) as of the respective date or for the respective period, as the case may be.

 

(g) Receipt by Lender of a Borrowing Request.

 

 

ANNEX C

 

LOAN DOCUMENT SCHEDULE

 

1.

Senior Secured Term Loan Agreement among Borrower, Guarantors and Lender.

 

2.

Guaranty Agreement from each Guarantor in favor of Lender.

 

3.

Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and Financing Statement from each of Pogo and LH to Lender to be filed in Lee County, New Mexico.

 

4.

Commercial Security Agreement from each Loan Party in favor of Lender.

 

5.

UCC-1 Financing Statements relating to the above-described Security Documents.

 

6.

Deposit Account Control Agreement (Operating Account) of even date herewith by and between Depository Bank, Borrower and Lender.1

 

7.

Deposit Account Control Agreement (Debt Service Reserve Account) of even date herewith by and between Depositary Bank, Borrower and Lender.

 

8.

Intercreditor Agreement by and between Cargill (Hedge Provider) and Lender

 

9.

Subordination Agreement of even date herewith by and between the Sellers and Lender.

 

10.

Letters in Lieu.

 

11.

Existing Letter of Credit Back Stop2

 

1

NTD: TBD whether Control Accounts required for other Loan Parties

2

NTD: TBD whether any documentation related to Pegasus’ LCs will be required other than posting of cash collateral

 

 

Exhibit 99.1

 

HNR Acquisition Corp Announces

 

Amended and Restated Membership Interest Purchase Agreement

 

HOUSTON, TX / August 30, 2023 / HNR Acquisition Corp (NYSE American: HNRA) (the “Company” or “HNRA”) announces that on August 28, 2023, the Company signed an Amended and Restated Membership Interest Purchase Agreement (“A&R MIPA”) to purchase all of the equity interests of a New Mexico based oil company and its subsidiaries (the “Target”), as the Company previously disclosed. The A&R MIPA replaces the previous membership interest purchase agreement that the Company executed in December 2022.

 

Amended and Restated Membership Interest Purchase Agreement

 

The Company has signed the A&R MIPA with the sellers described therein (“Sellers”) revising and replacing the terms of the prior agreement to purchase all of the equity interests in the Target. A copy of the A&R MIPA and a more detailed description of the A&R MIPA is included in the Company’s 8-K filling dated August 30, 2023. Highlights of the A&R MIPA include revision of the purchase price to an aggregate amount of $63 million in cash plus (i) two million shares of a new class of Class B Common Stock of the Company which have no economic rights (voting only) and two million units in the Company’s newly-formed subsidiary, HNRA Upstream, LLC (“OpCo”), which are exchangeable for two million shares of the Company’s newly created Class A Common Stock. The cash required at closing can be reduced by $15 million payable through a promissory note to Sellers, and up to another $20 million through issuance of preferred units in OpCo, which convert into shares of the Company’s proposed new Class B common stock in 2 years, at a conversion rate based on the Company’s stock price at the time. Within one year thereafter, the Class B common stock may be converted into the proposed Class A common stock. At a minimum, the Company must pay the Sellers $33 million in cash at closing.

 

In addition, in connection with the reduction of the purchase price due at closing, Target transferred a 10% overriding royalty interest in oil, gas and minerals in, under and produced from each lease of Target (the “ORR Interest”) to an affiliate that will not be purchased by the Company. Then, in connection with the A&R MIPA, the Company will be granted a 12-month option to purchase the ORR Interest for $30 million.

 

On August 28th the company signed a commitment letter with First International Bank & Trust (FIBT) for a senior secured term loan in the amount of $28 million to fund a portion of the purchase price, subject to a number of conditions set forth in the letter. FIBT is a 112-year-old commercial bank with offices in North Dakota, South Dakota, Minnesota and Arizona, headquartered in Watford City, North Dakota. A detailed description of the commitment letter and term sheet is included in the Company’s 8-K filing with the SEC dated August 30, 2023.

 

Intent to purchase all equity interests in Target

 

The Company previously announced its intent to purchase all equity interests Target, and to acquire the Grayburg-Jackson oil field in the prolific Permian Basin in Eddy County, New Mexico. The A&R MIPA confirms and formalizes this intent. The Target fields comprise 13,700 contiguous leasehold acres, 343 producing wells and 207 injection wells for a total of 550 wells on the properties. Current production is approximately 1,400 barrels of oil and oil equivalent per day. Management expects to increase daily production to nearly 4,000 barrels of oil and oil equivalent in the next three years in accordance with the reserve report by William Cobb & Associates, a third-party engineering firm retained by Target.

 

About HNR Acquisition Corp

 

HNRA is a blank check company (otherwise known as a special purpose acquisition company or SPAC) formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.

 

For more information on HNRA, the acquisition and the transaction, please visit the Company website: https://www.hnra-nyse.com/.

 

Forward-Looking Statements

 

This press release includes “forward-looking statements” that involve risks and uncertainties that could cause actual results to differ materially from what is expected, including the funding of the Trust Account to further extend the period for the Company to consummate an initial business combination, if needed. Words such as “expects,” “believes,” “anticipates,” “intends,” “estimates,” “seeks,” “may,” “might,” “plan,” “possible,” “should” and variations and similar words and expressions are intended to identify such forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Such forward-looking statements relate to future events or future results, based on currently available information and reflect the Company’s management’s current beliefs. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. Important factors - including the availability of funds, the results of financing efforts and the risks relating to our business - that could cause actual results to differ materially from the Company’s expectations are disclosed in the Company’s documents filed from time to time on EDGAR (see www.edgar-online.com) and with the Securities and Exchange Commission (see www.sec.gov). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. In addition, please refer to the Risk Factors section of the Company’s Form 10-K as filed with the SEC on March 31, 2023 for additional information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Investor Relations

 

Michael J. Porter, President

PORTER, LEVAY & ROSE, INC.

mike@plrinvest.com

 

 

v3.23.2

Cover	Aug. 28, 2023
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 28, 2023
Entity File Number	001-41278
Entity Registrant Name	HNR ACQUISITION CORP
Entity Central Index Key	0001842556
Entity Tax Identification Number	85-4359124
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	3730 Kirby Drive
Entity Address, Address Line Two	Suite 1200
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77098
City Area Code	713
Local Phone Number	834-1145
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Common stock, par value $0.0001 per share
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	HNRA
Security Exchange Name	NYSEAMER
Redeemable warrants, exercisable for three quarters of one share of common stock at an exercise price of $11.50 per share
Title of 12(b) Security	Redeemable warrants, exercisable for three quarters of one share of common stock at an exercise price of $11.50 per share
Trading Symbol	HNRAW
Security Exchange Name	NYSEAMER

---